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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
POLITICS.COM, INC.
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(Exact Name of Small Business Issuer in Its Charter)
DELAWARE 33-0836078
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2530 S. RURAL ROAD, TEMPE, AZ 85282
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(Address of Principal Executive Offices) (Zip Code)
(480) 858-0016
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(Registrant's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
To Be So Registered Each Class Is To Be Registered
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Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.00001
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(Title of Class)
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(Title of Class)
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INTRODUCTORY NOTE
Politics.com, Inc., a Delaware corporation, has prepared and filed this
Form 10-SB on a voluntary basis to make available reportable information about
the company to existing shareholders and others interested in the activities of
the company.
As used in this Registration Statement, the terms "we," "us," "our,"
and "Politics.com" mean Politics.com, Inc., a Delaware corporation and its
wholly-owned subsidiary, Politics.com, Inc., a Nevada corporation (unless the
context indicates a different meaning).
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
Politics.com, Inc., a Delaware corporation, was formed in January 1997
under the name Lone Oak, Inc. Lone Oak, Inc. is the successor-by-merger of B&E
Securities Management, Inc., a Maryland corporation incorporated in January
1969. B&E Securities Management, Inc. was inactive from around 1971 until its
merger with and into Lone Oak, Inc. in February 1997. Lone Oak, Inc. had no
significant operations since its inception until July 1999. In April 1999, Lone
Oak, Inc. sold its wholly-owned subsidiary, D&E Flight Simulators, Inc. for
$5,000. On July 27, 1999, Lone Oak, Inc. acquired all of the issued and
outstanding shares of common stock of Politics.com, Inc., a Nevada corporation
("Politics.com-Nevada") (following which Lone Oak, Inc. changed its name to
Politics.com, Inc.). Politics.com's business consists solely of the business
conducted by its wholly-owned subsidiary, Politics.com-Nevada.
GENERAL
Through our wholly-owned subsidiary, Politics.com-Nevada, we are a
development stage Internet company that intends to be a global Internet media
company, offering a branded network of information, communication,
entertainment, community, and commerce services with a common theme of politics.
We expect to draw users to our Web site by providing a one-stop
destination which will enable users to identify, select and access resources,
services, content and information on the Web, all of which will be related to
politics. Our Web site is expected to offer news, information and entertainment
search and directory service, activism and participation communities, and a
retail store.
The Web site is currently under development, but is available to
selected users who are provided with a pre-determined username and password.
THE INTERNET INDUSTRY AND POLITICS
The Internet is evolving into a global medium, allowing millions of
individuals throughout the world to communicate, share information and engage in
commerce electronically. The World Wide Web (the "Web") is a graphical based,
interactive environment which facilitates the exchange of information and
entertainment among users worldwide. The use of the Internet and the Web is
continuing to grow as the number of users increases due to the increasing number
of personal computers installed in homes and offices, the declining prices of
personal computers, the improvements in network infrastructure, the availability
of faster and cheaper Internet access, and the increasing familiarity and
acceptance of the Internet by businesses and consumers. Web usage is also
expected to continue to grow rapidly due to unique characteristics that
differentiate it from traditional media, such as real-time access to interactive
content, real-time communication capabilities and the absence of geographic or
temporal limitations.
The Internet is in the early stages of changing the political landscape
and political life in the United States and throughout the world. Government
bodies, political parties, candidates, movements, lobbying organizations, and
individuals seeking to employ the Internet as a vehicle for accomplishing their
goals, are beginning to utilize the Internet to express their political opinions
and beliefs. The online political landscape, while rich and diverse, is
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currently not well-organized, nor is it well served by systems for
communication, collaboration, and commerce. It is therefore not an environment
ready for the voting public. We believe that the online political environment
needs a portal company attuned to the unique nature of the political process.
Our Web site will provide the basic infrastructure for politics on the Internet.
PRODUCTS AND SERVICES
Our principal Web site will be focused solely on political interests
and activities. The principal Web site will likely consist of the following
underlying features and services: a news, information and entertainment channel
which will enable users to read, listen, see and interact with political
figures, newsmakers and experts; a search and directory service will provide a
robust and well-organized information directory which will enable users to find
and link to Web sites providing information covering political data and
information; activism and participation communities which will serve as a town
hall and will enable users to roam, meet, discuss, organize, fund-raise,
petition and vote on political matters; and a retail store which will sell
memorabilia, tapes, books, reports, travel, subscriptions, memberships and other
relevant items.
We currently hold various Internet domain names relating to our brand,
including "www.politics.com," "www.gop.com" and "www.elections.com," which we
acquired on June 30, 1999 from Howard R. Baer, Chairman of the Board of
Directors and our majority stockholder. In addition, on August 17, 1999, we
acquired "politicaljunkie.com" for $55,000, of which $36,667 has been paid to
date. The PoliticalJunkie Web site is a Web site that attracts a regular
audience of journalists, political professionals, and politically committed
individuals by offering an efficient source of access to political information.
The PoliticalJunkie Web site currently has a extensive library of information
and Web links to other Web sites relating to political information, including
approximately 90 newspapers, approximately 100 political columnists, many
governor's offices, and information on a number of declared and undeclared Year
2000 presidential candidates.
OUR MARKET OPPORTUNITY
We believe we are well-positioned to exploit the following key market
trends:
- Our research indicates that a majority of U.S. households are
accessing the Internet and are increasingly relying on the Internet
for information about politics;
- Advertisers are spending more money to advertise on the Internet as
Internet usage continues to expand;
- At least two studies indicate that the Internet will become a medium
utilized by candidates for campaign advertising and spending;
- The Internet audience is constantly looking for new sources of
information, entertainment, and interaction;
- There is currently no Web brand for Politics. None of the Top 25
Web sites has a strong focus on politics. Many have a political
dimension, but none of these sites offer a one stop destination
for politics, such as the Web site we intend to develop; and
- Our review of Web sites which are currently focused on politics as
their primary subject reveal that they are generally poorly
organized, lacking content and market presence.
We believe the opportunities to create value from an audience focused
on politics are numerous. For example:
- Vendors of products and services may want to promote and sell to
well-defined demographic groups;
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- Promoters of political causes and interests may want to focus their
efforts to those individuals most open to their arguments;
- Organizers of political initiatives and movements may want to rent
space in an active, well-populated political arena;
- Candidates are already raising money online;
- Activists and organizations will subscribe to premium political
information and will host services;
- Owners of traditional and Internet media will want to promote their
programming to a targeted audience and will also want access to
content, programming, and properties produced by the destination; and
- Sponsorship of "good causes" will help position organizations and
individuals.
OUR STRATEGIES
WE OWN THE POLITICS.COM DOMAIN NAME.
We believe that ownership of the Politics.com domain name provides us
with a strategic market advantage. We believe that branding and consumer loyalty
on the Internet are dependent upon our ability to differentiate our services and
to enhance our users' experience by continually offering innovative technology
and appealing features and effectively marketing these features to existing and
potential users of our Web site.
We expect to receive immediate and continuing name recognition because
our domain name communicates the nature of our brand, it provides an umbrella
for state, local, and international affiliations and it also yields traffic from
those users that routinely use the address bar of a browser to find sites of
interest. We believe that people type "politics" into their browser just to see
the response.
We expect to refine our brand identity with further market research and
testing. We will seek to make Politics.com the Web site to go to for information
relating to politics. We may also enhance our brand development through:
- Network radio advertising;
- National print, outdoor and Web-based advertising;
- Finding strategic partners;
- Engaging in marketing and distribution arrangements;
- Special event sponsorships;
- Public and community relations programs; and
- Network television and national cable advertising.
OUR KEY OPERATIONAL STRATEGIES.
We have a number of key operational strategies which include the
expectation to do the following:
- Locate our offices in New York and Washington, D.C. to strategically
position us for ready access to key talent, business partners, and
the marketplace;
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- Build a strong management team with the experience and talent to grow
a major media company;
- Appoint a prominent Board of Advisors to lend their experience,
reputation, and influence;
- Use an experienced Web development company to design, build, and host
the Web site. Internally produce original content and events. Acquire
and license generally available technology, content and services such
as chat rooms, site search, link directory, and free email;
- Use experienced managing editors to organize and manage content and
services;
- Acquire attractive, synergistic Web properties to rapidly expand the
breadth and depth of the Web site, in order to enhance the value of
the site to potential advertisers;
- Focus on aggressive marketing of our brand in a variety of media,
including print, radio, and television. Seek strategic relationships
with traditional and local media to enhance reach and penetration;
and
- Build a nationwide, direct sales force to address advertising,
electronic commerce, campaign spending, and corporate markets. Focus
primarily on high-population centers. Appoint distributors and
franchisees to cover other regions.
MARKETING AND ADVERTISING OF THE POLITICS.COM WEB SITE
Our marketing goal is to attract traffic to the Politics.com Web site
and to develop the Politics.com brand. We expect our marketing plan to include
the use of multiple advertising media, such as affiliate programs, radio,
television, print, outdoor and Web-based advertising.
We also intend to increase our Web site traffic by increasing the
number and visibility of entry points to the Politics.com Web site through
co-branding and other marketing arrangements with content providers and other
political-related Web sites.
In an effort to increase traffic, we expect to add content and other
features to our Web site which we expect will encourage users to spend more time
on our Web site. We also intend to regularly enhance our technological features
and services and update our content in order to encourage consumers to use our
Web site more frequently.
We cannot assure that we will be able to effectively promote the
Politics.com Web site.
SALES AND REVENUES
We expect to generate revenue primarily through the sale of
advertisements, promotions, sponsorships, merchandising, hosting services,
direct marketing and electronic commerce. We expect to derive revenue from our
Web site as follows:
- Advertising by vendors, candidates, parties, and special interest
groups both on the Web site and in a free email service;
- Commerce fees from advertisers making sales from their ads;
- Placement fees from political organizations, services, and figures;
- Pay-per-view or registration fees for premium services;
- Sponsorships and special promotions;
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- Paid surveys and polls;
- Sales of related products such as tapes, books, memorabilia, and
gifts;
- Placement fees from affiliated state and local political sites;
- Classified ad services;
- Travel services;
- Hosting fees from political organizations, individuals, and movements
for permanent and temporary spaces, special forums, fund-raisers,
campaigns, and conventions;
- Sales of value-added services to hosted organizations such as travel
services, direct marketing/mail, and virtual offices;
- Registration fees for special forums; and
- Sales of books, videos, magazine subscriptions, art, collectibles,
newsletters, Washington D.C. tours, affinity credit cards, etc.
We also expect to generate revenue from (i) co-branders who will
provide and use Politics.com's content and services in exchange for access fees;
(ii) distributors who will deliver Politics.com's services to their markets;
(iii) franchisees who will buy rights to local markets; (iv) media partners who
will co-distribute programming; (v) sponsors who will provide funding for some
events and properties; (vi) syndicators who will buy programming; and (vii)
vendors who will use our online store.
We expect that approximately 90% of our revenue will be generated by
advertising and sponsorship fees from organizations using our Web site to
communicate with their target markets and constituencies. Approximately 10% of
our revenues will result from service fees, e-commerce and other forms of
revenue described above.
Although we expect to derive revenue and generate sales from a variety
of sources, there can be no assurance that we will be able to generate revenue
or sales from any of the foregoing, or that the amount of revenue generated will
be sufficient to sustain our business as a going-concern.
COMPETITORS AND COMPETITIVE FACTORS AFFECTING OUR BUSINESS
The market for Internet products, services and advertising and commerce
is intensely competitive, and we expect that competition will continue to
intensify. We believe that the principal competitive factors in these markets
are name recognition, distribution arrangements, functionality, performance,
ease of use, the number of value-added services and features, and quality of
support. Our primary competitors are other companies providing portal and online
community services such as Yahoo, Lycos, and AOL. We do not believe, however,
that any of these competitors provide the same scope of services such as those
we intend to offer. In the event that any of these companies offer services
similar to ours, we could lose a substantial portion of our user traffic and
could suffer adverse consequences because our competitors, among other things,
may be more diversified, have greater resources and greater name recognition
than us. Although we believe that our commitment to providing quality and
consistent services and products will enable us to compete effectively with our
competitors, our failure to keep pace with rapidly changing technology could
have a material adverse effect on our operations and financial condition.
ACQUIRING AND DEVELOPING CONTENT AND FEATURES FOR THE POLITICS.COM COMMUNITY
We intend to develop partnerships with a wide variety of media sources,
strategic partners and content providers. We do not expect many of these
partnerships will involve the exchange of funds between us and these
organizations. Instead we expect to engage in barter transactions where we will
offer our services and the opportunity to advertise on our Web site as
consideration to these potential partners. Developing these relationships
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will allow us to increase our Web site content which should enable us to attract
and retain Internet users of our Web site and to solidify our position as an
easy-to-use interface for political information. We also plan to license
technology and information from third parties where appropriate in order to
increase the content of our Web site. We cannot assure, however, that we will be
able to develop these relationships or obtain the funds necessary to enter into
any licensing agreements with third parties. Our failure to develop these
relationships or enter into license agreements for technology could have a
material adverse effect on our business and results of operations.
PROPRIETARY RIGHTS
We believe our ability to compete effectively depends to a significant
extent on our ability to protect our proprietary information. We will rely
primarily upon confidentiality procedures, trade secrets and trademark and trade
name laws to protect our intellectual property rights.
We plan to enter into confidentiality agreements with our key employees
and our marketing partners, and will generally control access to our technology,
software and other proprietary information. Despite these precautions, however,
it may be possible for competitors or customers to copy all or part of our
technology or to obtain information which we regard as proprietary. Furthermore,
we cannot assure you that others will not independently develop technology
similar to ours. Misappropriation of our technology or development by our
competitors of technologies that are substantially equivalent or superior to our
technology would have a material adverse effect on our operations and financial
condition.
We are also subject to the risk of infringing the intellectual property
rights of others. Although we believe that our technology does not infringe on
the proprietary rights of others, and we have not received any written notice of
claimed infringements, because of the rapid technological development of the
Internet industry, certain of our technologies may infringe on existing
proprietary rights of third parties. If any such infringements exist or occur,
we cannot assure you that we will be able to obtain licenses or rights necessary
to avoid continued infringement on terms that would be satisfactory to us, if at
all. A failure to obtain such licenses or rights could have a material adverse
effect on our business, results of operations and financial condition. Further,
in such event, we may be required to modify the infringing technology. There can
be no assurance that we would be able to do so in a timely manner, upon
acceptable terms and conditions, or at all, and the failure to do so could have
a material adverse effect on our business, results of operations and financial
condition.
In addition, we may have to litigate to enforce our intellectual
property rights, to determine the validity and scope of the proprietary rights
of others or to defend against claims of infringement or invalidity. Such
litigation could result in substantial costs and a diversion of our resources,
and could have a material adverse effect on our business, results of operations
and financial condition.
GOVERNMENT REGULATION
REGULATION OF THE INTERNET
At the present time the amount of state and federal governmental
regulation applicable to the Internet is relatively small when compared to other
areas of communication and commerce. As the size, use and popularity of the
Internet increases, it is possible that laws and regulations may be enacted with
respect to the Internet, covering issues such as user privacy, pricing,
taxation, content, copyrights, distribution, antitrust and quality of products
and services. Additionally, the rapid growth of electronic commerce may trigger
the development of tougher consumer protection laws. The adoption of such laws
or regulations could reduce the rate of growth of the Internet and could make it
more difficult and expensive for us to carry on our planned business activities.
Due to the increasing use of the Internet and the burden it has placed
on the current telecommunications infrastructure, telephone carriers have
requested the Federal Communications Commission ("FCC") to regulate Internet
service providers and online service providers and impose access fees on those
providers. If the FCC imposes access fees, the costs of using the Internet could
increase dramatically. These regulations, if promulgated, could result in the
reduced use of the Internet as a medium for commerce, which could have a
material adverse effect on our business, financial condition and results of
operations.
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REGULATION CONCERNING PRIVACY
The United States Congress has passed the Children's Online Privacy
Protection Act, and the Federal Trade Commission ("FTC") has issued a Notice of
Proposed Rulemaking regarding the adoption of regulations with respect to the
collection and use of personal identifying information obtained from individuals
when accessing Web sites, with particular emphasis on access by minors. These
regulations may include requirements that companies establish certain procedures
to, among other things:
- give adequate notice to consumers regarding information collection
and disclosure practices;
- provide consumers with the ability to have personal identifying
information deleted from a company's database;
- provide consumers with access to their personal information and with
the ability to rectify inaccurate information; and
- obtain express parental consent prior to collecting and using
personal identifying information obtained from children under 13
years of age.
These regulations may also include enforcement and redress provisions. While we
expect to have a privacy policy designed to enhance the protection of the
privacy of our users, there can be no assurance that these programs will conform
with any regulations which may be adopted by the FTC.
It is also possible that cookies, or information keyed to a specific
server, file pathway or directory location that is stored on a user's hard
drive, which are used to track demographic information and to target
advertising, may become subject to laws limiting or prohibiting their use.
Limitations on or elimination of our use of cookies could limit the
effectiveness of our ability to market to certain users, which could have a
material adverse effect on our business, results of operations and financial
condition.
The European Union has adopted a directive that imposes restrictions on
the collection and use of personal data. Under the directive, EU citizens are
guaranteed rights to access their data, rights to know where the data
originated, rights to have inaccurate data rectified, rights to recourse in the
event of unlawful processing and rights to withhold permission to use their data
for direct marketing. The directive could, among other things, adversely affect
U.S. companies that collect information over the Internet from individuals in EU
member countries, and may impose restrictions that are more stringent than
current Internet privacy standards in the United States. Politics.com may
ultimately engage in data collection from users in EU member countries. If we
do, we would be subject to the EU directive.
We intend to take the necessary measures to ensure that our Web site
complies with industry standards relating to user privacy.
EMPLOYEES
As of September 15, 1999, we had nine employees, of which five were
full-time and four were part-time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of our plan of operation for the next 12
months should be read in conjunction with our financial statements, any notes
related thereto, and the other financial data included elsewhere in this
Registration Statement. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors discussed in this Registration Statement.
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OVERVIEW
Politics.com, Inc., a Delaware corporation, was incorporated on January
17, 1997, as Lone Oak, Inc. Lone Oak, Inc. is the successor-by-merger of B&E
Securities Management, Inc., a Maryland corporation which was inactive from
around 1971 until its merger with and into Lone Oak, Inc. in February 1997. Lone
Oak, Inc. had no significant operations since its inception until July 1999. In
April 1999, Lone Oak, Inc. sold its wholly-owned subsidiary, D&E Flight
Simulators, Inc. for $5,000. In July 1999, Lone Oak, Inc. acquired all of the
issued and outstanding common stock of Politics.com-Nevada, in exchange for an
aggregate of 7,000,000 shares of common stock of Lone Oak, Inc. Following the
acquisition, the former stockholders of Politics.com-Nevada owned approximately
77.0% of the issued and outstanding common stock of Lone Oak, Inc. Accordingly,
the transaction has been accounted for as a reverse acquisition, with
Politics.com-Nevada being deemed the acquiror and Lone Oak, Inc. being deemed
the acquired company. On July 27, 1999, Lone Oak, Inc. changed its name to
Politics.com, Inc.
PLAN OF OPERATION
From inception to June 30, 1999, we received approximately $145,000 to
fund our operations in the form of unsecured advances which have since been
converted into common stock. In addition, at June 30, 1999, we issued a
promissory note in the principal amount of $151,000 as consideration for the
purchase of certain Internet domain names. From July 1, 1999 to September 24,
1999, we borrowed an additional $260,000 in the form of unsecured cash advances
bearing interest at the rate of 10% per annum. We are currently experiencing a
severe working capital deficiency and are incurring significant losses. At this
time, we are not generating any revenue, but are incurring substantial costs and
expenses in connection with our business operations and the development of our
Web site.
As of September 24, 1999, our cash balances were approximately $19,000,
and we had a working capital deficiency of approximately $713,000, which
includes indebtedness to related parties of approximately $415,000. We expect to
remedy the working capital deficit with the anticipated proceeds from our
current private placement pursuant to which we are offering up to 666,667 shares
of our common stock, at $3.00 per share, in a private placement exempt from
registration under Rule 506 promulgated under Regulation D of the Securities Act
of 1933, as amended. Assuming the sale of all 666,667 shares, we expect to raise
approximately $2 million (before deducting finders' fees and offering expenses).
We cannot assure you that we will raise sufficient funds to remedy the working
capital deficit or fund our operations. If we are unable to raise sufficient
capital to remedy the working capital deficit and fund our continuing
operations, there will be a material adverse effect on our business and our
ability to continue as a going concern.
As of September 15, 1999, we intend to make capital expenditures in the
amount of approximately $150,000, consisting of approximately $60,000 for
computer equipment, approximately $40,000 for office cubicles and approximately
$50,000 for other office furniture and equipment. We also expect to spend
approximately $110,000 per year for each of the next three years for our planned
office space in New York. We anticipate that we will expend approximately
$500,000 to $700,000 for Web site development costs over the next four to six
months. During the next twelve months we expect to hire a significant number of
new employees and to incur approximately $2.5 million of salary, benefits and
other personnel expenses.
Assuming we raise the full $2 million from our current private
placement, based on our current plan, we will need to raise additional capital
in approximately four to six months. We cannot assure you that we will raise the
full $2 million from our current private placement or that we will in the future
be able to raise sufficient funds to continue our operations. Nor can there be
any assurance that we will be able to internally generate sufficient funds to
continue our operations. Our failure to raise sufficient additional funds,
either through additional financing or continuing operations, will have a
material adverse effect on our business and financial condition. The issuance of
additional equity securities or rights to acquire equity securities will dilute
the interest of our then current stockholders.
YEAR 2000 COMPLIANCE
We will depend on the delivery of information over the Internet, a
medium which is susceptible to the Year 2000 problem. The Year 2000 problem is a
result of limitations of certain software written using two digits rather than
four to define the applicable year. If software with date-sensitive functions is
not Year 2000 compliant, it may
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recognize a date using "00" as the Year 1900 rather than the Year 2000. The
Year 2000 problem could result in a system failure or miscalculations causing
significant disruption of our operation, including, among other things,
interruptions in Internet traffic, accessibility of our Web site, delivery of
our service, transaction processing or searching and other features of our
services. It is possible that this disruption will continue for an extended
period of time.
We will depend on information contained primarily in electronic format
in databases and computer systems maintained by us and by third parties. The
disruption of third-party systems or our systems interacting with these third
party systems could prevent us from delivering search results or other services
in a timely manner which could materially and adversely affect our business and
results of operations.
We believe that when acquired, our computerized systems will be Year
2000 compliant. If our computerized systems are not in fact Year 2000 compliant,
our failure to make our systems Year 2000 compliant in a timely manner will have
a material adverse effect on our business, results of operations and financial
condition.
Although we believe that we will be Year 2000 compliant, we will use
third party vendors whose equipment and software may not be Year 2000 compliant.
