-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Haho4FAmbBnECpmDLqkhAgIb1CIZobKJsyXXy2pXvZIoES7P3p9BGgGS44yTD9Fh KpY0VbUYzPCF6FBuFxmSIA== 0000950136-06-002083.txt : 20060320 0000950136-06-002083.hdr.sgml : 20060320 20060320171621 ACCESSION NUMBER: 0000950136-06-002083 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060320 DATE AS OF CHANGE: 20060320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RELATIONSERVE MEDIA INC CENTRAL INDEX KEY: 0001296001 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-51702 FILM NUMBER: 06699360 BUSINESS ADDRESS: BUSINESS PHONE: 954-202-6000 MAIL ADDRESS: STREET 1: 6700 NORTH ANDREWS AVENUE CITY: FT LAUDERDALE STATE: FL ZIP: 33309 FORMER COMPANY: FORMER CONFORMED NAME: CHUBASCO RESOURCES CORP. DATE OF NAME CHANGE: 20050311 FORMER COMPANY: FORMER CONFORMED NAME: CHUBASCO RESOURCES INC DATE OF NAME CHANGE: 20040630 10KSB 1 file001.htm FORM 10KSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934

For the fiscal year ended December 31, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE OF 1934

For the transition period from __________________ to __________________

Commission file number: 333-119632

RELATIONSERVE MEDIA, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)

Delaware 43-2053462
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

6700 North Andrews Avenue
Fort Lauderdale, Florida 33309
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Issuer's Telephone Number: (954) 202-6000

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par
value $0.001 per share

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]

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 [ ]

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The issuer's revenues during the fiscal year ended December 31, 2005
were $11,302,780.

The aggregate market value of the issuer's common equity held by
non-affiliates, as of March 13, 2006, was $63,459,868.

As of March 13, 2006, there were 40,741,920 shares of the issuer's common
equity outstanding.

Documents incorporated by reference: None

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]

Table of Contents

Page

Item 1. Description of Business...............................................1

Item 2. Description of Property...............................................6

Item 3. Legal Proceedings.....................................................6

Item 4. Submission of Matters to a Vote of Security Holders...................7

Item 5. Market for Common Equity, Related Stockholder Matters
and Small Business Issuer Purchases of Equity Securities..............7

Item 6. Management's Discussion and Analysis or Plan of Operation.............9

Item 7. Financial Statements.................................................30

Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.............................................30

Item 8A. Controls and Procedures..............................................30

Item 8B. Other Information....................................................31

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act....................31

Item 10. Executive Compensation...............................................32

Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters...........................36

Item 12. Certain Relationships and Related Transactions.......................38

Item 13. Exhibits.............................................................38

Item 14. Principal Accountant Fees and Services...............................43

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Overview

RelationServe Media, Inc. (the "Company", "we or "our") is a holding
company organized for the purpose of acquiring, owning, and managing various
marketing and advertising businesses, primarily involving the Internet. The
Company operates two primary businesses and since February 2006 the Company's
SendTec ("SendTec") marketing services business has become its dominant
operation. On March 17, 2006, our board of directors authorized that our name be
changed to SendTec, Inc., subject to stockholder approval.

SendTec is a marketing company, primarily involved in direct response
marketing. In addition to SendTec, the Company also owns and operates two
smaller businesses, RelationServe Access, and Friendsand.com. For the twelve
months ended December 31, 2005, the Company reported revenues of $11,302,780
derived solely from its RelationServe and Friendsand.com businesses. On a
pro-forma basis, the Company's consolidated revenues for 2005, including
SendTec's revenues as if it had been owned during the entire 2005 fiscal year,
was $49,072,522.

Merger Transactions Completed in 2005

The Company was originally formed as Chubasco Resources Corp. in the State
of Nevada as an exploration stage company engaged in the business of mineral
exploration. On October 21, 2004, the Company entered into an Asset Purchase
Agreement that was subsequently terminated due to a breach by the Company. In
2004, in accordance with the terms of the Asset Purchase Agreement, and an
Amended Mutual Release and Agreement, the Company accrued a termination fee of
$100,000, which was paid in 2005.

Pursuant to the terms of a Merger Agreement, the Company acquired all of
the issued and outstanding capital stock of RelationServe on a one-for-one basis
in exchange for 13,326,000 shares of its $0.001 par value common stock. In
addition, certain of Chubasco's stockholders simultaneously cancelled an
aggregate of 6,800,000 shares of their common stock upon completing the Merger.
Each share of RelationServe common stock (13,326,000) and each RelationServe
warrant (6,562,500) outstanding prior to the Merger was automatically converted
into an equivalent number of shares of the Company's common stock and an
equivalent number of warrants to purchase shares of the Company's common stock
upon completion of the Merger. As a result, RelationServe's former stockholders
became the Company's majority stockholders and RelationServe became the
Company's wholly-owned subsidiary. Chubasco's stockholders retained 3,216,500
shares of the Company's common stock. In addition, the Company assumed a
$700,000 promissory note due in May 2007 that RelationServe issued as partial
consideration in a previous purchase of net assets described below.

Prior to the Merger, RelationServe, through its wholly-owned subsidiary,
RelationServe Access, Inc. ("Access"), purchased certain assets and assumed
certain liabilities of Omni Point Marketing, LLC, a Florida limited liability
company ("Omni Point"), and through its wholly-owned subsidiary, Friendsand,
Inc. ("Friendsand"), acquired all of the outstanding membership interests of
Friendsand, LLC, a Delaware limited liability company related to Omni Point by
common ownership (the "Affiliated Company" or "Friends LLC"). RelationServe
completed these transactions simultaneously on May 16, 2005. RelationServe
acquired the net assets and business of Omni Point and membership interests of
Affiliated Company for a combination of cash in the amount of $150,000, a
two-year promissory note in the principal amount of $700,000, and 8,000,000
shares of its common stock. RelationServe, which had no business operations
prior to these transactions, accounted for its acquisition of Omni Point's net
assets and merger with Affiliated Company as a recapitalization because Omni
Point and the former member of Affiliated Company gained control of a majority
of RelationServe's common stock upon completing these transactions. Accordingly,
Omni Point and Affiliated Company are deemed to be the acquirer for accounting
purposes. The Company became a Delaware corporation through a reincorporation
merger completed in 2005.

Background of the Sendtec Acquisition

On August 9, 2005, the Company entered into an asset purchase agreement
(as subsequently amended, the "Agreement") with theglobe.com, inc. ("Globe") for
the purchase of the business and substantially all of the assets of SendTec. The
purchase price for SendTec under the Agreement was $37,500,000, subject to
adjustment, and the assumption of certain liabilities. On October 31, 2005 the
Company assigned its rights under the Agreement to an affiliated company,
SendTec Acquisition Corp. ("STAC") and entered into certain agreements providing
for financing of the transactions. As a result of requirements under the
acquisition financing arrangements described herein, from October 31, 2005 (the
"Acquisition Date") through February 3, 2006 (the "Consolidation Date") STAC
operated independently and as a minority-owned affiliate of the Company prior to
the Consolidation Date. Following the Consolidation Date, STAC became a
wholly-owned subsidiary of the Company in connection with a series of
transactions that took place on the Consolidation Date (the "Consolidation").

The SendTec purchase was financed by issuance of $34.95 million of Senior
Secured Convertible Debentures due October 30, 2009 of STAC as amended (the
"Debentures") collateralized and guaranteed by the Company and each of its
subsidiaries and issuance by the Company of $10,289,690 of Series A Convertible
Preferred Stock, par value $0.001 per share (the "Series A Preferred"). Both the
Debentures and the Series A Preferred were convertible, upon the Consolidation,
into the Common Stock of the Company. In order to provide funds to STAC to
complete the Asset Purchase, $10,000,000 of STAC common stock, par value $0.001
per share (the "STAC Common Stock") was issued to the Company from the proceeds
of the sale of the Series A Preferred by the Company upon the Consolidation.

On February 3, 2006, provisions of the Debentures, as well as the terms of
certain agreements with the management of STAC, resulted in the automatic
conversion of STAC into a wholly-owned subsidiary of the Company. All Series A
Preferred was automatically converted to Common Stock, and thereafter, the
Company, through STAC, acquired and continued to operate the business of
SendTec, in addition to the RelationServe Access and Friendsand.com business.

We currently plan to continue our efforts to acquire businesses engaged in,
or related to, Internet marketing and advertising. We may issue additional
shares of Common Stock, preferred stock, and warrants to acquire shares of our
Common Stock, debt, or make cash payments, or a combination thereof, in
connection with such acquisitions.

The Company maintains its principal executive offices at 877 Executive
Center Drive West, Suite 300, St. Petersburg, Florida 33702 and 6700 North
Andrews Avenue, Fort Lauderdale, Florida, 33309. SendTec also maintains an
office in New York City. The Company presently has 131 employees.

Any references to SendTec include the current business that is held by STAC
as well as the business and substantially all of the assets of SendTec that were
acquired by STAC.

SendTec Business

SendTec is a direct response marketing services and technology company that
provides customers a wide range of direct marketing products and services to
help market their products and services on the Internet ("online") and through
traditional media channels such as television, radio, and print advertising
("offline"). Utilizing SendTec's marketing products and services, SendTec's
clients seek to increase the effectiveness and the return on investment on
advertising campaigns. SendTec's online and offline direct marketing products
and services include strategic campaign development, creative development,
creative production and post-production, media buying and tracking, campaign
management, campaign analysis and optimization, technology systems
implementation and integration for campaign tracking, and many other agency type
services. In addition, SendTec has a suite of technology solutions, ROY,
SearchFactz(TM), SOAR (an acronym for "SendTec Optimization and Reporting") and
iFactz(TM), which enable it to deliver, track, and optimize direct marketing
campaigns across multiple distribution channels, including television, radio,
direct mail, print, and the Internet. The combination of SendTec's direct
marketing capabilities, technology, and experience in both online and offline
marketing, enable its clients to optimize their advertising campaigns across a
broad spectrum of advertising mediums.

On-line Marketing Services- SearchFactz(TM)

SendTec offers a variety of products and services that enable on-line
advertisers and publishers to generate performance-based results through online
marketing channels such as search marketing, web advertising, e-commerce
up-sells, affiliate marketing, and email marketing. SendTec's broad range of
products and services include creative strategy and execution, strategic offer
development, production planning, media planning, media buying, and search
optimization. Through these products and services, SendTec's clients can address
all aspects of the marketing continuum, from strategic planning through
execution, including results management and campaign refinements. SendTec's
proprietary technologies allow advertisers and publishers to track, report, and
optimize online campaign activity all the way to the "conversion level" (which
means a consumer's actual response to the offer, as for example, by making a
purchase). SendTec's knowledge of digital advertising strategies, targeting
methods, media placements, and creative executions combined with its technology
help SendTec's clients improve their advertising performance and return on
investment.

As part of its on-line marketing services, SendTec manages and optimizes
paid search programs for direct marketers, providing them with bid/rank
management, and creative and strategic consulting in order to optimize paid
search. SearchFactz(TM) is a search engine marketing pay-per-click bid
management technology that coordinates performance and cost data from search
engines, conversion activities from websites, and generates actionable campaign
alerts that can be analyzed and acted upon by marketing analysts to optimize
return on investment from marketing budgets. SendTec, through SearchFactz(TM)
and the collective experience of its search engine marketing team, develops the
mix of search engine marketing strategies and services to meet a client's
customer acquisition goals. SendTec's search engine marketing services include
goals assessment, keyword research and development, creative development,
landing page optimization, centralized search listing management, bid
management, conversion analysis, fraud detection, campaign optimization, and ROI
and profit maximization. From pay-per-click to paid-inclusion and comparison
shopping engines, the Company believes SendTec utilizes the most cost-effective
channels to create customized search marketing campaign to meet its client's
objectives.

Competition

SendTec's business and industry is highly competitive. The competition for
advertising dollars has also put pressure on pricing points, in particular, for
online advertisers. Our competitors include search engines, inventory resellers,
referral companies, online networks, and destination websites. SendTec also
competes with a variety of large and small advertising agencies but its primary
competitors are interactive marketing companies such as ValueClick, aQuantive,
Advertising.com, and Performics.

Off-line Marketing Services- iFactz(TM)

SendTec also offers a full array of off-line marketing services
utilizing traditional distribution channels such as television, radio, print,
and direct mail. SendTec's offline marketing services include creative strategy,
production, and media buying. SendTec has developed, produced, and distributed
numerous direct response television campaigns for customers and has received
national awards for its creative and production work. SendTec utilizes its two
in-house state-of-the-art non-linear digital video editing suites. SendTec's
staff includes experienced production department directors, producers, and
editors on staff. SendTec's media buying department provides a full range of
services including strategic media planning, media trafficking, media buying,
media tracking, and post-buy media and financial analysis and has executed media
buying assignments for all types of television (broadcast and cable), radio, and
print formats. SendTec's long time relationships with media partners have
enabled SendTec to provide clients competitive media prices.

SendTec has developed a proprietary software application, iFactz(TM),
which provides a competitive advantage in marketing offline advertising
services. iFactz(TM) is SendTec's Application Service Provider or "ASP"
technology that tracks and reports the online responses that are generated from
offline direct response advertising. Historically, advertisers have lacked the
ability to accurately track which offline advertising yields results online and
thus advertisers have been unable to properly optimize their media buys.
iFactz(TM) intelligently tracks and reports web activity from all offline
advertising - TV (even national cable), radio, print, and direct mail - in real
time. iFactz(TM)'s Intelligent Sourcing(TM) is a media technology that informs
the user where online customers come from, and what corresponding activity they
produced on the user's website. iFactz(TM)'s ASP design enables advertisers to

implement and access the technology in a timely and cost efficient manner as
there are no cumbersome, time-consuming, and costly implementation expenses and
lead times. iFactz(TM) is licensed to clients both as a stand alone technology
solution and as part of an overall campaign offering. The Company believes that
iFactz(TM) has provided SendTec with a significant competitive advantage, and
that there are currently no similar technologies available in the market.

RELATIONSERVE ACCESS BUSINESS

Internet Marketing

RelationServe offers advertisers and merchants integrated online marketing
programs including permission-based email advertising, email database append
services, online surveys, and Internet compiled direct mail lists. RelationServe
services advertising agencies, large consumer marketers and direct marketers and
has acquired various proprietary software technologies that enable RelationServe
to deliver email broadcast and email data append products.

Data Append

RelationServe's data append allows marketers to augment their existing
customer database with permission-based email and demographic data. When a match
is confirmed, the customer's email address and other demographic variables are
added to the client's file. We believe this increases the value of client
databases and allows the client to save money through email marketing, and to
access a market more efficiently through multi-channel campaigns.

Online Registration (Co-Reg)

Our co-registration service is a product that can build an in-house
database of new prospective clients. Through key strategic alliances, we are the
front end registration solution for a variety of products and services. These
include product registration sites, online newsletter registration, and
trial-software download sites. Custom co-registrations can also be created for
lead generation.

Lead Generation

Lead generation programs assist a variety of businesses with customer
acquisition. We pre-screen leads through online surveys to meet client's
specified criteria. For example, we are able to generate leads for the following
industries: mortgage; debt reduction/debt consolidation; not-for-profit
organizations; auto sales; telecommunications; insurance, and investment agents.

Targeted Opt-In Email

RelationServe's targeted opt-in email provides targeted lists and a network
of permission-based websites, with access to additional websites via various
list broker relationships.

Direct Mail and Postal List

We maintain a compiled postal mailing list from Internet responders to
online registration and online campaigns. These consumers are responders to
offers and may have purchased products and services through online and offline
channels. We offer a wide variety of demographic and psycho-graphic criteria for
customers list selection.

Markets

The following is an overview of our three primary channels through which
RelationServe markets its products and services:

Direct Sales

Through our direct sales team and business development executives, we
pursue major consumer marketers and direct marketers through telesales efforts,
direct marketing, trade shows, and on-site client presentations.

Advertising Agencies

We offer our products and services at a discounted rate to traditional
advertising agencies and online marketing agencies. These resellers offer our
products and services to their clients as a stand-alone marketing effort or as
part of a larger multi-channel marketing campaign.

List Brokers

We offer our products and services at a discounted rate to a network of
list brokers. These organizations often have years of experience marketing
postal lists and can expand their revenue potential by offering our email
marketing lists.

Competition

RelationServe's business and industry is highly competitive. The
competition for advertising dollars has also put pressure on pricing points, in
particular, for online advertisers. Our competitors include advertising
agencies, inventory resellers, search engines, referral companies, and
destination websites. We also compete with traditional media such as television,
radio, and print, and with direct marketing companies.

We are also impacted by competition among destination websites that reach
users or customers of search services. Several large media and search engine
companies dominate this end of the transaction channel, and thousands of smaller
outlets are available to customers as well. User traffic among the media and
search engine companies is concentrated among such larger participants as AOL,
Google, Microsoft through MSN Search, and Yahoo! through FAST, Inktomi, Overture
and Yahoo! Search. The online search industry continues to experience
consolidation of major websites and search engines, which has the effect of
increasing the negotiating power of these parties in relation to smaller
providers such as RelationServe.

Friendsand.com

The business of Friendsand.com, a social networking community, represents a
small portion of the overall activities of the Company. Friendsand.com competes
with such larger and more established social networking websites as Myspace.com.
To date, Friendsand.com has incurred losses.

Rationalization Plan

On and following the Consolidation, SendTec management and RelationServe
management commenced a joint review of the collective operations, synergies,
and, opportunities, which is ongoing. During the three month period following
the Acquisition Date and prior to the Consolidation Date, the Company operated
RelationServe and Friendsand.com wholly-independently from SendTec due to legal
and structural limitations imposed under the Debentures. During the first
quarter of 2006, initial steps were taken to reduce staff at RelationServe and
Friendsand.com, eliminate redundant positions and activities, replace certain
members of management, and evaluate additional opportunities for cost savings
through consolidation, reduction, disposition of assets or businesses, and other
means in an emphasis to streamline the businesses and implement a workable plan
to consolidate the management and operations of two synergistic but highly
divergent companies operating in two locations, with potential inefficiencies
and redundant administration. As a result of this review, the Company may take
additional steps which can not be determined at this time, which may include
further reducing its staff, combining administrative functions, relocating all
or a portion of its operations, terminating certain activities or operations, or
selling or disposing of assets of operations. Certain actions may require the
consent of the Company's Debenture holders and require the Company to recognize
accounting charges for discontinued or disposed operations.

During the initial phase of management's review, the Company recognized
that certain financial covenants required under the Debentures would likely not
be met during the fourth quarter of 2005, and possibly thereafter, based upon,
among other things, non-cash accounting charges, unexpected costs and
inefficiencies of operating as two separate entities required by the terms of
the STAC Debentures, the impact of Hurricane Katrina and Wilma on the national
economy and on Florida in particular where both RelationServe and SendTec were
forced to close or operate at reduced staffing levels for several weeks,
significant senior management and extensive junior personnel changes at
RelationServe and Friendsand, poor morale, cultural differences, and uncertainty
during the transition period, and increased costs at Friendsand. In addition,
the business of RelationServe experienced a downturn and the industry in which
Friendsand operates became the focus of regulatory and public scrutiny. These
factors continue to impact the Company as a whole and the Company is continuing
to study options for combining the various businesses, which could include
elimination or sale of certain assets or businesses.

As a result of discussions with representatives of the Debenture holders
during early 2006, the Company, STAC, and the Debenture holders agreed, on
February 3, 2006, to the following amendments to the Debentures and related
agreements:

o STAC will have minimum EBITDA for the fourth quarter of 2005 of
$650,000 (from $1,725,000) and for fiscal year 2005 of $4,350,000 (from
$5,200,000). Further, following the Consolidation, the financial
covenants for RelationServe are eliminated; and

o the Company financial covenants set forth in the Schedules 4.22(a)
(capital expenditures), (b) (minimum consolidated Company EBITDA), and
(c) (Company cash balances) were restated and are incorporated by
reference to Schedules 4.22(a), (b), and (c), respectively, to Exhibit
10.21 to this Annual Report on Form 10-KSB.

