Exhibit 10.3
LENDER REGISTRATION AND BIDDING
AGREEMENT
(Note Commitment, Purchase and Sale
Agreement)
This Lender Registration and Bidding
Agreement (this “Agreement”) is made and entered into
between you and IOU Central Inc. (“IOU Central,”
“we” or “us”). “You” as used in
this Agreement refers to you as a registered lender. This Agreement
will govern all purchases of Borrower Payment Dependent Notes that
you may, from time to time, purchase from IOU Central.
The IOU Central Internet-based loan
marketplace (the “loan marketplace”) is a peer-to-peer
lending platform that enables registered borrowers to post loan
requests and borrow money and registered lenders to purchase
Borrower Payment Dependent Notes (“Notes”), the
proceeds of which are designated to fund a specific loan made to an
individual registered borrower (a “registered borrower
loan”). Each registered borrower loan originated through the
loan marketplace is made by us with the proceeds of Notes purchased
by registered lenders that correspond to such registered borrower
loan. We service all registered borrower loans made through the
loan marketplace. The following Agreement describes the services we
will provide and your rights and obligations should you elect to
complete your registration as a lender on the loan marketplace and
to submit bids and to purchase Notes. You should read this
Agreement carefully and print a copy for your records.
We have filed with the U.S.
Securities and Exchange Commission (the “SEC”) a
registration statement on Form S-1 (No. 333-
) (as amended from time to time, the “Registration
Statement”) to register the continuous offering and sale of
Notes issued by us. The Registration Statement includes a
prospectus related to the offering of the Notes by IOU Central,
dated May , 2009 (as supplemented
from time to time, the “Prospectus”). The Registration
Statement became effective on
, 2009 pursuant to the rules and regulations of the SEC under the
Securities Act of 1933, as amended. You acknowledge that the
Registration Statement has been delivered to you. You should read
the Prospectus carefully and retain a copy for your
records.
By signing electronically below, you
are completing your registration as a lender on the loan
marketplace and are agreeing, or confirming your agreement, to,
among other things, (i) comply with the terms and provisions
of this Agreement, (ii) comply with the Terms of Use and
Privacy Policy of the loan marketplace and the policies posted on
the loan marketplace, as may be amended from time to time by IOU
Central in its sole discretion (collectively, the “IOU
Central Terms and Conditions”), (iii) transact business
with us electronically, and (iv) have any dispute with us
resolved by binding arbitration.
1. Registration as an IOU
Central Lender . You
are registering as a lender so that you may be eligible to make
bids on postings displayed on the loan marketplace and, if your bid
is accepted by a registered borrower, to purchase Notes issued by
us. The Notes are dependent for payment on payments we receive on
the corresponding registered borrower loans (“borrower
loans”) described in the postings. A “posting” is
a request by a registered borrower for a personal, unsecured loan
in a specified amount and for a specified term. In addition to the
registered borrower’s requested loan amount, postings contain
the registered borrower’s credit grade, suggested interest
rate, debt-to-income ratio, summary information
from the registered borrower’s
credit report, and self-reported occupation, employment status and
income, and may contain other personal information posted by the
registered borrower, such as intended use of proceeds for the loan
and personal financial situation. Postings may only be created by
individuals who are registered borrowers on our loan marketplace.
Postings are displayed publicly on our loan marketplace, although
certain information is only viewable by registered lenders.
Registered borrowers are identified by a user name. We do not
disclose their identity or contact information to you.
Your role as an IOU Central
“lender” is that of a purchaser or prospective
purchaser of Notes issued by IOU Central that are dependent for
payment on payments we receive on the corresponding registered
borrower loans, and your rights and obligations as a purchaser or
prospective purchaser of Notes are set forth below. Although you
are referred to in this Agreement and on our loan marketplace as a
“lender,” you are not actually lending your money
directly to registered borrowers. Instead, you are acting as an
investor and making purchase commitments for Notes and purchasing
Notes from us that are dependent for payment on payments we receive
on the corresponding registered borrower loans. We use the term
“lender” instead of “investor” in this
Agreement and on our loan marketplace for the convenience of our
users who appropriately view IOU Central as a marketplace for
connecting individuals who wish to borrow money with people who
have money and the desire to have loans funded to other
individuals.
