TERMS OF SERVICE BETWEEN ISSUERS OF SECURITIES AND CROWDCHECK
WHEREAS, the Company (as defined below) has engaged CrowdCheck Inc. for the purposes of undertaking a due diligence and compliance review associated with the issuance of securities.
WHEREAS, the Company may have separately engaged CrowdCheck Law LLP, an affiliate of CrowdCheck, for legal services, which is governed solely by an engagement agreement with CrowdCheck Law LLC and otherwise by the DC rules of professional conduct.
NOW THEREFORE, the following terms of service are applicable to the engagement with CrowdCheck associated with the due diligence and compliance services provided by CrowdCheck.
I. Company Representations and Warranties
The issuer of securities (the “Company”) represents that:
a. It is an entity duly incorporated or formed and in good standing in its jurisdiction of incorporation or formation.
b. It will conduct the offering or engage in any transaction to which these terms and conditions apply (the “Offering”) in compliance with all applicable federal and state laws.
II. Due Diligence and Compliance Check Processes
a. The Company agrees to make available to CrowdCheck, in a timely manner, all materials and information requested by CrowdCheck in connection with its examination of the Company, preparation of a due diligence check (a “Check”) or preparation of disclosure materials. The materials and information requested by CrowdCheck may be done as part of its Information, Document Request, and Release Form (the “IDR Form”). The Company is aware that preparation of certain materials, like financial statements and marketing materials other than the primary offering document, may require professional services from auditors or marketing professionals for example; and are outside the scope of CrowdCheck’s services. THE FAILURE TO PROVIDE ANY REQUESTED MATERIALS OR INFORMATION IN A TIMELY MANNER SHALL BE A MATERIAL BREACH OF THESE TERMS AND CONDITIONS AND MAY THEREFORE RESULT IN DENIAL OF A CHECK AND FURTHER CROWDCHECK SERVICES WITHOUT REFUND OF ANY PAYMENT MADE TO CROWDCHECK FOR ITS SERVICES.
b. Once CrowdCheck has completed its review, it will determine whether the Company is eligible for a Check. Issuance of a Check is at CrowdCheck’s sole discretion.
c. If a Check is granted, CrowdCheck will provide the registered broker-dealer, registered funding portal, other investment platform, or trading venue engaged by the Company upon which the Company’s securities will be offered or traded (the “Platform”) and the Company with a CrowdCheck Badge (the “Badge”) together with an embedded hyperlink to the Report (as defined below) relating to the Company. The Badge may be used in the following manner:
i. included on the Company’s profile on the Platform;
ii. Included in communications sent by the Company, including posting on the Company’s own website, provided such communications comply with all applicable state and federal securities laws; and
iii. in other marketing materials with CrowdCheck’s prior approval.
d. The Badge may only be used with its embedded hyperlink to the underlying Report. The badge may not be presented as an image or in another format that does not include the embedded hyperlink to the Report. The Company may not make any statements in any communications (whether verbal or written) regarding the substance of the Badge or the Report. For example, the Company may state “Due diligence has been conducted by CrowdCheck” or “The Company has received a due diligence check from Crowd Check” but NOT “The Company received a stellar [or even a “clean”] due diligence report from CrowdCheck.”
e. The Badge speaks as of the date issued.
f. Any use of the Badge not expressly authorized in these Terms and Conditions must be approved by CrowdCheck in writing. Unauthorized use of the Badge, including but not limited to any misleading use of the Badge or any use of CrowdCheck’s name or logo, may result in CrowdCheck taking any or all of the following actions: (1) revoking the check; (2) revoking the Company’s permission to use the Badge in any way; (3) insisting that the Company or the Platform remove the Badge and, if not removed within 24 hours, publicly announcing that Company’s Badge has been revoked by CrowdCheck; or (4) pursuing any and all legal and equitable remedies available to CrowdCheck.
g. If a Check is granted, CrowdCheck will provide the Platform with the data to be included in a “Due Diligence and Disclosure Report” or compliance report that may appear on the Company’s profile on the Platform (the “Report”).
