S-1/A

As filed with the Securities and Exchange Commission on November 26, 2012

Registration Nos. 333-179941 and 333-179941-01

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 5

to

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Prosper Funding LLC	Prosper Marketplace, Inc.
(Exact name of registrant as specified in its charter)	(Exact name of registrant as specified in its charter)
45-4526070	73-1733867
(I.R.S. Employer Identification Number)	(I.R.S. Employer Identification Number)

Delaware

(State or other jurisdiction of incorporation or organization)

6199

(Primary Standard Industrial Classification Code Number)

111 Sutter Street, 22nd Floor

San Francisco, CA  94104

(415) 593-5400

 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Sachin Adarkar, Esq.

Secretary

111 Sutter Street, 22nd Floor

San Francisco, CA  94104

(415) 593-5400

 (Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Keir D. Gumbs, Esq.

Covington & Burling LLP

1201 Pennsylvania Avenue, NW

Washington, DC 20004

(202) 662-6000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 under the Securities Exchange Act of 1934. (Check one):

Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer o Smaller Reporting Company ý

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be  Registered	Amount to be Registered			Proposed Maximum Aggregate Offering Price per Unit			Proposed Maximum Aggregate Offering Price			Amount of Registration Fee
Borrower Payment Dependent Notes	$	500,000,000			100	%	$	500,000,000	(1)	$	57,300
PMI Management Rights (2)		N/A	(2)		N/A	(2)		N/A	(2)		N/A	(2)

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f)(2) of the rules and regulations under the Securities Act of 1933, as amended.

(2) Each Borrower Payment Dependent Note will be issued with a PMI Management Right that is deemed to be attached to and will not be separable from the Borrower Payment Dependent Note.  No separate consideration is being paid for or value assigned to the PMI Management Rights and accordingly, no additional registration fee is being paid herewith.

The Registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed.  Prosper Funding LLC and Prosper Marketplace, Inc. may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED NOVEMBER 26, 2012

PROSPER FUNDING LLC

$500,000,000 Borrower Payment Dependent Notes

PROSPER MARKETPLACE, INC.

PMI Management Rights

This is a public offering to lender members of Prosper Funding LLC of up to $500,000,000 in principal amount of Borrower Payment Dependent Notes, or “Notes.”  Each Note will come attached with a PMI Management Right issued by Prosper Marketplace, Inc.  Prosper Funding LLC will be the sole issuer of the Notes and Prosper Marketplace, Inc. will be the sole issuer of the PMI Management Rights.

Each series of Notes will be dependent for payment on payments Prosper Funding LLC receives on a specific borrower loan described in a listing posted on its peer-to-peer online credit platform, which is referred to in this prospectus as the “platform.”  All listings on the platform are posted by individual consumer borrower members of Prosper Funding LLC requesting individual consumer loans, which are referred to in this prospectus as “borrower loans.”  In addition, each listing will be described in a prospectus supplement.

Important terms of the Notes include the following, each of which is described in detail in this prospectus:

· The Notes are special, limited obligations of Prosper Funding LLC only and are not obligations of its parent company, Prosper Marketplace, Inc. or of the borrowers under the corresponding borrower loans.

· Prosper Funding LLC’s obligation to make payments on a Note will be limited to an amount equal to the Note holder’s pro rata share of amounts Prosper Funding LLC receives with respect to the corresponding borrower loan, net of any servicing fees.  Neither Prosper Funding LLC nor Prosper Marketplace, Inc. guarantees payment of the Notes or the corresponding borrower loans.

· The Notes will bear interest from the date of issuance, have a fixed rate, be payable monthly and have an initial maturity of one, three or five years from issuance.  Prosper Funding LLC may add additional Note terms from time to time.

· A Note holder’s recourse will be extremely limited in the event that borrower information is inaccurate for any reason.

Important terms of the PMI Management Rights include the following, each of which is described in detail in this prospectus:

· The PMI Management Rights will not be separable from the Notes offered on the platform and will not be assigned a value separate from the Notes.

· The PMI Management Rights will consist of Prosper Marketplace, Inc.’s obligations under the Administration Agreement, which obligations relate to the services Prosper Marketplace, Inc. will provide to Prosper Funding LLC as described in this prospectus.

· Note holders will have limited rights, collectively through their indenture trustee, to enforce the PMI Management Rights.

Prosper Funding LLC will offer the Notes to its lender members at 100% of their principal amount.

The Notes and PMI Management Rights will be issued in electronic form only and will not be listed on any securities exchange.  The Notes and PMI Management Rights will not be transferable except through the Folio Investing Note Trader platform, or the “Note Trader Platform,” operated and maintained by FOLIOfn Investments, Inc., a registered broker-dealer.  There can be no assurance, however, that a market for Notes will develop on the Note Trader platform.  Therefore, note purchasers must be prepared to hold their Notes and PMI Management Rights to maturity.

Prosper Funding LLC is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”).

This offering is highly speculative and the Notes involve a high degree of risk.  Investing in the Notes should be considered only by persons who can afford the loss of their entire investment.  See “Risk Factors” on page 12.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.

The date of this prospectus is _____, 2012

TABLE OF CONTENTS

PART I
ABOUT THIS PROSPECTUS	iii
WHERE YOU CAN FIND MORE INFORMATION	iv
PROSPECTUS SUMMARY	1
THE OFFERING	5
FORWARD – LOOKING STATEMENTS	10
RISK FACTORS	12
RISKS RELATED TO BORROWER DEFAULT	12
RISKS INHERENT IN INVESTING IN THE NOTES	19
RISKS RELATED TO PROSPER FUNDING AND PMI, THE PLATFORM AND PROSPER FUNDING AND PMI’S ABILITY TO SERVICE THE NOTES	23
RISKS RELATING TO COMPLIANCE AND REGULATION	35
USE OF PROCEEDS	40
PLAN OF DISTRIBUTION	40
FINANCIAL SUITABILITY REQUIREMENTS	40
ABOUT THE PLATFORM	41
SUMMARY OF INDENTURE, FORM OF NOTES AND ADMINISTRATION AGREEMENT	75
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS	88
INFORMATION ABOUT PROSPER FUNDING LLC	95
INFORMATION ABOUT PROSPER MARKETPLACE, INC.	104
GOVERNMENT REGULATION	109
MANAGEMENT	112
EXECUTIVE COMPENSATION	121
TRANSACTIONS WITH RELATED PARTIES	121
PRINCIPAL SECURITYHOLDERS	125
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	131
LEGAL MATTERS	142
EXPERTS	142
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND BALANCE SHEET	II-2

i

PART II
Item 13. Other Expenses of Issuance and Distribution	II-8
Item 14. Indemnification of Directors and Officers	II-8
Item 15. Recent Sale of Unregistered Securities	II-11
Item 16. Exhibits and Financial Statements Schedules	II-13
Item 17. Undertakings	II-13
SIGNATURES	S-1
EXHIBIT INDEX	E-1

ii

ABOUT THIS PROSPECTUS

This prospectus describes Prosper Funding LLC’s offering of Borrower Payment Dependent Notes, or “Notes.”  In addition, a PMI Management Right issued by Prosper Marketplace, Inc. is deemed to be attached to each Note issued by Prosper Funding LLC.  Such PMI Management Right will not be separable from the Note to which it is attached and will not be assigned any value separate from such Note.  This prospectus is part of a registration statement filed with the Securities and Exchange Commission, which is referred to herein as the “SEC.” This prospectus, and the registration statement of which it forms a part, speak only as of the date of this prospectus.   Prosper Funding LLC and Prosper Marketplace, Inc. will supplement this registration statement from time to time as described below.

Unless the context otherwise requires, this prospectus shall refer to Prosper Funding LLC as “Prosper Funding” and to Prosper Marketplace, Inc. as “PMI.”  For the purposes of this registration statement, the Notes and the PMI Management Rights will be collectively referred to as “the Securities.”

The offering described in this prospectus is a continuous offering pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).  The Securities are offered continuously and sales of the Securities through the platform occur on a daily basis.  When Prosper Funding posts a loan request on the platform, that posting constitutes an offer by Prosper Funding to sell the series of Notes corresponding to that request.  As used in this prospectus, a “loan listing” or a “listing” shall refer to a posted loan request.  Prosper Funding and PMI prepare regular supplements to this prospectus, which are called “listing reports.”  In each listing report, Prosper Funding and PMI provide information about the most recent loan listings posted on the platform and the series’ of Notes that correspond to those listings.  Prosper Funding and PMI will also regularly file prospectus supplements that are called “sales reports,” describing the bidding history, funding, interest rate and maturity date for each series of Notes sold through the platform.  These prospectus supplements will provide information about the Notes that will correspond to the information contained in the corresponding borrower listings.  These listing and sales reports will also be posted on Prosper Funding’s website.

Prosper Funding and PMI will prepare prospectus supplements to update this prospectus for other purposes, such as to disclose changes to the terms of the offering of the Notes, provide quarterly updates of financial and other information included in this prospectus and disclose other material developments.  These prospectus supplements will be filed with the SEC pursuant to Rule 424(b) and will be posted on Prosper Funding’s website.  When required by SEC rules, such as when there is a “fundamental change” in the offering or the information contained in this prospectus, or when an annual update of financial information is required by the Securities Act or SEC rules, Prosper Funding and PMI will file post-effective amendments to the registration statement of which this prospectus forms a part, which will include either a prospectus supplement or an entirely new prospectus to replace this prospectus.  Prosper Funding and PMI currently anticipate that post-effective amendments will be required, among other times, when there are changes to the material terms of the Notes.

The Securities are not available for offer and sale to residents of every state.  Prosper Funding’s website will indicate the states where residents may purchase the Securities.  Prosper Funding will post on its website any special suitability standards or other conditions applicable to purchases of the Securities in certain states that are not otherwise set forth in this prospectus.

iii

WHERE YOU CAN FIND MORE INFORMATION

Prosper Funding and PMI have filed a registration statement on Form S-1 with the SEC in connection with this offering.  In addition, Prosper Funding and PMI are required to file annual, quarterly and current reports and other information with the SEC.  You may read and copy the registration statement and any other documents Prosper Funding or PMI has filed at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C.  20549.  Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.  Prosper Funding and PMI’s SEC filings are also available to the public at the SEC’s Internet site at http://www.sec.gov.

This prospectus is part of the registration statement and does not contain all of the information included in the registration statement and the exhibits, schedules and amendments to the registration statement.  Some items are omitted in accordance with the rules and regulations of the SEC.  For further information with respect to Prosper Funding, PMI and the Securities, please refer to the registration statement and to the exhibits and schedules to the registration statement filed as part of the registration statement.  Whenever a reference is made in this prospectus to any of Prosper Funding or PMI’s contracts or other documents, the reference may not be complete and, for a copy of the contract or document, you should refer to the exhibits that are a part of the registration statement.

PMI “incorporates” into this prospectus information it filed with the SEC in its Annual Report on Form 10-K/A (“Annual Report”) for the fiscal year ended December 31, 2011 filed on November 14, 2012, its Quarterly Report on Form 10-Q for the period ended September 30, 2012 filed on November 7, 2012 (“Quarterly Report”), its Current Report on Form 8-K filed on March 7, 2012, its Current Report on Form 8-K filed on March 15, 2012 and its Current Report on Form 8-K filed on June 25, 2012 (“Current Reports”). This means that Prosper Funding and PMI disclose important information to you by referring you to PMI’s Annual Report for the fiscal year ended December 31, 2011, its Quarterly Report for the period ended September 30, 2012 and its Current Reports on Form 8-K filed on March 7, 2012, March 15, 2012 and June 25, 2012, which are available at www.prosper.com. The information incorporated by reference is considered to be part of this prospectus. Information contained in this prospectus automatically updates and supersedes previously filed information.

You may request a copy of PMI’s Annual Report, Quarterly Report and its Current Reports, which will be provided to you at no cost, by writing, telephoning or emailing PMI. Requests should be directed to Customer Support, 111 Sutter St, 22nd Floor, San Francisco, CA 94104; telephone number (415) 593-5400; or emailed to support@prosper.com. In addition, PMI’s Annual Reports and Quarterly Reports are available at www.prosper.com.

iv

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including the financial statements and related notes, and the risk factors beginning on page 12, before deciding whether to purchase the Notes.

Prosper Funding operates a peer-to-peer online credit platform, which this prospectus refers to as the “platform,” that enables Prosper Funding’s borrower members to borrow money and its lender members to purchase Borrower Payment Dependent Notes, or Notes, issued by Prosper Funding, the proceeds of which facilitate the funding of the loans made to borrower members. The peer-to-peer lending industry is a very innovative and unique industry, and the application of federal and state laws in areas such as securities and consumer finance to Prosper Funding’s business is still evolving.  Prosper Funding is a wholly-owned subsidiary of PMI.

Prospective investors should note thatProsper Funding is an “emerging growth company” under the federal securities laws and will therefore be subject to reduced public company reporting requirements.

About the Platform

PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  In connection with this offering, PMI will transfer ownership of the platform, including all of the rights related to the operation of the platform, to Prosper Funding.

PMI and WebBank expect to enter into a Loan Account Program Agreement, pursuant to which PMI, as agent of WebBank, manages the operation of the platform in connection with the submission of loan applications by potential borrowers, the making of related loans by WebBank and the funding of such loans by WebBank.  Prosper Funding and PMI expect to enter into an Administration Agreement, pursuant to which PMI has agreed to manage all other aspects of the platform on behalf of Prosper Funding.  Prior to the commencement of this offering, PMI operated the platform, facilitated the origination of loans by WebBank through the platform and issued and sold notes corresponding to those loans.  Borrower loans originated and notes issued and sold through the platform prior to the commencement of this offering are referred to as “PMI Borrower Loans” and “PMI Notes,” respectively.  The PMI Notes are not offered pursuant to this prospectus.

Loan Listings.    A loan listing, or a listing, is a request by a Prosper Funding borrower member for a borrower loan in a specified amount that is posted on the platform by the borrower member.  A borrower member who posts a loan listing is referred to as an “applicant” and an applicant who obtains a loan through the platform as a “borrower.”  PMI adds to each listing additional information, including the desired loan amount, interest rate and corresponding yield percentage, the minimum amount of total bids required for the loan to fund, the Prosper Rating and estimated loss rate for the listing, the applicant’s debt-to-income ratio, certain credit information from the applicant’s credit report, the applicant’s numerical credit score range, and the applicant’s self-reported annual income range, occupation and employment status.  Neither Prosper Funding nor PMI guarantees payment of the Notes or the corresponding borrower loans.

The Prosper Rating is a proprietary credit rating that PMI assigns to each listing.  The Prosper Rating is a letter that indicates the level of risk associated with a listing and corresponds to an estimated average annualized loss rate range for the listing.  There are currently seven Prosper Ratings, represented by seven letter scores, but this, as well as the loss ranges associated with each, may change over time as the marketplace dictates.  The estimated loss rate for each listing is based on two scores: a consumer reporting agency score and an in-house custom score calculated using the historical performance of previous borrower loans with similar characteristics.  PMI will use these two scores to determine an estimated loss rate for each listing, which correlates to a Prosper Rating.  This rating system allows for consistency when assigning ratings to listings.  See “About the Platform – Risk Management” for more information.

Bidding on Listings.    A bid on a listing is a lender member’s commitment to purchase a Note in the principal amount of the lender member’s bid that will be dependent for payment on the payments Prosper Funding receives on the borrower loan described in the listing.  After a listing is posted, lender members can place bids on that listing until the listing has received bids totaling the requested loan amount.  Currently, a bid may be between $25 and the full amount of the requested loan.  A lender member who wishes to bid on a listing must have funds in the amount of the bid in his lender member account at the time the bid is made.  See “About the Platform—Structure of Lender Member Accounts and Treatment of Lender Member Balances” for more information.  Once a bid is placed, it is irrevocable, and the amount of the bid may not be withdrawn from the lender member’s account, unless the bidding period expires without the listing having received enough bids to be funded.  Once the listing has received bids totaling the requested loan amount, no further bids can be placed.  The maximum length of the bidding period is 14 days.  If the listing does not receive bids equal to or exceeding the minimum amount required for the listing to fund by the close of the fourteenth day after the listing is posted, the listing will terminate and the requested loan will not be funded.

1

Borrower Loans.    If at the end of the bidding period the listing has received bids equal to or exceeding the minimum amount required to fund, a loan will be made to the applicant in an amount equal to the total amount of all winning bids.  All borrower loans are unsecured obligations of individual borrower members with a fixed interest rate set by PMI and a loan term currently set at one, three or five years, although Prosper Funding may expand the range of available loan terms in the future to between three months and seven years.  The minimum and maximum principal amounts for borrower loans are currently $2,000 and $25,000, respectively, but in the future Prosper Funding may permit borrowers to request loans in principal amounts between $500 and $35,000.  All borrower loans are funded by WebBank, a Federal Deposit Insurance Corporation (“FDIC”) insured, Utah-chartered industrial bank.  After funding a borrower loan, WebBank sells and assigns the loan to Prosper Funding, without recourse to WebBank, in exchange for the principal amount of the borrower loan.  WebBank has no obligation to Note holders.

For all borrower loans, PMI verifies the applicant’s identity against data from consumer reporting agencies and other identity and anti-fraud verification databases.  Loan listings can be posted without PMI obtaining any documentation of the applicant’s ability to afford the loan.  In some instances, PMI verifies the income or employment information provided by applicants in listings.  This verification is normally done after the listing has been created but before the loan is funded, and therefore the results of the verification process are not reflected in the loan listings.  If it is unable to verify material information with respect to an applicant or listing, PMI will cancel or refuse to post the listing or cancel any or all commitments against the listing.  PMI may also delay funding of a borrower loan in order to verify the accuracy of information provided by an applicant in connection with the listing, or to determine whether there are any irregularities with respect to the listing.  If PMI identifies material misstatements or inaccuracies in the listing or in other information provided by the applicant, it will cancel the listing or related loan.  See “About the Platform—Borrower Identity and Financial Information Verification.”

The Notes. Prosper Funding issues and sells a series of Notes for each borrower loan that is funded on the platform.  The Notes are sold to the lender members who successfully bid on the corresponding loan listing in the principal amounts of their respective bids.  Each series of Notes is dependent for payment on payments Prosper Funding receives on the corresponding borrower loan.  Prosper Funding uses the proceeds of each series of Notes to purchase the corresponding borrower loan from WebBank.

Prosper Funding will pay each Note holder principal and interest on the Note in an amount equal to each such Note’s pro rata portion of the principal and interest payments, if any, that Prosper Funding receives on the corresponding borrower loan, net of Prosper Funding’s servicing fee, which is currently set at 1% per annum of the outstanding principal balance of the corresponding loan prior to applying the current payment.  Prosper Funding may in the future increase the servicing fee to a percentage that is greater than 1% but less than or equal to 3% per annum.  Any change to Prosper Funding’s servicing fee will only apply to Notes offered and sold after the date of the change.  Prosper Funding will pay Note holders any other amounts it receives on the corresponding borrower loans, including late fees and prepayments, subject to its servicing fee, except that it will not pay Note holders any non-sufficient funds fees for failed borrower payments that it receives.  In addition, the funds available for payment on the Notes will be reduced by the amount of any attorneys’ fees or collection fees a third-party servicer or collection agency imposes in connection with collection efforts related to the corresponding borrower loan.  Notwithstanding the foregoing, no payments will be made on any Note after its final maturity date.  See “The Offering—Final maturity date/Extension of maturity date.”

Under the Indenture, if a “Repurchase Event” occurs with respect to a Note, Prosper Funding will, at its sole option, either repurchase the Note from the holder or indemnify the holder of the Note for any losses resulting from nonpayment of the Note or from any claim, demand or defense arising as a result of such Repurchase Event.  A “Repurchase Event” occurs with respect to a Note if (i) a Prosper Rating different from the Prosper Rating actually calculated by Prosper Funding was included in the listing for the corresponding borrower loan and the interest of the holder in the Note is materially and adversely affected, (ii) a Prosper Rating different from the Prosper Rating that should have appeared was included in the listing for the corresponding borrower loan because either Prosper Funding inaccurately input data into, or inaccurately applied, the formula for determining the Prosper Rating and, as a result, the interest of the holder in the Note is materially and adversely affected, or (iii) the corresponding borrower loan was obtained as a result of verifiable identify theft on the part of the purported borrower member and a material payment default under the corresponding borrower loan has occurred.

Under Prosper Funding’s lender member registration agreement, Prosper Funding represents and warrants  that (i) if a lender member uses an automated bidding tool or order execution service offered by Prosper Funding, such as Quick Invest, Auto Quick Invest or Premier, to identify Notes for purchase, each Note purchased will conform to the investment criteria provided by the lender member through such tool or service, and (b) each Note that a lender member purchases from Prosper Funding will be in the principal amount of the bid such lender member placed and will correspond to the borrower loan on which such lender member bid.  If Prosper Funding breaches either of these representations and warranties and, as a result, the Note sold to a lender member is materially different from the Note that would have been sold had the breach not occurred or if the lender member would not have purchased the Note at all absent such breach, Prosper Funding will, at its sole option, either indemnify the lender member from any losses resulting from such breach, repurchase the Note or cure the breach, if the breach is susceptible to cure.  If Prosper Funding breaches any of its other representations and warranties in the lender member registration agreement and such breach materially and adversely affects a lender member’s interest in a Note, Prosper Funding will, at its sole option, either indemnify the lender member, repurchase the affected Note from such lender member or cure the breach.  If Prosper Funding repurchases any Notes, PMI will concurrently repurchase the related PMI Management Right for zero consideration. For more information about Prosper Funding’s repurchase and indemnification obligations under the indenture and the lender member registration agreements, see “About the Platform—Note Repurchase and Indemnification Obligations.”

2

PMI Management Rights.    PMI is the issuer of an investment contract that consists of its obligations under the Administration Agreement.  PMI’s obligations under the Administration Agreement relate to the services it will provide to Prosper Funding under the Administration Agreement as described in this prospectus.  Pursuant to the Administration Agreement, PMI will provide three kinds of services to Prosper Funding: (i) PMI will manage the operation of the platform itself (credit policy revisions, systems maintenance, etc.) (the “Loan Platform Administration Services”); (ii) PMI will provide back-office services to Prosper Funding (maintaining  books and records, making periodic regulatory filings, performing limited cash management functions, etc.) (the “Corporate Administration Services”); and (iii) PMI will service the loans and notes originated through the platform (the “Loan and Note Servicing Services”).  Holders of PMI Management Rights will have a limited ability, collectively through their indenture trustee, to enforce PMI’s obligations under the Administration Agreement.  PMI's obligations to provide services under the Administration Agreement may be terminated by PMI or by Prosper Funding under certain circumstances described in this prospectus. For more information, see “Summary of Indenture, Form of Notes, PMI Management Rights and Administration Agreement—PMI Management Rights.”

The PMI Management Rights will be attached to the Notes and consist solely of PMI’s obligations under the Administration Agreement.  They will not be separable from the Notes and will not be assigned a value separate from the Notes.

Servicing and Loan Platform Administration.    Prosper Funding is responsible for servicing the borrower loans and Notes.  Following its purchase of borrower loans and sale of Notes corresponding to the borrower loans, Prosper Funding begins servicing the borrower loans and Notes.  Borrower loans that become more than 30 days past-due are referred to a third party collection agency for collection. See “About the Platform – Loan Servicing and Collection.”

Prosper Funding expects to enter into an Administration Agreement with PMI, pursuant to which Prosper Funding has engaged PMI to assist it in servicing the borrower loans, managing the platform, and in performing other duties.  Pursuant to the Administration Agreement, PMI will provide a variety of administrative and management services, including, but not limited to, supervision of:

· the management, maintenance and operation of the platform;

· the issuance, sale and payment of the Notes;

· Prosper Funding’s purchase of borrower loans;

· the operation of www.prosper.com;

· Prosper Funding’s compliance with applicable federal and state laws (including consumer protection laws, state lender licensing requirements and securities registration requirements);

· the applicant verification and eligibility processes;

· the posting of listings on the platform; and

· the assignment of a Prosper Rating and an interest rate to each listing.

See “About the Platform,” “Summary of Indenture, Form of Notes and Administration Agreement—Administration Agreement” and “Information About Prosper Marketplace, Inc.” for more information.

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Quick Invest.  The platform includes a loan search tool, Quick Invest, that makes it easier for lender members to identify Notes that meet their investment criteria.  A lender member using Quick Invest is asked to indicate (i) the Prosper Rating or Ratings she wishes to use as search criteria, (ii) the total amount she wishes to invest and (iii) the amount she wishes to invest per Note.  If she wishes to search for Notes using criteria other than, or in addition to, Prosper Rating, she can use one or more of several dozen additional search criteria, such as loan amount, debt-to-income ratio and credit score.  The only criteria a lender member cannot specify in Quick Invest are the listing description and the monthly payment amount.  Quick Invest then compiles a basket of Notes for her consideration that meet her search criteria.  If the pool of Notes that meet her criteria exceeds the total amount she wishes to invest, Quick Invest selects Notes from the pool based on how far the listings corresponding to the Notes have progressed through the loan verification process,   i.e.  , Notes from the pool that correspond to listings for which PMI has completed the verification process will be selected first.  If the pool of Notes that meet the lender member’s specified criteria and for which PMI has completed verification still exceeds the amount she wishes to invest, Quick Invest selects Notes from that pool based on the principle of first in, first out,   i.e.  ,  the Notes from the pool with the corresponding listings that were posted earliest will be selected first.  If the pool of Notes that meet the lender member’s criteria exceeds the amount she wishes to invest, but the subset of that pool for which PMI has completed loan verification does not equal the amount she wishes to invest, Quick Invest selects all of the Notes that correspond to listings for which PMI has completed loan verification and makes up the difference by selecting Notes from the remaining pool on a first in, first out basis.  If the lender member’s search criteria include multiple Prosper Ratings, Quick Invest divides the lender’s basket into equal portions, one portion representing each Prosper Rating selected.  To the extent available Notes with these Prosper Ratings are insufficient to fill the lender member’s order, the lender member is advised of this shortfall and given an opportunity either to reduce the size of her order or to modify her search criteria to make her search more expansive.  The Auto Quick Invest feature allows lender members (i) to have Quick Invest searches run on their designated criteria automatically each time new listings are posted on the platform, and (ii) to have bids placed automatically on any Notes identified by each such search.  See “About the Platform—How to Bid to Purchase Notes—Quick Invest.”

PMI’s historical financial results and much of the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects the structure of the lending platform and PMI’s operations prior to July 13, 2009. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in PMI’s Annual Report for the fiscal year ended December 31, 2011, pages 73-83, which is incorporated by reference in this prospectus.

Corporate Information

Prosper Marketplace, Inc.  PMI was incorporated in the State of Delaware in March 2005.  Its principal executive offices are located at 111 Sutter Street, 22nd Floor, San Francisco, California 94104.  Its telephone number at this location is (415) 593-5400.

Prosper Funding LLC.  PMI formed Prosper Funding LLC in the State of Delaware in February 2012.  Prosper Funding’s principal executive offices are located at 111 Sutter Street, 22nd Floor, San Francisco, California 94104.  Its telephone number at this location is (415) 593-5479.  Its website address is   www.prosper.com.    The information contained on its website is not incorporated by reference into this prospectus.

Prosper Funding has been organized and will be operated in a manner that is intended (i) to minimize the likelihood that it will become subject to bankruptcy proceedings, and (ii) to minimize the likelihood that it would be substantively consolidated with PMI, and thus have its assets subject to claims by PMI’s creditors, if PMI files for bankruptcy.  This is achieved by placing certain restrictions on Prosper Funding’s activities, including its transactions with PMI, and implementing certain formalities designed to expressly reinforce Prosper Funding’s status as a distinct corporate entity from PMI. See “Information About Prosper Funding LLC.”

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THE OFFERING

Borrower Payment Dependent Notes

Issuer	Prosper Funding LLC
Securities offered	Borrower Payment Dependent Notes, or “Notes,” issued in series, with each series dependent for payment on payments Prosper Funding receives on a specific corresponding borrower loan.
Offering price	100% of the principal amount of each Note.
Initial maturity date	Maturities are for one, three or five years and match the maturity date of the corresponding borrower loan.  Prosper Funding may in the future extend the range of available loan terms to between three months and seven years, at which time the Notes will have terms between three months and seven years.
Final maturity date  /  Extension of maturity date	The final maturity date of each Note is the date that is one year after the initial maturity date. Each Note will mature on the initial maturity date, unless any principal or interest payments in respect of the corresponding borrower loan remain due and payable to Prosper Funding upon the initial maturity date, in which case the maturity of the Note will be automatically extended to the final maturity date.  Each Note will mature on its final maturity date, even if principal or interest payments in respect of the corresponding borrower loan remain due and payable.  Prosper Funding will have no further obligation to make payments on the Notes after the final maturity date even if it receives payments on the corresponding borrower loan after such date.
Interest rate	Each series of Notes will have a stated, fixed interest rate equal to the loan yield percentage specified in the related loan listing as determined by Prosper Funding, which is the interest rate for the corresponding borrower loan, net of servicing fees.
Setting interest rate for Notes	Interest rates vary among the Notes, but each series of Notes will have the same interest rate. PMI, on behalf of Prosper Funding, sets the interest rates for borrower loans based on Prosper Ratings, as well as additional factors such as loan terms, group affiliations, the economic environment and competitive conditions.  The interest rate on each Note is equal to the interest rate on the corresponding borrower loan, net of servicing fees. See “About the Platform—Setting Interest Rates.”
Payments on the Notes	Prosper Funding will pay principal and interest on any Note a lender member purchases in an amount equal to the lender member’s   pro rata   portion of the principal and interest payments, if any, Prosper Funding receives on the corresponding borrower loan, net of servicing fees and other charges.  See “The Offering—Servicing Fees and Other Charges.” Each Note will provide for monthly payments over a term equal to the corresponding borrower loan. The payment dates for the Notes will fall on the sixth business day after the due date for each installment of principal and interest on the corresponding borrower loan, although interest will be deemed to accrue thereon only through each corresponding loan payment date. See “Summary of Indenture, Form of Notes and Administration Agreement—Indenture and Form of Notes” for more information.

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Borrower loans

Lender members will designate Prosper Funding to apply the proceeds from the sale of each series of Notes to the purchase of the corresponding borrower loan from WebBank.  Each borrower loan is a fully amortizing consumer loan made by WebBank to an individual borrower member.  Borrower loans currently have a term of one, three or five years, but Prosper Funding may in the future extend the range of available loan terms to between three months and seven years.   Borrower members may request loans within specified minimum and maximum principal amounts (currently between $2,000 and $25,000, but which may increase to between $500 and $35,000), which are subject to change from time to time.  WebBank subsequently sells and assigns the borrower loans to Prosper Funding without recourse in exchange for the principal amount of the borrower loan.  Borrower loans provide for monthly payments over the term equal thereof and are unsecured and unsubordinated.  Borrower loans may be repaid at any time by the borrowers without prepayment penalty.  PMI verifies each applicant’s identity against data from consumer reporting agencies and other identity and anti-fraud verification databases.  Loan listings can be posted without PMI obtaining any documentation of the applicant’s ability to afford the loan.  PMI sometimes verifies the income or employment information provided by applicants.  This verification is normally done after the listing has been created but before the loan has funded, and therefore the results of the verification are not reflected in the listings.  See “About the Platform—Borrower Identity and Financial Information Verification” for more information. Borrower members are able to use the loan proceeds for any purpose other than (i) buying, carrying or trading in securities or buying or carrying any part of an investment contract security or (ii) paying for postsecondary educational expenses (  i.e.  , tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term “postsecondary educational expenses is defined in Bureau of Consumer Finance Protection Regulation Z, 12 C.F.R. § 1026.46(b)(3), and they warrant and represent that they will not use the proceeds for any such purposes.

Security interest—ranking

The Notes will not be contractually senior or contractually subordinated to other indebtedness, if any, that Prosper Funding incurs.  All Notes will be special, limited obligations of Prosper Funding.  Prosper Funding was formed by PMI so that, in the event of PMI’s bankruptcy, the borrower loans that Prosper Funding owns should be shielded from claims by PMI’s creditors, thereby protecting the interests of Note holders in those borrower loans and the proceeds thereof.  This is achieved by placing certain restrictions on Prosper Funding’s activities, including restrictions in Prosper Funding’s organizational documents on its ability to incur additional indebtedness, and by implementing certain formalities designed to expressly reinforce its status as a distinct corporate entity from PMI. Nevertheless, the Notes themselves do not restrict Prosper Funding’s incurrence of other indebtedness or the grant or imposition of liens or security interests on Prosper Funding’s assets, and holders of the Notes do not themselves have a direct security interest in the corresponding borrower loan or the proceeds of that loan.  Accordingly, in the event of a bankruptcy or similar proceeding of Prosper Funding, the relative rights of a holder of a Note may be uncertain. To further limit the risk of Prosper Funding’s insolvency, Prosper Funding has therefore granted the indenture trustee, for the benefit of the Note holders, a security interest in the borrower loans, the payments and proceeds that Prosper Funding receives on the borrower loans, the bank account in which the borrower loan payments are deposited and the FBO account.  The indenture trustee may exercise its legal rights to the collateral only if an event of default has occurred under the Amended and Restated Borrower Payment Dependent Notes Indenture for the Notes (the “indenture”), which would include Prosper Funding’s becoming subject to a bankruptcy or similar proceeding.  Only the indenture trustee, not the holders of the Notes, has a security interest in the above collateral.  If the indenture trustee were to exercise its legal rights to the collateral, the indenture provides that amounts collected on a particular borrower loan (minus allowable fees and expenses) are to be applied to amounts due and owing on the corresponding Note.  There can be no assurance, however, that the indenture trustee, or ultimately the Note holders, would realize any amounts from the collateral.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.

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Servicing fees and other charges	Prosper Funding subtracts a servicing fee from every loan payment it receives.  The amount of the servicing fee deducted from a particular payment is equal to (a) the product obtained by multiplying the applicable annual servicing fee rate by a fraction, the numerator of which is equal to the number of days since the borrower’s last payment (or, if applicable, since the date on which the relevant loan was funded) and the denominator of which is 365, multiplied by (b) the outstanding principal balance of the loan prior to applying the current payment.  The servicing fee rate is currently set at 1% per annum of the outstanding principal balance of the corresponding loan prior to applying the current payment, but Prosper Funding may increase that in the future to a rate greater than 1% but less than or equal to 3% per annum.  Any change to the servicing fee will only apply to Notes offered and sold after the date of the change.  Listings set forth the applicable servicing fee.  Because servicing fees reduce the effective yield to lenders, the yield percentage displayed in each listing is net of servicing fees. Prosper Funding will retain any non-sufficient funds fees charged to a borrower’s account to cover its administrative expenses.  If a borrower loan enters collection, the collection agency will charge a collection fee of between 17% and 40% of any amounts that are obtained, in addition to any legal fees incurred in the collection effort.  The collection fee will vary depending on the collection agency used.  The collection fees charged by the various collection agencies can be accessed through hyperlinks found on the bidding page on the platform.  These fees will correspondingly reduce the amounts of any payments that Note holders receive on the corresponding Notes and are not reflected in the yield percentage displayed in listings. Prosper Funding will pay lender members any late fees it receives on borrower loans.
Use of proceeds	Prosper Funding will use the proceeds of each series of Notes to purchase the corresponding borrower loan.
Electronic form and transferability	The Notes will be issued in electronic form only and will not be listed on any securities exchange.  The Notes will not be transferable except through the Folio Investing Note Trader platform operated and maintained by FOLIOfn Investments, Inc., a registered broker-dealer. There can be no assurance that a market for the Notes will develop on the Note Trader platform and, therefore, lender members must be prepared to hold their Notes to maturity.  See “About the Platform—Note Trader Platform” for more information.
U.S. federal income tax consequences	Although the matter is not free from doubt, Prosper Funding intends to treat the Notes as its debt instruments that have original issue discount (“OID”) for U.S. federal income tax purposes. Accordingly, if you hold a Note, you will be required to include OID currently as ordinary interest income for U.S. federal income tax purposes (which may be in advance of interest payments on the Note) if the Note has a maturity date of more than one year, regardless of your regular method of tax accounting.  If the Note has a maturity of one year or less, (1) if you are a cash-method taxpayer, in general, you will not have to include OID currently in income on your Note unless you elect to do so, and (2) if you are an accrual-method taxpayer, in general, you will have to include OID currently in income on your Note.  You should consult your own tax advisor regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership, and disposition of the Notes (including any possible differing treatments of the Notes). See “Material U.S. Federal Income Tax Considerations” for more information.
Financial suitability	To purchase the Securities, lender members located in Alaska, Idaho, Missouri, Nevada, New Hampshire, Virginia or Washington must meet one or more of the following suitability requirements:
	a.	(i) You must have an annual gross income of at least $70,000; (ii) your net worth must be at least $70,000 (exclusive of home, home furnishings and automobiles); and (iii) the total amount of Securities you purchase cannot exceed 10% of your net worth (exclusive of home, home furnishings and automobiles); or
	b.	(i) Your net worth must be at least $250,000 (exclusive of home, home furnishings and automobiles); and (ii) the total amount of Securities you purchase cannot exceed 10% of your net worth (exclusive of home, home furnishings and automobiles).
	Lender members that are residents of California must meet one or more of the following suitability requirements:
	a.	(i) You must have had an annual gross income of at least $85,000 during the last tax year; (ii) you must have a good faith belief that your annual gross income for the current tax year will be at least $85,000; and (iii) the total amount of Securities you purchase cannot exceed 10% of your net worth; or
	b.	(i) Your net worth must be at least $200,000; and (ii) the total amount of Securities you purchase cannot exceed 10% of your net worth; or
	c.	(i) Your net investment in Securities cannot exceed $2,500; and (ii) the total amount of Securities you purchase cannot exceed 10% of your net worth.
	The Maine Office of Securities recommends that an investor’s aggregate investment in this offering and similar offerings not exceed 10% of the investor’s liquid net worth.  For this purpose, “liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities. For purposes of these suitability requirements, you and your spouse are considered to be a single person.  In addition, the following definitions apply: "annual gross income" means the total amount of money you earn each year, before deducting any amounts for taxes, insurance, retirement contributions or any other payments or expenses; "net worth" means the total value of all your assets, minus the total value of all your liabilities. The value of an asset is equal to the price at which you could reasonably expect to sell it. In calculating your net worth, you should only include assets that are liquid, meaning assets that consist of cash or something that could be quickly and easily converted into cash, such as a publicly-traded stock. You shouldn't include any illiquid assets, such as homes, home furnishings or cars; "net investment" means the principal amount of Securities purchased, minus principal payments received on the Securities. Lender members should be aware that Prosper Funding may apply more restrictive financial suitability standards or maximum investment limits to residents of certain states.  If established, before making commitments to purchase Securities each lender member will be required to represent and warrant that he or she meets these minimum financial suitability standards and maximum investment limits.  See “Financial Suitability Requirements” for more information.

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PMI MANAGEMENT RIGHTS

Issuer	Prosper Marketplace, Inc.
Securities offered	PMI Management Rights issued by PMI and attached to the Notes offered on the platform.  The PMI Management Rights will consist of PMI’s obligations under the Administration Agreement.  PMI’s obligations under the Administration Agreement relate to the services PMI will provide to Prosper Funding as described in this prospectus.
Offering price	No separate consideration will be paid for the PMI Management Rights and such securities will not be separable from the Notes.
Use of proceeds	PMI will not receive any proceeds from the issuance of the PMI Management Rights.
Electronic form and transferability	The PMI Management Rights will be issued in electronic form only.
Enforceability	Holders of PMI Management Rights will not have the right individually to enforce PMI’s obligations under the Administration Agreement, but they will have certain rights collectively to cause the indenture trustee to enforce its rights as a third-party beneficiary under the Administration Agreement. PMI's obligations to provide services under the Administration Agreement may be terminated by PMI or by Prosper Funding under certain circumstances described in this prospectus. For more information, see “Summary of Indenture, Form of Notes, PMI Management Rights and Administration Agreement—Administration Agreement—Indenture Trustee as Third-Party Beneficiary.”
U.S. federal income tax consequences	PMI expects that the purchase, sale and holding of the PMI Management Rights will not have any U.S. federal income tax consequences.
Financial suitability	See “The Offering—Borrower Payment Dependent Notes—Financial Suitability.”

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The following diagram illustrates the basic structure of the platform for a single series of Notes.  This graphic does not demonstrate many details of the platform, including the effect of prepayments, late payments, late fees or collection fees.  See “About the Platform” on page 40 for more information.

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 FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements.  Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. In particular, information appearing under “About the Platform,” “Risk Factors” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus, as well as the information appearing under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in PMI’s Annual Report for the fiscal year ended December 31, 2011, pages 73 to 83, which are incorporated by reference in this prospectus, includes forward-looking statements.  Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements.  Where, in any forward-looking statement, Prosper Funding or PMI expresses an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of Prosper Funding and PMI’s respective managements and is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished.  The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated:

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

· Prosper Funding’s ability to make payments on the Notes, including in the event that borrowers fail to make payments on the corresponding loans;

· the reliability of the information about borrowers that is supplied by borrowers;

· Prosper Funding and PMI’s ability to service the loans, and their ability or the ability of a third party debt collector to pursue collection against any borrower, including in the event of fraud or identity theft;

· credit risks posed by the creditworthiness of borrowers, the lack of a maximum debt-to-income ratio for borrowers, and the effectiveness of the credit rating systems;

· actions by some borrowers to defraud lender members and risks associated with identity theft;

· Prosper Funding and PMI’s limited operational history and lack of significant historical performance data about borrower performance;

· the impact of current economic conditions on the performance of the Notes and loss rates of the Notes;

· payments by borrowers on the loans in light of the facts that the loans do not impose restrictions on additional borrower debt and do not include cross-default provisions;

· Prosper Funding and PMI’s compliance with applicable local, state and federal law, including the Investment Advisers Act of 1940, the Investment Company Act of 1940 and other laws;

· potential efforts by state regulators or litigants to characterize Prosper Funding or PMI, rather than WebBank, as the lender of the borrower loans;

· the application of federal and state bankruptcy and insolvency laws to borrowers, Prosper Funding and PMI;

· the impact of borrower delinquencies, defaults and prepayments on the returns on the Notes;

· the lack of a public trading market for the Notes and any inability to resell the Notes on the Note Trader platform;

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· the federal income tax treatment of an investment in the Securities;

· Prosper Funding and PMI’s ability to prevent security breaches, disruptions in service, and comparable events that could compromise the personal and confidential information held on their data systems, reduce the attractiveness of the platform or adversely impact their ability to service loans;

· the resolution of pending litigation involving PMI, including any state or federal securities litigation; and

· Prosper Funding’s ability to compete successfully in the peer-to-peer and consumer lending industry.

There may be other factors that may cause actual results to differ materially from the forward-looking statements.  Prosper Funding and PMI can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does occur, what impact they will have on Prosper Funding or PMI’s results of operations and financial conditions.  You should carefully read the factors described in the “Risk Factors” section of this prospectus for a description of certain risks that could, among other things, cause Prosper Funding and PMI’s actual results to differ from these forward-looking statements.

All forward-looking statements speak only as of the date of this prospectus and are expressly qualified in their entirety by the cautionary statements included in this prospectus.  Prosper Funding and PMI undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

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RISK FACTORS

The Securities involve a high degree of risk.  You should carefully consider the risks described below before making a decision to invest in the Securities.  If any of the following risks actually occurs, you might lose all or part of your investment in the Securities.  In addition to the disclosures below, please read carefully the sections entitled “Item 1A. Risk Factors” beginning on page 48 of PMI’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011 previously filed with the SEC and incorporated by reference into this prospectus, and the sections entitled “Item 1A. Risk Factors” included in any subsequent Annual or Quarterly Report that may be incorporated by reference into this prospectus. Before making an investment decision, you should carefully consider these risks. The risks and uncertainties described are not the only ones facing Prosper Funding and PMI.  Additional risks and uncertainties not presently known or that Prosper Funding and PMI currently deem immaterial may also affect Prosper Funding and PMI’s respective business operations.

RISKS RELATED TO BORROWER DEFAULT

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

You should be aware that the Notes offered through the platform are risky and speculative investments.  The Notes are special, limited obligations of Prosper Funding and depend entirely for payment on Prosper Funding’s receipt of payments under the corresponding borrower loans.  Notes are suitable only for lender members of adequate financial means.  If you cannot afford to lose the entire amount of your investment in the Notes you purchase, you should not invest in the Notes.

Payments on the Notes depend entirely on payments Prosper Funding receives on corresponding borrower loans.  If a borrower fails to make any payments on the corresponding borrower loan related to your Note, payments on your Note will be correspondingly reduced.

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

Information supplied by applicants may be inaccurate or intentionally false.  Information regarding income and employment is not verified in many cases.

Applicants supply a variety of information regarding the purpose of the loan, income, occupation, and employment status that is included in borrower listings.  Neither Prosper Funding nor PMI verifies the majority of this information, which may be incomplete, inaccurate or intentionally false.  Applicants may misrepresent their intentions for the use of borrower loan proceeds.  Neither Prosper Funding nor WebBank, nor PMI as agent of either of them, verifies any statements by applicants as to how loan proceeds are to be used nor confirms after loan funding how loan proceeds were used.  All listings are posted on the platform without Prosper Funding or PMI verifying the information provided by the applicant, including the borrower’s stated income, employment status or occupation.  Lender members should not rely on an applicant’s self-reported information such as income, employment status, or occupation in making investment decisions.  In the cases in which PMI selects applicants for income and employment verification, the verification is normally done after the listing has been created but prior to the time the borrower loan is funded.  From the period from July 14, 2009 to September 30, 2012, PMI verified employment and/or income on approximately 42% of the PMI Borrower Loans originated through the platform on a unit basis (14,369 out of 34,042) and approximately 65% of originations on a dollar basis ($147,598,201 out of $228,420,210).  PMI selected these listings based on the same combination of factors it will use in selecting Prosper Funding listings for additional verification, including amount of loan requested, Prosper Rating, debt-to-income ratio and stated income.  Listings do not disclose the identity of applicants, and lender members have no ability to obtain or verify applicant information either before or after they purchase a Note.  If an applicant supplies false, misleading or inaccurate information, you may lose part or all of the purchase price you pay for a Note.  Under Prosper Funding’s Administration Agreement with PMI, PMI is required to perform borrower identity and financial information verification services for Prosper Funding in the manner and to the extent contemplated in this prospectus.  See “About the Platform—Borrower Identity and Financial Information Verification” for more information.  The number or percentage of applicants whose income and employment information is verified by PMI in relation to listings made after the date hereof may differ from the historical information supplied above.  No assurance is made that such information will be verified with respect to any particular applicant or borrower.  Neither the indenture trustee nor holders of any Notes will have any contractual or other relationship with any borrower that would enable the indenture trustee or such holder to make any claim against such borrower for fraud or breach of any representation or warranty in relation to any false, incomplete or misleading information supplied by such borrower in relation to the relevant loan or Note.

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The borrower loans are not secured by any collateral or guaranteed or insured by any third party, and you must rely on Prosper Funding or a third-party collection agency to pursue collection against any borrower.

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

Some of the borrowers on the platform have “subprime” credit ratings, are considered higher than average credit risks, and may present a high risk of loan delinquency or default.

A “subprime” credit rating is traditionally defined as a FICO score below 640.  Although Prosper Funding uses Experian’s Scorex PLUS credit score, not FICO, and thus cannot precisely identify which of the borrowers on the platform meet the traditional definition of “subprime,” there may be borrowers on the platform who have “subprime” credit ratings.  Most of these borrowers are people who have had difficulty obtaining loans from other sources, including banks and other financial institutions, on favorable terms, or on any terms at all, due to credit problems, limited credit histories, adverse financial circumstances, or high debt-to-income ratios, but who have successfully borrowed through the platform on at least one prior occasion.   Based on the historical performance of such second-time borrowers on the platform, Prosper Funding believes the risk profile of such loans is superior to that of loans made by traditional consumer finance lenders to borrowers who have “subprime” credit ratings.  Nevertheless, acquiring Notes that are dependent on payments Prosper Funding receives on the corresponding borrower loans of such borrowers may present a high risk of loan delinquency or default.  See “About the Platform—Risk Management—  Credit Score  ” for more information.

Prior to the commencement of this offering, PMI operated the platform, facilitated the origination of loans by WebBank through the platform and issued and sold notes corresponding to those loans.  Borrower loans originated and notes issued and sold by PMI are referred to as “PMI Borrower Loans” and “PMI Notes,” respectively.  From July 13, 2009 to September 30, 2012 PMI facilitated 34,042 PMI Borrower Loans with an average original principal amount of $6,672 and an aggregate original principal amount of $227,112,997 on the platform.  As of September 30, 2012, of these 34,042 PMI Borrower Loans, 69.1% were current or had not reached their first billing cycle, 20.7% were paid in full, 2.0% were 1- 30 days past due, 2.1% were more than 30 days past due, and 6.1% had defaulted (a PMI Borrower Loan is considered to have defaulted when it is more than 120 days past due or has been discharged in bankruptcy).  In addition, of these 34,042 PMI Borrower Loans:

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· 4,037, or 12%, have been more than 15 days past due on at least one occasion;

· 3,256, or 10%,  have been more than 30 days past due on at least one occasion;

· 2,654, or 8%, have been more than 60 days past due on at least one occasion;

There can be no assurance that historical loss rates for PMI Borrower Loans will be indicative of future loss rates or the likelihood of the delinquency or default on Prosper Funding’s borrower loans. See “About the Platform—Historical Performance of PMI Borrower Loans” and “Risk Factors—Risks Relating to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.

There is a lower minimum credit score threshold for certain borrowers who have previously obtained a loan through the platform.  A borrower whose credit score has declined, but who satisfies the lower credit score threshold, may present a greater risk of loan delinquency or default than a borrower with a higher credit score.

The minimum credit score required for an applicant to post a listing is 640, except for applicants who (i) previously obtained a borrower loan or a PMI Borrower Loan and paid off the loan in full, or (ii) are seeking a second loan while their first loan is still outstanding, and such loan is current and has not been more than thirty days past due at any time during the preceding twelve months.  The minimum score required for any such second-time borrower is 600.  A borrower who initially possessed a credit score of 640 or greater, but whose credit score has declined below 640, may present a greater risk of loan delinquency or default than a borrower whose credit score has not declined, even if the borrower whose credit score declined previously paid off a loan through the platform and maintains a credit score above 600.

There is no maximum debt-to-income ratio for applicants.

There is no maximum debt-to-income ratio (or “DTI”) for applicants who post listings on the platform.  DTI is a measurement of a borrower’s ability to take on additional debt.  Because there is no maximum DTI for applicants, borrower loans may have a higher risk of default than would otherwise be the case if there were a maximum DTI.

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

PMI obtains applicant credit information from consumer reporting agencies, and assigns Prosper Ratings to listings based in part on the applicant’s credit score.  A credit score that forms a part of the Prosper Rating assigned to a listing may not reflect the applicant’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data.  Similarly, the credit data taken from the applicant’s credit report and displayed in listings may also be based on outdated, incomplete or inaccurate consumer reporting data.  Neither Prosper Funding nor PMI verifies the information obtained from the applicant’s credit report.   Moreover, lender members do not, and will not, have access to financial statements of applicants or to other detailed financial information about applicants.

The Prosper Rating may not accurately set forth the risks of investing in the Notes and no assurances can be provided that actual loss rates for the Notes will come within the expected loss rates indicated by the Prosper Rating.

If Prosper Funding includes in a listing a Prosper Rating that is different from the Prosper Rating calculated by Prosper Funding or calculates the Prosper Rating for a listing incorrectly, and such error materially and adversely affects a holder's interest in the related Note, Prosper Funding will  indemnify the holder or repurchase the Note.  Prosper Funding will not, however, have any indemnity or repurchase obligation under the Indenture, the Notes, the Lender Registration Agreement or any other agreement associated with the platform as a result of any other inaccuracy with respect to a listing’s Prosper Score or Prosper Rating.  For example, the Prosper Rating for a listing could be inaccurate because the applicant’s credit report contained incorrect information.  Similarly, the Prosper Rating does not reflect the substantial risk associated with the facts that (i) neither Prosper Funding nor PMI verifies much of the applicant information on which the Prosper Rating is based and (ii) much of such information is provided directly by the applicants themselves, who remain anonymous to potential Note purchasers.  In addition, the Prosper Rating does not reflect Prosper Funding’s credit risk as a debtor (such credit risk exists even though, as the debtor on the Notes, Prosper Funding’s only obligation is to pay to the Note holders their   pro rata   shares of collections received on the related borrower loans net of applicable fees).  If Prosper Funding repurchases any Notes, PMI will concurrently repurchase the related PMI Management Right for zero consideration.  Prosper Funding’s repurchase obligations under the Indenture, the Notes, the Lender Registration Agreement or any other agreement associated with the platform, and PMI’s concurrent repurchase of the related PMI Management Rights, do not affect your rights under federal or state securities laws.  A Prosper Rating is not a recommendation by Prosper Funding or PMI to buy, sell or hold a Note.  In addition, no assurances can be provided that actual loss rates for the Notes will fall within the expected loss rates indicated by the Prosper Rating. The interest rates on the Notes might not adequately compensate Note purchasers for these additional risks. See “About the Platform—Note Repurchase and Indemnification Obligations” for more information.

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Investors who use the Quick Invest tool may face additional risk of funding loans that have been erroneously selected by Quick Invest.

Since it was first implemented by PMI in July 2011, the Quick Invest tool has experienced errors that affected 6,043 Notes out of the 1,073,183 Notes purchased.  Of the affected lenders and Notes, 600 lenders and 2,053 Notes were affected by the erroneous selection by Quick Invest of all possible search criteria; 28 lenders and 2,517 Notes were affected by the erroneous use of inactive searches to purchase Notes; 23 lenders and 96 Notes were affected by an error that resulted in a search identifying every listing’s Prosper Score as a 10 (the best rating), regardless of the actual Prosper Score; 160 lenders and 1,209 Notes were affected by an error that resulted in lenders who had multiple searches with overlapping criteria bidding on the same listing more than once even though the lender had also selected an option that was supposed to preclude them from investing in the same listing more than once; and 42 lenders and 168 Notes were affected by a server failure that resulted in Quick Invest bidding on the same listing more than once.

In the event of any errors in Quick Invest that cause a lender to purchase a Note from Prosper Funding that such lender would not otherwise have purchased or that differs materially from the Note such lender would have purchased had there been no error, Prosper Funding will either repurchase the Note, indemnify the lender against losses suffered on that Note or cure such error.

Some borrowers may use the platform to defraud lender members, which could adversely affect your ability to recoup your investment.

PMI uses identity and fraud checks with external databases to authenticate each borrower’s identity. There is a risk, however, that these checks could fail and fraud may occur.  In addition, applicants may misrepresent their intentions regarding loan purpose or other information contained in listings, and neither Prosper Funding nor PMI verifies the majority of this information.  While Prosper Funding will indemnify you or repurchase Notes in limited circumstances (including,   e.g.  , a material payment default on the borrower loan resulting from verifiable identity theft), it is not obligated to indemnify you or repurchase a Note from you if your investment is not realized in whole or in part due to fraud (other than verifiable identity theft) in connection with a loan listing, or due to false or inaccurate statements or omissions of fact in a listing, whether in credit data, a borrower member’s representations, user recommendations, group affiliations or similar indicia of borrower intent and ability to repay the borrower loan.  If Prosper Funding repurchases a Note, the repurchase price will be equal to the Note’s outstanding principal balance and will not include accrued interest.  If Prosper Funding repurchases any Notes, PMI will concurrently repurchase the related PMI Management Rights for zero consideration.  See “About the Platform—Note Repurchase and Indemnification Obligations” for more information.

The fact that Prosper Funding has the exclusive right and ability to investigate claims of identity theft in the origination of loans creates a significant conflict of interest between Prosper Funding and the lender members.

Prosper Funding has the exclusive right to investigate claims of identity theft and determine, in its sole discretion, whether verifiable identity theft has occurred.  Verifiable identity theft triggers an obligation by Prosper Funding to either repurchase the related Notes or indemnify the applicable Note holders.  As Prosper Funding is the sole entity with the ability to investigate and determine verifiable identity theft, which triggers its repurchase or indemnification obligation, a conflict of interest exists.  Lender members rely solely on Prosper Funding to investigate incidents that might require it to indemnify them or repurchase a loan.  The denial of a claim under Prosper Funding’s identity theft guarantee would save Prosper Funding from its indemnification or repurchase obligation.  See “About the Platform—Note Repurchase and Indemnification Obligations” for more information.

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Prosper Funding does not have significant historical performance data about performance on the borrower loans.  Loss rates on the borrower loans may increase and prior to investing you should consider the risk of non-payment and default.

Prosper Funding is in the early stages of its development and has a limited operating history.  It did not offer borrower loans through the platform prior to this offering.  PMI began offering PMI Borrower Loans through the platform in February of 2006, but the performance of PMI Borrower Loans may not be indicative of the future performance of Prosper Funding’s borrower loans.  Due to Prosper Funding’s limited operational history, it does not have significant historical data regarding the performance of the borrower loans, and it does not yet know what the long-term loan loss experience will be.  The estimated loss rates displayed on Prosper Funding’s website and used to determine the Prosper Rating have been developed from PMI’s loss histories on PMI Borrower Loans.   Accordingly, borrower loans originated on the platform may default more often than similar PMI Borrower Loans have defaulted in the past, which increases the risk of investing in the Notes.

If payments on the corresponding borrower loans relating to your Notes become more than 30 days overdue, it is likely you will not receive the full principal and interest payments that you expect to receive on your Notes, and you may not recover your original purchase price.

If a borrower fails to make a required payment on a borrower loan within 30 days of the due date, PMI will pursue reasonable collection efforts in respect of the borrower loan.  Referral of a delinquent borrower loan to a collection agency within five (5) business days after it becomes thirty days past due will be considered reasonable collection efforts.

If PMI refers a borrower loan to a collection agency, it will not have any other obligation to attempt to collect that borrower loan.  PMI also may handle collection efforts in respect of a delinquent borrower loan directly as servicer of the loans pursuant to the Administration Agreement.  If payment amounts on a delinquent borrower loan are received from a borrower more than 30 days after their due date, and the loan has been referred to an outside collection agency, that collection agency will retain a percentage of that payment as a fee before any principal or interest becomes payable to you.  Collection fees range from 17% to 40% of recovered amounts, in addition to any legal fees incurred in the collection effort.

For some non-performing borrower loans, PMI may not be able to recover any of the unpaid loan balance and, as a result, a lender member who has purchased a corresponding Note may receive little, if any, of the unpaid principal and interest payable under the Note.  You must rely on the collection efforts of PMI or the applicable collection agency to which such borrower loans are referred.  You are not permitted to attempt to collect payments on the borrower loans in any manner.

On average, through September 30, 2012, Note holders have received $327, net of collection fees, on loans that were both funded through the platform since July 13, 2009 and sent to a collection agency.  A total of 1,757 loans funded through the platform from July 13, 2009 through September 30, 2012 have been charged off with no recovery.  Of those 1,757 loans, 75% had been referred to a collection agency.

Loss rates on the borrower loans may increase as a result of economic conditions beyond Prosper Funding or PMI’s control and beyond the control of the borrower member.

Borrower loan loss rates may be significantly affected by economic downturns or general economic conditions beyond Prosper Funding or PMI’s control and beyond the control of individual borrowers.  In particular, loss rates on borrower loans may increase due to factors such as prevailing interest rates, the rate of unemployment, the level of consumer confidence, residential real estate values, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets and other factors.

In the unlikely event that Prosper Funding receives payments on the borrower loans relating to your Notes after the final maturity date, you will not receive payments on your Notes after maturity.

Each Note will mature on the initial maturity date, unless any principal or interest payments in respect of the corresponding borrower loan remain due and payable to Prosper Funding upon the initial maturity date, in which case the maturity of the Note will be automatically extended to the final maturity date.  If there are any amounts under the corresponding borrower loan still due and owing to Prosper Funding on the final maturity date, Prosper Funding will have no further obligation to make payments on the related Notes, even if it receives payments on the corresponding borrower loan after such date.

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The borrower loans do not restrict borrowers from incurring additional unsecured or secured debt, nor do they impose any financial restrictions on borrowers during the term of the borrower loan, which may impair your ability to receive the full principal and interest payments that you expect to receive on a Note.

If a borrower incurs additional debt after the date of the borrower loan, the additional debt may impair the ability of that borrower to make payments on his or her borrower loan and your ability to receive the principal and interest payments that you expect to receive on a corresponding Note.  In addition, the additional debt may adversely affect the borrower’s creditworthiness generally, and could result in the financial distress, insolvency, or bankruptcy of the borrower.  To the extent that the borrower has or incurs other indebtedness and cannot pay all of his or her indebtedness, the borrower may choose to make payments to other creditors, rather than to Prosper Funding.

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

A borrower may request that his or her bank “chargeback” a payment on a borrower loan upon which a Note is dependent for payment and request a refund on that payment, resulting in a delinquency on the payment and a possible negative cash balance in your lender member account.

A borrower chargeback is a process by which a borrower who has made a payment on a borrower loan has his or her bank cancel the payment or request a refund of that payment.  Prosper Funding withholds payments to lender members up to six business days after a related borrower payment is initiated.  If the chargeback occurs between six and 60 days after the initiation of payment, you must rely on Prosper Funding to contest the chargeback if it deems it appropriate.  If a borrower successfully processes a chargeback between six and 60 days after initiation of payment, such payment will be deducted from your lender member account, and if you have withdrawn funds in the interim, a negative cash balance may result.  Amounts received on borrower loans corresponding to your Notes payments and deposited into your lender member account are subject to set-off against any negative balance or shortfall in your lender member account. In 2011, 367 borrower payments in the aggregate amount of approximately $73,000 were subject to chargebacks, which resulted in such payments being deducted from the accounts of the corresponding Note holders.  See “About the Platform—Structure of Lender Member Accounts and Treatment of Lender Member Balances” for more information.

Peer-to-peer lending is a new lending method and the platform has a limited operating history.  Borrowers may not view or treat their obligations to Prosper Funding as having the same significance as loans from traditional lending sources, such as bank loans.

The investment return on the Notes depends on borrowers fulfilling their payment obligations in a timely and complete manner under the corresponding borrower loan.  Borrowers may not view peer-to-peer lending obligations originated on the platform as having the same significance as other credit obligations arising under more traditional circumstances, such as loans from banks or other commercial financial institutions.  If a borrower neglects his or her payment obligations on a borrower loan upon which payment of your Note is dependent or chooses not to repay his or her borrower loan entirely, you may not be able to recover any portion of your investment in a Note.

The platform may fail to comply with applicable law, which could limit Prosper Funding and PMI’s ability to collect on borrower loans.

The borrower loans are subject to federal and state consumer protection laws.  The platform may not always be, and the equivalent platform previously operated by PMI may not always have been, in compliance with these laws.  Failure to comply with the laws and regulatory requirements applicable to the platform may, among other things, limit Prosper Funding’s, PMI’s or a collection agency’s ability to collect all or part of the principal of or interest on borrower loans.  See “Government Regulation—Regulation and Consumer Protection Laws” for more information.

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PMI regularly reviews the requirements of these laws and take measures aimed at ensuring that the borrower loans originated on the platform meet the requirements of all applicable laws.  However, determining compliance with all applicable laws is a complex matter and it is possible that PMI’s determination may be inaccurate or incorrect.  Also, changes in law, either due to court decisions, regulatory interpretations or rulings, or new legislation, may adversely affect the collectability of a borrower loan.

In general, the borrower loans do not contain any cross-default or similar provisions.  If a borrower defaults on any of his or her other debt obligations, Prosper Funding and PMI’s ability to collect on the borrower loan on which your Notes are dependent for payment may be substantially impaired.

The borrower loans do not contain cross-default provisions.  A cross-default provision makes a default under certain debt of a borrower an automatic default on other debt of that borrower.  Because the borrower loans do not contain cross-default provisions, a borrower’s loan will not be placed automatically in default upon that borrower’s default on any of the borrower’s other debt obligations.  If a borrower defaults on debt obligations owed to a third party and continues to satisfy the payment obligations under the borrower loan, the third party may seize the borrower’s assets or pursue other legal action against the borrower before the borrower defaults on the borrower loan.

Borrowers may seek the protection of debtor relief under federal bankruptcy or state insolvency laws, which may result in the nonpayment of your Notes.

Borrowers may seek protection under federal bankruptcy law or similar laws.  If a borrower files for bankruptcy (or becomes the subject of an involuntary petition), a stay will go into effect that will automatically put any pending collection actions on the borrower loan on hold and prevent further collection action absent bankruptcy court approval.  If Prosper Funding receives notice that a borrower has filed for protection under the federal bankruptcy laws, or has become the subject of an involuntary bankruptcy petition, it will put the borrower’s loan account into “bankruptcy status.” When this occurs, Prosper Funding terminates automatic monthly ACH debits on borrower loans and neither Prosper Funding nor PMI will undertake collection activity without bankruptcy court approval.  Whether any payment will ultimately be made or received on a borrower loan after a bankruptcy status is declared depends on the borrower’s particular financial situation.  In most cases, however, unsecured creditors such as Prosper Funding receive nothing, or only a fraction of their outstanding debt.  See “About the Platform—Loan Servicing and Collection” for more information.

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

Federal law provides borrowers on active military service with rights that may delay or impair Prosper Funding and PMI’s ability to collect on a borrower loan corresponding to your Note.  The Servicemembers Civil Relief Act, or “SCRA,” requires that the interest rate on preexisting debts, such as borrower loans, be set at no more than 6% while the qualified service member or reservist is on active duty.  A holder of a Note that is dependent on such a borrower loan for payment will not receive the difference between 6% and the original stated interest rate for the borrower loan during any such period.  The SCRA law also permits courts to stay proceedings and execution of judgments against service members and reservists on active duty, which may delay recovery on any borrower loans in default, and, accordingly, payments on the corresponding Notes.  If there are any amounts under such a borrower loan still due and owing to Prosper Funding after the final maturity of the corresponding Notes, Prosper Funding will have no further obligation to make payments on the Notes, even if it receives payments on the borrower loan after the final maturity of the Notes.  Prosper Funding and PMI do not take military service into account in assigning a Prosper Rating to loan listings.  In addition, as part of the borrower registration process, neither Prosper Funding nor PMI requests borrower members to confirm if they are qualified service members or reservists within the meaning of the SCRA.  See “Government Regulation—Regulation and Consumer Protection Laws—Servicemembers Civil Relief Act” for more information.

Since July 14, 2009, only six loans, with an aggregate principal amount of $34,500, funded through the platform have been subject to the SCRA.

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The death of a borrower may substantially impair your ability to recoup the full purchase price of Notes or to receive the interest payments that you expect to receive on the Notes.

If a borrower dies while his or her loan is still outstanding, generally, PMI will seek to work with the executor of the borrower’s estate to obtain repayment of the loan.  However, the borrower’s estate may not contain sufficient assets to repay the loan, or the related executor or trustee may prioritize repayment of other creditors.  In addition, if a borrower dies near the end of the term of his or her loan, it is unlikely that any further payments will be made on the corresponding Notes, because the time required for the probate of the borrower’s estate will probably extend beyond the final maturity date of the Notes.

RISKS INHERENT IN INVESTING IN THE NOTES

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

The Notes will not represent an obligation of borrowers, PMI or any other party except Prosper Funding, and are special, limited obligations of Prosper Funding.  The Notes are not guaranteed or insured by PMI, any governmental agency or instrumentality or any third party.  Although Prosper Funding has granted the indenture trustee, for the benefit of the Note holders, a security interest in the borrower loans, the payments and proceeds that Prosper Funding receives on the borrower loans, the bank account in which the borrower loan payments are deposited and the FBO account, the Note holders do not themselves have a direct security interest in the borrower loans or the right to payment thereunder.  If an event of default under the indenture were to occur, the Note holders would be dependent on the indenture trustee’s ability to realize on the collateral and make payments on the Notes in the manner contemplated by the indenture.  In addition, although Prosper Funding will take all actions that it believes are required under applicable law to perfect the security interest of the indenture trustee in the collateral, if its analysis of the required actions is incorrect or if it fails timely to take any required action, the indenture trustee’s security interest may not be effective and holders of the Notes could be required to share the collateral (and any proceeds thereof) with Prosper Funding’s other creditors, or, if a bankruptcy court were to order the substantive consolidation of PMI and Prosper Funding (as described below), PMI’s creditors.

Prosper Funding is not obligated to indemnify a Note holder or repurchase any Notes except in limited circumstances.

Prosper Funding is only obligated to repurchase Notes or indemnify holders of Notes in limited circumstances.  These circumstances include if (i) a material payment default under the corresponding borrower loan occurs as a result of verifiable identify theft or (ii) Prosper Funding includes a Prosper Rating in a listing that is different from the Prosper Rating calculated by Prosper Funding or calculates the Prosper Rating incorrectly.  Prosper Funding is not required to repurchase Notes or indemnify holders of Notes, however, if the holder’s investment is not realized in whole or in part due to fraud other than identity theft, or due to other false or inaccurate statements or omissions of fact in a listing, whether in credit data, borrower representations, user recommendations, group affiliations or similar indicia of borrower intent and ability to repay the loan.  Nor is Prosper Funding under any obligation to repurchase a Note or indemnify any holder of Notes if a correctly-determined Prosper Rating fails to accurately predict the actual losses on a borrower loan.

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Prosper Funding might incur indemnification and repurchase obligations that exceed its projections, in which case it may not have sufficient capital to meet its indemnification and repurchase obligations.

Before Prosper Funding commences this offering, PMI will make an additional cash contribution to Prosper Funding of between $3 million and $6 million, which Prosper Funding believes will be sufficient to meet its reasonably anticipated indemnification and repurchase obligations during the first six months of operations.  After Prosper Funding’s first six months of operations, it believes its fee income will be sufficient to cover such obligations.  In determining its expected capital needs with respect to indemnification and repurchase obligations, Prosper Funding reviewed the history of such obligations incurred by PMI.  From the inception of the platform in November 2005 through September 30, 2012, approximately $406 million of loans were originated through the platform and PMI repurchased approximately $594,000, or 0.15%, of corresponding PMI Notes.  As of September 30, 2012, approximately $114,005 in loans receivable were indemnified.  Prosper Funding believes this approach to estimating its future repurchase and indemnification obligations gives it a reasonable basis to conclude that it will be adequately capitalized to meet such obligations.  Nonetheless, there can be no assurance that if it is obligated to repurchase a Note or indemnify a Note holder, that it will be able to meet its repurchase or indemnification obligation.  If Prosper Funding is unable to meet its indemnification and repurchase obligations, you may lose all of your investment in the Note.

If you decide to invest through the platform and concentrate your investment in a single Note, you may increase your risk of borrower defaults.

Your expected return on your investment in the Notes depends on the performance of the borrowers under the corresponding borrower loans.  There are a wide range of Prosper Ratings and listings on the platform and Prosper Funding expects some borrowers to default on their loans.  If you decide to invest through the platform and concentrate your investment in a single Note, your entire return will depend on the performance of a single borrower loan.  For example, if you plan to purchase $200 of Notes, and choose to invest the entire $200 in a single Note instead of in eight $25 Notes corresponding to the borrower loans of eight different borrowers, your entire $200 investment will depend on the performance of a single borrower loan.  It may be desirable to diversify your portfolio in order to reduce the risk that you could lose your entire investment due to a single default, or a small number of defaults.  However, diversification does not eliminate the risk that you may lose some, or all, of your investment in the Notes.

The platform allows a borrower member to prepay a borrower loan at any time without penalty.  Borrower loan prepayments will extinguish or limit your ability to receive additional interest payments on a Note.

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

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

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

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PMI may not set appropriate interest rates for borrower loans.

If PMI sets interest rates for borrower loans too low, lender members may not be compensated appropriately for the level of risk that they are assuming in purchasing a Note, while setting the interest rate too high may increase the risk of non-payment.  In either case, failure to set rates appropriately may adversely impact the ability of lender members to receive returns on their Notes that are commensurate with the risks they have assumed in acquiring such Notes.

The PMI Management Rights attached to the Notes will not comprise collateral for the Notes nor generate any funds that will be payable to the holders of Notes.

There are no payment obligations on the part of PMI or any third party under or in relation to the PMI Management Rights that are in any way related to borrower obligations in relation to the loans or in any way related to Prosper Funding’s payment obligations in relation to the Notes.  The PMI Management Rights attached to the Notes will not comprise collateral for the Notes nor guarantees of any loans or Notes, nor generate any funds or proceeds that will be payable to Prosper Funding, the indenture trustee or holders of Notes in relation to any loans or Notes.  Holders of Notes will have no recourse to PMI or its assets in relation to payments on loans or Notes.  If Prosper Funding repurchases any Notes, PMI will concurrently repurchase the related PMI Management Right for zero consideration.  Prosper Funding’s repurchase obligations under the Indenture, the Notes, the Lender Registration Agreement or any other agreement associated with the platform, and PMI’s concurrent repurchase of the related PMI Management Rights, do not affect your rights under federal or state securities laws.

Holders of the PMI Management Rights, collectively through the indenture trustee, will have a limited ability to enforce PMI’s obligations under the Administration Agreement.  As a result, you will have a limited ability to require that PMI perform its obligations under the Administration Agreement.

Pursuant to the Administration Agreement, PMI will provide three kinds of services to Prosper Funding: (i) Loan Platform Administration Services (managing the operation of the platform); (ii) Corporate Administration Services (providing back-office services to Prosper Funding, such as maintaining books and records, making periodic regulatory filings, performing limited cash management functions, etc.); and (iii) Loan and Note Servicing Services (servicing the loans and notes originated through the platform). Holders of PMI Management Rights will not have the right, individually, to enforce PMI’s obligations under the Administration Agreement.  Although holders representing at least 25% of the outstanding Notes offered hereby and the PMI Notes, collectively, will have the right to cause the indenture trustee to take action as a third-party beneficiary of the Administration Agreement, such right is subject to certain conditions set forth in the indenture.  Those conditions include, for example, that the holders indemnify the trustee for taking such action. If PMI fails to adequately perform Loan and Note Servicing Services under the Administration Agreement, and if Prosper Funding is unable to timely replace PMI as the servicer of the Notes, your ability to receive principal and interest payments on your Notes may be substantially impaired, even if your portfolio of Notes is well diversified and the loans are paying on schedule.  In addition, although Prosper Funding has a back-up provider in place for PMI as Loan and Note Servicer under the Administration Agreement, Prosper Funding does not have a back-up provider for the Loan Platform Administration Services or the Corporate Administration Services that PMI is obligated to provide.  The failure of PMI to adequately perform those services could adversely affect your ability to benefit from those services. PMI's obligations to provide services under the Administration Agreement may be terminated by PMI or by Prosper Funding under certain circumstances described in this prospectus.

The Securities will not be listed on any securities exchange, will not be transferable except through the Note Trader platform, and can be held only by Prosper Funding’s lender members.  You should be prepared to hold the Securities you purchase until they mature.

The Securities will not be listed on any securities exchange.  All Securities must be held by Prosper Funding’s lender members.  The Securities will not be transferable except through the Note Trader platform and there can be no assurance that a market for Securities will continue to develop on the Note Trader platform, or that the Note Trader platform will continue in operation.  Therefore, lender members must be prepared to hold their Securities to maturity.  See “About the Platform—Note Trader Platform” for more information.

If the Note Trader platform fails to develop, or if the Note Trader platform develops but you cannot find a purchaser for the Notes that you wish to sell, you will be forced to hold the Notes for their remaining term.

Prosper Funding and PMI cannot guarantee that the Note Trader platform will continue to develop.  A Note offered for sale on the Note Trader platform must be purchased in its entirety by a single lender member, and Notes with a high outstanding principal balance may be more difficult to sell due to the smaller number of lender members with the ability to purchase such Notes.

If you choose to post your Notes for sale on the Note Trader platform, you may not realize the expected return on your investment due to changes in the creditworthiness of the borrower under the corresponding borrower loan.

The ability to sell your Note on the Note Trader platform does not guarantee that you will be able to find a lender member willing to buy the Note at a price acceptable to you, or at all.  If the borrower becomes delinquent in payments under the corresponding borrower loan upon which your Note is dependent for payment, your ability to sell the Note on the Note Trader platform will be substantially impaired.  You may have to offer the Note for sale at a substantial discount, and there is no guarantee that you will receive the expected value of the Note or any value at all.  Additionally, lender members may be less willing to bid for and purchase your Note if prevailing interest rates have changed or other investing activities have proven more attractive while you have held the Note.

You do not earn interest on funds held in your lender member account.

Your lender member account represents an interest in a pooled bank account that does not earn interest.  See “About the Platform—Structure of Lender Member Accounts and Treatment of Lender Member Balances” for more information.

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

There are no statutory provisions, regulations, published rulings or judicial decisions that directly address the characterization of the Notes or instruments similar to the Notes for U.S. federal income tax purposes.  However, although the matter is not free from doubt because payments on the Notes are dependent on payments on the corresponding borrower loan, Prosper Funding intends to treat the Notes as its debt instruments that have original issue discount (“OID”) for U.S. federal income tax purposes.  Where required, Prosper Funding intends to file information returns with the IRS in accordance with such treatment unless there is a change or clarification in the law, by regulation or otherwise, that would require a different characterization of the Notes.  You should be aware, however, that the U.S. Internal Revenue Service (“IRS”) is not bound by Prosper Funding’s characterization of the Notes and the IRS or a court may take a different position with respect to the Notes’ proper characterization.  For example, the IRS could determine that, in substance, each lender member owns a proportionate interest in the corresponding loan for U.S. federal income tax purposes or, for example, the IRS could instead treat the Notes as a different financial instrument (including an equity interest or a derivative financial instrument).  Any different characterization could significantly affect the amount, timing, and character of income, gain or loss recognized in respect of a Note.  For example, if the Notes are treated as Prosper Funding’s equity, (1) Prosper Funding would be subject to U.S. federal income tax on income, including interest, accrued on the corresponding loans but would not be entitled to deduct interest or OID on the Notes, and (2) payments on the Notes would be treated by the holder for U.S. federal income tax purposes as dividends (that may be ineligible for reduced rates of U.S. federal income taxation or the dividends-received deduction) to the extent of Prosper Funding’s earnings and profits as computed for U.S. federal income tax purposes.  A different characterization may significantly reduce the amount available to pay interest on the Notes.  You are strongly advised to consult your own tax advisor regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership, and disposition of the Notes (including any possible differing treatments of the Notes).

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

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

Participation in the funding of loans could be viewed as creating a conflict of interest.

As is the practice with other peer-to peer lending companies, including Prosper Funding and PMI’s competitor, LendingClub, from time to time, Prosper Funding or PMI may fund portions of qualified loan requests on the platform and hold any Notes purchased as a result of such funding for its own individual account.  Even though Prosper Funding and PMI will participate in loans on the platform under the same terms and conditions and through the use of the same information that is made available to other potential lenders on the platform, such participation may be perceived as involving a conflict of interest.  For example, Prosper Funding or PMI’s funding of a loan may cause the loan to fund, and in some cases, fund faster, than it would fund in the absence of Prosper Funding or PMI’s participation, which could benefit Prosper Funding to the extent that it ensures that Prosper Funding generates the revenue associated with the loan.

As of September 30, 2012, PMI had purchased PMI notes in the aggregate amount of approximately $147,000.  In addition, as of September 30, 2012, PMI’s executive officers, directors, affiliates and 5% shareholders had purchased PMI notes in the aggregate amount of $5,144,981.  The PMI notes were obtained on terms and conditions that were not more favorable than those obtained by other lender members of PMI.  Of the total aggregate amount of PMI notes purchased by PMI’s executive officers, directors and affiliates as of September 30, 2012, approximately 5% of principal has been charged off, compared to approximately 14% of principal charged off for all loans originated as of September 30, 2012.

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RISKS RELATED TO PROSPER FUNDING AND PMI, THE PLATFORM AND PROSPER FUNDING AND PMI’S ABILITY TO SERVICE THE NOTES

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

If PMI were to become subject to a bankruptcy proceeding, PMI may have the right to assume or reject the Administration Agreement between Prosper Funding and PMI (or the loan servicing provisions thereof) because a bankruptcy court may disallow termination of the Administration Agreement (or the loan servicing provisions thereof).  If PMI elected to continue to perform under the Administration Agreement (or the loan servicing provisions thereof) without expressly assuming it or elected to assume the Administration Agreement (or the loan servicing provisions thereof), PMI would continue to perform its servicing obligations with respect to the borrower loans and the Notes.  If PMI were to continue as servicer during the pendency of its bankruptcy proceeding, depending on the facts and circumstances at the time, Prosper Funding would determine whether the creation of new borrower loans would continue to be facilitated and new Notes issued through the platform.  If PMI elected to reject the Administration Agreement (or the loan servicing provisions thereof), or if PMI was in default in performing its obligations thereunder, and PMI was unable to cure such default, the loan servicing provisions of the Administration Agreement (and likely also the other provisions thereof) would be terminated.  If the loan servicing provisions of the Administration Agreement are terminated for any reason, Prosper Funding would attempt to transfer the loan servicing obligations on the borrower loans and Notes to a third party pursuant to its contractual agreements with lender members.

Prosper Funding and PMI have entered into back-up servicing agreements with a loan servicing company who is willing and able to transition servicing responsibilities from PMI.  There can be no assurance, however, that this back-up servicer will be able to adequately perform the servicing of the outstanding borrower loans.  If this back-up servicer assumes the servicing of the borrower loans, the back-up servicer may impose additional servicing fees, reducing the amounts available for payments on the Notes.  Additionally, transferring these servicing obligations to the back-up servicer, particularly if such transfer is made when PMI is in bankruptcy and already defaulting in performance of its obligations under the Administration Agreement, may result in delays in the processing of collections on borrower loans and information with respect to amounts owed on borrower loans or, if the platform becomes inoperable, may prevent the back-up servicer from servicing the borrower loans and making principal and interest payments on the Notes.  If the back-up servicer is not able to service the borrower loans effectively, your ability to receive principal and interest payments on your Notes may be substantially impaired, even if your portfolio of Notes is well diversified and the corresponding borrower loans are paying on schedule.

In addition, it is unlikely that the back-up servicer would be able to perform functions other than servicing the outstanding borrower loans and Notes.  For instance, the back-up servicer likely would not be able to facilitate the creation of new loans through the platform, manage Prosper Funding’s marketing efforts or maintain the relationship with FOLIOfn Investments, Inc. necessary to ensure continued operation of the Note Trader Platform.  Prosper Funding believes that it could find one or more other parties who could perform these and any other functions necessary to fully operate the platform in the absence of PMI.  However, it could take some time to find another such party or parties who could perform the necessary functions and it could take such party or parties additional time to become comfortable with the operation of the platform.

Moreover, PMI owns and is not transferring to Prosper Funding ownership of the computer hardware that it currently uses to host and maintain the website or agreements with third parties relating to the hosting and maintenance of the website.  Although PMI’s retention of such hardware and agreements should not bear on a bankruptcy court’s analysis of the legal separateness of PMI and Prosper Funding (or their respective assets and liabilities), the cessation of or substantial reduction of the day-to-day operations of PMI (because of or during its bankruptcy or otherwise) would materially impair and delay the ability of Prosper Funding or a back-up service provider to retrieve data and information in the possession of PMI and to operate the platform or elements thereof relevant to loan and Note servicing.

Any such delay or impairment that did not affect existing Note holders, because Prosper Funding or its back-up servicer proves able to continue servicing outstanding loans and Notes, could nonetheless delay Prosper Funding’s ability to facilitate the creation of new loans and issue new Notes through the platform, which could adversely affect Prosper Funding’s finances and customer relationships.

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

Although Prosper Funding has been organized and will be operated in a manner that is intended to minimize the likelihood that it will become subject to a bankruptcy or similar proceeding, if this were to occur, the recovery, if any, of a holder of a Note may be substantially delayed in time (for example, due to the imposition of a stay on payments by the bankruptcy court) and may be substantially less in amount than the principal and interest due and to become due on the Note even if a Note holder’s portfolio of Notes is well diversified and the loans are paying on schedule.  For example, Prosper Funding has structured its limited liability company agreement, and agreed to covenants in the indenture, that limit its activities in a manner that is intended to limit the possibility that it would voluntarily file for or could be required to file for bankruptcy.  Among other things, Prosper Funding must receive the affirmative vote of its independent board members to file for bankruptcy.  There is no guarantee, however, that its fee income from license fees and loan servicing fees will be sufficient to fund its contingent and other liabilities described above or that it will not enter into transactions that cause it to face solvency issues that ultimately could cause it to file for bankruptcy.  Further, although Prosper Funding has granted the indenture trustee, for the benefit of the Note holders, a security interest in all of the borrower loans, all payments and proceeds it receives on the corresponding borrower loans and in the bank account in which the borrower loan payments are deposited, the holders of the Notes would still be subject to the following risks associated with Prosper Funding’s insolvency, bankruptcy or a similar proceeding.

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

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

If Prosper Funding becomes subject to a bankruptcy or similar proceeding, interest accruing upon and following such bankruptcy or similar proceeding may not be paid  .

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

If Prosper Funding becomes subject to a bankruptcy or similar proceeding a holder of a Note may not have any priority right to payment from the corresponding borrower loan, may not have any right to payment from funds in the deposit account, and may not have any ability to access funds in the account maintained for the benefit of lender members.

If Prosper Funding failed to perfect the security interest properly, you may be required to share the proceeds of the borrower loan upon which your Note is dependent for payment with its other creditors, including holders of other Notes or PMI Notes.  To the extent that proceeds of the corresponding borrower loan would be shared with Prosper Funding’s other creditors, any secured or priority rights of such other creditors may cause the proceeds to be distributed to such other creditors before any distribution is made to you on your Note.

If a payment is made on a borrower loan corresponding to a Note before Prosper Funding’s bankruptcy or similar proceeding is commenced, and those funds are held in the deposit account Prosper Funding maintains with Wells Fargo Bank, N.A. to collect borrower payments and have not been used by Prosper Funding to make payments on the Note as of the date the bankruptcy or similar proceeding is commenced, there can be no assurance that Prosper Funding will or will be able to use such funds to make payments on the Note.  Other creditors of Prosper Funding (including holders of other Notes or of PMI Notes) may be deemed to have rights to such funds or interests in the deposit account and monies credited thereto that are equal to or greater than the rights of the holder of the Note.  See “About the Platform—Loan Servicing and Collections” for more information.

Prosper Funding maintains a pooled account at Wells Fargo Bank, N.A. to hold the funds of lender members.  This account is titled “Prosper Funding LLC for the benefit of its lender members” and is referred to as the “FBO account.”  Although Prosper Funding believes that amounts funded by lender members into the FBO account should not be subject to claims of its creditors other than the lender members for whose benefit the funds are held, the legal title to the FBO account, and the attendant right to administer the FBO account would be property of Prosper Funding’s bankruptcy estate.  As a result, if Prosper Funding were to file for bankruptcy protection, the legal right to administer the funds in the FBO account would vest with the bankruptcy trustee or debtor in possession.  In that case, while neither Prosper Funding nor its creditors should be able to reach those funds, the indenture trustee or the lender members may have to seek a bankruptcy court order lifting the automatic stay and permitting them to withdraw their funds.  Lender members may suffer delays in accessing their funds in the FBO account as a result.  Moreover, United States Bankruptcy Courts have broad powers at law and in equity and, if Prosper Funding has failed to properly segregate or handle lender members’ funds, a bankruptcy court could determine that some or all of such funds were beneficially owned by Prosper Funding and therefore that they became available to Prosper Funding’s creditors generally.  See “About the Platform—Loan Servicing and Collections” and “About the Platform—Structure of Lender Member Accounts and Treatment of Lender Member Balances” for more information.

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In a bankruptcy or similar proceeding for Prosper Funding, the holder of a Note may be delayed or prevented from enforcing Prosper Funding’s repurchase obligations.

In a bankruptcy or similar proceeding for Prosper Funding, any right of a holder of a Note to require Prosper Funding to repurchase the Note under the circumstances set forth in the lender registration agreement might not be enforceable, and such holder’s claim for such repurchase may be treated less favorably than a general unsecured obligation of Prosper Funding.  For a discussion of the restrictions Prosper Funding has imposed upon itself and the formalities it has adopted under its organizational documents to minimize the likelihood of its becoming subject to a bankruptcy or similar proceeding, see “Information about Prosper Funding LLC.”

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

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

In addition, in a bankruptcy or similar proceeding of PMI, (1) the implementation of back-up servicing arrangements may be delayed or prevented, and (2) PMI’s ability to transfer its servicing obligations to a back-up servicer or its other corporate and platform administration services and marketing services to third parties may be limited and subject to the approval of the bankruptcy court or other presiding authority.  The bankruptcy process may delay or prevent the implementation of back-up servicing, which may impair the collection of borrower loans to the detriment of holders of the Notes.

For a discussion of the restrictions Prosper Funding has imposed upon itself and the formalities it has adopted under its organizational documents and agreed to in the indenture to prevent its being substantively consolidated with PMI in the event of PMI’s bankruptcy, see “Information about Prosper Funding LLC.”

PMI owns and is not transferring to Prosper Funding ownership of the computer hardware that it currently uses to host and maintain the website or agreements with third parties relating to the hosting and maintenance of the website.  Although PMI’s retention of such hardware and agreements should not bear on a bankruptcy court’s analysis of the legal separateness of PMI and Prosper Funding (or their respective assets and liabilities), the cessation of or substantial reduction of the day-to-day operations of PMI (because of or during its bankruptcy or otherwise) would materially impair and delay the ability of Prosper Funding or a back-up service provider to retrieve data and information in the possession of PMI and to operate the platform or elements thereof relevant to loan and Note servicing.

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

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

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PMI faces a contingent liability for securities law violations in respect of PMI Borrower Loans sold to its lender members from inception until October 16, 2008.  This contingent liability may impair its ability to perform its obligations under the Administration Agreement.

PMI Borrower Loans sold to PMI’s lender members through PMI’s platform from November 2005 until October 16, 2008 may be viewed as involving an offering of securities that was not registered or qualified under federal or state securities laws.

In November of 2008, the SEC instituted cease and desist proceedings, pursuant to Section 8A of the Securities Act, against PMI.  In connection with such proceedings, PMI agreed to a settlement with the SEC and consented to the entry of a Cease and Desist order, in which PMI neither admitted nor denied liability, which was approved by the SEC on November 20, 2008.  The Cease and Desist order included a finding that PMI violated the registration requirements of the Securities Act, and required that PMI cease and desist from committing or causing any violations or any future violations.

