Issuer Agreement

This Issuer Agreement (“Agreement”) is made and entered into as of the date of the parties’ electronic consent on the Site (as defined below) by and among NetCapital Systems, LLC (“Platform”), NetCapital Funding Portal Inc. (“Funding Portal”), Livingston Securities, LLC (“Broker”) (solely for the purpose of any offer or sale of Securities in reliance on Regulation D (as such terms are defined below)) and the undersigned company (“Company”).

BACKGROUND

  1. The Company wishes to raise capital by selling beneficial interests in a certain amount of its capital stock or membership or partnership interests (the “Securities”) to eligible investors in reliance on the exemption under Section 4(a)(6) (“Regulation CF”) of the Securities Act of 1933 (the “Act”), on Rule 506(c) of the Regulation D safe harbor to the exemption under Section 4(a)(2) of the Act (“Regulation D”), or both (individually or collectively, the “Offering”).
  2. Platform operates the website netcapital.com (the “Site”) to provide technology and services for the facilitation of Regulation CF and Regulation D offerings.
  3. The Company desires to facilitate potential future transfers of beneficial interests in the Securities on the Site, subject to applicable laws and other requirements of the Platform.
  4. Funding Portal is registered with the Securities and Exchange Commission (“SEC”) as a funding portal in the offer and sale of Securities in reliance on Regulation CF.
  5. Broker is registered with the SEC as a broker in the offer and sale of Securities in reliance on Regulation D.
  6. The Company seeks to use the Site to (i) facilitate the ability of the Company to offer and sell beneficial interests in its Securities in connection with such Offerings and (ii) attract investors (the “Investors”) to purchase and sell beneficial interests in the Securities issued by the Company in such Offerings.

In consideration of the mutual agreements, covenants and provisions herein contained, the receipt and adequacy of which is acknowledged by the parties, the parties agree as follows:

1. Use of Website

Upon submission by Company of the information required to qualify to sell Securities in reliance on Regulation CF, Regulation D, or both (collectively, the “Exemptions”), Platform may make the Site available to the Company to allow Investors to purchase Securities offered for sale and facilitated by Funding Portal, Broker, or both (each an “Intermediary”, or collectively the “Intermediaries”). Netcapital shall have the right, but not the obligation, to list Securities of Company on the Site and Netcapital may withdraw such Securities from the Site in its sole discretion at any time prior to the release of beneficial interests in the Securities to Investors.

2. Terms of Service

The Terms of Service are incorporated by reference into this Agreement. Company has read and agree to the Terms of Service, and Company understands that the Terms of Service govern Company’s use of the Site and the Services (terms not defined herein are defined in the Terms of Service).

3. Offering Fee

Cash received from Investors for the purchase of Securities shall be held in a third-party escrow account, until the targeted offering amount established by the Company (the “Offering Amount”) is reached. Upon reaching the targeted Offering Amount, the Intermediaries earn a fee of 4.9% of the gross funds collected (the “Offering Fee”). The Company agrees that the escrow agent shall remit the Offering Fee directly to the Intermediaries, shall keep its negotiated fee for serving as the escrow agent, and shall remit the balance of the funds held in escrow to the Company. A portion of the Intermediaries’ fees may be directly remitted to the Platform in accordance with separate services agreements between Platform and the Intermediaries. If the targeted Offering Amount is not reached, there is no Offering Fee.

4. Representations, Warranties and Covenants

The representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement for a period of one year after the Securities cease to be offered for sale on the Site.