h. The information and data included in the Report (the “CrowdCheck Data”) will be provided to the Platform electronically. CrowdCheck shall not be liable for any delay or error caused by technical problems arising from systems not owned or maintained by CrowdCheck.
i. The Company acknowledges that the Platform must post the CrowdCheck Data on the Company’s profile on its own site (the “Platform Profile”) in the same format that it was received from CrowdCheck; provided that the Platform may, if necessary, alter the format of the CrowdCheck Data, with CrowdCheck’s prior written consent, but may not omit, add to, alter, or edit in any way the substance of the data. THE COMPANY IS NOT AUTHORIZED TO MAKE ANY CHANGES OF ANY KIND TO THE REPORT. ANY OMISSION OR ALTERATION OF THE CROWDCHECK DATA MAY RESULT IN CROWDCHECK TAKING ANY OR ALL OF THE FOLLOWING ACTIONS: (1) REVOKING THE CHECK; (2) REVOKING THE COMPANY’S PERMISSION TO USE THE BADGE IN ANY WAY; (3) INSISTING THAT THE COMPANY OR THE PLATFORM REMOVE THE BADGE AND, IF NOT REMOVED WITHIN 24 HOURS, PUBLICLY ANNOUNCING THAT COMPANY’S BADGE HAS BEEN REVOKED BY CROWDCHECK; OR (4) PURSUING ANY AND ALL LEGAL AND EQUITABLE REMEDIES AVAILABLE TO CROWDCHECK.
j. The Company acknowledges that certain information provided to CrowdCheck, including documents that may be subject to confidentiality or that the Company may consider sensitive, will be included in the Report and made available to prospective investors. CrowdCheck will identify to the Company all information and documents to be included in the Report before that Report is made available to investors. It is solely the responsibility of the Company to raise any concerns about the disclosure to investors and the public of any information or document that may be confidential or sensitive. CrowdCheck will, as appropriate, work with the Company to redact sensitive information from such documents without materially altering the substance of the Report.
k. If a Check is not granted, CrowdCheck will provide the Company with a report detailing the defects that resulted in its decision to deny a Check and the steps the Company must take to cure these defects. This report will include the time period within which the defects must be cured in order for a Check to be granted. If, within the time period specified, the Company demonstrates to CrowdCheck’s reasonable satisfaction that all listed defects have been cured, CrowdCheck will issue a Check at that time. If more than the specified time period has passed and the Company has not demonstrated to CrowdCheck’s reasonable satisfaction that all defects have been cured, the Company’s Check will be determined to be “incomplete.” At this time, the Company may only receive a Check by starting a new Check process, including paying the Check fee and, where necessary, re-submitting all materials and information.
l. CrowdCheck retains the exclusive right to modify the process described in Section II a-k of this Agreement at its sole discretion on a case-by-case basis.
m. CrowdCheck does not publish any information regarding any company that seeks but is not granted a Check.
n. CrowdCheck will make available to the Platform such information necessary to produce the CrowdCheck Data, including information and materials obtained in the course of its investigation of any companies, as required according to CrowdCheck’s understanding of the agreement between the Platform and the Company. The Company acknowledges that CrowdCheck may provide any materials, documents, data, or other information obtained in the course of performing the Services to the Platform and to other service providers designated by the Platform, including information that may be confidential or sensitive if the Company fails to alert CrowdCheck in writing to such matters prior to its providing such information or document to CrowdCheck. It is solely the Company’s responsibility to ensure its compliance with any confidentiality or non-disclosure obligations applicable to it and any of its information or documents. CrowdCheck shall not be liable for the disclosure or withholding of any information related to the Company or the Services made or withheld in good faith according to CrowdCheck’s reasonable understanding of the terms of the agreement between the Company and the Platform.