On April 21, 2009, PMI and the North American Securities Administrators Association (“NASAA”) reached agreement on the terms of a model consent order between PMI and the states in which PMI offered notes for sale prior to November 2008. The consent order involves payment by PMI of up to an aggregate of $1.0 million in penalties, which have been allocated among the states based on PMI’s loan sale transaction volume in each state prior to November 2008.  A state that enters into a consent order receives its portion of the $1 million in exchange for its agreement to terminate, or refrain from initiating, any investigation of PMI’s note sale activities prior to November 2008.  Penalties are paid promptly after a state enters into a consent order.  NASAA has recommended that each state enter into a consent order.  However, no state is obliged to do so, and there is no deadline by which  a state must make its decision.  PMI is not required to pay any portion of the penalty to those states that do not elect to enter into a consent order.  If a state does not enter into a consent order, it is free pursue its own remedies against PMI, subject to any applicable statute of limitations.  As of September 30, 2012, PMI had entered into consent orders with 33 states and has paid an aggregate of $436,717 in penalties to those states.

As of September 30, 2011 and September 30, 2012, PMI had accrued approximately $277,000 and $277,000, respectively, in connection with the contingent liability associated with the states that have not entered into consent orders, in accordance with ASC Topic 450, Contingencies.  The methodology applied to estimate the accrual was to divide the $1,000,000 maximum fee pro-rata by state using PMI’s originations from inception through November 2008.  A weighting was then applied by state to each state that has not entered into a consent order to assign a likelihood that the penalty will be claimed.  In estimating the probability of a claim being made by a state, PMI considered factors such as the standard terms of the consent order; whether the state ever gave any indication of concern regarding the sale of  promissory notes through PMI’s prior platform; the probability of a state electing not to enter into a consent order in order to pursue its own litigation against PMI; whether the penalty is sufficient to compensate a state for the cost of processing the consent order; and finally the impact that current economic conditions have had on state governments.  PMI will continue to evaluate this accrual and related assumptions as new information becomes known.

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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 loan note purchasers on PMI’s online lending 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 class certification, 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 January 26, 2012, the court issued a tentative ruling granting 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-judgment and post-judgment interest.

On January 26, 2011, the court issued a final statement of decision finding that Greenwich had 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. 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. On October 22, 2012 Greenwich made an additional payment of $142,585 to PMI for pre-judgment interest. As a result, Greenwich has now satisfied its obligations with respect to PMI’s defense costs for the Hellum suit.

PMI intends to vigorously defend the class action lawsuit.  PMI cannot, however, presently determine or estimate the final outcome of the lawsuit, and there can be no assurance that it will be finally resolved in PMI’s favor.  If the class action lawsuit is not resolved in PMI’s favor, PMI might be obliged to pay damages, and might be subject to such equitable relief as a court may determine.

As a result of PMI’s prior operations, a lender member who holds a loan originated on the platform prior to October 15, 2008 may be entitled to rescind her purchase and be paid the unpaid principal amount of her borrower loan, plus statutory interest.  PMI has not recorded an accrued loss contingency in respect of this contingent liability, although it intends to continue to monitor the situation.  Generally, the federal statute of limitations for noncompliance with the requirement to register securities under the Securities Act is one year from the violation; however, the statute of limitations periods under state laws may extend for a longer period of time.  Under the Administration Agreement, PMI is generally responsible for overseeing the operation of the platform on Prosper Funding’s behalf.  See “Summary of Indenture, Form of Notes and Administration Agreement—Administration Agreement.”  If a significant number of PMI’s former lender members sought rescission, or if the class action securities lawsuit is successful, PMI’s ability to perform its obligations under the Administration Agreement may be adversely affected and, in such event, Prosper Funding’s ability to continue to make payments on the Notes could be materially impaired.

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PMI has incurred operating losses since inception and anticipates that it will continue to incur net losses through at least December 31, 2012  .

PMI has incurred operating losses since its inception and anticipates that it will continue to incur net losses for a number of years as it grows its business.  For the nine months ended September 30, 2012 and 2011 PMI had negative cash flows from operations of $11.7 million and $6.7 million, respectively.  Additionally, from its inception through September 30, 2012, PMI had an accumulated deficit of $72.4 million.

PMI has financed its operations to date primarily with proceeds from the sale of equity securities.  At September 30, 2012, PMI had approximately $8.0 million in unrestricted cash and cash equivalents and short term investments.  PMI is dependent upon raising additional capital or debt financing to fund its current operating plan.  PMI’s failure to obtain sufficient debt and equity financings and, ultimately, to achieve profitable operations and positive cash flow from operations could adversely affect its ability to perform its obligations under the Administration Agreement and, in such event, Prosper Funding’s ability to continue to make payments on the Notes could be materially impaired.

Prosper Funding and PMI both have limited operating histories.  As online companies in the early stages of development, Prosper Funding and PMI face increased risks, uncertainties, expenses and difficulties.

As the number of borrowers, lender members and borrower loans originated on the platform increases, PMI will need to increase its facilities, personnel and infrastructure in order to accommodate the anticipated greater obligations on it under the Administration Agreement as the result of the anticipated greater servicing obligations and demands on the platform.  PMI must constantly add new hardware and update its software and the platform, expand customer support services, and add new employees to maintain the operations of the platform as well as to satisfy its servicing obligations on the borrower loans and the Notes and its other obligations under the Administration Agreement.  If PMI is unable to increase the capacity of the platform and maintain the necessary infrastructure to perform its duties under the Administration Agreement, Prosper Funding, or one or more other third-party service providers engaged by Prosper Funding, will have to perform the duties otherwise performed by PMI, and you may experience delays in receipt of payments on your Notes and periodic downtime of the platform.

Prosper Funding is a new company and has no independent operating history.

Prosper Funding is a newly formed limited purpose vehicle with no independent operating history.  Before Prosper Funding commences this offering, PMI will make an additional cash contribution to Prosper Funding of between $3 million and $6 million, which Prosper Funding believes will be sufficient to meet its reasonably anticipated obligations during the first six months of operations, including its indemnification and repurchase obligations.  Under the Administration Agreement, Prosper Funding is entitled to receive a license fee from PMI for granting PMI a non-exclusive, worldwide license to access and use the platform.  The license fee is payable on the last business day of each month and shall equal the product of $150.00 and the number of borrower listings posted on the platform on any given month, provided that on the last business day of each calendar year during the term of the license on or after 2013, PMI shall also pay Prosper Funding an additional amount equal to zero or the difference, if positive, between $2,500,000 and the aggregate amounts paid through such date in respect of such monthly license fee amounts already paid through such date during such calendar year.  In addition, Prosper Funding will earn servicing fees in relation to the servicing of the borrower loans and Notes that it will retain from collections on the borrower loans.  The licensing fees and servicing fees received by Prosper Funding are projected to substantially exceed the fees it will pay to PMI for services rendered by PMI under the Administration Agreement and its other current obligations pursuant to its agreements with other third parties.  After Prosper Funding’s first six months of operations, it believes this fee income will be sufficient to cover its reasonably anticipated obligations.  While Prosper Funding believes that it will be adequately capitalized to meet its foreseeable obligations, and that its fee income will be sufficient to meet its ongoing operating costs, its financial resources will be limited and could prove to be insufficient.  In addition, Prosper Funding has no employees and will rely on PMI, as servicer, or other third-party service providers, to perform most of its day-to-day operations.  While Prosper Funding generally expects the platform to present the same risks it presented when PMI operated the platform, the lack of Prosper Funding’s own employees, its limited operating history, and capitalization that is less than that of PMI could make it more difficult for Prosper Funding to operate at a level that will be sustainable.  Absent the services to be provided to Prosper Funding by PMI pursuant to the Administration Agreement, Prosper Funding’s risk management process, ability to predict loss rates and the general operation of the platform would have a thinner margin for error than does PMI.  See “Summary of Indenture, Form of Notes and Administration Agreement—Administration Agreement” for more information.

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The market in which Prosper Funding participates is competitive and, if it does not compete effectively, its operating results could be harmed.

The consumer lending market is competitive and rapidly changing.  With the introduction of new technologies and the influx of new entrants, Prosper Funding expects competition to persist and intensify in the future, which could harm Prosper Funding’s ability to increase volume on the platform.

Prosper Funding’s principal competitors include major banking institutions, credit unions, credit card issuers and other consumer finance companies, as well as other peer-to-peer lending platforms, including LendingClub.  Competition could result in reduced volumes, reduced fees or the failure of the platform to achieve or maintain more widespread market acceptance, any of which could harm Prosper Funding’s business.  In addition, in the future Prosper Funding may experience new competition from more established Internet companies, such as eBay Inc., Google Inc., or Yahoo! Inc., possessing large, existing customer bases, substantial financial resources and established distribution channels.  If any of these companies or any major financial institution decided to enter the peer-to-peer lending business, acquire one of Prosper Funding’s existing competitors or form a strategic alliance with one of Prosper Funding’s competitors, Prosper Funding’s ability to compete effectively could be significantly compromised and its operating results could be harmed.

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

If Prosper Funding fails to promote and maintain its brand in a cost-effective manner, it may lose market share and its revenue may decrease.

To succeed, Prosper Funding must increase transaction volumes on the platform by attracting a large number of borrowers and lender members in a cost-effective manner, many of whom have not previously participated in peer-to-peer lending.  If Prosper Funding is not able to attract qualified borrowers and sufficient lender members purchase commitments, it will not be able to increase its transaction volumes.  Prosper Funding believes that developing and maintaining awareness of its brand in a cost-effective manner is critical to achieving widespread acceptance of the platform and attracting new borrower and lender members.  Furthermore, it believes that the importance of brand recognition will increase as competition in the peer-to-peer lending industry increases.  Successful promotion of its brand will depend largely on the effectiveness of marketing efforts and the member experience on the platform.  These brand promotion activities may not yield increased revenues.  If Prosper Funding fails to successfully promote and maintain its brand, it may lose its existing members to competitors or be unable to attract new members, which would cause its revenue to decrease and may impair its ability to maintain the platform.

Prosper Funding and PMI are subject to extensive federal, state and local regulation that could adversely impact their ability to service the borrower loans.

Prosper Funding and PMI are subject to extensive federal, state and local regulation, non-compliance with which could have a negative impact on their ability to service the Notes, provide a trading market for the Notes, or maintain the platform.

Additionally, PMI holds lending licenses, collections licenses or similar authorizations in 18 states, all of which have the authority to supervise and examine PMI’s activities.  Because Prosper Funding currently relies on PMI, pursuant to the Administration Agreement, to oversee the operation of the platform on its behalf, if PMI does not comply with applicable laws, PMI could lose one or more of these licenses or authorizations, which may have an adverse effect on Prosper Funding’s ability to continue to perform its servicing obligations or maintain the platform.  See “Government Regulation—Regulation and Consumer Protection Laws” for more information.

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The Federal Fair Debt Collection Practices Act and similar state debt collection laws regulate debt collection practices by “debt collectors” and prohibit debt collectors from engaging in certain practices in collecting, and attempting to collect, outstanding consumer loans.  While Prosper Funding obligates the collection agencies it uses to comply with applicable law in collecting borrower loans (and PMI has sought and will seek to comply with such law when it undertakes direct collection activity in relation to borrower loans and PMI Borrower Loans), it is possible that improper collection practices may occur that could adversely affect the collectability of particular borrower loans originated through the platform or could result in financial penalties or operating restrictions being imposed on Prosper Funding or PMI that adversely affect their ability to operate or perform their respective payment and other obligations.

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

PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  Such proprietary technology consists of proprietary technologies, processes, know-how ,  and other information that may not be patentable.  One example of this kind of technology is the Prosper Rating system that has been developed by PMI and will be transferred to PFL.  In connection with this offering, PMI will transfer ownership of the platform, including the proprietary technology and all of the rights related to the operation of the platform, to Prosper Funding.  Prosper Funding’s ability to maintain the platform depends, in part, upon this proprietary technology.  Both Prosper Funding and PMI intend to vigorously protect proprietary interests in such technology.  Despite their best efforts, however, Prosper Funding or PMI may not protect the proprietary technology effectively, which would allow competitors to duplicate their products and adversely affect Prosper Funding and PMI’s ability to compete.  A third party may attempt to reverse engineer or otherwise obtain and use the proprietary technology without Prosper Funding’s consent.  In addition, the platform may infringe upon claims of third-party patents and Prosper Funding or PMI may face intellectual property challenges from such other parties.  Prosper Funding or PMI may not be successful in defending against any such challenges or in obtaining licenses to avoid or resolve any intellectual property disputes.  Furthermore, the technology may become obsolete, and there is no guarantee that Prosper Funding will be able to successfully develop, obtain or use new technologies to adapt the platform to compete with other peer-to-peer lending platforms.  If Prosper Funding cannot protect the proprietary technology embodied in and used by the platform from intellectual property challenges, or if the platform becomes obsolete, its ability to maintain the platform and perform its servicing obligations could be adversely affected and, in such event, its ability to continue to make payments on the Notes could be materially impaired.

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

Because Prosper Funding is not a bank, it cannot belong to or directly access the Automated Clearing House (ACH) payment network.  As a result, it currently relies on an FDIC-insured depository institution to process its transactions.  If Prosper Funding cannot continue to obtain such services from this institution or elsewhere, or if it cannot transition to another processor quickly, its ability to process payments will suffer and your ability to receive principal and interest payments on the Notes will be delayed or impaired.

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If the security of Prosper Funding’s lender members’ and borrower members’ confidential information stored in Prosper Funding or PMI’s systems is breached or otherwise subjected to unauthorized access, your secure information may be stolen, Prosper Funding and PMI’s reputations may be harmed, and they may be exposed to liability.

As with any entity with a significant Internet presence, Prosper Funding, PMI and the third party that Prosper Funding uses for website hosting occasionally have experienced cyber-attacks, attempts to breach their systems and other similar incidents, none of which have been successful.  The platform stores Prosper Funding’s lender members’ and borrower members’ bank information and other personally-identifiable sensitive data.  Any accidental or willful security breaches or other unauthorized access could cause your secure information to be stolen and used for criminal purposes.  Security breaches or unauthorized access to secure information could also expose Prosper Funding or PMI to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity.  If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in the relevant software are exposed and exploited, and, as a result, a third party or disaffected employee obtains unauthorized access to any lender members’ or borrower members’ data, Prosper Funding’s relationships with its members will be severely damaged, and it (or PMI) could incur significant liability.  Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, Prosper Funding, PMI and Prosper Funding’s third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures.  In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data.  These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause Prosper Funding’s members to lose confidence in the effectiveness of its and PMI’s data security measures.  Any security breach, whether actual or perceived, would harm Prosper Funding and PMI’s reputations, and Prosper Funding could lose members.

Any significant disruption in service on the platform or in PMI’s computer systems could adversely affect PMI’s ability to perform its obligations under the Administration Agreement.

PMI’s ability to perform its obligations under the Administration Agreement could be materially and adversely affected by events outside of its control.  The satisfactory performance, reliability and availability of PMI’s technology and its underlying network infrastructure are important to Prosper Funding and PMI’s respective operations, level of customer service, reputation and ability to attract new members and retain existing members.  PMI’s system hardware is hosted in a hosting facility located in San Francisco, California, owned and operated by Digital Realty Trust.  PMI also maintains an off-site backup system located in Las Vegas, Nevada.  Digital Realty Trust does not guarantee that access to the platform or to PMI’s own systems will be uninterrupted, error-free or secure.  The operation of the platform and PMI’s operation of its own systems depend on Digital Realty Trust’s ability to protect the relevant systems in Digital Realty Trust’s facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity or other environmental concerns, computer viruses or other attempts to harm them, criminal acts and similar events.  If PMI’s arrangement with Digital Realty Trust is terminated, or there is a lapse of service or damage to Digital Realty Trust’s facilities, PMI could experience interruptions in providing its services under the Administration Agreement, Prosper Funding could experience interruptions in the operations of the platform, and both could experience delays and additional expense in arranging new facilities.  Any interruptions or delays in PMI’s performance of its services or in the functioning of and accessibility of the platform, whether as a result of Digital Realty Trust or other third-party error, PMI’s error, natural disasters or security breaches, whether accidental or willful, could harm Prosper Funding’s relationships with its members and its reputation.  Additionally, in the event of damage or interruption, PMI’s insurance policies may not be sufficient for PMI to adequately compensate Prosper Funding for any losses that it may incur.  PMI’s disaster recovery plan has not been tested under actual disaster conditions, and PMI may not have sufficient capacity to recover all data and services in the event of an outage at the Digital Realty Trust facility.  These factors could prevent PMI from processing or posting payments on the borrower loans or the Notes, damage Prosper Funding’s brand and reputation, divert the attention of PMI’s employees, reduce Prosper Funding’s revenue, subject PMI or Prosper Funding to liability and cause members to abandon the platform, any of which could adversely affect PMI and Prosper Funding’s respective businesses, financial condition and results of operations.

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The platform may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.

The platform may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.  If a “hacker” were able to infiltrate the platform, you would be subject to the increased risk of fraud or borrower identity theft and may experience losses on, or delays in the recoupment of amounts owed on, a fraudulently induced purchase of a Note.  Additionally, if a hacker were able to access Prosper Funding or PMI’s secure files, he or she might be able to gain access to your personal information.  While Prosper Funding and PMI have taken steps to prevent such activity from affecting the platform, if they are unable to prevent such activity, the value of your investment in the Notes could be adversely affected.

Competition for PMI’s employees is intense, and PMI may not be able to attract and retain the highly skilled employees it needs to perform under the Administration Agreement.

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

In addition, PMI invests significant time and expense in training its employees, which increases their value to competitors who may seek to recruit them.  If PMI fails to retain its employees, it could incur significant expenses in hiring and training their replacements and the quality of its services and its ability to serve borrowers and lender members could diminish, resulting in a material adverse effect on its ability to perform its obligations under the Administration Agreement and, in such event, Prosper Funding’s ability to continue to make payments on the Notes could be materially impaired.

PMI’s growth could strain its personnel resources and infrastructure, and if PMI is unable to implement appropriate controls and procedures to manage its growth, this may adversely affect its ability to perform under the Administration Agreement.

PMI’s growth in headcount and operations since its inception has placed, and will continue to place, to the extent that PMI is able to sustain such growth, a significant strain on its management and its administrative, operational and financial reporting infrastructure.

PMI’s success will depend in part on the ability of its senior management effectively to manage the growth it achieves.  To do so, PMI must continue to hire, train and manage new employees as needed.  If PMI’s new hires perform poorly, or if PMI is unsuccessful in hiring, training, managing and integrating new employees, or if PMI is not successful in retaining its existing employees, its ability to perform under the Administration Agreement may be impaired.  To manage the expected growth of PMI’s operations and personnel, PMI will need to continue to improve its operational and financial controls and update its reporting procedures and systems.  The addition of new employees and the system development that PMI anticipates will be necessary to manage its growth will increase PMI’s cost base, which will make it more difficult for PMI to offset any future revenue shortfalls by reducing expenses in the short term.  If PMI fails to successfully manage its growth, it will be unable to execute its business plan and its ability to perform under the Administration Agreement may be impaired.

Purchasers of Notes will have no control over Prosper Funding or PMI and will not be able to influence their corporate matters.

Prosper Funding is not offering and will not offer equity interests in its company.  Lender members who purchase Notes offered through the platform will have no equity interest in Prosper Funding or in PMI and no ability to vote on or influence their decisions.  As a result, PMI, which owns all of Prosper Funding’s outstanding equity interests, will continue to have sole control over Prosper Funding’s governance matters, subject to the presence of Prosper Funding’s independent directors, whose consent will be required before Prosper Funding can take certain extraordinary actions, and subject to the limitations specified in Prosper Funding’s organizational documents and the indenture.  See “Information About Prosper Funding LLC.”

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Individuals who make misrepresentations or omissions in violation of the securities laws of the State of Washington when posting comments on the platform may be subject to sellers’ liability under the Securities Act of Washington.

Prosper Funding permits its members and loan applicants to post certain comments on the platform.  Individuals who make misrepresentations or omissions in violation of section 21.20.010 of the Securities Act of Washington when posting such comments may be subject to sellers’ liability under the Securities Act of Washington.  Neither Prosper Funding nor PMI monitors the comments posted on the platform for statements that might violate the securities laws of the State of Washington.

Events beyond Prosper Funding and PMI’s control may damage their ability to maintain adequate records, maintain the platform or perform the servicing obligations.  If such events result in a system failure, your ability to receive principal and interest payments on the Notes would be substantially harmed.

If a catastrophic event resulted in a platform outage and physical data loss, Prosper Funding’s ability (and PMI’s ability as servicer under the Administration Agreement) to perform its servicing obligations would be materially and adversely affected.  Such events include, but are not limited to, fires, earthquakes, terrorist attacks, natural disasters, computer viruses and telecommunications failures.  In addition, PMI is responsible for storing back-up records related to the operation of the platform in offsite facilities located in San Francisco, California and Las Vegas, Nevada.  If PMI’s electronic data storage and back-up data storage system are affected by such events, Prosper Funding’s ability (and PMI’s ability as servicer under the Administration Agreement) to perform its servicing obligations could be materially and adversely affected.  In the event of any platform outage or physical data loss described in this paragraph, Prosper Funding cannot guarantee that you would be able to recoup your investment in the Notes.

Prosper Funding is an “emerging growth company” under the JOBS Act of 2012, and it cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make the Notes less attractive to investors.

Prosper Funding is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, it is eligible for certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.  Prosper Funding will remain an emerging growth company until the earliest of: (i) the first fiscal year after it has revenue in excess of $1 billion; (ii) the beginning of the sixth fiscal year after its first registered sale of common equity securities in an initial public offering; (iii) the date upon which it has issued in excess of $1 billion of non-convertible debt during the previous three-year period; or (iv) the date on which it would be deemed a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Prosper Funding cannot predict if investors will find the Notes less attractive because it may rely on these exemptions.

Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, Prosper Funding has elected to “opt out” of this extended transition period, and as a result, it will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-”emerging growth companies.” Its decision to opt out of the extended transition period is irrevocable.

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RISKS RELATING TO COMPLIANCE AND REGULATION

The platform represents a novel approach to borrowing and lending that may fail to comply with federal and state securities laws, borrower protection laws, such as state lending laws, federal consumer protection laws, such as the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act and the Fair Debt Collection Practices Act, and the state counterparts to such consumer protection laws.  Borrowers may dispute the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws.  Lenders may attempt to rescind their Note purchases under securities laws.  Compliance with such regulatory regimes is also costly and burdensome.

The platform represents a novel program that must comply with regulatory regimes applicable to consumer credit transactions as well as with regulatory regimes applicable to securities transactions.  The novelty of the platform means compliance with various aspects of such laws is untested.  Certain state laws generally regulate interest rates and other charges and require certain disclosures, and also require licensing for certain activities.  In addition, other state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of borrower loans on the platform.  The platform is also subject to other laws, such as:

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

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

· the Federal Fair Credit Reporting Act, which regulates the use and reporting of information related to each applicant’s credit history;

· the Federal Fair Debt Collection Practices Act, which regulates debt collection practices by “debt collectors” and prohibits debt collectors from engaging in certain practices in collecting, and attempting to collect, outstanding consumer loans;

· state counterparts to the above consumer protection laws; and

· state and federal securities laws, which require that any non-exempt offers and sales of the Securities be registered.

Prosper Funding and PMI may not always be in compliance with these laws.   Borrowers may make counterclaims regarding the enforceability of their obligations under borrower or consumer protection laws after collection actions have commenced, or otherwise seek damages under these laws.  Lenders may attempt to rescind their Note purchases under securities laws, and Prosper Funding or PMI’s failure to comply with such laws could also result in civil or criminal liability.  For example, in 2010 and 2011 PMI failed to timely renew its applications to offer and sell its borrower payment dependent notes in several states, resulting in $75,800 in penalties in five states, and the repurchase of $21,900 of Notes from Florida residents pursuant to a rescission offer.  Compliance with these requirements is also costly, time-consuming and limits operational flexibility.  See “Government Regulation  —  Regulation and Consumer Protection Laws” for more information.

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Noncompliance with laws and regulations may impair PMI’s ability to facilitate the origination of or service borrower loans.

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

Where applicable, Prosper Funding and PMI seek to comply with state lending, servicing and similar statutes.  In all U.S. jurisdictions with licensing or other requirements that Prosper Funding and PMI believe may be applicable to the platform, Prosper Funding and PMI have obtained any necessary licenses or comply with the relevant requirements.  Nevertheless, if Prosper Funding or PMI are found to not comply with applicable laws, Prosper Funding or PMI could lose one or more of their licenses or face other sanctions, which may have an adverse effect on PMI’s ability to continue to facilitate the origination of borrower loans through the platform, and on Prosper Funding or PMI’s ability to perform servicing obligations or make the platform available to borrowers in particular states, which may impair your ability to receive the payments of principal and interest on your Notes that you expect to receive.  See “Government Regulation—Regulation and Consumer Protection Laws—State and Federal Laws and Regulations” for more information.

Prosper Funding relies on its agreement with WebBank, pursuant to which WebBank originates loans to qualified borrower members on a uniform basis throughout the United States and sells and assigns those loans to Prosper Funding.  If Prosper Funding’s relationship with WebBank were to end, it may need to rely on individual state lending licenses to originate borrower loans.

Borrower loan requests take the form of an application to WebBank submitted through the platform.  WebBank currently makes all loans to borrowers through the platform, which allows the platform to be available to borrowers on a uniform basis throughout the United States.  If Prosper Funding’s relationship with WebBank were to end or if WebBank were to cease operations, Prosper Funding may need to rely on individual state lending licenses to originate borrower loans.  Because Prosper Funding does not currently possess state lending licenses in any U.S. state, it might be forced to limit the rates of interest charged on borrower loans in some states and it might not be able to originate loans in some states altogether.  It also may face increased costs and compliance burdens if its agreement with WebBank is terminated.

Several lawsuits have sought to recharacterize certain loan marketers and other originators as lenders.  If litigation or a regulatory enforcement action on similar theories were successful against Prosper Funding or PMI, borrower loans originated through the platform could be subject to state consumer protection laws and licensing requirements in a greater number of states.

Several lawsuits have brought under scrutiny the association between high-interest “payday loan” marketers and out-of-state banks.  These lawsuits assert that payday loan marketers use out-of-state lenders in order to evade the consumer protection laws imposed by the states where they do business.  Such litigation has sought to recharacterize the loan marketer as the lender for purposes of state consumer protection law restrictions.  Similar civil actions have been brought in the context of gift cards.  Prosper Funding and PMI believe that their activities are distinguishable from the activities involved in these cases.

Nevertheless, if Prosper Funding or PMI were recharacterized as the lender of borrower loans, such a recharacterization could render those loans voidable or unenforceable in whole or in part.  In addition, Prosper Funding and PMI could be subject to claims by borrowers, as well as enforcement actions by regulators.  Even if Prosper Funding and PMI were not required to cease doing business with residents of certain states or to change their business practices to comply with applicable laws and regulations, they could be required to register or obtain licenses or regulatory approvals that could impose a substantial cost on them.  To date, no actions have been taken or threatened against Prosper Funding or PMI on the theory that either has engaged in unauthorized lending.  However, such actions could have a material adverse effect on Prosper Funding or PMI’s businesses.

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As Internet commerce develops, federal and state governments may draft and propose new laws to regulate Internet commerce, which may negatively affect Prosper Funding and PMI’s businesses.

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

If Prosper Funding or PMI is required to register under the Investment Company Act, their ability to conduct business could be materially adversely affected.

The Investment Company Act of 1940, or the “Investment Company Act,” contains substantive legal requirements that regulate the manner in which “investment companies” are permitted to conduct their business activities.  Prosper Funding and PMI believe PMI has conducted its business, and Prosper Funding intends to conduct its business, in a manner that does not result in being characterized as an investment company.  If, however, Prosper Funding is deemed to be an investment company under the Investment Company Act, it may be required to institute burdensome compliance requirements and its activities may be restricted, which would materially adversely affect its business, financial condition and results of operations.  Any determination that PMI is an investment company under the Investment Company Act similarly could impair its ability to perform its obligations under the Administration Agreement and thereby impair Prosper Funding’s ability to make payments on the Notes.  If Prosper Funding or PMI were deemed to be an investment company, Prosper Funding or PMI may also attempt to seek exemptive relief from the SEC, which could impose significant costs and delays on their businesses.

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If Prosper Funding or PMI is required to register under the Investment Advisers Act, their ability to conduct business could be materially adversely affected.

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

PMI’s previous administration of an automated bidding plan system and the administration of Quick Invest by PMI under its previous offering and by Prosper Funding under this offering, could create additional liability for PMI or Prosper Funding and such liability could be material.

PMI’s former automated plan system allowed lender members to create their own automated bidding plans.  By creating such a plan, a lender member could have bids placed automatically on her behalf on loan listings that met loan criteria selected by her. In creating an automated bidding plan, the member could design those criteria herself, use a group of model criteria selected by PMI, or customize one of those groups of model criteria as she saw fit.   Each automated bidding plan consisted of a group of loan criteria, such as loan amount, minimum yield percentage, Prosper Rating, income and employment characteristics, group affiliations and debt-to-income ratio. That group of criteria was divided into sub-groups, each of which were referred to as a “slice.”  The specific loans on which the lender member bid through her automated bidding plan were determined by the criteria in each of her plan slices.  If a loan listing was posted that satisfied all of the criteria in any one of her plan slices, a bid would automatically be placed on the listing on her behalf.

On July 6, 2011, PMI replaced the former automated plan system with a new loan search tool, Quick Invest.  Under Quick Invest, lender members are no longer able to create automated plans and instead identify Notes that meet their investment criteria.  A lender using Quick Invest is asked to indicate (i) the Prosper Rating or Ratings she wishes to use as search criteria, (ii) the total amount she wishes to invest and (iii) the amount she wishes to invest per Note. Quick Invest then compiles a basket of Notes for her consideration that meet her search criteria.  If the pool of Notes that meet her criteria exceeds the total amount she wishes to invest, Quick Invest selects Notes from the pool based on how far the listings corresponding to the Notes have progressed through the loan verification process, i.e., Notes from the pool that correspond to listings for which the loan verification process has been completed will be selected first.  If the pool of Notes that meet the lender member’s criteria and for which the loan verification process has been completed still exceeds the amount she wishes to invest, Quick Invest selects Notes from that pool based on the principle of first in, first out, i.e.,  the Notes from the pool with the corresponding listings that were posted on the website earliest will be selected first. If the member’s search criteria include multiple Prosper Ratings, Quick Invest divides her basket into equal portions, one portion representing each Prosper Rating selected. To the extent available Notes with these Prosper Ratings are insufficient to fill the lender’s order, the lender is advised of this shortfall and given an opportunity either to reduce the size of her order or to modify her search criteria to make her search more expansive.  The Auto Quick Invest feature allows lender members (i) to have Quick Invest searches run on their designated criteria automatically each time new listings are posted on the platform, and (ii) to place bids on any Notes identified by each such search. See “About the Platform—How to Bid to Purchase Notes—Quick Invest.”

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Since the Notes purchased through an automated plan or Quick Invest are the same as Notes purchased manually, they present the same risks of non-payment as all Notes that may be purchased through the platform.  For example, there is a risk that a loan identified through an automated plan or Quick Invest may become delinquent or default, and the estimated return and estimated loss for that loan individually, or the estimated loss or return for the plan or the basket of Notes selected by Quick Invest as a whole, may not accurately reflect the actual return or loss on such loan.  If this were to occur, a lender who purchased a note from PMI through an automated plan or Quick Invest could pursue a claim against PMI  in connection with its representations regarding the performance of the loans bid upon through the plan or Quick Invest, and a lender who purchases a Note from Prosper Funding through an automated plan or Quick Invest could pursue a claim against Prosper Funding in connection with its representations regarding the performance of the loans bid upon through the plan or Quick Invest.  An investor could pursue such a claim under various antifraud theories under federal and state securities law.  In addition, the SEC or an investor may take the position that the plans created pursuant to the automated bidding plan model involved the offer and sale of a separate security.  Since PMI did not register the automated bidding plans as separate securities, such a claim, if successful, could give investors who invested in notes through such plans a rescission right under state or federal law and possibly subject PMI to civil fines or criminal penalties under federal or state law.  If such a theory were sustained, PMI could be liable for sales through automated bidding plans that took place prior to July 6, 2011. To date, no actions have been taken or threatened against PMI on this theory.  However, such actions could have a material adverse effect on PMI’s business.

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

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

The activities of Prosper Funding and PMI in connection with the offer and sale of securities on the platform could result in potential violations of federal securities law and result in material liability to Prosper Funding and PMI.

Prosper Funding and PMI’s respective businesses are subject to federal and state securities laws that may limit the kinds of activities in which Prosper Funding and PMI may engage and the manner in which they engage in such activities.  For example, changes to the manner in which Prosper Funding offers and sells Notes or other securities on the platform could be viewed by the SEC or a state securities regulator as involving the creation or sale of new, unregistered securities.  In such circumstances, the failure to register such securities could subject Prosper Funding and PMI to liability and the amount of such liability could be meaningful.  In addition, PMI previously entered into a settlement with the SEC and consented to the entry of a Cease and Desist order that requires PMI to cease and desist from committing or causing any violations or any future violations of the securities laws.  Failure to comply with that order could result in material civil or criminal liability, which could materially adversely affect PMI’s business and this offering.

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USE OF PROCEEDS

Prosper Funding will use the proceeds of each series of Notes to facilitate the funding of the related borrower loan through the platform designated by the lender members purchasing such series of Notes.  Prosper Funding will use the proceeds of each series of Notes to purchase the corresponding borrower loan from WebBank.  See “About the Platform” for more information.

PMI will not receive any consideration for issuance of the PMI Management Rights that accompany each Note.

PLAN OF DISTRIBUTION

Prosper Funding will offer the Notes to lender members at 100% of their principal amount.  The Notes will be offered only by Prosper Funding through www.prosper.com.  See “About the Platform” and “About Prosper Funding LLC” for more information.  The PMI Management Rights offered by PMI will accompany each Note offered on the platform.

FINANCIAL SUITABILITY REQUIREMENTS

The Securities are highly risky and speculative.  Investing in the Securities should be considered only by persons who can afford the loss of their entire investment.  The platform currently allows lender members to bid as little as $25 and as much as the full amount of any particular listing, up to an aggregate amount of $5,000,000 for individuals and $50,000,000 for institutions.

To purchase Securities, lender members located in Alaska, Idaho, Missouri, Nevada, New Hampshire, Virginia or Washington must meet one or more of the following suitability requirements:

a.  (i) You must have an annual gross income of at least $70,000; (ii) your net worth must be at least $70,000 (exclusive of home, home furnishings and automobiles); and (iii) the total amount of Securities you purchase cannot exceed 10% of your net worth (exclusive of home, home furnishings and automobiles); or

b.  (i) Your net worth must be at least $250,000 (exclusive of home, home furnishings and automobiles); and (ii) the total amount of Securities you purchase cannot exceed 10% of your net worth (exclusive of home, home furnishings and automobiles).

Lender members that are residents of California must meet one or more of the following suitability requirements:

a.  (i) You must have had an annual gross income of at least $85,000 during the last tax year; (ii) you must have a good faith belief that your annual gross income for the current tax year will be at least $85,000;  and  (iii) the total amount of Securities you purchase cannot exceed 10% of your net worth; or

b.  (i) Your net worth must be at least $200,000; and (ii) the total amount of Securities you purchase cannot exceed 10% of your net worth; or

c.  (i) Your net investment in Securities cannot exceed $2,500; and (ii) the total amount of Securities you purchase cannot exceed 10% of your net worth.

The Maine Office of Securities recommends that an investor’s aggregate investment in this offering and similar offerings not exceed 10% of the investor’s liquid net worth.  For this purpose, “liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.

For purposes of the suitability requirements described above, you and your spouse are considered to be a single person.  In addition, the following definitions apply:

"annual gross income" means the total amount of money you earn each year, before deducting any amounts for taxes, insurance, retirement contributions or any other payments or expenses;

"net worth" means the total value of all your assets, minus the total value of all your liabilities. The value of an asset is equal to the price at which you could reasonably expect to sell it. In calculating your net worth, you should only include assets that are liquid, meaning assets that consist of cash or something that could be quickly and easily converted into cash, such as a publicly-traded stock. You shouldn't include any illiquid assets, such as homes, home furnishings or cars;

"net investment" means the principal amount of Securities purchased, minus principal payments received on the Securities.

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Prosper Funding and PMI intend to register the offer and sale of the Securities in all 50 states as well as the District of Columbia.  As part of this process, Prosper Funding and PMI expect that states in addition to those referenced above will impose minimum financial suitability standards and maximum investment limits for lender members who reside in such states.  Should this occur, Prosper Funding and PMI will set forth these requirements in a supplement to this prospectus.  Under the lender registration agreement, lender members are required to represent and warrant that they satisfy the applicable minimum financial suitability standards and maximum investment limits of the state in which they reside.  Lender members who fail to satisfy any such requirements will not be permitted to purchase the Securities.

ABOUT THE PLATFORM

Overview

Prosper Funding operates a peer-to-peer online credit platform, which this prospectus refers to as the “platform,” that enables its borrower members to borrow money and its lender members to purchase Borrower Payment Dependent Notes, or Notes, issued by Prosper Funding, the proceeds of which facilitate the funding of the loans made to borrower members. Prosper Funding is a wholly-owned subsidiary of PMI.

PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  In connection with this offering, PMI will transfer ownership of the platform, including all of the rights related to the operation of the platform, to Prosper Funding.  PMI and WebBank expect to enter into a Loan Account Program Agreement, pursuant to which PMI, as agent of WebBank, manages the operation of the platform in connection with the submission of loan applications by potential borrowers, the making of related loans by WebBank and the funding of such loans by WebBank.  Prosper Funding and PMI expect to enter into an Administration Agreement, pursuant to which PMI has agreed to manage all other aspects of the platform on behalf of Prosper Funding.  Prior to the commencement of this offering, PMI operated the platform, facilitated the origination of loans by WebBank through the platform and issued and sold notes corresponding to those loans.  This prospectus refers to borrower loans originated and notes issued and sold through the platform prior to the commencement of this offering as “PMI Borrower Loans” and “PMI Notes,” respectively.  The PMI Notes are not offered pursuant to this prospectus.

The platform was designed to allow people to lend money to other people in an open transparent marketplace. Prosper Funding and PMI believe peer-to-peer lending represents a new model of consumer lending, where individuals can earn the interest spread of a traditional consumer lender but must also assume the credit risk of a traditional lender.  It is people that are the drivers of credit formation in peer-to-peer lending, not institutions.

Prosper Funding and PMI believe peer-to-peer lending presents an enormous opportunity to create a more transparent form of consumer lending.  Key drivers of peer-to-peer lending include:

· The possibility of lower rates and better terms for borrowers compared to traditional sources of consumer credit, such as credit cards;

· A new asset class for investors with the possibility of attractive risk-adjusted returns that are not directly correlated to the performance of the stock market;

· An opportunity to combine social networking with financial services in a manner that allows users that help fund loans to feel they are directly helping other people while also potentially earning attractive returns; and

· Growing acceptance of the Internet as an efficient and convenient forum for consumer transactions.

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How the Platform Works

The platform is an online marketplace that matches individuals who wish to obtain consumer loans (“borrower members”) with those who are willing to help fund those loans (“lender members”).  A borrower member who wishes to obtain a loan through the platform must post a loan listing, or listing, on the platform.  Lender members can review all the loan listings on the platform and make a commitment towards any listing they wish to help fund.  A commitment is a commitment to purchase a promissory note, or “Note,” from Prosper Funding, the payments on which will be dependent on the payments Prosper Funding receives on the loan requested in the listing.  If a listing receives enough lender member commitments to be funded, WebBank, an FDIC-insured, Utah industrial bank, will originate the loan requested and then sell it to Prosper Funding and, at the same time, Prosper Funding will sell a Note to each lender member that made a commitment towards the loan in the principal amount of that commitment.  A borrower member who posts a loan listing is referred to as an “applicant” and an applicant who obtains a loan through the platform is referred to as a “borrower.”

In order to post a listing, an applicant must first complete a loan application.  PMI then obtains a credit report on the applicant and uses data from that report as well as data supplied by the applicant to assign a risk grade to the listing, which is called a “Prosper Rating.”  The listing is then posted on the platform.  The format for listings is shown below.  The images are not from actual listings, but rather depict hypothetical listings created for purposes of illustration in this prospectus.  Each listing includes the Prosper Rating, selected items from the applicant’s credit report, intended use of the potential loan, plus information regarding any previous loans obtained by the applicant through the platform.

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Lender members can bid on listings in amounts ranging from the entire loan amount requested to as little as $25.  Thus, it is typical to have multiple lender members bid on a single listing.  As the listing is funded, the listing will show the amount of commitments made towards that potential loan by lender members.

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One unique aspect of peer-to-peer lending is that it allows lender members who are friends and family of an applicant to bid on that applicant’s listing.  Friends and family bids can signal that a stronger social bond exists that could influence repayment rates.  Friends and family can also vouch for the applicant’s character.  These bids are also shown on the listing page for all lender members to review, as shown below.1

1 Neither Prosper Funding nor PMI verifies claims by a lender member that he is a friend or family member of an applicant.

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The registration, processing and payment systems are automated and electronic.  Prosper Funding has no physical branches, no deposit-taking and interest payment activities and limited loan underwriting activities.  Prosper Funding’s website provides detailed information about the platform, including detailed fee information, the full text of the member legal agreements, help pages and white papers.  In addition to the customer support materials available on the website, Prosper Funding makes additional customer support available to members by email and phone (which services are currently handled by PMI as servicer pursuant to the Administration Agreement).  Its customer support team is currently located at its headquarters in San Francisco, California.

PMI will attract lender members and borrowers to www.prosper.com through a variety of sources, including referrals from other parties (such as online communities, social networks and marketers), search engine results and online and offline advertising.  Prosper Funding is not dependent on any one source of traffic to its website.  In September 2012, the website received approximately 389,574 unique visitors.

Prosper Funding generates revenue by charging lender members ongoing servicing fees on the Notes they have purchased, and from licensing fees paid by PMI for Prosper Funding’s licensing of the platform to PMI.  PMI generates revenue by collecting fees from Prosper Funding under the Administration Agreement and by collecting origination fees from WebBank as compensation for its loan origination activities on WebBank’s behalf.

Platform Participants, Registration Requirements and Minimum Credit Criteria

All platform participants must register with Prosper Funding and agree to the platform’s rules and terms of use, including consent to receipt of disclosures electronically.  At the time of registration, individuals or authorized institutional agents must provide their name, address and an email address.  After responding to an email verification, registrants must agree to the terms and conditions (including the applicable registration agreement) for the specific role for which they are registering.

Borrower Members

A borrower member may be any natural person at least 18 years of age who is a U.S. resident in a state where loans through the platform are available, with a bank account and a social security number.  After passing the anti-fraud and identity verification process, borrower members can request unsecured borrower loans at interest rates set by PMI.  PMI sets minimum credit and other credit guidelines for borrowers, as discussed in the risk grading section.

When an applicant requests a loan, PMI first evaluates whether the applicant meets the underwriting criteria established in conjunction with WebBank.  WebBank makes loans to borrowers and then sells and assigns the promissory notes evidencing those loans to Prosper Funding.  The underwriting criteria apply for all borrower loans originated through the platform and may not be changed without WebBank’s consent.  The underwriting criteria require that borrowers have a minimum credit score of a specified threshold amount (currently 640, except that the minimum is 600 for borrower members who (1) previously obtained a borrower loan and paid off the loan in full, or (2) are seeking a second loan and are otherwise eligible for a second loan), have no prior charge-offs on loans originated through the platform not have filed for bankruptcy within the last 12 months, and have at least one open trade reporting on their credit report.  In connection with the identity and anti-fraud verification process for applicants, PMI verifies the deposit account into which the loan proceeds will be deposited, to determine that the applicant is a holder of record of the account.  Even if a listing receives bids that equal or exceed the minimum amount required to fund, PMI will cancel the listing if it is unable to verify the applicant’s account.  While PMI attempts to authenticate each platform participant’s identity, its fraud checks could fail to detect identity theft, fraud and inaccuracies.  See “Risk Factors—Risks Related to Borrower Default” for more information.

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Lender Members

Lender members are individuals and institutions that have the opportunity to buy Notes.  Lender members must register on the platform.  During lender registration, potential lender members must authorize Prosper Funding, or its agent, to obtain their credit report for identification purposes.  Lender members also must consent to any applicable tax withholding statement and must agree to the terms and conditions of Prosper Funding’s website.  Lender members must also enter into a lender registration agreement with Prosper Funding, which agreement governs all sales of Notes to lender members.  Lender members are not required to give credit information to the same extent as borrower members.  Both individuals and institutions may register as lender members.  An individual lender member must be a natural person at least 18 years of age and a U.S. resident, must provide his or her social security number and may be required to provide his or her state driver’s license or state identification card number.  Institutions must provide their taxpayer identification number.  At the time a lender member registers with Prosper Funding, the lender member must satisfy any minimum financial suitability standards and maximum investment limits established for the platform or the Note Trader platform by the state in which the lender member resides.  Prior to bidding on a listing, lender members must transfer funds to an account maintained on the platform (a “funding account”).  The funding account holds all funds supporting a lender member’s bids and all Note payments payable to the lender member are deposited in the funding account.

Relationship with WebBank

WebBank is a FDIC-insured, Utah-chartered industrial bank that originates all loans made through the platform.  WebBank and PMI are parties to a Loan Account Program Agreement, under which PMI manages the operations of the platform that relate to the submission of loan applications by potential borrowers, the making of related loans by WebBank and the funding of such loans by WebBank in exchange for a fee equal to the origination fee charged by WebBank.  In connection with this offering, WebBank, Prosper Funding and PMI will enter into a Loan Sale Agreement, under which WebBank will sell and assign the promissory notes evidencing the borrower loans to Prosper Funding.  As consideration for WebBank’s agreement to sell and assign the promissory notes, Prosper Funding will pay WebBank a monthly fee in addition to the purchase price of the promissory notes themselves.  Under the Loan Account Program Agreement, PMI will indemnify WebBank with respect to any damages arising from WebBank’s participation in the origination of borrower loans as contemplated in the Loan Account Program Agreement.

Risk Management

PMI’s risk management has evolved from its inception.  PMI has consistently worked to improve the information provided to lenders in order to help them make sound investment decisions.  A major source of improvement has been to progressively incorporate the historical performance of loans originated by PMI into the Prosper Ratings as more loan outcome data becomes available over time.  PMI intends to continuously refine the proprietary rating system by regularly reassessing the system and notifying Prosper Funding of any changes PMI believes should be made to the Prosper Ratings system.  For more information about how the Prosper Ratings and estimated loss rates are calculated and reassessed, see the following sections.  For more information about PMI’s obligation to regularly reassess the Prosper Ratings systems, including the reasonableness of the implied loss rates, see “About the Platform—Risk Management—Comparing Estimated Loss Rates to Actual Losses.”  PMI intends to transfer to Prosper Funding the software and intellectual property associated with the Prosper Ratings system.

Prosper Rating Assigned to Listings

Each listing is assigned a Prosper Rating.  The Prosper Rating is a letter that indicates the expected level of risk associated with the listing.  Each letter grade corresponds to an estimated average annualized loss rate range.  The rating associated with a listing reflects the loss expectations for that listing as of the time the rating is given.  This means that otherwise similar borrowers may have different Prosper Ratings at different points in time as the Prosper Rating is updated to incorporate more recent information.  There are currently seven Prosper Ratings, but this, as well as the loss ranges associated with each, may change over time as the marketplace dictates.  PMI intends to regularly update the loss rates associated with the Prosper Ratings to reflect the ongoing actual performance of historical borrower loans.  The updates will occur at least annually.

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The current Prosper Ratings and the estimated loss ranges associated with them are as follows:

Prosper Rating	Est. Avg. Annual Loss Rate
AA	0.00% - 1.99 %
A	2.00% - 3.99%
B	4.00% - 5.99%
C	6.00% - 8.99%
D	9.00% - 11.99%
E	12.00% - 14.99%
HR	>=15.00%

The estimated loss rate for each listing is based primarily on the historical performance of borrower loans with similar characteristics and is primarily determined by two scores: (1) a custom Prosper Score, and (2) a credit score obtained from a credit reporting agency.  The custom Prosper Score is updated periodically to include new information that is predictive of borrower risk as it becomes available or as the evidence supporting a particular datum becomes strong enough to merit its inclusion in the custom Prosper Score.

If a particular piece of information is found to be highly predictive of a borrower’s risk prior to a custom Prosper Score re-development, then it may be added to the rating process as an overlay until its impact on borrower risk is sufficiently captured by the combination of the custom Prosper Score and the credit bureau score.  Throughout 2011, for instance, increasingly strong evidence continued to emerge that successful performance on a previous loan through the platform was a strong predictor of borrower risk (borrowers having successfully performed on a previous loan through the platform were much less likely to default on a new loan than comparable borrowers who had not successfully repaid a loan through the platform).  Once this evidence was sufficiently robust, the presence of a second loan became an integral determinant of a borrower’s Prosper Rating.

Prosper Score

The Prosper Score predicts the probability of a borrower loan going “bad,” where “bad” is the probability of going more than 60 days past due within fifteen months of loan origination.  To create the Prosper Score, PMI developed a custom risk model using its historical data.  PMI built the model on its borrower population so that it would incorporate behavior that is unique and inherent to that population.  In contrast, a credit score obtained from a credit reporting agency is based on a much broader population, of which borrowers through the platform are just a small subset.  PMI uses both the Prosper Score and a credit score to assess the level of risk associated with a listing.

To build and validate the custom risk model, PMI used loans it booked from April 2007 through October 2008 and measured their performance for the fifteen months following origination.  PMI analyzed variables available at the time of listing for potential inclusion in the final model.  Potential variables included those from the credit report and also those provided by the borrower.  PMI dropped or kept variables in the final model based on their contribution and stability over time, and went through a number of iterations before finalizing the model in its current form.  The final model includes variables such as Total Inquiries and Debt-to-Income Ratio.

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The model assigns weights to all of its variables based on their value in predicting the likelihood of a loan going bad.  For a given listing, the model estimates the probability of the related loan becoming bad, which is called the listing’s “probability of bad.”  The probability of bad for a listing is then mapped to a Prosper Score, which is displayed as part of that listing.  Prosper Scores range from 1 to 10, with 10 being the best, or lowest risk value.  The probability of bad ranges and the corresponding Prosper Scores are as follows.

Probability Bad	Prosper Score
> 24.84%	1
20.33 < x <=24.84%	2
17.05 < x <= 20.33%	3
14.42 < x <= 17.05%	4
12.00 < x <= 14.42%	5
10.00 < x <= 12.00%	6
8.17 < x <= 10.00%	7
5.98 < x <= 8.17%	8
4.50 < x <= 5.98%	9
0.00 < x <= 4.50%	10

For example, a probability of bad of 3.29% equates to a Prosper Score of 10, a probability of bad of 12.00% equates to a Prosper Score of 6, and a probability of bad of 37.54% equates to a Prosper Score of 1.  The probability of bad ranges are likely to change over time as additional performance data is acquired.

Credit Score

In addition to the Prosper Score, another major element used to determine the Prosper Rating for a listing is a credit score from a consumer reporting agency.  PMI currently uses Experian’s Scorex PLUS score, although it may use one or more different scores in the future.  The minimum credit score required for a borrower to post a listing is 640, except for borrower members who (i) previously obtained a loan through the platform and paid off the loan in full, or (ii) are seeking a second loan while their first loan is still outstanding and are otherwise eligible for such second loan, for whom the minimum score required is 600.

PMI obtains a borrower’s credit score at the time his listing is created, unless it already has a credit score on file that is not more than thirty days old.  This credit score is used to determine the Prosper Rating for the listing, and the range that credit score falls within is also included in the listing.  If available, PMI obtains updated credit scores on a monthly basis for borrowers with outstanding loans, and it includes the applicable score ranges by month in listings on the Note Trader platform.  Neither Prosper Funding nor PMI discloses the borrower’s exact credit score to any of Prosper Funding’s members, except for the borrower himself.

Assigning Estimated Loss Rates

Estimated loss rates are based on the historical performance of loans originated through the platform with similar characteristics and are primarily determined by Prosper Scores and credit scores.  The starting point for this determination is the base loss rate table, shown below, which PMI created by dividing the range of Prosper Scores and credit scores into multiple segments and combining them into a single grid.  A base loss rate is estimated for each cell in the table, based on the historical performance of loans originated on the platform that occupied the same cell ( i.e., that had the same point of intersection for their Prosper Score and credit score).  Cells are grouped together due to small volume, similar behavior or both.  PMI reviews loan performance on a monthly basis to see how the loss estimates compare to the actual performance of borrower loans, and makes any adjustments to those estimates it deems necessary based on such reviews.  Please refer to the website for the estimated base loss rate table currently in use.  Estimated base loss rates for the cells in the table below are for PMI Borrower Loans as of September 30, 2012.

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	Experian Scorex Plus Score
Prosper Score	600-619	620-639	640-649	650-664	665-689	690-701	702-723	724-747	748-777	778+
1	24.75%	24.75%	24.75%	24.75%	24.75%	24.75%	24.75%	24.75%	23.25%	23.25%
2	24.75%	24.75%	24.75%	24.75%	23.25%	21.25%	21.25%	21.25%	20.75%	20.75%
3	24.75%	24.75%	22.75%	20.25%	20.25%	16.75%	16.25%	16.25%	16.25%	16.25%
4	20.25%	20.25%	20.25%	20.25%	16.75%	16.75%	16.25%	16.25%	16.25%	16.25%
5	20.25%	20.25%	20.25%	20.25%	16.75%	16.25%	16.25%	14.75%	14.75%	10.25%
6	20.25%	20.25%	20.25%	16.25%	14.25%	10.25%	10.25%	9.25%	9.25%	8.49%
7	20.25%	20.25%	20.25%	11.75%	11.25%	8.49%	8.49%	8.49%	8.49%	8.49%
8	20.25%	20.25%	13.75%	7.99%	6.49%	5.99%	5.99%	5.99%	5.49%	2.49%
9	20.25%	20.25%	13.75%	7.99%	5.99%	5.49%	5.49%	2.49%	2.49%	2.49%
10	20.25%	20.25%	13.75%	7.99%	5.49%	4.99%	4.99%	2.49%	2.24%	0.99%

The table above applies to borrowers seeking their first loan through the platform.  Although borrowers with credit scores below 640 are depicted in the table above, borrowers seeking a first loan whose credit score is below 640 are not currently eligible for a loan on the platform.  PMI can make adjustments to the base loss rate to determine the final loss rate.  The final loss rate determines the Prosper Rating.  PMI currently makes adjustments if the applicant has already been a borrower on the platform and based on loan term.  The value of the adjustments are based on historical PMI data, where available, as well as observed industry performance.  An example of a potential adjustment is shown below:

Here is an example of how the final loss rate and Prosper Rating for a loan listing would be calculated:

- Applicant credit bureau score = 715 and Prosper score = 9

- Applicant has a previous Prosper loan

Base Loss Rate:		5.49%
Adjustments:
	-Previous Loan:	-3.00%
Final Loss Rate:		2.49%
Prosper Rating:		A

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Calculating Loss Estimates

Loss rates for a particular group of loans will be a function of the group’s delinquency and loss behavior over time, pre-payment behavior over time, and responsiveness to collections activity.  For loans originated through the platform, the largest driver of the loss rate is the rate at which a group of loans becomes delinquent and charges off. A loan becomes “charged off” and is considered a loss when it becomes 121+ days past due.

Modeling Loss Rates.  The loss rate is the balance-weighted average of the monthly loss rates for the group of loans over the term of the loans.  The gross loss rate is adjusted for principal recovery net of collection expenses to arrive at a net loss rate.

Estimating Losses.  PMI determines the loss component of the loss rate calculation by analyzing losses for historical PMI loans and adjusting to reflect anticipated deviations from historical performance that may exist due to the current macro-economic or competitive environment.  Changes in delinquency and losses have the largest impact on the expected loss rate of a group of loans, and so changes in loan performance are monitored on at least a monthly basis.

Calculating Average Balance.  To calculate the average balance for each period, PMI used the amount of loan principal on loans that are still open and have not been charged-off or paid off. As loan payments are made, the principal balance of each loan declines over time.

When a loan pays faster than its amortization schedule (pre-payment), the portion of the principal that is pre-paid is no longer included in the outstanding balance for subsequent periods. Once a loan has been charged-off, the principal associated with this loan is considered a credit loss and is no longer included in the outstanding periodic balance.

Collection Expense and Recovery Adjustments.  When an account becomes more than 30 days past due, it is referred to a collection agency.  Collection agencies are compensated by keeping a portion of the payments they collect based on a predetermined schedule.  Once an account has been charged-off, any subsequent payments received or proceeds from the sale of the loan in a debt sale are considered recoveries and reduce the amount of principal lost.

Comparing Estimated Loss Rates to Actual Losses

Loan performance is reviewed on a monthly basis to determine how loss estimates compare to the actual performance of loans.  As part of this monthly review, the processes for calculating and assigning estimated loss rates and Prosper Ratings described in the preceding sections are reassessed to ensure continued accuracy.  Actual performance relative to expectations is a major factor when deciding on adjustments to loss expectations going forward.  The graphs below show the expected versus actual cumulative dollar loss rates by Prosper Rating for PMI Borrower Loans booked from July 13, 2009 through September 30, 2011.  Performance is as of September 30, 2012.   Loss performance is tracked by vintage and the rating segments shown are those that appeared on the note at the time it was funded.  The graphs include only quarterly vintages where all PMI Borrower Loans originated during that period have been outstanding at least 10 months.

The plot below shows the vintage cumulative losses of all loans originated during the period of interest and compares those losses to an origination-dollar weighted average expectation.  Aside from the 2011Q2 and 2011Q3 vintages of originated loans, all vintages are tracking at or below the average cumulative loss expectation.

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Note: Expectation line reflects the weighted average expected loss rate across all vintages at the time of origination

The remaining plots show the actual vintage performance within each Prosper Rating grade.  The rating segments are divided according to the rating that the loan was given at the point it was originated.  All loans underwritten on the platform for the period of interest are shown.

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Note: Expectation lines represent the high end of the estimated loss rate range for each Prosper Rating, except for HR, where the high end of the range is 100% and we have set the expectation curve at 24.75%, which equates to a 17% annualized loss rate.

In aggregate, actual losses for each maximum loss rate on the vintage and Prosper Rating have been well-calibrated relative to our expectations.  Some vintages came in slightly higher than expectations and some slightly lower, but there have not been any instances of losses systemically or materially deviating from expectations.  We track loan performance relative to our estimates regularly and adjust those estimates to the extent we deem appropriate to more accurately reflect anticipated deviations from historical performance that may arise due to changes in the macro-economic or competitive environment. But we have not made any fundamental changes to our methodology for estimating loss rates or calculating Prosper Ratings based on any such review. Please note that the historical performance of PMI Borrower Loans may not be indicative of the future performance of Prosper Funding borrower loans.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding and PMI’s Ability to Service the Notes” for more information. 

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Criteria for Applying for a Second Loan

Borrowers may have up to two loans outstanding at any one time, provided that the aggregate outstanding principal balance of both borrower loans does not exceed the then-current maximum allowable loan amount for borrower loans (currently $25,000, but which may increase to $35,000 in the future).  Any outstanding loan made through the platform is treated as a “loan” for purposes of this two loan limit.  Currently, to be eligible to obtain a second borrower loan while an existing loan is outstanding:

· Borrowers must be current on their existing borrower loan, and must not have been more than 30 days past due in making their most recent monthly borrower loan payments for a specified number of months (between six and twelve, depending on the borrower’s credit score range at time the existing loan was obtained);

· Borrowers may not post a listing for a second borrower loan within six to twelve months (depending on the borrower’s credit score range at time the existing loan was obtained) following the date of origination of their existing borrower loan; and

· Borrower’s credit score must be 600 or more.

Underwriting requirements for borrower loans, including eligibility requirements for second loans, are subject to change from time to time.

Maximum Loan Amount

The maximum loan amount for a listing is determined by the applicant’s Prosper Rating.  The table below shows the maximum loan amount for each Prosper Rating:

Prosper Rating	Maximum Loan Amount (In Dollars)
AA		25,000
A		25,000
B		15,000
C		15,000
D		15,000
E		4,000
HR		4,000

Borrower Identity and Financial Information Verification

Prosper Funding reserves the right in its member agreements to verify the accuracy of all statements and information provided by borrower members and lender members in connection with listings, commitments and borrower loans.  It may conduct its review at any time before, during or after the posting of a listing, or before or after the funding of a borrower loan.  If it is unable to verify material information with respect to an applicant or listing, Prosper Funding will cancel or refuse to post the listing or cancel any or all commitments against the listing.  Prosper Funding may also delay funding of a borrower loan in order to verify the accuracy of information provided by an applicant in connection with the listing, or to determine whether there are any irregularities with respect to the listing.  If Prosper Funding identifies material misstatements or inaccuracies in the listing or in other information provided by the applicant, it will cancel the listing or related loan.

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PMI verifies the identity of every borrower who obtains a loan through the platform using a combination of documentary and non-documentary methods.  It asks each applicant to submit a copy of her current driver’s license, passport or other government-issued, photo identification card, which are authenticated using third-party reference materials.  In addition, the information contained in the applicant’s credit report is compared with the information contained in the application, and the application information is run through a fraud database.  Finally, PMI requires the applicant to submit bank statements, cancelled checks or other documentary evidence to verify the accuracy of her bank account information.  To the extent any of these processes identify inconsistencies between the information submitted by the applicant and the information contained in another data source, the applicant must submit documentation to resolve the discrepancy to PMI’s satisfaction.  For example, the applicant might be required to submit a recent utility bill to reconcile a discrepancy between the current address listed in her application and the one listed in her credit report.  For the small number of applicants who do not have a current, government-issued photo identification card, PMI may rely on the other screening processes described above to verify their identity.  But PMI obtains and authenticates photo identification from the great majority of applicants, and performs the other processes described above for all borrowers.  If it is unable to verify the identity of an applicant in the manner described above, PMI will cancel the applicant’s listing or pending loan.

In addition to the identity verification processes just described, PMI verifies income and employment information for a subset of applicants based on a proprietary algorithm.  The intention of this algorithm is to identify instances where the applicant’s self-reported income is highly determinative of the applicant’s Prosper Rating.  The algorithm gives greatest weight to the following factors:

· Prosper Rating;

· loan amount;

· stated income; and

· debt-to-income ratio.

To verify an applicant’s income, PMI requires the applicant to submit a paystub from within the last thirty days and a W-2 or Form 1099 from the prior calendar year.  To verify an applicant’s employment, PMI obtains confirmation from the human resources department of the applicant’s employer, verbally or by email, or phones the main phone number of the applicant’s employer and confirms that it can be connected directly to the applicant’s work number from that main number.

Between July 14, 2009 and September 30, 2012  (based on start time of the applicable bidding period), PMI verified employment and/or income on approximately 42% of the PMI Borrower Loans originated on the platform on a unit basis (14,369 out of 34,042) and approximately 65% of originations on a dollar basis ($147,598,201 out of $228,420,210).  Breaking these numbers down by Prosper Rating:

● for PMI Borrower Loans with a Prosper Rating of AA, A or B, PMI verified income and/or employment information on approximately 60% of the loans originated on a unit basis (7,249 out of 12,007) and approximately 80% of originations on a dollar basis ($86,019,552 out of $106,872,571);

● for PMI Borrower Loans with a Prosper Rating of C or D, PMI verified income and/or employment information on approximately 48% of the loans originated on a unit basis (5,928 out of 12,265) and approximately 65% of originations on a dollar basis ($54,282,569 out of $83,650,459); and

● for PMI Borrower Loans with a Prosper Rating of E or HR, PMI verified income and/or employment information on approximately 12% of the loans originated on a unit basis (1,192 of 9,770) and approximately 19% of originations on a dollar basis ($7,296,081 out of $37,897,210).

Between July 14, 2009 and December 31, 2011, PMI canceled 10.8% of the loan listings for which it verified employment and/or income information because the listings contained inaccurate or insufficient employment or income information.  PMI will continue to use the same criteria for selecting listings for employment or income verification that it used for PMI Borrower Loans.  In addition, under the Administration Agreement, PMI is required to perform borrower identity and financial information verification services in the manner and to the extent contemplated in this section.  Please note, however, that historical data regarding PMI Borrower Loans may not be indicative of the future characteristics of Prosper Funding’s borrower loans.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.

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If an applicant fails to provide satisfactory information in response to an income or employment verification inquiry, PMI will (a) request additional information from the applicant, (b) cancel the applicant’s listing or (c) refuse to proceed with the funding of the loan.  Where PMI chooses to verify an applicant’s income or employment information, the verification is normally done after the applicant’s listing has already been posted.  This allows PMI to focus its verification efforts on the listings most likely to fund, and increases the percentage of funded loans that are subject to verification.

When PMI identifies inaccurate employment or income information in an  application or listing that has resulted in the applicant obtaining a different Prosper Rating or interest rate for her listing than she would have obtained if she had provided the correct information, PMI cancels the listing. If PMI identifies inaccurate information in a listing that does not trigger cancellation of the listing, it does not update the listing to include the corrected information. Cancellation automatically triggers a notice to the applicant and any lender members who made commitments that the listing has been cancelled, and PMI sends an adverse action notice to the applicant indicating the reasons for cancellation.  PMI makes the funds committed by the lender members on the cancelled listing immediately available to them for bidding on other listings.

PMI generally does not verify information included by applicants in their listings other than identity, income and employment information.  Similarly, it does not verify the information in any recommendations from an applicant’s Prosper friends or putative friends and family.  PMI derives the applicant’s debt-to-income ratio, or “DTI,” from a combination of the applicant’s self-reported income and information from the applicant’s credit report.  The credit data that appears in listings is taken directly from the applicant’s credit report.  Although applicants may provide proof of homeownership to establish homeownership status, in most instances, homeownership status is derived from the credit report as well.  For example, if the credit report reflects an active mortgage loan, the applicant is presumed to be a homeowner.  Lender members should not rely on unverified information provided by applicants.

Prosper Funding or PMI’s participation in funding loans on the platform from time to time has had, and will continue to have, no effect on the income and employment verification process, the selection of loan requests verified or the frequency of income and employment verification.

PMI is continuously looking for ways to improve the verification procedures in a cost-effective manner in order to increase the repayment performance of loans.  See “Risk Factors—Risks Related to Borrower Default—Information supplied by applicants may be inaccurate or intentionally false. Information regarding income and employment is not verified in many cases” for more information.

Note Repurchase and Indemnification Obligations

The Indenture

Under the Indenture, if a “Repurchase Event” occurs with respect to a Note, Prosper Funding will, at its sole option, either repurchase the Note from the holder or indemnify the holder of the Note for any losses resulting from nonpayment of the Note or from any claim, demand or defense arising as a result of such Repurchase Event.  A “Repurchase Event” with respect to a Note means (i) a Prosper Rating different from the Prosper Rating actually calculated by Prosper Funding was included in the listing for the corresponding borrower loan, as a result of which the interest of the holder in the Note is materially and adversely affected, (ii) a Prosper Rating different from the Prosper Rating that should have appeared was included in the listing for the corresponding borrower loan because either Prosper Funding inaccurately input data into the formula for determining the Prosper Rating or inaccurately applied the formula for determining the Prosper Rating and, as a result, the interest of the holder in the Note is materially and adversely affected, or (iii) the corresponding borrower loan was obtained as a result of verifiable identify theft on the part of the purported borrower member and a material payment default under the corresponding borrower loan has occurred.

The determination of whether verifiable identify theft has occurred is in Prosper Funding’s sole discretion, and Prosper Funding has the exclusive right to investigate such claims.  Prosper Funding may, in its reasonable discretion, require proof of the identify theft, such as a copy of a police report filed by the person whose identify was wrongfully used to obtain the corresponding borrower loan, an identity theft affidavit, a bank verification letter or all of the above.  Because Prosper Funding is the sole entity with the ability to investigate and determine verifiable identify theft, which in turn triggers its repurchase and indemnification obligations, a conflict of interest exists.  We believe the risk created by this conflict of interest is mitigated by three factors that incent Prosper Funding to vigorously investigate claims of identity theft. First, without the protection offered by its repurchase and indemnification obligations, fewer potential lender members will have the confidence to participate in the platform, limiting the growth and long term profitability of Prosper Funding.  Second, the agreements with WebBank include a requirement—and accompanying audit function—to insure that claims of identity theft are thoroughly investigated and accurately reported. Third, California statutes provide severe penalties to victims of identity theft if it is shown that a claim of identity theft was not adequately investigated or was frivolously dismissed.  See “Risk Factors—Risks Related to Borrower Default—The fact that Prosper Funding has the exclusive right and ability to investigate claims of identity theft in the origination of loans creates a significant conflict of interest between Prosper Funding and the lender members.”

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Prosper Funding is under no obligation to repurchase a series of Notes or indemnify any holder of Notes under the indenture if a correctly determined Prosper Rating fails to accurately predict the actual losses on a borrower loan.   In addition, the remedy described above for identity theft only provides protection against identity theft; in no way is it a guarantee of a borrower’s self-reported information (beyond identity) or a borrower’s creditworthiness.  See “Risk Factors-- Risks Inherent in Investing in the Notes—Prosper Funding is not obligated to indemnify a Note holder or repurchase any Notes except in limited circumstances.” Prosper Funding expects the incidence of identity fraud on the platform to be low because of its identity verification process. From inception until September 30, 2012, PMI experienced identity fraud cases affecting 38 PMI Borrower Loans. In the cases of identity theft PMI has experienced, it received a police report and identity theft affidavit from the victim evidencing that identity theft had occurred. Please note that historical data regarding PMI Borrower Loans may not be indicative of the future characteristics of Prosper Funding’s borrower loans. See “Risk Factors—Risks Relating to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.

The Lender Member Registration Agreements

Under Prosper Funding’s lender member registration agreements, Prosper Funding represents and warrants that (i) if a lender member uses an automated bidding tool or order execution service offered by Prosper Funding, such as Quick Invest, Auto Quick Invest or Premier, to identify Notes for purchase, each Note purchased will conform to the investment criteria provided by the lender member through such tool or service, and (ii) each Note that a lender member purchases from Prosper Funding will be in the principal amount of the bid such lender member placed and will correspond to the borrower loan on which such lender member bid.  If Prosper Funding breaches either of these representations and warranties and, as a result, the Note sold to a lender member is materially different from the Note that would have been sold had the breach not occurred or if the lender member would not have purchased the Note at all absent such breach, Prosper Funding will, at its sole option, either indemnify the lender member from any losses resulting from such breach, repurchase the Note or cure the breach, if the breach is susceptible to cure.  If Prosper Funding breaches any of its other representations and warranties in the lender member registration agreement and such breach materially and adversely affects a lender member’s interest in a Note, Prosper Funding will, at its sole option, either indemnify the lender member, repurchase the affected Note from such lender member or cure the breach.  The determination of whether a breach is susceptible to cure is in Prosper Funding’s sole discretion.

Calculation of Repurchase Price and Indemnification Payments

If Prosper Funding elects to repurchase a Note in connection with a Repurchase Event or the breach of a representation or warranty under a lender member registration agreement, the repurchase price will be equal to the principal amount outstanding on the Note as of the date of repurchase and will not include accrued and unpaid interest.  If Prosper Funding elects to provide indemnification in connection with a Repurchase Event or the breach of a representation or warranty under a lender member registration agreement, Prosper Funding will not be required to take any action with respect to any losses suffered until the effected Note is at least one hundred twenty (120) days past due.  For purposes of indemnification, Prosper Funding will calculate the losses resulting from nonpayment of a Note based on the principal amount outstanding on the Note.  If Prosper Funding makes an indemnification payment, Prosper Funding will be entitled to retain any subsequent recoveries that it receives on the effected Note.

Effect on PMI Management Rights

If Prosper Funding repurchases any Notes, PMI will concurrently repurchase the related PMI Management Right for zero consideration.

Historical Performance of PMI Borrower Loans

The performance of borrower loans is a function of the credit quality of borrowers and the risk and return preferences of lender members.  Lender members can choose to pursue a variety of bidding strategies, including strategies that may or may not maximize the return on their investment.  When making commitment decisions, lender members consider applicants’ Prosper Ratings, credit scores, debt-to-income ratios and other credit data and information displayed with listings.    See “Risk Factors—Risks Related to Borrower Default.”

The graph below displays the overall level of delinquency for the PMI Borrower Loan portfolio on a calendar basis.  Loss estimates for the portfolio on a vintage basis may be found in the section “Comparing Estimated Loss Rates to Actual Losses”.  Loans that are more than 30 days past due are considered to be severely delinquent due to the significant decrease in the likelihood of receiving future payment once a loan has missed two payments.

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The following table presents aggregated information as of September 30, 2012, grouped by Prosper Rating, for all PMI Borrower Loans originated on the platform from July 13, 2009 through September 30, 2012.  With respect to delinquent PMI Borrower Loans, the table shows the entire amount of the principal remaining due (not just that particular payment) as of September 30, 2012.

From July 13, 2009 through  September 30, 2012, 34,042 PMI Borrower Loans were originated on the platform with an average original principal amount of $6,672 and an aggregate original principal amount of $227,112,997.  As of September 30, 2012, 69.1% of these loans were current or had not reached their first billing cycle and 20.7% were paid in full, 2.0% were 1 to 30 days past due, 2.1% were more than 30 days past due, and 6.1% had defaulted.  A PMI Borrower Loan is considered to have defaulted when it is more than 120 days past due or has been discharged in bankruptcy.  Of these 34,042 loans, 4,037 loans, or 11.9%, have been greater than 15 days past due at any time, 3,256 loans, or 9.6%, have been more than 30 days past due at any time, and 2,654 or 7.8%, have been more than 60 days past due at any time.

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Of PMI Borrower Loans originated after July 13, 2009, 2,082 have defaulted as of September 30, 2012, equaling a total net defaulted amount of $10,552,181.  Of these 2,082 defaulted loans, the borrowers of 239 loans have filed for bankruptcy, resulting in a net defaulted amount of $970,324.

The data in the preceding tables regarding PMI Borrower Loans may not be representative of the loss experience that will develop for Prosper Funding’s borrower loans.  In addition, the data in the preceding tables regarding prepayments may not be representative of the prepayments Prosper Funding expects over time.

The following table presents aggregate information, as of September 30, 2012, regarding the results of PMI’s collection efforts for PMI Borrower Loans originated after July 13, 2009 that became more than 30 days past due at any time, grouped by Prosper Rating.

PMI may alter the terms or make principal reductions on some loans, which may include cases where a reduction in the initial interest rate is required by law.  The Servicemembers’ Civil Relief Act requires interest rates to be reduced to 6% while a borrower in the armed forces is on active duty.

PMI Borrower Loans

The following table presents aggregated information about borrowers for PMI Borrower Loans originated over the period from July 13, 2009 to September 30, 2012, grouped by Prosper Rating.

The following table presents aggregated information about borrowers for PMI Borrower Loans originated over the period from July 13, 2009 to September 30, 2012, grouped by Prosper Rating.  The information for each borrower was obtained from a credit reporting agency at the time the borrower’s loan application was submitted.  PMI has not independently verified this information:

Prosper Rating	Average Experian ScoreExPlus Score		Average Number of Current Delinquencies		Average Number of Open Credit Lines		Average Number of Total Credit Lines
AA		801		0.04		8.89		26.39
A		753		0.16		8.89		26.13
B		718		0.28		8.34		25.17
C		706		0.35		8.62		26.88
D		693		0.44		8.11		25.70
E		671		0.70		8.27		27.55
HR		687		0.64		7.96		26.65

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Please note that historical data regarding PMI Borrower Loans may not be indicative of the future characteristics of Prosper Funding’s borrower loans.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.

Posted Borrower Loan Listings

Once a loan listing is completed by an applicant, the listing is posted on the website and then becomes available for bidding by lender members. A loan listing is a request by the applicant for a borrower loan in a specified amount.

When creating a listing, the applicant may opt for partial funding.  Partial funding means the applicant’s loan does not have to receive bids for 100% of the amount requested to fund, but can be funded if it receives bids for 70% or more of the amount requested.  Each listing indicates whether the applicant has elected partial funding and, if so, the minimum amount of bids required for the loan to fund.  Prosper Funding may change the percentage threshold for partial funding, which is currently set at 70%, from time to time.  Any such change will be disclosed on the website, and will only affect listings created after such change is implemented.

Borrower loans are unsecured obligations of individual borrowers with an interest rate determined by Prosper Funding and with a specified loan term, currently set at one, three or five years, but which Prosper Funding may in the future extend to between three months to seven years. Applicants may currently request loans within specified minimum and maximum principal amounts (currently, between $2,000 and $25,000, but which may expand to between $500 and $35,000 in the future), which are subject to change from time to time. Borrower loans may be repaid at any time by borrowers without prepayment penalty.  A borrower loan will be made to an applicant only if the applicant’s listing has received bids equal to or exceeding the minimum amount required for the listing to fund.

In addition to the applicant’s requested loan amount, listings include:

· the interest rate, annual percentage rate and monthly payment amount on the requested loan;

· the servicing fee lenders must pay;

· the lender yield percentage (interest rate on the loan, net of the servicing fee);

· the Prosper Rating and estimated loss rate;

· the Prosper Score and credit score range;

· the minimum amount required for the loan to fund and whether the applicant has opted for partial funding;

· the number of accounts on which the applicant is currently late on a payment, including unpaid derogatory accounts;

· the total past-due amount the applicant owes on all delinquent and derogatory accounts;

· the number of 90+ days past due delinquencies on the applicant’s credit report;

· the number of public records (e.g., bankruptcies, liens, and judgments) on the applicant’s credit report over the last 12 months, and over the last 10 years;

· the number of inquiries made by creditors to the applicant’s credit report in the last six months;

· the month and year the applicant’s oldest recorded credit line (e.g., revolving, installment, or mortgage credit) was opened;

· the total number of credit lines appearing on the applicant’s credit report, along with the number that are open and current;

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· the total balance on all of the applicant’s open revolving credit lines;

· the applicant’s bankcard utilization ratio, expressed as a percentage, reflecting the ratio of the total balance used, to the aggregate credit limit on, all of the applicant’s open bankcards;

· whether the applicant owns a home;

· DTI percentage;

· the applicant’s self-reported income range, occupation, employment status, and intended use of funds;

· the amounts and dates of all lender member bids;

· the applicant’s Prosper friends who have bid on the listing, together with any narrative recommendation from a bidding Prosper friend;

· the applicant’s group affiliations, if any; and

· if the applicant previously obtained one or more loans through the platform, a description of such loan activity, including the number and aggregate principal borrowed on such loans, the current outstanding principal balance of any existing loan, the payment history on such loans, and the applicant’s credit score ranges as of the four most recent dates credit reports were obtained on the applicant in connection with the applicant’s listings, with an arrow indicator denoting whether the applicant’s credit score has improved, declined or remained unchanged since the applicant’s most recent Prosper loan.

Part of an applicant’s credit profile displayed in listings is a DTI ratio.  DTI is one measure of the applicant’s ability to take on additional debt.  This number takes into consideration how much debt the applicant has or will have, including the requested loan amount.  DTI is expressed as a percentage and is calculated by dividing the applicant’s monthly debt payments, including the debt resulting from the borrower loan being requested, by the applicant’s monthly income.  Such debt amounts are taken from the applicant’s credit report without verification and exclude monthly housing payments, and the applicant’s income is self-reported and may not be verified by Prosper Funding or PMI.

Listings may include the applicant’s narrative description of why the loan is being requested, and of the applicant’s financial situation.

For PMI Borrower Loans funded between July 13, 2009 and September 30, 2012, borrowers identified their intended use of loan proceeds by unit distribution as follows:

· debt consolidation (approximately 47%);

· business use, such as financing their home-based or small businesses (approximately 10%);

· home improvement (approximately 11%);

· financing the purchase of an automobile (approximately 5%); and

· other (approximately 27%).

Applicants typically state the use of funds in a short sentence or clause, such as “Consolidate my credit card debt and be rid of it.”  Please note that historical data regarding PMI Borrower Loans may not be indicative of the future characteristics of Prosper Funding’s borrower loans.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.

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Loan listings and other borrower information available on the platform or in the sales and listing reports are statements made in connection with the purchase and sale of securities, and are therefore subject to Rule 10b-5 of the Exchange Act as well as the antifraud provisions of the Securities Act.  In general, Section 10b-5 and the antifraud provisions of the Securities Act provide the purchaser of securities with a right to bring a claim against the issuer for damages arising from any untrue statement of material fact or failure to state a material fact necessary to make any statements made by the issuer not misleading.  In this prospectus, Prosper Funding and PMI advise you of the limitations on the reliability of the information provided by applicants with respect to loan listings.  Accordingly, a court could determine that Prosper Funding and PMI have advised you of all material facts regarding the information supplied by applicants and your recourse in the event this information is false or misleading may be extremely limited under the securities laws because you have been so advised.  Alternatively, the SEC or a court could determine that Prosper Funding and PMI have not advised you of all of the material facts regarding an investment in the Securities, which could give you the right to rescind your investment and obtain damages, and could subject Prosper Funding and PMI to civil fines or criminal penalties in addition to any such rescission rights or damages.

How to Bid to Purchase Notes

A bid on a listing is a lender member’s binding commitment to purchase a Note in the principal amount of the lender member’s bid, should the listing receive bids equaling or exceeding the amount required for the listing to fund.  Lender members bid the amount they are willing to commit to purchase a Note dependent for payment on payments Prosper Funding receives on the borrower loan described in the listing.

The bidding period for a listing begins when the listing is posted on the platform and ends either 14 days after posting or on the first date on which the listing has received bids totaling the loan amount requested, whichever is earlier.  Lender members cannot place bids on a listing once its bidding period has ended.  If the applicant opts for partial funding, the bidding period still will not end prior to the end of the 14 day listing period unless the listing has received bids totaling the full amount of the loan requested.

If the listing does not receive bids equal to or exceeding the minimum amount required for the loan to fund by the end of the bidding period, the listing will terminate and will not be funded.  Applicants whose listings expire due to an insufficient amount of bids may post a new listing on the platform, although Prosper Funding has the right under the borrower registration agreement to limit the number of listings a borrower member may post on the platform.

In order to bid on a listing, a lender member must have funds on deposit in his lender member account in at least the amount of the bid.  Once bids are placed, they are irrevocable.  Lender members may not cancel their bids or withdraw the amount of their bids from their accounts unless the bidding period expires without the listing having received bids in the required minimum amount, or unless the listing is withdrawn or cancelled.  See “About the Platform—Structure of Lender Member Accounts and Treatment of Lender Member Balances” for more information.

Currently, the minimum amount a lender member may bid is $25, and the maximum amount a lender member may bid is the amount of the requested borrower loan.  The maximum aggregate amount a single lender member may bid on the platform is currently $5,000,000 for individuals and $50,000,000 for institutions.  Prosper Funding may change the minimum bid amount or the maximum aggregate bid amounts from time to time.  Depending on the amount of the winning bids at the end of the bidding period, there may be a winning bidder on a listing with a winning bid of less than $25.  But there cannot be more than one partial winning bid on a listing.

A listing that gets funded typically receives bids from many different lender members.  For example, from July 2009 through September 30, 2012, the average aggregate size of a PMI Borrower Loan was approximately $6,672 and the average bid was approximately $70.  Please note that historical data regarding PMI Borrower Loans may not be indicative of the future characteristics of Prosper Funding’s borrower loans.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes” for more information.

Lender members may browse online through available listings displayed on the platform by desired borrower loan amount, yield percentage, Prosper Rating, estimated loss rate, debt-to-income ratio, group or other applicant characteristics.  Alternatively, lender members can use Quick Invest, a loan search tool, to identify loan listings that meet their investment criteria.  A lender member can bid on as many listings as the lender member desires, subject to the aggregate bidding limit.  A lender member can diversify her risk of default if she elects to do so.  It is solely up to the individual lender members to select their bidding method and the credit characteristics that are acceptable to the lender member and to determine a diversification strategy.

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Quick Invest

Quick Invest is a loan search tool that allows lender members to identify listings that meet their investment criteria.  A lender member using Quick Invest is asked to indicate (i) the Prosper Rating or Ratings she wishes to use as search criteria, (ii) the total amount she wishes to invest and (iii) the amount she wishes to invest per Note.  If she wishes to search for Notes using criteria other than, or in addition to, Prosper Rating, she can use one or more of several dozen additional search criteria, such as loan amount, debt-to-income ratio and credit score.  The only criteria a lender member cannot specify in Quick Invest are the listing description and the monthly payment amount.

Quick Invest then compiles a basket of Notes for the lender member’s consideration that meet her search criteria.  If the pool of Notes that meet her criteria exceeds the total amount she wishes to invest, Quick Invest selects Notes from the pool based on how far the listings corresponding to the Notes have progressed through the loan verification process,   i.e.  , Notes from the pool that correspond to listings for which the loan verification process has been completed will be selected first.  If the pool of Notes that meet the lender member’s criteria and for which the loan verification process has been completed still exceeds the amount she wishes to invest, Quick Invest selects Notes from that pool based on the principle of first in, first out, i.e.  ,  the Notes from the pool with the corresponding listings that were posted on the platform earliest will be selected first.  If the pool of Notes that meet the lender member’s specified criteria exceeds the amount she wishes to invest, but the subset of that pool for which the loan verification process has been completed does not equal the amount she wishes to invest, Quick Invest selects all of the Notes that correspond to listings for which the loan verification has been completed and makes up the difference by selecting Notes from the remaining pool on a first in, first out basis.  To the extent available Notes that meet the lender member’s criteria are insufficient to fill her order, the lender member is advised of this shortfall and given an opportunity either to reduce the size of her order or modify her search criteria to make her search more expansive.

If the lender member’s search criteria included multiple Prosper Ratings, Quick Invest divides her basket into equal portions, one portion representing each Prosper Rating selected, and then attempts to fill each portion in the manner just described.  To the extent there are insufficient Notes available with a particular Prosper Rating to fill that portion of the lender member’s basket, Quick Invest attempts to make up the deficit by including additional Notes with the other Prosper Ratings selected in equal proportions. To the extent available Notes with these other Prosper Ratings are still insufficient to fill the lender member’s order, the lender member is advised of this shortfall and given an opportunity either to reduce the size of her order or to modify her search criteria to make her search more expansive.

For example, if a lender member using Quick Invest indicated that she wished to invest a total of $600 in Notes with a Prosper Rating of B, C or D, Quick Invest would first attempt to fill her order with equal portions of B, C and D Notes ($200 – B; $200 – C; $200 – D).  If there were only $100 of D Notes available, the search tool would attempt to increase the allocation of B and C Notes from $200 to $250 ($250 – B; $250 – C; $100 – D).  If there were $250 of B Notes available but only $200 of C Notes available, the search tool would then attempt to make up the remaining gap by increasing the allocation of B Notes from $250 to $300 ($300 – B; $200 – C; $100 – D). But if there were only $275 worth of B Notes available, the lender member would be given the choice of expanding her search criteria or reducing the total size of her order from $600 to $575.  If she elected to reduce the size of her order, her final order would consist of $575 of Notes: $275 of B Notes, $200 of C Notes and $100 of D Notes.

The Auto Quick Invest feature allows lender members (i) to have Quick Invest searches run on their designated criteria automatically each time new listings are posted on the platform and (ii) to have bids placed automatically on any Notes identified by each such search.  As with a lender making manual bids, a lender member using Quick Invest is not permitted to place a bid unless the funds in her account are sufficient to cover the bid, and funds will only be debited from her account if and when her bid is successful.

Since it was first implemented in July 2011, the Quick Invest tool has experienced errors that affected 5,793 Notes out of the 750,021 Notes purchased through the Quick Invest tool since its inception.  Of the affected lenders and Notes, 596 lenders and 1,971 Notes were affected by the erroneous selection by Quick Invest of all possible search criteria; 28 lenders and 2,517 Notes were affected by the erroneous use of inactive searches to purchase Notes; 23 lenders and 96 Notes were affected by an error that resulted in a search identifying every listing’s Prosper Score as a 10 (the best rating), regardless of the actual Prosper Score; and 160 lenders and 1,209 Notes were affected by an error that resulted in lenders who had multiple searches with overlapping criteria bidding on the same listing more than once even though the lender had also selected an option that was supposed to preclude them from investing in the same listing more than once.

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In the event of any errors in Quick Invest that cause a lender to purchase a Note from Prosper Funding that he would not otherwise have purchased or that differs materially from the Note he would have purchased had there been no error, Prosper Funding will either repurchase the Note, indemnify the lender against losses suffered on that Note or cure the breach.

Setting Interest Rates

PMI has an interest rate committee, consisting of its Chief Executive Officer, Chief Operating Officer, Chief Risk Officer, and General Counsel, which meets regularly to set interest rates for all borrower loans.  These rates are set forth in a rate table, which is posted at  www.prosper.com .  The table specifies a range of interest rates for all borrower loans, based on Prosper Rating, loan term and the number of prior loans a borrower has obtained through the platform.  Additional factors, such as group affiliations, competitive conditions and the general economic environment affect the specific interest rate within a specified range that a borrower receives.  The yield percentage on each series of Notes is equal to the interest rate on the related borrower loan, minus a servicing fee, currently set at 1% per annum of the outstanding principal balance of the corresponding borrower loan prior to applying the current payment.  Prosper Funding may increase the servicing fee to no more than 3% per annum if its servicing costs increase or to reflect changes to the market rate for servicing similar assets.  Any change to the servicing fee will only apply to Notes offered and sold after the date of the change.

The interest rate committee meets on at least a monthly basis, but may meet more frequently as changes in market conditions and the general economic environment dictate.  At each meeting, the committee reviews the interest rate table and makes adjustments to it the extent the committee deems necessary.  The factors besides Prosper Rating that the committee takes into consideration in updating the table, as well as the weight the committee accords each such factor, may change from time to time.

The interest rate table currently in effect is set forth below.  In addition, the interest rate for each loan listing, as well as the yield percentage for the corresponding Notes, is included in the listing report filed for that listing.  This information is also included in the listing itself when it is posted on www.prosper.com.  In addition, the current interest rate table is posted on www.prosper.com.