In consideration of the Debenture holders' agreements the Company
issued 525,000 shares of Common Stock, pro rata to the Debenture holders in
accordance with their respective ownership at the closing of the Consolidation.

ITEM 2. DESCRIPTION OF PROPERTY.

SendTec's operations are located in St. Petersburg, Florida, where we lease
approximately 19,800 square feet of office space for approximately $27,600 per
month. The lease expires in February 2010. In addition, we maintain an office
for SendTec under a lease for approximately 2,500 square feet of office space in
New York City for approximately $5,400 per month, which expires in December of
2009. The Company's RelationServe operations are located in approximately 15,615
square feet in Ft. Lauderdale, Florida under a lease originally entered into by
Omni Point for rental payments of approximately $35,650 per month.

ITEM 3. LEGAL PROCEEDINGS.

Certain Legal Proceedings

Through December 31, 2005, the Company and/or Omni Point have been named as
defendants in two separate claims made by customers arising in the ordinary
course of its business and one employment related claim. The Company believes it
has substantial defenses and intends to vigorously defend itself against any all
actions taken by the plaintiffs in these matters. The Company does not believe
that any potential damages that could arise from these claims will have a
material adverse effect on its financial condition or the results of its
operations.

Omni Point has been named as a defendant in a certain employment related
claim which to date has not been asserted against the Company. Although the
Company is not a defendant in this matter at this time, there can be no
assurance that the plaintiffs will not attempt to assert this claim against the
Company in the future or that such claim, if asserted, will not result in a
material loss to the Company. The range of loss with respect to this matter, if
any, cannot be quantified.

On February 3, 2006, InfoLink Communications, Services, Inc, (InfoLink)
filed a complaint against the Company and Omnipoint for allegedly violating the
federal CAN SPAM ACT of 2003, 15 U.S.C. ss. 7701, and breach of an alleged
licensing agreement between Omni Point and InfoLink. InfoLink seeks actual
damages in an amount of approximately $100,000 and approximately $1,500,000 in
statutory damages, which are considered to be highly speculative by the Company
and legal counsel. This case is initial stages. The Company intends to
vigorously defend itself with respect to this matter, however; its outcome or
range of possible loss, if any, cannot be predicted at this time. The Company
cannot provide any assurance that the outcome of this matter will not have a
material adverse effect on its financial position or results of operations.

On February 17, 2006, the Law Offices of Robert H. Weiss PLLC ("Weiss")
filed a complaint against the Company and Omni Point for fraud, breach of
contract, unjust enrichment, and violation of the Uniform Deceptive Practices
Act. Weiss seeks compensatory damages in an amount no less than approximately
$80,000 in addition to punitive and exemplary damages with no specified amount.
The Company also has accounts receivable due from Weiss of approximately
$387,000 which are fully reserved. This case is in its initial stages. The
Company intends to vigorously defend itself with respect to this matter,
however; its outcome or range of possible loss, if any, cannot be predicted at
this time. The Company cannot provide any assurance that the outcome of this
matter will not have a material adverse effect on its financial position or
results of operations,

On March 6, 2006 Boston Meridian LLC ("Boston Meridian") filed a complaint
in the United States District Court District of Massachusetts alleging it is due
certain fees and expense reimbursements in connection with the acquisition of
the business of SendTec from theglobe.com inc. Boston Meridian seeks an
aggregate of $917,302 in fees and expenses and 100,000 shares of common stock.
The Company believes the litigation is without merit and intends to vigorously
defend against the complaint. The Company cannot provide any assurance that the
outcome of this matter will not have a material adverse effect on its financial
position or the results of operations.

On December 15, 2004, the Federal Bureau of Investigation served Omni Point
with a search warrant regarding the alleged use of unlicensed software and
seized certain e-mail servers with a net book value of approximately $135,000.
Management believes the investigation resulted from a former independent
contractor of the Company using the alleged unlicensed software on the Company's
behalf and without the Company's knowledge. Management and legal counsel are
currently unaware of any additional developments in the investigation. The
United States Attorney's Office had then indicated that it would contact the
Company's legal counsel as the investigation continues. The Company has not
received any further communications with respect to this matter; however, there
can be no assurance that this matter, if further investigated, will not have a
material adverse effect on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET INFORMATION

Our Common Stock has been quoted on the OTC Bulletin Board since June 30,
2005 under the symbol RSVM.OB. Prior to that date, there was no active market
for our Common Stock. Based upon information furnished by our transfer agent, as
of March 13, 2006, we had approximately 225 holders of record of our Common
Stock.

The following table sets forth the high and low bid prices for our Common
Stock for the periods indicated, as reported by the OTC Bulletin Board. The
prices state inter-dealer quotations, which do not include retail mark-ups,
mark-downs or commissions. Such prices do not necessarily represent actual
transactions.

Fiscal Year 2004 High Low
- ---------------- ------ ------
First Quarter $ NA $ NA
Second Quarter NA NA
Third Quarter NA NA
Fourth Quarter NA NA

Fiscal Year 2005
- ----------------
First Quarter $ NA $ NA
Second Quarter 4.35 3.50

Third Quarter 9.00 4.11
Fourth Quarter 6.48 2.52

Fiscal Year 2006
- ----------------
First Quarter (through March 15, 2006) $ 3.75 $ 1.71

DIVIDENDS

We have not declared or paid dividends on our Common Stock and do not
anticipate declaring or paying any cash dividends on our Common Stock in the
foreseeable future. We currently expect to retain future earnings, if any, for
the development of our business. Dividends may be paid on our Common Stock only
if and when declared by our board of directors. The Debentures restrict our
ability to pay dividends to our stockholders.

EQUITY COMPENSATION PLAN INFORMATION

We maintain a 2005 Non-Employee Directors Stock Option Plan (the "Directors
Plan"), 2005 Incentive Stock Plan (the "2005 Plan") and 2006 Incentive Stock
Plan (the "2006 Plan"). Both the Directors Plan and the 2005 Plan (collectively,
the "Plans") have been approved by our Board of Directors and stockholders. The
2006 Plan has been approved by our Board of Directors and is subject to
stockholder approval. As of March 10, 2006 we had issued (i) 282,100 shares of
Common Stock under the Plans and had outstanding stock options to purchase a
total of 3,948,500 shares of Common Stock, with exercise prices at or in excess
of the fair market value on the date of grant. (See "Item 10 - Executive
Compensation" for a detailed description of our equity compensation plans.)

The following table provides information as of December 31, 2005 with
respect to the shares of Common Stock that may be issued under our existing
equity compensation plans:

Number of securities to Weighted-average
be issued upon exercise price of Number of securities
exercise of outstanding outstanding options, remaining available
Plan Category options, warrants and rights warrants and rights for future issuance
------------- ----------------------------- ----------------------- -----------------------

Equity compensation 3,288,000 $2.98 1,729,900
plans approved by
security holders

Equity compensation
plans not approved by
security holders 0 $0 0

RECENT SALES OF UNREGISTERED SECURITIES

For information related to our recent sales of unregistered securities,
please see our Quarterly Reports on Form 10-QSB and Current Reports of Form 8-K
during the fiscal year ended December 31, 2005. On February 10, 2006, the
Company issued 200,000 shares of Common Stock upon the exercise of warrants to
purchase Common Stock at an exercise price of $0.25 per share. Such shares of
Common Stock were issued pursuant to the exemption contained in Section 4(2) of
the Securities Act of 1933, as amended. In addition, the Company has reported
recent sales of unregistered securities during the fourth quarter of 2005 and
the first quarter of 2006 on Current Reports on Form 8-K filed during February
2006.

PURCHASES OF EQUITY SECURITIES

None.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Results of Operations

Twelve Months Ended December 31, 2005 Compared To Twelve Months Ended
December 31, 2004

Revenues, Cost of Revenues and Gross Profit

Net revenues for twelve months ended December 31, 2005 were $11,302,780
as compared to net revenues of $9,564,993 for twelve months ended December 31,
2004, an increase of $1,737,787 or approximately 18.2%. This increase reflects
our increased marketing efforts and broadening of our customer base. We
currently employ 30 sales representatives who market and sell our products. This
increase reflects the growth in our online lead generation product revenues from
approximately $3,051,300 for the twelve months ended December 31, 2004 to
approximately $4,034,000 for the twelve months ended December 31, 2005, growth
in our append and data services products from approximately $2,979,600 for the
twelve months ended December 31, 2004 to $3,343,600 for the twelve months ended
December 31, 2005, and growth in our email marketing product revenues from
approximately $3,534,000 for the twelve months ended December 31, 2004 to
approximately $3,923,200 for the twelve months ended December 31, 2005. We
continue to build customer relations and expect revenues to increase in
connection with our subsequent consolidation with SendTec.

Costs of revenues for the twelve months ended December 31, 2005 were
$2,542,614 as compared to cost of revenues of $2,146,596 for the twelve months
ended December 31, 2004, an increase of $396,018 or approximately 18.4%. Costs
of revenues include salaries and contract labor costs for our technology
department, costs associated with our internet broadcast bandwidth,
non-capitalized costs associated with maintaining our databases and outsourcing
data information from outside vendors, and amortization expense associated with
our email database. For the twelve months ended December 31, 2005, technology
salaries and contract labor amounted to $643,893 as compared to $878,117 for the
twelve months ended December 31, 2004, a decrease of $234,224 or 26.7%. This
decrease reflects a decrease in the number of technology employees from 12
employees to 9. For the twelve months ended December 31, 2005, broadcast
bandwidth expenses amounted to $159,866 as compared to $547,331 for the twelve
months ended December 31, 2004, a decrease of $389,465 or 71.2%. This decrease
was attributable to the outsourcing of email broadcasting to third party vendor,
which reduced the Company's internal bandwidth requirements. For the twelve
months ended December 31, 2005, we incurred costs associated with the
acquisition of data for our database and outsourced data functions of $1,054,032
as compared to $395,673 for the twelve months ended December 31, 2004, an
increase of $658,359 or 166.4%. The increase is primarily attributable to the
outsourcing to third party vendors of our email broadcast function. For the
twelve months ended December 31, 2005, we incurred amortization expense related
to the amortization of our email database of $684,824 as compared to $325,475
for the twelve months ended December 31, 2004, an increase of $303,064 or 93%.
The increase in amortization expense was attributable to an increase in
capitalized costs associated with our email database.

Our gross profit margins approximately 77.5% of net revenues for the
twelve months ended December 31, 2005 as compared to approximately 77.6% for the
twelve months ended December 31, 2004.

Selling, General and Administrative Expenses

For the twelve months ended December 31, 2005, salaries expense
amounted to $2,441,026 as compared to $1,699,167 for the twelve months ended
December 31, 2004, an increase of $741,859 or approximately 43.7%. The increase
was attributable to the hiring of our chief executive officer and chief
operating officer in June 2005 as well as the hiring of additional
administrative staff to facilitate our growth and the recording of stock-based
compensation of $495,054 from the issuance of common shares and granting of
stock options to employees and a consultant. We expect our salaries expense to
increase in subsequent quarters due to these new officers and other new
employees.

For the twelve months ended December 31, 2005, bad debt expense
amounted to $2,393,203 as compared to $1,650,242 for the twelve months ended
December 31, 2004, an increase of $742,961 or approximately 45%. We have
established an allowance for doubtful accounts based upon factors pertaining to
the credit risk of specific

customers, historical trends, and other information. Delinquent accounts are
written-off when it is determined that the amounts are uncollectible. At
December 31, 2005, the allowance for doubtful accounts was $1,014,338.

For the twelve months ended December 31, 2005, commission expense
amounted to $1,462,728 as compared to $1,884,447 for the twelve months ended
December 31, 2004, a decrease of $421,719, or approximately 22.4%. The decrease
is primarily due to the reduction in sales personnel from 40 employees to 30.

For the twelve months ended December 31, 2005, professional fees
amounted to $975,132 as compared to $420,007 for the twelve months ended
December 31, 2004, an increase of $555,125 or approximately 132.2%. The increase
was primarily attributable to an increase in legal and accounting fees
associated with our acquisitions and SEC filings as well as the audit of our
financial statements.

For the twelve months ended December 31, 2005, advertising and trade
show expense amounted to $653,484 as compared to $493,713 for the twelve months
ended December 31, 2004, an increase of $159,771, or approximately 32.4%. We
continued to increase our marketing efforts to increase our revenues.

For the twelve months ended December 31, 2005, depreciation and
amortization expense amounted to $215,307 as compared to $187,031 for the twelve
months ended December 31, 2004, an increase of $28,276 or approximately 15%.
This increase was attributable to the acquisition of property and equipment of
$202,000 in 2005.

Total other general and administrative expenses for the twelve months
ended December 31, 2005 were $2,287,349, an increase of $1,374,400, or
approximately 151%, from total general and administrative expenses for the
twelve months ended December 31, 2004 of $912,949. This increase is summarized
as follows:

2005 2004
----------- ----------
Rent $ 359,885 $ 239,129
Consulting fees 448,188 -
Payroll taxes 243,089 -
Insurance 178,009 136,404
Telephone 124,168 185,430
Other 934,010 351,986
----------- ----------
Total $ 2,287,349 $ 912,949
=========== ==========

The increase in rent expense was attributable to payments during the
twelve months ended December 31, 2005 for common area maintenance and utilities
that were not reflected as rent expense in the prior period. Additionally,
during a portion of 2005, we rented an office in New York on a month-to-month
basis. As of December 31, 2005, we no longer rent the New York facility.

In 2005, we incurred payroll taxes related to our salaries. In 2004, we
leased our employees from a third party. The increase in insurance is primarily
related to an increase in health insurance costs due the increase in the number
of employees.

The increase in other general and administrative expense was
attributable to an overall increase in operations as well as an increase in
expenses in 2005 of approximately $211,000 related to the termination of
employment agreements with our former officers and settlement fees paid to
certain former employees.

We reported a loss from operations of $(1,668,063) for the twelve
months ended December 31, 2005 as compared to income from operations of $170,841
for the twelve months ended December 31, 2004.

Other Income (Expenses)

For the twelve months ended December 31, 2004, we recognized a gain on
extinguishment of debt of $162,955 compared to $0 for the twelve months ended
December 31, 2005.

In 2004, we recorded a loss of $100,000 from the termination of an
aborted acquisition. On October 21, 2004, we entered into an Asset Purchase
Agreement ("the Agreement") that was subsequently terminated due to a breach by
the Company. In accordance with the terms of the Agreement, and an Amended
Mutual Release and Agreement, we paid a termination fee of $100,000.

In 2004, we recorded an asset impairment charge of $198,240. The asset
impairment charge consisted of an asset impairment charge of $135,000 due to the
disposal of property and equipment and $63,371 for email addresses that were
removed from the email database.

For the twelve months ended December 31, 2005, we recorded an estimated
registration rights penalty of $75,000 compared to $0 for the twelve months
ended December 31, 2004.

For the twelve months ended December 31, 2005, we recorded a loss on
equity-method investment of $1,034,102 related to our equity investment in STAC,
as discussed elsewhere herein.

Interest income for the twelve months ended December 31, 2005 was
$3,144 as compared to $0 for the twelve months ended December 31, 2004, an
increase of $3,144 or 100%. This was primarily attributable to the investment of
excess cash in money market accounts.

Interest expense for the twelve months ended December 31, 2005 was
$14,268 as compared to $5,276 for the twelve months ended December 31, 2004, an
increase of $8,992 or 170%. This was primarily attributable to the assumption of
debt of $700,000 in connection with our acquisitions, which has been repaid
prior to December 31, 2005.

For the twelve months ended December 31, 2005, we did not record a
provision for income taxes due to our net loss. In 2004, the Company had made an
election to have its income or loss taxed directly to its members as a
partnership for income tax purposes. Accordingly, the pro rata income or loss
will be included in the tax return of the members. As a result, no income taxes
have been recognized in the accompanying financial statements for the 2004
period.

Net (Loss) Income

For the twelve months ended December 31, 2005, we recorded a net loss
of $2,788,289 compared to net income of $30,280 for the twelve months ended
December 31, 2004.

Liquidity and Capital Resources

On April 20, 2005, we commenced a private offering of up to $1,000,000
of Units, each Unit consisted of 50,000 shares of our common stock with warrants
to purchase 25,000 shares of our common stock exercisable at $2.00 per share.
The private placement was originally to be for a maximum amount of $1,000,000,
but was subsequently increased to a maximum of $1,625,000. In May and June 2005,
we sold 1,625,000 shares of and granted 812,500 warrants to purchase 812,500
shares of common stock at an exercise price of $2.00 per share for net proceeds
of $1,495,026.

Pursuant to a Confidential Memorandum dated June 22, 2005, (the "PPM"),
we offered in a private placement to accredited investors up to $4,000,000 of
Units for a purchase price of $100,000 per Unit. Each Unit consists of 50,000
shares of the Company's common stock, par value $0.001 per share (the "Common
Stock") and a three-year warrant to purchase 25,000 shares of Common Stock at
$3.50 per share. As of December 31, 2005, we sold Units to accredited investors
for net proceeds of $1,955,527 issuing 1,048,515 shares of common stock and
granting 524,257 warrants to purchase 524,257 shares of common stock at $3.50
per share.

The Company's purchase of SendTec was financed by issuance of $34.95
million of Senior Secured Convertible Debentures due October 30, 2009 of STAC as
well as issuance by the Company of $10,289,690 of Series A Convertible Preferred
Stock, par value $0.001 per share. We used $10,000,000 of the proceeds we
received in this transaction to purchase a 23% interest in STAC. As a result of
the Consolidation discussed above, the Debentures, initially convertible at
$1.00 per share into STAC Common Stock, are now convertible into Company common
stock at a conversion price of $1.50 per share. The Debenture Holders maintain a
first priority security interest in all of our assets and in the assets of our
subsidiaries. So long as the Debentures remain outstanding, we are restricted
from incurring additional indebtedness other than certain permitted indebtedness

Subsequent to December 31, 2005, the Company sold to Sunrise Equity
Partners, LP 500,000 shares of Company Common Stock for $750,000, of which the
Company received net proceeds of $675,000 after deducting fees and expenses of
$75,000. In addition, the Company has received proceeds of $62,500 from the
exercise of Warrants.

During the twelve months ended December 31, 2005, we repaid loans
payable of $700,000 and paid $150,000 in cash in connection with the
acquisition of certain assets and liabilities of Omni Point Marketing, LLC, a
Florida limited liability company ("Omni Point"), and all of the outstanding
membership interests of Friendsand, LLC, a Delaware limited liability company
related to Omni Point by common ownership.

Net cash flows provided by operating activities for the twelve months
ended December 31, 2005 were $156,722 as compared to net cash provided by
operating activities of $359,271 for the twelve months ended December 31, 2004,
a decrease of $202,549. For the twelve months ended December 31, 2005, net cash
provided by operating activities was attributable to cash provided from our net
loss of $(2,788,289) (adjusted for add-back non-cash items such as depreciation
and amortization of $900,130, stock-based compensation and consulting of
$705,179, an increase in provision for bad debt of $2,393,203, and a loss on
equity-method investment of $1,034,102), and an increase in accounts receivable
of $3,394,719, an increase in prepaid expenses and other assets of $91,862, and
a decrease in deferred rent of $26,330, offset by cash received from the
repayment of amounts due from former principals of $140,312, an increase in
accounts payable of $870,896, an increase in other accrued expenses of $201,149,
an increase in accrued commissions of $125,174 and an increase in customer
deposits of $87,677. For the twelve months ended December 31, 2004, net cash
provided by operating activities was attributable to net cash provided from our
net income of $30,280 (adjusted for add-back non-cash items such as depreciation
and amortization of $512,506, an increase in provision for bad debt of
$1,650,242, an asset impairment charge of $198,240, and a gain on extinguishment
of notes payable of $162,705, and an increase in accounts payable of $718,597,
offset by a decrease in accrued expenses of $55,952, an increase in amounts due
from former principals of $102,241, and an increase in prepaid expenses and
other assets of $133,237.

