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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB/A
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.
(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:
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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.
Since our acquisition of Politics.com-Nevada, our business operations
have commenced and our Web site is operational. Specifically, we have:
o Engaged a web design firm to study our target market and build our Web
site based on the results of their study;
o Tested and launched our current web site;
o Conducted the first live town hall Internet-based webcast with a
presidential candidate, Bill Bradley;
o Conducted the first ever Internet-based Presidential Primary, where
users of our Web site were able to vote for presidential candidates;
o Acquired "politicaljunkie.com", a Web site that provided access to a
wide variety of political information;
o Entered into content and distribution relationships with content
providers and web portals;
o Hired Marc Jacobson, a former senior vice president at Prodigy
Communications Corporation, as our President and Chief Operating
Officer and engaged additional staff to assist in the development of
our web site; and
o Formed advisory boards consisting of political figures who advise and
consult with us with respect to the content, features and
functionality of our Web site.
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 available to any internet user with a
generally available web browser. We are
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constantly updating and modifying our Web site to provide our users with the
most current and useful information and services relating to politics that we
believe is available on the Internet.
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. For example, current Presidential candidate Bill Bradley used our
Web site to participate in the first live town hall Internet webcast. Mr.
Bradley was able to present his views and answer questions asked by our Web site
users.
The online political landscape, while rich and diverse, is 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. The PoliticalJunkie Web site was a
Web site that attracted a regular audience of journalists, political
professionals, and politically committed individuals by offering an efficient
source of access to political information. We have since incorporated the
PoliticalJunkie Web site into the directory area of our WWW.POLITICS.COM Web
site. The directory area 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.
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OUR MARKET OPPORTUNITY
We believe we are well-positioned to exploit the following key market
trends:
o 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;
o Advertisers are spending more money to advertise on the Internet as
Internet usage continues to expand;
o The Internet audience is constantly looking for new sources of
information, entertainment, and interaction; and
o 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:
o Vendors of products and services may want to promote and sell to
well-defined demographic groups;
o Promoters of political causes and interests may want to focus their
efforts to those individuals most open to their arguments;
o Organizers of political initiatives and movements may want to rent
space in an active, well-populated political arena;
o Candidates are already raising money online;
o Activists and organizations will subscribe to premium political
information and will host services;
o 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
o 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.
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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:
o Network radio advertising;
o National print, outdoor and Web-based advertising;
o Finding strategic partners;
o Engaging in marketing and distribution arrangements;
o Special event sponsorships;
o Public and community relations programs; and
o 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:
o In addition to our offices in New York, we expect to open an office in
Washington, D.C. to strategically position us for ready access to key
talent, business partners, and the marketplace;
o Build a strong management team with the experience and talent to grow
a major media company;
o Appoint advisory boards to lend their experience, reputation, and
influence;
o 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;
o Use experienced managing editors to organize and manage content and
services;
o 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;
o 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
o 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.
Although we believe our operational strategies are attainable, we
cannot guarantee that we will successfully implement any or all of our key
operational strategies.
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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 (the
sale or rental of computer or server capacity which is connected to the
Internet), direct marketing and electronic commerce. We expect to derive revenue
from our Web site as follows:
o Advertising by vendors, candidates, parties, and special interest
groups both on the Web site and in a free email service;
o Commerce fees from advertisers making sales from their ads;
o Placement fees from political organizations, services, and figures;
o Pay-per-view or registration fees for premium services and products
which will include, among other things, subscriptions to special
e-mail publications, video conferences, and CD Roms;
o Sponsorships and special promotions;
o Paid surveys and polls;
o Sales of related products such as tapes, books, memorabilia, and
gifts;
o Placement fees from affiliated state and local political sites;
o Classified ad services;
o Travel services;
o Hosting fees (i.e., fees for providing the ability to access a Web
site on the Internet) from political organizations, individuals, and
movements for permanent and temporary spaces, special forums,
fund-raisers, campaigns, and conventions;
o Sales of value-added services to hosted organizations such as travel
services, direct marketing/mail, and virtual offices;
o Registration fees for special forums; and
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o 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 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.
OUR CONTENT
We intend to maintain a non-partisan Web site which contains balanced
content and presents all credible points of view. Content will generally be
provided by third parties, including individual users. If we create original
content, we will indicate to the user that we were the author of the content. If
the content is someone else's opinion, we will clearly designate the material as
the opinion of that author and not as the views of Politics.com. Our employees
who are responsible for the content of our Web site are trained to be as
objective as possible in the selection of third party content, so that the site
remains non-partisan. It is possible that groups whose views are not mainstream
will not be represented on our Web site. We believe, however, that many diverse
groups will use the communities area of our Web site to maintain and provide
information that might not otherwise be generally found on the World Wide Web.
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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
Specific laws and regulations concerning the use of the Internet have
been enacted. In particular, as directed by Congress in the Children's Online
Privacy Protection Act, also known as COPPA, the Federal Trade Commission
recently adopted regulations, effective April 21, 2000, prohibiting unfair and
deceptive acts and practices in connection with the collection and use of
personal information obtained from children under 13 years old on the Internet.
Because our Web site is not directed at children and we do not anticipate its
widespread use by children, COPPA and the FTC's regulations should not have a
significant effect upon our business.
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 have been adopted by the FTC. Nevertheless,
the FTC has strongly advocated that general audience Web sites establish privacy
policies that include procedures to disclose and notify users of privacy and
security policies, obtain consent from users for collection and use of
information, and provide users with the ability to access, correct and delete
personal information stored by the company. While we expect to adopt a privacy
policy regarding use of personal user information and expect to post this policy
on our Web site, there can be no assurance that we will adopt policies that
conform with the regulations adopted or policies advocated by the FTC or any
other federal or state governmental entity.
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.
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EMPLOYEES
As of December 15, 1999, we had eight employees, of which five were
full-time and three 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.
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.
Since Lone Oak, Inc. had no significant operations prior to the acquisition
of Politics.com-Nevada, we believe that the operations of Lone Oak, Inc. prior
to the acquisition of Politics.com-Nevada are not material or relevant to an
analysis of Politics.com as it exists today. Accordingly, the financial
statements of Lone Oak, Inc., with respect to periods prior to the acquisition,
are not being presented.
PLAN OF OPERATION
From inception to June 30, 1999, we received approximately $145,000
from Howard R. Baer, our Chairman for the initial funding of
Politics.com-Nevada. In addition, at June 30, 1999, we issued a promissory
note in the principal amount of $151,000 to Howard R. Baer as consideration for
the purchase of the Internet domain names "elections.com," "gop.com" and
"politics.com". From July 1, 1999 to December 15, 1999, we borrowed, in the
aggregate, an additional $592,000 from Howard R. Baer, an affiliate of Howard R.
Baer, Kevin C. Baer and an affiliate of Kevin C. Baer. These borrowings are
unsecured and bear interest at the rate of 6% per annum. Of these advances,
approximately $292,000 are evidenced by promissory notes that are payable on
demand.
Through October 31, 1999 (the termination date of our offering of up to
666,667 shares of common stock), we sold 141,000 shares of our common stock in a
private placement exempt from registration under Rule 506 of Regulation D of the
Securities Act of 1933, as amended. We raised approximately $423,000 in this
private placement.
Notwithstanding the funds we raised in the private placement, we are
currently experiencing a severe working capital deficiency and are incurring
significant losses. At this time, we are not generating any significant revenue,
but are incurring substantial costs and expenses in connection with our business
operations and the development of our Web site. We have an immediate need for
additional capital.
As of December 15, 1999, our cash balances were approximately $75,000,
and we had a working capital deficiency of approximately $1.4 million, which
includes indebtedness to related parties of approximately $745,000. We expect to
remedy the working capital deficit by raising additional capital in the
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form of either debt or equity financings. 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 December 15, 1999, we intend to make capital expenditures in the
amount of approximately $50,000 for office furniture and equipment and leasehold
improvements for our planned Washington, D.C. office. We also expect to spend
approximately $110,000 per year for each of the next three years for our office
space in New York, and approximately $110,000 for each of the next three years
for our planned office space in Washington, D.C. We anticipate that we will
expend approximately $$750,000 for Web site development costs over the next
twelve months. During the next twelve months we expect to hire a significant
number of new employees and to incur approximately $700,000 of salary, benefits
and other personnel expenses.
Our auditor's report indicates that certain factors raise substantial
doubt about our ability to continue as a going concern. Our auditors issued a
going concern opinion because we:
o have generated no significant revenues;
o have a severe working capital deficiency;
o have a limited operating history; and
o can provide no assurance that we will be able to generate sufficient
funds for our operations for the next twelve months.
Based upon our current budget and business planning, we believe that we will
need approximately $4.5 million of additional funding to continue our operations
over the next twelve months and that we will need to raise or generate such
amount over the next three months to eliminate this going concern opinion.
Because we are a development stage company, however, we cannot assure you that
we will be able to generate internally or raise sufficient funds to continue our
operations, or that our accountant's will not issue another going concern
opinion. To date, we have generated no significant revenue and have incurred
substantial losses. Further, through the termination date (October 31, 1999) of
our planned offering of 666,667 shares of common stock, we sold 141,000 shares
of common stock, for gross proceeds of $423,000. We have since used this capital
in 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.
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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 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 our computerized systems, which we recently purchased,
are Year 2000 compliant. We do not anticipate that we will perform any
additional testing on our computerized systems. 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 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. When we took possession of our new office space in New York, New York, we
terminated our tenancy in Arizona.
We are currently negotiating to lease approximately 3,800 square feet
of office space in Washington, D.C. for approximately $8,000 per month, pursuant
to a five year lease.
12
<PAGE>
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 December 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:
<TABLE>
<CAPTION>
SHARES OF
NAME COMMON STOCK
BENEFICIALLY OWNED PERCENT OF CLASS
------------------ ----------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Marc Jacobson(1) ............................................... 315,000 3.3%
Howard R. Baer ................................................. 5,250,000 56.9%
Kevin C. Baer .................................................. 1,750,000 19.0%
Brian Wadsworth(2) ............................................. 330,000 3.5%
Burt Alimansky(3) .............................................. 515,000 5.4%
All directors and executive officers as a group (5 persons) .... 8,160,000 80.2%
5% STOCKHOLDERS
Arlene West (4)
c/o Burt Alimansky
605 Madison Ave., Suite 300
New York, New York 10222 ....................................... 515,000 5.4%
</TABLE>
(1) Represents options to purchase 315,000 shares of our common stock that are
exercisable within 60 days from December 15, 1999.
(2) Represents options to purchase 330,000 shares of our common stock that are
exercisable within 60 days from December 15, 1999.
(3) Includes 215,000 shares are held of record by Arlene West, Mr. Alimansky's
spouse, and options to purchase 300,000 shares of common stock that are
exercisable within 60 days from December 15, 1999. Mr. Alimansky disclaims
beneficial ownership of such shares held by Ms. West.
(4) Includes options to purchase 300,000 shares of common stock that are
exercisable within 60 days from December 15, 1999 which are held by Burt
Alimansky, her spouse. Ms. West disclaims beneficial ownership of all
options held by Mr. Alimansky.
13
<PAGE>
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. Each of our directors is
serving as a director until the next annual meeting of stockholders and until
his successor is elected and qualified or until his earlier resignation or
removal. Each of our executive officers have been chosen for a term which
continues until the meeting of the Board of Directors which follows the next
annual meeting of stockholders and until his successor shall have been chosen
and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Howard R. Baer 57 Chairman of the Board July 1999
Marc Jacobson 47 President, Chief Operating Officer and Director September 1999
Burt Alimansky 56 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. 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 was a member of the board
of directors of the Alumni Association of Harvard Business School. Mr. Alimansky
currently serves as a national board member of the National Foundation for
Teaching Entrepreneurship and serves as chairman of the City of New York's
annual venture capital conference.
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
14
<PAGE>
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.
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 $100,000 during fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------
OTHER SECURITIES ALL OTHER
NAME AND FISCAL ANNUAL ANNUAL UNDERLYING COMPEN-
PRINCIPAL YEAR SALARY BONUS COMPENSATION OPTIONS SATION
POSITION ENDED ($) ($) ($) (#) ($)
- ------------------------------ ----------- ------------- -------- ------------------ -------------------- ------------
<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. Mr. Jacobson is entitled to
receive severance for a period of up to twelve months in an aggregate
amount equal to his annual salary if he is terminated without cause.
(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 $3.00 per share, such options to become exercisable as
follows: 146,000 are exercisable immediately and the remaining 184,000
options become exercisable in five equal monthly installments
commencing August 15, 1999.
15
<PAGE>
The following table sets forth certain information with respect to
option grants made to the executive officers named above pursuant to the
Politics.com, Inc. 1999 Combination Stock Option Plan. This table identifies
those options grants that have been made (or agreed to be made) during 1999. No
options were granted prior to the current fiscal year.
OPTION GRANTS DURING 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS EXERCISE PRICE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME (#) FISCAL YEAR ($/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 December 22, 1999, options
to purchase 1,809,200 shares of common stock were outstanding or committed for
issuance under this Plan.
COMPENSATION OF THE DIRECTORS
Our directors do not receive any compensation for acting as a director
of Politics.com.
ADVISORY COMMITTEES
We have established six advisory boards to advise us concerning our Web
site and matters related to our business. We are still in the process of filling
the seats created by these advisory boards. We expect that the seats for these
advisory boards will be filled by former or current political figures,
journalists, media political analysts, representatives from academia,
representatives from non-profit trade associations or "think tanks", and
politically oriented entertainers. Each advisory board member will be requested
to sign an agreement agreeing to provide company advice and guidance regarding
their views of our Web site, its progress and features. Each advisory board
member is expected to serve for a period of two years, subject to renewal or
earlier termination for non-performance. Each advisory board member is entitled
to receive options to purchase up to 10,000 shares, subject to a vesting
schedule, pursuant to the 1999 Advisory Council Stock Option Plan (the "Advisory
Plan"). As of December 15, 1999, options to purchase 20,000 shares have been
granted to advisory board members under the Advisory Plan. Current members of
the advisory councils include Gregory Simon, former Domestic Policy Advisor to
Al Gore, the current Vice President of the United States, Trevor Potter, former
Chairman and commissioner of the Federal Election Commission, and Hal Bruno, the
former political director at ABC News for over 20 years.
16
<PAGE>
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. The Board of Directors
believes that the terms of this transaction were at least as favorable as those
that could have been negotiated with unaffiliated third parties.
From March 1999 through June 1999, Howard R. Baer provided
approximately $145,000 for the initial funding of Politics.com-Nevada. Howard
R. Baer subsequently assigned to Kevin C. Baer, Vice President and one of our
directors, his rights with respect to $36,000 of such initial funding. At the
time of formation of Politics.com-Nevada, Howard R. Baer and
Politics.com-Nevada determined that Mr. Baer would provide approximately
$150,000 of initial funding to Politics.com-Nevada and that the amount of
such funding would be convertible into 6,990,000 shares of common stock of
Politics.com-Nevada, such that, following the conversion, there would be
7,000,000 outstanding shares of common stock 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, upon conversion of the
amount of such initial funding. Specifically, 5,242,500 shares were issued to
Howard R. Baer upon conversion of $108,000 of such funding and 1,747,500
shares were issued to Kevin C. Baer upon conversion of $36,000 of such
funding. The Board of Directors believes that the terms of these transactions
were at least as favorable as those that could have been negotiated with
unaffiliated third parties.
Since June 30, 1999, Howard R. Baer and Carriage House Capital, L.L.C.,
an affiliate of his, has made unsecured advances bearing interest at a rate of
6% per annum in the amount of approximately $527,000 to Politics.com-Nevada. In
addition, since June 30, 1999, Kevin C. Baer and an affiliate of his advanced an
aggregate of approximately $65,000 on the same terms. These advances were to
fund our current working capital needs. Approximately $292,000 of these advances
are evidenced by unsecured promissory notes and are payable on demand. The Board
of Directors believes that the terms of these transactions were at least as
favorable as those that could have been negotiated with unaffiliated third
parties.
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. The number of shares issued to Howard R. Baer
and Kevin C. Baer was the result of arms length negotiations between the
stockholders of Politics.com-Nevada and the Board of Directors of Politics.com
and on the basis of the relative value of Politics.com and Politics.com-Nevada,
as perceived by the parties to the transaction. The Board of Directors believes
that the terms of this transaction are at least as favorable as those that could
have been negotiated with unaffiliated third parties.
We have agreed to issue to Burt Alimansky, one of our directors,
options to purchase up to 300,000 shares of our common stock, at a per share
price of $3.00, in consideration of consulting services rendered and to be
rendered to us. The Board of Directors believes that the terms of this
transaction are at least as favorable as those that could have been negotiated
with unaffiliated third parties.
On December 2, 1999, Howard R. Baer agreed to guarantee up to $550,000
of Politics.com's payment obligations to its Web site developer. The amount of
compensation (if any) to be provided to Mr. Baer for such guaranty has not yet
been determined by the Board of Directors.
17
<PAGE>
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 December 15, 1999 there were 9,232,487 shares of common stock
outstanding, and 106 holders of record.
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.
18
<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........................................... 10 3/8 1 31/32
Fourth Quarter (through December 15, 1999) ............. 6 3/8 3 1/8
</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 December 22, 1999, there were 1,829,200 options to purchase
shares of common stock outstanding or committed for issuance under our 1999
Combination Stock Option Plan and 1999 Advisory Council Stock Option Plan. 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 7,710,816 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. On October 31, 1999, we completed a private placement of
141,000 shares of our common stock at $3.00 per share in a transaction exempt
from registration in reliance upon Rule 506 of Regulation D promulgated under
the Securities Act of 1933, as amended. We raised approximately $423,000 in
connection with this private placement.
HOLDERS. On December 15, 1999, there were approximately 106 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.
19
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no changes in or disagreements with our accountants.
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 Edward F. Myers, the father of Edward F. Myers III, a former director 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.
On February 1, 1998, Lone Oak, Inc. issued 1,666 shares of common stock
to Philip L. Thalhiemer, a former director of Lone Oak, Inc., for services
provided to Lone Oak, Inc. The Board of Directors valued Mr. Thalhimer's
services at $2.50 per share. 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 to
sophisticated investors 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 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 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 offered up to 666,667 shares of its common stock, at $3.00 per share
to accredited and sophisticated investors. This offering terminated on October
31, 1999. We sold 141,000 shares of common stock and raised approximately
$423,000. The shares issued in connection with the private placement were issued
in reliance upon the exemption from registration contained in Rule 506 of
Regulation D promulgated under the Securities Act of 1933.