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Prosper Rating	Loan Term (years)	# Previous Prosper Loans	Borrower Rate
			Min	Max
AA	1	0	5.65%	7.04%
AA	3	0	7.24%	8.39%
AA	5	0	10.28%	12.08%
AA	1	1+	5.65%	5.65%
AA	3	1+	7.24%	7.24%
AA	5	1+	10.28%	10.28%
A	1	0	7.35%	7.35%
A	3	0	9.24%	9.74%
A	5	0	13.12%	13.64%
A	1	1+	7.35%	9.81%
A	3	1+	9.74%	12.99%
A	5	1+	13.64%	17.28%
B	1	0	11.09%	12.79%
B	3	0	15.09%	16.79%
B	5	0	19.47%	21.24%
B	1	1+	10.33%	12.79%
B	3	1+	13.59%	16.79%
B	5	1+	17.94%	21.24%
C	1	0	14.68%	16.16%
C	3	0	17.74%	20.99%
C	5	0	22.18%	24.98%
C	1	1+	13.18%	16.16%
C	3	1+	17.34%	21.24%
C	5	1+	21.81%	25.15%
D	1	0	17.39%	19.22%
D	3	0	21.99%	25.24%
D	5	0	25.73%	28.67%
D	1	1+	16.80%	19.22%
D	3	1+	21.99%	25.24%
D	5	1+	25.73%	28.67%
E	1	0	21.99%	23.10%
E	3	0	28.39%	29.69%
E	5	0	31.85%	33.04%
E	1	1+	20.80%	23.10%
E	3	1+	27.10%	29.69%
E	5	1+	30.57%	33.04%
HR	3	0	31.77%	31.77%
HR	3	1+	31.77%	31.77%

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Purchase of Notes by Prosper Funding, PMI or Related Parties

From time to time, Prosper Funding or PMI may bid on listings and each may hold any Notes purchased as a result of such bids for its own account.  Any bid on a loan by Prosper Funding or PMI will be made public in the same manner in which bids by other bidders on a particular listing are made public.  In addition, loans upon which Prosper Funding or PMI bid will be identified to other bidders through the use of a special symbol and a user profile that are intended to make it clear that Prosper Funding or PMI is bidding on a particular listing.

Prosper Funding and PMI will participate in bidding on the listings under the same terms and conditions and through the use of the same information that is made available to other lender members on the platform.  In some cases, Prosper Funding’s or PMI’s bidding on a listing may cause it to fund, and in some cases, fund faster, than it would fund in the absence of such bid.  The amount that Prosper Funding or PMI may choose to bid on any particular listing may vary significantly and Prosper Funding and PMI each reserve the right to bid up to the entire amount of a listing.

Some of Prosper Funding’s or PMI’s executive officers, directors and 5% shareholders have bid on listings and purchased PMI Notes from time to time in the past, and may purchase Notes in the future.  As of September 30, 2012, these individuals had purchased $5,144,981 in PMI Notes or loans.  These loans and PMI Notes were obtained on the same terms and conditions as those obtained by other lender members.  However, as certain of these executive officers and directors, by virtue of their duties as employees, officers or directors of Prosper Funding and PMI, have access to information not available to the general population of lender members, Prosper Funding and PMI have adopted the following procedures to prevent or detect the improper use of non-public information in bidding activities by any of their respective officers and directors:

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· PMI’s corporate policies, distributed to all employees, prohibit an employee’s use of non-public information and any violation of this policy is grounds for immediate termination.

· Security features that limit access to data only to that needed to perform particular employee job functions. These limitations are defined by “security group,” which corresponds to both job title and function and the number of PMI’s employees that have access to such non-public information on a “bulk” or “query” basis is extremely limited.

· In addition to prevention efforts, Prosper Funding and PMI have developed an audit process that identifies and investigates bidding and funds transfer activities that are classified as “suspicious.”

Structure of Lender Member Accounts and Treatment of Lender Member Balances

Prosper Funding maintains a pooled account at Wells Fargo Bank, N.A. to hold the funds of lender members.  This account is titled “Prosper Funding LLC for the benefit of its lender members” and is referred to as the “FBO account.”  In order to bid on listings, a lender member must have sufficient funds in the FBO account.  A lender member can transfer funds into the FBO account by authorizing an electronic transfer using the Automated Clearing House, or ACH, network from the lender member’s designated and verified bank account to the FBO account.  All payments to fund purchases of Notes are made by deposit into the FBO account.  Upon request by the lender member, Prosper Funding will transfer lender member funds in the FBO account to the lender member’s designated and verified bank account by ACH transfer, provided such funds are not already committed to the future purchase of Notes.

Prosper Funding divides the FBO account into sub-accounts for each lender member.  These sub-accounts allow Prosper Funding to track and report for each lender member the funds the lender member has transferred into and out of the FBO account, the funds the lender member has committed to purchase Notes, and the payments the lender member has received on outstanding Notes.  Each lender member’s sub-account is referred to as his or her “lender member account.”  Lender members have no direct relationship with Wells Fargo Bank by virtue of having a lender member account or participating on the platform.

The FBO account is FDIC-insured on a “pass through” basis to the individual lender members, subject to applicable limits. This means that each lender member’s balance is protected by FDIC insurance up to the aggregate per person limit established by the FDIC.  Other funds the lender member has on deposit with the same institution where the FBO account is maintained may count against the FDIC insurance limits for that member.  Prosper Funding will always maintain the FBO account with an FDIC member financial institution.  Funds of a lender member may stay in the FBO account indefinitely and do not earn interest.  Prosper Funding never commingles its assets or any assets of PMI with the assets in the FBO account.

Borrower Loan Funding and Purchases; Sale of Notes

Once the bidding period for a listing ends, if the listing has received bids from lender members equal to or exceeding the minimum amount required to fund, the funding of the corresponding borrower loan and the sale of the Notes to the lender members who bid on the listing will proceed.

Applicants execute an electronic borrower registration agreement at the time they post a listing on the platform.  After expiration of the bidding period for the listing and satisfactory completion of the pre-funding verification process, the applicant executes an electronic promissory note in favor of WebBank in an amount equal to the total amount of winning bids.  WebBank then electronically endorses the promissory note to Prosper Funding and sells and assigns the promissory note to Prosper Funding without recourse. The promissory note and the borrower registration agreement contain customary agreements and covenants requiring the applicants to repay their loans and describing the process of posting listings and obtaining loans through the platform.

WebBank funds all loans originated on the platform, and PMI disburses the loan proceeds on WebBank’s behalf to the borrower.  Each borrower authorizes the loan proceeds to be disbursed by ACH transfer into the borrower’s designated bank account.

Borrowers pay an origination fee out of the proceeds of the loan at the time of funding.  As of September 30, 2012, origination fees were as follows:

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Prosper Rating	Origination Fee Percentage (1 year)	Origination Fee Percentage (3 year)	Origination Fee Percentage (5 year)
AA	0.50%	1.95%	4.95%
A	1.95%	3.95%	4.95%
B	2.95%	4.95%	4.95%
C-HR	3.95%	4.95%	4.95%

The origination fees are charged by WebBank, and PMI receives payments from WebBank equal to the origination fees as compensation for its loan origination activities on WebBank’s behalf.

Lender members know only the screen names, and do not know the actual names, of applicants.  The actual names and mailing addresses of the applicants are known only to Prosper Funding, PMI and WebBank.  Prosper Funding maintains custody of the electronically-executed promissory notes evidencing borrower loans as well as the Securities in electronic form on the platform.

When Prosper Funding issues and sells a Note to a lender member, PMI registers the Note in the name of the lender member on Prosper Funding’s books and records.  For each loan originated on the platform, PMI transfers the principal amount of the Notes corresponding to that loan from the FBO account to WebBank.  This transfer represents the payment (i) by the lender members who have agreed to purchase the Notes to Prosper Funding of the purchase price for the Notes and (ii) by Prosper Funding to WebBank of the purchase price for the corresponding loan.  WebBank is the lender for all borrower loans, which allows the platform to be available on a uniform basis to borrowers throughout the United States.

Borrower members are able to use the loan proceeds for any purpose other than (i) buying, carrying or trading in securities or buying or carrying any part of an investment contract security or (ii) paying for postsecondary educational expenses (  i.e.  , tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term “postsecondary educational expenses is defined in Bureau of Consumer Finance Protection Regulation Z, 12 C.F.R. § 1026.46(b)(3), and they warrant and represent that they will not use the proceeds for any such purposes.

Loan Servicing and Collection

Following Prosper Funding’s purchase of borrower loans and sale of Notes corresponding to the borrower loans, it begins servicing the borrower loans and Notes.  Prosper Funding expects to enter into an Administration Agreement with PMI, pursuant to which Prosper Funding will engage PMI to assist it in performing these duties and to perform various other tasks on Prosper Funding’s behalf relating to the corporate administration of Prosper Funding and the operation of the platform.  In general, any actions described below that Prosper Funding takes in servicing the borrower loans or Notes may be taken on Prosper Funding’s behalf by PMI acting as its agent.  See “Summary of Indenture, Form of Notes and Administration Agreement—Administration Agreement.”

Under the Administration Agreement, PMI undertakes to cause borrowers to make payments  on borrower loans into a specific account and/or to deliver collections of such payments into such account (called the “Deposit Account”) maintained by Prosper Funding but held by the Indenture Trustee under the Indenture.  Under the Indenture, Prosper Funding, or PMI on its behalf, will remove from the Deposit Account (or instruct the Indenture Trustee to remove from the Deposit Account) the servicing fees described herein and deposit the same in a separate Prosper Funding account from which, in accordance with the Administration Agreement, PMI will be paid certain fees due to it on a monthly basis under the Administration Agreement.  Also under the Indenture, after removal from the Deposit Account of the servicing fees described herein, Prosper Funding (or PMI on its behalf) will move funds from the Deposit Account to the FBO Account in order to make payments on the Notes.  On Notes, the payment dates will fall on the sixth business day after the due date for each monthly installment of principal and interest on the corresponding borrower loan, but interest will accrue on the Notes only through the relevant payment date for the related borrower loan.

To the extent Prosper Funding does not receive the anticipated payments on a borrower loan on or before any loan payment date, it will not make any payments on the Notes related to that borrower loan on the corresponding Note payment date, and a holder of a Note will not have any rights against Prosper Funding or the borrower in respect of the Note or the corresponding borrower loan in relation to any delay in collections and Note payments or for shortfalls in accrued Note interest that result then or in relation to the final maturity of the Note.  Each holder’s right to receive principal and interest payments and other amounts in respect of that Note is limited in all cases to the holder’s pro rata portion of the amounts Prosper Funding timely receives on the corresponding borrower loan, including without limitation, all payments or prepayments of principal and interest, subject to servicing fees and other charges and other fees retained by Prosper Funding or by a third party, as set forth in the following chart.  Prosper Funding’s current collection agencies charge collection fees from 17.0% to 40.0% of the amount recovered, in addition to any legal fees incurred in the collection effort, up to the “total amount delinquent.”  To the extent that Prosper Funding places loans with another collection agency, it will disclose the collection fees percentages on its website.

On average, through September 30, 2012, Note holders have received $327, net of collection fees, on loans that were both funded through the platform since July 13, 2009 and sent to a collection agency.  A total of 1,757 loans funded through the platform from July 13, 2009 through September 30, 2012 have been charged off with no recovery.  Of those 1,757 loans, 75% had been referred to a collection agency.

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Description of Fee Charged by Prosper Funding	Fee Amount	When Fee is Charged	Effect on Lender Member
Prosper Funding Borrower Payment Dependent Notes
Servicing fee	Annualized rate currently set at 1% per annum of outstanding principal balance, but which Prosper Funding may increase in the future to an amount greater than 1% but less than or equal to 3% per annum.  Any change to the servicing fee will only apply to Notes offered and sold after the date of the change. The servicing fee percentage is disclosed in all loan listings and is posted in the Help pages section at   www.prosper.com  .	The servicing fee is payable on all payments received by Prosper Funding on borrower loans, including, without limitation, partial payments.	The servicing fee will reduce the effective yield below the interest rate on the borrower loan. This reduction is reflected in the yield percentage included in each listing.
Non-sufficient funds fee	$15, unless a lesser amount is required by applicable law.	First failed payment for each billing period.	Prosper Funding retains 100% of the non-sufficient funds fees to cover its administrative expenses.
Late payment fee	Equal to greater of 5% of the unpaid installment amount or $15, unless a lesser amount is required by applicable law.	After 15-day grace period, Prosper Funding assesses a late fee. The late payment fee is charged only once per payment period.	Any late payment fees Prosper Funding receives are paid to the lender members, subject to deductions for Collection Charges and Servicing Fees.
Collection Charges	Prosper Funding’s current collection agencies charge collection fees from 17.0% to 40.0% of the amount recovered up to the “total amount delinquent,” plus any legal fees incurred in the event legal action is taken to collect a loan.  The collection fees vary depending upon the collection agency used.  These fees are posted in the Help pages  section of the website.	After a borrower loan becomes more than 30 days past due, the loan may be referred to a collection agency. Collection charges and any related legal fees are only charged if delinquent amounts are collected. Prosper Funding’s servicing fee is also deducted from the net payments it receives as a result of any collection efforts on a delinquent borrower loan.	Lender members will not receive any collection fees  a third-party collection agency charges, which fees will be retained by the party charging the fees as additional servicing compensation. The collection fees and any related legal fees will be deducted from any borrower loan payments Prosper Funding receives. These fees will reduce the lender member’s effective yield, and are   not  reflected in the yield percentage shown on the  listing.
Loan modification fees	Prosper Funding will not charge a fee for restructuring a borrower loan.	PMI may work with the borrower to structure a new payment plan in respect of the borrower loan without the consent of any holder of the Notes corresponding to the borrower loan. This generally would only occur in lieu of bankruptcy or a similar proceeding.	Not applicable.

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Prosper Funding’s procedures for collecting borrower loan payments generally involve the automatic debiting of borrower bank accounts by ACH transfer.  Such funds are transferred to a deposit account (the “Deposit Account”) in Prosper Funding’s name that Prosper Funding maintains with Wells Fargo Bank, N.A.  Thereafter, Prosper Funding makes payments on the Notes by transferring the appropriate funds from the Deposit Account to the FBO account and allocating amounts received on specific borrower loans to the appropriate lender member accounts.  Prosper Funding transfers amounts due to it for servicing from the Deposit Account to another operating account of Prosper Funding’s (called the Fee Account under the Administration Agreement) as often as daily, and transfers collections on Borrower Loans net of such servicing fees from the Deposit Account to the FBO Account before each Note Payment Date.  A lender member may transfer uncommitted funds out of the FBO account by ACH transfer to the lender member’s designated bank account at any time, subject to normal execution times for such transfers (generally 2-3 days), provided such funds are not already committed to the future purchase of Notes.

Prosper Funding will make payments on the Notes upon receiving payments under the corresponding borrower loan, in accordance with the payment schedule for each Note.  Each Note will have a payment schedule providing for monthly payments over a term equal to the corresponding borrower loan maturity.  The payment date for Notes will fall on the sixth business day after the due date for each monthly installment of principal and interest on the corresponding borrower loan, but interest will accrue on the Notes only through the corresponding payment dates for the related borrower loan.  The stated interest rate on each Note will be the lender yield percentage set forth in the loan listing.  The yield percentage is the loan interest rate net of the servicing fee.

Prosper Funding discloses borrowers’ payment performance on loans to the relevant lender members on its website and also reports such information to consumer reporting agencies.

Prosper Funding subtracts a servicing fee from every loan payment it receives.  The amount of the servicing fee with respect to a particular payment is calculated by (a) multiplying the applicable annual servicing fee rate by a fraction, the numerator of which is equal to the number of days since the borrower’s last payment (or, in the case of the borrower’s first payment, since the date on which the relevant loan was funded) and the denominator of which is 365, and (b) multiplying the product obtained by the outstanding principal balance of the loan prior to applying the current payment.  The rate of Prosper Funding’s annual servicing fee is currently set at 1.0% per annum of the outstanding principal balance, but Prosper Funding may increase that in the future to a rate greater than 1% but less than or equal to 3% per annum,.  Any change to Prosper Funding’s servicing fee will only apply to Notes offered and sold after the date of the change.  Prosper Funding’s servicing fees are posted in the Help pages section at   www.prosper.com.

PMI keeps lender members apprised of the delinquency status of borrower loans by identifying delinquent loans on its website as “1 month late,” “2 months late,” “3 months late,” or “current.”  Borrower loans that become more than 120 days overdue are charged off and designated as such on the website.  Through their online Prosper Funding account, lender members are able to monitor the borrower loans corresponding to their Notes, but cannot participate in or otherwise intervene in the collection process.

Historically, PMI referred PMI Borrower Loans that became more than 30 days past due to a third party collection agency for collection proceedings.  As of September 30, 2012, 11,826 PMI Borrower Loans funded between November 2005 and July 12, 2009, or 40.7% of all PMI Borrower Loans funded during that period, have been referred to a collection agency for collection proceedings, 42.6% have been greater than 30 days past due at any time and 40.4% have been greater than 60 days past due at any time.  As of September 30, 2012, 3,246 PMI Borrower Loans funded between July 13, 2009 and September 30, 2012, or 9.5% of all PMI Borrower Loans funded during that period, have been referred to a collection agency for collection proceedings, 9.6% have been greater than 30 days past due at any time and 7.8% have been greater than 60 days past due at any time.

If a borrower dies while a borrower loan is in repayment, Prosper Funding requires the executor or administrator of the estate to send a death certificate to Prosper Funding.  Depending on the size of the estate and the other liabilities thereof, Prosper Funding may not be able to recover the outstanding amount of the loan.  If the estate does not include sufficient assets to repay the outstanding borrower loan in full, or allocates its assets to other liabilities, Prosper Funding will treat the unsatisfied portion of that borrower loan as charged off with zero value.  In addition, if a borrower dies near the end of the term of a borrower loan, it is unlikely that any further payments will be made on the Notes corresponding to such borrower loan, because the time required for the probate of the estate may extend beyond the final maturity date of the Notes.

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When Prosper Funding receives notice of a borrower bankruptcy filing, it ceases all automatic monthly payments on the borrower loan and defers any other collection activity, as required by law.  The status of the borrower loan, which the relevant lender members may view through their online Prosper Funding accounts, switches to “bankruptcy.”  Prosper Funding then determines whether it has a basis to object to the inclusion of the debt in any bankruptcy action (e.g., based on the time between loan origination and bankruptcy filing).  If the proceeding is a Chapter 7 bankruptcy filing seeking liquidation, Prosper Funding attempts to determine if the proceeding is a “no asset” proceeding, based on instructions it receives from the bankruptcy court.  If the proceeding is a “no asset” proceeding, Prosper Funding takes no further action and assumes that no recovery will be made on the borrower loan.

In all other cases, PMI files a proof of claim involving the borrower.  The decision to pursue additional relief beyond the proof of claim in any specific matter involving a borrower will be entirely within Prosper Funding’s discretion and will depend upon certain factors including:

· if the borrower used the proceeds of the loan in a way other than that which was described in the listing;

· if the bankruptcy is a Chapter 13 proceeding, whether the proceeding was filed in good faith and if the proposed plan reflects a “best effort” on the borrower’s behalf; and

· Prosper Funding’s view of the costs and benefits to it of any proposed action.

Note Trader Platform

Lender members may not transfer the Notes except through the Note Trader platform operated and maintained by FOLIOfn Investments, Inc., a registered broker-dealer.  The Note Trader platform is an internet-based trading platform on which lender members may offer the Notes for sale or bid on and purchase Notes offered for sale by other lender members.  Lender members must first establish a brokerage relationship with FOLIOfn Investments, Inc. before using the Note Trader platform.  In this section, lender members who have established such brokerage relationships are referred to as “subscribers.”  Only transactions involving the sale of previously-issued Notes will be effected through the Note Trader platform; the Note Trader platform will not handle any aspect of transactions involving the initial offer and sale of Notes by Prosper Funding.

Subscribers who sell Notes on the Note Trader platform will be subject to transaction fees charged by FOLIOfn Investments, Inc.  The transaction fee is currently equal to one percent of the sale price of the Note sold.

Neither Prosper Funding nor PMI is a registered national securities exchange, securities information processor, clearing agency, broker, dealer or investment adviser.  All securities services relating to the Note Trader platform are provided by FOLIOfn Investments, Inc.  Neither Prosper Funding, nor PMI nor FOLIOfn Investments, Inc. will make any recommendations with respect to transactions on the Note Trader platform.  There is no assurance that lender members will be able to establish a brokerage relationship with FOLIOfn Investments, Inc.  Furthermore, Prosper Funding cannot assure subscribers that they will be able to sell Notes they offer for sale through the Note Trader platform at the offered price or any other price, nor can Prosper Funding offer any assurance that the Note Trader platform will continue to be available to subscribers.

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Sale of the Notes

Notes Subject to Sale by Subscribers.  All Notes, including Notes for which the corresponding borrower loans have become delinquent, will be eligible for sale on the Note Trader platform.  There is no limit on the number of times a Note may be sold on the Note Trader platform, so long as the Note is outstanding.

Lender Members Eligible to Bid on Note Listings.  Lender members must first establish a brokerage relationship with FOLIOfn Investments, Inc. before using the Note Trader platform.  To open an account, FOLIOfn Investments, Inc. may require lender members to confirm that they satisfy certain minimum financial suitability standards and maximum investment limits, if any, that may be imposed by the state in which the lender member resides.  If the lender member does not satisfy these suitability requirements he or she will not be able to participate on the Note Trader platform.

Creation of Note Listings.  Subscribers may offer one or more of their Notes for sale on the Note Trader platform by creating and posting a “Note listing.”  Subscribers may offer to sell any or all of the Notes they own and may offer to sell more than one Note at the same time.  When posting a Note listing, the subscriber will designate a minimum sale price the subscriber is willing to receive for the Note.

Note listings will have a seven-day auction bidding period, but selling subscribers may elect to end the listing early at any time after a winning bid is made.  Selling subscribers may also add an “automatic sale” feature to their Note listing, which would end the bidding period on a Note listing immediately after the listing receives an initial bid equal to an automatic sale price set by the selling subscriber.  In such instances the Note would be immediately sold to the subscriber who placed the bid.

The selling subscriber may withdraw Note listings without charge at any time prior to expiration of the auction bidding period, before any bids are received.  Note listings with at least one bid cannot be withdrawn by the selling subscriber.

Display of Note Listings.  Note listings will be displayed for auction on the Note Trader platform, and include the selling subscriber’s screen name, the offered sale price of the Note, the interest rate on the Note, the remaining term of the Note, and the yield to maturity that corresponds to the offered sale price.  Note listings will also include the repayment status of the borrower loan corresponding to the Note (  i.e., current or delinquent), the payment history on the borrower loan and the next scheduled payment on the Note.  In addition, Note listings will include the remaining duration of the Note listing, the number of bids, and whether the Note listing has an automatic sale feature.

Note listings will include a link to the original listing (including the listing title, description, credit data, recommendations and original bidding history) for the borrower loan that corresponds to the Note being offered for sale.  Although Note listings will be displayed publicly on the Note Trader platform, the borrower’s payment history and corresponding listings will be viewable only by registered subscribers.

Bidding on Note Listings.  Only registered subscribers are eligible to bid for and purchase Notes listed for sale on the Note Trader platform.  Subscribers may bid for and purchase one or more Notes from selling subscribers.  As with bidding on loan listings, subscribers who bid on Note listings must have funds on deposit in the subscriber’s funding account in at least the aggregate amount of the subscriber’s bids. Subscribers are prohibited from withdrawing amounts from the subscriber’s funding account to the extent any such withdrawal would reduce the balance below the aggregate amount of the subscriber’s pending bids on loan listings and Note listings.  Subscribers are not eligible to bid on their own Note listings.

Subscribers bidding on Note listings must bid for the full amount of the Note being sold, and there may be only one winning bidder for a Note offered for sale by a selling subscriber.

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Bids may be made by subscribers until the end of the auction bidding period specified in the Note listing.  The selling subscriber may, however, end the auction bidding period early at any time after a winning bid is made.  The winning bidder is the subscriber who has bid the highest price as of the end of the auction bidding period (or the automatic sale price with respect to a Note listing with such a feature).

Proxy Bidding.  The Note Trader platform  employs an automated proxy bidding system that enables bidding subscribers to place a bid higher than the then current minimum bid, and have bids continually applied against a Note listing, up to a specified maximum bid amount.  The maximum bid amount is hidden from view until competing bids push the current sale price higher than the bidder’s maximum bid.

Close of Bidding and Sale of Notes.  When a Note listing ends with a winning bidder, upon settlement of the sale of the Note to the winning bidder, which will normally occur on the business day following expiration of the Note listing, the final sale price is withdrawn from the winning subscriber’s funding account to pay the selling subscriber.  The transaction fee is deducted from the sale price and retained by FOLIOfn Investments, Inc.

Upon the selling subscriber’s receipt of the final net sale proceeds, the Note is sold, transferred and assigned by the selling subscriber to the winning bidder without recourse.  All further payments made on the Note following settlement of the sale will be credited to the account of the purchasing subscriber.  The purchasing subscriber may retain ownership of the Note for the remainder of its term, or list the Note for sale on the Note Trader platform.  The electronic original Note is retained by Prosper Funding, as servicer of the Note, for the remaining term of the Note.

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SUMMARY OF INDENTURE, FORM OF NOTES, PMI MANAGEMENT RIGHTS AND ADMINISTRATION AGREEMENT

Indenture and Form of Notes

Shortly before or after effectiveness of this Registration Statement, Prosper Funding, PMI and Wells Fargo Bank, National Association, as trustee, expect to enter into a supplemental indenture to PMI’s existing indenture pursuant to which (i) Prosper Funding will succeed to and be substituted for PMI, and PMI will be discharged from all of its obligations, under the indenture and under all notes previously issued by PMI under the indenture (collectively, the “PMI Notes”), and (ii) the indenture will be amended and restated to reflect such succession, substitution and discharge and to make certain other amendments to the indenture.  See “Transactions with Related Parties” for more information about the supplemental indenture.  Prosper Funding has filed a copy of the supplemental indenture and the amended and restated indenture (which includes the form of Note) as an exhibit to the registration statement of which this prospectus forms a part.  For purposes of this section, we refer to the PMI indenture, as amended, restated and assumed by Prosper Funding, as the “indenture” and to the form of note attached thereto as the “form of Note.”  The indenture contains provisions that define your rights under the Notes.  In addition, the indenture governs the obligations of Prosper Funding under the Notes.  The terms of the Notes include those stated in the indenture (including the form of Note) and those made part of the indenture by reference to the Trust Indenture Act of 1939.

General

Borrower Payment Dependent Notes or “Prosper Borrower Notes,” or “Notes” will be issued in series under the indenture. Each series of Notes will correspond to one borrower loan.  Each series of Notes are dependent for payment on payments Prosper Funding receives on such borrower loan.

All Notes will be U.S. dollar denominated, fully amortizing and have a fixed rate of interest.  The Notes will have a stated interest rate that is the same as the yield percentage for the corresponding borrower loan and an aggregate stated principal amount equal to the principal amount of the corresponding borrower loan.  Notwithstanding the foregoing, Prosper Funding has no obligation to make any payments on the Notes unless, and then only to the extent that, it has received payments on the corresponding borrower loan.  The Notes will also be subject to full or partial prepayment without penalty.

The indenture will not limit the aggregate principal amount of Notes that Prosper Funding can issue under the indenture, but each series of Notes will be effectively limited to the maximum allowable principal amount (currently $25,000, but which may increase to $35,000 in the future) of a borrower loan.  If in the future Prosper Funding changes the maximum allowable borrower loan amount, then the maximum aggregate principal amount of Notes per series would also increase.  Prosper Funding will use all proceeds it receives from sales of the Notes to purchase the corresponding borrower loans from WebBank.

Maturity Dates

PMI Notes currently have a term of one, three or five years. Prosper Funding currently expects the Notes to have similar terms but may in the future extend the range of available maturity dates to between three months and seven years.   If there are amounts owing to Prosper Funding in respect of the corresponding borrower loan at the initial maturity of a Note, the term of the Note will be automatically extended by one year, which this prospectus refers to as the “final maturity,” to allow the Note holder to receive any payments that Prosper Funding receives during such period on the corresponding borrower loan after the maturity of the corresponding borrower loan.   Following the final maturity of a Note, the holder of that Note will have no right to receive any further payments from Prosper Funding even if the borrower under the corresponding borrower loan, or a bankruptcy trustee or estate of such borrower, subsequently remits payments to Prosper Funding or the servicer of the borrower loan.

Ranking; Security Interest

The Notes will be special, limited obligations of Prosper Funding.  The Notes are not directly secured by any collateral and are not guaranteed or insured by PMI, any governmental agency or instrumentality or any third party.  Prosper Funding will be obligated to make payments on each Note in a series only if and to the extent that the borrower makes principal or interest payments on the corresponding borrower loan purchased by Prosper Funding with the proceeds of that series, and such borrower loan payments will be shared ratably among all owners of Notes of the series, subject to Prosper Funding’s servicing fees and the fees and charges retained by Prosper Funding or paid to third parties as described above.  In the event of a bankruptcy or similar proceeding of Prosper Funding, the relative rights of the holder of a Note as compared to the holders of other indebtedness of Prosper Funding with respect to payment from the proceeds of the borrower loan corresponding to that Note or other assets of Prosper Funding is uncertain.

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To limit the risks to holder of Notes of its insolvency, Prosper Funding has granted the trustee under the indenture for the Notes, referred to as the “indenture trustee,” for the benefit of the Note holders, a security interest in all of the borrower loans and all payments and proceeds received by Prosper Funding on the borrower loans, in the deposit account into which the borrower loan payments are deposited and the in the FBO account.  Prosper Funding will perfect the security interest of the indenture trustee in such collateral by maintaining this bank account with the indenture trustee (thus providing the indenture trustee with “control” of the account under applicable law governing the perfection of security interests) and by filing a Uniform Commercial Code financing statement with the Delaware Secretary of State.  The indenture trustee may exercise its legal rights to the collateral only if an event of default has occurred under the indenture.  Any borrower loans that PMI, performing loan servicing as Prosper Funding’s agent pursuant to the Administration Agreement, sells or otherwise transfers on Prosper Funding’s behalf for the purpose of realizing the value thereof (though not the proceeds of any such sale or transfer) will automatically be released from the security interest as will any borrower loan that remains unpaid on its final maturity date.

The indenture does not contain any provisions that limit Prosper Funding’s ability to incur indebtedness in addition to the Notes; however, Prosper Funding’s organizational documents do impose such limitations.  See “Information About Prosper Funding LLC-Overview.”

Payments

Subject to the limitations described below under “Limitations on Payments,” Prosper Funding will make payments of principal and interest on the Notes upon receiving borrower loan payments in respect of the corresponding borrower loan, in accordance with the payment schedule for each Note.  Each Note will have a payment schedule providing for monthly payments over a term equal to the maturity of the corresponding borrower loan.  The payment dates will fall on the sixth business day after the due date for each monthly installment of principal and interest on the corresponding borrower loan, but interest on the Notes will accrue only through the corresponding payment dates for the related borrower loan.

Prosper Funding requests an ACH payment from a borrower on the business day prior to the payment due date, and normally receives payment the following business day.  A borrower’s loan payment is initially deposited in the deposit account upon receipt and is not distributed to the lender member’s funding account until the sixth business day after the ACH payment was requested and the short return window for ACH funds has expired.  Lender members can review their account statements online and see if they received payment on the Notes on such following sixth business day.  Upon maturity of the Note, the same process occurs.  Although payment to lender members under the Notes is made six business days after the applicable loan payment and loan maturity date, Prosper Funding treats the payment date and maturity date of the Note to be the same as the dates set forth in the corresponding borrower loan.

The stated interest rate on each Note will be the lender yield percentage set forth in the loan listing. The lender yield percentage is equal to the interest rate on the corresponding borrower loan net of the servicing fee.  The stated interest rate on each Note will not be the same as the interest rate on the corresponding borrower loan because the interest rate on the corresponding borrower loan takes into account the servicing fee.  Interest will be computed on the Notes in the same manner as the interest on the corresponding borrower loans is computed.

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

Limitations on Payments

Subject to the servicing fees described below and Prosper Funding’s retention or payment to third parties of the other fees and charges described below, any amounts received from borrowers on borrower loans will be forwarded by Prosper Funding to the holder of the Notes corresponding to the borrower loan.  Each Note holder’s right to receive principal and interest payments and other amounts in respect of that Note is limited in all cases to the holder’s pro rata portion of the amounts received by Prosper Funding in connection with the corresponding borrower loan, including without limitation, all payments or prepayments of principal and interest, subject to servicing fees charged by Prosper Funding and Prosper Funding’s retention or payment to third parties of the other fees and charges described below.

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Prosper Funding retains a servicing fee from every loan payment it receives as compensation for servicing the borrower loans and Notes. The amount of the servicing fee with respect to a particular payment on a particular borrower loan is equal to (a) the product obtained by multiplying the applicable annual servicing fee rate by a fraction, the numerator of which is equal to the number of days since the borrower’s last payment (or, in the case of the borrower’s first payment, since the date on which the relevant loan was funded) and the denominator of which is 365, multiplied by (b) the outstanding principal balance of the loan prior to applying the current payment.  Prosper Funding currently charges lenders a servicing fee of 1.0% per annum, but it may increase that fee in the future to a rate greater than 1% but less than or equal to 3% per annum.  Any change to the servicing fee will only apply to Notes offered and sold after the date of the change.  Prosper Funding’s servicing fees are posted in the Help pages section at www.prosper.com. Servicing fees will reduce the effective yield on borrower loans below the borrower interest rate.  The servicing fee rate will be disclosed in all loan listings.  The servicing fee is payable on all payments received on borrower loans corresponding to the Notes, including without limitation partial payments, prepayments and late payment fees paid by the related borrower.  Prosper Funding will not pay Note holders any non-sufficient funds fees it receives, but will retain such fees as additional servicing compensation.  In addition, any attorneys’ fees or collection fees that a third party servicer or collection agency imposes in connection with collection efforts related to any corresponding borrower loan will be retained by the party earning such fees and will reduce the amount of collections available for payment on the Notes.  Prosper Funding will pay Note holders any late fees it receives on corresponding borrower loans.

The “non-sufficient funds fee” is a fee charged by Prosper Funding or a third-party servicer or collection agency when a payment request is denied or a check is returned unpaid for any reason, including but not limited to, insufficient funds in the borrower member’s bank account or the closing of that bank account.  The non-sufficient funds fee currently charged by Prosper Funding on borrower loans is $15 or such lesser amount permitted by law.  To the extent it does not receive the anticipated payments on a borrower loan, Prosper Funding will not make any payments on the Notes related to that borrower loan, and a holder of a Note will not have any rights against Prosper Funding or the borrower member in respect of the Note or the corresponding borrower loan.

Prepayments

To the extent that a borrower member prepays a borrower loan, such prepayment amount will be a borrower loan payment, and holders of Notes corresponding to that borrower loan will be entitled to receive their pro rata shares of the prepayment, net of applicable servicing fees and Prosper Funding’s retention or payment to third parties of the other fees and charges described above.

Repurchase and Indemnification

Under the Indenture, if a “Repurchase Event” occurs with respect to a Note, Prosper Funding will, at its sole option, either repurchase the Note from the holder or indemnify the holder of the Note for any losses resulting from nonpayment of the Note or from any claim, demand or defense arising as a result of such Repurchase Event.  A “Repurchase Event” with respect to a Note means (i) a Prosper Rating different from the Prosper Rating actually calculated by Prosper Funding was included in the listing for the corresponding borrower loan, as a result of which the interest of the holder in the Note is materially and adversely affected, (ii) a Prosper Rating different from the Prosper Rating that should have appeared was included in the listing for the corresponding borrower loan because either Prosper Funding inaccurately input data into the formula for determining the Prosper Rating or inaccurately applied the formula for determining the Prosper Rating and, as a result, the interest of the holder in the Note is materially and adversely affected, or (iii) the corresponding borrower loan was obtained as a result of verifiable identify theft on the part of the purported borrower member and a material payment default under the corresponding borrower loan has occurred.

The determination of whether verifiable identify theft has occurred is in Prosper Funding’s sole discretion.  Prosper Funding may, in its reasonable discretion, require proof of the identify theft, such as a copy of a police report filed by the person whose identify was wrongfully used to obtain the corresponding borrower loan, an identity theft affidavit, a bank verification letter or all of the above.

If Prosper Funding elects to repurchase a Note in connection with a Repurchase Event, the repurchase price will be equal to the principal amount outstanding on the Note as of the date of repurchase and will not include accrued and unpaid interest.  If Prosper Funding elects to provide indemnification in connection with a Repurchase Event, Prosper Funding will not be required to take any action with respect to any losses suffered until the effected Note is at least one hundred twenty (120) days past due.  For purposes of indemnification, Prosper Funding will calculate the losses resulting from nonpayment of a Note based on the principal amount outstanding on the Note.  If Prosper Funding makes an indemnification payment, Prosper Funding will be entitled to retain any subsequent recoveries that it receives on the effected Note.

If Prosper Funding repurchases any Notes, PMI will concurrently repurchase the related PMI Management Right for zero consideration.

Servicing Covenant

Prosper Funding is obligated to use commercially reasonable efforts to service and collect borrower loans, in good faith, accurately and in accordance with industry standards customary for servicing loans such as the borrower loans.  If Prosper Funding refers a delinquent borrower loan to a collection agency within five (5) business days after it becomes 30 days past-due, that referral shall be deemed to constitute commercially reasonable servicing and collection efforts.  Prosper Funding may, in its sole discretion and subject to its servicing standard, refer a borrower loan to a collection agency, elect to initiate legal action to collect a borrower loan or sell a borrower loan to a third party debt buyer at any time.  Prosper Funding may also work with the borrower member to structure a new payment plan for the borrower loan without the consent of any of the corresponding Note holders.  Prosper Funding is obligated to use commercially reasonable efforts to maintain back-up servicing arrangements for the borrower loans.  It has entered into a back-up servicing arrangement with CSC Logic, Inc., a subsidiary of Computer Sciences Corporation.  CSC Logic, Inc. is a financial services company that has entered into numerous successor loan servicing agreements and has operated in the back-up servicing market for more than twenty years.  It is unlikely that CSC Logic, Inc. would be able to perform functions other than servicing the existing borrower loans and Notes.  For instance, CSC Logic likely would not be able to facilitate the creation of new loans through the platform or manage Prosper Funding’s marketing efforts.  Prosper Funding believes that it could find one or more other parties who could perform these and any other functions necessary to fully operate the platform in the absence of PMI.  However, it could take some time to find another such party or parties who could perform the necessary functions and it could take such party or parties additional time to become comfortable with the operation of the platform.  Any such delay should not affect existing Note holders, because the back-up servicer should be able to continue servicing existing loans and Notes, but it could delay Prosper Funding’s ability to facilitate the creation of new loans and issue new Notes through the platform, which could adversely affect Prosper Funding’s finances and customer relationships.

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In servicing borrower loans, Prosper Funding may, in its discretion, utilize affiliated or unaffiliated third party loan servicers, collection agencies or other agents or contractors.  Any modification or restructuring of borrower payment terms that Prosper Funding approves must be done in compliance with the servicing standard described above, which means that the servicer must make a reasonable and prudent determination that any such modification is not materially adverse to the interests of the Note holders. The modifications contemplated by this servicing provision would be made in situations, common to loan servicing industry practices, where a reasonable forbearance or extension of time for payment to be received would prevent a borrower from defaulting entirely on the loan or filing for bankruptcy.  From the Note holder’s perspective, such modifications would only be employed in situations where a greater loss would be avoided.

In the event the terms of any borrower loan are modified, PMI will notify the corresponding Note holders via email of the material terms of the borrower loan modifications and the effect such changes will have on their Notes, including changes to payments they will receive under the Notes.

Administration Covenants

Prosper Funding is obligated to use, or to cause a third party administrator to use (which may include, for example, PMI as the Corporate Administrator), commercially reasonable efforts to administer its day-to-day business and operations and provide the other administrative services described under the heading “Corporate Administration Services” in this prospectus  in accordance with industry standards customary for administrative services of the same general type and character.

In addition, Prosper Funding is obligated to use, or to cause a third party administrator to use (which may include, for example, PMI as the Loan Platform Administrator), commercially reasonable efforts to manage the platform and provide certain other platform-related services in accordance with industry standards customary for online credit platforms of the same general type and character as the platform.

Notification Requirements

Prosper Funding keeps lender members apprised of the delinquency status of borrower loans by identifying delinquent loans on its website as “1 month late,” “2 months late,” “3 months late,” or “current.”  Borrower loans that become more than 120 days overdue are charged off and designated as such on Prosper Funding’s website.  Lender members are able to monitor the borrower loans corresponding to their Notes, but cannot participate in or otherwise intervene in the collection process.

If a default with respect to the Notes of any series occurs and is continuing, and if it is known to the indenture trustee, the trustee is required to notify each holder of the Notes within 90 days after it occurs.  The trustee may withhold the notice if and so long as a committee of its trust officers in good faith determines that withholding the notice is in the interests of the Note holders, except for defaults caused by Prosper Funding’s failure to make principal and interest payments when required.

In addition, if required by Section 313(a) of the Trust Indenture Act of 1939, within 60 days after each May 15, the Trustee shall mail or transmit electronically to each Note holder a brief report dated as of such May 15 that complies with Trust Indenture Act Section 313(a).

Consolidation, Merger, Sale of Assets

The indenture prohibits Prosper Funding from consolidating with or merging into another business entity or conveying, transferring or leasing its properties and assets substantially as an entirety to any business entity, unless:

· Prosper Funding is the continuing corporation or limited liability company after such consolidation, merger or sale of assets;

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· the surviving or acquiring entity is a U.S. corporation, limited liability company, partnership or trust and it expressly assumes Prosper Funding’s obligations with respect to the outstanding Notes by executing a supplemental indenture;

· immediately after giving effect to the transaction, no default shall have occurred or be continuing; and

· Prosper Funding has delivered to the trustee an officers’ certificate and an opinion of counsel, each stating that the transaction, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with the indenture and all conditions precedent relating to such transaction have been complied with.

Denominations, Form and Registration

Prosper Funding will issue the Notes only in registered form and only in electronic form.  This means that each Note will be stored on Prosper Funding’s website.  You can view a record of the Notes you own and the form of your Notes online and print copies for your records, by visiting your secure, password-protected webpage in the “My Account” section of Prosper Funding’s website.  Prosper Funding will not issue certificates for the Notes.  Lender members will be required to hold their Notes through Prosper Funding’s electronic Note register.

The laws of some states in the United States may require that certain persons take physical delivery in definitive, certificated form, of securities that they own.  This may limit or curtail the ability of such persons to purchase Notes.  Prosper Funding reserves the right to issue certificated Notes only if it determines not to have the Notes held solely in electronic form.

Prosper Funding and the indenture trustee will treat the lender members in whose names the Notes are registered as the owners thereof for the purpose of receiving payments and for any and all other purposes whatsoever with respect to the Notes.

Restrictions on Transfer

The Notes will not be listed on any securities exchange.  All Notes must be held by Prosper Funding’s lender members.  The Notes will not be transferable except through the Note Trader platform operated and maintained by FOLIOfn Investments, Inc., a registered broker-dealer.  Under the terms of the Notes, any transfer of a Note will be wrongful unless (1) the transfer is effected on a trading system that Prosper Funding approves as a Note trading system and (2) the Note has been presented by the registered holder to Prosper Funding or its agent for registration of transfer.  The registrar for the Notes, which initially will be Prosper Funding, will not be obligated to recognize any purported transfer of a Note, except a transfer through the trading system or except as required by applicable law or court order.  There can be no assurance, however, that a market for Notes will develop on the Note Trader platform, or that the platform will continue to operate.  Therefore, lender members must be prepared to hold their Notes to maturity.  See “About the Platform—Note Trader Platform” for more information.

Note Repurchase and Indemnification Obligations

Under the Notes, in the event of a material default under a series of Notes due to verifiable identity theft of the named borrower’s identity, Prosper Funding will in its discretion either repurchase the Note or indemnify the Note holder.  Prosper Funding’s indemnification obligation will apply only if the relevant Note is at least 120 days past-due; provided, that Prosper Funding may in its sole discretion elect to take action at an earlier time.  The determination of whether verifiable identity theft has occurred is in Prosper Funding’s sole discretion and Prosper Funding may require proof of identity theft, such as a copy of a police report filed by the person whose identity was wrongfully used to obtain the fraudulently-induced borrower loan, an identity affidavit or a bank verification letter (or all of the above) in order to determine that verifiable identity theft has occurred.

In the event Prosper Funding inserts a Prosper Rating in a borrower loan listing that is different from the Prosper Rating calculated by Prosper Funding for listing such borrower loan on the platform, or if Prosper Funding incorrectly inputs data into its formula or incorrectly applies its formula to determine the Prosper Rating, resulting in a Prosper Rating different from the Prosper Rating that should have appeared in a borrower loan listing, then, if such breach materially and adversely affects the interest of the holder of the Note corresponding to such borrower loan, Prosper Funding will in its discretion either repurchase such Note holder or indemnify the Note holder.

No Sinking Fund

The Notes are fully amortizing and will not have the benefit of a sinking fund.

Events of Default

Under the terms of the indenture, any of the following events will constitute an event of default for a series of Notes:

· Prosper Funding’s failure to make required payments on the Notes for thirty days past the applicable due date;

· Prosper Funding’s failure to perform, or the breach of, any other covenant for the benefit of the holders of the Notes which continues for 90 days after written notice from the indenture trustee or holders of 25% of the outstanding principal amount of the Notes for which such default exists, subject to an additional 90 day cure period; or

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· specified events relating to Prosper Funding’s bankruptcy, insolvency or reorganization.

It is not a default or event of default under the terms of the indenture if Prosper Funding does not make payments on a series of Notes when a borrower does not make payments on the corresponding borrower loan.  In that case, Prosper Funding is not required to make payments on the Notes, so no default occurs.  See “Risk Factors—Risks Related to Borrower Default,” for more information.  An event of default with respect to one series of Notes is not automatically an event of default for any other series, even where the same borrower member is the loan borrower on both loans.

As described above under “Summary of Indenture, Form of Notes and Administration Agreement—Indenture and Form of Notes—Ranking; Security Interest,” to limit the risk of Prosper Funding’s insolvency, Prosper Funding has granted the indenture trustee a security interest in all of the borrower loans, in the deposit account into which the borrower loan payments are deposited and in the FBO account.  The indenture trustee may exercise its legal rights to the collateral only if an event of default has occurred under the indenture.  Only the indenture trustee, not the holders of the Notes, will have a secured claim to the above collateral.

If an event of default occurs due to bankruptcy, insolvency or reorganization as provided in the indenture, then the stated principal amount of all outstanding Notes shall become due and payable immediately without any act by the trustee or any holder of Notes.

The holders of a majority in aggregate principal amount of the outstanding Notes of any series, by notice to the trustee (and without notice to any other holder of Notes), may on behalf of the holders of all Notes of the series waive an existing default with respect to such Notes, except (1) a default in the payment of amounts due in respect of such Notes or (2) a default in respect of a provision of the indenture that cannot be amended without the consent of each holder affected by such waiver.  When a default is permanently and irrevocably waived, it is deemed cured, but no such waiver shall extend to any subsequent or other default or impair any consequent right.

In addition, pursuant to the indenture, and subject to the conditions set forth therein, (1) the holders of at least 25% in aggregate principal amount of the outstanding Notes offered hereby and the PMI Notes collectively, will have the right to cause the indenture trustee to enforce its rights with respect to PMI’s obligations as Loan and Note Servicer under the Administration Agreement and (2) the holders of at least 25% in aggregate principal amount of the outstanding Notes offered hereby will have the right to cause the indenture trustee to enforce its rights with respect to all other provisions of the Administration Agreement. The conditions to the holders’ rights to cause the indenture trustee to enforce its rights under the Administration Agreement include, among others, that the holders indemnify the indenture trustee for taking such action.

A Note holder may not institute a suit against Prosper Funding for enforcement of such holder’s rights under the indenture or pursue any other remedy with respect to the indenture or the Notes unless:

· the holder gives the trustee written notice stating that an event of default with respect to the Notes is continuing;

· the holders of at least 25% in aggregate principal amount of the outstanding Notes of that series make a written request to the trustee to pursue a remedy available under the indenture with respect to such default;

· such holder or holders offer the trustee security or indemnity satisfactory to it against any loss, liability or expense;

· the trustee does not comply with the request within 60 days after receipt of the notice, request and offer of security or indemnity; and

· the holders of a majority in aggregate principal amount of the outstanding Notes of that series do not give the trustee a direction inconsistent with such request during such 60-day period.

The indenture will require Prosper Funding every year to deliver to the indenture trustee a statement as to performance of its obligations under the indenture and as to any defaults.

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Satisfaction and Discharge of the Indenture

The indenture will generally cease to be of any further effect with respect to a series of Notes if:

· all of the Notes of that series (with certain limited exceptions) have been delivered for cancellation; or

· allNotes of that series not previously delivered for cancellation have become due and payable or will become due and payable within one year and Prosper Funding has deposited with the trustee as trust funds the entire amount sufficient to pay at maturity all of the amounts due with respect to those Notes.

In either case, Prosper Funding must also pay or cause to be paid all other sums payable under the indenture by it and deliver to the trustee an officers’ certificate and opinion of counsel stating that all conditions precedent to the satisfaction and discharge of the indenture have been complied with.

The indenture does not contain any provisions for legal or covenant defeasance of the Notes.

No Recourse Against Others

The Notes are solely limited recourse obligations of Prosper Funding, payable from collections on the corresponding borrower loans as described herein, and are not the obligations of any other person.  Neither PMI, in its capacity as servicer, as issuer of the related PMI Management Rights or otherwise, nor any of Prosper Funding’s directors, officers or affiliates, has any liability for any amounts due on the Notes or the corresponding borrower loans.  Each purchaser of a Note, by accepting the same, is deemed to waive and release all such liability.

Governing Law

The indenture and the Notes are governed by the laws of the State of New York without regard to any principle of conflict of laws that would require or permit the application of the laws of any other jurisdiction.

Information Concerning the Trustee

Prosper Funding has selected Wells Fargo Bank, National Association, to serve as the trustee under the indenture.  From time to time, Prosper Funding maintains deposit accounts and conducts other banking transactions with the trustee and its affiliates in the ordinary course of business.  If and when the trustee becomes a creditor of Prosper Funding, the trustee will be subject to the provisions of the Trust Indenture Act regarding the collection of claims against Prosper Funding.  The trustee and its affiliates will be permitted to engage in other transactions; however, if they acquire any conflicting interest, the conflict must be eliminated or the trustee must resign.

PMI Management Rights

Each Note will come attached with a PMI Management Right issued by PMI.  Prosper Funding will be the sole issuer of the Notes and PMI will be the sole issuer of the PMI Management Rights.  The PMI Management Rights will not be separable from the Notes offered on the platform and will not be assigned a value separate from the Notes.  The PMI Management Rights will consist of PMI’s obligations under the Administration Agreement.  PMI’s obligations under the Administration Agreement relate to the services it will provide to Prosper Funding under the Administration Agreement as described in this prospectus.  For more information about PMI’s obligations under the Administration Agreement, see “Summary of Indenture, Form of Notes, PMI Management Rights and Administration Agreement—Administration Agreement.”

There are no payment obligations on the part of PMI or any third party under or in relation to the PMI Management Rights that are in any way related to borrower obligations in relation to the borrower loans or in any way related to Prosper Funding’s payment obligations in relation to the Notes.  The PMI Management Rights attached to the Notes will not comprise collateral therefor nor guarantees of any borrower loans or Notes, nor generate any funds or proceeds that will be payable to Prosper Funding, the indenture trustee or holders of Notes in relation to any borrower loans or Notes.  Holders of Notes will have no recourse to PMI or its assets in relation to payments on borrower loans or Notes.  If Prosper Funding repurchases any Notes, PMI will concurrently repurchase the related PMI Management Right for zero consideration.

The indenture trustee will be a third-party beneficiary of the Administration Agreement on behalf of holders of Notes and PMI Management Rights.  Holders of Notes and PMI Management Rights will not have the right individually to enforce PMI’s obligations under the Administration Agreement, but the holders of at least 25% of the outstanding Notes will have the right, subject to the conditions set forth in the Indenture, collectively to cause the indenture trustee to enforce its rights as a third-party beneficiary under the Administration Agreement. PMI's obligations to provide services under the Administration Agreement may be terminated by PMI or by Prosper Funding under certain circumstances described in this prospectus.  For more information, see “Summary of Indenture, Form of Notes, PMI Management Rights and Administration Agreement—Administration Agreement—Indenture Trustee as Third-Party Beneficiary.”

Administration Agreement

Prosper Funding and PMI plan to execute an Administration Agreement pursuant to which PMI will provide certain corporate administration services and platform administration services and will service all borrower loans and Notes, as well as all PMI Borrower Loans and PMI Notes.  This prospectus refers to PMI in its separate capacities under the Administration Agreement as follows: (i) in its capacity as the party providing the corporate administration services, as the “Corporate Administrator,” (ii) in its capacity as the party providing the platform administration services, as the “Loan Platform Administrator,” and (iii) in its capacity as the party servicing all borrower loans, Notes, PMI Borrower Loans and PMI Notes, as the “Loan and Note Servicer.”

The following summary of the Administration Agreement does not purport to be complete and is qualified in its entirety by the complete terms and conditions of the Administration Agreement.  A copy of the Administration Agreement is filed as an exhibit to the registration statement of which this prospectus forms a part.

Corporate Administration Services

The Corporate Administrator will oversee the daily business operations of Prosper Funding and provide a number of related administrative services.  Among other matters, the Corporate Administrator’s duties shall include:

·    administering Prosper Funding’s day-to-day operations, including paying (solely from Prosper Funding’s funds) Prosper Funding’s fees and expenses,

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· giving notices and communications in Prosper Funding’s behalf as Prosper Funding may be required to give from time to time under its various agreements,

· maintaining Prosper Funding’s general accounting records and preparing monthly, quarterly and annual financial statements as may be necessary or appropriate,

· retaining in Prosper Funding’s behalf an accounting firm to audit Prosper Funding’s year-end financial statements,

· preparing and filing Prosper Funding’s income, franchise or other tax returns,

· causing to be paid (solely from Prosper Funding’s funds) any taxes required to be paid by Prosper Funding,

· not knowingly causing Prosper Funding to engage in any activity that would cause Prosper Funding to be subject to income or franchise tax on a net income basis by any taxing jurisdiction outside of the United States,

· retaining on Prosper Funding’s behalf outside counsel,

· reviewing and analyzing any agreements entered into by Prosper Funding and establishing, in consultation with Prosper Funding, operating procedures to enable Prosper Funding to comply with the terms of such agreements,

· providing recordkeeping and maintenance to maintain Prosper Funding’s limited liability company existence,

· preparing resolutions for consideration by Prosper Funding’s board of directors in accordance with its limited liability company agreement,

· preparing and having executed and filed all documents necessary to qualify Prosper Funding to do business in any jurisdiction in which such qualification is necessary or appropriate,

· in conjunction with Prosper Funding’s counsel, monitoring compliance with licensing requirements and applicable laws,

· receiving notices on Prosper Funding’s behalf,

· notifying Prosper Funding of the institution of any action, suit or proceeding against, or regulatory investigation of, Prosper Funding,

· establishing and maintaining all necessary bank accounts for Prosper Funding and managing Prosper Funding’s cash in accordance with the terms and provisions of Prosper Funding’s material contracts,

· notifying Prosper Funding, to the extent the Corporate Administrator has actual knowledge thereof, of any failure of a party to a material agreement to perform any of its obligations with respect to Prosper Funding, and

· from time to time taking at Prosper Funding’s expense such actions as Prosper Funding may reasonably request, or as the Corporate Administrator deems appropriate.

The Corporate Administrator has agreed to provide Prosper Funding with an annual service provider compliance statement confirming that the Corporate Administrator has reviewed its activities and performance under the Administration Agreement during the preceding calendar year and, based upon such review, has determined that it materially fulfilled all of its obligations under the Administration Agreement during that year or, if there has been a failure to perform any such obligation in any material respect, specifically identifying each such failure and the nature and the status thereof.  Prosper Funding and PMI will provide a summary of the Corporate Administrator’s service provider compliance statement in their annual reports on Form 10-K.

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Loan Platform Administration Services

The Loan Platform Administrator will manage the platform and provide a number of related services.  Among other matters, the Loan Platform Administrator’s duties shall include supervision with respect to:

· managing, maintaining and operating the platform,

· the issuance, sale and payment of the Notes,

· Prosper Funding’s purchase of borrower loans,

· the operation of www.prosper.com, and

· the payment (solely from Prosper Funding’s funds) of related fees and expenses.

Among other things, the Loan Platform Administrator will assist Prosper Funding with the issuance and sale of the Notes and the posting and funding of borrower loans (including reviewing the eligibility of applicants to participate on the platform and performing the applicant verification processes described herein), and will manage the posting of listings on the website.  The Loan Platform Administrator will also assign a Prosper Rating and an interest rate to each listing.  See “About the Platform” for more information.

The Loan Platform Administrator has agreed to provide Prosper Funding with an annual service provider compliance statement confirming that the Loan Platform Administrator has reviewed its activities and performance under the Administration Agreement during the preceding calendar year and, based upon such review, has determined that it materially fulfilled all of its obligations under the Administration Agreement during that year or, if there has been a failure to perform any such obligation in any material respect, specifically identifying each such failure and the nature and the status thereof.  Prosper Funding and PMI will provide a summary of the Loan Platform Administrator’s service provider compliance statement in their annual reports on Form 10-K.

Servicing of Borrower Loans and Notes

The Loan and Note Servicer has agreed to service each borrower loan and the corresponding Notes, as well as each PMI Borrower Loan and PMI Note.  The Loan and Note Servicer is required at all times to use commercially reasonable efforts to service and collect the borrower loans in accordance with industry standards customary for loans of the same general type and character, in each case:

· as long as PMI is the Loan and Note Servicer, in accordance with the provisions of Prosper Funding’s Amended and Restated Limited Liability Company Agreement (in particular the sections governing the limitations on Prosper Funding’s activities),

· as long as PMI is the Loan and Note Servicer, in accordance with the provisions of the Unanimous Written Consent of the Board of Directors of Prosper Marketplace, Inc. with respect to the separateness principles to be observed by PMI in dealing with Prosper Funding,

· in accordance with all applicable laws, and

· without regard to:

· any relationship that the Loan and Note Servicer or its affiliates may have with the applicable borrower or Note holder, or

· the Loan and Note Servicer’s right to receive compensation for its services.

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This standard of care applicable to the Loan and Note Servicer is called the “Servicing Standard.”  Subject to the Servicing Standard, the Loan and Note Servicer has full power and authority to take any actions in connection with the servicing and administration of the borrower loans that it deems to be necessary or desirable.  The Loan and Note Servicer may act alone or through agents, but will remain responsible for the proper performance of its duties by any agents it appoints.  Prosper Funding’s ability to collect payments on the borrower loans, and therefore the amount of payments received by the holders of Notes, will be dependent upon the Loan and Note Servicer's performance of its duties under the Administration Agreement.

Subject to the Servicing Standard, the Loan and Note Servicer is responsible for protecting the interest of Prosper Funding in the borrower loans by dealing effectively with borrowers who are delinquent or in default.  The Loan and Note Servicer is required to maintain an adequate accounting system that will immediately identify delinquent loans and to maintain procedures for sending delinquent notices, assessing late charges and preparing individual analyses of distressed or chronically delinquent borrower loans.  The Loan and Note Servicer has sole discretion to determine (i) the timing and content of communications sent to delinquent borrowers, and (ii) when and whether to refer a delinquent loan for collection, initiate legal action to collect a delinquent loan, sell a delinquent loan to a third party, accelerate the maturity of a delinquent loan that is at least thirty days past due or write off a delinquent loan in whole or in part.  The Loan and Note Servicer is authorized to select and engage on Prosper Funding’s behalf  any collection agency to which any delinquent loan is referred for collection and to determine the amount of its compensation (which shall not, however, exceed 40% of the amount of any recoveries obtained, in addition to any legal fees incurred in the collection effort).  The Loan and Note Servicer will be deemed to have undertaken commercially reasonable servicing and collection efforts if it refers a delinquent loan to a collection agency within five business days after such loan first became thirty days past due.  The Loan and Note Servicer will charge off borrower loans that are 120 days past due and also may charge off delinquent loans that are less than 120 (but at least 31) days past due if the Loan and Note Servicer deems such action appropriate under the Servicing Standard.  Notwithstanding any decision by the Loan and Note Servicer to charge off a delinquent loan, holders of the Notes related to such loan will continue to receive their   pro rata   shares (net of servicing fees and other fees and charges, if applicable) of any payments that Prosper Funding receives on such loan on or prior to its Final Maturity Date.

Subject to the Servicing Standard, the Loan and Note Servicer may waive, modify or vary any non-material terms of any borrower loan, consent to the postponement of strict compliance with any such term or grant a non-material indulgence to any borrower.  Notwithstanding the foregoing, in the event that any borrower loan is in default, or in the judgment of the Loan and Note Servicer, such default is reasonably foreseeable, or the Loan and Note Servicer otherwise determines that such action would be consistent with the Servicing Standard, and provided that the Loan and Note Servicer has reasonably and prudently determined that such action will not be materially adverse to the interests of the relevant Note holders, the Loan and Note Servicer may also waive, modify or vary any term of any borrower loan (including material modifications that would change the interest rate, defer or forgive the payment of principal or interest, change the payment dates or change the place and manner of making payments on such borrower loan), accept payment from the related borrower of an amount less than the principal balance in final satisfaction of such borrower loan or consent to the postponement of strict compliance with any term or otherwise grant any indulgence to any borrower.  The modifications contemplated by this servicing provision would be in situations, common to loan servicing industry practices, where a reasonable forbearance or extension of time for payment to be received would prevent a borrower from defaulting entirely on the loan or filing for bankruptcy.  From the Note holder’s perspective, such modifications would only be employed in situations where a greater loss would be avoided.

Any such actions taken by the Loan and Note Servicer in relation to any borrower loan will be binding on the holders of the related Notes and may reduce the amount of payments to be made on such Notes or result in no further payments being made.  If the Loan and Note Servicer approves modifications to the terms of any borrower loan, it will promptly, on behalf of Prosper Funding, notify the corresponding lender members by email of the material terms of such modifications and the effect such modifications will have on their Notes, including any changes to the payments they will receive under the Notes.

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The Loan and Note Servicer has agreed to provide Prosper Funding with an annual servicer compliance statement confirming that the Loan and Note Servicer has reviewed its activities and performance under the Administration Agreement during the preceding calendar year and, based upon such review, has determined that it materially fulfilled all of its obligations under the Administration Agreement during that year or, if there has been a failure to perform any such obligation in any material respect, specifically identifying each such failure and the nature and the status thereof.  Prosper Funding and PMI will provide a summary of the servicer compliance statement in their annual reports on Form 10-K.

PMI Fees

Prosper Funding has agreed to compensate PMI with three fees for its various roles and related services under the Administration Agreement.

First, Prosper Funding will pay the Corporate Administrator a monthly corporate administration fee for its administrative services in overseeing the daily business operations of Prosper Funding (the “PMI Corporate Administration Fee”) commencing on December 28, 2012, or such later date as agreed among the parties to the Administration Agreement.  This monthly fee will be in an amount equal to one-twelfth (1/12) of the following specified amounts:

· 2012 — $800,000

· 2013 — $865,000

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

Second, Prosper Funding will pay the Loan Platform Administrator a monthly platform administration fee for its services in managing the platform (the “PMI Loan Platform Servicing Fee”) commencing on December 28, 2012 or such later date as of which at least 12,000 borrower loans have funded through the platform after the effective date of the Administration Agreement.  This fee will be in an amount equal to the product of $112.50 and the number of borrower loans funded since the last monthly fee payment date (or, in the case of the first such payment date, since the date of the Administration Agreement).

Third, Prosper Funding will pay the Loan and Note Servicer a monthly fee for its services in servicing the borrower loans (such fee, together with the PMI Corporate Administration Fee and the PMI Loan Platform Servicing Fee, the “PMI Fees”) commencing on December 28, 2012, or such later date as agreed among the parties to the Administration Agreement.  This fee will be in an amount equal to 90% of all servicing fees collected from Note holders by or on behalf of Prosper Funding and all non-sufficient funds fees collected from Note holders by or on behalf of Prosper Funding since the last monthly fee payment date (or, in the case of the first such payment date, since the date of the Administration Agreement).

Exculpation and Indemnity

PMI, in its capacity as Loan and Note Servicer under the Administration Agreement, will not be liable under the Administration Agreement to Prosper Funding, any Note holder, any borrower or any other person for any actions it takes or fails to take in connection with the servicing of the borrower loans or Notes or for any errors in judgment, except as described below.

PMI, in its various capacities under the Administration Agreement, and any of its directors, officers, employees or agents may rely in good faith on any document of any kind that appears to be properly executed and submitted by any person respecting any matters arising in connection with the Administration Agreement, except to the extent that PMI knows that such document is false, misleading, inaccurate or incomplete.

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PMI, in its various capacities under the Administration Agreement, has agreed to indemnify Prosper Funding and Prosper Funding’s officers, directors, employees and agents against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and disbursements), joint or several (collectively, “Damages”), directly or indirectly resulting from:

· the failure of PMI to perform its duties under the Administration Agreement,

· the material breach of any of PMI’s representations, warranties, covenants or agreements contained in the Administration Agreement,

· the acts or omissions of any permitted subservicer or service provider engaged by PMI, in its capacity as Loan and Note Servicer, to service the borrower loans or Notes in accordance with the Administration Agreement, and

· any infringement or misappropriation by PMI of any patent, copyright, trademark, servicemark, trade secret or other proprietary right of any other person;

provided, however, that PMI will not be responsible for any Damages resulting from:

· the failure of Prosper Funding to perform its duties under the Administration Agreement (unless such failure resulted from the actions or omissions of PMI),

· the material breach of any of Prosper Funding’s representations, warranties, covenants or agreements contained in the Administration Agreement (unless such breach resulted from the actions or omissions of PMI),

· the origination, making, funding, sale or servicing of any borrower loans or Notes following the termination of the Administration Agreement,

· the absence or unavailability of any books, records, data, files or other documents relating to a borrower loan, unless resulting from PMI's actions or omissions, or

· compliance with any instructions of Prosper Funding if such instructions did not comply with applicable law.

Assignment and Subservicing

PMI may not assign its various roles under the Administration Agreement or its duties thereunder without the prior written consent of Prosper Funding (excluding any assignment to an entity into which PMI is merged or consolidated or that succeeds to PMI's business).  PMI may in its discretion engage service providers to assist it in performing specific obligations under the Administration Agreement, provided that, in its capacity as Loan and Note Servicer, it may not engage a subservicer or other service provider to perform a substantial portion of the primary day-to-day servicing obligations of the Loan and Note Servicer without the prior written consent of Prosper Funding.  PMI, in its capacity as Loan and Note Servicer, will be solely responsible for the fees and expenses of any subservicer or service provider it engages.  PMI will be liable for the acts and omissions of any such subservicer or service provider to the same extent as if the Loan and Note Servicer had performed the servicing directly.

Termination and Replacement of Servicer

The Administration Agreement will terminate on May 31, 2023, unless Prosper Funding or PMI declares an earlier termination pursuant to the termination rights described below or unless the parties agree to extend the term of the Administration Agreement.

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Prosper Funding may terminate the Administration Agreement partially or in its entirety at its discretion upon 180 calendar days’ notice to PMI in any of its capacities under the Administration Agreement.  In addition, Prosper Funding may terminate the Administration Agreement partially or in its entirety at any time without 180 calendar days’ notice if PMI, in any of its capacities under the Administration Agreement, breaches any of its duties under the Administration Agreement and does not cure such breach within thirty days from the date that Prosper Funding provides notice of such breach.  Notwithstanding the foregoing, Prosper Funding may not terminate PMI in any of its capacities under the Administration Agreement unless (i) Prosper Funding determines that it, either directly or through a successor service provider, is able to act in such capacity in accordance with the indenture governing the Notes and (ii) Prosper Funding’s Board of Directors (including its independent directors) approve such determination and termination. If Prosper Funding partially terminates the Administration Agreement with respect to PMI in any of its capacities thereunder, PMI will continue to provide services under its other capacities pursuant to the terms of the Administration Agreement.

PMI may terminate the Administration Agreement if Prosper Funding breaches any of its obligations under the Administration Agreement and such breach is not cured by Prosper Funding within thirty days of the date PMI provides notice of such breach.  

PMI is required in connection with any termination of the Administration Agreement under any of its capacities thereunder to transfer the administrative services, platform management services or servicing of all borrower loans and Notes that remain outstanding to Prosper Funding or a successor servicer designated by Prosper Funding as soon as reasonably practicable.  Until such transfer is completed, PMI’s obligation to service the borrower loans and otherwise provide services in accordance with the Administration Agreement will remain in effect.  All costs and fees incurred in connection with any termination of the Administration Agreement will be payable by the party whose breach of obligation, or whose exercise of its voluntary termination right, resulted in the termination.   Any such amounts due from Prosper Funding will be payable only from funds not allocated to the payment of Notes under the indenture.  See “Summary of Indenture, Form of Notes and Administration Agreement—Indenture and Form of Notes.”  Prosper Funding also will be required upon any termination to pay PMI all accrued but unpaid PMI Fees.  No termination fees will be payable by either party upon any termination of the Administration Agreement.

Prosper Funding and PMI have entered into back-up servicing agreements with CSC Logic, Inc., a third-party loan administrator, pursuant to which CSC Logic, Inc. would become the successor servicer to PMI.  The back-up servicing agreements will facilitate the transfer of servicing responsibilities to CSC Logic, Inc. if the Administration Agreement terminates.  See “Summary of Indenture, Form of Notes and Administration Agreement—Indenture and Form of Notes—Servicing Covenant.”  CSC Logic, Inc. is a financial services company that has entered into numerous successor loan servicing agreements and has operated in the back-up servicing market for more than twenty years.  In the event that Prosper Funding must designate an additional or different successor servicer, it will seek to designate a servicer with experience and reputation comparable to CSC Logic, Inc.

Indenture Trustee as Third-Party Beneficiary

The indenture trustee will be a third-party beneficiary of (i) PMI’s obligations as Loan and Note Servicer under the Administration Agreement (the “Servicing Obligations”) for the benefit of the holders of the Notes offered hereby and the PMI Notes and (ii) all of PMI’s other obligations under the Administration Agreement for the benefit of holders of the Notes offered hereby.

Pursuant to the Indenture, and subject to the conditions set forth therein, (i) holders of at least 25% in aggregate principal amount of the outstanding Notes offered hereby and the PMI Notes will have the right to cause the indenture trustee to enforce its rights under the Servicing Provisions of the Administration Agreement and (ii) holders of at least 25% in aggregate principal amount of the outstanding Notes offered hereby will have the right to cause the indenture trustee to enforce its rights under any other provisions of the Administration Agreement, in each case whether or not there is a default under the Indenture. PMI's obligations to provide services under the Administration Agreement may be terminated by PMI or by Prosper Funding under certain circumstances described in this prospectus.

PMI’s obligations under the Administration Agreement may not be amended, waived or otherwise modified in a manner that would adversely affect the holders of the Notes without the consent of the indenture trustee. In order to cause the Trustee to enforce either of the rights discussed above, the holders of the Notes offered hereby (and the PMI Notes if the action relates to the Servicing Provisions of the Administration Agreement) must indemnify the indenture trustee against the costs, expenses and liabilities that it might incur as a result of taking such action.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following discussion constitutes the full opinion of our tax counsel, Covington & Burling LLP, regarding the material U.S. federal income tax considerations generally applicable to lender members who purchase Notes.  This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder (“Treasury Regulations”), administrative pronouncements of the U.S. Internal Revenue Service (“IRS”) and judicial decisions, all as currently in effect and all of which are subject to change and to different interpretations.  Changes to any of the foregoing authorities could apply on a retroactive basis, and could affect the U.S. federal income tax consequences described below.

This discussion does not address all of the U.S. federal income tax considerations that may be relevant to a particular lender member’s circumstances, and does not discuss any aspect of U.S. federal tax law other than income taxation or any state, local or non-U.S. tax consequences of the purchase, ownership and disposition of the Notes.  This discussion applies only to lender members who hold the Notes as capital assets within the meaning of the Code (generally, property held for investment).  This discussion does not address U.S. federal income tax considerations applicable to lender members that may be subject to special tax rules, such as:

· securities dealers or brokers, or traders in securities electing mark-to-market treatment;

· banks, thrifts or other financial institutions;

· insurance companies;

· regulated investment companies or real estate investment trusts;

· tax-exempt organizations;

· persons holding Notes as part of a “straddle,” “hedge,” “synthetic security” or “conversion transaction” for U.S. federal income tax purposes, or as part of some other integrated investment;

· partnerships or other pass-through entities;

· persons subject to the alternative minimum tax;

· certain former citizens or residents of the United States;

· non-U.S. Holders (as defined below); or

· “U.S. Holders” (as defined below) whose functional currency is not the U.S. dollar.

Asused herein, a “U.S. Holder” is a beneficial owner of Notes that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if (A) a United States court has the authority to exercise primary supervision over the administration of the trust and one or more U.S. persons (as defined under the Code) are authorized to control all substantial decisions of the trust or (B) it has a valid election in place to be treated as a U.S. person.  A “Non-U.S. Holder” is any beneficial owner of a Note that, for U.S. federal income tax purposes, is not a U.S. Holder and that is not a partnership (or other entity treated as a partnership for U.S. federal income tax purposes).

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds Notes, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership.  A partnership holding Notes, and partners in such a partnership, should consult their own tax advisors with regard to the U.S. federal income tax consequences of the purchase, ownership and disposition of the Notes by the partnership.

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THIS DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR PERSON.  ACCORDINGLY, ALL PROSPECTIVE LENDER MEMBERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES BASED ON THEIR PARTICULAR CIRCUMSTANCES.

Taxation of the Notes

In General

There are no statutory provisions, regulations, published rulings, or judicial decisions that directly address the characterization of the Notes or instruments similar to the Notes for U.S. federal income tax purposes.  However, although the matter is not free from doubt, Prosper Funding intends to treat the Notes as its debt instruments that have original issue discount (“OID”) for U.S. federal income tax purposes.  Where required, Prosper Funding intends to file information returns with the IRS in accordance with such treatment unless there is a change or clarification in the law, by regulation or otherwise, that would require a different characterization of the Notes.

You should be aware, however, that the U.S. Internal Revenue Service (“IRS”) is not bound by Prosper Funding’s characterization of the Notes and the IRS or a court may take a different position with respect to the Notes’ proper characterization.  Any different characterization could significantly affect the amount, timing, and character of income, gain or loss recognized in respect of a Note.  For example, because each series of Notes will correspond to a loan, and Prosper Funding has no obligation to make any payments on the Notes unless, and then only to the extent that, it has received payments on the corresponding loan, the IRS could determine that, in substance, each lender member owns a proportionate interest in the corresponding loan for U.S. federal income tax purposes.  If the IRS took such a position, the tax treatment of the Notes may differ materially, including, but not limited to, the fact that the Notes would no longer be considered to have OID.  Alternatively, the IRS could instead treat the Notes as a different financial instrument (including an equity interest or a derivative financial instrument).  If the Notes are treated as Prosper Funding’s equity, (i) Prosper Funding would be subject to U.S. federal income tax on income, including interest, accrued on the corresponding loans but would not be entitled to deduct interest or OID on the Notes, and (ii) payments on the Notes would be treated by the holder for U.S. federal income tax purposes as dividends (that may be ineligible for reduced rates of U.S. federal income taxation or the dividends-received deduction) to the extent of Prosper Funding’s earnings and profits as computed for U.S. federal income tax purposes.

A different characterization may significantly reduce the amount available to pay interest on the Notes  You are strongly advised to consult your own tax advisor regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership, and disposition of the Notes (including any possible differing treatments of the Notes).

The following discussion assumes that the Notes will be treated as Prosper Funding’s debt instruments that have OID for U.S. federal income tax purposes.  Unless otherwise specified, the following discussion assumes that the Notes will not be subject to the rules governing contingent payment debt instruments.

Taxation of Payments on the Notes

You will generally be required to accrue OID in income as ordinary interest income for U.S. federal income tax purposes, regardless of your regular method of tax accounting.  If you hold a Note that has a maturity date of more than one year, you will be required to accrue OID income as ordinary interest income under a “constant yield method.”  Under this treatment, if a payment on a Note is not made in accordance with the payment schedule in respect of the corresponding loan (for example, because of a late payment on the corresponding loan), you will be required to include an amount of OID in taxable income as interest even if you have not received the actual payment from the corresponding loan.

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The Treasury Regulations governing OID provide special rules for determining the amount and accrual of OID for debt instruments that provide for one or more alternative payment schedules applicable upon the occurrence of contingencies.  If the timing and amounts of the payments that comprise each payment schedule are known as of the issue date, and based on all the facts and circumstances as of the issue date, a single payment schedule for a debt instrument, including the stated payment schedule, is significantly more likely than not to occur, the amount and accrual of OID is determined based on that payment schedule.  In addition, under the applicable Treasury Regulations, remote and/or incidental contingencies may generally be ignored.  A contingency relating to the amount of a payment is incidental if, under all reasonably expected market conditions, the potential amount of the payment is insignificant relative to the total expected amount of the remaining payments on the debt instrument.  A contingency relating to the timing of a payment is incidental if, under all reasonably expected market conditions, the potential difference in the timing of the payment is insignificant.  The determination of whether a single payment schedule is significantly more likely than not to occur, or whether a contingency is remote or incidental, is made for each Note.

Each Note provides for one or more alternative payment schedules because Prosper Funding is obligated to make payments on a Note only to the extent that it receives payments on the corresponding loan, less the service charge and less any charges it incurs in connection with collection on the corresponding loan.    The payment schedule for each Note provides for payments of principal and interest on the Note in accordance with the payment schedule for the corresponding loan.  In addition to scheduled payments, Prosper Funding will prepay a Note to the extent that a borrower prepays the loan corresponding to the Note, and Prosper Funding will pay late fees collected on a corresponding borrower loan to the holders of the corresponding Note.  Notwithstanding such contingencies, Prosper Funding intends to use the payment schedule of a Note to determine the amount and accrual of OID on the Note because it believes that a Note is significantly more likely than not to be paid in accordance with such payment schedule and/or the likelihood of nonpayment, prepayment or late payment on the loan corresponding to such Note will be remote or incidental.  If in the future, based on Prosper Funding’s experience or for any other reason, Prosper Funding determines that the previous sentence does not apply to a Note, Prosper Funding anticipates that it will be required to determine the amount and accrual of OID for such Note pursuant to the rules applicable to contingent payment debt instruments, which are described below, and Prosper Funding shall so notify you.

OID on a Note will equal the excess of the Note’s “stated redemption price at maturity” over its “issue price.” The stated redemption price at maturity of a Note includes all payments of principal and stated interest on the Note under the payment schedule of the Note.  The issue price of a Note will generally equal the principal amount of a Note.

The amount of OID includible in income for a taxable year is the sum of the “daily portions” of OID with respect to the Note for each day during the taxable year in which the holder held the Note.  The daily portion of OID is determined by allocating to each day of any accrual period within a taxable year a pro rata portion of an amount equal to the product of such Note’s adjusted issue price at the beginning of the accrual period and its yield to maturity (properly adjusted for the length of the period).  Prosper Funding intends to use 30-day accrual periods.  The adjusted issue price of a Note at the beginning of any accrual period should be its issue price, increased by the aggregate amount of OID previously accrued with respect to the Note, and decreased by any payments of principal and interest previously made on the Note.  A Note’s yield to maturity should be the discount rate that, when used to compute the present value of all payments of principal and interest to be made on the Note under the payment schedule of the Note, produces an amount equal to the issue price of such Note.

If a Note is paid in accordance with its payment schedule, the amount of OID includible in income is anticipated to be based on the stated interest rate of the Note.  As a result, you will generally be required to include an amount of OID in income that is equal to the amount of stated interest paid on the Note.

Cash payments of interest and principal under the payment schedule on the Notes will not be separately included in income, but rather will be treated first as payments of previously accrued but unpaid OID and then as payments of principal.

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Sale, Retirement or Other Taxable Disposition of Notes

Upon the sale, retirement or other taxable disposition of a Note, you generally will recognize gain or loss equal to the difference, if any, between the amount realized upon the sale, retirement or other taxable disposition and your adjusted tax basis in the Note.  In general, your adjusted tax basis in the Note will equal your cost for the Note, increased by any OID and market discount previously included in gross income by you, as discussed below, and reduced by any payments previously received by you in respect of the Note.

Except as discussed below with respect to a Note subject to rules governing market discount, contingent payment debt instruments, or the special rules applicable to short-term obligations, your gain or loss on the taxable disposition of the Note generally will be long-term capital gain or loss if the Note has been held for more than one year and short-term otherwise.  The deductibility of capital losses is subject to limitations.

Prepayments

If Prosper Funding prepays a note in full, the Note will be treated as retired and, as described above, you will generally have gain or loss equal to the difference, if any, between the amount realized upon the retirement and your adjusted tax basis in the Note.  If Prosper Funding prepays a Note in part, a portion of the Note will be treated as retired.  Generally, for purposes of determining (i) your gain or loss attributable to the portion of the Note retired and (ii) your OID accruals on the portion of the Note remaining outstanding, the adjusted issue price, your adjusted tax basis, and the accrued but unpaid OID of the Note, determined immediately before the prepayment, will be allocated between the two portions of the Note based on the portion of the Note that is treated as retired.  The yield to maturity of a Note is not affected by a partial prepayment.

Market Discount

If you purchase a Note on the Note Trader platform for an amount that is less than the adjusted issue price of the Note at the time of purchase, the amount of the difference will be treated as “market discount” for U.S. federal income tax purposes, unless that difference is less than a specified   de minimis   amount.  The amount of any market discount will generally be treated as   de minimis   and disregarded if it is less than ¼ of 1 percent of the revised issue price (calculated as the sum of the issue price of the Note and the aggregate amount of OID previously includible in the gross income of any holder without regard to any acquisition premium), multiplied by the number of complete years to maturity. If you hold a Note that has   de minimis  market discount, the rules described below do not apply to you.

Under the market discount rules, you generally will be required to treat any principal payments received in respect of the Note, and any gain derived from the sale, retirement or other disposition of the Note, as ordinary income to the extent of the market discount that has accrued on the Note but that has not previously been included in gross income by you.  Such market discount will accrue on the Note on a ratable basis over the remaining term of the Note unless you elect to accrue market discount on a constant yield basis.  In addition, you may be required to defer until the maturity of the Note, or its earlier disposition in a taxable transaction, the deduction of all or a portion of any interest expense attributable to (i) any indebtedness incurred to purchase or carry such Note or (ii) any indebtedness continued to purchase or carry such Note.  If you dispose of a Note in a nontaxable transaction (other than certain specified nonrecognition transactions), you will be required to include any accrued market discount as ordinary income as if you had sold the Note at its then fair market value.

You may elect to currently include market discount in gross income as it accrues, under either a ratable or constant yield method, in which case the rules described in the prior paragraph regarding characterization of payments and gain as ordinary income and the deferral of interest deductions will not apply.  If you make an election to include market discount in income currently, your adjusted basis in a Note will be increased by any market discount that you include in income.  An election to currently include market discount in gross income, once made, applies to all market discount obligations acquired by you on or after the first taxable year to which the election applies and may not be revoked without the consent of the IRS.  You should consult your own tax advisor before making this election.

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Acquisition Premium

If you purchase a Note on the Note Trader platform for an amount greater than the Note’s adjusted issue price but less than the sum of all amounts payable on the Note after the purchase date, the Note will be treated as acquired at an acquisition premium.  For a Note acquired with an acquisition premium, the amount of OID that you must include in gross income with respect to the Note for any taxable year will be reduced by the portion of the acquisition premium properly allocable to such taxable year.

If you purchase a Note on the Note Trader platform for an amount in excess of the sum of all amounts payable on the Note after the purchase date, you will not be required to include OID in income with respect to the Note.

Late Payments

As discussed above, late fees collected on borrower loans corresponding to the Notes will generally be paid to you.  Prosper Funding anticipates that any late fees paid will be insignificant relative to the total expected amount of the remaining payments on the Note.  In such case, any late fees paid to you should be taxable as ordinary income at the time such fees are paid or accrued in accordance with your regular method of accounting for U.S. federal income tax purposes.

Nonpayment of Loans Corresponding to Note — Automatic Extension

In the event that Prosper Funding does not make scheduled payments on a Note as a result of nonpayment by a borrower on the loan corresponding to the Note, you must continue to accrue and include OID on a Note in taxable income until the initial maturity date or, in the case of an automatic extension, the final maturity date, except as described below.  Solely for purposes of the OID rules, the Note may be treated as retired and reissued on the scheduled payment date for an amount equal to the Note’s adjusted issue price on that date.  As a result of such reissuance, the amount and accrual of OID on the Note may change.  At the time of the deemed reissuance, due to nonpayment by the borrower, Prosper Funding may not be able to conclude that it is significantly more likely than not that the Note will be paid in accordance with one payment schedule and/or that the likelihood of future nonpayment, prepayment, or late payment by the borrower on the loan corresponding to such Note will be remote or incidental.  Accordingly, the Note may become subject to the contingent payment debt instrument rules (which are discussed in more detail below) even if not subject to these rules at the time of original issue.   In addition, in the event that a Note’s maturity date is automatically extended because amounts remain due and payable on the initial maturity date by the borrower on the loan corresponding to the Note, the Note likely will be treated as reissued and become subject to the contingent payment debt instrument rules.  If Prosper Funding determines that a Note is subject to the contingent payment debt instrument rules as a result of such a reissuance, it will notify you and provide the projected payment schedule and comparable yield.

If collection on a Note becomes doubtful, you may be able to stop accruing OID on the Note.  Under current IRS guidance, it is not clear whether you may stop accruing OID if scheduled payments on a Note are not made.  You should consult your own tax advisor regarding the accrual and inclusion of OID in income when collection on a Note becomes doubtful.

Losses as a Result of Worthlessness

In the event that a Note becomes wholly worthless, if you are an individual, and you did not acquire the Note as part of your trade or business, you should generally be entitled to deduct your loss on the Note as a short-term capital loss in the taxable year the Note becomes wholly worthless.  The portion of your loss attributable to accrued but unpaid OID may be deductible as an ordinary loss, although such treatment is not entirely free from doubt.  Under Section 166 of the Code, if you are a corporation, or if you are an individual and you acquired your Notes as part of a trade or business, you should generally be entitled to deduct any loss sustained during the taxable year on account of a Note becoming wholly or partially worthless as an ordinary loss.  You should consult your own tax advisor regarding the character and timing of losses attributable to Notes that become worthless in whole or in part.

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Potential Characterization as Contingent Payment Debt Instruments

To the extent Prosper Funding determines that a Note is not subject to the contingent payment debt instrument rules, its position is not binding on the IRS or a court of competent jurisdiction and it cannot predict what the IRS or a court would ultimately decide with respect to the proper U.S. federal income tax treatment of the Note. Accordingly, there exists a risk that the IRS or a court could determine that the Notes are “contingent payment debt instruments” because payments on the Notes are linked to performance on the corresponding loan.

To the extent a Note is characterized as a contingent payment debt instrument, or in the future, Prosper Funding concludes that a Note is subject to the contingent payment debt instrument rules, the Note would be subject to special rules applicable to contingent payment debt instruments.  If these rules were to apply, you would generally be required to accrue interest income under the noncontingent bond method.  Under this method, interest would be taken into account whether or not the amount of any payment is fixed or determinable in the taxable year. The amount of interest that would be taken into account would generally be determined by constructing a hypothetical noncontingent bond, which is based on a “comparable yield” (generally, a hypothetical yield to be applied to determine interest accruals with respect to the Note, and which can be no less than the applicable federal rate) and a “projected payment schedule” (generally, a series of projected payments, the amount and timing of which would produce a yield to maturity on that Note equal to the comparable yield).  Based on the comparable yield and the projected payment schedule, you will generally be required to accrue as OID the sum of the daily portions of interest for each day in the taxable year that you held the Note, adjusted to reflect the difference, if any, between the actual and projected amount of any contingent payments on the Note.  The daily portions of interest are determined by allocating to each day in an accrual period the ratable portion of interest that accrues in such accrual period.  The amount of interest you may accrue under this method could be higher or lower than the stated interest rate on the Note.  In addition, any gain recognized on the sale, exchange or retirement of your Note will generally be treated as ordinary interest income, and any loss will be treated as ordinary loss to the extent of prior OID inclusions, and then as capital loss thereafter.

Short-Term Notes

The following discussion applies to Notes that have a maturity of one year or less from the date of issue (“Short-Term Notes”).  There are special rules that address the U.S. federal income taxation of Short-Term Notes that you should be aware of.  These rules are not entirely clear in all situations.  Accordingly, you are strongly advised to consult your own tax advisor with regard to the U.S. federal income tax consequences of the purchase, ownership and disposition of Short-Term Notes.

In general, the Treasury Regulations provide that, in the case of a debt instrument with a maturity date of one year or less, no payments of interest are considered qualified stated interest.  This means that a Short-Term Note is treated as having OID equal to the excess of the total payments on the obligation over its issue price.  In general, if you are a cash method taxpayer, you should not be required to recognize interest income until actual or constructive receipt of payment, unless you elect to accrue OID in income on a current basis under either a straight-line or a constant yield method.  If you do not elect to currently include accrued OID in income, you will not be allowed to deduct any of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry the Note (in an amount not exceeding the deferred income), and instead you will be required to defer deductions for such interest until the deferred income is realized upon the maturity of the Note or its earlier disposition in a taxable transaction.  Notwithstanding the foregoing, if you elect to include accrued OID in income on a current basis, the limitation on the deductibility of interest will not apply.  Upon disposition of a Short-Term Note, you will be required to characterize some or all of the gain realized on a sale, exchange or retirement of the Note as ordinary income.  The amount characterized as ordinary income upon such disposition will generally equal an amount of OID that would have accrued under a straight-line basis or, if you so elect, an amount of OID that would have accrued under a constant yield method.  If you are an accrual method taxpayer, you will generally be required to accrue OID in income on a current basis on either a straight-line basis or, at your election, under the constant yield method based on daily compounding.  It should also be noted that the market discount rules (discussed above) generally do not apply to short-term obligations.  In addition, while there are special rules that address the U.S. federal income taxation of notes that have a maturity date of more than one year and that provide for one or more contingent payments, those rules generally do not apply to short-term obligations.  Accordingly, the U.S. federal income taxation of short-term obligations that provide for contingent payments is not entirely clear.  You should consult your own tax advisor regarding the U.S. federal income tax consequences if Short-Term Notes are considered short-term obligations that provide for contingent payments.

