Issuer Terms of Service

Welcome to Localvest, a platform, and website operated by Miladvisor, Inc. (“Localvest,” “we,” or “us”). Localvest is an online community that matches investors with businesses and entrepreneurs seeking investment. Localvest is also a destination for investors to connect and foster relationships based on shared investment interests. All terms appearing in initial capitalized form have the meaning set forth in Schedule A (Definitions) of the Localvest Terms of Service (the “Agreement”).

1. Overview

As an Issuer (“Issuer,” “you,” or ““your”), when you use the Localvest issuer platform (the “Platform”) and our related issuer services offered by us from time to time (collectively the “Platform Services”) you are agreeing to the terms of this Localvest Terms of Service (this “Agreement”) by and between an Issuer and Localvest, so please read it carefully as it contains important information regarding your legal rights and obligations. Certain capitalized words used throughout this Agreement are defined in Schedule A (Definitions).

Localvest restricts access to its password protected site to potential investors (each an “Investor”) who have completed our registration process and have demonstrated that they are an “Accredited Investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), and to Issuers and other companies seeking to attract investment who have completed the process to list their particular investment opportunity on the Localvest website. Localvest also maintains a public facing website which is accessible to the general public without the requirement to complete our registration process. We refer to those who view our public-facing site as “Visitors.”

Significant legal and regulatory considerations apply to the capital raising process, and this Agreement sets forth terms on which Issuer may interact with Investors and other Visitors through our Platform and the Localvest website. An overview of these considerations is set forth on Annex A to this Agreement entitled “Certain Securities Law Matters and Frequently Asked Questions.” We urge you to review them and consult with an experienced securities lawyer prior to the closing of any offering, as Localvest is not a law firm and does not provide legal advice to any Issuer or Investor. Also, Localvest is not an investment adviser, funding portal, or broker-dealer and does not conduct any activity that would require registration as such with the Securities and Exchange Commission (the “SEC”) or any other governmental authority.

As an Issuer, you are invited to create a summary of the terms of your offering, which we refer to as a “Deal Tile,” and to upload other information about your offering. By selecting the offering exemption you are relying upon to offer securities on the Localvest website when you complete the Localvest Issuer Platform Services Order Form (which is either the exemption provided under Rule 506(b) or Rule 506(c) under Regulation D of the Securities Act), you are designating whether the Deal Tile is available only to registered Investors who have logged in to the Localvest website, or to any Visitor (i.e., any member of the general public who visits the Localvest public facing website). Issuer may also upload other information about your business and the offering on the Platform, including your business plan, financial model, offering materials, and “pitch decks,” and may conduct Investor calls, virtual investor events, and presentations. You understand that although certain information you upload onto the Platform may be designated by you as confidential, we cannot guarantee that Investors who see your Deal Tile or other confidential information will maintain its confidentiality and will not distribute that information.

By using Localvest’s Platform, our Platform Services and by simply viewing content on the Localvest website, you are agreeing that you, and each Person you allow to access to Localvest through your account will abide by the terms of this Agreement.

The Localvest website is not directed to any Person in any jurisdiction where (by reason of that Person’s nationality, residence or otherwise) the publication or availability of the Localvest website is prohibited. Persons in respect of whom such prohibitions apply must not access the Localvest website. The Platform Services are available only to Issuers organized under the Laws of the United States.

IMPORTANT NOTICE REGARDING ARBITRATION: WHEN YOU AGREE TO THIS AGREEMENT YOU ARE AGREEING (WITH LIMITED EXCEPTION) TO RESOLVE ANY DISPUTE BETWEEN YOU AND LOCALVEST THROUGH BINDING, INDIVIDUAL ARBITRATION RATHER THAN IN COURT. PLEASE REVIEW CAREFULLY SECTION 13 (ARBITRATION) BELOW FOR DETAILS REGARDING ARBITRATION.

2. Issuer Representations and Obligations

In partial consideration for our agreement to provide Issuer with access to the Platform, the Platform Services and use of the Localvest website, Issuer represents, warrants and covenants to Localvest on the Effective Date of this Agreement, and each time Issuer (and each authorized Person using Issuer’s User ID and Password) uses the Platform, the Platform Services or visits the Localvest website that:

(a) this Agreement is a duly authorized agreement binding upon Issuer in accordance with its terms;

(b) any authorized representative of Issuer is at least 18 years old and has Issuer’s permission to use Issuer’s User ID and that Issuer shall be solely responsible for maintaining the confidentiality of its User ID and Password;

(c) no Covered Person is a “bad actor” as defined in Rule 506(d) under the Securities Act which would disqualify Issuer from relying on Rule 506(b) and 506(c) of Regulation D;

(d) the registration information provided on the Order Form is true, correct, and complete and that Issuer will update such registration information with the Localvest as needed so that it remains true, correct, and complete;

(e) you will conduct yourself in a professional manner in all your interactions with Localvest and with any Investor, Visitor or other Localvest user;

(f) you will only upload onto the Platform such Materials that you have a right to provide to Localvest and to allow Localvest to display through the Platform Services, and that you have adequate rights to all copyrights, trademarks, trade secrets, intellectual property, or other material provided by you for display, publication or use by Localvest;

(g) that any Materials you upload onto the Platform will not contain any untrue statement of a material fact concerning you, your business, or the terms of any proposed offering, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading;

(h) you understand that your Materials may be republished and if you do not have the right to submit Materials for such use, it may subject you to liability, and that Localvest will not be responsible or liable for any use of your Materials by Localvest in accordance with this Agreement;

(i) you are not relying on Localvest to, and you understand that we do not, endorse, support, represent or guarantee the completeness, truthfulness, accuracy, or reliability of any Materials or communications posted via the Platform Services or endorse any opinions expressed via the Platform Services;

(j) you understand that by using the Platform and the Platform Services, you may be exposed to Materials that might be offensive, harmful, inaccurate, or otherwise inappropriate and that you have no claim against Localvest for any such material;

(k) you understand that the Service may include advertisements or other similar items, which may be related to Materials, queries made through the Platform Services, or other information, and you have no claim against Localvest for the placement of advertising or similar content on the Platform Services or in connection with the display of any Materials or other information from the Platform Services.

(l) you are solely responsible for complying with applicable Law regarding any transaction, including verifying the accredited investor status of any Investor who purchases securities from you in any offering displayed on the Localvest website or who were introduced to you through the use of the Platform Services;

(m) neither Localvest nor any Affiliate of Localvest, or any employee, officer, director, representative, or other agent of the foregoing (each a “Localvest Representative”) has reviewed or passed upon the terms of any Deal Tile, any Materials uploaded on the Platform or any other document or matter related to your use of the Platform Services, and that any transaction entered into by you and any Investor will be entered into without reliance upon Localvest in any capacity whatsoever;

(n) you will obtain such professional advice as is appropriate to protect your interests, including legal, tax, accounting, and other advice; and

(o) you have reviewed and understand the discussion of risks inherent in private securities offerings, including those disclosed here, and that you are otherwise aware of the risks of offering securities through the use of the Platform and the Platform Services;

(p) you will not violate the Community Rules of Localvest, as defined in Schedule A (Definitions);

(q) you will not expect us to evaluate, confirm or otherwise stand behind any user’s statements or recommend any investment;

(r) you will not treat any Materials, email, or other information you receive as a result of your access to the Platform Services as a recommendation or representation of any kind by Localvest or any Localvest Representative on which you should rely unless such information has been expressly identified as created by a Localvest Representative;

(s) you will not claim any ownership or other proprietary right in any material, software, or other intellectual property displayed on, published by, or otherwise available through Localvest, other than Materials, software or intellectual property that you own or otherwise have rights to without regard for its appearance on Localvest;

(t) you will not copy or distribute Materials except as specifically allowed in this Agreement;

(u) you will not use any Materials, or other information acquired from Localvest or a Localvest Representative, Investors or Visitor, or otherwise through your use of the Platform Services, for commercial or investment activity outside of the Platform Services, without prior written approval from Localvest;

(v) you will not claim any right to access, view, or alter any source code or object code of Localvest;

(w) you will not use Localvest to market services, particularly investment advisory services that might cause Localvest to have to register as a broker-dealer or investment adviser with the SEC, or to be treated as an underwriter; and

(x) you will not market competing services to any Person you have identified through Localvest.

