UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number 333-90649
AdStar.com, Inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-3666899
- ------------------------------- -------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4553 Glencoe Avenue, Suite 300, Marina del Rey, California 90292
(Address of principal executive offices)
(310) 577-8255
(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 3, 2000 the Issuer had
outstanding 2,831,272 shares of its common stock.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
<PAGE>
ADSTAR.COM, INC.
TABLE OF CONTENTS
FORM 10-QSB REPORT
March 31, 2000
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial Statements
(Unaudited)
Balance Sheet - March 31, 2000 3
Statements of Operations
Three-Month Periods Ended
March 31, 2000 and 1999 4
Statements of Cash Flows
Three-Month Periods Ended
March 31, 2000 and 1999 5
Notes to Interim Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 9
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 13
SIGNATURES 14
<PAGE>
AdStar.com, Inc.
Balance Sheet
As Of March 31, 2000 (Unaudited)
<TABLE>
<S> <C>
Assets
Current Assets:
Cash and Cash Equivalents $ 3,098,645
Accounts Receivable 222,067
Prepaids and Other Assets 207,764
------------
Total Current Assets 3,528,476
Property and Equipment, Net 512,194
Intangible Assets, Net 153,018
Other Assets 24,862
------------
Total Assets $ 4,218,550
============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable $ 441,108
Accrued Expenses 198,235
Deferred Revenue 91,870
Capital Lease Obligations 3,255
------------
Total Current Liabilities 734,468
Note Payable 1,100,000
Other Accrued Expenses 29,032
------------
Total Liabilities 1,863,500
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, par value $0.0001; authorized 5,000,000 shares;
none issued and outstanding
Common Stock, par value $0.0001; authorized 10,000,000 shares; --
issued and outstanding 2,830,858 at March 31, 2000 283
Additional Paid-In Capital 5,951,520
Deferred Compensation (176,301)
Accumulated Deficit (3,420,452)
------------
Total Stockholders' Equity 2,355,050
------------
Total Liabilities and Stockholders' Equity $ 4,218,550
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AdStar.com, Inc.
Statements of Operations
For the Three-Month Periods
Ended March 31, 1999 and 2000 (unaudited)
<TABLE>
<CAPTION>
1999 2000
<S> <C> <C>
Revenues $ 406,602 $ 570,730
Cost of Revenues 199,548 486,612
--------------------------
Gross Profit 207,054 84,118
Sales, General and Administrative Expenses 234,836 773,369
Development Costs 0 300,465
--------------------------
Loss from Operations (27,782) (989,716)
Interest Income (Expense), Net (2,884) 19,177
--------------------------
Loss before Taxes (30,666) (970,539)
Provision for Income Taxes 690 2,790
--------------------------
Net Loss $ (31,356) $ (973,329)
==========================
Loss per share -- basic and diluted $ (0.02) $ (0.34)
Weighted average number of shares -- basic and diluted 1,479,664 2,827,196
</TABLE>
The accompanying notes are an integral part of these interim
financial statements.
4
<PAGE>
AdStar.com, Inc.
Statements of Cash Flows
For the Three-Month Periods
Ended March 31, 1999 and 2000 (Unaudited)
<TABLE>
<CAPTION>
1999 2000
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (31,356) $ (973,329)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation and amortization 10,888 37,483
Warrants issued for services -- 13,107
Common stock issued for services -- 48,962
Changes in assets and liabilities:
Accounts receivable (28,817) 238,410
Prepaids and other assets (62,773) (73,228)
Accounts payable (10,558) (687,707)
Accrued expenses 4,442 (226,150)
Deferred revenue (20,935) (15,130)
----------- -----------
Net cash used in operating activities (139,109) (1,637,582)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (83,067) (115,091)
----------- -----------
Net cash used in investing activities (83,067) (115,091)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance from convertible notes payable 700,000
Repayment of note payable (749,466)
Principal repayments on capital leases (1,708) (1,709)
----------- -----------
Net cash from (used in) financing activities 698,292 (751,175)
----------- -----------
Net increase (decrease) in cash and cash equivalents 476,116 (2,503,848)
Cash and cash equivalents at beginning of period 90,007 5,602,493
----------- -----------
Cash and cash equivalents at end of period $ 566,123 $ 3,098,645
=========== ===========
Noncash investing and financing activities:
Purchase of intangible assets, cancellation of an option and
Repayment of accrued liability by issuance of note payable
751,710
</TABLE>
The accompanying notes are an integral part of these
interim financial statements.
5
<PAGE>
AdStar.com, Inc.
Notes To Interim Financial Statements
(Unaudited)
1. General
The interim financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with instructions to Form 10-QSB and Item 10 of
Regulation S-B. Accordingly they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2000
are not necessarily indicative of the results that may be expected
for the year ending December 31, 2000. For further information,
refer to AdStar.com's Annual Report on Form 10-KSB for the year
ended December 31, 1999.
2. Summary of Significant Accounting Policies
Concentration of Credit Risk and Major Customers
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
trade accounts receivable. Also, at times, cash balances held in
financial institutions are in excess of FDIC insurance limits.
For the three months ended March 31, 2000, no customer accounted for
10% of the Company's revenues and three customers in the aggregate
accounted for 19% of the Company's accounts receivable. For the
three months ended March 31, 1999, one customer accounted for 17% of
the Company's revenues and five customers comprised 42%, in the
aggregate, of the Company's accounts. The majority of the Company's
customers have historically consisted of newspapers and publishers
of classified advertisements. The Company's customers on its Web
site are classified advertisers.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Revenue Recognition
The Company recognizes revenue from the sale of its software upon
delivery and customer acceptance and when collection of the
resulting receivable is probable. Maintenance, license fees and user
support fees are recognized ratably over the period to which they
relate. To the extent that customers
6
<PAGE>
make advance payments for installation fees, license fees, user
support or maintenance fees, the amount received is deferred until
the revenue has been earned. Revenues are recorded net of any
discounts.
The Company also sells hardware to certain customers to support the
installation of its Ad-Star technology. The Company charges the
customer a small mark-up on the cost of the hardware and recognizes
revenue on delivery to the customer. For the three-month periods
ended March 31, 1999 and 2000, sales of hardware totaled
approximately $36,000 and $8,500, respectively.
In June 1999, the Company introduced a Web-based product that
permits advertisers to plan, schedule, compose and purchase
advertising from many print and online publishers. The Company
recognizes revenues on a per-transaction basis. The manner in which
these transaction revenues are recognized depends on the service
sold. With respect to ads composed directly on the Company's Web
site, and where the advertiser does not have a contract with the
publisher, the amount billed to the customer by the Company is
recognized if, and when, the Company accepts the customer's ad and
charges the customer's credit card. In these transactions, the
Company is responsible for the resulting credit risk. Credit card
and debit card processing fees and amounts remitted to the publisher
on these transactions are recognized as a cost of sale. With respect
to ads placed through the Company's Web site, where the customer has
a contract with the publisher, the publisher collects the revenues
and remits the transaction fee to the Company. In these instances,
these transaction fees are recognized when the ad is placed through
the Company's system and the collection from a publisher of the
resulting receivable is probable. For the three months ended March
31, 2000, Internet revenues totaled approximately $195,000.
Research and Development Costs
Costs incurred in the research and development of products are
expensed as incurred.
Computation of Earnings Per Share
Basic earnings (loss) per share is computed by dividing the net
income (loss) by the weighted average number of shares of common
stock outstanding during the period. Diluted earnings (loss) per
share is computed by dividing the net income (loss) by the weighted
average number of common shares outstanding plus the number of
additional common shares that would have been outstanding if all
dilutive potential common shares had been issued, using the treasury
stock method. Potential common shares are excluded from the
computation when their effect is antidilutive.
For the three months ended March 31, 1999 and 2000, diluted earnings
(loss) per share does not include 0 and 1,772,362 options and
warrants to purchase common stock and 146,750 and 0 shares issuable
on the conversion of notes payable, as their inclusion is
antidilutive.
7
<PAGE>
3. Notes Payable
The Company paid in full in January 2000 notes payable in the
principal amount of $15,000, bearing interest at 10% per annum. In
addition the Company paid in full in January 2000, a note payable in
the principal amount of $734,446, bearing interest at 10% per annum.
At March 31, 2000, the Company had outstanding a note payable
bearing interest at 6% per annum, due in full in October 2001 in the
principal amount of $1,100,000.
4. Capital Transactions
Warrants
In March 2000, the Company granted to a consultant warrants to
purchase an aggregate of 40,000 shares of common stock at an
exercise price of $10.00 per share. The warrants expire in March
2005 and are exercisable upon vesting. 25,000 of the warrants vest
immediately and 15,000 of them vest when the consultant achieves
certain performance goals or, if not then vested, on the fifth
anniversary of the date of grant, provided the consultant is still
providing services to the Company. In connection with the 25,000
warrants, the Company recorded deferred compensation of $157,408
representing the fair value of the warrants using the Black-Scholes
pricingoption-pricing model. For the quarter ended March 31, 2000,
$13,107 of the deferred compensation was charged to expense. The
Company will record additional non-cash charges for the 15,000
warrants over the service period.
Equity Compensation to Vendors
The Company established a vendor compensation plan whereby it may
compensate vendors in shares of its common stock in lieu of cash.
Under the plan, 200,000 shares are available for issuance. In the
three-month period ended March 31, 2000, 10,594 shares were issued
to vendors under the plan representing compensation of $80,962. Of
that amount, $48,962 was expensed in the three-month period. The
balance is deferred and amortized over periods of three or eleven
months. An additional 414 shares of common stock were issued under
the plan in April representing $3,000 in compensation to one vendor.