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Backup Withholding and Reporting

Prosper Funding will be required to report information to the IRS on certain payments on a Note (including interest and discount) and on proceeds of the sale of a Note if you are not an exempt recipient (such as a corporation). In addition, backup withholding (currently at a 28% rate) may apply to payments made to you if (a) you do not furnish or you have failed to provide your correct taxpayer identification number, (b) Prosper Funding has been instructed by the IRS to backup withhold because of underreporting (generally meaning that the IRS has determined and notified you that you have failed to report any reportable dividend and interest payments required to be shown on a tax return for a taxable year), or (c) in certain circumstances, you have failed to comply with applicable certification requirements or otherwise establish an exemption from backup withholding.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished to the IRS on a timely basis. You should consult your tax advisor regarding the application of information reporting and backup withholding rules in your particular situation, the availability of an exemption, and the procedure for obtaining such an exemption, if applicable.

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INFORMATION ABOUT PROSPER FUNDING LLC

Overview

Prosper Funding operates a peer-to-peer online credit platform, which this prospectus refers to as the “platform,” that enables its borrower members to borrow money and its lender members to purchase Borrower Payment Dependent Notes, or Notes, issued by Prosper Funding, the proceeds of which facilitate the funding of the loans made to borrower members.  Prosper Funding is a wholly-owned subsidiary of PMI.

PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  PMI will transfer the platform to Prosper Funding, giving Prosper Funding the right to operate the peer-to-peer online credit platform to originate and service borrower loans and Notes.  PMI owns and is not transferring to Prosper Funding ownership of the computer hardware that PMI currently uses to develop, update, maintain and operate the platform (including the website), produce and record or register loans and Notes, process and record the origination of loans, the acquisition thereof by Prosper Funding, funds transfers in relation to loans and collections on loans, the issuance and transfer of Notes, funds transfers in relation to purchases of and payments on Notes, and which PMI uses to store, backup and manage the information and data used and generated by the platform (such as in relation to the preparation of reports).  PMI is a party to agreements with third parties relating to (i) the hosting and maintenance of servers and other computer and communications equipment used by PMI in relation to all of the foregoing aspects of the development, updating of, maintenance and operation of the platform and the provision of related customer support services, (ii) the backup, offsite storage and protection of all information and data produced and used by PMI in relation to all of the foregoing aspects of the development, updating of, maintenance and operation of the platform and the performance by it of all related services, and (iii) maintenance of the integrity, functionality and security of the platform from cyber-attacks and similar threats, which agreements PMI is not assigning to Prosper Funding such that Prosper Funding will not be a party to or third party beneficiary of such agreements.

Prosper Funding also expects to enter into the Administration Agreement, pursuant to which PMI has agreed to provide certain administrative services relating to the platform.  The Administration Agreement between Prosper Funding and PMI contains a license granted by Prosper Funding to PMI that entitles PMI to use the platform for and in relation to: (i) PMI’s performance of its duties and obligations under the Administration Agreement relating to corporate administration, loan platform services, loan and note servicing and marketing, and (ii) PMI’s performance of its duties and obligations to WebBank in relation to loan origination and funding.  The license is terminable in whole or in part in relation to failure by PMI to pay the licensing fee or the termination of PMI as the provider of some or all of the aforementioned services.

Prosper Funding has been organized and will be operated in a manner that is intended (i) to minimize the likelihood that it will become subject to a voluntary or involuntary bankruptcy or similar proceeding, and (ii) to minimize the likelihood that it would be substantively consolidated with PMI in the event of PMI’s bankruptcy and thus have its assets subjected to claims of PMI’s creditors.  Prosper Funding and PMI believe they have achieved this by imposing through Prosper Funding’s organizational documents and covenants in the indenture certain restrictions on Prosper Funding’s activities and certain formalities designed to reinforce Prosper Funding’s status as a distinct entity from PMI.  In addition, in the Administration Agreement PMI has agreed, in its dealings with Prosper Funding and with third parties, to observe the “separateness covenants” described below as they relate to Prosper Funding.

Restrictions that Prosper Funding and PMI believe minimize the likelihood that Prosper Funding will become subject to a voluntary or involuntary bankruptcy or similar proceeding include the following:

· Prosper Funding’s permissible activities are limited to operating the platform, including entering into the related registration agreements with its members; purchasing, owning, financing and pledging the borrower loans; issuing and selling the Notes; entering into the Administration Agreement (or, if applicable, one or more similar agreements with another entity or entities providing similar services); entering into agreements with third parties (such as WebBank, FOLIOfn Investments, Inc. and a back-up servicer) regarding the purchase and servicing of the borrower loans and the Notes and transfers of Notes between members, its own management and operations, and the issuing, paying, sale and administration of the Notes and other obligations; making requisite filings with the SEC and other authorities, and issuing and furnishing prospectuses and other offering materials; and certain related activities.  So long as any Note is outstanding, Prosper Funding is not permitted to engage in any other business.

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· So long as any Note is outstanding, Prosper Funding is prohibited from incurring any debt; guarantying the obligations of any other person, including PMI and Prosper Funding’s other affiliates; acquiring any assets except in connection with the permitted activities described above; engaging, directly or indirectly, in any business other than the permitted activities described above; engaging in any dissolution, liquidation, consolidation, merger, asset sale or transfer of ownership interests; or forming, acquiring or holding any subsidiary.

· So long as any Note is outstanding, Prosper Funding is required to have at all times two independent directors whose consent is required for it to take certain extraordinary actions, including filing for bankruptcy.

Because Prosper Funding’s activities are essentially limited to operating the platform, dealing with borrower loans and issuing Notes, and Prosper Funding is prohibited from incurring any debt for borrowed money other than the Notes, or liabilities to third parties other than those arising under the agreements it is permitted to enter into, as described above, it should not be subject to the claims of any creditors unrelated to its permissible activities.  With the exception of its limited indemnification and repurchase obligations, the Note holders do not have recourse to Prosper Funding for payment of their Notes and must rely on the corresponding borrower loans for payment.  Prosper Funding expects to be adequately capitalized, and that its capitalization, together with the fee income that it earns, will be sufficient to meet all of its monetary obligations to affiliates and the third parties with whom it contracts in order to operate the platform and conduct its permitted business activities.  Accordingly, Prosper Funding does not expect to have creditors holding unsatisfied claims against it who could seek to place it into bankruptcy involuntarily.  For the same reason, Prosper Funding believes it is unlikely that it would become insolvent.  Prosper Funding does not believe that its independent directors would approve a voluntary bankruptcy filing, even if such a filing might be advantageous to PMI or Prosper Funding’s other affiliates, if Prosper Funding is not insolvent in its own right, unless another basis for such a filing exists at the time consistent with their fiduciary duties.

Restrictions that Prosper Funding and PMI believe minimize the likelihood that Prosper Funding would be substantively consolidated with PMI in the event of PMI’s bankruptcy and thus have its assets subjected to claims of PMI’s creditors include the following (“separateness covenants”):

· Prosper Funding is required to maintain its own books and records and bank accounts separate from those of PMI or any other person;

· Prosper Funding is required at all times to hold itself out to the public and all other persons as a legal entity separate from PMI and any other person;

· Prosper Funding is required to have a board of directors separate from that of PMI and any other person;

· Prosper Funding is required to file its own tax returns, if any, as may be required under applicable law, to the extent it is (1) not part of a consolidated group filing a consolidated return or returns or (2) not treated as a division for tax purposes of another taxpayer, and it must pay any taxes so required to be paid under applicable law;

· Except as contemplated by the agreements it enters into in connection with its permissible activities, Prosper Funding may not commingle its assets with assets of PMI or any other person and maintain its funds and other assets such that they shall be separately identified and segregated from those of PMI and any other person;

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· Prosper Funding is required to conduct its business in its own name so as not to mislead third parties as to the identity of the entity with which such third parties are dealing and to strictly comply with all organizational formalities to maintain its separate existence;

· Prosper Funding is required to maintain separate financial statements and ensure that such financial statements indicate (in the notes thereto or otherwise) the separate existence of Prosper Funding and PMI and their respective assets and liabilities and, to the extent the assets and liabilities of Prosper Funding are represented on the financial statements of PMI, ensure that such financial statements indicate (in the notes thereto or otherwise) the separate existence of Prosper Funding and PMI and their separate assets and liabilities;

· Prosper Funding is required to pay its operating expenses and its own liabilities only out of its own funds and not from the funds of any other person;

· Prosper Funding is required to maintain an arm’s length relationship with PMI and its other affiliates and to ensure that all transactions between Prosper Funding and its affiliates are on terms and conditions that are not materially more favorable to the affiliate than the terms and conditions that would be expected to have been obtained under similar circumstances from a non-affiliate;

· Prosper Funding is required to pay the salaries of its own employees, if any;

· Prosper Funding is prohibited from holding out its credit or assets as being available to satisfy the obligations of others;

· Prosper Funding is required to allocate fairly and reasonably any overhead for shared office space and pay for its share of such overhead;

· Prosper Funding is required, so as not to mislead third parties as to the identity of the entity with which such third parties are dealing, to maintain and utilize separate stationery, invoices and checks;

· Except as contemplated by the agreements it enters into in connection with its permissible activities, Prosper Funding is prohibited from pledging its assets for the benefit of any other person;

· Prosper Funding is required to correct any known misunderstanding regarding its separate identity;

· rosper Funding is required to maintain adequate capital in light of its contemplated business purpose, transactions and liabilities;

· Prosper Funding is required to ensure that it does not enter into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of any other person;

· Prosper Funding is required to ensure that it will not conceal from creditors any of its assets or participate in concealing the assets of any other person or entity;

· Prosper Funding’s board of directors is required to meet at least annually or act pursuant to written consent and keep minutes of such meetings and actions, and Prosper Funding is required to observe all other Delaware limited liability company formalities;

· Prosper Funding is prohibited from acquiring any securities of PMI (other than the purchase or other acquisition of certain borrower payment dependent notes issued by PMI and the related borrower loans); and

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· Prosper Funding’s directors, officers, agents and other representatives are required to act at all times with respect to Prosper Funding consistently and in furtherance of the foregoing and in Prosper Funding’s best interests.

In addition, as described below under “Information About Prosper Marketplace, Inc.—Relationship with Prosper Funding,” PMI has adopted resolutions limiting its own activities and interactions with Prosper Funding in order further to minimize the likelihood that Prosper Funding would be substantively consolidated with PMI in the event of PMI’s bankruptcy.

Substantive consolidation is a judicially developed equitable doctrine that permits a bankruptcy court, in appropriate circumstances, to disregard the legal separateness of a debtor and a related entity, which may or may not itself be a debtor in bankruptcy, and merge their respective assets and liabilities for bankruptcy purposes.  Substantive consolidation typically results in the pooling of all assets and liabilities of the entities to be consolidated, the satisfaction of liabilities from the resulting common fund of assets, and the elimination of all duplicate and inter-entity claims. While the formulation for the standard to apply in determining whether two or more entities should be substantively consolidated in bankruptcy has varied somewhat as among the different courts that have considered such cases, the three most commonly cited tests are as follows:

· The proponent seeking substantive consolidation must establish either (1) the entities pre-petition disregarded their separateness so significantly that their creditors relied on the breakdown of entity borders and treated them as one legal entity, or (2) post-petition that the assets and liabilities of the entities are so entangled that separating them is prohibitive and hurts all creditors.

· The court must determine (1) whether all creditors dealt with the entities as a single economic unit and did not rely on their separate identity in extending credit or (2) whether the affairs of the two entities are so entangled that consolidation will benefit all creditors.

· The proponent of consolidation must make a prima facie case demonstrating that (1) there is substantial identity between the entities to be consolidated and (2) consolidation is necessary to avoid some harm or to realize some benefit.  Once the proponent for consolidation has made this showing, the burden shifts to an objecting creditor to show that (1) it has relied on the separate credit of one of the entities to be consolidated and (2) it will be prejudiced by substantive consolidation.

Adherence to the separateness covenants by both Prosper Funding and PMI should negate any argument that the respective assets of Prosper Funding and PMI are impermissibly entangled or impossible to separate.  It should be neither difficult nor costly to ascertain the respective assets and liabilities of Prosper Funding and PMI.

Similarly, creditors of PMI should not be able to demonstrate that they dealt with PMI and Prosper Funding as a single economic unit, and creditors of Prosper Funding are not relying on PMI for either the payment of Prosper Funding’s Notes or the performance of Prosper Funding’s obligations under the agreements Prosper Funding enters into in connection with its permissible activities (other than PMI’s performance, for Prosper Funding’s benefit, of PMI’s obligations under the Administration Agreement, and PMI’s own indemnification obligations referred to below).  Once Prosper Funding commences its offering of the Notes, (1) the website through which PMI previously operated the platform will have been modified to clearly indicate that borrower members and lender members are dealing with Prosper Funding and not PMI, (2) all new borrower registration agreements and lender registration agreements will be entered into with Prosper Funding and not PMI and will clearly indicate that Prosper Funding is the party with whom borrower and lender members are transacting, and (3) all agreements with third parties (such as WebBank, FOLIOfn Investments, Inc. and a back-up servicer) will have been modified such that the rights and obligations of PMI under such agreements, formerly applicable to the period when PMI operated the platform, will have been assigned to and assumed by Prosper Funding (other than certain indemnification obligations in favor of third parties that will be retained by PMI, and certain other miscellaneous provisions which should not expose PMI to financial liability).

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Accordingly, all of Prosper Funding’s creditors should clearly understand that they are looking to Prosper Funding for the payment and performance of Prosper Funding’s obligations to them, and that PMI is not liable to them for Prosper Funding’s obligations.  Prosper Funding and PMI believe the purchasers of Notes will clearly be relying on Prosper Funding being a legal entity separate and distinct from PMI in making their investment decisions and would be materially prejudiced if Prosper Funding were substantively consolidated with PMI.  Once Prosper Funding commences its offering of the Notes, PMI will no longer be obligated to third parties under the agreements related to operating the platform except as noted above.  There should not be creditors of PMI who would be successful in arguing that they relied on Prosper Funding’s assets and creditworthiness in extending credit to PMI.  Finally, all relevant legal formalities required to support Prosper Funding’s legal existence as a Delaware limited liability company separate and distinct from PMI will be strictly observed.  Certain hardware and agreements relevant to the development, maintenance and use of the platform, including in relation to the origination, funding and servicing of borrower loans, and the issuance, funding and payment of the Notes, will not be transferred or assigned to Prosper Funding by PMI as described above under “Information About Prosper Funding LLC—Overview.”  Although such retention of hardware and agreements should not bear on a bankruptcy court’s analysis of the legal separateness of PMI and Prosper Funding (or their respective assets and liabilities), the cessation of or substantial reduction of the day-to-day operations of PMI (because of or during its bankruptcy or otherwise) would materially impair and delay the ability of Prosper Funding or a back-up servicer to retrieve data and information in the possession of PMI and to operate the platform or elements thereof relevant to loan and Note servicing.

Potential Business Strengths

Prosper Funding believes that the following business strengths differentiate Prosper Funding from competitors and are key to its success:

Scalable Operating Infrastructure: The platform allows Prosper Funding to economically acquire and service borrower loans and Notes, and allows WebBank to efficiently originate and fund such loans.  The platform is both flexible and highly scalable;

Proprietary Risk Management Capabilities:  PMI is the only company that has developed a proprietary risk model based on P2P specific performance data, which allows PMI to accurately gauge the riskiness of applicants and will allow lender members to earn attractive risk adjusted returns;

Management Team:  Prosper Funding has a management team with experience in a broad set of areas that are essential to the operation of a P2P business.  These areas include but are not limited to risk management, fraud detection, loan servicing operations, technology development, data management, financial controls, securities regulation, compliance, customer management and website development;

Open access:  Prosper Funding allows individuals with a wide range of credit characteristics to apply for loans; and

Transparency and data availability:  By making all transactions on the platform visible and available electronically for analysis, Prosper Funding allows its members to better understand its marketplace and make better decisions about their activity.

The platform provides a number of benefits to borrower members.  Prosper Funding and PMI believe the key features of the platform are the following:

· better interest rates than those available from traditional banks;

· 24-hour online availability to initiate a loan listing;

· convenient, electronic payment processing; and

· amortizing, fixed rate loans, which represent a more responsible way for consumers to borrow than revolving credit facilities.

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Corporate History

Prosper Funding was formed in the State of Delaware in February 2012. Its principal executive offices are located at 111 Sutter Street, 22nd Floor, San Francisco, California 94104.  Its telephone number at that location is (415) 593-5479.  Its website address is   www.prosper.com.    The information contained on its website is not incorporated by reference into this prospectus.

Marketing

PMI’s marketing efforts are designed to attract individuals and institutions to the platform, to enroll them as members and to have them understand and utilize the services for borrowing or investing in Notes on the platform.  Prosper Funding and PMI believe there are significant opportunities to increase the number of members who use the platform through additional marketing initiatives.  For example, such marketing initiatives may, but will not necessarily, include e-mail campaigns, presentations and paid search advertisements.  PMI employs a combination of paid and unpaid sources to market the platform.  PMI also invests in public relations to build its brand and visibility.  PMI is constantly seeking new methods to reach more potential members.

PMI attracts members to the platform in a variety of ways, including advertising, search engine results and word-of-mouth referrals.  In addition, PMI and the platform have been featured in a variety of media outlets, including television and print media.

PMI continuously measures website visitor-to-member conversion.  It tests graphics and layout alternatives in order to improve website conversion.  It also seeks to customize the website to its members’ needs whenever possible.  PMI carefully analyzes visitor website usage to understand and overcome barriers to conversion.

From time to time, Prosper Funding may conduct special promotions to increase the participation of existing members on the platform or to attract new members.  These promotions could include offering special incentives for registering as a lender or a borrower, posting a loan listing, moving money onto the platform, placing bids on loan listings or successfully bidding on a loan listing.  The incentives could include cash bonuses or rebates or fee discounts or waivers.  These promotions may be offered to all customers for all products or could be restricted to particular products or types of customers.  For example, Prosper Funding could conduct a special promotion to attract customers who come to its website through a marketing partnership it has with another company.

For the nine months ended September 30, 2012 and 2011, PMI spent approximately $4.0 million and $1.2 million, respectively, on marketing.  Prosper Funding expects to spend similar amounts in the future.  Each marketing effort is measured, analyzed and optimized to improve scale and efficiency in each channel.  Through optimization of targeting efforts we will shift marketing costs to efficient channels to balance the mix of growth and efficiency in our marketing activities in subsequent quarters.

Technology

The system hardware for the platform, which is owned by PMI, is located in a hosting facility in San Francisco, California, owned and operated by Rincon 365 Borrower, LLC under an agreement that expires in August 2014.  Generally, unless PMI or Rincon 365 Borrower, LLC delivers a termination notice, the agreement is automatically renewable for three year terms.  The facility provides around-the-clock security personnel, video surveillance and biometric access screening and is serviced by onsite electrical generators and fire detection and suppression systems.  The facility has multiple interconnects to the Internet, and Internap Network Services Corporation is the Internet service provider for the platform.  It also maintains off-site backups at a secure, Tier 1 data center in Las Vegas, Nevada.  It backs up all customer data daily and replicates this data offsite via an encrypted connection.

PMI owns all of the hardware deployed in support of the platform.  PMI continuously monitors the performance and availability of the platform.  The infrastructure is scalable and utilizes standard techniques such as load-balancing and redundancies.

The platform utilizes proprietary accounting software to process electronic cash movements, record book entries and calculate cash balances in members’ funding accounts.  PMI processes electronic deposits and payments by originating ACH transactions.  This software puts these transactions in the correct ACH transaction data formats and makes book entries between individual members’ accounts using a Write-Once-Read-Many (WORM) ledger system.

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Prosper Funding and PMI have entered into back-up servicing agreements with CSC Logic, Inc., a loan servicing company that is willing and able to transition servicing responsibilities in the event that Prosper Funding and/or PMI are no longer able to service the borrower loans.  CSC Logic, Inc. is a financial services company that has entered into numerous successor loan servicing agreements and has operated in the back-up servicing market for more than twenty years.  It is unlikely that CSC Logic, Inc. would be able to perform functions other than servicing the existing borrower loans and Notes.  See “Risk Factors—Arrangements for back-up servicing are limited.  If PMI fails to maintain operations, you may experience a delay and increased cost in respect of your expected principal and interest payments on your Notes, and Prosper Funding may be unable to collect and process repayments from borrowers.  ”

Scalability

The platform is designed and built as a highly scalable, multi-tier, redundant system.  It incorporates technologies designed to prevent any single point of failure within the data center from taking the entire system offline.  This is achieved by utilizing load-balancing technologies at the front end and business layer tiers and clustering technologies in the back-end tiers to allow scaling both horizontally and vertically depending on platform utilization.  In addition, the core network load-balancing, routing and switching infrastructure is built with fully redundant hardware and sub-second failover between those devices.

Data integrity and security

Prosper Funding and PMI transmit all sensitive data to and from customers and service providers using a secure transport proocol.  Communication of sensitive data via the web site to customers is secured utilizing SSL 128-bit enabled encryption certificates provided by VeriSign and Thawte, Inc.  Communication of sensitive data with service providers is secured utilizing authenticated VPN, SSL 128-bit encryption and SSH protocols depending on the service providers’ requirements.  Storage of sensitive data is encrypted utilizing AES 256-bit and 3DES 168-bit cryptographic ciphers, depending upon the service providers’ requirements and internal storage policies.  Access to the data by Prosper Funding or PMI personnel is restricted based upon a least-privilege principle such that employees have access only to the information and systems needed to perform their function.  In the event of disaster, data is repeatedly stored securely at an offsite data center.

Prosper Funding protects the security of the platform using a multilayered defense strategy incorporating several different security technologies and points of monitoring.  At the perimeter of the network, multi-function security technologies implement firewall, intrusion prevention, anti-virus and anti-spam threat management techniques.  Internally, the network and hosts are segmented by function with another layer of firewalls and traffic inspection devices.  At the host level, the platform utilizes host based intrusion prevention, anti-virus, anti-spyware, and application control systems.  Logging and monitoring for network security devices is done in real-time with notifications to the appropriate staff upon any suspicious event or action that requires attention.  Logging and monitoring of host systems is done in real-time to a centralized database with web based reporting and additional notification to the appropriate staff for any remediation.

Fraud detection

Prosper Funding considers fraud detection to be of utmost importance to the successful operation of the platform.  It employs a combination of proprietary technologies and commercially available licensed technologies and solutions to prevent and detect fraud.  Prosper Funding employs techniques such as knowledge based authentication, or KBA, out-of-band authentication and notification, behavioral analytics and digital fingerprinting to prevent identity fraud.  Prosper Funding uses services from third-party vendors for user identification, credit checks and for checking customer names against the list of Specially Designated Nationals maintained by the Office of Foreign Assets Control (OFAC).  In addition, Prosper Funding uses specialized third-party software to augment its identity fraud detection systems.  In addition, PMI has a dedicated team which conducts, on Prosper Funding’s behalf, additional investigations of cases flagged for high fraud risk.  See “About the Platform—Borrower Identity and Financial Information Verification” for more information.  Prosper Funding also enables its lender members to report suspicious activity, which Prosper Funding may then evaluate further.

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Engineering

PMI has made substantial investment in software and website development and Prosper Funding and PMI expect to continue to make significant investments in software and website development.  In addition to developing new products and maintaining an active online deployment, PMI’s technology team also performs technical competitive analysis as well as systematic product usability testing.  As of September 30 30, 2012, PMI’s technology group consisted of nineteen employees.  Those resources will be made available to Prosper Funding pursuant to the Administration Agreement.

Competition

The market for peer-to-peer lending is competitive and rapidly evolving.  Prosper Funding believes the following are the principal competitive factors in the peer-to-peer lending market:

· fee structure;

· website attractiveness;

· member experience, including borrower loan funding rates and lender returns;

· acceptance as a social network;

· branding; and

· ase of use.

Prosper Funding’s primary competitors are major credit card issuers, such as JPMorgan Chase Bank, Bank of America and Citibank, other commercial banks, savings banks and consumer finance companies.  Prosper Funding also faces competition from other peer-to-peer platforms such as LendingClub.

Prosper Funding may also face future competition from new companies entering the market, which may include large, established companies, such as eBay Inc., Google Inc. or Yahoo! Inc. These companies may have significantly greater financial, technical, marketing and other resources and may be able to devote greater resources to the development, promotion, sale and support of their consumer platforms.  These potential competitors may be in a stronger position to respond quickly to new technologies and may be able to undertake more extensive marketing campaigns.  These potential competitors may have more extensive potential borrower bases.  In addition, these potential competitors may have longer operating histories and greater name recognition.  Moreover, if one or more of these competitors were to merge or partner with another competitor or a new market entrant, the change in competitive landscape could adversely affect Prosper Funding’s ability to compete effectively.

Intellectual Property

Prosper Funding’s intellectual property rights are important to its business.  Prosper Funding relies on a combination of copyright, trade secret, trademark, and other rights, as well as confidentiality procedures and contractual provisions to protect its proprietary technology, processes and other intellectual property.

Although the protection afforded by copyright, trade secret, trademark, written agreements and common law may provide some advantages, Prosper Funding believes that the following factors help it to maintain a competitive advantage:

· the technological skills of the software and website development personnel who developed the platform;

· frequent enhancements to the platform and

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· high levels of member satisfaction.

Competitors may develop products that are similar to Prosper Funding’s technology.  For example, Prosper Funding’s legal agreements may be copied directly from its website by others.  As Loan and Note Servicer under the Administration Agreement, PMI will have access to confidential information regarding Prosper Funding’s intellectual property.  PMI enters into confidentiality and other written agreements with its employees, consultants and service providers, and through these and other written agreements, attempts to control access to and distribution of the software, documentation and other proprietary technology and information.  Despite these efforts to protect Prosper Funding’s proprietary rights, third parties may, in an authorized or unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute Prosper Funding’s intellectual property rights or technology or otherwise develop a product with the same functionality.  Policing all unauthorized use of intellectual property rights is nearly impossible.  Therefore, Prosper Funding cannot be certain that the steps it has taken or will take in the future will prevent misappropriations of its technology or intellectual property rights.

Prosper Funding and PMI use software developed by PMI.  Neither Prosper Funding nor PMI use software licensed by third parties for processing electronic cash movements, recording book entries or calculating cash balances in lender members’ accounts.

Employees

Prosper Funding does not have any employees.  As of September 30, 2012, PMI employed 68 full-time employees.  Of these employees:

· 19 were in engineering;

· 19 were in operations;

· 17 were in sales and marketing; and

· 13 were in general and administrative.

None of PMI’s employees are represented by labor unions.  PMI has not experienced any work stoppages and Prosper Funding and PMI believe that PMI’s relations with its employees are good.

PMI expects to improve its operating efficiency going forward, but it also intends to increase its employee headcount as the platform’s lender and borrower bases expand.

Facilities

Prosper Funding does not lease or own any real property or equipment.  Its headquarters is located in San Francisco, California, where PMI leases workstations and conference rooms under a lease that will expire on July 31, 2013.  Prosper Funding believes that its existing facilities are adequate to meet its current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.

Legal Proceedings

Prosper Funding is not currently subject to any material legal proceedings.  Prosper Funding is not aware of any litigation matters which have had, or are expected to have, a material adverse effect on it.  PMI is the defendant in a class action lawsuit relating to its sale of loan notes prior to October 16, 2008.  For more information see  “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding’s Ability to Service the Notes—  PMI faces a contingent liability for securities law violations in respect of PMI Borrower Loans sold to its lender members from inception until October 16, 2008.  This contingent liability may impair its ability to perform its obligations under the Administration Agreement  ” on page 23.

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INFORMATION ABOUT PROSPER MARKETPLACE, INC.

See “Item 1. Business” beginning on page 1 of PMI’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011, which is incorporated by reference into this prospectus.

PMI’s Duties Under the Administration Agreement

PMI is a Delaware corporation whose principal office is located at 111 Sutter Street, 22nd Floor, San Francisco, CA 94104.   Prosper Funding expects to enter into an Administration Agreement with PMI, pursuant to which Prosper Funding has engaged PMI to provide certain corporate administration services, platform administration services and to service all borrower loans and Notes.  This prospectus refers to PMI in its separate capacities under the Administration Agreement as follows: (i) in its capacity as the party providing the corporate administration services, as the “Corporate Administrator,” (ii) in its capacity as the party providing the platform administration services, as the “Loan Platform Administrator” and (iii)  in its capacity as the party providing the servicing to all borrower loans and Notes, as the “Loan and Note Servicer.”

In its capacity as Corporate Administrator, PMI will oversee the daily business operations of Prosper Funding and provide a number of related administrative services.  Among other matters, the Corporate Administrator’s duties shall include:

· administering Prosper Funding’s day-to-day operations, including paying (solely from Prosper Funding’s funds) Prosper Funding’s fees and expenses,

· giving notices and communications in Prosper Funding’s behalf as Prosper Funding may be required to give from time to time under its various agreements,

· maintaining Prosper Funding’s general accounting records and preparing monthly, quarterly and annual financial statements as may be necessary or appropriate,

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· retaining in Prosper Funding’s behalf an accounting firm to audit Prosper Funding’s year-end financial statements,

· preparing and filing Prosper Funding’s income, franchise or other tax returns,

· causing to be paid (solely from Prosper Funding’s funds) any taxes required to be paid by Prosper Funding,

· not knowingly causing Prosper Funding to engage in any activity that would cause Prosper Funding to be subject to income or franchise tax on a net income basis by any taxing jurisdiction outside of the United States,

· retaining on Prosper Funding’s behalf outside counsel,

· eviewing and analyzing any agreements entered into by Prosper Funding and establishing, in consultation with Prosper Funding, operating procedures to enable Prosper Funding to comply with the terms of such agreements,

· providing recordkeeping and maintenance to maintain Prosper Funding’s limited liability company existence,

· preparing resolutions for consideration by Prosper Funding’s board of directors in accordance with its limited liability company agreement,

· preparing and having executed and filed all documents necessary to qualify Prosper Funding to do business in any jurisdiction in which such qualification is necessary or appropriate,

· in conjunction with Prosper Funding’s counsel, monitoring compliance with licensing requirements and applicable laws,

· receiving notices on Prosper Funding’s behalf,

· notifying Prosper Funding of the institution of any action, suit or proceeding against, or regulatory investigation of, Prosper Funding,

· establishing and maintaining all necessary bank accounts of Prosper Funding and managing Prosper Funding’s cash in accordance with the terms and provisions of Prosper Funding’s material contracts,

· notifying Prosper Funding, to the extent the Corporate Administrator has actual knowledge thereof, of any failure of a party to a material agreement to perform any of its obligations with respect to Prosper Funding, and

· from time to time taking at Prosper Funding’s expense such actions as Prosper Funding may reasonably request, or as the Corporate Administrator deems appropriate.

In its capacity as Loan Platform Administrator, PMI will manage the platform and provide a number of related services.  Among other matters, the Loan Platform Administrator’s duties shall include:

· managing, maintaining and operating the platform,

· the issuance, sale and payment of the Notes,

· Prosper Funding’s purchase of borrower loans,

· the operation of www.prosper.com, and

· the payment (solely from Prosper Funding’s funds) of related fees and expenses.

Among other things, the Loan Platform Administrator will assist Prosper Funding with the issuance and sale of the Notes, the posting and funding of borrower loans (including reviewing the eligibility of applicants to participate on the platform and performing the applicant verification processes described herein) and manage the posting of listings on the website.  The Loan Platform Administrator will also assign a Prosper Rating and an interest rate to each listing.  See “About the Platform” for more information.

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In its capacity as Loan and Note Servicer, PMI has agreed to service each borrower loan and the corresponding Notes.  The Loan and Note Servicer is required at all times to use commercially reasonable efforts to service and collect the borrower loans in accordance with industry standards customary for loans of the same general type and character, in each case (i) in accordance with all applicable laws, and (ii) without regard to (A) any relationship that the Loan and Note Servicer or its affiliates may have with the applicable borrower or Note holder, or (B) the Loan and Note Servicer’s right to receive compensation for its services.  This standard of care applicable to the Loan and Note Servicer is called the “Servicing Standard.”  Subject to the Servicing Standard, the Loan and Note Servicer has full power and authority to take any actions in connection with the servicing and administration of the borrower loans that the Loan and Note Servicer deems to be necessary or desirable.  The Loan and Note Servicer may act alone or through agents, but will remain responsible for the proper performance of its duties by any agents it appoints.  Prosper Funding’s ability to collect payments on the borrower loans, and therefore the amount of payments received by the holders of Notes, will be dependent upon the Loan and Note Servicer's performance of its duties under the Administration Agreement.

PMI will in no event be responsible to make payments from its own funds on any Notes or other obligations of the Company.  See “Summary of Indenture, Form of Notes and Administration Agreement—Administration Agreement” for more information.

Relationship with PMI

Prosper Funding is a wholly-owned subsidiary of PMI.  As Prosper Funding’s sole member, PMI selects all of Prosper Funding’s directors, subject to the requirement that Prosper Funding have two independent directors as long as any Note is outstanding.  Three of Prosper Funding’s directors—Joseph L . Toms, Sachin D. Adarkar and Kirk T. Inglis—are officers of PMI.  All of Prosper Funding’s officers are also officers of PMI.

Prosper Funding is required by the LLC Agreement to indemnify PMI and any employee, representative, agent or affiliate of PMI (collectively, the “Covered Persons”), for any Covered Loss incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of Prosper Funding and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person, except for any act or omission that constitutes gross negligence or willful misconduct.  The term “Covered Loss” includes any loss, damage or claim incurred by (i) PMI solely in its capacity as Prosper Funding’s sole member (and not in its capacity as Loan and Note Servicer or otherwise pursuant to the Administration Agreement) or (ii) any other Covered Person when acting on behalf of PMI in its capacity as Prosper Funding’s sole member.  Covered Losses do not include any loss, damage or claim for which PMI separately would be required to indemnify Prosper Funding under the Administration Agreement or any other contract.  Prosper Funding is required to make indemnification payments only from funds that are not required to be applied to payments on the Notes and that are not needed to make current payments to third parties.

Moreover, PMI has adopted resolutions to govern its relationship with Prosper Funding.  According to its resolutions, PMI shall:

· Maintain and utilize separate stationery or letterhead, invoices and checks from Prosper Funding;

· Maintain its own books, records and bank accounts separate from those of Prosper Funding;

· Pay its operating expenses and own liabilities only out of its own funds, and not from the funds of Prosper Funding (other than those distributed to PMI as member thereof in a manner consistent with the limited liability company agreement of Prosper Funding and Prosper Funding's other material contracts) and not fund the operating expenses or liabilities of Prosper Funding out of the funds of PMI;

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· Not guarantee, hold itself out as being liable for or pledge or commit its assets or credit to secure or fund payment of the obligations or liabilities of Prosper Funding, and not cause Prosper Funding to guarantee, hold itself out as being liable for or pledge or commit its assets or credit to secure or fund payment of the obligations or liabilities of PMI;

· Not commingle its assets with assets of Prosper Funding, and not utilize the assets of Prosper Funding as if they were assets of PMI, but instead maintain its funds and other assets separately identified and segregated from those of Prosper Funding;

· File its own tax returns and pay its own taxes, if any, as may be required under applicable law, except to the extent that applicable law requires PMI to file tax returns that include Prosper Funding in the consolidated tax returns of PMI;

· Produce and maintain separate financial statements and reports and ensure that such financial statements and reports appropriately indicate (in the notes thereto or otherwise) the separate existence of PMI and Prosper Funding and their respective assets and liabilities, and to the extent the assets and liabilities of Prosper Funding are represented in the consolidated financial statements of PMI, ensure that such financial statements appropriately indicate (in the notes or otherwise) the separate existence of PMI and Prosper Funding and their separate assets and liabilities;

· Ensure that all agreements, contracts and transactions between PMI and Prosper Funding are on terms and conditions that are not materially more favorable to PMI or Prosper Funding than the terms and conditions that would be expected to have been obtained under similar circumstances, from a party not affiliated with PMI or Prosper Funding (particularly including terms and conditions relating to compensation or consideration payable by one to the other, indemnification, exclusivity, rights of first offer, term and termination);

· Not enter into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of Prosper Funding or to cause Prosper Funding to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of Prosper Funding; and

· Not sell any of its securities to Prosper Funding (other than the transfer of certain direct loans originated through the platform prior to the transfer of the same to Prosper Funding).

The resolutions also provide that to avoid any confusion by third parties with respect to the separate existence, operation, assets and credit and other obligations and liabilities of PMI and Prosper Funding, PMI shall observe the following additional principles:

· PMI shall, at all times, in its public filings, press releases, websites and otherwise, hold itself out to the public and all other persons and entities as a legal entity separate from Prosper Funding and cause Prosper Funding to hold itself out to the public and all other persons and entities as a legal entity separate from PMI;

· PMI shall conduct its business in its own name so as not to mislead third parties as to the identity of the entity with which such third parties are dealing and strictly comply with all organizational formalities and the principles listed in these resolutions to maintain its separate existence;

· To the extent that PMI acts as an agent for or on behalf of Prosper Funding pursuant to any administrative services, servicing or other agreement or arrangement, PMI shall take reasonable steps to ensure that third parties understand that PMI is acting in such capacity for or on behalf of Prosper Funding and not for itself or its own account; and

· PMI shall take prompt and reasonable action to correct any known misunderstanding regarding the separateness of its legal identity, assets, credit, obligations and liabilities from those of Prosper Funding.

Prosper Funding has been organized and will be operated in a manner that is intended to prevent it from being substantively consolidated with PMI in the event of PMI’s bankruptcy.  However, if Prosper Funding were substantively consolidated in this manner, payments on Notes may be substantially delayed and substantially reduced.  See “Risk Factors—Risks Related to Prosper Funding and PMI, the Platform and Prosper Funding and PMI’s Ability to Service the Notes” for further discussion of the risks attendant to a potential bankruptcy of Prosper Funding or PMI.

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PMI Fees

Prosper Funding has agreed to compensate PMI with three fees for its various roles and related services under the Administration Agreement.

First, Prosper Funding will pay the Corporate Administrator a monthly corporate administration fee for its administrative services in overseeing the daily business operations of Prosper Funding (the “PMI Corporate Administration Fee”) commencing on December 28, 2012, or such later date as agreed among the parties to the Administration Agreement.  This monthly fee will be in an amount equal to one-twelfth (1/12) of the following specified amounts:

· 2012 — $800,000

· 2013 — $865,000

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

Second, Prosper Funding will pay the Loan Platform Administrator a monthly platform administration fee for its services in managing the platform (the “PMI Loan Platform Servicing Fee”) commencing on December 28, 2012 or such later date as of which at least 12,000 borrower loans have funded through the platform after the effective date of the Administration Agreement.  This fee will be in an amount equal to the product of $112.50 and the number of borrower loans funded since the last monthly fee payment date (or, in the case of the first such payment date, since the date of the Administration Agreement).

Third, Prosper Funding will pay the Loan and Note Servicer a monthly fee for its services in servicing the borrower loans (such fee, together with the PMI Corporate Administration Fee and the PMI Loan Platform Servicing Fee, the “PMI Fees”) commencing on December 28, 2012, or such later date as agreed among the parties to the Administration Agreement.  This fee will be in an amount equal to 90% of all servicing fees collected from Note holders by or on behalf of Prosper Funding and all non-sufficient funds fees collected from Note holders by or on behalf of Prosper Funding since the last monthly fee payment date (or, in the case of the first such payment date, since the date of the Administration Agreement).

PMI’s Historical Performance

See “About the Platform—Historical Performance of PMI Borrower Loans” for information regarding PMI’s historical performance.

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GOVERNMENT REGULATION

Overview

The consumer loan industry is highly regulated.  Prosper Funding, PMI and the borrower loans made through the platform are subject to extensive and complex rules and regulations.  Prosper Funding and PMI also are subject to licensing and examination by various federal, state and local government authorities.  These authorities impose obligations and restrictions on Prosper Funding and PMI’s activities and the borrower loans made through the platform.  In particular, these rules limit the fees that may be assessed on the borrower loans, require extensive disclosure to, and consents from, applicants and borrowers, prohibit discrimination and impose multiple qualification and licensing obligations on platform activities.  Failure to comply with these requirements may result in, among other things, revocation of required licenses or registration, loss of approved status, voiding of loan contracts, indemnification liability to contract counterparties, class action lawsuits, administrative enforcement actions and civil and criminal liability.  While compliance with such requirements is at times complicated by Prosper Funding and PMI’s novel business model, Prosper Funding and PMI believe they are in substantial compliance with these rules and regulations.  These rules and regulations are subject to continuous change, however, and a material change could have an adverse effect on Prosper Funding and PMI’s compliance efforts and ability to operate.

Regulation and Consumer Protection Laws

State and Federal Laws and Regulations

State Licensing Requirements.  PMI holds consumer lending licenses, collections licenses or similar authorizations in 18 states.  PMI is subject to supervision and examination by the state regulatory authorities that administer the state lending laws.  The licensing statutes vary from state to state and variously prescribe or impose recordkeeping requirements; restrictions on loan origination and servicing practices, including limits on finance charges and the type, amount and manner of charging fees; disclosure requirements; requirements that licensees submit to periodic examination; surety bond and minimum specified net worth requirements; periodic financial reporting requirements; notification requirements for changes in principal officers, stock ownership or corporate control; restrictions on advertising; and requirements that loan forms be submitted for review.

WebBank is a Utah-chartered industrial bank organized under Title 7, Chapter 8 of the Utah Code and has its deposits insured by the Federal Deposit Insurance Corporation, or FDIC.  WebBank is subject to supervision and examination by the Utah Department of Financial Institutions and the FDIC.  Applicable federal law preempts state usury limitations and allows FDIC-insured depository institutions, such as WebBank, to “export” the interest rates permitted under the laws of the state where the bank is located when making loans to borrowers who reside in other states, regardless of the usury limitations imposed by the state law of the borrower’s residence.  WebBank is located in Utah, and Utah law does not limit the amount of interest that may be charged on loans of the type offered through the platform.  A few jurisdictions have elected to opt out of the federal usury preemption available to state-chartered, FDIC-insured banks.  To the extent that a WebBank borrower loan is deemed to be “made” in such a jurisdiction, the loan would be subject to the maximum interest rate limit of such jurisdiction.

Truth-in-Lending Act.  The federal Truth-in-Lending Act (TILA), and the regulation issued by the Federal Reserve Board implementing the TILA, Regulation Z, requires disclosure of, among other things, the annual percentage rate, the finance charge, the amount financed, the number of payments, and the amount of the monthly payment on consumer loans.  WebBank provides borrowers with a TILA disclosure form when borrower loans are originated and seeks to comply with TILA’s disclosure requirements relating to credit advertising.

Equal Credit Opportunity Act.  The federal Equal Credit Opportunity Act (ECOA) and the regulation issued by the Federal Reserve Board implementing the ECOA, Regulation B, prohibit discrimination in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age (with certain limited exceptions), because all or part of the applicant’s income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.  Prosper Funding, PMI and WebBank comply with the ECOA’s nondiscrimination requirements, and the lender registration agreement requires lender members to comply with the ECOA in their bidding practices.  Prosper Funding also requires individual group leaders who form groups to comply with the ECOA in that they are prohibited from excluding individuals from membership in a group on a prohibited basis.

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The ECOA also requires creditors to provide consumers with notice of adverse action taken on credit applications, giving the consumer the principal reasons why adverse action was taken.  PMI and WebBank provide prospective borrowers who attempt but fail to obtain a borrower loan through the platform with an adverse action notice in compliance with the ECOA’s requirements.

Fair Credit Reporting Act.  The federal Fair Credit Reporting Act (FCRA), administered by the Federal Trade Commission, promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies.  In addition to requirements on credit bureaus, the FCRA requires that users of consumer credit reports have a permissible purpose to obtain a credit report on a consumer and that persons who furnish loan payment information to credit bureaus report such information accurately.  The FCRA also has disclosure requirements for creditors who take adverse action on credit applications based on information contained in a credit report.  WebBank, and PMI as its agent in relation to borrower loan originations, have a permissible purpose for obtaining credit reports on borrower members and they report loan payment and delinquency information to the credit bureaus in compliance with the FCRA.  PMI and WebBank’s adverse action notices contain the disclosures required by the FCRA.

Fair Debt Collection Practices Act.  The federal Fair Debt Collection Practices Act (FDCPA) provides guidelines and limitations on the conduct of third party debt collectors in connection with the collection of consumer debts.  The FDCPA limits certain communications with third parties, imposes notice and debt validation requirements, and prohibits threatening, harassing or abusive conduct in the course of debt collection.  While the FDCPA applies to third party debt collectors, debt collection laws of certain states, including California, impose similar requirements on creditors who collect their own debts.  In order to ensure compliance with the FDCPA, Prosper Funding has contracted with professional third party debt collection agencies to engage in debt collection activities.  Prosper Funding’s agreements with lender members and group leaders prohibit registered lender members and group leaders from attempting to directly collect on the Notes, and Prosper Funding  has established procedures to ensure that lender members and group leaders do not attempt to collect on the Notes themselves.

Servicemembers Civil Relief Act.  The federal Servicemembers Civil Relief Act (SCRA) allows military members to suspend or postpone certain civil obligations so that military members can devote their full attention to military duties.  In accordance with the SCRA, PMI must adjust the interest rate of borrowers on active duty and other military personnel who qualify for and request relief.  If a borrower with an outstanding borrower loan is called to active military duty, PMI will reduce the interest rate on the borrower loan to 6% for the duration of the borrower’s active duty.  During this period, the holders of the corresponding Notes will not receive the difference between 6% and the interest rate on the Notes.  For borrowers to obtain an interest rate reduction on a borrower loan due to military service, PMI requires the borrowers to send it a written request and a copy of the borrower’s mobilization orders.  Neither Prosper Funding nor PMI takes military service into account in assigning Prosper Ratings to listings.

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

Electronic Funds Transfer Act.  The federal Electronic Funds Transfer Act (EFTA) and the regulation issued by the Federal Reserve Board implementing the EFTA, Regulation E, place guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts, including preauthorized electronic fund transfers from consumers’ accounts to make loan payments.  Most transfers of funds in connection with the origination and repayment of Notes and bidding on the platform are done by Automated Clearing House (ACH) electronic transfers of funds subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association (NACHA).  Transfers of funds on the platform are done in conformity with the EFTA and its regulations, as well as NACHA guidelines.

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Electronic Signatures in Global and National Commerce Act.  The federal Electronic Signatures in Global and National Commerce Act (ESIGN) and similar state laws authorize the creation of legally binding and enforceable agreements, including electronic loan agreements, utilizing electronic records and electronic signatures.  ESIGN imposes special requirements on businesses that want to use electronic records or signatures in consumer transactions, and requires businesses to obtain from consumers electronic consent or confirmation to receive information electronically that a law requires be in writing.  When a platform participant registers on the platform, PMI obtains his or her consent to transact business electronically with Prosper Funding and WebBank and maintains electronic records in compliance with ESIGN requirements.

Privacy and Data Security Laws.  The federal Gramm-Leach-Bliley Act (GLBA) limits the disclosure of nonpublic personal information about a consumer to nonaffiliated third parties and requires financial institutions to disclose certain privacy policies and practices with respect to its information sharing with both affiliates and nonaffiliated third parties.  A number of states have enacted privacy and data security laws requiring safeguards on the privacy and security of consumers’ personally identifiable information.  Prosper Funding and PMI have privacy policies that conform to GLBA requirements.  In addition, both Prosper Funding and PMI have policies and procedures intended to maintain platform participants’ personal information securely, and neither entity sells or rents such information to third parties for marketing purposes.

OFAC and Bank Secrecy Act.  Prosper Funding and PMI check customer names against the list of Specially Designated Nationals maintained by the Office of Foreign Assets Control (OFAC).  Prosper Funding and PMI have also instituted procedures to comply with the anti-money laundering requirements of the USA PATRIOT Act and the Bank Secrecy Act.

State Securities Laws.  Prosper Funding and PMI are subject to the securities laws of each state in which the registration or qualification to offer and sell the Securities has been approved.  Certain of these state laws require Prosper Funding and PMI to renew their registration or qualification on an annual basis.  In August 2010 and October 2011, PMI was inadvertently late in filing applications to renew its registrations or qualifications in several states.  Although all of these renewal applications were approved, PMI agreed to pay the following penalties in connection with the late filings: (i) $300 to the State of Washington; (ii) $25,000 to the State of California; (iii) $45,000 to the State of Connecticut; (iv) $500 to the State of Illinois; and (v) $5,000 to the State of Maine.  In addition, the Florida Office of Financial Regulation required PMI to make a rescission offer to any Florida resident who purchased a note from PMI during the period in which PMI inadvertently allowed its registration in Florida to expire.  PMI made this rescission offer on February 4, 2011.  The offer expired on March 6, 2011, and on March 20, 2011, PMI repurchased $21,900 of Notes from persons who accepted the rescission offer.

Foreign Laws and Regulations

Prosper Funding does not permit non-U.S. residents to register as members on the platform and neither Prosper Funding  nor PMI operate outside the United States.  Therefore, neither Prosper Funding nor PMI are subject to foreign laws or regulations.

States in Which Prosper Funding and PMI Currently Operate

The platform operates online only and is available to borrower members in all states except Iowa, Maine and North Dakota.  Prosper Funding and PMI intend to register or qualify the offer and sale of the Securities in each of the 50 states as well as Washington D.C., and will offer the Securities in each jurisdiction where they obtain such qualification or where such registration is declared effective, subject to any applicable state suitability requirements.

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MANAGEMENT

PROSPER FUNDING LLC

The following table sets forth information about Prosper Funding’s executive officers and directors as of the date of this prospectus:

Name	Age	Position(s)
Joseph L. Toms	54	President and Director
Sachin  D. Adarkar	46	Secretary and Director
Kirk T. Inglis	46	Vice President, Treasurer and Director
Bernard J. Angelo	42	Director
Kevin P. Burns	43	Director

Joseph Toms is Prosper Funding’s President and one of Prosper Funding’s directors.  Mr. Toms has served as Chief Investment Officer of PMI since June 2011.  Prior to joining PMI, Mr. Toms served as the Managing Director of LendingClub Advisors from September 2010 to June 2011, where he was responsible for investment, sales and marketing strategies and investment research. Previously, he served as President and CIO of Compass Global Advisors, a $2 billion dollar Fund of Funds from 2008 to 2009, and was a Director for various RAB Capital Funds from 2007 to 2008. Mr. Toms was also the Founder, Chief Investment Officer, President, and Managing Principal of Hilspen Capital Management, LLC from 1996 to 2010. From 1985 to 1996, Mr. Toms served in various capacities at Fisher Investments, which included Director of Research and Senior Vice President, as well as being one of Fisher Investments’ original shareholders and employees. Mr. Toms holds a Bachelor of Arts degree in Political Science from the University of California, Santa Barbara.  Prosper Funding believes that Mr. Toms’ financial and business expertise, including his experience with the consumer credit industry, as well as his general operational and management experience, give him the qualifications and experience to serve as a director.

Sachin D. Adarkar is Prosper Funding’s Secretary and one of Prosper Funding’s directors.  Mr. Adarkar has served as PMI’s General Counsel since August 2009.  Prior to joining PMI, he was at the law firm of Sonnenschein, Nath & Rosenthal LLP in Palo Alto, CA from 2007 until 2009.   Prior to joining Sonnenschein, Mr. Adarkar served as Vice President and Deputy General Counsel of GreenPoint Mortgage Funding, Inc., a wholesale mortgage lender in Novato, CA, from 2003 until 2007.  Prior to joining GreenPoint, Mr. Adarkar spent several years practicing with the law firms of Gibson Dunn & Crutcher LLP and Howard Rice Nemerovski Canady Falk & Rabkin, both in San Francisco, and also served as Vice President and General Counsel of Valley Media, Inc., a music and video distributor.  Mr. Adarkar has a J.D. from UCLA, an M.A. from the University of California at Berkeley and a B.A.,   cum laude  , from Georgetown University.  Mr. Adarkar is a member of the California Bar.  Prosper Funding believes that Mr. Adarkar’s financial and compliance expertise, including his experience with financial service companies and lending companies, as well as his general operational and management experience, give him the qualifications and skills to serve as a director.

Kirk T. Inglis is Prosper Funding’s Vice President and Treasurer and is one of Prosper Funding’s directors.  Mr. Inglis has served as PMI’s Chief Operating Officer since June 2009.  From 2006 to June 2012, he served as PMI’s Chief Financial Officer.  Prior to joining PMI in 2006, he worked as a consultant for Wells Fargo Bank, N.A., consulting on the effectiveness of their online marketing program.  From 1994 to 2003, Mr. Inglis served in various positions with Providian Financial Corporation.  At Providian, Mr. Inglis served as President of First Select Corporation, the largest purchaser of charged-off credit card debt in the United States, from 2000 to 2001.  In addition, he served as Chief Financial Officer of GetSmart.com following its acquisition by Providian in 1999.  Mr. Inglis also developed the financial planning and control infrastructure for Providian Financial Corporation following the spin-off from its parent company in 1996.  Mr. Inglis holds an M.B.A. from Memphis State University and a B.A. from the University of Texas at Austin.  Prosper Funding believes that Mr. Inglis’ financial and business expertise, including his experience with the consumer credit industry, as well as his general operational and management experience, give him the qualifications and skills to serve as a director.

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Bernard J. Angelo has served on Prosper Funding’s board of directors since March of 2012. Mr. Angelo joined Global Securitization Services, LLC (“Global Securitization”) in April 1997 and has extensive experience in managing commercial paper and medium term note programs.  In addition to his administrative skills, he has over twelve years of experience in both the business and legal side of structured finance. At Global Securitization, Mr. Angelo has been active in assisting clients and their legal counsel during the structuring phase of their transactions as well as assimilating bank sponsored commercial paper programs into the operating matrix at Global Securitization.  Prior to joining Global Securitization, Mr. Angelo was an Assistant Vice President at Bankers Trust Company from January 1993 to April 1997 where he was responsible for oversight of the treasury and accounting functions on the Corporate Trust side of structured transactions managed by the bank.  Mr. Angelo currently also serves on the board of ATAX TEBS I, LLC, Bay View Deposit Corporation, BEC Funding II LLC, Carmax Auto Funding LLC, CEC Funding LLC, CenterPoint Energy Transition Bond Company II, LLC, CenterPoint Energy Transition Bond Company III, LLC, CenterPoint Energy Transition Bond Company LLC, Ford Credit Auto Receivables Two LLC, National City Mortgage Capital LLC, PG&E Energy Recovery Funding LLC, and World Omni Auto Receivables LLC.  He has a B.S. in Finance from Siena College.  Prosper Funding believes that Mr. Angelo’s experience in structured finance as well as his general management experience, give him the qualifications and skills to serve as a director.

Kevin P. Burns has served on Prosper Funding’s board of directors since March of 2012.  Mr. Burns is a co-founder of Global Securitization and has twenty years of direct experience in managing special purpose vehicles.  Mr. Burns’ broad experience in the sophisticated uses of SPV’s is a resource that benefits the firm’s clients and their advisors as they structure and launch finance programs.  Prior to co-founding Global Securitization, Mr. Burns spent over four years with Lord Securities Corporation where he became a Director and Vice President.  He developed his expertise while managing all of the firm’s asset backed commercial paper administration efforts.  Mr. Burns is a graduate of the University of Notre Dame with degrees in Philosophy, Finance and Business Economics.  Mr. Burns currently also serves on the board of Chesapeake Finance Holdings LLC, Deutsche Alt-A Securities, Inc., Deutsche Mortgage Securities, Inc., Ford Credit Auto Receivables Two LLC, Volkswagen Auto Lease/Loan Underwriting Funding, LLC, Volkswagen Dealer Finance, LLC, and Volkswagen Public Auto Loan Securitization LLC.  Prosper Funding believes that Mr. Burns’ experience in structured finance as well as his general management experience, give him the qualifications and skills to serve as a director.

Director Attributes

Prosper Funding’s goal is to assemble a board of directors that operates cohesively and works with management in a constructive way. Prosper Funding believes that its directors possess valuable experience and the knowledge necessary to guide its business. Its current board of directors consists of individuals with proven records of success in their chosen professions. They all have the highest integrity and a keen intellect. They are collegial yet independent in their thinking, and are committed to the hard work necessary to be informed about the lending industry, Prosper Funding, and its key constituents, including borrower members, lender members, stockholders and management.

Director Compensation

Prosper Funding does not compensate its directors for service on the Board.  On March 1, 2012, Prosper Funding, PMI, Global Securitization Services, LLC (“GSS”), and Prosper Funding’s independent directors, Kevin Burns and Bernard Angelo, who are employees of GSS and are described as the “GSS representatives,” entered into a Services and Indemnity Agreement (the “GSS Agreement”), pursuant to which, among other things, (i) GSS and the GSS representatives agreed that the GSS representatives would serve as Prosper Funding’s independent directors, and (ii) Prosper Funding agreed to pay GSS an annual fee of $5,000 as compensation for providing such independent director services.  Prosper Funding does not consider the annual fee it pays to GSS to constitute director compensation, but such payment could be construed to constitute compensation of Bernard Angelo and Kevin Burns and, therefore, is reflected as compensation in the table below.

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Name	Fees earned or paid in cash ($)		Stock awards ($)		Option awards ($)		Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)
Joseph L. Toms		-		-		-		-		-		-		-
Kirk T. Inglis		-		-		-		-		-		-		-
Sachin D. Adarkar		-		-		-		-		-		-		-
Bernard J. Angelo		2,500		-		-		-		-		-		2,500
Kevin P. Burns		2,500		-		-		-		-		-		2,500

Limitations on Officers’ and Directors’ Liability and Indemnification Agreements

The LLC Agreement provides that, to the fullest extent permitted by applicable law, Prosper Funding’s directors and officers will not be liable to Prosper Funding for, and shall be indemnified by Prosper Funding against, any loss, damage or claim incurred by reason of any act or omission performed or omitted by such officer or director in good faith on Prosper Funding’s behalf and in a manner reasonably believed to be within the scope of the authority conferred on the officer or director by the LLC Agreement, except for any loss, damage or claim incurred by reason of the officer’s or director’s gross negligence or willful misconduct;   provided,  however, that any such indemnity shall be provided out of and to the extent of Prosper Funding’s assets only.  In addition, the LLC Agreement provides that, to the fullest extent permitted by applicable law, Prosper Funding may advance any expenses incurred by an officer or director defending any claim, demand, action, suit or proceeding prior to its final disposition, upon Prosper Funding’s receipt of an undertaking by or on behalf of the officer or director to repay such amount if it is determined that the officer or director is not entitled to be indemnified under the LLC Agreement.  Prosper Funding will not pay any such indemnification from any borrower loan collections that are allocable to the payment of Notes.

Under the GSS Agreement, PMI has agreed to indemnify the GSS Representatives and GSS (collectively, the “Indemnitees”) against any loss, damage or claim incurred by the Indemnitees as a result of the GSS Representatives’ service as independent directors for Prosper Funding or by reason of any act or omission performed or omitted by the GSS Representatives as Prosper Funding’s independent directors, except for any loss, damage or claim incurred by reason of the GSS Representative’s gross negligence or willful misconduct.  If any proceeding is asserted against the Indemnitees for which they may be indemnified under the GSS Agreement, PMI will retain and direct counsel to defend such action and will be responsible for paying all reasonable fees and disbursements of such counsel.  The Indemnitees have the right to approve such counsel, but may not unreasonably withhold approval.  If a court of competent jurisdiction determines that an Indemnitee is not entitled to indemnification under the GSS Agreement, GSS must repay any amounts paid by PMI to or on behalf of such Indemnitee in connection with those matters as to which it has been determined that such Indemnitee is not entitled to indemnification.

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

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PROSPER MARKETPLACE, INC.

The following table sets forth information about PMI’s executive officers and directors as of the date of this prospectus:

Name	Age	Position(s)
Dawn G. Lepore	58	President and Chief Executive Officer
Sachin  D. Adarkar	46	General Counsel
Kirk T. Inglis	46	Chief Operating Officer
Daniel P. Sanford	56	Senior Vice President, Finance
Lawrence W. Cheng	37	Director
Court Coursey	40	Director
Timothy C. Draper	54	Director
Jeff Jacobs	62	Director
Christian A. Larsen	51	Chairman, Director
Eric Schwartz	50	Director
David Silverman	41	Director
Nigel W. Morris	54	Director

Dawn G. Lepore has served as PMI’s President and Chief Executive Officer since March 2012.  Prior to joining PMI, Ms. Lepore  served as president, chief executive officer and chairman of the board of drugstore.com, inc., an online provider of health, beauty, vision, and pharmacy products from October 2004 until June 2011. Ms. Lepore served as vice chairman—Active Trader, technology, operations, administration and business strategy of The Charles Schwab Corporation (“  CSC  ”) from August 2003 to October 2004. CSC, through Charles Schwab & Co., Inc. (“  Schwab ”) and its other operating subsidiaries, is a financial services firm. Ms. Lepore served as vice chairman—technology, Active Trader, operations, and administration of CSC and Schwab from May 2003 until August 2003, as vice chairman—technology, operations and administration of CSC and Schwab from July 2002 until May 2003, as vice chairman—technology and administration of CSC and Schwab from 2001 to 2002, as vice chairman and chief information officer of CSC and Schwab from 1999 to 2001, and as executive vice president and chief information officer of CSC and Schwab from 1993 to 1999. She currently serves as a director of eBay Inc., a public company and Coupons.com Incorporated, a privately held company.  Ms. Lepore received a B.A. from Smith College.

Sachin D. Adarkar has served as PMI’s General Counsel since August 2009.  Mr. Adarkar is also Secretary and a director of Prosper Funding.  Prior to joining PMI, Mr. Adarkar was at the law firm of Sonnenschein, Nath & Rosenthal LLP in Palo Alto, CA from 2007 until 2009.   Prior to joining Sonnenschein, Mr. Adarkar served as Vice President and Deputy General Counsel of GreenPoint Mortgage Funding, Inc, a wholesale mortgage lender in Novato, CA, from 2003 until 2007.  Prior to joining GreenPoint, Mr. Adarkar spent several years practicing with the law firms of Gibson Dunn & Crutcher LLP and Howard Rice Nemerovski Canady Falk & Rabkin, both in San Francisco, and also served as Vice President and General Counsel of Valley Media, Inc., a music and video distributor.  Mr. Adarkar has a J.D. from UCLA, an M.A. from the University of California at Berkeley and a B.A., cum laude, from Georgetown University.

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Kirk T. Inglis has served as PMI’s Chief Operating Officer since June 2009.  Mr. Inglis is also Vice President, Treasurer and a director of Prosper Funding.  From 2006 to June 2012, Mr. Inglis served as PMI’s Chief Financial Officer.  Prior to joining PMI, in 2006, Mr. Inglis worked as a consultant for Wells Fargo Bank, N.A., consulting on the effectiveness of their online marketing program.  From 1994 to 2003, Mr. Inglis served in various positions with Providian Financial Corporation.  At Providian, Mr. Inglis served as President of First Select Corporation, the largest purchaser of charged-off credit card debt in the United States, from 2000 to 2001.  In addition, he served as Chief Financial Officer of GetSmart.com following its acquisition by Providian in 1999.  Mr. Inglis also developed the financial planning and control infrastructure for Providian Financial Corporation following the spin-off from its parent company in 1996.  Mr. Inglis holds an M.B.A. from Memphis State University and a B.A. from the University of Texas at Austin.

Daniel P. Sanford has served as PMI’s Senior Vice President, Finance since December 2011.  Prior to joining PMI, Mr. Sanford co-founded and served as the Chief Financial Officer of a consumer home owner financial services company, Home Value Protection, Inc., from 2010 to 2011.  From 2005 to 2010, Mr. Sanford served as Senior Vice President, Controller of Washington Mutual Card Services (“  WaMu  ”), which was subsequently purchased by J.P. Morgan.  While at WaMu and J.P. Morgan, Mr. Sanford was responsible for accounting and financial reporting activities, and was a leader in the structuring of various securitization trust transactions.  From 1992 to 2005, Mr. Sanford served in various financial management leadership positions at Providian Financial Services (“  Providian  ”), including Controller.  While Controller at Providian, Mr. Sanford was responsible for managing all financial reporting and accounting aspects of the business.  Mr. Sanford holds a B.S. degree in Accounting and Finance from the University of California, Berkeley.

Lawrence W. Cheng has served as one of PMI’s directors since July 2006.  Mr. Cheng has been a Managing Partner at Volition Capital since 2010.  Prior to helping found Volition, he was a Partner at Fidelity Ventures, a venture capital firm, from 2007 until 2010, and a Principal from 2005 until 2007.  From 2000 to 2005, Mr. Cheng was a senior associate at Battery Ventures and from 1998 to 2000, he was an associate of Bessemer Ventures.  Mr. Cheng currently serves on the boards of several other privately held companies. Mr. Cheng holds a B.A. from Harvard College.  PMI believes that Mr. Cheng’s financial and business expertise, including his diversified background of managing and directing start-up, internet based, software and technology-enabled service companies, give him the qualifications and skills to serve as a director.

Court Coursey has served as one of PMI’s directors since April 2010.  Mr. Coursey has been the Managing Partner at TomorrowVentures, LLC since 2009.  Immediately prior to joining TomorrowVentures, Mr. Coursey was a principal of Rundell, Coursey, & Company, which he co-founded in 1998, which helped incubate, develop and provide strategic planning services for high-growth companies.  In 1996, he founded certifiedemail.com, an online service that allows people to track their emails.  Prior to launching certifedemail.com, he founded TRUOC Aviation, a private aviation services business.  PMI believes that Mr. Coursey’s financial and business expertise, as well as his general operational and management experience in start-up companies, give him the qualifications and skills to serve as a director.

Timothy C. Draper has served as one of PMI’s directors since June 2011.  Mr. Draper founded Draper Fisher Jurvetson in 1985 and has been a Managing Director since its inception.  Mr. Draper currently sits on the board of a number of privately held companies.  Mr. Draper holds a B.S. in Electrical Engineering from Stanford University, and an MBA from Harvard Business School.  PMI believes that Mr. Draper’s financial and business expertise, and his background of managing and directing innovative start-up companies give him the qualifications and skills to serve as a director.

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Jeff Jacobs has served as one of PMI’s directors since November 2011. Mr. Jacobs began his career as an entertainment lawyer in Chicago.  He then co-founded the Harpo Entertainment Group, a film and television production company, and served as its President from 1984 until 2002.  During the last five years Mr. Jacobs primary occupation and interests have been as a private investor and philanthropist.  Mr. Jacobs holds a B.A. from Bradley University, and a J.D. from the Loyola University Chicago School of Law.  PMI believes that Mr. Jacob’s business expertise, as well as his general management experience give him the qualifications and skills to serve as a director.

Christian A. Larsen co-founded PMI and served as its Chief Executive Officer and President until March 15, 2012, and has been one of its directors since inception.  Prior to joining PMI, Mr. Larsen co-founded E-LOAN, Inc. in 1996, and served as one of its directors from 1996 until its acquisition in October 2005, and as its Chairman from March 2001 until October 2005.  From 1999 to February 2005, Mr. Larsen served as Chief Executive Officer of E-LOAN, and from 1996 to 1998 and from January 2004 to June 2004, Mr. Larsen served as President of E-LOAN.  From 1992 to 1996, Mr. Larsen was the President of Palo Alto Funding Group, a mortgage brokerage he co-founded in 1992 and E-LOAN’s predecessor company.  Prior to attending business school, Mr. Larsen held positions at Chevron Corporation and NASA Ames Research Center.  Mr. Larsen holds an M.B.A. from Stanford University and a B.S. from San Francisco State University.  PMI believes that Mr. Larsen’s financial and business expertise, including his diversified background of managing and directing public and start-up companies, his experience with financial services companies and lending companies, as well as his general operational and management experience, give him the qualifications and skills to serve as a director.

Eric Schwartz has served as one of PMI’s directors since March 2012.  Mr. Schwartz was formerly co-head of asset management at Goldman Sachs. During his 23-year career at Goldman Sachs from 1984 through 2007, Mr. Schwartz held multiple leadership positions at the company, including serving as a partner in the Equity Capital Markets unit of the Investment Banking Division, and serving as co-head of the Global Equities and Investment Management Divisions.  He joined Goldman Sach’s Management Committee in 2001 and was named co-head of the Partnership Committee in 2005. Since his retirement from Goldman Sachs in 2007, he operates a private company to manage his personal investments.  He currently serves as Chairman of Jefferson National, an insurance company that principally provides low-cost variable annuities to US consumers; as Chairman of Gold Bullion International, a technology-enabled precious metals dealer based in the U.S.; and as a board member at Indostar Capital, a finance company based in India. Mr. Schwartz graduated with a B.S.E (summa cum laude) and M.B.A from the University of Pennsylvania.  PMI believes that Mr. Schwartz’s experience with large institutional investment companies, his financial expertise and strong background in managing and leading a multinational financial company, give him the qualifications and skills to serve as a director.

David Silverman has served as one of PMI’s directors since March 2012.  Mr. Silverman has been a managing partner at Crosslink Capital, a venture capital firm, since July 2011.  Prior to joining Crosslink Capital, Mr. Silverman was the managing director at Piper Jaffray from July 2009 to July 2011 and a partner at 3i Ventures from June 2000 to July 2008.  Mr. Silverman holds B.A. from Dartmouth College and a J.D from Stanford University.  PMI believes that Mr. Silverman’s experience as a venture capital investor with a focus on financial technologies and his overall management experience, give him the qualifications and skills to serve as a director.

Nigel W. Morris has served as one of PMI’s directors since December 2009.  Mr. Morris is the managing partner of QED Investors, an investment firm he founded in 2008.  He was also the co-founder of Capital One Financial Services, where he served as President and Chief Operating Officer and Vice Chairman from 1994 until his retirement in 2004.  Mr. Morris has served on the board of TransUnion Corp., a provider of credit information and credit information management services, since February 2011.  Mr. Morris also serves on the boards of other privately held companies.  Mr. Morris has a BSC in Psychology from East London University and a MBA with distinction from London Business School, where he is also a Fellow.  PMI believes that Mr. Morris’s financial and business expertise, including his diversified background of managing and directing public companies, his extensive experience in the credit and financial services industry give him the qualifications and skills to serve as a director.

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Director Attributes

PMI’s goal is to assemble a board of directors that operates cohesively and works with management in a constructive way. PMI believes that its directors possess valuable experience and the knowledge necessary to guide its business.  Its current board of directors consists of individuals with proven records of success in their chosen professions. They all have the highest integrity and a keen intellect. They are collegial yet independent in their thinking, and are committed to the hard work necessary to be informed about the lending industry, PMI, and its key constituents, including borrower members, lender members, stockholders and management.

Director Compensation

As reflected in the table below, PMI occasionally grants options to its directors for their service on the Board but does not otherwise compensate directors for their service on the board.

Name	Fees earned or paid in cash ($)		Stock awards ($)		Option awards ($)		Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)
James W. Breyer (1)		-		-		-		-		-		-		-
Lawrence W. Cheng		-		-		-		-		-		-		-
Jerome Contro		-		-		-		-		-		-		-
Court Coursey		-		-		-		-		-		-		-
Timothy C. Draper		-		-		-		-		-		-		-
Nigel W. Morris		-		-		-		-		-		-		-
Jeffrey Jacobs		-		-		37,383.38		-		-		-		37,383.38

(1)  Effective June 19, 2012, Mr. Breyer resigned from the board of directors.

During the year ended December 31, 2011, PMI granted Jeff Jacobs 349,338 options.  Of these options, 25,000 were granted to him while acting in an advisory role to PMI’s board of directors, which were vested immediately, with a total fair value of $1,927 at the grant date.  An additional 324,338 options were granted to Mr. Jacobs upon his appointment to PMI’s board of directors which are subject to the same vesting requirements set forth in PMI’s 2005 Stock Option Plan noted below.  The total aggregate fair value of these grants was $37,383.38 on the grant date.

From time to time, PMI reimburses certain of its non-employee directors for travel and other expenses incurred in connection with attending its board meetings.  PMI has agreed to reimburse certain of its directors for legal expenses incurred by them stemming from the class action lawsuit as described in the “Information About Prosper Marketplace, Inc.—Legal Proceedings” section above, pursuant to its indemnification agreements with its directors as discussed below.

Limitations on Officers’ and Directors’ Liability and Indemnification Agreements

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

· any breach of the director’s duty of loyalty to PMI or PMI’s stockholders;

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

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

· any transaction from which the director derived an improper personal benefit.

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

In addition to the indemnification provided for in PMI’s amended and restated certificate of incorporation and bylaws, PMI has entered into indemnification agreements with each of its directors and officers.  The indemnification agreements require PMI, among other things, to indemnify such persons for all expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement (if such settlement is approved in advance by PMI) (collectively, “Expenses”), actually and reasonably incurred by such person in connection with the investigation, defense or appeal of any proceeding to which such person may be made a party, a potential party, a non-party witness, or otherwise by reason of:

· such person’s service as a director or officer of PMI;

· any action or inaction taken by such person or on such person’s part while acting as director, officer, employee or agent of PMI; or

· such person’s actions while serving at the request of PMI as a director, officer, employee, trustee, general partner, managing member, agent or fiduciary of PMI or any other entity, in each case, whether or not serving in any such capacity at the time any liability or expense is or was incurred.

In addition, PMI is required to indemnify against any Expenses actually and reasonably incurred in connection with any action establishing or enforcing a right to indemnification or advancement of expenses under the agreement or under any directors’ and officers’ liability insurance policies maintained by PMI to the extent that such person is successful in such action.

Under the indemnification agreements, PMI is not obligated to provide indemnification on account of any proceeding unless such person acted in good faith and in a manner reasonably believed to be in the best interests of PMI, and with respect to criminal proceedings, such person had no reasonable cause to believe his conduct was unlawful.  The termination of a proceeding by judgment, settlement, conviction or upon a plea of   nolo contendere   or its equivalent does not, by itself, create the presumption that such person did not satisfy the above standards.

In addition, under the indemnification agreements, PMI is not obligated to provide indemnification:

· for any proceedings or claims initiated or brought voluntarily by such person and not by way of defense, unless such indemnification is authorized by PMI, other than a proceeding to establish such person’s right to indemnification;

· for any expenses incurred by such person with respect to any proceeding instituted by such person to enforce and interpret the terms of his indemnification agreement, unless such person is successful in such action;

· for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

· for an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act, as amended, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements); and

· for any reimbursement of PMI by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of PMI, as required in each case under the Exchange Act, as amended (including any such reimbursements that arise from an accounting restatement of PMI pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to PMI of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements).

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The indemnification agreements also provide that PMI agrees to indemnify such persons to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of the agreement or PMI’s amended and restated certificate of incorporation or bylaws.  Moreover, the indemnification agreements provide that any future changes under Delaware law that expand the ability of a Delaware corporation to indemnify its officers and directors are automatically incorporated into the agreements.

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

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

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EXECUTIVE COMPENSATION

PROSPER FUNDING LLC

Prosper Funding does not compensate any of its officers.

PROSPER MARKETPLACE, INC.

See “Item 11. Executive Compensation” beginning on page 94 of PMI’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011, which is incorporated by reference into this prospectus.

TRANSACTIONS WITH RELATED PARTIES

PROSPER FUNDING LLC

Prosper Funding expects to enter into the Administration Agreement pursuant to which PMI has agreed to provide certain administrative services relating to the platform.  Prosper Funding and PMI have entered into related back-up servicing agreements with a third-party loan administrator.  See “Summary of Indenture, Form of Notes and Administration Agreement—Indenture and Form of Notes—Servicing Covenant” for more information.

Asset Transfer

PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  Shortly before or after effectiveness of this Registration Statement, but in any event before any offering is commenced hereunder, Prosper Funding and PMI will enter into an Asset Transfer Agreement (the “Asset Transfer Agreement”) pursuant to which PMI will (i) transfer the platform and substantially all of PMI’s assets and rights related to the operation of the platform to Prosper Funding and (ii) make a cash contribution to Prosper Funding of between $3 million and $6 million.  Under the Asset Transfer Agreement, PMI may also transfer substantially all of its remaining assets to Prosper Funding, including (i) all outstanding PMI Notes issued by PMI under the Indenture (the “PMI Indenture”) dated June 15, 2009 between PMI and Wells Fargo Bank, as trustee (the “PMI Trustee”), (ii) all borrower loans held by PMI (the “PMI Borrower Loans”), (iii) all lender/borrower/group leader registration agreements related to the PMI Notes or the PMI Borrower Loans, and (iv) all documents and information related to the foregoing.  The transfer of assets under the Asset Transfer Agreement is referred to as the “Asset Transfer.”  Certain hardware and agreements relevant to the development, maintenance and use of the platform, including in relation to the origination, funding and servicing of borrower loans , and the issuance, funding and payment of the Notes, will not be transferred or assigned to Prosper Funding by PMI as described above under “Information About Prosper Funding LLC—Overview.”

If the Asset Transfer includes the transfer of the PMI Notes and the PMI Borrower Loans (the “Loan and Note Transfer”), in the Asset Transfer Agreement, PMI will agree, among other things, to:

· fund any repurchase obligation with respect to the PMI Notes, and indemnify Prosper Funding for any other losses that arise out of any lender/borrower/group leader registration agreement related to the PMI Notes or the PMI Borrower Loans, including as a result of a breach by PMI of any of its representations or warranties made therein;

· fund any arbitration filing or administrative fees or arbitrator fees payable under any lender/borrower/group leader registration agreement related to the PMI Notes or the PMI Borrower Loans; and

· fund any indemnification obligations that arise under any group leader registration agreement entered into by PMI prior to the date of the Asset Transfer.

If the Loan and Note Transfer occurs, PMI will continue to service the PMI Borrower Loans pursuant to the Administration Agreement between PMI and Prosper Funding.  Under the  Administration Agreement, PMI will agree, among other things, to use commercially reasonable efforts to service and collect the PMI Borrower Loans and will indemnify Prosper Funding for any losses as a result of its breach of such obligation.

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If the Loan and Note Transfer occurs, holders of the PMI Notes will be third party beneficiaries under the Asset Transfer Agreement and the Administration Agreement.

PMI Note Assumption

Under Section 4.1 of the PMI Indenture, PMI may transfer substantially all of its assets to any person without the consent of the holders of the PMI Notes, provided that the transferee expressly assumes all of PMI’s obligations under the PMI Indenture and the PMI Notes.  In that case, the transferee will succeed to and be substituted for PMI, and PMI will be discharged from all of its obligations and covenants, under the PMI Indenture and the PMI Notes.  Accordingly, if the Loan and Note Transfer occurs, concurrently with that transaction, PMI, Prosper Funding and the PMI Trustee will enter into a supplemental indenture to the PMI Indenture that will effect such assumption, substitution and discharge (the “PMI Note Assumption”).  Following the PMI Note Assumption, Prosper Funding will be the obligor under the PMI Notes and the PMI Indenture and PMI will no longer have any obligations with respect thereto.

Prosper Funding has not engaged in any other transactions with its directors, executive officers, holders of more than 5% of its voting securities, or immediate family members or other affiliates of its directors, executive officers or 5% stockholders.

Timeline for Asset Transfer and Loan and Note Transfer

Shortly before or immediately after this Registration Statement is declared effective, PMI will file a post-effective amendment to its separate shelf registration statement to disclose information regarding the proposed Asset Transfer and Loan and Note Transfer.  Prosper Funding and PMI will then post the preliminary prospectus for this Registration Statement on www.prosper.com .  Prior to consummating the Asset Transfer and Loan and Note Transfer, Prosper Funding and PMI will prepare various change to the platform, communications to borrowers and lenders and related communications that it intends to implement on consummation of the Asset Transfer and Loan and Note Transfer.  If Prosper Funding and PMI consummate the Asset Transfer and Loan and Note Transfer, they will execute the Asset Transfer Agreement and Supplemental Indenture at that time, and will file Form 8-Ks to disclose their entry into such agreements.  If Prosper Funding enters into any other agreements that were not executed at the time this Registration Statement was declared effective, Prosper Funding will file such agreements with its Form 8-K, which Form 8-K will be incorporated by reference into this Registration Statement pursuant to a post-effective amendment to the Registration Statement.  Finally, PMI will file a post-effective amendment to its separate shelf registration statement to terminate its offering of PMI Notes.

Indemnification Agreements

Under Prosper Funding’s organizational documents, it is required to indemnify its directors and officers in certain instances.   For more information, see “Management—Prosper Funding LLC—Limitations on Officers’ and Directors’ Liability and Indemnification Agreements.”

PROSPER MARKETPLACE, INC.

Transactions with Related Parties

PMI also expects to enter into the Administration Agreement with Prosper Funding pursuant to which PMI has agreed to provide certain administrative services relating to the platform.  Prosper Funding and PMI have entered into related back-up servicing agreements with a third-party loan administrator.  See “Summary of Indenture, Form of Notes and Administration Agreement—Indenture and Form of Notes—Servicing Covenant” for more information.

Since PMI’s inception, it has engaged in various transactions with its directors, executive officers and holders of more than 5% of its voting securities, and immediate family members and other affiliates of its directors, executive officers and 5% stockholders.  Since January 1, 2009, PMI has engaged in the following financial transactions with an aggregate value of greater than $120,000 with its directors, executive officers and holders of more than 5% of its voting securities and other affiliates of its directors and executive officers.  PMI believes that all of the transactions described below were made on terms no less favorable to PMI than could have been obtained from unaffiliated third parties.

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Asset Transfer

PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  Shortly before or after effectiveness of this Registration Statement, but in any event before any offering is commenced hereunder, Prosper Funding and PMI will enter into an Asset Transfer Agreement (the “Asset Transfer Agreement”) pursuant to which PMI will (i) transfer the platform and substantially all of PMI’s assets and rights related to the operation of the platform to Prosper Funding and (ii) make a cash contribution to Prosper Funding of between $3 million and $6 million.  Under the Asset Transfer Agreement, PMI may also transfer substantially all of its remaining assets to Prosper Funding, including (i) all outstanding PMI Notes issued by PMI under the Indenture (the “PMI Indenture”) dated June 15, 2009 between PMI and Wells Fargo Bank, as trustee (the “PMI Trustee”), (ii) all borrower loans held by PMI (the “PMI Borrower Loans”), (iii) all lender/borrower/group leader registration agreements related to the PMI Notes or the PMI Borrower Loans, and (iv) all documents and information related to the foregoing.  The transfer of assets under the Asset Transfer Agreement is referred to as the “Asset Transfer.”  Certain hardware and agreements relevant to the development, maintenance and use of the platform, including in relation to the origination, funding and servicing of borrower loans , and the issuance, funding and payment of the Notes, will not be transferred or assigned to Prosper Funding by PMI as described above under “Information About Prosper Funding LLC—Overview.”

If the Asset Transfer includes the transfer of the PMI Notes and the PMI Borrower Loans (the “Loan and Note Transfer”), in the Asset Transfer Agreement, PMI will agree, among other things, to:

· fund any repurchase obligation with respect to the PMI Notes, and indemnify Prosper Funding for any other losses that arise out of any lender/borrower/group leader registration agreement related to the PMI Notes or the PMI Borrower Loans, including as a result of a breach by PMI of any of its representations or warranties made therein;

· fund any arbitration filing or administrative fees or arbitrator fees payable under any lender/borrower/group leader registration agreement related to the PMI Notes or the PMI Borrower Loans; and

· fund any indemnification obligations that arise under any group leader registration agreement entered into by PMI prior to the date of the Asset Transfer.

If the Loan and Note Transfer occurs, PMI will continue to service the PMI Borrower Loans pursuant to the Administration Agreement between PMI and Prosper Funding.  Under the  Administration Agreement, PMI will agree, among other things, to use commercially reasonable efforts to service and collect the PMI Borrower Loans and will indemnify Prosper Funding for any losses as a result of its breach of such obligation.

If the Loan and Note Transfer occurs, holders of the PMI Notes will be third party beneficiaries under the Asset Transfer Agreement and the Administration Agreement.

PMI Note Assumption

Under Section 4.1 of the PMI Indenture, PMI may transfer substantially all of its assets to any person without the consent of the holders of the PMI Notes, provided that the transferee expressly assumes all of PMI’s obligations under the PMI Indenture and the PMI Notes.  In that case, the transferee will succeed to and be substituted for PMI, and PMI will be discharged from all of its obligations and covenants, under the PMI Indenture and the PMI Notes.  Accordingly, if the Loan and Note Transfer occurs, concurrently with that transaction, PMI, Prosper Funding and the PMI Trustee will enter into a supplemental indenture to the PMI Indenture that will effect such assumption, substitution and discharge (the “PMI Note Assumption”).  Following the PMI Note Assumption, Prosper Funding will be the obligor under the PMI Notes and the PMI Indenture and PMI will no longer have any obligations with respect thereto.

Timeline for Asset Transfer and Loan and Note Transfer

Shortly before or immediately after this Registration Statement is declared effective, PMI will file a post-effective amendment to its separate shelf registration statement to disclose information regarding the proposed Asset Transfer and Loan and Note Transfer.  Prosper Funding and PMI will then post the preliminary prospectus for this Registration Statement on www.prosper.com .  Prior to consummating the Asset Transfer and Loan and Note Transfer, Prosper Funding and PMI will prepare various change to the platform, communications to borrowers and lenders and related communications that it intends to implement on consummation of the Asset Transfer and Loan and Note Transfer.  If Prosper Funding and PMI consummate the Asset Transfer and Loan and Note Transfer, they will execute the Asset Transfer Agreement and Supplemental Indenture at that time, and will file Form 8-Ks to disclose their entry into such agreements.  If Prosper Funding enters into any other agreements that were not executed at the time this Registration Statement was declared effective, Prosper Funding will file such agreements with its Form 8-K, which Form 8-K will be incorporated by reference into this Registration Statement.  Finally, PMI will file a post-effective amendment to its separate shelf registration statement to terminate its offering of PMI Notes.

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Purchase of PMI Notes

PMI’s executive officers, directors and 5% shareholders have bid on and purchased PMI Notes originated through the platform from time to time in the past, and may do so in the future.  As of September 30, 2012, these parties had purchased $5,144,981 of PMI Notes through the platform.  Christian Larsen has purchased PMI Notes in an aggregate amount of approximately $1,635,761; Larry Cheng has purchased PMI Notes in an aggregate amount of $33,772; Nigel Morris has purchased PMI Notes in an aggregate amount of $71,566; Eric Schwartz has purchased PMI Notes in an aggregate amount of $652,245; Tim Draper has purchased PMI Notes in an aggregate amount of $733,783; and management, other affiliates and 5% shareholders have purchased PMI Notes in an aggregate amount of $2,017,854.  Of the total aggregate amount of PMI Notes purchased by executive officers, directors, and affiliates since inception through September 30, 2012, approximately $254,947 or 5.0% of principal has been charged off, as compared to approximately $55.2 million or 14% of principal charged off for all loans originated since inception through September 30, 2012.  The PMI Notes were obtained on terms and conditions that were not more favorable than those obtained by other lenders.  In addition, from time to time, PMI may fund portions of qualified loan requests and hold any PMI Notes it purchases as a result of such funding for its own account.  As of September 30, 2012, PMI has purchased PMI Notes in the aggregate amount of approximately $147,000.

Financing Arrangements with Significant Shareholders, Directors and Officers

In June 2011, PMI issued and sold to investors an aggregate of 23,222,747 shares of its Series E convertible preferred stock (“Series E”) at a purchase price of $0.74 per Series E share for an aggregate consideration of $17,150,000 net of issuance costs of approximately $441,000.   In connection with that sale, PMI issued 10,000,000 shares of the Company’s Series E-1 (“Series E-1”) Preferred Stock to certain holders of its Series A, B and C Preferred Stock who participated in the Series E financing.  The Series E-1 shares were allocated among these stockholders in proportion to their relative participation in the Series E financing.

In November 2011, PMI entered into a stock purchase agreement with certain new investors (the “Share Purchasers”), pursuant to which PMI issued and sold to such Share Purchasers 8,996,739 shares of PMI’s Series F Preferred Stock (the “Series F”) for an aggregate purchase price of $9.0 million.  The Share Purchasers included certain investment funds that are affiliated with IDG Capital Partners and Accel Partners.  James W. Breyer, who was a member of PMI’s Board of Directors, is a partner of Accel Partners.

The participants in these convertible preferred stock financings included (i) the entities set forth in the following table (either directly or through one or more affiliates), each of which held, directly or indirectly, more than 5% of any class of PMI’s voting securities at the time the transactions indicated in the table were consummated, as well as (ii) the directors set forth in the table.

Participant	Series E	Series F
James W. Breyer Trust dated March 25, 2005	658,829
Accel Partners	4,283,622
Agilus Ventures	1,624,915
Meritech Capital Partners	2,031,144
DAG Ventures	2,031,144
Draper Fisher Jurvetson Fund	7,109,005
Crosslink Capital	4,265,403
IDG Capital Partners		6,997,538
Eric & Erica Schwartz Investments LLC		1,999,201

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For further information regarding stock ownership for officers, directors and individuals owning greater than 5% ownership of all PMI classes of voting securities please see “Principal Securityholders—Prosper Marketplace, Inc.”

As of the date of this prospectus, five of PMI’s directors—Lawrence W. Cheng, David Silverman, Court Coursey, Timothy Draper, and Eric Schwartz—are affiliated with Agilus Ventures, Crosslink Capital, TomorrowVentures, Draper Fisher Jurvetson and Eric & Erica Schwartz Investments LLC, respectively.  The notes to PMI’s beneficial ownership table describe these affiliations in greater detail in “Principal Securityholders—Prosper Marketplace, Inc.”

Indemnification Agreements

PMI’s amended and restated certificate of incorporation provides that it will indemnify its directors and officers to the fullest extent permitted by Delaware law.  In addition, PMI has entered into separate indemnification agreements with each of its directors and executive officers.

PRINCIPAL SECURITYHOLDERS

PROSPER FUNDING LLC

PMI is the sole member of, and holds a 100% equity interest in, Prosper Funding.

PROSPER MARKETPLACE, INC.

The following table sets forth information regarding the beneficial ownership of PMI’s common stock as of November 15, 2012, by:

· each of PMI’s directors;

· each of PMI’s named executive officers;

· each person, or group of affiliated persons, who is known by PMI to beneficially own more than 5% of PMI’s common stock; and

· all of PMI’s directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC.  These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include shares of common stock issuable upon the exercise of stock options or warrants that are immediately exercisable or exercisable within 60 days after November 15, 2012.  Except as otherwise indicated in the footnotes to the table below, all of the shares reflected in the table are shares of common stock and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws.  The information is not necessarily indicative of beneficial ownership for any other purpose.