3. Indemnification of Localvest and Related Parties

(a) You are promising to hold Localvest and each Localvest Representative harmless against any loss or damage that may happen to us or any Localvest Representative as a result of your use of the Platform, the Platform Services or the Localvest website. In that regard you agree to indemnify, defend, and hold harmless Localvest and any Localvest Representative from and against any and all third party claims alleged or asserted against any of them, and all related charges, damages and expenses (including, but not limited to, reasonable attorneys’ fees and costs) arising from or relating to: (i) your access to or use of the Platform, the Platform Services or the Localvest website; (ii) the violation of this Agreement by you; (iii) the infringement or misappropriation by you, or any third party using your account, of any intellectual property or other right of any Person, or for any Materials posted on the Platform or through the Platform Services by you (including claims related to defamation, invasion of privacy or other violation of a Person’s rights); and (iv) any actual or alleged violation by you of the Securities Act or any other applicable laws or regulations. Your obligations under the foregoing indemnity may not be offset against any other claim you may have against Localvest or any Localvest Representative. You remain solely responsible for all Materials that you upload, post, email, transmit, or otherwise disseminate using, or in connection with, the Platform or through the Platform Services. You agree that the provisions in this paragraph will survive any termination of your account(s) or the Platform Services.

(b) You hereby release any claims you may have against Localvest and any Localvest Representative that are in any way related to the Platform, the Platform Services or the Localvest website, or the use by any Person of any of your Materials, including any representations, introductions or referrals you may receive as a result of your registration with Localvest and entering into this Agreement. You are solely responsible for your use of the Platform, the Platform Services or the Localvest website, for any Materials you provide, and for any consequences thereof, including the use of your Materials by Investors, Visitors or other users of the Localvest website.

4. Other Issuer Obligations, Agreements and Acknowledgements

(a) Issuer covenants that it will comply with the terms of the license set forth in Section 6 (Localvest Platform Services and License Grants) of this Agreement.

(b) In addition to the Deal Tile you create you acknowledge that you are licensing us the right to publish all Materials you upload to Localvest, in order for us to provide the Platform Services. If you elect to conduct an offering upon reliance on Rule 506(b) your Deal Tile and other Materials will be viewable by Investors and others who have logged into our password-protected website. If you elect to conduct an offering upon reliance on Rule 506(c) your Deal Tile and other Materials will be viewable on our public-facing website and through third-party services and websites. You should only provide Materials that you are comfortable sharing with others as there is no obligation for Localvest to maintain the confidential nature of any Materials you upload on the Platform or that is published through the use of the Platform Services.

(c) To the extent that Localvest is determined, for any reason, not to be the licensee of any Materials you have provided to us, including all rights of paternity, integrity, disclosure, and withdrawal, and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like (collectively “Moral Rights”), you hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by Localvest and agree not to assert any Moral Rights with respect thereto. You further agree that you will confirm any such ratifications, consents, and agreements from time to time as requested by Localvest.

(d) You acknowledge that other than for payment of the Platform Services set forth on the Order Form there is no compensation being paid to Localvest or any Localvest Representative in connection with the use of the Platform, the Platform Services, or the Localvest website. You understand that payment for the Platform Services ordered on the Order Form is nonrefundable and is not contingent on the success of any offering, including without limitation any offering described in any Deal Tile or other Materials.

(e) You agree that this Agreement does not entitle you to any support, upgrades, updates, add-ons, patches, enhancements, or fixes for the Platform Services (collectively, “Updates”). Localvest, however, may occasionally provide automatic Updates to the Platform Services at its sole discretion (and without any advance notification to you). Any such Updates for the Platform Services shall become part of the Platform Services and subject to this Agreement.

(f) You agree that Localvest, at its sole discretion and to the extent permitted by law, may access, read, preserve and disclose your account information, usage history and uploaded Materials in order to: (i) comply with any applicable law, regulation, legal process, or governmental request; (ii) respond to claims that any such Material violates the rights of third parties, including intellectual property rights; (iii) enforce this Agreement and investigate potential violations thereof; (iv) detect, prevent, or otherwise address fraud, security, or technical issues; (v) respond to your requests for customer service; or (vi) protect the rights, property, or personal safety of Localvest, any Localvest Representative, Investors and Visitors, or the public.

5. Privacy and Protection of Personal Information

(a) Localvest values your privacy. Please review our Privacy Policy to learn more about how we collect and use information about you via the Platform Services. The Privacy Policy explains how Localvest treats your personal information and protects your privacy when you access Localvest and use the Platform Services. By using the Platform Services, you are indicating that you’ve read the Privacy Policy and agree to its terms.

(b) Amendments to the Privacy Policy. We may amend the Privacy Policy at any time in our sole discretion, effective upon posting the amended Privacy Policy on our website located at www.localvest.com/privacy where the prior version of the Privacy Policy was posted, or by communicating these changes through any written or other contact method we have established with you. Your use of the Platform Services following the date on which such amended Privacy Policy is published will constitute consent to such amendments to the extent they do not have retroactive applicability.

6. Localvest Platform Services and License Grants

(a) License Grant to You. Subject to the terms and conditions of this Agreement, Localvest hereby grants to you a limited, non-exclusive, non-transferable, non-sublicensable, revocable license and right to use the Platform Services set forth on the Order Form, during the Subscription Term and solely for your internal business purposes, including your capital raising efforts. You will not: (i) modify, copy or create any derivative works based on the Platform Services; (ii) license, sublicense, sell, resell, rent, lease, transfer, assign, distribute, time share, offer in a service bureau, or otherwise make the Platform Services available to any third party, other than to your authorized users as permitted herein; (iii) reverse engineer or decompile any portion of the Platform Services, including but not limited to, any software utilized by Localvest in the provision of the Platform Services; (iv) access or use (or allow a third party to access or use) the Platform Services for competitive analysis or to build any competing products or services; (v) copy any features, functions, integrations, interfaces or graphics of the Platform Services; or (vi) otherwise use or exploit the Platform Services in any manner not expressly permitted by this Agreement. All right, title, and interest in and to the Platform Services (excluding Materials provided by Issuer) is and will remain the exclusive property of Localvest and its licensors. The Platform Services are protected by copyright, trademark, and other Laws of the United States. Except as expressly provided herein, nothing in this Agreement gives you a right to use the Localvest name or any of the Localvest trademarks, logos, domain names or other distinctive brand features.