III. Company Report
a. The Company retains all existing intellectual property rights in any material submitted to CrowdCheck.
b. CrowdCheck may not be held liable for any Report content submitted by the Company, including, but not limited to, content that may be libelous, fraudulent, misleading, constitute harassment under the laws of any jurisdiction, or that is in violation of any applicable federal or state laws or regulations.
c. The Company represents and warrants that no material or information submitted to CrowdCheck orally or in writing in connection with the Services, including but not limited to information provided in response to the IDR Form (the “Material”) contains Prohibited Material. Prohibited Material is material that:
i. includes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading; or
ii. contains a statement, information, image, or other content that includes any content that:
a) is false, fraudulent, or misleading to potential investors or other users;
b) is libelous against any party;
c) infringes on any copyright, trademark, patent, or other intellectual property held by any party;
d) constitutes harassment of any party; or
e) violates any law, civil or criminal, of the United States, any State within the United States, or the Company’s home jurisdiction, if posting from outside the United States, including, but not limited to, any securities law.
d. The Company acknowledges that CrowdCheck is relying on the Company’s representations regarding the exclusion of Prohibited Material from the Material. CrowdCheck shall not be held liable for any actions, damages, or other liability as a result of its good faith reliance on the Company’s representations regarding the Material or the Company’s failure to comply with these issuer terms of service.
e. CrowdCheck shall make the Company Report, Badge, and CrowdCheck Data continually available to the Platform until the earlier of the Offering closes, provided that the Badge is not used in any public communication after its expiration date.
f. CrowdCheck shall not be liable if the Badge or CrowdCheck Data cannot be displayed on the Platform due to technical problems with any system not owned or maintained by CrowdCheck or if updated CrowdCheck Data cannot be displayed due to systems not maintained by CrowdCheck.
g. The Company shall provide prompt notification to CrowdCheck if it, or any control person, has a reasonable belief that the Company:
i. may have made a material misstatement in connection with a securities offering listed on the Platform, or may have omitted to state a material fact required to be stated or necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading;
ii. may have intentionally made a misstatement of any kind, or made a material misstatement whether intentional or not, in connection with any securities offering;
iii. has been, Is or is reasonably likely to become the subject of an investigation by any federal, state or foreign corporate, banking or securities regulatory authority, whether or not any charges were brought;
iv. has been, is or is reasonably likely to become the subject of any action, including but not limited to an investigation, by any federal, state or foreign corporate, banking or securities regulatory authority, whether or not charges were brought;
v. has been, is or is reasonably likely to become a defendant in any action, whether civil or criminal, alleging fraud; or
vi. has been, is or is reasonably likely to become subject to any type of sanction, discipline, or fine in connection with the purchase or sale of any securities.
The Company’s duty to notify CrowdCheck shall continue until the earliest of the following: (1) CrowdCheck ceases operations; (2) the Company purchases or redeems all of its outstanding stock and other outstanding securities; or (3) the Company dissolves as a corporation.
IV. Payment
a. Unless otherwise agreed to in writing, the Company understands and agrees that CrowdCheck will not begin work until payment has been received in full for all amounts required as an initial payment under the relevant engagement agreement. The Company also understands and agrees that payment in no way guarantees that a Check will be granted or that any other services will be provided through their conclusion; and that, in the case that the Company is denied a Check, the Check remains incomplete or any services contemplated by the engagement agreement with CrowdCheck for any reason outside of CrowdCheck’s control, including but not limited to the Company’s or any third party’s unwillingness or inability to provide CrowdCheck with all materials or information requested, the Company will not receive any refund from CrowdCheck. Undue and unreasonable delay in providing materials or information requested shall be understood to constitute an unwillingness or inability to provide such materials and information. NOTWITHSTANDING THE FORGOING, IN THE EVENT THE COMPANY AND ALL RELEVANT THIRD PARTIES HAVE NOT PROVIDED ALL NECESSARY MATERIAL WITHIN SIX MONTHS OF THE DATE OF THE COMPANY SIGNING THE ENGAGEMENT AGREEMENT OR AGREEING TO THE ENGAGEMENT WITH CROWDCHECK, THE ENGAGEMENT SHALL TERMINATE AND CROWDCHECK WILL RETAIN ALL PAYMENTS MADE THROUGH THE DATE OF TERMINATION.
b. The Company also acknowledges and agrees that CrowdCheck shall be reimbursed for all reasonable expenses incurred by CrowdCheck in the performance of the services under the relevant engagement agreement, including, but not necessarily limited to, travel and lodging expenses, but only to the extent CrowdCheck has provided notification that such expenses are required to perform its services and the Company consents to CrowdCheck continuing work under its engagement. Upon request, CrowdCheck will work with the Company to establish, and will conform to, a reasonable budget for such expenses, to be agreed in writing; provided however, that the Company agrees to pay any increase in such expenses (1) in an amount less than 10% of the agreed budget or (2) caused by a change in circumstances outside of CrowdCheck’s control.