The failure of such third parties to make their systems Year 2000 compliant will
have a material adverse effect on the our business, results of operation and
financial condition. We have not yet determined the extent to which the computer
systems of such third parties are Year 2000 compliant, if at all. The failure of
such third parties to make their systems Year 2000 compliant in a timely manner
will have a material adverse effect on our company.
We have not developed a Year 2000-specific contingency plan. If Year
2000 compliance issues are discovered, we will then evaluate the need for
contingency plans relating to such issues. We intend to actively work with our
vendors and service providers to minimize the risks of business disruptions
resulting from Year 2000 issues and to develop contingency plans where
necessary. Such plans may include using alternative suppliers and service
providers. We expect to have such plans in place by December 1999.
The most reasonably likely worst case scenario related to Year 2000
issues would involve a major shutdown of the Internet or there may be serious
disruptions in shipping products purchased through our retail store. In
addition, if our users are not Year 2000 compliant, then may not be able to
access our Web site without serious disruptions. Each of the foregoing would
result in a severe loss of revenue to us until the problem was resolved.
ITEM 3. DESCRIPTION OF PROPERTY.
We currently rent, on a month-to-month basis, approximately 1,400
square feet of space for our executive offices in Arizona for $1,200 per month.
We are negotiating to lease approximately 3,000 square feet of office
space in New York, New York for approximately $9,000 per month, pursuant to a
three year lease. We plan to terminate our tenancy in Arizona once we take
possession of our new office space in New York, New York.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of our common stock as of September 15, 1999, by (i) each person or
group known by us to own beneficially more than 5% of the outstanding common
stock; (ii) each of our directors and named executive officers; and (iii) all of
our directors and executive officers as a group. The term "beneficial
ownership," as defined by applicable federal securities laws, includes shares
that may be acquired within 60 days upon the exercise of options, warrants and
other rights. This information is based upon information that has been received
from and on behalf of the named individuals. Unless otherwise noted below, the
persons named in the table have sole voting and sole investment powers with
respect to each of the shares reported as beneficially owned by such person:
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SHARES OF
Name COMMON STOCK
- ---- BENEFICIALLY OWNED PERCENT OF CLASS
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DIRECTORS AND EXECUTIVE OFFICERS
Marc Jacobson(1).............................................. 315,000 3.3%
Howard R. Baer................................................ 5,250,000 57.7%
Kevin C. Baer................................................. 1,750,000 19.3%
Brian Wadsworth(2)............................................ 293,200 3.1%
Burt Alimansky(3)............................................. 215,000 2.3%
All directors and executive officers as a group (5 persons)... 7,823,200 80.7%
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(1) Represents options to purchase 315,000 shares of our common stock that
are exercisable within 60 days from September 15, 1999.
(2) Represents options to purchase 293,200 shares of our common stock that
are exercisable within 60 days from September 15, 1999.
(3) All of the shares are held of record by Mr. Alimansky's spouse.
Mr. Alimansky disclaims beneficial ownership of such shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The following table sets forth the name, age and positions of our
directors, executive officers and key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Howard R. Baer 57 Chairman of the Board July 1999
Marc Jacobson 46 President, Chief Operating Officer and Director September 1999
Burt Alimansky 55 Director September 1999
Kevin C. Baer 31 Director, Vice President, Treasurer and Secretary July 1999
Brian Wadsworth 50 Director July 1999
Kurt Ehrenberg 40 Managing Editor ---
</TABLE>
HOWARD R. BAER joined us in July 1999 as Chairman of the Board of
Directors. Mr. Baer was the founder of and has been Chairman of the Board of
Politics.com-Nevada since its inception in March 1999. Mr. Baer is the founder
of and has served as President of Carriage House Capital, L.L.C., a business and
financial services firm which provides consulting services to private and public
entities, since 1988. Mr. Baer is the father of Kevin C. Baer, one of our
directors and executive officers.
MARC JACOBSON joined us September 7, 1999 as President and Chief
Operating Officer and as a Director. From 1998 to 1999, Mr. Jacobson served as
senior vice president of corporate development and public policy at Prodigy
Communications Corporation, a leading Internet Service Provider. During the
period 1995 through 1999, Mr. Jacobson served in various capacities for Prodigy
including chief financial officer, general counsel and corporate secretary.
Prior to his employment with Prodigy, Mr. Jacobson served as an entertainment
attorney. He is the founding chairman of the New York State Bar Association's
Section on Entertainment, Arts and Sports Law.
11
<PAGE>
Mr. Jacobson is the chairman of the advisory board for the Internet Alliance, a
Washington-based trade association, and also serves as an advisory board member
for the New York Infotech Forum.
BURT ALIMANSKY joined us as a director in September 1999. Since 1981,
Mr. Alimansky has served as managing director of Alimansky Capital Group Inc., a
New York City-based private financial advisory firm serving emerging-growth and
middle-market companies. Alimansky Capital Group, founded by Mr. Alimansky in
1981, advises privately-held companies on venture capital, private equity and
debt financings for buyouts, expansion, strategic buy-ins, restructurings, and
growth. In 1984, Mr. Alimansky founded and became chairman of New York Business
Forums Inc., an entity which holds monthly programs intended to stimulate
interaction among private equity investors, bankers, entrepreneurs, attorneys,
accountants and senior executives of major corporations. He has served as
director of several companies and investment firms and currently serves as a
national board member of the National Foundation for Teaching Entrepreneurship,
and serves on the board of directors of the American Woman's Economic
Development Corporation.
KEVIN C. BAER joined us in July 1999 as Vice President, Treasurer
and Secretary and as a director. Mr. Baer has been Vice President, Treasurer
and Secretary and a director of Politics.com-Nevada since its inception in
March 1999. Mr. Baer has been an Executive Vice President of Carriage House
Capital, L.L.C., a business and financial services firm which provides
consulting services to private and public entities, since October 1992. Mr.
Baer is the son of Howard R. Baer, our Chairman and majority stockholder.
BRIAN WADSWORTH, now a consultant for us, joined us in July 1999 as a
director and has served as a director of Politics.com-Nevada since March 1999.
Mr. Wadsworth served as our interim President from July 1999 to September 7,
1999 and also served as interim President of Politics.com-Nevada from March 1999
to September 7, 1999. Mr. Wadsworth previously served as president of Noble
Technologies, Inc., a provider of business consulting services for technology
companies from 1995 through February 1999. From 1993 through 1995, Mr. Wadsworth
served as the chief operating officer of Computer Concepts Corp., a developer
and marketer of computer software. Mr. Wadsworth has over thirty years
experience with technology and technology businesses including service in
general manager, product management, and sales and marketing positions.
KURT EHRENBERG joined us in July 1999 as Managing Editor. Mr. Ehrenberg
has been Managing Editor of Politics.com-Nevada since its inception in May 1999.
Prior to joining Politics.com-Nevada, Mr. Ehrenberg owned and operated the
PoliticalJunkie.com Web site, a site that attracts a regular audience of
journalists, political professionals, and politically committed individuals by
offering an efficient source of access to political information. Prior to
PoliticalJunkie.com, Mr. Ehrenberg accumulated over 20 years experience of
political activity, including election campaigns, lobbying, and consulting.
12
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation to be paid to Marc Jacobson, our President and Chief Operating
Officer, and Brian Wadsworth, our interim President from July 1999 to September
7, 1999, during fiscal 1999. No other current executive officer is expected to
receive total compensation in excess of $100,000 during fiscal 1999.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------
OTHER SECURITIES ALL OTHER
NAME AND FISCAL ANNUAL ANNUAL UNDERLYING COMPENSATION
PRINCIPAL YEAR SALARY BONUS COMPENSATION OPTIONS ($)
POSITION ENDED ($) ($) ($) (#)
- ------------------------------ ----------- -------------- --------- ------------------ -------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Marc Jacobson(1), 12/31/99 200,000 -- -- 840,000 --
President and Chief 12/31/98 -- -- -- -- --
Operating Officer 12/31/97 -- -- -- -- --
Brian Wadsworth(2), 12/31/99 126,000 -- -- 330,000 --
Former President 12/31/98 -- -- -- -- --
12/31/97 -- -- -- -- --
</TABLE>
- -------------
(1) Mr. Jacobson was appointed as our President on September 7, 1999. He
currently receives a salary of $16,667 per month. Mr. Jacobson is
eligible to receive a bonus in an amount up to 50% of his annual
salary. We have agreed to grant to Mr. Jacobson options to purchase up
to 840,000 shares of common stock at an exercise price of $2.00 per
share, such options to become exercisable as follows: 315,000 are
exercisable immediately and the remaining 525,000 options become
exercisable in six equal semi-annual installments commencing on June
30, 2000 and on each December 31 and June 30 thereafter.
The term of Mr. Jacobson's employment is three years.
(2) Mr. Wadsworth served as our interim President from July 1999 until
September 7, 1999. He received a salary of $10,500 per month. He is
currently serves as a consultant for us. He has also been granted
options to purchase up to 330,000 shares of common stock at an exercise
price of $3.00 per share, such options to become exercisable as
follows: 146,000 are exercisable immediately and the remaining 184,000
options become exercisable in five equal monthly installments
commencing August 15, 1999.
13
<PAGE>
The following table sets forth certain information with respect to
option grants made to the executive officers named above pursuant to the
Politics.com, Inc. 1999 Combination Stock Option Plan. This table identifies
those options grants that have been made (or agreed to be made) during 1999. No
options were granted prior to the current fiscal year.
OPTION GRANTS DURING 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------- --------------------------------- -------------
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS EXERCISE PRICE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- --- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Marc Jacobson 840,000 70.0% 2.00 9/7/2009 $1,056,543 $2,677,488
Brian Wadsworth 330,000 27.5% 3.00 7/27/2009 $622,605 $1,577,805
</TABLE>
- -----------------
(1) The assumed rates are compounded annually for the full term of the options.
STOCK OPTION PLAN
On July 27, 1999, we adopted the 1999 Combination Stock Option Plan
(the "Plan"). Under the Plan, both non-qualified and incentive stock options to
purchase shares of our common stock may be granted to key employees and other
persons who are in a position to contribute to our long-term success and growth.
The Board of Directors currently administers the Plan and has the authority to,
among other things, determine those persons who are eligible to participate;
determine the size of the grant; establish the terms and conditions of the
options granted; make or alter restrictions and conditions on the options; and
adopt rules and regulations and interpret the Plan. A total of 2,000,000 shares
have been reserved for issuance under the Plan. As of September 15, 1999,
options to purchase 1,525,000 shares of common stock were outstanding or
committed for issuance.
COMPENSATION OF THE DIRECTORS
Our directors do not receive any compensation for acting as a director
of Politics.com.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On June 30, 1999, Howard R. Baer, Chairman of the Board, the majority
stockholder and a promoter of Politics.com, sold the domain names for
"elections.com," "gop.com" and "politics.com" to Politics.com-Nevada, in
exchange for an unsecured promissory note, payable on demand, in the principal
amount of $151,000 with an interest rate of 10% per annum. The principle
followed in determining the consideration to be paid to Mr. Baer for the domain
names was determined by our Board of Directors and was based upon the
approximate cost of the domain names to Mr. Baer.
Politics.com-Nevada was indebted to Howard R. Baer and Kevin C. Baer,
Vice President and one of our directors, in the aggregate amount of
approximately $145,000 as a result of unsecured advances to Politics.com-Nevada
in such amount. These advances were made to fund the start-up operations of
Politics.com-Nevada. On June 30, 1999, Politics.com-Nevada issued an aggregate
of 6,990,000 shares of common stock to Howard R. Baer and Kevin C. Baer, in full
satisfaction and cancellation of the indebtedness of Politics.com-Nevada as of
June 30, 1999, as follows: 5,242,500 shares were issued to Howard R. Baer in
satisfaction of $108,000 of indebtedness and 1,747,500 shares were issued to
Kevin C. Baer in satisfaction of $36,000 of indebtedness.
Since June 30, 1999, Carriage House Capital, L.L.C., of which Howard R.
Baer is an affiliate, has made unsecured advances bearing interest at a rate of
10% per annum in the amount of approximately $235,000 to Politics.com-Nevada. In
addition, since June 30, 1999, an affiliate of Kevin C. Baer advanced $25,000 on
the same
14
<PAGE>
terms. The amounts advanced by Carriage House Capital and Kevin C. Baer's
affiliate were to fund our current working capital needs.
On July 27, 1999, Politics.com acquired an aggregate of 7,000,000
shares of common stock of Politics.com-Nevada from Howard R. Baer and Kevin C.
Baer (representing all of the issued and outstanding shares of capital stock of
Politics.com-Nevada), and in consideration therefor, Politics.com issued an
aggregate of 7,000,000 shares as follows: 5,250,000 shares to Howard R. Baer and
1,750,000 shares to Kevin C. Baer.
ITEM 8. DESCRIPTION OF SECURITIES.
GENERAL
Our authorized capital stock consists of 20,000,000 shares of Preferred
Stock, $.00001 par value per share, and 50,000,000 shares of common stock,
$.00001 par value per share. Only common stock is issued and outstanding.
The following descriptions of the capital stock are qualified in all
respects by reference to our Articles of Incorporation.
PREFERRED STOCK
We have never issued, and we have no present plans to issue, any shares
of preferred stock. The Board of Directors has the authority, without action by
the shareholders, to create one or more series of Preferred Stock and determine
the number of shares, designation, price, redemption terms, conversion and
voting rights with respect to any such series.
An unfriendly tender offer, proxy contest, merger or other change in
control would be more difficult if we issued any series of Preferred Stock.
COMMON STOCK
As of September 15, 1999 there were 9,091,487 shares of common stock
outstanding. Assuming the sale of all the 666,667 shares currently being offered
in a private placement exempt from registration pursuant to Rule 506 promulgated
under Regulation D of the Securities Act of 1933, as amended, there will be
9,758,154 shares of common stock outstanding.
The holders of common stock are entitled to one vote per share on all
matters to be voted on by stockholders, and cumulative voting is not permitted.
Subject to the prior right of any series of Preferred Stock that may be issued
by us in the future, holders of common stock are entitled to receive dividends,
if any, as may be declared from time to time by the Board of Directors from
funds legally available for the payment of dividends. If we are liquidated or
dissolved, the holders of common stock are entitled to receive all assets
available for distribution to the stockholders, subject to the prior payment of
all of our indebtedness, and subject to any preferential rights or other rights
of other security holders. The common stock has no preemptive rights or other
subscription rights, and there are no conversion rights or redemption or sinking
fund provisions with respect to such shares. All of the shares of common stock
are, and the shares to be sold in the offering will be, fully paid and
nonassessable, and will not be protected by any anti-dilution provisions.
15
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
MARKET INFORMATION. The following table sets forth, for the periods
indicated, the high and low quotations for our common stock, as reported on the
OTC Bulletin Board. The over-the counter market quotations below reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions. There is no established public
trading market for our common stock.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
FISCAL 1998:
First Quarter .......................................... $ -- $ --
Second Quarter.......................................... -- --
Third Quarter(1)........................................ 1/16 1/16
Fourth Quarter.......................................... 1/16 1/16
FISCAL 1999:
First Quarter(2)........................................ $ 7/8 $ 1/16
Second Quarter.......................................... 1 17/32 1/4
Third Quarter (through September 15, 1999).............. 9 5/8 1 31/32
</TABLE>
- -------------------
(1) Our common stock commenced quotation on the OTC Bulletin Board in
August 1998 under the symbol "LOAK". Our common stock is currently
quoted on the OTC Bulletin Board under the symbol "POCO".
(2) On March 26, 1999, we effected a one for fifteen reverse stock split.
As of September 15, 1999, there were 1,525,000 options to purchase
shares of common stock outstanding or committed for issuance. In addition, there
were approximately 1,520,659 shares of common stock that are freely tradable
without restriction under the Securities Act of 1933, as amended, and
approximately 570,816 shares of common stock that will be eligible for sale in
the public market without registration at different times during the next 12
months, subject to certain volume and other limitations, pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended. We are also presently
offering up to 666,667 shares of our common stock at $3.00 per share in a
private placement exempt from registration in reliance upon Rule 506 of
Regulation D promulgated under the Securities Act of 1933, as amended.
HOLDERS. On September 15, 1999, there were approximately 76 holders of
record of the common stock.
DIVIDENDS. We have never declared or paid any dividends on our common
stock and we do not intend to pay dividends on our common stock in the
foreseeable future. We anticipate that we will retain any earnings to finance
the growth and development of our business and for general corporate purposes.
ITEM 2. LEGAL PROCEEDINGS.
We are not currently a party to any legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no changes in or disagreements with our accountants.
16
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
THE FOLLOWING SALES OF UNREGISTERED SECURITIES HAVE BEEN RESTATED TO GIVE EFFECT
TO THE ONE FOR FIFTEEN REVERSE STOCK SPLIT EFFECTIVE ON MARCH 26, 1999.
On February 24, 1997, B&E Securities Management Company, Inc. merged
into Lone Oak, Inc. The merger was accomplished through a stock for stock
transaction in which 60,584 shares of Lone Oak, Inc. common stock were issued to
the shareholders of B&E Securities Management Company, Inc. and 908,767 shares
of B&E Securities Management Company, Inc. were canceled. This transaction was
effected without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act.
On January 12, 1998, Lone Oak, Inc. sold 161,408 shares of common stock
to an existing stockholder of Lone Oak, Inc. for par value ($24.00). The
issuance of the shares was effected without registration under the Securities
Act, in reliance upon the exemption from registration contained in Section 4(2)
of the Securities Act.
On January 12, 1998, Lone Oak, Inc. acquired directly from the
stockholders all the issued and outstanding shares of D&E Flight Simulators,
Inc. in exchange for 383,440 shares of Lone Oak, Inc. common stock. The issuance
of the shares was effected without registration under the Securities Act, in
reliance upon the exemption from registration contained in Section 4(2) of the
Securities Act.
In March 1999, Lone Oak, Inc. sold 1,484,375 shares of common stock for
$95,000 in a private placement exempt from registration in reliance upon Rule
504 of Regulation D promulgated under the Securities Act.
In July 1999, Lone Oak, Inc. acquired 7,000,000 shares of common stock
of Politics.com-Nevada, constituting all of the issued and outstanding shares of
Politics.com-Nevada. In connection with the transaction, Lone Oak, Inc. issued
an aggregate of 7,000,000 shares of its common stock to the stockholders of
Politics.com-Nevada as follows: 5,250,000 shares to Howard R. Baer and 1,750,000
shares to Kevin C. Baer. The shares were issued in reliance upon the exemption
from registration contained in Section 4(2) of the Securities Act.
In July 1999, following Lone Oak's acquisition of Politics.com-Nevada,
Lone Oak changed its name to Politics.com, Inc.
In July 1999, Politics.com, Inc. commenced a private placement pursuant
to which it is offering up to 666,667 shares of its common stock, at $3.00 per
share. The shares issued and to be issued in connection with the private
placement are being issued in reliance upon the exemption from registration
contained in Rule 506 of Regulation D promulgated under the Securities Act of
1933. As of September 28, 1999, we have received subscriptions in the amount of
$264,000 in connection with this private placement.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation include provisions (i) to eliminate the
personal liability of our directors for monetary damages resulting from breaches
of their fiduciary duty and (ii) to require us to indemnify our directors and
officers to the fullest extent permitted by the General Delaware Corporation
Law.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation to indemnify directors, officers, employees or agents
of the corporation in non-derivative suits if such party acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe this conduct was unlawful, as
determined in accordance with the Delaware General Corporation Law. Section 145
further provides that indemnification shall be provided if the party in question
is successful on the merits or otherwise in the defense of any claim.
17
<PAGE>
PART F/S
LONE OAK, INC. AND ITS SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report............................................................................ 19
Consolidated Balance Sheets as of December 31, 1996, 1997 and 1998 ..................................... 20
Consolidated Statements of Operations for the Fiscal Years Ended December 31, 1996, 1997 and 1998 and
for cumulative period from inception to December 31, 1998. ............................................. 21
Consolidated Statements of Changes in Stockholders' Equity for the Fiscal Years Ended December 31, 1995,
1996, 1997 and 1998..................................................................................... 22
Consolidated Statements of Cash Flows for the Fiscal Years Ended December 31, 1996, 1997 and 1998....... 23
Notes to Consolidated Financial Statements.............................................................. 24
</TABLE>
18
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
LONE OAK, INC., AND SUBSIDIARY:
FORMERLY B&E SECURITIES MANAGEMENT COMPANY, INC.
We have audited the accompanying consolidated balance sheets of Lone Oak, Inc.
(a development stage company), formerly B&E Securities Management Company, Inc.,
and subsidiary (collectively, the "Company") as of December 31, 1998, 1997 and
1996 and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for the years then ended, and for
the period from January 17, 1997 (date of inception) to December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1998, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended and from January 17, 1997 (date of inception) to
December 31, 1998, in conformity with generally accepted accounting principles.
As discussed in Note C to the consolidated financial statements, Lone Oak, Inc.,
formerly B&E Securities Management Company, Inc., has not previously presented
consolidated financial statements. On January 12, 1998, Lone Oak, Inc. acquired
a 100% owned subsidiary, D&E Flight Simulators, Inc.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company has not generated significant revenue from
operations and has little equity. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regards to those matters are discussed in Note E. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
San Diego, California
February 11, 1999
19
<PAGE>
LONE OAK, INC.
(A DEVELOPMENT STAGE COMPANY)
FORMERLY B&E SECURITIES MANAGEMENT COMPANY, INC.,
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
ASSETS 1998 1997 1996
---------- ---------- -------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 587 $ - $ -
Inventory (Note A) 9,143 - -
--------- ----------- -----------
TOTAL CURRENT ASSETS 9,730 $ - $ -
--------- ----------- -----------
--------- ----------- -----------
OTHER ASSETS
Organization costs, net (Note A) 588 - -
--------- ----------- -----------
TOTAL ASSETS $ 10,318 $ - $ -
--------- ----------- -----------
--------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,064 $ - $ -
--------- ----------- -----------
TOTAL CURRENT LIABILITIES 3,064 - -
--------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
(Note E and G) - - -
---------- ---------- ----------
TOTAL LIABILITIES 3,064 - -
--------- ---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $.00001 par value,
20,000,000 shares authorized; none - - -
issued
Common stock, $.00001, $.00001, and $.01 par value, respectively,
50,000,000 shares authorized; 9,081,486, 908,767 and 908,767
issued and outstanding, respectively (Note B and D) 91 9 9,088
Additional paid-in capital 111,296 100,878 91,799
Less: stock subscriptions receivable (24) -
Deficit accumulated during development stage (104,109) (100,887) (100,887)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 7,254 - -
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,318 $ - $ -
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
LONE OAK, INC.