(b) License Grant to Localvest. You hereby grant to Localvest and its Affiliates a worldwide, perpetual, irrevocable, transferable, sublicensable, royalty-free license to (i) modify, copy, distribute, and incorporate into the Platform Services (without attribution of any kind) any suggestions, enhancement request, recommendations, proposals, correction or other feedback or information provided by you, any of your Affiliates, or your representatives relating to the Platform Services or Localvest’s or its Affiliates’ business(es); and (ii) to use your business name(s), trademarks, service marks, logos or any publicly available images (collectively, “Your Marks”) in connection with providing the Platform Services and for marketing and promotional purposes in connection with Localvest’s business. Localvest agrees that any use by Localvest of any of Your Marks will inure solely to the benefit and goodwill of your business. Other than those rights specifically granted to Localvest or its Affiliates herein, all right, title and interest in and to Your Marks are expressly reserved by you. Issuer retains all right, title and interest in and to all Materials uploaded onto the Platform or otherwise provided to Localvest in connection with the Platform Services (collectively, “Issuer Materials”), and Localvest acknowledges that it neither owns nor acquires any additional rights in and to such Issuer Materials not expressly granted by this Agreement. Subject to the foregoing, Issuer hereby grants to Localvest a non-exclusive, non-transferable right and license to use the Issuer Materials during the Term for the limited purposes of performing Localvest’s obligations under this Agreement.

(c) Localvest shall use commercially reasonable efforts to make the Platform Services available 24 hours a day, 7 days a week except for: (i) scheduled maintenance and planned downtime, and/or (ii) events of Force Majeure. Notwithstanding anything to the contrary contained in this Agreement, Localvest does not guarantee or promise the Platform Services will be timely, uninterrupted, or continuous. Issuer understands that distribution of any Issuer Materials depends on numerous factors, technologies, and systems, some of which are beyond Localvest’s authority, control or responsibility. These include, without limitation, the availability of public Internet service, whether to Issuer, to Localvest, or to any Investor or Visitor; the use of firewalls or blocking filters; denial of service attacks, viruses, or any other type of malicious attack against Issuer, Localvest, or to any Investor or Visitor, and losses of power.

7. Reservation of The Company’s Rights

(a) Right to Control Materials. Localvest may, but is not required to, monitor or control the Materials posted via the Platform Services. Our failure to exercise this right does not give you any right to make a claim against Localvest. Other than with respect to any Issuer Materials, any other Materials that have been uploaded through the Platform Services may be deleted at any time without notice to you.

Right to Discontinue the Platform Services. Localvest reserves the right to discontinue the Platform Services or to change the Platform Services in any way and at any time, with or without notice to you, without liability.

(b) Right to Terminate Investor Access. Issuer acknowledges that Localvest reserves the right to terminate any Investor’s access to the Platform Services without notice. We may delete an Investor’s account for any reason or for no reason at all, and if we delete an Investor’s account you will lose all access to any information, connections, or other features that may have value to you that may have been associated with such Investor.

(c) Issuer Acknowledgement. The Platform Services provide you with the opportunity to create, submit, post, transmit, publish or distribute Issuer Materials to Localvest and Investors via the Platform Services. Any such Issuer Materials you transmit to Localvest and Investors through the Platform Services will be treated as non-confidential and non-proprietary. To the extent Issuer determines that any Issuer Materials constitute proprietary information of the Issuer or any other Person, Issuer undertakes to enter into a suitable confidentiality and nondisclosure agreement with any prospective recipient of such Issuer Materials prior to disclosure. Localvest does not undertake to maintain the confidentiality of any Issuer Materials in the absence of a separate written agreement between Issuer and Localvest to the contrary.

8. Limits on Localvest’s Obligations

(a) Although we will provide the Platform Services we are not obligated to introduce you to any Investor or Visitor. Through the use of the Platform Services, Investors, and for offerings made in reliance on Rule 506(c) of Regelation D, Visitors, will be able to view your Deal Tile and any Issuer Materials you make available. Investors and Visitors, as applicable, will make their own determination as to whether they want to initiate any communication with you, and the terms of such communication. Localvest makes no representation whatsoever that you will be successful in interesting Investors or Visitors in your offering, or whether any such offering will be consummated on the terms appearing on your Deal Tile, or at all.

(b) We are not responsible for doing due diligence on any Investors, Visitors, other Issuers, or any other Person you meet through Localvest, nor are we verifying any representations, materials, or other information provided by any of the foregoing to you or any other Person.

(c) We are not responsible for verifying that any Investor is an accredited investor or otherwise authorized or appropriate to invest in you, or for determining whether any use of Localvest constitutes a general solicitation of securities under the securities Laws of the United States, or the Laws of any state or other jurisdiction, including foreign jurisdictions.

(d) You understand that we do not recommend you or any other Issuer for investment, endorse the terms of your or any other Issuer’s offering or fitness for investment or verify or claim the accuracy of information provided by you or any other Issuer on the Localvest website or in our emails or other notifications. In particular, we do not act as an investment adviser to any Person and no part of this website is intended to constitute investment advice.

(e) You acknowledge that we are not obligated to maintain the confidentiality of any Issuer Materials you give us, other than for the Deal Tile and any Issuer Materials for offerings relying upon the exemption afforded by Rule 506(b) which we will only make available to Investors, and with respect to such information, we are not obligated to protect it other than by designating it as information not intended for public dissemination.

(f) Localvest has no obligation to monitor or enforce any intellectual property rights that may be associated with Issuer Materials you provide to us, but Localvest does have the right to enforce such rights through any means it sees fit, including bringing and controlling actions on your behalf if in our determination we believe it is in our interest to do so.

(g) In the event that Localvest or any Localvest Representative or Affiliate invests in any business or investment opportunity, we are not obligated to make that investment opportunity available to anyone else.

(h) Localvest does not control or endorse any Materials, including any other Issuer Materials, messages, or information found on the Localvest website, in the Platform Services or external websites that may be linked to or from Localvest and, therefore, Localvest specifically disclaims any responsibility with regard thereto.

(i) Localvest has no obligation to accept, display, review, verify, monitor, or maintain any Materials submitted by Investors, Visitors, Investor forum posts, commentary, ratings, or compliments (“Comments”). We have the right to delete Materials or Comments from the Platform Services without notice for any reason at any time. Localvest may move, re-format, edit, alter, distort, remove, or refuse to exploit Materials or Comments without notice to you and without liability. Notwithstanding the forgoing rights, Localvest reserves the right to treat Materials provided by Investors, Visitors, and other Issuers and Comments as content stored at the direction of the author of such Materials and Content for which Localvest will not exercise editorial control except as required to enforce the rights of third parties and applicable restrictions when violations are brought to our attention.

(j) The Platform Services may contain or deliver advertising and sponsorships. Advertisers and sponsors are responsible for ensuring that material submitted for inclusion is accurate and complies with applicable Laws. We are not responsible for the illegality or any error, inaccuracy, or problem in an advertiser’s or sponsor’s Materials.

9. Notification of Copyright Infringement

Localvest respects the intellectual property rights of others and expects users of the Platform Services to do the same. We will respond to notices of alleged copyright infringement that comply with applicable Law and are properly provided to us. The Digital Millennium Copyright Act (“DMCA”) provides recourse to copyright owners who believe that their rights under the U.S. Copyright Act have been infringed by acts of third parties over the Internet.