V. Liability
a. The services provided to the Company by CrowdCheck shall include only those services expressly described in these Terms and Conditions or in the engagement agreement entered into between the Company and CrowdCheck.
b. CrowdCheck’s services do not include the following:
i. valuation of any entity or security;
ii. services that require the services of a licensed private investigator except as specifically contemplated by the IDR Form;
iii. ratings or any similar evaluation of a Company’s business plan, viability, or profitability or valuation or evaluation of any of the Company’s assets including its intellectual property;
iv. any statement regarding the advisability of purchasing any security;
v. any type of ranking of companies or offerings;
vi. any other services not described in these Terms and Conditions or in the engagement agreement entered into between the Company and CrowdCheck.
c. CrowdCheck makes no representation regarding the value or appropriateness of any of its Checks for the Company’s business. The Company must determine, in its own judgment, whether CrowdCheck’s Services may be valuable to its business.
d. A CrowdCheck Check is not intended to be an endorsement of any particular business decision, including but not limited to any model, practice, strategy, or product. A CrowdCheck Check may not be used by the Company as any indication, in the judgment of CrowdCheck or any of its employees, officers, or directors, of the likely success or advisability of the Company’s business or business strategy.
e. CrowdCheck may not be held liable for any losses related, directly or indirectly, to the Company’s Offering, decision to seek a CrowdCheck Check, or to CrowdCheck’s decision to either grant or deny a Check.
f. No action by the Company nor CrowdCheck or any person affiliated with either of them creates an attorney/client relationship between the Company or any of its officers, managers, directors, employees, consultants or agents and CrowdCheck or any of its officers, directors, employees, consultants or agents. The Company agrees that it will seek legal advice from qualified counsel if required.
g. The Company and CrowdCheck acknowledge and agree that no action by the Company or CrowdCheck, or any of their respective directors, managers, officers, employees, consultants or agents, creates a fiduciary duty between CrowdCheck or any such CrowdCheck affiliated persons on the one hand and the Company or any such Company affiliated persons on the other hand; or between CrowdCheck and any such CrowdCheck affiliated persons on the one hand and any of the Company’s investors, potential investors or affiliates thereof on the other hand..
h. The Company acknowledges and agrees that CrowdCheck is not a broker or dealer, a securities intermediary, an investment advisor, or a funding portal, all as defined by the U.S. federal laws or the laws of any state or other jurisdiction. The Company understands that CrowdCheck is not providing it with recommendations or advice with respect to the offering, or negotiating or advising with respect to the terms or marketing of the offering or the Company’s relationship with the Platform.
i. The Company acknowledges and agrees that any offering document prepared by CrowdCheck, the Report and CrowdCheck Data with respect to the Company is intended for use in the jurisdiction in which the Platform operates and that CrowdCheck is not responsible for its use in any other jurisdiction.
VI. Mutual Nondisclosure of Confidential Information
a. During the course of CrowdCheck’s performance of services for the Company, each party may be given access to information (in hardcopy and/or electronic form) that relates to the other’s past, present, and future research, development, business activities, products, services, and technical knowledge Such information will be deemed “Confidential Information” as set forth in the following sentence or otherwise only to the extent such information is identified in writing by the discloser as confidential at or prior to its disclosure to the receiver. Confidential Information shall include, but not be limited to, the services provided by CrowdCheck, any summary of the services or the investigation undertaken by CrowdCheck in performance of the services, and the IDR Form.