We reported net cash flows used in investing activities of $13,125,548
for the twelve months ended December 31, 2005 as compared to net cash used in
investing activities of $881,233 for the twelve months ended December 31, 2004,
an increase of $12,244,315. This increase is attributable to the use of cash of
$10,309,083 in connection with our investment in a prospective acquiree, an
increase in acquisitions of capitalized data costs of $2,464,850, an increase in
the acquisition of property and equipment of $201,615, and cash paid in the
acquisition of the net assets of Friendsand, LLC of $150,000.

Net cash flows provided by financing activities was $12,971,019 for the
twelve months ended December 31, 2005 as compared to net cash provided by
financing activities of $432,118 for the twelve months ended December 31, 2004.
For the twelve months ended December 31, 2005, we received net proceeds from the
sale of common stock of $2,455,527, proceeds from the sale of preferred stock of
$10,289,690, cash received in acquisition of $995,426, and net proceeds from the
exercise of warrants of $137,500 offset by net draws by members
(pre-acquisition) of $207,124 and the repayment of loans payable of $700,000. In
addition to the proceeds from the sale of preferred stock, our purchase of
SendTec was financed by issuance of $34.95 million of the Debentures of STAC.
For the twelve months ended December 31, 2004, we received proceeds from
contributions by members of $1,195,000 offset by the repayment of notes payable
of $532,882 and the distribution of $230,000 to former principals.

We reported a net increase in cash for the twelve months ended December
31, 2005 of $2,093 as compared to a net decrease in cash of $59,564 for the
twelve months ended December 31, 2004. At December 31, 2005, we had cash on hand
of $156,472.

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses. These estimates and assumptions are affected by management's
applications of accounting policies. Our critical accounting policies include
revenue recognition, the useful life of our intangible assets, and accounting
for stock based compensation.

Revenue Recognition - We follow the guidance of the Securities and
Exchange Commission's Staff Accounting Bulletin 104 for revenue recognition. In
general, we record revenue when persuasive evidence of an arrangement exists,
services have been rendered or product delivery has occurred, the sales price to
the customer is fixed or determinable, and collectibility is reasonably assured.
The following policies reflect specific criteria for the various revenues
streams of the Company:

Email append Services: The Company's email append solution allows marketers
to augment their existing customer database with the Company's
permission-based email data. When a match is confirmed, the customer's
email address is added to the client's file. Revenue is recognized upon
completion of the email append service and the delivery of the updated
customer database is delivered to the client.

Electronic change of address: The Company's electronic change of address
service enables clients to update their email databases. Revenue is
recognized upon delivery of the updated customer database is delivered to
the client.

Lead generation: The Company offers lead generation programs to assist a
variety of businesses with customer acquisition. The Company pre-screens
the leads through its online surveys to meet its clients' exact criteria.
Revenue is recognized upon delivery of a lead database to the client.

Direct Mail and postal list advertisement: The Company compiles an
exclusive Internet responders' postal mailing list. This list is sourced
from online registration and individuals who have responded to the
Company's online campaigns. These consumers are responsive to offers and
purchase products and services through online and offline channels. Revenue
is recognized upon delivery of the respective list to the client.

Online market research: The Company has developed a consumer survey. The
Company offers a variety of targeted leads generated from its ongoing
survey responses. The Company also offers marketers the opportunity to add
specific questions to the survey. The Company then sells the response
information to the marketer on a cost per response basis. If a marketer or
a market research company needs a full survey completed, the Company will
broadcast its client's survey to a designated responder list on a cost per
thousand basis. Revenue is recognized upon delivery of the respective
survey is delivered to the designated responder.

Intangible assets consist of a database of email addresses acquired
during normal operations and costs associated with the development of our
various websites. Costs to develop new email databases, which primarily
represent direct external costs, are capitalized and are amortized straight-line
over the expected lives of the databases. We review the carrying value of
intangibles and other long-lived assets for impairment at least annually or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of long-lived assets is measured
by comparison of its carrying amount to the undiscounted cash flows that the
asset or asset group is expected to generate. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the property, if any, exceeds its fair market value.

Accounting for Stock Based Compensation - We account for stock based
compensation utilizing Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), which

encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. We have chosen to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the estimated fair market
value of our stock at the date of the grant over the amount an employee must pay
to acquire the stock. We have adopted the "disclosure only" alternative
described in SFAS 123 and SFAS 148 (See Recent Accounting Pronouncements), which
require pro forma disclosures of net income and earnings per share as if the
fair value method of accounting had been applied. Because of this election, we
continue to account for our employee stock-based compensation plans under
Accounting Principles Board (APB) Opinion No. 25 and the related
interpretations. We are required to comply with SFAS No. 123 (revised 2004)
starting on the first day of our fiscal year 2006. We are currently evaluating
the effect that the adoption of SFAS No. 123 (revised 2004) will have on our
consolidated operating results and financial condition. No stock-based
compensation cost is currently reflected in net income for employee and director
option grants as all options granted under the 2005 Incentive Stock Plan and the
Non-Employee Directors Stock Plan had an exercise price equal to the market
value of the underlying common stock on the date of grant.

Recent Accounting Pronouncements

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based
Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R
requires companies to recognize in the statement of operations the grant date
fair value of stock options and other equity-based compensation issued to
employees. FAS No. 123R is effective beginning in the Company's first of fiscal
2006. We are in process of evaluating the impact this pronouncement may have on
our financial statements.

RISK FACTORS

RISKS RELATING TO THE CONSOLIDATED COMPANY

Our acquisition of SendTec occurred on February 3, 2006. All references
to SendTec's risks herein are intended to refer prospectively to periods on and
following the acquisition.

WE MAY BE UNABLE TO EFFECTIVELY INTEGRATE SENDTEC OR ADDITIONAL TARGETED ASSETS
OR MAY INCORRECTLY ASCERTAIN THE MERITS OR RISKS OF OUR OR SUCH TARGETED ASSETS
OPERATIONS.

The success of the SendTec acquisition will depend, in part, on our
ability to realize the benefits of enhanced resources, growth opportunities and
other synergies of combining with SendTec and to effectively leverage the
SendTec marketing and technical resources. We are exposed to risks related to
the integration, management, and retention of acquired client relationships,
operations and personnel. Integration of the businesses will be complex,
time-consuming and may disrupt the combined company's businesses if not
completed in a timely and efficient manner. Some of the difficulties that the
combined company may encounter include:

o diversion of management's attention from other business concerns;

o inability to use the acquired resources effectively; and

o demonstrating to the combined company's customers, vendors and
partners that the acquisition will not result in adverse changes
to their relationships.

We may also be affected by numerous risks inherent in our operations
and the operations of additional targeted assets. Although our management will
endeavor to evaluate the risks inherent in our business, other targeted
businesses, and the industry generally, we cannot assure that we will properly
ascertain or assess all of the significant risk factors.

ON A COMBINED PRO FORMA BASIS WE EXPERIENCED A SIGNIFICANT LOSS FOR THE YEAR
ENDED DECEMBER 31, 2005.

While we had $1,095,993 of operating income on a combined pro forma
basis for the year ended December 31, 2005, we experienced a net loss of
$15,068,650 on a combined pro forma basis. We are unable to predict if we will
achieve profitability on a combined pro forma basis. In order to achieve and
maintain profitability, we will need to generate significant revenues. If we do
not continue to increase our revenues, our business, results of operations, and
financial condition could be materially and adversely affected.

WE MAY REQUIRE ADDITIONAL FUNDING TO SUPPORT OUR OPERATIONS AND CAPITAL
EXPENDITURES, WHICH MAY NOT BE AVAILABLE AND WHICH LACK OF AVAILABILITY COULD
ADVERSELY AFFECT OUR BUSINESS.

We may need additional funds to support our growth, fund future
acquisitions, pursue business opportunities, react to unforeseen difficulties
and to respond to competitive pressures. There can be no assurance that any
financing arrangements will be available in amounts or on terms acceptable, if
at all. Furthermore, the sale of additional equity or convertible debt
securities may result in further dilution to existing stockholders. If we raise
additional funds through the issuance of debt, we will be required to service
that debt and we are likely to become subject to restrictive covenants and other
restrictions contained in the instruments governing that debt, which may limit
our operational flexibility. If adequate additional funds are not available, we
may be required to delay, reduce the scope of, or eliminate material parts of
the implementation of our business strategy, including the possibility of
additional acquisitions or internally developed businesses.

WE MAY MAKE ADDITIONAL ACQUISITIONS, WHICH COULD DIVERT MANAGEMENT'S ATTENTION,
CAUSE OWNERSHIP DILUTION, AND BE DIFFICULT TO INTEGRATE.

Our business strategy depends in part upon our ability to identify,
structure, and integrate acquisitions, in addition to SendTec, that are
complementary with our business model. Acquisitions, strategic relationships,
and investments in the technology and Internet sectors involve a high degree of
risk. We may also be unable to find a sufficient number of attractive
opportunities, if any, to meet our objectives. Although many technology and
Internet companies have grown in terms of revenue, few companies are profitable
or have competitive market share. Our potential acquisitions, relationships,
investment targets, and partners may have histories of net losses and may expect
net losses for the foreseeable future.

Acquisition transactions are accompanied by a number of risks that
could harm us and our business, operating results, and financial condition.
These risks apply to our completed acquisitions and acquisitions we may
undertake in the future, including:

o We could experience a substantial strain on our resources,
including time and money, and may not be successful;

o Our management's attention may be diverted from our ongoing
business concerns;

o While integrating new companies, we may lose key executives or
other employees of these companies;

o We could experience customer dissatisfaction or performance
problems with an acquired company or technology;

o We may become subject to unknown or underestimated liabilities of
an acquired entity or incur unexpected expenses or losses from
such acquisitions; and

o We may incur possible impairment charges related to goodwill or
other intangible assets or other unanticipated events or
circumstances, any of which could harm our business.

Consequently, we might not be successful in integrating any acquired
businesses, products or technologies, and might not achieve anticipated revenue
and cost benefits.

IF AN EVENT OF DEFAULT OCCURS UNDER THE DEBENTURES, IT COULD RESULT IN A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, OPERATING RESULTS, OR FINANCIAL
CONDITION AS THE DEBENTURE HOLDERS MAINTAIN A FIRST PRIORITY SECURITY INTEREST
ON ALL OF OUR ASSETS AND ON THE ASSETS OF OUR SUBSIDIARIES.

On October 31, 2005, effective upon the Consolidation, STAC issued
$34.95 million of Senior Secured Convertible Debentures due October 30, 2009
that are now convertible into shares of our Common Stock and are guaranteed by
us and each of our subsidiaries. The Debenture holders have

a first priority security interest on all of our assets and on the assets of our
subsidiaries. Events of default include, but are not limited to, the following:

o failure to pay interest, principal payments or liquidated damages
if and when due;

o a breach of any material covenant or term or condition of the
Debenture or any of the transaction documents;

o a default or event of default (subject to any grace or cure
period provided for in the applicable agreement, document or
instrument) under any of the transaction documents, or any other
material agreement, lease, document or instrument;

o a breach of any representation or warranty made in the Debenture
or the other transaction documents;

o certain bankruptcy and bankruptcy related matters;

o a default by us or any of our subsidiaries in any of its material
obligations under any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may
be secured or evidenced, any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement of
any of them in an amount exceeding $75,000 ($150,000 in the case
of the Company); and

o a Registration Statement for the shares issuable upon conversion
of the Debentures and exercise of certain warrants shall not have
been declared effective by the SEC on or prior to the 120th
calendar day after the Consolidation Date; or shall lapse after
effectiveness.

If we default on our obligations under our Debentures or related
agreements, the cash required to pay such amounts will most likely come out of
our working capital. Since we rely on our working capital for our day-to-day
operations, such a default would have a material adverse effect on our business,
operating results, or financial condition. In such event, we may be forced to
restructure, file for bankruptcy, sell assets, or cease operations, any of which
would put the Company, its investors and the value of our Common Stock, at
significant risk. Further, our obligations under the Debentures are secured by
substantially all of our assets. Failure to fulfill our obligations under the
Debentures and related agreements could lead to loss of these assets, which
would be detrimental to our operations.

THE RESTRICTIONS ON OUR ACTIVITIES CONTAINED IN THE DEBENTURES COULD NEGATIVELY
IMPACT OUR ABILITY TO OBTAIN FINANCING FROM OTHER SOURCES.

So long as any portion of the Debentures remain outstanding, we are
restricted from incurring additional indebtedness other than certain permitted
indebtedness. To the extent that additional debt financing is required for us to
conduct our operations, these restrictions could materially adversely impact our
ability to achieve our operational objective.

WE MAY BE UNABLE TO EFFECT AN ADDITIONAL ACQUISITION OR INCORRECTLY ASCERTAIN
THE MERITS OR RISKS OF AN ADDITIONAL ACQUIRED COMPANY.

To the extent we complete an acquisition, we may be affected by
numerous risks inherent in its business operations. Although our management will
endeavor to evaluate the risks inherent in a business or industry, we cannot
assure an investor that we will properly ascertain or assess all of the
significant risk factors.

WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY EMPLOYEES.

Failure to attract and retain necessary technical personnel and skilled
management could adversely affect our business. Our success depends to a
significant degree upon our ability to attract, retain and motivate highly
skilled and qualified personnel. If we fail to attract, train and retain
sufficient numbers of these highly qualified people, our prospects, business,
financial condition, and results of operations will be materially and adversely
affected. Our success also depends on the skills, experience, and performance of
key members of our management team. The loss of any key employee, could have an
adverse effect on our prospects, business, financial condition, and results of
operations.

The lack of experience of our management team puts us at a competitive
disadvantage. Our management team lacks public company experience, which could
impair our ability to comply with legal and regulatory requirements such as
those imposed by Sarbanes-Oxley Act of 2002. The individuals who now constitute
management have never had responsibility for managing a publicly traded company.
Such responsibilities include complying with federal securities laws and making
required disclosures on a timely basis. There can be no assurance that our
management will be able to implement and affect programs and policies in an
effective and timely manner that adequately respond to such increased legal,
regulatory compliance, and reporting requirements. Our failure to do so could
lead to penalties, loss of trading liquidity, and regulatory actions and further
result in the deterioration of our business.

WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH.

Our strategy envisions continuing to grow our business. If we fail to
effectively manage growth, our financial results could be adversely affected.
Additional growth may place a strain on management systems and resources. We
must continue to refine and expand our business development capabilities,
systems, and processes as well as our access to financing sources. As we grow,
we must continue to hire, train, supervise, and manage new employees. We may not
be able to:

o meet our capital needs;

o expand our systems effectively or efficiently or in a timely
manner;

o allocate our human resources optimally;

o identify and hire qualified employees or retain valued employees;
or

o incorporate effectively the components of additional business
that we may acquire in our effort to achieve growth.

IF WE ARE UNABLE TO OBTAIN ADEQUATE INSURANCE, OUR FINANCIAL CONDITION COULD BE
ADVERSELY AFFECTED IN THE EVENT OF UNINSURED OR INADEQUATELY INSURED LOSS OR
DAMAGE. OUR ABILITY TO EFFECTIVELY RECRUIT AND RETAIN QUALIFIED OFFICERS AND
DIRECTORS COULD ALSO BE ADVERSELY AFFECTED IF WE EXPERIENCE DIFFICULTY IN
OBTAINING ADEQUATE DIRECTORS' AND OFFICERS' LIABILITY INSURANCE.

We may not be able to obtain insurance policies on terms affordable to
us that would adequately insure our business and property against damage, loss,
or claims by third parties. To the extent our business or property suffers any
damages, losses, or claims by third parties that are not covered or adequately
covered by insurance, our financial condition may be materially adversely
affected.

We may be unable to secure or maintain insurance as a public company to
cover liability claims made against our officers and directors. If we are unable
to adequately insure our officers and directors, we may not be able to retain or
recruit qualified officers and directors. Our Debentures require $8 million of
directors and officers insurance and key man insurance on the life of Paul
Soltoff, without which the Debentures may be in default.

IF WE ARE UNABLE TO COMPETE IN THE HIGHLY COMPETITIVE PERFORMANCE-BASED
ADVERTISING AND SEARCH MARKETING INDUSTRIES, WE MAY EXPERIENCE REDUCED DEMAND
FOR OUR PRODUCTS AND SERVICES.

We expect to operate in a highly competitive environment. We
principally compete with other companies in the following main areas:

o sales to merchant advertisers of performance-based advertising;
and

o services that allow merchants to manage their advertising
campaigns across multiple networks and track the success of these
campaigns.

Although we expect to pursue a strategy that allows us to potentially
partner with all relevant companies in the industry, there are certain companies
in the industry that may not wish to partner with us.

We expect competition to intensify in the future because current and
new competitors can enter our market with little difficulty. The barriers to
entering such markets are relatively low. In fact, many current Internet and
media companies presently have the technical capabilities and advertiser bases
to enter the search marketing service industry. Further, if the consolidation
trend continues among the larger media and search engine companies with greater
brand recognition, the share of the market remaining for us and other smaller
search marketing services providers could decrease, even though the number of
smaller providers could continue to increase. These factors could adversely
affect our competitive position in the search marketing services industry.

Some of our competitors, as well as potential entrants into our market,
may be better positioned to succeed in this market. They may have:

o longer operating histories;

o more management experience;

o an employee base with more extensive experience;

o a better ability to service customers in multiple cities in the
United States and internationally by virtue of the location of
sales offices;

o larger customer bases;

o greater brand recognition; and

o significantly greater financial, marketing and other resources.

In addition, many current and potential competitors can devote
substantially greater resources than we can to promotion, web site development,
and systems development. Furthermore, there are numerous larger, more
well-established and well-financed entities with which we will compete and that
could acquire or create competing companies and/or invest in or form joint
ventures in categories or countries of interest to us, all of which could
adversely impact our business. Any of these trends could increase competition
and reduce the demand for any of our services.

WE ARE SUSCEPTIBLE TO GENERAL ECONOMIC CONDITIONS, AND A DOWNTURN IN ADVERTISING
AND MARKETING SPENDING BY MERCHANTS COULD ADVERSELY AFFECT OUR OPERATING
RESULTS.

Our operating results will be subject to fluctuations based on general
economic conditions, in particular those conditions that impact
merchant-consumer transactions. If there were to be a general economic downturn
that affected consumer activity in particular, however slight, then we would
expect that business entities, including our merchant advertisers and potential
merchant advertisers, could substantially and immediately reduce their
advertising and marketing budgets. We believe that during periods of lower
consumer activity, merchant spending on advertising and marketing is more likely
to be reduced, and more quickly, than many other types of business expenses.
These factors could cause a material adverse effect on our operating results.

RISKS RELATED TO SENDTEC'S BUSINESS

ANY DECREASE IN DEMAND FOR SENDTEC'S ONLINE MARKETING SERVICES COULD
SUBSTANTIALLY REDUCE SENDTEC'S REVENUES.

To date, a substantial portion of SendTec's revenues have been derived
from Internet advertising. SendTec expects that online advertising will continue
to account for a substantial portion of revenues for the foreseeable future.
However, SendTec's revenues from Internet advertising may decrease in the future
for a number of reasons, including the following:

o the rate at which Internet users click on advertisements or take
action in response to an advertisement has always been low and
could decline as the volume of Internet advertising increases;

o Internet users can install software programs that allow them to
prevent advertisements from appearing on their screens or block
the receipt of emails;

o advertisers may prefer an alternative Internet advertising
format, product or service which SendTec might not offer at that
time; and

o SendTec may be unable to make the transition to new Internet
advertising formats preferred by advertisers.

