Issuer Terms of Service

Issuer Terms of Service

TERMS OF SERVICE BETWEEN ISSUERS OF SECURITIES AND CROWDCHECK FOR CROWDCHECK DUE DILIGENCE REPORTS

I. Company Representations and Warranties

The Company represents that:

a. It is an entity duly organized in good standing in its jurisdiction of organization.

b. It will conduct the offering to which these terms and conditions apply (the “Offering”) in compliance with all applicable federal and state corporate, banking and securities laws.

II. Check Process

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. 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 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 the Check requested. Issuance of a Check is at CrowdCheck’s sole discretion.

c. If a Check is granted, CrowdCheck will provide the investment platform upon which the Company’s securities will be offered (the “Platform”) and the Company with a CrowdCheck Badge (the “Badge”) relating to the Company. The Badge may be used in the following manner:

i. included on the Company’s profile on the Platform;

ii. 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 be used for the period of time specified on the CrowdCheck Badge.

e. 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) pursuing any and all legal and equitable remedies available to CrowdCheck.

f. If a Check is granted, CrowdCheck will provide the Platform with the data to be included in a “Due Diligence and Disclosure Report” that will appear on the Company’s profile on the Platform (the “Report”).

g. 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.

h. The Company acknowledges that the Platform shall post the CrowdCheck Data on the Company’s profile on its own site (the “Platform Profile”) in substantially the same format that it was received from CrowdCheck. The Company acknowledges that the Platform may, if necessary, alter the format of the CrowdCheck Data 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) PURSUING ANY AND ALL LEGAL AND EQUITABLE REMEMDIES AVAILABLE TO CROWDCHECK.

i. The Company acknowledges that certain information provided to CrowdCheck, including documents 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 documents to be included in the Report before that Report is made available to investors and will, when appropriate, work with the Company to redact sensitive information from such documents without materially altering the substance of the Report.

j. 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.

k. CrowdCheck retains the exclusive right to modify the process described in section II a-l of this Agreement at its sole discretion on a case-by-case basis.

l. CrowdCheck does not publish any information regarding any company that seeks but is not granted a Check.

m. 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. CrowdCheck is not 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 libellous, fraudulent, misleading, constitute harassment under the laws of any jurisdiction, or that is in violation of any applicable securities 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 libellous 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 as a result of its good faith reliance on the Company’s representations regarding the Material.

e. CrowdCheck shall make the Company Report, Badge, and CrowdCheck Data continually available to the Platform until the Offering closes.

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 in connection with any securities offering;

iii. has been the subject of an investigation by any corporate, banking or securities regulatoryauthority, whether or not any charges were brought;

iv. has been the subject of any action, including but not limited to an investigation, by any corporate, banking or securities regulatory authority, whether or not charges were brought;

v. has been a defendant in an action alleging fraud; or

vi. has been 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 all of its outstanding stock or redeems all of its bonds; or (3) the Company dissolves as a corporation.

IV. Payment

a. The Company understands and agrees that CrowdCheck will not begin the Check process until payment has been received in full. The Company also understands and agrees that payment in no way guarantees that a Check will be granted and that, in the case that the Company is denied a Check and/or the Check remains incomplete for any reason outside 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 THREE MONTHS OF THE DATE OF THE COMPANY SIGNING THE CONTRACT WITH CROWDCHECK, THE CONTRACT SHALL TERMINATE AND CROWDCHECK WILL RETAIN ALL PAYMENTS MADE.

i. Full payment includes the base cost of the due diligence report, plus corresponding fees for all required Bad Actor Reports on Covered Persons of the Issuer.  Covered Persons include the Issuer’s executive officers, members of its Board of Directors or corresponding managing body, equity owners who hold a 20% or greater interest, promoters of the issuer, paid solicitors, and any predecessor entity of the Issuer.

b. In addition to the fee described above, CrowdCheck shall be reimbursed for all reasonable expenses incurred by CrowdCheck in the performance of the services under this 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, and there has been agreement on the general amount of such expenses.