In December 1999, Politics.com granted options to purchase an aggregate
of 13,500 shares of common stock at an exercise price of $3.00 per share to two
consultants in consideration of services rendered and to be
20
<PAGE>
rendered to Politics.com. The issuance of the options was effected without
registration under the Securities Act, in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act.
To the extent that the foregoing transactions constituted "sales"
within the meaning of the Securities Act, except as otherwise noted, the
securities issued in such transactions were not registered under the Securities
Act in reliance upon the exemption from registration set forth in Section 4(2)
thereof, relating to sales by an issuer not involving any public offering. Each
of the foregoing transactions, to the extent constituting "sales" within the
meaning of the Securities Act, were exempt under Section 4(2) thereof based on
the following facts: to the knowledge of Politics.com, there was no general
solicitation, there were a limited number of purchasers; the purchasers were
provided with or had access to information about Politics.com; either (i) the
purchasers or their respective representatives were sophisticated about business
and financial matters; or (ii) the purchasers were "accredited investors" within
the meaning of Rule 501 under the Securities Act; and Politics.com took
reasonable steps to assure that the purchasers were not underwriters within the
meaning of Section 2(11) under the Securities Act.
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.
21
<PAGE>
PART F/S
POLITICS.COM, INC., A NEVADA CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................................................................... 23
Balance Sheet as of June 30, 1999........................................................................... 24
Statements of Operations for the period March 23, 1999 (inception) to June 30, 1999......................... 25
Statement of Changes in Stockholders' Equity for the period March 23, 1999 (inception) to June 30, 1999..... 26
Statement of Cash Flows for the period March 23, 1999 (inception) to June 30, 1999.......................... 27
Notes to Financial Statements............................................................................... 28
</TABLE>
22
<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 8, as to
which the date is July 27, 1999)
23
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS
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.
24
<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.
25
<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 Conversion 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.
26
<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
Conversion of Indebtedness $ 144,000
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<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 has been acquired by Lone
Oak, Inc. on July 27, 1999 (see Note 7). The Company has not had any operating
revenues and has been funding its operations through debt and equity financings.
The Company will need to continue to fund its operations in this manner until it
achieves sufficiently profitable operations. The achievement and/or success of
these planned measures, however, cannot be determined at this time.
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.
28
<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
Revenues, consisting principally of advertising and electronic commerce
revenues will be recognized as the services are performed or when the goods are
delivered. Deferred revenues will consist primarily of prepaid advertising and
electronic commerce fees.
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. The Internet Domain Names are
"politics.com", "elections.com" and "gop.com".
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. As
of June 30, 1999, the Company has not capitalized any software development
costs.
29
<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 as part of its initial capitalization.
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, as conversion of indebtedness of the
Company in the amount of $144,000.
30
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
Note 5 - INCOME TAXES
For income tax purposes, the Company has a net operating loss
carryforward ("NOL") at June 30, 1999 of approximately $124,000 expiring in 2014
if not offset against future federal taxable income. There may be certain
limitations as to the future annual use of the NOLs due to certain changes in
the Company's ownership.
Income tax benefit attributable to net loss differed from the amounts
computed by applying the statutory Federal Income tax rate applicable for each
period as a result of the following:
<TABLE>
<S> <C>
Computed "expected" tax benefit $ 42,000
Decrease in tax benefit resulting from net operating
loss for which no benefit is currently available (42,000)
---------
$ -
</TABLE>
The Company had deferred tax assets of approximately $42,000 at June
30, 1999, resulting primarily from net operating loss carryforwards. The
deferred tax assets have been fully offset by a valuation allowance resulting
from the uncertainty surrounding the future realization of the net operating
loss carryforwards.
NOTE 6 - 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 7 - 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.
31
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 8 - 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.
32
<PAGE>
POLITICS.COM, INC., A DELAWARE CORPORATION
(FORMERLY LONE OAK, INC.)
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Consolidated Balance Sheet as of September 30, 1999 ...................................... 34
Unaudited Consolidated Statement of Operations for the period March 23, 1999 (inception) to ........ 35
September 30, 1999
Unaudited Statement of Changes in Stockholders' Deficit for the period March 23, 1999 (inception) to 36
September 30, 1999
Unaudited Statement of Cash Flows for the period March 23, 1999 (inception) to September 30, 1999 .. 37
Notes to Consolidated Financial Statements ......................................................... 38
</TABLE>
33
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash $ 20,346
Prepaid Expenses 8,409
Total Current Assets 28,755
Intangibles - Internet Domain Names (Net of Accumulated
Amortization of $15,639) 190,361
Security Deposit 35,000
Total Assets $ 254,116
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable $ 619,236
Note Payable - Related Party 151,000
Loans Payable - Related Parties 290,786
Total Current Liabilities 1,061,022
Commitments and Contingencies
Stockholders' Deficit:
Preferred Stock, $.00001 Par Value; 20,000,000 Shares
Authorized , None Issued --
Common Stock, $.00001 Par Value; 50,000,000 Shares
Authorized, 9,136,975 Shares Issued and Outstanding 92
Additional Paid-In Capital 8,146,174
Deficit Accumulated in the Development Stage (4,528,847)
Deferred Compensation (4,424,325)
Total Stockholders' Deficit (806,906)
Total Liabilities and Stockholders' Deficit $ 254,116
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 23, 1999 (INCEPTION) TO SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<S> <C>
Revenues $ --
Costs and Expenses:
Selling, General and Administrative Expenses 3,961,634
Website Development Costs 545,354
Interest Expense 6,220
Amortization 15,639
Total Costs and Expenses 4,528,847
Net Loss $(4,528,847)
Earnings Per Common Share - Basic:
Weighted Average Common Shares Outstanding 4,067,663
Net Loss Per Common Share - Basic $ (1.11)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD MARCH 23, 1999 (INCEPTION) TO SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional in the
Common Stock Paid-in Development Deferred
Shares Amount Capital Stage Compensation Total
<S> <C> <C> <C> <C> <C> <C>
Balance - Beginning -- $ -- $ -- $ -- $ -- $ --
Sale of Politics-Nevada
Common Stock 10,000 -- 100 -- -- 100
Issuance of Politics-Nevada
Common Stock Upon
Conversion of Indebtedness 6,990,000 70 143,930 -- -- 144,000
Effect of Reverse Acquisition 2,091,475 21 65,645 -- -- 65,666
Sale of Common Stock, Net of
Offering Costs 45,500 1 76,499 -- -- 76,500
Deferred Compensation -- -- 4,424,325 -- (4,424,325) --
Stock Based Compensation -- -- 3,435,675 -- -- 3,435,675
Net Loss for the Period -- -- -- (4,528,847) -- (4,528,847)
--------- ----------- ----------- ----------- ----------- -----------
Balance - Ending 9,136,975 $ 92 $ 8,146,174 $(4,528,847) $(4,424,325) $ (806,906)
========= =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 23, 1999 (INCEPTION) TO SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net Loss $(4,528,847)
Adjustment to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Amortization 15,639
Stock Based Compensation 3,435,675
Changes in Operating Assets and Liabilities:
Increase in Prepaid Expenses (8,409)
Increase in Security Deposits (35,000)
Increase in Accounts Payable 619,236
-----------
Net Cash Used by Operating Activities: (501,706)
-----------
Cash Flows from Investing Activities:
Purchase of Intangibles - Internet Domain Names (206,000)
Net Assets Acquired in Reverse Acquisition 65,666
-----------
Net Cash Used by Investing Activities (140,334)
-----------
Cash Flows from Financing Activities:
Sale of Common Stock - Private Offering 136,500
Expenses of Private Offering (60,000)
Proceeds of Borrowings from Related Party 144,786
Sale of Common Stock - Related Party 100
Issuance of Note Payable - Related Party 151,000
Proceeds of Loans Payable - Related Parties 290,000
-----------
Net Cash Provided by Financing Activities 662,386
-----------
Increase in Cash 20,346
Cash - Beginning of Period --
Cash - End of Period $ 20,346
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
Conversion of Indebtedness $ 144,000
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
NOTE 1 - ORGANIZATION
On July 27, 1999, Lone Oak, Inc., a Delaware corporation ("Lone Oak"),
acquired all of the issued and outstanding common stock of Policitcs.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 Lone Oak being the acquired company. Consequently, only
the historical operations of Politics-Nevada are presented for periods through
July 27, 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
("Politics-Delaware").
Politics-Nevada was incorporated on March 23, 1999 in the State of
Nevada. Politics-Nevada 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. Politics-Nevada has selected December 31 as its fiscal year.
Politics-Delaware and its wholly-owned subsidiary Politics-Nevada are
hereafter collectively referred to as the "Company".
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited consolidated financial statements include the accounts of
Politics-Delaware and its wholly-owned subsidiary, Politics-Nevada. All
significant inter-company accounts and transactions have been eliminated in
consolidation.
In the opinion of the Company, the accompanying consolidated financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations and
cash flows presented.
Results of operations for interim periods are not necessarily
indicative of the results of operations for a full year.
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.
38
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
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
Revenues, consisting principally of advertising and electronic commerce
revenues will be recognized as the services are performed or when the goods are
delivered. Deferred revenues will consist primarily of prepaid advertising and
electronic commerce fees.
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 September 30, 1999, in the opinion
of management, there has been no such impairment. The Internet Domain Names are
"politics.com", "elections.com", "gop.com" and "PoliticalJunkie.com".
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
assets 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. As
of September 30, 1999 the Company has not capitalized any software development
costs.
39
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
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 option 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 has 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.
Prior to the July 27, 1999 acquisition, the computation of net loss per
share is based on the weighted average number of outstanding common shares of
Politics-Nevada. Following the acquisition, shares presented are adjusted for
the effect of the reverse acquisition.
Because the Company is incurring losses, the effect of stock options
and warrants is antidilutive. Accordingly, the Company's presentation of diluted
earnings per share is the same as that of basic earnings per share.
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 AND LOANS PAYABLE - RELATED PARTIES
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 certain internet domain names.
Loans payable to related parties represent unsecured advances by the
Company's Chairman and an Officer. These loans, which are due on demand, bear
interest at 6% per annum.
40
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
NOTE 4 - STOCKHOLDERS' DEFICIT
PREFERRED STOCK
The Company's Board of Directors may, without further action by the
Company's stockholders, from time to time, direct the issuance of any authorized
but unissued or unreserved shares of Preferred Stock in series and may, at the
time of issuance, determine the rights, performances and limitations of each
series. The holders of Preferred Stock may be entitled to receive a preference
payment in the event of any liquidation, dissolution or winding-up of the
Company before any payment is made to the holders of the Common Stock. The Board
of Directors could issue Preferred Stock with voting and other rights that could
adversely affect the voting power of the holders of Common Stock and could have
certain anti-takeover effects.
COMMON STOCK
On March 24, 1999 Politics-Nevada sold 10,000 shares of common stock at
$.01 per share for gross proceeds of $100 as part of its initial capitalization.
On June 30, 1999 Politics-Nevada 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 Politics-Nevada, as conversion of
indebtedness of Politics-Nevada in the amount of $144,000.
On July 27, 1999, Lone Oak acquired all of the issued and outstanding
common stock of 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 stockholders prior
to the acquisition. As a result of the acquisition, Politics-Nevada 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.
During August and September 1999 the Company sold 45,500 shares of
common stock for gross proceeds of $136,500 to private investors.
STOCK OPTION PLAN
On July 27, 1999, the Company adopted the 1999 Combination Stock Option
Plan (the "Plan"). Under the Plan, both non-qualified and incentive stock
options to purchase shares of the Company's common stock may be granted to key
employees and other persons. A total of 2,000,000 shares have been reserved for
issuance under the Plan. The options expire ten years from the date of grant,
subject to certain restrictions.
41
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
NOTE 4 - STOCKHOLDERS' DEFICIT (Continued)
STOCK OPTION PLAN (Continued)
The Company has issued various stock options to employees. The options'
vesting period varies from full vesting upon issuance of options to vesting over
a 3 to 4 year period. A summary of the Company's stock options activity is as
follows:
<TABLE>
<CAPTION>
Options
Weighted Average
Shares Exercise Price
<S> <C> <C>
Balance, July 27, 1999
Granted 1,325,000 $ 2.37
--------- --------
Balance, September 30, 1999 1,325,000 $ 2.37
========= ========
</TABLE>
<TABLE>
<CAPTION>
Outstanding Exercisable Weighted Average
Exercise Price Range Shares Shares Exercise Price
<S> <C> <C> <C>
$ 2.00 840,000 315,000 $ 2.00
$ 3.00 485,000 344,600 $ 3.00
</TABLE>
The Company recognized approximately $3,436,000 of stock-based
compensation expense and deferred compensation of approximately $4,424,000
during the period ended September 30, 1999, relating to options granted with
exercise prices below the estimated fair market value of the Company's common
stock at the date of grant. The Company applies APB Opinion No. 25 and related
Interpretations in accounting for these plans. Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") was
issued by the FASB in 1995 and, if fully adopted, changes the methods for
recognition of cost on plans similar to those of the Company. The Company has
adopted the disclosure-only provision of SFAS 123. Pro forma information
regarding net income and earnings per share is required by Statement 123, and
has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions: risk-free interest rate
of 5.5%; volatility factor of the expected market price of the Company's common
stock of .50; and a weighted-average expected life of the option, after the
vesting period, of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
42
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
NOTE 4 - STOCKHOLDERS' DEFICIT (Continued)
STOCK OPTION PLAN (Continued)
Had compensation cost for stock options granted been determined based
on the fair value at the grant date consistent with the provisions of SFAS 123,
the Company's net loss and loss per share would have been increased to the pro
forma amounts indicated below:
<TABLE>
<S> <C>
Net loss - as reported $ (4,528,847)
Net loss - pro forma $ (5,089,386)
Loss per share - as reported
Basic $ (1.11)
Loss per share - pro forma
Basic $ (1.25)
</TABLE>
The effects of applying the pro forma disclosures of SFAS 123 are not
likely to be representative of the effects on reported net earnings for future
years due to the various vesting schedules.
NOTE 5 - INCOME TAXES
For income tax purposes, the Company has a net operating loss
carryforward ("NOL") at September 30, 1999 of approximately $1,093,000 expiring
in 2014 if not offset against future federal taxable income. There may be
certain limitations as to the future annual use of the NOLs due to certain
changes in the Company's ownership.
Income tax benefit attributable to net loss differed from the amounts
computed by applying the statutory Federal Income tax rate applicable for each
period as a result of the following:
<TABLE>
<S> <C>
Computed "expected" tax benefit $ 372,000
Decrease in tax benefit resulting from net operating
loss for which no benefit is currently available (372,000)
---------
$ --
</TABLE>
The Company had deferred tax assets of approximately
$1,540,000 at September 30, 1999, resulting primarily from net operating loss
carryforwards of approximately $372,000 and stock based compensation of
approximately $1,168,000. The deferred tax assets have been fully offset by a
valuation allowance resulting from the uncertainty surrounding their future
realization.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company has entered into a 3 year employment agreement with its
President. The agreement calls for annual salary of $200,000. In addition, the
agreement provides for a bonus in an amount up to 50% of the annual salary and
up to 12 months severance in an aggregate amount equal to annual salary if
terminated without cause.
43
<PAGE>
POLITICS.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
NOTE 7 - 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 8- SUBSEQUENT EVENTS
In October 1999 the Company entered into a 3 year lease that terminates
October 31, 2002. In additional to base rent, the lease provides for payment of
certain other occupancy costs. Approximate future minimum payments under this
lease are summarized as follows:
<TABLE>
<S> <C> <C>
November 1, 1999 to December 31, 1999 $ 16,000
January 1, 2000 to December 31, 2000 $ 97,000
January 1, 2001 to December 31, 2001 $100,000
January 1, 2002 to October 31, 2002 $ 85,000
</TABLE>
44
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER
NUMBER DESCRIPTION
<S> <C> <C>
2.1 Articles of Incorporation, as amended, of the Company.* --
2.2 Bylaws of the Company.* --
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.* --
3.3 Promissory Note issued by Politics.com-Nevada in favor of Carriage House
Capital, LLC dated November 1, 1999.** III-1
3.4 Promissory Note issued by Politics.com-Nevada in favor of Kevin C. Baer
dated November 1, 1999. ** III-2
3.5 Promissory Note issued by Politics.com-Nevada in favor of Northeast
Investments dated November 1, 1999.** III-3
6.1 Contract of Sale between Politics.com, Inc., a Nevada corporation, and
Howard R. Baer dated June 30, 1999.* --
6.2 Contract of Sale between Politics.com, Inc., a Nevada corporation, and Kurt
Ehrenberg dated August 17, 1999.* --
6.3 1999 Combination Stock Option Plan.* --
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.* --
6.5 Form of Non-Qualified Stock Option Agreement.* --
6.6 Form of Incentive Stock Option Agreement.* --
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.* --
6.8 Employment Letter dated July 29, 1999, as amended September 7, 1999.* --
6.9 Lease Agreement between Renaissance 632 Broadway LLC and Politics.com, Inc.
dated October 29, 1999.** III-4
6.10 1999 Advisory Council Stock Option Plan.** III-28
6.11 Form of Advisory Council Engagement and Option Agreement.** III-33
6.12 Services Agreement between Touchscreen Media Group and Politics.com, Inc. --
dated October 29, 1999, as supplemented on December 2, 1999** III-40
6.13 Individual Limited Guaranty by Howard R. Baer in favor of Touchscreen Media
Group dated December 2, 1999.** III-55
27 Financial Data Schedule.** --
</TABLE>
________________
* Previously filed.
** Filed herewith.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment no. 1 to registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
POLITICS.COM, INC.