IF SENDTEC'S PRICING MODELS ARE NOT ACCEPTED BY ITS ADVERTISER CLIENTS, SENDTEC
COULD LOSE CLIENTS AND ITS REVENUES COULD DECLINE.

Most of SendTec's services are offered to advertisers based on
cost-per-action or cost-per-click pricing models, under which advertisers only
pay SendTec if SendTec provides the results they specify. These results-based
pricing models differ from the fixed-rate pricing model used by many Internet
advertising companies, under which the fee is based on the number of times the
advertisement is shown without regard to effectiveness. SendTec's ability to
generate significant revenues from advertisers will depend, in part, on
SendTec's ability to demonstrate the effectiveness of these primary pricing
models to advertisers, who may be more accustomed to a fixed-rate pricing model.

Furthermore, intense competition among websites and other Internet
advertising providers has led to the development of a number of alternative
pricing models for Internet advertising. The proliferation of multiple pricing
alternatives may confuse advertisers and make it more difficult for them to
differentiate among alternatives. In addition, it is possible that new pricing
models may be developed and gain widespread acceptance that are not compatible
with SendTec's business model or SendTec's technology. These alternatives, and
the likelihood that additional pricing models will be introduced, make it
difficult for SendTec to project the levels of advertising revenues or the
margins that SendTec, or the Internet advertising industry in general, will
realize in the future. If advertisers do not understand the benefits of
SendTec's pricing models, then the market for SendTec's services may decline or
develop more slowly than SendTec expects, which may limit SendTec's ability to
grow their revenues or cause their revenues to decline.

SENDTEC DEPENDS ON A LIMITED NUMBER OF CLIENTS FOR A SIGNIFICANT PERCENTAGE OF
THEIR REVENUES, AND THE LOSS OF ONE OR MORE OF THESE ADVERTISERS COULD CAUSE
SENDTEC'S REVENUES TO DECLINE.

For year ended December 31, 2005, revenues from SendTec's two largest
clients accounted for 43.8% and of its total revenues. SendTec believes that a
limited number of clients will continue to be the source of a substantial
portion of their revenues for the foreseeable future. Key factors in maintaining
SendTec's relationships with these clients include SendTec's performance on
individual campaigns, the strength of SendTec's professional reputation, and the
relationships of SendTec's key executives with client personnel. To the extent
that SendTec's performance does not meet client expectations, or its reputation
or relationships with one or more major clients are impaired, SendTec's revenues
could decline and its operating results could be adversely affected.

ANY LIMITATION ON SENDTEC'S USE OF DATA DERIVED FROM CLIENTS' ADVERTISING
CAMPAIGNS COULD SIGNIFICANTLY DIMINISH THE VALUE OF SENDTEC'S SERVICES AND CAUSE
SENDTEC TO LOSE CLIENTS AND REVENUES.

When an individual visits SendTec's clients' websites, SendTec uses
technologies, including cookies and web beacons, to collect information such as
the user's IP address, advertisements delivered by SendTec that have been viewed
by the user, and responses by the user to such advertisements. SendTec
aggregates and analyzes this information to determine the placement of
advertisements across SendTec's affiliate network of advertising space. Although
the data SendTec collects from campaigns of different clients, once aggregated,
are not identifiable, SendTec's clients might decide not to allow SendTec to
collect some or all of this data or might limit SendTec's use of this data. Any
limitation on SendTec's ability to use such data could make it more difficult
for SendTec to deliver online marketing programs that meet client demands.

In addition, although SendTec's contracts generally permit SendTec to
aggregate data from advertising campaigns, SendTec's clients might nonetheless
request that SendTec discontinue using data obtained from their campaigns that
have already been aggregated with other clients' campaign data. It would be
difficult, if not impossible, to comply with these requests, and such requests
could result in significant expenditures of resources, interruptions, failures
or defects or use in SendTec's data collection, mining, and storage systems.
Privacy concerns regarding the collection or use of user data, could also limit
SendTec's ability to aggregate and analyze data from SendTec's clients. Under
such circumstances, SendTec may lose clients and their revenues may decline.

IF THE MARKET FOR INTERNET ADVERTISING FAILS TO CONTINUE TO DEVELOP, SENDTEC'S
REVENUES AND SENDTEC'S OPERATING RESULTS COULD BE HARMED.

SendTec's future success is highly dependent on the continued use and
growth of the Internet as an advertising medium. The Internet advertising market
is relatively new and rapidly evolving, and it uses different measurements than
traditional media to gauge effectiveness. As a result, demand for and market
acceptance of Internet advertising services is uncertain and subject to change.
Many of SendTec's current or potential advertiser clients have little or no
experience using the Internet for advertising purposes and have allocated only
limited portions of their advertising budgets to the Internet. The adoption of
Internet advertising, particularly by those entities that have historically
relied upon traditional media for advertising, requires the acceptance of a new
way of conducting business, exchanging information, measuring success, and
evaluating new advertising products and services. Such clients find Internet
advertising to be less effective for promoting their products and services than
traditional advertising media. SendTec cannot assure that the market for
Internet advertising will continue to grow or become sustainable. If the market
for Internet advertising fails to continue to develop or develops more slowly
than SendTec expects, SendTec's revenues and business could be harmed.

RISKS RELATED TO THE SUPPLY OF ADVERTISING SPACE

SENDTEC DEPENDS ON ONLINE PUBLISHERS FOR ADVERTISING SPACE TO DELIVER ITS
CLIENTS' ADVERTISING CAMPAIGNS, AND ANY DECLINE IN THE SUPPLY OF ADVERTISING
SPACE AVAILABLE THROUGH SENDTEC'S NETWORK COULD CAUSE SENDTEC'S REVENUES TO
DECLINE.

The websites, search engines, and email publishers that sell or venture
their advertising space to or with SendTec are not bound by long-term contracts
that ensure SendTec a consistent supply of advertising space, which

SendTec refers to as their inventory. SendTec generates a significant portion of
revenues from the advertising inventory provided by a limited number of
publishers. In most instances, publishers can change the amount of inventory
they make available to SendTec at any time, as well as the price at which they
make it available. In addition, publishers may place significant restrictions on
SendTec's use of their advertising inventory. These restrictions may prohibit
advertisements from specific advertisers or specific industries, or restrict the
use of certain creative content or format. If a publisher decides not to make
inventory available to SendTec, or decides to increase the price, or places
significant restrictions on the use of such inventory, SendTec may not be able
to replace this with inventory from other publishers that satisfy SendTec's
requirements in a timely and cost-effective manner. If this happens, SendTec's
revenues could decline or SendTec's cost of acquiring inventory may increase.

SENDTEC'S GROWTH MAY BE LIMITED IF IT IS UNABLE TO OBTAIN SUFFICIENT ADVERTISING
INVENTORY THAT MEETS SENDTEC'S PRICING AND QUALITY REQUIREMENTS.

SendTec's growth depends on its ability to effectively manage and
expand the volume of its inventory of advertising space. To attract new
advertisers, SendTec must increase its supply of inventory that meets its
performance and pricing requirements. SendTec's ability to purchase or venture
sufficient quantities of suitable advertising inventory will depend on various
factors, some of which are beyond its control. These factors include:

o SendTec's ability to offer publishers a competitive price for
their inventory;

o SendTec's ability to estimate the quality of the available
inventory; and

o SendTec's ability to efficiently manage its existing advertising
inventory.

In addition, the number of competing Internet advertising networks that
purchase advertising inventory from websites, search engine and email publishers
continues to increase. SendTec cannot assure that SendTec will be able to
purchase or venture advertising inventory that meets its performance, price, and
quality requirements, and if it cannot do so, SendTec's ability to generate
revenues could be limited.

ANY LIMITATION ON SENDTEC'S ABILITY TO POST ADVERTISEMENTS THROUGHOUT ITS
NETWORK OF ADVERTISING SPACE COULD HARM SENDTEC'S BUSINESS.

SendTec executes advertising programs for clients primarily by posting
advertisements, which it refers to as ad delivery, on SendTec's affiliate
network of advertising space. SendTec's business could suffer from a variety of
factors that could limit or reduce its ability to post advertisements across
SendTec's affiliate network, including:

o technological changes that render the delivery of SendTec's
advertisements obsolete or incompatible with the operating
systems of consumers and/or the systems of online publishers;

o lawsuits or injunctions based on claims that SendTec's ad
delivery methodologies violate the proprietary rights of other
parties and regulatory or legal restrictions; and

o interruptions, failures or defects in SendTec's ad delivery and
tracking systems.

CONSOLIDATION OF ONLINE PUBLISHERS MAY IMPAIR SENDTEC'S ABILITY TO PROVIDE
MARKETING SERVICES, ACQUIRE ADVERTISING INVENTORY AT FAVORABLE RATES AND COLLECT
CAMPAIGN DATA.

The consolidation of Internet advertising networks, web portals, search
engines and other online publishers could eventually lead to a concentration of
desirable advertising inventory on a very small number of networks and large
websites. Such concentration could:

o increase SendTec's costs if these publishers use their greater
bargaining power to increase rates for advertising inventory;

o impair SendTec's ability to provide marketing services if these
publishers prevent SendTec from distributing SendTec's clients'
advertising campaigns on their websites or if they adopt ad
delivery systems that are not compatible with SendTec's ad
delivery methodologies; and

SENDTEC'S BUSINESS COULD BE HARMED IF THE USE OF TRACKING TECHNOLOGY IS
RESTRICTED OR BECOMES SUBJECT TO NEW REGULATION.

In conjunction with the delivery of advertisements to websites, SendTec
typically places small files of information, commonly known as cookies, on an
Internet user's hard drive, generally without the user's knowledge or consent.
Cookie information is passed to SendTec through an Internet user's browser
software. SendTec uses cookies to collect information regarding the
advertisements SendTec delivers to Internet users and their interaction with
these advertisements. SendTec uses this information to identify Internet users
who have received SendTec's advertisements in the past and to monitor and
prevent potentially fraudulent activity. In addition, SendTec's technology uses
this information to monitor the performance of ongoing advertising campaigns and
plan future campaigns.

Some Internet commentators and privacy advocates have proposed limiting
or eliminating the use of cookies and other Internet tracking technologies, and
legislation has been introduced in some jurisdictions to regulate Internet
tracking technologies. The European Union has already adopted a directive
requiring that when cookies are used, the user must be informed and offered an
opportunity to opt-out of the cookies' use. If there is a further reduction or
limitation in the use of Internet tracking technologies such as cookies:

o SendTec may have to replace or re-engineer SendTec's tracking
technology, which could require significant amounts of SendTec's
time and resources, may not be completed in time to avoid losing
clients or advertising inventory, and may not be commercially or
technically feasible;

o SendTec may have to develop or acquire other technology to
prevent fraud; and

o SendTec may become subject to costly and time-consuming
litigation or investigations due to SendTec's use of cookie
technology or other technologies designed to collect Internet
usage information.

Any one or more of these occurrences could result in increased costs, require
SendTec to change its business practices or divert management's attention.

IF SENDTEC OR ITS ADVERTISER OR PUBLISHER CLIENTS FAIL TO COMPLY WITH
REGULATIONS GOVERNING CONSUMER PRIVACY, SENDTEC COULD FACE SUBSTANTIAL COSTS AND
SENDTEC'S BUSINESS COULD BE HARMED.

SendTec's collection, maintenance and sharing of information regarding
Internet users could result in lawsuits or government inquiries. These actions
may include those related to U.S. federal and state legislation or European
Union directives limiting the ability of companies like SendTec to collect,
receive and use information regarding Internet users. Litigation and regulatory
inquiries are often expensive and time-consuming and the outcome is uncertain.
Any involvement by SendTec in any of these matters could require SendTec to:

o spend significant amounts on SendTec's legal defense;

o divert the attention of senior management from other aspects of
SendTec's business;

o defer or cancel new product launches as a result of these claims
or proceedings; and

o make changes to SendTec's present and planned products or
services.

Further, SendTec cannot assure that its advertiser and publisher
clients are currently in compliance, or will remain in compliance, with their
own privacy policies, regulations governing consumer privacy or other applicable
legal requirements. SendTec may be held liable if its clients use SendTec's
technology or its data or SendTec

collects on their behalf in a manner that is not in compliance with applicable
laws or regulations or its or their own stated privacy standards.

SENDTEC MAY BE LIABLE FOR CONTENT IN THE ADVERTISEMENTS IT DELIVERS FOR
SENDTEC'S CLIENTS.

SendTec may be liable to third parties for content in the
advertisements they deliver if the artwork, text or other content involved
violates copyrights, trademarks, or other intellectual property rights of third
parties or if the content is defamatory. Although SendTec generally receives
warranties from its advertisers that they have the right to use any copyrights,
trademarks or other intellectual property included in an advertisement and are
normally indemnified by the advertisers, a third party may still file a claim
against SendTec. Any claims by third parties against SendTec could be
time-consuming, could result in costly litigation and adverse judgments, and
could require SendTec to change its business or practices.

MISAPPROPRIATION OF CONFIDENTIAL INFORMATION HELD BY SENDTEC COULD CAUSE SENDTEC
TO LOSE CLIENTS OR INCUR LIABILITY.

SendTec retains highly confidential information on behalf of its
clients in SendTec's systems and databases. Although SendTec maintains security
features in its systems, SendTec's operations may be susceptible to hacker
interception, break-ins and other disruptions. These disruptions may jeopardize
the security of information stored in and transmitted through SendTec's systems.
If confidential information is compromised, SendTec could be subject to lawsuits
by the affected clients or Internet users, which could damage SendTec's
reputation among its current and future potential clients, require significant
expenditures of capital and other resources, and cause SendTec to lose business
and revenues.

ADDITIONAL BUSINESS RISKS RELATING TO SENDTEC'S BUSINESS

SENDTEC GENERALLY DOES NOT HAVE LONG-TERM CONTRACTS WITH ITS CLIENTS.

SendTec's clients typically hire SendTec on a project-by-project basis
or on an annual contractual relationship. Moreover, SendTec's clients generally
have the right to terminate their relationships with SendTec without penalty and
with relatively short or no notice. Once a project is completed SendTec cannot
assure that a client will engage SendTec for further services. From time to
time, highly successful engagements have ended because SendTec's client was
acquired and the new owners decided not to retain SendTec. A client that
generates substantial revenue for SendTec in one period may not be a substantial
source of revenue in a subsequent period. SendTec expects a relatively high
level of client concentration to continue, but not necessarily involve the same
clients from period to period. The termination of SendTec's business
relationships with any of its significant clients, or a material reduction in
the use of SendTec's services by any of their significant clients, could
adversely affect SendTec's future financial performance.

IF SENDTEC FAILS TO MANAGE ITS GROWTH EFFECTIVELY, SENDTEC'S EXPENSES COULD
INCREASE AND SENDTEC'S MANAGEMENT'S TIME AND ATTENTION COULD BE DIVERTED.

As SendTec continues to increase the scope of its operations, SendTec
will need an effective planning and management process to implement their
business plan successfully in the rapidly evolving Internet it is unable to
manage its expanding operations effectively. SendTec plans to continue to expand
its sales and marketing, customer support and research and development
organizations. Past growth has placed, and any future growth will continue to
place, a significant strain on SendTec's management systems and resources.
SendTec will likely need to continue to improve its financial and managerial
controls and SendTec's reporting systems and procedures. In addition, SendTec
will need to expand, train and manage its work force. SendTec's failure to
manage its growth effectively could increase SendTec's expenses and divert
management's time and attention.

If we are unable to manage our growth or our operations, our financial
results could be adversely affected.

IF SENDTEC FAILS TO ESTABLISH, MAINTAIN AND EXPAND ITS TECHNOLOGY BUSINESS, AND
MARKETING ALLIANCES AND PARTNERSHIPS, SENDTEC'S ABILITY TO GROW COULD BE
LIMITED.

In order to grow SendTec's technology business, we must generate,
retain and strengthen successful business and marketing alliances with
advertising agencies.

SendTec depends, and expects to continue to depend, on SendTec's
business and marketing alliances, which are companies which they have written or
oral agreements to work to provide services to work with SendTec's clients and
to refer business from their clients and customers to SendTec. If companies with
which SendTec has business and marketing alliances do not refer their clients
and customers to SendTec to perform their online campaign and message
management, SendTec's revenue and results of operations would be severely
harmed.

RISKS RELATING TO OUR BUSINESS

IF WE ARE NOT ABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE CHARACTERISTIC
OF OUR INDUSTRY, OUR PRODUCTS AND SERVICES MAY NOT BE COMPETITIVE.

The market for our services is characterized by rapid change in
business models and technological infrastructure, and we need to constantly
adapt to changing markets and technologies to provide competitive services. Our
future success will depend, in part, upon our ability to develop our services
for both our target market and for applications in new markets. We may not,
however, be able to successfully do so, and our competitors may develop
innovations that render our products and services obsolete or uncompetitive.

OUR TECHNICAL SYSTEMS WILL BE VULNERABLE TO INTERRUPTION AND DAMAGE THAT MAY BE
COSTLY AND TIME-CONSUMING TO RESOLVE AND MAY HARM OUR BUSINESS AND REPUTATION.

A natural or man-made disaster or other cause could interrupt our
services for an indeterminate length of time and severely damage our business,
prospects, financial condition, and results of operations. Our systems and
operations are vulnerable to damage or interruption from fire, floods, network
failure, hardware failure, software failure, power loss, telecommunications
failures, break-ins, terrorism, war or sabotage, computer viruses, denial of
service attacks, penetration of our network by unauthorized computer users and
"hackers," and other similar events, and other unanticipated problems.

We presently may not posses and may not have developed or implemented
adequate protections or safeguards to overcome any of these events. We also may
not have anticipated or addressed many of the potential events that could
threaten or undermine our technology network. Any of these occurrences could
cause material interruptions or delays in our business, result in the loss of
data, render us unable to provide services to our customers, expose us to
material risk of loss or litigation and liability, materially damage our
reputation and our visitor traffic may decrease as a result. In addition, if a
person is able to circumvent our security measures, he or she could destroy or
misappropriate valuable information or disrupt our operations, which could cause
irreparable damage to our reputation or business. Similar industry-wide concerns
or events could also damage our reputation or business. Our insurance, if
obtained, may not be adequate to compensate us for all losses that may occur as
a result of a catastrophic system failure or other loss, and our insurers may
not be able or may decline to do so for a variety of reasons.

If we fail to address these issues in a timely manner, we may lose the
confidence of our merchant advertisers, our revenue may decline, and our
business could suffer.

WE MAY RELY ON THIRD PARTY CO-LOCATION PROVIDERS, AND A FAILURE OF SERVICE BY
THESE PROVIDERS COULD ADVERSELY AFFECT OUR BUSINESS AND REPUTATION.

We may rely upon third party co-location providers to host our main
servers. In the event that these providers experience any interruption in
operations or cease operations for any reason or if we are unable to agree on
satisfactory terms for continued hosting relationships, we would be forced to
enter into a relationship with other service providers or assume hosting
responsibilities ourselves. If we are forced to switch hosting facilities, we
may

not be successful in finding an alternative service provider on acceptable
terms or in hosting the computer servers ourselves. We may also be limited in
our remedies against these providers in the event of a failure of service. In
the past, short-term outages have occurred in the service maintained by
co-location providers that could recur. We also may rely on third party
providers for components of our technology platform, such as hardware and
software providers, credit card processors, and domain name registrars. A
failure or limitation of service or available capacity by any of these third
party providers could adversely affect our business and reputation.

OUR RESULTS OF OPERATIONS MIGHT FLUCTUATE DUE TO CHANGES IN THE SEARCH ENGINE
BASED ALGORITHMS, WHICH COULD ADVERSELY AFFECT OUR REVENUE AND IN TURN THE
MARKET PRICE OF OUR COMMON STOCK.