Percentage ownership calculations are based on 3,006,745 shares of common stock outstanding as of November 15, 2012.  Each share of PMI’s preferred stock is convertible at any time at the discretion of the holder.  All shares of PMI’s preferred stock convert into shares of common stock at a ratio of 1 to 1, except for shares of PMI’s Series E-1 Preferred Stock, which convert into shares of common stock at a ratio of 1,000,000 to 1.

In computing the number of shares of common stock beneficially owned by a person or entity and the percentage ownership of that person or entity, PMI deemed outstanding all shares of common stock subject to options and warrants held by that person or entity that are currently exercisable or exercisable within 60 days of November 15, 2012.  PMI did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.  Beneficial ownership representing less than 1.0% is denoted with an asterisk (*). Except as otherwise indicated in the footnotes to the table below, addresses of named beneficial owners and officers are in care of Prosper Marketplace, Inc., 111 Sutter Street, 22nd Floor, San Francisco, CA 94104.

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	Total Beneficial Ownership
Name of Beneficial Owner	Number of Shares		Beneficial Ownership
			Percentage (1)
	2012		2012
Officer and Directors
Dawn Lepore (2)		224,063	6.94%
Lawrence W. Cheng (3)		7,160,528	70.43%
David Silverman (4)		4,265,402	58.65%
Court Coursey (5)		2,234,256	42.63%
Timothy C. Draper (6)		7,109,006	70.28%
Jeff Jacobs (7)		25,000	*
Nigel W. Morris (8)		2,450,169	44.90%
Christian A. Larsen (9)		3,951,485	79.70%
Kirk T. Inglis (10)		665,467	18.12%
Jim Catlin (11)		579,372	16.16%
Eric Schwartz (12)		2,569,917	46.08%
All directors and named executive officers as a group (13)*		31,234,665	96.95%
5% Shareholders
Accel Partners (14)		18,404,545	85.96%
Agilus Ventures (15)		7,160,528	70.43%
Benchmark Capital Partners (16)		3,807,720	55.88%
Crosslink Capital (17)		4,265,402	58.65%
DAG Ventures (18)		4,420,902	59.52%
Draper Fisher Jurvetson (19)		7,109,006	70.28%
IDG Capital Partners (20)		18,404,545	85.96%
Meritech Capital Partners (21)		4,420,902	59.52%

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(1) As of November 15, 2012, there were 3,006,745 shares of common stock outstanding.  If all preferred stock, warrants and options were converted into shares of common stock, there would be 80,488,950 shares of common stock outstanding as of November 15, 2012.  On a fully diluted as-converted basis, the Company’s officers, directors and 5% shareholders would own the following percentages of the Company’s stock, as of November 15, 2012:

· Dawn Lepore: 0.28%

· Lawrence W. Cheng: 8.90%

· David Silverman: 5.30%

· Court Coursey: 2.78%

· Timothy C. Draper: 8.83%

· Jeff Jacobs: 0.03%

· Nigel W. Morris: 3.04%

· Christian A. Larsen: 4.91%

· Kirk T. Inglis: 0.83%

· Jim Catlin: 0.72%

· Eric Schwartz: 3.19%

· All directors and named executive officers as a group: 38.81%

· Accel Partners: 22.87%

· Agilus Ventures: 8.90%

· Benchmark Capital Partners: 4.73%

· Crosslink Capital: 5.30%

· DAG Ventures: 5.49%

· Draper Fisher Jurvetson: 8.83%

· IDG Capital Partners: 22.87%

· Meritech Capital Partners: 5.49%

(2) Consists of 224,063 shares of common stock issuable upon the exercise of stock options held by Dawn Lepore, Chief Executive Officer of  the Company.

(3) Consists of 7,085,235 shares of common stock issuable upon the conversion of preferred stock held by Agilus Ventures through certain of its affiliates and 75,293 shares of common stock issuable upon the exercise of warrants held by Agilus Ventures through certain of its affiliates (the “Agilus Shares”). Volition Capital, LLC, manages the US portfolio of Agilus Ventures under a sub-advisory agreement and has voting and investment power over the Agilus Shares. Mr. Cheng is a managing partner of Volition Capital and therefore may be deemed to share voting and investment power over the Agilus Shares. Mr. Cheng disclaims beneficial ownership of the Agilus Shares except to the extent of his pecuniary interest therein.

(4) Consists of 4,265,402 shares of common stock issuable upon the conversion of preferred stock held by Crosslink Capital through certain of its affiliates. Mr. Silverman is a general partner of Crosslink Capital and therefore may be deemed to share voting and investment power over these shares. Mr. Silverman disclaims beneficial ownership with respect to the shares except to the extent of his pecuniary interest therein.

(5) Consists of 2,234,256 shares of common stock issuable upon the conversion of preferred stock held by TomorrowVentures through certain of its affiliates. Mr. Coursey is the managing partner of TomorrowVentures and therefore may be deemed to share voting and investment power over these shares. Mr. Coursey disclaims beneficial ownership of the shares except to the extent of his pecuniary interest therein.

(6) Consists of 7,109,006 shares of common stock issuable upon the conversion of preferred stock held by Draper Fisher Jurvetson through certain of its affiliates. Mr. Draper. is a managing director of Draper Fisher Jurvetson and therefore may be deemed to share voting and investment power over these shares. Mr. Draper disclaims beneficial ownership of the shares except to the extent of his pecuniary interest therein.

(7) Consists of 25,000 shares of common stock issuable upon the exercise of stock options held by Mr. Jacobs.

(8) Consists of 1,847,690 shares of common stock issuable upon the conversion of preferred stock held by QED Investors through certain of its affiliates and 602,479 shares of common stock issuable upon the exercise of warrants held by QED Investors through certain of its affiliates. Mr. Morris is the managing partner of QED Investors and therefore may be deemed to share voting and investment power over these shares. Mr. Morris disclaims beneficial ownership of the shares except to the extent of his pecuniary interest therein.

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(9) Consists of 6,621 shares of common stock issuable upon the conversion of preferred stock held by Mr. Larsen, 2,000,000 shares of common stock held by the Larsen-Lam Family Trust, of which Mr. Larsen is a trustee, and 1,944,864 shares of common stock issuable upon the exercise of stock options held by Mr. Larsen. Mr. Larsen has voting and investment power over the shares held by the Larsen Lam Family Trust. On March 15, 2012, Christian A. Larsen resigned as President and Chief Executive Officer of  the Company. Mr. Larsen will continue to serve as Chairman of  the Company’s Board of Directors.

(10) Consists of 665,467 shares of common stock issuable upon the exercise of stock options held by Mr. Inglis.

(11) Consists of 579,372 shares of common stock issuable upon the exercise of stock options held by Mr. Catlin.

(12) Eric Schwartz was named a Director of  the Company on March 15, 2012. As of that date, Mr. Schwartz held individually or through certain of his affiliates, 2,131,616 shares of common stock issuable upon the conversion of preferred stock and 438,301 shares of common stock issuable upon the exercise of warrants.

(13) Consists of 26,704,826 shares of common stock and common stock issuable upon the conversion of preferred stock, 3,413,766 shares of common stock issuable upon the exercise of stock options and 1,116,073 shares of common stock issuable upon the exercise of warrants.

(14) Consists of 11,330,636 shares of common stock issuable upon the conversion of preferred stock held by Accel Partners through certain of its affiliates and 76,371 shares of common stock issuable upon exercise of warrants held by Accel Partners through certain of its affiliates (collectively, the “Accel Shares”); and 6,997,538 shares of common stock issuable upon the conversion of preferred stock held by IDG Capital Partners through certain of its affiliates (the “IDG Shares”). Accel Partners is deemed to have voting and investment power over the Accel Shares. Accel Partners is an affiliate of IDG Capital Partners and may also therefore be deemed to share voting and investment power over the IDG Shares. Accel Partners disclaims beneficial ownership of the IDG Shares except to the extent of its pecuniary interest therein. The address of Accel Partners is 428 University Avenue, Palo Alto, California 94301.  James W. Breyer is a partner of Accel Partners.  Therefore, Mr. Breyer may be deemed to share voting and investment power over the Accel Shares and IDG Shares.  Mr. Breyer disclaims beneficial ownership of the Accel Shares and the IDG Shares except to the extent of his pecuniary interest therein.

(15) Represents 7,085,235 shares of common stock issuable upon the conversion of preferred stock held by Agilus Ventures and 75,293 shares of common stock issuable upon exercise of warrants held by Agilus Ventures through certain of its affiliates. Volition Capital, LLC, manages the US portfolio of Agilus Ventures under a sub-advisory agreement and has voting and investment power over the shares held by Agilus Ventures. The address of Agilus Ventures is 82 Devonshire Street, E16B, Boston, Massachusetts 02109.

(16) Represents 3,724,035 shares of common stock issuable upon the conversion of preferred stock held by Benchmark Capital Partners through certain of its affiliates and 83,685 shares of common stock issuable upon exercise of warrants held by Benchmark Capital Partners through certain of its affiliates. Benchmark Capital Partners is deemed to have voting and investment power over these shares. The address of Benchmark Capital Partners V, L.P. is 2480 Sand Hill Road, Suite 200, Menlo Park, California 94025.

(17) Represents 4,265,402 shares of common stock issuable upon the conversion of preferred stock held by Crosslink Capital through certain of its affiliates. Crosslink Capital is deemed to have voting and investment power over these shares. The address for Crosslink Capital is Two Embarcadero Center, Suite 2200, San Francisco, CA 94111.

(18) Represents 4,393,362 shares of common stock issuable upon the conversion of preferred stock held by DAG Ventures through certain of its affiliates and 27,540 shares of common stock issuable upon the exercise of warrants held by DAG Ventures through certain of its affiliates. DAG Ventures is deemed to have voting and investment power over these shares. The address of DAG Ventures is 251 Lytton Avenue, Suite 200, Palo Alto, California 94301.

(19) Represents 7,109,006 shares of common stock issuable upon the conversion of preferred stock held by Draper Fisher Jurvetson through certain of its affiliates. Draper Fisher Jurvetson is deemed to have voting and investment power over these shares. The address for Draper Fisher Jurvetson is 2882 Sand Hill Road, Suite 150, Menlo Park, California 94025.

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20) Represents 6,997,538 shares of common stock issuable upon the conversion of preferred stock held by IDG Capital Partners through certain of its affiliates (“IDG Shares”), 11,330,636 shares of common stock issuable upon the conversion of preferred stock held by Accel Partners through certain of its affiliates and 76,371 shares of common stock issuable upon exercise of warrants held by Accel Partners through certain of its affiliates (collectively, the “Accel Shares”). IDG Capital Partners is deemed to have voting and investment power over the IDG shares, and maybe deemed to control the Accel Shares, but disclaims control of the Accel Shares. The address for IDG Capital Partners is 99 Queen’s Road Central, Unit 1509, The Center, Hong Kong, China. James W. Breyer is a partner of Accel Partners, and Accel Partners is an affiliate of IDG Capital Partners.  Therefore, Mr. Breyer may be deemed to share voting and investment power over the Accel Shares and the IDG Shares.  Mr. Breyer disclaims beneficial ownership of the Accel Shares and the IDG Shares except to the extent of his pecuniary interest therein.

21) Represents 4,393,362 shares of common stock issuable upon the conversion of preferred stock held by Meritech Capital Partners through certain of its affiliates and 27,540 shares of common stock issuable upon the exercise of warrants held by Meritech Capital Partners through certain of its affiliates. Meritech Capital Partners is deemed to have voting and investment power over these shares. The address for Meritech Capital Partners is 245 Lytton Avenue, Suite 350, Palo Alto, California 94301.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PROSPER FUNDING LLC

This management’s discussion and analysis of financial condition or MD&A, contains forward-looking statements that involve risks and uncertainties.  Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.  The following discussion and analysis of Prosper Funding’s unaudited pro forma combined financial condition and results of operations should be read in conjunction with the historical combined financial statements of PMI derived from the audited combined financial data of Prosper Funding’s Predecessor in PMI’s Annual Report on Form 10-K/A for the year ended December 31, 2011 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2012, which are incorporated by reference into this prospectus and the audited financial statements of Prosper Funding included elsewhere in this prospectus.

Overview

Prosper Funding plans to operate a peer-to-peer online credit platform (the “platform”) that will enable its borrower members to borrow money and its lender members to purchase Borrower Payment Dependent Notes (“Notes”), issued by Prosper Funding, the proceeds of which facilitate the funding of borrower loans made to borrower members.

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

PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  PMI will transfer the platform to Prosper Funding, giving Prosper Funding the right to operate the peer-to-peer online credit platform to originate and service borrower loans and Notes.  Prosper Funding also expects to enter into an Administration Agreement pursuant to which PMI has agreed to provide certain administrative services relating to the platform.  The Administration Agreement contains a license granted by Prosper Funding to PMI that entitles PMI to use the platform for and in relation to: (i) PMI’s performance of its duties and obligations under the Administration Agreement relating to corporate administration, loan platform services, loan and note servicing and marketing, and (ii) PMI’s performance of its duties and obligations to WebBank in relation to loan origination and funding.  The license is terminable in whole or in part in relation to failure by PMI to pay the licensing fee or the termination of PMI as the provider of some or all of the aforementioned services.

Prosper Funding has not commenced operations as of the date of the financial statements included in this prospectus.  It has prepared unaudited pro forma financial statements for the year ended December 31, 2011 and the nine months ended September 30, 2012 to reflect the change in the form of the business organization, which statements are included below under the heading “Unaudited Pro Forma Financial and Operating Data.”  Currently, PMI operates the platform facilitating the origination of loans by WebBank through the platform.  Subsequently, these loans are purchased and held by PMI which issues and sells PMI Notes corresponding to those loans.  Prosper Funding refers to borrower loans originated and notes issued and sold through the platform prior to the commencement of this offering as “PMI Borrower Loans” and “PMI Notes,” respectively.  Upon commencement of Prosper Funding’s operations it will facilitate the lending activities and act as an agent to the lender members by maintaining the online marketplace to be transferred to Prosper Funding by PMI and holding those borrower loans and Notes.

Although Prosper Funding is newly formed and has no operating history, the platform will be operated in a manner that is substantially identical to how it was operated by PMI, and the Notes will be substantially identical to PMI Notes resulting in minimal impact to borrower and lender members.  Shortly after this registration statement is declared effective, Prosper Funding will operate the platform and will begin issuing the Notes and PMI will suspend the offering of PMI Notes.

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In addition to a cash contribution of between $3 million and $6 million, PMI expects to transfer substantially all of PMI’s assets, including all borrower loans held by PMI (the “PMI Borrower Loans”), the platform and the website, to Prosper Funding (the “Asset Transfer”).  Prosper Funding and PMI will file the agreements relating to the Asset Transfer—an Asset Transfer Agreement and a Supplemental Indenture—as exhibits when such agreements are finalized.  In addition, Prosper Funding and PMI will provide disclosure regarding the proposed transaction in their offering documents and periodic reports.

Trends and Uncertainties

The performance of loans may not be consistent with the historical trends demonstrated by PMI Borrower Loans.  During 2011, PMI increased its origination volume consistently month over month in terms of both units and total dollar amounts.  Prosper Funding hopes to continue a similar trend of growth into the future.  Over time, Prosper Funding expects its lender base to grow as it gains more exposure to potential lenders and establishes its Notes as a viable investment alternative, and PMI and Prosper Funding expect that growth of Prosper Funding’s lender base will contribute to increased origination volume.

Prosper Funding’s operating plan calls for a strategy of increasing transaction volume to increase revenue. Prosper Funding will generate revenue through license fees earned under the Administration Agreement and servicing fees from lender members which are described more fully in the Notes to the Financial Statement included elsewhere in this prospectus.

The peer-to-peer lending industry remains a very innovative and unique industry, and the application of federal and state laws in areas such as securities and consumer finance to Prosper Funding’s business is still evolving. Prosper Funding will continue to monitor this evolution actively in order to identify and respond quickly to any legislative or regulatory developments that may impact the platform.

Results of Operations

Prosper Funding is newly formed and has not commenced operations and has no operating history.  It has not begun issuing Notes and has not collected any servicing fees or any other fees.

Unaudited Pro Forma Financial and Operating Data

The following table shows summary historical combined financial and operating data of PMI, Prosper Funding’s Predecessor for accounting purposes (as used in this section, the “Predecessor”), as of the date and for the periods indicated and summary pro forma financial and operating data for Prosper Funding as of the date and for the periods indicated.  The Predecessor consists of a 100.0% interest in all of the assets and operations of PMI that would have been contributed to Prosper Funding as well as certain assets and liabilities of the Predecessor that will not be contributed.  In connection with the closing of this offering, the Predecessor will transfer certain assets and liabilities to Prosper Funding, and the Predecessor will retain a 100.0% indirect ownership interest in Prosper Funding.  However, as required by United States generally accepted accounting principles (“GAAP”), the Predecessor will continue to consolidate 100.0% of the assets and operations of Prosper Funding in the Predecessor’s financial statements.  In addition, Prosper Funding will record the contribution at historical cost, as the contribution will be considered a reorganization of entities under common control.

The summary historical combined financial and operating data of the Predecessor as of and for the year ended December 31, 2011 and nine months ended September 30, 2012 are derived from the audited combined financial data of the Predecessor in PMI’s Annual Report on Form 10-K/A for the year ended December 31, 2011 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2012, which are incorporated by reference into this prospectus.  The following table should be read together with, and is qualified in its entirety by reference to, the historical audited and unaudited interim combined financial statements and the accompanying notes included elsewhere in this prospectus or incorporated by reference.

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The following table should also be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  The pro forma financial information is not necessarily indicative of the results (such as financial position and results of operations) that would have been attained had the transaction actually taken place on January 1, 2011.

The pro forma balance sheet assumes that the offering and the related asset and liability transfer occurred as of January 1, 2011, and the pro forma statements of income for the year ended December 31, 2011 and the nine months ended September 30, 2012 assume that the offering and the related transfer occurred as of January 1, 2011. These transactions primarily include, and the pro forma financial data give effect to, the following:

· the transfer of certain cash and restricted cash accounts, borrower loans and related assets from the Predecessor to Prosper Funding;

· the transfer of proprietary technology and the peer-to-peer online credit platform, including all of the rights related to the operation of the platform, to Prosper Funding;

· the transfer of lender Borrower Payment Dependent Notes and related liabilities from the Predecessor to Prosper Funding;

· the collection of payments from borrowers and subsequent distribution of those payments to Note holders by Prosper Funding rather than the Predecessor; and

· Prosper Funding’s execution of a long-term Administration Agreement with the Predecessor and recognition of costs by Prosper Funding and revenues by the Predecessor under those agreements.

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Predecessor Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2011

	Predecessor			Pro Forma Adjustments				Pro Forma PMI			Pro Forma PFL
ASSETS
Cash and cash equivalents	$	9,216,133		$	(450,798	)	A	$	8,765,335		$	450,798
Restricted cash		4,364,102			(4,233,807	)	B		130,295			4,233,807
Short term investments		9,997,420			-				9,997,420			-
Receivables		12,941			-				12,941			-
Loans held for investment at fair value		137,314			(137,314	)	C		-			137,314
Borrower Loans Receivable at fair value		75,762,894			(75,762,894	)	D		-			75,762,894
Property and equipment, net		1,337,572			(597,286	)	E		740,286			597,286
Prepaid and other assets		234,539			-				234,539			-
Investment in wholly owned subsidiary		-			3,099,893		F		3,099,893			-
Total assets	$	101,062,915		$	(78,082,206	)		$	22,980,707		$	81,182,099
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	1,123,732		$	(148,467	)	G	$	975,265		$	148,467
Accrued liabilities		2,027,313			(749,965	)	H		1,277,348			749,965
Borrower Payment Dependent Notes at fair value		76,159,501			(76,159,501	)	I		-			76,159,501
Repurchase obligation		22,168			(22,168	)	J		-			22,168
Total liabilities		79,332,714			(77,080,100	)			2,252,613			77,080,100
Stockholders' Equity
Convertible preferred stock		71,959			-				71,959			-
Common stock ($0.001 par value; 81,414,566 shares authorized; 2,872,859 and 4,478,667 shares issued and outstanding as of December 31, 2011 and December 31, 2010, respectively)		4,696			-				4,696			-
Additional paid-in capital		82,733,624							82,733,624			-
Members' Equity					3,099,893		K		-			3,099,893
Less Treasury Stock		(291,046	)		-				(291,046	)		-
Retained earnings (accumulated deficit)		(60,789,032	)		(1,002,106	)	L		(61,791,138	)		1,002,106
Total stockholders' equity		21,730,201			2,097,788				20,728,095			4,101,999
Total liabilities and stockholders' equity	$	101,062,915		$	(74,982,313	)		$	22,980,707		$	81,182,099

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Predecessor Unaudited Pro Forma Condensed Combined Balance Sheet

As of September 30, 2012

	Predecessor			Pro Forma Adjustments				Pro Forma PMI			Pro Forma PFL
ASSETS
Cash and cash equivalents	$	4,033,981		$	(2,366,389	)	A	$	1,667,592		$	2,366,389
Restricted cash		5,364,159			(5,264,160	)	B		100,000			5,264,160
Short term investments		3,999,402			-				3,999,402			-
Receivables		76,909			-				76,909			-
Loans held for investment at fair value		193,403			(193,403	)	C		-			193,403
Borrower Loans Receivable at fair value		148,546,530			(148,546,530	)	D		-			148,546,530
Property and equipment, net		1,397,505			(647,999	)	E		749,506			647,999
Prepaid and other assets		422,451			-				422,451			-
Investment in wholly owned subsidiary		-			3,099,893		F		3,099,893			-
Total assets	$	164,034,340		$	(153,918,588	)		$	10,115,754		$	157,018,480
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	1,527,026		$	(66,899	)	G	$	1,460,126		$	66,899
Accrued liabilities		2,839,218			(1,287,501	)	H		1,551,717			1,287,501
Borrower Payment Dependent Notes at fair value		149,177,364			(149,177,364	)	I		-			149,177,364
Repurchase obligation		35,500			(35,500	)	J		-			35,500
Total liabilities		153,579,108			(150,567,264	)			3,011,843			150,567,264
Stockholders' Equity
Convertible preferred stock		71,959			-				71,959			-
Common stock ($0.001 par value; 82,630,003 shares authorized; 3,006,745 and 2,872,859 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively)		4,830			-				4,830			-
Additional paid-in capital		83,066,775			-				83,066,775			-
Members' Equity					3,099,893		K		-			3,099,893
Less Treasury Stock		(291,046	)		-				(291,046	)		-
Retained earnings (accumulated deficit)		(72,397,286	)		(3,351,322	)	L		(75,748,608	)		3,351,322
Total stockholders' equity		10,455,232			(251,429)				7,103,910			6,451,215
Total liabilities and stockholders' equity	$	164,034,340		$	(150,818,693	)		$	10,115,754		$	157,018,480

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Pro Forma Balance Sheet Adjustments

The following adjustments to the pro forma condensed combined balance sheet assume the following transactions occurred on January 1, 2011:

A. Reflects the cash accounts associated with the borrower loans and borrower payment dependent notes.

B. Reflects the restricted cash associated with bank collateral requirements for origination and payment activity, as well as cash received for borrower payments payable to lender members.

C. Reflects the borrower loans held for investment which have been repurchased from lenders or funded by the predecessor.

D. Reflects the fair value of borrower member loans to Prosper Funding.

E. Reflects the historical cost of platform assets to Prosper Funding.

F. Reflects the investment in Prosper Funding.

G. Reflects the payables incurred for services directly related to lending and borrowing activities that will be paid by Prosper Funding.

H. Reflects the accrued liabilities incurred for services and accrued interest directly related to lending and borrowing activities that will be paid by Prosper Funding.

I. Reflects the fair value of borrower payment dependent notes to Prosper Funding.

J. Reflects the repurchase provision which is estimated based on historical repurchase experience and on planned lender indemnifications.

K: Reflects the Members' Equity associated with Prosper Funding.

L: Reflects the retained earnings associated with Prosper Funding operations.

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Predecessor Unaudited Pro Forma Condensed Combined Statements of Operations

	12 months ended December 31, 2011													9 months ended September 30, 2012
	Historical			Adjustments				Pro Forma PMI			Pro Forma PFL			Historical			Adjustments				Pro Forma PMI			Pro Forma PFL
Revenues
Origination fees	$	2,836,917			-			$	2,836,917		$	-		$	5,222,542			-			$	5,222,542		$	-
Loan servicing fees		23,389			-				23,389			-			442			-				442			-
Interest Income		9,691,735			(9,691,735	)	A		-			9,691,735			15,437,216			(15,437,216	)	A		-			15,437,216
Interest Expense		(9,195,721	)		9,195,721		B		-			(9,195,721	)		(14,618,105	)		14,618,105		B		-			(14,618,105	)
Rebates and promotions		(1,169,278	)						(1,169,278	)		-			(1,004,265	)		-				(1,004,265	)		-
Administration agreement fee revenue		-			4,216,157		C		1,199,057			3,017,100			-			5,409,167		C		1,659,917			3,749,250
Revenues		2,187,042			3,720,143				2,890,085			3,513,114			5,037,830			4,590,056				5,878,636			4,568,361
Cost of revenues
Cost of services		(1,244,240	)		872,636		D		(371,604	)		(872,636	)		(1,055,932	)		640,809		D		(415,123	)		(640,809	)
Reversal of (Provision for) loan and Note repurchases		32,340			(32,340	)	E		-			32,340			(16,845	)		16,845		E		-			(16,845	)
Net revenues		975,142			4,560,439				2,518,481			2,672,818			3,965,053			5,247,711				5,463,513			3,910,707
Operating expenses
Compensation and benefits		6,824,295			-				6,824,295			-			7,584,541			-				7,584,541			-
Marketing and advertising		2,017,981			-				2,017,981			-			3,979,980			-				3,979,980			-
Depreciation and amortization		482,457			-				482,457			-			492,948			-				492,948			-
Administration agreement fees		-			4,216,157		F		3,017,100			1,199,057			-			5,409,167		F		3,749,250			1,659,917
General and administrative
Professional services		2,149,749			(584,607	)	G		1,565,142			584,607			2,495,822			(508,056	)	G		1,987,766			508,056
Facilities and maintenance		730,606			-				730,606			-			926,960			-				926,960			-
Other		1,061,218			(167,612	)	H		893,606			167,612			1,169,666			(229,316	)	H		940,351			229,316
Total expenses		13,266,306			3,463,938				15,531,187			1,951,277			16,649,917			4,671,796				19,661,795			2,397,289
Loss before other income and expenses		(12,291,164	)		1,096,501				(13,012,706	)		721,542			(12,684,864	)		575,915				(14,198,281	)		1,513,418
Other income and expenses
Interest income		5,657			-				5,657			-			5,606			-				5,606			-
Change in fair value on Borrower Loans, Loans Held for Investment and Payment Dependent Notes, net		280,564			280,564		I		-			280,564			835,799			835,799		I		-			835,799
Insurance recoveries		1,999,999			-				1,999,999			-			-			-				-			-
Loss on impairment of fixed assets		(124,387	)		-				(124,387	)		-			-			-				-			-
Other Income		108,282			-				108,282			-			235,205			-				235,205			-
Total other income and expenses, net		2,270,115			280,564				1,989,551			280,564			1,076,610			835,799				240,811			835,799
Loss before income taxes		(10,021,049	)		1,377,065				(11,023,155	)		1,002,106			(11,608,254	)		1,411,714				(13,957,470	)		2,349,216
Provision for income taxes		-			-				-			-			-			-				-			-
Net income (loss)	$	(10,021,049	)	$	1,377,065			$	(11,023,155	)	$	1,002,106		$	(11,608,254	)	$	1,411,714			$	(13,957,470	)	$	2,349,216

Pro Forma Statements of Operations Adjustments

The following adjustments to the pro forma condensed combined statement of income assume the following transactions occurred on January 1, 2011:

A. Reflects the interest income associated with borrower member loans to Prosper Funding.

136

B. Reflects the interest expense associated with borrower payment dependent notes to Prosper Funding.

C. Reflects the fee revenue received under the terms of the Administration Agreement.

D.  Reflects the services directly related to lending and borrowing activities that will be paid by Prosper Funding.

E. Reflects the increase in the provision for loan and note repurchases by Prosper Funding.

F. Reflects the fees received under the terms of the Administration Agreement.

G. Reflects the professional services directly related to lending and borrowing activities that will be paid by Prosper Funding.

H. Reflects the banking and licensing expenses directly related to lending and borrowing activities that will be paid by Prosper Funding.

I. Reflects the change in fair value on the borrower loans and notes and the loans held for investment.

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Future Critical Accounting Policies and Estimates

Prosper Funding has not commenced operations as of the date of the balance sheet included herein.  In preparing its financial statements, it is required to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosures.  Prosper Funding has based these estimates on the historical experience of PMI and on various other assumptions that it believes to be reasonable under the circumstances.  Actual results could differ from those estimates.  Prosper Funding’s significant accounting policies which may include revenue recognition and fair value measurement for borrower loans and Notes are more fully described in the notes to its balance sheet included elsewhere in this prospectus.

Critical accounting policies are those policies that Prosper Funding believes present the most complex or subjective measurements and have the most potential to impact its financial position and operating results.  While all decisions regarding accounting policies are important, Prosper Funding believes that the following policies could be considered critical.

Prosper Funding qualifies as an “emerging growth company” under the JOBS Act.  As a result, it is permitted to rely on exemptions from certain disclosure requirements. For so long as it is an emerging growth company, it will not be required to:

· have an auditor report on its internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

· comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); and

· disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, Prosper Funding is choosing to opt out of such extended transition period, and as a result, it will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that Prosper Funding’s decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Prosper Funding will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which its total annual gross revenues exceed $1 billion, (ii) the date that it becomes a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of its ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter or (iii) the date on which it has issued more than $1 billion in non-convertible debt during the preceding three-year period.

Revenue Recognition

Upon commencement of operations, Prosper Funding’s revenue recognition policy will be in accordance with ASC Topic 605, Revenue Recognition. Under ASC Topic 605, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price of the services is fixed and determinable and collectability is reasonably assured.

Loan servicing fees

Loan servicing revenue includes monthly loan servicing fees and non-sufficient funds (“NSF”) fees on loans.  Loan servicing fees are accrued daily based on the current outstanding loan principal balance of the borrower loan but are not recognized until payment is received due to the uncertainty of collection of borrower loan payments.  Prosper Funding’s servicing fee is currently equal to 1.0% of the outstanding principal balance of the corresponding borrower loan.  Prosper Funding charges a NSF fee to borrowers for the first failed payment of each billing period.  NSF fees are charged to the borrower and collected and recognized immediately.

138

Interest income (expense) on Borrower Loans receivable and Payment Dependent Notes

Prosper Funding recognizes interest income on its borrower loans receivable using the accrual method based on the stated interest rate to the extent that it believes it to be collectable.  It records interest expense on the corresponding Note based on the contractual interest rate.

Fair Value Measurement

Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820 Fair Value Measurements and Disclosures, Prosper Funding determines the fair values of its financial instruments based on the fair value hierarchy established in that standard, which requires an entity to maximize the use of quoted prices and observable inputs and to minimize the use of unobservable inputs when measuring fair value. Prosper Funding uses various valuation techniques depending on the nature of the financial instrument, including the use of market prices for identical or similar instruments, or discounted cash flow models.  When possible, active and observable market data for identical or similar financial instruments are utilized. Alternatively, Prosper Funding may determine fair value using assumptions that it believes a market participant would use in pricing the asset or liability.

After Prosper Funding commences operations, its financial instruments will consist principally of cash and cash equivalents, restricted cash, borrower loans, accounts payable and accrued liabilities and Notes.  The estimated fair values of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximate their carrying values because of their short term nature.

Upon commencement of Prosper Funding’s operations, it will begin to purchase borrower loans originated through the platform and issue Notes, and it will account for borrower loans and Notes on a fair value basis.

Borrower Loans and Notes

Once Prosper Funding begins operations, it will purchase borrower loans from WebBank and, except as may otherwise be determined in connection with the servicing of any borrower loan, will hold the borrower loans until maturity.  Prosper Funding will also issue Notes to the lender members to fund its purchase of borrower loans.  Prosper Funding’s obligation to repay the Notes is conditioned upon the repayment of the associated borrower loan owned by Prosper Funding.  Prosper Funding will carry the borrower loans and Notes on its balance sheet as assets and liabilities, respectively.

In conjunction with Prosper Funding’s commencement of operations, it will adopt the provisions of ASC Topic 825, Financial Instruments.    ASC Topic 825 permits companies to choose to measure certain financial instruments and certain other items at fair value.  The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings.  Prosper Funding applies the provisions of ASC Topic 825 to the borrower loans and Notes issued on an instrument by instrument basis.   The aggregate fair value of the borrower loans and Notes will be reported as separate line items in the assets and liabilities sections of the balance sheet using the methods described in ASC Topic 820.

Prosper Funding will determine the fair value of the borrower loans and Notes in accordance with the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  As observable market prices will not be available for the borrower loans and Notes Prosper Funding will hold or for similar assets and liabilities, Prosper Funding believes that the borrower loans and Notes will be considered Level 3 financial instruments under ASC Topic 820.  ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

139

In a hypothetical transaction as of the measurement date, Prosper Funding believes that differences in the principal marketplace in which the borrower loans are originated and the principal marketplace in which it might offer those borrower loans may result in differences between the originated amount of the borrower loans and their fair value as of the transaction date. Changes in the fair value of borrower loans and Notes subject to the provisions of ASC Topic 820 are recognized in earnings; fees and costs associated with the acquisition of borrower loans are recognized as incurred.  Prosper Funding will estimate the fair value of the borrower loans and Notes using a discounted cash flow methodology based upon a set of valuation assumptions it believes market participants would use for similar assets and liabilities. The main assumptions used to value the borrower loans and Notes include default rates, discount rates applied to each credit tranche/grade, prepayment rates, and recovery rates based upon historical data for PMI Loans and PMI Notes originated in prior periods.

Overall, if the fair value of the borrower loans decrease or increase due to any changes in Prosper Funding’s assumptions, there will also be a corresponding decrease or increase in the fair value of the linked Notes. As a result, the effect on Prosper Funding’s earnings of adverse changes in key assumptions is mitigated. However, the impact of these changes in fair value could have a material adverse impact on lender members’ investments in the Notes.

As Prosper Funding receives scheduled payments of principal and interest on the borrower loans it will in turn make principal and interest payments on the Notes.  These principal payments will reduce the carrying value of the borrower loans and Notes.  If Prosper Funding does not receive payments on the borrower loans, it is not obligated to and will not make payments on the Notes.  The fair value of a Note is approximately equal to the fair value of the corresponding borrower loan, less a 1.0% per annum servicing fee charged to Note holders.  If the fair value of the borrower loan decreases due to Prosper Funding’s expectation regarding both the likelihood of default of the loan and the amount of loss in the event of default, there will also be a corresponding decrease in the fair value of the Note (an unrealized gain related to the Note and an unrealized loss related to the borrower loan).

Repurchase Obligation

Prosper Funding is obligated to cure the breach, indemnify lender members or repurchase certain Notes sold to lender members in the event of its violation of applicable federal, state, or local lending laws; verifiable identify theft; certain material breaches of representations and warranties; errors in assigning Prosper Ratings; or errors in the Quick Invest tool.  Prosper Funding will estimate a provision for the repurchase obligation when operations commence and the borrower loans are funded.  Repurchased Notes and borrower loans associated with violations of federal, state, or local lending laws, or verifiable identity thefts are written off at the time of repurchase.

Liquidity and Capital Resources

Prosper Funding will incur certain fees relating to registering or qualifying its offering and sale of Notes with federal and state securities regulators, as well as additional fees relating to obtaining any other licenses and permits that are necessary to the operation of its business.  In addition, upon commencement of the offering, Prosper Funding will incur certain ongoing expenses related to collateral requirements under its agreements with WebBank and Wells Fargo Bank.  Prior to the commencement of the offering, PMI will make one or more additional capital contributions to Prosper Funding in an aggregate amount that is sufficient to ensure that Prosper Funding is able to meet these expenses.  Prosper Funding expects the aggregate amount of these additional capital contributions to be between $3 million and $6 million.  Upon commencement of the offering, Prosper Funding will also incur certain recurring expenses relating to fees under the Administration Agreement with PMI, as well as its agreements with WebBank, Wells Fargo and FOLIOfn Investments, Inc.  Prosper Funding will also incur additional expense to the extent it is required to repurchase any Notes or indemnify Note holders in regard to any Notes.  It will pay these recurring expenses from license fees and servicing fees that it earns in connection with the license contained in the Administration Agreement and the servicing of borrower loans and Notes.  Prosper Funding expects that the combination of the initial capital contributions described above and ongoing fee revenue will be sufficient for it to meet ongoing cash requirements and sustain its operations.

Off-Balance Sheet Arrangements

As of September 30, 2012, Prosper Funding has not engaged in any off-balance sheet financing activities.

140

Tabular Disclosure of Contractual Obligations

As of September 30, 2012, Prosper Funding does not have any material amounts due under contractual obligation.

PROSPER MARKETPLACE, INC.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 73 of PMI’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011, which is incorporated by reference into this prospectus.

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 24 of PMI’s Quarterly Report for the period ended September 30, 2012, which is incorporated by reference into this prospectus.

LEGAL MATTERS

The validity of the Securities offered by this prospectus has been passed upon by Covington & Burling LLP, Washington, DC.

EXPERTS

The balance sheet of Prosper Funding as of March 1, 2012 included in this Registration Statement has been audited by OUM & Co. LLP, independent registered public accounting firm, as set forth in their report herein.  The balance sheet is included in reliance upon such report given on the authority of such firm as an expert in accounting and auditing.  The financial statements as of and for the period ended September 30, 2012 have been reviewed by OUM & Co. LLP.

The financial statements of PMI at December 31, 2011 and December 31, 2010, and for the years then ended, incorporated by reference in this prospectus and registration statement have been audited by OUM & Co. LLP, independent registered public accounting firm, as set forth in their report incorporated by reference elsewhere herein.  The financial statements referred to above are included in reliance upon such reports given on the authority of such firm as an expert in accounting and auditing.

141

Prosper Funding LLC

Index to Financial Statement

Report of Independent Registered Public Accounting Firm	II-2
Balance Sheet as of September 30, 2012 (unaudited) and March 1, 2012 (audited)	II-3
Statement of Operations (unaudited)	II-4
Statement of Cash Flows (unaudited)	II-5
Notes to Financial Statements (unaudited)	II-6

II-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Member of

Prosper Funding LLC

We have audited the accompanying balance sheet of Prosper Funding LLC as of March 1, 2012. This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Prosper Funding LLC at March 1, 2012, in conformity with accounting principles generally accepted in the United States of America.

The Company was incorporated in the state of Delaware on February 17, 2012 and has not commenced operations.

/s/ OUM & Co. LLP

San Francisco, California

March 5, 2012

II-2

Prosper Funding LLC

(A Development Stage Company)

Balance Sheets

	September 30, 2012 (Unaudited)			March 1, 2012 (Audited)
ASSETS
Cash and cash equivalents	$	5,000		$	100
Total assets		5,000			100
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities		-			-
Stockholders' Equity
Members Equity		172,785			100
Accumulated deficit		(167,785	)		-
Total stockholders' equity		5,000			-
Total liabilities and stockholders' equity	$	5,000		$	100

The accompanying notes are an integral part of these financial statements.

II-3

Prosper Funding LLC

(A Development Stage Company)

Statement of Operations

(Unaudited)

	Period From February 17, 2012  (Inception) to September 30, 2012
Operating expenses
Professional services	$	89,720
Other		78,065
Total expenses		167,785
Net loss	$	(167,785)

The accompanying notes are an integral part of these financial statements.

II-4

Prosper Funding LLC

(A Development Stage Company)

Statement of Cash Flows

(Unaudited)

	Period From February 17, 2012  (Inception) to September 30, 2012
Cash flows from operating activities:
Net loss	$	(167,785	)
Net cash used in operating activities		(167,785	)
Cash flows from financing activities:
Members' Equity capital infusion from Parent		172,785
Net cash provided by financing activities		172,785
Net increase in cash and cash equivalents		5,000
Cash and cash equivalents at beginning of the period		–
Cash and cash equivalents at end of the period	$	5,000

The accompanying notes are an integral part of these consolidated financial statements.

II-5

Notes to Prosper Funding LLC Financial Statements

1. Organization and Business

Prosper Funding LLC (“Prosper Funding”), a development stage company, was formed in the state of Delaware in February 2012 as a limited liability company with the sole equity member being Prosper Marketplace, Inc. (“PMI”).  To date, Prosper Funding has not commenced operations and is considered to be in the development stage.

Prosper Funding was formed by PMI to hold the borrower loans and issue the Notes.  Although Prosper Funding will be consolidated with PMI for accounting and tax purposes, Prosper Funding has been organized and will be operated in a manner that is intended to minimize the likelihood that it would be substantively consolidated with PMI in a bankruptcy proceeding.  Prosper Funding’s intention is to minimize the likelihood that its assets would be subject to claims by PMI’s creditors if PMI were to file for bankruptcy, as well as to minimize the likelihood that Prosper Funding will become subject to bankruptcy proceedings directly.  Prosper Funding seeks to achieve this by placing certain restrictions on its activities and implementing certain formal procedures designed to expressly reinforce its status as a distinct corporate entity from PMI.

Prosper Funding will operate a peer-to-peer online credit platform, which it refers to as the “platform,” that will enable Prosper Funding’s borrower members to borrow money and lender members to purchase Borrower Payment Dependent Notes (“Notes”), issued by Prosper Funding, the proceeds of which facilitate the funding of the loans (“Borrower Loans”) made to borrower members.  PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  PMI will transfer the platform to Prosper Funding, giving Prosper Funding the right to operate the peer-to-peer online credit platform to originate and service borrower loans and Notes.  Prosper Funding also expects to enter into an Administration Agreement, pursuant to which PMI has agreed to provide certain administrative services relating to the platform.

Prosper Funding has not commenced operations as of the date of this balance sheet.  Currently PMI operates the platform facilitating the origination of loans by WebBank through the platform and issues and sells notes corresponding to those loans which are held by PMI.  Upon commencement of Prosper Funding’s operations, PMI will facilitate the lending and borrowing activities of applicants and borrowers as agent of WebBank, and Prosper Funding will act as an agent to the lender members by maintaining the online marketplace to be transferred to Prosper Funding by PMI.

2. Summary of Significant Accounting Policies

Basis of Presentation

The preparation of the balance sheet was in conformity with accounting principles generally accepted in the United States.  From inception to September 30, 2012, member’s equity was $172,785 from a capital infusion from the Parent.  The historical net loss through September 30, 2012 resulted in an accumulated deficit of $167,785.  A statement of stockholder’s equity has not been presented since this financial information is already included in the balance sheet.

Federal Income Taxes

As a limited liability company, Prosper Funding will be classified as a disregarded pass through entity for U.S. federal income tax purposes.  Accordingly, Prosper Funding will not incur federal or state tax liabilities; rather, interest, gains and losses are “passed through” to the consolidated United States and applicable state information tax returns of PMI.

II-6

Cash

Prosper Funding maintains cash deposits in a bank which may exceed the amount of deposit insurance available.  Management periodically assesses the financial condition of the bank and believes that any potential credit loss is minimal.

3. Related Party

Prosper Funding is a wholly-owned subsidiary of PMI.  PMI developed the platform and owned the proprietary technology that makes operation of the platform possible.  As noted above, PMI will transfer ownership of the platform, including all of the rights related to the operation of the platform, to Prosper Funding.

Prosper Funding expects to enter into the Administration Agreement with PMI pursuant to which PMI has agreed to provide certain administrative services including: (i) managing the operation of the platform itself (credit policy revisions, systems maintenance, etc.); (ii) providing back-office services to Prosper Funding (maintaining  books and records, making periodic regulatory filings, performing limited cash management functions, etc.); and (iii) servicing the loans and notes originated through the platform.

4. Commitments and Contingencies

In the normal course of business, Prosper Funding enters into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications.  Prosper Funding’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against Prosper Funding that have not yet occurred.  Prosper Funding expects the risk of any future obligation under these indemnifications to be remote. 

II-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS OF PMI

See the following information included in PMI’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011, pages F-1 to F-29, which is incorporated by reference into this prospectus:

· Report of Independent Registered Public Accounting Firm,

· Balance Sheets as of December 31, 2011 and 2010, and the related Statements of Operations, Changes in Stockholders’ Equity and Cash Flows for the years then ended; and

· Notes to the Financial Statements.

See the following financial information included in PMI’s Quarterly Report as of September 30, 2012 and for the nine month periods ended September 30, 2012 and 2011, respectively, pages 1-23, which are incorporated by reference into this prospectus:

· Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011,

· Statements of Operations for the three and nine month periods ended September 30, 2012 and 2011 (unaudited),

· Statements of Changes in Stockholders’ Equity for the nine month periods ended September 30, 2012 and 2011 (unaudited),

· Statement of Cash Flows for the nine month periods ended September 30, 2012 and 2011 (unaudited); and

· Notes to financial statements (unaudited).

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table indicates the expenses to be incurred in connection with the offering described in this Registration Statement, all of which will be paid by PMI.  All amounts are estimated except the Securities and Exchange Commission registration fee.

Securities and Exchange Commission registration fee	$	57,400
Accountants’ fees and expenses		25,000
Legal fees and expenses		900,000
Blue Sky fees and expenses		60,000
Miscellaneous		-
Total Expenses	$	1,042,400

Item 14. Indemnification of Directors and Officers

Prosper Funding LLC

The LLC Agreement provides that, to the fullest extent permitted by applicable law, Prosper Funding’s directors and officers will be indemnified by Prosper Funding against, any loss, damage or claim incurred by reason of any act or omission performed or omitted by such officer or director in good faith on Prosper Funding’s behalf and in a manner reasonably believed to be within the scope of the authority conferred on the officer or director by the LLC Agreement, except for any loss, damage or claim incurred by reason of the officer’s or director’s gross negligence or willful misconduct;   provided, however, that any such indemnity shall be provided out of and to the extent of Prosper Funding’s assets only.  In addition, the LLC Agreement provides that, to the fullest extent permitted by applicable law, Prosper Funding may advance any expenses incurred by an officer or director defending any claim, demand, action, suit or proceeding prior to its final disposition, upon Prosper Funding’s receipt of an undertaking by or on behalf of the officer or director to repay such amount if it is determined that the officer or director is not entitled to be indemnified under the LLC Agreement.  Prosper Funding will not pay any such indemnification from any borrower loan collections that are allocable to the payment of Notes.

II-8

Prosper Funding and PMI have entered into a Services and Indemnity Agreement with Global Securitization Services, LLC and Prosper Funding’s independent directors, Kevin Burns and Bernard Angelo (the “GSS representatives”).  Under this agreement, PMI has agreed to indemnify each of the GSS representatives against any loss, damage or claim incurred by him as a result of serving as an independent director for Prosper Funding or by reason of any act or omission performed or omitted by him as one of Prosper Funding’s independent directors, except for any loss, damage or claim incurred by reason of the GSS representative’s gross negligence or willful misconduct.  Prosper Funding will not pay any such indemnification from any borrower loan collections that are allocable to the payment of Notes.

Prosper Funding believes these provisions and agreements are necessary to attract and retain qualified persons as directors and officers.  To the extent these provisions permit Prosper Funding to indemnify its officers and directors for liabilities arising under the Securities Act of 1933, as amended, however, Prosper Funding has been informed by the SEC that such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Prosper Marketplace, Inc.

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

· any breach of the director’s duty of loyalty to PMI or PMI’s stockholders;

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

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

· any transaction from which the director derived an improper personal benefit.

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

· PMI will indemnify its directors and officers to the fullest extent permitted by law;

· PMI may indemnify its other employees and other agents to the same extent that it indemnifies its officers and directors; and

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

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

II-9

In addition to the indemnification provided for in PMI’s amended and restated certificate of incorporation and bylaws, PMI has entered into indemnification agreements with each of its directors. The indemnification agreements require PMI, among other things, to indemnify such persons for all expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement (if such settlement is approved in advance by PMI) (collectively, “Expenses”) actually and reasonably incurred by such person in connection with the investigation, defense or appeal of any proceeding to which such person may be made a party by reason of:

· such person’s service as a director or officer of PMI,

· any action taken by such person while acting as director, officer, employee or agent of PMI, or

· such person’s actions while serving at the request of PMI as a director, officer, employee, trustee, general partner, managing member, agent or fiduciary of PMI or any other entity

in each case, whether or not serving in any such capacity at the time such Expense is or was incurred.

In addition, PMI is required to indemnify against any Expenses actually and reasonably incurred in connection with any action establishing or enforcing a right to indemnification or advancement of expenses under the agreement or under any directors’ and officers’ liability insurance policies maintained by PMI to the extent that such person is successful in such action.

Under the indemnification agreements, PMI is not obligated to provide indemnification on account of any proceeding unless such person acted in good faith and in a manner reasonably believed to be in the best interests of PMI, and with respect to criminal proceedings, such person had no reasonable cause to believe his conduct was unlawful. The termination of a proceeding by judgment, settlement, conviction or upon a plea of   nolo contendere   or its equivalent does not, by itself, create the presumption that such person did not satisfy the above standards

In addition, under the indemnification agreements, PMI is not obligated to provide indemnification:

· for any proceedings or claims initiated or brought voluntarily by such person and not by way of defense, unless such indemnification is authorized by PMI, other than a proceeding to establish such person’s right to indemnification;

· for any expenses incurred by such person with respect to any proceeding instituted by such person to enforce and interpret the terms of his indemnification agreement, unless such person is successful in such action;

· for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

· for an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements); and.

· for any reimbursement of PMI by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of PMI, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of PMI pursuant to Section 304 of the Sarbanes-Oxley Act, or the payment to PMI of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements).

The indemnification agreements also provide that PMI agrees to indemnify such persons to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of the agreement or PMI’s amended and restated certificate of incorporation or bylaws. Moreover, the indemnification agreements provide that any future changes under Delaware law that expand the ability of a Delaware corporation to indemnify its officers and directors are automatically incorporated into the agreements and that, to the extent permitted by law, any future changes under Delaware law that would limit the ability of a Delaware corporation to indemnify its officers and directors shall have no effect on PMI’s indemnification obligations as set forth in such agreements.

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

II-10

PMI believes that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers.

Item 15.  Recent Sales of Unregistered Securities

PROSPER FUNDING LLC

Issuances of Equity Interest

Set forth below is information regarding equity interests issued by Prosper Funding since its inception.  Also included is the consideration, if any, received by Prosper Funding for such securities and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.  No underwriters were involved in the sale of any of the securities set forth below.

On March 1, 2012, Prosper Funding issued and sold to PMI a 100% equity interest for consideration of $100.  These securities were sold in reliance on the exemption from the registration requirements of the Securities Act as set forth in Section 4(2) of the Securities Act relative to sales by an issuer not involving a public offering.

PROSPER MARKETPLACE, INC.

Issuances of Capital Stock, Warrants and Promissory Notes

Set forth below is information regarding shares of common and preferred stock issued, warrants exercisable for common and preferred stock issued, convertible notes issued and options granted by PMI since its inception. Also included is the consideration, if any, received by PMI for such securities and information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed. No underwriters were involved in the sale of any of the securities set forth below.

In November 2009, PMI issued and sold a promissory note and related warrants to purchase an aggregate of 164,178 shares of PMI’s Common Stock to an accredited investor, for an aggregate purchase price of $1,000,000. In connection with the consummation of PMI’s Series D financing, the note and all outstanding principal and accrued interest thereunder was converted into shares of PMI’s Series D preferred stock. See “Transactions with Related Parties—Prosper Marketplace, Inc.—Financing Arrangements with Significant Shareholders, Directors and Officers” located elsewhere in this prospectus for further details. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving any public offering.

In February 2010, PMI sold promissory notes and issued warrants to acquire 328,356 shares of its common stock to accredited investors, all of which were existing investors, for an aggregate purchase price of $2,000,000. In connection with the consummation of PMI’s Series D financing, these notes and all outstanding principal and accrued interest thereunder were converted into shares of PMI’s Series D preferred stock. See “Transactions with Related Parties—Prosper Marketplace, Inc.—Financing Arrangements with Significant Shareholders, Directors and Officers” located elsewhere in this prospectus for further details. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving any public offering.

In March 2010, PMI entered into a Note Option Agreement with an individual accredited investor, who was also an existing investor, pursuant to which the investor granted PMI an option to sell him an aggregate principal amount of up to $300,000 of convertible promissory notes. PMI exercised the option in full on March 22, 2010. PMI paid off the notes in full in a single payment on April 19, 2010. See “Transactions with Related Parties—Prosper Marketplace, Inc.—Financing Arrangements with Significant Shareholders, Directors and Officers” located elsewhere in this prospectus for further details. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving any public offering.

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In April 2010, PMI sold promissory notes to accredited investors, all of which were existing investors, for an aggregate purchase price of $250,000. In connection with the consummation of PMI’s Series D financing, these notes and all outstanding principal and accrued interest thereunder were converted into shares of PMI’s Series D preferred stock. See “Transactions with Related Parties—Prosper Marketplace, Inc.—Financing Arrangements with Significant Shareholders, Directors and Officers” located elsewhere in this prospectus for further details. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving any public offering.

In April 2010, Prosper issued and sold 20,340,705 shares at $0.7385 per share of Series D convertible preferred stock (Series D Preferred Stock) in a private placement for $14,595,709, net of issuance costs of $125,903. In connection with that sale, we issued 4,978,854 Series D shares pursuant to the conversion of $3,676,884 in promissory notes payable, including $300,000 that represented consideration for a note holder’s agreement to convert its note prior to maturity. Also, in connection with the Series D transaction, we issued 3,110,188 shares of Series D-1 convertible preferred stock (Series D-1 Preferred Stock). We issued the Series D-1 Preferred Stock as additional consideration for certain holders of Series A, B or C Preferred Stock that participated in the Series D transaction at significant levels but did not receive any cash consideration for those shares.  As part of the Series D transaction, the aggregate liquidation preferences of the Series A, B and C Preferred Stock were reduced from $40 million to $20 million. The Series D-1 Preferred Stock established aggregate liquidation preferences of $3.1 million which offset, for the recipients of Series D-1 Preferred Stock, some of the reduction in liquidation preference they experienced with respect to their Series A, B and C Preferred Stock. The Series D-1 Preferred Stock was convertible into Common Stock at a ratio of 1,000,000:1.  Holders of Series D-1 Preferred Stock that held less than 1 million Series D-1 shares were entitled on conversion of those shares to receive a cash payment equal to a pro rata fraction of the par value of a single share of Common Stock.  The Series D-1 Preferred Stock had no voting rights and limited preference and conversion rights. As a result, we allocated the fair value of Series D-1 Preferred Stock at the par value of $.001 per share from the proceeds of Series D.

In June 2011, Prosper issued and sold 23,222,747 shares at $0.7385 per share of Series E convertible preferred stock (Series E Preferred Stock) in a private placement for $16,708,524, net of issuance costs of $441,476.  In connection with that sale, we issued and recorded 10,000,000 shares at the par value $0.001 per share of Series E-1 convertible preferred stock (Series E-1 Preferred Stock) to certain holders of Series A, Series B and Series C Preferred Stock who participated in the sale. The Series E-1 shares established certain liquidation rights, as described below, have no voting rights and are convertible into one share of common stock (Common Stock) for every one million shares of Series E-1. We allocated the fair value of the shares of Series E-1 Preferred Stock at the par value of $.001 per share from the proceeds of Series E. Upon issuance of our Series E and Series E-1 Preferred Stock, the Series D-1 Preferred Stock was converted into a single share of Common Stock.

In November 2011, PMI issued and sold to investors an aggregate of 8,996,739 shares of Series F convertible preferred stock in a private placement at a purchase price of $1.00 per share for$8,941,602 net of issuance costs of $58,735. Purchasers of the securities included certain investment funds that are affiliated with IDG Capital Partners and Accel Partners. James W. Breyer, who was a member of PMI's board of directors at the time, is a partner of Accel Partners. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder regarding sales by an issuer not involving a public offering.

Stock Grants

During the years ended December 31, 2011, 2010 and 2009 and through September 30, 2012, PMI did not grant any fully vested common shares to employees.

During the year ended December 31, 2009 PMI granted 6,500 fully vested common shares to non-employees. Of the 6,500 shares granted in 2009, 2,000 shares were granted at $0.56 per share, and the remaining 4,500 shares were granted at $1.94 per share. During the years ended December 31, 2011 and 2010 and through June 30, 2012, PMI did not grant any fully vested common shares to non-employees.

In 2006, PMI also issued 26,483 shares of common stock granted at $0.50 per share as partial payment to acquire the Prosper.com domain name.

These securities were sold or granted in reliance on the exemption from the registration requirements of the Securities Act set forth in Section 4(2) of the Securities Act regarding sales by an issuer not involving a public offering.

Warrants

Excluding the warrants noted above granted in connection with PMI’s funding rounds in November 2009 and February 2010, PMI granted warrants to acquire 237,506 shares of its common stock at an exercise price of $0.20 per share, and granted warrants to acquire 703,714 shares of its common stock at an exercise price of $0.12 per share, during the year ended December 31, 2011. From January 1, 2012 through September 30, 2012, PMI granted warrants to acquire 1,266,281 shares of its common stock at an exercise price of $0.17. These securities were sold in reliance on the exemption from the registration requirements of the Securities Act as set forth in Section 4(2) of the Securities Act and Regulation D promulgated thereunder relative to sales by an issuer not involving a public offering.

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Item 16.  Exhibits and Financial Statements Schedules

(a)

Exhibits

See the Index to Exhibits attached to this registration statement, which is incorporated by reference herein.

(b)

Financial Statement Schedules

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or the notes thereto.

Item  17.  Undertakings

The undersigned registrants hereby undertake:

1.  To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

i.  To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

ii.  To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

iii.  To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

2.  That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3.  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

4.  That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the Registrants are subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.  Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

5.  That, for the purpose of determining liability of the Registrants under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Registrants undertake that in a primary offering of securities of the undersigned Registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

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i.  Any preliminary prospectus or prospectus of the undersigned Registrants relating to the offering required to be filed pursuant to Rule 424;

ii.  Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrants or used or referred to by the undersigned Registrants;

iii.  The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrants or their securities provided by or on behalf of the undersigned Registrants; and

iv.  Any other communication that is an offer in the offering made by the undersigned Registrants to the purchaser.

6.  Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act, Prosper Funding LLC has duly caused this Amendment No. 5 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in San Francisco, California, on the 26th day of November, 2012.

PROSPER FUNDING LLC.
By:	/s/ Joseph L. Toms
	Joseph L. Toms
	President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below, constitutes and appoints Kirk T. Inglis and Sachin D. Adarkar and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for her and in her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the Securities Act, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Joseph L. Toms	President (principal executive officer);	November 26, 2012
Joseph L. Toms
/s/ Daniel P. Sanford	Treasurer (principal financial and accounting officer)	November 26, 2012
Daniel P. Sanford
*	Vice President; Director	November 26, 2012
Kirk T. Inglis
/s/ Sachin D. Adarkar	Secretary; Director	November 26, 2012
Sachin D. Adarkar
*	Director	November 26, 2012
Bernard J. Angelo
*	Director	November 26, 2012
Kevin P. Burns
* By: Sachin D. Adarkar
Sachin D. Adarkar
Attorney-in-Fact

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SIGNATURES

Pursuant to the requirements of the Securities Act, Prosper Marketplace, Inc. has duly caused this Amendment No. 5 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in San Francisco, California, on the 26th day of November, 2012.

PROSPER MARKETPLACE, INC.
By:	/s/ Dawn Lepore
	Dawn Lepore
	President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below, constitutes and appoints Kirk T. Inglis and Sachin D. Adarkar and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for her and in her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the Securities Act, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Daniel P. Sanford	Senior Vice President, Finance (principal  financial	November 26, 2012
Daniel P. Sanford	and accounting officer)
*	Director	November 26, 2012
Lawrence W. Cheng
*	Director	November 26, 2012
Court Coursey
*	Director	November 26, 2012
Timothy C. Draper
*	Director	November 26, 2012
Nigel W. Morris
*	Director	November 26, 2012
David Silverman
* By: Sachin D. Adarkar
Sachin D. Adarkar
Attorney-in-Fact

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 EXHIBIT INDEX

Exhibit Number	Description
2.1	Form of Asset Transfer Agreement, between Prosper Marketplace, Inc. and Prosper Funding LLC
3.1	Amended and Restated Limited Liability Company Agreement of Prosper Funding LLC, dated October 1, 2012
3.2	Amended and Restated Certificate of Incorporation of Prosper Marketplace, Inc. (incorporated by reference to Exhibit 3.1 of PMI’s Annual Report on Form 10-K, filed March 30, 2012)
3.3	Prosper Funding LLC Certificate of Formation
3.4	Bylaws of PMI, dated March 22, 2005 (incorporated by reference to Exhibit 3.2 of PMI’s Registration Statement on Form S-1, filed October 30, 2007)
4.1	Form of Prosper Funding Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.3)
4.2	Form of PMI Borrower Payment Dependent Note (included as Exhibit A in Exhibit 4.4)
4.3	Form of  Supplemental Indenture between Prosper Funding LLC and Wells Fargo Bank, National Association
4.4	Indenture, dated June 15, 2009, between Prosper Marketplace, Inc. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of PMI’s Registration Statement on Form S-1/A, filed June 26, 2009)
5.1	Opinion of Covington & Burling LLP dated November 26, 2012
8.1	Opinion of Covington & Burling LLP dated November 26, 2012
10.1	Form of Prosper Funding Borrower Registration Agreement
10.2	Form of Prosper Funding Lender Registration Agreement
10.3	Form of PMI Borrower Registration Agreement (incorporated by reference to Exhibit 10.1 of PMI’s Registration Statement on Form S-1 filed on November 19, 2012, SEC file number 333-182599)
10.4	Form of PMI Lender Registration Agreement (Note Commitment, Purchase and Sale Agreement) (incorporated by reference to Exhibit 10.2 of PMI’s Registration Statement on Form S-1 filed on November 19, 2012, SEC file number 333-182599)
10.5	Amended and Restated Processing Agreement, dated  November 21, 2012, between CSC Logic and Prosper Marketplace, Inc. (2)
10.6	Back-up Processing Agreement, dated November 21, 2012, between CSC Logic, Inc. and Prosper Funding LLC (2)
10.7	Form of Administration Agreement between Prosper Funding LLC and Prosper Marketplace, Inc.
10.8	Form of Services and Indemnity Agreement, dated March 1, 2012, between Global Securitization Services, LLC, Kevin Burns, Bernard Angelo, Prosper Marketplace, Inc.

E-1

10.9	Second Amended and Restated Loan Sale Agreement, dated ______________, 2012, between WebBank, Prosper Marketplace, Inc. and Prosper Funding LLC (1) (2)
10.10	Second Amended and Restated Loan Account Program Agreement, dated __________, 2012, between WebBank and Prosper Marketplace, Inc. (1) (2)
10.11	Stand By Loan Purchase Agreement, dated ___________, 2012, between WebBank and Prosper Marketplace, Inc. (1) (2)
10.12	Amended and Restated Loan Sale Agreement, dated September 14, 2010, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.4 of PMI’s Quarterly Report on Form 10-Q, filed November 12, 2010)
10.13	Amended and Restated Loan Account Program Agreement, dated September 14, 2010, between WebBank and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.3 of PMI’s Quarterly Report on Form 10-Q, filed November 12, 2010)
10.14	Form of Amended and Restated Hosting Services Agreement, between FOLIOfn Investments, Inc., Prosper Marketplace, Inc. and Prosper Funding LLC
10.15	Form of Amended and Restated Services Agreement, between FOLIOfn Investments, Inc., Prosper Marketplace, Inc. and Prosper Funding LLC
10.16	Form of Amended and Restated License Agreement, between FOLIOfn Investments, Inc., Prosper Marketplace, Inc. and Prosper Funding LLC
10.17	Hosting Services Agreement, dated March 3, 2009, between FOLIOfn Investments, Inc. and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.5 of PMI’s Registration Statement on Form S-1/A, filed April 14, 2009)
10.18	Prosper-Folio Services Agreement, dated March 3, 2009, between FOLIOfn Investments, Inc. and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.6 of PMI’s Registration Statement on Form S-1/A, filed April 14, 2009)
10.19	Prosper-Folio Software License Agreement, dated March 3, 2009, between FOLIOfn Investments, Inc. and Prosper Marketplace, Inc. (incorporated by reference to Exhibit 10.7 of PMI’s Registration Statement on Form S-1/A, filed April 14, 2009)
10.20	Indemnification Agreement, dated November 2, 2011, between Prosper Marketplace, Inc. and Jeffrey Jacobs  (incorporated by reference to Exhibit 10.9 of PMI’s Registration Statement on Form S-1 filed on November 19, 2012, SEC file number 333-182599)
10.21	Schedule of Prosper Marketplace, Inc. Officer and Director Indemnification Agreements (included as Exhibit A in Exhibit 10.20)
23.1	Consent of OUM & Co. LLP, an independent registered public accounting firm
23.2	Consent of Covington & Burling LLP (included in Exhibits 5.1 and 8.1)
24.1	Power of Attorney (see page S-1 of this prospectus)
25.1	Form T-1 Statement of Eligibility under Trust Indenture Act of 1939 of Trustee under the Indenture

(1)	Executed version of this exhibit to be filed subsequently.
(2)	Certain portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act.

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EX-2.1

Exhibit 2.1

ASSET TRANSFER AGREEMENT

This ASSET TRANSFER AGREEMENT (this “Agreement”), dated as of [●], is entered into by and between Prosper Marketplace, Inc., a Delaware corporation (“PMI”), and Prosper Funding LLC, a Delaware limited liability company and a wholly-owned subsidiary of PMI (“Prosper Funding”).  PMI and Prosper Funding are sometimes individually referred to herein as a “Party” and are sometimes collectively referred to herein as the “Parties.”

WHEREAS, PMI operates a peer-to-peer online credit platform (the “Platform”) that enables PMI’s borrower members to borrow money and its lender members to purchase certain notes referred to as Borrower Payment Dependent Notes (collectively, the “Notes”), issued by PMI in series under that certain Indenture, dated as of June 15, 2009 (the “Indenture”), by and between PMI and Wells Fargo Bank, National Association, as trustee (the “Trustee”), the proceeds of which facilitate the funding of the loans made to borrower members (collectively, “Borrower Loans”);

WHEREAS, PMI desires to transfer, assign and convey to Prosper Funding, and Prosper Funding desires to acquire, assume and accept from PMI, each of the following: (i) all of PMI’s rights and obligations with respect to all Notes that are outstanding as of the date hereof (collectively, the “Outstanding Notes”); (ii) all of PMI’s rights and obligations with respect to all Borrower Loans corresponding to any of the Outstanding Notes, including without limitation all rights to receive payments thereunder (including all payments of principal and interest); (iii) all of PMI’s rights and obligations with respect to any agreement entered into between PMI and any of its lender or borrower members, on or prior to the date hereof (collectively, the “Customer Agreements”), including without limitation all Lender Registration Agreements, Borrower Registration Agreements, Group Leader Registration Agreements, consents for PMI to make electronic disclosures, agreements pertaining to the terms of use of PMI’s website, authorizations to debit the accounts of PMI’s borrower members, authorizations to obtain credit reports with respect to PMI’s lender members, state financial suitability questionnaires, withholding tax certifications, and any other agreement, document, consent, authorization or other instrument entered into between PMI and its lender or borrower members or delivered to PMI by any of them; (iv) all books, records, information or other documents in PMI’s possession related to such Outstanding Notes or Borrower Loans; (v) the Platform, and all assets and rights of PMI related to the operation of the Platform (other than computer and electronic hardware), as described on Schedule A hereto; (vi) the trademarks, copyrights and domain names identified on Schedule A hereto (collectively, the “IP Assets”), and all related “goodwill assets” identified as such on Schedule A hereto that comprise all of the tangible and intangible assets and information connected with the use of, symbolized by, and embodied in the IP Assets that are necessary for Prosper Funding to continue using the IP Assets in continuity with PMI’s past practice; (vii) each of the accounts, and all funds therein, held by PMI, for the benefit of the holders of the Outstanding Notes, at the Trustee and identified on Schedule B hereto; and (viii) a cash capital contribution in the amount of $[●] (the foregoing clauses (i) through (viii) are referred to herein collectively as the “Transferred Assets”); and

WHEREAS, the Transferred Assets constitute substantially all of the properties and assets of PMI as an entirety, and pursuant to a Supplemental Indenture to be entered into among PMI, Prosper Funding and the Trustee in accordance with the terms of the Indenture, Prosper Funding will assume all of the obligations of, and succeed to and be substituted for, and be entitled to exercise every right and power of, PMI under the Outstanding Notes and the Indenture, with PMI to be discharged thereafter from all obligations and covenants under the Outstanding Notes and the Indenture.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1.             Assignment and Assumption of Transferred Assets.  Effective as of the date hereof, PMI hereby transfers, assigns and conveys to Prosper Funding and its successors and assigns, and Prosper Funding hereby acquires, assumes and accepts from PMI, all of PMI’s right, title and interest in, to and under, and all of PMI’s obligations under, all of the Transferred Assets.  Such transfer is a capital contribution that has been duly authorized and approved by the board of directors of PMI in accordance with (i) the requirements of the organizational and other governing documents of PMI, and (ii) the requirements of Delaware law applicable to capital contributions between affiliates.

2.             Intellectual Property Filings.

(a)             In connection with the foregoing contribution PMI agrees to (i) record and file at the United States Patent and Trademark Office and any necessary foreign equivalents, at its own expense, the original executed trademark assignment set forth in Schedule C hereto to provide third parties with notice of the conveyance hereunder and to perfect the assignment of the trademark assets to Prosper Funding within the applicable timeframes required in each jurisdiction and (ii) to cause all financing statements and continuation statements (including, without limitation, filings under the Uniform Commercial Code as in effect in Delaware and any other relevant state of the United States, or any foreign equivalent thereto), this Agreement and all amendments hereto, and any other documents necessary to provide  third parties with notice of Prosper Funding’s right, title and interest in, to and under all intellectual property included in the Transferred Assets to be promptly filed, recorded and registered, and at all times to be kept filed, recorded and registered, all in such manner and in such places as ay be required by law fully to preserve and protect the right, title and interest of Prosper Funding in such Transferred Assets, and to deliver to Prosper Funding copies or filing receipts for any document so filed, recorded or registered as soon as reasonably available after such filing, recording or registration.  Prosper Funding will cooperate fully with PMI in connection with PMI’s performance of its obligations set forth in this Section 2(a), including, without limitation, by executing any and all documents reasonably required to fulfill the intent of this Section 2(a).

(b)             In connection with the foregoing contribution, PMI will provide Prosper Funding, its successors, assigns or legal representatives, cooperation and assistance at Prosper Funding’s request and expense (including, but not limited to, the execution and delivery of any  and all affidavits, declarations, oaths, assignments, powers of attorney or other documentation as may be reasonably required) in:

  (i)             the preparation and prosecution of any applications for registration or any applications for renewal of a registration covering any of the transferred trademarks;

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  (ii)           the prosecution or defense of any trademark office proceedings, infringement proceedings or other proceedings that may arise in connection with any of the transferred trademarks, including, without limitation, testifying as to any facts related to the transferred trademarks, the contribution thereof to Prosper Funding or this Agreement;

  (iii)           obtaining any additional trademark protection reasonably appropriate that may be secured under the laws now or hereinafter in effect in the United States or any other relevant jurisdiction for the transferred trademarks; and

  (iv)           the implementation of or perfection of this Agreement and the grants, rights and transactions contemplated hereby.

3.             Security Interests.  It is the intention of the Parties that each of the contributions contemplated by this Agreement constitutes an absolute assignment and transfer, and that the beneficial interest in all of the Transferred Assets not be property of PMI’s estate in the event of any filing of a bankruptcy petition by or against PMI under any bankruptcy, insolvency or receivership law.  However, if the transfer of any of the Transferred Assets is deemed to be other than an absolute assignment and transfer, the Parties intend that this Agreement comprise a security agreement (as such term is defined in the Uniform Commercial Code or equivalent statute or law concerning the grant and perfection of security interests in every relevant jurisdiction) that grants a security interest in all of the Transferred Assets to Prosper Funding such that Prosper Funding shall have the rights, powers and privileges of a secured party under the Uniform Commercial Code or equivalent statute or law concerning the grant and perfection of security interests in every relevant jurisdiction, and that the filings, recordings and registrations described in this Section 3 give Prosper Funding a first priority perfected security interest in, to and under all of the Transferred Assets.

4.             Agreement to Fund.  Upon demand by Prosper Funding presented to PMI from time to time, PMI hereby agrees that it shall fund in full, and provide Prosper Funding with the full, complete and timely payment of, any liability, obligation or debt of Prosper Funding arising out of or relating to any of the following, to the extent the following relate to, arise from or are caused by any condition, event or circumstance existing, arising or occurring prior to the date hereof or to any act or omission of PMI as agent of Prosper Funding or in contravention of its duties to Prosper Funding under any contract or agreement between PMI and Prosper Funding:

(a)             any obligation to repurchase any of the Outstanding Notes pursuant to the terms of such Outstanding Note, the Indenture or any Lender Registration Agreement pertaining to such Outstanding Note;

(b)             any obligation to pay arbitration filing fees, administrative  fees or arbitrator fees under any of the Customer Agreements; or

(c)             any indemnification obligations arising out of or relating to any Group Leader Registration Agreement entered into by PMI on or prior to the date hereof.

5.             Representations and Warranties of PMI.  PMI hereby represents and warrants to Prosper Funding, as of the date hereof, as follows:

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(a)             Authorization.  PMI is an entity duly organized and validly existing in good standing under the laws of its jurisdiction of organization.  PMI has the requisite power and authority to enter into, execute and deliver this Agreement and to perform all of its obligations hereunder.  This Agreement and the transactions contemplated hereby have been duly authorized, executed and delivered by it, and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject only to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(b)             No Conflicts.  Neither the execution and delivery of this Agreement nor the performance by PMI of its obligations hereunder will conflict with, breach, violate, constitute a default under or accelerate any rights or obligations under (or constitute an event which, with the passage of time, would result in any of the foregoing): (i) any indenture, mortgage, deed of trust, loan agreement or other contract, agreement, commitment or instrument to which PMI is a party or by which it is bound and which relates to, or imposes any restrictions upon the ability of PMI to transfer to Prosper Funding, the Transferred Assets; (ii) the organizational or other governing documents of PMI; or (iii) in any material respect, any statute, law, judgment, order, writ, decree, permit, license, rule or regulation of any court or governmental or regulatory agency or body having jurisdiction over PMI or its property.  The performance by PMI of its obligations hereunder will not require any consent or approval of, or any filing, qualification or registration with, any court or governmental or regulatory agency or authority having jurisdiction over PMI or its property or any other third party.

(c)             Title to Transferred Assets.  PMI owns all right, title and interest in, to and under the Transferred Assets, free and clear of all liens, pledges, claims, security interests, charges, restrictions, limitations or other encumbrances of any kind (collectively, “Liens”), other than restrictions under federal and state securities laws.  Upon execution of this Agreement by the Parties and the consummation of the transactions contemplated hereby, Prosper Funding will acquire good title to such Transferred Assets free and clear of all Liens other than restrictions under federal and state securities laws and any Liens created by Prosper Funding.

(d)             Certain Conduct.  At all times prior to the date hereof and during the entire term of each of the Outstanding Notes, PMI has (i) used commercially reasonable efforts to service and collect the Borrower Loan corresponding to each Outstanding Loan, in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans; and (ii) used commercially reasonable efforts to maintain backup servicing arrangements providing for the Borrower Loan corresponding to each Outstanding Loan to be serviced and collected in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans, in each case of the foregoing clauses (i) and (ii), all in accordance with PMI’s obligations set forth in Sections 3.6(a) and (b) of the Indenture, respectively.

(e)             Transferred IP Assets.

  (i)             Schedule of Licenses.  The information set forth in Schedule A  hereto is true and correct in all material respects.

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  (ii)            Compliance with Law.  The assignment and contribution of the Platform and the IP Assets (collectively, the “Transferred IP Assets”) pursuant to this Agreement complies in all material respects with all requirements of applicable federal, state, local, and foreign laws, and regulations thereunder.

  (iii)           All Filings Made.  PMI has caused or will cause the filing of all appropriate financing statements and other filings (including, but not limited to, UCC filings (and relevant foreign equivalents) and trademark filings (with the United States Patent and Trademark Office and relevant foreign equivalents)) in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Transferred IP Assets granted to Prosper Funding hereunder, or as otherwise necessary in any jurisdiction to provide third parties with notice of the transfers and assignments herein contemplated and to perfect the absolute conveyance of the Transferred IP Assets from PMI to Prosper Funding on the date hereof, and no other consent, approval, or order of, or filing with, any court or governmental body is required to be obtained or made by PMI for the consummation of the transactions in the manner contemplated by this Agreement, except such as have been obtained as of the date hereof or such as may be required under state securities laws; provided, however, that if (A) any filing or trademark filing is not accepted by the relevant governmental authority or is not effective to provide such notice or to perfect such conveyance, and (B) such nonacceptance or ineffectiveness would not have a material adverse effect on the conveyance of the Transferred IP Assets, such event will not constitute a breach of this representation.

  (iv)           Priority.  Other than the security interest granted to Prosper Funding pursuant to this Agreement, PMI has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Transferred IP Assets.  PMI has not authorized the filing of and is not aware of any financing statements against PMI that include a description of collateral covering the Transferred IP Assets other than any financing statement relating to the security interest granted to Prosper Funding hereunder or that has been terminated.  PMI is not aware of any judgment or tax lien filings against PMI.

  (v)             Lawful Assignment.  The contribution, transfer, and assignment of the Transferred IP Assets under this Agreement and the related assignments are not unlawful, void, or voidable pursuant to the laws or statutes of any jurisdiction, nor will they result in a breach, default, conflict, lien, violation of, or material adverse effect upon, any of the Transferred IP Assets.

  (vi)            Validity.  The trademarks that are part of the Transferred IP Assets are valid, subsisting, enforceable, and have not been abandoned in any applicable jurisdiction.

  (vii)           No Infringement.  The trademarks that are part of the Transferred IP Assets do not violate the trademark rights of any third party and there is no action or proceeding pending or threatened alleging that such trademarks infringe upon the rights of any third party.

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  (viii)          No Adverse Judgments.  No domestic or foreign court, tribunal, or other official governmental authority, including the United States Patent and Trademark Office or any foreign equivalent, has entered a holding, judgment or decision canceling or otherwise limiting PMI’s interest in the Transferred IP Assets.

  (ix)            No Pending Actions.  No action or proceeding is pending or, to PMI’s knowledge, threatened, seeking to limit, cancel, or question the validity of any material portion of the Transferred IP Assets or of PMI’s ownership interest therein, that if adversely determined would have a material adverse effect on the Transferred IP Assets or the conveyance thereof by PMI to Prosper Funding hereunder.

  (x)             Quality Control.  Through the date hereof, PMI has examined, monitored and otherwise policed the trademarks that are part of the Transferred IP Assets in a manner and to an extent necessary and sufficient to prevent the abandonment of any such trademarks.

6.             Representations and Warranties of Prosper Funding.  Prosper Funding hereby represents and warrants to PMI, as of the date hereof, as follows:

(a)             Authorization.  Prosper Funding is an entity duly organized and validly existing in good standing under the laws of its jurisdiction of organization.  Prosper Funding has the requisite power and authority to enter into, execute and deliver this Agreement and to perform all of its obligations hereunder.  This Agreement and the transactions contemplated hereby have been duly authorized, executed and delivered by it, and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject only to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(b)             No Conflicts.  Neither the execution and delivery of this Agreement nor the performance by Prosper Funding of its obligations hereunder will conflict with, breach, violate, constitute a default under or accelerate any rights or obligations under (or constitute an event which, with the passage of time, would result in any of the foregoing): (i) any indenture, mortgage, deed of trust, loan agreement or other contract, agreement, commitment or instrument to which Prosper Funding is a party or by which it is bound and which relates to, or imposes any restrictions upon the ability of Prosper Funding to acquire from PMI, the Transferred Assets; (ii) the organizational or other governing documents of Prosper Funding; or (iii) in any material respect, any statute, law, judgment, order, writ, decree, permit, license, rule or regulation of any court or governmental or regulatory agency or body having jurisdiction over Prosper Funding or its property.  The performance by Prosper Funding of its obligations hereunder will not require any consent or approval of, or any filing, qualification or registration with, any court or governmental or regulatory agency or authority having jurisdiction over Prosper Funding or its property or any other third party.

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7.             Indemnification.

(a)             From and after the date hereof, PMI shall indemnify and hold harmless Prosper Funding from and against any and all claims, losses, liabilities, obligations, damages, deficiencies, taxes, assessments, fines, judgments, costs and expenses, including without limitation reasonable costs and expenses of responding to, investigating and defending a claim, and all reasonable attorneys’ fees and expenses (collectively, “Losses”), incurred or suffered by Prosper Funding to the extent such Losses arise out of or relate to any liability, obligation or debt, whether accrued or fixed, known or unknown, absolute or contingent, matured or unmatured or determined or determinable, of Prosper Funding arising out of or relating to any of the following:

  (i)             any breach of any representation or warranty of PMI, or any failure by PMI to perform any of its covenants, agreements or obligations, contained in this Agreement; or

  (ii)            any Losses arising out of or relating to any of the Customer Agreements, including any Losses arising out of or relating to any breach of PMI’s representations or warranties thereunder, to the extent relating to, arising from or caused by any condition, event or circumstance existing, arising or occurring on or prior to the date hereof or to any act or omission of PMI as agent of Prosper Funding or in contravention of its duties to Prosper Funding under any contract or agreement between PMI and Prosper Funding.

(b)             If Prosper Funding receives written notice of the commencement of any action or proceeding or the assertion of any claim by a third party or the imposition of any penalty or assessment for which a claim for indemnification may be made under Section 7(a) (a “Third Party Claim”) or otherwise discovers the liability, obligation or facts giving rise to such claim for indemnity, and Prosper Funding intends to seek indemnity therefor pursuant to Section 7(a), Prosper Funding shall promptly provide PMI with written notice of such Third Party Claim, stating the nature, basis and the amount thereof, to the extent known, along with copies of the relevant documents evidencing such Third Party Claim and the basis for indemnification sought.  Failure of Prosper Funding to give such notice on a timely basis will not relieve PMI from its indemnification obligations hereunder.  With respect to any Third Party Claim, PMI shall have the right to direct, through counsel of its own choosing, the defense or settlement of any such Third Party Claim at its own expense.  If PMI does not so assume control of such defense or withdraws from such defense, Prosper Funding shall control such defense.  Prosper Funding shall reasonably assist and cooperate with PMI and its counsel in the defense or compromise of any such claim or demand.  Such reasonable assistance and cooperation shall include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees, upon reasonable advance notice and for reasonable periods of time, to assist in the investigation, defense and resolution of such matters and providing reasonable legal and business assistance with respect to such matters.  If PMI assumes the defense of a Third Party Claim, no compromise, discharge or settlement of such claims may be effected by PMI without the consent of Prosper Funding unless (A) such compromise, discharge, or settlement provides for a complete and unconditional release of Prosper Funding, and (B) the sole relief provided in connection therewith is monetary damages that are paid in full by PMI.  If, however, PMI does not assume the defense of a Third Party Claim, no compromise, discharge or settlement of such claims may be effected by Prosper Funding without PMI’s prior written consent.

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(c)             If Prosper Funding shall have a claim to be indemnified by PMI under Section 7(a) which does not involve a Third Party Claim, and Prosper Funding intends to seek indemnity therefor pursuant to Section 7(a), Prosper Funding shall send to PMI a written notice specifying the nature, the amount thereof, to the extent known, and the basis for indemnification sought, promptly after Prosper Funding discovers the liability, obligation or facts giving rise to such claim for indemnity.  Failure of Prosper Funding to give such notice on a timely basis will not relieve PMI from its indemnification obligations hereunder.

8.             Further Assurances.  Each Party hereby agrees to furnish upon request to the other Party such further information, to execute and deliver to the other Party such other documents, and to do such other acts and things, in each case as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement and perfecting the transactions contemplated hereby.

9.             Third Party Beneficiaries.  There are no third-party beneficiaries to this Agreement; provided, however, that the Trustee and holders of Outstanding Notes shall be and are express third-party beneficiaries of, and shall be entitled to enforce, the obligations of PMI set forth in Section 4 hereof, including the indemnification obligations of PMI under Section 7 hereof directly relating to its undertakings in Section 4 hereof; provided, further, however that no holder of an Outstanding Note (nor the Trustee of behalf of such holder) will have any right to enforce such obligations from and after any time when Prosper Funding has itself (from its own resources or otherwise) purchased such Outstanding Note or paid the relevant indemnification amount to the holder of such Outstanding Note  to which such funding obligation of PMI set forth in Section 4 relates.

10.             Survival.  The provisions of Section 2, Section 4, Section 7 and Section 9 will survive any termination of this Agreement.

11.             Severability.  If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of applicable law, all other terms and provisions of the Agreement shall remain in full force and effect. Upon such determination, the Parties shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the Parties to the fullest extent permitted by applicable law.

12.             Amendment, Modification and Waiver.  No amendment, modification, waiver or termination of this Agreement shall be binding unless executed in writing by both of the Parties; provided, that any amendment, modification or waiver of Section 4, Section 7, Section 9 or this Section 12 that would adversely affect the rights of the holders of any series of Outstanding Notes shall require the written consent of the holders of at least a majority in aggregate Principal Amount (as such term is defined in the Indenture) of such series.  Any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

13.             Assignment.  This Agreement shall not be assigned by either Party without the prior written consent of the other Party, and any assignment in violation of this Section 13 shall be void.  Subject to the foregoing sentence, all of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the Parties.

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14.             Notices.  Any notice, request, demand, waiver, consent, approval, or other communication that is required or permitted to be given to either Party hereunder shall be in writing and shall be deemed given only if delivered to such Party personally or sent to such Party by facsimile transmission (promptly followed by a hard-copy delivered in accordance with this Section 14), by overnight courier, or by registered or certified mail (return receipt requested), with postage and registration or certification fees thereon prepaid, addressed to the Party at its address set forth below:

If to PMI:

 Prosper Marketplace, Inc.

 111 Sutter Street, 22nd Floor

 San Francisco, CA 94104

 Attention:  [  ]

 Facsimile:   [  ]

If to Prosper Funding:

 Prosper Funding LLC

 c/o Prosper Marketplace, Inc.

 111 Sutter Street, 22nd Floor

 San Francisco, CA 94104

 Attention:  [  ]

 Facsimile:   [  ]

or to such other address or person as either Party may have specified in a notice duly given to the other Party as provided herein.

15.             Counterparts.  This Agreement may be executed in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same Agreement.  This Agreement may also be executed and delivered by facsimile signature and in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument.

16.             Headings.  The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

17.             Governing Law and Consent to Jurisdiction.  This Agreement and the legal relations between the Parties shall be governed by, and construed and enforced in accordance with, the laws of the State of California, without regard to its conflict of laws rules.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

PROSPER MARKETPLACE, INC.
By:
	Name:
	Title:
PROSPER FUNDING LLC
By:
	Name:
	Title:

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

PROSPER FUNDING LLC

This Amended and Restated Limited Liability Company Agreement (together with the schedules attached hereto, this “Agreement”) of PROSPER FUNDING LLC (the “Company”), dated as of October 1, 2012, is entered into by PROSPER MARKETPLACE, INC., a Delaware corporation as the sole equity member (the “Member”), Bernard J. Angelo and Kevin P. Burns, as Independent Directors who may become Special Members and each other Special Member who may become a party hereto from time to time.  Capitalized terms used but not otherwise defined in Schedule A hereto shall have the respective meanings assigned to such terms in the Indenture or, if not defined therein, in the Administration Agreement.

The Certificate of Formation of the Company, effective as of February 17, 2012, has been filed with the Secretary of State of the State of Delaware.  The Member executed the Limited Liability Company Agreement of PROSPER FUNDING LLC (the “Initial Agreement”), dated as of March 1, 2012, to form the Company as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del. C. § 18-101 et seq.), as amended from time to time (the “Act”).  The Member hereby agrees as follows:

Section 1.               Name

The name of the limited liability company formed is “Prosper Funding LLC.”

Section 2.               Principal Business Office

The principal business office of the Company shall be located at 111 Sutter Street, 22nd Floor, San Francisco, CA 94104 or such other location as may hereafter be determined by the Member.

Section 3.               Registered Office

The address of the registered office of the Company in the State of Delaware is 615 South DuPont Highway, Dover, Delaware, 19901, County of Kent.

Section 4.               Registered Agent

The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is National Corporate Research, Ltd., 615 South DuPont Highway, Dover, Delaware, 19901, County of Kent.

Section 5.               Members

(a)           The mailing address of the Member is set forth on Schedule B attached hereto.  The Member was admitted to the Company as a member of the Company upon its execution of a counterpart signature page to the Initial Agreement.

(b)           Subject to Section 9(j), the Member may act by written consent.

(c)           Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than (i) upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections 21 and 23, or (ii) the resignation of the Member and the admission of an additional member of the Company pursuant to Sections 22 and 23), each person acting as an Independent Director pursuant to Section 10 shall, without any action of any Person and simultaneously with the Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special Member and shall continue the Company without dissolution.  No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart signature page to this Agreement, and (ii) such successor has also accepted its appointment as an Independent Director pursuant to Section 10; provided, however, the Special Members shall automatically cease to be members of the Company upon the admission to the Company of a substitute Member.  Each Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets.  Pursuant to Section 18-301 (or any successor provision) of the Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company.  A Special Member, in its capacity as Special Member, may not bind the Company.  Except as required by any mandatory provision of the Act, each Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including, without limitation, the merger, consolidation or conversion of the Company.  In order to implement the admission to the Company of each Special Member, each  person acting as an Independent Director pursuant to Section 10 shall execute a counterpart signature page to this Agreement.  Prior to its admission to the Company as a Special Member, each person acting as an Independent Director pursuant to Section 10 shall not be a member of the Company.

