To: ACME, INC., a California corporation I, the undersigned subscriber, hereby acknowledge that: (i) I have received and reviewed materials and information relating to Acme, Inc., a California corporation (“Company”) relating to an investment in shares of common stock, no par value (the “Shares”) of the Company; and (ii) I understand that I must accompany my subscription now with funds in the amount of the purchase price for the Shares to be purchased. 1 Subscription.
1.1 Subscription. Subject to the terms and conditions hereof, I hereby irrevocably subscribe for and agree to purchase, as of the date this subscription is accepted by the Company, for the consideration identified on Exhibit A attached hereto, the Shares identified on Exhibit A attached hereto, which purchase shall be subject to the conditions and restrictions stated herein, on such Exhibit A and to the performance of all agreements I have made with the Company. 1.2 Acceptance of Subscription. I understand that this Agreement will provide the Company with the necessary information to allow such subscription to be made, to allow compliance with applicable securities laws and to obtain the consideration I will be paying for my Shares. 1.3 Tax Consequences. I understand and agree that I am solely responsible for the tax consequences of this investment, I have been urged by the Company to consult my own tax adviser prior to making this subscription and I have not received any advice or guarantees from the Company or any agent, employee, shareholder, representative or attorney of the Company as to the tax treatment of this investment and my tax consequences and liabilities. 1.4 Risk Factors. I have read and understand all of the contents of Exhibit C attached hereto (“Risk Factors”) and I understand the nature of my investment and possible consequences thereof. 2 Representations and Warranties.
2.1 I understand that the Shares have not been registered under the Act or qualified under the securities laws of any state, and therefore cannot be transferred, resold, pledged, hypothecated, assigned, or otherwise disposed of unless they are subsequently registered or qualified under the Act and under applicable state securities laws or unless such sale is exempted from registration. (Transfer of the Shares to members of the subscriber’s immediate family are permitted.) I understand that there are substantial restrictions on the transferability of, and there will be no public market for, the Shares, and accordingly, it may not be possible to liquidate the investment in the Shares in case of emergency.
2.2 I understand that the Shares are being offered and sold under one or more of the exemptions from registration provided for in the Act, that I am purchasing the Shares without being offered or furnished any offering literature or prospectus other than any materials provided by the Company, that this transaction has not been scrutinized by the United States Securities and Exchange Commission or by any administrative agency charged with the administration of the securities laws of any state, that all documents, records and books pertaining to this investment have been made available, or would have been made available upon request, to me and my representatives, including my attorney, accountant and/or representative(s), if any, and that the books and records of the Company will be available upon reasonable notice for inspection by investors during reasonable business hours at its principal place of business (subject to appropriate confidentiality limitations and agreements). 2.3 I confirm that I am able (i) to bear the economic risk of this investment, (ii) to hold the Shares for an indefinite period of time, and (iii) presently to afford a complete loss of this investment; and represent that I have sufficient liquid assets so that the illiquidity associated with this investment will not cause any undue financial difficulties or affect my ability to provide for my current needs and possible financial contingencies, and that my commitment to all speculative investments (including this one if this subscription is accepted by the Company) is reasonable in relation to my net worth and annual income. 2.4 I confirm that, in making the decision to purchase the Shares, I have relied solely upon independent investigations made by me and/or by my representative(s), and that I and such representative(s) have been given the opportunity to ask questions of, and to receive answers from, persons acting on behalf of the Company concerning the terms and conditions of this offering, and to obtain any additional information, to the extent such persons possess such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information provided by the Company. 2.5 I have received, read and understood any materials provided to me by the Company, including any supplements and amendments thereto. I confirm that in making the decision to subscribe for and purchase the Shares, I have considered the risk factors applicable to this investment, including but not limited to the reliance on management, the lack of operating experience, the competitive nature of the market, the existence of significant regulation, both state and federal, affecting the Company’s operations, the illiquidity of the portfolio’s assets, and the engagement in arbitrage and other high risk transactions. 2.6 The Shares are being acquired by me in good faith solely for my own account, for investment purposes only, and are not being purchased with a view to or for the resale, resyndication, distribution, subdivision or fractionalization thereof. 2.7 I realize that, in the absence of the availability of Rule 144, any disposition of the Shares may require compliance with an exemption under the Act, and that the Company is under no obligation to take any action to make any such exemption so available.