If you believe that your copyrighted work has been copied without your authorization and is available on or in the Platform Services in a way that may constitute copyright infringement, or if you believe that any material on the Platform Services violates this Agreement or your intellectual property rights, please notify Localvest as soon as possible by sending an email to copyright @localvest.com, or by mailing a letter to the Localvest Copyright Agent (listed below) containing the following information in accordance with the DMCA: (i) identification of the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit us to locate the material on the Localvest website; (ii) identification of the copyrighted work claimed to have been infringed; (iii) if other than the Issuer contact information set forth on the Order Form, the contact information of the Issuer Representative responsible for copyright issues, including his or her address, telephone number, and an email address; (iv) a statement by you that you have a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent or the Law; (v) a statement that the information in the notification is accurate, and, under penalty of perjury, that you are authorized to act on behalf of the copyright owner; and (vi) a physical or electronic signature of the copyright owner or a person authorized to act on their behalf.

Our Localvest Copyright Agent for notice of alleged copyright infringement or other legal notices regarding Materials appearing on the Platform Services is:

Miladvisor, Inc.

Attn: Localvest Copyright Matters

19455 Deerfield Ave., Suite 307

Leesburg, VA 20176

Email: support@localvest.com

We reserve the right to remove Materials alleged to be infringing or otherwise illegal without prior notice and at our sole discretion. In appropriate circumstances, Localvest will also terminate a user’s account if the user is determined to be a repeat infringer.

10. Term and Termination

(a) You may terminate this Agreement at any time prior to the termination of the Subscription Term by providing notice to us and deleting all Issuer Materials you have uploaded onto the Localvest Platform and ceasing to use the Platform Services. Localvest may terminate this Agreement at any time effective immediately upon notice to you if you are in breach of any provision of this Agreement. Upon termination of this Agreement for any reason, you shall destroy and remove from all computers, and other storage media all copies of any intellectual property owned by Localvest or any other user of the Platform Services that you acquired via use of the Platform Services. If you elect to terminate this Agreement early, you will remain responsible for payment of all fees owed for the entire Subscription Term and will continue to be charged for the remainder of the Subscription Term for any Platform Services set forth on the Order Form. Your representations in this Agreement and the provisions of Section 2 (Issuer Obligations), Section 3 (Indemnification), Section 13 (Arbitration), and any other provisions of this Agreement which by their nature are designed to survive termination shall survive any termination or expiration of this Agreement.

11. DISCLAIMERS; LIMITATIONS; WAIVERS OF LIABILITY

(a) YOU EXPRESSLY AGREE THAT ACCESS TO AND USE OF THE PLATFORM SERVICES IS AT YOUR SOLE RISK AND IS PROVIDED ON AN “AS IS” BASIS WITHOUT WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF TITLE OR IMPLIED WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE (EXCEPT ONLY TO THE EXTENT PROHIBITED UNDER THE LAWS APPLICABLE TO TERMS OF SERVICE WITH ANY LEGALLY REQUIRED WARRANTY PERIOD TO THE SHORTER OF THIRTY DAYS FROM FIRST USE OR THE MINIMUM PERIOD REQUIRED). WITHOUT LIMITING THE FOREGOING, NEITHER LOCALVEST NOR ITS AFFILIATES OR SUBSIDIARIES, OR ANY OF THEIR DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS, THIRD-PARTY CONTENT PROVIDERS, DISTRIBUTORS, LICENSEES, OR LICENSORS (COLLECTIVELY, “LOCALVEST PARTIES”) WARRANT THAT THE LOCALVEST SERVICES WILL BE SECURE, TIMELY, ERROR-FREE OR UNINTERRUPTED, OR THAT THE LOCALVEST SERVICES ARE OR WILL REMAIN UPDATED, COMPLETE OR CORRECT, OR THAT THE LOCALVEST SERVICES WILL MEET YOUR REQUIREMENTS OR THAT THE SYSTEMS THAT MAKE THE LOCALVEST SERVICES AVAILABLE (INCLUDING WITHOUT LIMITATION THE INTERNET, OTHER TRANSMISSION NETWORKS, AND YOUR LOCAL NETWORK AND EQUIPMENT) WILL BE UNINTERRUPTED OR FREE FROM VIRUSES OR OTHER HARMFUL COMPONENTS.

(b) TO THE FULLEST EXTENT PERMITTED BY LAW, THE DISCLAIMERS OF LIABILITY CONTAINED HEREIN APPLY TO ANY AND ALL DAMAGES OR INJURY WHATSOEVER CAUSED BY OR RELATED TO USE OF, OR INABILITY TO USE, THE LOCALVEST SERVICES UNDER ANY CAUSE OR ACTION WHATSOEVER OF ANY JURISDICTION, INCLUDING, WITHOUT LIMITATION, ACTIONS FOR BREACH OF WARRANTY, BREACH OF CONTRACT OR TORT (INCLUDING NEGLIGENCE) AND THAT LOCALVEST PARTIES SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES IN ANY WAY WHATSOEVER ARISING OUT OF THE USE OF, OR INABILITY TO USE, THE LOCALVEST SERVICES OR OTHERWISE IN CONNECTION WITH THIS AGREEMENT. YOU FURTHER SPECIFICALLY ACKNOWLEDGE THAT THE LOCALVEST PARTIES ARE NOT LIABLE, AND YOU AGREE NOT TO SEEK TO HOLD THE LOCALVEST PARTIES LIABLE, FOR THE CONDUCT OF THIRD PARTIES, INCLUDING OTHER USERS OF THE LOCALVEST SERVICES AND OPERATORS OF EXTERNAL WEBSITES, AND THAT THE RISK OF THE SERVICES AND EXTERNAL WEBSITES AND OF INJURY FROM THE FOREGOING RESTS ENTIRELY WITH YOU.

(c) Under no circumstances will any Localvest Party be responsible for any loss or damage, including any loss or damage to any content or personal injury or death, resulting from anyone’s use of the Platform Services, any Materials, or third-party applications, software or content posted on or through the Platform Services or transmitted to Investors, Visitors or other users or any interactions between Investors, Visitors or other users of the Platform Services, whether online or offline.

(d) We make no warranty and disclaim all responsibility and liability for the completeness, accuracy, availability, timeliness, security, or reliability of the Platform Services or any Materials thereon or any content you receive as a result of your relationship with Localvest. Localvest will not be responsible or liable for any harm to your computer system, loss of data, or other harm that results from your access to or use of the Platform Services or any Materials. You also agree that Localvest has no responsibility or liability for the deletion of, or the failure to store or to transmit, any Materials and other communications maintained by the Platform Services. We make no warranty that the Platform Services will meet your requirements or be available on an uninterrupted, secure, or error-free basis. No advice or information, whether oral or written, obtained from Localvest or through the Platform Services, will create any warranty not expressly made herein.

(e) UNDER NO CIRCUMSTANCES WILL ANY LOCALVEST PERSON BE LIABLE TO YOU FOR MORE THAN THE AMOUNT YOU HAVE PAID LOCALVEST IN THE TWELVE (12) MONTHS IMMEDIATELY PRECEDING THE DATE ON WHICH YOU FIRST ASSERT ANY SUCH CLAIM.

(f) To the extent any provision(s) relating to arbitration, disclaimer, waiver of liability, or any other rights and obligations set forth herein is not permissible or enforceable under applicable Law, each such provision shall be deemed removed and invalid, but all remaining provisions shall be in full force and effect.

12. Disputes with Others

We reserve the right, but have no obligation, to monitor and/or manage disputes between you and other users of the Platform Services. If you have a dispute with any Investor, Visitor or other users of the Localvest website or Platform Services, you release Localvest and each Localvest Person, and hereby agree to indemnify the Localvest from claims, demands, and damages (actual and consequential) of every kind and nature, known and unknown, arising out of, or in any way connected with, such a dispute.