Section 6.               Certificates

Michael S. Himmel was designated as an “authorized person” within the meaning of the Act and has executed, delivered and filed the Certificate of Formation of the Company with the Secretary of State of the State of Delaware.  Upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware, his powers as an “authorized person” ceased, and the Member thereupon became the designated “authorized person” and shall continue as the designated “authorized person” within the meaning of the Act.  The Member or an Officer shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in any jurisdiction in which the Company may wish to conduct business.

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The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.

Section 7.               Purposes

(a)           The sole purpose to be conducted or promoted by the Company is to engage in the following activities:

(i) to own and operate the Prosper System;

(ii) to purchase or otherwise acquire, own (and to exercise and enforce all rights and powers conferred by or incidental to such ownership), hold, finance, transfer, sell, convey, dispose of, pledge, assign or otherwise deal with Borrower Loans;

(iii) to issue and sell Securities;

(iv) to execute, deliver, and perform its obligations under the Program Documents;

(v) without limitation to Section 7(a)(iv), to provide for the servicing of the Borrower Loans and the administration of the Prosper System pursuant to the Administration Agreement (or, if applicable, any other agreement between the Company and another entity acting as servicer of the Borrower Loans and/or administrator of the Prosper System);

(vi) to pledge or otherwise grant security interests in the Borrower Loans and certain other Company assets pursuant to the Indenture;

(vii) without limitation to Section 7(a)(iv), to enter into agreements with third parties regarding (i) the administration of the Borrower Loans in accordance with the Program Documents, (ii) the Company’s own management and operations and (iii) the issuing, paying, sale and administration of the Securities and other obligations;

(viii) to file registration statements, and make all other requisite filings, with the SEC and State securities commissions, and to issue prospectuses and furnish other offering materials and related information in relation to the Securities;

(ix) to take any and all other action necessary to maintain the existence of the Company as a limited liability company in good standing under the laws of the State of Delaware and/or to qualify the Company to do business as a foreign limited liability company in any other state or foreign jurisdiction in which such qualification is desirable or required;

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(x) to establish bank accounts and make investments as are necessary, convenient or advisable to accomplish the activities set forth herein;

(xi) to contract with third parties to provide services as may be required from time to time by the Company, including legal, investment, accounting, data processing, administrative and management services; and

(xii) to engage in any lawful act or activity and to exercise any powers permitted to limited liability companies organized under the laws of the State of Delaware that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above-mentioned purposes.

(b)           The Company, by or through the Member, or any Director or Officer on behalf of the Company, may enter into and perform the Program Documents, all without any further act, vote or approval of any other Person notwithstanding any other provision of this Agreement, the Act or applicable law, rule or regulation.  The foregoing authorization shall not be deemed a restriction on the powers of the Member or any Director or Officer to enter into other agreements on behalf of the Company.

Section 8.               Powers

Subject to Section 9(j), the Company, and the Board of Directors and the Officers of the Company on behalf of the Company, (i) shall have and exercise all powers necessary, convenient or incidental to accomplish its purposes as set forth in Section 7 and (ii) shall have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.  No Officer, Independent Director or Director shall have the power to make an election to treat the Company as an association taxable as a corporation for U.S. federal, state and local income tax purposes (including an election under Treasury Regulation § 301.7701-3(c)).

Section 9.               Management

(a)           Board of Directors.  Subject to Section 9(j), the business and affairs of the Company shall be managed by or under the direction of a Board of one or more Directors designated by the Member.  Subject to Section 10, the Member may determine at any time in its sole and absolute discretion the number of Directors to constitute the Board.  The authorized number of Directors may be increased or decreased by the Member at any time in its sole and absolute discretion, upon notice to all Directors, and subject in all cases to Section 10.  The initial number of Directors shall be five, two of which shall be Independent Directors pursuant to Section 10.  Each Director elected, designated or appointed by the Member shall hold office until a successor is elected and qualified or until such Director’s earlier death, resignation, expulsion or removal.  The initial Directors designated by the Member are listed on Schedule C hereto.

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(b)           Powers.  Subject to Section 9(j), the Board of Directors shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise.  Subject to Section 7, the Board of Directors has the authority to bind the Company.

(c)           Meeting of the Board of Directors.  The Board of Directors of the Company may hold meetings, both regular and special, within or outside the State of Delaware.  Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.  Special meetings of the Board may be called by the President on not less than one day’s notice to each Director by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President or Secretary in like manner and with like notice upon the written request of any one or more of the Directors.

(d)           Quorum: Acts of the Board.  At all meetings of the Board, a majority of the Directors shall constitute a quorum for the transaction of business and, except as otherwise provided in any other provision of this Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board.  If a quorum shall not be present at any meeting of the Board, the Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.  Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee, as the case may be.

(e)            Electronic Communications.  Members of the Board, or any committee designated by the Board, may participate in meetings of the Board, or any committee, by means of telephone conference or similar communications equipment that allows all Persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in Person at the meeting.  If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.

(f)            Committees of Directors.

(i) The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the Company.  The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

(ii) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

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(iii) Any such committee, to the extent provided in the resolution of the Board, and subject to, in all cases, Sections 9(j) and 10, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board.  Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

(g)           Compensation of Directors; Expenses.  The Board shall have the authority to fix the compensation of Directors.  The Directors may be paid their expenses, if any, of attendance at meetings of the Board, which may be a fixed sum for attendance at each meeting of the Board or a stated salary as Director.  No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor.  Members of special or standing committees may be allowed like compensation for attending committee meetings.

(h)           Removal of Directors.  Unless otherwise restricted by law, any Director or the entire Board of Directors may be removed or expelled, with or without cause, at any time by the Member, and, subject to Section 10, any vacancy caused by any such removal or expulsion may be filled by action of the Member.

(i)            Directors as Agents.  To the extent of their powers set forth in this Agreement and subject to Section 9(j), the Directors are agents of the Company for the purpose of the Company’s business, and the actions of the Directors taken in accordance with such powers set forth in this Agreement shall bind the Company.  Notwithstanding the last sentence of Section 18-402 of the Act, except as provided in this Agreement or in a resolution of the Directors, a Director may not bind the Company.

(j)             Limitations on the Company’s Activities.

(i) This Section 9(j) is being adopted in order to comply with certain provisions required in order to qualify the Company as a “special purpose” entity.

(ii) The Member shall not, so long as any Security is outstanding, amend, alter, change or repeal the definition of “Independent Director” or Sections5(c) , 7, 8, 9(a), 9(j), 10, 16, 20, 21, 22, 23, 24, 25, 26 or 31 or Schedule A of this Agreement without the unanimous written consent of the Board (including all Independent Directors).  Subject to this Section 9(j), the Member reserves the right to amend, alter, change or repeal any provisions contained in this Agreement in accordance with Section 31.

Notwithstanding any other provision of this Agreement and any provision of law that otherwise so empowers the Company, the Member, the Board, any Officer or any other Person, neither the Member nor the Board nor any Officer nor any other Person shall be authorized or empowered, nor shall they permit the Company, without the prior unanimous written consent of the Member and the Board (including all Independent Directors), to take any Material Action (provided, however, that the Board may not vote on, or authorize the taking of, any Material Action, unless there are at least two Independent Directors then serving in such capacity).

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(iii) The Board and the Member shall cause the Company to do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board shall determine that the preservation thereof is no longer desirable for the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Company.  The Board also shall cause the Company to:

(A) maintain its own separate books and records and bank accounts separate from those of the Member or any other Person;

(B) at all times hold itself out to the public and all other Persons as a legal entity separate from the Member and any other Person;

(C) have a Board of Directors separate from that of the Member and any other Person;

(D) file its own tax returns, if any, as may be required under applicable law, to the extent (1) not part of a consolidated group filing a consolidated return or returns or (2) not treated as a division for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law;

(E) except as contemplated by the Program Documents, not commingle its assets with assets of any other Person and maintain its funds and other assets such that they shall be separately identified and segregated from those of the Member and any other Person;

(F) conduct its business in its own name so as not to mislead third parties as to the identity of the entity with which such third parties are dealing and strictly comply with all organizational formalities to maintain its separate existence;

(G) maintain separate financial statements and ensure that such financial statements indicate (in the notes thereto or otherwise) the separate existence of the Company and the Member and their respective assets and liabilities and to the extent the assets and liabilities of the Company are represented on the financial statements of the Member, ensure that such financial statements indicate (in the notes or otherwise) the separate existence of the Company and the Member and their separate assets and liabilities;

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(H) pay its operating expenses and own liabilities only out of its own funds and not from the funds of any other Person;

(I) maintain an arm’s length relationship with its Affiliates and the Member and ensure that all transactions between the Company and its Affiliates are on terms and conditions that are not materially more favorable to the Affiliate than the terms and conditions that would be expected to have been obtained under similar circumstances, from a non-Affiliate;

(J) pay the salaries of its own employees, if any;

(K) not hold out its credit or assets as being available to satisfy the obligations of others;

(L) allocate fairly and reasonably any overhead for shared office space and pay for its share of such overhead;

(M) so as not to mislead third parties as to the identity of the entity with which such third parties are dealing, maintain and utilize separate stationery, invoices and checks;

(N) except as contemplated by the Program Documents, not pledge its assets for the benefit of any other Person;

(O) correct any known misunderstanding regarding its separate identity;

(P) maintain adequate capital in light of its contemplated business purpose, transactions and liabilities;

(Q) ensure that it does not enter into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of any other Person;

(R) ensure that it will not conceal from creditors any of its assets or participate in concealing the assets of any other person or entity;

(S) cause its Board of Directors to meet at least annually or act pursuant to written consent and keep minutes of such meetings and actions and observe all other Delaware limited liability company formalities;

(T) not acquire any securities of the Member (other than the purchase or other acquisition of certain borrower payment dependent notes issued by the Member, and the related borrower loans); and

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(U) cause the Directors, Officers, agents and other representatives of the Company to act at all times with respect to the Company consistently and in furtherance of the foregoing and in the best interests of the Company.

Failure of the Company, or the Member or Board on behalf of the Company, to comply with any of the foregoing covenants or any other covenants contained in this Agreement shall not affect the status of the Company as a separate legal entity or the limited liability of the Member or the Directors.

(iv) So long as any Security is outstanding, the Board shall not cause or permit the Company to:

(A) except as contemplated by the Program Documents, guarantee any obligation of any Person, including any Affiliate;

(B) engage, directly or indirectly, in any business other than the actions required or permitted to be performed under Section 7;

(C) incur, create or assume any indebtedness other than as permitted under the Program Documents;

(D) make or permit to remain outstanding any loan or advance to any Person, except that the Company may invest in those investments permitted under the Program Documents and may make any advance required or permitted to be made pursuant to any provisions of the Program Documents and permit the same to remain outstanding in accordance with such provisions;

(E) to the fullest extent permitted by law, engage in any dissolution, liquidation, consolidation, merger, asset sale or transfer of ownership interests other than such activities as are permitted pursuant to the Program Documents; or

(F) form, acquire or hold any subsidiary (whether corporate, partnership, limited liability company or other), except as permitted pursuant to the Program Documents.

Section 10.             Independent Director

As long as any Security is outstanding, the Member shall cause the Company at all times to have at least two Independent Directors who will be appointed by the Member.  To the fullest extent permitted by law, including Section 18-1101(c) (or any successor provision) of the Act, the Independent Directors shall consider only the interests of the Company, including its respective creditors, in acting or otherwise voting on the matters referred to in Section 9(j)(iii).  No resignation or removal of an Independent Director, and no appointment of a successor Independent Director, shall be effective until such successor (i) shall have accepted his or her appointment as an Independent Director by a written instrument and (ii) shall have executed a counterpart signature page to this Agreement as required by Section 5(c).  In the event of a vacancy in the position of Independent Director, the Member shall, as soon as practicable, appoint a successor Independent Director.  All right, power and authority of the Independent Directors shall be limited to the extent necessary to exercise those rights and perform those duties specifically set forth in this Agreement.  Except as provided in the second sentence of this Section 10, in exercising their rights and performing their duties under this Agreement, any Independent Director shall have a fiduciary duty of loyalty and care similar to that of a director of a business corporation organized under the General Corporation Law of the State of Delaware.  No Independent Director shall at any time serve as trustee in bankruptcy for any Affiliate of the Company.

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Section 11.             Officers

(a)           Officers.  The initial Officers of the Company were designated by the Member in the Initial Agreement. The additional or successor Officers of the Company shall be chosen by the Board and shall consist of at least a President, a Secretary and a Treasurer.  The Board of Directors may also choose one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers and such other Officers and agents as it shall deem necessary or advisable who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.  Any number of offices may be held by the same person.  The salaries of all Officers and agents of the Company shall be fixed by or in the manner prescribed by the Board.  The Officers of the Company shall hold office until their successors are chosen and qualified.  Any Officer may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board.  Any vacancy occurring in any office of the Company shall be filled by the Board.  The current Officers of the Company are listed on Schedule D hereto.

(b)           President.  The President shall be the chief executive officer of the Company, shall preside at all meetings of the Board, shall be responsible for the general and active management of the business of the Company and shall see that all orders and resolutions of the Board are carried into effect.  The President or any other Officer authorized by the President or the Board shall execute all bonds, mortgages and other contracts, except:  (i) where required or permitted by law or this Agreement to be otherwise signed and executed, including Section 7(b); (ii) where signing and execution thereof shall be expressly delegated by the Board to some other Officer or agent of the Company, and (iii) as otherwise permitted in Section 11(c).

(c)           Vice President.  In the absence of the President or in the event of the President’s inability to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Directors, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.  The Vice Presidents, if any, shall perform such other duties and have such other powers as the Board may from time to time prescribe.

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(d)           Secretary and Assistant Secretary.  The Secretary shall be responsible for filing legal documents and maintaining records for the Company.  The Secretary shall attend all meetings of the Board and record all the proceedings of the meetings of the Company and of the Board in a book to be kept for that purpose and shall perform like duties for the standing committees when required.  The Secretary shall give, or shall cause to be given, notice of all meetings of the Member, if any, and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board or the President, under whose supervision the Secretary shall serve.  The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in order of their election), shall, in the absence of the Secretary or in the event of the Secretary’s inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe

(e)           Treasurer and Assistant Treasurer.  The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board.  The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and to the Board, at its regular meetings or when the Board so requires, an account of all of the Treasurer’s transactions and of the financial condition of the Company.  The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer’s inability to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.

(f)            Officers as Agents.  The Officers, to the extent of their powers set forth in this Agreement or otherwise vested in them by action of the Board not inconsistent with this Agreement, are agents of the Company for the purpose of the Company’s business and, subject to Section 9(j), the actions of the Officers taken in accordance with such powers shall bind the Company.

(g)           Duties of Board and Officers.  Except to the extent otherwise provided herein, each Director and Officer shall have a fiduciary duty of loyalty and care similar to that of directors and officers of business corporations organized under the General Corporation Law of the State of Delaware.

Section 12.             Limited Liability

Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither the Member nor the Special Members nor any Officer or Director shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member, Special Member, Officer or Director of the Company.

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Section 13.             Capital Contributions

The Member has contributed to the Company property of an agreed value as listed on Schedule B attached hereto.  In accordance with Section 5(c), the Special Members shall not be required to make any capital contributions to the Company.

Section 14.             Additional Contributions

The Member is not required to make any additional capital contribution to the Company. However, the Member may make additional capital contributions to the Company at any time.  The provisions of this Agreement, including this Section 14, are intended to benefit the Member and the Special Members and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor of the Company shall be a third-party beneficiary of this Agreement) and the Member and the Special Members shall not have any duty or obligation to any creditor of the Company to make any contribution to the Company or to issue any call for capital pursuant to this Agreement.

Section 15.             Allocation of Profits and Losses.

The Company’s profits and losses shall be allocated to the Member.

Section 16.             Distributions

Distributions shall be made to the Member at the times and in the aggregate amounts determined by the Board.  Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to the Member on account of its interest in the Company if such distribution would violate Section 18-607 (or any successor provision) of the Act or any other applicable law or any Program Document.

Section 17.             Books and Records

The Board shall keep or cause to be kept complete and accurate books of account and records with respect to the Company’s business.  The books of the Company shall at all times be maintained by the Board.  The Member and its duly authorized representatives shall have the right to examine the Company books, records and documents during normal business hours.  The Company, and the Board on behalf of the Company, shall not have the right to keep confidential from the Member any information that the Board would otherwise be permitted to keep confidential from the Member pursuant to Section 18-305(c) (or any successor provision)  of the Act.  The Company’s books of account shall be kept using the method of accounting determined by the Member.  The Company’s independent auditor, if any, shall be an independent public accounting firm selected by the Member.

Section 18.             Reports

(a)           The Board shall use diligent efforts to cause to be prepared and mailed to the Member, within 180 days after the end of each fiscal year, an audited or unaudited report setting forth as of the end of such fiscal year:

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(i) a balance sheet of the Company;

(ii) an income statement of the Company for such fiscal year; and

(iii) a statement of the Member’s capital account.

(b)           The Board shall, after the end of each fiscal year, use reasonable efforts to cause the Company’s independent accountants, if any, to prepare and transmit to the Member as promptly as possible any such tax information as may be reasonably necessary to enable the Member to prepare its federal, state and local income tax returns relating to such fiscal year.  Nothing in this Section 18 shall limit the Company from hiring a person or company to perform its bookkeeping, accounting or other related services.

Section 19.             Other Business

The Member, the Special Members and any Affiliate of the Member or the Special Members may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others.  The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement.

Section 20.             Exculpation and Indemnification

(a)           To the fullest extent permitted by applicable law, neither the Member nor the Special Members nor any Officer, Director, employee or agent of the Company nor any employee, representative, agent or Affiliate of the Member or the Special Members (collectively, the “CoveredPersons”) shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person’s gross negligence or willful misconduct.

(b)           To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person’s gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 20 by the Company shall be provided out of and to the extent of Company assets only, and the Member and the Special Members shall not have personal liability on account thereof.

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(c)           To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding may, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section 20.

(d)           A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the Member might properly be paid.

(e)           To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person.  The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Member and the Special Members to replace such other duties and liabilities of such Covered Person.

(f)            Notwithstanding any other provisions contained in this Section 20 to the contrary, the Company shall not pay, nor be obligated to pay, any amount pursuant to this Section 20 other than from funds available to the Company that are not required to be applied to payments on the Securities.  Any amount which the Company does not pay pursuant to the operation of the preceding sentence shall not constitute a claim (as defined in Section 101 of the U.S. Bankruptcy Code) against or obligation of the Company for any insufficiency unless and until the Company satisfies the provisions above.

(g)           The foregoing provisions of this Section 20 shall survive any termination of this Agreement.

Section 21.             Assignments

Subject to Section 23, the Member may assign in whole or in part its limited liability company interest in the Company; provided that, prior to the transfer, the Member must deliver to the Board and the Independent Directors an opinion of counsel to the effect that such transfer will not result in the Company being treated as a “publicly traded partnership” under Section 7704 of the Code.  If the Member transfers all of its limited liability company interest in the Company pursuant to this Section 21, the transferee shall be admitted to the Company as a member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement.  Such admission shall be deemed effective immediately prior to the transfer and, immediately following such admission, the transferor Member shall cease to be a member of the Company.  Notwithstanding anything in this Agreement to the contrary, any successor to the Member by merger or consolidation in compliance with the Program Documents shall, without further act, be the Member hereunder, and such merger or consolidation shall not constitute an assignment for purposes of this Agreement and the Company shall continue without dissolution.

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Section 22.             Resignation

So long as any Security is outstanding, the Member may not resign, except as permitted under the Program Documents.  If the Member is permitted to resign pursuant to this Section 22, an additional member of the Company shall be admitted to the Company, subject to Section 23, upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement.  Such admission shall be deemed effective immediately prior to the resignation and, immediately following such admission, the resigning Member shall cease to be a member of the Company.

Section 23.             Admission of Additional Members

One or more additional members of the Company may be admitted to the Company with the written consent of the Member.

Section 24.             Dissolution

(a)           Subject to Section 9(j), the Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following:  (i) the termination of the legal existence of the last remaining member of the Company or the occurrence of any other event which terminates the continued membership of the last remaining member of the Company in the Company unless the business of the Company is continued in a manner permitted by this Agreement or the Act or (ii) the entry of a decree of judicial dissolution under Section 18-802 (or any successor provision) of the Act.  Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company, to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining member of the Company in the Company.

(b)           Notwithstanding any other provision of this Agreement, the Bankruptcy of the Member or a Special Member shall not cause the Member or Special Member, respectively, to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution.

(c)           Notwithstanding any other provision of this Agreement, each of the Member and the Special Members waives any right it might have under Section 18-801(b) (or any successor provision) of the Act to agree in writing to dissolve the Company upon the Bankruptcy of the Member or a Special Member, or the occurrence of an event that causes the Member or a Special Member to cease to be a member of the Company.

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(d)           In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 (or any successor provision) of the Act.

(e)           The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company, shall have been distributed to the Member in the manner provided for in this Agreement and Program Documents and (ii) the Certificate of Formation shall have been canceled in the manner required by the Act.

Section 25.             Waiver of Partition; Nature of Interest

Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each of the Member and the Special Members hereby irrevocably waives any right or power that such Person might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of the Company.  The Member shall not have any interest in any specific assets of the Company, and the Member shall not have the status of a creditor with respect to any distribution pursuant to Section 16 hereof.  The interest of the Member in the Company is personal property.

Section 26.             Benefits of Agreement; No Third-Party Rights

None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Member or a Special Member.  Nothing in this Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person (except as provided in Section 29).

Section 27.             Severability of Provisions

Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.

Section 28.             Entire Agreement

This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof

Section 29.             Binding Agreement

Notwithstanding any other provision of this Agreement, the Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member by the Independent Directors, in accordance with its terms.  In addition, the Independent Directors shall be intended beneficiaries of this Agreement.

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Section 30.             Governing Law

This Agreement shall be governed by and construed under the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.

Section 31.             Amendments

Subject to Section 9(j), this Agreement may be modified, altered, supplemented or amended pursuant to a written agreement executed and delivered by the Member.

Section 32.             Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement and all of which together shall constitute one and the same instrument.

Section 33.             Notices

Any notices required to be delivered hereunder shall be in writing and personally delivered, mailed or sent by telecopy, electronic mail or other similar form of rapid transmission, and shall be deemed to have been duly given upon receipt (a) in the case of the Company, to the Company at its address in Section 2, (b) in the case of the Member, to the Member at its address as listed on Schedule B attached hereto (c) in the case of any Special Member, at the address set forth on his respective signature page hereto, and (d) in the care of any of the foregoing, at such other address as may be designated by written notice to the other parties.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the undersigned has duly executed this Amended and Restated Limited Liability Company Agreement as of the date first above written.

Member: PROSPER MARKETPLACE, INC.

	By: /s/ Dawn Lepore
	Name: Dawn Lepore
	Title: President and CEO
Independent Director (who may become a Special Member):	By: /s/ Bernard J. Angelo
	Name: Bernard J. Angelo
Independent Director (who may become a Special Member):	By: /s/ Kevin P. Burns
	Name: Kevin P. Burns

SCHEDULE A

Definitions

A.           Definitions

When used in this Agreement, the following terms not otherwise defined herein have the meanings set forth below.  Any other capitalized term used but not defined herein shall have the meaning assigned to such term in the Indenture or, if not defined therein, in the Administration Agreement.

“Act” has the meaning set forth in the preamble to this Agreement.

“Agreement” means this Amended and Restated Limited Liability Company Agreement of the Company, together with the schedules attached hereto, as amended,  supplemented or otherwise modified from time to time.

“Bankruptcy” means, with respect to any Person, if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (vii) if 90 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 60 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 60 days after the expiration of any such stay, the appointment is not vacated.  The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 (or any successor provisions) of the Act.

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

“Borrower” means the obligor on any Borrower Loan.

“Certificate of Formation” means the Certificate of Formation of the Company filed with the Secretary of State of the State of Delaware on February 17, 2012, as amended or amended and restated from time to time.

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

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

“Directors” means the Persons elected to the Board of Directors from time to time by the Member, including the Independent Directors, in their capacity as managers of the Company.  A Director is hereby designated as a “manager” of the Company within the meaning of Section 18-101(10) (or any successor provision) of the Act.

“Indenture” means the Indenture relating to the Securities to be entered into between the Company and Wells Fargo Bank, National Association, as Trustee.

“Independent Director” means a natural person that has at least three years’ experience as an independent manager or director at a nationally recognized organization that provides independent director services and who, for the five-year period prior to his or her appointment as Independent Director has not been, and during the continuation of his or her service as Independent Director is not: (i) an employee, director, stockholder, partner, officer, creditor, supplier, manager, contractor, or direct or indirect legal or beneficial owner of the Company, the Member, the Bank or the Servicer or any of their respective Affiliates or delegates (of which the Company has knowledge) (other than his or her service as Independent Director); (ii) any member of the immediate family of any person described in (i); or (iii) any person who controls, either directly, indirectly or otherwise, any person described in (i) or (ii).

“Material Action” means to amend or purport to amend the provisions of Section 7(a) of this Agreement, consolidate or merge the Company with or into any Person, or, other than through the Company’s issuance of the Securities, to sell all or substantially all of the assets of the Company, or to institute proceedings to have the Company be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against the Company or file a petition seeking, or consent to, reorganization or relief with respect to the Company under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or a substantial part of its property, or make any assignment for the benefit of creditors of the Company, or admit in writing the Company’s inability to pay its debts generally as they become due, or take action in furtherance of any such action, or, to the fullest extent permitted by law,  dissolve or liquidate the Company, or enter into any agreement, contract or arrangement with the Member or any affiliate of the Company, or with any other person, that (i) creates or reasonably could create, directly or indirectly, any material obligations or liabilities for the Company in favor of, on behalf of or for the benefit of the Member or any affiliate of the Company (including any guarantees of any performance or payment obligations thereof), (ii) that materially restricts or changes the business or operations of the Company or commits the Company to transact all or any material portion thereof with, through or with the assistance of the Member or any other affiliate of the Company, (iii) that obligates the Company to pay, reimburse or fund, directly or indirectly, substantial fees, compensation or consideration to, on behalf of or for the benefit of the Member or any affiliate of the Company, (iv) the subject matter of which involves or reasonably could involve commitment to acquire or to assign, transfer, pledge or dispose of all or any material portion of the current, expected, projected or potentially obtained assets, proceeds of assets, or revenues of the Company.

“Member” means Prosper Marketplace, Inc., as the initial member of the Company, and includes any Person admitted as an additional member of the Company or a substitute member of the Company pursuant to the provisions of this Agreement, each in its capacity as a member of the Company; provided, however, the term “Member” shall not include the Special Members.

“Officer” means an officer of the Company described in Section 11.

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

“Prosper System” means the proprietary, internet-based peer-to-peer lending platform developed by the Member and transferred to the Company, through which Borrowers may obtain Borrower Loans and qualified investors may purchase Securities.

“Administration Agreement” means the Administration Agreement to be entered into between the Company and the Member, pursuant to which the Member will agree to (i) manage the Prosper System on behalf of the Company, (ii) provide certain administrative services to the Company, and (iii) service the Borrower Loans and Securities  on behalf of the Company.

“Special Member” means, upon such person’s admission to the Company as a member of the Company pursuant to Section 5(c), a person acting as Independent Director, in such person’s capacity as a member of the Company.  A Special Member shall only have the rights and duties expressly set forth in this Agreement.

B.             Rules of Construction

Definitions in this Agreement apply equally to both the singular and plural forms of the defined terms.  The words “include” and “including” shall be deemed to be followed by the phrase “without limitation.”  The terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section, paragraph or subdivision.  The Section titles appear as a matter of convenience only and shall not affect the interpretation of this Agreement.  All Section, paragraph, clause, Exhibit or Schedule references not attributed to a particular document shall be references to such parts of this Agreement.  All references to agreements shall include such agreements as they may be supplemented, amended or otherwise modified from time to time.  All references to a Person shall include such Person’s successors and assigns.

SCHEDULE B

Member

Name	Mailing Address	Agreed Value of Capital Contribution	Membership Interest
Prosper Marketplace, Inc.	111 Sutter Street, 22nd Floor, San Francisco, CA 94104	$100	100%

SCHEDULE C

DIRECTORS

1.           Joseph Toms

2.           Kirk Inglis

3.           Sachin Adarkar

4.           Bernard J. Angelo

5.           Kevin P. Burns

SCHEDULE D

Joseph Toms	President
Kirk Inglis	Vice President and Treasurer
Sachin Adarkar	Secretary

EX-4.3

Exhibit 4.3

FIRST SUPPLEMENTAL INDENTURE

This FIRST SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of [●], is entered into by and among Prosper Marketplace, Inc., a Delaware corporation (“PMI”), Prosper Funding LLC, a Delaware limited liability company (“Prosper Funding”), and Wells Fargo Bank, National Association, a national banking association incorporated and existing under the laws of the United States of America, as trustee (the “Trustee”).

W I T N E S S E T H:

WHEREAS, PMI and the Trustee have heretofore entered into that Indenture, dated as of June 15, 2009 (the “Indenture”), providing for the issuance from time to time of special limited obligations of PMI referred to as Borrower Payment Dependent Notes (referred to herein collectively as the “Securities”), to be issued in series as provided therein;

WHEREAS, PMI and Prosper Funding entered into that Asset Transfer Agreement, dated as of even date herewith (the “Asset Transfer Agreement”), pursuant to which, among other things, PMI has transferred all of its properties and assets substantially as an entirety to Prosper Funding, including without limitation all of PMI’s rights and obligations with respect to the Securities;

WHEREAS, Section 4.1 of the Indenture sets forth the terms upon which, in connection with a transfer of all of PMI’s properties and assets substantially as an entirety to any successor person, such successor person may assume, by an indenture supplemental to the Indenture, all of the obligations of PMI under the Securities and the Indenture, and succeed to, and be substituted for, and be entitled to exercise every right and power of, PMI under the Indenture with the same effect as if such successor person had been named as PMI under the Indenture, with PMI to be discharged thereafter from all obligations and covenants under the Securities and the Indenture;

WHEREAS, this Supplemental Indenture is the indenture supplemental to the Indenture referred to in Section 4.1 of the Indenture, and Prosper Funding desires to assume all of the obligations of PMI under the Securities and the Indenture by executing and delivering this Supplemental Indenture to the Trustee, as a result of which Prosper Funding will succeed to and substitute for PMI under the Indenture;

WHEREAS, the parties hereto also desire to amend and restate the Indenture in order to (i) reflect the succession by Prosper Funding to, and substitution of Prosper Funding for, PMI under the Securities and the Indenture, and (ii) make certain other amendments to the Indenture;

WHEREAS, Section 8.1(a) of the Indenture provides that the Company (as defined in the Indenture) and the Trustee, without the consent of any Holder (as defined in the Indenture) of Securities, may enter into one or more indentures supplemental to the Indenture in order to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company in the Indenture and the Securities; and

WHEREAS, additionally, pursuant to Sections 8.1(e), 8.1(g) and 8.1(i), the proposed amendments to the Indenture either (i) cure an ambiguity, defect or inconsistency of the Indenture, (ii) do not adversely affect the rights of any Holder of any Security in any material respect, or (iii) do not apply to, or modify the rights of the Holder of, any Security of any series created prior to the execution of this Indenture.

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:

1.             Assumption of Obligations.  Effective as of the date hereof, Prosper Funding hereby expressly assumes by this Supplemental Indenture all of the obligations of PMI under the Securities and the Indenture.

2.             Substitution of Successor Person.  Effective as of the date hereof, Prosper Funding hereby succeeds to, and is substituted for, and may exercise every right and power of, PMI under the Indenture with the same effect as if Prosper Funding had been named as PMI under the Indenture.

3.             Discharge of PMI. From and after the date hereof, PMI is hereby discharged from all obligations and covenants under the Securities and the Indenture.

4.             Amendment and Restatement of Indenture.  The Indenture is hereby amended and restated to read in its entirety in the form attached hereto as Exhibit A (the “Amended and Restated Indenture”).  The Amended and Restated Indenture is hereby incorporated into and made part of this Supplemental Indenture.

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

6.             No Recourse Against Others.  No past, present or future director, manager, officer, employee, stockholder or member, as such, of Prosper Funding or PMI shall have any liability for any obligations of Prosper Funding or PMI, respectively, under this Supplemental Indenture or for any claim based on, in respect of or by reason of such obligations or their creation.  By accepting a Security, each Holder of such Security shall waive and release all such liability.  The waiver and release shall be part of the consideration for the issue of the Securities.

7.             Effect of Headings. The section headings herein are for convenience only and shall not affect the construction hereof.

8.            Governing Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLE OF CONFLICTS OF LAW THAT WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

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

10.           Multiple Originals.  The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes.  Signatures of the parties hereto transmitted by facsimile or PDF transmission shall be deemed to be their original signatures for all purposes.

11.           Execution as Supplemental Indenture.  This Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Indenture and, as provided in the Indenture, this Supplemental Indenture forms a part thereof.

12.           Ratification and Incorporation of Indenture.  As supplemented, amended and restated hereby, the Indenture, in the form of the Amended and Restated Indenture, is in all respects ratified and confirmed, and the Amended and Restated Indenture and this Supplemental Indenture shall be read, taken and construed as one and the same instrument.

13.           Trustee Makes No Representation.  The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.  The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture, but on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee.  Without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by Prosper Funding or PMI, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by Prosper Funding or PMI by action or otherwise, (iii) the due execution hereof by Prosper Funding or PMI, or (iv) the consequences of any amendment herein provided for, and the Trustee makes no representation with respect to any such matters.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Supplemental Indenture as of the date first above written.

PROSPER MARKETPLACE, INC.
By:
	Name:
	Title:
PROSPER FUNDING LLC
By:
	Name:
	Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:
	Name:
	Title:

[Signature Page to Supplemental Indenture]

Exhibit A

Amended and Restated Indenture

See attached.

FORM OF

PROSPER FUNDING LLC

AMENDED AND RESTATED

BORROWER PAYMENT DEPENDENT NOTES

INDENTURE

Dated as of ____, 2012

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Trustee

TABLE OF CONTENTS

			Page
ARTICLE I    DEFINITIONS; INCORPORATION BY REFERENCE; OTHER PROVISIONS OF GENERAL APPLICATION			2
	Section 1.01	Definitions	2
	Section 1.02	Other Definitions	7
	Section 1.03	Incorporation by Reference of Trust Indenture Act	7
	Section 1.04	Rules of Construction	8
	Section 1.05	Amendment and Restatement	8
ARTICLE II   THE SECURITIES			8
	Section 2.01	Forms Generally	8
	Section 2.02	Title, Terms and Denominations	8
	Section 2.03	Execution, Authentication, Delivery and Dating	10
	Section 2.04	Registrar and Paying Agent	11
	Section 2.05	Paying Agent to Hold Money and Securities in Trust	12
	Section 2.06	Securityholder Lists	12
	Section 2.07	Transfer	13
	Section 2.08	Outstanding Securities; Determinations of Holders’ Action	13
	Section 2.09	Cancellation	13
	Section 2.10	Payments	14
	Section 2.11	Persons Deemed Owners	14
	Section 2.12	CUSIP Numbers	14
ARTICLE III   COVENANTS			14
	Section 3.01	Payment of Securities	14
	Section 3.02	SEC Reports	15
	Section 3.03	Compliance Certificate; Statement by Officers as to Default	15

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	Section 3.04	Further Instruments and Acts	15
	Section 3.05	Maintenance of Office or Agency	16
	Section 3.06	Borrower Loan Servicing; Corporate and Platform Administration Services	16
	Section 3.07	Separateness Covenants	17
ARTICLE IV   SUCCESSOR CORPORATION			18
	Section 4.01	When Company May Merge or Transfer Assets	18
ARTICLE V DEFAULTS AND REMEDIES			19
	Section 5.01	Events of Default	19
	Section 5.02	Acceleration	20
	Section 5.03	Other Remedies	21
	Section 5.04	Waiver of Past Defaults	21
	Section 5.05	Control by Securityholders	21
	Section 5.06	Limitation on Suits	22
	Section 5.07	Rights of Holders to Receive Payment	22
	Section 5.08	Collection Suit by Trustee	23
	Section 5.09	Trustee May File Proofs of Claim	23
	Section 5.10	Priorities	23
	Section 5.11	Undertaking for Costs	24
	Section 5.12	Waiver of Stay, Extension or Usury Laws	24
ARTICLE VI   TRUSTEE			24
	Section 6.01	Duties of Trustee	24
	Section 6.02	Rights of Trustee	25
	Section 6.03	Individual Rights of Trustee, Etc.	27
	Section 6.04	Trustee’s Disclaimer	27

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	Section 6.05	Notice of Defaults	27
	Section 6.06	Reports by Trustee to Holders	27
	Section 6.07	Compensation and Indemnity	28
	Section 6.08	Replacement of Trustee	28
	Section 6.09	Successor Trustee by Merger	30
	Section 6.10	Eligibility; Disqualification	30
	Section 6.11	Preferential Collection of Claims Against Company	30
	Section 6.12	Security Interest	31
ARTICLE VII   SATISFACTION AND DISCHARGE			32
	Section 7.01	Discharge of Liability on Securities	32
	Section 7.02	Repayment to the Company	32
ARTICLE VIII   SUPPLEMENTAL INDENTURES			33
	Section 8.01	Supplemental Indentures Without Consent of Holders	33
	Section 8.02	Supplemental Indentures With Consent of Holders	34
	Section 8.03	Compliance with Trust Indenture Act	35
	Section 8.04	Revocation and Effect of Consents, Waivers and Actions	35
	Section 8.05	Notation on or Exchange of Securities	35
	Section 8.06	Trustee to Sign Supplemental Indentures	35
	Section 8.07	Effect of Supplemental Indentures	35
ARTICLE IX   MISCELLANEOUS			36
	Section 9.01	Trust Indenture Act Controls	36
	Section 9.02	Notices	36
	Section 9.03	Communication by Holders with Other Holders	37
	Section 9.04	Certificate and Opinion as to Conditions Precedent	37

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Section 9.05	Form of Documents Delivered to Trustee	37
Section 9.06	Statements Required Certificate or Opinion	38
Section 9.07	Separability Clause	38
Section 9.08	Rules by Trustee	38
Section 9.09	Legal Holidays	38
Section 9.10	Governing Law and Jurisdiction; Waiver of Jury Trial	38
Section 9.11	No Recourse Against Others	39
Section 9.12	No Petition	39
Section 9.13	Successors	39
Section 9.14	Effect of Headings and Table of Contents	39
Section 9.15	Benefits of Indenture	40
Section 9.16	Multiple Originals	40
Section 9.17	Force Majeure	40
Section 9.18	U.S.A. Patriot Act	40

Exhibit
Exhibit A	-	Form of Borrower Payment Dependent Note

iv 

THIS AMENDED AND RESTATED BORROWER PAYMENT DEPENDENT NOTES INDENTURE (this “Indenture”), dated as of ____, 2012, is entered by and between PROSPER FUNDING LLC, a Delaware limited liability company (the “Company”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association incorporated and existing under the laws of the United States of America, as trustee (the “Trustee”).

RECITALS OF THE COMPANY

Prosper Marketplace, Inc., a Delaware corporation (“PMI”), and the Trustee heretofore entered into that Indenture, dated as of June 15, 2009 (the “Original Indenture”), providing for the issuance from time to time of special limited obligations referred to as Borrower Payment Dependent Notes (herein, individually and collectively, the “Securities”), to be issued in series as provided therein.

PMI and the Company entered into that certain Asset Transfer Agreement, dated as of even date herewith, pursuant to which, among other things, PMI has transferred all of its properties and assets substantially as an entirety to the Company (the “Asset Transfer”), including without limitation all of PMI’s rights and obligations with respect to the Securities.

PMI, the Company and the Trustee entered into that certain indenture supplemental to the Original Indenture, as of even date herewith, pursuant to which:

(a)           in connection with the Asset Transfer and pursuant to Section 4.1 of the Original Indenture, the Company assumed all of the obligations of PMI under the Securities and the Original Indenture, and succeeded to, and was substituted for, and became entitled to exercise every right and power of, PMI under the Original Indenture with the same effect as if the Company had been named as PMI under the Original Indenture, and PMI was discharged from all obligations and covenants under the Securities and the Original Indenture; and

(b)           pursuant to Section 8.1 of the Original Indenture, the Original Indenture was amended and restated in the form of this Indenture in order to (i) reflect the succession by Prosper Funding to, and substitution of Prosper Funding for, PMI under the Securities and the Indenture, and (ii) make certain other amendments to the Indenture that either (A) cure an ambiguity, defect or inconsistency of the Original Indenture, (B) do not adversely affect the rights of any Holder of any Security in any material respect, or (C) do not apply to, or modify the rights of, the Holder of any Security of any series created prior to the execution of this Indenture.

Upon becoming effective, unless otherwise expressly provided herein, this Indenture shall apply to all Securities of any series created prior to the date hereof (the “Original Securities”) and to all Securities of any series created on or after the date hereof (the “New Securities”).

All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.

The foregoing recitals are made as representations and statements of fact by the Company and not by the Trustee.

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

ARTICLE I

DEFINITIONS; INCORPORATION BY REFERENCE; OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.01           Definitions.

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

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

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

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

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

“Borrower Loan” means a direct loan originated through the Platform.

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

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

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“Business Day” means, except as otherwise specified as contemplated by Section 2.02(c), with respect to any place of payment or any other particular location referred to in this Indenture or in the Securities, each Monday, Tuesday, Wednesday, Thursday and Friday that is (i) not a day on which the ACH System is closed, and (ii) not a day on which banking institutions are authorized or obligated by law or executive order to close in San Francisco, California or New York, New York.

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

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

“Company Request” means a written request or order signed in the name of the Company (i) by its President or a Vice President, and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee or, with respect to Section 6.02, any other employee of the Company named in an Officers’ Certificate delivered to the Trustee.

“Corporate Administrator” means PMI in its capacity as the Corporate Administrator under the Administration Agreement or any successor or permitted assign thereunder.

“Corresponding Borrower Loan” means, with respect to a particular series of Securities, the Borrower Loan upon which such series of Securities is dependent for payment.

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

“Deposit Account” means a deposit account, as defined in Section 9-108 of the UCC, in the name of the Company held by the Trustee, or such additional or replacement account or accounts as may from time to time be maintained by the Company for the purpose of holding Borrower Loan Payments, provided any such account is deemed a deposit account under Section 9-108 of the UCC and is held by the Trustee.

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

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

“FBO Account” means a deposit account, as defined in Section 9-108 of the UCC, titled “Prosper Funding LLC for the benefit of its lender members,” maintained by the Company at Wells Fargo Bank, National Association, or such additional or replacement account or accounts as may from time to time be maintained by the Company for the benefit of its lender members, provided any such account is deemed a deposit account under Section 9-108 of the UCC and is held by the Trustee.

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“Fee Account” means an account maintained by the Company at Wells Fargo Bank, National Association, or such additional or replacement account or accounts as may from time to time be maintained by the Company for the purpose of holding amounts in respect of Other Payments and Charges and the Servicing Fee, either exclusively or with other amounts.

“Final Maturity” means, when used with respect to any Security, the date to which the Initial Maturity Date of such Security may be extended in accordance with its terms.

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

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

“Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof and shall include the terms of a particular series of Securities established as contemplated in Section 2.02(c).

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

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

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

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

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

“Member” means the sole equity member, or collectively all the equity members, of the Company under the LLC Agreement, or any successors or permitted assigns thereunder.

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

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

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

“Officers’ Certificate” means a written certificate containing the information specified in Sections 9.04 and 9.06, signed in the name of the Company (i) by its President or a Vice President, and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

“Opinion of Counsel” means a written opinion containing the information specified in Sections 9.04 and 9.06, from legal counsel who is acceptable to the Trustee.  The counsel may be an employee of, or counsel to, the Company or the Trustee.

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

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

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

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

“Platform Administrator” means PMI in its capacity as the Loan Platform Administrator under the Administration Agreement or any successor to or permitted assign thereunder.

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

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

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

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

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

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“Record Date” for the amounts payable on any Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 2.02(c).

“Sales Report” means a prospectus supplement filed with the SEC by the Company pursuant to Rule 424 under the Securities Act, containing the information listed in Section 2.02(c) with respect to one or more series of Securities.

“SEC” means the Securities and Exchange Commission.

“Security” or “Securities” has the meaning set forth in the first recital of this Indenture  and more particularly means any Securities authenticated and delivered under this Indenture, including, without limitation, any Original Securities and New Securities.

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

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

“Servicer” means PMI in its capacity as the Loan and Note Servicer under the Administration Agreement or any successor or permitted assign thereunder.

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

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

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

“TIA” means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, except as provided in Section 8.03.

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

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

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

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

Section 1.02           Other Definitions.

Term	Defined in Section
Asset Transfer	Recitals
Bankruptcy Law	5.01
Collateral	6.12
Company	Preamble
Custodian	5.01
Defaulted Payment	2.10
Event of Default	5.01
Excess Amounts	6.12
form of Securities	2.01
Indenture	Preamble
Legal Holiday	9.09
New Securities	Recitals
Notice of Default	5.01
Original Indenture	Recitals
Original Securities	Recitals
Outstanding	2.08
Paying Agent	2.04
PMI	Recitals
Registrar	2.04
Security Interest	6.12
Trustee	Preamble

Section 1.03           Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

“Commission” means the SEC.

“Indenture Securities” means the Securities.

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“Indenture Security Holder” means a Holder or Securityholder.

“Indenture to be Qualified” means this Indenture.

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

“Obligor” on the indenture securities means the Company.

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

Section 1.04          Rules of Construction. Unless the context otherwise requires:

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

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

(c)           all references herein to Articles, Sections or Exhibits shall be construed to refer to Articles, Sections and Exhibits of this Indenture;

(d)           “or” is not exclusive;

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

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

Section 1.05          Amendment and Restatement.  Effective as of the date hereof, this Indenture amends, restates and supersedes in its entirety the Original Indenture.

ARTICLE II

THE SECURITIES

Section 2.01          Forms Generally.  The definitive Securities of each series created after the date hereof and the certificate of authentication in respect thereof shall be in substantially the form set forth on Exhibit A (the “form of Securities”), in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the Officers executing such Securities as evidenced by their execution of the Securities.  The Securities shall be in fully registered form only and shall be printed, lithographed, engraved, word processed or evidenced in electronic form or produced by any combination of these methods or may be produced in any other manner, all as determined by the Officers executing such Securities as evidenced by their execution of such Securities.

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Section 2.02          Title, Terms and Denominations.

(a)           The aggregate Principal Amount of Securities that may be authenticated and delivered under this Indenture shall be unlimited.

(b)           The Securities shall be special limited obligations of the Company and no payments of Principal and interest on the Securities of any series shall be payable unless the Company has received Borrower Loan Payments in respect of the Corresponding Borrower Loan, and then shall be payable equally and ratably on the Securities of such series only to the extent of the Borrower Loan Net Payments related to the Corresponding Borrower Loan.  No Holder of a Security shall have any recourse against the Company unless and then only to the extent that the Company (i) has failed to pay such Holder the Holder’s pro rata share of the Borrower Loan Net Payments in respect of the Corresponding Borrower Loan, or (ii) has otherwise breached a covenant in this Indenture.

(c)           For each series of Securities there shall be established and, subject to Section 2.03, set forth in a Sales Report or any indenture supplemental hereto the following terms, to the extent such terms are not set forth in or otherwise differ from the terms set forth in this Indenture or the form of Securities annexed hereto as Exhibit A:

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

(ii)           the Corresponding Borrower Loan;

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

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

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

(vi)          the Servicing Fee;

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

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

(ix)           any addition to, change in or elimination of the Events of Default which apply to any Securities of the series, and any change in the right of the Trustee or the requisite Holders of such Securities to declare the Principal Amount thereof due and payable pursuant to Section 5.02;

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

(xi)          any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 8.01(g)).

All Securities of a series shall be substantially identical except as to denomination and except as may otherwise be provided in a Sales Report pursuant to this Section 2.02(c) or in any indenture supplemental hereto.

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

Section 2.03           Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its President or one of its Vice Presidents, or the Treasurer or any Assistant Treasurer.  The signature of any of these officers on the Securities may be electronic, manual or facsimile.

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

At any time and from time to time after the execution and delivery of this Indenture (and subject to delivery of the Board Resolution and Officers’ Certificate as set forth in Section 2.02(d) prior to the issuance of the initial series of Securities), the Company may authenticate and deliver Securities of any series.  Not later than January 15th and July 15th of each calendar year, the Company shall provide a record of all Securities executed and authenticated by the Company to the Trustee during the preceding semiannual period of July 1st through December 31st, or January 1st through June 30th, as applicable; provided, that the first such certificate delivered by the Company shall pertain to the period from the date of this Indenture through December 31, 2012.

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

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

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

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

The Trustee may conclusively rely, as to the authorization by the Company of any series of Securities, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel and other documents delivered pursuant to Sections 2.02(c) and 2.02(d) and this Section 2.03, as applicable, at or prior to the time of the first authentication of Securities of the initial series of Securities unless and until it has received written notification that such opinion or other documents have been superseded or revoked.  In connection with the authentication and delivery of Securities, the Trustee shall be entitled to assume, unless it has received written notice to the contrary or any of its Trust Officers has actual knowledge to the contrary, that the Company’s authentication and delivery of such Securities do not violate any rules, regulations or orders of any governmental agency or commission having jurisdiction over the Company.

Each Security shall be dated the date of its authentication.

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

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

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

PROSPER FUNDING LLC,

as Authenticating Agent

By:

Name:

Tilte:

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Section 2.04          Registrar and Paying Agent.  The Company shall maintain, with respect to each series of Securities, an office or agency where such Securities may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where such Securities may be presented for purchase or payment (“Paying Agent”).  The Registrar shall maintain a register of all series of Securities executed and authenticated hereunder and of their transfer and exchange in accordance with the terms hereof.  The Company may have one or more co-registrars and one or more additional paying agents.  The terms Registrar and Paying Agent include any co-registrar or additional paying agent, respectively.

The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent or Registrar.  If a person other than the Company or any Subsidiary or an Affiliate of either of them acts as Registrar or Paying Agent, the Company shall enter into an appropriate agency agreement with respect to each series of Securities with any such Registrar or Paying Agent.  Such agreement shall implement the provisions of this Indenture that relate to such agent.  The Company shall notify the Trustee of the name and address of any such agent.

The Company initially will serve as the Registrar and Paying Agent in connection with all series of Securities.  The Company may from time to time appoint one of its Subsidiaries or any of its or their respective Affiliates or any other person to act as Registrar or Paying Agent for one or more series of Securities in accordance with this Section 2.04.

Section 2.05         Paying Agent to Hold Money and Securities in Trust.  Except as otherwise provided herein, prior to or on each due date of payments in respect of any series of Securities, the Company shall deposit with the Paying Agent with respect to such Securities a sum of money sufficient to make such payments when so becoming due.  The Company shall require each Paying Agent (other than the Trustee or the Company) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by such Paying Agent for the making of payments in respect of the Securities of such series and shall notify the Trustee in writing of any default by the Company in making any such payment.  At any time during the continuance of any such default, a Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money so held in trust with respect to such Securities.  If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent for a series of Securities, it shall segregate the money held by it as Paying Agent with respect to such Securities.  The Company at any time may require a Paying Agent for a series of Securities to pay all money held by it with respect to such Securities to the Trustee and to account for any money disbursed by it.  Upon doing so, such Paying Agent shall have no further liability for the money.

Section 2.06          Securityholder Lists.  The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of each series of Securities.  For so long as any series of Original Securities is Outstanding, the Company shall cause to be furnished to the Trustee at least monthly on the first Business Day of each month a list of the names and addresses of the Holders of each series of Securities Outstanding as of a date within the fifteen (15) days before the date on which the list is furnished.  From and after the date on which no series of Original Securities is Outstanding, the Company shall cause to be furnished to the Trustee not later than January 15th and July 15th in each calendar year a list of the names and addresses of the Holders of each series of Securities Outstanding as of the immediately preceding January 1 or July 1, respectively.  In addition, the Company shall cause to be furnished to the Trustee at such times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of each series of Securities Outstanding.

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Section 2.07          Transfer. Except as stated in the immediately following paragraph, the Securities will only be transferable through the Note Trader Platform.  The Company may (i) impose a reasonable administrative fee for any such transfer, which fee shall be described on the Company’s website www.prosper.com and may be changed or waived from time to time, and (ii) require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer of the Securities from the Securityholder requesting such transfer.

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

Any Security transferred in accordance with this Section 2.07 shall be the valid obligation of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Security so transferred.

Section 2.08          Outstanding Securities; Determinations of Holders’ Action.  Securities of any series “Outstanding” at any time are, as of the date of determination, all the Securities of such series theretofore authenticated by the Company for such series except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding.  A Security does not cease to be “Outstanding” because the Company or an Affiliate thereof is the Holder of the Security; provided, however, that in determining whether the Holders of the requisite Principal Amount of Outstanding Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in conclusively relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any Affiliate of the Company.  Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination.

If, on the final Stated Maturity for a series of Securities, the Company has irrevocably deposited money into the FBO Account sufficient to pay such Securities in full, then on and after that date such Securities shall cease to be Outstanding.  In addition, each series of New Securities shall cease to be Outstanding if the Company, pursuant to Section 3.06(a), has written off in full all unpaid principal and interest on the Corresponding Borrower Loan and has notified the Trustee of such action; provided, that in the event the Company has written off in full all unpaid principal and interest on a Borrower Loan prior to the Final Maturity Date of the related series of New Securities, such series of New Securities shall remain Outstanding until the Final Maturity Date thereof.

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Section 2.09          Cancellation. The Company may at any time cancel any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may cancel any Securities previously authenticated hereunder that the Company has not issued and sold. The Company may not reissue, or issue new Securities to replace, Securities it has cancelled.

No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 2.09, except as expressly permitted in the form of Securities for any particular series or as permitted by this Indenture.

Section 2.10          Payments.  Except as otherwise provided herein (including, without limitation, in Section 2.02(b)), prior to or on each Payment Date in respect of any series of Securities, the Company shall irrevocably deposit into the FBO Account, for the benefit of the Holder of such Securities, a sum of money sufficient to satisfy the installment of Principal thereof or interest thereon that is due on such Payment Date.  Payment of Principal and interest on any Security which is payable, and is punctually paid or duly provided for, on any Payment Date shall be paid to the person in whose name such Security is registered at the close of business on the Record Date for such Payment Date.

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

Section 2.11          Persons Deemed Owners.  Prior to the transfer of a Security in accordance with Section 2.07, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of Principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

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

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ARTICLE III

COVENANTS

Section 3.01          Payment of Securities. The Company shall promptly make all payments in respect of each series of Securities in lawful money of the United States on the dates and in the manner provided in the Securities but solely from the sources provided pursuant to Section 2.02(b).  The Company shall have no liability or obligation with respect to the payment of Principal and interest on any Securities except to the extent of the Borrower Loan Net Payments in respect of the Corresponding Borrower Loan.  The Company shall make payments of Principal or interest on the Securities by irrevocable transfer of funds into the FBO Account for the benefit of the applicable Holders.

Section 3.02          SEC Reports.  The Company shall deliver to the Trustee, within fifteen (15) days after the end of each calendar quarter, copies of all Sales Reports filed with the SEC by the Company during such quarter as well as copies of any information, documents or reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company was required to file with the SEC during such quarter pursuant to Section 13 or 15(d) of the Exchange Act.  The Company also shall comply with the provisions of TIA Section 314(a).

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

Section 3.03          Compliance Certificate; Statement by Officers as to Default. The Company shall deliver to the Trustee within one hundred twenty (120) days after the end of each fiscal year (beginning with the fiscal year ending on December 31, 2009) an Officers’ Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating whether or not the signers know of any Default that occurred during such period.  If they do, such Officers’ Certificate shall describe the Default and its status.

The Company shall deliver to the Trustee, as soon as possible and in any event within five (5) days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers’ Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto.

Section 3.04          Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

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Section 3.05          Maintenance of Office or Agency.  The Company will maintain an office or agency where Securities of any series may be presented or surrendered for payment and where notices and demands to or upon the Company in respect of the Securities of any series and this Indenture may be served.  The office of the Company at 111 Sutter Street, 22nd Floor, San Francisco, California 94104 shall be such office or agency for all of the aforesaid purposes unless the Company shall maintain some other office or agency for such purposes and shall give prompt written notice to the Trustee of the location, and any change in the location, of such other office or agency.

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

Section 3.06           Borrower Loan Servicing; Corporate and Platform Administration Services.

(a)           With respect to each series of Securities, the Company or a third-party servicer (which may include, without limitation, the Servicer) shall use commercially reasonable efforts to service and collect the Corresponding Borrower Loan, in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans. Notwithstanding the generality of the foregoing, (i) referral of a delinquent Borrower Loan to a collection agency within five (5) Business Days after it becomes thirty (30) days past-due shall be deemed to constitute commercially reasonable servicing and collection efforts; and (ii) the Company and any third-party servicer of a Borrower Loan shall have the right, at any time and from time to time and subject to the foregoing servicing standard, to change the stated maturity of the principal of, or any installment of principal or interest on, any Borrower Loan, or reduce the principal amount thereof or the rate of interest thereon, or change the coin or currency in which, any installment of principal and interest on any such Borrower Loan is payable or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or amend or waive any terms of such Borrower Loan, or write off and cancel such Borrower Loan without the consent of any Holder of any Securities of the series corresponding to such Borrower Loan.

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

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

(d)           The Company shall, or shall cause a third-party administrator (which may include, without limitation, the Corporate Administrator) to, use commercially reasonable efforts to administer its day-to-day business and operations and provide the other administrative services set forth in Article III of the Administration Agreement as in effect on the date hereof in accordance with industry standards customary for administrative services of the same general type and character as those to be provided under Article III of the Administration Agreement.

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(e)           The Company shall, or shall cause a third-party administrator (which may include, without limitation, the Platform Administrator) to, use commercially reasonable efforts to manage the Platform and provide the other services set forth in Section 4.2 of the Administration Agreement as in effect on the date hereof in accordance with industry standards customary for online credit platforms of the same general type and character as the Platform.

Section 3.07          Separateness Covenants.  The Company agrees that it will at all times when any Securities are Outstanding:

(a)           maintain its own separate books and records and bank accounts separate from those of its Members or any other Person;

(b)           hold itself out to the public and all other Persons as a legal entity separate from its Members and any other Person;

(c)           have a Board of Directors separate from that of its Members and any other Person;

(d)           file its own tax returns, if any, as may be required under applicable law, to the extent (A) not part of a consolidated group filing a consolidated return or returns, or (B) not treated as a division for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law;

(e)           except as contemplated by the Program Documents, not commingle its assets with assets of any other Person and maintain its funds and other assets such that they shall be separately identified and segregated from those of its Members and any other Person;

(f)           conduct its business in its own name so as not to mislead third parties as to the identity of the entity with which such third parties are dealing and strictly comply with all organizational formalities to maintain its separate existence;

(g)           maintain separate financial statements and ensure that such financial statements indicate (in the notes thereto or otherwise) the separate existence of the Company and its Members and their respective assets and liabilities and, to the extent the assets and liabilities of the Company are represented on the financial statements of any of its Members, ensure that such financial statements indicate (in the notes or otherwise) the separate existence of the Company and such Member and their separate assets and liabilities;

(h)           pay its operating expenses and own liabilities only out of its own funds and not from the funds of any other Person;

(i)            maintain an arm’s length relationship with its Affiliates and Members and ensure that all transactions between the Company and its Affiliates are on terms and conditions that are not materially more favorable to the Affiliate than the terms and conditions that would be expected to have been obtained under similar circumstances from a non-Affiliate;

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(j)            pay the salaries of its own employees, if any;

(k)           not hold out its credit or assets as being available to satisfy the obligations of any other Person;

(l)            allocate fairly and reasonably any overhead for shared office space and pay for its share of such overhead;

(m)          so as not to mislead third parties as to the identity of the entity with which such third parties are dealing, maintain and utilize separate stationery, invoices and checks;

(n)           except as contemplated by the Program Documents, not pledge its assets for the benefit of any other Person;

(o)           correct any known misunderstanding regarding its separate identity;

(p)           maintain adequate capital in light of its contemplated business purpose, transactions and liabilities;

(q)           ensure that it does not enter into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of any other Person;

(r)            ensure that it will not conceal from creditors any of its assets or participate in concealing the assets of any other Person;

(s)           cause its Board of Directors to meet at least annually or act pursuant to written consent and keep minutes of such meetings and actions and observe all other Delaware limited liability company formalities;

(t)            not acquire any securities of its Members (other than the acquisition of the Original Securities and the Corresponding Borrower Loans); and

(u)           cause the directors, officers, agents and other representatives of the Company to act at all times with respect to the Company consistently and in furtherance of the foregoing and in the best interests of the Company.

The Company further agrees that at all times when any Securities are Outstanding the Board of Directors will include at least two Independent Directors (as defined in the LLC Agreement) and that the Company will not take any action that, under the terms of the LLC Agreement, requires the written consent of all of the Independent Directors unless such consent is obtained.

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ARTICLE IV

SUCCESSOR CORPORATION

Section 4.01          When Company May Merge or Transfer Assets.  The Company shall not consolidate with or merge with or into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

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

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

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

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

ARTICLE V

DEFAULTS AND REMEDIES

Section 5.01          Events of Default. Unless otherwise specified as contemplated by Section 2.02(c) with respect to any series of Securities, an “Event of Default” occurs, with respect to each series of the Securities individually, if:

(a)           the Company defaults, subject in each case, to the limitations set forth in Sections 2.02(b) and 3.01 and in the Securities in the payment of any Principal of, or interest upon, any Security of such series when the same becomes due and payable and continuance of such default for a period of thirty (30) days;

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(b)           the Company fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clause (a) above and other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section 5.01 specifically dealt with or which has been expressly included in this Indenture solely for the benefit of a series of Securities other than such series) and such failure continues for ninety (90) days after receipt by the Company of a Notice of Default; provided, however, that if the Company shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within a period of ninety (90) days, then such period shall be increased to such extent as shall be necessary to enable the Company diligently to complete such curative action;

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

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

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

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

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

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Section 5.02          Acceleration.  If an Event of Default specified in Section 5.01(c) or Section 5.01(d) occurs and is continuing, the Principal (or portion thereof) of all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders, notwithstanding, for purposes of the effectiveness of such acceleration, the second sentence of Section 3.01 and without respect to whether there are or will be Borrower Loan Net Payments in respect of the Corresponding Borrower Loans.  The Holders of a majority in aggregate Principal Amount of all Outstanding Securities, by notice to the Trustee (and without notice to any other Securityholder), may rescind an acceleration and its consequences if (a) the rescission would not conflict with any judgment or decree, and (b) all Events of Default specified in Section 5.01(c) or Section 5.01(d) have been cured or waived.  No such rescission shall affect any subsequent Default or impair any right consequent thereto.  For the avoidance of doubt, (i) there shall be no acceleration of the Principal (or portion thereof) of any Securities upon the occurrence of an Event of Default other than an Event of Default specified in Section 5.01(c) or Section 5.01(d), and (ii) the acceleration of any Securities shall not limit the application of the second sentence of Section 3.01 to the calculation of the amounts actually payable on any Securities or limit or affect the conditions to the right of any Holder to receive such amounts in respect of such Holder’s Securities.

Section 5.03          Other Remedies.  If an Event of Default with respect to a series of Outstanding Securities occurs and is continuing, the Trustee may pursue any available remedy to (a) collect the payment of the whole amount then due and payable on such Securities for Principal and interest, with interest upon the overdue Principal and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest from the date such interest was due, at the rate or rates prescribed therefor in such Securities and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including amounts due the Trustee under Section 6.07, (b) exercise any and all rights of a secured party under the UCC and other applicable law pursuant to the security interest granted to the Trustee under Section 6.12, or (c) enforce the performance of any provision of the Securities or this Indenture.

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

Section 5.04          Waiver of Past Defaults. The Holders of a majority in aggregate Principal Amount of the Outstanding Securities of any series, by notice to the Trustee (and without notice to any other Securityholder), may on behalf of the Holders of all the Securities of such series waive an existing Default with respect to such series and its consequences except (a) an Event of Default described in Section 5.01(a) with respect to such series, or (b) a Default in respect of a provision that under Section 8.02 cannot be amended without the consent of the Holder of each Outstanding Security of such series affected.  When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

Section 5.05          Control by Securityholders.

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(a)           The Holders of a majority in aggregate Principal Amount of the Outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities.

(b)           The Holders of at least 25% in aggregate Principal Amount of the Securities Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to, or for taking any other action in connection with the enforcement by the Trustee of its rights under, Article V of the Administration Agreement, including any related indemnification rights thereunder for breaches thereof.

(c)           The Holders of at least 25% in aggregate Principal Amount of the New Securities Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to, or for taking any other action in connection with the enforcement by the Trustee of its rights under, the Administration Agreement other than Article V thereof.

(d)           For the avoidance of doubt, the Holders may exercise their respective rights under this Section 5.05 regardless of whether an Event of Default has occurred or is continuing.  The Trustee may refuse to follow any direction by the Holders under this Section 5.05 that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability.

Section 5.06          Limitation on Suits. A Holder of any Security of any series may not pursue any remedy with respect to this Indenture or the Securities unless:

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

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

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

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

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

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

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Section 5.07          Rights of Holders to Receive Payment. Subject to Section 3.06(a), the right, which is absolute and unconditional, of any Holder of any Security to receive payment of the Principal of and interest on (subject to Sections 2.02(b) and 2.10) such Security on the Stated Maturity or Maturities expressed in such Security held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected adversely without the consent of each such Holder.

Section 5.08          Collection Suit by Trustee.  If an Event of Default described in Section 5.01(a) with respect to Securities of any series occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to such series of Securities and the amounts provided for in Section 6.07.

Section 5.09         Trustee May File Proofs of Claim.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue Principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a)           to file and prove a claim for the whole amount of Principal and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amount due the Trustee under Section 6.07) and of the Holders of Securities allowed in such judicial proceeding;

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

(c)           to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Securities to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Securities, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07.

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

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

FIRST: to the Trustee for amounts due under Section 6.07;

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

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

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

Section 5.11          Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant.  This Section 5.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.07 or a suit by Holders of more than 10% in aggregate Principal Amount of the Outstanding Securities of any series, or to any suit instituted by any Holder of any Security for the enforcement of the payment of the Principal of or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security.

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

ARTICLE VI

TRUSTEE

Section 6.01          Duties of Trustee. i) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

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

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

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

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

(i)            this paragraph (c) does not limit the effect of paragraph (b) of this Section 6.01;

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

(iii)          the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.05 or exercising any trust or power conferred upon the Trustee under this Indenture.

(d)           Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 6.01.

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

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

Section 6.02           Rights of Trustee.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 6.03          Individual Rights of Trustee, Etc.  The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.  Any authenticating agent or any other agent of the Company may do the same with like rights. However, the Trustee must comply with Sections 6.10 and 6.11.

Section 6.04          Trustee’s Disclaimer.  The recitals contained herein and in the Securities shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same.  The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities.  The Trustee shall not be accountable for the Company’s use of the proceeds from the Securities and shall not be responsible for any statement in the registration statement for the Securities under the Securities Act, or in this Indenture or the Securities or for the determination as to which beneficial owners are entitled to receive any notices hereunder.

Section 6.05          Notice of Defaults. If a Default with respect to the Securities of any series occurs and is continuing and if it is known to the Trustee, the Trustee shall give to each Holder of Securities of such series notice of such Default in the manner set forth in TIA Section 315(b) within ninety (90) days after it occurs.  Except in the case of a Default described in Section 5.01(a) with respect to any Security of such series or a Default in the payment of any sinking fund installment with respect to any Security of such series, the Trustee may withhold the notice if and so long as it in good faith determines that withholding the notice is in the interests of the Holders of Securities of such series.

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Section 6.06          Reports by Trustee to Holders.  If required by Section 313(a) of the TIA, within sixty (60) days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail or transmit electronically to each Holder of Securities a brief report dated as of such May 15 that complies with TIA Section 313(a).  If the Trustee is required to prepare such report pursuant to Section 313(a) of the TIA and if it chooses to transmit such report electronically, the Trustee appoints the Company, and the Company agrees to act, as the Trustee’s agent to transmit such report electronically to each Holder of Securities and to the SEC as provided in the immediately following paragraph.  Promptly following such transmissions, the Company shall certify, in writing, to the Trustee that it has effected each of such transmissions to Holders of Securities and to the SEC.  The Trustee also shall comply with TIA Sections 313(b) and (c).

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

Section 6.07           Compensation and Indemnity.  The Company agrees:

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

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

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

To secure the Company’s payment obligations in this Section 6.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal of or interest, if any, on particular Securities.

The Company’s obligations pursuant to this Section 6.07 shall survive the discharge or other termination of this Indenture or the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(c) or Section 5.01(d), the expenses are intended to constitute expenses of administration under any Bankruptcy Law.

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Section 6.08          Replacement of Trustee.  The Trustee may resign by so notifying the Company; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 6.08.  The Holders of a majority in aggregate Principal Amount of the Outstanding Securities at the time outstanding may remove the Trustee with respect to the Securities by so notifying the Trustee and may appoint a successor Trustee, which successor Trustee shall, in the absence of an Event of Default, be reasonably acceptable to the Company.  The Company shall remove the Trustee if:

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

(b) the Trustee is adjudged bankrupt or insolvent;

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

(d) the Trustee otherwise becomes incapable of acting.

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

In the case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company.  Thereupon, the resignation or removal of the retiring Trustee shall become effective and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall mail or electronically transmit a notice of its succession to Holders of Securities of the particular series with respect to which such successor Trustee has been appointed.  The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 6.07.

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In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-Trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, subject, nevertheless, to its lien, if any, provided for in Section 6.07.

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

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

Section 6.09           Successor Trustee by Merger.  If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

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

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

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

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

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ARTICLE VII

SATISFACTION AND DISCHARGE

Section 7.01        Discharge of Liability on Securities. This Indenture shall upon Company Request cease to be of further effect as to all Outstanding Securities or all Outstanding Securities of any series, as the case may be (except as to any surviving rights of registration of transfer of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when:

(a)           either (i) all Outstanding Securities or all Outstanding Securities of any series, as the case may be, theretofore authenticated and delivered (other than Securities or Securities of such series, as the case may be, for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 7.02), have been delivered to the Company or the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Company or the Trustee for cancellation: (1) have become due and payable, or (2) will become due and payable at their Stated Maturity within one (1) year; and the Company, in the case of the foregoing clauses (1) and (2), has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose, an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee or the Company for cancellation, for Principal and any interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity, as the case may be;

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

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

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

Notwithstanding the satisfaction and discharge of this Indenture with respect to the Securities of any series, the obligations of the Company to the Trustee with respect to the Securities of that series under Section 6.07, the obligations of the Company to any authenticating agent and, if money shall have been deposited with the Trustee pursuant to Section 7.02(b), this Section 7.02, shall survive.  The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities.

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Section 7.02          Repayment to the Company. The Trustee shall return to the Company on Company Request any money held by them for the payment of any amount with respect to the Securities that remains unclaimed for two (2) years.  After return to the Company, Holders entitled to the money must look to the Company for payment as general creditors with limited recourse as described herein and in the Securities unless an applicable abandoned property law designates another person.

ARTICLE VIII

SUPPLEMENTAL INDENTURES

Section 8.01         Supplemental Indentures Without Consent of Holders. Without the consent of any Holders of Securities, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

(a)           to evidence the succession of any Person to the Company in accordance with the provisions of Article IV and the assumption by such successor of the covenants of the Company herein and in the Securities; or

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

(c)           to establish the form or terms of Securities of any series as permitted by Sections 2.01 and 2.02(c), respectively; or

(d)           to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.08; or

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

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

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

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

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

Section 8.02          Supplemental Indentures With Consent of Holders. With the written consent of the Holders of at least a majority in aggregate Principal Amount of the Outstanding Securities of each series affected by such supplemental indenture, the Company and the Trustee may amend this Indenture or the Securities of any series or may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Securities of such series and under this Indenture; provided, however, that no such amendment or supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby:

(a)           subject to Section 3.06(a), change the Stated Maturity of the Principal of, or any installment of Principal or interest on, any such Security, or reduce the Principal Amount thereof or the rate of interest thereon that would be due and payable upon a declaration of acceleration of maturity thereof pursuant to Section 5.02, or change the coin or currency in which any installment of principal of or interest on, any such Security is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof;

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

(c)           modify any of the provisions of this Section 8.02, Section 5.04 (clauses (a) and (b)) or Section 5.07, except to increase the percentage of Outstanding Securities of such series required for such actions or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby.

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

It shall not be necessary for the consent of the Holders under this Section 8.02 to approve the particular form of any proposed amendment or supplemental indenture, but it shall be sufficient if such consent approves the substance thereof.

After an amendment or supplemental indenture under this Section 8.02 becomes effective, the Company shall mail or electronically transmit to each Holder of the particular Securities affected thereby a notice briefly describing the amendment.

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Section 8.03          Compliance with Trust Indenture Act.  Every supplemental indenture executed pursuant to this Article VIII shall comply with the TIA as then in effect.

Section 8.04          Revocation and Effect of Consents, Waivers and Actions.  Until an amendment or waiver with respect to a series of Securities becomes effective, a consent to it or any other action by a Holder of a Security of that series hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of that Security that evidences the same obligation as the consenting Holder’s Security, even if notation of the consent, waiver or action is not made on the Security.  However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder’s Security or portion of the Security if the Trustee receives the notice of revocation before the Company or an agent of the Company certifies to the Trustee that the consent of the requisite aggregate Principal Amount of the Securities of that series has been obtained.  After an amendment, waiver or action becomes effective, it shall bind every Holder of Securities of that series.

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

Section 8.05          Notation on or Exchange of Securities.  Securities of any series authenticated and delivered after the execution of any supplemental indenture with respect to such series pursuant to this Article VIII may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture.  If the Company shall so determine, new Securities of such series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared, executed, authenticated and delivered by the Company in exchange for outstanding Securities of that series.

Section 8.06          Trustee to Sign Supplemental Indentures.  The Trustee shall sign any supplemental indenture authorized pursuant to this Article VIII if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee.  If it does, the Trustee may, but need not, sign it.  In signing such amendment, the Trustee shall receive, and shall be fully protected in conclusively relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and is the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.

Section 8.07          Effect of Supplemental Indentures.  Upon the execution of any supplemental indenture under this Article VIII, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby, except to the extent otherwise set forth thereon.

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ARTICLE IX

MISCELLANEOUS

Section 9.01           Trust Indenture Act Controls.  If any provision of this Indenture limits, qualities or conflicts with another provision hereof which is required to be included in this Indenture by the TIA, the required provision shall control.

Section 9.02          Notices.  Any notice or communication shall be in writing and delivered in person, mailed by first-class mail, postage prepaid or transmitted electronically to any Holder at the registered address maintained in the Company’s records; provided, that any notice or communication by and among the Trustee and the Company may be made by telecopy and shall be effective upon receipt thereof and shall be confirmed in writing, mailed by first-class mail, postage prepaid, and addressed as follows:

if to the Company:	Prosper Funding LLC
	111 Sutter Street, 22nd Floor
	San Francisco, CA 94104
	Attention:	____
	Facsimile:	____
	Email:	____
if to the Trustee:	Wells Fargo Bank, National Association
	45 Broadway, 14th Floor
	New York, NY 10006
	Attention:	Corporate Trust Services
	Facsimile:	(212) 515-1589

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

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

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

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

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

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

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

Section 9.03          Communication by Holders with Other Holders.  Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities.  The Company and the Trustee with respect to a particular series of Securities, and anyone else, shall have the protection of TIA Section 312(c).

Section 9.04          Certificate and Opinion as to Conditions Precedent.  Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

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

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

Section 9.05          Form of Documents Delivered to Trustee.  In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or governed by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

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

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Section 9.06          Statements Required Certificate or Opinion. Each Officers’ Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include:

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

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

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

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

Section 9.07          Separability Clause.  In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 9.08          Rules by Trustee.  With respect to the Securities of a particular series, the Trustee with respect to such series of Securities may make reasonable rules for action by or a meeting of Holders of such series of Securities.

Section 9.09          Legal Holidays.  A “Legal Holiday” is any day other than a Business Day. If any specified date (including an Interest Payment Date or Stated Maturity of any Security, or a date for giving notice) is a Legal Holiday at any place for giving notice or taking any other action required hereunder or under any series of Securities, then (notwithstanding any other provision of this Indenture or of the Securities other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu of this Section 9.09) such action need not be taken, on such date, but the action shall be taken on the next succeeding day that is not a Legal Holiday at such place with the same force and effect as if made on such date.

Section 9.10          GOVERNING LAW AND JURISDICTION; WAIVER OF JURY TRIAL.  THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLE OF CONFLICTS OF LAW THAT WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.  THE COMPANY, THE TRUSTEE, AND EACH HOLDER OF A SECURITY (BY ACCEPTANCE THEREOF), (I) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS INDENTURE, (II) IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION IN SUCH SUITS, AND (III) IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT IN THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK THAT SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

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EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 9.11          No Recourse Against Others.  The obligations of the Company under this Indenture and (subject to Sections 2.02(b), 3.01 and 3.06(a)) the Securities are solely obligations of the Company and are not obligations of any other Person.  Neither PMI, in its capacity as Servicer or otherwise, nor any director, officer, employee or member, as such, of the Company, shall have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By executing this Indenture the Trustee, and by accepting a Security each Holder of such Security, waives and releases all such liability. Such waiver and release shall be part of the consideration for the execution by the Company of this Indenture and the issue of the Securities. The terms of this Section 9.11 shall survive the termination of this Indenture or the resignation or removal of the Trustee.

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

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

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

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

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

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

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

[Signatures appear on the following page]

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IN WITNESS WHEREOF, the Parties have duly executed this Indenture as of the date first above written.

PROSPER FUNDING LLC
By:
	Name:
	Title:

Attest:
	Name:
	Title:

WELLS FARGO, NATIONAL ASSOCIATION, as Trustee
By:
	Name:
	Title:

[Signature Page to Amended and Restated

Borrower Payment Dependent Notes Indenture]

EXHIBIT A

FORM OF BORROWER PAYMENT DEPENDENT NOTE

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS BORROWER PAYMENT DEPENDENT NOTE (THIS "NOTE") IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") BECAUSE PAYMENTS ON THIS NOTE ARE DEPENDENT ON PAYMENTS ON THE CORRESPONDING BORROWER LOAN. THE ISSUE PRICE OF THIS NOTE IS THE STATED PRINCIPAL AMOUNT OF THIS NOTE, AND THE ISSUE DATE IS THE ORIGINAL ISSUE DATE. UPON REQUEST, THE COMPANY WILL PROMPTLY MAKE AVAILABLE TO THE HOLDER THE AMOUNT OF OID AND YIELD TO MATURITY OF THIS NOTE. A HOLDER SHOULD CONTACT PROSPER MEMBER SUPPORT AT (866) 615-6319 OR SUPPORT@PROSPER.COM.

ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL UNLESS SUCH TRANSFER IS EFFECTED THROUGH THE NOTE TRADER PLATFORM OR IS OTHERWISE PERMITTED BY THE INDENTURE.

BORROWER PAYMENT DEPENDENT NOTE SERIES NO._______ 1

PROSPER FUNDING LLC

No.__________________ [CUSIP__________]

HOLDER:__________________ 2

CORRESPONDING BORROWER LOAN:________________ 3

STATED PRINCIPAL AMOUNT OF THIS NOTE: U.S. $____________ 4

AGGREGATE PRINCIPAL AMOUNT OF THIS SERIES OF NOTES: U.S. $________ 5

INTEREST RATE:________ 6

1 Insert loan ID Number for Corresponding Borrower Loan.

 

2 Insert lender member's screen name and member identification number.

 

3 Insert description of Corresponding Borrower Loan.

 

4 Insert principal amount of lender member's corresponding Note.

5 Insert aggregate principal amount of Corresponding Borrower Loan.

 

6 Insert final yield percentage.

A-1

SERVICING FEE: An Annualized Rate applied to the Outstanding Principal Amount of the Corresponding Prosper Borrower Loan:___________ 7

ORIGINAL ISSUE DATE:_________ 8

INITIAL MATURITY DATE:_________ 9

FINAL MATURITY DATE:__________________ 10

EXTENSION OF MATURITY DATE: This Note will mature on the Initial Maturity Date, unless the maturity of this Note is extended to the Final Maturity Date as described below. In no event will the maturity of this Note be extended beyond the Final Maturity Date.

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

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

7 Insert total servicing fee rate to be charged by Company.

 

8 Insert date corresponding to date of funding Corresponding Borrower Loan.

 

9 Insert date corresponding to stated maturity of Corresponding Borrower Loan.

 

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

A-2

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

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

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

If, on the Initial Maturity Date, any principal or interest payments in respect of the Corresponding Borrower Loan remain due and payable to the Company, the maturity date of this Note will automatically be extended to the Final Maturity Date.  In such case, this Note will mature on the Final Maturity Date, even if principal or interest payments in respect of the Corresponding Borrower Loan remain due and payable to the Company.  No payments shall be required to be made on this Note after the Final Maturity Date even if the Company receives Borrower Loan Net Payments related to the Corresponding Borrower Loan after such date.

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

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

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

A-3

If an Event of Default described in Section 5.01(c) or (d) of the Indenture occurs and is continuing, the unpaid stated principal amount hereof will become and be immediately due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

The Indenture provides that the Company or a third-party servicer shall use commercially reasonable efforts to service and collect the Corresponding Borrower Loan in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans, and may in applying that standard amend or waive any term of such Borrower Loan, and without limitation to the foregoing, shall have authority to write off and cancel such Borrower Loan without the consent of any Holder of any Securities of the series corresponding to such Borrower Loan. The Indenture contains provisions permitting (subject to the servicing standard) the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of each series of Securities affected thereby, at the time Outstanding, evidenced as provided in the Indenture, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any indenture supplemental thereto or modifying in any manner the rights of the holders of this Note; provided, however, that no such supplemental indenture shall (1) change the Stated Maturity of the principal of, or any installment of principal or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon that would be due and payable upon a declaration of acceleration of maturity thereof or change the place of payment where, or change the coin or currency in which, any installment of principal and interest on any such Security is payable or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof, (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such amendment or supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) with respect to the Securities, or (3) modify any of the provisions of Section 8.02, Section 5.04 (clauses (a) and (b)) or Section 5.07 of the Indenture, except to increase the percentage of Outstanding Securities required for such actions or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Securities of all affected series at the time outstanding, on behalf of the holders of all the Securities of such series, to waive, insofar as those series are concerned, compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future holders and owners of this Note and any Notes which may be issued upon the registration of transfer hereof, irrespective of whether or not any notation thereof is made upon this Note or other such Notes.

A-4

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

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

A-5

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

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

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

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

A-6

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

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

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

[Signature Page Follows]

A-7

IN WITNESS WHEREOF, Prosper Funding LLC has caused this instrument to be signed by its duly authorized officers.

Dated:

PROSPER FUNDING LLC
By:
	Name:
	Title:

CERTIFICATE OF AUTHENTICATION

Dated:

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

PROSPER FUNDING LLC,

as Authenticating Agent

By:
	Name:
	Title:

EX-5.1

Exhibit 5.1

November 26, 2012

Prosper Funding LLC

111 Sutter Street, 22nd Floor

San Francisco, CA 94104

Ladies and Gentlemen:

We have acted as counsel to Prosper Funding LLC, a Delaware limited liability company (“Prosper Funding”), and to Prosper Marketplace, Inc., a Delaware corporation (“PMI” and, collectively with Prosper Funding, the “Registrants”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) of the Registrants’ Registration Statement on Form S-1, File No. 333-179941, initially filed by Prosper Funding with the Commission under the Securities Act of 1933, as amended (the “Act”), on March 7, 2012 (such Registration Statement, as amended through the date hereof, the “Registration Statement”).  The Registration Statement includes, as Part 1 thereof, a preliminary prospectus, dated November 26, 2012, relating to an offering of up to $500,000,000 in aggregate principal amount of Prosper Funding’s Borrower Payment Dependent Notes (the “Notes”) and PMI Management Rights that will accompany the Notes. The Notes and the PMI Management Rights will be offered and sold in accordance with the terms of a Lender Registration Agreement (the “Lender Registration Agreement”), between Prosper Funding and a purchaser of the Notes. The form of the Lender Registration Agreement is attached as Exhibit 10.2 to the Registration Statement.  The Notes will be issued under an Amended and Restated Indenture (the “Indenture”), between Prosper Funding and Wells Fargo Bank, National Association, as trustee (the “Trustee”) the form of which was filed as Exhibit 4.3 to the Registration Statement.  As used herein, the “PMI Management Rights” shall mean PMI’s obligations under the Administration Agreement to be entered into between PMI and Prosper Funding (the “Administration Agreement”).  The form of the Administration Agreement is attached as Exhibit 10.7 to the Registration Statement.

We have reviewed such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion.  We have assumed that all signatures are genuine, that all documents submitted to us as originals are authentic and that all copies of documents submitted to us conform to the originals.

We have relied as to certain matters on information obtained from public officials, officers of Prosper Funding and PMI, and other sources believed by us to be responsible.

With respect to the Notes, we have assumed that the Trustee has duly authorized the Indenture.  We have further assumed with respect to the Notes and the PMI Management Rights that each Lender Registration Agreement will be duly authorized, executed and delivered by Prosper Funding and the other parties thereto.

Based upon and subject to the foregoing and subject to the qualifications set forth below, with respect to the Notes, we are of the opinion that when, as and if: (i) the Registration Statement and any required post-effective amendments thereto have all become effective under the Act and all Prospectus Supplements required by applicable law have been delivered and filed as required by such laws, (ii) the Indenture has been duly executed and delivered by Prosper Funding and the Trustee and duly qualified under the Trust Indenture Act of 1939, as amended, and (iii) the Notes have been duly executed by Prosper Funding and authenticated by the Trustee in accordance with the Indenture and have been duly issued and delivered against payment therefor in accordance with the terms of the respective Lender Registration Agreements and as contemplated by the Registration Statement, then, upon the happening of such events, the Notes will constitute the valid and binding obligations of Prosper Funding, enforceable against Prosper Funding in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

Based upon and subject to the foregoing and subject to the qualifications set forth below, with respect to the PMI Management Rights, we are of the opinion that when, as and if: (i) the Registration Statement and any required post-effective amendments thereto have all become effective under the Act and all Prospectus Supplements required by applicable law have been delivered and filed as required by such laws, (ii) the Indenture has been duly executed and delivered by Prosper Funding and the Trustee and duly qualified under the Trust Indenture Act of 1939, as amended, (iii) the Notes have been duly executed by Prosper Funding and authenticated by the Trustee in accordance with the Indenture and have been duly issued and delivered against payment therefor in accordance with the terms of the respective Lender Registration Agreements, and as contemplated by the Registration Statement and (iv) the Administration Agreement has been duly executed and delivered by Prosper Funding and PMI, then the PMI Management Rights will constitute the valid and binding obligations of PMI, enforceable against PMI in accordance with the terms of the Administration Agreement, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

We express no opinion as to the binding effect of: (i) waivers of defenses, subrogation and related rights, rights to trial by jury, rights to object to venue, or other rights or benefits bestowed by operation of law; (ii) releases or waivers of unmatured claims or rights; (iii) indemnification, contribution, exculpation, or arbitration provisions, or provisions for the non-survival of representations, to the extent they purport to indemnify any party against, or release or limit any party's liability for, its own breach or failure to comply with statutory obligations, or to the extent such provisions are contrary to public policy; (iv) provisions for liquidated damages and penalties, penalty interest and interest on interest; or (v) provisions that are deemed to be inconsistent with general principles of equity.

We are members of the bars of the District of Columbia and the State of New York.  We do not express any opinion herein on any laws other than the laws of the State of New York, the Delaware General Corporation Law, and applicable provisions of the Delaware Constitution and reported judicial decisions interpreting these laws.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement.  We also hereby consent to the reference to our firm under the heading “Legal Matters” in the prospectus constituting part of the Registration Statement.  In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act.

Very truly yours,

Covington & Burling. LLP

EX-8.1

Exhibit 8.1

November 26, 2012

Prosper Funding LLC

111 Sutter Street, 22nd Floor

San Francisco, CA 94104

Ladies and Gentlemen:

We have acted as counsel to Prosper Funding LLC, a Delaware limited liability company (“Prosper Funding”), and to Prosper Marketplace, Inc., a Delaware corporation (“PMI” and, collectively with Prosper Funding, the “Registrants”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) of the Registrants’ Registration Statement on Form S-1 (File No. 333-179941) initially filed with the Commission under the Securities Act of 1933, as amended (the “Act”), on March 7, 2012 (such registration statement, as amended to the date hereof, is herein referred to as the “Registration Statement”).  The Registration Statement includes, as Part 1 thereof, a preliminary prospectus, dated as of the date hereof, relating to the offer of up to $500,000,000 in aggregate principal amount of Prosper Funding’s Borrower Payment Dependent Notes (the “Notes”) and PMI Management Rights that will be attached to each Note.  In connection therewith, we prepared the discussion set forth under the caption “Material U.S. Federal Income Tax Considerations” (the “Discussion”) in the preliminary prospectus.

In rendering the opinion set forth below, we have examined and relied upon the Registration Statement and the exhibits thereto, and such other records, agreements, instruments and other documents as we have deemed relevant and necessary to our analysis.  In our examination of documents, we have assumed the authenticity of original documents, the accuracy of copies, the genuineness of signatures, the legal capacity of signatories, and the proper execution of the documents.  We have further assumed that all parties to the documents have acted, and will act, in accordance with the terms and conditions of such documents, including any covenants and agreements contained therein, without the waiver or modification of any such terms, conditions, covenants or agreements.  We have not attempted to verify independently such assumptions, but nothing has come to our attention in the course of our representation that would cause us to question the accuracy thereof.

The opinion set forth below represents our judgment as to the matters addressed herein under the income tax laws of the United States based upon the relevant provisions of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, and interpretations of the foregoing as expressed in court decisions and administrative determinations, all as in effect on the date of this opinion.  We cannot give any assurance that such laws will not be amended or otherwise changed after the date of this opinion, or that any such changes will not affect the conclusions expressed herein.  In addition, the opinion rendered herein is based on the facts as of the date of this letter, and we assume no obligation to advise you as to any change in fact or law occurring after the delivery of this letter that could affect the opinion rendered herein.  Any variation or difference in any fact from those relied on or assumed herein may affect the conclusions stated herein.

No ruling has been sought from the Internal Revenue Service (the “IRS”) as to the matters addressed herein.  Our opinion is not binding on the IRS or any court, and thus there can be no assurance that the IRS or a court of competent jurisdiction will agree with our opinion.