DATE: DECEMBER 29, 1999 BY:/s/ Marc Jacobson
-------------------------------------
MARC JACOBSON
PRESIDENT AND CHIEF OPERATING OFFICER
<PAGE>
EXHIBIT 3.3
-----------
PROMISSORY NOTE
---------------
$227,002 Phoenix, Arizona
November 1, 1999
FOR VALUE RECEIVED, Politics.com, Inc., a Nevada Corporation ("Maker"),
hereby promises to pay to the order of Carriage House Capital, LLC the sum of
TWO HUNDRED TWENTY SEVEN THOUSAND TWO DOLLARS ($227,002), payable on demand,
together with interest or unpaid principal compounded monthly and accrued at the
rate of six percent (6%) 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/ Jen Jackson By: /s/ Marc Jacobson
- -------------------------- ---------------------
President
III-1
<PAGE>
EXHIBIT 3.4
PROMISSORY NOTE
---------------
$40,204 Phoenix, Arizona
November 1, 1999
FOR VALUE RECEIVED, Politics.com, Inc., a Nevada Corporation ("Maker"),
hereby promises to pay to the order of Kevin C. Baer the sum of FORTY THOUSAND
TWO HUNDRED FOUR DOLLARS ($40,204), payable on demand, together with interest or
unpaid principal compounded monthly and accrued at the rate of six percent (6%)
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/ Jen Jackson By: /s/ Marc Jacobson
- -------------------------- --------------------
Marc Jacobson
President
III-2
<PAGE>
EXHIBIT 3.5
PROMISSORY NOTE
---------------
$25,181 Phoenix, Arizona
November 1, 1999
FOR VALUE RECEIVED, Politics.com, Inc., a Nevada Corporation ("Maker"),
hereby promises to pay to the order of Northeast Investments the sum of
TWENTY-FIVE THOUSAND ONE HUNDRED EIGHTY ONE DOLLARS ($25,181), payable on
demand, together with interest or unpaid principal compounded monthly and
accrued at the rate of six percent (6%) 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/ Jen Jackson By: /s/ Marc Jacobson
- ------------------------- ----------------------
Marc Jacobson
President
<PAGE>
EXHIBIT 6.9
STANDARD FORM OF OFFICE LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
AGREEMENT OF LEASE, made as of this 14th day of October 1999, between
RENAISSANCE 632 BROADWAY LLC, 627 Broadway, 6th Floor, New York, New York 10012
PARTY OF THE FIRST PART, HEREINAFTER REFERRED TO AS OWNER, AND POLITICS.COM,
INC., c/o Mark Jacobson, 12 Colgate Lane, Woodbury, New York 11797
WITNESSETH
----------
Owner hereby leases to Tenant and Tenant hereby hires from Owner SUITE 301 in
the building known as 632 Broadway in the Borough of Manhattan, City of New
York, for the term of three (3) years (or until such term shall sooner cease and
expire as hereinafter provided) to commence on the 1st day of November nineteen
hundred and ninety-nine, and to end on the 31st day of October two thousand and
two both dates inclusive, at an annual rental rate of
SEE PARAGRAPH 36A OF THE ANNEXED RIDER
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first _______ monthly installment(s) on the execution hereof (unless
this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
1. RENT. Tenant shall pay the rent as above and as hereinafter provided.
2. OCCUPANCY. Tenant shall use and occupy demised premises for
SEE PARAGRAPH 52 OF THE ANNEXED RIDER
3. TENANT ALTERATIONS. Tenant shall make no structural changes in or to
the demised premises of any nature without Owner's prior written consent.
Subject to the prior written consent of Owner, and to the provisions of this
article, Tenant at Tenant's expense, may make alterations, installations,
additions or improvements which are non-structural and which do not affect
utility services or plumbing and electrical lines, in or to the interior of the
demised premises. Tenant shall, before making any alterations, additions,
installations or improvements, at its expense, obtain all permits, approvals and
certificates required by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval thereof
III-4
<PAGE>
and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner and Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within thirty days thereafter, at Tenant's
expense, by filing the bond required by law. All fixtures and all paneling,
partitions, railings and like installations, installed in the premises at any
time, either by Tenant or by Owner in Tenant's behalf, shall, upon installation,
become the property of Owner and shall remain upon and be surrendered with the
demised premises unless Owner, by notice to Tenant no later than twenty days
prior to the date fixed as the termination of this lease, elects to relinquish
Owner's right thereto and to have them removed by Tenant, in which event the
same shall be removed from the premises by Tenant prior to the expiration of the
lease, at Tenant's expense. Nothing in this Article shall be construed to give
Owner title to or to prevent Tenant's removal of trade fixtures, moveable office
furniture and equipment, but upon removal of any such from the premises or upon
removal of other installations as may be required by Owner, Tenant shall
immediately and at its expense, repair and restore the premises to the condition
existing prior to installation and repair any damage to the demised premises or
the building due to such removal. All property permitted or required to be
removed, by Tenant at the end of the term remaining in the premises after
Tenant's removal shall be deemed abandoned and may, at the election of Owner,
either be retained as Owner's property or may be removed from the premises by
Owner, at Tenant's expense.
4. MAINTENANCE AND REPAIRS. Tenant shall, throughout the term of this
lease, take good care of the demised premises and the fixtures and appurtenances
therein. Tenant shall be responsible for all damage or injury to the demised
premises or any other part of the building and the systems and equipment
thereof, whether requiring structural or nonstructural repairs caused by or
resulting from carelessness, omission, neglect or improper conduct of Tenant,
Tenant's subtenants, agents, employees, invitees or licensees, or which arise
out of any work, labor, service or equipment done for or supplied to Tenant or
any subtenant or arising out of the installation, use or operation of the
property or equipment of Tenant or any subtenant. Tenant shall also repair all
damage to the building and the demised premises caused by the moving of Tenant's
fixtures, furniture and equipment. Tenant shall promptly make, at Tenant's
expense, all repairs in and to the demised premises for which Tenant is
responsible, using only the contractor for the trade or trades in question,
selected from a list of at least two contractors per trade submitted by Owner.
Any other repairs in or to the building or the facilities and systems thereof
for which Tenant is responsible shall be performed by Owner at the Tenant's
expense. Owner shall maintain in good working order and repair the exterior and
the structural portions of the building, including the structural portions of
its demised premises, and the public portions of the building interior and the
building plumbing, electrical, heating and ventilating systems (to the extent
such systems presently exist) serving the demised premises. Tenant agrees to
give prompt notice of any defective condition in the premises for which Owner
may be responsible hereunder. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or others
making repairs, alterations, additions or improvements in or to any portion of
the building or the demised premises or in and to the fixtures, appurtenances or
equipment thereof. It is specifically agreed that Tenant shall not be entitled
to any setoff or reduction of rent y reason of any failure of Owner to comply
with the covenants of this or any other article of this Lease. Tenant agrees
that Tenant's sole remedy at law in such instance will be by way of an action
for damages for breach of contract. The provisions of this Article 4 shall not
apply in the case of fire or other casualty which are dealt with in Article 9
hereof.
5. WINDOW CLEANING. Tenant will not clean nor require, permit, suffer or
allow any window in the demised premises to be cleaned from the outside in
violation of Section 202 of the Labor Law or any
III-5
<PAGE>
other applicable law or of the Rules of the Board of Standards and Appeals, or
of any other Board or body having or asserting jurisdiction.
6. REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS. Prior to the
commencement of the lease term, if Tenant is then in possession, and at all
times thereafter, Tenant, at Tenant's sole cost and expense, shall promptly
comply with all present and future laws, orders and regulations of all state,
federal, municipal and local governments, departments, commissions and boards
and any direction of any public officer pursuant to law, and all orders, rules
and regulations of the New York Board of Fire Underwriters, Insurance Service
Office, or any similar body which shall impose any violation, order or duty upon
Owner or Tenant with respect to the demised premises, whether or not arising out
of Tenant's use or manner of use thereof, (including Tenant's permitted use) or,
with respect to the building if arising out of Tenant's use or manner of use of
the premises or the building (including the use permitted under the lease).
Nothing herein shall require Tenant to make structural repairs or alterations
unless Tenant has, by its manner of use of the demised premises or method of
operation therein, violated any such laws, ordinances, orders, rules,
regulations or requirements with respect thereto. Tenant may, after securing
Owner to Owner's satisfaction against all damages, interest, penalties and
expenses, including, but not limited to, reasonable attorney's fees, by cash
deposit or by surety bond in an amount and in a company satisfactory to Owner,
contest and appeal any such laws, ordinances, orders, rules, regulations or
requirements provided same is done with all reasonable promptness and provided
such appeal shall not subject Owner to prosecution for a criminal offense or
constitute a default under any lease or mortgage under which Owner may be
obligated, or cause the demised premises or any part thereof to be condemned or
vacated. Tenant shall not do or permit any act or thing to be done in or to the
demised premises which is contrary to law, or which will invalidate or be in
conflict with public liability, fire or other policies of insurance at any time
carried by or for the benefit of Owner with respect to the demised premises or
the building of which the demised premises form a part, or which shall or might
subject Owner to any liability or responsibility to any person or for property
damage. Tenant shall not keep anything in the demised premises except as now or
hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire
Insurance Rating Organization or other authority having jurisdiction, and then
only in such manner and such quantity so as not to increase the rate for fire
insurance applicable to the building, nor use the premises in a manner which
will increase the insurance rate for the building or any property located
therein over that in effect prior to the commencement of Tenant's occupancy,
Tenant shall pay all costs, expenses, fines, penalties, or damages, which may be
imposed upon Owner by reason of Tenant's failure to comply with the provisions
of this article and if by reason of such failure the fire insurance rate shall,
at the beginning of this lease or at any time thereafter, be higher than it
otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of all fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant. In any
action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up" of rate for the building or demised premises issued by the New York
Fire Insurance Exchange, or other body making fire insurance rates applicable to
said premises exceeding the floor load per square foot area which is was
designed to carry and which is allowed by law. Owner reserves the right to
prescribe the weight and position of all safes, business machines and mechanical
equipment. Such installations shall be placed and maintained by Tenant, at
Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and
prevent vibration, noise and annoyance.
7. SUBORDINATION. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages, which may now or hereafter affect such
leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any
III-6
<PAGE>
lease or the real property of which the demised premises are a part. In
confirmation of such subordination, Tenant shall execute promptly any
certificate that Owner may request.
8. PROPERTY - LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY. Owner or its agents
shall not be liable for any damage to property of Tenant or of others entrusted
to employees of the building, nor for loss of or damage to any property of
Tenant by theft or otherwise, nor for any injury or damage to persons or
property resulting from any cause of whatsoever nature, unless caused by or due
to the negligence of Owner, its agents, servants or employees. Owner or its
agents will not be liable for any such damage caused by other tenants or persons
in, upon or about said building or caused by operations in construction or any
private, public or quasi public work. If at any time any windows of the demised
premises are temporarily closed, darkened or bricked up (or permanently closed,
darkened or bricked up, if required by law) for any reason whatsoever including,
but not limited to Owner's own acts, Owner shall not be liable for any damage
Tenant may sustain thereby and Tenant shall not be entitled to any compensation
thereof nor abatement or diminution of rent nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction. Tenant shall
indemnify and save harmless Owner against and from all liabilities, obligations,
damages, penalties, claims, costs and expenses for which Owner shall not be
reimbursed by insurance, including reasonable attorney's fees, paid, suffered or
incurred as a result of any breach by Tenant, Tenant's agents, contractors,
employees, invitees, or licensees, of any covenant or condition of this lease,
or the carelessness, negligence or improper conduct of the Tenant, Tenant's
agents, contractors, employees, invitees or licensees. Tenant's liability under
this lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.
9. DESTRUCTION, FIRE AND OTHER CASUALTY. (a) If the demised premises or
any part thereof shall be damaged by fire or other casualty, Tenant shall give
immediate notice thereof to Owner and this lease shall continue in full force
and effect except as hereinafter set forth.
(b) If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by and
at the expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable.
(c) If the demised premises are totally damaged or rendered wholly
unusable by fore or other casualty, then the rent shall be proportionately paid
up to the time of the casualty and thenceforth shall cease until the date when
the premises shall have been repaired and restored by Owner, subject to Owner's
right to elect not to restore the same as hereinafter provided.
(d) If the demised premises are rendered wholly unusable or (whether or
not the demised premises are damaged in whole or in part) if the building shall
be so damaged that Owner shall decide to demolish it or to rebuild it, then, in
any of such events, Owner shall decide to demolish it or to rebuild it, then, in
any of such events, Owner may elect to terminate this lease by written notice to
Tenant, given within 90 days after such fire or casualty, specifying a date for
the expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the tern of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Landlord's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to
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Tenant. Unless Owner shall serve a termination notice as provided for herein,
Owner shall make the repairs and restorations under the conditions of (b) and
(c) hereof, with all reasonable expedition, subject to delays due to adjustment
of insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonable possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) day after written notice from Owner
that the premises are substantially ready for Tenant's occupancy.
(e) Nothing contained herein above shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery against the
other or any one claiming through or under each of them by way of subrogation or
otherwise. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by payment of additional premiums, then the party
benefitting from the waiver shall pay such premium within ten days after written
demand or shall be deemed to have agreed that the party obtaining insurance
coverage shall be free of any further obligation under the provision hereof with
respect to waiver of subrogation. Tenant acknowledges that Owner will not carry
insurance on Tenant's furniture and/or furnishings or any fixtures or equipment,
improvements, or appurtenances removable by Tenant and agrees that Owner will
not be obligated to repair any damage thereto or replace the same.
(f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
10. EMINENT DOMAIN. If the whole or any part of the demised premises shall
be acquired or condemned by Eminent Domain for any public or quasi public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease and assigns to
Owner, Tenant's entire interest in any such award. Tenant has a right to make a
separate claim based on its own interest.
11. ASSIGNMENT, MORTGAGE, ETC. Tenant, for itself, its heirs,
distributees, executors, administrators, legal representatives, successors and
assigns, expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor underlet, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant shall be
deemed an assignment. If this lease be assigned, or if the demised premises or
any part thereof be underlet or occupied by anybody other than Tenant, Owner
may, after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, underletting, occupancy or collection shall be deemed a waiver
of this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
12. ELECTRIC CURRENT. Rates and conditions in respect to submetering or
rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
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installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
13. ACCESS TO PREMISES. Owner or Owner's agents shall have the right (but
shall not be obligated) to enter the demised premises in any emergency at any
time, and, at other reasonable times, to examine the same and to make such
repairs, replacements and improvements as Owner may deem necessary and
reasonable desirable to the demised premises or to any other portion of the
building or which Owner may elect to perform. Tenant shall permit Owner to use
and maintain and replace pipes and condults in and through the demised premises
and to erect new pipes and condults therein provided they are concealed within
the walls, floor, or ceiling. Owner may, during the progress of any work in the
demised premises, take all necessary materials and equipment into said premises
without the same constituting an eviction nor shall the Tenant be entitled to
any abatement or rent while such work is in progress nor to any damages by
reason of loss or interruption of business or otherwise. Throughout the term
hereof Owner shall have the right to enter the demised premises at reasonable
hours for the purpose of showing the same to prospective purchasers or mortgages
of the building, and during the last six months of the term for the purpose of
showing the same to prospective tenants. If Tenant is not present to open and
permit an entry into the premises, Owner or Owner's agents may enter the same
whenever such entry may be necessary or permissible by master key or forcibly
and provided reasonable care is exercised to safeguard Tenant's property, such
entry shall not render Owner or its agents liable therefor, nor in any event
shall the obligations of Tenant hereunder be affected. If during the last month
of the term Tenant shall have removed all or substantially all of Tenant's
property therefrom. Owner may immediately enter, alter, renovate or redecorate
the demised premises without limitation or abatement of rent, or incurring
liability to Tenant for any compensation and such act shall have no effect on
this lease or Tenant's obligations hereunder.
14. VAULT, VAULT SPACE, AREA. [Deleted]
15. OCCUPANCY. Tenant will not at any time use or occupy the demised
premises in violation of the certificate of occupancy issued for the building of
which the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to Owner's
work, if any. In any event, Owner makes no representation as to the condition of
the premises and Tenant agrees to accept the same subject to violations, whether
or not of record.
16. BANKRUPTCY. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor; or (2) the making by
Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 15 shall be applicable only to the party
then owing Tenant's interest in this lease.
(b) it is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the
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difference between any installment of rent becoming due hereunder after the date
of termination and the fair and reasonable rental value of the demised premises
for the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove for and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the amount
of the difference referred to above.
17. DEFAULT. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or additional rent;
or if the demised premises become vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under Section 235 of the of Title 11 of the U.S. Code
(bankruptcy code); or if Tenant shall fail to take possession of the premises
within fifteen (15) days after the commencement of the term of this lease, then,
in any one or more of such events, upon Owner serving a written twenty (20) days
notice upon Tenant specifying the nature of said default and upon the expiration
of said twenty (20) days, if Tenant shall have failed to comply with or remedy
such default, or if the said default or omission complained of shall be of a
nature that the same cannot be completely cured or remedied within said twenty
(20) day period, and if Tenant shall not have diligently commended curing such
default within such twenty (20) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written three (3) days' notice of cancellation of this
lease upon Tenant, and upon the expiration of said three (3) days of this lease
and the term thereunder shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been
given, and the term shall expire as aforesaid; or if Tenant shall make default
in the payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
18. REMEDIES OF OWNER AND WAIVER OF REDEMPTION. In case of any such
default, re-entry, expiration and/or dispossess by summary proceedings or
otherwise, (a) the rent shall become due thereupon and be paid up to the time of
such re-entry, dispossess and/or expiration, (b) Owner may re-let the premises
or any part or parts thereof, either in the name of the Owner or otherwise, for
a term or terms, which may at Owner's option be less than or exceed the period
which would otherwise have constituted the balance of the term of this lease and
may grant concessions or free rent or charge a higher rental than that in this
lease, and/or (c) Tenant or the legal representatives of Tenant shall also pay
Owner as liquidated damages for the failure of Tenant to observe and perform
said Tenant's covenants herein contained, and deficiency
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between the rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this lease. The failure of Owner to
re-let the premises or any part or parts thereof shall not release or affect
Tenant's liability for damages. In computing such liquidated damages there shall
be added to the said deficiency such expenses as Owner may incur in connection
with re-letting, such as legal expenses, attorneys' fees, brokerage, advertising
and for keeping the demised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in monthly installments by
Tenant on the rent day specified in this lease and any suit brought to collect
the amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the deficiency for any subsequent month by a similar
proceeding. Owner, in putting the demised premises in good order or preparing
the same for re-rental may, at Owner's option, make such alterations, repairs,
replacements, and/or decorations in the demised premises as Owner, in Owner's
sole judgement, considers advisable and necessary for the purpose of re-letting
the demised premises, and the making of such alterations, repairs, replacements,
and/or decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Owner shall in no event be liable in any way
whatsoever for failure to re-let the demised premises, or in the event that the
demised premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to received any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings or other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Owner obtaining
possession of demised premises, by reason of the violation by Tenant of any of
the covenants and conditions of this lease, or others.
19. FEES AND EXPENSES. If Tenant shall default in the observance or
performance of any term or covenant on Tenant's part to be observed or performed
under or by virtue of any of the terms or provisions in any article of this
lease, then, unless otherwise provided elsewhere in this lease, Owner may
immediately or at any time thereafter and without notice perform the obligation
of Tenant thereunder. If Owner, in connection with the foregoing or in
connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to attorney's fees, in instituting, prosecuting or
defending any action or proceeding, then Tenant will reimburse Owner for such
sums so paid or obligations incurred with interest and costs. The foregoing
expenses incurred by reason of Tenant's default shall be deemed to be additional
rent hereunder and shall be paid by Tenant to Owner within five (5) days of
rendition of any bill or statement to Tenant therefor. If Tenant's lease term
shall have expired at the time of making of such expenditures or incurring of
such obligations, such sums shall be recoverable by Owner as damages.