V. Liability

a. The services provided to the Company by CrowdCheck shall include only those services expressly described in these Terms and Conditions.

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 this these Terms and Conditions.

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 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 and CrowdCheck, between any of the Company’s officers, managers, directors, or employees and any of CrowdCheck’s officers, directors, or employees. 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, or employees creates a fiduciary duty between CrowdCheck and the Company or any investors in the Company, or any potential investors viewing the Company profile, including the Report.

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 the Report and CrowdCheck Data with respect to any 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.

VII. 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, and is identified by the discloser as confidential (“Confidential Information”). 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 defence 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.

XII. Modifications

No part of these Terms of Service shall be modified except by agreement of the parties, which shall be memorialized in writing. An exchange of e-mail messages, properly addressed, between the parties shall be sufficient to satisfy this requirement if the e-mail messages, taken together, show the requisite meeting of the minds and consideration. Any modification made via e-mail shall be memorialized in an addendum to the agreement within ten business days of the last e-mail sent that completes the requirements for modification.

XI. 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.

XIII. 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. 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.

c. 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.

d. The Company agrees, as a User of the Web Site, CrowdCheck.com, to abide by the Terms and Conditions set out at www.CrowdCheck.com.

 

CONDITIONS FOR FIXED-PRICE SERVICES FOR CROWDCHECK REGULATION A SERVICES

  • Fixed fees are only available for offerings under Tier 2 of Regulation A.
  •  The company’s financial statements must be audited by an independent accountant, who has given a clean (not qualified) audit opinion. That accountant must calculate and prepare the dilution information required in Form 1-A.
  • Fixed fees do not apply for companies who would be required to produce “segment information.”
  • The offering must be a regular offering of securities to potential new investors; not a rights offering or an offer of securities in a reorganization of the company, or a transaction that would result in the SEC requiring a tax opinion.
  • The securities offered must be common stock or other classes of securities with standard terms (such as SAFE notes, Series Seed Preferred, preferred stock using NVCA terms, etc.).  Negotiation of separate terms with individual investors is not included and would likely cause issues in the SEC review process in any case.
  • The issuer must be in good standing and authorized under its corporate constitution to issue the type of securities it is planning to offer. For example, a Delaware company planning to offer preferred stock must have already filed an effective Amendment to its Certificate of Incorporation covering a sufficient number of preferreds.
  • The price of the securities offered must be fixed by the time the Offering Statement is filed with the SEC as opposed to being established by a price discovery process that occurs up to the time of qualification by the SEC (i.e., price information will be included in the Preliminary Offering Circular).
  • If an intermediary (platform, broker-dealer) is used, it is not acting pursuant to a firm commitment underwriting agreement.
  • The relationship between the platform (or other intermediary) and the issuer is set out in a standardized listing agreement or placement agreement that will not be negotiated by KHLK.
  • The relationship between the issuer and investors will be documented by a standard subscription agreement, provided by KHLK, which will be subject to no or minimal negotiation.
  • The costs of printing offering documents are not included; it is assumed those documents will be in soft form.
  • For the purposes of the “start-up” price, a start-up is defined as a company that has been in existence less than three years, and is not yet in a fully operational mode. It will not have revenues, or those revenues will be derived only from beta-type operations or operating in MVP mode.
  • In the event CrowdCheck is engaged for due diligence services only, the drafting of the Offering Statement must be given to us in a state sufficiently advanced for us to review and fact-check its contents. On the other hand, it is not advisable to present us with the Offering Statement too late in the process for the results of our findings to be reflected in the Offering Circular. While other documents that we need to review should be delivered to us as soon as they are available, we suggest that the Preliminary Offering Circular be delivered to CrowdCheck at least ten business days prior to filing with the SEC, and the final version of the Offering Circular, reflecting changes made in response to SEC review, be delivered to CrowdCheck at least a week before first sales of securities, allowing time for the CrowdCheck Report to be available to prospective investors two business days before first sale.