(A DEVELOPMENT STAGE COMPANY)
FORMERLY B&E SECURITIES MANAGEMENT COMPANY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
from
For the years ended January 17, 1997
December 31 (date of inception) to
---------------------------------------
1998 1997 1996 DECEMBER 31, 1998
---- ---- ---- -----------------
<S> <C> <C> <C> <C>
NET SALES $13,150 $ - $ - $13,150
COSTS OF SALES 7,412 - - 7,412
------- ------ ------ --------
GROSS PROFIT 5,738 - - 5,738
OPERATING EXPENSES 8,080 - - 8,080
------- ------ ------ --------
LOSS FROM OPERATIONS (2,342) - - (2,342)
------- ------ ------ --------
OTHER (INCOME) EXPENSE
Other income (80) - - (80)
Other expense 160 - - 160
------- ------ ------ --------
TOTAL OTHER (INCOME) EXPENSE 80 - 80
------- ------ ------ --------
-
NET LOSS FROM OPERATIONS BEFORE INCOME TAXES
(2,422) - (2,422)
INCOME TAXES 800 800
------- ------ ------ --------
- -
NET LOSS $(3,222) $ - $ - $(3,222)
------- ------ ------ --------
------- ------ ------ --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
LONE OAK, INC.
(A DEVELOPMENT STAGE COMPANY)
FORMERLY B&E SECURITIES MANAGEMENT COMPANY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Additional Stock Total
------------ Paid-In Accumulated Subscription Stockholders
Shares Amount Capital Deficit Receivable Equity (Deficit)
------ ------ ------- ------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 908,767 $9,088 $91,799 $(100,887) $ $
--------- ------ ------- ---------- ---------- ---------
BALANCE, DECEMBER 31, 1996 908,767 9,088 91,799 (100,887) -- --
Stock conversion (Note B) -- (9,079) 9,079 -- -- --
Net loss -- -- -- -- -- --
--------- ------ ------- ---------- ---------- ---------
BALANCE, DECEMBER 31, 1997 908,767 9 100,878 (100,887) -- --
Common stock issued (Note D) 8,172,719 82 4,167 -- (24) 4,225
Contributed capital (Note D) -- -- 6,251 -- -- 6,251
Net loss -- -- -- (3,222) -- (3,222)
--------- ------ ------- ---------- ---------- ---------
BALANCE, DECEMBER 31, 1998 9,081,486 $ 91 $111,296 $(104,109) $ (24) $7,254
--------- ------ ------- ---------- ---------- ---------
--------- ------ ------- ---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
LONE OAK, INC.
(A DEVELOPMENT STAGE COMPANY)
FORMERLY B&E SECURITIES MANAGEMENT COMPANY, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended
December 31, Cumulative from January
------------------------- 17, 1997
(date of Inception)
1998 1997 1996 to December 31, 1998
---- ---- ---- --------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,222) $ - $ - $(3,222)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization 147 - - 147
Changes in operating assets and liabilities:
Inventory 335 - - 335
Accounts payable 3,064 - - 3,064
-------- -------- ------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES
324 - - 324
-------- -------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES - - - -
-------- -------- ------- ---------
NET CASH USED IN INVESTING ACTIVITIES - - - -
-------- -------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 263 - - 263
-------- -------- ------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES
263 - - 263
-------- -------- ------- ---------
NET INCREASE IN CASH 587 - - 587
CASH AT BEGINNING OF PERIOD - - - -
-------- -------- ------- ---------
CASH AT END OF PERIOD $ 587 $ - $ - $ 587
-------- -------- ------- ---------
-------- -------- ------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
LONE OAK, INC.
(A DEVELOPMENT STAGE COMPANY)
FORMERLY B&E SECURITIES MANAGEMENT COMPANY, INC.,
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Lone Oak, Inc., a Delaware corporation was incorporated on January 17,
1997. On February 24, 1997, the Company merged with B&E Securities
Management Company, Inc., which was then dissolved. B&E Securities
Management Company, Inc. was incorporated on January 30, 1969 in the state
of Maryland and has not had operations since 1971. As discussed in Note C,
the Company acquired 100% of D&E Flight Simulators, Inc., (the
"Subsidiary") a flight simulator equipment developer on January 12, 1998.
All operations of the Company during 1998 were conducted by D&E Flight
Simulators, Inc.
The Company is a development stage business engaged in the development of
flight simulators. Development stage operations for the Company began upon
the incorporation of Lone Oak, Inc. on January 17, 1997.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Lone Oak, Inc., and its wholly-owned subsidiary, D&E Flight Simulators,
Inc. (collectively, the "Company"). Material intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all investments with a maturity of three months or
less to be cash equivalents.
ORGANIZATION COSTS
Organization costs are amortized on a straight line basis over five years.
Accumulated amortization at December 31, 1998 was $147.
INVENTORY
Inventory is stated at the lower of cost or market on the first-in,
first-out (FIFO) method. Inventory consists of one completed flight
simulator and parts.
24
<PAGE>
LONE OAK, INC.
(A Development Stage Company)
Formerly B&E Securities Management Company, Inc.,
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
ADVERTISING
Advertising costs are expensed as incurred. Advertising costs included in
operating expenses for the years ended December 31, 1998, 1997 and 1996
were $1,158, $0 and $0, respectively.
INCOME TAXES
Income taxes are provided using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109), "Accounting for Income Taxes." A deferred tax asset or liability is
recorded for all temporary differences between financial and tax reporting
and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
B. BUSINESS COMBINATION:
On February 24, 1997, the Company merged with B&E Securities Management
Company, Inc. The merger was accomplished through a stock for stock
transaction in which all 908,767 common stock shares at $.01 par value of
B&E Securities Management Company, Inc. were canceled and 908,767 shares at
$.00001 par value of Lone Oak, Inc. common stock were issued. The financial
statements, as presented, reflect the results of operations of B&E
Securities Management Company, Inc., prior to the merger with Lone Oak,
Inc.
C. ACQUISITION:
On January 12, 1998, the Company acquired all outstanding shares of D&E
Flight Simulators, Inc. in exchange for shares of Lone Oak, Inc. The
Company issued 5,751,600 shares of stock to acquire 100% of D&E Flight
Simulators, Inc. D&E Flight Simulators, Inc. had assets which primarily
consisted of inventory and computer equipment valued at $3,169 at the
acquisition date. D&E Flight Simulators, Inc. is 50% owned by a relative of
an officer and majority stockholder of Lone Oak, Inc. The acquisition was
accounted for using the purchase method of accounting. The consolidated
financial statements include the results of operations of D&E Flight
Simulators, Inc. from the date of acquisition (January 12, 1998) to
December 31, 1998. Prior to January 12, 1998, D&E Flight Simulators, Inc.
had not begun operating activity, and, therefore, the consolidated
financial statements of Lone Oak, Inc., shown pro forma, would not change.
25
<PAGE>
LONE OAK, INC.
(A Development Stage Company)
Formerly B&E Securities Management Company, Inc.,
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. STOCKHOLDERS' EQUITY:
On January 12, 1998, the majority stockholders of Lone Oak, Inc. approved
the sale of 2,421,119 shares of common stock at par value (.00001), or $24,
to the majority stockholder of the Company. Additionally, on January 12,
1998, as discussed in Note C, the majority stockholders of Lone Oak, Inc.
approved the issuance of 5,751,600 shares of common stock to acquire all
assets of D&E Flight Simulators, Inc.
During 1998, each of the Company's major stockholders purchased inventory
or paid expenses on behalf of D&E Flight Simulators, Inc. which was
classified as additional paid in capital.
E. GOING CONCERN:
The Company is in the developmental stage of operations and has yet to
generate significant revenue or equity. These conditions raise substantial
doubt about the ability of the Company to continue as a going concern.
Management believes the sale of flight simulator equipment will generate
sufficient working capital through operations. Currently, the Company is
awaiting approval by the Federal Aviation Administration for their product
to be used in flight schools. Accordingly, the Company is dependent upon
its ability to achieve profitable operations and generate sufficient cash
flows from the sale of flight simulators.
F. SUPPLEMENTARY CASH FLOW INFORMATION:
Supplemental disclosures of cash flow information for the years ended
December 31, 1998, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash paid for interest and income taxes:
Interest $ - $ - $ -
Income Taxes 800 - -
</TABLE>
Non-cash investing and financing activities are as follows:
During the year ended December 31, 1998, the Company acquired $3,962 in
assets in the acquisition of D&E Flight Simulators, Inc. for common stock.
During the year ended December 31, 1998, the Company issued common stock in
exchange for stock subscriptions receivable amounting to $24.
During 1998, the majority stockholders contributed an additional $6,251 in
capital in the form of inventory purchases.
26
<PAGE>
LONE OAK, INC.
(A Development Stage Company)
Formerly B&E Securities Management Company, Inc.,
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. COMMITMENTS:
In December 1997, D&E Flight Simulators, Inc. (D&E) entered into a
licensing agreement with Simpkins Design Group, Inc. (Simpkins) allowing
D&E to manufacture, market and sell the FLY-IT general aviation control
panel for a period of five years. The agreement calls for Simpkins to
supply the FLY-IT controller to D&E or the specific components by which to
manufacture it. D&E agrees to pay $50 to Simpkins for each unit of the
FLY-IT sold or used. Additionally, D&E is restricted to selling the units
between $795 and $1,000.
H. RELATED PARTY TRANSACTIONS:
D&E Flight Simulators, Inc. conducts transactions with J. Bright Henderson
Art Gallery (JBH) which is owned by the President of the Company. JBH
provides credit card processing of sales transactions, labor for the
manufacture of flight simulators and packing and shipping for units sold.
During the years ended December 31, 1998, 1997 and 1996 the Company
incurred $7,165, $0 and $0, in expense for these services, respectively.
Additionally, the Company had an accounts payable balance of $639 to JBH at
December 31, 1998.
27
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Balance Sheet as of June 30, 1999............................................................. 29
Unaudited Statement of Operations for the six months ended June 30, 1999................................ 30
Unaudited Statement of Changes in Stockholders' Equity for the six months ended June 30, 1999........... 31
Unaudited Statement of Cash Flows for the six months ended June 30, 1999................................ 32
Notes to Financial Statements........................................................................... 33
</TABLE>
28
<PAGE>
POLITICS. COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash ......... $ 94,000
Escrow Funds.... 5,000
---------
Total Assets...... $ 99,000
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 44,104
---------
Total Current Liabilities 44,104
---------
Stockholders' Equity:
Preferred Stock, $.00001 Par Value; 20,000,000 Shares
Authorized, None Issued -
Common Stock, $.00001 Par Value; 50,000,000 Shares
Authorized, 2,091,475 Shares Issued and Outstanding 21
Additional Paid-In Capital 195,948
Deficit Accumulated in the Development Stage (141,073)
---------
Total Stockholders' Equity 54,896
---------
Total Liabilities and Stockholders' Equity $ 99,000
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
FROM
JANUARY 17, 1997
SIX MONTHS (INCEPTION)
ENDED TO
JUNE 30, 1999 JUNE 30, 1999
------------ ----------------
<S> <C> <C>
Revenues $ - $ -
---------- ---------
Cost of Expenses:
Selling, General and Administrative Expenses 42,403 43,283
---------- ---------
Loss before Discontinued Operations (42,403) (43,283)
---------- ---------
Discontinued Operations:
Loss from Operations of Discontinued Subsidiary (2,783) (5,125)
Gain on Sale of Discontinued Subsidiary 5,000 5,000
2,217 (125)
---------- ---------
Net Loss $ (40,186) $ (43,408)
---------- ---------
---------- ---------
Earnings Per Common Share - Basic:
Weighted Average Common Shares Outstanding 1,402,594
----------
----------
Net Loss Per Common Share - Basic $ (.03)
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
DEFICIT
ADDITIONAL ACCUMULATED STOCK
COMMON PAID-IN IN DEVELOPMENT SUBSCRIPTION
STOCK CAPITAL STAGE RECEIVABLE TOTAL
------ ---------- -------------- ------------ -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $ 6 $111,381 $(104,109) $ (24) $ 7,254
Payment Received - - - 24 24
Sale of 1,484,375 Shares
of Common Stock 15 94,985 - - 95,000
Net Loss for the Period - - (40,186) - (40,186)
Sale of Subsidiary - (10,418) 3,222 - (7,196)
----- --------- ---------- -------- ---------
Balance, June 30, 1999 $ 21 $195,948 $(141,073) $ - $ 54,896
----- --------- ---------- -------- ---------
----- --------- ---------- -------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
FROM
JANUARY 17, 1997
SIX MONTHS (INCEPTION)
ENDED TO
JUNE 30, 1999 JUNE 30, 1999
---------------- ----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss from Operations $ (42,403) $ (43,283)
Adjustments to Reconcile Net Loss from Operations to
Net Cash Provided by Operating Activities
Amortization -- 335
Changes in Operating Assets and Liabilities:
Decrease in Inventories -- 147
Increase in Accounts Payable 44,104 47,168
Loss from Discontinued Operations (2,783) (5,125)
Gain on Sale of Discontinued Operations 5,000 5,000
--------- ---------
Net Cash Provided by Operating Activities 3,918 4,242
--------- ---------
Cash Flows from Investing Activities:
Increase in Escrow Funds (5,000) (5,000)
Disposition of Subsidiary, Net of Cash (529) (529)
--------- ---------
Net Cash (Used) by Financing Activities (5,529) (5,529)
--------- ---------
Cash Flows from Financing Activities:
Payment of Stock Subscription Receivable 24 24
Proceeds from Sale of Common Stock 95,000 95,263
--------- ---------
Net Cash Provided by Financing Activities 95,024 95,287
--------- ---------
Increase in Cash 93,413 94,000
Cash - Beginning 587 --
--------- ---------
Cash - Ending $ 94,000 $ 94,000
--------- ---------
--------- ---------
Supplemental Cash Flow Information:
Cash Paid for Interest $ -- $ --
--------- ---------
--------- ---------
Cash Paid for Income Taxes $ -- $ 800
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 1 - UNAUDITED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of operations for the
periods indicated.
Results of operations for interim periods are not necessarily
indicative of the results of operations for a full year.
NOTE 2 - SALE OF SUBSIDIARY
On April 30, 1999, the Company sold 100% of the outstanding common
shares of its wholly-owned subsidiary, D&E Flight Simulators, Inc., for $5,000.
Escrow funds represents the amount receivable from this transaction. These
escrow funds were paid to the Company in July 1999.
NOTE 3 - STOCKHOLDERS' EQUITY
REVERSE SPLIT
In March 1999, the Board of Directors and stockholders approved a 1 for
15 reverse split of the Company's common stock to be effective March 26, 1999.
All share and per share data have been retroactively restated to reflect this
recapitalization.
COMMON STOCK
In March 1999, the Company sold privately 1,484,375 shares of common
stock for gross proceeds of $95,000.
33
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 4 - SUBSEQUENT EVENTS
On July 27, 1999, the Company acquired all of the issued and
outstanding common stock of Politics.com, Inc, a Nevada Corporation
("Politics-Nevada"). In connection with this transaction, the Company issued
7,000,000 shares of its common stock directly to the stockholders of
Politics-Nevada in exchange for all of Politics-Nevada's 7,000,000 issued and
outstanding common shares. The exchange resulted in Politics-Nevada stockholders
holding a larger portion of the voting rights of the Company than was held after
the acquisition by the persons who were the Company's stockholders prior to the
acquisition. As a result of the acquisition, Politics-Nevada became a
wholly-owned subsidiary of the Company. In connection with this transaction, the
Company changed its name to Politics.com, Inc., a Delaware corporation.
On July 27, 1999, the Company adopted the 1999 Combination Stock Option
Plan (the "Plan") which reserves for issuance 2,000,000 shares of common stock
under both non-qualified and incentive stock options. As of September 15, 1999
options to purchase 1,525,000 shares of common stock were outstanding or
committed for issuance.
The Company has agreed to pay its President an annual base salary of
$200,000 effective September 7, 1999 for a three year period. In addition, the
Company intends to pay its President a bonus of up to 50% of the annual base
salary upon the achievement of specified company objectives. The Company has
agreed to grant to its President options to purchase 840,000 shares of common
stock at an exercise price of $2.00 per share, such options to become
exercisable as follows: 315,000 options immediately, and the remaining 525,000
options in six equal semi-annual installments commencing June 30, 2000.
34
<PAGE>
POLITICS.COM, INC., A NEVADA CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants....................................................................... 36
Balance Sheet as of June 30, 1999....................................................................... 37
Statements of Operations for the period March 23, 1999 (inception) to June 30, 1999..................... 38
Statement of Changes in Stockholders' Equity for the period March 23, 1999 (inception) to June 30, 1999. 39
Statement of Cash Flows for the period March 23, 1999 (inception) to June 30, 1999...................... 40
Notes to Financial Statements........................................................................... 41
</TABLE>
35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Politics.com, Inc.
We have audited the accompanying balance sheet of Politics.com, Inc. (A
Development Stage Enterprise) as of June 30, 1999, and the related statements of
operations, changes in stockholders' equity, and cash flows for the period March
23, 1999 (Inception) to June 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Politics.com, Inc. as of June
30, 1999, and the results of its operations and its cash flows for the period
March 23, 1999 (Inception) to June 30, 1999 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred a net loss since inception and
has had no revenues and has a working capital deficiency at June 30, 1999. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
Rockville Centre, New York
July 7, 1999 (Except for Note 7, as to
which the date is July 27, 1999)
36
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JUNE 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash $ 3,057
Deposits 18,333
Prepaid Expenses 15,000
---------
Total Current Assets 36,390
Intangibles - Internet Domain Names 151,000
---------
Total Assets $ 187,390
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 16,227
Note Payable - Related Party 151,000
Loans Payable - Related Party 786
---------
Total Current Liabilities 168,013
---------
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.001 Par Value; 50,000,000 Shares
Authorized, 7,000,000 Shares Issued and Outstanding 7,000
Additional Paid-In Capital 137,100
Deficit Accumulated in the Development Stage (124,723)
---------
Total Stockholders' Equity 19,377
---------
Total Liabilities and Stockholders' Equity $ 187,390
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 23, 1999 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<S> <C>
Revenues $ --
---------
Costs and Expenses:
Selling, General and Administrative Expenses 107,723
Website Development Costs 17,000
---------
Total Costs and Expenses 124,723
---------
Net Loss $(124,723)
---------
---------
Earnings Per Common Share - Basic:
Weighted Average Common Shares Outstanding 79,800
---------
---------
Net Loss Per Common Share - Basic $ (1.56)
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD MARCH 23, 1999 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
In The
Common Stock Additional Development
---------------------
Shares Amount Paid-In Capital Stage Total
--------------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance - Beginning -- $ -- $ -- $ -- $ --
Sale of Common Stock 10,000 10 90 -- 100
Issuance of Common Stock
Upon Cancellation of
Indebtedness 6,990,000 6,990 137,010 -- 144,000
Net Loss for the Period -- -- -- (124,723) (124,723)
--------- --------- --------- --------- ---------
Balance - Ending 7,000,000 $ 7,000 $ 137,100 $(124,723) $ 19,377
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 23, 1999 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net Loss $( 124,723)
Changes in Operating Assets and Liabilities:
(Increase) in Prepaid Expenses ( 15,000)
Increase in Accounts Payable 16,227
-----------
Net Cash (Used) by Operating Activities ( 123,496)
-----------
Cash Flows from Investing Activities:
Purchase of Intangibles ( 151,000)
Deposits Paid ( 18,333)
-----------
Net Cash (Used) by Investing Activities ( 169,333)
-----------
Cash Flows from Financing Activities:
Proceeds from Borrowings from Related Party 144,786
Sale of Common Stock 100
Issuance of Note Payable - Related Party 151,000
-----------
Net Cash Provided by Financing Activities 295,886
-----------
Increase in Cash 3,057
Cash - Beginning -
Cash - Ending $ 3,057
-----------
-----------
Supplemental Disclosure of Cash Information:
Cash Paid for Interest $ -
-----------
-----------
Cash Paid for Income Taxes $ -
-----------
-----------
Non-Cash Financing Activities:
Issuance of 6,990,000 Shares of Common Stock upon
Cancellation of Indebtedness $ 144,000
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Politics.com, Inc. ("the Company") was incorporated on March 23, 1999
in the State of Nevada. The Company is a development stage enterprise that
intends to be a global Internet media company, offering a branded network of
information, communication, entertainment, community and commerce services with
a common theme of Politics. The Company has selected December 31 as its fiscal
year.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company is a development stage
enterprise. The Company has had no revenues and has incurred a net loss of
approximately $125,000 since inception and its current liabilities exceed its
current assets by approximately $132,000. These factors, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
Continuation of the Company is dependent on (i) its exiting the development
stage, (ii) achieving sufficiently profitable operations and (iii) obtaining
adequate financing. These financial statements do not reflect any adjustments
relating to the recoverability and classification of asset carrying amounts and
classification of liabilities should the Company be unable to continue as a
going concern.
In connection with the above, the Company is actively seeking to
combine with a public company and raise additional financing. There can be no
assurance, however, that such combination or financing will be successfully
completed.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using the straight line method over the estimated
useful lives of the related assets. Significant additions and improvements are
capitalized and costs for maintenance and repairs are expensed as incurred.
41
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
WEBSITE DEVELOPMENT COSTS
Website development costs are expensed as incurred.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
REVENUE RECOGNITION
Revenue is recognized when earned.
INTANGIBLES
Intangibles consist of the cost of certain Internet Domain Names. These
intangibles will be amortized using the straight-line method over periods
ranging from three to four years. The Company periodically reviews intangible
assets to determine if any impairment exists based upon projected, undiscounted
net cash flows of the related business. As of June 30, 1999, in the opinion of
management, there has been no such impairment.
INCOME TAXES
The Company records deferred income taxes using the liability method.
Under the liability method, deferred tax assets and liabilities are recognized
for the expected future tax consequences of temporary differences between the
financial statement and income tax bases of the Company's assets and
liabilities. An allowance is recorded, based upon currently available
information, when it is more likely than not that any or all of the deferred tax
asset will not be realized. The provision for income taxes includes taxes
currently payable, if any, plus the net change during the year in deferred tax
assets and liabilities recorded by the Company.
SOFTWARE DEVELOPMENT COSTS
SFAS No. 86 "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed" requires software development costs to be
capitalized upon the establishment of technological feasibility. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs requires considerable judgement by management with
respect to certain external factors such as anticipated future revenue,
estimated economic life, and changes in software and hardware technologies.
42
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation to its employees
using the intrinsic value method, which requires the recognition of compensation
expense over the vesting period of the options when the exercise price of the
stock option granted is less than the fair value of the underlying common stock.
Additionally, the Company provides pro forma disclosure of net loss and loss per
share as if the fair value method had been applied in measuring compensation
expense for stock options granted. Stock-based compensation related to options
granted to non-employees is recognized using the fair value method.
LOSS PER SHARE
The computation of loss per share of common stock is computed by
dividing net loss for the period by the weighted average number of common shares
outstanding during that period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, including
cash, accounts payable and notes and loans payable approximated fair value
because of the short maturity of these instruments.
NOTE 3 - NOTE PAYABLE - RELATED PARTY
Note payable to the Company's Chairman of the Board is payable on
demand with interest at 10% per annum. Such note was issued as consideration for
the purchase of internet domain names.