5. Subsequent Event
In April 2000, the Company entered into an equipment leasing
agreement with a commercial bank, which provides up to $100,000 for
financing of capital equipment.
8
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes to
the financial statements included elsewhere in this quarterly report. Certain
statements in this discussion and elsewhere in this report constitute
forward-looking statements within the meaning of Section 21E of the Securities
and Exchange Act of 1934 and are subject to the "Risk Factors" included in our
Annual Report on Form 10-KSB for our fiscal year ended December 31, 1999.
Because this discussion involves risk and uncertainties, our actual results may
differ materially from those anticipated in these forward-looking statements.
INTRODUCTION
We have developed a one-stop marketplace on the Web for advertisers to buy
classified ads. We enable advertisers by accessing our Web site on their
computers to plan, schedule, compose and purchase classified advertising from a
large number of print and on-line publishers. Our service permits both
professional and non-professional advertisers, including the general public, to
create and submit to one or many publishers any number of ads, 24 hours a day,
seven days a week, using any recognized Web browser.
This new Web-based service is an outgrowth of our historical business that,
since 1986, has offered professional advertisers the ability to place ads
electronically with a growing number of the largest newspapers in the United
States based on circulation. Using this system, we have become the largest
provider of remote entry for classified ads into newspapers in the United
States.
In 1999 we commenced our transition from software provider to an Internet
marketplace for print and online classified advertising. We received our first
transaction fees from Internet business in June 1999 with one online publication
available on the site. By the end of the year we had five print and one online
publications available on the site and Internet revenues accounted for
approximately 16% of our total revenues for the year ended December 31, 1999. In
addition, we powered approximately $550,000 of classified advertising through
our classified advertising marketplace, Advertise123.com, and private-label
sites.
As we build a critical mass of publishers, we are also focusing our marketing
efforts on bringing advertisers to our site. On February 23, 2000, we announced
that we had publications available to advertisers on Advertise123.com that
enabled them to place ads in the top 10 designated market areas, or DMAs, in the
country. On March 15, 2000, we announced that we had expanded market coverage to
the top 20 DMAs; and on March 29, 2000 we had expanded coverage to the top 31
DMAs. By the end of the quarter we had 60 print and 28 online publications
available on our Web site and Internet revenues comprised 34% of our revenues
for the three months ended March 31, 2000. In addition we powered approximately
$530,000 of classified advertising through Advertise123.com and private-label
sites.
9
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the results of operations as a percentage of
revenues:
Three-month period ended
March 31,
---------------------------------
1999 2000
---- ----
Revenues 100.0% 100.0%
Cost of Revenues 49.1% 85.3%
Gross Profit 50.9% 14.7%
Sales, General and Administrative Expenses 57.8% 135.5%
Web Site Development Costs 0.0% 52.6%
Income (Loss) from Operations -6.8% -173.4%
Interest Expense, Net -0.7% 3.4%
Income (Loss) before Taxes -7.5% -170.1%
Provision for Income Taxes 0.2% 0.5%
Net Income (Loss) -7.7% -170.5%
Revenues. Revenues increased to approximately $571,000 for the three-
month period ended March 31, 2000 from $407,000 in the comparable 1999 period,
representing 40% growth. This increase was due to the recording of Internet
revenues of approximately $195,000 in the 2000 period. We had our first Internet
revenues in June 1999. Internet revenues represented approximately 34% of our
total revenues in the 2000 quarter. As we shifted our focus in 1999 to the Web,
we also shifted resources from building our software service business.
Consequently, software installation, license and end-user support revenues
(referred to as "service revenues") were essentially flat at approximately
$367,000 for the 2000 quarter compared with approximately $370,000 for the 1999
comparable quarter. While we expect to continue to recognize service revenues
from existing and potential new software licensing contracts, we expect that
Internet transaction based revenues will eventually become our principal source
of revenues. Hardware sales were approximately $8,500 in the first quarter of
2000 compared with approximately $36,000 in the 1999 quarter.
Cost of Revenues. Cost of revenues consists primarily of payments to
publications for transactions placed on our Internet system, to pay for credit
card processing costs for transactions placed on our Internet system, to
configure and install the AdStar software into the publishing systems of
newspapers, to configure end-user software for the newspaper's advertiser
clients, to provide customer training and end-user support, and to pay costs of
hardware sales and royalty fees. These costs increased to approximately $487,000
for the first quarter of 2000 compared to $200,000 for the comparable 1999
quarter. Cost of Internet transactions was $179,000 in 2000, representing
payments to publications and credit card companies and processors. In the 1999
first quarter we had no Internet transaction costs. Personnel costs associated
with cost of revenues rose 84% to $193,000 in 2000 compared with $105,000 in
1999 for added technical support and end user support staff and associated
recruitment expenses necessary to grow our business. Hardware expense decreased
to $7,000 in 2000 from $33,000 in 1999. We view sales of hardware as an
accommodation to our clients coincident to the installation of our software in
the front-end publishing
10
<PAGE>
systems of newspapers. Royalty expense increased to $56,000 in 2000 from $18,000
in 1999 due to the timing of royalties payable on installation of our fax
product. Cost of revenues increased as a percentage of revenues in that our Web
business is a higher volume lower margin business than our service business.
Sales, General and Administrative. Sales, general and administrative
expense consists primarily of salaries of business development personnel, sales
and marketing personnel, executive and administrative personnel, and other
advertising and sales promotion, marketing, trade show and travel expense. These
personnel expenses increased to $363,000 in the first quarter of 2000 from
$112,000 in 1999, representing a tripling in the number of personnel in this
area and the employment of temporary personnel to expand our business. Our
personnel additions are primarily for marketing, business development and
operations for our Web-based service. We expect to incur additional sales,
general and administrative expenses as we hire additional personnel and incur
additional expenses related to the development of our Web-based service. Travel
expense, primarily associated with business development and investor relations,
increased to $74,000 in the 2000 quarter from $42,000 in 1999. Our advertising,
sales promotion and trade show expense grew to $91,000 in the 2000 period
compared with $59,000 in 1999 reflecting our increased business development
efforts. We had $45,000 of expenses in 2000 specifically associated with being a
public company, which we did not have in 1999.
Development Costs. Development costs of $300,000 represent expenses to
design, configure and build our branded and private label sites. The primary
components of this expense were technical and design consultant fees of $147,000
and employee expense of $123,000.
Interest Income (Expense), Net. Interest income was $44,000 in the first
quarter of 2000 attributable to investing available cash in short-term time
deposits and money market accounts at Chase Bank. Interest expense was $25,000
in the first quarter of 2000 (of which $17,000 was accrued but not payable until
October 2001)compared with $12,000 in 1999.
Liquidity and Capital Resources. As of March 31, 2000, we had cash and
cash equivalents of approximately $3,100,000.
Net cash used in operations was approximately $ 1,637,000 for the 2000 period
compared with $139,000 for 1999. The difference is due primarily to the sizable
net loss from operations in 2000 compared to the small net loss in 1999 and a
$688,000 reduction in the level of accounts payable in the 2000 quarter largely
attributable to the payment of costs related to our initial public offering
completed in December 1999. Net cash used in investing activities increased to
$115,000 in 2000 compared with $83,000 in 1999 resulting from the purchase and
development of computer equipment and related infrastructure for our Web-based
system. Net cash used in financing activities was approximately $750,000 during
2000 compared to $698,000 provided by in financing activities in 1999. The
activity in 2000 reflects repayment of notes payable. The Company paid in full
in January 2000 notes payable in the principal amount of $15,000, bearing
interest at 10% per annum . In addition the Company paid in full in January
2000, a note payable in the principal amount of $734,446, bearing interest at
10% per annum. In March 1999, we sold $700,000 of our 12% convertible notes in a
private placement. These notes converted to common stock in December 1999 upon
the closing of our initial public offering.
11
<PAGE>
In April 2000, we entered into an equipment leasing agreement with Imperial
Bank, which provides up to $100,000 of financing for capital equipment.
We anticipate that our operating expenses will increase substantially as the
number of our employees increases. Additionally we may evaluate from time to
time possible investments in new businesses, products and technologies to build
our business. We expect that our available funds will be sufficient to meet our
anticipated needs for working capital and capital expenditures for at least the
next 12 months. We may need to seek additional funding through public or private
financings or other arrangements prior to the expiration of the twelve-month
period. Adequate funds may not be available when needed or may not be available
on terms favorable to us. If additional funds are raised through the issuance of
equity securities, dilution to existing stockholders may result. If funding is
insufficient at any time in the future, we may be unable to develop or enhance
our products or services, take advantage of business opportunities or respond to
competitive pressures, any of which could have a material and adverse effect on
our financial position, results of operations and cash flows.
12
<PAGE>
PART II
Item 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities. The Company established a vendor
compensation plan whereby it may compensate vendors in shares of its common
stock in lieu of cash. Under the plan, 200,000 shares are available for
issuance. In the three-month period ended March 31, 2000, 10,594 unregistered
shares were issued to vendors under the plan relying upon the exemption under
section 4(2) of the Securities Act of 1933 and which represented compensation of
$80,962. Of that amount, $48,962 was expensed in the three-month period. The
balance is deferred and amortized over periods of three or eleven months. An
additional 414 shares of common stock were issued under the plan in April
representing $3,000 in compensation to one vendor. The vendors have taken the
shares for investment.