20. BUILDING ALTERATIONS AND MANAGEMENT. Owner shall have the right at any
time without the same constituting an eviction and without incurring liability
to Tenant therefor to change the arrangement and/or location of public
entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets
or other public parts of the building and to change the name, number or
designation by which the building may be known. There shall be no allowance to
Tenant for diminution of rental value and no liability on the part of Owner by
reason of inconvenience, annoyance or injury to business arising from Owner or
other Tenants making any repairs in the building or any such alterations,
additions and improvements. Furthermore, Tenant shall not have any claim against
Owner by reason of Owner's imposition of such controls of the manner of access
to the building by Tenant's social or business visitors as the Owner may deem
necessary for the security of the building and its occupants.
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21. NO REPRESENTATIONS BY OWNER. Neither Owner nor Owner's agents have
made any representations or promises with respect to the physical condition of
the building, the land upon which it is erected or the demised premises, the
rents, leases, expenses of operation of any other matter or thing affecting or
related to the premises except as herein expressly set forth and no rights,
easements or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth in the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly acquainted with their
condition and agrees to take the same "as is" and acknowledges that the taking
of possession of the demised premises by Tenant shall be conclusive evidence
that the said premises and the building of which the same form a part were in
good and satisfactory condition at the time such possession was so taken, except
as to latent defects. All understandings and agreements heretofore made between
the parties hereto are merged in this contract, which alone fully an completely
expresses the agreement between Owner and Tenant and any executory agreement
hereafter made shall be ineffective to change, modify, discharge or effect an
abandonment of it in whole or in part, unless such executory agreement is in
writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
22. END OF TERM. Upon the expiration or other termination of the term of
this lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If the
last day of the term of this Lease or any renewal thereof, falls on Sunday, this
lease shall expire at noon on the preceding Saturday unless it be a legal
holiday in which case it shall expire at noon the preceding business day.
23. QUITE ENJOYMENT. Owner covenants and agrees with Tenant that upon
paying the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
24. FAILURE TO GIVE POSSESSION. If Owner is unable to give possession of
the demised premises on the date of the commencement of the term hereof, because
of the holding-over or retention of possession of any tenant, undertenant or
occupants or if the demised premises are located in a building being
constructed, because such building has not been sufficiently completed to make
the premises ready for occupancy or because of the fact that a certificate of
occupancy has not been procured or for any other reason, Owner shall not be
subject to any liability for failure to give possession on said date and the
validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the term of this lease, but the rent
payable hereunder shall be abated (provided Tenant is not responsible for
Owner's inability to obtain possession) until after Owner shall have given
Tenant written notice that the premises are substantially ready for Tenant's
occupancy. If permission is given to Tenant to enter into the possession of the
demised premises or to occupy premises other than the demised premises prior to
the date specified as the commencement of the term of this lease, Tenant
covenants and agrees that such occupancy shall be deemed to be under all the
terms, covenants, conditions and provides of this lease, except as tot he
covenant to pay rent. The provisions of this article are intended to constitute
"an express provision to the contrary" within the meaning of Section 223-a of
the New York Real Property Law.
25. NO WAIVER. The failure of Owner to seek redress for violation of, or
to insist upon the strict performance of any covenant or condition of this lease
or of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
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violation from having all the force and effect of an original violation. The
receipt by Owner of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. No act or thing done by Owner or Owner's
agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises, and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease or a surrender of the premises.
26. WAIVER OF TRIAL BY JURY. It is mutually agreed by and between Owner
and Tenant that the respective parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or ___________________ counterclaim
brought by either of the parties hereto against the other (except for personal
injury or property damage) on any matters whatsoever arising out of or in any
way connected with this lease, the relationship of Owner and Tenant, Tenant's
use of or occupancy of said premises, and any emergency statutory or any other
statutory remedy. It is further mutually agreed that in the event Owner
commences any summary proceeding for possession of the premises, Tenant will not
interpose any counterclaim of whatever nature or description in any such
proceeding including a counterclaim under Article 4.
27. INABILITY TO PERFORM. This Lease and the obligation of Tenant to pay
rent hereunder and perform all of the other covenants and agreements hereunder
on part of Tenant to be performed shall in no wise be affected, impaired or
excused because Owner is unable to fulfill any of its obligations under this
lease or to supply or is delayed in supplying any service expressly or impliedly
to be supplied or is unable to make, or is delayed in making any repair,
additions, alterations or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Owner is prevented or delayed from so
doing by reason of strike or labor troubles or any cause whatsoever including,
but not limited to, government preemption in connection with a National
Emergency or by reason of any rule, order or regulation of any department or
subdivision thereof of any government agency or by reason of the conditions of
supply and demand which have been or are affected by ware or other emergency.
28. BILLS AND NOTICES. [Deleted]
29. SERVICES PROVIDED BY OWNERS. Owner shall provide: (a) necessary
elevator facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from
8 a.m. to 1 p.m. and have one elevator subject to call at all other times; (b)
heat to the demised premises when and as required by law, on business days from
8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (c) water for ordinary
lavatory purposes, but if Tenant uses or consumes water for any other purposes
or in unusual quantities (of which fact Owner shall be the sole judge), Owner
may install a water meter at Tenant's expense which Tenant shall thereafter
maintain at Tenant's expense in good working order and repair to register such
water consumption and Tenant shall pay for water consumed as shown on said meter
as additional rent as and when bills are rendered; (d) cleaning service for the
demised premises on business days at Owner's expense provided that the same are
kept in order by Tenant. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner satisfactory to
Owner and no one other than persons approved by Owner shall be permitted to
enter said premises or the building of which they are a part for such purpose.
Tenant shall pay Owner the cost of removal of any of Tenant's refuse and rubbish
from the building; (e) If the demised premises are serviced by Owner's air
condition/cooling and ventilating
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system, air conditioning/cooling will be furnished to tenant from May 15th
through September 30th on business days (Mondays through Fridays, holidays
excepted) from 8:00 a.m. to 6:00 p.m., and ventilation will be furnished on
business days during the aforesaid hours except when air conditioning/cooling or
ventilation for more extended hours or on Saturdays, Sundays or on holidays, as
defined under Owner's contract with Operating Engineers Local 94-94A, Owner will
furnish the same at Tenant's expense. RIDER to be added in respect to rates and
conditions for additional service; (f) Owner reserves the right to stop services
of the heating, elevators, plumbing, air-conditioning, power systems or cleaning
or other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owner for as long as may be reasonably required by reason thereof. If the
building of which the demised premises are a part supplies manually-operated
elevator service, Owner at anytime may substitute automatic-control elevator
service and upon ten days' written notice to Tenant, proceed with alterations
necessary therefor without in any wise affecting this lease or the obligation of
Tenant hereunder. The same shall be done with a minimum of inconvenience to
Tenant and Owner shall pursue the alteration with due diligence.
30. CAPTIONS. The Captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
lease nor the intent of any provisions. thereof.
31. DEFINITIONS. The term "office", or "offices", wherever used in this
lease, shall not be construed to mean premises used as a store or stores, for
the sale or display, at any time, of goods, wares or merchandise, of any kind,
or as a restaurant, shop, booth, bootblack or other stand, barber shop, or for
other similar purposes or for manufacturing. The term "Owner" means a landlord
or lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturdays
(except such portion thereof as is covered by specific hours in Article 29
hereof), Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
32. ADJACENT EXCAVATION - SHORING. If an excavation shall be made upon
land adjacent to the demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work as
said person shall deem necessary to preserve the wall or the building of which
demised premises form a part from injury or damage and to support the same by
proper foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
33. RULES AND REGULATIONS. Tenant and Tenant's servants, employees,
agents, visitors, and licensees shall observe faithfully, and comply strictly
with, the Rules and Regulations and such other and further reasonable Rules and
Regulations as Owner or Owner's agents may from time to time adopt. Notice of
any additional rules or regulations shall be given in such manner as Owner may
elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
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Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within ten (10) days
after the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
34. SECURITY. Tenant has deposited with Owner the sum of $___________ as
security for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
lease, including, but not limited to, the payment of rent and additional rent,
Owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or any other sum as to which Tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect of
any of the terms, covenants and conditions of this lease, including but not
limited to, any damages or deficiency in the re-letting of the premises, whether
such damages or deficiency accrued before or after summary proceedings or other
re-entry by Owner. in the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of the lease, the
security shall be returned to Tenant after the date fixed as the end of the
Lease and after delivery of entire possession of the demised premises to Owner.
In the event of a sale of the land and building or leasing of the building, of
which the demised premises form a part, Owner shall have the right to transfer
the security to the vendee or lessee and Owner shall thereupon be released by
Tenant from all liability for the return of said security, and it is agreed that
the provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
35. ESTOPPEL CERTIFICATE. Tenant, at any time, and from time to time, upon
at least 10 days' prior notice by Owner, shall execute, acknowledge and deliver
to Owner, and/or to any other person, firm or corporation specified by Owner, a
statement certifying that this Lease is unmodified and in full force and effect
(or, if there have been modifications, that the same is in full force and effect
(or, if there have been modifications, that the same is in full force and effect
as modified and stating the modifications), stating the dates to which the rent
and additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and if so, specifying each such default.
36. SUCCESSORS AND ASSIGNS. The covenants, conditions and agreements
contained in this lease shall bind and inure to the benefit of Owner and Tenant
and their respective heirs, distributees, executors, administrators, successors,
and except as otherwise provided in this lease, their assigns.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner: RENAISSANCE 632 BROADWAY LLC
By: /s/ Kenneth Fishel
- -------------------------- -----------------------------------
Witness for Tenant: POLITICS.COM, INC.
By: /s/ Marc Jacobson
- -------------------------- -----------------------------------
III-15
<PAGE>
RIDER TO LEASE BETWEEN
RENAISSANCE 632 BROADWAY LLC
AND
POLITICS.COM, INC.
DATED: October 14, 1999
36A. The annual base rent during the term of the Lease shall be as set
forth in the following table. In addition, the tenant shall pay a monthly
sprinkler charge of $30.00 and a monthly water and sewer charge of $70.00. Said
sprinkler and water charge may be raised in the event-the rate at which Landlord
is charged for sprinkler and/or water service is raised. Any such raise shall be
equal to the same percentage as Landlord's rate is raised. Landlord shall
provide, at Tenant's request, evidence of such increased changes. The first
month's rent, the first month's sprinkler charge and the security shall be paid
on the signing of this Lease. Landlord represents that the demised premises are
serviced by an operating sprinkler system.
<TABLE>
<CAPTION>
PERIOD MONTHLY ANNUAL BASE RENT
INSTALLMENT
<S> <C> <C>
11/01/99-10/31/2000 $8,025.00 $96,300.00
11/01/00-10/31/2001 $8,265.75 $99,189.00
11/01/01-10/31/2002 $8,513.72 $102,164.67
</TABLE>
37. At the date of execution of this Lease, the Tenant shall pay to
Landlord, and Landlord acknowledges receipt of the following:
<TABLE>
<S> <C>
November 1999 base rent .........................................................................$8,025.00
November 1999 water and sewer .......................................................................70.00
November 1999 sprinkler protection .................................................................$30.00
BID tax (11/99-6/2000, 8 months pro-rata @$35.50 month) ...........................................$284.00
Security Deposit* ..............................................................................$35,000.00
------------
TOTAL UPON SIGNING OF LEASE ....................................................................$43,409.00
</TABLE>
The security deposit will be held in an interest-bearing "lease security"
account in HSBC Bank USA. Interest is to be paid annually to Tenant on or about
March 30 of each year, less a one (1%) percent administrative fee to be retained
by Landlord. Landlord reserves the right to change the bank in which the deposit
is mentioned and shall notify Tenant of any such change. Landlord shall not be
required to obtain an interest rate above that normally given by the bank for
ordinary lease security accounts.
III-16
<PAGE>
RENT: METHOD OF PAYMENT: Landlord will usually deliver a rent bill to the
Tenant's premises. This bill will usually be delivered before the First (1st) of
each month. The rent is due, in the Landlord's office, on the First (1st) day of
each and every month. On the First (1st) day of each month (or, if that is a
non-business day, on the first business day thereafter), a messenger from the
Landlord will pick up the rent from the Tenant's premises. Tenant agrees to have
the rent ready for the Landlord to pick up before 2:00 p.m. on the First (1st)
day of each and every month. Rent shall be paid in U.S. currency in good funds
in cash or check drawn on a bank with an office in New York City. Failure of the
Landlord to deliver a rent bill shall not relieve or extend Tenant's obligation
to pay rent timely.
RENT: LATE PAYMENT: Rent, Additional Rent, or utility charges not received
by the Landlord by 3:00 p.m. on the Seventh (7th) calendar day of each month
shall be deemed in default. In the event the full Rent, Additional Rent, or
utility charges are not received by the owner by the Seventh (7th) calendar day
of each month, the Tenant shall pay a late charge equal to four (4%) percent of
the unpaid amount of Rent, Additional Rent or Utility Charges unpaid by the due
date.
In the event any check given by Tenant to Landlord is dishonored by
Tenant's bank, for any reason, Tenant shall forthwith deliver a certified or
bank check to Landlord in the amount of the dishonored check together with any
applicable late payment charge, plus a charge of Twenty-five Dollars ($25), upon
receipt of which Landlord will return the dishonored check to Tenant.
The charges herein set forth shall be deemed reimbursement to Landlord for
expenses incurred and lost income which may result from such late payments and
not as a penalty. The charges herein shall be in addition to and not in lieu of
any other rights of Landlord granted by this Lease or by law.
37A. In the event this Lease is terminated or possession surrendered
before the expiration date as a result of Tenant's default hereunder, in
addition to all other remedies of Landlord pursuant to this Lease and the law,
any unamortized brokerage commissions actually paid by Landlord on behalf of
this lease shall become immediately due and payable and a debt to be charged
against the Tenant as additional rent or otherwise. Tenant shall further be
responsible for all costs associated in order to restore the Demised Premises to
their original condition (at the Landlord's option) and to repaint/clean the
Demised Premises.
38. (a) For the purpose of this Paragraph, it is agreed that the area
occupied by Tenant under this Lease represents 3.35 % percent of the total
rentable area of the building, of which the demised premises are a part
(hereinafter referred to as the building); that the "lease year" shall mean the
twelve (12) month period commencing with the first day of the term and each
twelve (12) month period thereafter; that the "Base" tax year for determining
the increase in taxes and vault charges, shall be the tax year 1999/2000. The
"Base" year for determining all charges in subparagraph (b) below shall be
Calendar year 1999.
III-17
<PAGE>
(b) In addition to all other rent charges payable by Tenant under this
Lease, Tenant agrees to pay 3.35 % percent of the amount of any increase in
Landlord's expense on the building for real estate taxes, common vault charges
and fuel charges imposed on the building (including the land thereunder) in any
subsequent year over the amount of the fuel costs and taxes, common vault
charges paid or required to be paid by Landlord for the Base tax year, by reason
of any increase in the assessed valuation or an increase in the tax rate, or
both, or by the levy, assessment or imposition of any new or additional real
estate tax or assessment on the building and/or appurtenances (including the
land thereunder) to the extent that same shall be in lieu of or in addition to
any of aforesaid taxes or assessments upon or against said building and/or
appurtenances (including the land thereunder) or by any increase in the vault
charges. The Tenant agrees to pay the amount of any such increase within twenty
(20) days following receipt of Landlord's bill for same. If any such increase
shall be applicable to less than a full lease year, the increase shall be
pro-rated. Landlord shall, at the time it sends Tenant a bill for the aforesaid
tax increase, enclose a copy of the most recent fuel bill and the most recent
tax and related bills from the City of New York and indicate how Landlord
computes Tenant's share of any tax increase.
(c) In addition to the above, Tenant shall be responsible for Tenant's
proportionate share 3.35 % of any Business Improvement District Charge
(B. I. D.) or tax imposed upon the building.
(d) In no event shall the annual rent stated in this Lease (exclusive
of additional rent under this article) be reduced for any year below the amount
specified therefor in paragraph 36 for such year.
39. Electric current is supplied by Landlord and is submetered to the
Tenant who shall purchase same from Landlord or Landlord's agent at the same
base rate which Landlord pays to Consolidated Edison Company (Rate No. 4) plus
Twenty-five (25 %) percent.
Landlord shall not be liable to Tenant for any loss or damage or expense
which Tenant may sustain or incur if either the quantity or character of
electric service is changed or is no longer available or suitable for Tenant's
requirements as a result of causes beyond Landlord's reasonable control. Any
riser or risers to supply Tenant's electrical requirements, upon written request
of Tenant, and written approval of Landlord may be installed by Tenant, at the
sole cost and expense of Tenant, if, in Landlord's sole reasonable judgment, the
same are necessary and will not cause permanent damage or injury to the building
or demised premises or cause or create a dangerous or hazardous condition or
entail excessive or unreasonable alterations, repairs or expense or interfere
with or disturb other tenants or occupants. In addition to the installation of
such riser or risers, Tenant will also at the sole cost and expense of Tenant,
install all other equipment proper and necessary in connection therewith subject
to the aforesaid terms and conditions. Tenant covenants and agrees that at all
times its use of electrical current shall never exceed the capacity of existing
feeders to the building or the risers or wiring installations.
III-18
<PAGE>
Bills shall be rendered at such times as Landlord may elect. In the event
that such bills are not paid within fifteen (15) business days after they are
rendered, Landlord may, after fifteen (15) business days written notice to
Tenant in accordance with paragraph 60, discontinue the service of electric
current to the demised premises. Since Landlord is liable to Con Edison for
payment of the bills even in the event Tenant defaults, Landlord's election to
employ this remedy shall not be considered a breach of agreement and shall not
entitle Tenant to any offset of rent.
Landlord may also discontinue the service of electric current to the
demised premises without cause upon thirty (30) days notice to Tenant, however,
in such event, Landlord will continue to supply electric service until Tenant
has had a reasonable time to obtain same directly from the Utility. In the event
of discontinuance of electric service by the Landlord, as hereinabove provided,
Landlord shall have the option to install a meter at its sole cost and expense
and other appropriate wiring to insure that Tenant's electrical service is not
interrupted. In such event Tenant shall not be released from any liability under
this Lease. Such discontinuance shall not be deemed to be a lessening of
services within the meaning of any law, rule, or regulation now or hereafter
enacted, promulgated or issued. In the event of such discontinuance, Tenant
shall arrange to receive such service directly from said public utility
corporation.