NOTE 4 - STOCKHOLDERS' EQUITY
COMMON STOCK
On March 24, 1999 the Company sold 10,000 shares of common stock at
$.01 per share for gross proceeds of $100.
On June 30, 1999 the Company issued 6,990,000 shares of common stock to
two individuals, one of whom is an officer and one of whom is a majority
stockholder and an officer of the Company, in consideration of cancellation of
indebtedness of the Company in the amount of $144,000.
43
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company has entered into an agreement with an employee of the
Company to purchase an Internet Domain Name and certain associated assets. Total
consideration will be $55,000 payable in three equal monthly installments. At
June 30, 1999, the Company paid the first installment of $18,333, which has been
reported as a deposit on the balance sheet, subject to conveyance of title to
the Company.
NOTE 6 - YEAR 2000 CONSIDERATIONS
The "Year 2000" problem relates to computer systems that have time and
date-sensitive programs that were designed to read years beginning with "19",
but may not properly recognize the year 2000. If a computer system or software
application used by the Company or a third party dealing with the Company fails
because of the inability of the system or application to properly read the year
2000 the results could have a material adverse effect on the Company.
The Company believes that when acquired its computer system will be
Year 2000 compliant. However, the Company is dependent on third party vendors.
Failures and interruptions, if any, resulting from the inability of certain
computing systems of third party vendors to recognize the Year 2000 could have a
material adverse effect on the Company's results of operations. There can be no
assurance that the Year 2000 issue can be resolved by any of such third parties
prior to the upcoming change in the century. Although the Company may incur
substantial costs, as a result of such third party service providers correcting
Year 2000 issues, such costs are not sufficiently certain to estimate at this
time.
NOTE 7 - SUBSEQUENT EVENTS
On July 27, 1999, Lone Oak, Inc., a Delaware corporation ("Lone Oak"),
acquired all of the issued and outstanding common stock of the Company. In
connection with this transaction, Lone Oak issued 7,000,000 shares of its common
stock directly to the stockholders of the Company in exchange for all of the
Company's 7,000,000 issued and outstanding common shares. The exchange resulted
in the Company's stockholders holding a larger portion of the voting rights of
Lone Oak than was held after the acquisition by the persons who were Lone Oak
stockholders prior to the acquisition. As a result of the acquisition, the
Company became a wholly owned subsidiary of Lone Oak. In connection with the
transaction, Lone Oak changed its name to Politics.com, Inc., a Delaware
corporation.
44
<PAGE>
POLITICS.COM, INC., A DELAWARE CORPORATION
(FORMERLY LONE OAK, INC.)
INDEX TO UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Consolidated Pro Forma Balance Sheet as of June 30, 1999...................................... 47
Unaudited Consolidated Pro Forma Statement of Operations for the period March 23, 1999 (inception) to
June 30, 1999........................................................................................... 48
Notes to Unaudited Consolidated Pro Forma Financial Statements.......................................... 49
</TABLE>
45
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma unaudited consolidated financial statements
present pro forma financial information of the Company with respect to the
acquisition of 100% of the issued and outstanding common stock of Politics.com,
Inc., a Nevada corporation, as if such acquisition occurred on June 30, 1999.
The pro forma consolidated financial statements and accompanying notes
should be read in conjunction with the Company's consolidated financial
statements (including notes thereto) appearing elsewhere in this Registration
Statement. The pro forma financial statements do not purport to represent what
the Company's results of operations or financial position actually would have
been had such events occurred on the dates specified, or to project the
Company's results of operations or financial position for any future period or
date. The pro forma adjustments are based upon available information and certain
adjustments that management believes are reasonable. In the opinion of
management, all adjustments have been made that are necessary to present fairly
the pro forma consolidated financial statements.
46
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash $ 97,057
Escrow Funds 5,000
Deposits 18,333
Prepaid Expenses 15,000
---------
Total Current Assets 135,390
Intangibles - Internet Domain Names 151,000
---------
Total Assets $ 286,390
---------
---------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current Liabilities:
Accounts Payable $ 60,331
Note Payable - Related Party 151,000
Loans Payable - Related Party 786
----------
Total Current Liabilities 212,117
----------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $.00001 Par Value; 20,000,000 Shares
Authorized, None Issued -
Common Stock, $.00001 Par Value; 50,000,000 Shares
Authorized, 9,091,475 Shares Issued and Outstanding 91
Additional Paid-In Capital 198,905
Deficit Accumulated in the Development Stage (124,723)
----------
Total Stockholders' Equity 74,273
----------
Total Liabilities and Stockholders' Equity $ 286,390
----------
----------
</TABLE>
See accompanying notes to pro forma unaudited financial statements.
47
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 23, 1999 (INCEPTION) TO JUNE 30, 1999
(Unaudited)
<TABLE>
<S> <C>
Revenues $ -
----------
Costs and Expenses:
Selling, General and Administrative Expenses 107,723
Website Development Costs 17,000
----------
Total Costs and Expenses 124,723
----------
Net Loss $(124,723)
----------
----------
Earnings Per Common Share - Basic:
Weighted Average Common Shares Outstanding 100,715
----------
----------
Net Loss Per Common Share - Basic $( 1.24)
----------
----------
</TABLE>
See accompanying notes to pro forma unaudited financial statements.
48
<PAGE>
POLITICS.COM, INC.
(FORMERLY LONE OAK, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - The unaudited pro forma consolidated financial statements include the
accounts of Politics.com, Inc., a Delaware corporation ("Politics-Delaware"),
and its wholly-owned subsidiary, Politics.com, Inc. a Nevada corporation
("Politics-Nevada"). All significant intercompany accounts and transactions have
been eliminated in consolidation.
NOTE 2 - On July 27, 1999, Loan Oak, Inc., a Delaware corporation ("Lone Oak"),
acquired all of the issued and outstanding common stock of Politics.com, Inc, a
Nevada corporation ("Politics-Nevada"). In connection with this transaction,
Lone Oak issued 7,000,000 shares of its common stock directly to the
stockholders of Politics-Nevada in exchange for all of Politics-Nevada's
7,000,000 issued and outstanding common shares. The exchange resulted in
Politics-Nevada's stockholders holding a larger portion of the voting rights of
Lone Oak than was held after the acquisition by the persons who were Lone Oak's
stockholders prior to the acquisition. The transaction has been treated for
accounting purposes as a reverse acquisition (purchase) with Politics-Nevada
being the acquirer and Politics-Delaware being the acquired company.
Consequently, only the historical operations of Politics-Nevada are presented
for periods through June 30, 1999. As a result of the acquisition,
Politics-Nevada became a wholly-owned subsidiary of Lone Oak. In connection with
this transaction, Lone Oak changed its name to Politics.com, Inc., a Delaware
Corporation.
49
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
2.1 Articles of Incorporation, as amended, of the Company.* 52
2.2 Bylaws of the Company.* 60
3.1 Specimen Certificate of Common Stock.* ---
3.2 Promissory Note issued by Politics.com-Nevada in favor of Howard R. Baer
dated June 30, 1999. 69
6.1 Contract of Sale between Politics.com, Inc., a Nevada corporation, and
Howard R. Baer dated June 30, 1999.* 70
6.2 Contract of Sale between Politics.com, Inc., a Nevada corporation, and Kurt
Ehrenberg dated August 17, 1999.* 74
6.3 1999 Combination Stock Option Plan.* 78
6.4 Form of Non-Qualified Stock Option Agreement between Politics.com, Inc., a
Delaware corporation, and Brian Wadsworth dated as of July 27, 1999.* 85
6.5 Form of Non-Qualified Stock Option Agreement.* 91
6.6 Form of Incentive Stock Option Agreement.* 97
6.7 Stock Purchase Agreement by and among Lone Oak, Inc., a Delaware
corporation, and Howard R. Baer and Kevin C. Baer dated July 22, 1999.* 103
6.8 Employment Letter dated July 29, 1999, as amended September 7, 1999.* 118
</TABLE>
________________
* Filed herewith.
50
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
POLITICS.COM, INC.
DATE: October 6, 1999 BY: /s/ MARC JACOBSON
---------------------------------------
MARC JACOBSON
PRESIDENT AND CHIEF OPERATING OFFICER
51
<PAGE>
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
LONE OAK, INC.
FIRST: The name of this corporation is Lone Oak, Inc.
SECOND: The name and address in the State of Delaware of this Corporation's
initial agent for service of process is:
Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805
THIRD: The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: This corporation is authorized to issue two classes of shares designated
respectively as, "Capital Common Stock" and "Preferred Stock", and referred to
herein either as Common Stock or Common Shares and preferred Stock or Preferred
Shares, respectively. The number of authorized shares of Common Stock is
50,000,000, and the par value of these shares is $0.00001. The number of
authorized shares of preferred Stock is 20,000,000, and the par value of each of
these shares is $0.00001.
FIFTH: The name and mailing address of the incorporator is as follows:
NAME ADDRESS
Edward F. Myers II 4190 Bonita Road Ste. 105
Bonita, CA 91902
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for this corporation under
<PAGE>
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under provisions of section 279 of Title 8 of the Delaware
Code order a meeting of the creditors, and/or of the stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, an/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation, and regulation of the
powers of the corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors, shall be established by the
Bylaws, or otherwise, in the manner provided therein. In said Bylaws, the terms
"whole Board" and "total number of directors" shall have the same meaning, and
provide that the total number of directors be equal to the number of directors
which the corporation would have if there were no vacancies. There shall be no
requirement of a written ballot for the election of Directors.
2. After the original or other Bylaws of the corporation have been adopted,
amended, or repealed, as the case may be, in accordance with the provisions of
section 109 of the General Corporation Law of the State of Delaware, and, after
the corporation has received any payment for any of its stock, the power to
adopt, amend, or repeal the Bylaws of the corporation may be exercised by the
Board of Directors of the corporation for staggered terms pursuant to the
provisions of subsection (d) of section 141 of the General Corporation Law of
the State of Delaware shall be set forth in an initial Bylaw or in a Bylaw
adopted by the stockholders entitled to vote of the corporation unless
provisions for such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice of, and
the right to vote at, any meeting of stockholders. Whenever the corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the right to
vote an any meeting of stockholders except as the provisions of paragraph (2) of
subsection (b) of section 242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any such class
which is otherwise denied voting power
<PAGE>
shall entitle the holder thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
NINTH: The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under provisions of
paragraph (7) of subsection (b) of section 102 of the General Corporation Law of
the State of Delaware, as the same may be amended or supplemented.
TENTH: The corporation shall, to the fullest extent permitted by the provisions
of section 145 of the General Corporations Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators or such a person.
ELEVENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions or this
Article ELEVENTH.
Date: January 14, 1997 /s/ Edward F. Myers II
-----------------------------
Edward F. Myers II, President
<PAGE>
CERTIFICATE OF MERGER
OF FOREIGN CORPORATIONS
INTO A DELAWARE CORPORATION
CERTIFICATE OF MERGER
OF
B & E SECURITIES MANAGEMENT CO., INC.
INTO
LONE OAK, INC.
(Under Section 252 of the General Corporation Law of the State of Delaware)
LONE OAK, INC. hereby certifies that:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger as follows:
NAME STATE OF INCORPORATION
B & E Securities Management Co, Inc. Maryland
Lone Oak, Inc. Delaware
SECOND: That a Plan and Agreement of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of Section
252 of the General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the merger is Lone
Oak, Inc.
FOURTH: That the certificate of incorporation of Lone Oak, Inc., a
Delaware corporation, the surviving corporation, shall be the certificate of
incorporation of the surviving corporation.
FIFTH: That the surviving corporation is a corporation of the State of
Delaware.
SIXTH: That the executed Plan and Agreement of Merger is on file at the
principal place of business of the surviving corporation. The address of the
principal place of business of the surviving corporation is 4190 Bonita Road,
Suite 105, Bonita, California 91902.
<PAGE>
SEVENTH: That a copy of the plan and agreement of merger will be
furnished by the surviving corporation, on request and without cost to any
stockholder of any constituent corporation.
EIGHT: That the authorized capital stock of B & E Securities Management
Co., Inc. is 2,000,000 shares of Common Stock. $0.01 par value and the
authorized capital stock of Lone Oak, Inc. is 50,000,000 shares of Common Stock,
$0.0001 par value
IN WITNESS WHEREOF: Lone Oak, Inc. has caused the Certificate to be
signed by Edward F. Myers II, its authorized officer this 24th day of February
1997.
LONE OAK, INC.
By: /s/ Edward F. Myers II
----------------------
Name: Edward F. Myers II
Title: President
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
LONE OAK, INC.
LONE OAK, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), pursuant to Section 242 of the
General Corporation Law of the State of Delaware, hereby certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by amending and restating ARTICLE FOURTH of the Certificate of
Incorporation as follows:
FOURTH: (a) This Corporation is authorized to issue two
classes of shares designated respectively as, "Capital Common
Stock" and "Preferred Stock", and referred to herein as Common
Stock or Common Shares and Preferred Stock or Preferred
Shares, respectively. The number of authorized shares of
Common Stock is 50,000,000, and the par value of these shares
is $.00001. The number of authorized shares of Preferred Stock
is 20,000,000, and the par value of each of these shares is
$.00001.
(b) Effective as of March 26, 1999 (the "Effective
Time"), each FIFTEEN outstanding shares of Common Stock, par
value $.00001 per share (the "Old Common Stock"), shall
thereupon be reclassified and changed into ONE share of
Common Stock, par value $.00001 per share (the "New Common
Stock'). Upon such Effective Time, each holder of Old Common
Stock shall thereupon automatically be and become the holder
of ONE share of New Common Stock for every FIFTEEN shares of
Old Common Stock then held by such holder. Upon such Effective
Time, each certificate formerly representing a stated number
of shares of Old Common Stock shall be deemed for all
corporate purposes to evidence ownership of ONE share of New
Common Stock for each FIFTEEN shares of Old Common Stock. As
soon as practicable after such Effective Time, stockholders as
of the date of the reclassification will be notified of the
reverse stock split and, upon their delivery of their
certificates of Common Stock will be sent new stock
certificates representing their shares of New Common Stock. No
fractional shares will be issued by the Corporation. In lieu
thereof, each stockholder whose shares of Old Common Stock are
not evenly divisible by FIFTEEN will receive one additional
share of New Common Stock for the fractional share of New
Common Stock such stockholder would otherwise be entitled to
as a result of the reverse stock split.
<PAGE>
SECOND: The foregoing amendment to the Certificate of Incorporation of
the Corporation was deemed advisable and was duly adopted and approved by
resolution of the Board of Directors of the Corporation adopted by written
consent dated March 12, 1999 in accordance with Sections 141 and 242 of the
General Corporation Law of the State of Delaware.
THIRD: The foregoing amendment to the Certificate of Incorporation of
the Corporation was duly adopted and approved by written consent of the
stockholders dated March 17, 1999 in accordance with the provisions of Sections
228 and 242 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, the undersigned, being the President of LONE OAK,
INC., does hereby execute this Certificate of Amendment and affirms and
acknowledges under penalties of perjury that this is his free act and deed and
that the facts stated herein are true this 22nd day of July, 1999.
/s/ Dal Grauer
----------------------
Dal Grauer, President
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
LONE OAK, INC.
LONE OAK, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), pursuant to Section 242 of the
General Corporation Law of the State of Delaware, hereby certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article FIRST of the Certificate of Incorporation in its
entirety and substituting therefor a new Article FIRST to read as follows:
FIRST: The name of the corporation is Politics.com, Inc.
SECOND: The foregoing amendment to the Certificate of Incorporation of
the Corporation was deemed advisable and was duly adopted and approved by
resolution of the Board of Directors of the Corporation adopted by written
consent dated July 21, 1999 in accordance with Sections 141 and 242 of the
General Corporation Law of the State of Delaware.
THIRD: The foregoing amendment to the Certificate of Incorporation of
the Corporation was duly adopted and approved by written consent of the
stockholders dated July 27, 1999 in accordance with the provisions of Sections
228 and 242 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, the undersigned, being the President of LONE OAK,
INC., does hereby execute this Certificate of Amendment and affirms and
acknowledges under penalties of perjury that this is his free act and deed and
that the facts stated herein are true this 27th of July, 1999.
/s/ Dal Grauer
----------------------
Dal Grauer, President
<PAGE>
EXHIBIT 2.2
BYLAWS
OF
LONE OAK, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing
stock in the corporation shall be signed by, or in the name of, the corporation
by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the
President or a Vice-President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statement prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by
the General Corporation Law, the Board of Directors of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of the stock of the corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
<PAGE>
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fractions of a share. If the corporation does not
issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a full
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share or an uncertificated fractional share shall,
but scrip or warrants shall not unless otherwise provided therein, entitle the
holder to exercise voting rights, to receive dividends thereon, and to
participate in any of the assets of the corporation in the event of liquidation.
The Board of Directors may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing the full shares or uncertificated full shares before a specified
date, or subject to the conditions that the shares for which scrip or warrants
are exchangeable may be sold by the corporation and the proceeds thereof
distributed to the holders of scrap or warrants, or subject to any other
conditions which the Board of Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration, transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the corporation
shall be made only on the stock ledger of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and, in the case of shares represented by
certificates, on surrender of the certificate or certificates for such shares of
stock properly endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next or
preceding the day on which notice is given, or, if notice is waived, at the
close of business or the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting. In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining the stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by the General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office
<PAGE>
in the State of Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by the General
Corporation Law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action. In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or diner distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in, writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class of
shares of stock, and said reference is also intended to include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the certificate of
incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the certificate of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder; provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the certificate of incorporation,
except as any provision of law may otherwise require.
7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at
the time fixed, from time to time, by the directors, provided, that the first
annual meeting shall be held on a date within thirteen months after the
organization of the corporation, and each successive annual meeting shall be
held on a date within thirteen months after the date of the preceding annual
meeting. A special meeting shall be held on the date and at the time fixed by
the directors.
- PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of Delaware, as the directors may, from
time to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the registered office of the corporation in the State
of Delaware.
<PAGE>
- CALL. Annual meetings and special meetings may be called
by the directors or by any officer instructed by the directors to call the
meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings
shall be given, stating the place, date, and hour of the meeting and stating the
place within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, enter adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholders shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders
shall be presided over by one of the following officers in the order of
seniority and if present and acting - the Chairman of the Board, if any, the
Vice-Chairman of the Board, if any, the President, a Vice-
<PAGE>
President, or, if none of the foregoing is in office and present and acting, by
a chairman to be chosen by the stockholders. The Secretary of the corporation,
or in his absence, an Assistant Secretary, shall act as secretary of every
meeting, but if neither the Secretary nor an Assistant Secretary is present the
Chairman of the meeting shall appoint a secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may,
but need not, appoint one or more inspectors of election to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspectors at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity, and effect of proxies, and shall
receive votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspector or inspectors, if
any, shall make a report in writing of any challenge, question, or matter
determined by him or them and execute a certificate of any fact found by him or
them. Except as otherwise required by subsection (e) of Section 231 of the
General Corporation Law, the provisions of that Section shall not apply to the
corporation.
- QUORUM. The holders of a majority of the outstanding shares
of stock shall constitute a quorum at a meeting of stockholders for the
transaction of any business. The stockholders present may adjourn the meeting
despite the absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof
to one vote. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Any other action shall be authorized by a
majority of the votes cast except where the General Corporation Law prescribes a
different percent of votes and/or a different exercise of voting power, and
except as may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
<PAGE>
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The initial Board of Directors shall consist of ___ persons.
Thereafter the number of directors constituting the whole board shall be at
least one. Subject to the foregoing limitation and except for the first Board of
Directors, such number may be fixed from time to time by action of the
stockholders or of the directors, or, if the number is not fixed, the number
shall be 7. The number of directors may be increased or decreased by action of
the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
<PAGE>
4. MEETINGS.
- TIME. meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held as
soon after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or
without the State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the whole
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any
committee designated by the Board, may participate in a meeting of the Board, or
any such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any
and if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board, shall preside.
<PAGE>
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided
by the General Corporation Law, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President,
a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by
the Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board,
an Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of the
Board of Directors following the next annual meeting of stockholders and until
his successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and
perform such duties in the management and operation of the corporation as shall
be prescribed in the resolutions of the Board of Directors designating and
choosing such officers and prescribing their authorities and duties, and shall
as are incident to their office except to the extent that such resolutions may
be inconsistent therewith. The Secretary or Assistant Secretary of the
corporation shall record all
<PAGE>
of the proceedings of all meetings and actions in writing of stockholders,
directors, and committees of directors, and shall exercise such additional
authority and perform such additional duties as the Board shall assign to him.
Any officer may be removed, with or without cause, by the Board of Directors.
Any vacancy in any office may be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of
Directors shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall
be subject to change, by the Board of Directors.
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation
and the provisions of the General Corporation Law, the power to amend, alter, or
repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of
Directors or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and
correct copy of the Bylaws of Lone Oak, Inc., a Delaware corporation, as in
effect on the date hereof.
Dated: July 1, 1997
/s/ Betty N. Myers
-----------------------------
Secretary of Lone Oak, Inc.
(SEAL)
<PAGE>
EXHIBIT 3.1
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE
NUMBER SHARES
POLITICS.COM
1505 We put the .com into politics
--------- ----------
CUSIP NO. 73111k 1D 8
AUTHORIZED COMMON STOCK: 50,000,000 SHARES @ PAR VALUE $.00001
THIS CERTIFIES THAT
S P E C I M E N
IS THE RECORD HOLDER OF
Shares of POLITICS.COM, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
Politics.com, Inc.
Corporate
Seal
Delaware
* * * * *
- --------------------------------- ---------------------------------
SECRETARY PRESIDENT
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a
saving bank), or a trust company. The following abbreviations, when
used in the inscription on the face of this certificate, shall be
construed as though they were written out in full according to
applicable laws or regulations.
<TABLE>
<S> <C>
UNIF GIFT MIN ACT-- Custodian
TEN COM -- as tenants in common ---------------------------------
TEN ENT -- as tenants by the entireties (CUST) (MINOR)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors Act
survivorship and not as tenants
in common ---------------------------------
State
</TABLE>
Additional abbreviations may also be used though not in the above list
For Value Received, ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OR ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint ___________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
------------------------------
- -------------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
S P E C I M E N
<PAGE>
EXHIBIT 3.2
PROMISSORY NOTE
$151,000 Phoenix, Arizona
June 30, 1999
FOR VALUE RECEIVED, Politics.com, Inc., a Nevada Corporation ("Maker"),
hereby promises to pay to the order of Howard R. Baer the sum of ONE HUNDRED
FIFTY-ONE THOUSAND DOLLARS ($151,000), payable on demand, together with interest
or unpaid principal compounded monthly and accrued at the rate of ten percent
(10%) per annum until repaid in full.
If the holder incurs actual out-of-pocket costs (including attorneys'
fees or expenses) to enforce this Note after a default hereunder, such holder
shall be entitled to the reimbursement of all such costs from Maker upon demand
for the same.
This Note shall be governed by Nevada law.
Executed as an instrument under seal as of the date first above written.