Use of Proceeds. On December 22, 1999, we completed our initial public
offering of 1,150,000 units, each comprised of one share of our common stock and
one warrant to purchase one share. The offering was lead managed by Paulson
Investment Company, Inc. The Units were sold pursuant to a registration
statement filed with the Securities and Exchange Commission (Reg. No. 333-90649)
and declared effective December 16, 1999. The price of each unit was $6.00.
After deducting expenses of $1,509,000 incurred in connection with the offering,
our net proceeds from the offering were approximately $5,391,000. From our net
proceeds, we repaid three items of whichindebtedness, which aggregated
approximately $1,600,000, as follows:
Note payable bearing interest at 10% per annum, repayable in
monthly installments of $8,333 comprising principal and
interest. Repaid in January 2000. $ 734,500
Note payable bearing interest at 14% per annum, repayable in
54 equal installments commencing February 2000. Repaid in
December 1999. 850,000
Notes payable bearing interest at 10% per annum, repayable on
demand. Repaid in January 2000. 15,000
Total $1,599,500
Through March 31, 2000, we expended approximately $695,000 in development and
expansion of our Web site and further product development and site maintenance.
The balance of the net proceeds will be used for development and expansion of
our Advertise123.com Web site and for product development and site maintenance.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.23 Engagement Agreement, dated March 7, 2000, between RCG
Capital Markets Group and the Company.
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10.24 First Amendment of Office Lease and Parking License
Agreement, dated December 13, 1999, between TIAA Realty,
Inc. and the Company.
10.25 Second Amendment of Office Lease and Parking License
Agreement, dated March 24, 2000, between TIAA Realty, Inc.
and the Company.
27 Financial Data Schedule
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AdStar.com, Inc.
(Registrant)
Date May 12, 2000 /s/ LESLIE BERNHARD
- ------------------- -------------------------------
President & CEO
Date May 12, 2000 /s/ BENJAMIN J. DOUEK_
- ------------------- -------------------------------
Senior vice President & CFO
<PAGE>
INDEX
List of Exhibits
Exhibit
- -------------------
10.23 Engagement Agreement, dated March 7, 2000, between RCG
Capital Markets Group and the Company.
10.24 First Amendment of Office Lease and Parking License
Agreement, dated December 13, 1999, between TIAA Realty,
Inc. and the Company.
10.25 Second Amendment of Office Lease and
Parking License Agreement, dated March 24,
2000, between TIAA Realty, Inc.
and the Company.
27 Financial Data Schedule
Exhibit 10.23
ENGAGEMENT AGREEMENT
March 7, 2000
Ms. Leslie Bernhard
President and CEO
AdStar.com, Inc.
4553 Glencoe Avenue, Suite 300
Marina del Rey, CA 90292
1. This letter agreement will confirm the understanding between AdStar.com,
Inc. and/or its affiliates and successors (the "Company" or "AdStar") and
RCG Capital Markets Group, Inc. ("RCG') with respect to the matters set
forth herein. RCG will provide consulting and other services, as more
particularly described herein and in the attachment hereto entitled
Financial Relations Services Attachment (the "Financial Relations
Services"), to the Company and will represent the Company during the
engagement as Financial Relations Consultants with respect to the
Financial Relations Services, on the terms and conditions set forth herein
and in the attachments hereto, all of which are incorporated herein by
reference and form a part hereof. The period during which RCG will perform
the Financial Relations Services for the Company will commence on the date
set forth above (the "Commencement Date") and, unless otherwise terminated
as provided in this paragraph or in paragraph nine of this letter
agreement, will terminate on the date which is the first anniversary of
the Commencement Date (the "Termination Date"). The period beginning on
the Commencement Date and ending on the Termination Date is hereafter
referred to as the "Engagement Term".
2. During the Engagement Term, the Company agrees to furnish or cause to be
furnished to RCG all information concerning the Company as RCG reasonably
requests and deems appropriate for purposes of providing the Financial
Relations Services. The Company represents that all information
represented as being complete, with respect to the Company, provided to
RCG will be complete and correct in all material respects and will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in light of the circumstances under which such statements are
made. RCG understands that in order to facilitate communications, AdStar
may provide information in draft form to RCG as to which no representation
is made. AdStar understands that in rendering the Financial Relations
Services required hereunder, RCG will be using and relying on publicly
available information and the information furnished to RCG by AdStar
without independent verification thereof. RCG will treat as confidential
any non-public information (including information provided in draft form)
provided to it hereunder and will not disclose the same to third parties
at any time unless required by applicable law. In the event disclosure has
been or will be made by RCG, RCG will use its best efforts to cooperate as
reasonably requested by the Company in minimizing any potential loss or
injury to the Company as a consequence of any such necessary disclosure.
In addition, RCG will comply with all applicable state and Federal
securities laws in the performance of this agreement.
3. During the Engagement Term, RCG and its employees, consultants and
contractors will be available to AdStar in connection with its rendering
of the Financial Relations Services. Specifically, RCG (a) will outline,
develop and implement a financial relations program to assist the Company
in creating and/or enhancing a positive and more visible public image with
the professional investment community (b) may contact existing and future
shareholders, broker/dealers, potential investors, registered
representatives, institutions, mutual fund managers, investment banking
sources, securities analysts, independent portfolio managers, and other
professional investment community contacts for the purpose of enhancing
the Company's public image and perceived value, (c) will assist the
Company in the creation, production and distribution of certain financial
markets and investor/shareholder corporate image materials, including
corporate profiles, due diligence materials and investor packages; (d)
assist the Company in its endeavor to secure research analyst coverage
through a targeted securities professionals campaign and (e) otherwise
perform the services described in the Financial Relations Services
Attachment.
<PAGE>
4. During the Engagement Term, the Company will afford RCG an opportunity to
review and/or comment on any disclosure, prior to its release, which the
Company plans to make to any of the sources described in paragraph (3) and
which relates to the Financial Relations Services to be provided
hereunder. In addition, at the request of the Company, RCG will be
responsible for assisting AdStar in writing and/or editing, producing,
coordinating and disseminating all financial industry press releases. RCG
agrees that it will not release or distribute any press release without
the Company's prior consent.
5. In consideration of RCG's services hereunder, the Company agrees to pay
RCG, promptly when due, the Compensation as described by and in strict
accordance with the attachment hereto entitled Financial Relations
Compensation Attachment. Should RCG and the Company determine to extend
the Engagement Term or change the scope of the engagement, then a mutually
acceptable amendment or supplement to that attachment shall be promptly
executed by RCG and Company. Absent any such amendment, all terms and
conditions of this letter agreement shall be binding to the parties.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, ADSTAR SHALL
NOT BE OBLIGATED TO PAY ANY OF THE COMPENSATION TO RCG AFTER THIS LETTER
AGREEMENT HAS BEEN TERMINATED EXCEPT THAT ADSTAR SHALL ISSUE ANY OPTIONS
THAT HAVE VESTED PRIOR TO SUCH TERMINATION PURSUANT TO THE TERMS HEREOF
AND RCG'S REGISTRATION RIGHTS WITH RESPECT TO ANY OPTION SHARES UNDERLYING
VESTED OPTIONS SHALL BE UNAFFECTED BY SUCH TERMINATION.
6. RCG shall be entitled to such additional fees as may be mutually agreed
upon by separate agreement between the parties hereto, for additional
consulting services not anticipated in this letter agreement rendered
during the Engagement Term.
7. As more particularly set forth in the Financial Relations Compensation
Attachment, the Company agrees to pay all of RCG's out-of-pocket expenses
reasonably incurred in connection with the performance of the Financial
Relations Services. As set forth in the Financial Relations Compensation
Attachment, an expense escrow deposit shall be utilized for this purpose.
8. The Company and RCG agree to indemnify each other (the indemnifying party
hereafter being referred to as the "Indemnity", and the party entitled to
indemnification hereafter being referred to as the "Indemnity") as
follows: Indemnity agrees to defend, indemnify and hold harmless
Indemnity, and its officers, directors, and employees against any and all
losses, claims, demands, suits, actions, judgments, awards, damages,
liabilities, costs, reasonable attorneys' fees, and expenses incurred in
investigating, preparing or defending any such action or claim, directly
or indirectly caused by, related to, or asserted by a third party, based
upon or arising out of (a) the Indemnity's breach of or the incorrectness
of any of its representations, warranties, agreements or covenants
contained in this letter agreement; and/or (b) any of the Financial
Relations Services rendered by RCG. Notwithstanding the foregoing, the
lndemnitor shall have no obligation to indemnify or hold the Indemnitee
harmless with regard to Indemnitee's negligence, willful misconduct, or
the material breach of or the incorrectness of any representation,
warranty or covenant of lndemnitee contained in this letter agreement.
9. (a) Either party hereto may terminate this letter agreement at any time
after June 30, 2000 upon thirty (30) days prior written notice to the
other party.
(b) A party to this letter agreement may terminate this letter agreement
prior to June 30, 2000 Date, if the other party to this letter agreement
commits a "Terminable Act". A Terminable Act shall mean: (i) a material
breach of any term or provision of this letter agreement by such other
party and such breach remains unremedied for a period of thirty (30) days
following the receipt of notice from the nonbreaching party setting forth
in reasonable detail the circumstances of such breach ;provided however,
if such breach cannot be remedied, termination shall be immediate; (ii)
the negligence, willful misconduct, fraud or misrepresentation of such
other party; (iii) the failure of such other party to materially comply
with any applicable law or regulation relating to the Financial Relations
Services being provided; (iv) if such other party shall plead guilty or
nolo contendere to any violation of the securities laws of the United
States or any state; and (v) upon the filing by or against such other
party of a petition to have such party adjudged as bankrupt or a petition
for reorganization or arrangement under any law relating to bankruptcy,
and where any such involuntary petition is not dismissed within 90 days.