If any tax is imposed upon Landlord's receipt from the sale or resale of
electrical energy or gas or telephone service to the Tenant by any Federal,
State or Municipal Authority, Tenant covenants and agrees that, where permitted
by law, Tenant's prorata share of such taxes shall be passed on to, and included
in the bill of, and paid by, Tenant to Landlord.
40. It is understood and agreed that this Lease may not be assigned nor
may the demised premises be sub-leased without the prior written consent of
Landlord, whose consent shall not be unreasonable withheld and/or delayed.
However, it is understood and agreed that in the event Landlord consents to any
such assignment, sublet or transfer same shall not diminish Tenant's obligation
to perform all the terms, warranties, and covenants. Such assignment shall NOT
relieve tenant of its obligations or duties hereunder.
At Landlord's option, where Tenant proposes to Sublet or Assign all of the
Demised Premises, Landlord may elect to terminate this Lease in lieu of giving
consent, whereupon all obligations of the parties shall terminate on all
respects. Landlord, if it so elects, shall exercise this option within
Twenty-One (21) days of receipt of a written request for permission to Sublet or
Assign from the Tenant received in accordance with Paragraph 59 of this Lease.
Tenant has no reciprocal option to Terminate. Upon such Termination, the
provisions of this lease applicable to the end of the term shall be accelerated
to the date the Tenant proposed such Sublet or Assignment were to be effective.
In the event Landlord makes such election, Tenant shall remain fully responsible
for all terms of this Lease until the accelerated Termination thereof. Tenant
shall further be responsible for all charges as per paragraph 37A in the event
of any accelerated termination of this Lease pursuant to this paragraph.
III-19
<PAGE>
In the event Tenant does sell, assign or transfer this Lease or sublet any
part of the demised premises with Landlord's consent as hereinbefore provided
for a sum in excess of the base rent as herein provided Landlord shall be
entitled to receive one-half (1/2) of any such excess base rent, less of any
expense which Tenant may incur in renting same, including, without limitation,
brokerage commissions, legal fees and the cost of Tenant's leasehold
improvements. Such excess shall be determined by dividing the rent (base and
additional) paid by Tenant by the number of square feet of the demised premises
in order to determine a rent per square foot. If the rent per square foot
pursuant to the sublease or lease assignment exceeds the rent per square foot
pursuant to this Lease less the aforementioned expenses, Landlord shall be
entitled to one-half (1/2) of such excess. For the purposes of this Lease the
portion agree that the demised premises consist of 3210 square feet.
In the event of an assignment or sublease to a subsidiary, parent,
partner, affiliated company or other alter-ego of Tenant, Tenant shall remain
liable for the performances of all obligations pursuant to this Lease. Any such
assignment or sublease shall be permitted without Landlord's consent, except
Landlord must be notified in advance of such assignment or sublease and such
assignment or sublease shall not relieve either the Tenant or any Guarantor from
its obligations hereunder.
Any other assignment must be done in strict compliance with this
paragraph.
41. Tenant shall, at its sole cost and expense, provide and keep in full
force and effect for the benefit of Landlord and Tenant, a liability insurance
policy (naming Landlord as additional insured) in the amount of One Million
($1,000,000) Dollars for any one loss - Said policy shall be in standard form
written by good and solvent insurance companies reasonably satisfied to
Landlord, protecting Landlord and Tenant against any and all liabilities due to
or occasioned by negligence, occurrence, accident, or disaster on or about the
demised premises.
Said policies of insurance shall contain a provision waiving rights of
subrogation as against Landlord.
All certificates of insurance shall be delivered to and left in the
possession of Landlord prior to the commencement of this lease or the
commencement of any work performed in or on the demised premises whichever date
shall be earlier. Such insurance shall be reasonably satisfactory to Landlord
and shall contain a clause requiring notification in writing by Certified Mail,
Return Receipt Requested, on ten (10) days notice to Landlord in the event of
cancellation thereof for any reason whatsoever.
42. Tenant shall be responsible to maintain, service and install fire
extinguishers in the demised premises as required by the New York City Fire
Department and shall be responsible for the arrangement for and costs of all
required inspections.
III-20
<PAGE>
43. It is understood and that in the event an insurance company providing
Landlord with insurance for the building in which the demised premises
constitutes a part shall at any time after the commencement of this lease
increase the annual premium for the amount of coverage then in place because of
Tenant's manner of use of the demised premises, other then for office space,
Tenant shall pay to Landlord as "Additional Rent", collectible in the same
manner and method as Rent is collected hereunder, One Hundred (100%) Percent of
such increase, due and payable on the first day of the first month subsequent to
Landlord's notification to Tenant that Landlord has received notification of
such increase.
44. Intentionally Omitted.
45. The Landlord will provide steam heat to the premises between October
15 and May 15 and from 7:00 a.m. to 6:00 p.m., Monday through Friday, when the
outside temperature falls below 55DEG.F. On Saturday, Sunday, legal Holidays,
and between the hours of 5:00 p.m. to 7:00 a.m., the Landlord will provide heat
only if the outside temperature falls below 40DEG.F. In the event of a
mechanical breakdown of the heating equipment, the owner shall not be
responsible for any loss of income or damages sustained by the Tenant. The owner
agrees to make prompt repairs to the heating equipment, provided same is within
the owner's reasonable control.
The Tenant may install a supplementary heating and/or air conditioning
system, which is capable of heating and/or cooling the entire demised premises.
The Tenant's use of the supplementary heat shall be at the sole option, control,
and expense of the Tenant. The heating system shall be installed and operated in
accordance with any and all governmental laws and regulations pertaining
thereto. In the event the Tenant desires to use gas for said supplementary
heating system, the Tenant will first obtain a "blue card" and Con Edison gas
meter through the services of a licensed plumber. No air conditioner shall be
placed in the front of the building. Landlord must approve the location and the
types of air conditioning units used. Such consent shall not be unreasonably be
withheld or delayed, however, air conditioning units must conform to the general
decor of the building.
In no respect is Landlord required to maintain the premises at a specified
temperature.
In no event shall the Landlord's failure to provide heat due to technical
problems be a cause for diminution or suspension of Tenant's rental obligations.
46. In order to properly service and maintain the sprinkler system for the
entire building, the Landlord must gain access to certain sprinkler valves
within Tenant's premises. The Tenant shall permit reasonable access by
Landlord's agents or employees to the valves during normal business hours.
Tenant agrees that nothing may be attached to or hung from any sprinkler pipes.
Tenant expressly grants Landlord an easement to permit access as set forth
above.
III-21
<PAGE>
47. No services shall be provided by Landlord on legal holidays including,
but not necessary limited to, New Years Day, Presidents Day, Thanksgiving, Labor
Day, Columbus Day, Election Day, Independence Day, Memorial Day, Martin Luther
King's Birthday and Christmas Day. Notwithstanding above tenant may use the
premises and passenger elevator.
48. It is understood and agreed that any an all supplies, materials,
services equipment, and labor required for any work performed by Tenant or
performed by Landlord on Tenant's behalf to the demised premises shall be
supplied by Tenant at Tenant's sole cost and expense, unless specifically
excepted herein. Furthermore, it is understood and agreed that Tenant shall make
no demands upon Landlord for the provision of any supplies, materials, services,
equipment, or labor, nor shall Tenant request from Landlord any form of
compensation for Tenant's expenditures, unless specifically provided for herein.
49. It is understood and agreed that any and all work done by Tenant to
the demised premises shall be in accordance with all laws, regulations, and
ordinances of all governmental or municipal agencies having jurisdiction
therein.
50. Tenant, and it assigns, shall indemnify and hold Landlord harmless
from and against all liabilities, obligations, damages, penalties, claims,
costs, and expenses, including reasonable attorneys' fees paid, suffered, or
incurred arising out of or from any occurrence, accident, or disaster in the
demised premises, or in and about or adjacent to the exterior of the building in
which the demised premises constitutes a part, causing injury or damage to any
person, entity, or property, due to, any neglectful act or neglect of Tenant,
its agents, servants, employees, customers, or visitors to comply with and
perform each and every requirement and provision of this lease on its part to be
performed or due or claimed to be due to any use made by Tenant of the demised
premises. The foregoing indemnity shall not apply to the extent that Landlord
shall be determined to be contributorily negligent in respect of any occurrence,
accident or disaster in or about the demised premises.
51. Tenant agrees to use its best efforts to maintain the demised premises
free of any violations that may be imposed by the Department of Buildings and/or
any other governmental or municipal agency having jurisdiction over the demised
premises, arising out of Tenant's manner of use of the demised premises
hereunder which affect Landlord's building.
52. It is understood and agreed that Tenant will only use the demised
premises for General Office use and for no other purpose. Tenant acknowledges
that any breach of the foregoing provision will cause Landlord substantial and
irreparable harm and damage. In addition to all other remedies available to
Landlord, it is understood and agreed that this Lease and the term hereof shall
end, expire, and terminate in the event such breach is not cured within ten (10)
days after notice by Landlord to Tenant to cure said breach as served pursuant
to paragraph 60 hereof. In the event such notice is given, Tenant hereby agrees
to vacate and surrender the demised premises to Landlord forthwith. If tenant
fails to do so landlord may seek an eviction by summary proceeding.
III-22
<PAGE>
53. It is understood and agreed that in the event Tenant shall "Hold Over"
and fail to deliver the demised premises to Landlord vacant and in "Broom Clean"
condition at the expiration of this Lease, at the expiration of any extensions
of this Lease, or at any time Landlord shall gain legal possession of the
demised premises by reason of Court Order, Tenant's default, or for any other
reason whatsoever, such "Holding Over" shall not be deemed to extend the term or
to renew this Lease, but such "Holding Over" thereafter shall continue upon the
covenants and conditions herein set forth except that the charge for the use and
occupancy of such "Holding Over" for each calendar month or part thereof (even
if such part shall be a small fraction of a calendar month) shall be at the rate
of 2 times the aggregate rent and additional rent payable hereunder during the
last month of Tenant's legal occupancy, which total sum Tenant agrees to pay
Landlord promptly upon demand, in full, without set-off or deduction. In the
event Tenant shall fail to pay Landlord such charge for "Holding Over" promptly
upon Landlord's demand, as provided for hereinabove, it is understood and agreed
that Landlord shall be entitled to interest calculated at a daily periodic rate
of .0411, an annual percentage rate of Fifteen (15%) percent. Neither the
billing nor the collection of use and occupancy charges in the above amount
shall be deemed a waiver of any right of Landlord to collect damages for
Tenant's failure to vacate the demised premises after the expiration or sooner
termination of this Lease. The foregoing shall survive the term of this Lease
and any renewals or extensions thereof.
54. It is understood and agreed that the demised premises is used
commercially and any refuse or garbage generated from such commercial
establishment will not be removed by the New York City Department of Sanitation.
Therefore, Tenant understands and agrees that Tenant shall, at its own sole cost
and expense, hire a licensed garbage removal service to remove Tenant's garbage
from the demised premises.
55. It is understood and agreed that Tenant, at Tenant's sole cost and
expense, shall provide Landlord with complete access as is reasonable to the
demised premises and every part within the demised premises, provided that
Tenant shall receive reasonable advance notice thereof and that Landlord and its
agents and employees and all such persons shall use their best efforts not to
unreasonably interfere with the conduct of Tenant's business and Tenant's
occupancy of the demised premises. Tenant's failure to comply with this
provision shall be deemed a substantial breach of this Lease and sufficient
grounds for the summary termination of this Lease. Landlord agrees that except
in the event of an emergency requiring immediate entry, it will give Tenant
reasonable notice if Landlord desires to inspect or otherwise gain access to the
demised premises, provided that Tenant shall receive reasonable advance notice
thereof and that Landlord and its agents and employees and all such persons
shall use their best efforts not to unreasonably interfere with the conduct of
Tenant's business and Tenant's occupancy of the demised premises.
Furthermore, in the event Tenant shall fail to provide Landlord with
access as provided for hereinabove and in the event Landlord, in its sole and
reasonable discretion, shall deem it necessary to enter the demised premises
forcibly for any reason whatsoever, Landlord may forcibly enter the demised
premises without any liability to Tenant in the event of any emergency and
Landlord shall repair any damage caused by such forcible entry with whatever
workmen and with whatever materials and in whatever manner Landlord, in its
reasonable discretion, may deem advisable provided such repairs are done in a
workmen like manner. Landlord shall use reasonable efforts not to damage the
demised premises and the property of Tenant located therein provided that Tenant
shall receive reasonable advance notice thereof and that Landlord and its agents
and employees and all such persons shall use their best efforts not to
unreasonably interfere with the conduct of Tenant's business and Tenant's
occupancy of the demised premises.
III-23
<PAGE>
56. Tenant has inspected the premises and it is understood and agreed that
except as otherwise provided in this Lease, Tenant will accept the said premises
under this Lease, "AS IS" vacant and broom clean, in their present state and
condition, and Landlord will have no obligations to undertake any alterations,
decoration, installments, additions, improvements, or repairs except as herein
contained in or to the demised premises during the term of this Lease.
Notwithstanding the above Landlord agrees to do the following work:
a) Fully paint space.
b) Refinish existing wood floor (scrape, sand and polyutherane entire
floor).
All Tenant work must be done in accordance with New York City Building
Regulations and Code.
Landlord represents that it has no knowledge of any pending violations or
hazardous wastes at the premises.
57. Tenant hereby expressly grants to Landlord an easement and shall
permit Landlord to erect, use, maintain and repair pipes, ducts, cables,
conduits, plumbing, vents and wires in, to and through the premises as and to
the extent that Landlord may now or hereafter deem to be necessary or
appropriate for the proper operation and maintenance of the building in which
the demised premises are located or to the extent necessary to accommodate the
requirements of other Tenants in the building. All such work shall be done, so
far as practicable, in such manner as to avoid unreasonable interference with
Tenant's use of the premises. Landlord shall grant Tenant access to the plumbing
and electrical systems in the building to the extent that it can so as to allow
the hookup of the Tenant's plumbing and electrical installations.
58. The parties represent that no broker was instrumental in consummating
this Lease, except for Newmark & Company and Tarter Stats Realty. Landlord and
Tenant each agree to indemnify and to hold the other harmless against any claims
for brokerage commissions arising out of any conversations or negotiations had
by the indemnifying party with any other broker regarding these premises. This
indemnity shall include any claim and any of the indemnified party's expenses
arising out of such claims, including, but not limited to, attorneys' fees.
59. Notwithstanding any provision to the contrary, all notices required to
be sent under this lease shall be sent by Certified Mail, Return Receipt
Requested. If to the Tenant, the notice shall be addressed to the Tenant at the
demised premises with a copy to Mark Jacobson, 12 Colgate Lane, Woodbury, New
York 11797 and Michael D. Passe, 18 East 41st Street, 10th Floor, New York, New
York 10017, Fax NO. (212) 486-8668. If to the Landlord, the notice shall be
addressed to the Landlord at 627 Broadway, New York, New York with a copy to
Richard J. Pilson, Esq., c/o Berliner & Pilson, Esqs., 3 New York Plaza, 18th
Floor, New York, New York 10004, Fax no. (212) 425-6444. Either the Landlord or
the Tenant may designate another address for notices by sending the other party
a notice of same. All notices shall be effective as of the date mailed, if
mailed from a Post Office with proof of mailing.
60. In the event of any conflict between the provisions of this rider and
the printed "Boilerplate" Lease, the provisions of this rider shall prevail.
61. The failure of any party to insist upon the strict performance of a
party to exercise any right, option or remedy hereby reserved shall not be
construed as a waiver for the future of any such
III-24
<PAGE>
provision, right, option or remedy or as a waiver of a subsequent breach hereof.
The consent or approval by the Landlord of any act by Tenant requiring the
Landlord's consent or approval shall not be construed to waiver or render
unnecessary the requirement for the Landlord's consent or approval of any
subsequent similar act by the Tenant. The receipt and acceptance by the Landlord
of rent or other payments, charges or sums with knowledge of a breach of any
provision of this Lease Agreement shall not be deemed a waiver of such breach.
No provision of this Lease Agreement shall be deemed to have been waived unless
such waiver shall be in writing signed by the party to be charged. No payment by
the Tenant or receipt by the Landlord of a lesser amount than the rents, charges
and other sums hereby reserved shall be deemed to be other than on account of
the earliest rents, additional rents due hereunder, charges and other sums then
unpaid, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment by Tenant be deemed an accord and
satisfaction, and such rents, charges and other sums shall remain due and
Landlord may pursue any other remedy in this Lease Agreement provided or by law
permitted, and no waiver by Landlord in favor of any other Tenant or occupant
shall constitute a waiver in favor of the Tenant herein. No agreement to accept
a surrender of all or any part of demised premises or this Lease Agreement shall
be valid unless in writing and signed by the Landlord and the Tenant. No
delivery of keys shall operate as a termination of this Lease Agreement or a
surrender of the demised premises.
62. Tenant agrees not to use or permit the demised premises to be used for
parties of any kind, except office parties, nor to permit the maintenance of any
pets or permit the demised premises to be used as residential space or living
quarters.
63. Tenant may install only such locks on the demised premises as are
approved by law, rule or ordinance for premises of the type designated in the
use clause of this lease and further agrees to see to it that all fire exits
remain unobstructed at all times. Tenant further agrees to enforce all laws,
rules or ordinances regulating permitted smoking areas in the demised premises.
Tenant shall be responsible for installation and the cost and expense of all
locks and security devices (i.e. alarms, etc.), and the maintenance thereof.
Landlord is not responsible for any damage or loss to tenant by theft,
vandalism, etc.
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<PAGE>
64. Landlord shall provide, at no cost to Tenant, two (2) keys to the
passenger elevator. Additional elevator keys are available, but there shall be a
fifteen ($15) dollar deposit for each extra key. In addition, Landlord shall
give Tenant four (4) listings on the building directory without charge. Up to
two (2) additional listings may be had at Twenty-Five ($25) Dollars per line.
65. (a) Landlord and Tenant agree to give up the right to a trial by jury
in any court action, proceeding or counterclaim on any matters concerning this
Lease, the relationship of Tenant and Landlord or Tenant's use or occupancy of
the demised premises.
(b) If Landlord begins any court action or proceeding against Tenant
in a non-payment or holdover proceeding, Tenant may not make any counterclaim in
such action or proceeding. Tenant agrees that the rents and additional rents due
hereunder shall be due and payable and not subject to any offset or
counterclaims of any kind.
