Issuer Access Agreement
Backers Network Inc. and its subsidiary Backers Securities Inc. operating under the Start-Up Crowdfunding Portal – Exemption (the “Funding Portal’ “Backers”) are pleased to act as partners in connection with the proposed Initial Backers Offering of The Company’s (the “Issuer”) equity securities (the “Initial Backers Offering” or “IBO”). The IBO may be completed in a series of closings, each bound by the same terms and conditions specified herein. The purpose of this agreement is to set forth the terms of engagement by the Issuer of Backers the Funding Portal (the “Agreement”).
This Agreement outlines the terms and conditions for the various service options (‘Service Options’) offered by Backers. The Service Options and associated pricing may vary based on the selections made by the Issuer during the purchase or checkout process. By purchasing a Service Option, the Issuer agrees to be bound by these terms and conditions.”
Backers offers a range of Service Options, which may include different combinations of services and features. The specific services, features, and pricing for each Service Option will be displayed during the purchase or checkout process. Pricing may change regularly based on factors such as promotional offers, seasonal discounts, or updates to the available services.”
Backers shall perform the services described in this Agreement on a “best efforts” basis, in good faith and in a professional manner consistent with industry practice and always with a view to furthering the best interests of the Issuer and its existing shareholders. It is understood that this agreement does not represent a firm commitment of Backers to underwrite the IBO. Backers will be entitled, subject to the terms hereof, to appoint, in respect of the IBO, a selling group consisting of other duly registered sub-Agents acceptable to the Issuer, acting reasonably (together with Backers, the “Agent”).
The Issuer will make available or cause to be made available to Backers and their counsel on a timely basis, all information (financial or otherwise), data, documents, opinions, appraisals, valuations or other information and materials of whatsoever nature or kind respecting the Issuer as provided in subsection 4(a). The Issuer also agrees to provide Backers with timely access to the directors, officers, employees, independent auditors, consultants and financial, legal and other professional advisors of the Issuer as Backers may reasonably require or consider appropriate in performing their services hereunder.
Backers shall be entitled to rely upon such information and all other information that is filed by the Issuer with applicable regulators or other similar authorities, and Backers shall be under no obligation to verify independently any such information so provided to or otherwise obtained by Backers. Backers shall also be under no obligation to determine whether there have been, or to investigate, any changes in any of such information occurring after the date the same were provided or obtained.
The Issuer will advise Backers promptly of any material change, actual or contemplated, in the business of the Issuer or in any information provided to Backers concerning the IBO or the Issuer. Unless so advised otherwise, Backers will be entitled to assume that there has been no material change in such information and will be entitled to rely thereon.
Backers shall have the right to conduct adequate due diligence and obtain satisfactory results in their sole opinion therefrom prior to Closing and shall have the right to terminate this IBO if it deems appropriate.
Terms of Engagement.
Backers will provide services to the Issuer as provided in this Agreement until the earlier of (i) the closing or termination of the IBO, (ii) twelve months from the date of this Agreement, and (iii) the termination of Backers engagement by Backers upon 30 days written notice to the Issuer or by the Issuer upon 30 days written notice to Backers, provided that in any such event, the Issuer’s obligations under paragraphs 4, 5, 6, and 8 (b) and (d), and the obligation of the Issuer and Backers to maintain confidentiality shall survive the termination hereof.
Issuer Acknowledgements, Representations, Covenants and Agreements
Compliance with the Funding Portal Policies & Procedures – The Issuer hereby covenants and agrees to comply with Backers’ policies and procedures concerning information posted by issuers on the Funding Portal.
Information Accuracy – The Issuer hereby covenants and agrees that all information the Issuer provides to Backers or posts on the Funding Portal will only contain permitted materials that are reasonably supported, and will not contain a promotional statement, a misrepresentation or an untrue statement of a material fact or otherwise be misleading.
Compliance with Securities Legislation – The Issuer acknowledges and agrees that it is responsible for compliance with applicable securities legislation, including compliance with Instrument NI 45-110 and hereby represents that it is in compliance with all applicable securities legislation.