2. Posting of Bids
. By entering into this
Agreement with us, you will be eligible to post bids on postings. A
“bid” is your commitment to purchase a Note from us in
the principal amount and at the interest rate set forth in your
bid. You bid the amount you are willing to commit to the purchase
of a Note that is dependent for payment on payments we receive on
the registered borrower loan corresponding to the posting and the
interest rate you are willing to receive. A registered borrower
loan will be closed and funded if the registered borrower chooses
to manually accept bids reflecting full or partial funding of the
loan or chooses to accept bids reflecting full funding of the loan
using the Auto-Fund feature of our loan marketplace (as described
below). Currently, a bid may be between $25 and the full amount of
the posting. Once you have finished placing bids, you may review
all of your selected bids before confirming your order. Once
confirmed, your bids represent a binding commitment to purchase
Notes from us that are dependent for payment on the corresponding
registered borrower loan. However, your funds are only committed to
purchase a Note when a registered borrower accepts the bids and
funds the corresponding registered borrower loan. Any bids not
accepted by a registered borrower at the time the loan funds or
when posting expires will automatically be withdrawn. During the
time that you have outstanding bids, you will be allowed to
withdraw funds from your IOU account provided that you keep a
minimum balance in your IOU account equal to the funds allocated to
fund your placed bids.
Types of Postings.
Postings on the loan marketplace are
made by registered borrowers requesting a registered borrower
loan.
Types of Bids.
You can bid selectively by browsing
through postings and placing a bid on the posting or postings that
you choose. You can also use the Auto-Bid and Unlimited Bidding
features of our loan marketplace.
2
“Auto-Bid” is a feature
of our loan marketplace that allows a registered lender to use our
proprietary search engine to routinely filter registered borrower
loan requests based on certain loan request criteria and
automatically make bids on registered borrower loans that meet such
criteria. The loan request criteria that a registered lender can
choose to filter registered borrower loan requests include credit
grade, loan amount, loan term, loan purpose, debt-to-income ratio
and other credit profile characteristics. Once a registered lender
sets Auto-Bid parameters, our proprietary search engine will
routinely filter postings on our loan marketplace and automatically
make bids on registered borrower loans that meet such parameters.
In the event a bid placed using the Auto-Bid feature is accepted by
a registered borrower, we will automatically commit your funds to
the purchase of a Note in the amount and at the interest rate set
forth in the Auto-Bid.
“Auto-Fund” is a feature
of our loan marketplace that allows a registered borrower to
automatically accept funding of a loan request when bids are
received in an aggregate amount that is equal to the loan request
amount specified by the registered borrower and at a weighted
average interest rate that is equal to or less than an interest
rate specified by the registered borrower. Auto-Fund allows
registered borrowers to automatically close a loan that has been
fully funded with bids in an aggregate amount and at an interest
rate that is acceptable to the registered borrower without any
further action from the registered borrower.
“Unlimited bidding” is a
feature of our loan marketplace that allows a registered lender to
bid on postings in an aggregate amount exceeding the amount of
funds the registered lender has allocated to fund his or her placed
bids. For example, a registered lender can place five $100 bids and
five $500 bids and only allocate $500 of the funds available in his
or her IOU account to fund those bids. If a bid is accepted, our
loan marketplace automatically reduces the allocated amount by the
amount of the bid. Subsequently, our loan marketplace will
immediately reduce any outstanding bids that are greater than the
allocated amount and make them equal to the allocated amount. In
this example if a $100 bid is accepted, the allocated amount is
reduced to $400 and all $500 bids are reduced to $400.
YOU AGREE THAT WHEN MAKING BIDS YOU
WILL NOT DISCRIMINATE AGAINST ANY REGISTERED BORROWER ON THE BASIS
OF RACE, COLOR, RELIGION, NATIONAL ORIGIN, SEX, MARITAL STATUS,
AGE, SEXUAL ORIENTATION, MILITARY STATUS, THE REGISTERED
BORROWER’S SOURCE OF INCOME, OR ANY OTHER BASIS PROHIBITED BY
AN APPLICABLE FEDERAL, STATE OR LOCAL FAIR LENDING LAW, INCLUDING,
WITHOUT LIMITATION, THE EQUAL CREDIT OPPORTUNITY ACT.
Availability of Funds.
As described above, you may place
bids in an amount exceeding the amount of funds you have allocated
to fund your placed bids. In addition, during the time that you
have outstanding bids, you will be allowed to withdraw funds from
your IOU account provided that you keep a minimum balance in your
IOU account equal to the funds allocated to fund your placed bids.
You may at any time request that your uncommitted funds in your IOU
account be returned to you, in which case we will promptly return
the remaining funds to your deposit account using the Automated
Clearing House (“ACH”) network.