  1. Company represents and warrants to Platform and the Intermediaries that the Issuer Information (as defined below) is correct and complete. None of the Issuer Information provided is false or misleading or omits a fact necessary to make such information false or misleading.
  2. Company understands and agrees that if any event occurs or circumstance arises that creates an obligation to update the Issuer Information, then Company must update such information in accordance with applicable federal securities laws and provide Platform immediately with a copy of such update.
  3. Company agrees that Company is fully responsible for the accuracy of any information that Company uploads to the Site, and Company is fully responsible for any and all consequences and claims related to any investment that is made in Company through the Site in reliance upon such information.
  4. Company understands that the offer and sale of Securities—including, without limitation, stock, options, convertible debt, warrants and other similar instruments—is regulated by federal and state law and regulation (including non-U.S. securities laws and regulations if Company’s Securities are offered and sold in transactions outside the United States) (“Securities Laws”), and that if Company uses the services available through the Site to conduct any transaction involving Securities, Company must do so in compliance with applicable Securities Laws and all other applicable laws.
  5. Company represents and warrants to the Platform and the Intermediaries that the Securities offered and sold in this Offering are duly authorized, validly issued, fully paid and nonassessable.
  6. Company understands that Platform and the Intermediaries make no representation or warranty that transactions conducted through the Site will be in compliance with applicable Securities Laws, including state blue sky laws, except for Funding Portal’s liability in connection with its role as an Intermediary under Regulation CF and Broker’s liability in connection with its role as an Intermediary under Regulation D, which may, at the time of the Company's Offering, include exemption from state blue sky laws. Company acknowledges that use of the Services available through the Site to conduct any transaction involving securities does not constitute compliance with applicable Securities Laws, and may violate applicable Securities Laws in certain jurisdictions.
  7. Company agrees to sell the Securities to Investors through the Intermediaries on the Platform in accordance with Regulation CF and Regulation D, any Form C filed with the U.S. Securities and Exchange Commission and the terms of the Offering.
  8. Funding Portal represents it is a registered funding intermediary with the SEC and covenants to maintain compliance throughout the duration of the Offering.
  9. Broker represents it is a registered funding intermediary with the SEC and covenants to maintain compliance throughout the duration of the Offering.
  10. Company acknowledges that it is a third party beneficiary under the Master Investor Agreement between Platform and each Investor.
  11. Company agrees, represents and warrants to all of the following matters:
    1. The Company is organized under, and subject to, the laws of a State or territory of the United States or the District of Columbia.
    2. The Company is not subject to the requirement to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.
    3. The Company is not an investment company registered or required to be registered under the Investment Company Act of 1940.
    4. The Company is not ineligible to rely on the exemption under Section 4(a)(6) of the Securities Act as a result of a disqualification specified in Rule 503(a) of Regulation Crowdfunding.
    5. The Company has filed with the Securities and Exchange Commission and provided to investors, to the extent required, the ongoing annual reports required by Regulation Crowdfunding during the two years immediately preceding the filing of this offering statement (or for such shorter period that the issuer was required to file such reports).
    6. The Company is not a development stage company that (a) has no specific business plan or (b) has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies.

5. Limited Liability

Company agrees that, to the fullest extent permitted by law:

  1. Funding Portal shall have no liability for any losses arising from or related to any transaction in Securities conducted through the Site, except for liability arising from Funding Portal’s failure to materially comply with applicable Securities Laws in connection with its role as an Intermediary under Regulation CF.
  2. Broker shall have no liability for any losses arising from or related to any transaction in Securities conducted through the Site, except for liability arising from Broker’s failure to materially comply with applicable Securities Laws in connection with its role as an Intermediary under Regulation D.
  3. Platform shall have no liability for any losses arising from or related to any transaction in securities conducted through the Site, except in the case of gross negligence in the handling of Offering data.
  4. Funding Portal and Broker shall have no liability for false, misleading or incomplete information regarding Company provided by or on behalf of Company.

6. Indemnification

Company will defend, indemnify and hold harmless Platform, Intermediaries, and their officers, directors, employees, agents and third parties, for any losses, costs and expenses (including reasonable attorney’s fees) relating to or arising out of Company’s violation of applicable law, the Issuer Information, use of the Site, integration of offerings of Company’s securities, including but not limited to, any breach by Company of the terms of this Agreement. This provision shall not apply to any losses, costs, liabilities and expenses relating to or arising out of any exception to the Limited Liability detailed in Section 5 of this Agreement.

7. Custodial Accounts

Company acknowledges that Worldwide Stock Transfer LLC, a New Jersey corporation, has been retained as custodian (“Custodian”) and transfer agent (“Transfer Agent”) for the Securities offered and sold on the Site. The Custodian will be the sole legal owner and record holder of the Securities and all voting rights to the Securities. Investors will be purchasing or reselling beneficial interests in the Securities. The books and records of Issuer will reflect that the Custodian is the sole legal and record owner of the Securities. The sole dispositive record of Investors’ beneficial ownership of the Securities will be on the books and records of the Transfer Agent.

8. Secondary Transfers

  1. The Platform agrees to facilitate investors in the beneficial interests in the Securities to transfer such beneficial interests in the Securities to eligible investors on the Site, subject to applicable law.
  2. Company shall provide to Platform a copy of the following information regarding the Issuer within 24 hours of filing with the Securities and Exchange Commission: (i) Issuer’s Form C, Form C-A and Form C-U, as applicable; and (ii) Issuer’s Form C-AR, if available, and the date on which the next report will be available (collectively with all other information relating to the Issuer provided by the Issuer to Platform, the “Issuer Information”).
  3. Company confirms that the Securities are being issued without any transfer restrictions and that Investors may transfer beneficial interests in such Securities without any additional approvals from Issuer.
  4. Platform and the Intermediaries shall have no liability for the valuation or price of Securities beneficially offered or purchased through the Site.
  5. Secondary trading will occur solely in the beneficial interests of the Securities and not in the legal title of the Securities. Accordingly, the books, records and capital table of the Issuer will remain unchanged as a result of secondary trading in the beneficial interests in the Securities.