Obligation to Terminate Distribution – The Issuer acknowledges and agrees that Backers shall terminate the Offering and report immediately to the securities regulatory authority or regulator if, at any time during the distribution period, it appears to Backers that the business of the Issuer is not being, or may not be, conducted with integrity.
Funding Portal role as Agent – The Issuer acknowledges and agrees that, in certain of the jurisdictions in which the Offering is to be made, Backers is the agent of the Issuer for the purposes of a distribution under the Startup Crowdfunding prospectus exemption.
Offering Document – The Issuer acknowledges and agrees that by using the crowdfunding prospectus exemption for a distribution, investors must be provided with an offering document in the prescribed form (Form 45-110F1) which includes certain detailed information relating to the Issuer and the securities being issued (the “Offering Document”), together with an obligation to include financial statements as applicable. The Issuer may also make available to investors, via the Platform, a term sheet, a video and other materials summarizing the information in the Offering Document.
Advertising restriction for IBO – The Issuer acknowledges that it may not directly or indirectly advertise the Offering; however prospective purchasers may be informed that the Issuer intends to conduct a IBO and can direct purchasers to the online portal through which the Offering will be conducted.
Limitations – Issuer acknowledges that, under the Startup Crowdfunding Exemption NI-45-110, there are limitations on the amount of funds the Issuer may raise in any 12 month period and the amount any investor may invest.
Length of a IBO – Issuer acknowledges that the Offering may remain open for no more than 90 days and closing must occur within 30 days of the end of the Offering. While this is the maximum outer limit the program prescribed by Backers may be considerably shorter by creating a shorter stacked approach to the fund raise program.
Platform Access Fee: The Pricing of the applicable Service Option chosen by the Issuer payable in advance of the IBO.
Success Based Fee: If, during the period Backers is retained by the Issuer and an IBO is consummated or the Issuer enters into an agreement by which an IBO or an equivalent Equity Crowdfunding subsequently results, a fee equal to a specific percentage (%) of the capital raised pursuant the IBO, with the exact percentage determined based on the Service Option selected by the Issuer.
Conversion Option: Backers reserves the right, and the Issuer hereby accepts, at any time Backers can choose to convert any or all of the Platform Access Fee and/or the Success Based Fee at a premium of 300% of the value into the Issuer’s equity/securities issued pursuant to the IBO at the same value as the IBO or in the case that no IBO is consummated, Backers at its discretion can choose to convert any and/or all amounts owing at a premium of 300% of the value into the Issuer’s equity/securities at a 20% discount of any subsequent round of equity/securities financing.
Other Fees: The Company will be responsible for all expenses related to the Offering, whether or not it is completed, including all fees and disbursements of its legal counsel. For greater clarity, expenses shall also include all reasonable expenses, background search fees and filing fees.
Payment Terms: Payment for the selected Service Option is due in advance, on a monthly or annual basis, as chosen by the Issuer. Backers accepts payment via various payment methods including but not limited to eTransfer and EFT. From time to time, Backers may offer discounts or promotions for certain Service Options or payment terms. These offers will be subject to additional terms and conditions.
Modifications and Cancellations: Issuers may modify or cancel their Service Option by notifying Backers in writing at least 90 days prior to the next billing cycle. Cancellation fees or penalties may apply.
Service Limitations: Each Service Option may have specific limitations on usage. Exceeding these limitations may result in additional fees or require an upgrade to a different Service Option.
Price and Service Changes: Backers reserves the right to change available Service Options and their associated prices at any time. Clients will be notified of any price or service changes at least 90 days in advance of the effective date. Continued use of the services after the effective date constitutes acceptance of the new Service Options and prices.