2.8 I have not engaged any broker, dealer, finder, commission agent or other similar person in connection with the offer, offer for sale, or sale of the Shares and I am under no obligation to pay any broker's fee, finder's fee or commission in connection with this investment. 2.9 I have a pre-existing personal or business relationship with the Company and/or its officers, directors, managers (or members and managers thereof) or controlling persons. 2.10 I acknowledge that the information provided to me by the Company, whether orally or in writing, contains the views of the management of the Company, and that the analysis of the market and of the Company's strategy contained therein represent subjective assessments about which reasonable persons could disagree. 2.11 I acknowledge that there have been no representations, guarantees or warranties made to me by the Company, its agents or employees, or by any other person, expressly or by implication, with respect to: the Shares; or 2.11.1 The approximate length of time that I will be required to remain as owner of
2.11.2 The percentage of profit and/or amount of or type of consideration, profit or loss to be realized, if any, as a result of this investment. 2.12 If the subscriber is a corporation, partnership, trust or other entity, it was not formed for the specific purpose of acquiring the securities offered, it is qualified and authorized to invest or purchase the Shares, and the signatory has been duly authorized to execute this Agreement. The subscriber represents further that it is not a foreign corporation, foreign partnership, foreign trust or foreign estate as defined in the Internal Revenue Code of 1986, as amended. 2.13 I am (i) at least 21 years of age, and (ii) a bona fide resident and domiciliary (not a temporary or transient resident) of the State listed on the signature page. I am not a nonresident alien as defined in the Internal Revenue Code of 1986, as amended, and have no present intention of becoming a resident of any other state or jurisdiction. 2.14 If the subscriber is a benefit plan, Individual Retirement Account (“IRA”) or an entity which is exempt from taxation pursuant to Section 501 of the Internal Revenue Code, the subscriber acknowledges that it may be subject to tax on a substantial part of its share of income derived from its ownership of the Shares depending upon the extent to which such income is characterized as “unrelated business taxable income” (“UBTI”). 2.15 If the subscriber is a fiduciary with respect to an employee benefit plan, IRA, Keogh plan or other arrangement subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the subscriber represents that he/she/it is aware of and understands the Company’s investment objectives, policies and strategies, that the decision to invest plan assets in the Company was made with appropriate consideration of relevant investment factors with regard to the ERISA plan and is consistent with the duties and responsibilities imposed upon fiduciaries with regard to their investment decisions under ERISA.
2.16 If subscriber has obtained the funds for this subscription for purchase of Shares through a margin loan or a loan collateralized by securities, the subscriber is not investing in the Shares and the purchase of after securities more than fifty percent (50%) of the current market value of the underlying securities collateralizing such loan. 2.17 The representations, warranties and acknowledgments made herein by me are true and accurate as of the date of this Agreement and may be relied upon in determining my suitability as an investor in the Company. Such representations, warranties and acknowledgments shall be true and accurate as of the date of delivery to and acceptance by the Company, and shall survive such delivery and acceptance. If in any respect such representations, warranties and acknowledgments shall not be true and accurate prior to such delivery and acceptance, I shall give immediate written notice of such fact to the Company specifying which representations and warranties and acknowledgments are not true and accurate and the reasons therefor. 3 Representations and Warranties of the Company.
3.1 The Company is a corporation duly organized, validly existing, and in good standing under the Laws of the State of California. The Company is not qualified to do business in any other jurisdiction. The Company has all corporate power and authority, and holds all Permits and authorizations necessary, to carry on its business as currently conducted and to own and use the assets and properties owned and used by the Company. 3.2 This Agreement sets forth the legal, valid and binding obligations of the Company enforceable against the Company in accordance with its terms. 3.3 There are no actions or proceedings pending relating to or affecting (i) the Company, the Company’s assets and properties or the Company’s business; or (ii) the transaction contemplated by this Agreement. The Company is not in default with respect to any order, and there are no unsatisfied judgments against the Company. 3.4 The performance by Company of its obligations hereunder and the consummation of the transaction contemplated hereby do not and will not, conflict with, result in a violation or breach of, or give rise to an encumbrance or right of termination, cancellation or acceleration under, any charter document, bylaw, other organizational document, law, order, permit, contract, instrument or obligation to which the Company, any of its affiliates or any of the businesses, assets or properties of the Company may be bound or subject. 4 Miscellaneous.
4.1 This Agreement shall be governed by and construed in accordance with the laws of the State of California. 4.2 Subscriber hereby agrees to indemnify and hold harmless the Company, its officers or any of its affiliates, associates, agents or employees from and against any and all loss, damage or liability (including costs and reasonable attorney’s fees) due to or arising out of a breach of any
representation, warranty or acknowledgment in this Agreement. This indemnification section shall survive the delivery and acceptance of this Agreement. 4.3 With respect to the subject matter hereof, this Agreement constitutes the entire agreement among the parties hereto, supersedes any prior or contemporaneous agreement (oral or written) between the parties and may be amended only by a writing executed by all parties. This Agreement may only be terminated by mutual agreement or otherwise as permitted by applicable law. 4.4 All notices hereunder or to be otherwise provided between the parties hereto shall be in writing and either delivered in person or by registered or certified mail, return receipt requested, and shall be deemed delivered upon delivery or three (3) days after so mailed to the addresses listed on the signature page of this Subscription Agreement. 4.5 This Agreement is not transferable or assignable by Subscriber.