2
<PAGE>
(c) Upon termination under subparagraphs (a) or (b) of this paragraph 9,
the Company shall have no liability to RCG for Compensation accruing after
such termination, and RCG shall have no further entitlement thereto. Upon
such termination, RCG shall be entitled to receive and retain only accrued
Compensation and vested Options to the date of such termination, to the
extent it is unpaid, together with expenses not yet reimbursed.
(d) If this letter agreement is not terminated by either party prior to
the Termination Date, it shall renew automatically on a month to month
basis until specifically renewed in writing or terminated upon thirty (30)
days prior written notice. Such renewal on month to month basis shall be
on the same terms and conditions contained herein.
10. RCG hereby fully discloses that certain associates, affiliates, officers
and employees of RCG are:
(a) Licensed as Registered Securities Principals issued by the
National Association of Securities Dealers ('^NASD"); and/or
(b) Licensed as Registered Representatives issued by the NASD.
All NASD registrations are carried by SWS Financial Services, Inc.,
which is a non-RCG affiliated NASD-registered broker/dealer.
RCG represents and warrants that RCG is NOT a broker/dealer
registered with the NASD or any other regulatory agency and its
performance of Financial Relations Services under the terms and
conditions of this agreement shall not be considered to be acting in
any broker/dealer or underwriting capacity and therefore RCG is not
receiving any compensation from the Company as such.
11. The Company understands and acknowledges that RCG provides other and
similar consulting services to companies which may or may not conduct
business and activities similar to those of the Company. RCG is not
required to devote its full time and attention to the performance of its
duties detailed in this agreement, and may devote only so much of its time
and attention as is reasonable or necessary. RCG represents and warrants
that it does not currently represent nor does it perform services to or
for any individual, partnership, limited liability company, sole
proprietorship, corporation or any other entity engaged in the business of
developing, licensing, selling, marketing or distributing internet and
software applications to or for the classified advertising industry. RCG
further covenants and agrees that throughout the Engagement Term and any
extension thereof it will not represent or provide services to or for any
individual, partnership, limited liability company, sole proprietorship,
corporation or any other entity engaged in the business of developing,
licensing, selling, marketing or distributing internet or software
applications to or for the classified advertising industry.
12. The terms of this letter agreement shall be governed by and interpreted in
accordance with the laws of the State of California.
13. For the convenience of the parties, this letter agreement may be executed
in separate counterparts. Each such counterpart shall be deemed to be an
original instrument, but both such counterparts taken together shall
constitute one and the same letter agreement.
If the foregoing correctly sets forth our agreement, please sign the enclosed
copy of the letter in the space provided and return it to us, whereupon both
parties will be bound by the terms of this engagement.
Confirmed and agreed to as of the date first above written.
RCG Capital Markets Group, Inc. AdStar.com, Inc.
By: _______________________________ By: _______________________________
Title: ____________________________ Title: ____________________________
3
<PAGE>
FINANCIAL RELATIONS
SERVICES ATTACHMENT
At the Commencement Date of this letter agreement as defined in Paragraph I of
the letter agreement to which this Attachment is appended, RCG Capital Markets
Group, Inc. CRCG") will serve as Financial Relations Consultant for AdStar.com
("AdStar" or the "Company"). RCG anticipates the following services will be
attempted and/or implemented within the scope of this engagement:
o Outline, define, establish and implement a well-coordinated
"Financial Relations" campaign.
o Create, produce, or enhance existing, and distribute high-quality,
due diligence and marketing materials, which specifically include,
but are not limited to a "Corporate Profile" document and the
Company's "Investor Package".
o Specifically develop, proactively execute and maintain a targeted
securities professionals telecommunications and information campaign
specifically directed toward retail brokers, institutional
investors, third-party portfolio managers and small/mid-cap mutual
funds, buy and sell side analysts. At the Company's request, RCG
will allocate and utilize its proprietary securities industry,
small/mid cap company oriented, databases and fax-line
communications programs. (This will include responding to all
incoming investment community inquiries and fulfillment of
information and data requests.)
o RCG will attempt to secure investment recommendations and on-going
corporate research coverage from national or regional investment
banking or research firms and/or an endorsement by an investment
news letter publication.
o Plan, arrange and coordinate specific follow-on road-show
presentations to strategically targeted primary metropolitan
financial markets.
o At the Company's request, RCG will be responsible for the
origination and release of financial industry data on behalf of
AdStar. Also at the Company's request, RCG will be responsible for
editing (or writing) all press releases and coordinating information
disseminated to all media sources relating to the securities
industry and capital markets.
o At the Company's request, RCG will organize, monitor and follow-up
all conference calls between the Company and RCG's targeted segment
of the investment community, in conjunction with material press
releases, through a teleconferencing service. (RCG will be
responsible for faxing and/or emailing the invitations and will
follow up with calls to the recipients in an effort to expand the
conference call participation.)
o Plan, arrange and coordinate periodic registered representative,
institutional and/or other securities professionals meetings,
luncheons, dinners or special gatherings.
o Implement periodic direct mailings which may include the most recent
statistical information reports, and any appropriate articles or
press releases that have been released during the last reported
quarter.
o Update all due diligence and marketing materials. RCG anticipates
updating Company information on a regular basis as required when
there are material changes or events that should be disseminated to
the investment community.
o Implement an AdStar lnternet Site on RCG's Internet Home Page, RCG
Online (the "AdStar Page"). RCG Online will also create an Internet
link to the Company's home page. The purpose of these inclusions
will be to provide the investment community a 24-hour access site to
obtain up-to-date information about the Company.
4
<PAGE>
RCG intends to perform the services and accomplish the specified goals within
the scope of this engagement. However, due to the nature and type of services
being performed, RCG cannot guarantee, nor can it be assumed that certain
specific results will be realized with reference to increased market valuation
of AdStar securities.
5
<PAGE>
FINANCIAL RELATIONS
COMPENSATION ATTACHMENT
In consideration of the Financial Relations Services to be rendered pursuant
hereto, AdStar agrees to pay RCG the following compensation (the
"Compensation"):
A. Cash Compensation. AdStar shall pay RCG (1) the sum of $350 per month for
the RCG Online service beginning with the month the AdStar Page is
available online, and (2) a monthly retainer of $6,000 for each month
beginning July 1, 2000 of the Engagement Term, payable monthly in advance
of services rendered: provided, however, AdStar may continue to pay, at
its option, the Equity Compensation specified in paragraph C hereof in
lieu of the Cash Compensation specified in this paragraph A.t.
B. Expense reimbursement In addition, RCG shall be reimbursed for all direct
and certain indirect prorated out-of-pocket incurred in connection with
the performance of the Financial Relations Services pursuant hereto.
AdStar, will remit $5,000 to RCG, which RCG will utilize as an escrow
deposit for the express purpose of indemnifying RCG in the event of late
payment of monthly expenses by the Company. RCG will provide the Company
with a detailed breakdown of all reimbursable expenses incurred in the
previous month by approximately the twentieth (20th) day of the following
month of service. AdStar agrees to reimburse RCG within 15 days of receipt
of detailed invoice each month. If AdStar is delinquent in timely
reimbursement of expenses as defined above, RCG will have the fight to
withdraw from the escrow account the applicable dollar amount to fully
reimburse RCG. If reimbursement is not received by RCG by the 25th day
after the date of the invoice, AdStar will then be immediately required to
remit to RCG an amount equal to the expenses in question. RCG will then
replenish the escrow account for the amount withdrawn to cover the
delinquency. RCG can at its discretion discontinue all representation
activities on behalf AdStar, if RCG deems AdStar to be routinely
delinquent in the timely payment of expenses and/or the monthly fees as
stated above. Such discontinuance does not extinguish the Company's
obligation for reimbursement and payment of retainer fees.
RCG will obtain prior approval from the Company for all specific expense
items and any single miscellaneous expense item in excess of $500. RCG
acknowledges and understands that the Company will have specific amounts
budgeted for these expenditures and will attempt to ensure those budget
amounts are not exceeded.
C. Equity Compensation. On the Commencement Date, the Company shall pay RCG
an engagement fee of 1,200 shares of its unregistered common stock. For
the period commencing on the Commencement Date and terminating on the date
when the monthly retainer specified in paragraph A hereof is paid in cash,
AdStar shall pay RCG a monthly fee of 700 shares of its unregistered
common stock. Payments of the monthly fees shall be due at the beginning
of each month; provided, however the first four payments (2,800 shares)
shall be paid on the Commencement Date.
D. Stock Options. As additional compensation for Financial Relations
Services, RCG requests non-forfeitable granted options/warrants to
purchase 25,000 shares of AdStar common stock (the "Signing Options"). The
Signing Options shall be granted as consideration for RCG agreeing to take
compensation in equity rather than cash for the initial period of this
engagement and shall be immediately vested upon execution of this
agreement. Additional options/warrants to purchase 15,OO0 shares of AdStar
common stock (the "Additional Options") are also granted. The Additional
Options will vest and become exercisable at the expiration of five years
from the date of grant provided that RCG is still providing services to
the Company on that date and provided further that such options shall vest
and become earlier exercisable on a performance basis as outlined below:
3,750 shall become exercisable upon confirmation of an average 5%
increase per calendar month in the average daily trading
volume of AdStar for any period of 90 calendar days;
provided, however, in no event shall any Additional
Options vest if the average daily trading volume in
AdStar common stock is less than 5,000 shares. (The
baseline average
6
<PAGE>
shall be determined as the average daily trading volume
calculated for the 20 trading days prior to the
Commencement Date.)