Based on and subject to the foregoing, we hereby confirm that all statements of legal conclusion contained in the Discussion reflect the opinion of Covington & Burling LLP with respect to the matters set forth therein as of the effective date of the Registration Statement, subject to the assumptions, limitations and qualifications set forth therein.  We express no opinion other than as expressly set forth herein, nor do we express any opinion concerning any law other than the federal income tax law of the United States.  We assume no obligation to advise you of any subsequent changes of the facts stated or assumed herein or any subsequent changes in applicable law.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement.  In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act.

Very truly yours,

 Covington & Burling LLP

EX-10.1

Exhibit 10.1

Borrower Registration Agreement

This Borrower Registration Agreement (this "Agreement") is made and entered into between you and Prosper Funding LLC ("Prosper").

The Prosper marketplace is a person-to-person online credit platform (the "platform") operated by Prosper. All loans originated through the platform are made by WebBank, a Utah-chartered industrial bank ("WebBank"). A separate legal entity, Prosper Marketplace, Inc. (“PMI”), provides services to WebBank in connection with the origination of such loans, Prosper services all loans made through the platform, but has engaged certain third parties (including PMI) to act as agents of Prosper in the performance of such servicing. The following Agreement describes those services as well as your rights and obligations should you elect to register as a borrower on the platform. Except for Section 22, when used in this Agreement “we” or “us” refers to Prosper, WebBank and PMI (in its capacity as agent of Prosper or WebBank).

1. Registration as a Prosper Borrower. You are registering with Prosper as a borrower so that you can post loan requests or "listings" for display on the platform. In entering into this Agreement, you are agreeing to comply with the Terms of Use for the platform as well as any other rules or policies set forth on Prosper's website (www.prosper.com), any of which may be amended from time to time by Prosper in its sole discretion (collectively, as amended, the "Prosper Terms and Conditions"). The Prosper Terms and Conditions are accessible via a link marked "Policies" at the bottom of each page of Prosper's website.

We reserve the right to restrict access to the platform to individuals who meet minimum credit guidelines and other criteria, as determined by us in our sole discretion.

2. Authorization to Obtain Credit Report. By registering on the platform as a borrower, you authorize us or our agents (including PMI), to obtain a credit report from one or more consumer credit reporting agencies. We may use the credit report for any purpose that would be authorized by applicable law in connection with a credit transaction involving you and involving the extension of credit to you or review or collection of your account, including but not limited to (i) for authentication purposes, to make sure you are who you say you are, (ii) to make credit decisions; (iii) to administer the sale of Borrower Payment Dependent Notes ("Notes") associated with your loan; (iv) to determine how much debt you currently have, in order to determine your debt-to-income ratio, (v) to obtain your credit score and assign you a Prosper Rating based in part on that score, (vi) to obtain and display information and characteristics from your credit report from one or more consumer credit reporting agencies, and (vii) to obtain and display on the Folio Investing Note Trader platform certain information and characteristics from your credit report from one or more consumer credit reporting agencies at any time or times that a Note corresponding to your loan is offered for sale by lenders holding such Notes. Information from your credit report will be displayed on the Prosper website with your listing. You authorize us to verify information in your credit report and your listing, and you agree that Prosper, WebBank or PMI (in its capacity as agent of Prosper or WebBank) may contact third parties without further notice to you to verify any such information. We may obtain your credit report each time you create a listing and at any other time that we deem it necessary in our sole discretion.

3. Listings. The platform connects individuals who wish to obtain loans with persons who wish to help fund them. To receive a loan, a borrower member must post a loan listing on the platform. The listing is a request by the borrower member for a loan in the amount and at the interest rate specified in the listing. In order to post a listing on the platform, you must have a good faith intent to obtain and repay your loan, and your listing must be consistent with that intent.

Once a listing is posted, our lender members can make commitments to help fund all or a portion of the loan. Each commitment is an agreement by the lender member to purchase a Note issued and sold by Prosper that is dependent for payment on the payments made by the borrower on the loan requested. If the listing receives commitments equal to or exceeding the minimum amount required for the loan to fund, WebBank will originate a loan to the borrower member in an amount equal to the total amount of those commitments, and Prosper will sell a Note to each lender member in the amount of that lender member's commitment. Lender members may resell Notes they purchase to other lender members on our secondary trading platform (the "Note Trader platform").

Information Included in Listings. To post a listing, you must provide the amount of the loan you are requesting as well as your annual income, occupation and employment status. The minimum and maximum loan amounts you may request are posted on the Prosper website and are subject to change by us at any time without notice. We reserve the right to restrict the posting of listings on the platform to individuals who meet minimum credit guidelines and other criteria, as determined by us in our sole discretion.

You authorize and agree that we may display in your listing any information from the credit report we obtain pursuant to Section 2 above, including but not limited to the following information:

(i) Your Prosper Rating, which is calculated by us but based on information from your credit report;

(ii) Your debt-to-income ratio, expressed as a percentage, reflecting the ratio between the amount of your monthly non-mortgage debt, as compared to the amount of monthly income that you indicated when completing your listing;

(iii) Whether you own a home;

(iv) The number of accounts on which you are currently late on a payment;

(v) The total past-due amount you owe on all delinquent and charged-off accounts;

(vi) The number of 90+ days past due delinquencies on your credit report;

(vii) The number of negative public records (e.g., bankruptcies, liens, and judgments) on your credit report over the last 12 months, and over the last 10 years;

(viii) The month and year the oldest account on your credit report (e.g., revolving, installment, or mortgage credit) was opened;

(ix) The total number of credit lines appearing on your credit report, along with the number that are open and current;

(x) The total balance on all of your open revolving credit lines;

(xi) Your bankcard utilization ratio, expressed as a percentage, reflecting the ratio of the total balance used, to the aggregate credit limit on, all of your open bankcards; and

(xii) The number of inquiries made by creditors to your credit report in the last six months.

In addition, you authorize and agree that we may display any of the above information in a listing for a Note corresponding to your loan on the Note Trader platform, and that we may display updated information from your credit report, as well as information about the payment history and status of your loan, in any such listing.

Listings on either platform may also display any information we ask you to provide, including, without limitation, your self-reported occupation, employment status and range of income. You authorize us to verify your residence, income, employment and any other information you provide in connection with a listing or your registration as a borrower, and you agree that we may contact third parties to verify information you provide. If any such information changes after you post a listing but before the listing expires, you must either (i) promptly notify us of the change, or (ii) withdraw your listing.

In creating your listing, or posting content on your Prosper member web page or anywhere else on Prosper's website, you may not include (i) any personally identifiable information, including, without limitation, your name, address, phone number, email address, Social Security number, driver's license number, bank account number or credit card number, (ii) any information that reveals your race, color, religion, national origin, sex, marital status, age, sexual orientation, military status, source of income, or plans for having a family, and (iii) any information that is inconsistent with your obligations to refrain from engaging in any Prohibited Activities (as defined below) (any information of the type described in parts (i), (ii) or (iii) being, "Prohibited Information"). We may take remedial action with respect to any Prohibited Information you post on Prosper's web site, including without limitation canceling any listing containing Prohibited Information or deleting or modifying all or any portion of a listing description or other content that contains Prohibited Information; provided, however, that we are under no obligation to take any such action, and any posting of Prohibited Information by you on Prosper's web site is done solely at your own risk.

If you are a member of a Prosper group when you post your listing, the listing will also identify your group. You do not have to be a member of a group to post a listing, however. You may also create a network of Prosper friends, and if one or more of your Prosper friends or your fellow group members commits to help fund your listing, your listing will reflect that the commitment was made by a fellow group member or a Prosper friend. Your Prosper friends who commit to help fund your listing may also write a recommendation that will be displayed in your listing. Prosper friends do not guarantee payments on your loan, and commitments to help fund your listing or recommendations of your listing from your Prosper friends do not obligate the individual making the commitment or recommendation to guarantee or make any payments on your loan.

Any person who visits the Prosper website will be able to view your listing and see your Prosper Rating as well as certain information about the loan you have requested; provided, however, that information from your credit report will only be viewable by lender members.

Partial Funding. When creating a loan listing, we may elect in our sole discretion to give you a partial funding option, which means your loan will be funded if it receives commitments totaling less than the full amount of your requested loan but equal to or exceeding 70% of that amount (subject to the loan size minimum). Each loan listing related to a borrower who was offered the partial funding option will indicate whether the borrower member has opted for partial funding as well as the minimum amount required for the loan to fund. The current percentage threshold for partial funding is 70%, but we may change that threshold from time to time. Any such change will only affect listings created after the change is made.

Duration of Listings. A listing will expire on the earlier of (a) the first day in which it has received commitments equal to the full amount of the loan requested or (b) 14 days after being posted, unless the listing is withdrawn by you or cancelled by us prior to either of those events.

WITHDRAWAL OF LISTINGS. IF YOU POST A LISTING, YOU HAVE THE RIGHT TO WITHDRAW IT AT ANY TIME PRIOR TO THE EXPIRATION OF THE LISTING PERIOD AS DESCRIBED ABOVE. AFTER THE LISTING PERIOD EXPIRES, YOU WILL NO LONGER HAVE THE RIGHT TO WITHDRAW YOUR LISTING. IF A LOAN IS MADE TO YOU, YOU DO NOT HAVE ANY RIGHT TO RESCIND THE LOAN.

If you elect to withdraw your listing, you may (but are not required to) post a new listing containing the updated information. We reserve the right, in our sole discretion, to limit the number of listings you post or attempt to post on the platform.

Additional Loans. The guidelines and eligibility requirements for additional loans are posted on the Prosper website and are subject to change by us in our sole discretion at any time without notice. Subject to these requirements, you may have up to two loans outstanding at any one time, provided that the aggregate outstanding principal balance of your loans does not exceed the maximum loan amount then in effect. You may not post a listing for a second loan unless you meet the eligibility requirements then in effect as of the date of such posting.

Prohibited Activities. You agree that you will not, in connection with any listings, lender commitments, loans or other transactions involving or potentially involving Prosper or WebBank, (i) make any false, misleading or deceptive statements or omissions of material fact; (ii) misrepresent your identity, or describe, present or portray yourself as a person other than yourself; (iii) give to or receive from, or offer or agree to give to or receive from, any Prosper lender or other person any fee, bonus, additional interest, kickback or thing of value of any kind, including in exchange for such person's commitment, recommendation, or offer or agreement to recommend or make a commitment with respect to your listing; and (iv) represent yourself to any person as a director, officer or employee of Prosper, PMI or WebBank, unless you are such director, officer or employee.

4. Right to Verify Information and Cancel Funding.

a. We reserve the right to verify the accuracy of all information provided by borrowers, lenders and group leaders in connection with listings, lender commitments and loans. We also reserve the right to determine in our sole discretion whether a registered user is using, or has used, the Prosper website illegally or in violation of any order, writ, injunction or decree of any court or governmental instrumentality, for purposes of fraud or deception, or otherwise in a manner inconsistent with the Prosper Terms and Conditions or any agreement between Prosper or WebBank and such user. We may conduct our review at any time - before, during or after the posting of a listing, or before or after the funding of a loan. You agree to respond promptly to our requests for information in connection with any such review by us.

b. In the event we determine, prior to funding a loan, that a listing, or a lender commitment for the listing, contains materially inaccurate information (including but not limited to unintended inaccuracies, inaccuracies resulting from errors by us, or inaccuracies resulting from changes in the borrower's income, residence or credit profile between the date a listing is posted and the date the listing is to be funded) or was posted illegally, in violation of any order, writ, injunction or decree of any court or governmental instrumentality, for purposes of fraud or deception, or otherwise in a manner inconsistent with the Prosper Terms and Conditions or any member agreement, we may refuse to post the listing or, if the listing has already been posted, remove the listing from the platform and cancel all lender commitments with respect to the listing.

c. When a listing receives commitments equal to or exceeding the minimum amount required for the loan to fund, we may conduct a "pre-funding" review prior to funding the loan. Loan funding occurs when loan proceeds are disbursed to or at the direction of the borrower. We may, at any time and in our sole discretion, delay funding of a loan (i) in order to enable us to verify the accuracy of information provided by borrowers, lenders and group leaders in connection with the listing or lender commitments made with respect to the listing; (ii) to determine whether there are any irregularities with respect to the listing or the lender commitments; or (iii) if we become aware of information concerning the borrower member or the listing during our pre-funding review, as a result of which we determine, in our sole discretion, that the likelihood of the borrower not making payments on the loan is materially greater than would be expected based on the assigned Prosper Rating. We may cancel or proceed with funding the loan, depending on the results of our pre-funding review. If funding is cancelled, the listing will be removed from the platform and all lender commitments against the listing will be cancelled. In the event we cancel funding of a loan, we will notify the borrower, group leader (if any), and all lenders who made commitments with respect to the listing of such cancellation.

5. Matching of Lender Commitments and Listings; Loan Funding.

a. Prosper lender members will be able to view your listing and commit funds to purchase Notes issued by Prosper, the payments on which will be dependent on payments Prosper receives on your loan. In other words, the Prosper lenders who committed funds will receive payments on their Notes only to the extent you make payments on your loan.

b. A match of your listing with one or more lender commitments equal to or exceeding the minimum amount required for the loan to fund, will result in a loan from WebBank to you, subject to our right to verify information as described above. The loan will be evidenced by a Promissory Note in the form set forth on the attached Exhibit A. Depending on the loan product you receive, loan proceeds are disbursed into your designated deposit account or they are paid directly to a merchant in satisfaction of your purchase of goods and/or services from that merchant. The loan will be sold by WebBank to Prosper, and Prosper or its agents will service the loan.

c. We do not warrant or guaranty that your listing will be matched with any lender commitments. Your listing must receive one or more lender commitments equal to or exceeding the minimum amount required for the loan to fund in order for a loan to be made.

d. To safeguard your privacy rights, your name and address will not be included in your listing. Only your Prosper screen name will appear on your listing, and only the screen name of the lenders will appear with lender commitments.

e. IF YOUR LISTING RECEIVES SUFFICIENT LENDER COMMITMENTS TO FUND, AND YOU DO NOT WITHDRAW YOUR LISTING PRIOR TO EXPIRATION OF THE LISTING PERIOD, YOU HEREBY AUTHORIZE PROSPER TO ACT AS YOUR ATTORNEY-IN-FACT TO EXECUTE A PROMISSORY NOTE ON YOUR BEHALF IN THE FORM SET FORTH ON THE ATTACHED EXHIBIT A IN FAVOR OF WEBBANK.

6. Compensation. If you receive a loan, you must pay WebBank a non-refundable origination fee. The amount of the estimated origination fee is stated in the disclosures provided to you at the time you apply. This amount will decline if you've been offered a partial funding option and your loan is not 100% funded. Notwithstanding the foregoing, no amount of the finally determined fee is refundable. The finally determined fee will be stated in your Truth in Lending disclosure. This fee will be deducted from your loan proceeds, so the loan proceeds delivered to you or at your direction will be less than the full amount of your issued loan. You acknowledge that the origination fee will be considered part of the principal on your loan and is subject to the accrual of interest.

7. Making Your Loan Payments. At the time you register as a borrower, you must provide your deposit account information to facilitate transfers of funds to and from your deposit account. You agree to make your loan payments by automated withdrawals from your designated account, or by the use of bank drafts drawn on your designated account. At the time you create your listing, you will be asked to choose the method of making your loan payments, and your loan payments will be made by the payment method you choose. Prosper or its agents will act as the servicer for all loans you obtain through the platform, and all communications regarding your loan must be made to Prosper or its agents.

8. Group Membership. Groups on Prosper may be rated according to the collective payment performance of the group's members. Therefore, if you are a member of a group, your failure to make loan payments when due, or the failure of another group member to make loan payments when due, may have a negative effect on your group's rating.

9. Collection & Reporting of Delinquent Loans. In the event you do not make your loan payments on time, WebBank or any subsequent owner of the loan will have all remedies authorized or permitted by the Promissory Note and applicable law. In addition, if you fail to make timely payments on your loan, your loan may be referred to a collection agency for collection. Prosper or its agents may report loan payment delinquencies in excess of thirty (30) days to one or more credit reporting agencies in accordance with applicable law. Subject to limitations of applicable law, you authorize and agree that Prosper, its agents or a collection agency may contact you at any or all of the telephone numbers you provide to us at or after registration, or any of your other telephone numbers.

10. No Guarantee. NEITHER PROSPER NOR WEBBANK WARRANTS OR GUARANTEES (1) THAT YOUR LISTING WILL BE MATCHED WITH ANY LENDER COMMITMENTS, OR (2) THAT YOU WILL RECEIVE A LOAN AS A RESULT OF POSTING A LISTING.

11. Restrictions on Use. You are not authorized or permitted to use the Prosper website to obtain, or attempt to obtain, a loan for someone other than yourself. You are not authorized or permitted to use the Prosper website to obtain, or attempt to obtain, a loan for the purpose of (i) buying, carrying or trading in securities or for the purpose of buying or carrying any part of an investment contract security, or (ii) paying for postsecondary educational expenses (i.e., tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term "postsecondary educational expenses" is defined in Bureau of Consumer Financial Protection Regulation Z, 12 C.F.R. § 1026.46(b)(3), and you warrant, represent and agree that you will not use the proceeds of any loan for such purposes. You must be an owner of the deposit account you designate for electronic transfers of funds, with authority to direct that loan payments be made from the account. Your designated account will be the account from which loan payments will be made. Although you are registering as a borrower, you may also register and participate on the platform as a lender or as a group leader. If you participate on the platform as a lender, any amounts in your Prosper funding account are subject to set-off against any delinquent amounts owing on any loans you obtain as a Prosper borrower. You will not receive further notice in advance of our exercising our right to set-off amounts in your Prosper funding account against any delinquent amounts owing on any loans you obtain. If you obtain a loan and fail to pay your loan in full, whether due to default, bankruptcy or other reasons, you will not be eligible to post any further listings or re-register with Prosper as a borrower, lender or group leader. We may in our sole discretion, with or without cause and with or without notice, restrict your access to the Prosper website or platform.

12. Authority. You warrant and represent that you have the legal competence and capacity to execute and perform this Agreement.

13. Termination of Registration. Prosper may, in its sole discretion, with or without cause, terminate this Agreement at any time by giving you notice as provided below. In addition, upon our determination that you committed fraud or made a material misrepresentation in connection with a listing, lender commitment or loan, performed any prohibited activity, or otherwise failed to abide by the terms of this Agreement or the Prosper Terms and Conditions, we may, in our sole discretion, immediately and without notice, take one or more of the following actions: (i) terminate or suspend your right to post listings or otherwise participate on the platform; or (ii) terminate this Agreement and your registration with Prosper. Upon termination of this Agreement and your registration with Prosper, any listings you have posted on the platform shall be cancelled, and will be removed from the platform immediately. Any loans you obtain prior to the effective date of termination resulting from listings you had placed on the platform shall remain in full force and effect in accordance with their terms.

14. Prosper's Right to Modify Terms. Prosper has the right to change any term or provision of this Agreement or the Prosper Terms and Conditions. Prosper will give you notice of material changes to this Agreement, or the Prosper Terms and Conditions, in the manner set forth in Section 16. You authorize us to correct obvious clerical errors appearing in information you provide to us, without notice to you, although we expressly undertake no obligation to identify or correct such errors. This Agreement, along with the Prosper Terms and Conditions, represents the entire agreement between you and Prosper regarding your participation as a borrower on the platform, and supersedes all prior or contemporaneous communications, promises and proposals, whether oral, written or electronic, between you and Prosper with respect to your involvement as a borrower on the platform.

15. Member Web Page Display and Content. You may, but are not required to, maintain a "Prosper member web page" on the Prosper website, where you can post content, logos or links to websites. If you elect to do so, you authorize us to display on the Prosper website all such material you provide. Any material you display on your member page must conform to the Prosper Terms and Conditions, and material you display or link to must not (i) infringe on Prosper's or any third party's copyright, patent, trademark, trade secret or other proprietary rights or right of publicity or privacy; (ii) violate any applicable law, statute, ordinance or regulation; (iii) be defamatory or libelous; (iv) be lewd, hateful, violent, pornographic or obscene; (v) violate any laws regarding unfair competition, anti-discrimination or false advertising; (vi) promote violence or contain hate speech; or (vii) contain viruses, trojan horses, worms, time bombs, cancelbots or other similar harmful or deleterious programming routines. You may not include or display any personally identifying information of any Prosper member on your Prosper member web page or elsewhere on the Prosper website, including, without limitation, any Prosper member's name, address, phone number, email address, Social Security number, driver's license number, bank account number or credit card number.

16. Notices. All notices and other communications hereunder shall be given by email to your registered email address or will be posted on the Prosper website, and shall be deemed to have been duly given and effective upon transmission or posting. You can contact us by sending an email to support@prosper.com. You agree to notify Prosper if your registered email address changes, and you agree to update your registered residence address, mailing address and telephone number on the Prosper website if any of those items changes.

17. No Warranties. EXCEPT FOR THE REPRESENTATIONS CONTAINED IN THIS AGREEMENT, PROSPER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES TO YOU OR ANY OTHER PARTY WITH REGARD TO YOUR USE OF THE PROSPER WEBSITE OR THE PLATFORM, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

18. Limitation on Liability. IN NO EVENT SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE TO ANY OTHER PARTY FOR ANY LOST PROFITS OR SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. FURTHERMORE, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO ANY OTHER PARTY REGARDING THE EFFECT THAT THE AGREEMENT MAY HAVE UPON THE FOREIGN, FEDERAL, STATE OR LOCAL TAX LIABILITY OF THE OTHER.

19. Miscellaneous. You may not assign, transfer, sublicense or otherwise delegate your rights under this Agreement to another person without Prosper's prior written consent. Any such assignment, transfer, sublicense or delegation in violation of this Section shall be null and void. This Agreement shall be governed by federal law and, to the extent that state law applies, the laws of the State of Utah. Any waiver of a breach of any provision of this Agreement will not be a waiver of any other breach. Failure or delay by either party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition. If any part of this Agreement is determined to be invalid or unenforceable under applicable law, then the invalid or unenforceable provision will be deemed superseded by a valid enforceable provision that most closely matches the intent of the original provision, and the remainder of the Agreement shall continue in effect. WebBank is not a party to this Agreement, but you agree that WebBank is a third-party beneficiary and is entitled to rely on the provisions of this Agreement, including without limitation your representations, covenants and agreements herein. There are no third party beneficiaries to this Agreement other than WebBank.

20. Performance by Prosper and WebBank.  You acknowledge and agree that any obligations of or actions by Prosper under this Agreement may be performed by PMI on behalf of Prosper in PMI’s capacity as servicer or agent of Prosper under any administrative services or similar agreement entered into between PMI and Prosper pursuant to which Prosper appoints PMI as servicer or agent to provide administrative, management, servicing or other services to Prosper.You also acknowledge and agree that any obligations of or actions by WebBank under this Agreement may be performed by PMI on behalf of WebBank in PMI’s capacity as agent of WebBank under any loan program or similar agreement entered into between PMI and WebBank pursuant to which WebBank appoints PMI as agent to provide services to WebBank.

21.  Separate Entities.  Notwithstanding Section 20, you acknowledge and agree that Prosper, WebBank and PMI are separate legal entities and that neither entity has guaranteed the performance by the other entity of its obligations hereunder.

22.  Arbitration.

(a) In this Resolution of Disputes provision:

(i) "You" and "your" mean the individual entering into this Agreement, as well as any person claiming through such individual;

(ii) "We" and "us" mean WebBank, and Prosper Funding LLC and each of their respective parents, subsidiaries, affiliates, predecessors, successors, and assigns, as well as the officers, directors, and employees of each of them;

(iii) "Claim" means any dispute, claim, or controversy (whether based on contract, tort, intentional tort, constitution, statute, ordinance, common law, or equity, whether pre-existing, present, or future, and whether seeking monetary, injunctive, declaratory, or any other relief) arising from or relating to this Note or the relationship between us and you (including claims arising prior to or after the date of the Agreement, and claims that are currently the subject of purported class action litigation in which you are not a member of a certified class), and includes claims that are brought as counterclaims, cross claims, third party claims or otherwise, as well as disputes about the validity or enforceability of this Agreement or the validity or enforceability of this Section 22.

(b) Any Claim may be resolved, upon the election of both us and you, by binding arbitration administered by the American Arbitration Association or JAMS, under the applicable arbitration rules of the administrator in effect at the time a Claim is filed ("Rules"). Any arbitration under this Agreement will take place on an individual basis; class arbitrations and class actions are not permitted. If you file a claim, you may choose the administrator; if we file a claim, we may choose the administrator, but we agree to change to the other permitted administrator at your request (assuming that the other administrator is available). You can obtain the Rules and other information about initiating arbitration by contacting the American Arbitration Association at 1633 Broadway, 10th Floor, New York, NY 10019, (800) 778-7879, www.adr.org; or by contacting JAMS at 1920 Main Street, Suite 300, Irvine, CA 92614, (949) 224-1810, www.jamsadr.com. The address for serving any arbitration demand or claim on us is Prosper Funding LLC, c/o Prosper Marketplace, Inc., 111 Sutter Street, 22nd Floor, San Francisco, CA 94104, Attention: Compliance.

(c) Claims submitted for arbitration will be arbitrated by a single, neutral arbitrator, who shall be a retired judge or a lawyer with at least ten years’ experience.

(d) We will pay all filing and administration fees charged by the administrator and arbitrator fees up to $1,000, and we will consider your request to pay any additional arbitration costs. If an arbitrator issues an award in our favor, you will not be required to reimburse us for any fees we have previously paid to the administrator or for which we are responsible. If you receive an award from the arbitrator, we will reimburse you for any fees paid by you to the administrator or arbitrator. Each party shall bear its own attorney's, expert's and witness fees, which shall not be considered costs of arbitration; however, if a statute gives you the right to recover these fees, or fees paid to the administrator or arbitrator, then these statutory rights will apply in arbitration.

(e) Any in-person arbitration hearing will be held in the city with the federal district court closest to your residence, or in such other location as you and we may mutually agree. The arbitrator shall apply applicable substantive law consistent with the Federal Arbitration Act, 9 U.S.C. § 1-16, and, if requested by either party, provide written reasoned findings of fact and conclusions of law. The arbitrator shall have the power to award any relief authorized under applicable law. Any appropriate court may enter judgment upon the arbitrator's award. The arbitrator's decision will be final and binding except that: (1) any party may exercise any appeal right under the FAA; and (2) any party may appeal any award relating to a claim for more than $100,000 to a three-arbitrator panel appointed by the administrator, which will reconsider de novo any aspect of the appealed award. The panel's decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal's cost, regardless of its outcome. However, we will consider any reasonable written request by you for us to bear the cost.

(f) YOU AND WE AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN OUR INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and we agree otherwise in writing, the arbitrator may not consolidate more than one person's claims. The arbitrator shall have no power to arbitrate any Claims on a class action basis or Claims brought in a purported representative capacity on behalf of the general public, other borrowers, or other persons similarly situated. The validity and effect of this paragraph (f) shall be determined exclusively by a court, and not by the administrator or any arbitrator.

(g) If any portion of this Section 22 is deemed invalid or unenforceable for any reason, it shall not invalidate the remaining portions of this section. However, if paragraph (f) of this Section 22 is deemed invalid or unenforceable in whole or in part, then this entire Section 22 shall be deemed invalid and unenforceable. The terms of this Section 22 will prevail if there is any conflict between the Rules and this section.

(h) You and I acknowledge and agree that the arbitration agreement set forth in this Section 22 is made pursuant to a transaction involving interstate commerce, and thus the Federal Arbitration Act shall govern the interpretation and enforcement of this Section 22. This Section 22 shall survive the termination of this Agreement.

EXHIBIT A

PROMISSORY NOTE

Borrower Address: ______________________________________________.

1. Promise to Pay. In return for a loan I have received, I promise to pay WebBank, a Utah-chartered Industrial Bank ("you") the principal sum of ___________________ Dollars ($__________), together with interest thereon commencing on the date of funding at the rate of ____ percent (____%) per annum simple interest. I understand that references in this Promissory Note ("Note") to you shall also include any person to whom you transfer this Note.

2. Payments. This Note is payable in ___ monthly installments of $___________ each, consisting of principal and interest, commencing on the ________ day of _____________, and continuing until the final payment date of __________________, which is the maturity date of this Note. The final payment shall consist of the then remaining principal, unpaid accrued interest and other charges due under this Note. All payments will be applied first to any unpaid fees incurred as a result of failed automated payments or returned bank drafts or checks, as provided in Paragraph 11; then to any charges for making payments other than as provided in this Note; then to any late charges then due; then to any interest then due; and then to principal. No unpaid interest or charges will be added to principal.

3. Interest. Interest will be charged on unpaid principal until the full amount of principal has been paid. Interest under this Note will accrue daily, on the basis of a 365-day year. If payments are made on time, my final payment will be in the amount of a regular monthly payment. Because of the daily accrual of interest and the effect of rounding, my final payment may be more or less than my regular payment. I acknowledge that, if I make my payments after the scheduled due date, this Note will not amortize as originally scheduled, which may result in a substantially higher final payment amount. The interest rate I will pay will be the rate I will pay both before and after any default.

4. Late Charge. If the full amount of any monthly payment is not made by the end of fifteen (15) calendar days after its due date, I will pay you a late charge of______________. I will pay this late charge promptly but only once on each late payment.

5. Waiver of Defenses. Except as otherwise provided in this Note, you are not responsible or liable to me for the quality, safety, legality, or any other aspect of any property or services purchased with the proceeds of my loan. If I have a dispute with any person from whom I have purchased such property or services, I agree to settle the dispute directly with that person.

6. Certification; Exception to Waiver. I certify that the proceeds of my loan will not be applied in whole or in part to postsecondary educational expenses (i.e., tuition, fees, required equipment or supplies, or room and board) at a college/university/vocational school, as the term "postsecondary educational expenses" is defined in Bureau of Consumer Financial Protection Regulation Z, 12 C.F.R. § 1026.46 (b)(3). I further certify that, to my knowledge, the proceeds of my loan will not be applied in whole or part to purchase property or services from any person to whom any interest in this Note may be assigned. If, notwithstanding the preceding sentence, any person from whom I have purchased such property acquires any interest in this Note, then Paragraph 5 will not apply to the extent of that person's interest, even if that person later assigns that person's interest to another person.

7. Method of Payment. I will pay the principal, interest, and any late charges or other fees on this Note when due. Those amounts are called "payments" in this Note. To ensure that my payments are processed in a timely and efficient manner, you have given me the choice of making my monthly payments (i) by automated withdrawal from an account that I designate using an automated clearinghouse (ACH) or other electronic fund transfer, or (ii) by bank drafts drawn by you on my behalf on my account each month; and I have chosen one of these methods. If I close my account or if my account changes or is otherwise inaccessible such that you are unable to withdraw my payments from that account or draw bank drafts on the account, I will notify you at least three (3) days prior to any such closure, change or inaccessibility of my account, and authorize you to withdraw my payments from, or draw bank drafts on, another account that I designate.

With regard to payments made by automatic withdrawals from my account, I have the right to (i) stop payment of a preauthorized automatic withdrawal, or (ii) revoke my prior authorization for automatic withdrawals with regard to all further payments under this Note, by notifying the financial institution where my account is held, orally or in writing at least three (3) business days before the scheduled date of the transfer. I agree to notify you orally or in writing, at least three (3) business days before the scheduled date of the transfer, of the exercise of my right to stop a payment or to revoke my prior authorization for further automatic withdrawals.

8. Default and Remedies. If I fail to make any payment when due in the manner required by Paragraph 7, I will be in default and you may at your option accelerate the maturity of this Note and declare all principal, interest and other charges due under this Note immediately due and payable. If you exercise the remedy of acceleration you will give me at least thirty (30) days prior notice of acceleration.

9. Prepayments. I may prepay this Note in full or in part at any time without penalty.

10. Waivers. You may accept late payments or partial payments, even though marked "paid in full," without losing any rights under this Note, and you may delay enforcing any of your rights under this Note without losing them. You do not have to (a) demand payment of amounts due (known as "presentment"), (b) give notice that amounts due have not been paid (known as "notice of dishonor"), or (c) obtain an official certification of nonpayment (known as "protest"). I hereby waive presentment, notice of dishonor and protest. Even if, at a time when I am in default, you do not require me to pay immediately in full as described above, you will still have the right to do so if I am in default at a later time. Neither your failure to exercise any of your rights, nor your delay in enforcing or exercising any of your rights, will waive those rights. Furthermore, if you waive any right under this Note on one occasion, that waiver will not operate as a waiver as to any other occasion.

11. Insufficient Funds Charge. If I attempt to make a payment, whether by automated withdrawal from my designated account or by other means, and the payment cannot be made due to (i) insufficient funds in my account, (ii) the closure, change or inaccessibility of my account without my having notified you as provided in Paragraph 7, or (iii) for any other reason (other than an error by you), I will pay you an additional fee of $______ for each returned or failed automated withdrawal, bank draft or other item, unless prohibited by applicable law.

12. Attorneys' Fees. To the extent permitted by law, I am liable to you for your legal costs if you refer collection of my loan to a lawyer who is not your salaried employee. These costs may include reasonable attorneys' fees as well as costs and expenses of any legal action.

13. Loan Charges. If a law that applies to my loan and sets maximum loan charges is finally interpreted so that the interest or other loan charges collected or to be collected in connection with my loan exceed the permitted limits, then: (a) any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (b) any sums already collected from me that exceeded permitted limits will be refunded to me. You may choose to make this refund by reducing the principal I owe under this Note or by making a direct payment to me.

14. Assignment. I may not assign any of my obligations under this Note without your written permission. You do not have to give me your permission. You may assign this Note at any time without my permission. Unless prohibited by applicable law, you may do so without telling me. My obligations under this Note apply to all of my heirs and permitted assigns. Your rights under this Note apply to each of your successors and assigns.

15. Notices. All notices and other communications hereunder shall be given in writing and shall be deemed to have been duly given and effective (i) upon receipt, if delivered in person or by facsimile, email or other electronic transmission, or (ii) one day after deposit prepaid for overnight delivery with a national overnight express delivery service. Except as expressly provided otherwise in this Note, notices to me may be addressed to my registered email address or to my address set forth above unless I provide you with a different address for notice by giving notice pursuant to this Paragraph, and notices to you must be addressed to WebBank at support@prosper.com or c/o Prosper Marketplace, Inc., 111 Sutter Street, 22nd Floor, San Francisco, CA 94104, Attention: Compliance.

16. Governing Law. This Note is governed by federal law and, to the extent that state law applies, the laws of the State of Utah.

17. Miscellaneous. No provision of this Note shall be modified or limited except by a written agreement signed by both you and me. The unenforceability of any provision of this Note shall not affect the enforceability or validity of any other provision of this Note.

18. Arbitration.

(a) In this Resolution of Disputes provision:

(i) "I," "me" and "my" mean the promisor under this Note, as well as any person claiming through such promisor;

(ii) "You" and "your" mean WebBank, any person servicing this Note for WebBank, and any subsequent holders of this Note or any interest in this Note, and each of their respective parents, subsidiaries, affiliates, predecessors, successors, and assigns, as well as the officers, directors, and employees of each of them; and

(iii) "Claim" means any dispute, claim, or controversy (whether based on contract, tort, intentional tort, constitution, statute, ordinance, common law, or equity, whether pre-existing, present, or future, and whether seeking monetary, injunctive, declaratory, or any other relief) arising from or relating to this Note or the relationship between you and me (including claims arising prior to or after the date of the Note, and claims that are currently the subject of purported class action litigation in which I am not a member of a certified class), and includes claims that are brought as counterclaims, cross claims, third party claims or otherwise, as well as disputes about the validity or enforceability of this Note or the validity or enforceability of this Section 18.

(b) Any Claim may be resolved, upon the election of both you and me, by binding arbitration administered by the American Arbitration Association or JAMS, under the applicable arbitration rules of the administrator in effect at the time a Claim is filed ("Rules"). Any arbitration under this arbitration agreement will take place on an individual basis; class arbitrations and class actions are not permitted. If I file a claim, I may choose the administrator; if you file a claim, you may choose the administrator, but you agree to change to the other permitted administrator at my request (assuming that the other administrator is available). I can obtain the Rules and other information about initiating arbitration by contacting the American Arbitration Association at 1633 Broadway, 10th Floor, New York, NY 10019, (800) 778-7879, www.adr.org; or by contacting JAMS at 1920 Main Street, Suite 300, Irvine, CA 92614, (949) 224-1810, www.jamsadr.com. Your address for serving any arbitration demand or claim is WebBank, c/o Prosper Marketplace, Inc., 111 Sutter Street, 22nd Floor, San Francisco, CA 94104, Attention: Compliance.

(c) Claims submitted for arbitration will be arbitrated by a single, neutral arbitrator, who shall be a retired judge or a lawyer with at least ten years’ experience.

(d) You will pay all filing and administration fees charged by the administrator and arbitrator fees up to $1,000, and you will consider my request to pay any additional arbitration costs. If an arbitrator issues an award in your favor, I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible. If I receive an award from the arbitrator, you will reimburse me for any fees paid by me to the administrator or arbitrator. Each party shall bear its own attorney's, expert's and witness fees, which shall not be considered costs of arbitration; however, if a statute gives me the right to recover these fees, or fees paid to the administrator or arbitrator, then these statutory rights will apply in arbitration.

(e) Any in-person arbitration hearing will be held in the city with the federal district court closest to my residence, or in such other location as you and I may mutually agree. The arbitrator shall apply applicable substantive law consistent with the Federal Arbitration Act, 9 U.S.C. § 1-16, and, if requested by either party, provide written reasoned findings of fact and conclusions of law. The arbitrator shall have the power to award any relief authorized under applicable law. Any appropriate court may enter judgment upon the arbitrator's award. The arbitrator's decision will be final and binding except that: (1) any party may exercise any appeal right under the FAA; and (2) any party may appeal any award relating to a claim for more than $100,000 to a three-arbitrator panel appointed by the administrator, which will reconsider de novo any aspect of the appealed award. The panel's decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal's cost, regardless of its outcome. However, you will consider any reasonable written request by me for you to bear the cost.

(f) YOU AND I AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN OUR INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and I agree otherwise in writing, the arbitrator may not consolidate more than one person's claims. The arbitrator shall have no power to arbitrate any Claims on a class action basis or Claims brought in a purported representative capacity on behalf of the general public, other borrowers, or other persons similarly situated. The validity and effect of this paragraph (f) shall be determined exclusively by a court, and not by the administrator or any arbitrator.

(g) If any portion of this Section 18 is deemed invalid or unenforceable for any reason, it shall not invalidate the remaining portions of this section. However, if paragraph (f) of this Section 18 is deemed invalid or unenforceable in whole or in part, then this entire Section 18 shall be deemed invalid and unenforceable. The terms of this Section 18 will prevail if there is any conflict between the Rules and this section.

(h) You and I acknowledge and agree that the arbitration agreement set forth in this Section 18 is made pursuant to a transaction involving interstate commerce and thus the Federal Arbitration Act shall govern the interpretation and enforcement of this Section 18. This Section 18 shall survive the termination of this Note and the repayment of any or all amounts borrowed thereunder.

19. Preservation of Claims and Defenses.

NOTICE

ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.

State Law Notices:

Arizona Residents: I understand that I may request that the initial disclosures prescribed in the Truth in Lending Act (15 United States Code sections 1601 through 1666j) be provided in Spanish before signing any loan documents.

Aviso Para Prestatarios En Arizona: Puedo solicitar que las divulgaciones iniciales prescritas en la Ley Truth in Lending Act (15 Código de los Estados Unidos secciones 1601 hasta 1666j) sean proporcionadas en español antes de firmar cualesquiera documentos de préstamos.

Missouri Residents: Oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt, including promises to extend or renew such debt, are not enforceable. To protect me (borrower) and you (creditor) from misunderstanding or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete and exclusive statement of the agreement between us, except as we may later agree in writing to modify it.

By signing this Note, I acknowledge that I (i) have read and understand all terms and conditions of this Note, (ii) agree to the terms set forth herein, and (iii) acknowledge receipt of a completely filled-in copy of this Note.

Date: _______________

By:  Prosper Funding LLC

Attorney-in-Fact for _________________________________ [Borrower]

(Signed Electronically)

Last Updated: [INSERT IMPLEMENTATION DATE]

EX-10.2

Exhibit 10.2

Lender Registration Agreement

This Lender Registration Agreement (this "Agreement") is made and entered into between you and Prosper Funding LLC ("Prosper", "we", or "us"). This Agreement will govern all purchases of Borrower Payment Dependent Notes ("Notes") that you may, from time to time, make from Prosper.

Prosper has filed with the U.S. Securities and Exchange Commission a registration statement on Form S-1 (No. 333-179941) (as amended from time to time, the "Registration Statement") to register the continuous offering and sale of Notes issued by Prosper. The Notes are offered pursuant to a prospectus (as supplemented from time to time, the "Prospectus") which forms a part of the Registration Statement. The Registration Statement became effective on [INSERT EFFECTIVE DATE], 2012 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended.  Pursuant to the same Registration Statement and Prospectus, Prosper Marketplace, Inc. (a separate legal entity that is the parent company of Prosper) has registered its continuous issuance of PMI Management Rights that are deemed to be attached to the Notes issued and sold by Prosper (including any Notes purchased pursuant to this Agreement), but as to which no purchase price is payable.  The PMI Management Rights do not comprise a guarantee of payments on any Notes or corresponding Borrower Loans.  Assets of Prosper Marketplace, Inc. are not available to satisfy Prosper’s obligations in relation to Notes.  Prosper will be the sole issuer of the Notes and Prosper Marketplace, Inc. will be the sole issuer of the PMI Management Rights.  You should review this Agreement, the Terms of Use and any policies posted on Prosper’s website at www.prosper.com and any subdomain thereof (collectively, the “Prosper Terms and Conditions”), and the Prospectus carefully.  You should print and retain a copy of these documents for your records.

In consideration of the covenants, agreements, representations and warranties hereinafter set forth, and for other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows:

1. Purchase and Sale of Notes. Subject to the terms and conditions of this Agreement, Prosper will provide you the opportunity through its website:

● To review and bid on loan listings, which are requests for loans (“Borrower Loans”) that Prosper has received from its borrower members, with each such bid being at least $25;

● To purchase Notes from Prosper in the principal amount of the bids you place on loan listings, each such Note associated with, and dependent on, a specific Borrower Loan; and

● To instruct Prosper to apply the proceeds from the sale of each Note you purchase to facilitate the funding of a specific Borrower Loan you have designated.

Any bid you place on a loan listing is a commitment by you to purchase a Note from Prosper in the principal amount of the bid you placed on the loan listing. If the amount available for further bidding on a loan listing is less than the amount of your bid, your bid will be deemed to be in the amount still available for bidding.  You must commit to purchase a Note to fund a Borrower Loan prior to the origination of that Borrower Loan.  At the time you commit to purchase a Note, you must have sufficient funds on deposit in your account with Prosper to complete the purchase. The funds on deposit in your account with Prosper will be placed in an FDIC-insured non-interest bearing account at Wells Fargo Bank, N. A. (the "funding account") separate from Prosper's own funds. Once you bid on a loan listing, it is irrevocable regardless of whether the full amount of the loan listing is funded, and you will not have access to the funds used to support your bid unless and until Prosper has notified you that the Borrower Loan will not be funded. If a loan listing on which you’ve bid does not fund, Prosper will inform you and release you from your purchase commitment. Prosper does not warrant or guaranty that you will be able to place a bid on any loan listing before that loan listing receives bids totaling the requested loan amount.

All Notes are issued pursuant to an indenture (the "Indenture") between Prosper and an indenture trustee.

2. Issuance. Each time you purchase a Note, it will be issued immediately following the closing of the corresponding Borrower Loan. All Borrower Loans are originated by WebBank, an FDIC insured, Utah-chartered industrial bank. Prosper will use the proceeds of the sale of each series of Notes to purchase the corresponding Borrower Loan from WebBank. Borrower Loans generally close at the end of their 14-day listing period unless (1) the borrower member withdraws the loan request prior to funding; (2) bids for the entire amount of the borrower member’s loan request have been received earlier, in which case the Borrower Loan will close earlier; or (3) the loan request is canceled by Prosper or WebBank for reasons relating to the operation and integrity of the Prosper website, such as attempted fraud or a failure to verify information upon request.

3. Terms of the Notes. Each Note shall have the terms and conditions described in the Prospectus, the Indenture and the Note itself. The Indenture and the form of Note are exhibits to the Registration Statement of which the Prospectus forms a part.  The Registration Statement is available for your review on the Prosper website (the Note is included as an exhibit to the Indenture). The interest rate, maturity and other terms of the corresponding Borrower Loan will be described in the loan listing on Prosper’s website and the Promissory Note executed by the borrower. Subject to our obligation to use commercially reasonable efforts to service and collect Borrower Loans, you understand and agree that we may, in our sole discretion, at any time and from time to time, amend or waive any term of a Borrower Loan, and we may in our sole discretion charge off any Borrower Loan that we deem uncollectible.  Although PMI Management Rights are attached to the Notes and are not severable from the Notes, the PMI Management Rights are not separately represented by any contract or instrument deliverable to holders of Notes, do not provide for any separate payments, proceeds or funds to be delivered to holders of Notes in support of payments on Borrower Loans or Notes and are not transferable apart from the Notes.

4. Representations and Warranties as to Notes Sold. Prosper makes the following representations and warranties to you, with respect to each Note sold to you under this Agreement, as of the date the Note is sold to you:

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

b.           The Note has been duly authorized and, following payment of the purchase price by you and electronic delivery by Prosper to you, will constitute a valid and binding obligation of Prosper enforceable against Prosper in accordance with its terms, except as the enforcement of the Note may be limited by applicable bankruptcy, insolvency or similar laws.

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

d.           If you bid on a loan listing by browsing online through available loan listings displayed on our website, the Note sold to you will be in the principal amount of the bid you placed on the loan listing and dependent for payment on the Borrower Loan identified in the loan listing.

e.           If you have used an automated bidding tool or order execution service that we offer, such as Quick Invest, Auto Quick Invest or Premier, to identify the Notes you are purchasing, each of those Notes conforms to the investment criteria you provided through the applicable tool or service.

f.           The Borrower Loan to which your Note corresponds was not issued as a result of verifiable identity theft of the named borrower’s identity;  provided, however, that the determination of whether verifiable identity theft has occurred shall be in Prosper's sole discretion; and provided further that we may require proof of the identity theft, such as a copy of a police report filed by the person whose identity was wrongfully used to obtain the fraudulently-induced borrower loan, an identity theft affidavit or a bank verification letter (or all of the above) in order to determine that verifiable identity theft has occurred.

5. Remedies.

a. In the event of a breach by Prosper of any of the representations and warranties contained in paragraphs (a) through (c) of Section 4 that materially and adversely affects your interest in a Note sold to you by Prosper (an “Interest Breach”), Prosper shall, at its option, either (i) cure the Interest Breach, if it is susceptible to cure; (ii) repurchase the Note from you; or (iii) indemnify and hold you harmless against all losses (including losses resulting from the nonpayment of the Note), damages, expenses, legal fees, costs and judgments resulting from any claim, demand or defense arising as a result of the Interest Breach.

b.  In the event of a breach by Prosper of any of the representations and warranties contained in paragraphs (d) and (e) of Section 4 that results in (i) the sale of a Note to you that is materially different from the Note that would have been sold to you had there been no such breach; or (ii) the sale of a Note to you that you would not have purchased had there  been no such breach (“Sale Breach”), Prosper shall, at its option, either (i) cure the Sale Breach, if it is susceptible to cure; (ii) repurchase the Note from you; or (iii) indemnify and hold you harmless against all losses (including losses resulting from the nonpayment of the Note), damages, expenses, legal fees, costs and judgments resulting from any claim, demand or defense arising as a result of the Sale Breach.

d.  The decision whether an Interest Breach or Sale Breach is susceptible to cure, or whether Prosper shall cure or repurchase a Note or indemnify you with respect to the Note, shall be in Prosper's sole discretion. Upon discovery by Prosper of an Interest Breach or Sale Breach, Prosper shall give you notice of such breach, and of Prosper's election to indemnify, repurchase the Note or cure, no later than ninety (90) days after our discovery of the breach.

e.  In the event Prosper repurchases a Note pursuant to paragraph (a) or (b) of this Section 5, Prosper will pay you a repurchase price equal to the remaining outstanding principal balance of the Note as of the date of repurchase. The repurchase price will be paid to you by remittance into the Prosper funding account. Upon any such repurchase, the Note shall be automatically transferred and assigned by you to Prosper, in each case without recourse, and you authorize and agree that Prosper may execute any endorsements or assignments necessary to effectuate the transfer and assignment of the Note to Prosper.

f. In the event Prosper indemnifies you and holds you harmless against all losses with respect to a Note pursuant to paragraph (a) or (b) of this Section 5, Prosper shall not be required to take any action with respect to losses you may suffer resulting from nonpayment of a Note until the Note is at least 120 days past due, provided, however, that Prosper may in its sole discretion elect to take action at an earlier time.  For purposes of indemnification, Prosper shall calculate losses resulting from the nonpayment of a Note based upon the outstanding principal balance of the Note.  If Prosper makes an indemnification payment to you as a result of losses you suffered resulting from the nonpayment of a Note, Prosper shall be entitled to retain any subsequent recoveries on the Note.  Any indemnification payments will be paid to you by remittance into the Prosper funding account.

g. The remedies provided for in this Section 5 are your sole protection with respect to a breach of the representations and warranties set forth in Section 4 above.  Prosper may have additional repurchase and indemnification obligations under the terms of the Indenture and the Notes themselves.

6. Your Covenants and Acknowledgements.  YOU AGREE THAT WHEN MAKING BIDS ON LOAN LISTINGS YOU WILL NOT DISCRIMINATE AGAINST ANY BORROWER MEMBER OR GROUP ON THE BASIS OF RACE, COLOR, RELIGION, NATIONAL ORIGIN, SEX, MARITAL STATUS, AGE, SEXUAL ORIENTATION, MILITARY STATUS, THE BORROWER MEMBER'S SOURCE OF INCOME, OR ANY OTHER BASIS PROHIBITED BY AN APPLICABLE FEDERAL, STATE OR LOCAL FAIR LENDING LAW, REGULATION, RULE OR ORDINANCE, INCLUDING WITHOUT LIMITATION THE EQUAL CREDIT OPPORTUNITY ACT AND REGULATION B. You agree that you have no right to, and shall not, make any attempt, directly or through any third party, to collect from borrower members on your Notes or the corresponding Borrower Loans. YOU UNDERSTAND AND AGREE THAT BORROWER MEMBERS MAY DEFAULT ON THEIR PAYMENT OBLIGATIONS UNDER BORROWER LOANS AND THAT SUCH DEFAULTS WILL REDUCE THE AMOUNTS, IF ANY, YOU MAY RECEIVE UNDER THE TERMS OF ANY NOTES YOU HOLD THAT CORRESPOND TO THOSE BORROWER LOANS.

7. Your Financial Suitability Representations and Warranties. You represent and warrant that you satisfy the minimum financial suitability standards applicable to the state in which you reside, if any, and you covenant that you will abide by any applicable maximum investment amount, each as set forth in the Prospectus. You agree to provide any additional documentation reasonably requested by us, or as may be required by the Securities and Exchange Commission or the securities administrator of any state, to confirm that you meet such minimum financial suitability standards and have abided by such maximum investment limit. You represent and warrant that, based on your overall investment objectives, portfolio structure and financial situation, you can reasonably benefit from, and can bear the economic risk of, an investment in Notes.  You represent and warrant, as of the date of this Agreement and as of any date that you commit to purchase Notes, that you have received the Prospectus, the Indenture and the form of the Note, including the information contained therein regarding the background and qualifications of Prosper Funding LLC, the experience and qualifications of Prosper Marketplace, Inc. who will be acting in various capacities as agent on behalf of Prosper Funding, LLC and as agent on behalf of WebBank, the tax consequences of purchasing Notes, and the risks attendant to purchasing Notes (including, but not limited to, the risk that you may lose your entire investment). You understand that the Notes will not be listed on any securities exchange, that there may be no, or only a limited, secondary market for the Notes, that any trading of Notes must be conducted in accordance with federal and applicable state securities laws and that Note purchasers should be prepared to hold the Notes they purchase until the Notes mature.

8. Your Other Representations and Warranties. You warrant and represent to Prosper, as of the date of this Agreement and as of any date that you commit to purchase Notes, that (i) you have the power to enter into and perform your obligations under this Agreement; (ii) this Agreement has been duly authorized, executed and delivered by you; (iii) you have received the Prospectus, the Indenture, and the form of the Note; and (iv) in connection with this Agreement you have complied in all material respects with applicable federal, state and local laws. In addition, if the person entering this Agreement is a corporation, partnership, limited liability company or other entity (each, an "institution"), the institution warrants and represents that (i) the individual executing this Agreement on behalf of the institution has all necessary power and authority to execute and perform this Agreement on the institution's behalf; (ii) the execution and performance of this Agreement will not violate any provision in the institution's charter documents, by-laws, indenture of trust or partnership agreement, or other constituent agreement or instrument governing the institution's formation or administration; and (iii) the execution and performance of this Agreement will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking to which the institution is a party or by which it is bound.

9. No Advisory Relationship. You acknowledge and agree that (i) the purchase and sale of Notes is an arms-length transaction between you and Prosper; (ii) in connection with the purchase and sale of Notes, Prosper is not acting as your agent or fiduciary; (iii) Prosper assumes no advisory or fiduciary responsibility with respect to you in connection with the purchase and sale of Notes; (iv) Prosper has not provided you with any legal, accounting, regulatory or tax advice with respect to Notes; and (v) you have consulted your own legal, accounting, regulatory and tax advisors with respect to the Notes to the extent you have deemed it appropriate.

10. Restrictions on Use. Prosper may in its sole discretion, with or without cause and with or without notice, restrict your access to the platform or the Prosper website. Except as provided in Section 8 above, (i) you are not authorized or permitted to use Prosper to bid on loan listings or to purchase Notes for someone other than yourself; and (ii) you must be an owner of the deposit account you designate for electronic transfers of funds, with authority to direct that funds be transferred to or from the account. Individuals who are registered investors may also register and participate on the Prosper platform as a borrower member. If you obtain one or more Borrower Loans through the platform, amounts in your Prosper funding account are subject to set-off against any delinquent amounts owing on your Borrower Loans. Amounts in your Prosper funding account are also subject to set-off against any shortfall resulting from ACH returns of transfers or deposits of funds to your Prosper funding account. You will not receive further notice in advance of our exercise of our right to set-off amounts in your Prosper funding account against any delinquent amounts owing on any Borrower Loans you obtain.

11. Prosper's Representations and Warranties. Prosper represents and warrants to you, as of the date of this Agreement and as of any date that you commit to purchase Notes, that: (i) it is duly organized and is validly existing as a limited liability company in good standing under the laws of Delaware and has power to enter into and perform its obligations under this Agreement; (ii) this Agreement has been duly authorized, executed and delivered by Prosper; and (iii) the Indenture has been duly authorized by Prosper and qualified under the Trust Indenture Act of 1939 and constitutes a valid and binding agreement of Prosper, enforceable against Prosper in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency or similar laws.

12. No Guarantee of Returns or Payments. PROSPER DOES NOT WARRANT OR GUARANTEE THAT YOU WILL RECEIVE ANY RATE OF RETURN, ANY MINIMUM AMOUNT OF PRINCIPAL OR INTEREST OR ANY PRINCIPAL OR INTEREST AT ALL ON ANY NOTE. THE AMOUNT YOU RECEIVE ON A NOTE IS WHOLLY DEPENDENT UPON THE BORROWER MEMBER’S PAYMENT PERFORMANCE ON THE BORROWER LOAN CORRESPONDING TO YOUR NOTE. PROSPER DOES NOT GUARANTEE ANY BORROWER LOANS OR NOTES AND DOES NOT ACT AS A GUARANTOR OF ANY LOAN PAYMENT OR PAYMENTS BY ANY BORROWER MEMBER. YOU FURTHER UNDERSTAND AND ACKNOWLEDGE THAT BORROWER MEMBERS MAY DEFAULT ON THE BORROWER LOANS CORRESPONDING TO YOUR NOTES, AND THAT SUCH DEFAULTS MAY NEGATIVELY AFFECT THE AMOUNT OF PRINCIPAL AND INTEREST YOU RECEIVE ON YOUR NOTES.

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

14. Prohibited Activities. You agree that you will not do the following, in connection with any loan listings, bids, Notes, Borrower Loans or other transactions involving or potentially involving Prosper:

a.           Represent yourself to any person, as a director, officer or employee of Prosper, Prosper Marketplace, Inc. or WebBank, unless you are such director, officer or employee;

b.           Charge, or attempt to charge, any Prosper borrower member any fee in exchange for your agreement to bid on or recommend a borrower member's loan listing, or propose or agree to accept any fee, bonus, additional interest, kickback or thing of value of any kind, in exchange for your agreement to bid on or recommend a borrower member's loan listing;

c.           Engage in any activities in connection with a Borrower Loan that require a license as a loan broker, credit services organization, credit counselor, credit repair organization, lender or other regulated entity, including but not limited to soliciting loans or loan applications, quoting loan terms and rates and counseling borrower members on credit issues or loan options,; or

d.           Violate any applicable federal, state or local laws, including but not limited to, the Equal Credit Opportunity Act and other fair lending laws, the Truth in Lending Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, federal and state consumer privacy laws, state usury and loan fee statutes, state licensing laws and state unfair and deceptive trade practices statutes.

15. Tax Treatment. The parties agree that the Notes are intended to be indebtedness of Prosper that have original issue discount for U.S. federal income tax purposes. You agree that you will not take any position inconsistent with such treatment of the Notes for tax, accounting, or other purposes, unless required by law. You further acknowledge that the Notes will be subject to the original issue discount rules of the Internal Revenue Code of 1986, as amended, as described in the Prospectus. You acknowledge that you are prepared to bear the risk of loss of your entire purchase price for any Notes you purchase.

16. Termination of Agreement. Prosper may in its sole discretion, with or without cause, immediately, take one or more of the following actions: (i) terminate this Agreement by giving you notice as provided below; or (ii) terminate or suspend your right to bid on loan listings or otherwise participate on the Prosper platform immediately and without notice. Any Notes you purchase from Prosper prior to the effective date of any such action by Prosper shall remain in full force and effect in accordance with their terms.

17. Indemnification by You. In addition to your indemnification obligations set forth in Prosper's Terms and Conditions, you agree to indemnify, defend, protect and hold harmless Prosper and its parent company, Prosper Marketplace, Inc., and their respective officers, directors, members, shareholders, employees and agents (collectively, the “Prosper Parties”) against all claims, liabilities, actions, costs, damages, losses, demands and expenses of every kind, known or unknown, contingent or otherwise, (i) resulting from any material breach of any obligation you undertake in this Agreement, including but not limited to your obligation to comply with applicable laws; (ii) relating to the contents of your Prosper member web page, your own website or your business; (iii) resulting from your acts, omissions and representations (and those of your employees, agents or representatives) relating to the Prosper Parties; or (iv) asserted by third parties against the Prosper Parties alleging that the trademarks, trade names, logos or branding you use, display, link to or advertise infringes upon the intellectual property rights of any such third party. Your obligation to indemnify the Prosper Parties shall survive termination of this Agreement, regardless of the reason for termination.

18. Prosper's Right to Modify Terms. Prosper has the right to change any term or provision of this Agreement. Prosper will give you notice of material changes to this Agreement in the manner set forth in Section 20. You authorize Prosper to correct obvious clerical errors appearing in information you provide to Prosper, without notice to you, although Prosper expressly undertakes no obligation to identify or correct such errors.

19. Member Web Page Display and Content. You may, but are not required to, maintain a member web page on the Prosper website, where you can post content, logos or links to websites. If you elect to do so, you authorize Prosper to display on the Prosper website all such material you provide to Prosper. Any material you display on your member page must conform to the Prosper Terms and Conditions, as amended from time to time, and material you display or link to must not (i) infringe on Prosper's or any third party's copyright, patent, trademark, trade secret or other proprietary rights or right of publicity or privacy; (ii) violate any applicable law, statute, ordinance or regulation; (iii) be defamatory or libelous; (iv) be lewd, hateful, violent, pornographic or obscene; (v) violate any laws regarding unfair competition, anti-discrimination or false advertising; (vi) promote violence or contain hate speech; or (vii) contain viruses, trojan horses, worms, time bombs, cancelbots or other similarly harmful or deleterious programming routines.

20. Notices. All notices, requests, demands, required disclosures and other communications from Prosper to you will be transmitted to you by email to the email address you have registered on the Prosper website or will be posted on the Prosper website, and shall be deemed to have been duly given and effective upon such transmission or posting. All notices, required disclosures and other communications to you from the trustee under the Indenture relating to Notes you own will be transmitted to you by email to your registered email address or mailed to you at your registered residence/mailing address. If your registered email address changes, you must notify Prosper promptly. You also agree to promptly update your registered residence/mailing address on the Prosper website if you change your residence/mailing address. You shall send all notices or other communications required to be given hereunder to Prosper via email at compliance@prosper.com or by writing to: Prosper Funding LLC, 111 Sutter Street, 22nd Floor, San Francisco, CA 94104, Attention: Compliance. You may contact Prosper by sending an email to support@prosper.com or calling us toll-free at (866) 615-6319, but such communications may not satisfy your obligation to provide notice hereunder or otherwise preserve your rights.

21. No Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES TO THE OTHER PARTY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

22. Limitation on Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOST PROFITS OR SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. FURTHERMORE, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER REGARDING THE EFFECT THAT THE AGREEMENT MAY HAVE UPON THE FOREIGN, FEDERAL, STATE OR LOCAL TAX LIABILITY OF THE OTHER.

23. Entire Agreement.  Except as otherwise expressly provided herein, this Agreement represents the entire agreement between you and Prosper regarding the subject matter hereof and supersedes any prior lender registration agreement between you and Prosper Marketplace, Inc. as well as all prior or contemporaneous communications, promises and proposals, whether oral, written or electronic, between us.

24. Miscellaneous. The parties acknowledge that there are no third party beneficiaries to this Agreement. You may not assign, transfer, sublicense or otherwise delegate your rights under this Agreement to another person without Prosper's prior written consent. Any such assignment, transfer, sublicense or delegation in violation of this Section shall be null and void. This Agreement shall be governed by the laws of the State of New York. Any waiver of a breach of any provision of this Agreement will not be a waiver of any other subsequent breach. Failure or delay by either party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition. If any part of this Agreement is determined to be invalid or unenforceable under applicable law, then the invalid or unenforceable provision will be deemed superseded by a valid enforceable provision that most closely matches the intent of the original provision, and the remainder of the Agreement shall continue in effect. The parties agree to execute and deliver such further documents and information as may be reasonably required in order to effectuate the purposes of this Agreement.

25. Arbitration.

a.           In this Resolution of Disputes provision:

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

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

  iii.          "Claim" means any dispute, claim, or controversy (whether based on contract, tort, intentional tort, constitution, statute, ordinance, common law, or equity, whether pre-existing, present, or future, and whether seeking monetary, injunctive, declaratory, or any other relief) arising from or relating to this Agreement or the relationship between you and me (including claims arising prior to or after the date of the Agreement, and claims that are currently the subject of purported class action litigation in which you are not a member of a certified class), and includes claims that are brought as counterclaims, cross claims, third party claims or otherwise, as well as disputes about the validity or enforceability of this Agreement or the validity or enforceability of this Section 25.

b.           Any Claim may be resolved, upon the election of both you and me, by binding arbitration administered by the American Arbitration Association or JAMS, under the applicable arbitration rules of the administrator in effect at the time a Claim is filed ("Rules"). Any arbitration under this Agreement will only take place with respect to a single person; class arbitrations and class actions are not permitted. If I file a claim, I may choose the administrator; if you file a claim, you may choose the administrator, but you agree to change to  another permitted administrator at my request (assuming that the other administrator is available). I can obtain the Rules and other information about initiating arbitration by contacting the American Arbitration Association at 1633 Broadway, 10th Floor, New York, NY 10019, (800) 778-7879, www.adr.org; or by contacting JAMS at 1920 Main Street, Suite 300, Irvine, CA 92614, (949) 224-1810, www.jamsadr.com. Your address for serving any arbitration demand or claim is Prosper Funding LLC, c/o, Prosper Marketplace, Inc., 111 Sutter Street, 22nd Floor, San Francisco, CA 94104, Attention: Compliance.

c.           Claims submitted for arbitration will be arbitrated by a single, neutral arbitrator, who shall be a retired judge or a lawyer with at least ten years’ experience.

d.           You will pay all filing and administration fees charged by the administrator and arbitrator fees up to $1,000, and you will consider my request to pay any additional arbitration costs. If an arbitrator issues an award in your favor, I will not be required to reimburse you for any fees you have previously paid to the administrator or for which you are responsible. If I receive an award from the arbitrator, you will reimburse me for any fees paid by me to the administrator or arbitrator. Each party shall bear its own attorney's, expert's and witness fees, which shall not be considered costs of arbitration; however, if a statute gives me the right to recover these fees, or fees paid to the administrator or arbitrator, then these statutory rights will apply in arbitration.

e.           Any in-person arbitration hearing will be held in the city with the federal district court closest to my residence, or in such other location as you and I may mutually agree. The arbitrator shall apply applicable substantive law consistent with the Federal Arbitration Act, 9 U.S.C. § 1-16, and, if requested by either party, provide written reasoned findings of fact and conclusions of law. The arbitrator shall have the power to award any relief authorized under applicable law. Any appropriate court may enter judgment upon the arbitrator's award. The arbitrator's decision will be final and binding except that: (i) any party may exercise any appeal right under the FAA; and (ii) any party may appeal any award relating to a claim for more than $100,000 to a three-arbitrator panel appointed by the administrator, which will reconsider de novo any aspect of the appealed award. The panel's decision will be final and binding, except for any appeal right under the FAA. Unless applicable law provides otherwise, the appealing party will pay the appeal's cost, regardless of its outcome. However, you will consider any reasonable written request by me for you to bear the cost.

f.           YOU AND I AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN OUR CAPACITY AS A SINGLE PERSON, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and I agree otherwise in writing, the arbitrator may not consolidate more than one person's claims. The arbitrator shall have no power to arbitrate any Claims on a class action basis or Claims brought in a purported representative capacity on behalf of the general public, other investors, or other persons similarly situated. The validity and effect of this paragraph f shall be determined exclusively by a court, and not by the administrator or any arbitrator.

g.           If any portion of this Section 25 is deemed invalid or unenforceable for any reason, it shall not invalidate the remaining portions of this section. However, if paragraph f of this Section 25 is deemed invalid or unenforceable in whole or in part, then this entire Section 25 shall be deemed invalid and unenforceable. The terms of this Section 25 will prevail if there is any conflict between the Rules and this section.

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

26. State Notices.

Maine: The Maine Office of Securities recommends that an investor’s aggregate investment in this offering and similar offerings not exceed 10% of the investor’s liquid net worth.  For this purpose, “liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.

27.  No Guarantee of Payments by Prosper Marketplace, Inc.

PROSPER WILL BE THE SOLE ISSUER OF THE NOTES.  THE NOTES ARE SPECIAL, LIMITED OBLIGATIONS OF PROSPER ONLY AND ARE NOT OBLIGATIONS OF ITS PARENT COMPANY, PROSPER MARKETPLACE, INC. OR OF THE BORROWERS UNDER THE CORRESPONDING BORROWER LOANS.  PROSPER’S OBLIGATION TO MAKE PAYMENTS ON A NOTE WILL BE LIMITED TO AN AMOUNT EQUAL TO THE NOTE HOLDER’S PRO RATA SHARE OF AMOUNTS PROSPER RECEIVES WITH RESPECT TO THE CORRESPONDING BORROWER LOAN, NET OF ANY SERVICING FEES.   PROSPER MARKETPLACE, INC. WILL BE THE SOLE ISSUER OF THE PMI MANAGEMENT RIGHTS.  THE PMI MANAGEMENT RIGHTS WILL NOT BE SEPARABLE FROM THE NOTES OFFERED ON THE PLATFORM AND WILL NOT BE ASSIGNED A VALUE SEPARATE FROM THE NOTES.  THE PMI MANAGEMENT RIGHTS RELATE SOLELY TO THE SERVICES PROVIDED BY PROSPER MARKETPLACE, INC. TO PROSPER PURSUANT TO THE ADMINISTRATION AGREEMENT DESCRIBED IN THE PROSPECTUS.   PROSPER MARKETPLACE, INC. IS NOT A PARTY TO THIS AGREEMENT, HAS NO PAYMENT OBLIGATIONS IN RELATION TO ANY BORROWER LOAN OR ANY NOTE, AND DOES NOT GUARANTEE PAYMENT OF THE CORRESPONDING BORROWER LOANS OR THE NOTES.  PROSPER MARKETPLACE, INC. DOES NOT WARRANT OR GUARANTEE THAT YOU WILL RECEIVE ANY RATE OF RETURN, ANY MINIMUM AMOUNT OF PRINCIPAL OR INTEREST OR ANY PRINCIPAL OR INTEREST AT ALL ON ANY NOTE.

Last Updated: [INSERT IMPLEMENTATION DATE]

EX-10.5

Exhibit 10.5

CONFIDENTIAL TREATMENT REQUESTED

AMENDED AND RESTATED

PROCESSING AGREEMENT

between

CSC Logic, Inc.

and

Prosper Marketplace Inc.

November 21, 2012

CSC Logic, Inc.

A Subsidiary of Computer Sciences Corporation

8616 Freeport Parkway, Suite 2B

Irving, Texas 75063

 (800) 527-2323

AMENDED AND RESTATEDPROCESSING AGREEMENT

This Amended and Restated Processing Agreement (this “Agreement”) is entered into as of the 21st day of November, 2012 (the “Effective Date”) by and among CSC Logic, Inc., a Texas corporation (“CSC Logic”) and Prosper Marketplace, Inc., a Delaware corporation (“PMI”).  As used in this Agreement, “Party” means CSC Logic or PMI; “Parties” means CSC Logic and PMI.

WHEREAS, CSC Logic is in the business of performing back-up loan servicing duties;

WHEREAS, CSC Logic and PMI have entered into a Processing Agreement, dated as of January 1, 2009, pursuant to which CSC Logic performs certain back-up loan servicing duties for PMI (the “Existing Processing Agreement”);

WHEREAS, PMI may transfer to Prosper Funding LLC, a Delaware limited liability company and wholly-owned subsidiary of PMI (“PFL”), the on-line loan platform used by PMI to originate borrower loans and issue notes to lenders to fund such loans (the “Platform”), all loans (the “PMI Borrower Loans”) owned by PMI as of the date of such transfer (the “Transfer Date”) all notes issued by PMI to fund such loans (the “PMI Notes”) and certain related rights, assets and other property;

WHEREAS, from and after any Transfer Date, PFL will (i) operate the Platform to originate additional loans (the “New Loans” and, together with the PMI Borrower Loans, the “Loans”) and issue notes to fund such loans (the “New Notes” and, together with the PMI Notes, the “Notes”), (ii) will assume all obligations of PMI in relation to the PMI Borrower Loans and PMI Notes and (iii) engage PMI pursuant to an Administration Agreement to perform certain services relating to the acquisition, maintenance, collection, liquidation and other servicing of Loans and the issuance and sale of New Notes and performance of its obligations in relation to all Notes;

WHEREAS, form and after any Transfer Date, PMI would no longer require performance by CSC Logic or any other person of back-up loan servicing duties in relation to PMI Borrower Loans or PMI Notes;

WHEREAS, CSC Logic and PFL are entering into a separate back-up processing agreement, dated as of the Effective Date (the “PFL Back-up Processing Agreement”), pursuant to which, from and after any Transfer Date, CSC Logic may commence to perform substantially the same back-up loan servicing duties for PFL in relation to the Loans and Notes that, prior to such Transfer Date, CSC Logic performs for PMI under this Agreement, on substantially the same terms and conditions as are set forth in this Agreement;

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

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1.             Services to be Performed by CSC Logic.  Subject to the terms and conditions hereof, for the Initial Term of this Agreement and any Renewal Term, CSC Logic shall provide certain back-up servicing services to PMI, and/or to others on behalf of PMI, and shall deliver reports and information to PMI relating to the foregoing services (collectively, all of the foregoing are referred to as the “CSC Logic Services” or the “Services”), as described in Exhibit A (which shall be titled “Statement of Work” or “Description of Services”).

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1.2 Changes to Exhibit A.  At any time or times, CSC Logic may revise Exhibit A, and thereby offer additional services, or modify existing services or terminate certain services; provided, however, that PMI agrees to such modifications, and provided that CSC Logic will give to PMI not less than one hundred and eighty (180) days’ notice prior to materially diminishing the services offered.  In addition, CSC Logic may provide other services to PMI on terms and conditions as may be otherwise mutually negotiated and agreed upon between them.

2. Fees, Charges and Billing.

2.1 Payment. As consideration for performing the CSC Logic Services, PMI, among other things, shall pay CSC Logic the fees and expenses as set forth in the Pricing Schedule that is attached hereto and incorporated herein as Exhibit B.  CSC Logic shall issue an invoice to PMI on a monthly basis.  The fees and expenses set forth in Exhibit B are stated in U.S. Dollars, and all invoicing and payments hereunder shall also be in U.S. Dollars.  PMI shall pay outstanding invoices within thirty (30) days or incur interest charges of 1.5% per month on any outstanding balance.

2.2 Taxes.  Except for income taxes levied on CSC Logic’s net income, PMI shall pay or reimburse CSC Logic for all national, federal, provincial, state, local or other taxes and assessments of any jurisdiction, including sales or use taxes, data processing taxes, royalty taxes, property taxes, international withholding taxes (including those in lieu of income taxes), customs or other import or export taxes, value added taxes and amounts levied in lieu thereof based on charges set, services performed or to be performed, or payments made or to be made hereunder.    PMI shall not be entitled to deduct the amount of any such taxes, duties or assessments from payments made to CSC Logic under this Agreement.   This provision shall survive the termination of this Agreement and shall be applicable regardless of the time frame in which the requirement of the payment of such taxes or assessments is asserted (e.g. a deficiency assessment by a taxing authority as a result of an audit after the termination of this Agreement).  Provided, however, CSC Logic will cooperate with PMI to attempt to minimize the amount of taxes and assessments payable by PMI in accordance with applicable statutes, rules and regulations.

In the event that a taxing authority or other entity asserts that CSC Logic is responsible for the payment of any taxes, interest or penalties for which PMI is responsible pursuant to this Section, PMI shall defend, indemnify and hold harmless CSC Logic from any and all liability for the payment of such taxes, interest or penalties and any expenses and fees (including reasonable attorneys’ fees) incurred by CSC Logic as a result of such assertion.   PMI shall take all reasonable steps, including the posting of a bond, to remove any lien from CSC Logic property, which arises from such assertion.

If PMI is a tax exempt entity or if any transaction covered by this Agreement is a tax exempt transaction, PMI will provide a copy of such tax exemption certificate to CSC Logic immediately after the execution of this Agreement.  If PMI has a direct pay certificate that allows the direct payment to the proper taxing authority of PMI’s obligations under this Section, PMI shall provide a copy of such direct pay certificate to CSC Logic immediately upon the execution of this Agreement.

In the event that an Exhibit or other attachment to this Agreement specifically provides for the delivery of equipment or other property to PMI for the resale to a third party, and as a result PMI is not responsible for the payment of the taxes and assessments under this Section, PMI shall provide a copy of such resale certificate to CSC Logic immediately upon the execution of this Agreement.

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PMI warrants and represents that, if applicable, it will provide the following to CSC Logic: a) Tax exempt certificate; b) Direct Pay permit; c) Resale Certificate.

2.3 CSC Logic may increase any of the fees and charges as set forth in Exhibit B annually, with such changes to be effective on the anniversary of the Effective Date; provided, however, that the percentage increase for all fees and charges at the time of the increase shall not exceed the percentage increase in the Consumer Price Index For All Urban Consumers: All Items, for the most recent twelve (12) month period as most recently published at the time of the increase.

3. Term of Agreement.

3.1 The initial term of this Agreement shall begin on the Effective Date as set forth above and shall continue for a period one (1) year (“Initial Term”), unless earlier terminated by PMI or CSC Logic in accordance with this Agreement.  On the first anniversary of the Effective Date and each anniversary date thereafter, this Agreement shall automatically successively renew for a period of one (1) year each (each a “Renewal Term”) unless (a) earlier terminated by PMI or CSC Logic in accordance with this Agreement, or (b) PMI or CSC Logic gives notice of non-renewal (a “Non-Renewal Notice”) to the non-terminating Parties at least ninety (90) days prior to the expiration of the Initial Term or any Renewal Term.

3.2 Early Termination.  At any time during the Initial Term or any Renewal Term, PMI shall have the right to give CSC Logic notice of early termination of this Agreement, in connection with the occurrence of a Transfer Date or otherwise, which notice shall call for a termination date not earlier than one (1) month after the date of the notice.  If such notice is given other than in relation to a Transfer Date, termination for diminution as described in Section 3.3 or termination in relation to a default pursuant to Section 13, then such notice shall be accompanied by payment to CSC Logic of an “Early Termination Payment” in an amount equal to the product of (a) the average amount invoiced monthly by CSC Logic to PMI pursuant to the Agreement, calculated over the four months preceding such notice of early termination, multiplied by (b) the number of months (not to exceed  twelve  (12)) otherwise remaining between the date of termination and the end of the Initial Term or the Renewal Term during which such early termination occurs.   If such notice, other than such notice made in connection with the occurrence of a Transfer Date, termination for diminution as described in Section 3.3 or termination in relation to a default pursuant to Section 13, is not accompanied by such early termination payment, then such early termination notice will be null and void and of no effect.

3.3 Termination for Diminution.  During the sixty (60) day period (the “Review Period”) commencing on PMI's receipt of notice from CSC Logic pursuant to Section 1.2 of a material diminution of services, PMI shall have the option to elect to terminate this Agreement based on such diminution.  If PMI elects to so terminate, it shall provide notice thereof to CSC Logic during the Review Period, which termination shall be effective on the day that CSC Logic's Section 1.2 notice specified as the day upon which the diminution would otherwise take effect.  No Early Termination Payment shall be payable to CSC Logic if PMI elects to terminate this Agreement pursuant to this Section 3.3.

4. Duties of PMI.  So long as this Agreement is in force, PMI warrants and covenants that PMI shall:

4.1 furnish or cause to be furnished to CSC Logic in form satisfactory to CSC Logic, all information (the “Data”) as specified by CSC Logic in form and content sufficient for CSC Logic to perform the CSC Logic Duties.  It is understood that PMI shall be solely responsible for completeness and accuracy of the Data and CSC Logic shall not be responsible for errors of any nature attributable to the Data being incomplete or inaccurate;

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4.2 furnish promptly to CSC Logic copies of all reports, documents, information and input Data required by CSC Logic to implement and furnish the services and products hereunder and such other information as is reasonably requested by CSC Logic from time to time;

4.3 pay to CSC Logic when due all charges for its services and products as set forth in this Agreement;

4.4 be appropriately licensed to conduct its business in compliance with all legal requirements, and shall cause all policy forms, certificates, endorsements and other appropriate documents to be prepared, approved and issued in compliance with all applicable federal and state laws and regulations.

5. Limited Liability and Limited Warranty. THERE ARE NO WARRANTIES MADE BY CSC LOGIC, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  IN NO EVENT SHALL CSC LOGIC BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO DAMAGES FOR LOSS OF CURRENCY, FUNDS, DATA, PROFITS OR GOODWILL.  CSC LOGIC'S MAXIMUM LIABILITY FOR ANY BREACH OF THIS AGREEMENT SHALL NOT EXCEED THE FEES ACTUALLY PAID BY EITHER PROSPER PARTY TO CSC LOGIC FOR THE SERVICES TO WHICH SUCH BREACH PERTAINS FOR THE THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING SUCH BREACH.  THE LIMITATIONS OF LIABILITY IN THIS SECTION WILL BE ENFORCED, EVEN IF ANY EXCLUSIVE REMEDY FAILS OF ITS ESSENTIAL PURPOSE.

6. Correction of Reports.  PMI will give detailed notice to CSC Logic of any error in any report prepared by CSC Logic within three (3) business days after receipt of daily reports, within two (2) weeks after receipt of weekly reports and within thirty (30) days after receipt of all other reports; thereafter, CSC Logic may not have the data to recreate the report.  Failure by PMI to give CSC Logic such notice within the appropriate time period detailing the specific error which is claimed by PMI shall relieve CSC Logic of any responsibility to correct such error and rerun such report.

7. PMI Materials.

7.1 Condition of Materials.  All source material, data and equipment furnished by PMI in order that CSC Logic may perform hereunder must be compatible with CSC Logic's equipment and such material and data must be in good condition for machine processing.  If PMI fails to furnish its Data to CSC Logic in the form and as timely as needed by CSC Logic, CSC Logic will undertake to process such Data within a reasonable time after it is furnished in proper form.  Data submitted by PMI to CSC Logic for processing, and all other data, material and property, shall be transmitted or transported to and from CSC Logic at PMI's expense.  CSC Logic shall not be liable to PMI under any circumstances for the loss or destruction of or damage to any of PMI's Data, material or property in the custody, control or possession of CSC Logic except for the reasonable cost of replacement or restoration.

7.2 Customer Privacy and Confidentiality of PMI Data.

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7.2.1 Confidential Information. Each Party and their respective affiliates, directors, officers, employees, authorized representatives, agents and advisors (including without limitation, attorneys, accountants, consultants, bankers and financial advisors) shall keep confidential all information concerning the other Party’s proprietary business procedures, products, services, operations, marketing materials, fees, policies or plans and all Nonpublic Personal Information of the other Party or its affiliates that is received or obtained during the negotiation or performance of the Agreement, whether such information is oral or written, and whether or not labeled as confidential by such Party (collectively "Confidential Information"). "Nonpublic Personal Information" shall include all personally identifiable financial information and any list, description or other grouping of consumers, and publicly available information pertaining to them, that is derived using any personally identifiable financial information that is not publicly available, and shall further include all "nonpublic personal information" as defined by federal regulations implementing the Gramm-Leach-Bliley Act, as amended from time to time. "Personally identifiable financial information" means any information a consumer provides to a Party or its affiliates in order to obtain a financial product or service, any information a Party or its affiliates otherwise obtains about a consumer in connection with providing a financial product or service to that consumer, and any information about a consumer resulting from any transaction involving a financial product or service between a Party or its affiliate and a consumer.  Personally identifiable information may include, without limitation, a consumer's first and last name, physical address, zip code, email address, phone number, social security number, birth date, and any other information that itself identifies or when tied to the above information, may identify a consumer.

7.2.2 Use of Confidential Information. For as long as Confidential Information is in possession of a Party, such Party shall take reasonable steps, at least substantially equivalent to the steps it takes to protect its own proprietary information, to prevent the use, duplications or disclosure of Confidential Information, other than, by or to its employees or agents who are directly involved in negotiating or performing this Agreement and who are apprised of their obligations under this Section and directed by the receiving Party to treat such information confidentially, or except as required by law or by a supervising regulatory agency of a receiving Party. No Party shall disclose, share, rent, sell or transfer to any third party any Confidential Information. The Parties shall use Confidential Information only as necessary to perform this Agreement.

7.2.3 Return of Information; Indemnity. Upon the termination or expiration of this Agreement (other than termination in relation to the occurrence of a Transfer Date), or upon the request of the disclosing Party, the receiving Party shall promptly return all Confidential Information received in connection with the transaction, and shall promptly destroy such materials containing such information (and any copies, extracts, and summaries thereof) and shall further provide the disclosing Party with written confirmation of such return or destruction upon request. In the event a Party discovers that Confidential Information has been used in an unauthorized manner or disclosed in violation of this Section, the Party discovering the unauthorized use or disclosure shall immediately notify the other  Party of such event, and the receiving Party shall indemnify and hold the disclosing Party harmless from all claims, damage, liability, costs and expenses (including court costs and reasonable attorneys' fees) arising or resulting from the unauthorized use or disclosure. In addition, the disclosing Party shall be entitled to all other remedies available at law or equity, including injunctive relief. The provisions of this Section 7.2.3 shall survive termination of this Agreement.

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7.3 Escrow Agent.   PMI agrees to maintain in escrow all software, manuals, and operating procedures that would be required by CSC Logic to duplicate the operating environment of PMI within a seventy- two (72) hour period.  In addition to the escrow, any related vendor services, naming rights, proprietary hardware, or any other contract or knowledge that would reasonably be required for CSC Logic to continue to operate PMI’s website and all related services, must be documented and made available to CSC Logic.  PMI further guarantees that it will keep all of these above-referenced material and documentation current.  CSC Logic shall be entitled to receive any or all of the above-referenced escrow and related operating elements in the event that PMI has completely ceased all business activities for a period of sixty (60) days or more, or by notification by the lenders or controlling parties of a default event by the PMI.  CSC Logic’s use of PMI’s property is limited to the CSC Services related to the remaining terms of the receivables or as defined in any agreement between PMI and a lender or other controlling party. PMI agrees to provide CSC Logic, within ninety (90) days of the execution of this Agreement, an inventory of all elements that PMI intends to escrow or otherwise provide that will give CSC Logic the ability to continue operation in the event of a transfer.  The escrow and other required accommodations must be in place ninety (90) days after PMI and CSC Logic agree that the proposed inventory is complete.

7.4 Disposition of PMI Materials. CSC Logic agrees that upon the expiration or termination of this Agreement for any reason other than the occurrence of a Transfer Date, CSC Logic will return, in accordance with PMI's instructions and in a mutually agreeable format, all of PMI's Data and materials that are not Confidential Information as such term is defined in Section 7.2.1 relating to the services provided by CSC Logic hereunder.  If PMI fails to provide CSC Logic with instructions regarding the return or disposal of such Data within sixty (60) days following such expiration or termination, CSC Logic may dispose of any Data, material or property belonging to PMI.  If, pursuant to such disposal, CSC Logic incurs any expense, PMI shall pay CSC Logic for such reasonable expense upon demand.

8. Infringement and Capacity.  The performance of PMI’s duties under this Agreement shall not cause CSC Logic to infringe upon any patent, license, copyright or other proprietary, intellectual or property right, or violate any other right (including but not limited to, the right to royalties or license fees) of any person, partnership, corporation or other entity.  PMI also represents and warrants that (i) it is and at all times will be free of any contractual obligation that would prevent it from entering into this Agreement and (ii) CSC Logic's offer to provide services and information hereunder in no way caused, or will cause, or induce, it to breach any contractual obligation.

9. Confidentiality of CSC Logic Proprietary Information.  PMI acknowledges that the designs, specifications, manuals, documentation and other materials related to the services performed and the information produced hereunder by CSC Logic (collectively “Documentation”), and all other systems, programs, designs, specifications, manuals, documentation and other materials which are utilized, developed or made available by CSC Logic in connection with this Agreement or the PFL Back-up Processing Agreement (collectively “Other Materials”) are the confidential, proprietary and/or trade secret property and information of CSC Logic or its licensors and shall remain such property and information of CSC Logic or its licensors, both before and after the term of this Agreement.  PMI shall not copy, sell, assign, transfer, distribute or disclose all or any part of the Documentation or Other Materials to any other person, partnership, corporation or other entity (except PFL upon the occurrence of a Transfer Date).  PMI shall confine the knowledge and use of the Documentation and Other Materials only to its employees who require such knowledge for use in the ordinary course and scope of their employment.  PMI and such employees shall use such Documentation and Other Materials solely in connection with its business purposes which are being addressed by CSC Logic pursuant to this Agreement or PMI’s performance of its duties under the Administration Agreement.  Upon any expiration or termination of this Agreement other than in relation to the occurrence of a Transfer Date, PMI shall promptly return to CSC Logic all property or information which is covered by this Section 9.  Notwithstanding anything herein to the contrary, the Parties can copy, distribute or disclose Documentation and Other Materials with each other and with the Parties’ employees (and with PFL and its employees), provided that such copying, distribution or disclosure is solely for the purpose of fulfilling the sharing Party’s obligations under this Agreement or the PFL Back-up Processing Agreement.

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10. No Solicitation. During the term of this Agreement and for one year after its termination, PMI shall not (a) attempt to induce an employee or independent contractor of CSC Logic to terminate his or her employment or contract; nor (b) hire or enter into a contract for the services of an employee, independent contractor, or former employee or independent contractor of CSC Logic without first obtaining CSC Logic's written consent, except for former employees or independent contractors whose employment or engagement has been terminated for over six (6) months.

11. Relationship of the Parties.  The relationship of the Parties to this Agreement is that of independent contractors.  Neither this Agreement nor any of the activities contemplated hereby shall be deemed to create any partnership, joint venture, agency or employer-employee relationship between CSC Logic and PMI.

12. Force Majeure.  Notwithstanding anything herein to the contrary, no Party shall be considered in default hereunder or have any liability to any other Party for any failure to perform if such failure arises out of causes beyond the control of such Party.  Such causes include, but are not limited to, acts of God or public enemy, acts of the government acting in any capacity, fires, floods, epidemics, quarantine restrictions, strikes, war, terroristic or criminal acts, civil disturbance, riots, rebellion, freight embargoes, degradation of telephone or other communication service or weather conditions.

13. Default.

13.1 Notice and Cure Period, Rights, After Default.  If PMI is not in compliance with Section 4.4, or if PMI shall fail to pay to CSC Logic any amount due hereunder within five (5) days after receipt of the notice that the same is past due, or if either CSC Logic or PMI breaches or fails to comply with any other provision of this Agreement and such failure continues for a period of thirty (30) days after receipt of written notice thereof, then CSC Logic or PMI, as the case may be, shall be deemed to be in default and the non-breaching Party shall have the right (i) to terminate this Agreement immediately, and (ii) in addition, but subject to any limitations contained in this Agreement, to pursue any and all rights which may be available to it.  Termination of this Agreement shall not relieve either Party from payment of all amounts of money owed by it to the other Party.  Notwithstanding anything in this Agreement to the contrary, so long as PMI is in default under this Agreement or any other agreement in effect between CSC Logic and PMI, CSC Logic shall have no obligation to perform the CSC Logic Duties while the default continues.

13.2 Injunctive Relief.  The Parties acknowledge that if either CSC Logic or PMI fails to comply with the provisions of Sections 7.2, 9 or 10 hereof, the non-breaching Party may suffer irreparable harm for which there may be no adequate remedy at law.  Accordingly, if either CSC Logic or PMI fails to comply with any provision of said sections, then the non-breaching Party will be entitled immediately to injunctive relief or any other appropriate equitable remedy.  Further, if such failure continues for thirty (30) days after receipt of notice thereof from the non-breaching Party, then such non-breaching Party shall also have all of the rights available to it as if there was a default under Section 13.1 hereof.