4.6 This Agreement nor any provision hereof will be modified, discharged or terminated except by an instrument in writing signed by the party against whom the waiver, change, discharge or termination is asserted. 4.7 This Agreement may be executed through the use of separate signature pages or in any number of counterparts, and each of such counterparts will, for all purposes, constitute one agreement binding on all the parties, notwithstanding that all parties are not signatories to the same counterpart. (signature page follows)
SUBSCRIPTION AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the undersigned has hereby executed this Subscription Agreement on this ___ day of December, 2008.
Print name: ________________________________
Signed on behalf of: ___________________________________ as its _____________________. (Name of corporation, LLC, partnership, trust or other entity, as applicable) (Title) Type of entity (if applicable): _________________________________ Number of shareholders, members or partners (if applicable): ______ _______________________________ SS# or EIN (as applicable) Subscriber’s Principal Address: _____________________________________ State of residency, incorporation or registration ____________________________________ Street Address ____________________________________ City or Town ____________________________________ State Zip Code The Company hereby accepts the foregoing subscription subject to the term and conditions hereof as of the ___ day of December, 2008. ACME INC., a California corporation By:_______________________________ Joe Smith, Chief Executive Officer If not an individual: Please attach a copy of the Articles of Incorporation, Partnership Agreement or Operating Agreement, as applicable, and documentation (e.g., a certified resolution) authorizing execution and delivery of this Agreement.
AMOUNT OF SHARES SUBSCRIBED PAYMENT METHOD:
_______ Shares of Common Stock Cash, paid by (check one): Check Wire transfer
PRICE PER SHARE: TOTAL AMOUNT PAID:
EXHIBIT C RISK FACTORS The purchase of Seed Round Common Stock (the “Shares”) involves a high degree of risk, and no prospective investor (each an “Investor,” and collectively the “Investors”) should purchase any Shares unless he or she can afford to lose his or her entire investment in Acme, Inc. (the “Company”). Each prospective Investor should carefully consider the following risk factors, in addition to any other risks associated with this investment, and should consult with his own legal and financial advisors. Competition; Speculative Business. The Internet and music industries are extremely competitive. Some competitors may have substantially greater experience, assets and financial and other resources than the Company. There is no assurance that the Company will be able to successfully or profitably compete in the Internet music business, or that Investors will not lose their investments. The commercial success of the Company’s operations will be dependent on several factors beyond the control of the Company’s directors and officers. Violation of Third Party Rights. There are inherent third party legal risks associated with the Company’s business model, insofar as it will facilitate the sharing, production, use, development and exploitation of intellectual property and other protected rights, including without limitation music, lyrics, videos, names, likenesses, photographs, trademarks, service marks and logos. While the Company will endeavor to ensure that any and all exploitation of intellectual property through its website is licensed and authorized, unauthorized uses could occur despite the Company’s best efforts. While the Company will establish contractual and other safeguards to minimize the risk of copyright infringement and/or other violations of intellectual property rights, it may be possible for users of the Company’s products and services (including artists and bands using the Company’s website) to upload images, songs, videos and other content and thereby infringe third party rights in the same. If such infringement occurs, the Company could become subject to legal or administrative proceedings, such as civil lawsuits, administrative investigations or enforcement actions, arising from such infringement of third party rights. If this occurs, the Company may be subject to, among other things, judgments, fines, sanctions and/or other remedies that could have a significant detrimental effect on the Company and its operations. Insufficient Marketing or Advertising to Gain a “Critical Mass” of Users. The success of internet services and products, such as those to be offered by the Company, depends in large part on building a “critical mass” of internet users who visit and/or use the Company’s website. There can be no assurance that a “critical mass” of users will be attained. Technology Issues. There are inherent risks associated with the development and maintenance of new technology, and the Company may be subject to customary types of delays and problems associated with new technology. The technologies on which the Company’s website will be based are inherently complicated. The success of the Company depends in large part on the successful operation of proprietary technology and any internal or outsourced technology team(s) charged with developing and maintaining it. Failure of this technology and/or the technology team(s) could have a significant adverse effect on the Company’s operations and revenue.