3,750 shall become exercisable upon confirmation of corporate
research coverage from a buy- or sell-side analyst at a
reputable national or regional investment banking firm
having institutional clients and at least 50 retail
brokers.
3,750 shall become exercisable upon securing confirmation of two (2)
new institutional investors or third-party portfolio
managers positioning at least 2% of the Company's issued
and outstanding stock. (Vesting to be prorated at 1,875
Additional Options for each investor secured.)
3,750 shall become exercisable upon confirmation of four (4) new
non-wholesale market makers. (Vesting to be prorated at
937.5 Additional Options for each new market maker
secured.)
The Company agrees to issue an options/warrants document
within thirty (30) days of the Commencement Date which
conforms to and delineates the terms and conditions contained
herein.
The exercise price for the Signing Options and the Additional Options
(collectively, the "Options" shall be $10.00.
The Options issued will possess a five (5) year expiration term and the shares
of AdStar common stock underlying the Options together with any shares issued
pursuant to paragraph C hereof (the "Option Shares") will be eligible for
registration on and after January 31,2001. Such registration shall be
accomplished by one demand registration rights via a form S-3 registration
statement or by non-profitable piggyback registration rights should the Company
file a registration after the one year period. In the event that RCG provides a
written request to register the Option Shares, as provided herein, the Company
hereby agrees that it will use its reasonable best efforts to file such
registration statement within 45 days of such request. The Company's obligation
to file a registration statement, or cause such registration statement to become
and remain effective, shall be suspended for a period not to exceed 120 days in
any 12-month period if there exists at the time material non-public information
relating to the Company which, in the reasonable opinion of the Company, based
on the advice of counsel, should not be disclosed. RCG agrees to pay 50% of the
cost of such S-3 registration up to an amount not to exceed $12,500. Such
payment by RCG is due upon the effective date of the registration statement.
RCG's demand registration right shall terminate at such time as the Option
Shares shall be salable under Rule 144 during a period of not more than 90 days.
Notwithstanding anything contained herein, the Company shall not be required to
include any Options or Option Shares in any Registration Statement filed on Form
S-8 or Form S-4 or their equivalents relating to an offering of securities by
the Company to be issued in connection with any acquisition of any entity or
business or otherwise Isabel in connection with any stock option or employee
benefit plan.
In the event that AdStar is merged into or a controlling interest is acquired by
any entity, or there is a material change in AdStar management, RCG will be
immediately vested in all remaining options, including those, which to that
point have not yet been vested.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN, ADSTAR SHALL NOT BE OBLIGATED TO PAY
ANY OF THE FOREGOING COMPENSATION TO RCG AFTER THIS LETTER AGREEMENT HAS BEEN
TERMINATED EXCEPT THAT ADSTAR SHALL ISSUE ANY OPTIONS THAT HAVE VESTED PRIOR TO
SUCH TERMINATION PURSUANT TO THE TERMS HEREOF AND RCG'S REGISTRATION RIGHTS WITH
RESPECT TO ANY OPTION SHARES UNDERLYING VESTED OPTIONS SHALL BE UNAFFECTED BY
SUCH TERMINATION.
7
Exhibit 10.24
FIRST AMENDMENT OF OFFICE LEASE
AND
PARKING LICENSE AGREEMENT
THIS FIRST AMENDMENT OF OFFICE LEASE AND PARKING LICENSE AGREEMENT (this
"Agreement") is made and executed this 13TH DAY OF December, 1999, by and
between TIAA REALTY, INC., a Delaware corporation, successor-in-interest to
Teachers Insurance and Annuity Association, a New York corporation (hereinafter
referred to as "Landlord") and ADSTAR.COM, INC., a Delaware corporation,
successor-in-interest to Ad-Star Services, Inc., a New York corporation
(hereinafter referred to as "Tenant"), who agree as follows:
RECITALS
A. Teachers Insurance and Annuity Association ("Teachers") and Ad-Star Services
("AdSvc") entered into a written Office Lease made as of January 3, 1996
(hereinafter the "Lease") for the lease of certain premises ("Premises") more
commonly known as Suite 325 in that certain office building ("Building") located
at 4553 Glencoe Avenue in the City of Marina del Rey, County of Los Angeles,
State of California, in a project ("Project"), generally referred to as Marina
Business Center II, all as more particularly set forth in the Lease.
B. On March 18, 1998, Landlord succeeded to all right, title and interest in
said Lease held by Teachers.
C. On August 31, 1999, Tenant succeeded to all right, title and interest in said
Lease held by Ad Svc.
D. Landlord and Tenant desire by this Agreement to extend the term of the Lease
and to amend the Lease to provide for Tenant to lease from Landlord, in addition
to its existing Premises, approximately 5,098 square feet of rentable space more
commonly known as Suite 300 (the "Additional Space") on the third floor of the
Building as delineated on Exhibit A-2 attached hereto and by this reference made
a part hereof.
TERMS
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants herein contained, and good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Terms. All undefined terms when used herein shall have the same respective
meanings as are given such terms in the Lease unless expressly provided
otherwise in this Agreement.
2. Effective as of the date hereof, the Lease is hereby amended as follows:
2.1 Section 1.1 ("Premises") is amended by deleting the words "2,209
square feet of rentable area from the fourth line thereof and
substituting the following in lieu thereof:
"2,209 square feet of rentable area ('Original Space') and
5,098 square feet of rentable area ('Additional Space')".
2.2 Section 1.2 ("Term") is amended by adding at the end of the second
line thereof
<PAGE>
the following:
"The preceding applies to the Original Space. As to the
Additional Space, the target 'New Commencement Date' (as such
term is hereinafter defined) shall be February 15, 2000. The
Lease term as to the Additional Space shall commence on the
earlier to occur of (i) the date of substantial completion of
Landlord's Work in the Additional Space, or (ii) the date
Tenant occupies or commences using any part of the Additional
Space (the 'New Commencement Date') and shall expire on the
day preceding the fifth anniversary of the New Commencement
Date. Thereafter, the Lease term as to the Original Space
shall be co-terminus with the Lease term for the Additional
Space".
2.3 Section 1.3 ("Rental") is deleted in its entirety and the following
substituted in lieu thereof:
"As to the Original Space, the Basic Rent shall be Three
Thousand Two Hundred Three and 05/100 Dollars; commencing
February 19, 2001, the Basic Rent as to the Original Space
shall be increased to Four Thousand Five Hundred Twenty-Eight
and 45/100 Dollars ($4,528.45) per month. As to the Additional
Space, the Basic Rent shall be Eleven Thousand Three Hundred
Sixty-Eight and 54/100 Dollars ($11,368.54) per month;
commencing in the 31st month of the Lease term for the
Additional Space, the Basic Rent shall be increased to Eleven
Thousand Eight Hundred Seventy-Eight and 34/100 Dollars
($11,878.34) per month".
2.4 Section 1.4 ("Expenses") is amended by adding at the end of the
fourth line thereof, the following:
"As to the Original Space, commencing February 19, 2001,
Tenant shall pay Tenant's Share of all Expenses that exceed
Landlord's Base Year Costs for calendar year 2001. As to the
Additional Space, Tenant shall pay Tenant's Share of all
Expenses that exceed Landlord's Base Year Costs for calendar
year 2000, together with other items of Expense as set forth
in Article 6. Tenant's Share is Seven and 1/100ths percent
(7.01%) as to the Additional Space".
2.5 Section 1.7 ("Security Deposit") is deleted in its entirety and the
following substituted in lieu thereof:
"1.7 Security Deposit: Sixteen Thousand Four Hundred Six and 79/100
Dollars ($16,406.79)".
2.6 Section 2.1 is amended by adding on the first line thereof between
the words "premises" and "(the 'Premises')" the following:
"including the Original Space and the Additional Space"
and by adding at the second line of Section 2.1 after the words "Exhibit
A" the following:
"and Exhibit A-2"
and by deleting the language on the third line which begins "The area of
the Premises..." and which ends on the fifth line with the words
"...rentable area." and substituting the
<PAGE>
following in lieu thereof:
"The area of the Premises for all purposes hereunder is
stipulated to be 1,943 square feet of usable area as to the
Original Space and 4,486 square feet of usable area as to the
Additional Space; and 2,209 square feet of rentable area as to
the Original Space and 5,098 square feet of rentable area as
to the Additional Space".
2.7 Article 3 ("Term")is deleted in its entirety and the following
substituted in lieu thereof:
"3. TERM
3.1 New Commencement Date. The Lease term as to the Additional
Space shall be for sixty (60) months and shall commence on the
earlier to occur of (i) the date Tenant (or any subtenant)
takes possession of, occupies or commences using any part of
the Additional Space, or (ii) [he date of "substantial
completion" (as hereinafter defined), or (iii) the date
established by Landlord in the event of a delay as described
in Article 10 hereof. The date on which the Lease term of the
Additional Space commences pursuant to the foregoing (the "New
Commencement Date") shall be confirmed by Landlord and Tenant
in the form set forth in Exhibit B when Tenant takes
possession of the Additional Space. The term of the Lease for
the Additional Space shall be extended to be co-terminus with
the Lease term for the Additional Space. Failure of Tenant to
execute Exhibit B within ten (10) days after written request
from Landlord shall be a material default hereunder. This
Agreement shall be a binding contractual agreement effective
upon the date of execution hereof by both Landlord and Tenant,
notwithstanding the later commencement of the term of the
Lease as to the Additional Space".