CSC Logic, Inc. page 8 of  15 CSC Confidential

13.3 Time for Bringing Suit.  No action may be brought by any Party against the other in connection with this Agreement more than two (2) years after the cause of action arose, except that any action by either Party for nonpayment of any amount of money due to it hereunder may be brought at any time subject to the applicable statute of limitations.

13.4 Attorney or Collection Fees.  If either Party incurs any cost or fee from an attorney, collection agency or otherwise in attempting to collect any amount due it hereunder, then the non-paying Party shall pay to the collecting Party upon demand the amount of such cost or fee.  Further, in the event of any litigation between the Parties in connection with this Agreement, the prevailing Party shall be entitled to recover its reasonable costs and attorney fees incurred in enforcing this Agreement and any related judgments entered.

13.5 No Waiver of Remedies.  The failure by either Party to exercise any option or right upon a default or breach of any of the terms of this Agreement shall not be construed as waiving such right or option at a later date.  Further, all of such rights or options shall be cumulative, and the exercise of any one such right or option shall not preclude the exercise of any other right or option.  No exercise of, or delay or omission to exercise, the rights and powers herein granted shall be held to exhaust the same or be construed as a waiver thereof, and every such right and power may be exercised at any time and from time to time.

14. Transfer Date.  From and after the occurrence of a Transfer Date (and written notification of such given by PMI to CSC Logic), this Agreement shall automatically terminate, and PMI shall be fully released and discharged from any and all duties, obligations, covenants, representations and warranties hereunder except that PMI shall remain liable to CSC Logic in relation to (a) performance of its covenants and obligations set forth in Sections 4, 6, 7, 9, 10 16.5 and 16.6;

15. Performance by PMI; Separate Entities.

15.1 CSC Logic acknowledges and agrees that from and after a Transfer Date PMI may perform, on behalf of PFL, obligations of PFL to CSC Logic under the PFL Back-up Processing Agreement (other than payment obligations), and, to the extent it does so, will be doing so solely in its various capacities as corporate administrator, loan servicer, platform administrator or similar capacity under the Administration Agreement and not for its own account, and CSC Logic agrees to accept performance by PMI of such duties on behalf of PFL (which acknowledgement and acceptance does not include any waiver by CSC Logic of PFL’s liabilities in relation to such performance).

15.2 CSC Logic acknowledges and agrees that PFL and PMI are separate legal entities and that neither of them has guaranteed the performance or payment obligations of the other to CSC Logic under this Agreement or under the PFL Back-up Processing Agreement.  Accordingly, CSC Logic agrees that (i) PFL shall have no liability for the performance by PMI of its obligations under this Agreement, and (ii) PMI shall have no liability for the performance by PFL of its obligations under the PFL Back-up Processing Agreement except that to the extent that PMI in fact performs or undertakes to perform any PFL obligation under the PFL Back-up Processing Agreement, PMI will have liability to CSC Logic in relation to its performance thereof.

16. Miscellaneous.

CSC Logic, Inc. page 9 of  15 CSC Confidential

16.1 Notices.  Any notice which is required or permitted to be given hereunder shall be in writing and shall be effective upon receipt, and shall be delivered as follows:  (a) by United States mail, with return receipt requested, postage prepaid; (b) by Federal Express or other nationally recognized overnight delivery service; or (c) delivered by telecopy as follows:

If to CSC Logic:
	CSC Logic, Inc.
	8616 Freeport Parkway, Suite 2B
	Irving, Texas 75063
	Attn:  Legal
	Facsimile: 469.499.5974
If to PMI:
	Prosper Marketplace, Inc.
	111 Sutter Street, 22nd Floor
	San Francisco, CA 94104
	Attn: General Counsel
	Facsimile: 415-362-7233

Either Party at any time or times may change the foregoing address or telecopy information, pursuant to notice to the other Party duly given in accordance with requirements of this Section 16.1.

16.2 Audit.  PMI and its authorized agents shall have the right, at its expense and at reasonable times and upon reasonable notice, to audit the applicable books and records of PMI's program in CSC Logic's office.

16.3 Assignment.  No Party may transfer, whether by assignment, sublicense, merger, consolidation, operation of law, or otherwise, any rights or obligations under this Agreement without the other Party’s prior written consent.  The consent to any particular assignment shall not constitute consent to further assignment.  This Agreement shall be binding upon the Parties and their respective successors and permitted assigns.  Any transaction in contravention of this Section shall be null and void.

16.4 Captions.  All captions and headings to the sections and subsections of this Agreement have been inserted for convenience of reference only and shall not be construed as a part hereof.

16.5 Advertising  No Party shall publish or use the name of the other Party in any manner or publication without the prior consent of such other Party, except as required by law or legal process, in which event notice thereof shall be promptly given.  Without limiting the generality of the foregoing, no letter of general mailing or advertisement or other communication to be sent to a policyholder or customer of PMI may contain the name CSC Logic without CSC Logic's prior written approval.

16.6 Indemnity  PMI hereby agrees to indemnify, defend and hold harmless CSC Logic and its shareholders, directors, officers, agents and employees from all claims, costs, penalties, damages, liability, obligation, cause of action, and all fees, expenses and costs associated therewith, including attorneys' fees, arising from PMI's breach or nonperformance hereunder or from CSC Logic’s faithful performance of the CSC Logic duties hereunder or claimed by any borrower of PMI, any customer of PMI, any financial investor of PMI, or any person claiming under or through any of them.

CSC Logic, Inc. page 10 of  15 CSC Confidential

PMI also hereby agrees to indemnify, defend and hold harmless CSC Logic and its respective shareholders, directors, officers, agents and employees from all claims, costs, penalties, damages, liability, obligation, cause of action, and all fees, expenses and costs associated therewith, including attorneys' fees, arising from PMI's actions and performance under the PFL Back-up Processing Agreement in its various capacities as corporate administrator, loan servicer or platform administrator on behalf of PFL occurring after any Transfer Date.

CSC Logic shall indemnify, defend and hold harmless PMI and its shareholders, directors, officers, agents and employees from and against all claims, costs, penalties, damages, liability, obligations, cause or action, and all fees, expenses and costs associated therewith, including attorneys' fees, arising from CSC Logic’s material breach of nonperformance hereunder, or and from and against any Damages, to the extent such Damages arise under this Agreement and to the extent that such Damages arise out of or relate to any third party claim of willful misconduct or gross negligence, or personal injury or property damage caused by CSC Logic in the performance of its obligations hereunder. CSC Logic further agrees to indemnify, hold harmless, and defend PMI and its shareholders, directors, officers, agents and employees from and against all claims of intellectual property infringement arising from the products or services provided hereunder.

16.7 Governing Law, Jurisdiction, Venue.  THIS AGREEMENT IS BEING MADE AND ENTERED INTO IN THE COUNTY OF DALLAS, STATE OF TEXAS AND, IT SHALL BE GOVERNED AND CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO TEXAS’ CONFLICTS OF LAWS PRINCIPLES.  THE PARTIES AGREE TO THE EXCLUSIVE JURISDICTION OF AND VENUE IN THE STATE AND FEDERAL COURTS IN DALLAS COUNTY, TEXAS AND WAIVE ALL RIGHTS TO VENUE AND JURISDICTION IN ANY OTHER FORUM.  BECAUSE THE PARTIES AGREE THAT THIS CONTRACT IS NOT A CONTRACT FOR THE SALE OF GOODS, THIS AGREEMENT SHALL NOT BE GOVERNED BY ANY CODIFICATION OF ARTICLE 2 OR 2A OF THE UNIFORM COMMERCIAL CODE, OR ANY CODIFICATION OF THE UNIFORM COMPUTER INFORMATION TECHNOLOGY ACT OR ANY REFERENCE TO THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.

16.8 Severability.  If any clause or provision of this Agreement becomes or is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under any present or future law effective during the term hereof, the remainder of this Agreement shall not be affected thereby.

16.9 Survival of Certain Provisions.  Notwithstanding anything herein to the contrary, the obligations of the Parties under Sections 2.2, 5, 7.2, 8, 9, 10, 13.2, 13.3, 13.4, 13.5, 15, 16.5, 16.6, 16.7 and 16. 8 hereof shall survive any expiration or termination of this Agreement.

16.10 Entire Agreement.  This Agreement together with its attached Exhibits, which are hereby incorporated herein as if set forth in full herein, constitutes the entire agreement between the Parties with respect to the subject matter hereof, and it supersedes all prior or contemporaneous agreements, contracts, understandings, proposals and negotiations with respect to such subject matter.  This Agreement may be amended, waived or supplemented only by a written instrument duly executed by CSC Logic and PMI.  The terms and conditions of this Agreement shall prevail notwithstanding any additional or different terms or conditions of any purchase order that may be issued by PMI.

CSC Logic, Inc. page 11 of  15 CSC Confidential

16.11 Multiple Counterparts.  This Agreement may be signed in multiple counterparts and all such counterparts shall be treated as one document.  The signatures of the Parties need not appear on the same copy of this Agreement, so long as each Party signs at least one copy of this Agreement and the copies contain the same terms.

16.12 Construction.  The headings used herein are inserted only as a matter of convenience and for reference and shall not affect the construction or interpretation of this Agreement.  Where context so indicates, a word in the singular form shall include the plural, a word in the masculine form shall include the feminine and vice-versa.  The word “including” and similar constructions (such as “for example”, “such as”, and “e.g.”) shall mean “including, without limitation”, throughout this Agreement.  The Parties agree that the terms and conditions of this Agreement are the result of negotiations between the Parties and that this Agreement shall not be construed in favor of or against any Party by reason of the extent to which the Party or its professional advisors participated in the preparation of this Agreement.

16.13 Third Party Beneficiaries.  Each Party intends that this Agreement shall not benefit, or create any right or cause of action in or on behalf of, any person or entity other than PMI, and CSC Logic.

16.14 Covenant of Further Assurances.  PMI and CSC Logic covenant and agree that, subsequent to the execution and delivery of this Agreement and without any additional consideration, each of PMI and CSC Logic shall execute and deliver any further legal instruments and perform any acts which are or may become necessary to effectuate the purposes of this Agreement.

[Remainder of page intentionally left blank.  Signature page follows.]

CSC Logic, Inc. page 12 of  15 CSC Confidential

IN WITNESS WHEREOF, the Parties, by their duly authorized officers whose signatures are set forth below, have executed this Agreement as of the Effective Date set forth above.

CSC Logic, Inc. 8616 Freeport Parkway, Suite 2B Irving, Texas 75063
By:	- /s/ -
Name: Michael W. Risley
Title: Industry General Manager
Execution Date: November 13, 2012

Prosper Marketplace, Inc. 111 Sutter Street, 22nd Floor San Francisco, CA 94104
By:	- /s/ -
Name: Sachin Adarkar
Title: General Counsel and Secretary
Execution Date: November 21, 2012

CSC Logic, Inc. page 13 of  15 CSC Confidential

EXHIBIT A

DESCRIPTION OF SERVICES / STATEMENT OF WORK

Cold Back- Up Servicing Duties:

CSC Logic receives and reviews the consolidated monthly servicer's report (certificate) and determines that it is complete on its face.

Additional duties as requested by PMI:

1. Conduct quarterly conference call with Servicer to discuss general status including financial, portfolio, and systems issues.

2. Conduct periodic due diligence reviews (as directed by PMI) and in accordance with a separate agreement with such entities) at servicer’s location(s) to meet staff, review servicing practices and controls, review software controls and functionality and report  on any issues or concerns.

3. Such other services as shall be addressed and set forth in an addendum hereto.

Transfer of Servicing.

CSC Logic shall assist PMI in developing a reasonable transition plan and shall assist PMI in the transfer of the servicing activities defined herein to CSC Logic.

PMI Statement of Work page 14 of  15 CSC Confidential

EXHIBIT B

PMI

Services		Fee
PMI Setup Fee	Includes back-up servicing set-up and attorney fees	[*]†
Monthly Back-up Servicing Fee (COLD)		[*]
Monthly Minimum Back-up Servicing Fee (COLD)		[*]
Consulting Services/Due Diligence Reviews		[*]

REIMBURSABLE EXPENSES  As specified below:

1) Reasonable out-of-pocket travel expenses incurred by CSC Logic staff and approved by PMI.

2) Any other expenses approved by PMI.

† Already paid on March 25, 2009.

 *Confidential Treatment Requested

PMI page 15 of  15 CSC Confidential

EX-10.6

Exhibit 10.6

CONFIDENTIAL TREATMENT REQUESTED

BACK-UP PROCESSING AGREEMENT

between

CSC Logic, Inc.

and

Prosper Funding LLC

 November 21, 2012

CSC Logic, Inc.

A Subsidiary of Computer Sciences Corporation

8616 Freeport Parkway, Suite 2B

Irving, Texas 75063

 (800) 527-2323

BACK-UP PROCESSING AGREEMENT

This Back-up Processing Agreement (this “Agreement”) is entered into as of the 21st day of November, 2012 (the “Effective Date”) by and among CSC Logic, Inc., a Texas corporation (“CSC Logic”), and Prosper Funding LLC, a Delaware limited liability company.  As used in this Agreement, “Party” means CSC Logic or PFL; “Parties” means CSC Logic and PFL.

WHEREAS, CSC Logic is in the business of performing back-up loan servicing duties;

WHEREAS, CSC Logic and Prosper Marketplace, Inc., a Delaware Corporation (“PMI”) have entered into a Processing Agreement, dated as of January 1, 2009, pursuant to which CSC Logic performs certain back-up loan servicing duties for PMI (as amended and restated through the date hereof, the “Existing Processing Agreement”);

WHEREAS, PMI may transfer to PFL the on-line loan platform used by PMI to originate borrower loans and issue notes to lenders to fund such loans (the “Platform”), all loans (the “PMI Borrower Loans”) owned by PMI as of the date of such transfer (the “Transfer Date”) all notes issued by PMI to fund such loans (the “PMI Notes”) and certain related rights, assets and other property;

WHEREAS, from and after any Transfer Date, PFL will (i) operate the Platform to originate additional loans (the “New Loans” and, together with the PMI Borrower Loans, the “Loans”) and issue notes to fund such loans (the “New Notes” and, together with the PMI Notes, the “Notes”), (ii) will assume all obligations of PMI in relation to the PMI Borrower Loans and PMI Notes and (iii) engage PMI pursuant to an Administration Agreement to perform certain services relating to the acquisition, maintenance, collection, liquidation and other servicing of Loans and the issuance and sale of New Notes and performance of its obligations in relation to all Notes;

WHEREAS, PFL desires to engage CSC Logic to perform, from and after any Transfer Date, substantially the same back-up loan servicing duties for PFL in relation to the Loans and Notes that, prior to such Transfer Date, CSC Logic performs for PMI under the Existing Processing Agreement, on substantially the same terms and conditions as are set forth in the Existing Processing Agreement;

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1.         Services to be Performed by CSC Logic.  Subject to the terms and conditions hereof, commencing on the Transfer Date (which date will be specified in a notice of termination delivered to CSC Logic by PMI pursuant to the Existing Processing Agreement), CSC Logic shall provide certain back-up servicing services to PFL and shall deliver reports and information to PFL relating to the foregoing services (collectively, all of the foregoing are referred to as the “CSC Logic Services” or the “Services”), as described in Exhibit A (which shall be titled “Statement of Work” or “Description of Services”).

1.2 Changes to Exhibit A.  At any time or times, CSC Logic may revise Exhibit A, and thereby offer additional services, or modify existing services or terminate certain services; provided, however, that PFL agrees to such modifications, and provided that CSC Logic will give to PFL not less than one hundred and eighty (180) days’ notice prior to materially diminishing the services offered.  In addition, CSC Logic may provide other services to PFL on terms and conditions as may be otherwise mutually negotiated and agreed upon between them.

CSC Logic, Inc. page 2 of  28 CSC Confidential

2. Fees, Charges and Billing.

2.1 Payment. As consideration for performing the CSC Logic Services, commencing on the Transfer Date, PFL, among other things, shall pay CSC Logic the fees and expenses as set forth in the Pricing Schedule that is attached hereto and incorporated herein as Exhibit B.  CSC Logic shall issue an invoice to PFL on a monthly basis.  The fees and expenses set forth in Exhibit B are stated in U.S. Dollars, and all invoicing and payments hereunder shall also be in U.S. Dollars.  PFL shall pay outstanding invoices within thirty (30) days or incur interest charges of 1.5% per month on any outstanding balance.

2.2 Taxes.  Except for income taxes levied on CSC Logic’s net income, PFL shall pay or reimburse CSC Logic for all national, federal, provincial, state, local or other taxes and assessments of any jurisdiction, including sales or use taxes, data processing taxes, royalty taxes, property taxes, international withholding taxes (including those in lieu of income taxes), customs or other import or export taxes, value added taxes and amounts levied in lieu thereof based on charges set, services performed or to be performed, or payments made or to be made hereunder.    PFL shall not be entitled to deduct the amount of any such taxes, duties or assessments from payments made to CSC Logic under this Agreement.   This provision shall survive the termination of this Agreement and shall be applicable regardless of the time frame in which the requirement of the payment of such taxes or assessments is asserted (e.g. a deficiency assessment by a taxing authority as a result of an audit after the termination of this Agreement).  Provided, however, CSC Logic will cooperate with PFL to attempt to minimize the amount of taxes and assessments payable by PFL in accordance with applicable statutes, rules and regulations.

In the event that a taxing authority or other entity asserts that CSC Logic is responsible for the payment of any taxes, interest or penalties for which PFL is responsible pursuant to this Section, PFL shall defend, indemnify and hold harmless CSC Logic from any and all liability for the payment of such taxes, interest or penalties and any expenses and fees (including reasonable attorneys’ fees) incurred by CSC Logic as a result of such assertion.   PFL shall take all reasonable steps, including the posting of a bond, to remove any lien from CSC Logic property, which arises from such assertion.

If PFL is a tax exempt entity or if any transaction covered by this Agreement is a tax exempt transaction, PFL will provide a copy of such tax exemption certificate to CSC Logic immediately after the execution of this Agreement.  If PFL has a direct pay certificate that allows the direct payment to the proper taxing authority of PFL’s obligations under this Section, PFL shall provide a copy of such direct pay certificate to CSC Logic immediately upon the execution of this Agreement.

In the event that an Exhibit or other attachment to this Agreement specifically provides for the delivery of equipment or other property to PFL for the resale to a third party, and as a result PFL is not responsible for the payment of the taxes and assessments under this Section, PFL shall provide a copy of such resale certificate to CSC Logic immediately upon the execution of this Agreement.

PFL warrants and represents that, if applicable, it will provide the following to CSC Logic: a) Tax exempt certificate; b) Direct Pay permit; c) Resale Certificate.

2.3 CSC Logic may increase any of the fees and charges as set forth in Exhibit B annually, with such changes to be effective on the anniversary of the Effective Date; provided, however, that the percentage increase for all fees and charges at the time of the increase shall not exceed the percentage increase in the Consumer Price Index For All Urban Consumers: All Items, for the most recent twelve (12) month period as most recently published at the time of the increase.

CSC Logic, Inc. page 3 of  28 CSC Confidential

3. Term of Agreement.

3.1 The initial term of this Agreement shall begin on the Effective Date as set forth above and shall continue for a period one (1) year (“Initial Term”), unless earlier terminated by PFL or CSC Logic in accordance with this Agreement.  On the first anniversary of the Effective Date and each anniversary date thereafter, this Agreement shall automatically successively renew for a period of one (1) year each (each a “Renewal Term”) unless (a) earlier terminated by PFL or CSC Logic in accordance with this Agreement, or (b) PFL or CSC Logic gives notice of non-renewal (a “Non-Renewal Notice”) to the non-terminating Parties at least ninety (90) days prior to the expiration of the Initial Term or any Renewal Term.

3.2 Early Termination.  At any time during the Initial Term or any Renewal Term, PFL shall have the right to give CSC Logic notice of early termination of this Agreement, which notice shall call for a termination date not earlier than one (1) month after the date of the notice.  If such notice is delivered on or after a Transfer Date and other than in relation to a termination for diminution as described in Section 3.3 or termination in relation to a default pursuant to Section 13, then such notice shall be accompanied by payment to CSC Logic of an “Early Termination Payment” in an amount equal to the product of (a) the average amount invoiced monthly by CSC Logic to PFL pursuant to the Agreement, calculated over the four months preceding such notice of early termination (or if such notice is delivered during the first three months after such Transfer Date, then calculated as the average amount invoiced monthly by CSC Logic to PFL or PMI over the four months preceding such notice of early termination), multiplied by (b) the number of months (not to exceed  twelve  (12)) otherwise remaining between the date of termination and the end of the Initial Term or the Renewal Term during which such early termination occurs.   If such notice is delivered after a Transfer Date and other than in connection with a termination for diminution as described in Section 3.3 or termination for default pursuant to Section 13 and is not accompanied by the early termination payment, then such early termination notice shall be null and void and of no effect.

3.3 Termination for Diminution.  During the sixty (60) day period (the “Review Period”) commencing on PFL's receipt of notice from CSC Logic pursuant to Section 1.2 of a material diminution of services, PFL shall have the option to elect to terminate this Agreement based on such diminution.  If PFL elects to so terminate, it shall provide notice thereof to CSC Logic during the Review Period, which termination shall be effective on the day that CSC Logic's Section 1.2 notice specified as the day upon which the diminution would otherwise take effect.  No Early Termination Payment shall be payable to CSC Logic if PFL elects to terminate this Agreement pursuant to this Section 3.3.

4. Duties of PFL.  So long as this Agreement is in force, PFL warrants and covenants that PFL shall:

4.1 furnish or cause to be furnished to CSC Logic in form satisfactory to CSC Logic, all information (the “Data”) as specified by CSC Logic in form and content sufficient for CSC Logic to perform the CSC Logic Duties.  It is understood that PFL shall be solely responsible for completeness and accuracy of the Data and CSC Logic shall not be responsible for errors of any nature attributable to the Data being incomplete or inaccurate;

CSC Logic, Inc. page 4 of  28 CSC Confidential

4.2 furnish promptly to CSC Logic copies of all reports, documents, information and input Data required by CSC Logic to implement and furnish the services and products hereunder and such other information as is reasonably requested by CSC Logic from time to time;

4.3 pay to CSC Logic when due all charges for its services and products as set forth in this Agreement;

4.4 be appropriately licensed to conduct its business in compliance with all legal requirements, and shall cause all policy forms, certificates, endorsements and other appropriate documents to be prepared, approved and issued in compliance with all applicable federal and state laws and regulations.

5. Limited Liability and Limited Warranty. THERE ARE NO WARRANTIES MADE BY CSC LOGIC, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  IN NO EVENT SHALL CSC LOGIC BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO DAMAGES FOR LOSS OF CURRENCY, FUNDS, DATA, PROFITS OR GOODWILL.  CSC LOGIC'S MAXIMUM LIABILITY FOR ANY BREACH OF THIS AGREEMENT SHALL NOT EXCEED THE FEES ACTUALLY PAID BY EITHER PROSPER PARTY TO CSC LOGIC FOR THE SERVICES TO WHICH SUCH BREACH PERTAINS FOR THE THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING SUCH BREACH.  THE LIMITATIONS OF LIABILITY IN THIS SECTION WILL BE ENFORCED, EVEN IF ANY EXCLUSIVE REMEDY FAILS OF ITS ESSENTIAL PURPOSE.

6. Correction of Reports.  PFL will give or cause to be given detailed notice to CSC Logic of any error in any report prepared by CSC Logic within three (3) business days after receipt of daily reports, within two (2) weeks after receipt of weekly reports and within thirty (30) days after receipt of all other reports; thereafter, CSC Logic may not have the data to recreate the report.  Failure by PFL to give CSC Logic such notice within the appropriate time period detailing the specific error which is claimed by PFL shall relieve CSC Logic of any responsibility to correct such error and rerun such report.

7. PFL Materials.

7.1 Condition of Materials.  All source material, data and equipment furnished by PFL in order that CSC Logic may perform hereunder must be compatible with CSC Logic's equipment and such material and data must be in good condition for machine processing.  If PFL fails to furnish its Data to CSC Logic in the form and as timely as needed by CSC Logic, CSC Logic will undertake to process such Data within a reasonable time after it is furnished in proper form.  Data submitted by PFL to CSC Logic for processing, and all other data, material and property, shall be transmitted or transported to and from CSC Logic at PFL's expense.  CSC Logic shall not be liable to PFL under any circumstances for the loss or destruction of or damage to any of PFL's Data, material or property in the custody, control or possession of CSC Logic except for the reasonable cost of replacement or restoration.

7.2 Customer Privacy and Confidentiality of PFL Data.

CSC Logic, Inc. page 5 of  28 CSC Confidential

7.2.1 Confidential Information. Each Party and their respective affiliates, directors, officers, employees, authorized representatives, agents and advisors (including without limitation, attorneys, accountants, consultants, bankers and financial advisors) shall keep confidential all information concerning the other Party’s proprietary business procedures, products, services, operations, marketing materials, fees, policies or plans and all Nonpublic Personal Information of the other Party or its affiliates that is received or obtained during the negotiation or performance of the Agreement, whether such information is oral or written, and whether or not labeled as confidential by such Party (collectively "Confidential Information"). CSC Logic acknowledges and agrees that from and after a Transfer Date, all Confidential Information supplied by PMI under or in relation to the Existing Processing Agreement that relates to PMI Borrower Loans, PMI Notes, the related borrower or lenders, and payments by or to them, including all related Nonpublic Personal Information will be considered Confidential Information of PFL under this Agreement.  "Nonpublic Personal Information" shall include all personally identifiable financial information and any list, description or other grouping of consumers, and publicly available information pertaining to them, that is derived using any personally identifiable financial information that is not publicly available, and shall further include all "nonpublic personal information" as defined by federal regulations implementing the Gramm-Leach-Bliley Act, as amended from time to time. "Personally identifiable financial information" means any information a consumer provides to a Party or its affiliates in order to obtain a financial product or service, any information a Party or its affiliates otherwise obtains about a consumer in connection with providing a financial product or service to that consumer, and any information about a consumer resulting from any transaction involving a financial product or service between a Party or its affiliate and a consumer.  Personally identifiable information may include, without limitation, a consumer's first and last name, physical address, zip code, email address, phone number, social security number, birth date, and any other information that itself identifies or when tied to the above information, may identify a consumer.

7.2.2 Use of Confidential Information. For as long as Confidential Information is in possession of a Party, such Party shall take reasonable steps, at least substantially equivalent to the steps it takes to protect its own proprietary information, to prevent the use, duplications or disclosure of Confidential Information, other than, by or to its employees or agents who are directly involved in negotiating or performing this Agreement and who are apprised of their obligations under this Section and directed by the receiving Party to treat such information confidentially, or except as required by law or by a supervising regulatory agency of a receiving Party. No Party shall disclose, share, rent, sell or transfer to any third party any Confidential Information. The Parties shall use Confidential Information only as necessary to perform this Agreement.

7.2.3 Return of Information; Indemnity. Upon the termination or expiration of this Agreement, or upon the request of the disclosing Party, the receiving Party shall promptly return all Confidential Information received in connection with the transaction, and shall promptly destroy such materials containing such information (and any copies, extracts, and summaries thereof) and shall further provide the disclosing Party with written confirmation of such return or destruction upon request. In the event a Party discovers that Confidential Information has been used in an unauthorized manner or disclosed in violation of this Section, the Party discovering the unauthorized use or disclosure shall immediately notify the other  Party of such event, and the receiving Party shall indemnify and hold the disclosing Party harmless from all claims, damage, liability, costs and expenses (including court costs and reasonable attorneys' fees) arising or resulting from the unauthorized use or disclosure. In addition, the disclosing Party shall be entitled to all other remedies available at law or equity, including injunctive relief. The provisions of this Section 7.2.3 shall survive termination of this Agreement.

CSC Logic, Inc. page 6 of  28 CSC Confidential

7.3 Escrow Agent.   PFL agrees to maintain or cause to be maintained in escrow all software, manuals, and operating procedures that would be required by CSC Logic to duplicate the operating environment of PFL within a seventy- two (72) hour period.  In addition to the escrow, any related vendor services, naming rights, proprietary hardware, or any other contract or knowledge that would reasonably be required for CSC Logic to continue to operate PFL’s website and all related services, must be documented and made available to CSC Logic.  PFL further guarantees that it will keep all of these above-referenced material and documentation current.  CSC Logic shall be entitled to receive any or all of the above-referenced escrow and related operating elements in the event that PFL has completely ceased all business activities for a period of sixty (60) days or more, or by notification by the lenders or controlling parties of a default event by the PFL.  CSC Logic’s use of PFL’s property is limited to the CSC Services related to the remaining terms of the receivables or as defined in any agreement between PFL and a lender or other controlling party. PFL agrees to provide CSC Logic, within ninety (90) days of the execution of this Agreement, an inventory of all elements that PFL intends to escrow or otherwise provide (exclusive of any items or elements inventoried by PMI pursuant to Section 7.3 of the Existing Processing Agreement) that will give CSC Logic the ability to continue operation in the event of a transfer.  The escrow and other required accommodations must be in place ninety (90) days after Client and CSC Logic agree that the proposed inventory is complete.

7.4 Disposition of PFL Materials. CSC Logic agrees that upon the expiration or termination of this Agreement for any reason, CSC Logic will return, in accordance with PFL's instructions and in a mutually agreeable format, all of PFL's Data and materials that are not Confidential Information as such term is defined in Section 7.2.1 relating to the services provided by CSC Logic hereunder.  If PFL fails to provide CSC Logic with instructions regarding the return or disposal of such Data within sixty (60) days following such expiration or termination, CSC Logic may dispose of any Data, material or property belonging to PFL.  If, pursuant to such disposal, CSC Logic incurs any expense, PFL shall pay CSC Logic for such reasonable expense upon demand.

8. Infringement and Capacity.  The performance of PFL’s duties under this Agreement shall not cause CSC Logic to infringe upon any patent, license, copyright or other proprietary, intellectual or property right, or violate any other right (including but not limited to, the right to royalties or license fees) of any person, partnership, corporation or other entity.  PFL also represents and warrants that (i) it is and at all times will be free of any contractual obligation that would prevent it from entering into this Agreement and (ii) CSC Logic's offer to provide services and information hereunder in no way caused, or will cause, or induce, it to breach any contractual obligation.

9. Confidentiality of CSC Logic Proprietary Information.  PFL acknowledges that the designs, specifications, manuals, documentation and other materials related to the services performed and the information produced hereunder by CSC Logic (collectively “Documentation”), and all other systems, programs, designs, specifications, manuals, documentation and other materials which are utilized, developed or made available by CSC Logic in connection with this Agreement or the Existing Processing Agreement (collectively “Other Materials”) are the confidential, proprietary and/or trade secret property and information of CSC Logic or its licensors and shall remain such property and information of CSC Logic or its licensors, both before and after the term of this Agreement.  PFL shall not copy, sell, assign, transfer, distribute or disclose all or any part of the Documentation or Other Materials to any other person, partnership, corporation or other entity.  PFL shall confine the knowledge and use of the Documentation and Other Materials only to its employees who require such knowledge for use in the ordinary course and scope of their employment and PMI in relation to it performance of services to PFL under the Administration Agreement.  PFL and such employees shall (and shall cause PMI to) use such Documentation and Other Materials solely in connection with its business purposes which are being addressed by CSC Logic pursuant to this Agreement.  Upon any expiration or termination of this Agreement, PFL shall promptly return to CSC Logic all property or information which is covered by this Section 9.  Notwithstanding anything herein to the contrary, the Parties can copy, distribute or disclose Documentation and Other Materials with each other and with the Parties’ employees (and in the case of PFL, with PMI), provided that such copying, distribution or disclosure is solely for the purpose of fulfilling the sharing Party’s obligations under this Agreement.

CSC Logic, Inc. page 7 of  28 CSC Confidential

10. No Solicitation. During the term of this Agreement and for one year after its termination, PFL shall not (a) attempt to induce an employee or independent contractor of CSC Logic to terminate his or her employment or contract; nor (b) hire or enter into a contract for the services of an employee, independent contractor, or former employee or independent contractor of CSC Logic without first obtaining CSC Logic's written consent, except for former employees or independent contractors whose employment or engagement has been terminated for over six (6) months.

11. Relationship of the Parties.  The relationship of the Parties to this Agreement is that of independent contractors.  Neither this Agreement nor any of the activities contemplated hereby shall be deemed to create any partnership, joint venture, agency or employer-employee relationship between CSC Logic and PFL.

12. Force Majeure.  Notwithstanding anything herein to the contrary, no Party shall be considered in default hereunder or have any liability to any other Party for any failure to perform if such failure arises out of causes beyond the control of such Party.  Such causes include, but are not limited to, acts of God or public enemy, acts of the government acting in any capacity, fires, floods, epidemics, quarantine restrictions, strikes, war, terroristic or criminal acts, civil disturbance, riots, rebellion, freight embargoes, degradation of telephone or other communication service or weather conditions.

13. Default.

13.1 Notice and Cure Period, Rights, After Default.  If PFL is not in compliance with Section 4.4, or if PFL shall fail to pay to CSC Logic any amount due hereunder within five (5) days after receipt of the notice that the same is past due, or if either CSC Logic or PFL breaches or fails to comply with any other provision of this Agreement and such failure continues for a period of thirty (30) days after receipt of written notice thereof, then CSC Logic or PFL, as the case may be, shall be deemed to be in default and the non-breaching Party shall have the right (i) to terminate this Agreement immediately, and (ii) in addition, but subject to any limitations contained in this Agreement, to pursue any and all rights which may be available to it.  Termination of this Agreement shall not relieve either party from payment of all amounts of money owed by it to the other Party (for the avoidance of doubt, no Early Termination Payment being applicable in relation to termination pursuant to this Section 13.1).  Notwithstanding anything in this Agreement to the contrary, so long as PFL is in default under this Agreement or any other agreement in effect between CSC Logic and PFL, CSC Logic shall have no obligation to perform the CSC Logic Duties while the default continues.

13.2 Injunctive Relief.  The Parties acknowledge that if either CSC Logic or PFL fails to comply with the provisions of Sections 7.2, 9 or 10 hereof, the non-breaching Party may suffer irreparable harm for which there may be no adequate remedy at law.  Accordingly, if either CSC Logic or PFL fails to comply with any provision of said sections, then the non-breaching Party will be entitled immediately to injunctive relief or any other appropriate equitable remedy.  Further, if such failure continues for thirty (30) days after receipt of notice thereof from the non-breaching Party, then such non-breaching Party shall also have all of the rights available to it as if there was a default under Section 13.1 hereof.

CSC Logic, Inc. page 8 of  28 CSC Confidential

13.3 Time for Bringing Suit.  No action may be brought by either Party against the other in connection with this Agreement more than two (2) years after the cause of action arose, except that any action by either Party for nonpayment of any amount of money due to it hereunder may be brought at any time subject to the applicable statute of limitations.

13.4 Attorney or Collection Fees.  If either Party incurs any cost or fee from an attorney, collection agency or otherwise in attempting to collect any amount due it hereunder, then the non-paying Party shall pay to the collecting Party upon demand the amount of such cost or fee.  Further, in the event of any litigation between the Parties in connection with this Agreement, the prevailing Party shall be entitled to recover its reasonable costs and attorney fees incurred in enforcing this Agreement and any related judgments entered.

13.5 No Waiver of Remedies.  The failure by either Party to exercise any option or right upon a default or breach of any of the terms of this Agreement shall not be construed as waiving such right or option at a later date.  Further, all of such rights or options shall be cumulative, and the exercise of any one such right or option shall not preclude the exercise of any other right or option.  No exercise of, or delay or omission to exercise, the rights and powers herein granted shall be held to exhaust the same or be construed as a waiver thereof, and every such right and power may be exercised at any time and from time to time.

14. Performance By PMI as Administrator; Separate Entities.

14.1 CSC Logic acknowledges and agrees that from and after a Transfer Date PMI may, in its capacity as agent of PFL pursuant to the Administration Agreement, perform obligations of PFL under this Agreement and, to the extent it does so, will be doing so solely in its various capacities as corporate administrator, loan servicer, platform administrator or similar capacity under the Administration Agreement and not for its own account and that PFL, for purposes of this Agreement, will remain responsible to CSC Logic for any responsibilities PMI is performing on behalf of PFL in accordance with the Administration Agreement.

14.2 CSC Logic acknowledges and agrees that PFL and PMI are separate legal entities and that neither of them has guaranteed the performance by the other of its obligations hereunder or under the Existing Processing Agreement.  Accordingly, CSC Logic agrees that (i) PFL shall have no liability for the performance by PMI of its obligations under the Existing Processing Agreement, and (ii) PMI shall have no liability for the performance by PFL of its obligations under this Agreement, except that to the extent that PMI in fact performs (or undertakes to perform) any PFL obligation under this Agreement; PMI will have liability to CSC Logic in relation to its performance thereof.

15. 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 PMI or any other organizer, member, director, officer, manager or employee of PMI or any of its other 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.  CSC Logic acknowledges that the obligations of PFL on the Notes are secured by a pledge of the Loans and related proceeds, such that the proceeds of Loans will not be available to pay claims of CSC Logic against PFL.  “Affiliate” shall mean, with respect to a Party, a Person who directly or indirectly controls, is controlled by or is under common control with the Party.  For 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.  “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.

CSC Logic, Inc. page 9 of  28 CSC Confidential

16. No Petition.  CSC Logic 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.

17. Miscellaneous.

17.1 Notices.  Any notice which is required or permitted to be given hereunder shall be in writing and shall be effective upon receipt, and shall be delivered as follows:  (a) by United States mail, with return receipt requested, postage prepaid; (b) by Federal Express or other nationally recognized overnight delivery service; or (c) delivered by telecopy as follows:

If to CSC Logic:
	CSC Logic, Inc.
	8616 Freeport Parkway, Suite 2B
	Irving, Texas 75063
	Attn:  Legal
	Facsimile: 469.499.5974
If to PFL:
	Prosper Funding LLC
	111 Sutter Street, 22nd Floor
	San Francisco, CA 94104
	Attn: Secretary
	Facsimile: 415-362-7233

Either Party at any time or times may change the foregoing address or telecopy information, pursuant to notice to the other Party duly given in accordance with requirements of this Section 17.1.

17.2 Audit.  PFL and its authorized agents (including PMI) shall have the right, at its expense and at reasonable times and upon reasonable notice, to audit the applicable books and records of PFL's program in CSC Logic's office.

17.3 Assignment.  No Party may transfer, whether by assignment, sublicense, merger, consolidation, operation of law, or otherwise, any rights or obligations under this Agreement without the other Party’s prior written consent.  The consent to any particular assignment shall not constitute consent to further assignment.  This Agreement shall be binding upon the Parties and their respective successors and permitted assigns.  Any transaction in contravention of this Section shall be null and void.

CSC Logic, Inc. page 10 of  28 CSC Confidential

17.4 Captions.  All captions and headings to the sections and subsections of this Agreement have been inserted for convenience of reference only and shall not be construed as a part hereof.

17.5 Advertising  No Party shall publish or use the name of any other Party in any manner or publication without the prior consent of such other Party, except as required by law or legal process, in which event notice thereof shall be promptly given.  Without limiting the generality of the foregoing, no letter of general mailing or advertisement or other communication to be sent to a policyholder or customer of PFL may contain the name CSC Logic without CSC Logic's prior written approval.

17.6 Indemnity  PFL hereby agrees to indemnify, defend and hold harmless CSC Logic and its shareholders, directors, officers, agents and employees from all claims, costs, penalties, damages, liability, obligation, cause of action, and all fees, expenses and costs associated therewith, including attorneys' fees, arising from PFL's breach or nonperformance hereunder or from CSC Logic’s faithful performance of the CSC Logic duties hereunder or claimed by any borrower of PFL, any customer of PFL, any financial investor of PFL, or any person claiming under or through any of them.

CSC Logic shall indemnify, defend and hold harmless PFL and its shareholders, directors, officers, agents and employees from and against all claims, costs, penalties, damages, liability, obligations, cause or action, and all fees, expenses and costs associated therewith, including attorneys' fees, arising from CSC Logic’s material breach of nonperformance hereunder, or and from and against any Damages, to the extent such Damages arise under this Agreement and to the extent that such Damages arise out of or relate to any third party claim of willful misconduct or gross negligence, or personal injury or property damage caused by CSC Logic in the performance of its obligations hereunder. CSC Logic further agrees to indemnify, hold harmless, and defend PFLand its shareholders, directors, officers, agents and employees from and against all claims of intellectual property infringement arising from the products or services provided hereunder.

17.7 Governing Law, Jurisdiction, Venue.  THIS AGREEMENT IS BEING MADE AND ENTERED INTO IN THE COUNTY OF DALLAS, STATE OF TEXAS AND, IT SHALL BE GOVERNED AND CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO TEXAS’ CONFLICTS OF LAWS PRINCIPLES.  THE PARTIES AGREE TO THE EXCLUSIVE JURISDICTION OF AND VENUE IN THE STATE AND FEDERAL COURTS IN DALLAS COUNTY, TEXAS AND WAIVE ALL RIGHTS TO VENUE AND JURISDICTION IN ANY OTHER FORUM.  BECAUSE THE PARTIES AGREE THAT THIS CONTRACT IS NOT A CONTRACT FOR THE SALE OF GOODS, THIS AGREEMENT SHALL NOT BE GOVERNED BY ANY CODIFICATION OF ARTICLE 2 OR 2A OF THE UNIFORM COMMERCIAL CODE, OR ANY CODIFICATION OF THE UNIFORM COMPUTER INFORMATION TECHNOLOGY ACT OR ANY REFERENCE TO THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.

17.8 Severability.  If any clause or provision of this Agreement becomes or is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under any present or future law effective during the term hereof, the remainder of this Agreement shall not be affected thereby.

17.9 Survival of Certain Provisions.  Notwithstanding anything herein to the contrary, the obligations of the Parties under Sections 2.2, 5, 7.2, 9, 10, 13.2, 13.3, 13.4, 13.5, 15, 16, 17.5, 17.6, 17.7 and 17.8 hereof shall survive any expiration or termination of this Agreement.

CSC Logic, Inc. page 11 of  28 CSC Confidential

17.10 Entire Agreement.  This Agreement together with its attached Exhibits, which are hereby incorporated herein as if set forth in full herein, constitutes the entire agreement between the Parties with respect to the subject matter hereof, and it supersedes all prior or contemporaneous agreements, contracts, understandings, proposals and negotiations with respect to such subject matter.  This Agreement may be amended, waived or supplemented only by a written instrument duly executed by CSC Logic and PFL.  The terms and conditions of this Agreement shall prevail notwithstanding any additional or different terms or conditions of any purchase order that may be issued by PFL.

17.11 Multiple Counterparts.  This Agreement may be signed in multiple counterparts and all such counterparts shall be treated as one document.  The signatures of the Parties need not appear on the same copy of this Agreement, so long as each Party signs at least one copy of this Agreement and the copies contain the same terms.

17.12 Construction.  The headings used herein are inserted only as a matter of convenience and for reference and shall not affect the construction or interpretation of this Agreement.  Where context so indicates, a word in the singular form shall include the plural, a word in the masculine form shall include the feminine and vice-versa.  The word “including” and similar constructions (such as “for example”, “such as”, and “e.g.”) shall mean “including, without limitation”, throughout this Agreement.  The Parties agree that the terms and conditions of this Agreement are the result of negotiations between the Parties and that this Agreement shall not be construed in favor of or against any Party by reason of the extent to which the Party or its professional advisors participated in the preparation of this Agreement.

17.13 Third Party Beneficiaries.  Each Party intends that this Agreement shall not benefit, or create any right or cause of action in or on behalf of, any person or entity other than PFL and CSC Logic.

17.14 Covenant of Further Assurances.  PFL and CSC Logic covenant and agree that, subsequent to the execution and delivery of this Agreement and without any additional consideration, each of PFL and CSC Logic shall execute and deliver any further legal instruments and perform any acts which are or may become necessary to effectuate the purposes of this Agreement.

[Remainder of page intentionally left blank.  Signature page follows.]

CSC Logic, Inc. page 12 of  28 CSC Confidential

IN WITNESS WHEREOF, the Parties, by their duly authorized officers whose signatures are set forth below, have executed this Agreement as of the Effective Date set forth above.

CSC Logic, Inc.
8616 Freeport Parkway, Suite 2B
Irving, Texas 75063
By:	- /s/ -
Name: Michael W. Risley
Title: Industry General Manager

Execution Date: November 13, 2012

Prosper Funding LLC
111 Sutter Street, 22nd Floor
San Francisco, CA 94104
By:	- /s/ -
Name: Sachin Adarkar
Title: Secretary
Execution Date: November 21, 2012

CSC Logic, Inc. page 13 of  28 CSC Confidential

EXHIBIT A

DESCRIPTION OF SERVICES / STATEMENT OF WORK

Cold Back- Up Servicing Duties:

CSC Logic receives and reviews the consolidated monthly servicer's report (certificate) and determines that it is complete on its face.

Additional duties as requested by PFL (or PMI as its agent) or a successor or permitted assign thereof:

1. Conduct quarterly conference call with PFL (or PMI as its agent) or a successor or permitted assign thereof to discuss general status including financial, portfolio, and systems issues.

2. Conduct periodic due diligence reviews as directed by PFL (or PMI as its agent) or a successor or permitted assign thereof to meet staff, review servicing practices and controls, review software controls and functionality and report  on any issues or concerns.

Transfer of Servicing

1.     CSC Logic shall assist controlling parties in developing a reasonable transition plan and shall assist PFL (or PMI as its agent) or a successor or permitted assign thereof in the transfer of the servicing activities defined herein to CSC Logic, if applicable.

2.      In the event of a transfer of servicing, whereby CSC Logic is requested to assume the servicing functions then performed by PMF (or PMI, as the case may be, pursuant to the Administration Agreement), CSC Logic may assume the role as a successor servicer and may perform functions such as the maintenance of invoice activity, collections, asset recovery, cash management, lockbox management, payment processing and other applicable accounting functions.  Such services shall be addressed and set forth in an agreement, the terms of which will be in material accordance with CSC Logic’s standard Portfolio Servicing Agreement, which is attached as Exhibit C hereto.

PFL
Statement of Work	page 14 of  28	CSC Confidential

EXHIBIT B

PFL

Services		Fee
PFL Setup Fee	Includes back-up servicing set-up and attorney fees	[*]
Monthly Back-up Servicing Fee (COLD)		[*]
Monthly Minimum Back-up Servicing Fee (COLD)		[*]
Consulting Services/Due Diligence Reviews		[*]

REIMBURSABLE EXPENSES As specified below:

1)  Reasonable out-of-pocket travel expenses incurred by CSC Logic staff and approved byPFL (orPMI as its agent).

2)  Any other expenses approved by PFL (or PMI as its agent).

* Confidential treatment requested

PFL page 15 of  28 CSC Confidential

EXHIBIT C

Form of Portfolio Servicing Agreement

PFL page 16 of  28 CSC Confidential

PROCESSING AGREEMENT

between

CSC Logic, Inc.

and

CSC Logic, Inc.

A Subsidiary of Computer Sciences Corporation

8616 Freeport Parkway, Suite 2B

Irving, Texas 75063

 (800) 527-2323

CSC Logic, Inc. Page 17 of  28 CONFIDENTIAL AND PROPRIETARY

PROCESSING AGREEMENT

This Agreement (“Agreement”) is entered into as of the ____ day of _________, 20____ (the “Effective Date”) by and between CSC Logic, Inc., a Texas corporation (“CSC Logic”) and [______], a [________] corporation (“Client”).

WHEREAS, Client desires that CSC Logic perform certain services, and Client further desires that Logic deliver reports and information to Client in connection with CSC Logic's performance of the services to be performed by CSC Logic.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Services to be Performed by CSC Logic.

1.1 CSC Logic Services.  Subject to the terms and conditions hereof, CSC Logic shall provide certain data processing services to Client, and/or to others on behalf of Client, and shall deliver reports and information to Client relating to the foregoing services (collectively, all of the foregoing are referred to as the “CSC Logic Services” or the “Services”), as described in Exhibit A (which shall be titled “Statement of Work” or “Description of Services”).

1.2 Changes to Exhibit A.  At any time or times, CSC Logic may revise Exhibit A, and thereby offer additional services, or modify existing services or terminate certain services; provided, however, that CSC Logic will give to Client not less than one hundred and eighty (180) days’ notice prior to materially diminishing the services offered.  In addition, CSC Logic may provide other services to Client on terms and conditions as may be otherwise mutually negotiated and agreed upon between them.

2. Fees, Charges and Billing.

2.1 Payment. As consideration for performing the CSC Logic Duties, Client, among other things, shall pay CSC Logic the fees and expenses as set forth in the Pricing Schedule that is attached hereto and incorporated herein as Exhibit B.  CSC Logic shall issue an invoice to Client on a monthly basis.  The fees and expenses set forth in Exhibit B are stated in U.S. Dollars, and all invoicing and payments hereunder shall also be in U.S. Dollars.  Servicing fees and expenses due hereunder shall be netted from the monthly payments received by CSC Logic, if applicable. If payments collected on the Receivables are not sufficient to pay the servicing fees and expenses as stated in Exhibit B, or if net remittance is not applicable hereunder, the Client shall pay outstanding invoices or any shortfall from net remittance within thirty (30) days or incur interest charges of 1.5% per month on any outstanding balance.

2.2 Taxes.  Except for income taxes levied on CSC Logic’s net income, Client shall pay or reimburse CSC Logic for all national, federal, provincial, state, local or other taxes and assessments of any jurisdiction, including sales or use taxes, data processing taxes, royalty taxes, property taxes, international withholding taxes (including those in lieu of income taxes), customs or other import or export taxes, value added taxes and amounts levied in lieu thereof based on charges set, services performed or to be performed, or payments made or to be made hereunder.    Client shall not be entitled to deduct the amount of any such taxes, duties or assessments from payments made to CSC Logic under this Agreement.   This provision shall survive the termination of this Agreement and shall be applicable regardless of the time frame in which the requirement of the payment of such taxes or assessments is asserted (e.g. a deficiency assessment by a taxing authority as a result of an audit after the termination of this Agreement).  Provided, however, CSC Logic will, cooperate with Client to attempt to minimize the amount of taxes and assessments payable by the Client in accordance with applicable statutes, rules and regulations.

CSC Logic, Inc. Page 18 of  28 CONFIDENTIAL AND PROPRIETARY

In the event that a taxing authority or other entity asserts that CSC Logic is responsible for the payment of any taxes, interest or penalties for which Client is responsible pursuant to this Section, Client shall defend, indemnify and hold harmless CSC Logic from any and all liability for the payment of such taxes, interest or penalties and any expenses and fees (including reasonable attorneys’ fees) incurred by CSC Logic as a result of such assertion.   Client shall take all reasonable steps, including the posting of a bond, to remove any lien from CSC Logic property, which arises from such assertion.

If Client is a tax exempt entity or if any transaction covered by this Agreement is a tax exempt transaction, Client will provide a copy of such tax exemption certificate to CSC Logic immediately after the execution of this Agreement.  If Client has a direct pay certificate that allows the direct payment to the proper taxing authority of Client’s obligations under this Section, Client shall provide a copy of such direct pay certificate to CSC Logic immediately upon the execution of this Agreement.

In the event that an Exhibit or other attachment to this Agreement specifically provides for the delivery of equipment or other property to Client for the resale to a third party, and as a result Client is not responsible for the payment of the taxes and assessments under this Section, Client shall provide a copy of such resale certificate to CSC Logic immediately upon the execution of this Agreement.

Client warrants and represents that it has or will provide the following to CSC Logic: a) Tax exempt certificate; b) Direct Pay permit; c) Resale Certificate.

2.3 CSC Logic may increase any of the fees and charges as set forth in Exhibit B annually, with such changes to be effective on the anniversary of the Effective Date; provided, however, that the percentage increase for all fees and charges at the time of the increase shall not exceed the percentage increase in the Consumer Price Index For All Urban Consumers: All Items, for the most recent twelve (12) month period as most recently published at the time of the increase.

3. Term of Agreement.

3.1 The initial term of this Agreement shall begin on the Effective Date as set forth above and shall continue for a period of five (5) years (“Initial Term”), unless earlier terminated by either party in accordance with this Agreement.  On the fifth anniversary of the Effective Date and each anniversary date thereafter, this Agreement shall automatically successively renew for a period of one (1) year each (each a “Renewal Term”) unless (a) earlier terminated by either party in accordance with this Agreement, or (b) either party gives notice of non-renewal (a “Non-Renewal Notice”) to the other party at least one hundred and eighty (180) days prior to the expiration of the Initial Term or any Renewal Term.

3.2 Early Termination.  At any time during the Initial Term or any Renewal Term, upon payment to the early termination payment described below, Client shall have the right to give CSC Logic notice of early termination of this Agreement, which notice shall call for a termination date not earlier than six (6) months after the date of the notice.  The “Early Termination Payment” shall accompany the notice to CSC Logic, and shall be in an amount equal to the product of (a) the greatest monthly invoice issued by CSC Logic to Client pursuant to this Agreement, multiplied by (b) the number of months otherwise remaining between the date of termination and the end of the Initial Term or the Renewal Term during which such early termination occurs.  Failure to accompany the early termination notice with the early termination payment shall render the early termination notice null and void and of no effect.

CSC Logic, Inc. Page 19 of  28 CONFIDENTIAL AND PROPRIETARY

3.3 Termination for Diminution.  During the sixty (60) day period (the “Review Period”) commencing on Client's receipt of notice from CSC Logic pursuant to Section 1.2 of a material diminution of services, Client shall have the option to elect to terminate this Agreement based on such diminution.  If Client elects to so terminate, it shall provide notice thereof to CSC Logic during the Review Period, which termination shall be effective on the day that CSC Logic's Section 1.2 notice specified as the day upon which the diminution would otherwise take effect.

4. Deliveries After Non-Renewal Notice.  Client expressly agrees that after any Non-Renewal Notice or after any other termination or expiration of this Agreement, CSC Logic shall not be obligated to release the information or Data (as defined in Section 5) resulting from CSC Logic's performance of the CSC Logic Duties during the final month of this Agreement or any data, material or property furnished by Client to CSC Logic until Client has paid all amounts due CSC Logic hereunder and Client has returned to CSC Logic all Documentation and Other Materials (as defined in Section 10) and equipment of CSC Logic.

5. Duties of Client.  So long as this Agreement is in force, the Client warrants and covenants that Client shall:

5.1 furnish or cause to be furnished to CSC Logic in form satisfactory to CSC Logic, all information (the “Data”) as specified by CSC Logic in form and content sufficient for CSC Logic to perform the CSC Logic Duties.  It is understood that Client shall be solely responsible for completeness and accuracy of the Data and CSC Logic shall not be responsible for errors of any nature attributable to the Data being incomplete or inaccurate;

5.2 furnish promptly to CSC Logic copies of all reports, documents, information and input Data required by CSC Logic to implement and furnish the services and products hereunder and such other information as is reasonably requested by CSC Logic from time to time;

5.3 pay to CSC Logic when due all charges for its services and products as set forth in this Agreement;

5.4 be appropriately licensed conduct its business in compliance with all legal requirements, and shall cause all policy forms, certificates, endorsements and other appropriate documents to be prepared, approved and issued in compliance with all applicable federal and state laws and regulations.

6. Limited Liability and Limited Warranty. THERE ARE NO WARRANTIES MADE BY CSC LOGIC, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  IN NO EVENT SHALL CSC LOGIC BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES INCLUDING, BUT NOT LIMITED TO DAMAGES FOR LOSS OF CURRENCY, FUNDS, DATA, PROFITS OR GOODWILL.  CSC LOGIC'S MAXIMUM LIABILITY FOR ANY BREACH OF THIS AGREEMENT SHALL NOT EXCEED THE FEES ACTUALLY PAID BY CLIENT TO CSC LOGIC FOR THE SERVICES TO WHICH SUCH BREACH PERTAINS FOR THE THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING SUCH BREACH.  THE LIMITATIONS OF LIABILITY IN THIS SECTION WILL BE ENFORCED, EVEN IF ANY EXCLUSIVE REMEDY FAILS OF ITS ESSENTIAL PURPOSE.

7. Correction of Reports.  Client will give detailed notice to CSC Logic of any error in any report prepared by CSC Logic within three (3) business days after receipt of daily reports, within two (2) weeks after receipt of weekly reports and within thirty (30) days after receipt of all other reports; thereafter, CSC Logic may not have the data to recreate the report.  Failure by Client to give CSC Logic such notice within the appropriate time period detailing the specific error which is claimed by Client shall relieve CSC Logic of any responsibility to correct such error and rerun such report.

CSC Logic, Inc. Page 20 of  28 CONFIDENTIAL AND PROPRIETARY

8. Client Materials.

8.1 Condition of Materials.  All source material, data and equipment furnished by Client in order that CSC Logic may perform hereunder must be compatible with CSC Logic's equipment and such material and data must be in good condition for machine processing.  If Client fails to furnish its Data to CSC Logic in the form and as timely as needed by CSC Logic, CSC Logic will undertake to process such Data within a reasonable time after it is furnished in proper form.  Data submitted by Client to CSC Logic for processing, and all other data, material and property, shall be transmitted or transported to and from CSC Logic at Client's expense.  CSC Logic shall not be liable to Client under any circumstances for the loss or destruction of or damage to any of Client's Data, material or property in the custody, control or possession of CSC Logic except for the reasonable cost of replacement or restoration.

8.2 Confidentiality of Client Data.  All Data or other material relating to Client's business which is required to be submitted by Client to CSC Logic pursuant to this Agreement will be safeguarded by CSC Logic to the same extent that CSC Logic safeguards similar data and material relating to its business.  If, however, such Data or material is publicly available, already in CSC Logic's possession or known to it, or is rightfully obtained by CSC Logic from third parties, CSC Logic shall bear no responsibility for its disclosure, inadvertent or otherwise. In addition, CSC Logic will comply with the provisions of the Gramm-Leach-Bliley Act as it relates to the personally identifiable information of Client’s customers.

8.3 Disposition of Client Materials. CSC Logic agrees that upon the expiration or termination of this Agreement for any reason and upon payment of all invoices by Client, CSC Logic will return, in accordance with Client's instructions and in a mutually agreeable format, all of Client's Data and materials relating to the services provided by CSC Logic hereunder.  CSC Logic may dispose of any Data, material or property belonging to Client in CSC Logic’s possession and CSC Logic shall not be liable in any way if Client fails to provide CSC Logic with disposal instructions prior to the expiration or termination of this Agreement or prior to sixty (60) days after CSC Logic provides Client with notice of such disposal to Client's address identified in the Notice section herein, whichever is earlier.  If pursuant to such disposal CSC Logic incurs any expense, Client shall pay CSC Logic for such expense upon demand.

9. Infringement and Capacity.  The performance of Client’s duties under this Agreement shall not cause CSC Logic to infringe upon any patent, license, copyright or other proprietary, intellectual or property right, or violate any other right (including but not limited to, the right to royalties or license fees) of any person, partnership, corporation or other entity.  Client also represents and warrants that (i) it is and at all times will be free of any contractual obligation that would prevent Client from entering into this Agreement and (ii) CSC Logic's offer to provide services and information hereunder in no way caused, or will cause, or induce, Client to breach any contractual obligation.

10. Confidentiality of CSC Logic Proprietary Information.  Client acknowledges that the designs, specifications, manuals, documentation and other materials related to the services performed and the information produced hereunder by CSC Logic (collectively “Documentation”), and all other systems, programs, designs, specifications, manuals, documentation and other materials which are utilized, developed or made available by CSC Logic in connection with this Agreement (collectively “Other Materials”) are the confidential, proprietary and/or trade secret property and information of CSC Logic or its licensors and shall remain such property and information of CSC Logic or its licensors, both before and after the term of this Agreement.  Client shall not copy, sell, assign, transfer, distribute or disclose all or any part of the Documentation or Other Materials to any other person, partnership, corporation or other entity.  Client shall confine the knowledge and use of the Documentation and Other Materials only to its employees who require such knowledge for use in the ordinary course and scope of their employment.  Client and such employees shall use such Documentation and Other Materials solely in connection with Client's business purposes which are being addressed by CSC Logic pursuant to this Agreement.  Upon any expiration or termination of this Agreement, Client shall promptly return to CSC Logic all property or information which is covered by this Section 10.

CSC Logic, Inc. Page 21 of  28 CONFIDENTIAL AND PROPRIETARY

11. No Solicitation. During the term of this Agreement and for one year after its termination, Client shall not (a) attempt to induce an employee or independent contractor of CSC Logic to terminate his or her employment or contract; nor (b) hire or enter into a contract for the services of an employee, independent contractor, or former employee or independent contractor of CSC Logic without first obtaining CSC Logic's written consent, except for former employees or independent contractors whose employment or engagement has been terminated for over six (6) months.

12. Relationship of the Parties.  The relationship of the parties to this Agreement is that of independent contractors.  Neither this Agreement nor any of the activities contemplated hereby shall be deemed to create any partnership, joint venture, agency or employer-employee relationship between CSC Logic and Client.

13. Force Majeure.  Notwithstanding anything herein to the contrary, CSC Logic shall not be considered in default hereunder or have any liability to Client for any failure to perform if such failure arises out of causes beyond the control of CSC Logic.  Such causes include, but are not limited to, acts of God or public enemy, acts of the government acting in any capacity, fires, floods, epidemics, quarantine restrictions, strikes, war, terroristic or criminal acts, civil disturbance, riots, rebellion, freight embargoes, degradation of telephone or other communication service or weather conditions.

14. Default.

14.1 Notice and Cure Period, Rights, After Default.  If Client becomes Insolvent, as further described in Section 14.2 below, Client is not in compliance with Section 5.4, or if Client shall fail to pay to CSC Logic any amount due hereunder within five (5) days after receipt of the notice that the same is past due, or if either party breaches or fails to comply with any other provision of this Agreement and such failure continues for a period of thirty (30) days after receipt of written notice thereof, then CSC Logic or Client, as the case may be, shall be deemed to be in default and the other party shall have the right (i) to terminate this Agreement immediately, and (ii) in addition, but subject to any limitations contained in this Agreement, to pursue any and all rights which may be available to it.  Termination of this Agreement shall not relieve Client from payment of all amounts of money owed by Client to CSC Logic.  Notwithstanding anything in this Agreement to the contrary, so long as Client is in default under this Agreement or any other agreement in effect between CSC Logic and Client, CSC Logic shall have no obligation to perform the CSC Logic Duties while the default continues.

14.2 Insolvency of Client.  Client shall have become “Insolvent,” for purposes of Section 14.1 above if: (a) Client becomes bankrupt or insolvent, admits its inability to or fails to pay generally its debts as they become due or otherwise admits its insolvency, or ceases or threatens to cease carrying on business; (b) Client makes a general assignment for the benefit of creditors, any proceeding seeking general relief as a debtor, any proceeding is initiated by or against Client to declare it bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement or composition of its debts or for an order for similar relief under any law relating to bankruptcy, insolvency or relief of debtors or seeking appointment of a receiver, trustee or other similar official for the party of for any substantial part of its assets, and, in the case of a proceeding instituted against Client, such proceeding has not been dismissed or stayed within thirty (30) days; or (c) a receiver or similar official is appointed with respect to a substantial portion of the assets of Client by a court or a creditor and such appointment has not been terminated within thirty (30) days of such appointment.

14.3 Injunctive Relief.  The parties acknowledge that if either party fails to comply with the provisions of Sections 8.2, 10 or 11 hereof, the other party may suffer irreparable harm for which there may be no adequate remedy at law.  Accordingly, if either party fails to comply with any provision of said sections, then the other party will be entitled immediately to injunctive relief or any other appropriate equitable remedy.  Further, if such failure continues for thirty (30) days after receipt of notice thereof from the other party, then such other party shall also have all of the rights available to it as if there was a default under Section 14.1 hereof.

CSC Logic, Inc. Page 22 of  28 CONFIDENTIAL AND PROPRIETARY

14.4 Time for Bringing Suit.  No action may be brought by either party against the other party in connection with this Agreement more than two (2) years after the cause of action arose, except that any action by CSC Logic for nonpayment of any amount of money due to CSC Logic hereunder may be brought at any time subject to the applicable statute of limitations.

14.5 Attorney or Collection Fees.  If CSC Logic incurs any cost or fee from an attorney, collection agency or otherwise in attempting to collect any amount due it hereunder, then Client shall pay to CSC Logic upon demand the amount of such cost or fee.  Further, in the event of any litigation between the parties in connection with this Agreement, the prevailing party shall be entitled to recover its reasonable costs and attorney fees incurred in enforcing this Agreement and any related judgments entered.

14.6 No Waiver of Remedies.  The failure by either party to exercise any option or right upon a default or breach of any of the terms of this Agreement shall not be construed as waiving such right or option at a later date.  Further, all of such rights or options shall be cumulative, and the exercise of any one such right or option shall not preclude the exercise of any other right or option.  No exercise of, or delay or omission to exercise, the rights and powers herein granted shall be held to exhaust the same or be construed as a waiver thereof, and every such right and power may be exercised at any time and from time to time.

15. Miscellaneous.

15.1 Notices.  Any notice which is required or permitted to be given hereunder shall be in writing and shall be effective upon receipt, and shall be delivered as follows:  (a) by United States mail, with return receipt requested, postage prepaid; (b) by Federal Express or other nationally recognized overnight delivery service; or (c) delivered by telecopy as follows:

If to CSC Logic:
	CSC Logic, Inc.
	8616 Freeport Parkway, Suite 2B
	Irving, Texas 75063
	Attn:  Legal
	or
If to Client:
	Name:
	Address:
	Telecopy No
	Attn:

Either party at any time or times may change the foregoing address or telecopy information, pursuant to notice to the other party duly given in accordance with requirements of this Section 15.1.

15.2 Audit.  Client and its authorized agents shall have the right, at its expense and at reasonable times and upon reasonable notice, to audit the applicable books and records of Client's program in CSC Logic's office.

CSC Logic, Inc. Page 23 of  28 CONFIDENTIAL AND PROPRIETARY

15.3 Assignment.  Client may not transfer, whether by assignment, sublicense, merger, consolidation, operation of law, or otherwise, any rights or obligations under this Agreement without CSC Logic's prior written consent.  The consent to any particular assignment shall not constitute consent to further assignment.  This Agreement shall be binding upon the parties and their respective successors and permitted assigns.  Any transaction in contravention of this Section shall be null and void.

15.4 Captions.  All captions and headings to the sections and subsections of this Agreement have been inserted for convenience of reference only and shall not be construed as a part hereof.

15.5 Advertising  Neither party shall publish or use the name of the other in any manner or publication without the prior consent of the other, except as required by law or legal process, in which event notice thereof shall be promptly given.  Without limiting the generality of the foregoing, no letter of general mailing or advertisement or other communication to be sent to a policyholder or customer of Client may contain the name CSC Logic without CSC Logic's prior written approval.

15.6 Indemnity  Client hereby agrees to indemnify, defend and hold harmless CSC Logic and its shareholders, directors, officers, agents and employees from all claims, costs, penalties, damages, liability, obligation, cause of action, and all fees, expenses and costs associated therewith, including attorneys fees, arising from Client's breach or nonperformance hereunder or from CSC Logic's faithful performance of the CSC Logic Duties hereunder or claimed by any insured of Client, any customer of any insured, or any person claiming under or through any of them.

15.7 Governing Law, Jurisdiction, Venue.  THIS AGREEMENT IS BEING MADE AND ENTERED INTO IN THE COUNTY OF DALLAS, STATE OF TEXAS AND, IT SHALL BE GOVERNED AND CONSTRUED UNDER THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO TEXAS’ CONFLICTS OF LAWS PRINCIPLES.  THE PARTIES AGREE TO THE EXCLUSIVE JURISDICTION OF AND VENUE IN THE STATE AND FEDERAL COURTS IN DALLAS COUNTY, TEXAS AND WAIVE ALL RIGHTS TO VENUE AND JURISDICTION IN ANY OTHER FORUM.  BECAUSE THE PARTIES AGREE THAT THIS CONTRACT IS NOT A CONTRACT FOR THE SALE OF GOODS, THIS AGREEMENT SHALL NOT BE GOVERNED BY ANY CODIFICATION OF ARTICLE 2 OR 2A OF THE UNIFORM COMMERCIAL CODE, OR ANY CODIFICATION OF THE UNIFORM COMPUTER INFORMATION TECHNOLOGY ACT OR ANY REFERENCE TO THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.

15.8 Severability.  If any clause or provision of this Agreement becomes or is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under any present or future law effective during the term hereof, the remainder of this Agreement shall not be affected thereby.

15.9 Survival of Certain Provisions.  Notwithstanding anything herein to the contrary, the obligations of the parties under Sections 2.2, 6, 8.2, 8.3, 9, 10, 11, 14.2, 14.3, 14.4, 14.5, 14.6, 15.6, 15.7 and 15.8 hereof shall survive any expiration or termination of this Agreement.

15.10 Entire Agreement.  This Agreement together with its attached Exhibits, which are hereby incorporated herein as if set forth in full herein, constitutes the entire agreement between the parties with respect to the subject matter hereof, and it supersedes all prior or contemporaneous agreements, contracts, understandings, proposals and negotiations with respect to such subject matter.  This Agreement may be amended, waived or supplemented only by a written instrument duly executed by both CSC Logic and Client.  The terms and conditions of this Agreement shall prevail notwithstanding any additional or different terms or conditions of any purchase order that may be issued by Client.

CSC Logic, Inc. Page 24 of  28 CONFIDENTIAL AND PROPRIETARY

15.11 Multiple Counterparts.  This Agreement may be signed in multiple counterparts and all such counterparts shall be treated as one document.  The signatures of the parties need not appear on the same copy of this Agreement, so long as each party signs at least one copy of this Agreement and the copies contain the same terms.

15.12 Construction.  The headings used herein are inserted only as a matter of convenience and for reference and shall not affect the construction or interpretation of this Agreement.  Where context so indicates, a word in the singular form shall include the plural, a word in the masculine form shall include the feminine and vice-versa.  The word “including” and similar constructions (such as “for example”, “such as”, and “e.g.”) shall mean “including, without limitation”, throughout this Agreement.  The parties agree that the terms and conditions of this Agreement are the result of negotiations between the parties and that this Agreement shall not be construed in favor of or against any party by reason of the extent to which the party or its professional advisors participated in the preparation of this Agreement.

15.13 Third Party Beneficiaries.  Each party intends that this Agreement shall not benefit, or create any right or cause of action in or on behalf of, any person or entity other than Client and CSC Logic.

15.14 Covenant of Further Assurances.  Client and CSC Logic covenant and agree that, subsequent to the execution and delivery of this Agreement and without any additional consideration, each of Client and CSC Logic shall execute and deliver any further legal instruments and perform any acts which are or may become necessary to effectuate the purposes of this Agreement.

[Remainder of page intentionally left blank.  Signature page follows.]

CSC Logic, Inc. Page 25 of  28 CONFIDENTIAL AND PROPRIETARY

IN WITNESS WHEREOF, the parties, by their duly authorized officers whose signatures are set forth below, have executed this Agreement as of the Effective Date set forth above.

CSC Logic, Inc.	Client name and address
8616 Freeport Parkway, Suite 2B
Irving, Texas 75063
By:	By:
Name:	Name:
(printed)	(printed)
Title:	Title:

Execution Date: Execution Date:

CSC Logic, Inc. page 26 of  28 CONFIDENTIAL AND PROPRIETARY

EXHIBIT A

SERVICES / STATEMENT OF WORK

CSC Logic, Inc. Page 27 of  28 CONFIDENTIAL AND PROPRIETARY

EXHIBIT B

PRICING

CSC Logic, Inc. Page 28 of  28 CONFIDENTIAL AND PROPRIETARY

EX-10.7

Exhibit 10.7

ADMINISTRATION AGREEMENT

among

PROSPER FUNDING LLC,

as the Company and as the Licensor

PROSPER MARKETPLACE, INC.,

in its capacity as the Licensee

PROSPER MARKETPLACE, INC.,

in its separate capacity as the Corporate Administrator

PROSPER MARKETPLACE, INC.,

in its separate capacity as the Loan Platform Administrator

and

PROSPER MARKETPLACE, INC.,

in its separate capacity as the Loan and Note Servicer

Dated as of _________, 2012

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	1
1.1	Certain Defined Terms	1
ARTICLE II	LICENSE OF THE PROSPER SYSTEM	8
2.1	Grant of License	8
2.2	License Fee	9
2.3	Termination of License	9
2.4	Standard of Liability; Indemnification	10
2.5	Additional Transfer Agreements	11
ARTICLE III	AGREEMENTS OF THE CORPORATE ADMINISTRATOR	11
3.1	General Agreements of the Corporate Administrator	11
3.2	Corporate Administration Services	12
3.3	Corporate Administrator Books and Records	14
3.4	Corporate Administrator Advances	15
3.5	Fees and Reimbursement of the Corporate Administrator	15
3.6	Corporate Administrator’s Licenses	16
3.7	Corporate Administrator’s Power of Attorney	16
3.8	Indemnification by the Corporate Administrator	17
3.9	Termination of the Corporate Administrator	18
3.10	Transfer upon Termination	19
ARTICLE IV	AGREEMENTS OF THE LOAN PLATFORM ADMINISTRATOR	19
4.1	General Agreements of the Loan Platform Administrator	19
4.2	Platform Administration Services	20
4.3	Securities-Related Services by the Loan Platform Administrator	22
4.4	Posting and Funding of Borrower Loans	23
4.5	Prosper Ratings, Prosper Scores and Borrower Verification	24
4.6	Loan Platform Administrator Books and Records	25
4.7	Loan Platform Administrator Advances	26
4.8	Fees and Reimbursement of the Loan Platform Administrator	26
4.9	Loan Platform Administrator’s Licenses	27
4.10	Loan Platform Administrator’s Power of Attorney	27

-i-

TABLE OF CONTENTS

(Continued)

		Page
4.11	Indemnification by the Loan Platform Administrator	27
4.12	Termination of the Loan Platform Administrator	28
4.13	Transfer upon Termination	29
ARTICLE V	AGREEMENTS OF THE LOAN AND NOTE SERVICER	30
5.1	General Agreements of the Loan and Note Servicer	30
5.2	General Services of the Loan and Note Servicer	31
5.3	Securities-Related Services by the Loan and Note Servicer	32
5.4	Servicing of Borrower Loans and Securities	32
5.5	Collection of Borrower Loan Payments	34
5.6	Delinquency Control	35
5.7	Loan and Note Servicer Reports; Additional Duties	35
5.8	Loan and Note Servicer Books and Records	36
5.9	Repurchase Obligation	37
5.10	Loan and Note Servicer Advances	38
5.11	Fees and Reimbursement of the Loan and Note Servicer	38
5.12	Loan and Note Servicer’s Licenses	39
5.13	Loan and Note Servicer’s Power of Attorney	39
5.14	Indemnification by the Loan and Note Servicer	39
5.15	Termination of the Loan and Note Servicer	41
5.16	Transfer upon Termination	41
ARTICLE VI	AGREEMENTS OF THE COMPANY	42
6.1	Documentation	42
ARTICLE VII	REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND LICENSOR	42
7.1	Authority	42
7.2	Authorization, Enforceability and Execution	43
7.3	No Conflict	43
7.4	No Consent	43
7.5	No Litigation	43
7.6	The Borrower Loans and Securities	44

-ii-

TABLE OF CONTENTS

(Continued)

		Page
ARTICLE VIII	REPRESENTATIONS AND WARRANTIES OF THE LICENSEE AND THE SERVICE PROVIDERS	44
8.1	Representations and Warranties of the Licensor	44
8.2	Representations and Warranties of Service Providers	46
ARTICLE IX	ANNUAL REPORTING	47
9.1	Service Providers’ Compliance Statement	47
ARTICLE X	MISCELLANEOUS	47
10.1	Independence of Parties	47
10.2	Assignment of Duties	48
10.3	Entire Agreement	48
10.4	Invalidity	48
10.5	Effect	48
10.6	Damage Limitation	48
10.7	Applicable Law; Jurisdiction; Waiver of Jury Trial	49
10.8	Notices	49
10.9	Waivers	49
10.10	Binding Effect	50
10.11	Headings and Section References	50
10.12	Exhibits	50
10.13	Counterparts	50
10.14	Confidentiality	50
10.15	Insurance	52
10.16	Disaster Recovery	52
10.17	Background Check	52
10.18	Separate Identity	53
10.19	No Third-party Beneficiary	53
10.20	Limited Recourse	53
10.21	No Petition	54
10.22	Informal Dispute Resolution	54
10.23	Taxes	54
10.24	Severability	54

-iii-

Exhibit A:	Borrower Registration Agreement	A-1
Exhibit B:	Lender Registration Agreement	B-1
Exhibit C:	Loan and Note Servicing Fee	C-1

-iv-

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

RECITALS:

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

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

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

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

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

ARTICLE I

DEFINITIONS

1.1           Certain Defined Terms.

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

1

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

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

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

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

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

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

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

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

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

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

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

2

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

“Borrower Registration Agreement” means an agreement between the Company or PMI, on the one hand, and a Borrower, on the other hand, which after the date hereof shall be in the form of Exhibit A hereto or in such other form as the Company and the Loan Platform Administrator may approve in writing.

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

“Closing Date” means ______, 2012.

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

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

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

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

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

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

“Deposit Account” means a deposit account, as defined in Section 9-108 of the UCC, in the name of the Company held by the Trustee, or such additional or replacement account or accounts as may from time to time be maintained by the Company for the purpose of holding Borrower Loan Payments, provided any such account is deemed a deposit account under Section 9-108 of the UCC and is held by the Trustee.

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

3

“FBO Account” means a deposit account, as defined in Section 9-108 of the UCC, titled “Prosper Funding LLC for the benefit of its lender members,” maintained by the Company at Wells Fargo Bank, National Association, or such additional or replacement account or accounts as may from time to time be maintained by the Company for the benefit of the Lenders, provided any such account is deemed a deposit account under Section 9-108 of the UCC and is held by the Trustee.

“Fee Account” means an account maintained by the Company at Wells Fargo Bank, National Association, or such additional or replacement account or accounts as may from time to time be maintained by the Company for the purpose of holding amounts in respect of the Corporate Administration Fee, the Loan Platform Servicing Fee and the Loan and Note Servicing Fee, together with all other amounts payable to the Corporate Administrator, the Loan Platform Servicer and the Loan and Note Servicer under Section 3.5, Section 4.8 and Section 5.11, respectively, either exclusively or with other amounts (including in respect of the Other Payments and Charges).

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

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

“Independent Director” shall have the meaning assigned thereto in the LLC Agreement.

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

“Lender Registration Agreement” means an agreement between the Company or PMI, on the one hand, and a Lender, on the other hand, which after the date hereof shall be in the form of Exhibit B hereto or in such other form as the Company and the Loan Platform Administrator may approve in writing.

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

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

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

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

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

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

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

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

“Loan and Note Servicer” means PMI, in its capacity as Loan and Note Servicer under Article V of this Agreement, or any successor or permitted assign under the terms of this Agreement.

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

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

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

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

“Loan Platform Administrator” means PMI, in its capacity as Loan Platform Administrator under Article IV of this Agreement, or any successor or permitted assign under the terms of this Agreement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“SEC” means the Securities and Exchange Commission.

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

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

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

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

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

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

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

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

ARTICLE II

LICENSE OF THE PROSPER SYSTEM

2.1           Grant of License.

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

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

2.2           License Fee.

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

2.3           Termination of License.

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

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

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

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2.4           Standard of Liability; Indemnification.

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

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

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

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2.5           Additional Transfer Agreements.

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

ARTICLE III

AGREEMENTS OF THE CORPORATE ADMINISTRATOR

3.1           General Agreements of the Corporate Administrator.

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

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

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

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

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

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

3.2           Corporate Administration Services.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.3           Corporate Administrator Books and Records.

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

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

3.4           Corporate Administrator Advances.

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

3.5           Fees and Reimbursement of the Corporate Administrator.

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

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

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

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

3.6           Corporate Administrator’s Licenses.

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

3.7           Corporate Administrator’s Power of Attorney.

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

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3.8           Indemnification by the Corporate Administrator.

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

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

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

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

3.9           Termination of the Corporate Administrator.

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

(b)           In the event that the Corporate Administrator breaches any of its obligations under this Agreement in any material respect, the Company shall give prompt written notice to the Corporate Administrator.  Subject to Section 3.9(e), if the Corporate Administrator breaches any of its obligations under this Agreement in any material respect and does not cure such breach within thirty (30) days from the date that the Corporate Administrator receives the Company’s notice of breach, the Company may terminate this Article III.

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

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

(e)           Notwithstanding anything herein to the contrary, in no event may the Company terminate PMI as Corporate Administrator hereunder unless (i) the Company determines that it, either directly or through a successor service provider, will be able to fulfill its obligations under Section 3.06(d) of the Indenture and (ii) the Company’s Board of Directors (including the Independent Directors) approves such determination and such termination.

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3.10           Transfer upon Termination.

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

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

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

ARTICLE IV

AGREEMENTS OF THE LOAN PLATFORM ADMINISTRATOR

4.1           General Agreements of the Loan Platform Administrator.

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

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

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

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

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

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

4.2           Platform Administration Services.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4.3           Securities-Related Services by the Loan Platform Administrator.

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

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

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

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

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

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

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

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

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

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

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

4.4           Posting and Funding of Borrower Loans.

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

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

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

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

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

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

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

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

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

4.5           Prosper Ratings, Prosper Scores and Borrower Verification.

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

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4.6           Loan Platform Administrator Books and Records.

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

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

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4.7           Loan Platform Administrator Advances.

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

4.8           Fees and Reimbursement of the Loan Platform Administrator.

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

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

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

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

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4.9           Loan Platform Administrator’s Licenses.

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

4.10         Loan Platform Administrator’s Power of Attorney.

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

4.11         Indemnification by the Loan Platform Administrator.

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

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

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

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

4.12         Termination of the Loan Platform Administrator.

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

(b)           In the event that the Loan Platform Administrator breaches any of its obligations under this Agreement in any material respect, the Company shall give prompt written notice to the Loan Platform Administrator.  Subject to Section 4.12(e), if the Loan Platform Administrator breaches any of its obligations under this Agreement in any material respect and does not cure such breach within thirty (30) days from the date that the Loan Platform Administrator receives the Company’s notice of breach, the Company may terminate this Article IV.

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

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

(e)           Notwithstanding anything herein to the contrary, in no event may the Company terminate PMI as Loan Platform Administrator hereunder unless (i) the Company determines that it, either directly or through a successor service provider, will be able to fulfill its obligations under Section 3.06(e) of the Indenture and (ii) the Company’s Board of Directors (including the Independent Directors) approves such determination and such termination.

4.13         Transfer upon Termination.

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

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

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

ARTICLE V

AGREEMENTS OF THE LOAN AND NOTE SERVICER

5.1           General Agreements of the Loan and Note Servicer.

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

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

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

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

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

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

5.2           General Services of the Loan and Note Servicer.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5.4           Servicing of Borrower Loans and Securities.

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

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

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

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

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

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

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

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

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

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

5.5           Collection of Borrower Loan Payments.

(a)           The Loan and Note Servicer shall (i) make and use commercially reasonable efforts to service and collect all Borrower Loans, in good faith, accurately and in accordance with the Servicing Standard and (ii) use commercially reasonable efforts to maintain backup servicing arrangements providing for the Borrower Loans to be serviced and collected in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Borrower Loans, in each case of the foregoing clauses (i) and (ii), all in accordance with the Company’s obligations set forth in Sections 3.06(a) and (b) of the Indenture.

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

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5.6           Delinquency Control.

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

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

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

5.7           Loan and Note Servicer Reports; Additional Duties.

The Loan and Note Servicer shall–

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

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

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

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

5.8           Loan and Note Servicer Books and Records.

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

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

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5.9           Repurchase Obligation.

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

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5.10         Loan and Note Servicer Advances.

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

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

5.11         Fees and Reimbursement of the Loan and Note Servicer.

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

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

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

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

5.12         Loan and Note Servicer’s Licenses.

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

5.13         Loan and Note Servicer’s Power of Attorney.

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

5.14         Indemnification by the Loan and Note Servicer.

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

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

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

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

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

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5.15         Termination of the Loan and Note Servicer.

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

(b)           In the event that the Loan and Note Servicer breaches any of its obligations under this Agreement in any material respect, the Company shall give prompt written notice to the Loan and Note Servicer.  Subject to Section 5.15(e), if the Loan and Note Servicer breaches any of its obligations under this Agreement in any material respect and does not cure such breach within thirty (30) days from the date that the Loan and Note Servicer receives the Company’s notice of breach, the Company may terminate this Article V.

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

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

(e)           Notwithstanding anything herein to the contrary, in no event may the Company terminate PMI as Loan and Note Servicer hereunder unless (i) the Company determines that it, either directly or through a successor service provider, will be able to fulfill its obligations under Section 3.06(a) of the Indenture and (ii) the Company’s Board of Directors (including the Independent Directors) approves such determination and such termination.

5.16         Transfer upon Termination.

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

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

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

ARTICLE VI

AGREEMENTS OF THE COMPANY

6.1           Documentation.

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

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND LICENSOR

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

7.1           Authority.

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

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7.2           Authorization, Enforceability and Execution.

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

7.3           No Conflict.

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

7.4           No Consent.

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

7.5           No Litigation.

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

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7.6           The Borrower Loans and Securities.

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

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

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

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

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES OF THE LICENSEE AND THE SERVICE PROVIDERS

8.1           Representations and Warranties of the Licensor.

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

(a)           Authority.

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

(b)           Authorization, Enforceability and Execution.

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

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(c)           No Conflict.

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

(d)           No Consent.

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

(e)           No Litigation.

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

(f)            License Warranty.

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

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8.2           Representations and Warranties of Service Providers.

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

(a)           Authority.

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

(b)           Authorization, Enforceability and Execution.

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

(c)           No Conflict.

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

(d)           No Consent.

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

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(e)           No Litigation.

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

ARTICLE IX

ANNUAL REPORTING

9.1           Service Providers’ Compliance Statement.

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

ARTICLE X

MISCELLANEOUS

10.1         Independence of Parties.

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

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10.2         Assignment of Duties.

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

10.3         Entire Agreement.

This Agreement contains the entire agreement among the Parties hereto with respect to the transactions contemplated hereby.

10.4         Invalidity.

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

10.5         Effect.

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

10.6         Damage Limitation.

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

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10.7         Applicable Law; Jurisdiction; Waiver of Jury Trial.

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

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

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

10.8         Notices.

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

10.9        Amendments, Modifications and Waivers.

No amendment, modification or waiver of any of the terms, conditions, covenants or other provisions of this Agreement shall be effective unless it is in writing and signed by each of the Parties hereto; provided, however, that any amendment, modification or waiver of PMI’s obligations hereunder, whether in its capacity as Licensee, Corporate Administrator, Loan Platform Administrator, Loan and Note Servicer or otherwise, or of Sections 3.9(e), 4.12(e), 5.15(e) or 10.19 or this Section 10.9, in each case that would adversely affect the rights of the holders of the Securities shall also require the written consent of the Trustee.  Any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the purpose for which given.

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10.10       Binding Effect.

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

10.11       Headings and Section References.

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

10.12       Exhibits.

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

10.13       Counterparts.

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

10.14       Confidentiality.

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

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

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

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

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

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

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10.15       Insurance.

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

10.16       Disaster Recovery.

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

10.17       Background Check.

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

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10.18       Separate Identity.

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

10.19       Third-party Beneficiaries.

There are no third-party beneficiaries to this Agreement; provided, however, that the Trustee shall be and is an express third-party beneficiary of, and shall be entitled to enforce, (i) on behalf of the holders of the Securities, the obligations of PMI under Article V hereof and (ii) on behalf of the holders of the New Securities, all other obligations of PMI under this Agreement.

10.20       Limited Recourse.

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

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10.21       No Petition.

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

10.22       Informal Dispute Resolution.

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

10.23       Taxes.

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

10.24       Severability.

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

[SIGNATURE PAGE FOLLOWS]

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

Company:
PROSPER FUNDING LLC
By:
	Name:
	Title:
	Address:	111 Sutter Street, 22nd Floor
		San Francisco, CA  94104
		Tax Identification No.:
Licensor:
PROSPER FUNDING LLC
By:
	Name:
	Title:
	Address:	111 Sutter Street, 22nd Floor
		San Francisco, CA  94104
		Tax Identification No.:
Licensee:
PROSPER MARKETPLACE, INC.
By:
	Name:
	Title:
	Address:	111 Sutter Street, 22nd Floor
		San Francisco, CA  94104
		Tax Identification No.:

Signature page to Administration Agreement

Corporate Administrator:
PROSPER MARKETPLACE, INC.
By:
	Name:
	Title:
	Address:	111 Sutter Street, 22nd Floor
		San Francisco, CA  94104
		Tax Identification No.:
Loan Platform Administrator:
PROSPER MARKETPLACE, INC.
By:
	Name:
	Title:
	Address:	111 Sutter Street, 22nd Floor
		San Francisco, CA  94104
		Tax Identification No.:
Loan and Note Servicer:
PROSPER MARKETPLACE, INC.
By:
	Name:
	Title:
	Address:	111 Sutter Street, 22nd Floor
		San Francisco, CA  94104
		Tax Identification No.:

2

Exhibit A

Borrower Registration Agreement

A-1

Exhibit B

Lender Registration Agreement

B-1

Exhibit C

Fees

License Fee

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

Corporate Administration Fee

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

Year	Annual Corporate Administration Fee
2012	$800,000
2013	$865,000

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

C-1

Loan Platform Servicing Fee

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

Loan and Note Servicing Fee

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

C-2

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in the Prospectus constituting a part of this Pre-Effective Amendment No. 5 to the Registration Statement on Form S-1 (File No. 333-179941) of Prosper Funding LLC of our report dated March 5, 2012 on the balance sheet of Prosper Funding LLC.

We also consent to the incorporation by reference in the Prospectus of our report dated March 29, 2012, except for Notes 1, 2 and 3 as to which the date is May 14, 2012, with respect to the financial statements of Prosper Marketplace, Inc. included in its Annual Report on Form 10-K/A, Amendment No. 2, for the year ended December 31, 2011.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ OUM & Co. LLP

San Francisco, California

November 23, 2012

CORRESP

    corresp.htm