9. Ongoing Reporting and Advertising Restrictions

For any Offerings under Regulation CF, Company understands that Company has ongoing disclosure obligations to the SEC. In addition, Company agrees to comply with restrictions on advertising for any Offerings under Regulation CF. Company agrees that Company is solely responsible for compliance with such ongoing disclosure obligations and advertising restrictions, except to the extent of Funding Portal’s responsibility in connection with its role as an intermediary.

10. Concurrent Offerings

The parties agree that, if applicable, they intend that two separate offerings that occur within a six month period of each other and that are made through the Platform and the Intermediaries under (1) Regulation CF and (2) Rule 506(c) of Regulation D, respectively, will not be treated as the same offering for purposes of the U.S. Securities Act of 1933, as amended (“Securities Act”). Company agrees that if Company makes two offerings in this manner, Company will conduct each offering to comply with all applicable laws, rules and restrictions applicable to each offering. Company further agrees that if Company offers securities outside this Agreement under another exemption from registration under the Securities Act, Company will conduct that offering in compliance with all applicable laws, rules and restrictions, and will take all necessary steps to avoid the offering being treated as the same offering as any conducted under this Agreement. Company also agrees that any offering Company conducts under Section 506(b) of Regulation D will be made prior to an offering under Rule 506(c) of Regulation D under this Agreement, and each investor who invests in the prior offering under Rule 506(b) will invest independent of any offering made under this Agreement. Company is solely responsible for all liability that may arise based on any integration of offerings of Company’s securities.

11. Governing Law

This Agreement shall be governed by the substantive laws of the State of Delaware without regard to its conflict of law principles.

12. Publicity

Company agrees that, from the time Company registers on the Site, Netcapital may identify Company as a user of Netcapital.

13. Headings

The paragraph headings of this Agreement are for convenience of reference only and do not form a part of the terms and conditions of this Agreement or give full notice thereof.

14. Counterparts; Electronic Signature

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. This Agreement may be executed by electronic signature and an electronic signature shall constitute an original for all purposes.

15. Severability

If any provision of this Agreement is found by a court of competent jurisdiction to be invalid, the parties nevertheless agree that the court should endeavor to give effect to the parties’ intentions as reflected in the provision, and the other provisions of the Agreement remain in full force and effect.

16. Assignment

This Agreement and any rights or licenses granted hereunder may not be transferred or assigned by Company without Portal’s prior written consent, but may be assigned by Platform or the Intermediaries without consent or other restriction upon notice to Company or where substantially all of Platform’s or Intermediaries’ assets are sold. Any attempt by Company to assign this Agreement, or any rights or licenses granted herein, without Platform’s express written consent will be null and void.

17. Successors and Assigns

This Agreement shall be binding on and inure to the benefit of the parties to this Agreement and their respective heirs, legal or personal representatives, successors and assigns.

18. Compliance with Laws

Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.

19. No Waiver

The failure of any party to exercise or enforce any right or provision of this Agreement shall not constitute a waiver of such right or provision. A waiver on any one occasion shall not be construed as a bar to, or waiver of, any right or remedy on any future occasion.

20. Force Majeure

The Company, Platform and Intermediaries will not be held liable for any delays or failure to perform their obligations under this Agreement, from any cause beyond their control. This includes, but is not limited to, changes to law or regulations, embargoes, war, terrorist acts, riots, fires, earthquakes, floods, nuclear accidents, strikes, power blackouts, volcanic action, unusually severe weather conditions, and acts of hackers or third-party internet service providers.

21. Modification

This Agreement shall not be modified or amended except by an instrument in writing signed by or on behalf of the parties to this Agreement.

22. Further Assurances

Company agrees that Company will do any and all things reasonably necessary without undue burden or expense after the date of this Agreement in order to effectuate all the terms and conditions of this Agreement.

23. Entire Agreement

This Agreement contains the entire understanding between the parties with respect to its subject matter and supersedes all prior or contemporaneous agreements, representations, warranties and understandings of such parties (whether oral or written). No promise, inducement, representation or agreement other than as expressly set forth herein, has been made to or by the parties to this Agreement.

Company has caused this Agreement to be executed by its duly authorized corporate officer, as of the time, day and year of Company’s electronic consent.

Last updated February 28, 2018