"3.2 Substantial Completion. For purposes hereof, the phrase
"substantial completion" means the completion (as determined,
in the event of a dispute, by Landlord's architect or space
planner in accordance with AIA standards) of the construction
work to be performed by Landlord pursuant to the "Plans" (as
defined in Exhibit C, "Construction Provisions", attached
hereto), except for such items that constitute minor defects
or adjustments which can be completed after occupancy by
Tenant without causing material interference with Tenant's use
of the Additional Space (so-called "punch list" items). On or
about the date when Landlord has substantially completed all
work to be performed by Landlord in the Additional Space,
Landlord and Tenant shall inspect the Additional Space and all
punch list items shall be noted in writing on Landlord's punch
list form. Damage to the Additional Space caused by Tenant or
its agents or contractors shall not constitute punch list
items. As soon thereafter as conditions permit, Landlord shall
complete all such punch list items, provided Tenant is not
then in default hereunder. Upon Landlord's completion of such
punch list items, Landlord and Tenant shall reinspect the
Additional Space with regard to all punch list items
previously noted and shall indicate on Landlord's punch list
form if such items have been satisfactorily completed.
Tenant's failure to reinspect any such punch list items within
fifteen (15) days after Landlord's written request to do so
shall constitute an acceptance by Tenant of such items as
being satisfactorily completed".
<PAGE>
"3.3 Target New Commencement Date. The Target New Commencement
Date is an estimated date only and is set forth in Section 1.3
hereof. Landlord shall attempt to complete "Landlord's Work"
(as defined in Section 10.1) prior to the Target New
Commencement Date, but this Agreement shall not be void or
voidable nor shall Landlord or its agents be liable to Tenant
by reason of Landlord's failure to complete Landlord's Work by
such date. Landlord shall use its best efforts to give Tenant
sufficient advance notice of the date of substantial
completion. Landlord shall use its best efforts to cooperate
with Tenant's move-in schedule and, at Landlord's sole
discretion, may allow Tenant to have access to the Additional
Space prior to completion of Landlord's Work (provided that
Landlord may, after having allowed such access, disallow
further access) so that Tenant may install its furniture,
equipment and fixtures, prior to the New Commencement Date. In
such event, however, Tenant shall not interfere with
completion of such work and shall be responsible for any
delays, costs or expenses incurred by Landlord due to any such
interference, and in such event Tenant shall hold Landlord
harmless and indemnify Landlord for any loss or damage to
Tenant's furniture, equipment, fixtures, or merchandise and
for injury to any persons arising out of the performance of
such work in the Additional Space unless caused by the
negligence of Landlord, its agents or contractors".
2.7 The Lease is amended by adding the following after Article 43:
"44. OPTION TO EXTEND TERM
44.1 Option to Extend Term. Landlord hereby grants Tenant one
(1) option of five (5) years ("Option") to extend the initial
Lease term ("Initial Term") on the same terms and conditions
as set forth in this Lease(excepting this Option to Extend)
but at a Basic Rent as set forth below. The Option shall be
for an additional term of five (5) years commencing upon the
expiration of the Initial Term ("Extended Term") and shall be
exercised only by written notice ("Option Notice") delivered
to Landlord at least six (6) months, but not more than twelve
(12) months prior to the expiration of the Initial Term. If
Tenant does not deliver the Option Notice for the Option
within the time period set forth herein, the Option shall
lapse and Tenant shall have no further right to extend the
Lease term. Tenant shall have no further right to extend the
term beyond the Extended Term.
44.2 Personal Option. If Tenant assigns, mortgages, pledges,
hypothecates or encumbers this Lease or its interest in the
Premises or sublets all or any portion of the Premises
("Assigns" for purposes of this Article 44 only) prior to the
exercise of the Option without first obtaining Landlord's
written consent, then the Option shall lapse. If Tenant
assigns any interest of Tenant in the Lease or the Premises to
an entity after the exercise of the Option, but prior to the
commencement of the Extended Term, and Landlord's prior
written consent has not been obtained, the Option shall lapse
and this Lease shall expire as if the Option were not
exercised.
44.3 Calculation of Basic Rent. The Basic Rent shall be
adjusted on the first day of the Extended Term to the then
"Fair Market Rental Value of
<PAGE>
the Premises" (as defined in this Article 44), but in no event
less than the Basic Rent payable immediately preceding the
Extended Term. The term "Fair Market Rental Value of the
Premises" shall be the then prevailing fair market rental rate
per square foot achieved for comparable space and use within
the Marina del Rey - Fox Hills - Culver City market as of the
commencement of the Extended Term.
44.4 Negotiation. After Landlord receives the Option Notice
for the Option, the parties shall have thirty (30) days after
Landlord receives the Option Notice in which to negotiate, in
good faith, to agree on the Fair Market Rental Value of the
Premises during the Extended Term. If, within said thirty
(30)-day period the parties agree on the Fair Market Rental
Value of the Premises, then this Lease shall be amended
pursuant to Section 44.5 hereof. However, if the parties are
unable to agree upon the Fair Market Value of the Premises
during said thirty (30)-day period, then this Lease shall
expire upon the end of the Initial Term unless earlier
terminated. Neither Landlord nor Tenant shall have the right
to have the Court or any other third party set the Fair Market
Value of the Premises; however, neither party shall be
prevented from having a Court rule on the issue of good faith.
44.5 Documentation. Following Landlord and Tenant's agreement
as to the Fair Market Rental Value of the Premises as provided
in Section 44.4 above, Landlord shall prepare an amendment to
this Lease setting forth the terms of this Lease as modified
by the terms of this Article 44. Said amendment shall be
submitted to Tenant for execution and Tenant shall have thirty
(30) days following receipt thereof from Landlord in which to
properly execute and deliver to Landlord said amendment. If
Tenant should not execute and deliver said amendment as and
when required by this Section 44.5, the same shall constitute
a material default under this Lease.
44.6 Additional Conditions. The Option shall be exercisable by
Tenant on the express conditions that at the time of the
exercise of the Option and upon the date of the commencement
of the Extended Term, Tenant shall not be in default under any
of the provisions of this Lease. The Option granted herein is
subject to any existing or prior rights of expansion,
extension, renewal, negotiation, offer and other rights and
options which third parties may have for the Premises."
2.8 The Lease is further amended by adding thereto, after Exhibit A-1,
Exhibit A-2, which is attached hereto and by this reference made a
part hereof.
2.9 Exhibit "C" ("Construction Provisions") is deleted in its entirety
and the attached Exhibit "C" substituted in lieu thereof.
2.10 Section 1 of the License is amended by deleting the words "Nine (9)"
on the first line thereof and substituting the words "Thirty (30)"
therefor.
2.11 Section 2.1 of the License is deleted in its entirety.
3. Notwithstanding anything to the contrary in the Lease or in Exhibit "C",
Landlord hereby grants Tenant a remodeling allowance of $9,715 (the
"Remodeling Allowance") to be used as a credit towards repainting and
re-carpeting the Original Space. The Remodeling
<PAGE>
Allowance will be provided to Tenant within thirty (30) days following
Landlord's receipt of paid invoices totaling or in excess of the
Remodeling Allowance; provided, however, that the Remodeling Allowance
will not be available for Tenant's use until February 19, 2001.
4. This Agreement contains all of the agreements of the parties hereto with
respect to the matters contained herein, and no prior agreement,
arrangement or understanding pertaining to any such matter shall be
effective for any purpose.
<PAGE>
5. Except as expressly modified by this Agreement, the Lease shall remain
unchanged and in full force and effect.
6. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the
same Agreement.
7. The provisions of this Agreement shall bind and inure to the benefit of
the heirs, representatives, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LANDLORD: TIAA REALTY, INC., a Delaware corporation
By: TEACHERS INSURANCE AND ANNUITY
ASSOCIATION, a New York corporation,
its authorized representative
By: _________________________________________
James P. Garofalo, Assistant Secretary
Date: _______________________________________
TENANT: ADSTAR.COM, INC., a Delaware corporation
By: _______________________________________________
Name: _____________________________________________
Title: ____________________________________________
By: _______________________________________________
Name: _____________________________________________
Title: ____________________________________________
<PAGE>
EXHIBIT A-2
MARINA BUSINESS CENTER II
4553 GLENCOE AVENUE
MARINA DEL REY
THIRD FLOOR
<PAGE>
EXHIBIT C
CONSTRUCTION PROVISIONS
1. These provisions define the scope of work to be provided by Landlord in
the Additional Space under the terms of the Lease. Words and phrases used herein
which are defined in the Lease have the meanings set forth therein unless
provided otherwise.
2. It is the intent of these provisions that Tenant shall be permitted
freedom in the interior design and layout of its space so long as same is
consistent with Landlord's policies and structural requirements, applicable
building codes, and with sound architectural and construction practices, and
provided further that no interference is caused to the operation of the
Building's mechanical heating, cooling or electrical systems or structure, or
other Building operations or functions, and that no unusual increase in
maintenance, insurance, taxes, fees or utility charges will be incurred by
Landlord or the other tenants in the Building as a result thereof. Any
additional cost of design, construction, operation, insurance, maintenance,
taxes, fees or utilities which results therefrom shall be charged to Tenant and
paid for by Tenant in accordance with the provisions hereof and of the Lease.