13. Governing Law; Dispute Resolution; Arbitration

(a) Venue and Governing Law. This Agreement and all aspects of the Platform Services will be governed by and interpreted in accordance with the internal Laws of the Commonwealth of Virginia without regard to conflicts of laws principles. For the purpose of any judicial proceeding to enforce an arbitration award or incidental to such arbitration or to compel arbitration, or if for any reason a claim proceeds in court rather than in arbitration, you hereby submit to the non-exclusive jurisdiction of the state and federal courts sitting in Loudoun County, Virginia, and agree that service of process in such arbitration or court proceedings shall be satisfactorily made upon a party if sent by certified, express or registered mail addressed to it at the address set forth in the books and records of Localvest. With respect to any disputes not subject to mandtory informal dispute resolution or arbitration (as set forth below), you agree not to commence or prosecute any action in connection therewith other than in the state and federal courts located in Loudoun County, Virginia, and you hereby consent to, and waive all defenses of lack of personal jurisdiction and forum non conveniens with respect to, venue and jurisdiction in the state and federal courts located in Loudoun County, Virginia.

(b) Mandatory Informal Dispute Resolution. If you have any dispute with Localvest arising out of or relating to this Agreement, you agree to notify Localvest in writing with a brief, written description of the dispute and your contact information, and Localvest will have thirty (30) days from the date of receipt within which to attempt to resolve the dispute to your reasonable satisfaction. If the parties are unable to resolve the dispute through good faith negotiations over such a thirty (30) day period under this informal process, either party may pursue resolution of the dispute in accordance with the arbitration agreement below.

(c) Arbitration Agreement; Waiver of Class-Actions. ALL DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY ASPECT OF THE RELATIONSHIP BETWEEN YOU AND LOCALVEST, WHETHER BASED IN CONTRACT, TORT, STATUTE, FRAUD, MISREPRESENTATION OR ANY OTHER LEGAL THEORY, THAT ARE NOT RESOLVED PURSUANT TO SECTION 13(b) ABOVE WILL BE RESOLVED THROUGH FINAL AND BINDING ARBITRATION BEFORE A NEUTRAL ARBITRATOR INSTEAD OF IN A COURT BY A JUDGE OR JURY, AND LOCALVEST AND YOU EACH HEREBY WAIVE THE RIGHT TO TRIAL BY A JURY. YOU AGREE THAT ANY ARBITRATION UNDER THIS AGREEMENT WILL TAKE PLACE ON AN INDIVIDUAL BASIS; CLASS ARBITRATIONS AND CLASS ACTIONS ARE NOT PERMITTED AND YOU ARE AGREEING TO GIVE UP THE ABILITY TO PARTICIPATE IN A CLASS ACTION. YOU UNDERSTAND THAT ABSENT THIS PROVISION, YOU WOULD HAVE THE RIGHT TO SUE IN COURT AND HAVE A JURY TRIAL. The arbitration will be administered by the American Arbitration Association under its Commercial Arbitration Rules and Mediation Procedures as amended by this Agreement. Any arbitration hearing will be held in Loudoun County, Virginia. The applicable governing law will be as set forth in Section 13(a) (provided that with respect to arbitrability issues, federal arbitration law will govern). The arbitrator’s decision will follow the terms of this Agreement and will be final and binding. The arbitrator will have authority to award temporary, interim or permanent injunctive relief or relief providing for specific performance of this Agreement, but only to the extent necessary to provide relief warranted by the individual claim before the arbitrator. The award rendered by the arbitrator may be confirmed and enforced in any court having jurisdiction thereof. In the event of litigation or arbitration concerning the subject matter of this Agreement, the prevailing party shall be entitled to recover all costs incurred by it, including such party’s reasonable attorneys’ fees and reasonable compensation for the services of its internal personnel.

14. MISCELLANEOUS

(a) Entire Agreement. This Agreement, together with any Order Forms and any terms and policies that are incorporated into this Agreement by reference (including by reference to a URL), constitute the entire agreement and supersede any prior agreements between you and Localvest with respect to the subject matter hereof. In the event of a conflict between an Order Form and this Agreement, the Order Form will control. This Agreement supersedes and replaces all prior and contemporaneous agreements, proposals, or representations, written or oral, between the parties to this Agreement.

(b) Amendments to this Agreement. No amendment, modification, waiver or discharge of this Agreement shall be valid unless in writing and signed by an authorized representative of the party against whom such amendment, modification, waiver or discharge is sought to be enforced.

(c) Assignment. Neither this Agreement nor any of the rights or duties hereunder may be assigned or otherwise transferred by either party without the other party’s prior written consent. Such consent shall not be unreasonably withheld. Any act which is inconsistent with the terms of this Section shall be null and void ab initio.

(d) Relationship of the Parties. The relationship between Localvest and Issuer shall not be that of partners, agents, or joint ventures for one another, and nothing contained in the Agreement shall be deemed to constitute a partnership or agency agreement between them for any purposes whatsoever. Localvest and Issuer, in performing any of their obligations hereunder, shall be independent contractors or independent parties and shall discharge their contractual obligations at their own risk.

(e) Force Majeure. Neither party will be liable for any failure or delay in performance under this Agreement (other than for delay in the payment of money due and payable hereunder) for causes beyond that party’s reasonable control and occurring without that party’s fault or negligence, including, but not limited to, acts of God, acts of government, flood, fire, civil unrest, acts of terror, epidemics, strikes or other labor problems (other than those involving Localvest’s or your employees, respectively), computer attacks (by government/nation entities or otherwise) or malicious acts, such as attacks on or through the Internet, any Internet service provider, telecommunications or hosting facility. Dates by which performance obligations are scheduled to be met will be extended for a period of time equal to the time lost due to any delay so caused.

(f) Electronic Communications and Signatures. You agree to the use of electronic communication in order to enter into agreements and place orders, and to the electronic delivery of notices, policies and records of transactions initiated or completed through the Platform Services. Furthermore, you hereby waive any rights or requirements under any Laws or regulations in any jurisdiction that require an original (non-electronic) signature or delivery or retention of non-electronic records, to the extent permitted under applicable Law.

(g) Availability of Platform Services. Localvest operates and controls the Platform Services from its offices in the United States. Localvest makes no representation that the Platform Services are appropriate or available in other locations. The information provided on or through the Platform Services is not intended for distribution to or use by any Person in any jurisdiction or country where such distribution or use would be contrary to Law or regulation or which would subject Localvest to any registration requirement within such jurisdiction or country. Accordingly, those Persons who choose to access the Platform Services from other locations do so on their own initiative and are solely responsible for compliance with local Laws, if and to the extent local Laws are applicable. Certain information provided by Issuers or Investors may be subject to U.S. export controls. Thus, no such materials may be downloaded, exported or re-exported (i) into (or to a national or resident of) Cuba, Iraq, North Korea, Iran, Syria or any other country to which the United States has embargoed goods; or (ii) to anyone on the U.S. Treasury Department’s Specially Designated Nationals List or the U.S. Commerce Department’s Denied Persons List. By downloading any material available through the Platform Services, you represent and warrant that you are not located in, under the control of, or a national or resident of, any such country or on any such list. The parties specifically disclaim application of the United Nations Convention on Contracts for the International Sale of Goods.