WITNESS: POLITICS.COM, INC.
/s/ By: /s/ Brian Wadsworth
- ------------------------- -------------------
Brian Wadsworth
President
<PAGE>
EXHIBIT 6.1
CONTRACT OF SALE
FOR INTERNET URLS (DOMAIN NAMES) OF
"POLITICS.COM"
"ELECTIONS.COM"
"GOP.COM"
THIS CONTRACT is entered into on this 30th day of June, 1999, by and
between HOWARD R. BAER, whose address is 2530 South Rural Road, Tempe, Arizona
85282, and who will be referred to in this Contract as the "Seller"; and
POLITICS.COM, INC., a Nevada Corporation, with its principal place of business
at 2530 South Rural Road, Tempe, Arizona 85282, and which will be referred to in
this document as the "Buyer".
RECITALS
WHEREAS, Seller is the owner of the following three (3) World-Wide-Web
Uniform Resource Locators, or Internet Domain Names, known as "POLITICS.COM",
"ELECTIONS. COM" and "GOP.COM", which will be referred to in this Contract as
the "URLS".
WHEREAS, Seller is also the sole owner of all of the intangible rights
and assets that are or have been connected with the ownership and use of the
URLS. These rights may include, but are not limited to, all state and federal
statutory and common law rights to any trade names, trademarks, service marks or
copyrights, and any business goodwill that may be associated with the URLS and
their ownership and use. These rights shall together be referred to in this
Contract as the "Associated Rights."
WHEREAS, it is the intent and agreement of the parties that the Seller
will hereby convey to the "Buyer" all right, title and interest that the Seller
has in and to the URLS, along with 100% of all right, title and interest that
the Seller has or may acquire in and to the Associated Rights.
AGREEMENTS
WHEREFORE, in view of the foregoing, and in consideration of the mutual
promises and covenants that are contained in this Contract, the Buyer and Seller
agree as follows:
1. SALE AND PURCHASE: In exchange for a promissory note of Buyer in the
principal amount of $151,000.00 and other good and valuable consideration, which
will be referred to herein as the "Purchase Price", the receipt and adequacy of
which is hereby acknowledged, and subject to the other terms and conditions that
are set forth in this Contract, the Seller hereby sells, conveys and transfers
to the Buyer, and the Buyer hereby purchases, accepts and receives from the
Seller, the URLS and all of the Associated Rights, that the Seller now owns or
may hereafter acquire which in any way relates to the URLS.
2. MATERIAL REPRESENTATIONS BY THE SELLER: As a material part of the
consideration that will be provided to the Buyer by the Seller in this
transaction, the Seller represents as follows:
a. The Seller is the sole owner of the URLS and the Associated
Rights, and has the full and unrestricted right to sell and convey the URLS and
the Associated Rights to the Buyer.
<PAGE>
b. There are no prior owners of the URLS or the Associated
Rights who now own, claim, or have any interest in the URLS or the Associated
Rights.
c. There are no pending, expected or threatened legal actions
or claims relating to the URLS or the Associated Rights.
d. The Seller has not granted to any individual or entity any
rights or interests in or to the URLS or the Associated Rights, and there are no
individuals or entities that have or are making a claim of any right to the URLS
or to any of the Associated Rights.
e. The Seller shall cooperate and assist the Buyer, in
whatever way is necessary to see that the transfers undertaken hereby are
properly accomplished.
3. TRANSFER OF URLS REGISTRATION: Upon receipt of the Purchase Price,
the Seller shall immediately send the original of the InterNIC/Network
Solutions, Inc. Registrant Name Change Agreement, which is attached to this
Contract as Exhibit "A", completed, signed and notarized by the Seller, to
Network Solutions, Inc. for formal processing, at the address that is shown at
the top of that document. It shall be the responsibility of the Seller to see
that transfer takes place as requested. Exhibit "A" is hereby made a part of
this Contract.
4. EXECUTION OF OTHER DOCUMENTS: The Seller and the Buyer will promptly
execute any other documents, and will promptly perform any other acts, that may
be reasonably necessary or convenient in order to properly accomplish the
transfer of the URLS and the Associated Rights as set forth in this Contract.
a. The Buyer shall execute, at the Internet web site of
"WWW.NETWORKSOLUTIONS.COM", a Domain Name Registration Agreement with Networks
Solutions, Inc., obligating Buyer to assume payment of certain registration and
renewal fees for the URLS.
b. The Seller shall confirm, via the "WHO IS?" service of
InterNIC and Network Solutions, Inc., at the Internet web site of
"WWW.NETWORKSOLUTIONS.COM", and certify to the Buyer in writing that the URLS
have in fact been formally and properly transferred from the Seller to the
Buyer.
5. GOOD FAITH OBLIGATION OF PARTIES: The Buyer and the Seller shall
each have the obligation to act in good faith with respect to their performance
under this Contract, and shall make every reasonable effort to effectively
communicate with each other, with the intent to facilitate and expedite the
proper closing of this transaction.
6. SETTING OF TIME OF SALE AND RESPONSIBILITY FOR FUTURE EXPENSES:
a. The point in time when the Buyer confirms that the URLS
have been formally transferred to the Buyer by the Seller, and transmits to the
Seller the Purchase Price as described above, shall be referred to as the "Time
of Sale". The Buyer will become the complete and unrestricted owner of the URLS
and the Associated Rights at the Time of Sale. The Seller shall be responsible
for all expenses relating to the URLS and its maintenance and hosting, if any,
prior to the Time of Sale, and the Buyer shall be responsible for all such
expenses after the Time of Sale.
<PAGE>
b. The Buyer shall be responsible to pay when due any
registration fees that will be due to InterNIC and Network Solutions, Inc., in
connection with the URLS being transferred from the Seller and placed in the
name of the Buyer.
7. CONTROLLING LAWS: The laws of the State of Arizona shall be applied
in interpreting and enforcing this Contract and its provisions.
<PAGE>
IN WITNESS OF their voluntary agreement to the foregoing terms and
conditions, this Contract is being executed on behalf of the Buyer and the
Seller with the specific intention that it becomes binding upon them as of the
date that is set forth in the first paragraph of this Contract.
"BUYER" "SELLER"
POLITICS.COM, INC.
By: /s/ Brian Wadsworth /s/ Howard R. Baer
---------------------------- -----------------------
Brian Wadsworth, President Howard R. Baer
2530 South Rural Road 2530 South Rural Road
Tempe, Arizona 85282 Tempe, Arizona 85282
STATE OF ARIZONA )
)ss:
County of Maricopa )
The foregoing document was SUBSCRIBED AND SWORN TO before me, a duly
authorized Notary Public, in and for the State and County that is set forth
above, on this 26th day of July, 1999, by a person that is known by me to be
Howard R. Baer.
/s/ Diane M. Lewis
------------------
Notary Public
My Commission Expires:
February 16, 2001
<PAGE>
EXHIBIT 6.2
CONTRACT OF SALE
FOR INTERNET URL (DOMAIN NAME) OF
"POLITICALJUNKIE.COM"
THIS CONTRACT is entered into on this 17th day of August, 1999, by and
between KURT EHRENBERG, whose address is 281 Wallis Road, Rye New Hampshire
03870, and who will be referred to in this Contract as the "Seller"; and
POLITICS.COM, INC., a Nevada Corporation, with its principal place of business
at 2530 South Rural Road, Tempe, Arizona 85282, and which will be referred to in
this document as the "Buyer".
RECITALS
WHEREAS, Seller is the sole owner of the following World-Wide-Web
Uniform Resource Locator, or Internet Domain Name, known as
"POLITICALJUNKIE.COM", which will be referred to in this Contract as the "URL".
WHEREAS, Seller registered the URL with Network Solutions, Inc. under
the name of Wallis Sands Associates, a fictitious name created by Seller.
WHEREAS, Seller is also the sole owner of all of the intangible rights
and assets that are or have been connected with the ownership and use of the
URL. These rights and assets may include, but are not limited to, (i) all state
and federal statutory and common law rights to any trade names, trademarks,
service marks or copyrights, (ii) software at the Internet Domain Name, (iii)
content of the politicaljunkie.com Web site, (iv) the list of subscribers to the
politicaljunkie newsletter, and (v) any business goodwill that may be associated
with the URL and its ownership and use. These rights and assets shall together
be referred to in this Contract as the "Associated Assets."
WHEREAS, it is the intent and agreement of the parties that the Seller
will hereby convey to the "Buyer" all right, title and interest that the Seller
has in and to the URL, along with 100% of all right, title and interest that the
Seller has or may acquire in and to the Associated Assets.
AGREEMENTS
WHEREFORE, in view of the foregoing, and in consideration of the mutual
promises and covenants that are contained in this Contract, the Buyer and Seller
agree as follows:
1. SALE AND PURCHASE: In exchange for the aggregate amount of $55,000,
of which $36,667 has previously been paid by Buyer and received by Seller and of
which the remaining $18,333 will be paid by Buyer to Seller no later than August
24, 1999, and for other good and valuable consideration, which will be referred
to herein as the "Purchase Price", the receipt and adequacy of which is hereby
acknowledged, and subject to the other terms and conditions that are set forth
in this Contract, the Seller hereby sells, conveys and transfers to the Buyer,
and the Buyer hereby purchases, accepts and receives from the Seller, the URL
and all of the Associated
<PAGE>
Assets, that the Seller now owns or may hereafter acquire which in any way
relates to the URL.
2. MATERIAL REPRESENTATIONS BY THE SELLER: As a material part of the
consideration that will be provided to the Buyer by the Seller in this
transaction, the Seller represents as follows:
a. The Seller is the sole owner of the URL and the
Associated Assets, and has the full and unrestricted right to sell and convey
the URL and the Associated Assets to the Buyer.
b. There are no prior owners of the URL or the
Associated Assets who now own, claim, or have any interest in the URL or the
Associated Assets.
c. Seller registered the URL with Network Solutions,
Inc. under the name "Wallis Sands Associates", which is a fictitious name
created by Seller.
d. There are no pending, expected or threatened legal
actions or claims relating to the URL or the Associated Assets.
e. The Seller has not granted to any individual or
entity any rights or interests in or to the URL or the Associated Assets, and
there are no individuals or entities that have or are making a claim of any
right to the URL or to any of the Associated Assets.
f. The Seller shall cooperate and assist the Buyer, in
whatever way is necessary to see that the transfers undertaken hereby are
properly accomplished.
3. COVENANTS OF THE SELLER AND THE BUYER:
a. The Seller agrees to continue to manage and operate
the politicaljunkie.com Web site in the ordinary course in the same manner
consistent with its past practice until the Buyer's politics.com Web site is
operational, ready to absorb content and receive diverted traffic from the URL.
b. In the event the Buyer fails to make the final
payment of $18,333 to Seller on or before August 24, 1999, upon written request
of Seller, Buyer shall transfer all right, title and interest of the URL and the
Associated Assets back to Seller and will execute and deliver those documents
reasonably necessary to effect such transfer; provided, however, that any
payments previously received by Seller from Buyer shall be refunded to Buyer
upon Buyer's execution and delivery of such transfer documents.
4. TRANSFER OF URL REGISTRATION: Upon execution of this Contract, the
Seller shall immediately send the original of the InterNIC/Network Solutions,
Inc. Registrant Name Change Agreement, which is attached to this Contract as
Exhibit "A", completed, signed and notarized by the Seller, to Network
Solutions, Inc. for formal processing, at the address that is shown at the top
of that document. It shall be the responsibility of the Seller to see that
transfer takes place as requested. Exhibit "A" is hereby made a part of this
Contract.
<PAGE>
5. EXECUTION OF OTHER DOCUMENTS: The Seller and the Buyer will promptly
execute any other documents, and will promptly perform any other acts, that may
be reasonably necessary or convenient in order to properly accomplish the
transfer of the URL and the Associated Assets as set forth in this Contract.
a. The Buyer shall execute, at the Internet web site of
WWW.NETWORKSOLUTIONS.COM", a Domain Name Registration Agreement with Networks
Solutions, Inc., obligating Buyer to assume payment of certain registration and
renewal fees for the URLS.
b. The Seller shall confirm, via the "WHO IS?" service
of InterNIC and Network Solutions, Inc., at the Internet web site of
"WWW.NETWORKSOLUTIONS.COM", and certify to the Buyer in writing that the URL has
in fact been formally and properly transferred from the Seller to the Buyer.
6. GOOD FAITH OBLIGATION OF PARTIES: The Buyer and the Seller shall
each have the obligation to act in good faith with respect to their performance
under this Contract, and shall make every reasonable effort to effectively
communicate with each other, with the intent to facilitate and expedite the
proper closing of this transaction.
7. SETTING OF TIME OF SALE AND RESPONSIBILITY FOR FUTURE EXPENSES:
a. The point in time when the Buyer confirms that the
URL has been formally transferred to the Buyer by the Seller, shall be referred
to as the "Time of Sale". The Buyer will become the complete and unrestricted
owner of the URL and the Associated Assets at the Time of Sale. The Seller shall
be responsible for all expenses relating to the URL and its maintenance and
hosting, if any, prior to the Time of Sale, and the Buyer shall be responsible
for all such expenses after the Time of Sale.
b. The Buyer shall be responsible to pay when due any
registration fees that will be due to InterNIC and Network Solutions, Inc., in
connection with the URL being transferred from the Seller and placed in the name
of the Buyer.
8. CONTROLLING LAWS: The laws of the State of Delaware shall be applied
in interpreting and enforcing this Contract and its provisions.
9. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
and understanding of the parties relating to the subject matter hereof and this
Agreement supersedes all previous communications, proposals, and
representations, whether oral or written, relating thereto. It may be modified,
changed, altered or amended only by a writing signed by each of the parties
hereto, and it shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
<PAGE>
10. COUNTERPARTS: This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, and all signatures need
not appear on any one counterpart.
IN WITNESS OF their voluntary agreement to the foregoing terms and
conditions, this Contract is being executed on behalf of the Buyer and the
Seller with the specific intention that it becomes binding upon them as of the
date that is set forth in the first paragraph of this Contract.
"BUYER" "SELLER"
POLITICS.COM, INC.
By: /s/ Brian Wadsworth /s/ Kurt Ehrenberg
-------------------------- -------------------------
Brian Wadsworth, President Kurt Ehrenberg
2530 South Rural Road 281 Wallis Road
Tempe, Arizona 85282 Rye, New Hampshire 03870
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
The foregoing document was SUBSCRIBED AND SWORN TO before me, a duly
authorized Notary Public, in and for the State and County that is set forth
above, on this 17th day of September, 1999, by a person that is known by me to
be Kurt Ehrenberg.
/s/ Norma H. Gowen
------------------
Notary Public
My Commission Expires:
5/13/00
- ----------------------------
<PAGE>
EXHIBIT 6.3
POLITICS.COM, INC.
1999 COMBINATION STOCK OPTION PLAN
SECTION I. PURPOSE OF THE PLAN.
The purposes of this Politics.com, Inc. 1999 Combination Stock Option
Plan (the "1999 Plan") are (i) to provide long-term incentives and rewards to
those key employees (the "Employee Participants") of Politics.com, Inc., a
Delaware corporation (the "Corporation"), and its subsidiaries (if any), and any
other persons (the "Non-employee Participants") who are in a position to
contribute to the long-term success and growth of the Corporation and its
subsidiaries, (ii) to assist the Corporation in retaining and attracting
executives and key employees with requisite experience and ability, and (iii) to
associate more closely the interests of such executives and key employees with
those of the Corporation's stockholders.
SECTION II. DEFINITIONS.
"CODE" is the Internal Revenue Code of 1986, as it may be amended
from time to time.
"COMMON STOCK" is the $.00001 par value common stock of the
Corporation.
"COMMITTEE" is defined in Section III, paragraph (a).
"CORPORATION" is defined in Section I.
"CORPORATION ISOS" are all stock options (including 1999 Plan ISOs)
which (i) are Incentive Stock Options and (ii) are granted under any
plans (including this 1999 Plan) of the Corporation, a Parent
Corporation and/or a Subsidiary Corporation.
"EMPLOYEE PARTICIPANTS" is defined in Section I.
"FAIR MARKET VALUE" of any property is the value of the property as
reasonably determined by the Committee.
"INCENTIVE STOCK OPTION" is a stock option which is treated as an
incentive stock option under Section 422 of the Code.
"1999 PLAN" is defined in Section I.
<PAGE>
"1999 PLAN ISOs" are Stock Options which are Incentive Stock Options.
"NON-EMPLOYEE PARTICIPANTS" is defined in Section I.
"NON-QUALIFIED OPTION" is a Stock Option which does not qualify as an
Incentive Stock Option or for which the Committee provides, in the terms
of such option and at the time such option is granted, that the option
shall not be treated as an Incentive Stock Option.
"PARENT CORPORATION" has the meaning provided in Section 424(e) of
the Code.
"PARTICIPANTS" are all persons who are either Employee Participants
or Non-employee Participants.
"PERMANENT AND TOTAL DISABILITY" has the meaning provided in Section
22(e)(3) of the Code.
"RULE 16b-3" means Securities and Exchange Commission Rule 16b-3.
"SECTION 16" means Section 16 of the Securities Exchange Act of 1934,
as amended, or any similar or successor statute, and any rules,
regulations, or policies adopted or applied thereunder.
"STOCK OPTIONS" are rights granted pursuant to this 1999 Plan to
purchase shares of Common Stock at a fixed price.
"SUBSIDIARY CORPORATION" has the meaning provided in Section 424(f)
of the Code.
"TEN PERCENT STOCKHOLDER" means, with respect to a 1999 Plan ISO, any
individual who directly or indirectly owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Corporation or any Parent Corporation or any Subsidiary Corporation at
the time such 1999 Plan ISO is granted.
SECTION III. ADMINISTRATION.
(a) THE COMMITTEE. This 1999 Plan shall be administered by the Board of
Directors or by a compensation committee consisting solely of two or more
"non-employee directors", as defined in Rule 16b-3, who shall be designated by
the Board of Directors of the Corporation (the administering body is hereafter
referred to as the "Committee"). The Committee shall serve at the pleasure of
the Board of Directors, which may from time to time, and in its sole discretion,
<PAGE>
discharge any member, appoint additional new members in substitution for those
previously appointed and/or fill vacancies however caused. A majority of the
Committee shall constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present shall be deemed the action
of the Committee. No person shall be eligible to be a member of the Committee if
that person's membership would prevent the plan from complying with Section 16,
if applicable to the Corporation.
(b) AUTHORITY AND DISCRETION OF THE COMMITTEE. Subject to the express
provisions of this 1999 Plan and provided that all actions taken shall be
consistent with the purposes of this 1999 Plan, and subject to ratification by
the Board of Directors only if required by applicable law, the Committee shall
have full and complete authority and the sole discretion to: (i) determine those
persons who shall constitute key employees eligible to be Employee Participants;
(ii) select the Participants to whom Stock Options shall be granted under this
1999 Plan; (iii) determine the size and the form of the Stock Options, if any,
to be granted to any Participant; (iv) determine the time or times such Stock
Options shall be granted including the grant of Stock Options in connection with
other awards made, or compensation paid, to the Participant; (v) establish the
terms and conditions upon which such Stock Options may be exercised and/or
transferred, including the exercise of Stock Options in connection with other
awards made, or compensation paid, to the Participant; (vi) make or alter any
restrictions and conditions upon such Stock Options and the Stock received on
exercise thereof, including, but not limited to, providing for limitations on
the Participant's right to keep any Stock received on termination of employment;
(vii) determine whether the Participant or the Corporation has achieved any
goals or otherwise satisfied any conditions or requirements that may be imposed
on or related to the exercise of Stock Options; and (viii) adopt such rules and
regulations, establish, define and/or interpret these and any other terms and
conditions, and make all determinations (which may be on a case-by-case basis)
deemed necessary or desirable for the administration of this 1999 Plan.
Notwithstanding any provision of this 1999 Plan to the contrary, only Employee
Participants shall be eligible to receive 1999 Plan ISOs.
(c) APPLICABLE LAW. This 1999 Plan and all Stock Options shall be
governed by the law of the state in which the Corporation is incorporated.
SECTION IV. TERMS OF STOCK OPTIONS.
(a) AGREEMENTS. Stock Options shall be evidenced by a written agreement
between the Corporation and the Participant awarded the Stock Option. This
agreement shall be in such form, and contain such terms and conditions (not
inconsistent with this 1999 Plan) as the Committee may determine. If the Stock
Option described therein is not intended to be an Incentive Stock Option, but
otherwise qualifies as an Incentive Stock Option, the agreement shall include
the following or a similar statement: "This stock option is not intended to be
an Incentive
<PAGE>
Stock Option, as that term is described in Section 422 of the Internal Revenue
Code of 1986, as amended."
(b) TERM. Stock Options shall be for such periods as may be determined
by the Committee, provided that in the case of 1999 Plan ISOs, the term of any
such 1999 Plan ISO shall not extend beyond three months after the time the
Participant ceases to be an employee of the Corporation. Notwithstanding the
foregoing, the Committee may provide in a 1999 Plan ISO that in the event of the
Permanent and Total Disability or death of the Participant, the 1999 Plan ISO
may be exercised by the Participant or his estate (if applicable) for a period
of up to one year after the date of such Permanent and Total Disability or
Death. In no event may a 1999 Plan ISO be exercisable (including provisions, if
any, for exercise in installments) subsequent to ten years after the date of
grant, or, in the case of 1999 Plan ISOs granted to Ten Percent Stockholders,
more than five years after the date of grant.
(c) PURCHASE PRICE. The purchase price of shares purchased pursuant to
any Stock Option shall be determined by the Committee, and shall be paid by the
Participant or other person permitted to exercise the Stock Option in full upon
exercise, (i) in cash, (ii) by delivery of shares of Common Stock (valued at
their Fair Market Value on the date of such exercise), (iii) any other property
(valued at its Fair Market Value on the date of such exercise), or (iv) any
combination of cash, stock and other property, with any payment made pursuant to
subparagraphs (ii), (iii) or (iv) only as permitted by the Committee, in its
sole discretion. In no event will the purchase price of Common Stock be less
than the par value of the Common Stock. Furthermore, the purchase price of
Common Stock subject to a 1999 Plan ISO shall not be less than the Fair Market
Value of the Common Stock on the date of the issuance of the 1999 Plan ISO,
provided that in the case of 1999 Plan ISOs granted to Ten Percent Stockholders,
the purchase price shall not be less than 110% of the Fair Market Value of the
Common Stock on the date of issuance of the 1999 Plan ISO.
(d) FURTHER RESTRICTIONS AS TO INCENTIVE STOCK OPTIONS. To the extent
that the aggregate Fair Market Value of Common Stock with respect to which
Corporation ISOs (determined without regard to this section) are exercisable for
the first time by any Employee Participant during any calendar year exceeds
$100,000, such Corporation ISOs shall be treated as options which are not
Incentive Stock Options. For the purpose of this limitation, options shall be
taken into account in the order granted, and the Committee may designate that
portion of any Corporation ISO that shall be treated as not an Incentive Stock
Option in the event that the provisions of this paragraph apply to a portion of
any option, unless otherwise required by the Code or regulations of the Internal
Revenue Service. The designation described in the preceding sentence may be made
at such time as the Committee considers appropriate, including after the
issuance of the option or at the time of its exercise. For the purpose of this
section, Fair Market Value shall be determined as of the time the option with
respect to such stock is granted.