Our revenue will be heavily dependent on how search engines treat our
content in their indexes. In the event search engines determine that our content
is not high quality, such search engines may not rank our content as highly in
their indexes resulting in a reduction in our traffic, which may cause lower
than expected revenues. We are greatly dependent on a small number of major
search engines, namely Google, Yahoo!, MSN, and AOL. Search engines tend to
adjust their algorithms periodically and each adjustment tends to have an impact
on how our content ranks in their indexes. These constant fluctuations could
make it difficult for us to predict future revenues.

WE DEPEND ON THE GROWTH OF THE INTERNET AND INTERNET INFRASTRUCTURE FOR OUR
FUTURE GROWTH AND ANY DECREASE OR LESS THAN ANTICIPATED GROWTH IN INTERNET USAGE
COULD ADVERSELY AFFECT OUR BUSINESS PROSPECTS.

Our future revenue and profits, if any, depend upon the continued
widespread use of the Internet as an effective commercial and business medium.
Factors that could reduce the widespread use of the Internet include:

o possible disruptions or other damage to the Internet or
telecommunications infrastructure;

o failure of the individual networking infrastructures of our
merchant advertisers and distribution partners to alleviate
potential, overloading and delayed response times;

o a decision by merchant advertisers to spend more of their
marketing dollars in offline areas;

o increased governmental regulation and taxation; and

o actual or perceived lack of security or privacy protection.

In particular, concerns over the security of transactions conducted on
the Internet and the privacy of users may inhibit the growth of the Internet and
other online services, especially online commerce. In order for the online
commerce market to develop successfully, we, and other market participants, must
be able to transmit confidential information, including credit card information,
securely over public networks. Any decrease or less than anticipated growth in
Internet usage could have a material adverse effect on our business prospects.

WE ARE EXPOSED TO RISKS ASSOCIATED WITH CREDIT CARD FRAUD AND CREDIT PAYMENT,
AND WE MAY SUFFER LOSSES AS A RESULT OF FRAUDULENT DATA OR PAYMENT FAILURE BY
MERCHANT ADVERTISERS.

We may suffer losses as a result of payments made with fraudulent
credit card data. Our failure to adequately control fraudulent credit card
transactions could reduce any gross profit margin. In addition, under limited
circumstances, we extend significant amounts of credit to clients and merchant
advertisers who may default on their accounts payable to us.

GOVERNMENT REGULATION OF THE INTERNET MAY ADVERSELY AFFECT OUR BUSINESS AND
OPERATING RESULTS.

We may be subject to additional operating restrictions and regulations
in the future. Companies engaging in online search, commerce, and related
businesses face uncertainty related to future government regulation of the
Internet. Due to the rapid growth and widespread use of the Internet,
legislatures at the federal and state levels are enacting and considering
various laws and regulations relating to the Internet. Furthermore, the
application of

existing laws and regulations to Internet companies remains somewhat unclear.
Our business and operating results may be negatively affected by new laws, and
such existing or new regulations may expose us to substantial compliance costs
and liabilities and may impede the growth in use of the Internet.

The application of these statutes and others to the Internet search
industry is not entirely settled. Further, several existing and proposed federal
laws could have an impact on our business:

o The Digital Millennium Copyright Act and its related safe
harbors, are intended to reduce the liability of online service
providers for listing or linking to third-party web sites that
include materials that infringe copyrights or other rights of
others.

o The CAN-SPAM Act of 2003 and certain state laws are intended to
regulate interstate commerce by imposing limitations and
penalties on the transmission of unsolicited commercial
electronic mail via the Internet.

With respect to the subject matter of each of these laws, courts may
apply these laws in unintended and unexpected ways. As a company that provides
services over the Internet, we may be subject to an action brought under any of
these or future laws governing online services. Many of the services of the
Internet are automated and companies, such as ours, may be unknowing conduits
for illegal or prohibited materials. It is not known how courts will rule in
many circumstances. For example, it is possible that courts could find strict
liability or impose "know your customer" standards of conduct in certain
circumstances in which case we could be liable for actions by others.

We may also be subject to costs and liabilities with respect to privacy
issues. Several Internet companies have incurred costs and paid penalties for
violating their privacy policies. Further, it is anticipated that new
legislation will be adopted by federal and state governments with respect to
user privacy. Additionally, foreign governments may pass laws that could
negatively impact our business or may prosecute us for our products and services
based upon existing laws. The restrictions imposed by, and costs of complying
with, current and possible future laws and regulations related to our business
could harm our business and operating results.

FUTURE REGULATION OF SEARCH ENGINES MAY ADVERSELY AFFECT THE COMMERCIAL UTILITY
OF OUR SEARCH MARKETING SERVICES.

The Federal Trade Commission ("FTC") has recently reviewed the way in
which search engines disclose paid placements or paid inclusion practices to
Internet users. In 2002, the FTC issued guidance recommending that all search
engine companies ensure that all paid search results are clearly distinguished
from non-paid results, that the use of paid inclusion is clearly and
conspicuously explained and disclosed and that other disclosures are made to
avoid misleading users about the possible effects of paid placement or paid
inclusion listings on search results. Such disclosures, if ultimately mandated
by the FTC or voluntarily made by us, may reduce the desirability of any paid
placement and paid inclusion services that we offer. We believe that some users
may conclude that paid search results are not subject to the same relevancy
requirements as non-paid search results, and will view paid search results less
favorably. If such FTC disclosure reduces the desirability of our paid placement
and paid inclusion services, and "click-throughs" of our paid search results
decrease, the commercial utility of our search marketing services could be
adversely affected.

GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET AND
ONLINE COMMERCE COULD NEGATIVELY IMPACT OUR INTERNET BUSINESS.

Online commerce is relatively new and rapidly changing, and federal and
state regulations relating to the Internet and online commerce are evolving.
Currently, there are few laws or regulations directly applicable to the Internet
or online commerce on the Internet, and the laws governing the Internet that
exist remain largely unsettled. New Internet laws and regulations could dampen
growth in use and acceptance of the Internet for commerce. In addition,
applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, libel, obscenity,
and personal privacy is uncertain. The vast majority of those laws were adopted
prior to the advent of the Internet and related technologies and, as a result,
do not expressly contemplate or address the unique issues presented by the
Internet and related technologies. Further, growth and

development of online commerce have prompted calls for more stringent consumer
protection laws, both in the U.S. and abroad. The adoption or modification of
laws or regulations applicable to the Internet could have a material adverse
effect on our Internet business operations. We also will be subject to
regulation not specifically related to the Internet, including laws affecting
direct marketers and advertisers.

In addition, in 1998, the Internet Tax Freedom Act was enacted, which
generally placed a three-year moratorium on state and local taxes on Internet
access and on multiple or discriminatory state and local taxes on electronic
commerce. This moratorium was recently extended until November 1, 2007. We
cannot predict whether this moratorium will be extended in the future or whether
future legislation will alter the nature of the moratorium. If this moratorium
is not extended in its current form, state and local governments could impose
additional taxes on Internet-based transactions, and these taxes could decrease
our ability to compete with traditional retailers and could have a material
adverse effect on our business, financial condition, results of operations, and
cash flow.

In addition, several telecommunications carriers have requested that
the Federal Communications Commission ("FCC") regulate telecommunications over
the Internet. Due to the increasing use of the Internet and the burden it has
placed on the current telecommunications infrastructure, telephone carriers have
requested the FCC to regulate Internet service providers and impose access fees
on those providers. If the FCC imposes access fees, the costs of using the
Internet could increase dramatically. This could result in the reduced use of
the Internet as a medium for commerce, which could have a material adverse
effect on our Internet business operations.

WE MAY INCUR LIABILITIES FOR THE ACTIVITIES OF USERS OF OUR SERVICE, WHICH COULD
ADVERSELY AFFECT OUR SERVICE OFFERINGS.

The law relating to the liability of providers of online services for
activities of their users and for the content of their merchant advertiser
listings and other postings or usage (such as our social networking community
Friendsand.com) is currently unsettled and could damage our business, financial
condition, and operating results. Our insurance policies may not provide
coverage for liability arising out of activities of our users or merchant
advertisers for the content of our listings or other services (such as our
social networking community Friendsand.com). Furthermore, we may not be able to
obtain or maintain adequate insurance coverage to reduce or limit the
liabilities associated with our businesses. We may not successfully avoid civil
or criminal liability for unlawful activities carried out by consumers or other
users of our services or for the content of our or their listings or posting
therein. Our potential liability for unlawful activities of users of our
services or for the content of our or their listings or postings therein could
require us to implement measures to reduce our exposure to such liability, which
may require us, among other things, to spend substantial resources or to
discontinue certain service offerings.

IF WE DO NOT MAINTAIN AND GROW A CRITICAL MASS OF MERCHANT ADVERTISERS, OUR
OPERATING RESULTS COULD BE ADVERSELY AFFECTED.

Our success depends, in part, on our and any additional acquired
business's maintenance and growth of a critical mass of merchant advertisers and
a continued interest in our and any additional acquired business's
performance-based advertising and search marketing services. If, through our or
any additional acquired business, we are unable to achieve a growing base of
merchant advertisers, we may not successfully develop or market technologies,
products or services that are competitive or accepted by merchant advertisers.
Any decline in the number of merchant advertisers could adversely affect our
operating results generally.

WE ARE DEPENDENT UPON SEVERAL OF THE MAJOR SEARCH ENGINES TO CONTINUE TO PROVIDE
US TRAFFIC THAT MERCHANT ADVERTISERS DEEM TO BE OF VALUE, AND IF THEY DO NOT, IT
COULD HAVE A MATERIAL ADVERSE EFFECT ON THE VALUE OF OUR SERVICES.

We are dependent upon several of the major Internet search engines
namely Google, Yahoo!, MSN and AOL to provide traffic that merchant advertisers
deem to be of value. We monitor the traffic delivered to our merchant
advertisers in an attempt to optimize the quality of traffic we deliver. We
review factors such as non-human processes, including robots, spiders, scripts
(or other software), mechanical automation of clicking and other sources and
causes of low-quality traffic, including, but not limited to, other non-human
clicking agents. Even with such monitoring in place, there is a risk that a
certain amount of low-quality traffic will be provided to our merchant
advertisers, which, if not contained, may be detrimental to those relationships.
Low-quality traffic (or traffic that is

deemed to be less valuable by our merchant advertisers) may prevent us from
growing our base of merchant advertisers and cause us to lose relationships with
existing merchant advertisers or any additional acquired business.

WE MAY BE SUBJECT TO LITIGATION FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS
OF OTHERS.

Our success will depend, in part, on our ability to protect our
intellectual property and to operate without infringing on the intellectual
property rights of others. There can be no guarantee that any of our
intellectual property will be adequately safeguarded, or that it will not be
challenged by third parties. We may be subject to patent infringement claims or
other intellectual property infringement claims that would be costly to defend
and could limit our ability to use certain critical technologies.

Any additional patent litigation could negatively impact our business
by diverting resources and management attention from other aspects of the
business and adding uncertainty as to the ownership of technology and services
that we view as proprietary and essential to our business. In addition, a
successful claim of patent infringement against us and our failure or inability
to license the infringed or similar technology on reasonable terms, or at all,
could have a material adverse effect on our business.

WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE ANY PATENTS THAT WE
CURRENTLY HOLD OR MAY BE GRANTED, WHICH COULD BE EXPENSIVE AND TIME CONSUMING.

We may initiate patent litigation against third parties to protect or
enforce our patent rights, although we presently do not own any patents, and we
may be similarly sued by others. We may also become subject to interference
proceedings conducted in the patent and trademark offices of various countries
to determine the priority of inventions. The defense and prosecution, if
necessary, of intellectual property suits, interference proceedings and related
legal and administrative proceedings is costly and may divert our technical and
management personnel from their normal responsibilities. We may not prevail in
any of these suits. An adverse determination of any litigation or defense
proceedings could put our patents at risk of being invalidated or interpreted
narrowly and could put our patent applications at risk of not being issued.

Furthermore, because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk that some of
our confidential information could be compromised by disclosure during this type
of litigation. In addition, during the course of this kind of litigation, there
could be public announcements of the results of hearings, motions or other
interim proceedings or developments in the litigation. If securities analysts or
investors perceive these results to be negative, they could have an adverse
effect on the trading price of our Common Stock.

RISKS RELATING TO OUR COMMON STOCK

EFFECT OF OUTSTANDING WARRANTS, OPTIONS AND CONVERTIBLE DEBENTURES

Currently, we have outstanding warrants and options exercisable into an
aggregate of 20,115,214 shares of Common Stock and outstanding Debentures
convertible into 23,300,000 shares of Common Stock and an additional 5,852,000
shares if the Debenture holders exercise their right to purchase additional
Debentures. The exercise or conversion of all of such outstanding warrants,
options or Debentures would dilute the then-existing stockholders' percentage
ownership of our Common Stock, and any sales in the public market of the Common
Stock underlying such securities could adversely affect prevailing market prices
for the Common Stock. Moreover, the terms upon which we would be able to obtain
additional equity capital could be adversely affected since the holders of such
securities can be expected to exercise or convert them at a time when we would,
in all likelihood, be able to obtain any needed capital on terms more favorable
to us than those provided by such securities.

APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMITS THE TRADING
AND LIQUIDITY OF OUR COMMON STOCK.

Our Common Stock is quoted on the OTC Bulletin Board, and currently
trades, and may continue to trade below $5.00 per share. Therefore, the Common
Stock is considered a "penny stock" and subject to SEC rules and regulations
that impose limitations upon the manner in which such shares may be publicly
traded. These regulations

require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the associated risks.
Under these regulations, certain brokers who recommend such securities to
persons other than established customers or certain accredited investors must
make a special written suitability determination regarding such a purchaser and
receive such purchaser's written agreement to a transaction prior to sale. These
regulations have the effect of limiting the trading activity of our Common Stock
and reducing the liquidity of an investment in our Common Stock.

THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE AND SUBJECT
TO WIDE FLUCTUATIONS.

The market price of our Common Stock is likely to be highly volatile
and could be subject to wide fluctuations in response to a number of factors,
including:

o announcements of new products or services by our competitors;

o fluctuations in revenue attributable to changes in the search
engine based algorithms that rank the relevance of our content;

o quarterly variations in our revenues and operating expenses;

o announcements of technological innovations or new products or
services by us; and

o sales of our Common Stock by our founders or other selling
stockholders.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE FLUCTUATIONS MAY
CAUSE OUR COMMON STOCK PRICE TO FALL.

Our operating results will likely vary in the future primarily as the
result of fluctuations in our revenues and operating expenses. If our results of
operations do not meet the expectations of current or potential stockholders,
the price of our Common Stock may decline.

THERE MAY BE A LIMITED PUBLIC MARKET FOR SHARES OF OUR COMMON STOCK, WHICH MAY
MAKE IT DIFFICULT FOR STOCKHOLDER TO SELL THEIR SHARES.

An active public market for shares of our Common Stock may not develop,
or if one should develop, it may not be sustained. Therefore, stockholders may
not be able to find purchasers for their shares of Common Stock.

OUR COMMON STOCK IS CONTROLLED BY INSIDERS.

Paul Soltoff, Eric Obeck and Donald Gould, who are officers of our
Company, collectively own in excess of 20% of the outstanding shares of our
Common Stock. Such concentrated control may adversely affect the price of our
Common Stock. These principal stockholders may be able to control matters
requiring approval by our stockholders, including the election of directors.
Such concentrated control may also make it difficult for our stockholders to
receive a premium for their shares of Common Stock in the event we were to have
an opportunity to merge with a third party or enter into different transactions
which require stockholder approval. In addition, certain provisions of Delaware
law could have the effect of making it more difficult or more expensive for a
third party to acquire, or of discouraging a third party from attempting to
acquire control.

WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.

We currently intend to retain any future earnings to support the
development and expansion of our business and do not anticipate paying cash
dividends in the foreseeable future. In addition, the terms of the Debentures
prohibit the payment of dividend. Our payment of any future dividends will be at
the discretion of our board of directors after taking into account various
factors, including but not limited to our financial condition, operating
results, cash needs, growth plans, and the terms of any credit agreements that
we may be a party to at the time. Accordingly, stockholders must rely on sales
of their Common Stock after price appreciation, which may never

occur, as the only way to realize a return on their investment. The Debentures
restrict our ability to pay dividends to our stockholders.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB contains forward-looking statements
(as defined in Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act"). To the extent that any
statements made in this Report contain information that is not historical, these
statements are essentially forward-looking. Forward-looking statements can be
identified by the use of words such as "expects," "plans" "will," "may,"
"anticipates," believes," "should," "intends," "estimates," and other words of
similar meaning. These statements are subject to risks and uncertainties that
cannot be predicted or quantified and consequently, actual results may differ
materially from those expressed or implied by such forward-looking statements.
Such risks and uncertainties include, without limitation, risks associated with
the uncertainty of future financial results, additional financing requirements,
development of new products, the effectiveness, profitability, and marketability
of such products, the ability to protect proprietary information, the impact of
current, pending, or future legislation and regulation on the electronic
marketing industry, the impact of competitive products or pricing, technological
changes, the effect of general economic and business conditions and other risks
and uncertainties detailed from time to time in our filings with the Securities
and Exchange Commission. We do not undertake any obligation to publicly update
any forward-looking statements. As a result, you should not place undue reliance
on these forward-looking statements.

We also use market data and industry forecasts and projections
throughout this Report, which we have obtained from market research, publicly
available information and industry publications. These sources generally state
that the information they provide has been obtained from sources believed to be
reliable, but that the accuracy and completeness of the information are not
guaranteed. The forecasts and projections are based on industry surveys and the
preparers' experience in the industry, and the projected amounts may not be
achieved. Similarly, although we believe that the surveys and market research
others have performed are reliable, we have not independently verified this
information. Forecasts and other forward-looking information obtained from these
sources are subject to the same qualifications and the additional uncertainties
accompanying any estimates of future market size, revenue and market acceptance
of products and services.

ITEM 7. FINANCIAL STATEMENTS.

See the Company's Financial Statements beginning on page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not Applicable.

ITEM 8A. CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our reports filed pursuant
to the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms, and that such information is accumulated
and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures.

We carry out a variety of on-going procedures, under the supervision
and with the participation of management, including our principal executive
officer and principal financial officer, to evaluate the effectiveness of the
design and operation of our disclosure controls and procedures. Based on the
foregoing, our principal

executive officer and principal financial officer concluded that our disclosure
controls and procedures were effective at the reasonable assurance level as of
December 31, 2005.

There have been no significant changes in our internal controls over
financial reporting during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.

ITEM 8B. OTHER INFORMATION.

Not Applicable.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

Directors and Executive Officers

Our directors and executive officers as of the date of this report are
as follows:

YEAR
BECAME A PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS AND CURRENT PUBLIC
NAME AGE DIRECTOR DIRECTORSHIPS

Paul Soltoff 51 2005 CHIEF EXECUTIVE OFFICER AND DIRECTOR OF THE COMPANY SINCE FEBRUARY 2006.
Chief Executive Officer of STAC since February 2006 and Chairman of the
Board and Chief Executive Officer of SendTec since its inception in
February 2000. Mr. Soltoff is a director of Health Benefits Direct
Corporation, an online insurance marketplace that enables consumers to shop
online for individual health and life insurance and obtain insurance
company-sponsored quotes for such coverage.

Eric Obeck 41 - PRESIDENT OF THE COMPANY SINCE FEBRUARY 2006. President of STAC since
February 2006 and President of
SendTec since July 2003. Chief
Operating Officer of SendTec from
August 2000 through June 2003.

Donald Gould 42 - CHIEF FINANCIAL OFFICER OF THE COMPANY SINCE FEBRUARY 2006. Chief
Financial Officer of STAC since February 2006 and of SendTec since 2000.

Michael Brauser 50 2005 CHAIRMAN OF THE BOARD OF DIRECTORS OF THE COMPANY SINCE OCTOBER 2005.
Founder, President and CEO of Marlin Capital Partners, a private investment
company, since 2003. President and Chief Executive Officer of Naviant,
Inc. (eDirect, Inc), an internet marketing company, from 1999 through
2002. Director and Founder of Seisint Inc. (eData.com, Inc), from 1999
through 2003.