(h) Injunctive Relief. You acknowledge that the rights granted and obligations made hereunder to Localvest are of a unique and irreplaceable nature, the loss of which shall irreparably harm Localvest and which cannot be replaced by monetary damages alone. Accordingly, Localvest shall be entitled to injunctive or other equitable relief (without the obligations of posting any bond or surety) in the event of any breach or anticipatory breach by you of this Agreement. You irrevocably waive all rights to seek injunctive or other equitable relief and agree to limit your claims to claims for monetary damages (if any).

(i) Waiver and Severability. No waiver or failure to exercise any option, right or privilege under the terms of this Agreement by either of the parties hereto on any occasion or occasions shall be construed to be a waiver of the same on any other occasion or of any other option, right or privilege. The parties agree that if any portion of this Agreement, except any portion of Section 13(c) (Arbitration Agreement; Waiver of Class-Actions) is found illegal or unenforceable, in whole or in part by any court of competent jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such determination of invalidity or unenforceability without affecting the validity or enforceability thereof in any other manner or jurisdiction and without affecting the remaining provisions of this Agreement, which shall continue to be in full force and effect. If Section 13(c) is found to be illegal or unenforceable, then neither you nor Localvest will elect to arbitrate any dispute falling within that portion of Section 13(c) found to be illegal or unenforceable and such dispute shall be decided by a court of competent jurisdiction within Loudoun County, Virginia, and you and Localvest agree to submit to the personal jurisdiction of that court.

(j) Section Headings; Verification Documentation; Waiver of Execution Defenses. The section headings used herein are for convenience only and shall not be given any legal import. Upon Localvest’s request, you will furnish Localvest any documentation, substantiation, or releases necessary to verify your compliance with this Agreement. You agree that this Agreement will not be construed against Localvest by virtue of having drafted them. You hereby waive any and all defenses you may have based on the electronic form of this Agreement and the lack of signing by the parties hereto to execute this Agreement.

(k) Statute of Limitations. You and Localvest both agree that regardless of any statute or law to the contrary but only to the extent permissible by Law in each relevant jurisdiction, any claim or cause of action arising out of or related to use of the Platform Services, this Agreement or our Privacy Policy must be filed within one (1) year after such claim or cause of action arose or be forever barred.

(l) No Third-Party Beneficiaries. This Agreement is entered into solely by and between, and may be enforced only by, Localvest and the Investor set forth on the Order Form; and this Agreement shall not be deemed to create any rights in third parties, including, without limitation, employees, suppliers, customers or Affiliates of a party, or to create obligations of a party to any such third parties.

15. Annexes and Schedules

The Annexes and Schedules attached hereto are incorporated herein and made a part hereof for all purposes. As used herein, the expression “this Agreement” means the body of this Agreement and such Annexes and Schedules; and the expressions “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement and such Annexes and Schedules as a whole and not to any particular part or subdivision thereof.

Schedule A– Certain Definitions

Annex A – Certain Securities Law Matters and Frequently Asked Questions

Schedule A

Certain Definitions

When used in the Localvest Issuer Platform Services Agreement terms appearing in initial capitalized form and not otherwise defined in the body of the Agreement have the following meanings:

“Accredited Investor” as defined in Rule 501 of Regulation D of the Securities Act is:

a bank, insurance company, registered investment company, business development company, or small business investment company;
an employee benefit plan (within the meaning of the Employee Retirement Income Security Act) if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
a tax-exempt charitable organization, corporation, or partnership with assets in excess of $5 million;
a director, executive officer, or general partner of the company selling the securities
an enterprise in which all the equity owners are accredited investors;
an individual with a net worth of at least $1 million, not including the value of his or her primary residence;
an individual with income exceeding $200,000 in each of the two most recent calendar years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
a trust with assets of at least $5 million, not formed only to acquire the securities offered, and whose purchases are directed by a person who meets the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment.

“Affiliate” shall mean a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with, the Person specified. For purposes of this definition, the terms “control,” “controlled by” and “under common control with” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person and, in the case of an entity, shall require (i) in the case of a corporate entity, direct or indirect ownership of at least a majority of the securities having the right to vote for the election of directors, and (ii) in the case of a non-corporate entity, direct or indirect ownership of at least a majority of the equity interests with the power to direct the management and policies of such non-corporate entity.

“Community Rules” as an Issuer you will not be in connection with the Platform Services or otherwise in connection with the Localvest website:

defame, libel, disparage, threaten, harass, or intimidate anyone, including by the use of offensive comments related to race, national origin, gender, sexual preference, or physical handicap;
use any profane, obscene, pornographic or otherwise objectionable content or language;
promote or describe how to perform violence, illegal drug or substance abuse, or any other illegal activity;
violate the personal, privacy, contractual, intellectual property or other rights of any Person;
reveal, with respect to personal or privacy rights, any personal information about another individual, including an address, phone number, email address, credit card number, or other information that could be used to track, contact or impersonate that individual;
violate this Agreement or any applicable Law;
trick, defraud, deceive, or mislead Localvest, any Investor, Visitor, or other users, such as by submitting false reports of abuse or misconduct to Localvest’s support services, disguising the source of materials or other information you submit to the Platform Services or using tools which anonymize your Internet protocol address to access the Platform Services;
interfere with or disrupt (or attempt to interfere with or disrupt) access and enjoyment of the Platform Services of other users or any host or network, including, without limitation, creating or transmitting unwanted electronic communications such as “spam” to other users, overloading, flooding or mail-bombing the Platform Services, or scripting the creation of Materials in such a manner as to interfere with or create an undue burden on the Platform Services;
disparage, tarnish, or otherwise harm, in Localvest’s opinion, Localvest and/or the Platform Services;
upload or transmit (or attempt to upload or transmit) any material that acts as a passive or active information collection or transmission mechanism, such as viruses, worms, Trojan horses, spyware, adware, or any other malicious or invasive code or program onto the Platform Services;
reverse engineer, decompile, reverse assemble, modify or attempt to discover or copy any software, source code, or structure that the Platform Services utilize to generate web pages or any software or other products or processes accessible through the Platform Services;
access or search (or attempt to access or search) the Platform Services by any means, such as any automated system or unauthorized script or software, other than currently available, published interfaces provide by Localvest unless you have been specifically allowed to do so in a separate Agreement with Localvest;
remove, obscure, or change any copyright, trademark, hyperlink, or other proprietary rights notices contained in or on the Platform Services or any website on which the Platform Services are offered or on a third-party website and/or Localvest software on which Localvest or any of its licensors code is embeddable or embedded on;
remove, obscure or change any notice, banner, advertisement or other branding on the Platform Services;
submit any Materials or material that falsely expresses or implies that such Materials are sponsored or endorsed by Localvest or any of its Affiliates;
interfere with or circumvent any security feature of the Platform Services or any feature that restricts or enforces limitations on use of or access to the Platform Services, such as probing or scanning the vulnerability of any system, network or breach; or
sell access to the Platform Services or any part thereof other than through a mechanism approved by Localvest.

“Covered Person” are those Person’s set forth in Rule 506(d) of Regulation D under the Securities Act whose “bad actor” disqualifying events either disqualify the offering from reliance on Rule 506 or will have to be disclosed to investors and include:

the issuer, including its predecessors and Affiliated issuers
directors, general partners, and managing members of the issuer
executive officers of the issuer, and other officers of the issuers that participate in the offering
20 percent beneficial owners of the issuer, calculated on the basis of total voting power
promoters connected to the issuer
for pooled investment fund issuers, the fund’s investment manager and its principals
Persons compensated for soliciting investors, including their directors, general partners, and managing members“Law” means any federal, state, local or foreign law, statute, code, ordinance, rule or regulation (including rules of any self-regulatory organization).