<PAGE>
(e) RESTRICTIONS. At the discretion of the Committee, the Common Stock
issued pursuant to the Stock Options granted hereunder may be subject to
restrictions on vesting or transferability. For the purposes of this limitation,
options shall be taken into account in the order granted.
(f) WITHHOLDING OF TAXES. Pursuant to applicable federal, state, local
or foreign laws, the Corporation may be required to collect income or other
taxes upon the grant of a Stock Option to, or exercise of a Stock Option by, a
holder. The Corporation may require, as a condition to the exercise of a Stock
Option, or demand, at such other time as it may consider appropriate, that the
Participant pay the Corporation the amount of any taxes which the Corporation
may determine is required to be withheld or collected, and the Participant shall
comply with the requirement or demand of the Corporation. In its discretion, the
Corporation may withhold shares to be received upon exercise of a Stock Option
if it deems this an appropriate method for withholding or collecting taxes.
(g) SECURITIES LAW COMPLIANCE. Upon exercise (or partial exercise) of a
Stock Option, the Participant or other holder of the Stock Option shall make
such representations and furnish such information as may, in the opinion of
counsel for the Corporation, be appropriate to permit the Corporation to issue
or transfer Stock in compliance with the provisions of applicable federal or
state securities laws. The Corporation, in its discretion, may postpone the
issuance and delivery of Stock upon any exercise of this Option until completion
of such registration or other qualification of such shares under any federal or
state laws, or stock exchange listing, as the Corporation may consider
appropriate. Furthermore, the Corporation is not obligated to register or
qualify the shares of Common Stock to be issued upon exercise of a Stock Option
under federal or state securities laws (or to register or qualify them at any
time thereafter), and it may refuse to issue such shares if, in its sole
discretion, registration or exemption from registration is not practical or
available. The Corporation may require that prior to the issuance or transfer of
Stock upon exercise of a Stock Option, the Participant enter into a written
agreement to comply with any restrictions on subsequent disposition that the
Corporation deems necessary or advisable under any applicable federal and state
securities laws. Certificates of Stock issued hereunder shall bear a legend
reflecting such restrictions.
(h) RIGHT TO STOCK OPTION. No employee of the Corporation or any other
person shall have any claim or right to be a participant in this 1999 Plan or to
be granted a Stock Option hereunder. Neither this 1999 Plan nor any action taken
hereunder shall be construed as giving any person any right to be retained in
the employ of the Corporation. Nothing contained hereunder shall be construed as
giving any person any equity or interest of any kind in any assets of the
Corporation or creating a trust of any kind or a fiduciary relationship of any
kind between the Corporation and any such person. As to any claim for any unpaid
amounts under this 1999 Plan, any person having a claim for payments shall be an
unsecured creditor.
<PAGE>
(i) INDEMNITY. Neither the Board of Directors nor the Committee, nor any
members of either, nor any employees of the Corporation or any parent,
subsidiary, or other affiliate, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with their responsibilities with respect to this 1999 Plan, and the Corporation
hereby agrees to indemnify the members of the Board of Directors, the members of
the Committee, and the employees of the Corporation and its parent or
subsidiaries in respect of any claim, loss, damage, or expense (including
reasonable counsel fees) arising from any such act, omission, interpretation,
construction or determination to the full extent permitted by law.
(j) PARTICIPATION BY FOREIGNERS. Without amending this 1999 Plan, except
to the extent required by the Code in the case of Incentive Stock Options, the
Committee may modify grants made to participants who are foreign nationals or
employed outside the United States so as to recognize differences in local law,
tax policy, or custom.
SECTION V. AMENDMENT AND TERMINATION: ADJUSTMENTS UPON CHANGES IN STOCK.
The Board of Directors of the Corporation may at any time, and from time
to time, amend, suspend or terminate this 1999 Plan or any portion thereof,
provided that no amendment shall be made without approval of the Corporation's
stockholders if such approval is necessary to comply with any applicable tax
requirement, any applicable rules or regulations of the Securities and Exchange
Commission, including Rule 16b-3 (or any successor rule thereunder), or the
rules and regulations of any exchange or stock market on which the Corporation's
securities are listed or quoted. Except as provided herein, no amendment,
suspension or termination of this 1999 Plan may affect the rights of a
Participant to whom a Stock Option has been granted without such Participant's
consent. The Committee is specifically authorized to convert, in its discretion,
the unexercised portion of any 1999 Plan ISO granted to an Employee Participant
to a Non-qualified Option at any time prior to the exercise, in full, of such
1999 Plan ISO. If there shall be any change in the Common Stock or to any Stock
Option granted under this 1999 Plan through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or other change in
the corporate structure of the Corporation, appropriate adjustments may be made
by the Committee (or if the Corporation is not the surviving corporation in any
such transaction, the Board of Directors of the surviving corporation, or its
designee) in the aggregate number and kind of shares subject to this 1999 Plan,
and the number and kind of shares and the price per share subject to outstanding
options, provided that such adjustment does not affect the qualification of any
1999 Plan ISO as an Incentive Stock Option. In connection with the foregoing,
the Committee may issue new Stock Options in exchange for outstanding Stock
Options.
<PAGE>
SECTION VI. SHARES OF STOCK SUBJECT TO THE PLAN.
The number of shares of Common Stock that may be the subject of awards
under this 1999 Plan shall not exceed an aggregate of 2,000,000 shares. Shares
to be delivered under this 1999 Plan may be either authorized but unissued
shares of Common Stock or treasury shares. Any shares subject to an option
hereunder which for any reason terminates, is canceled or otherwise expires
unexercised, and any shares reacquired by the Corporation due to restrictions
imposed on the shares, shares returned because payment is made hereunder in
stock of equivalent value rather than in cash, and/or shares reacquired from a
recipient for any other reason shall, at such time, no longer count towards the
aggregate number of shares which have been the subject of Stock Options issued
hereunder, and such number of shares shall be subject to further awards under
this 1999 Plan, provided, first, that the total number of shares then eligible
for award under this 1999 Plan may not exceed the total specified in the first
sentence of this Section VI, and second, that the number of shares subject to
further awards shall not be increased in any way that would cause this 1999 Plan
or any Stock Option to not comply with Section 16, if applicable to the
Corporation.
SECTION VII. EFFECTIVE DATE AND TERM OF THIS PLAN.
The effective date of this 1999 Plan is July 27, 1999 (the "Effective
Date") and awards under this 1999 Plan may be made for a period of ten years
commencing on the Effective Date. The period during which a Stock Option may be
exercised may extend beyond that time as provided herein.
DATE OF APPROVAL BY STOCKHOLDERS: As of July 27, 1999
DATE OF APPROVAL BY BOARD OF DIRECTORS: As of July 27, 1999
<PAGE>
EXHIBIT 6.4
POLITICS.COM, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(BRIAN WADSWORTH)
Non-qualified Stock Option Agreement (the "Option") made effective as
of the 27th day of July, 1999 between Politics.com, Inc., a Delaware corporation
(the "Corporation"), and Brian Wadsworth (the "Recipient"), an employee of the
Corporation, a Parent or a Subsidiary, pursuant to the Corporation's 1999
Combination Stock Option Plan, as it may be amended from time to time (the "1999
Plan").
W I T N E S S E T H:
WHEREAS, on July 27, 1999, the Corporation adopted the 1999 Plan which
provides for the issuance of stock options, and
WHEREAS, the Corporation and the Recipient desire to enter into an
agreement whereby the Corporation will grant the Recipient an option to purchase
shares of the Common Stock, $.00001 par value, of the Corporation (the "Stock"),
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Corporation and the Recipient
agree as follows:
1. GRANT OF OPTION.
Pursuant to the terms and conditions of the 1999 Plan and this Option,
the Corporation hereby grants to the Recipient an Option to purchase, as
provided in Section 3 hereof, all or any part of a total of 330,000 shares of
Stock (the "Option Shares").
2. PURCHASE PRICE.
The price at which the Option Shares may be purchased shall be $3.00
per share (the "Option Exercise Price"). This price is not less than the par
value of the Stock.
3. EXERCISE OF OPTION.
Subject to the provisions of Section 4 and the right of the Corporation
to accelerate the date upon which any or all of this Option becomes exercisable,
the Recipient shall be entitled to exercise this Option as follows: 146,000
shall be immediately exercisable and the remaining 184,000 shall become
exercisable in five (5) equal monthly installments commencing August 15, 1999.
Notwithstanding any provision of this Option to the contrary, in no event may
this Option be exercised after 10 years from the date of this Option (the
"Expiration Date"). In the event the Recipient's employment is terminated, other
than for cause, in connection with a "change of control" of the Corporation, the
purchase rights which were not exercisable at the date of termination of
employment shall as of such date become immediately exercisable. For purposes of
the foregoing, a
<PAGE>
"change of control" shall be deemed to have occurred if the Corporation shall
consummate a transaction involving the sale of the Corporation's assets or all
the Corporation's capital stock or the merger of the Corporation with or into
another entity, following which the persons who were the Corporation's
stockholders prior to such transaction own less than a majority of the
outstanding voting stock of the surviving Corporation.
4. TERMINATION OF RELATIONSHIP.
If the Recipient's relationship with the Corporation is terminated, as
determined by the Corporation, then this Option may be exercised as to all
shares with respect to which Recipient could exercise this Option on the date of
termination of the relationship, and which shares have not been previously
purchased, until the earlier of Expiration Date, or:
(i) in the case of termination by reason of
death or Permanent Disability, one year after
termination of the relationship, or
(ii) in the case of any other termination, other than
termination for cause, three months after the
termination of the relationship.
Notwithstanding the foregoing, in the case of termination for cause, the ability
to exercise this option may be terminated on such earlier date as the
Corporation may specify, and such date may be set so as to prevent the Recipient
from further exercising any portion of this Option.
5. NONTRANSFERABILITY; PERSONS ABLE TO EXERCISE.
The Option may not be transferred other than by will or the
laws of descent and distribution. During the life of the Recipient, only the
Recipient may exercise this Option. If the Recipient dies while still employed
by the Corporation, or during the periods specified in Section 4, this Option
may be exercised by his executors, administrators, legatees or distributees,
provided that such person or persons comply with the provisions of this Option
applicable to the Recipient.
6. METHOD OF EXERCISING OPTION.
The Option may be exercised, in whole or in part, by written
notice to the Corporation, containing an executed Notice of Exercise in the form
of Attachment A, provided that the Corporation, in its discretion, may modify or
augment these requirements as provided in Section 9 of this Option, or where
appropriate because a person other than the Recipient is exercising the Option
pursuant to Section 5. The written notice specified in this Section must be
accompanied by payment of the Option Exercise Price for the shares being
purchased. Payment shall be made in cash, unless the Corporation, in its sole
discretion, authorizes payment to be made in shares of the Corporation, other
property, or a combination of such shares, other property and cash. As soon as
practical after receipt of this notice and payment, the Corporation shall
deliver a certificate or certificates representing the purchased shares
registered in the name of the person or persons exercising this Option. In the
event this Option is exercised by any person other than the Recipient, the
notice shall be accompanied by appropriate proof of the right of such person to
exercise this Option. All shares purchased upon the exercise of this Option and
payment of the full Option Exercise Price will be fully paid and nonassessable.
<PAGE>
7. STOCK ADJUSTMENTS.
If there shall be any change in the Stock through merger,
consolidation, reorganization, recapitalization, or other change in the
corporate structure of the Corporation, appropriate adjustments in the Option
Exercise Price and total number and kind of shares subject to this Option shall
be made by the Corporation as provided in the 1999 Plan.
8. NO RIGHTS OTHER THAN THOSE EXPRESSLY CREATED.
Neither this Option nor any action taken hereunder shall be construed
as (i) giving the Recipient any right to be retained in the employ of, or
continue to be affiliated with, the Corporation, (ii) giving the Recipient any
equity or interest of any kind in any assets of the Corporation, or (iii)
creating a trust of any kind or a fiduciary relationship of any kind between the
Recipient and the Corporation. As to any claim for any unpaid amounts under this
Option, any person having a claim for payments shall be unsecured creditor. The
Recipient shall not have any of the rights of a stockholder with respect to any
Option Shares until such time as this Option has been exercised and Option
Shares have been issued.
9. COMPLIANCE WITH LAWS.
(a) WITHHOLDING OF TAXES. Pursuant to applicable federal,
state, local or foreign laws, the Corporation may be required to collect or
withhold income or other taxes from Recipient upon the grant of this Option, the
exercise of this Option, or at some other time. The Corporation may require, as
a condition to the exercise of this Option, or demand, at such other time as it
may consider appropriate, that the Recipient pay the Corporation the amount of
any taxes which the Corporation may determine is required to be collected or
withheld, and the Recipient shall comply with the requirement or demand of the
Corporation.
(b) SECURITIES LAW COMPLIANCE. Upon exercise (or partial
exercise) of this Option, the Recipient shall make such representations and
furnish such information as may, in the opinion of counsel for the Corporation,
be appropriate to permit the Corporation to issue or transfer the Option Shares
in compliance with the provisions of applicable federal or state securities
laws. The Corporation, in its discretion, may postpone the issuance and delivery
of Option Shares upon any exercise of this Option until completion of such
registration or other qualification of such shares under any federal or state
laws, or stock exchange listing, as the Corporation may consider appropriate.
The Corporation may require that prior to the issuance or transfer of Option
Shares upon exercise of this Option, the Recipient enter into a written
agreement to comply with any restrictions on subsequent disposition that the
Corporation deems necessary or advisable under any applicable federal and state
securities laws. Certificates of Stock issued hereunder shall be legended to
reflect such restrictions.
(c) GENERAL. No Option Shares shall be issued upon exercise of
this Option unless and until the Corporation is satisfied, in its sole
discretion, that there has been compliance with all legal requirements
applicable to the issuance of such Option Shares.
<PAGE>
10. MISCELLANEOUS.
(a) PROVISIONS OF THE PLAN. The Option hereby granted is
expressly subject to all of the terms and conditions contained in this Option
and in the 1999 Plan, except those which are expressly applicable only to "1999
Plan ISOs", and the 1999 Plan is hereby incorporated herein by reference. All
capitalized terms not defined in this Option have the meanings specified in the
1999 Plan. This stock option is not intended to be an Incentive Stock Option, as
that term is described in Section 422 of the Internal Revenue Code of 1986, as
amended.
(b) DISCRETION OF THE COMMITTEE. Unless otherwise explicitly
provided, the Committee, as defined in the Plan, shall make all determinations
required to be made hereunder, including determinations required to be made by
the Corporation, and shall interpret all provisions of this Option, as it deems
necessary or desirable, in its sole and unfettered discretion. Such
determinations and interpretations shall be binding and conclusive on the
Corporation and the Recipient. The Committee, in its sole discretion, is
authorized to accelerate the time at which this Option may be exercised.
(c) RESERVATION OF SHARES. During the term of this Option, the
Corporation shall at all times reserve and keep available shares of Stock
sufficient to satisfy the requirements of this Option.
(d) AMENDMENT. This Option may only be modified or
amended by a writing signed by both parties.
(e) NOTICES. Any notices required to be given under this
Option shall be sufficient if in writing and if hand-delivered or if sent by
first class mail and addressed as follows:
if to the Corporation:
Politics.com, Inc.
The Baer Building
2530 South Rural Road
Tempe, AZ 85282
<PAGE>
if to the Recipient:
Brian Wadsworth
164 Bayview Avenue
Northport, NY 11768
or to such other address as either party may designate under the provisions
hereof.
(f) SUCCESSORS AND ASSIGNS. The rights and obligations of the
Corporation under this Option shall inure to the benefit of and be binding upon
the successors and assigns of the Corporation.
(g) APPLICABLE LAW. All rights and obligations under this
Option shall be governed by the laws of the State of Delaware.
(h) PARAGRAPH HEADINGS. The paragraph headings used in this
Option are for convenience or reference, and are not to be construed as part of
this Option.
IN WITNESS WHEREOF, the parties have executed this Option as an
instrument under seal effective as of the date written on the first page of this
Option.
Politics.com, Inc.
By:
----------------------------
Howard R. Baer, Chairman
-------------------------------
Name: Brian Wadsworth
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
Politics.com, Inc.
The Baer Building
2530 South Rural Road
Tempe, AZ 85282
ATTENTION: TREASURER
Gentlemen:
Pursuant to our Stock Option Agreement dated as of ___________, I
hereby elect to exercise this Option to the extent indicated:
Number of Shares Per Share Total
Which I Elect to x Price = Price
Purchase
________ x ________ = _____
Enclosed with this letter is full payment of the total price of the
shares described above in the following form:
(1) a check in the amount of $___________ payable to the order of
the Corporation; and/or [if authorized by the Corporation]
(2) shares of Stock of the Corporation properly endorsed and
having a fair market value equal to $____________________.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to the address
provided above.
Very truly yours,
--------------------------------
<PAGE>
EXHIBIT 6.5
POLITICS.COM, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
( )
Non-qualified Stock Option Agreement (the "Option") made effective as
of the ____ day of _____________, 199_ between Politics.com, Inc., a Delaware
corporation (the "Corporation"), and _____________________ (the "Recipient"), an
__________________ of the Corporation, a Parent or a Subsidiary, pursuant to the
Corporation's 1999 Combination Stock Option Plan, as it may be amended from time
to time (the "1999 Plan").
W I T N E S S E T H:
WHEREAS, on July 27, 1999, the Corporation adopted the 1999 Plan which
provides for the issuance of stock options, and
WHEREAS, the Corporation and the Recipient desire to enter into an
agreement whereby the Corporation will grant the Recipient an option to purchase
shares of the Common Stock, $.00001 par value, of the Corporation (the "Stock"),
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Corporation and the Recipient
agree as follows:
1. GRANT OF OPTION.
Pursuant to the terms and conditions of the 1999 Plan and this Option,
the Corporation hereby grants to the Recipient an Option to purchase, as
provided in Section 3 hereof, all or any part of a total of __________ shares of
Stock (the "Option Shares").
2. PURCHASE PRICE.
The price at which the Option Shares may be purchased shall be
$__________ per share (the "Option Exercise Price"). This price is not less than
the par value of the Stock.
3. EXERCISE OF OPTION.
Subject to the provisions of Section 4, the purchase rights with
respect to the __________ Option Shares shall be exercisable as follows
_________________________.
Notwithstanding any provision of this Option to the contrary, in no event may
this Option be exercised after 10 years from the date of this Option (the
"Expiration Date").
<PAGE>
4. TERMINATION OF RELATIONSHIP.
If the Recipient's relationship with the Corporation is terminated, as
determined by the Corporation, then this Option may be exercised as to all
shares with respect to which Recipient could exercise this Option on the date of
termination of the relationship, and which shares have not been previously
purchased, until the earlier of Expiration Date, or:
(i) in the case of termination by reason of death or
Permanent Disability, one year after termination of the
relationship, or
(ii) in the case of any other termination, other than
termination for cause, three months after the
termination of the relationship.
Notwithstanding the foregoing, in the case of termination for cause, the ability
to exercise this option may be terminated on such earlier date as the
Corporation may specify, and such date may be set so as to prevent the Recipient
from further exercising any portion of this Option.
5. NONTRANSFERABILITY; PERSONS ABLE TO EXERCISE.
The Option may not be transferred other than by will or the
laws of descent and distribution. During the life of the Recipient, only the
Recipient may exercise this Option. If the Recipient dies while still employed
by the Corporation, or during the periods specified in Section 4, this Option
may be exercised by his executors, administrators, legatees or distributees,
provided that such person or persons comply with the provisions of this Option
applicable to the Recipient.
6. METHOD OF EXERCISING OPTION.
The Option may be exercised, in whole or in part, by written
notice to the Corporation, containing an executed Notice of Exercise in the form
of Attachment A, provided that the Corporation, in its discretion, may modify or
augment these requirements as provided in Section 9 of this Option, or where
appropriate because a person other than the Recipient is exercising the Option
pursuant to Section 5. The written notice specified in this Section must be
accompanied by payment of the Option Exercise Price for the shares being
purchased. Payment shall be made in cash, unless the Corporation, in its sole
discretion, authorizes payment to be made in shares of the Corporation, other
property, or a combination of such shares, other property and cash. As soon as
practical after receipt of this notice and payment, the Corporation shall
deliver a certificate or certificates representing the purchased shares
registered in the name of the person or persons exercising this Option. In the
event this Option is exercised by any person other than the Recipient, the
notice shall be accompanied by appropriate proof of the right of such person to
exercise this Option. All shares purchased upon the exercise of this Option and
payment of the full Option Exercise Price will be fully paid and nonassessable.
<PAGE>
7. STOCK ADJUSTMENTS.
If there shall be any change in the Stock through merger,
consolidation, reorganization, recapitalization, or other change in the
corporate structure of the Corporation, appropriate adjustments in the Option
Exercise Price and total number and kind of shares subject to this Option shall
be made by the Corporation as provided in the 1999 Plan.
8. NO RIGHTS OTHER THAN THOSE EXPRESSLY CREATED.
Neither this Option nor any action taken hereunder shall be construed
as (i) giving the Recipient any right to be retained in the employ of, or
continue to be affiliated with, the Corporation, (ii) giving the Recipient any
equity or interest of any kind in any assets of the Corporation, or (iii)
creating a trust of any kind or a fiduciary relationship of any kind between the
Recipient and the Corporation. As to any claim for any unpaid amounts under this
Option, any person having a claim for payments shall be unsecured creditor. The
Recipient shall not have any of the rights of a stockholder with respect to any
Option Shares until such time as this Option has been exercised and Option
Shares have been issued.
9. COMPLIANCE WITH LAWS.
(a) WITHHOLDING OF TAXES. Pursuant to applicable federal,
state, local or foreign laws, the Corporation may be required to collect or
withhold income or other taxes from Recipient upon the grant of this Option, the
exercise of this Option, or at some other time. The Corporation may require, as
a condition to the exercise of this Option, or demand, at such other time as it
may consider appropriate, that the Recipient pay the Corporation the amount of
any taxes which the Corporation may determine is required to be collected or
withheld, and the Recipient shall comply with the requirement or demand of the
Corporation.
(b) SECURITIES LAW COMPLIANCE. Upon exercise (or partial
exercise) of this Option, the Recipient shall make such representations and
furnish such information as may, in the opinion of counsel for the Corporation,
be appropriate to permit the Corporation to issue or transfer the Option Shares
in compliance with the provisions of applicable federal or state securities
laws. The Corporation, in its discretion, may postpone the issuance and delivery
of Option Shares upon any exercise of this Option until completion of such
registration or other qualification of such shares under any federal or state
laws, or stock exchange listing, as the Corporation may consider appropriate.