In connection with this engagement, the Issuer (as defined in the Agreement) agrees to indemnify and save harmless Backers, their affiliates and their respective directors, officers, employees, partners, Agent, advisors and shareholders (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”) from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatsoever nature or kind (excluding loss of profits), including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, investigations or claims and the reasonable fees, disbursements and taxes of their counsel in connection with any action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party or in enforcing this indemnity (collectively, the “Claims”) to which an Indemnified Party may become subject or otherwise involved in any capacity insofar as the Claims relate to, are caused by, result from, arise out of or are based upon, directly or indirectly, the Engagement whether performed before or after the Issuer’s execution of the Agreement and to reimburse each Indemnified Party forthwith, upon demand, for any legal or other expenses reasonably incurred by such Indemnified Party in connection with any Claim.
The Issuer also agrees that no Indemnified Party shall have any liability (either direct or indirect, in contract or tort or otherwise) to the Issuer or any person asserting claims on the Issuer’s behalf or in right for or in connection with the Engagement, except to the extent that any losses, expenses, claims, actions, damages or liabilities incurred by the Issuer are determined by a court of competent jurisdiction in a final judgement that has become non-appealable to have resulted from the gross negligence or willful misconduct of such Indemnified Party.
In the event and to the extent that a court of competent jurisdiction in a final judgement that has become non-appealable determines that an Indemnified Party was grossly negligent or guilty of willful misconduct in connection with a Claim in respect of which the Issuer has advanced funds to the Indemnified Party pursuant to this indemnity, such Indemnified Party shall reimburse such funds to the Issuer and thereafter this indemnity shall not apply to such Indemnified Party in respect of such Claim. The Issuer agrees to waive any right the Issuer might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy or security or claim payment from any other person before claiming under this indemnity.
In case any action, suit, proceeding or claim is brought against an Indemnified Party or an Indemnified Party has received notice of the commencement of any investigation in respect of which indemnity may be sought against the Issuer, the Indemnified Party will give the Issuer prompt written notice of any such action, suit, proceeding, claim or investigation of which the Indemnified Party has knowledge and the Issuer will undertake the investigation and defence thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Parties affected and the payment of all expenses. Failure by the Indemnified Party to so notify shall not relieve the Issuer of its obligation of indemnification hereunder unless (and only to the extent that) such failure results in forfeiture by the Issuer of substantive rights or defences.
No admission of liability and no settlement, compromise or termination of any action, suit, proceeding, claim, or investigation shall be made without the Issuer’s consent and the consent of the Indemnified Parties affected, such consents not to be unreasonably withheld. Notwithstanding that the Issuer will undertake the investigation and defence of any Claim, an Indemnified Party will have the right to employ separate counsel with respect to any Claim and participate in the defence thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless:
employment of such counsel has been authorized in writing by the Issuer;
the Issuer has not assumed the defence of the action within a reasonable period of time after receiving notice of the claim;
the named parties to any such claim include both the Issuer and the Indemnified Party and the Indemnified Party shall have been advised by counsel to the Indemnified Party that there may be a conflict of interest between the Issuer and the Indemnified Party; or
there are one or more defences available to the Indemnified Party which are different from or in addition to those available to the Issuer;
in which case such fees and expenses of such counsel to the Indemnified Party will be for the Issuer’s account. The rights accorded to the Indemnified Parties hereunder shall be in addition to any rights an Indemnified Party may have at common law or otherwise.
If for any reason the foregoing indemnification is unavailable (other than in accordance with the terms hereof) to the Indemnified Parties (or any of them) or is insufficient to hold them harmless, the Issuer will contribute to the amount paid or payable by the Indemnified Parties as a result of such Claims in such proportion as is appropriate to reflect not only the relative benefits received by the Issuer or the Issuer’s shareholders on the one hand and Backers on the other, but also the relative fault of the parties and other equitable considerations which may be relevant. Notwithstanding the foregoing, the Issuer will in any event contribute to the amount paid or payable by the Indemnified Parties as a result of such Claim any amount in excess of the fees actually received by Backers for their services in respect of the Engagement.
The Issuer hereby constitutes Backers as trustee for each of the other Indemnified Parties of the Issuer’s covenants under this indemnity with respect to such persons and Backers agree to accept such Issuer and to hold and enforce such covenants on behalf of such persons.