3
Your Note Purchase
Commitment. Whether you
bid selectively or by using the Auto-Bid feature of our loan
marketplace, each bid you post on the loan marketplace is a
commitment and promise to purchase a Note issued by us in the
amount of your bid that is dependent for payment on payments we
receive on the corresponding registered borrower loan.
AT THE TIME YOU SUBMIT A BID ON A
POSTING, WHETHER MANUALLY OR USING THE AUTO-BID FEATURE OF OUR LOAN
MARKETPLACE, YOU ARE COMMITTING TO PURCHASE A NOTE ISSUED BY IOU
CENTRAL IN THE AMOUNT OF YOUR BID THAT IS DEPENDENT FOR PAYMENT ON
PAYMENTS WE RECEIVE ON THE CORRESPONDING BORROWER LOAN DESCRIBED IN
THE POSTING.
Limits on Bids.
You may bid the entire amount
requested by the registered borrower in their posting or may bid a
lesser amount, subject to a minimum bid amount of $25. The
aggregate amount outstanding on all of your Notes must not exceed
$5,000,000. Subject to these dollar limits, there is no limit on
the amount of funds you may commit to bids on postings.
3. Purchase and Sale of
Notes . Upon closing
of a registered borrower loan, if the aggregate amount of the bids
placed on the posting accepted by the registered borrower exceeds
the maximum amount of the loan request, the registered borrower
loan will be funded with bids in the following order of
priority:
First, bids with the lowest interest rates required to
fund the loan request; and
Second , if there are two or more bids indicating the
same interest rate, priority will be given to the bid(s) that were
placed first, and if the amount of the last bid needed to fund the
loan request is greater than the remaining amount required to fund
the loan request, only that portion of the bid required to fund the
loan request shall be used.
Any bids not required to fund the
loan request in accordance with the order of priority described
above shall immediately terminate.
At the time a registered borrower
loan closes, we proceed with the issuance and sale of Notes to the
registered lenders whose bids were accepted by the registered
borrower in accordance with the order of priority described above.
We will use the proceeds of the sale of each series of Notes to
fund the corresponding registered borrower loan.
Purchase Price for the
Notes . Each Note of a
series will have a purchase price equal to the amount the
registered lender bid and the registered borrower accepted for the
corresponding registered borrower loan, subject to adjustment as
described above.
Interest Rate for the
Notes . Each Note will
have a stated, fixed interest rate equal to the interest rate the
registered lender bid and the registered borrower accepted for the
corresponding registered borrower loan. In most cases, a posting
will be matched with more than one registered lender bid and there
will be several registered lenders who purchase Notes corresponding
to the registered borrower loan described in the
posting.
4
Terms of the Notes.
The Notes will be issued pursuant to
an indenture (the “Indenture”) between IOU Central and
a trustee. The Notes will have the terms and conditions described
in the Prospectus, the Indenture and the Note. The Prospectus is
available for you to review at [INSERT LINK TO PROSPECTUS] and the
Indenture and the Note are attached as Exhibit A to
this Agreement. The specific interest rate, maturity and other
terms of the corresponding registered borrower loan are described
in the registered borrower’s posting on the loan marketplace
and in the promissory note signed by the registered borrower in
connection with the corresponding borrower loans. The form of
promissory note evidencing registered borrower loans is attached as
Exhibit B to this Agreement. Subject to the servicing
standard set forth in Section 4 below, 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 registered borrower
loan, and we may in our sole discretion charge off any registered
borrower loan that is more than 120 days delinquent (or sooner in
certain circumstances).
PAYMENT ON THE NOTES, IF ANY,
DEPENDS ENTIRELY ON THE RECEIPT OF PAYMENTS BY IOU CENTRAL IN
RESPECT OF THE CORRESPONDING REGISTERED BORROWER LOAN. WE DO NOT
WARRANT OR GUARANTEE IN ANY MANNER THAT YOU WILL RECEIVE ALL OR ANY
PORTION OF THE PRINCIPAL OR INTEREST YOU EXPECT TO RECEIVE ON ANY
NOTE OR REALIZE ANY PARTICULAR OR EXPECTED RATE OF RETURN. THE
AMOUNT YOU RECEIVE ON YOUR NOTE, IF ANY, IS SPECIFICALLY RESTRICTED
TO PAYMENTS MADE BY US EQUAL TO THE PAYMENTS WE RECEIVE ON THE
CORRESPONDING REGISTERED BORROWER LOAN, NET OF OUR SERVICING FEE
AND CERTAIN OTHER FEES ON ALL REGISTERED BORROWER PAYMENTS. WE DO
NOT MAKE ANY REPRESENTATIONS AS TO A REGISTERED BORROWER’S
ABILITY TO PAY AND DO NOT ACT AS A GUARANTOR OF ANY CORRESPONDING
REGISTERED BORROWER LOAN PAYMENT OR PAYMENTS BY ANY REGISTERED
BORROWER.