Shawn McNamara 40 - PRINCIPAL EXECUTIVE OFFICER AND SENIOR VICE PRESIDENT OF THE COMPANY SINCE
NOVEMBER 2005. Interim Chief Executive Officer from November 2005 through
the present. From 2004 to October 2005, Mr. McNamara was President of
Marketlink, Inc., an internet marketing company. From 2001 to 2003, Mr.
McNamara was President of Optinic.com, an internet marketing company. From
1998 through 2001, Mr. McNamara was President and COO for worldwideweb.com,
a publicly-traded company and an internet marketing company.

Adam C. Wasserman 41 - PRINCIPAL FINANCIAL OFFICER OF THE COMPANY SINCE AUGUST 2005. Interim
Chief Financial Officer since August 2005, Chief Executive Officer of CFO
Oncall, Inc., a provider of consultant accounting services specializing in
SEC financial reporting, outsourced chief financial officer services, audit
preparation service, accounting, automated systems, and internal controls,
since November 1999.

Each director holds office until the next annual meeting of
stockholders or until his or her successor has been duly elected and qualified.
Executive officers are elected annually and serve at the discretion of our
Board.

The Company's purchase of SendTec's assets was financed by the issuance
of Debentures to several holders including LB I Group Inc., which is an
affiliated entity of Lehman Brothers Holdings Inc. and Lehman Brothers Inc. In
conjunction with this issuance, on October 31, 2005, effective upon the
Consolidation, the Company, Lehman Brothers Inc. and LB I Group Inc. entered
into a letter agreement (the "Director Agreement"), pursuant to which the
parties agreed to certain matters relating to the composition of the Company's
Board of Directors and its independent registered public accounting firm. For a
further description of this Director Agreement, see "Item 12- Certain
Relationships and Related Transactions".

There are no family relationships between any of our directors or
executive officers.

AUDIT COMMITTEE

Our Board of Directors has determined that Michael Brauser is the
financial expert serving on our Audit Committee and as of December 31, 2005 was
independent as such term is used in Item 7(d)(3)(iv) of Schedule 14A under the
Exchange Act.

CODE OF ETHICS

We adopted a Code of Ethics that applies to our officers, directors and
employees, including our chief executive officer and chief financial officer. A
copy of such Code of Ethics is attached as Exhibit 14 to the Company's Current
Report on Form 8-K dated July 13, 2005.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

On December 30, 2005 the Company became subject to Section 16(a) of the
Exchange Act, which requires executive officers and directors, and persons who
beneficially own more than ten percent of the common stock of a company with a
class of securities registered under the Exchange Act, to file initial reports
of ownership and reports of changes in ownership with the Securities and
Exchange Commission. MHB Trust, a Cook Island Trust, which the Company believes
is a more than ten percent owner of the Company's Common Stock, has not
currently filed a Form 3 stating such ownership percentage. The MHB Trust was
established during 2005 by our Chairman of the Board Michael Brauser, as
settler.

ITEM 10. EXECUTIVE COMPENSATION.

Summary Compensation Table

The following table sets forth information for the three most recently
completed fiscal years concerning the compensation of (i) the Chief Executive
Officer and (ii) all other executive officers who earned in excess of $100,000
in salary and bonus in the fiscal year ended December 31, 2005 (the "Named
Executive Officers"). Such information excludes for the periods stated all
compensation and awards to any STAC officers and directors inasmuch as the date
of the consolidation was in February 2006.

Long Term Compensation
------------------------------------------------------
Annual Compensation Securities
-------------------- Restricted Underlying All Other
Salary Stock Award(s) Options Compensation
Name and Principal Position Year ($) ($) (#) ($)(3)
- --------------------------------------- ---- ------ ------------- ---------- -------------

Shawn McNamara 2005 40,502 10,000 100,000 0
(Principal Executive Officer from 2004 0 0 0 0
November 16, 2005 through present) 2003 0 0 0 0

Adam Wasserman 2005 40,610 0 0 0
(Principal Financial Officer from 2004 0 0 0 0
August 9, 2005 through present) 2003 0 0 0 0

Danielle Karp(1)(2) 2005 68,270 0 100,000 0
(President from June 13, 2005 through 2004 64,214 0 0 0
February 3, 2006) 2003 0 0 0 0

Ohad Jehassi(2) 2005 82,958 80,000 100,000 0
(COO from July 13, 2005) 2004 0 0 0 0
2003 0 0 0 0

Mandee Heller Adler(2) 2005 73,077 100,000 100,000 0
(CEO from June 21, 2005 through 2004 0 0 0 0
November 11, 2005) 2003 0 0 0 0

Scott Young(2) 2005 0 0 0 0
(President and CFO from inception 2004 0 0 0 0
through June 13, 2005) 2003 0 0 0 0

- -------------

(1) The Company was formed in May 2005. Amounts for periods prior to
2005 reflect compensation received from an entity that sold its assets
to the Company.

(2) Former officer and/or director of the Company.

(3) As to Named Executive Officers, perquisites and other personal
benefits, securities, or property received by each Named Executive
Officer did not exceed the lesser of $50,000 or 10% of such Named
Executive Officer's annual salary and bonus.

OPTION GRANTS TABLE FOR FISCAL 2005

The following table contains information concerning the grant of stock
options to our executive officers during the fiscal year. No stock appreciation
rights were granted during the year.

Number of
Securities Percent of Total
Underlying Options/SARs Granted Exercise Or
Options/SARs to Employees in Fiscal Base Price
Name Granted (#) Year(%)(1) ($/Sh) Expiration Date
- ------------------------ -------------------- ------------------------ ------------- ----------------------

Shawn McNamara 100,000 5.9 3.85 November 30, 2010

Adam Wasserman 0 0 0 None

Danielle Karp 100,000 5.9 3.85 July 13, 2015

Ohad Jehassi 100,000 5.9 3.85 July 13, 2015

Mandee Heller Adler 100,000 5.9 3.85 July 13, 2015

Scott Young 0 0 0 None

- -----------------
(1) Based on number of options granted and not forfeited as of December 31,
2005. Does not include options granted to the Company's non-employee
Chairman of the Board of Directors.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information regarding the exercise of
stock options during the last fiscal year by the named officers in the Summary
Compensation Table above and the fiscal year-end value of unexercised options.

Number of Securities
Underlying Unexercised Value Of Unexercised
Options/SARs At FY-End In-The-Money Options/SARs
(#) Exercisable/ At FY-End ($) (1)
Name Unexercisable Exercisable/Unexercisable
- ------------------------ ------------------------- ---------------------------
Shawn McNamara 0/100,000 0/0

Adam Wasserman 0/0 0/0

Danielle Karp 0/100,000 0/0

Ohad Jehassi 0/100,000 0/0

Mandee Heller Adler 0/100,000 0/0

Scott Young 0/0 0/0

EQUITY COMPENSATION PLAN INFORMATION

2005 Incentive Stock Plan

An aggregate of 3,300,000 shares of Common Stock have been reserved for
issuance under the 2005 Incentive Plan. The purpose of the 2005 Incentive Plan
is to provide an incentive to retain in the employ and as directors, officers,
consultants, advisors and employees of the Company, persons of training,
experience, and ability, to attract new directors, officers, consultants,
advisors and employees whose services are considered valuable, to encourage the
sense of proprietorship, and to stimulate the active interest of such persons in
our development and financial success. Under the 2005 Incentive Plan, we are
authorized to issue incentive stock options intended to qualify under Section
422 of the Code, non-qualified stock options, and restricted stock. The 2005
Incentive Plan is

administered by the Board or a compensation committee designated be the Board of
at least two directors (the "Compensation Committee").

Options and restricted Common Stock granted under the 2005 Incentive
Plan have a maximum term of ten years. Unless otherwise determined by the Board
or Compensation Committee at the time of grant, options will be subject to a
vesting period of three years. Upon a change in control, the vesting and
exercisability of outstanding options and vesting of outstanding restricted
common stock may accelerate. The 2005 Incentive Plan permits "cashless exercise"
of outstanding options. As of the date of this Annual Report on Form 10-KSB,
options to purchase 2,948,500 shares of Common Stock (intended to qualify as
incentive stock options) and 282,100 shares of restricted Common Stock have been
granted under the 2005 Incentive Plan.

Directors' Plan

The Directors Plan provides for the grant of non-qualified stock
options to non-employee directors of the Company and its subsidiaries. 2,000,000
shares of common stock have been reserved for issuance under the Directors Plan,
provided that awards to the Chairman of the Board are limited to 1,000,000
shares. The Directors Plan provides that each non-employee director who is
newly-elected or appointed Chairman of the Board shall receive an option to
purchase 1,000,000 shares of common stock exercisable on the six-month
anniversary of the approval of the Directors Plan by the stockholders, each
newly elected or appointed non-employee director (other than the Chairman) shall
be granted an option to purchase 50,000 shares of common stock, exercisable as
to 50% of such shares on the date which is one year from the date of grant and
50% on the date which is two years from the date of grant. The Directors Plan
permits "cashless exercise" of outstanding options. In addition, each
non-employee director shall be granted an option to purchase 50,000 shares of
common stock on the second anniversary of such director's initial election or
appointment, exercisable as to 50% on the date which is one year from the date
of grant and 50% on the date which is two years from the date of grant. All such
options shall be exercisable at the fair market value on the date of grant. As
of the date of this Annual Report on Form 10-KSB, 1,000,000 options to purchase
Common Stock were granted to the Company's former Chairman of the Board.

2006 Incentive Stock Plan

The 2006 Incentive Plan was adopted by the Board of Directors on March
3, 2006 and is still subject to approval by stockholders. An aggregate of
2,700,000 shares of Common Stock have been reserved for issuance under the 2006
Incentive Plan. The purpose of the 2006 Incentive Plan is to provide an
incentive to retain in the employ of and as directors, officers, consultants,
advisors, and employees of the Company, persons of training, experience, and
ability, to attract new directors, officers, consultants, advisors, and
employees whose services are considered valuable, to encourage the sense of
proprietorship and to stimulate the active interest of such persons into our
development and financial success. Under the 2006 Incentive Plan, we are
authorized to issue incentive stock options intended to qualify under Section
422 of the Code, non-qualified stock options, and restricted stock. The 2006
Incentive Plan permits "cashless exercise" of outstanding options. The maximum
number of shares of Common Stock that may be subject to options granted under
the 2006 Incentive Plan to any individual in any calendar year shall not exceed
1,000,000 shares in order to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code. The 2006 Incentive Plan is
currently administered by the Board of Directors or a Committee of the Board of
Directors. As of March 13, 2005, no shares of Common Stock have been issued
under the 2006 Incentive Plan and no options to purchase shares of Common Stock
were outstanding.

EMPLOYMENT AGREEMENTS

Paul Soltoff became Chief Executive Officer of STAC pursuant to an
Employment Agreement dated October 31, 2005 and of the Company on February 3,
2006. The Agreement provides that Mr. Soltoff will serve as Chief Executive
Officer for an initial five year term, which will be renewed for additional one
year terms thereafter, unless written notice is provided by either party. The
agreement provides for an annual base salary of no less than $400,000, as well
as such incentive compensation and bonuses as the Board of Directors may
determine and to which he may become entitled pursuant to an incentive
compensation or bonus program.

Donald Gould became Chief Financial Officer of STAC pursuant to an
Employment Agreement dated October 31, 2005 and of the Company on February 3,
2006. The Agreement provides that Mr. Gould will serve as

Chief Financial Officer for an initial five year term, which will be renewed for
additional one year terms thereafter, unless written notice is provided by
either party. The agreement provides for an annual base salary of no less than
$225,000, as well as such incentive compensation and bonuses as the board of
directors may determine and to which he may become entitled to pursuant to an
incentive compensation or bonus program.

Eric Obeck became President of STAC pursuant to an Employment Agreement
dated October 31, 2005 and of the Company on February 3, 2006. The Agreement
provides that Mr. Obeck will serve as President for an initial five year term,
which will be renewed for additional one year terms thereafter, unless written
notice is provided by either party. The agreement provides for an annual base
salary of no less than $325,000, as well as such incentive compensation and
bonuses as the Board of Directors may determine and to which he may become
entitled to pursuant to an incentive compensation or bonus program.

Shawn McNamara became Vice President of the Company pursuant to an
Employment Agreement dated November 30, 2005. The Agreement provides that Mr.
McNamara will serve as the Vice President for an initial one-year term, which
will be renewed for additional one-year terms thereafter, unless written notice
is provided by either party. The agreement provides for a signing bonus of
$30,000 and an annual base salary of $180,000. In addition, pursuant to the
agreement, Mr. McNamara received five-year options to purchase 100,000 shares of
the Company's Common Stock, exercisable at $3.85 per share, subject to exercise
upon his continued employment as to one third (1/3) of such shares on each of
the six month, first, and second year anniversaries of the date of grant. Mr.
McNamara also received 10,000 shares of unregistered Common Stock.

COMPENSATION OF DIRECTORS

Each non-employee director who is newly elected or appointed Chairman
of the Board is granted an option to purchase up to 1,000,000 shares of Common
Stock. Each person (other than the Chairman) who is newly elected or appointed
as a non-employee director is granted an option to purchase fifty thousand
shares of Common Stock. Each person who remains a non-employee director for a
period of two consecutive years following the date of initial election or
appointment is granted an option to purchase fifty thousand (50,000) shares of
Common Stock.

In addition, the current Chairman of the Board of Directors received a
$200,000 payment in connection with his services and a $100,000 expense
reimbursement in connection with the closing of the SendTec Acquisition.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The information regarding beneficial ownership of our Common Stock has
been presented in accordance with the rules of the SEC. Under these rules, a
person or entity may be deemed to beneficially own any shares as to which such
person or entity, directly or indirectly, has or shares voting power or
investment power, or has the right to acquire voting or investment power within
60 days through the exercise of any stock option or other right. The percentage
of beneficial ownership as to any person as of a particular date is calculated
by dividing (a) (i) the number of shares beneficially owned by such person, plus
(ii) the number of shares as to which such person has the right to acquire
voting or investment power within 60 days, by (b) the total number of shares
outstanding as of such date, plus any shares that such person has the right to
acquire from us within 60 days. Including those shares in the tables does not,
however, constitute an admission that the named stockholder is a direct or
indirect beneficial owner of those shares.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Based solely upon information available to us, the following table sets
forth certain information regarding beneficial ownership of our Common Stock as
of March 13, 2006 by (i) each person or entity known by us to own beneficially
more than 5% of our outstanding Common Stock, (ii) each of our directors and
Named Executive Officers, and (iii) all directors and executive officers as a
group. Except as otherwise indicated, each of the stockholders named below has
sole voting and investment power with respect to such shares of Common Stock:

Name and Address of Number of Shares Percentage Beneficially
Beneficial Owner(1) Beneficially Owned Owned
- ------------------------------------ ------------------ ------------------------

Paul Soltoff 3,341,276(2) 8.2%
Donald Gould 2,248,013(3) 5.5%
Eric Obeck 2,788,487(4) 6.8%
Michael Brauser 100,000(5) *
LB I Group Inc. 3,034,795(6) 7.3%
MHB Trust 5,392,500(7) 12.4%
Leslie T. Altavilla Revocable Trust 3,200,000(8) 7.9%
Shawn McNamara 43,334(9) *
Adam Wasserman 0 0
Danielle Karp 100,000(10) *
Ohad Jehassi 125,000(11) *
Mandee Heller Adler 200,000(12) *
Scott Young 0 0

- ------------
* Represents less than 1%.

(1) Unless otherwise indicated, the address of each stockholder listed above is
c/o the executive offices of Relationserve

2) Based on a Schedule 13D filed on March 1, 2006. Mr. Soltoff's business
address is c/o SendTec Acquisition Corp., 877 Executive Center Drive West,
Suite 300, St. Petersburg, Florida 33702.

(3) Based on a Schedule 13D filed on March 1, 2006. Mr. Gould's business
address is c/o SendTec Acquisition Corp., 877 Executive Center Drive West,
Suite 300, St. Petersburg, Florida 33702.

(4) Based on a Schedule 13D filed on March 1, 2006. Mr. Obeck's business
address is c/o SendTec Acquisition Corp., 877 Executive Center Drive West,
Suite 300, St. Petersburg, Florida 33702.

(5) Consists of presently exercisable warrants to purchase 100,000 shares of
Common Stock held by DIG Investment Trust, an entity in which the wife of
Mr. Brauser is the trustee of a trust for the benefit of their children.
Mr. Brauser disclaims beneficial ownership of the warrants and the shares
of Common Stock underlying the warrants.

(6) Based on a Schedule 13G filed on February 15, 2006, LB I Group Inc.
beneficially owns 3,034,795 shares of Common Stock. Such shares include a
warrant to purchase 1,037,985 shares of Common Stock exercisable within 60
days. Lehman Brothers Inc. is the parent company of LB I Group. Lehman
Brothers Holdings Inc., a public reporting company, is the parent company
of Lehman Brothers Inc. The address for LB I Group is c/o Lehman Brothers
Inc., 399 Park Avenue, New York, New York 10022, Attn: Eric Salzman and
Will Yelsits. Lehman Brothers Inc. is a registered broker-dealer.

(7) Includes immediately exercisable warrant to purchase 2,792,500 shares of
Common Stock. MHB Trust's address is c/o Southpac Trust Limited, ANZ House,
Main Road, Avara, Raratongo, Cook Islands. Mr. Brauser disclaims beneficial
ownership of any shares of Common Stock or Warrants owned MHB Trust.

(8) The business address for the trust is 14300 Clay Terrace Blvd., Ste. 269,
Carmel, IN 46037.

(9) Consists of an option to purchase 33,334 shares of Common Stock exercisable
within 60 days and 10,000 shares of restricted Common Stock granted under
the 2005 Plan. Such restrictions lapse as to 1/3 of such shares on the six
month, one year and two year anniversaries of the date of grant.

(10) Consists of immediately exercisable option to purchase 100,000 shares of
Common Stock.

(11) Consists of an immediately exercisable option to purchase 25,000 shares of
Common Stock and 80,000 shares of restricted Common Stock granted under the
2005 Plan.

(12) Includes immediately exercisable option to purchase 100,000 shares of
Common Stock granted under the 2005 Incentive Plan.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company's purchase of SendTec's assets was financed by the issuance
of $34.95 million of Senior Secured Convertible Debentures due October 30, 2009
of STAC. The Debentures are convertible into shares of Company Common Stock.
Among the purchasers of the Debentures was LB I Group Inc., which is currently a
5% stockholder of the Company. LB I Group Inc. may be deemed an affiliate of
Lehman Brothers Holdings Inc. and Lehman Brothers Inc. In conjunction with the
initial issuance of the Debentures on October 31, 2005, effective upon the
Consolidation, the Company, Lehman Brothers, Inc. and LB I Group Inc. entered
into a letter agreement pursuant to which the parties agreed to certain matters
relating to the Company's Board of Directors and its independent registered
public accounting firm including: (i) the Company's Board of Directors may not
exceed six members, (ii) at Lehman's request, the Company must use its best
efforts to cause all then members of the Board of Directors to resign other than
Mandee Heller Adler and cause the election of Michael Brauser and Paul Soltoff
as members of the Board of Directors, (iii) at the request of Lehman, the
Company must use its best efforts to prevent the election of any member of the
Board of Directors to which Lehman reasonably and timely objects, (iv) Lehman
has the right to designate a member of the Board of Directors and the Company
must use its best efforts to cause such person's election to the Board of
Directors, (v) Lehman has the right to designate a representative to attend all
meetings of the Board of Directors in a nonvoting observer capacity and, in this
respect, the Company must give such representative copies of all notices,
minutes, consents and all other materials that it provides to the directors and
(vi) the Company's independent registered public accounting firm must be
reasonably acceptable to Lehman. On February 3, 2006, Lehman advised the Company
that it did not currently intend to exercise its right to designate a member of
the Board of Directors.