“Person” means any individual, corporation, partnership, limited partnership, joint venture, limited liability company, trust or unincorporated organization, governmental entity, government, or any agency or political subdivision thereof.

Annex A

Certain Securities Law Matters and Frequently Asked Questions

This Annex is intended to provide a general overview of relevant U.S. federal securities laws implicated by using the Localvest Platform to interest investors in any investment opportunity or offering posted on the Localvest website. By using the Platform Services Issuer acknowledges that the information provided below is not intended to be construed as legal advice in any jurisdiction and that Issuer is strongly encouraged to consult with legal counsel experienced in conducting securities offerings in the U.S., and in those states where securities are sold, in connection with its use of the Localvest Platform and the Platform Services.

General Overview of Securities Offerings in the United States

The Securities Act of 1933, as amended (the “Securities Act”) is the applicable federal statute regulating the offer and sale of securities in the United States. Each state also regulates the offer and sale of securities to investors located in that particular state and these state laws are commonly referred to as “blue sky laws.” issuers offering securities must comply with both federal regulations and state securities laws and regulations in the states where securities are offered and sold (typically, the states where offerees and investors are based).

Section 2(a)(1) of the Securities Act broadly defines what types of financial instruments constitute securities and generally they include stock, notes, debentures, warrants, and certificates of interest in any profit sharing arrangement (e.g., limited partnership interests, membership interests in limited liability companies, etc.). Case law over the years has further considered what types of financial instruments constitute securities and have determined that a security will be deemed to exist where there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.[1] The term “offer” is defined broadly in Section 2(a)(3) of the Securities Act as “every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value.”

In general, the Securities Act and state “blue sky laws” are designed to protect unsophisticated investors from making poor investment decisions. Accordingly, Federal securities laws require that all offers and sales of securities be either registered with the Securities and Exchange Commission (the “SEC”) under the Securities Act or made in reliance upon an exemption from registration. Under the Securities Act, if a company’s offering qualifies for certain exemptions from registration, that offering is not required to be registered or qualified by state securities regulators, however, certain state notice filings may be required.

Section 4(a)(2) of the Securities Act exempts from registration those transactions by an issuer not involving any public offering. This is often referred to as the private offering exemption. The two relevant exemptions for Issuers offering securities on the Localvest Platform are those conducted under 506(b) and Rule 506(c) of Regulation D under the Securities Act which each provide a “safe harbor” under Section 4(a)(2) when offerings are made in compliance with these Rules.

[1] See, SEC v. W.J. Howey Co., 328 U.S. 293 (1946). See also United Housing Found., Inc. v. Forman, 421 U.S. 837 (1975); Tcherepnin v. Knight, 389 U.S. 332 (1967); SEC v. C. M. Joiner Leasing Corp., 320 U.S. 344 (1943).

Offerings Made Under Rule 506(b) of Regulation D

Issuers conducting an offering under Rule 506(b) can raise an unlimited amount of money and can sell securities to an unlimited number of “accredited investors”. However, an offering under Rule 506(b) is subject to the following requirements:

Issuer may not generally solicit the public or advertise to market the securities;
Issuer may not sell securities to more than 35 non-accredited investors (all non-accredited investors, either alone or with a purchaser representative, must meet the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment);
Issuer files a notice with the SEC on Form D within 15 days after the first sale of securities in the offering; and
There are no felons or other “bad actors” involved in the offering.

Offerings Made Under Rule 506(c) of Regulation D

Issuers conducting an offering under Rule 506(c) can raise an unlimited amount of money and can broadly solicit and generally advertise the offering and still be deemed to be in compliance with the exemption’s requirements if:

The investors in the offering are all accredited investors;
The Issuer takes reasonable steps to verify that the investors are accredited investors, which could include reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the like, or have an investor’s status confirmed by the investor’s lawyer, accountant, investment adviser or broker;
Issuer files a notice with the SEC on Form D within 15 days after the first sale of securities in the offering; and
There are no felons or other “bad actors” involved in the offering.

Accredited Investor Requirements

According to the SEC, the “accredited investor” definition is a central component of Regulation D and is “intended to encompass those persons whose financial sophistication and ability to sustain the risk of loss of investment or ability to fend for themselves render the protections of the Securities Act’s registration process unnecessary”[1]. In order to rely on investor status as an accredited investor, the Issuer must know or have a reasonable basis to believe that the investor falls within one of the following eight categories. Defined in Rule 501 of Regulation D an “accredited investor” is:

a bank, insurance company, registered investment company, business development company, or small business investment company;
an employee benefit plan (within the meaning of the Employee Retirement Income Security Act) if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
a tax exempt charitable organization, corporation or partnership with assets in excess of $5 million;
a director, executive officer, or general partner of the company selling the securities;
an enterprise in which all the equity owners are accredited investors;
an individual with a net worth of at least $1 million, not including the value of his or her primary residence;
an individual with income exceeding $200,000 in each of the two most recent calendar years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
a trust with assets of at least $5 million, not formed only to acquire the securities offered, and whose purchases are directed by a person who meets the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment.

Bad Actor Disqualifications

As a result of Rule 506(d) of the Securities Act, an offering is disqualified from relying on Rule 506(b) and 506(c) of Regulation D if the Issuer or any other person covered by Rule 506(d) has a relevant criminal conviction, regulatory or court order or other disqualifying event that occurred on or after September 23, 2013, the effective date of the rule amendments. For a listing of covered persons please refer to Rule 506(d). The SEC’s Small Entity Compliance Guide entitled “Disqualification of Felons and Other “Bad Actors” from Rule 506 Offerings and Related Disclosure Requirements” available at https://www.sec.gov/info/smallbus/secg/bad-actor-small-entity-compliance-guide.htm#P9_40 is also informative.

Restricted Securities

Investors who purchase securities offered pursuant to Rule 506(b) and 506(c) receive “restricted” securities, meaning that these securities cannot be resold for at least six months or a year without registering them. The SEC’s Investor Publication entitled “Rule 144: Selling Restricted and Control Securities” available at https://www.sec.gov/reportspubs/investor-publications/investorpubsrule144htm.html is also informative.

Compensation in Connection with the Offering – No Unregistered Finders

Section 15(a)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires any person that acts as a “broker” in securities in interstate commerce to register with the SEC. Section 3(a)(4)(A) of the Exchange Act defines a “broker” as “any person engaged in the business of effecting transactions in securities for the account of others.” In order to determine whether a person or entity is a broker, the SEC considers the activities that the person or entity actually performs in connection with the offering. Court decisions and SEC no-action and interpretive letters consider the following factors to determine whether a person or entity is acting as a broker:

does the person or entity participate in important parts of a securities transaction, including solicitation, negotiation, or execution of the transaction?
does the compensation the person or entity receive for participation in the transaction depend upon, or is it related to, the outcome or size of the transaction or deal, or does the person or entity otherwise receive any other “transaction-based” compensation?
is the person or entity otherwise engaged in the business of effecting or facilitating securities transactions?
does the person or entity handle the securities or funds of others in connection with securities transactions?