The Corporation may require that prior to the issuance or transfer of Option
Shares upon exercise of this Option, the Recipient enter into a written
agreement to comply with any restrictions on subsequent disposition that the
Corporation deems necessary or advisable under any applicable federal and state
securities laws. Certificates of Stock issued hereunder shall be legended to
reflect such restrictions.
(c) GENERAL. No Option Shares shall be issued upon exercise of
this Option unless and until the Corporation is satisfied, in its sole
discretion, that there has been compliance with all legal requirements
applicable to the issuance of such Option Shares.
<PAGE>
10. MISCELLANEOUS.
(a) PROVISIONS OF THE PLAN. The Option hereby granted is
expressly subject to all of the terms and conditions contained in this Option
and in the 1999 Plan, except those which are expressly applicable only to "1999
Plan ISOs", and the 1999 Plan is hereby incorporated herein by reference. All
capitalized terms not defined in this Option have the meanings specified in the
1999 Plan. This stock option is not intended to be an Incentive Stock Option, as
that term is described in Section 422 of the Internal Revenue Code of 1986, as
amended.
(b) DISCRETION OF THE COMMITTEE. Unless otherwise explicitly
provided, the Committee, as defined in the Plan, shall make all determinations
required to be made hereunder, including determinations required to be made by
the Corporation, and shall interpret all provisions of this Option, as it deems
necessary or desirable, in its sole and unfettered discretion. Such
determinations and interpretations shall be binding and conclusive on the
Corporation and the Recipient. The Committee, in its sole discretion, is
authorized to accelerate the time at which this Option may be exercised.
(c) RESERVATION OF SHARES. During the term of this Option, the
Corporation shall at all times reserve and keep available shares of Stock
sufficient to satisfy the requirements of this Option.
(d) AMENDMENT. This Option may only be modified or amended by
a writing signed by both parties.
(e) NOTICES. Any notices required to be given under this
Option shall be sufficient if in writing and if hand-delivered or if sent by
first class mail and addressed as follows:
if to the Corporation:
Politics.com, Inc.
The Baer Building
2530 South Rural Road
Tempe, AZ 85282
if to the Recipient:
---------------------
---------------------
---------------------
or to such other address as either party may designate under the provisions
hereof.
<PAGE>
(f) SUCCESSORS AND ASSIGNS. The rights and obligations of the
Corporation under this Option shall inure to the benefit of and be binding upon
the successors and assigns of the Corporation.
(g) APPLICABLE LAW. All rights and obligations under this
Option shall be governed by the laws of the State of Delaware.
(h) PARAGRAPH HEADINGS. The paragraph headings used in this
Option are for convenience or reference, and are not to be construed as part of
this Option.
IN WITNESS WHEREOF, the parties have executed this Option as an
instrument under seal effective as of the date written on the first page of this
Option.
Politics.com, Inc.
By:
-------------------------
Print Name:
-----------------
Title:
----------------------
----------------------------
Name:
-----------------------
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
Politics.com, Inc.
The Baer Building
2530 South Rural Road
Tempe, AZ 85282
ATTENTION: TREASURER
Gentlemen:
Pursuant to our Stock Option Agreement dated as of ___________, I
hereby elect to exercise this Option to the extent indicated:
Number of Shares Per Share Total
Which I Elect to x Price = Price
Purchase
________ x ________ = _____
Enclosed with this letter is full payment of the total price of the
shares described above in the following form:
(1) a check in the amount of $________ payable to the order of
the Corporation; and/or [if authorized by the Corporation]
(2) shares of Stock of the Corporation properly endorsed and
having a fair market value equal to $______________.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to the address
provided above.
Very truly yours,
-------------------------
<PAGE>
EXHIBIT 6.6
POLITICS.COM, INC.
INCENTIVE STOCK OPTION AGREEMENT
( )
Incentive Stock Option Agreement (the "Option") made effective as of
the _________ day of _________________ between Politics.com, Inc., a Delaware
corporation (the "Corporation"), and ________________ (the "Recipient"), an
employee of the Corporation, a Parent or a Subsidiary, pursuant to the
Corporation's 1999 Stock Option Plan, as it may be amended from time to time
(the "1999 Plan").
W I T N E S S E T H:
WHEREAS, on July 27, 1999, the Corporation adopted the 1999 Plan which
provides, for the issuance of stock options including stock options intended to
qualify as "incentive stock options", as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (The "Code"), and
WHEREAS, the Corporation and the Recipient desire to enter into an
agreement whereby the Corporation will grant the Recipient an option to purchase
shares of the Common Stock, $.00001 par value, of the Corporation (the "Stock"),
and this Option is intended to qualify as an incentive stock option;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Corporation and the Recipient
agree as follows:
1. GRANT OF OPTION.
Pursuant to the terms and conditions of the 1999 Plan and this Option,
the Corporation hereby grants to the Recipient an Option to purchase, as
provided in Section 3 hereof, all or any part of a total of ___________________
shares of Stock (the "Option Shares").
2. PURCHASE PRICE.
The price at which the Option Shares may be purchased shall be
US$_______ per share (the "Option Exercise Price"). This price is not less than
the Fair Market Value of the Stock on the date of this Option.
3. EXERCISE OF OPTION.
Subject to the provisions of Section 4 and the right of the Corporation
to accelerate the date upon which any or all of this Option becomes exercisable,
the Recipient shall be entitled to exercise this Option as follows
___________________________________________________________.
<PAGE>
Notwithstanding any provision of this Option to the contrary, in no event may
this Option be exercised after 10 years from the date of this Option (the
"Expiration Date").
4. TERMINATION OF EMPLOYMENT.
If the Recipient ceases to be employed by the Corporation, a Parent, or
a Subsidiary (a "Termination"), then this Option may be exercised as to all
shares with respect to which Recipient could exercise this Option on the date of
Termination, and which shares have not been previously purchased, until the
earlier of the Expiration Date, or:
(i) in the case of Termination by reason of death or Permanent and
Total Disability, one year after termination of employment;
(ii) in the case of any other Termination, other than termination
for cause, three months after the termination of employment.
Notwithstanding the foregoing, in the case of Termination for cause, the ability
to exercise this Option may be terminated on such earlier date as the
Corporation may specify, and such date may be set so as to prevent the Recipient
from further exercising any portion of this Option.
5. NONTRANSFERABILITY; PERSONS ABLE TO EXERCISE.
The Option may not be transferred other than by will or the
laws of descent and distribution. During the life of the Recipient, only the
Recipient may exercise this Option. If the Recipient dies while still employed
by the Corporation, or the periods specified in Section 4, this Option may be
exercised by his executors, administrators, legatees or distributees, provided
that such person or persons comply with the provisions of this Option applicable
to the Recipient.
6. METHOD OF EXERCISING OPTION.
The Option may be exercised, in whole or in part, by written
notice to the Corporation, containing an executed Notice of Exercise in the form
of ATTACHMENT A, provided that the Corporation, in its discretion, may modify or
augment these requirements as provided in Section 9 of this Option, or where
appropriate because a person other than the Recipient is exercising the Option
pursuant to Section 5. The written notice specified in this Section must be
accompanied by payment of the Option Exercise Price for the shares being
purchased. Payment shall be made in cash, unless the Corporation authorizes
payment to be made in shares of the Corporation, or other property, or some
combination thereof, as determined and valued by the Corporation in its sole
discretion. As soon as practical after receipt of this notice and payment, the
Corporation shall deliver a certificate or certificates representing the
purchased shares registered in the name of the person or persons exercising this
Option. In the event this Option is exercised by any person other than the
Recipient, the notice shall be accompanied by appropriate proof of the right of
such person to exercise this Option. All shares purchased upon the exercise of
this Option and payment of the full Option Exercise Price will be fully paid and
nonassessable.
<PAGE>
7. STOCK ADJUSTMENTS.
If there shall be any change in the Stock through merger,
consolidation, reorganization, recapitalization, or other change in the
corporate structure of the Corporation, appropriate adjustments in the total
number and kind of shares subject to this Option, consistent with the
requirements of the Code to insure that this Option will qualify as an Incentive
Stock Option, shall be made by the Corporation as provided in the 1999 Plan.
Such adjustments may include the elimination of any fractional shares that might
otherwise be subject to this Option.
8. NO RIGHTS OTHER THAN THOSE EXPRESSLY CREATED.
Neither this Option nor any action taken hereunder shall be
construed as (i) giving the Recipient any right to be retained in the employ of,
or continue to be affiliated with, the Corporation, (ii) giving the Recipient
any equity or interest of any kind in any assets of the Corporation, or (iii)
creating a trust of any kind or a fiduciary relationship of any kind between the
Recipient and the Corporation. As to any claim for any unpaid amounts under this
Option, any person having a claim for payments shall be unsecured creditor. The
Recipient shall not have any of the rights of a stockholder with respect to any
Option Shares until such time as this Option has been exercised and Option
Shares have been issued.
9. COMPLIANCE WITH LAWS.
(a) WITHHOLDING OF TAXES. Pursuant to applicable federal,
state, local or foreign laws, the Corporation may be required to collect or
withhold income or other taxes from Recipient upon the grant of this Option, the
exercise of this Option, or at some other time. The Corporation may require, as
a condition to the exercise of this Option, or demand, at such other time as it
may consider appropriate, that the Recipient pay the Corporation the amount of
any taxes which the Corporation may determine is required to be collected or
withheld, and the Recipient shall comply with the requirement or demand of the
Corporation.
(b) SECURITIES LAW COMPLIANCE. Upon exercise (or partial
exercise) of this Option, the Recipient shall make such representations and
furnish such information as may, in the opinion of counsel for the Corporation,
be appropriate to permit the Corporation to issue or transfer the Option Shares
in compliance with the provisions of applicable federal or state securities
laws. The Corporation, in its discretion, may postpone the issuance and delivery
of Option Shares upon any exercise of this Option until completion of such
registration or other qualification of such shares under any federal or state
laws, or stock exchange listing, as the Corporation may consider appropriate.
The Corporation may require that prior to the issuance or transfer of Option
Shares upon exercise of this Option, the Recipient enter into a written
agreement to comply with any restrictions on subsequent disposition that the
Corporation deems necessary or advisable under any applicable federal and state
securities laws. Certificates of Stock issued hereunder may bear a legend
reflecting such restrictions.
(c) GENERAL. No Option Shares shall be issued upon exercise of
this Option unless and until the Corporation is satisfied, in its sole
discretion, that there has been compliance with all legal requirements
applicable to the issuance of such Option Shares.
<PAGE>
10. MISCELLANEOUS.
(a) PROVISIONS OF THE PLAN. This Option is expressly subject
to all of the terms and conditions contained in this Option and in the 1999
Plan, except those terms and conditions which are expressly applicable only to
options which are not "1999 Plan ISOs", and the 1999 Plan is hereby incorporated
herein by reference. All capitalized terms not defined in this Option have the
meanings specified in the 1999 Plan.
(b) DISCRETION OF THE COMMITTEE. Unless otherwise explicitly
provided herein, the Committee, as defined in the Plan, shall make all
determinations required to be made hereunder, including determinations required
to be made by the Corporation, and shall interpret all provisions of this
Option, as it deems necessary or desirable, in its sole and unfettered
discretion. Such determinations and interpretations shall be binding and
conclusive to the Corporation and the Recipient. The Committee, in its sole
discretion, is authorized (i) to convert the unexercised portion of this Option
to an option which is not an incentive stock option by written notice to the
Recipient, and (ii) to accelerate the time at which this Option may be
exercised.
(c) $100,000 LIMITATION. As provided in Section IV(d) of the
Plan, if the aggregate Fair Market Value of Common Stock with respect to which
Corporation ISOs (determined without regard to Section IV(d) of the Plan) are
exercisable for the first time by the Recipient during any calendar year exceeds
$100,000, a portion of such Corporation ISOs (which may include this Option)
shall be treated as options which are not Incentive Stock Options. For purposes
of this limitation, (i) options shall be taken into account in the order
granted, and (ii) the Committee may designate that portion of any Corporation
ISO (including this Option) that shall be treated as not an Incentive Stock
Option if the provisions of this paragraph apply to a portion of any option,
unless another treatment is required by the Code or regulations of the Internal
Revenue Service. The foregoing designation may be made at such time as the
Committee considers appropriate, including after the issuance of this Option or
at the time of its exercise. For the purpose of this section, Fair Market Value
shall be determined as of the time the option with respect to such stock is
granted.
(d) LIMITATIONS ON DISPOSITION OF OPTION SHARES. It is
understood and intended that this Stock Option shall qualify as an "Incentive
Stock Option" as defined in Section 422 of the Code. Accordingly, the Recipient
understands that in order to obtain the benefits of an Incentive Stock Option
under Section 421 of the Code, no sale or other disposition may be made of any
Option Shares within one year after the day after the transfer of such Option
Shares to the Recipient, nor within two years after the grant of the Stock
Option. If the Recipient intends to dispose, or does dispose of any such Option
Shares within said periods (whether by sale, exchange, gift, transfer or
otherwise, including, if authorized by the Corporation, paying the exercise
price of a Stock Option by transfer of Option Shares), then Recipient will
notify the Corporation in writing within ten days after such disposition.
(e) RESERVATION OF SHARES. During the term of this Option, the
Corporation shall at all times reserve and keep available shares of Stock
sufficient to satisfy the requirements of this Option.
<PAGE>
(f) AMENDMENT. This Option may only be modified or amended by
a writing signed by both parties.
(g) NOTICES. Any notices required to be given under this
Option shall be sufficient if in writing and if hand-delivered or if sent by
first class mail and addressed as follows:
if to the Corporation:
Politics.com, Inc.
The Baer Building
2530 South Rural Road
Tempe, AZ 85282
if to the Recipient:
-------------------
-------------------
-------------------
or to such other address as either party may designate under the provisions
hereof.
(g) SUCCESSORS AND ASSIGNS. The rights and obligations of the
Corporation under this Option shall inure to the benefit of and be binding upon
the successors and assigns of the Corporation.
(h) APPLICABLE LAW. All rights and obligations under this
Option shall be governed by the laws of the State of Delaware.
(i) PARAGRAPH HEADINGS. The paragraph headings used in this
Option are for convenience or reference, and are not to be construed as part of
this Option.
IN WITNESS WHEREOF, the parties have executed this Option as an
instrument under seal effective as of the date written on the first page of this
Option.
Politics.com, Inc.
By:
----------------------------
Print Name:
--------------------
Title:
-------------------------
-------------------------------
Name:
<PAGE>
ATTACHMENT A
NOTICE OF EXERCISE
[Recipient's Address]
Politics.com, Inc.
The Baer Building
2530 South Rural Road
Tempe, AZ 85282
ATTENTION: TREASURER
Gentlemen:
Pursuant to our Incentive Stock Option Agreement dated as of
_______________ __, 1999, I hereby elect to exercise this Stock Option to the
extent indicated:
_____________________ x _____________________ = ______________________
Number of Shares Option Exercise Price Total Option Exercise
Which I Elect to Purchase Per Share Price
Enclosed with this letter is full payment of the total price of the
shares described above in the following form:
(1) a check in the amount of $____________ payable to the order
of the Corporation; and/or
[METHOD 2, BELOW, MUST BE AUTHORIZED IN ADVANCE BY THE
CORPORATION]
(2) shares of Stock of the Corporation properly endorsed and
having a fair market value equal to $______ . Include if
appropriate: These shares [were/were not] acquired by exercise
of an incentive stock option, and are now being disposed of
within one year after the transfer of such Stock to me, or
within two years after the grant of the Stock Option by which
I acquired such Stock. I understand that if I am transferring
shares of Stock that were acquired by exercise of an incentive
stock option within the time periods specified in the
preceding sentence, then such transferred Stock will not be
eligible for treatment as an "incentive stock option" pursuant
to Section 422 of the Internal Revenue Code of 1986, as
amended.
Kindly issue a certificate or certificates to me representing the
shares which I am acquiring by this exercise, and deliver it to the address
provided above.
Very truly yours,
<PAGE>
EXHIBIT 6.7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of July
22, 1999, by and among LONE OAK, INC., a Delaware corporation, as Buyer (the
"Buyer"); and Howard R. Baer and Kevin C. Baer, as Sellers (collectively, the
"Sellers").
WITNESSETH
WHEREAS, the Sellers own an aggregate of 7,000,000 shares (the
"Shares") of common stock, $.001 par value, of Politics.com, Inc., a Nevada
corporation (the "Company"), representing 100% of the outstanding shares of
Common Stock of the Company; and
WHEREAS, the Sellers desire to sell, and the Buyer desires to
purchase, the Shares on the Closing Date (as defined herein);
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
intending to be legally bound, hereby agree as follows:
Article I.
SALE OF SHARES
Section 1.1 DELIVERY OF SHARES.
(a) TO THE BUYER. On the terms and subject to the
conditions set forth in this Agreement, on the Closing
Date, the Sellers shall deliver to the Buyer a certificate
or certificates representing the number of Shares set forth
opposite each Seller's name on Schedule A hereto, duly
endorsed for transfer or accompanied by appropriate stock
powers, duly executed, in either case in favor of the
Buyer, and each certificate shall have all necessary stock
transfer stamps affixed thereto at the expense of the
Sellers.
Section 1.2 PURCHASE CONSIDERATION. The aggregate consideration to
be paid for the Shares (the "Purchase Price") shall consist of 7,000,000
shares of Common Stock, $.00001 par value, of the Buyer ("Buyer's Shares"),
of which 5,250,000 shares shall be issued in the name of Howard R. Baer and
of which 1,750,000 shares shall be issued in the name of Kevin C. Baer.
Section 1.3 TRANSFER TAXES. The Buyer shall pay any stock transfer
taxes, recording fees and other sales, use, purchase or similar taxes
resulting from the transactions contemplated hereby.
Section 1.4 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Buyer's Shares to
be acquired by the Sellers pursuant to the terms hereof will be acquired for
investment for Sellers' own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part
<PAGE>
thereof. The Sellers have no present intention of selling, granting any
participation in, or otherwise distributing the Buyer's Shares acquired by the
Sellers. The Sellers have no contract, undertaking, agreement or arrangement
with any person to sell or transfer, or grant any participation to such person
or to any third person, with respect to any Buyer's Shares to be acquired by the
Sellers.
Section 1.5 ACCESS TO INFORMATION, EXPERIENCE, ETC.
(a) The Sellers have received and read and are
familiar with this Agreement. The Sellers have had an
opportunity to ask questions of and receive answers from
the Buyer concerning the terms and conditions of this
purchase. The Sellers have substantial experience in
evaluating non-liquid investments such as the Buyer's
Shares and are capable of evaluating the merits and risks
of an investment in the Buyer. Each Seller is an
"accredited investor" as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act of
1933, as amended.
(b) The Sellers have been furnished access to such
information and documents as the Sellers have requested and
the Sellers have been afforded an opportunity to ask
questions of, and receive answers from, the Buyer
concerning the terms and conditions of this Agreement and
the purchase of the Buyer's Shares and all other matters
deemed relevant to the Sellers.
(c) The Sellers acknowledge that they have had an
opportunity to evaluate all information regarding purchase
of the Buyer's Shares as they deemed necessary or desirable
in connection with the transactions contemplated by this
Agreement, have independently evaluated the transactions
contemplated by this Agreement and have reached their own
decision to enter into this Agreement.
(d) The Sellers are capable of bearing the economic
risk of an investment in the Buyer's Shares and
acknowledges that the Buyer's Shares will not be
transferable without registration under the Securities Act
of 1933 or an exemption therefrom.
Article II.
CLOSING
Section 2.1 CLOSING DATE. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place as soon as
practicable at the offices of Brown Rudnick Freed & Gesmer, P.C., One Financial
Center, Boston, Massachusetts 02111, or at such other time and place as the
Buyer and the Sellers shall agree (the date on which such closing occurs being
herein referred to as the "Closing Date").
<PAGE>
Article III.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represents and warrants to the Buyer as
follows:
Section 3.1 OWNERSHIP. Each Seller owns the Shares set forth opposite
his name on Schedule A hereto free and clear of all liens, claims or
encumbrances of any nature. The Shares constitute all of the issued and
outstanding Shares of Common Stock of the Company. Each Seller has full right,
power, legal capacity and authority to transfer and deliver his Shares pursuant
to this Agreement.
Section 3.2 AUTHORITY RELATIVE TO AND VALIDITY OF THIS AGREEMENT. Each
Seller has all requisite power and authority to enter into this Agreement, to
perform all of its respective obligations hereunder and to consummate the
transactions contemplated hereby without the approval of any third party. All
necessary action has been taken by each Seller with respect to the execution,
delivery and performance by it of this Agreement and the consummation of the
transactions contemplated hereby and no further authorization will be necessary
to authorize the execution and delivery by it hereof, and the performance of its
respective obligations hereunder. There are no contractual, statutory or other
restrictions of any kind upon the power and authority of each Seller to execute
and deliver this Agreement, and to consummate the transactions contemplated
hereunder and no action, waiver or consent by any federal, state, municipal or
other governmental department, commission or agency ("Governmental Authority")
is necessary to make this Agreement a valid instrument binding upon each Seller
in accordance with its terms. This Agreement has been duly executed and
delivered by each Seller and constitutes, legal, valid and binding obligations
of each Seller, enforceable against each Seller in accordance with its terms,
except (i) as such enforceability may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, (ii) as such obligations are subject to
general principles of equity and (iii) as rights to indemnity may be limited by
federal or state securities laws or by public policy.
Section 3.3 REQUIRED FILINGS AND CONSENTS; NO CONFLICT. Neither Seller
is required to submit any notice, report or other filing with any Governmental
Authority in connection with the execution, delivery or performance of this
Agreement.
Section 3.4 BROKER. No broker, finder or investment banker is entitled
to any brokerage or finder's fee or other commission in connection with the
transactions contemplated hereby based on the arrangements made by or on behalf
of either Seller.
Article IV.
THE REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to each Seller as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its
<PAGE>
incorporation. The copies of the Charter and By-Laws of the Buyer, as amended to
date, which have been furnished to Sellers' counsel by the Buyer, are correct
and complete.
Section 4.2 SUBSIDIARIES. The Buyer has no investments in any other
corporation or business organization.
Section 4.3 CAPITALIZATION. The authorized capital stock of the Buyer
consists (i) of 50,000,000 shares of Common Stock, $.00001 par value, of which
2,091,487 shares are validly issued and outstanding, fully paid and
non-assessable and (ii) 20,000,000 shares of Preferred Stock, $.0001 par value,
of which none are issued and outstanding. There are no outstanding warrants,
options or other rights to purchase or acquire the Buyer's Common Stock. There
are no securities of the Buyer or any Subsidiary directly or indirectly
convertible into or exchangeable for shares of capital stock of the Buyer or any
Subsidiary. There are no restrictions on the transfer of the Buyer's Common
Stock, except under applicable securities laws. Of the 2,091,487 shares of
Common Stock issued and outstanding, an aggregate of 570,828 are "restricted
securities" within the meaning of Rule 144 under the Securities Act of 1933, as
amended (the "Act") and an aggregate of 1,520,659 shares are tradable without
restriction under the Act.