66. Notwithstanding anything to the contrary in this lease it is agreed
that any demand for rent may be made orally and no written notice of any kind
shall be necessary as a condition precedent to commencement of a non-payment
petition:
67. In any action or proceeding brought by Landlord for non-payment of
rent, additional rent and/or holdover. The prevailing party either by court
decision or settlement, shall be entitled to recover the reasonable legal fees
incurred in the prosecution or defense of such action or proceeding.
68. Pursuant to the terms of this Lease, Landlord proposes to give
possession of the Demised Premises to Tenant as of November 1, 1999. Possession
shall be deemed given when the keys to the particular space is delivered. In the
event of a delay in the giving of possession beyond the dates set forth above,
the rent for the portion of the premises for which possession is delayed shall
be apportioned until possession is given Tenant by Landlord. Landlord shall not
be responsible for failure to give possession by the above dates if such delay
is caused by the holding over of the previous tenant, provided Landlord
diligently proceeds to obtain such possession for Tenant. Tenant's sole remedy
in the event of such delay shall be an abatement of the rein for all rental
obligations during the period that the premises are not delivered. Tenant
recognizes that the current tenant's lease does not expire until March 31, 2000.
However, Landlord represents that an early termination of the current tenant's
lease is presently being negotiated and that Landlord is entering this Lease
with a good faith belief that possession will be available by November 1, 1999.
Tenant may terminate this Lease at its option if possession is not available by
December 1, 1999, and in such event all monies advanced on behalf of this Lease
shall be immediately refunded and neither party shall have any further claims
hereunder.
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<PAGE>
RENAISSANCE 632 BROADWAY LLC,
-----------------------------
Landlord,
By: /s/ Kenneth Fishel
------------------------
Kenneth Fishel
POLITICS. COM, INC.,
--------------------
Tenant,
By: /s/ Marc Jacobson
------------------------
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<PAGE>
EXHIBIT 6.10
POLITICS.COM, INC.
------------------
1999 ADVISORY COUNCIL STOCK OPTION PLAN
---------------------------------------
SECTION I. PURPOSE OF THE PLAN.
The purposes of this Politics.com, Inc. 1999 Advisory Council Stock
Option Plan (the "1999 Plan") are (i) to provide long-term incentives and
rewards to members of the Advisory Councils (the "Participants") of
Politics.com, Inc., a Delaware corporation (the "Corporation") and its
subsidiaries (if any), (ii) to assist the Corporation in retaining and
attracting Advisory Council Members with requisite experience and ability, and
(iii) to associate more closely the interests of such Advisory Council Members
with those of the Corporation's stockholders.
SECTION II. DEFINITIONS.
"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.
"PARTICIPANTS" is defined in Section I.
"FAIR MARKET VALUE" of any property is the value of the property as
reasonably determined by the Committee.
"1999 PLAN" 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.
"PERMANENT AND TOTAL DISABILITY" has the meaning provided in Section
22(e)(3) of the Code.
"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.
SECTION III. ADMINISTRATION.
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<PAGE>
(a) THE COMMITTEE. This 1999 Plan shall be administered by the Board of
Directors or by a compensation committee consisting of two or more directors,
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, 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.
(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 Advisory Council Members eligible to be
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.
(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.
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<PAGE>
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. The agreement
shall include the following or a similar statement: "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) TERM. Stock Options shall be for such periods as may be determined
by the Committee.
(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.
(d) 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.
(e) 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.
(f) 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,
III-30
<PAGE>
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.
(g) 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.
(h) 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.
(i) PARTICIPATION BY FOREIGNERS. Without amending this 1999 Plan, 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 rules
or regulations of the Securities and Exchange Commission, 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. 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. In
III-31
<PAGE>
connection with the foregoing, the Committee may issue new Stock Options in
exchange for outstanding Stock Options.
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 400,000 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 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.
SECTION VII. EFFECTIVE DATE AND TERM OF THIS PLAN.
The effective date of this 1999 Plan is October 7, 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: N/A
DATE OF APPROVAL BY BOARD OF DIRECTORS: As of October 7, 1999
III-32
<PAGE>
EXHIBIT 6.11
POLITICS.COM, INC.
ADVISORY COUNCIL ENGAGEMENT AND OPTION AGREEMENT
(-----------------)
Advisory Council Engagement and Option Agreement (the "Agreement") made
effective as of the ____ day of _____________, 1999 between Politics.com, Inc.,
a Delaware corporation (the "Corporation"), and _____________________ (the
"Advisor"), a member of one of the Corporation's Advisory Councils.
W I T N E S S E T H:
WHEREAS, the Corporation and the Advisor desire to enter into an
agreement whereby the Advisor will serve as a member of one of the Corporation's
Advisory Councils and the Corporation will grant the Advisor 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 Advisor
agree as follows:
1. ADVISORY COUNCIL ENGAGEMENT.
Subject to the terms and conditions contained in this Agreement, the
Corporation hereby appoints the Advisor as a member of the Corporation's
Advisory Council for an initial term of two years, and the Advisor hereby
accepts such appointment. At the Corporation's election, the Corporation may
renew the Advisor's appointment for additional two year terms, upon written
notice to the Advisor given at least thirty days prior to the expiration of the
initial term or any renewal term.
2. RESPONSIBILITIES OF ADVISOR.
The Advisor shall provide such consulting services to the Corporation
concerning the Corporation's Web Site and related matters, as the Corporation
may reasonably request. Without limiting the generality of the foregoing, the
Advisor shall view and critique the Corporation's Web Site on a regular basis,
provide guidance on issues relevant to the Corporation and provide the
Corporation with ideas to enhance its Web Site. Further, the Advisor shall, at
the Corporation's request, use his/her best efforts to attend up to two meetings
per year.
III-33
<PAGE>
3. COMPENSATION TO ADVISOR.
As full compensation to the Advisor for services to be rendered to the
Corporation, pursuant to the terms and conditions of the Corporation's 1999
Advisory Council Stock Option Plan (the " 1999 Plan") and this Agreement, the
Corporation hereby grants to the Advisor an option ("Option") to purchase, as
provided in Section 5 hereof, all or any part of a total of 10,000 shares of
Stock (the "Option Shares"). The Corporation shall reimburse the Advisor for out
of pocket expenses reasonably incurred by the Advisor in connection with
rendering services to the Corporation hereunder, provided that any expense over
$250 shall be subject to prior approval by the Corporation, and, provided
further, that the Advisor shall provide reasonable documentation of all
reimbursable expenses.
4. 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.
5. EXERCISE OF OPTION.
Subject to the provisions of Section 6, the purchase rights with
respect to the 10,000 Option Shares shall be exercisable as follows: 2,000 shall
be immediately exercisable, and the remaining 8,000 shall become exercisable in
four (4) equal semi-annual installments commencing six (6) months from the date
hereof.
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").
6. TERMINATION OF RELATIONSHIP.
The Corporation shall have the right to terminate this Agreement if the
Advisor is not fulfilling his/her obligations under this Agreement, as
determined by the Corporation. If the Advisor'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 Advisor could exercise
this Option on the date of vesting under Section 5 next succeeding 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 Advisor
from further exercising any portion of this Option.
7. 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 Advisor, only the Advisor
may exercise this Option. If the Advisor dies while still employed by the
Corporation, or during the periods specified in Section 6, this Option may
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<PAGE>
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 Advisor.
8. 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 11 of this Option, or where
appropriate because a person other than the Advisor is exercising the Option
pursuant to Section 7. 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 Advisor, 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.
9. 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.
10. NO RIGHTS OTHER THAN THOSE EXPRESSLY CREATED.
Neither this Option nor any action taken hereunder shall be construed
as (i) giving the Advisor any right to be retained in the employ of, or continue
to be affiliated with, the Corporation, (ii) giving the Advisor 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 Advisor 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 Advisor
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.
11. 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 Advisor 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 Advisor pay the Corporation the amount of any
taxes which the Corporation may determine is required to be collected or
withheld, and the Advisor shall comply with the requirement or demand of the
Corporation.
(b) SECURITIES LAW COMPLIANCE. Upon exercise (or partial
exercise) of this Option, the Advisor 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
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<PAGE>
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 Advisor 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.
12. NON DISCLOSURE.
The Advisor acknowledges that the Corporation has developed certain
innovations, designs and sales, marketing and business strategies related to its
business and Web Sites and in connection therewith has developed and uses
certain confidential and proprietary information (hereinafter the "Confidential
Information") concerning all supporting and related technology, know how, trade
secrets, formulae, processes, methods, specifications, administrative, marketing
and financial activities, including sales, marketing and business plans, models
and strategies, cost and financial data, and customer and supplier names, and
related tangible and intangible property rights. Advisor agrees that the
Confidential Information disclosed in any medium of expression by the
Corporation to Advisor will be received and held in confidence by Advisor and
will be used by Advisor for the sole purpose of rendering services to the
Corporation hereunder. Advisor will take all necessary measures to safeguard the
Confidential Information. Advisor shall not copy or duplicate any documentation
relating to the Confidential Information and shall not disclose any part of the
Confidential Information to any third party or otherwise use the Confidential
Information for its own benefit or the benefit of any third party. Upon request
of the Corporation, Advisor shall promptly deliver to the Corporation any and
all documentation of the Confidential Information and any and all documents,
letters, records, notebooks, and all other tangible and intangible materials and
all copies thereof which contain any such information then in Advisor's
possession or under its control. Advisor acknowledges and agrees that the
Corporation shall not have an adequate remedy at law in the event of a breach of
this Agreement by Advisor, that the Corporation will suffer irreparable damage
and injury if Advisor breaches any provision of this Agreement, and that if
Advisor violates any of the provisions of this Agreement, the Corporation, in
addition to any other rights and remedies available under this Agreement or
otherwise, shall be entitled to an injunction to be issued by a court of
competent jurisdiction restricting Advisor from committing or continuing any
violation of this Agreement.
13. COVENANT NOT TO COMPETE.
(a) For a period commencing on the date hereof and ending upon
the expiration of a period of six (6) months from the termination of the
Advisor's relationship with the Corporation either as a consultant or as an
employee (the "Noncompetition Period"), the Advisor shall not, directly or
indirectly, whether as owner, part-owner, security holder, investor, creditor,
guarantor, surety, trustee, partner, shareholder, director, officer, consultant,
agent, employee, or otherwise, or through any person or entity, including as a
passive stockholder, partner or beneficial owner, have any interest in, consult
with, become an employee or independent contractor of, or in any way aid or
assist any competitor of the Corporation, or any of its affiliates or other
business entities that are either controlled by, controlling or under common
control with the Corporation, now or hereafter existing (each an "Affiliate" and
collectively the "Affiliates"), or any successor or assign of the Corporation (a
"Successor"), or engage or
III-36
<PAGE>
attempt to engage in any employment, independent contracting, consulting or
other business activity, which activity competes, directly or indirectly, with
the Business (defined below) of the Corporation, any Affiliate or any Successor
anywhere within the continental United States. For purposes of this Agreement,
the term "Business" shall mean activities related to the Corporation's Internet
business, and any other businesses currently conducted, or conducted by the
Corporation at any time during the Advisor's employment with the Corporation, or
which may reasonably be expected to be conducted in the future by the
Corporation or its Affiliates or its Successors. The Advisor acknowledges that
his/her participation in the conduct of any such business alone or with any
person will materially impair the Business and prospects of the Corporation and
its Affiliates.
(b) In addition to and without limiting the foregoing, during
the term of the Noncompetition Period, the Advisor shall not attempt to or
assist any other person in attempting to do any of the following : (i) encourage
any customer, client, supplier or other business relationship of the Corporation
or any Affiliate or any former customer, client, supplier or other business
relationship of the Corporation or any Affiliate, to terminate or adversely
alter such relationship, whether contractual or otherwise, to the disadvantage
of the Corporation or any Affiliate, as the case may be; (ii) encourage any
prospective customer, client, supplier or other business relationship of the
Corporation or any Affiliate not to enter into a business relationship with the
Corporation or any Affiliate; (iii) impair or attempt to impair any
relationship, contractual or otherwise, written or oral, between the Corporation
or any Affiliate and any customer, client, supplier or other business
relationship of the Corporation or any Affiliate; or (iv) participate, directly
or indirectly, whether as owner, part-owner, security holder, investor,
creditor, guarantor, surety, trustee, partner, shareholder, director, officer,
consultant, agent, employee, or otherwise, in any business which is a customer,
client, supplier or other business relationship of the Corporation or any
Affiliate. In addition to and without limiting the foregoing, during the
Noncompetition Period, the Advisor shall not solicit, hire, attempt to hire, or
assist any other person in attempting to hire, any person who is then or who has
been within the preceding five years a director, officer, employee, or agent of
the Corporation or any Affiliate, or encourage any such person to terminate such
relationship with the Corporation or any Affiliate, as the case may be.
14. SEVERABILITY.
The parties agree that each provision contained in this Agreement shall
be treated as a separate and independent clause, and the unenforceability of any
one clause in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such unenforceability without invalidating the remaining
provisions hereof, and any such unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to scope, activity or subject,
such provisions shall be construed by the appropriate judicial body by limiting
and reducing it or them, so as to be enforceable to the extent compatible with
the applicable law.
15. MISCELLANEOUS.
(a) PROVISIONS OF THE PLAN. The Option hereby granted is
expressly subject to all of the terms and conditions contained in this Agreement
and in the 1999 Plan, and the 1999 Plan is hereby incorporated herein by
reference. All capitalized terms not defined in this Agreement 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
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<PAGE>
determinations required to be made by the Corporation, and shall interpret all
provisions of this Agreement, 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 Advisor. The Committee, in its
sole discretion, is authorized to accelerate the time at which this Agreement
may be exercised.
(c) RESERVATION OF SHARES. During the term of this
Agreement, the Corporation shall at all times reserve and keep available shares
of Stock sufficient to satisfy the requirements of this Agreement.
(d) AMENDMENT. This Agreement may only be modified or amended
by a writing signed by both parties.
(e) NOTICES. Any notices required to be given under this
Agreement 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 Advisor:
-----------------
-----------------
-----------------
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 Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Corporation. The Advisor may not assign
his/her rights or obligations under this Agreement, as the Corporation has
entered into this Agreement in reliance on the personal qualities and skills of
Advisor.
(g) APPLICABLE LAW. All rights and obligations under this
Agreement shall be governed by the laws of the State of Delaware.
(h) PARAGRAPH HEADINGS. The paragraph headings used in this
Agreement are for convenience or reference, and are not to be construed as part
of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal effective as of the date written on the first page of this
Agreement.
Politics.com, Inc.
By:
------------------------------
Marc Jacobson, President
------------------------------
Name
---------------------
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<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 Advisory Council Engagement and 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,
------------------------
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<PAGE>
EXHIBIT 6.12
TOUCHSCREEN MEDIA GROUP, INC.
SERVICES AGREEMENT
1. PARTIES. This Services Agreement ("Agreement") is between Touchscreen
Media Group, Inc., 1674 Broadway, New York, New York 10019 ("Touchscreen") and
Politics.com, Inc. 2530 South Rural Road, Tempe, Arizona 85282 ("Politics.com")
effective as of October 29, 1999 ("Effective Date").
2. RETENTION OF TOUCHSCREEN; PROJECT IDENTIFICATION.
(a) Politics.com desires to retain Touchscreen to provide certain
professional services relating to the Politics.com's web site ("Web Site").
(b) Touchscreen shall provide services relating to specifications,
information organization and development, graphic design, software development,
architecture and functionality for each Project, as the parties shall agree
which shall be set forth in a separate Statement of Work, in the format attached
("SOW"). Each SOW shall also include the deliverables, fees, reporting
responsibilities and milestones. Any changes to a SOW must be in writing and
signed by the parties.
3. COMPENSATION AND EXPENSES.
(a) Politics.com shall pay Touchscreen in accordance with the applicable
SOW. If no time period for payment is identified in the SOW, Politics.com shall
pay Touchscreen no later than thirty (30) days after Politics.com's receipt of
Touchscreen's invoices. Touchscreen shall invoice Politics.com on a biweekly
basis. Except as otherwise provided in the SOW, Politics.com shall pay
Touchscreen the final fifteen (15%) for each Project after completion, delivery
and acceptance of the Project to and by Politics.com. Politics.com agrees to pay
a late fee for all overdue invoices at the rate of one and a half percent (1.5%)
of the outstanding balance per month, or the legal maximum, whichever is lower.
Politics.com expressly reserves the right to require that any invoice submitted
be supported by reasonable documentation prior to Politics.com's acceptance and
payment thereof. Each invoice shall be forwarded to the attention of the
Accounts Payable department at: 2530 South Rural Road, Tempe, Arizona 85282. In
no event shall Politics.com be obligated to pay Touchscreen for an amount in
excess of the maximum aggregate amount stated in a SOW, without the express
prior written agreement of Politics.com.
(b) All prices and fees are exclusive of all sales, use, or other
taxes, and shipping, transportation, insurance for deliverables, or other direct
charges, unless specifically stated to the contrary in the SOW. Politics.com
shall reimburse Touchscreen for reasonable, necessary and actual out-of-pocket
expenses such as travel, lodging, communications and supplies (which may include
administrative expenses or other mark-up, up to a maximum of 15%, but shall not
include Touchscreen's overhead costs or allocations thereof) except as shall be
approved in advance in writing by Politics.com.
4. TERM AND TERMINATION.
(a) This Agreement shall remain in effect for so long as Touchscreen is
providing services and/or products under a SOW, unless terminated by one of the
parties as provided herein. Either party may terminate this Agreement if the
other party commits a material breach of this Agreement and fails to cure the
breach within thirty (30) days of written notice from the nonbreaching party. If
Politics.com fails to pay an invoice within the time specified for payment,
Touchscreen shall have the right, in
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<PAGE>
addition to any other rights or remedies, to suspend its services to
Politics.com under the applicable SOW and any other SOW then in effect, until
receipt of payment, plus interest, from Politics.com. Any SOW may be terminated
in accordance with this provision, or in accordance with any termination
provisions in the SOW. Notwithstanding any other provision to the contrary
contained in this Agreement, Politics.com may at any time terminate the
performance of all or any portion of the services to be provided under any SOW
upon ten (10) days prior written notice to Touchscreen, in which event
Politics.com shall be obligated to pay only for such portions of the services
actually performed in accordance with such SOW. In such an event, payment must
be made by Politics.com to Touchscreen before Touchscreen shall be obligated to
return any Politics.com materials to Politics.com.
(b) Wherever in this Agreement provision is made for the mutual
agreement of the parties with respect to any matter, the parties shall negotiate
in good faith to reach mutual agreement. If the parties are unable to reach
agreement within the time required, then either party may terminate this
Agreement upon not less than thirty (30) days prior written notice to the other
party.