On October 31, 2005, the Company and STAC entered into certain
agreements with members of STAC management including Paul Soltoff, Donald Gould,
and Eric Obeck. On February 2, 2006, members of STAC management received
9,506,380 shares of Company Common Stock (9.5% of the outstanding shares of STAC
Common Stock giving effect to the conversion as of October 31, 2005 of all
Debentures) in a transaction intended to be a tax-free reorganization for all
ownership interests held in STAC by such persons.

The current Chairman of the Board of Directors received a $200,000
payment in connection with his services and a $100,000 expense reimbursement in
connection with the closing of the SendTec transaction.

The Company has an arrangement with CFO OnCall, Inc. pursuant to which
Adam C. Wasserman serves as the principal financial officer of the Company.

ITEM 13. EXHIBITS

Exhibit
Number Description
- -------- -----------

2.1 Agreement and Plan of Merger of RelationServe Media, Inc. (Nevada) with and into RelationServe
Media, Inc. (Delaware) dated August 29, 2005 (incorporated herein by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K filed with the Commission on September 2, 2005)

2.2 Agreement of Merger and Plan of Reorganization among Chubasco Resources Corp., Reland Acquisition,
Inc. and RelationServe, Inc. dated June 10, 2005 (incorporated herein by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K filed with the Commission on June 16, 2005)

3.1 Amended and Restated Certificate of Incorporation of RelationServe, Inc. dated August 29, 2005 (incorporated
herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed

Exhibit
Number Description
- -------- -----------

with the Commission on September 2, 2005)

3.2 Amended and Restated By-Laws of RelationServe Media, Inc. (incorporated herein by reference to
Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the Commission on September 2,
2005)

3.3 Amendment to Amended and Restated By-Laws of RelationServe Media, Inc. (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission on
December 5, 2005)

4.1 Form of Warrant to purchase Common Stock of RelationServe Media, Inc. at an exercise price of $0.01
per share (incorporated herein by reference to Exhibit 10.7 to the Company's Current Report on Form
8-K filed with the Commission on February 9, 2006)

4.2 Form of Warrant to purchase Common Stock of RelationServe Media, Inc. at an exercise price of $3.50
per share (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form
8-K filed with the Commission on June 30, 2005)

4.3 Form of Warrant to purchase Common Stock of RelationServe Media, Inc. at an exercise price of $2.00
per share *

4.4 Form of Warrant to purchase Common Stock of RelationServe Media, Inc. at an exercise price of $0.25
(incorporated herein by reference to Exhibit 2.8 to the Company's Current Report on Form 8-K filed with
the Commission on June 16, 2005)

4.5 Form of Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.15 to the Company's
Quarterly Report on Form 10-QSB filed with the Commission on August 15, 2005)

4.6 Form of Option Certificate (incorporated herein by reference to Exhibit 10.14 to the Company's
Quarterly Report on Form 10-QSB filed with the Commission on August 15, 2005)

10.01 Asset Purchase Agreement by and among RelationServe Access, Inc., Omni Point Marketing, LLC, Cobalt
Holdings, LLC and McCall and Estes Advertising, Inc. dated May 12, 2005 (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission on
June 16, 2005)

10.02 Agreement and Plan of Merger between Friends Acquisition, Inc. and Friendsand LLC dated May 13,
2005 (incorporated herein by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K
filed with the Commission on June 16, 2005)

10.03 Asset Purchase Agreement by and between RelationServe Media Inc., theglobe.com, inc., and SendTec,
Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form
8-K/A filed with the Commission on August 18, 2005)

10.04 Amendment No. 1 to Asset Purchase Agreement by and between RelationServe Media Inc., theglobe.com,
inc., and SendTec, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed with the Commission on August 24, 2005)

10.05 Holdback Escrow Agreement by and among RelationServe Media, Inc., theglobe.com., SendTec, Inc. and
Olshan Grundman Frome Rosenzweig & Wolosky LLP, dated August 9, 2005 (incorporated herein by
reference to Exhibit 10.8 to the Company's Current Report on Form 8-K/A filed with the Commission
on November 7, 2005)

Exhibit
Number Description
- -------- -----------

10.06 Securities Purchase Agreement dated as of October 31, 2005, among SendTec Acquisition Corp.,
RelationServe Media, Inc., each purchaser identified on the signature pages hereto and Christiana
Corporate Services, Inc., in its capacity as administrative agent for the Purchasers (incorporated
herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K/A filed with the
Commission on November 7, 2005)

10.07 Form of Senior Secured Convertible Debenture dated as of October 31, 2005, among SendTec
Acquisition Corp., RelationServe Media, Inc., purchaser, and Christiana Corporate Services, Inc.,
in its capacity as administrative agent for the Purchasers (incorporated herein by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K/A filed with the Commission on November 7,
2005)

10.08 SendTec Acquisition Corp. Security Agreement (incorporated herein by reference to Exhibit 10.3 to
the Company's Current Report on Form 8-K/A filed with the Commission on November 7, 2005)

10.09 Guarantor Security Agreement among the Grantors and Christiana Corporate Services, Inc., in its
capacity as administrative agent for the Holders, dated February 3, 2006 (incorporated herein by
reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on
February 9, 2006)

10.10 Copyright Security Agreement among the Grantors and Christiana Corporate Services, Inc., in its
capacity as administrative agent for the Holders, dated February 3, 2006 (incorporated herein by
reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Commission on
February 9, 2006)

10.11 Patent Security Agreement, dated February 3, 2006 among the Grantors and Christiana Corporate
Services, Inc., in its capacity as administrative agent for the Holders, dated February 3, 2006
(incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed
with the Commission on February 9, 2006)

10.12 Trademark Security Agreement among the Grantors and Christiana Corporate Services, Inc., in its
capacity as administrative agent for the Holders, dated February 3, 2006 (incorporated herein by
reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the Commission on
February 9, 2006)

10.13 General Continuing Guaranty among the Guarantors in favor of the Holders and Christiana Corporate
Services, Inc., in its capacity as administrative agent for the Holders, dated February 3, 2006
(incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed
with the Commission on February 9, 2006)

10.14 Securities Exchange Agreement by and among the Company and STAC Management, dated February 3, 2006
(incorporated herein by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed
with the Commission on February 9, 2006)

10.15 Employment Agreement for Paul Soltoff, effective October 31, 2005 (incorporated herein by reference
to Exhibit 10.15 to the Company's Current Report on Form 8-K filed with the Commission on February
9, 2006)

10.16 Employment Agreement for Eric Obeck, effective October 31, 2005 (incorporated herein by reference
to Exhibit 10.16 to the Company's Current Report on Form 8-K filed with the Commission

Exhibit
Number Description
- -------- -----------

on February 9, 2006)

10.17 Employment Agreement for Donald Gould, effective October 31, 2005 (incorporated herein by reference
to Exhibit 10.17 to the Company's Current Report on Form 8-K filed with the Commission on February
9, 2006)

10.18 Employment Agreement between RelationServe Media, Inc. and Ohad Jehassi, dated July 13, 2005
(incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed
with the Commission on July 18, 2005)

10.19 Employment Agreement between RelationServe Media, Inc. and Shawn McNamara, dated November 30, 2005
(incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed
with the Commission on December 5, 2006)

10.20 Letter Agreement by and between the Company and LB I Group Inc., dated October 31, 2005
(incorporated herein by reference to Exhibit 10.14 to the Company's Current Report on Form 8-K
filed with the Commission on February 9, 2006)

10.21 Covenant Agreement among SendTec Acquisition Corp., the Company and the Purchasers, dated February
3, 2006*

10.22 Release and Employment Severance Agreement between RelationServe Media, Inc. and Mandee Heller
Adler dated November 11, 2005 (incorporated herein by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed with the Commission on November 17, 2005)

10.23 Severance Agreement by and between the Company and Danielle Karp, effective February 3, 2006
(incorporated herein by reference to Exhibit 10.11 to the Company's Current Report on Form 8-K
filed with the Commission on February 9, 2006)

10.24 Non-Competition and Non-Solicitation Agreement by and between the Company and the Hirsch
Affiliates, dated February 3, 2006 (incorporated herein by reference to Exhibit 10.10 to the
Company's Current Report on Form 8-K filed with the Commission on February 9, 2006)

10.25 Mutual General Release by and between the Company and the Hirsch Affiliates, dated February 3, 2006
(incorporated herein by reference to Exhibit 10.13 to the Company's Current Report on Form 8-K
filed with the Commission on February 9, 2006)

10.26 Stock Purchase Agreement by and between the Company and Sunrise Equity Partners, L.P., dated
February 3, 2006 (incorporated herein by reference to Exhibit 10.12 to the Company's Current Report
on Form 8-K filed with the Commission on February 9, 2006)

10.27 Registration Rights Agreement among the Company and the Purchasers, dated February 3, 2006
(incorporated herein by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K filed
with the Commission on February 9, 2006)

10.28 Waiver and Amended and Restated Registration Rights Agreement between RelationServe Media, Inc. and
certain subscribers to RelationServe Media Inc.'s common stock and warrants Subscribers to the
RelationServe Media Inc.'s common stock and warrants (incorporated herein by reference to Exhibit 10.7
to the Company's Current Report on Form 8-K/A filed with the Commission on November 7, 2005)

Exhibit
Number Description
- -------- -----------

10.29 Consulting Agreement between Elite Card Services, Inc. and the Company, dated November 30, 2005
(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed
with the Commission on December 5, 2005)

10.30 Form of Registration Rights Agreement between RelationServe Media, Inc. and Subscribers to the
RelationServe Media Inc.'s Series A Convertible Preferred Stock (incorporated herein by reference
to Exhibit 10.6 to the Company's Current Report on Form 8-K/A filed with the Commission on November
7, 2005)

10.31 Form of Subscription Agreement between RelationServe Media, Inc. and Subscribers to the
RelationServe Media Inc.'s Series A Convertible Preferred Stock (incorporated herein by reference
to Exhibit 10.5 to the Company's Current Report on Form 8-K/A filed with the Commission on November
7, 2005)

10.32 Form of Subscription Agreement of RelationServe Media, Inc. (Nevada) in connection with the private
placement offering which closed on June 30, 2005 (incorporated herein by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K filed with the Commission on June 30, 2005)

10.33 RelationServe Media, Inc. 2006 Incentive Stock Plan*

10.34 RelationServe Media Inc. 2005 Non-Employee Directors Stock Option Plan (incorporated herein by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on
August 12, 2005)

10.35 RelationServe Media, Inc. 2005 Incentive Stock Plan (incorporated herein by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K filed with the Commission on July 18, 2005)

10.36 Note Purchase Agreement by and between RelationServe, Inc., JH Associates, Inc. and GRQ
Consultants, Inc. dated April 1, 2005 (incorporated herein by reference to Exhibit 2.3 to the
Company's Current Report on Form 8-K filed with the Commission on June 16, 2005)

10.37 Lease Agreement dated January 30, 2004 by and between Koger Equity, Inc. and SendTec, Inc.*

10.38 Lease Amendment Number 1 dated September 27, 2005 by and between CRT Properties, Inc. and SendTec,
Inc.

10.39 Agreement of Lease dated May 23, 2005 between 386 PAS Partners, L.L.C. and SendTec, Inc.

14.1 Code of Ethics of the Company (incorporated herein by reference to Exhibit 14 to the Company's
Current Report on Form 8-K filed with the Commission on July 18, 2005)

16.1 Letter from Sherb & Co., LLP to the Company, dated December 5, 2005 (incorporated herein by
reference to Exhibit 16 to the Company's Current Report on Form 8-K filed with the Commission on
December 5, 2005)

16.2 Letter from Morgan & Company to the Securities and Exchange Commission dated July 15, 2005
(incorporated herein by reference to Exhibit 16.1 to the Company's Current Report on Form 8-K filed
with the Commission on July 18, 2005)

21.1 Subsidiaries of Small Business Issuer (to be filed by amendment)

Exhibit
Number Description
- -------- -----------

31.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

- ------------
* filed herewith.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Our principal accountant and predecessor accountants for the audit of
our annual financial statements for our fiscal years ended December 31, 2004 and
2005, was Marcum & Kliegman LLP, McKean, Paul, Chrycy, Fletcher & Co. and Sherb
& Co., LLP. The following table shows the fees paid or accrued by us to Marcum &
Kliegman LLP, McKean, Paul, Chrycy, Fletcher & Co. and Sherb & Co., LLP during
the periods indicated.

Type of Service Fiscal 2004 Fiscal 2005
- ---------------------- ----------- -----------
Audit Fees (1) $71,564 $218,053
Audit-Related Fees (2) 0 0
Tax Fees (3) 0 0
All Other Fees (4) 0 0
- ------------------ -------- ---------
Total $71,564 $218,053

- ------------
(1) Comprised of the audit of our annual financial statements and reviews
of our quarterly financial statements.

(2) Comprised of services rendered in connection with our capital raising
efforts, registration statement and consultations regarding financial
accounting and reporting.

(3) Comprised of services for tax compliance, tax return preparation, tax
advice and tax planning.

(4) Fees related to other filings with the SEC, including consents.

In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee
established policies and procedures under which all audit and non-audit services
performed by our principal accountants must be approved in advance by the Audit
Committee. As provided in the Sarbanes-Oxley Act of 2002, all audit and
non-audit services to be provided after May 6, 2003 must be pre-approved by the
Audit Committee in accordance with these policies and procedures. Based in part
on consideration of the non-audit services provided by Marcum & Kliegman LLP
during our 2005 fiscal year, the Audit Committee determined that such non-audit
services were compatible with maintaining the independence of Marcum & Kliegman
LLP.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

RELATIONSERVE MEDIA, INC.

By: /s/ Shawn McNamara
----------------------------
Name: Shawn McNamara
Title: Senior Vice President
Date: March 20, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

By: /s/ Paul Soltoff
--------------------------------------------------- March 20, 2006
Paul Soltoff, Director

By: /s/ Adam Wasserman
--------------------------------------------------- March 20, 2006
Adam Wasserman, Principal Financial Officer and
Principal Accounting Officer

By: /s/ Michael Brauser
--------------------------------------------------- March 20, 2006
Michael Brauser, Chairman of the Board of Directors

By: /s/ Shawn McNamara
--------------------------------------------------- March 20, 2006
Shawn McNamara, Senior Vice President (Principal
Executive Officer)




                                     RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                                                        CONTENTS
- --------------------------------------------------------------------------------



                                                                                                            Page
                                                                                                            ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS                                                   F1 - F2

CONSOLIDATED FINANCIAL STATEMENTS

     Consolidated Balance Sheet                                                                            F3 - F4
     Consolidated Statements of Operations                                                                   F5
     Consolidated Statements of Stockholders' Equity                                                       F6 - F7
     Consolidated Statements of Cash Flows                                                                 F8 - F9


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                F10 - F28







             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

To the Board of Directors
RelationServe Media, Inc. and Subsidiaries
Fort Lauderdale, Florida

We have audited the accompanying consolidated balance sheet of RelationServe
Media, Inc. and Subsidiaries as of December 31, 2005 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RelationServe Media,
Inc. and Subsidiaries as of December 31, 2005, and the results of its operations
and its cash flows for the year then ended December 31, 2005, in conformity with
accounting principles generally accepted in the United States of America.

New York, New York
March 10, 2006

                                                       /S/ MARCUM & KLIEGMAN LLP

                                      F-1





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------

To the Members of
Omnipoint Marketing, LLC:

We have audited the accompanying statements of operations, members' equity and
cash flows of Omnipoint Marketing, LLC (a Florida limited liability company)
("the Company") for the year ended December 31, 2004. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Omnipoint Marketing, LLC for
the year ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 9 to the financial statements, on December 15, 2004, the
Federal Bureau of Investigation served the Company with a search warrant
regarding alleged use of unlicensed software and seized certain e-mail servers
with a net book value of approximately $135,000. Management and legal counsel
have indicated that an investigation by the United States Attorney's Office is
currently being conducted and have no information regarding its status or
effect, if any, on the financial statements. The financial statements do not
include any adjustments, other than the write-off of the e-mail servers, which
might result from the outcome of the investigation.

As discussed in Note 2 to the financial statements, on May 16, 2005, the Company
sold substantially all its net assets. The Company received 3,500,000 shares of
common stock or 26% of the outstanding common shares of the acquirer.

                                        /s/ McKEAN, PAUL, CHRYCY, FLETCHER & CO.

Miami, Florida,
May 24, 2005

                                     F - 2



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                                      CONSOLIDATED BALANCE SHEET

                                                              December 31, 2005
- --------------------------------------------------------------------------------



                                     ASSETS
                                     ------


CURRENT ASSETS
- --------------

   Cash                                                                        $        156,472
   Accounts receivable, less allowance for doubtful accounts of $1,014,338            1,624,577
   Prepaid expenses and other current assets                                            154,673
                                                                               ----------------
         Total Current Assets                                                                       $      1,935,722

PROPERTY AND EQUIPMENT, Net                                                                                  782,386
- ----------------------

INTANGIBLE ASSETS, Net                                                                                     2,561,298
- -----------------

INVESTMENT IN SENDTEC ACQUISITION CORP.                                                                    9,274,981
- ---------------------------------------

OTHER ASSETS                                                                                                  32,690
- ------------                                                                                        ----------------

         TOTAL ASSETS                                                                               $     14,587,077
                                                                                                    ================








   The accompanying notes are an integral part of these financial statements.

                                     F - 3




                                     RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                          CONSOLIDATED BALANCE SHEET, Continued

                                                              December 31, 2005
- -------------------------------------------------------------------------------





                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES
- -------------------


Accounts payable                                                          $        1,208,693
Accrued expenses                                                                     156,815
Accrued compensation                                                                 175,966
Accrued commissions                                                                  381,444
Accrued penalty - registration rights                                                 75,000
Customer deposits                                                                    391,890
                                                                          -------------------
           Total Current Liabilities                                                             $        2,389,808

DEFERRED RENT                                                                                               166,535
- -------------                                                                                    ------------------

           TOTAL LIABILITIES                                                                              2,556,343

COMMITMENTS AND CONTINGENCIES
- -----------------------------

STOCKHOLDERS' EQUITY
- --------------------
Series A Convertible Preferred stock - $.001 par value; 1,500,000
     authorized; 762,199 shares issued and outstanding                            10,289,690
Common stock - $.001 par value; 90,000,000 shares authorized;
     19,671,015 shares issued and outstanding                                         19,671
Deferred compensation                                                             (1,851,973)
Additional paid in capital                                                        16,651,325
Accumulated deficit                                                              (13,077,979)
                                                                          -------------------

           TOTAL STOCKHOLDERS' EQUITY                                                                    12,030,734
                                                                                                 ------------------
           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                            $       14,587,077
                                                                                                 ==================


   The accompanying notes are an integral part of these financial statements.