Section 4.4 APPROVALS; COMPLIANCE WITH LAWS. Neither the Buyer nor any
Subsidiary is in violation of its Charter or by-laws as of the date hereof.
Section 4.5 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the
audited consolidated financial statements of the Buyer and its Subsidiaries for
the years ended December 31, 1998, 1997 and 1996, all of which statements are
complete and correct and fairly present the financial position of the Buyer and
its Subsidiaries on a consolidated basis, on the dates of such statements and
the results of their operations on the applicable basis for the periods covered
thereby and have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved and prior
periods.
The most recent balance sheet included in the above financial
statements is sometimes referred to hereinafter as the "Base Balance Sheet".
Section 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Buyer nor
any Subsidiary has any material accrued or contingent liability arising out of
any transaction or state of facts existing prior to the date hereof other than
as reflected or reserved against in the Base Balance Sheet.
Section 4.7 ABSENCE OF CERTAIN CHANGES. Since the date of the Base
Balance Sheet, there has not been:
(a) any change in the financial condition,
properties, assets, liabilities, business or operations of
the Buyer or any Subsidiary which change by itself or in
conjunction with all other such changes, whether or not
arising in the ordinary course of business, has had or will
have a material adverse effect with respect to the Buyer or
any Subsidiary;
<PAGE>
(b) any contingent liability incurred by the Buyer or
any Subsidiary as guarantor or otherwise with respect to
the obligations of others;
(c) any mortgage, encumbrance or lien placed on any
of the properties of the Buyer or any Subsidiary which
remains in existence on the date hereof; or
(d) any obligation or liability incurred by the Buyer
or any Subsidiary other than obligations and liabilities
incurred in the ordinary course of business.
Section 4.8 CONTRACTS AND COMMITMENTS. Neither the Buyer nor any
Subsidiary has any contract, obligation or commitment which is material or which
involves a potential commitment in excess of $10,000 or any employment contract,
stock redemption or purchase agreement, financing agreement, license, lease,
franchise, pension, profit-sharing, retirement or stock option plan. Neither the
Buyer nor any Subsidiary is in default under any contract, obligation or
commitment.
Section 4.9 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Buyer nor
any Subsidiary is in default in the performance of any material obligation,
agreement or condition contained in any bond or debenture or any other evidence
of indebtedness or any indenture or loan agreement of the Buyer or any
Subsidiary which default affords to any person the unconditional right to
accelerate any material indebtedness or terminate any material right or
agreement of the Buyer or any Subsidiary.
Section 4.10 LITIGATION. There is no litigation pending or, to the
knowledge of the Buyer or any Subsidiary, threatened against the Buyer or any
Subsidiary and there are no outstanding court orders, court decrees, or court
stipulations to which the Buyer or any of its Subsidiaries is a party which will
or could result in any materially adverse change in the condition, financial or
otherwise, of Buyer or any of its Subsidiaries. The Buyer has no reason to
believe that any such action, suit, proceeding or investigation may be brought
against the Buyer or any of its Subsidiaries.
Section 4.11 COMPLIANCE WITH LAW. Neither the Buyer nor any Subsidiary
has violated any law, regulation, authorization or order of any public
authority, including without limitation, any federal or state securities laws.
Section 4.12 SALES OF SECURITIES. The Buyer has complied with all
applicable state "blue-sky" and federal securities laws in connection with the
issuance and sale of its Common Stock and other securities.
Section 4.13 ASSETS AND LIABILITIES. The Buyer has approximately
$60,000 in cash and no liabilities as of this date.
Section 4.14 DISCLOSURE. The representations and warranties contained
herein do not contain any untrue statement of a material fact or omit to state
any material fact necessary in
<PAGE>
order to make the statements contained herein not misleading in light of the
circumstances under which they are made.
Section 4.15 AUTHORIZATION. The Buyer has all necessary power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. This Agreement has been duly
authorized and approved by the Buyer and no further action on the part of the
Buyer will be necessary to authorize the execution and delivery by it of, and
the performance of its obligations under, this Agreement. There are no
contractual, statutory or other restrictions of any kind upon the power and
authority of the Buyer to execute and deliver this Agreement and to consummate
the transactions contemplated hereunder, and no action, waiver or consent by any
Governmental Authority is necessary to make this Agreement a valid instrument
binding upon the Buyer in accordance with its terms. The Buyer's Shares, when
issued in accordance with this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable.
Section 4.16 EXECUTION AND DELIVERY. This Agreement has been duly
executed and delivered by the Buyer and constitutes a legal, valid and binding
obligation, enforceable against the Buyer in accordance with its terms, except
(i) as such enforceability may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, (ii) as such obligations are subject to general
principles of equity and (iii) as rights to indemnity may be limited by federal
or state securities laws or by public policy.
Section 4.17 REQUIRED FILINGS AND CONSENTS; NO CONFLICT. The Buyer is
not required to submit any notice, report or other filing with any Governmental
Authority in connection with the execution, delivery or performance of this
Agreement, except as may be required by applicable securities laws.
Section 4.18 BROKER. The Buyer shall be responsible for any brokerage
or finder's fee or other commission in connection with the transactions
contemplated hereby based on the arrangements made by or on behalf of the Buyer.
Article V.
COVENANTS OF THE SELLERS AND THE BUYER
Section 5.1 Each of the Sellers and the Buyer covenants and agrees:
(a) BEST EFFORTS. To use its or their best efforts to
take or cause to be taken all actions and to do or cause to
be done all things necessary, proper and advisable to
consummate the transactions contemplated by this Agreement.
(b) COMPLIANCE. To comply in all material respects
with all applicable rules and regulations of any
Governmental Authority in connection with the execution,
delivery and performance of this Agreement and the
transactions contemplated hereby.
<PAGE>
(c) NOTICE. To give prompt notice to the other party
of (i) the occurrence, or failure to occur, of any event
whose occurrence or failure to occur, would be likely to
cause any representation or warranty contained in this
Agreement to be untrue or incorrect in any material respect
and (ii) any material failure on its part, or on the part
of any of its officers, directors, employees or agents, to
comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any such notice shall not
limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
(d) ANNOUNCEMENTS. That all public announcements,
statements and press releases concerning the transactions
contemplated by this Agreement shall be mutually agreed to
by the Buyer and the Sellers before the issuance or the
making thereof and, subject to the advice of counsel, no
party shall issue any such press releases or make any such
public statement prior to such mutual agreement, except as
may be required by law.
Section 5.2 REGISTRATION RIGHTS. The Buyer agrees to register at its
expense the Buyer's Shares for resale by the Sellers under the Securities Act of
1933 in any Registration Statement (other than form S-8) filed by the Buyer
after the date hereof.
Article VI.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
Section 6.1 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of
the Sellers under this Agreement are subject to the satisfaction, on or prior to
the Closing Date, unless waived in writing by the Sellers, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Buyer's
representations and warranties set forth in Article IV of
this Agreement shall have been true and correct in all
material respects when made and shall be true and correct
in all material respects at and as of the Closing as if
such representations and warranties were made as of the
Closing.
(b) PERFORMANCE OF AGREEMENT. All covenants,
conditions and other obligations under this Agreement which
are to be performed or complied with by the Buyer shall
have been performed and complied with in all material
respects on or prior to the Closing including the delivery
of stock certificates evidencing the Buyer's Shares and the
fully executed instruments and documents in accordance with
this Agreement.
(c) NO ADVERSE PROCEEDING. There shall be no pending
or threatened claim, action, litigation or proceeding,
judicial or administrative, or governmental investigation
against the Buyer or the
<PAGE>
Sellers by a third party for the purpose of enjoining
or preventing the consummation of this Agreement, or
otherwise claiming that this Agreement or the consummation
hereof is illegal.
(d) CERTIFICATES. The Buyer shall have delivered to
the Sellers a certificate, dated the Closing Date, executed
by the Buyer to the effect that the conditions set forth in
subsections (a), (b) and (c) of this Section 6.1 have been
satisfied.
(e) CONSENTS AND APPROVALS. All filings and
registrations with, and notifications to, all federal,
state, local and foreign authorities required for
consummation of the transactions contemplated by this
Agreement shall have been made, and all consents, approvals
and authorizations of all federal, state, local and foreign
authorities required for consummation of the transactions
contemplated by this Agreement shall have been received and
shall be in full force and effect.
Article VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Section 7.1 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of
the Buyer under this Agreement are subject to the satisfaction, on or prior to
the Closing Date, unless waived in writing by the Buyer, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Sellers set forth in
Article III of this Agreement shall have been true and
correct in all material respects when made and shall be
true and correct in all material respects at and as of the
Closing as if such representations and warranties were made
as of the Closing.
(b) PERFORMANCE OF AGREEMENT. All covenants,
conditions and other obligations under this Agreement which
are to be performed or complied with by the Sellers shall
have been performed and complied with in all material
respects on or prior to the Closing including, without
limitation, the delivery of (i) the certificates
representing the Shares pursuant to the terms hereof and
(ii) fully executed instruments and documents in accordance
with this Agreement.
(c) NO ADVERSE PROCEEDING. There shall be no pending
or threatened claim, action, litigation or proceeding,
judicial or administrative, or governmental investigation
against the Buyer or the Sellers by any third party for the
purpose of enjoining or preventing the consummation of this
Agreement, or otherwise claiming that this Agreement or the
consummation hereof is illegal.
<PAGE>
(d) CERTIFICATES. The Sellers shall have delivered to
the Buyer a certificate, dated the Closing Date to the
effect that the conditions set forth in subsections (a),
(b) and (c) of this Section 7.1 have been satisfied.
(e) CONSENTS AND APPROVALS. All filings and
registrations with, and notifications to, all federal,
state, local and foreign authorities required for
consummation of the transactions contemplated by this
Agreement shall have been made, and all consents, approvals
and authorizations of all federal, state, local and foreign
authorities required for consummation of the transactions
contemplated by this Agreement shall have been received and
shall be in full force and effect.
Article VIII.
INDEMNIFICATION
Section 8.1 SURVIVAL OF REPRESENTATIONS WARRANTIES AND AGREEMENTS.
Subject to the limitations set forth in this Article VIII and notwithstanding
any investigation conducted at any time with regard thereto by or on behalf of
the Buyer or the Sellers, all representations, warranties, covenants and
agreements of the Buyer and the Sellers in this Agreement shall survive the
execution, delivery and performance of this Agreement for the applicable statute
of limitations period. The obligation of indemnity provided herein shall survive
the Closing. All statements contained in any Exhibit, Schedule, statement,
certificate or other writing pursuant to this Agreement or in connection with
the transactions contemplated hereby shall be deemed representations and
warranties of the Buyer or the Sellers, as the case may be, set forth in this
Agreement within the meaning of this Article.
Section 8.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in this
Article VIII, the Sellers shall indemnify and hold harmless
the Buyer from and against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or
causes of action, assessments, costs and expenses
including, without limitation, interest, penalties,
reasonable attorneys' fees, any and all reasonable expenses
incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of
any claim or litigation (collectively, "Damages"), asserted
against, resulting to, imposed upon, or incurred or
suffered by the Buyer, directly or indirectly, as a result
of or arising from any inaccuracy in or breach of any of
the representations, warranties or agreements made in this
Agreement by that Seller or the non-performance of any
covenant or obligation to be performed by the Seller under
this Agreement (individually an "Indemnifiable Claim" and
collectively "Indemnifiable Claims" when used in the
context of the Buyer as the Indemnified Party (as defined
below)).
<PAGE>
(b) Subject to the limitations set forth in this
Article VIII, the Buyers shall, jointly and severally,
indemnify and hold the Seller harmless from and against any
and all Damages asserted against, resulting to, imposed
upon, or incurred or suffered by the Seller, directly or
indirectly, as a result of or arising from any inaccuracy
in or breach of any of the representations, warranties or
agreements made in this Agreement by the Buyers or the
non-performance of any covenant or obligation to be
performed by the Buyers under this Agreement (individually
an "Indemnifiable Claim" and collectively "Indemnifiable
Claims" when used in the context of Sellers as the
Indemnified Party).
Section 8.3 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY
CLAIMS. The Indemnified Party shall give the Indemnifying Party prompt written
notice of any third party claim, demand, assessment, suit or proceeding to which
the indemnity set forth in this Article VIII applies which notice shall describe
said claim in reasonable detail (the "Indemnification Notice"). Notwithstanding
the foregoing, the Indemnified Party shall not have any obligation to give any
notice of any assertion of liability by a third party unless such assertion is
in writing, and the rights of the Indemnified Party to be indemnified hereunder
in respect of any third party claim shall not be adversely affected by its
failure to give notice pursuant to the foregoing unless and, if so, only to the
extent that, the Indemnifying Party is materially prejudiced thereby. The
Indemnifying Party shall have the right to control the defense or settlement of
any such action subject to the provisions set forth below in the event such
claim solely involves an action for monetary damages and could not affect the
Indemnified Party's business going forward, but the Indemnified Party may, at
its election, participate in the defense of any action or proceeding at its sole
cost and expense. Notwithstanding the foregoing, if there exists a conflict of
interest that would make it inappropriate for the same counsel to represent both
the Indemnified Party, on the one hand, and the Indemnifying Party, on the other
hand, in connection with any Indemnifiable Claim, then the Indemnified Party
shall be entitled to retain its own counsel as is reasonably satisfactory to the
Indemnifying Party at the Indemnifying Party's expense. In the event that such
Indemnified Party shall seek indemnification as provided herein, such
Indemnified Party shall make available to the Indemnifying Party, at its
expense, all witnesses, pertinent records, materials and information in the
Indemnified Party's possession or under the Indemnified Party's control relating
thereto as is reasonably required by the Indemnifying Party. Should the
Indemnifying Party fail to defend any such Indemnifiable Claim (except for
failure resulting from the Indemnified Party's failure to timely give notice of
such Indemnifiable claim), then, in addition to any other remedy, the
Indemnified Party may settle or defend such action or proceeding through counsel
of its own choosing and may recover from the Indemnifying Party the amount of
such settlement, demand, or any judgment or decree and all of its costs and
expenses, including reasonable fees and disbursements of counsel. Except as
permitted in the preceding sentence, the Indemnifying Party shall not be liable
for any settlement effected without its written consent, which consent shall not
be unreasonably withheld; provided, however, if such approval is unreasonably
withheld, the liability of the Indemnifying Party shall be limited to the amount
of the proposed compromise or settlement and the mount of the Indemnified
Party's reasonable counsel fees incurred in defending such claim, as permitted
by the preceding sentence, at the time such consent is unreasonably withheld.
Notwithstanding the preceding sentence, the right of the Indemnified Party to
compromise or settle any claim without the prior written consent of the
Indemnifying Party shall only be available if a complete release of the
<PAGE>
Indemnifying Party is contemplated to be part of the proposed compromise or
settlement of such third party claim.
Article IX.
MISCELLANEOUS
Section 9.1 EXPENSES. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the Buyer, including, without limitation, the legal fees and expenses of the
Sellers; provided, that, in the event of the breach of this Agreement by a
party, such party shall pay all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby by the other party.
Section 9.2 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered personally
or by facsimile transmission, in either case with receipt acknowledged, or three
days after being sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) If to the Sellers, to:
Howard R. Baer
Kevin C. Baer
The Baer Building
2530 South Rural Road
Tempe, Arizona 85282
with a copy to:
Brown Rudnick Freed & Gesmer, P.C.
One Financial Center
Boston, Massachusetts 02111
Attn: John G. Nossiff, Esquire
(b) If to Buyer, to:
Lone Oak, Inc.
c/o Fulford Partners Ltd.
42-700 Bob Hope Drive
Suite 304
Rancho Mirage, California 92270
Attn: Dal Grauer, President
or to such other address as any party shall have specified by notice in writing
to the other in compliance with this Section 9.2.
<PAGE>
Section 9.3 SPECIFIC PERFORMANCE. The parties hereto recognize that,
became of the nature of the subject matter of this Agreement, it would be
impractical and extremely difficult to determine actual damages in the event of
a breach of this Agreement. Accordingly, if either party commits a breach of any
of the provisions of hereof, as applicable, of this Agreement, the other party
shall have the fight to seek and receive a temporary restraining order,
injunction or other equitable remedy relating to the prevention or cessation of
such breach, including, without limitation, the right to have the provisions of
this Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury and that money damages will not provide an adequate
remedy.
Section 9.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, representations and understandings among the
parties hereto.
Section 9.5 BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns; nothing in this Agreement, expressed or implied, is
intended to confer on any other person, other than the parties hereto or their
respective successors and assigns, any fights, remedies, obligations or
liabilities under or by reason of this Agreement. This Agreement may not be
assigned without the prior written consent of the other parties hereto.
Section 9.6 APPLICABLE LAW. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to conflicts of law rules of
such state.
Section 9.7 JURISDICTION. Each of the parties hereto hereby irrevocably
submits to the exclusive jurisdiction of any Arizona state court or Federal
court sitting in the State of Arizona over any action or proceeding arising out
of or relating to this Agreement and the transactions contemplated hereby and
each of the parties hereto hereby irrevocably agrees that all claims in respect
of such action or proceeding shall be heard and determined in such Arizona state
or Federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent legally possible, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
Section 9.8 FURTHER ASSURANCES. At, and from time to time after the
Closing Date, at the request of either party but without further consideration,
the Sellers will execute and deliver such other instruments of conveyance,
assignment, transfer, and delivery and take such other action as the Buyer
reasonably may request in order more effectively to convey, transfer, assign and
deliver to the Buyer, and to place the Buyer in possession and control of the
Shares, or to enable the Buyer to exercise and enjoy all rights and benefits of
the Sellers with respect to the Shares.
Section 9.9 SEVERABILITY. With respect to any provision of this
Agreement finally determined by a court of competent jurisdiction to be
unenforceable, such court shall have jurisdiction to reform such provision so
that it is enforceable to the maximum extent permitted by law, and all the
parties hereto shall abide by such court's determination. In the event that any
provision of this Agreement cannot be reformed, such provision shall be deemed
to be severed
<PAGE>
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect.
Section 9.10 HEADINGS. The headings and captions in this Agreement are
included for purposes of convenience only and shall not affect the construction
or interpretation of any of its provisions.
Section 9.11 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year hereinabove first set forth.
LONE OAK, INC.
By: /s/ Dal Grauer
-------------------------
Name: Dal Grauer
Title: President
/s/ Howard R. Baer
-------------------------
Howard R. Baer
/s/ Kevin C. Baer
-------------------------
Kevin C. Baer
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NAME # SHARES
---- --------
<S> <C>
Howard R. Baer 5,250,000
Kevin C. Baer 1,750,000
</TABLE>
<PAGE>
EXHIBIT 6.8
MARC JACOBSON
12 Colgate Lane
Woodbury, NY 11797
September 7, 1999
Politics.com, Inc., a Nevada corporation
Politics.com, Inc., a Delaware corporation
2530 South Rural Rd.
Tempe, AZ 85282
Attn: Howard Baer, Chairman
Dear Howard:
Reference is made to my letter to you dated July 28, 1999 and executed
by Politics.com, Inc., a Nevada corporation and Politics.com, Inc., a Delaware
corporation (the "Company") (the "Letter Agreement") on July 29, 1999. We have
agreed to amend the Letter Agreement as follows: (1) regarding Paragraph 9, the
option grant is increased from 700,000 to 840,000 shares and the total
outstanding common stock of the Company with this new grant: approximately 9.9
million; (2) regarding Paragraph 10, 315,000 options will be exercisable upon
commencement of employment and the balance of 525,000 options will become
exercisable as follows: in six equal semi-annual installments commencing on June
30, 2000 and on each December 31 and June 30 thereafter; and (3) regarding
Paragraph 12, the stock grant of 100,000 additional shares of stock is deleted.
Please indicate your agreement to this amendment by executing it where
indicated below.
Sincerely,
/s/ Marc Jacobson
AGREED TO AND ACCEPTED:
Politics.com, Inc., a Nevada corporation
Politics.com, Inc., a Delaware corporation
By: /s/ Howard R. Baer
-------------------------
Howard R. Baer, Chairman
<PAGE>
MARC JACOBSON
12 Colgate Lane
Woodbury, NY 11797
July 28, 1999
Mr. Howard Baer
Politics.com, Inc. & Lone Oak, Inc.
2530 South Rural Rd.
Tempe, AZ 85282
Dear Howard:
For good order's sake, I think we should document the terms of the
understanding between Politics.com, Inc./Lone Oak, Inc. and me with respect to
my joining the executive team at Politics.com as follows:
1. Title: President and Chief Operating Officer (COO).
2. Reporting Relationship: Directly to the Board of Directors (BOD). (Brian
Wadsworth will continue in a consulting capacity, but will not use the title
of President, Chairman or Chief Executive Officer (CEO)).
3. Responsibility: Overall strategic direction, financing, distribution,
implementation, personnel, and other responsibilities customarily expected
from a President and COO reporting directly to the Board.
4. Term: Three Years.
5. Commencement date: September 7, 1999 (day after Labor Day).
6. Position Location: New York, New York.
7. Base Salary: $200,000 per annum.
8. Bonus: 50% of base salary, based upon achieving certain annual goals,
mutually agreed upon, between the Board and me.
9. Stock Options: Option Grant of 700,000 shares. Exercise Price: $2.00. Total
outstanding with this new grant: approximately 9.0 million.
10. Vesting Schedule: 25% of options (150,000) vest upon commencement of
employment. Balance of shares (450,000) vest ratably ever six months of
employment.
11. Vacation: Four weeks per year.
12. Signing bonus:
- Immediate stock grant of 100,000 additional shares of stock.
- Politics.com to pay Marc Jacobson, PC $50,000 for services rendered up
to September 6, 1999.
13. Standard Company Benefit Packages:
- Expenses reimbursed
- Health & Dental Plan; Group Life & Disability Insurance
- Holiday and sick days.
- 401(k) plan.
14. Severance: 12 months. Severance payable at any time if terminated for any
reason other than cause.
<PAGE>
15. Guarantee: Howard Baer will personally guarantee salary and bonus (and
severance, if applicable) until such time as the next round of public
financing for Politics.com is concluded.
16. Ancillary Responsibilities: I shall be permitted to continue in my duties as
a member of the Boards of the Internet Alliance and The Direct Marketing
Association. Politics.com shall become a member of both organizations as
soon as practical. Also, I shall be permitted to provide incidental
consulting services to Prodigy Communications Corp. for a limited period of
time.
17. Tax Consequences. The terms of this agreement may be amended to reduce tax
consequences to me, provided there is no additional cost to Politics.com.
We should also plan to create a more formal document at the earliest
possible time. Finally, please keep this matter confidential, until I notify
Prodigy of my resignation. I am one very excited person.
Thanks for creating this opportunity for me.
Sincerely,
/s/ Marc Jacobson
Marc Jacobson
AGREED TO AND ACCEPTED:
Politics.com, Inc./Lone Oak, Inc.
By: /s/ Howard R. Baer, Chairman
----------------------------
July 29, 1999