3. Landlord's Work. Landlord hereby grants Tenant a construction allowance
not to exceed $82,991.00 (the "Additional Space Allowance") which Additional
Space Allowance shall be used only as a credit towards the cost of the following
services and materials (hereinafter referred to as "Landlord's Work"):
3.1 The services of Landlord's space planner to prepare one (1)
approved space layout and one (1) set of approved working drawings [with five
(5) prints]. One minor revision to the original space layout will be included
without charge. All other revisions and prints as well as all interior design or
decorating fees, shall be at Tenant's sole cost and expense.
3.2 The construction of the improvements and the installation of the
items shown the "Plans", hereinafter defined (as used in the Lease and this
Exhibit C, the term "Building Standard" refers to the minimum quality of
materials to be used in the construction of the Additional Space).
3.3 Fees for engineering, construction management by Landlord's
Construction Manager (as hereinafter set forth), and previously installed
materials used in the construction (if any).
3.4 Permits and license fees relating to the construction of
Tenant's improvements.
4. Tenant's Work. All costs incurred in excess of the foregoing Additional
Space Allowance (hereinafter referred to as "Tenant's Work") shall be for the
account of Tenant and at Tenant's sole cost and expense. Tenant shall pay
building lifting charges (if any) for Tenant's Work to the extent the same are
not otherwise included in the cost of Landlord's Work.
5. Space Planner. Tenant shall use the services of the space planner
retained by Landlord to prepare a space layout and working drawings and
specifications for all construction work in the Additional Space. Interior
design, and details and specifications for improvements other than Landlord's
Work, shall be for the account of Tenant and shall be paid by Tenant upon
invoice therefor. Tenant shall devote such time in consultation with Landlord's
space planner as shall be necessary to enable the space planner to develop
complete working drawings and
<PAGE>
specifications (hereinafter referred to as the "Plans") for construction of
improvements in the Additional Space, showing thereon partitions, doors,
electrical and telephone outlets, light fixture locations, wall finishes, floor
coverings and special requirements (if any) for Tenant's review and approval.
Failure of Tenant to approve the Plans within the time limit specified in
Section 7 hereof shall be deemed disapproval. If Tenant requests or necessitates
any changes or revisions in the Plans after they have been approved, Tenant
shall bear all costs associated therewith.
6. Cost Estimates. As soon as practicable after Tenant's approval of the
Plans, Landlord will advise Tenant of the estimated cost payable by Tenant due
to costs for improvements, services or materials in excess of the Additional
Space Allowance (i.e., the estimated cost for Tenant's Work). Landlord will have
no obligation whatsoever to commence construction of any improvements in the
Additional Space unless Tenant approves same and pays the estimated costs for
Tenant's Work in advance, and Landlord's refusal to proceed under such
circumstances shall not defer the New Commencement Date. Upon Tenant's
authorization to proceed and payment of such estimated costs, Landlord shall
commence the construction of improvements in the Additional Space. Upon
substantial completion of the Additional Space (which in the event of a dispute
shall be determined by Landlord's project architect pursuant to AIA standards),
Tenant shall pay the amount of actual costs in excess of such estimated costs
previously paid by Tenant or, if the actual costs are less than such estimated
costs previously paid by Tenant, Landlord shall reimburse the difference to
Tenant. If Tenant fails to make such payment within ten (10) days after receipt
of a demand therefor, Landlord shall have the same rights and remedies as in the
case of a default by Tenant in the payment of Rent under the Lease, and interest
will accrue thereon at the Agreed Rate.
7. Time Limits. The following maximum time periods shall be allowed for
the indicated matters:
<TABLE>
<CAPTION>
Time Limit After Completion
Action of Preceding Item
- ------
<S> <C> <C>
(a) Tenant meets with Landlord's space planner and
approves initial space layout. 5 days after execution
of this Agreement
(b) Tenant furnishes all required working drawing
information to Landlord's space planner. 10 business days
(c) Landlord's space planner submits working drawings
to Tenant for review and approval. 15 business days
(d) Tenant gives Landlord its approval of working drawings,
with any required changes in detail. 5 business days
(e) Landlord quotes estimated cost to Tenant for Tenant's
Work. 10 business days
(f) Tenant approves such estimated costs and pays the
amount thereof to Landlord and authorizes
Landlord to proceed. 5 business days
(g) Upon substantial completion of the improvements in the
Additional Space (i.e., exclusive of punchlist items) Tenant
shall pay the entire then remaining balance of actual costs in
excess of the Additional Space Allowance within ten (10) days
after its receipt of a billing statement from Landlord.
</TABLE>
<PAGE>
It is expressly acknowledged by Tenant that inaccurate or incomplete information
furnished by Tenant may cause delays and that delays in the time schedule set
forth in this Section 7 attributable to Tenant, its agents or contractors will
result in liquidated damages as set forth in Section 12 hereof.
8. Construction by Landlord's Contractor. Unless otherwise agreed in
writing in this Exhibit C, all construction work in the Additional Space
including Tenant's Work shall be performed by the Tenant Improvement Contractor
("TI Contractor") retained by Landlord. The TI Contractor shall perform such
work in a good and workmanlike manner and shall construct the improvements in
the Additional Space substantially in accordance with the Plans. All such
construction work shall be performed in accordance with all laws, ordinances and
requirements of government agencies having jurisdiction. If Landlord shall,
pursuant to this Exhibit C, permit Tenant to have any work performed by a
contractor retained by Tenant rather than by the TI Contractor, then (i) Tenant
shall use only such contractor as shall have first been approved by Landlord;
(ii) such contractor shall be bondable, (iii) Landlord will permit entry of such
contractor into the Additional Space for the purpose of performing such work,
prior to commencement of the term of the Lease, and while the TI Contractor is
working at the Additional Space, but only at such time or times as Landlord
shall deem feasible in the circumstances; (iv) such license to enter before
commencement of the term is expressly conditioned upon the contractor retained
by Tenant working in harmony and not interfering with the workmen, mechanics and
contractors of Landlord or of any other tenant in the Building or the Project,
and if at any time such entry or work by Tenant's contractor shall cause any
disharmony or interference, such permission to enter may be withdrawn by
Landlord immediately upon written notice to Tenant; (v) worker's compensation,
public liability and property damage insurance, all in amounts and with
companies and on forms satisfactory to Landlord, shall be provided and at all
times maintained by Tenant's contractor, and before proceeding with the work,
certificates of such insurance shall be furnished to Landlord; (vi) such entry
shall be deemed to be under all the terms, covenants, provisions and conditions
of the Lease, except the covenant to pay Rent and Expenses; and (vii) all
materials, work, installations and decorations of any nature whatsoever brought
on or installed in the Additional Space before the commencement of the term of'
the Lease shall be at Tenant's risk, and neither Landlord nor any party acting
on Landlord's behalf shall be responsible for any damage thereto or loss or
destruction thereof.
9. Construction Manager. Landlord has designated a "Construction Manager"
who shall be responsible for the management and coordination of all work to be
performed in the Additional Space and coordination with Tenant on all matters
governed by these Construction Provisions. The Construction Manager shall be
paid a fee equal to three percent (3%) of the cost of the improvements, services
and materials furnished as a part of Landlord's Work and Tenant's Work as
reimbursement for the expense of administration and coordination of such work.
With regard to all matters involving such work, Tenant shall communicate with
the Construction Manager rather than the TI Contractor. Landlord shall not be
responsible for any statement, representation or agreement made between Tenant
and TI Contractor. It is hereby expressly acknowledged by Tenant that such TI
Contractor is not Landlord's agent and has no authority whatsoever to enter into
agreements on Landlord's behalf or otherwise bind Landlord. The Construction
Manager will furnish Tenant with notices of substantial completion, cost
estimates for Tenant's Work, Landlord's approvals or disapprovals of Plans and
changes thereto, billings for actual costs of Tenant's Work and other similar
notices. Tenant shall deliver all payments required hereunder to the
Construction Manager unless written notice is given by Landlord to the contrary.
10. Changes. If Tenant requests or necessitates any change, addition or
deletion to the Additional Space after approval of the Plans, as described in
Section 7 above, a request for the change shall be submitted to the Construction
Manager accompanied by revised plans prepared by Landlord's space planner at
Tenant's sole expense. The Construction Manager shall thereafter notify Tenant
in writing of the estimated cost which will be chargeable to Tenant by
<PAGE>
reason of such change, addition or deletion. Such estimated cost shall include
Landlord's cost of any delay in completion of the Additional Space resulting
from such change (including, but not limited to, loss of income, additional
interest, penalties, and extra labor costs incurred in order to minimize further
delay). Tenant shall within five (5) business days thereafter notify the
Construction Manager in writing whether it desires to proceed with such change.
In the absence of such written authorization within that five (5) day period,
Landlord shall not be obligated to perform such change and shall be deemed to
have been authorized by Tenant to proceed without making such change.
11. Substitutions. Tenant may select different new materials (except
exterior window levelors which must be installed on all exterior windows, the
ceiling system, parabolic light fixtures, and the doors and frames and hardware)
in substitution for the materials specified as the building standard, provided
the selection is indicated on the approved Plans.