Reliance on Key Management. The Company will be relying in large part on its key management personnel to implement the Company’s business plan and supervise Company operations. The Investors must be willing to entrust all aspects of the Company’s business to such key management. The loss of certain key officers and directors could have a material adverse impact on the Company. The Company will be largely dependent upon its key officers and directors for the direction, management and supervision of the Company’s operations. Limited Operating History; New Business Model. The Company has recently been formed to provide internet-based services and entertainment. The company has limited operating history, and the business model upon which the Company’s operations are based is new and substantially untested. The Company has no earnings or gross revenues to date. The Company has limited assets and working capital. There is no assurance that the Company will earn any revenue from its planned operations. Cautionary Statements. To the extent that the discussions and information provided to you in connection with this offering of Shares contain forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of the Company, please be advised that the Company’s actual financial condition, operating results and business performance may differ materially from that projected or estimated by the Company in forward-looking statements. The differences may be caused by a variety of factors including, but not limited to, adverse economic conditions, intense competition, cost overruns in developing, producing, and marketing Company’s website, lack of customer acceptance of the Company’s services, inability to acquire quality musical content, termination of contracts, government regulation, inadequate capital, unexpected operating deficits, lower sales and revenues than forecast, the risk of litigation and administrative proceedings involving the Company, adverse publicity and news coverage, inability to carry out marketing and sales plans, loss or retirement of key executives, losses incurred from operations, changes in interest rates, inflationary factors, inaccurate assumptions regarding the Company and its business, and other specific risks that may be alluded to in the offering documents. The financial projections are prepared by the Company and have not been examined or compiled by independent certified public accountants. Accordingly, neither the independent certified public accountants nor counsel to the Company are providing any level of assurance on them. There is no assurance that the results illustrated in any financial projections will, in fact, be realized. Absence of Immediate Revenues; Fluctuations in Company Operating Results. The Company anticipates that it will incur substantial operating losses relating to start-up operations until the Company is able to generate adequate revenues from the use of its website and related services, of which there can be no assurance. The Company’s revenues and results of operations are significantly dependent upon the growing use of its website, which cannot be predicated with certainty. Revenue may not be recognized until a substantial number of customers purchase goods or services from the Company. Indemnification of Directors and Officers. The Company’s governing documents provide that the Company will, within the limits of capital contributions and retained assets, hold its Directors and Officers harmless against certain claims arising from Company activities, other than losses or damages incurred by it as a result of its gross negligence, fraud or bad faith. If the Company were called upon to perform under its indemnification agreement, then the portion of its assets expended for such purpose would reduce the amount otherwise available for the Company operations or for distributions to the Investors, if any.
Discretion in Application of Proceeds. Company management will have broad discretion as to the application of the net proceeds from the sale of the Shares on behalf of the Company. Possible Inadequacy of Company Funds. The Company will have limited capital available, to the extent that the Company raises capital from this offering. If the Company’s entire original capital is fully expended, additional costs may not be funded from borrowings or capital from other sources. There is no assurance that the Company will have adequate capital to conduct its business. There is no assurance that the Company will raise sufficient funds through this offering, and the Company may close the offering after a minimum amount of capital is raised (as described in the offering documents). If minimal/insufficient funds are raised during this offering, the Company may not be able to fully implement its business plan. There is no assurance that the Company will be able to raise additional capital, or that additional capital could be raised at favorable valuations. No Assurance of Profit. There is no assurance as to whether the Company will be profitable or earn revenues, or whether the Company will be able to return any investment funds, to make cash distributions or to meet its operating expenses and debt service. Potential Further Dilution of Ownership. Unless otherwise limited by an agreement to which Investor is a party, under the Company’s governing documents the Board of Directors (the “Board”) has the right to issue additional shares of preferred and/or common stock in the Company, in excess of amounts designated in this offering, on such terms and conditions and for such consideration as are determined by the Board. There is no assurance that additional capital rounds will not cause ownership dilution to all of the Investors. No Assurance of Dividends. There is no assurance as to when or whether dividends will be paid to Investors. The Company currently does not intend to declare any dividends, as the Company intends to invest all excess cash flow into Company operations to spur growth. The Company must pay operating expenses and other costs prior to paying dividends. Even if dividends are paid, the Company may not be profitable or be earning revenues. The Board, in its discretion, may retain Company funds for working capital purposes. Limited Transferability of Shares. Investors may have considerable difficulty in selling their Shares or pledging the same as collateral for loans. Shares should be purchased only by persons with the financial ability to acquire and hold them as a long-term investment. Federal and state securities laws may also impose restrictions on the transferability of Shares. There may be no public market for the Shares, and it may not be possible to liquidate an investment in the Shares. Disasters. Unforeseeable disasters (including without limitation earthquakes, fires, floods and/or acts of terrorism) may negatively impact the Company’s operations, facilities, customers and users, both domestically and overseas. Such negative impact could disrupt and/or disable the Company’s continued operations, and result in a loss or elimination of value in the Shares.