(c) Upon termination of this Agreement or the particular SOW, each
party shall return the other's Confidential Information; Politics.com shall pay
Touchscreen all fees owed under this Agreement for products and/or services
provided through the effective date of termination; and Touchscreen shall return
any Politics.com materials, equipment and property of any nature.
5. POLITICS.COM CONTRIBUTIONS TO DELIVERABLES, REPRESENTATIONS AND
WARRANTIES.
(a) Politics.com represents and warrants that all information, text,
graphics and other materials it discloses or delivers to Touchscreen for use in
connection with this Agreement and/or Politics.com's Web Site ("Politics.com
Contributions") are the property of Politics.com or that Politics.com has
secured the necessary rights from the owner of the Politics.com Contributions
for their use in connection with this Agreement and/or Politics.com's Web Site.
Politics.com represents and warrants that no Politics.com Contributions infringe
any copyright, trademark, trade secret, patent or other right of a third party.
Touchscreen shall be entitled to rely on the accuracy, completeness and
appropriateness of all Politics.com Contributions for each Project. Except as
provided above, Politics.com makes no other express or implied warranty with
respect to the Politics.com Contributions. Politics.com disclaims, and
Touchscreen waives all other express or implied warranties, including, without
limitation, the implied warranties of merchantability or fitness for a
particular purpose.
(b) Politics.com agrees that if Politics.com Contributions for a
Project are not provided in the mutually agreed upon format, reformatting may
alter time-frames and costs for the Project.
(c) Touchscreen represents and warrants to Politics.com that: (a) it
will perform the services in accordance with the standards of its profession or
industry, and the scope of work described in the SOW and will use only qualified
personnel and be responsible for the supervision, management and control of all
personnel performing the services; (b) the Works (and each portion thereof,
excluding Politics.com Contributions): (i) will not infringe on or violate any
copyright, patent, trademark or any other intellectual property or other
proprietary right of any third party, (ii) will consist only of information that
Touchscreen is authorized to use and to authorize Politics.com to use as
contemplated in this Agreement, (iii) will not constitute a libel or defamation
or conflict with any right of privacy or other rights of, and will not cause
injury to, any third party, and will not be obscene, pornographic or otherwise
tortious; (c) Touchscreen has the full and unrestricted right to disclose any
information, knowledge or data disclosed by it to Politics.com in the
performance of this Agreement; (d) Touchscreen is free to undertake the services
required by this Agreement, and there is no conflict of interest between
Touchscreen's performance of this Agreement and any obligation Touchscreen may
have to other
III-41
<PAGE>
parties; (e) Touchscreen will perform the services in strict compliance with all
applicable laws, regulations and ordinances; (f) Touchscreen will obtain at its
expense all necessary permits, licenses and other consents required for the
performance of the services; (g) if applicable, Touchscreen has caused its
employees to assign to it all their right, title and interest in any invention,
discovery or other work invented, discovered or developed by its employees in or
as a direct result of the performance of this Agreement; and (f) the
deliverables, at no additional charge to Politics.com and without any
modifications by Politics.com to its hardware, software or firmware, shall be
Year 2000 Compliant. "Year 2000 Compliant" shall mean that the deliverables
shall correctly process, provide and/or receive date data: a) within and between
the twentieth and twenty-first centuries; b) on, before and after February 29,
2000; and c) in any test simulation of those dates, provided that all products
(for example, hardware, software and firmware) used with the deliverables
properly exchange accurate date data with the deliverables.
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<PAGE>
6. WEB SITE CONTENT. If any Politics.com Contribution and/or other
Politics.com content, in Touchscreen's reasonable opinion, is defamatory,
threatening, obscene, indecent, patently offensive, violative of the proprietary
rights of a third party or otherwise tortious, then the parties shall negotiate
in good faith to attempt to resolve the matter. If the parties are unable to
reach mutual agreement, then either party may terminate the Agreement in
accordance with Section 4(b) above.
7. ACCEPTANCE AND REMEDY. All deliverables are legally accepted upon
delivery and acceptance by Politics.com, unless within thirty (30) days after
receipt of a deliverable, Politics.com notifies Touchscreen in writing in detail
as to how the deliverable fails to conform to the specifications set forth in
the applicable SOW. If Politics.com, in its reasonable discretion, determines in
good faith that the deliverable fails to materially conform to those
specifications, Touchscreen shall have thirty (30) days to use its best efforts
to remedy any material nonconformance and to provide a revised deliverable to
Politics.com. If Touchscreen is unable to remedy any such nonconformance after
such thirty-day period, Politics.com shall have the right to terminate the SOW
and/or the Agreement and shall be entitled to a full refund of any compensation
paid to Touchscreen in connection with such deliverable.
8. TECHNICAL SUPPORT. Under the terms of a SOW, and at Touchscreen's
standard rates (except during the warranty period specified in Section 10(a)
below, when such technical support shall be provided at no charge), Touchscreen
will provide to Politics.com a reasonable level of technical support during the
support hours of 9:00 a.m. to 5:00 p.m., Eastern Time, by telephone, facsimile
and electronic mail by personnel familiar with the operation of Politics.com's
Web Site to answer questions, furnish information and render assistance to
Politics.com in its use and operation and to assist Politics.com to resolve
problems in its Web Site. In addition, Touchscreen will make reasonable attempts
to provide technical support outside of its standard support hours if required
on occasion by Politics.com. In no event shall Touchscreen have any obligation
under this Agreement to respond to inquiries (whether by electronic mail,
telephone or any other means), provide on-line help utilities for, or otherwise
render assistance to any person other than an authorized representative of
Politics.com. Without limiting the foregoing, Touchscreen shall have no
obligation to assist users of the World Wide Web regarding the use or operation
of Politics.com's Web Site or server. Any provision of technical support
services by Touchscreen under this section shall not grant to Politics.com any
rights to any customization, enhancements, upgrades, or modifications to the
services set forth in a SOW.
9. PUBLIC NOTICE OF WEB SITE CREATOR. Politics.com agrees that in its Web
Site, and its marketing materials and press releases about the Web Site,
Politics.com shall use commercially reasonable efforts to identify Touchscreen
as the developer of the Web Site.
10. DELIVERABLES - LIMITED WARRANTY.
(a) Touchscreen warrants that each deliverable shall materially conform
to its written specifications in a SOW for a period of one hundred eighty (180)
days after delivery to Politics.com. If, during such limited warranty period,
the deliverable fails to so conform, Touchscreen shall use commercially
reasonable efforts to remedy such nonconformity, replace the deliverable, or
refund the fees Touchscreen received in connection with the deliverable.
(b) No warranty applies to any deliverable which has been damaged or
misused, altered or upgraded by anyone other than Touchscreen. This limited
warranty shall apply only so long as the deliverables are maintained in the same
operating environment set forth in the applicable SOW. The remedies above are
the Politics.com's sole and exclusive remedies for a defect in any deliverable.
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<PAGE>
(c) Except as expressly provided in this Agreement or an SOW,
Touchscreen makes no other express or implied warranty with respect to the
products, deliverables, services and/or the results obtained from their use by
Politics.com. Touchscreen disclaims, and Politics.com waives all other express
or implied warranties, including, without limitation, the implied warranties of
merchantability or fitness for a particular purpose.
11. OWNERSHIP AND USE OF DELIVERABLES.
(a) Touchscreen agrees that all technology, technical know-how and
software including but not limited to, development tools, programming
techniques, standardized routines, structures, algorithms, processes, designs,
screen displays, menus and interface designs made or conceived by Touchscreen,
whether or not patentable or copyrightable, and whether made solely by
Touchscreen or jointly with others, which are delivered pursuant to, result
directly or indirectly from, or are suggested by any SOW or which result from
information derived from Politics.com or its employees, agents or other
consultants shall hereinafter be referred to as "Works". Touchscreen shall
promptly communicate all Works to Politics.com in writing. All Works (or any
part thereof) which are subject to copyright shall be deemed "works made for
hire" specially ordered or commissioned as a contribution to a collective work,
such that Politics.com shall be the author and sole owner of all right, title
and interest in and to such Works. To the extent that any Works are not deemed
"works made for hire", and further, with regard to any Works that Touchscreen
acquires ownership of from third parties, this Agreement shall operate as
Touchscreen's irrevocable assignment to Politics.com of all right, title, and
interest (including any copyright) in such Works in perpetuity. Touchscreen
shall cooperate with Politics.com in executing such documents or taking such
other steps that Politics.com deems necessary or appropriate to record or
otherwise memorialize such assignment, including all steps necessary to obtain a
patent (if applicable). As between Touchscreen and Politics.com, Politics.com
shall own all other aspects of the Works. Politics.com shall own (and
Touchscreen hereby assigns to Politics.com all of Touchscreen's right, title,
and interest to) any trademark, service mark, logo, character, design, etc.
created or acquired for, or otherwise first used in connection with the Works.
This Section shall not grant Politics.com any rights in any established
Touchscreen trademark, service mark, or logo that Touchscreen uses in connection
with the Works.
(b) Notwithstanding the foregoing, nothing herein shall be construed to
vest in Politics.com ownership of any right, title or interest in that portion
of the Works developed by Touchscreen prior to the commencement of work
hereunder (collectively "Touchscreen's Pre-existing Software Tools"); however,
Touchscreen hereby grants to Politics.com a non-exclusive, worldwide,
royalty-free, irrevocable license in perpetuity to use the Touchscreen
Pre-existing Software Tools in connection with the Politics.com Web Site;
provided Politics.com is not in material breach of the terms of this Agreement.
(c) Politics.com hereby grants Touchscreen a perpetual, non-exclusive
license to use the technology, technical know-how, software, development tools
and programming techniques developed by Touchscreen to create the Works
hereunder in connection with other projects Touchscreen may develop for third
parties; provided that (i) such third parties are not in the business of
providing political information or services, (ii) Touchscreen, when practicable,
endeavors to notify Politics.com of its intent to use such technology for such
other projects and to negotiate a license fee payable to Politics.com for the
use of such technology, and (iii) Touchscreen is not in material breach of the
terms of this Agreement.
(d) The source code for the Web Site and for the services rendered by
Touchscreen hereunder (except for the source code for Touchscreen's Pre-Existing
Software Tools) shall be delivered
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<PAGE>
to Politics.com as part of any deliverable under any SOW and shall be owned by
Politics.com. Politics.com hereby grants Touchscreen a non-exclusive,
world-wide, royalty-free, non-transferable, perpetual license to use such source
code for its own business purposes, subject to the limitations set forth in this
Agreement including, but not limited to, the limitation on using such technology
for other projects for other parties set forth in Section 11(c) above.
(e) Any customization of the Web Site by Politics.com or any use of the
above-described source code by Politics.com or a party other than Touchscreen
shall void the limited warranties provided in this Agreement.
12. CONFIDENTIALITY.
(a) During this Agreement, each party may have access to information
that is considered confidential by the other. This information may include
technical know how, technical specifications, software object code and source
code, protocols, strategic business plans, results of testing, systems,
financial information, product information, methods of operation, compilations
of data, and third party confidential information ("Confidential Information").
(b) Each party shall use the other's Confidential Information only for
the purposes of, and in performance of its obligations under, this Agreement
and/or a SOW. Each party shall maintain the confidentiality of the other party's
Confidential Information in the same manner in which it protects its own
Confidential Information of like kind, but in no event shall either party take
less than reasonable precautions to prevent the unauthorized disclosure or use
of the Confidential Information. Each party may disclose such Confidential
Information to its attorneys and auditors in the normal course or by reason of
governmental rules or regulations or court proceedings.
(c) Each party is permitted to disclose the other party's Confidential
Information to its employees and subcontractors on a need to know basis only,
provided that such employees and subcontractors have written confidentiality
obligations to that party. Each party shall be responsible for, and shall
indemnify and hold the other harmless from, any damages, expenses or costs
resulting from unauthorized disclosure or use of Confidential Information by its
employees or subcontractors.
(d) The confidentiality provisions of this Agreement do not apply to
information that is in the public domain; was known to the receiving party prior
to access to that information; received lawfully from a third party through no
breach of any obligation of confidentiality owed to the other party; or created
by a party independently of its access to or use of the other party's
Confidential Information.
(e) Upon termination of this Agreement or a party's request, each party
shall return the other party's Confidential Information in its possession and
shall not use the other party's Confidential Information for its own, or any
third party's, benefit. Each party's confidentiality obligations shall survive
termination of this Agreement, and any applicable SOW, for so long as the
Confidential Information remains confidential.
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<PAGE>
13. LIMITATION OF LIABILITY. Except as otherwise provided in Section 14
below, in no event shall either party be liable to the other, regardless of the
form of action or theory of recovery for (a) any indirect, special, exemplary,
consequential, incidental or punitive damages, or for lost profits or business
interruption losses, even if such party has been advised of the possibility of
such damages.
14. INDEMNIFICATIONS.
(a) Touchscreen shall, at its sole expense, defend, indemnify, and hold
Politics.com harmless against any and all third party claims, suits, demands and
actions against Politics.com (including reasonable attorneys fees) resulting
from or arising out of Touchscreen's breach of any of its covenants,
representations or warranties or its performance or non-performance under this
Agreement.
(b) Politics.com shall, at its sole expense, defend, indemnify, and
hold Touchscreen harmless against any and all third party claims (including
reasonable attorneys fees and expenses) that (1) that Politics.com Contributions
and/or other Politics.com content infringes a third party's intellectual
property rights; and/or (2) that Politics.com Contributions and/or other
Politics.com content are obscene, pornographic, threatening, defamatory,
libelous, slanderous, or otherwise tortious.
(c) To receive indemnification, the party seeking indemnification must
provide the other party with prompt written notice of the claim, must allow the
other party to have sole and exclusive control of the defense and/or settlement
of the claim, and must cooperate with the other party, at the other party's
expense, in the defense and/or settlement of the claim. This provision states
each party's sole and exclusive remedy and obligations for indemnification
regarding the above referenced claims.
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<PAGE>
15. RELATIONSHIP OF THE PARTIES. The relationship created by this Agreement
is that of independent contractor, and nothing in this Agreement shall
constitute the parties as joint venturers, partners, employees, or agents of
each other.
16. NO EMPLOYEE SOLICITATION. During the term of this Agreement and for a
period of one (1) year after its termination, each party agrees not to hire,
solicit for hire, or use the services of any individuals who were or are
employees of the other party during the term of this Agreement. Each party
stipulates to the reasonableness of this provision to protect the legitimate
interests of each party in its workforce.
17. INSURANCE. Touchscreen represents that it shall at all times during the
term of this Agreement have insurance in effect in the minimum amounts and
coverage as are standard in its industry, including without limitation, Worker's
Compensation, and providing that no cancellation, reduction in amount or
material change in coverage thereof shall be effective until at least ten (10)
days after receipt by Politics.com of written notice thereof. Such notice shall
be forwarded to: Politics.com, 2530 South Rural Road, Tempe, Arizona 85282
Attn.: Legal. In the event of any such change, Politics.com may require
Touchscreen to obtain said minimum amounts and coverages from another acceptable
carrier. Touchscreen agrees to submit copies of such insurance policies to
Politics.com upon request.
18. ADVERTISING. Touchscreen shall not in any way or in any form publicize
or advertise the fact that it is performing the services without the prior
written consent of Politics.com, provided that Touchscreen, without such
consent, may include Politics.com in any representative listing of its clients.
19. ASSIGNMENT. Neither this Agreement nor any interest under it shall be
assignable by Touchscreen, nor shall Touchscreen subcontract with, or otherwise
delegate duties to, any other party for the provision of the services, or any
part thereof, without Politics.com's prior written consent. Any purported
assignment or delegation by Touchscreen without such consent shall be void.
20. GENERAL PROVISIONS.
(a) This Agreement, all SOWs, and any addenda thereto, contain the
entire understanding of the parties with respect to the subject matter addressed
herein and supersedes and merges all prior understandings, agreements, promises
and representations, whether written or oral, relating thereto. No alteration,
modification or amendment of any provision of this Agreement or a SOW shall be
binding unless in writing and signed by an authorized representative of each
party. Neither this Agreement, nor any SOW, shall be amended by Touchscreen's
receipt of purchase orders or other administrative documents, regardless of
Touchscreen's failure to object to such form.
(b) This Agreement shall be governed by the laws of the State of New
York, without regard to its conflicts of laws, and the copyright, trademark, and
patent laws of the USA. The parties consent to the exclusive jurisdiction of the
Federal or State courts located in New York City.
(c) Any waiver of a party's right or remedy related to this Agreement
must be in writing, signed by that party to be effective. No waiver shall be
implied from a failure of either party to exercise a right or remedy. In
addition, no waiver of a party's right or remedy will effect the other
provisions of this Agreement.
(d) All notices must be in writing and sent either by hand delivery;
messenger; certified mail, return receipt requested; overnight courier; or by
facsimile (with a confirming copy) and shall be effective when received by such
party at the address listed above or other address provided in writing.
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<PAGE>
(e) All provisions of this Agreement and any SOW relating to
confidentiality, ownership, indemnification, and limitations of liability or
where the context would otherwise require survival shall survive the termination
of this Agreement and the SOW.
(f) If any provision of this Agreement and/or a SOW is held by a court
of competent jurisdiction to be invalid or unenforceable, such provision will be
enforced to the extent it is not in violation of such law or is not otherwise
unenforceable and all other provisions shall remain in full force and effect.
ACCEPTED AND AGREED:
TOUCHSCREEN MEDIA GROUP, INC.
By: /s/ Dennis McCole
----------------------------------------
(signature)
Name: /s/ Dennis McCole
--------------------------------------
(printed)
Title: President
-------------------------------------
(printed)
POLITICS.COM
By: /s/ Marc Jacobson
----------------------------------------
(signature)
Name: Marc Jacobson
--------------------------------------
(printed)
Title: President
-------------------------------------
(printed)
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<PAGE>
STATEMENT OF WORK
CLIENT: POLITICS.COM
PROJECT: CIT
DATE: OCTOBER 29, 1999
- --------------------------------------------------------------------------------
A) DESCRIPTION OF PROJECT:
Over the past five months, it has been both a challenging and rewarding
opportunity to work with the Politics.com team. Our collective strength has put
Politics.com in a unique position to gain significant share and recognition on
the Internet. We are very proud to be a part of this accomplishment and thank
you for giving us this opportunity.
As Politics.com continues to execute on a very aggressive business strategy, we
have recognized the necessity to respond to your needs with a proposal to create
a core team of dedicated resources to support your application development
needs.