An affirmative answer to any of the questions listed above creates a strong presumption that the person or entity may need to register with the SEC as a broker. Individuals or firms who engage in such activities without registration face SEC enforcement actions and risk civil monetary penalties, disgorgement, bars from future activities, and other consequences. In addition, Issuers who utilize such individuals or firms could also be subject to SEC enforcement actions for causing or aiding and abetting the violations. Perhaps even more importantly, the offering may be subject to rescission by Investors.

Frequently Asked Questions

How can an Issuer post a Deal Tile on the Localvest website without running afoul of the prohibition against general solicitation in a Rule 506(b) Offering?

To rely on Rule 506(b) of Regulation D, an Issuer cannot engage in activities that constitute general solicitation or general advertising. The term “general solicitation” is not defined in the statutes or rules, and the SEC takes a case-by-case approach to determining whether an offering involves general solicitation, placing particular emphasis on whether there is a pre-existing relationship between the Issuer and the investor in the securities. In several no-action letters issued by the SEC in the mid-1990s, the SEC addressed whether the use of the Internet to facilitate private offerings under Regulation D would run afoul of the prohibition on general solicitation and general advertising. In the IPONET no-action letter,[2] the SEC determined that pre-certification of accredited investors and posting a notice of a private offering on a password-protected webpage accessible only to pre-certified members would not involve general solicitation or general advertising. This position was extended to private offerings of private fund interests through a password-protected website in the Lamp Technologies no-action letter.[3]

For Issuers who are offering securities under the exemption afforded by Rule 506(b), Localvest will not allow any information about the offering, including the Deal Tile, to be accessible outside Localvest’s website. We also require the Issuer to provide us with written assurance that it is aware that it cannot engage in general solicitation, including sending its Deal Tile or otherwise offering the securities to potential investors outside of Localvest unless the Issuer has a pre- existing relationship with those potential investors. In order to ensure that there will not be a general solicitation, Localvest may also limit the investors that can access a particular 506(b) Deal Tile on the Localvest website to those that have expressed a particular interest in that type of investment. Moreover, only those investors who have represented to Localvest that they are accredited investors or have provided us with an accredited investor questionnaire sufficient for us to pre-certify them as accredited investors are able to view Deal Tile’s for Rule 506(b) offerings. As discussed above, these limitations are not applicable to Rule 506(c) offerings which explicitly permit general solicitation and advertising.

Is Localvest a broker-dealer?

No. Localvest is not a broker-dealer registered with the SEC under the Exchange Act. Section 4(c) of the Securities Act provides exemptions from broker-dealer registration for certain activities taken in connection with offerings conducted in compliance with Rules 506(b) and 506(c). It specifically allows a person to “maintain a platform or mechanism that permits the offer, sale, purchase, or negotiation of or with respect to securities, or permits general solicitation, general advertisements, or similar or related activities by issuers of such securities, whether online, in person, or through other means.” The SEC staff has clarified that internet websites and social media are included in the phrase “platforms or mechanisms.”[4] We note that the exemption from broker-dealer registration in Securities Act Section 4(c) only applies when securities are offered and sold under Rule 506 of Regulation D, and not to securities offered and sold under other exemptions from registration.

The exemption in Section 4(c) applies to any person meeting the following criteria: (i) such person and each person associated with that person receives no compensation in connection the purchase or sale of such security; (ii) such person and each person associated with that person does not have possession of customer funds or securities in connection with the purchase or sale of such security; and (iii) such person is not subject to a statutory disqualification.

Moreover, Localvest does not undertake any of the activities that would otherwise require registration as a broker under the Exchange Act. In particular, neither Localvest nor any of its affiliates:

receive any “transaction-based” compensation in connection with any offering – the service fees due to Localvest for the use of the Localvest Platform and related Services are not in any way dependent upon the size of any offering or whether the Issuer is successful in raising any investor funds;
participate in any aspect of the securities offering – Localvest’s Services are limited to making the Deal Tile available on the Localvest website[5], and for 506(c) offerings provide Issuers with marketing and advertising services expressly permitted under existing SEC guidance;
negotiate the terms of, provide transaction or other offering documentation for, handle the securities or funds of, any securities offering listed on the Localvest website or facilitated through the use of the Localvest Plaftorm or Services; or
is otherwise engaged in the business of effecting or facilitating securities transactions.

Is Localvest an Investment Adviser?

No. Although certain affiliates of Localvest provide investment advisory Services pursuant to an exemption from the Investment Advisers Act of 1940, as amended (the “Advisers Act”) to certain individuals and entities, these activities do not involve Localvest or the Localvest Platform or Services.

Section 202(11) of the Advisers Act, provides that an “investment adviser” includes any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities. All three prongs of the definition (compensation, engaging in the business of providing advice, and advising about securities) must be present for a person to fit within the definition of an investment adviser. In particular, neither Localvest nor any of its affiliates:

provides any advice, endorsement, analysis or recommendation about the merits of any offering listed on the Localvest website weather independently or in relation to any other listed offering;
makes any referral for or highlights or prioritizes one offering as being a more favorable investment than another listed on the Localvest website; or
receives any compensation related to any offering listed on Localvest website for advising others as to the value of the Issuer’s securities or the advisability of investing in, purchasing, or selling securities those securities.

Is Localvest a Registered Crowdfunding Portal?

No. According to the SEC a person or entity required to register – either as a broker-dealer under Section 15(b) of the Exchange Act or as a funding portal pursuant to Section 4A(a)(1) of the Securities Act – if such person or entity wishes to “act as an intermediary in a transaction involving the offer or sale of securities in reliance on Section 4(a)(6) of the Securities Act”. Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides an exemption from registration for certain crowdfunding transactions. These transactions are not available for listing on the Localvest website. Only offerings conducted in reliance upon the exemptions from registration afforded by Rules 506(b) and 506(c) may be conducted on the Localvest website or through the use of the Localvest Platform and Services.

It is important to note that Localvest is not an “intermediary” in any transaction listed on the Localvest website or through the use of the Localvest Platform and Services. No transaction listed on the Localvest site takes place on the Localvest platform. Rather, the negotiation of the terms of any offering and the closing of any purchase and sale of securities offered on the Localvest website is done off-line between the investor and the Issuer. Localvest is not involved in any aspect of such transaction. In particular, neither Localvest nor any of its affiliates:

reviews any offering documentation or is involved in the preparation of such materials;
serves in the capacity of escrow agent or custodian of any investor funds;
facilitates the negotiation or closing of any offering;
performs any due diligence activities;
advises on the terms of the offering; or
undertakes to verify that any investor is an accredited investor as the Issuer is required to undertake to satisfy its obligations under Rule 506(c).

[1] Rule 501 of Regulation D Regulation D Revisions; Exemption for Certain Employee Benefit Plans, Release No. 33-6683 (Jan. 16, 1987) [52 FR 3015] (the “Regulation D Revisions Proposing Release”).

[2] IPONET, SEC No-Action Letter (July 26, 1996).

[3] Lamp Technologies, Inc., SEC No-Action Letter (May 29, 1997).

[4] See, https://www.sec.gov/divisions/marketreg/exemption-broker-dealer-registration-jobs-act-faq.htm

[5] As discussed above, Deal Tiles are posted behind our password-protected webpage accessible only to pre-certified members for 506(b) offerings, and to any visitor to the Localvest public facing website for offerings relying upon the exemption afforded by 506(c). Consistent with SEC guidance, email notifications of new offerings are also made to pre-certified members for 506(b) offerings and more broadly for offerings relying upon the exemption afforded by 506(c).