4. Servicing and Collection of
Borrower Loans . We
will use commercially reasonable efforts to service and collect the
borrower loans corresponding to your Notes in accordance with
industry standards customary for loans of the same general type and
character as the registered borrower loans. When a registered
borrower loan is past due and payment has not been received, our
in-house collection department immediately contacts the registered
borrower to request payment. When a monthly payment becomes 30 days
past due, we will continue our in house collection procedures and
will notify consumer reporting agencies of the missed payment. When
a monthly payment becomes 90 days past due, we will refer the
registered borrower loan to an outside collection agency, currently
the Collection Bureau of Hudson Valley. You agree that you have no
rights to, and shall not, make any attempt, directly or through any
third party, to collect from registered borrowers on your Notes or
the corresponding registered borrower loans.
YOU UNDERSTAND AND ACKNOWLEDGE THAT
BORROWERS MAY DEFAULT ON THEIR PAYMENT OBLIGATIONS UNDER THE
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.
5
5. Limited Repurchase
Obligation for Identity Fraud . We reimburse registered lenders for the unpaid
principal balance of a Note that is dependent for payment on a
registered borrower loan obtained through identity fraud. We
generally recognize the occurrence of identity fraud upon receipt
of a police report regarding the identity fraud. This reimbursement
for identity fraud only provides an assurance that our registered
borrower identity verification is accurate; in no way is it a
guarantee of a registered borrower’s self-reported
information (beyond the borrower’s identity) or a registered
borrower’s creditworthiness. We expect the incidence of
identity fraud on our loan marketplace to be low because of the
robustness of our identity verification process. You agree that
repurchase of the remaining unpaid principal balance of your Note
by IOU Central is the sole remedy you will have with respect to any
such Notes.
6. IOU Central Terms and
Conditions . You
acknowledge that you have agreed to comply, and will comply, with
the IOU Central Terms and Conditions.
7. Bank Account
Verification . You
acknowledge that you will be required to authorize us to initiate a
credit and debit entry between your IOU account and your bank
account in the amount of $0.01 to $0.25 for account verification
purposes through the ACH network. The deposit amount will always be
equal to or greater than the withdrawal amount. Your authorization
will be in the form of Exhibit C attached to this Agreement.
If you do not agree to this verification, you will not be permitted
to submit a loan request to us.
8. IOU Central’s
Representations and Warranties . IOU Central represents and warrants to you, as
of the date of this Agreement, as of any date that you commit to
purchase Notes and as of the date that a Note is sold to you, as
applicable, that:
a. IOU Central is duly organized and
is validly existing as a corporation in good standing under the
laws of the State of Delaware, and has the corporate power to enter
into and perform its obligations under this Agreement;
b. this Agreement has been duly
authorized, executed and delivered by IOU Central;
c. the Indenture has been duly
authorized by IOU Central and qualified under the Trust Indenture
Act of 1939, and constitutes a valid and binding agreement of IOU
Central, enforceable against IOU Central in accordance with its
terms, except as the enforcement of the Indenture may be limited by
applicable bankruptcy, insolvency or similar laws;
d. the Note has been duly authorized
and, following payment of the purchase price by you and electronic
execution, authentication and delivery to you, will constitute a
valid and binding obligation of IOU Central enforceable against IOU
Central in accordance with its terms, except as the enforcement of
the Note may be limited by applicable bankruptcy, insolvency or
similar laws;
e. the proceeds of the borrower loan
corresponding to the Note sold have been fully disbursed to the
registered borrower or the registered borrower’s designated
payee subsequent to your purchase of the Note;
6
f. IOU Central has complied in all
material respects with applicable federal, state and local laws in
connection with this Agreement and the offer and sale of the Notes;
and
g. IOU Central has made commercially
reasonable efforts to authenticate and verify the identity of the
borrower obligated on the borrower loan that correspond to the
Note.