The Issuer agrees to reimburse Backers monthly for the time spent by Backers and the Backers personnel in connection with any Claim at their normal per diem rates. The Issuer also agrees that if any action, suit, proceeding or claim shall be brought against, or an investigation commenced in respect of the Issuer or the Issuer and Backers and personnel of Backers and Backers shall be required to testify, participate or respond in respect of or in connection with the Engagement, Backers shall have the right to employ their own counsel in connection therewith and the Issuer will reimburse Backers monthly for the time spent by their personnel in connection therewith at their normal per diem rates together with such disbursements and reasonable out-of-pocket expenses as may be incurred, including fees and disbursements of Backers’ counsel.
Acknowledgement of Securities Activities.
Backers acknowledge their responsibility to comply with applicable securities laws.,
This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the parties hereby irrevocably attorn to the jurisdiction of the courts of the Province of Ontario. All financial references in this Agreement are in Canadian dollars unless otherwise indicated. If any provision hereof shall be determined to be invalid or unenforceable in any respect such determination shall not affect such provision in any other respect or any other provision hereof. Headings used herein are for convenience of reference only and shall not affect the interpretation or construction of this Agreement. It is understood that this Agreement supersedes any previous verbal or written Agreement between Backers and the Issuer with respect to the issuance of securities.
Until completion of the IBO, the Issuer agrees not to sell or negotiate or enter into an arrangement to sell all or substantially all of the assets of the Issuer or enter into a merger or other business combination with a third party or other similar transaction, which transaction does not provide for the completion of the IBO (an “Alternative Transaction”). In the event the Issuer enters into an Agreement or makes a public announcement with respect to an Alternative Transaction prior to completion of the IBO, within the jurisdiction and/or capabilities of Backers the Issuer agrees to make payments to Backers forthwith upon entering into such Agreement or making such announcement in the amount equal to 3.0% of the contemplated maximum gross proceeds for the Equity Offering in full satisfaction of all claims against the Issuer in this regard.
From the date hereof and until the 90th day after the Closing Date, the Issuer and management agree not to, without the prior written consent of Backers, such consent not to be unreasonably withheld, authorize, sell or issue or announce its intention to authorize, sell or issue, or negotiate or enter into an Agreement to sell or issue any securities of the Issuer within the jurisdiction and/or capabilities of Backers other than (i) pursuant to the IBO and/or on terms more favorable to investors than the IBO; (ii) the issue of nonconvertible debt securities; (iii) upon the exercise of convertible securities, options or warrants of the Issuer outstanding at the date hereof; or (iv) pursuant to the Issuer’s Stock Option Plan.
In the event that the IBO is not completed and equity securities (including securities convertible into equity securities) of the Issuer are sold or agreed to be sold within 24 months of the date of the termination of this Agreement to investors identified by Backers and connected to the Issuer prior to the date of the termination, then Backers shall be entitled to receive from the Issuer the fees set forth in this Agreement in respect of any such sales.
Subject to the closing of the IBO, the Issuer will grant Backers a customary right of first opportunity to provide services within the jurisdiction and/or capabilities of Backers to lead, any future financing for a period of 12 months from completion of the IBO. Any Agreement to lead a future financing of the Issuer entered into pursuant to the right of first opportunity will be in accordance with standard industry terms at the time of the future financing.
You agree, if so requested by Backers, to include a reference to us and our role in any press release or other public communication issued by you with respect to the Initial Backers Offering. If the IBO is successfully completed and provided Backers are not in breach of any material provision hereof, Backers shall be permitted to publish, at our own expense, subject to your prior consent, not to be unreasonably withheld or delayed, such advertisements or announcements relating to the services provided hereunder in such newspaper or other publications as we consider appropriate. You also agree that you will not refer to Backers in any communication or press release without our prior written consent, not to be unreasonably withheld or delayed.
Please confirm that the foregoing is in accordance with the Issuer’s understanding by agreeing to these terms, which shall thereupon constitute a binding agreement between the Issuer and Backers.