12. Responsibility for Delays. Tenant hereby expressly agrees that if
Tenant is responsible for any delay in substantial completion of the Additional
Space, whether by reason of (i) failure to meet the time schedule set forth in
Section 7 above, (ii) delays in performance or completion by a party employed by
Tenant, (iii) building code problems arising from Tenant's design, or (iv) an
unapproved change in the work necessitated by Tenant, Landlord will suffer loss
or damage (which loss or damage may include administrative costs, attorneys'
fees, excess interest penalties and loss of income), the amount of which would
be extremely difficult to ascertain. Therefore, it is expressly agreed that for
each day of such delay attributable to Tenant the New Commencement Date shall be
accelerated and Tenant shall pay to Landlord an amount equal to the daily amount
of Basic Rent under the Lease, as liquidated damages for such delay and not as a
penalty. Furthermore, if Tenant fails to approve the Plans within ninety (90)
days after execution of the Agreement or fails to pay the estimated costs of
Tenant's Work within thirty (30) days after the same become due and payable,
Landlord may (but need not) terminate the Lease for default upon written notice
to Tenant and in such event Landlord shall not be precluded by reason of the
foregoing from recovering any additional damages it may suffer as a result of
such termination. It is acknowledged and agreed by Tenant that notwithstanding
the provisions for liquidated damages hereinabove set forth, if the Lease is
terminated for default as set forth above such liquidated damages shall not be
deemed to compensate Landlord for the amount of damage, if any, which Landlord
may incur as a result of such termination, and Landlord will not be precluded,
by reason of such liquidated damages provisions, from pursuing any rights or
remedies available under the law for losses incurred as a result thereof.
13. Incorporation by Reference. This Exhibit C is and shall be
incorporated by reference in the Lease, and all of the terms and provisions of
the Lease are incorporated herein by this reference. Schedule A to this Exhibit
C is hereby incorporated by this reference in the Lease and in this Exhibit.
14. Attorneys' Fees. In the event of any action or proceeding initiated by
a party hereto for the enforcement or interpretation of the provisions contained
herein, the prevailing party shall be entitled to recover its costs incurred in
connection therewith, including its reasonable attorneys' fees.
Exhibit 10.25
SECOND AMENDMENT OF OFFICE LEASE
AND
PARKING LICENSE AGREEMENT
THIS SECOND AMENDMENT OF OFFICE LEASE AND PARKING LICENSE AGREEMENT (this
"Agreement") is made this ____ day of _________, 2000 by and between TIAA
REALTY, INC., a Delaware corporation, successor-in-interest to Teachers
Insurance and Annuity Association, a New York corporation (the "Landlord") and
ADSTAR.COM, a Delaware corporation, successor-in-interest to Ad-Star Services,
Inc., a New York corporation (the "Tenant"), who agree as follows:
RECITALS
A. Teachers Insurance and Annuity Association ("Teachers") and Ad-Star
Services, Inc. ("Ad Svc.") entered into a written Office Lease Agreement made as
of January 3, 1996 as amended by a First Amendment of Office Lease and Parking
License Agreement made as of December 13, 1999 (the "Lease"), for the lease of
certain premises more commonly known as Suites 300 and 325 (the "Premises") in
that certain office building ("Building") located at 4553 Glencoe Avenue in the
City of Marina del Rey, State of California, in a project ("Project") generally
referred to as Marina Business Center II, all as more particularly set forth in
the Lease.
B. Teachers, as Licensor thereunder, and Ad Svc. as Licensee thereunder,
entered into that certain Parking License Agreement dated January 8, 1996
("License") wherein Licensor granted to Licensee the right and license to use
parking spaces in the Project.
C. On March 18, 1998, Landlord succeeded to all right, title, and interest
in said Lease held by Teachers.
D. On August 31, 1999, Tenant succeeded to all right, title, and interest
in said Lease held by Ad Svc.
E. Landlord and Tenant desire by this Amendment to amend the Lease to
provide for Tenant to lease from Landlord, in addition to its existing Premises,
approximately 1,139 square feet of rentable area more commonly known as Suite
305 ("Second Additional Space") on the third floor of the Building as delineated
on Exhibit A-3 attached hereto and by this reference made a part hereof.
TERMS
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants herein contained, and good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Terms. All undefined terms when used herein shall have the same
respective meanings as are given such terms in the Lease unless expressly
provided otherwise in this Agreement.
<PAGE>
2. Effective as of the date hereof (the "Effective Date"), the Lease is
hereby amended as follows:
2.1 Section 1.1 ("Premises") is amended by deleting the words
"Suite: 325" from the second line thereof and substituting the following in lieu
thereof: "Suites: 325 ('Original Space'), 300 ('Additional Space') and 305
("Second Additional Space)" and by deleting the words "2,209 square feet of
rentable area ('Original Space') and 5,098 square feet of rentable area
("Additional Space') on the fourth line thereof and substituting the following
therefor:
"Original Space: 2,209 square feet of rentable area
Additional Space: 5,098 square feet of rentable area
Second Additional Space: 1,139 square feet of rentable area"
2.2 Section 1.2 ("Term") is amended by adding at the end of the
second line thereof the following:
"The Lease term as to the Second Additional Space shall commence on
the date Landlord delivers possession of the Second Additional Space
to Tenant; thereafter, the Lease term for the Second Additional
Space shall be co-terminus with the Lease term for the Original
Space and the Additional Space".
2.4 Section 1.4 ("Basic Rent") is hereby deleted in its entirety and
the following language substituted in lieu thereof:
<TABLE>
<CAPTION>
"Rental: Months Dollars Per Month Dollars Per Year
-------- ------ ----------------- ----------------
<S> <C> <C> <C>
Original Space: 2/01/99 - 2/18/01 $ 3,203.05 $ 38,436.60
2/19/01 - 3/31/05 $ 4,528.45 $ 54,341.40
Additional Space 4/01/00 - 9/30/02 $11,368.54 $136,422.48
10/1/02 - 3/31/05 $11,878.34 $142,540.08
Second
Additional Space: 1-58 $ 2,278.00 $ 27,336.00"
</TABLE>
2.5 Section 1.4 ("Expenses") is amended by adding the following at
the end of the eleventh line thereof:
"As to the Second Additional Space, Tenant shall pay Tenant's Share
of all Expenses that exceed Landlord's Base Year Costs for calendar
year 2000, together with other items of Expense as set forth in
Article 6. Tenant's Share as to the Second Additional Space is One
and 56/100ths percent (1.56%)."
2.6 Section 1.7 ('Security Deposit") is amended by adding the
following at the end of the second line thereof:
"and Two Thousand Two Hundred Seventy-Eight Dollars ($2,278.00) as
to the Second Additional Space".
<PAGE>
2.7 Section 2.1 is amended by adding on the first line thereof
between the words "and the Additional Space" and "(the 'Premises') the
following:
"and the Second Additional Space'
and by adding at the second line of Section 2.1 after the words "Exhibit A-2 the
following:
"and Exhibit A-3"
and by deleting the language on the third line which begins "The area of the
Premises..." and which ends on the fifth line with the words "...rentable area.'
and substituting the following in lieu thereof:
"The area of the Premises for all purposes hereunder is stipulated
to be 1,943 square feet of usable area as to the Original Space,
4,486 square feet of rentable area as to the Additional Space and
1,002 square feet of rentable area as to the Second Additional
Space; and 2,209 square feet of rentable area as to the Original
Space, 5,098 square feet of rentable area as to the Additional Space
and 1,139 square feet of rentable area as to the Second Additional
Space."
2.8 The Lease is further amended by adding thereto, after Exhibit
A-2, Exhibit A-3, which is attached hereto and by this reference made a part
hereof.
2.9 Section 1 of the License is amended by deleting the words
"Thirty (30)" on the first line thereof and substituting the words "Thirty-Five"
therefor.
3. Notwithstanding anything to the contrary in the Lease or in Exhibit
"C", within thirty (30) days after receipt of written request from Tenant,
Landlord shall perform the following items of work in the Second Additional
Space:
3.1 New building standard carpet and base shall be installed
throughout the Second Additional Space (color to match the carpet in the
Additional Space);
3.2 The creation of an opening between the Additional Space and the
Second Additional Space;
3.3 Repainting; and
3.4 Removal of cabinets and sink and floor tile in the current
kitchen (plumbing shall be capped off and the drywall repaired as needed).
4. Except as herein modified, the Lease shall remain in full force and
effect.
5. The provisions of this Agreement shall bind and inure to the benefit of
the heirs, representatives, successors and assigns of the parties hereto.
<PAGE>
6. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same Agreement.
IN WITNESS WHEREOF, this Agreement has been entered into by the parties as
of the day and year first above written.
LANDLORD:
TIAA REALTY, INC., a Delaware corporation
By: TEACHERS INSURANCE AND ANNUITY
ASSOCIATION, a New York corporation, its
authorized representative
By: ______________________________________
James P. Garofalo, Assistant Secretary
Date: ____________________________________
TENANT:
ADSTAR.COM., INC., a California corporation
By:.______________________________________
Title:_____________________________________
By:.______________________________________
Title:_____________________________________
Date: ____________________________________
<PAGE>
EXHIBIT A-3
MARINA BUSINESS CENTER II
455 GLENCOE AVENUE
MARINA DEL REY
THIRD FLOOR
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATON EXTRACTED FROM INTERIM FINANCIAL
STATEMENTS OF ADSTAR.COM, INC. AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH
31, 2000 INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,098,645
<SECURITIES> 0
<RECEIVABLES> 222,067
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,528,476
<PP&E> 512,194
<DEPRECIATION> 27,716
<TOTAL-ASSETS> 4,218,550
<CURRENT-LIABILITIES> 734,468
<BONDS> 1,100,000
0
0
<COMMON> 283
<OTHER-SE> 2,354,767
<TOTAL-LIABILITY-AND-EQUITY> 3,266,310
<SALES> 8,519
<TOTAL-REVENUES> 570,730
<CGS> 7,025
<TOTAL-COSTS> 486,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,860
<INCOME-PRETAX> (970,539)
<INCOME-TAX> 2,790
<INCOME-CONTINUING> (973,329)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (973,329)
<EPS-BASIC> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