b. In connection therewith, the following subsections shall apply:
i. The Confidential Information of the discloser may be used by the receiver only in connection with the services provided by CrowdCheck;
ii. Each party agrees to protect the confidentiality of the Confidential Information of the other in the same manner that it protects the confidentiality of its own proprietary and confidential information of like kind, but in no event shall either party exercise less than reasonable care in protecting such Confidential Information. Access to the Confidential Information shall be restricted to CrowdCheck and Company personnel (including such personnel employed by affiliated entities) engaged in a use permitted hereby;
iii. The Confidential Information may not be copied or reproduced without the discloser’s prior written consent;
iv. All Confidential Information made available hereunder, including copies thereof, shall be returned or destroyed upon the first to occur of (a) completion of CrowdCheck’s services or (b) request by the discloser, unless the receiver is otherwise allowed to retain such Confidential Information. CrowdCheck may retain, subject to the terms of this Section, copies of the Company’s Confidential Information required for compliance with its recordkeeping or quality assurance requirements;
v. Nothing in this agreement shall prohibit or limit either party’s use of information (including, but not limited to, ideas, concepts, know-how, techniques, and methodologies) (a) previously known to it without an obligation of confidence, (b) independently developed by or for it, (c) acquired by it from a third party which is not, to its knowledge, under an obligation of confidence with respect to such information, or (d) which is or becomes publicly available through no breach of this agreement; and
vi. If either party receives a subpoena or other validly issued administrative or judicial process demanding Confidential Information of the other party, it shall promptly notify the other of such receipt and tender to it the defense of such demand. The party receiving the subpoena shall thereafter be entitled to comply with such subpoena or other process to the extent permitted by law. Services provided hereunder in no event include CrowdCheck acting as an expert witness or otherwise providing litigation support services.
c. Nothing in this section shall prevent CrowdCheck from making public its Report and the documents that form part of the Report, after the Company has approved delivery of the Report to the Platform.
VII. Advertisement Reviews
a. Notwithstanding the above, additional terms and conditions will apply to reviews of television or print advertisements initiated by the Company or a Platform (“Ad Reviews”).
b. With respect to the Ad Reviews, the Company acknowledges and agrees to the following:
ii. Ad Reviews do not include discussions with television networks, publishers, or other entities with which the Company is discussing placement of its advertisements;
iii. Company is responsible for providing initial scripts and content, as well as for editing of those scripts and content;
iv. Company will provide final versions as intended for use to CrowdCheck;
v. Company will provide supporting materials related to any claims being made in the advertisement; and
vii. CrowdCheck will not issue a report following completion of the Ad Review, but will inform the Platform of the completion of the Ad Review.
c. Company agrees that all of these issuer terms of service are applicable to Ad Reviews.
VIII. Modifications
CrowdCheck reserves the right to modify these Terms of Service at any time, with written notice (which may be in email form) to each Company for which an engagement is ongoing.
IX. Governing Law and Arbitration
THE AGREEMENT BETWEEN THE COMPANY AND CROWDCHECK WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ANY DISPUTE ARISING BETWEEN CROWDCHECK AND THE COMPANY WILL BE RESOLVED BY BINDING ARBITRATION IN THE COMMONWEALTH OF VIRGINIA. THE COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION.
X. Miscellaneous
a. If any provision of these terms and Conditions is held unenforceable, then such provision will be modified to reflect the parties’ intention. All remaining provisions of these Terms and Conditions shall remain in full force and effect.
b. In the event of any inconsistency or conflict between these terms and any terms of conditions set for the relevant engagement shall, for such terms and/or conditions, the relevant terms and conditions set forth for in the engagement agreement shall control.
c. The failure by one party to require performance of any provision shall not affect that party’s right to require performance at any time thereafter, nor shall a waiver of any breach or default of this Agreement constitute a waiver of any subsequent breach or default or a waiver of the provision itself.
d. If either Party has committed an act or omission that would constitute a material breach of these Terms and Conditions, the non-breaching Party may notify the breaching party who shall have seven business days to remedy the act or omission before it shall be considered a breach of these Terms and Conditions.
e. The Company agrees, as a User of the Web Site, CrowdCheck.com, to abide by the User Terms and Conditions set out at https://crowdcheck.com/terms-conditions/ .