9. Your Financial Suitability
Representations and Warranties . You represent and warrant that you satisfy the
applicable minimum financial suitability standards and maximum
investment limits set forth in Exhibit D attached hereto (or
as set forth in a supplement to the Prospectus for residents of the
state in which you reside), and you agree to provide any additional
documentation reasonably requested by us, as may be required by the
securities administrators of certain states or otherwise, to
confirm that you meet such minimum financial suitability standards
and maximum investment limits. You acknowledge that (a) the
Notes will not be listed on any securities exchange, (b) there
may be no, or only a limited, trading platform for the Notes,
(c) any trading of Notes must be conducted in accordance with
federal and applicable state securities laws, (d) you are
prepared to bear the risk of loss of your entire purchase price for
any Notes you purchase, and (e) you are prepared to hold the
Notes you purchase until the Notes mature.
10. Your Other Representations
and Warranties . You
represent and warrant to us, as of the date of this Agreement and
as of any date that you commit to purchase Notes, that (a) you
have received the Prospectus, the Indenture, and the form of the
Note, (b) you have the legal competence and capacity to
execute and perform this Agreement and you have duly authorized,
executed and delivered this Agreement, (c) you have complied
in all material respects with applicable federal, state and local
laws in connection with this Agreement, and (d) you have made
your decisions in connection with your consideration of any
postings on the loan marketplace in compliance with the Equal
Credit Opportunity Act, 15 U.S.C. 1601 et. seq., and its
implementing Regulation B, 12 C.F.R. § 202 et. seq., as such
may be amended from time to time, and any applicable state or local
laws, regulations, rules or ordinances concerning credit
discrimination.
11. No Advisory
Relationship . You
acknowledge and agree that (a) the purchase and sale of the
Notes pursuant to this Agreement is an arm’s-length
transaction between you and us, (b) in connection with the
purchase and sale of the Notes, we are not acting as your agent or
fiduciary, (c) we assume no advisory or fiduciary
responsibility in your favor in connection with the purchase and
sale of the Notes, (d) we have not provided you with any
legal, accounting, regulatory or tax advice with respect to the
Notes, and (e) you have consulted your own legal, accounting,
regulatory and tax advisors to the extent you have deemed it
appropriate.
12. Tax Treatment and
Withholding . The
parties agree that the Notes are intended to be indebtedness of IOU
Central 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. In addition, you
acknowledge that you have provided a certification to us with
respect to backup tax withholding and certain other matters as set
forth in Exhibit E attached hereto.
7
13. IOU Central’s Right
to Verify Information and Cancel Funding .
a. We reserve the right to verify
the accuracy of all information provided by registered users in
connection with postings, bids and registered borrower loans. We
also reserve the right to determine, in our reasonable discretion,
whether a registered user is using, or has used, the loan
marketplace or the IOU Central 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 IOU Central Terms and Conditions
or any agreement between IOU Central and such user. We may conduct
our review at any time – before, during or after posting is
made, or before or after the funding of a registered borrower loan
or the sale of a Note. You agree to respond promptly to our
requests for information in connection with your bid, accounts, or
your registration with us.
b. In the event we reasonably
determine that a posting or a bid contains materially inaccurate
information (including, without limitation, unintended
inaccuracies, inaccuracies resulting from errors by IOU Central, or
inaccuracies resulting from changes in the registered
borrower’s income, residence or credit profile between the
date of a posting and the date the posting is to be funded) or was
posted 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 IOU Central Terms and Conditions or any registration agreement,
we may refuse to make the posting or, if the listing has already
been posted, remove the listing from the IOU Central platform and
cancel all bids against the listing.
c. When a posting ends or expires
with a bid or bids totaling the amount requested for the registered
borrower loan, we may conduct a “pre-funding” review
prior to the funding of the registered borrower loan. We may, at
any time and in our sole discretion, delay funding of a registered
borrower loan in order to enable us to verify the accuracy of
information provided by registered users in connection with the
posting or bids against the posting, and to determine whether there
are any irregularities with respect to the posting or the bids
against the listing. We may cancel or proceed with funding the
registered borrower loan, depending on the results of our
pre-funding review. If funding is cancelled, the posting will be
removed from the loan marketplace, all bids against the posting
will be cancelled, and each bidder’s funds will be returned
to their respective IOU Central accounts, available for further
bidding. In the event we cancel funding of a registered borrower
loan, we will notify the registered borrower and all bidders for
the listing of our determination to cancel funding of the
registered borrower loan.
d. In most instances, we do not
independently verify the income, employment and occupation or other
information provided by registered borrowers in their loan request
and postings. The registered borrower’s income, employment
and occupation are self-reported, and the registered
borrower’s non-housing debt-to-income ratio is determined by
us from a combination of the registered borrower’s
self-reported income and information from the registered
borrower’s credit report. The credit data that appears in
listings is taken directly
8
from a credit report obtained on the
registered borrower from a cred