Our goal is to make it easier for Politics.com to do business with Touchscreen
by providing a dedicated pool of resources while providing a more cost-effective
solution to Politics.com. This core team will be focused on maintaining and
enhancing the Politics.com web site, as Politics.com becomes more
self-sufficient overtime.
The objectives of this team are to:
I. Develop a team of resources with deep knowledge of Politics.com's business.
2. Provide a single point of contact for site development that ensures plans
are executed in a consistent and timely manner.
3. Ensure that communication is convenient and easy for Politics.com
4. Deliver a team of resources in order to respond rapidly to market demands
and mission critical requirements.
TOUCHSCREEN MEDIA GROUP
1674 BROADWAY, NEW YORK, NY 10019 TEL:
212.262.7014 FAX: 212.245.7487
- --------------------------------------------------------------------------------
NEW MODELS FOR NEW MEDIA
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The following is a description of the core team members and the activities they
will perform to support Politics.com. In addition to this team, the Touchscreen
management team will allocate 10% of heir time to Politics.com, these managers
include: Executive Producer, Creative Director, Chief Technology Officer, and
Technical Services Manager.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INDIVIDUAL ACTIVITIES
- --------------------------------------------------------------------------------
<S> <C>
STRATEGY & - Understand Politics.com business, objectives, and
PLANNING industry
- Communicate the strategic vision of Politics.com to
the core team
- Proactively identify/recommend new opportunities
that support the business strategy
- --------------------------------------------------------------------------------
PROJECT - Overall project management responsibilities
MANAGER - Development of production documentation - flow
charts, functional specification, blueprint, testing
plans, etc...
- Production and implementation schedule
- Work flow and resource management
- Time accounting, budget management and status
reports
- Participation in strategy and marketing projects
- --------------------------------------------------------------------------------
CREATIVE - Graphic production
DESIGNER - Animation production
- Audio and video compression (streaming media)
- --------------------------------------------------------------------------------
APPLICATION - HTML Programming
PROGRAMMER - Database development
- Web server Programming
- Systems Integration
- Multimedia programming
- Application development
- Testing and debugging
- --------------------------------------------------------------------------------
TECHNICAL - Server configuration
SERVICES - Hardware and software configuration and support
- Systems administration
- --------------------------------------------------------------------------------
TESTER & - Test function
ADMINISTRATION - Test content
- Test performance
- Test usability
- Feedback documentation
- Site Statistics documentation
- General project team support
- --------------------------------------------------------------------------------
</TABLE>
B) PROJECT COMMENCEMENT DATE:
This project will commence upon the execution of this SOW. Target date is
November 1, 1999.
TERM OF PROJECT:
Ongoing
C) DELIVERABLE ITEMS:
This is an ongoing development assignment. Work will be defined as it is
identified. Progress Reports will indicate deliverables and schedules.
COMPLETION AND DELIVERY DATE FOR DELIVERABLE ITEMS:
See progress report weekly.
III-50
<PAGE>
D) THE PROJECT SERVICES WILL BE PROVIDED BY THE FOLLOWING EMPLOYEES OF
CONTRACTOR:
As we launch the Continuous Improvement team into place, we will support it with
the following employees:
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------
MANAGEMENT EMPLOYEE
- ------------------------------------------------- ------------------------------
<S> <C>
Vice President- Consultant Cheryl Moellenbeck
- ------------------------------------------------- ------------------------------
Executive Producer Tom Skinner
- ------------------------------------------------- ------------------------------
Creative Director Emilya Naymark
- ------------------------------------------------- ------------------------------
Chief Technology Officer Diego Rivera
- ------------------------------------------------- ------------------------------
Technical Services Director Joe Cucchiara
- ------------------------------------------------- ------------------------------
CIT - FULL - TIME TEAM
- ------------------------------------------------- ------------------------------
Project Manager Jim Hutchinson
- ------------------------------------------------- ------------------------------
Creative Designer Richard Cunningham
- ------------------------------------------------- ------------------------------
Cold Fusion/HTML Programmer Don Morrill
- ------------------------------------------------- ------------------------------
Cold Fusion/HTML Programmer Subrata Saha
- ------------------------------------------------- ------------------------------
Tester/Administrative Assistant Yukiko Ito
</TABLE>
Please note that the team members may change from time to time.
<TABLE>
<CAPTION>
COMPENSATION RATE AND CALCULATION METHOD:
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
MANAGEMENT % WEEKLY HOURS RATE TOTAL
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Vice President - Consultant 20% 8 $270 $ 2,160
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Executive Producer 10% 4 $200 $ 800
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Creative Director 10% 4 $135 $ 540
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Chief Technology Officer 10% 4 $205 $ 820
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Technical Services Director 10% 4 $135 $ 540
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
CIT - FULL - TIME TEAM
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Project Manager 100% 40 $125 $ 5,000
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Creative Designer 100% 40 $ 85 $ 3,400
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Cold Fusion/HTML Programmer 100% 40 $180 $ 7,200
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Cold Fusion/HTML Programmer 100% 40 $180 $ 7,200
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
Tester/Administrative Assistant 100% 40 $ 60 $ 2,400
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
WEEKLY TOTALS 224 $30,060
- ------------------------------------------ ------------------ ----------------------- ---------------- ---------------
</TABLE>
- - ESTIMATED TOTAL COST: $30,060 per week. In the event the CIT team is
required to provide additional hours/staff to meet the needs of the
development schedule, Touchscreen will inform Politics.com by providing a
"statement of work" (SOW). Upon written approval of the SOW, Touchscreen
will assign the resource for this additional work.
- - MAXIMUM AGGREGATE AMOUNT PAYABLE UNDER THIS SOW WITHOUT FURTHER APPROVAL:
$30,060 per week.
E) PROGRESS REPORT AND COST ACCRUAL SCHEDULE:
- - Touchscreen will invoice Politics.com each week for services and materials.
Politics.com will provide payment net 10 business days from receipt of
invoices. Weekly payments will be supported with progress reports that
include activities, deliverables, time and materials.
III-51
<PAGE>
- - As new projects that are outside the scope of the CIT effort are
identified, Touchscreen will "statement of work"(SOW). Upon written
approval of the SOW, Touchscreen will assign the resource for this
additional work. Resource outside the CIT team will be billed at
Touchscreen's published rates.
F) POLITICS.COM REPRESENTATIVE:
Brian Wadsworth
AGREEMENT:
- - Politics.com will transition the development business "in house" and reduce
the development activity at Touchscreen overtime. In order to manage this
transition, Politics.com will provide 6 weeks notice when an individual on
the CIT team is to be replaced with a Politics.com employee.
- - This estimate does not include management or responsibility for work
completed by Politics.com employees during the transition period.
- - This proposal shall be considered a part of and subject to the terms and
conditions of the "Professional Services Agreement" between Touchscreen
Media Group, Inc. and Politics.com dated 10/11/99. With the exception of
the payment terms in this SOW, to the extent that there are any other
inconsistencies in this Statement of Work" (SOW), the "Professional
Services Agreement" will prevail.
Please signify your acceptance of this "Statement of Work" by signing below.
Upon a fully executed SOW, we will commence work.
TOUCHSCREEN MEDIA GROUP, INC. POLITICS.COM, INC.
By: /s/ Dennis Mccole By: /s/ Marc Jacobson
----------------- -----------------
Name: Dennis Mccole Name: Marc Jacobson
------------- -------------
Title: President Title: President
--------- ----------
Date: October 29, 1999 Date: November 3, 1999
---------------- -----------------
III-52
<PAGE>
POLITICS.COM, INC.
2530 South Rural Road
Tempe, Arizona 85282
Touchscreen Media Group December 2, 1999
1674 Broadway
New York, New York 10019
ATTN: DENNIS MCCOLE
Dear Dennis:
The following is the agreement we believe Politics.com, Inc. (the "Company")
reached with Touchscreen Media Group ("Touchscreen") today.
1. The Company currently owes Touchscreen $466,000 for services rendered. The
Company agrees to make the following payments (the "Scheduled Payments") to
Touchscreen for invoiced services: $35,000 by the end of the business day
on December 31, 1999, $85,000 by the end of the business day on January 14,
2000, and $35,000 per week on each Friday thereafter until such date as all
outstanding invoices from Touchscreen to the Company are less than thirty
days old.
2. Howard R. Baer, Chairman of the Company, will personally guarantee the
Scheduled Payments (up to $550,000), subject however to the terms and
conditions set forth in the Individual Limited Guaranty Agreement dated the
date hereof (the "Guaranty"). Mr. Baer's obligations under the Guaranty are
subject to your execution and delivery of this Agreement to the Company.
3. In consideration of Mr. Baer's Guaranty, Touchscreen agrees that it will
continue to provide services to the Company in the amount of approximately
$10,000-$12,000 per week. Touchscreen will not be obligated to provide
further services to the Company in the event that the total outstanding
invoices owed by the Company to Touchscreen exceed $550,000 or Mr. Baer
defaults under the Guaranty.
4. The Company agrees to pay to Touchscreen 25% of the proceeds of any
offering of securities by the Company upon receipt thereof until such time
as the Company's account with Touchscreen is current (outstanding invoices
less than thirty days old). Any payments made by the Company to Touchscreen
pursuant to this Section 4 shall be applied to reduce the Company's
obligation to make the Scheduled Payments.
5. This Agreement supersedes our prior agreements with respect to the subject
matter hereof.
III-53
<PAGE>
If the foregoing correctly reflects our agreement, please execute this Agreement
where indicated below and return a copy to the Company at 480-731-9565.
Very truly yours,
POLITICS.COM, INC.
By: /s/ Howard R. Baer
------------------------------
Howard R. Baer, Chairman
READ AND AGREED TO
TOUCHSCREEN MEDIA GROUP
By: /s/ Dennis Mccole
--------------------------------------
Dennis McCole, a duly authorized
officer
III-54
<PAGE>
EXHIBIT 6.13
INDIVIDUAL LIMITED GUARANTY
---------------------------
(Howard R. Baer)
W I T N E S S E T H :
--------------------
WHEREAS, Politics.com, Inc., a Delaware corporation (the "Obligor"),
has agreed in Section 1 of a letter agreement dated as of the date hereof (the
"Agreement") to a schedule of payments (the "Scheduled Payments") it will make
to Touchscreen Media Group (the "Vendor") on account of services rendered by the
Vendor to the Obligor, as evidenced by invoices issued by the Vendor to the
Obligor (collectively, the "Invoices"); and
WHEREAS, as a condition to accepting the Agreement and the payments
thereunder, the Vendor has required that Howard R. Baer (the "Guarantor")
guarantee the full and prompt payment and performance of the Scheduled Payments
under the Agreement, subject to the terms and limitations hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of any and all
loans, advances, and extensions of credit now or hereafter made or extended by
Vendor to, for the account of or on behalf of Obligor pursuant to and under the
Agreement, Guarantor hereby unconditionally and absolutely guarantees to Vendor
the full and prompt payment and performance by Obligor of all obligations which
Obligor now or hereafter may have to Vendor to make the Scheduled Payments under
the Agreement (the "Obligations"), subject to the terms and limitations hereof.
This Guaranty is a continuing, unconditional and absolute guaranty of
payment and performance of the Scheduled Payments, subject to the terms and
limitations hereof. The obligations of the Guarantor hereunder are primary, with
no recourse necessary by Vendor against the Obligor or any collateral given to
secure the obligations guaranteed hereby prior to proceeding against the
Guarantor hereunder. The Guarantor hereby waives notice of and consent to the
creation of Obligations, to any amendments thereof, to any actions taken
thereunder, and to the execution by Obligor of the above-referenced Agreement
and of any other agreements, documents and instruments now or hereafter executed
by Obligor in connection with any Obligation. The Guarantor further waives the
following: notice of incurring of indebtedness and obligations by Obligor;
acceptance of this Guaranty by Vendor; presentment and demand for payment,
protest, notice of protest and notice of dishonor or non-payment on account of
the Agreement; any right to require suit against Obligor or any other party
before enforcing this Guaranty; and any right to have security applied before
enforcing this Guaranty.
Guarantor's obligations hereunder shall not be released, discharged,
terminated or impaired in any manner whatsoever, irrespective of the lack of any
notice to or consent of the Guarantor, by any of the following: (a) new
agreements or obligations of Obligor with or to Vendor; (b) amendments,
indulgences, extensions, modifications, renewals or waivers of default as to any
existing or future agreements or obligations of Obligor or third parties with or
to Vendor, or extensions of credit by Vendor to Obligor; (c) adjustments,
compromises or releases of any obligations of Obligor, Guarantor or other
parties, including any other guarantors, or exchanges, releases, dispositions or
sales of any security of Obligor, Guarantor or other parties, including any
other guarantors; (d) invalidity, irregularity, defect, or unenforceability, for
any reason, of any of the Obligations, or of any instrument or writing, or of
any security or other guaranty, or acts or omissions by Vendor or Obligor; (e)
failure to perfect any lien securing the obligations of Obligor, Guarantor or
other parties, including any other guarantors; (f) interruptions in the business
relations between Vendor and Obligor; (g) voluntary or involuntary bankruptcy
(including a reorganization in bankruptcy) of Obligor or entry of an order for
relief against or with respect to the Obligor under Title 11 of the United
III-55
<PAGE>
States Code; (h) composition, extension, moratoria or other forms of debtor
relief granted to Obligor pursuant to law presently in force or hereafter
enacted; (i) payment of any or all obligations and indebtedness of Obligor in
the event such payment is invalidated or avoided by a trustee, custodian or
receiver of Obligor; (j) the dissolution of Obligor; and (k) the reorganization,
merger or consolidation of Obligor into or with another entity, corporate or
otherwise, or the sale or disposition of all or substantially all of the capital
stock, business or assets of Obligor to any other person or party.
Notwithstanding anything to the contrary set forth herein or in any
other document in favor of Vendor:
i. the liability of Guarantor hereunder (for principal, interest
or any other charge, including, without limitation, attorneys'
fees or expenses) shall be limited to an amount equal to Five
Hundred Fifty Thousand Dollars ($550,000.00) in the aggregate;
and
ii. if, on any date, the only outstanding Invoices from the Vendor
to the Obligor are dated less than thirty (30) days prior to
such date, then on such date the Guarantor's liability
hereunder shall irrevocably terminate and the Guarantor shall
from and after such date have no liability hereunder, whether
then existing or thereafter incurred; and
iii. the liability of the Guarantor hereunder shall be subject to
the Vendor executing and delivering to the Obligor the
Agreement, in the form attached hereto as Exhibit A, by
December 3, 1999.
Any amount that becomes due hereunder and is not paid by Guarantor upon
demand shall accrue interest at the annual rate of ten percent (10%).
For purposes of any action or proceeding involving this Guaranty,
Guarantor hereby expressly submits to the jurisdiction of all federal and state
courts located in the State of Arizona and consents that any order, process,
notice of motion or other application to or by any of said courts or a judge
thereof may be served within or without such court's jurisdiction by registered
mail or by personal service.
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO
THE EXTENT PERMITTED BY APPLICABLE LAW) (I) ANY RIGHT TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS GUARANTY OR THE AGREEMENTS AND AGREES
THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY AND
(II) ANY RIGHT TO CONTEST THE APPROPRIATENESS OF ANY ACTION BROUGHT IN ANY COURT
WITHIN THE JURISDICTION MENTIONED IN THE PRECEDING PARAGRAPH BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE AND FORUM NON CONVENIENS.
This Guaranty and all terms and conditions hereof shall be binding upon
Guarantor, his heirs and assigns, and shall inure to the benefit of Vendor and
its successors and assigns. Legal rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of Arizona.
IN WITNESS WHEREOF, Guarantor executes this instrument under seal as of
this 2nd day of December, 1999.
WITNESS:
/s/ Howard R. Baer
- ----------------------------- -----------------------------------
Howard R. Baer
III-56
<PAGE>
EXHIBIT A
---------
POLITICS.COM, INC.
2530 South Rural Road
Tempe, Arizona 85282
Touchscreen Media Group December 2, 1999
1674 Broadway
New York, New York 10019
ATTN: DENNIS MCCOLE
Dear Dennis:
The following is the agreement we believe Politics.com, Inc. (the "Company")
reached with Touchscreen Media Group ("Touchscreen") today.
6. The Company currently owes Touchscreen $466,000 for services rendered. The
Company agrees to make the following payments (the "Scheduled Payments") to
Touchscreen for invoiced services: $35,000 by the end of the business day
on December 31, 1999, $85,000 by the end of the business day on January 14,
2000, and $35,000 per week on each Friday thereafter until such date as all
outstanding invoices from Touchscreen to the Company are less than thirty
days old.
7. Howard R. Baer, Chairman of the Company, will personally guarantee the
Scheduled Payments (up to $550,000), subject however to the terms and
conditions set forth in the Individual Limited Guaranty Agreement dated the
date hereof (the "Guaranty"). Mr. Baer's obligations under the Guaranty are
subject to your execution and delivery of this Agreement to the Company.
8. In consideration of Mr. Baer's Guaranty, Touchscreen agrees that it will
continue to provide services to the Company in the amount of approximately
$10,000-$12,000 per week. Touchscreen will not be obligated to provide
further services to the Company in the event that the total outstanding
invoices owed by the Company to Touchscreen exceed $550,000 or Mr. Baer
defaults under the Guaranty.
9. The Company agrees to pay to Touchscreen 25% of the proceeds of any
offering of securities by the Company upon receipt thereof until such time
as the Company's account with Touchscreen is current (outstanding invoices
less than thirty days old). Any payments made by the Company to Touchscreen
pursuant to this Section 4 shall be applied to reduce the Company's
obligation to make the Scheduled Payments.
10. This Agreement supersedes our prior agreements with respect to the subject
matter hereof.
III-57
<PAGE>
If the foregoing correctly reflects our agreement, please execute this Agreement
where indicated below and return a copy to the Company at 480-731-9565.
Very truly yours,
POLITICS.COM, INC.
By: /s/ Howard R. Baer
------------------
Howard R. Baer, Chairman
READ AND AGREED TO
TOUCHSCREEN MEDIA GROUP
By: /s/ Dennis McCole
--------------------------------------
Dennis McCole, a duly authorized
officer
III-58
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-23-1999
<PERIOD-END> SEP-30-1999
<CASH> 20,346
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,755
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 254,116
<CURRENT-LIABILITIES> 1,061,022
<BONDS> 0
0
0
<COMMON> 92
<OTHER-SE> (806,998)
<TOTAL-LIABILITY-AND-EQUITY> 254,116
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,522,627
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,220
<INCOME-PRETAX> (4,528,847)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,528,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,528,847)
<EPS-BASIC> (1.11)
<EPS-DILUTED> 0
</TABLE>