                                     F - 4




                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                                        For the Year Ended
                                                                                           December 31,
                                                                                -----------------------------------
                                                                                    2005                 2004
                                                                                ---------------   -----------------

REVENUES, Net                                                                   $   11,302,780      $     9,564,993
- --------

COST OF REVENUES                                                                     2,542,614            2,146,596
- ----------------                                                                ---------------    ----------------

            GROSS PROFIT                                                             8,760,166            7,418,397
                                                                                ---------------    ----------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Salaries                                                                             2,441,026            1,699,167
Bad debt                                                                             2,393,203            1,650,242
Commissions                                                                          1,462,728            1,884,447
Professional fees                                                                      975,132              420,007
Advertising and trade shows                                                            653,484              493,713
Depreciation and amortization                                                          215,307              187,031
Other general and administrative                                                     2,287,349              912,949

            TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                      10,428,229            7,247,556
                                                                                -------------------  ----------------
            (LOSS) INCOME FROM OPERATIONS                                           (1,668,063)             170,841

OTHER INCOME (EXPENSE)
Gain on forgiveness of debt                                                                 --              162,955
Termination fee in connection with aborted acquisition                                      --             (100,000)
Asset impairment charge                                                                     --             (198,240)
Registration rights penalty                                                            (75,000)                  --
Loss on equity-method investment                                                    (1,034,102)                  --
Interest income                                                                          3,144                   --
Interest expense                                                                       (14,268)              (5,276)
                                                                                --------------------- ----------------

            TOTAL OTHER EXPENSE                                                     (1,120,226)            (140,561)
                                                                                --------------------- ----------------

            (LOSS) INCOME BEFORE INCOME TAX PROVISION                               (2,788,289)              30,280

INCOME TAX PROVISION                                                                        --                   --
- --------------------

            NET (LOSS) INCOME                                                       (2,788,289)              30,280

BENEFICIAL CONVERSION FEATURE - PREFERRED STOCK                                    (10,289,690)                  --
- -----------------------------------------------                                 --------------------- ----------------

NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS                           $  (13,077,979)       $      30,280
                                                                                ===================== ================
Net (Loss) Income Per Common Share:
     Basic and Diluted                                                          $        (0.19)       $       (0.00)
                                                                                ===================== ================
Weighted Average Number of Common Shares Outstanding:
     Basic and Diluted                                                              14,500,271            8,000,000
                                                                                ===================== ================


   The accompanying notes are an integral part of these financial statements.

                                    F - 5




                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                  For the Years Ended December 31, 2005 and 2004
- --------------------------------------------------------------------------------



                                                    Series A Preferred
                                                       Convertible
                                                     Preferred Stock            Common Stock $.001
                                                     $.001 Par Value                Par Value
                                                 ------------------------   ------------------------
                                                                                                                         Advanced
                                                 Number of                   Number of                    Deferred       Paid-In
                                                   Shares        Amount        Shares        Amount     Compensation     Capital
                                                -------------  ----------  --------------  ----------  --------------  -------------


BALANCE - January 1, 2004                                --    $       --     8,000,000    $    8,000    $       --     $1,207,220
- -------

Contributions from former members of Omni Point
     Marketing, LLC                                      --            --            --            --            --      1,195,000
Distributions to former members of Omni Point
     Marketing, LLC                                      --            --            --            --            --       (230,000)
Net income                                               --            --            --            --            --             --
                                                -------------  ------------- -------------  -------------  -----------  ------------
BALANCE - January 1, 2005                                --            --     8,000,000         8,000            --      2,172,220
- -------

Distributions to former members of Omni Point
     Marketing, LLC                                      --            --            --            --            --       (438,169)

Effects of reverse merger at June 13, 2005
     Capitalization of LLC's accumulated
         deficit at time of recapitalization             --            --            --            --            --       (656,351)
     Equity of RelationServe, Inc. at time of
         recapitalization                                --            --     5,326,000         5,326    (1,050,000)     2,040,100
Common stock issued in private placement
     commenced in April 2005                             --            --       500,000           500            --        499,500
Cash paid to former member of Friendsand, LLC
     in exchange for membership interest                 --            --            --            --            --       (150,000)
Note issued to former member of Friendsand, LLC
     in exchange for membership interest                 --            --            --            --            --       (700,000)
Common stock issued to employees as an
     accommodation by stockholders                       --            --            --            --            --        210,000
                                                -------------  ------------- ------------  ------------ ------------   ------------
         Balance carried forward                         --    $       --    13,826,000    $   13,826   $(1,050,000)    $2,977,300
                                                -------------  ------------- ------------  ------------ ------------   ------------




                                                                         Total
                                                        Accumulated   Stockholders'
                                                          Deficit        Equity
                                                       -------------- -------------


BALANCE - January 1, 2004                                $ (686,631)   $  528,589
- -------

Contributions from former members of Omni Poin
     Marketing, LLC                                              --     1,195,000
Distributions to former members of Omni Point
     Marketing, LLC                                              --      (230,000)
Net income                                                   30,280        30,280
                                                          ------------- -----------

BALANCE - January 1, 2005                                  (656,351)    1,523,869
- -------

Distributions to former members of Omni Point
     Marketing, LLC                                              --      (438,169)

Effects of reverse merger at June 13, 2005
     Capitalization of LLC's accumulated
         deficit at time of recapitalization                656,351            --
     Equity of RelationServe, Inc. at time of
         recapitalization                                        --       995,426
Common stock issued in private placement
     commenced in April 2005                                     --       500,000
Cash paid to former member of Friendsand, LLC
     in exchange for membership interest                         --      (150,000)
Note issued to former member of Friendsand, LL
     in exchange for membership interest                         --      (700,000)
Common stock issued to employees as an
     accommodation by stockholders                               --       210,000
                                                          ------------ ------------
         Balance carried forward                          $      --    $1,941,126
                                                          ------------ ------------




   The accompanying notes are an integral part of these financial statements.

                                     F - 6



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, Continued

                                  For the Years Ended December 31, 2005 and 2004
- --------------------------------------------------------------------------------


                                                   Preferred Stock $.001         Common Stock $.001
                                                         Par Value                   Par Value
                                                 -------------------------  --------------------------
                                                                                                                        Additional
                                                  Number of                   Number of                    Deferred       Paid-In
                                                   Shares         Amount        Shares        Amount     Compensation     Capital
                                                 ------------- ------------ ------------- ------------  -------------- ------------



         Balance brought forward                         --     $       --    13,826,000    $   13,826    $(1,050,000)   $2,977,300

Equity of Chubasco Resources Corp. at time of
     recapitalization                                    --             --     3,216,500         3,216            --         (3,215)
Common stock issued under consulting agreements          --             --       840,000           840      (871,500)       870,660
Common stock issued under employment agreements          --             --       390,000           390      (393,500)       393,110
Common stock issued in private placement
     commenced in June 2005                              --             --     1,048,515         1,049            --      1,954,478
Common stock issued upon exercise of warrants            --             --       550,000           550            --        136,950
Series A preferred stock issued in private
     placement commenced in October 2005            762,199     10,289,690            --            --            --             --
Common Shares returned upon cancellation of
     employment agreements                               --             --      (200,000)         (200)      200,000       (199,800)
Cancellation of consulting agreement                     --             --            --            --       850,000       (850,000)
Grant of common stock options                            --             --            --            --    (1,067,152)     1,082,152
Beneficial conversion feature - Series A
     preferred                                           --             --            --            --            --     10,289,690
Amortization of deferred compensation                    --             --            --            --       480,179            --
Net loss                                                 --             --            --            --            --
                                                 ------------- ------------ ------------- ------------  -------------- ------------
BALANCE - DECEMBER 31, 2005                         762,199     $10,289,690   19,671,015    $   19,671    $(1,851,973)  $16,651,325
- -------                                          ============= ============ ============= ============  ============== ============





                                                                      Total
                                                   N Accumulated   Stockholders'
                                                       Deficit        Equity
                                                   --------------- -------------


         Balance brought forward                     $        --    $1,941,126

Equity of Chubasco Resources Corp. at time of
     recapitalization                                         --             1
Common stock issued under consulting agreements               --            --
Common stock issued under employment agreements               --            --
Common stock issued in private placement
     commenced in June 2005                                   --     1,955,527
Common stock issued upon exercise of warrants                 --       137,500
Series A preferred stock issued in private
     placement commenced in October 2005                      --    10,289,690
Common Shares returned upon cancellation of
     employment agreements                                    --            --
Cancellation of consulting agreement                          --            --
Grant of common stock options                                 --        15,000
Beneficial conversion feature - Series A
     preferred                                       (10,289,690)           --
Amortization of deferred compensation                         --       480,179
Net loss                                              (2,788,289)   (2,788,289)
                                                     -------------- ------------
BALANCE - DECEMBER 31, 2005                          $(13,077,979)  $12,030,734
- -------                                              ============== ============




   The accompanying notes are an integral part of these financial statements.

                                     F - 7







                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                        For the Year Ended
                                                                                           December 31,
                                                                                ----------------------------------
                                                                                     2005                2004
                                                                                ---------------- -----------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income                                                               $   (2,788,289)    $        30,280
                                                                                ----------------   ---------------
Adjustments to reconcile net (loss) income to net cash used
     in operating activities:
     Depreciation and amortization                                                     900,130             512,506
     Stock-based compensation                                                          705,179                  --
     Provision for bad debt                                                          2,393,203           1,650,242
     Loss on equity-method investment                                                1,034,102                  --
     Asset impairment charge                                                                --             198,240
     Gain on extinguishment of notes payable                                                --            (162,705)
Changes in assets and liabilities:
     Accounts receivable                                                            (3,394,719)         (2,266,179)
     Due from former members of LLC                                                    140,312            (102,241)
     Prepaid expenses and other current assets                                         (88,138)           (133,237)
     Other assets                                                                       (3,724)                 --
     Accounts payable                                                                  870,896             718,597
     Accrued expenses                                                                  201,149             (55,952)
     Accrued commissions                                                               125,174                  --
     Deferred rent                                                                     (26,330)                 --
     Customer deposits                                                                  87,677                  --
                                                                                ----------------   ---------------

            TOTAL ADJUSTMENTS                                                        2,944,911             359,271
                                                                                ----------------   ---------------

            NET CASH PROVIDED BY OPERATING ACTIVITIES                                  156,622             389,551
                                                                                ----------------   ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid in purchase of net assets of Friendsand, LLC                                (150,000)                 --
Purchase of property and equipment                                                    (201,615)            (64,805)
Investment in prospective acquiree                                                 (10,309,083)                 --
Purchase of intangible assets                                                       (2,464,850)           (816,428)

                                                                                ----------------   ---------------
            NET CASH USED IN INVESTING ACTIVITIES                               $  (13,125,548)    $      (881,233)


   The accompanying notes are an integral part of these financial statements.

                                     F - 8



                   RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued



                                                                                         For the Year Ended
                                                                                            December 31,
                                                                                ----------------------------------
                                                                                      2005                2004
                                                                                ----------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sales of common stock                                         $     2,455,527    $            --
Net proceeds from sales of preferred stock                                           10,289,690                 --
Cash received in acquisition                                                            995,426                 --
Proceeds received upon exercise of warrants                                             137,500                 --
Contributions from former members of Omni Point Marketing LLC                                --          1,195,000
Distributions to former members of Omni Point Marketing LLC                            (207,124)          (230,000)
Payments on notes payable                                                                    --           (532,882)
Principal payments payable to former member of  Friendsand, LLC                        (700,000)                --
                                                                                ----------------- ----------------

            NET CASH PROVIDED BY FINANCING ACTIVITIES                                12,971,019            432,118
                                                                                ----------------- ----------------

            NET INCREASE (DECREASE) IN CASH                                               2,093            (59,564)

CASH - Beginning of Year                                                                154,379            213,943
- ----                                                                            ----------------- ----------------

CASH - End of Year                                                              $       156,472    $       154,379
- ----

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:

Interest                                                                        $           810    $         5,276
                                                                                ================= ================
Taxes                                                                           $            --    $            --
                                                                                ================= ================

Non-cash investing and financing activities:

Note payable assumed in connection with acquisition of net assets from Omni
     Point Marketing, LLC                                                       $       700,000    $            --
                                                                                ================== ===============

Common stock issued under deferred compensation arrangements                    $     1,263,770    $            --
                                                                                ================== ===============

Distribution of asset to former member of Friendsand, LLC                       $       231,003    $            --
                                                                                ================== ===============




   The accompanying notes are an integral part of these financial statements.

                                     F - 9



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

     RelationServe Media, Inc. was originally formed as Chubasco Resources Corp.
     ("Chubasco") in the state of Nevada on April 27, 2004 as an exploration
     stage company engaged in the business of mineral exploration. On June 10,
     2005, Chubasco's Board of Directors authorized the merger (the "Merger") of
     its newly formed wholly-owned subsidiary, Reland Acquisition, Inc.
     ("Reland"), a Delaware corporation, with RelationServe, Inc., a Delaware
     corporation ("RelationServe"), pursuant to an Agreement of Merger and Plan
     of Reorganization (the "Merger Agreement") described in Note 2. At the time
     of the merger, Chubasco was an inactive public shell company. The Merger
     was completed on June 13, 2005. Chubasco changed its name to RelationServe
     Media, Inc. (the "Company") on June 15, 2005.

     The Company specializes in marketing third party offers for products and
     services via email. The Company also offers integrated online and offline
     marketing programs, including permission-based email advertising, email
     database append services, online surveys, ad serving networks and internet
     compiled direct mail lists. Through its wholly-owned subsidiary,
     Friendsand, Inc., the Company hosts an internet social networking
     community.

NOTE 2 - MERGER TRANSACTIONS

     Pursuant to the terms of the Merger Agreement, the Company acquired all of
     the issued and outstanding capital stock of RelationServe on a one-for-one
     basis in exchange for 13,326,000 shares of its $0.001 par value common
     stock. In addition, certain of Chubasco's stockholders simultaneously
     cancelled an aggregate of 6,800,000 shares of their common stock upon
     completing the Merger. Each share of RelationServe common stock
     (13,326,000) and each RelationServe warrant (6,562,500) outstanding prior
     to the Merger were automatically converted into an equivalent number of
     shares of the Company's common stock and an equivalent number of warrants
     to purchase shares of the Company's common stock upon completing the
     Merger. As a result, RelationServe's former stockholders became the
     Company's majority stockholders and RelationServe became the Company's
     wholly-owned subsidiary. Chubasco's stockholders retained 3,216,500 shares
     of the Company's common stock. In addition, the Company assumed a $700,000
     promissory note due in May 2007 that RelationServe issued as partial
     consideration in a previous purchase of net assets described below.

     Prior to the Merger, RelationServe, through its wholly-owned subsidiary,
     RelationServe Access, Inc. ("Access"), purchased certain assets and assumed
     certain liabilities of Omni Point Marketing, LLC, a Florida limited
     liability company ("Omni Point"), and through its wholly-owned subsidiary,
     Friendsand, Inc. ("Friendsand"), acquired all of the outstanding membership
     interests of Friendsand, LLC, a Delaware limited liability company related
     to Omni Point by common ownership (the "Affiliated Company" or "Friends
     LLC"). RelationServe completed these transactions simultaneously on May 16,
     2005. RelationServe acquired the net assets and business of Omni Point and
     membership interests of Affiliated Company for a combination of cash in the
     amount of $150,000, a two-year promissory note in the principal amount of
     $700,000, and 8,000,000 shares of its common stock. RelationServe, which
     had no business operations prior to these transactions had 5,326,000 shares
     of common stock outstanding at the time of the merger including 1,050,000
     it issued under a deferred compensation arrangement described in Note 9.
     Accordingly, the Company, accounted for its acquisition of Omni Point's net
     assets and merger with the Affiliated Company as a recapitalization because
     Omni Point and the former member of the Affiliated Company gained control
     of a majority of RelationServe's common stock upon completing these
     transactions. Accordingly, Omni Point and the Affiliated Company are deemed
     to be the acquirer for accounting purposes.

     The consolidated financial statements have been retroactively restated to
     give effect to these transactions for all periods presented.

     On October 21, 2004, the Company entered into an Asset Purchase Agreement
     that was subsequently terminated due to a breach by the Company. In 2004,
     in accordance with the terms of the Asset Purchase

                                     F - 10



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     Agreement, and an Amended Mutual Release and Agreement, the Company accrued
     a termination fee of $100,000 that was paid in 2005.

NOTE 3 - LIQUIDITY AND FINANCIAL CONDITION

     The Company's incurred a $2,788,289 loss for the year ended December 31,
     2005, which includes an aggregate of $2,639,411 in non-cash charges
     relating to stock based compensation of $705,179, depreciation and
     amortization of $900,130 and its proportionate share of losses in an
     investee accounted for under the equity method of accounting in the amount
     of $1,034,102. The Company's cash flow from operations amounted $156,622.

     In October 31, 2005, the Company raised aggregate proceeds of $10,309,083
     in a sale of its Series A Preferred stock, which it used to purchase a 23%
     interest in SendTec Acquisition Corp. (Note 5). In addition, the Company
     raised $2,455,527 in net proceeds from sales of its common stock and used
     such funds, among other purposes, to invest an additional $2,464,850 to
     improve its e-mail database and acquire a customer.

     The Company raised additional net proceeds of approximately $500,000 in a
     financing transactions it completed subsequent to December 31, 2005.

     The Company is in the process of integrating an acquired business (Notes 5
     and 14) with and into its existing operations and believes that its current
     capital resources and resources and it expects to have available from its
     acquired business will enable it to sustain operations through December 31,
     2005. The Company intends to raise additional capital to fund the expansion
     of its business and believes it has access to capital resources, however;
     the Company has not secured any commitments for new financing at this time
     nor can the Company provide any assurance that it will be successful in its
     efforts to raise additional capital, if considered necessary, in the
     future.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION
     The consolidated financial statements are prepared in accordance with
     generally accepted accounting principles in the United States of America.
     The consolidated financial statements include the Company and its
     wholly-owned subsidiaries, RelationServe Access, Inc., RelationServe, Inc.
     and Friendsand, Inc. All material intercompany balances and transactions
     have been eliminated in the consolidated financial statements.

     ACCOUNTS RECEIVABLE
     The Company has a policy of reserving for uncollectible accounts based on
     its best estimate of the amount of probable credit losses in its existing
     accounts receivable. The Company periodically reviews its accounts
     receivable to determine whether an allowance is necessary based on an
     analysis of past due accounts and other factors that may indicate that the
     realization of an account may be in doubt. Account balances deemed to be
     uncollectible are charged to the allowance after all means of collection
     have been exhausted and the potential for recovery is considered remote. At
     December 31, 2005, the Company has established, based on a review of its
     outstanding balances, an allowance for doubtful accounts in the amount of
     $1,014,338.

     REVENUE RECOGNITION
     The Company follows the guidance of Securities and Exchange Commission
     ("SEC") Staff Accounting Bulletin ("SAB") 104 with respect to its
     recognition for revenue. Accordingly, the Company records revenue at the
     time in which persuasive evidence of an arrangement exists, services have
     been rendered or product delivery has occurred, the sales price to the
     customer is fixed or determinable, and collectability is reasonably
     assured. The Company's accounting policies with respect to its specific
     revenues streams are as follows:


                                     F - 11



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     EMAIL APPEND SERVICES: The Company's email append solution allows a
     marketer to augment their existing customer database with the Company's
     permission-based email data. When a match is confirmed, the customer's
     email address is added to the client's file. Revenue is recognized at the
     time in which the email append service is completed and the updated
     customer database is delivered to the customer.

     ELECTRONIC CHANGE OF ADDRESS: The Company's electronic change of address
     service updates customers their email databases. Revenue is recognized at
     the time in which an updated customer database is delivered to the
     customer.

     LEAD GENERATION: The Company offers lead generation programs to assist a
     variety of businesses with customer acquisition. The Company pre-screens
     the leads through its online surveys to meet its clients' exact criteria.
     Revenue is recognized at the time in which the updated lead database is
     delivered to the customer.

     DIRECT MAIL AND POSTAL LIST ADVERTISEMENT: The Company compiles an
     exclusive Internet responders' postal mailing list. This list is sourced
     from online registration and individuals who have responded to the
     Company's online campaigns. These consumers are responsive to offers and
     purchase products and services through online and offline channels. Revenue
     is recognized at the time in which such lists are delivered to a customer.

     ONLINE MARKET RESEARCH: The Company has developed a consumer survey that is
     used to identify targeted leads based on survey responses. The Company then
     sells the response data to the customer on a cost per response basis.
     Revenue is recognized at the time in which the respective survey data is
     delivered to the customer.

     PROPERTY AND EQUIPMENT
     Property and equipment are stated at cost. The cost of repairs and
     maintenance is expensed as incurred; major replacements and improvements
     are capitalized. When assets are retired or disposed of, the cost and
     accumulated depreciation are removed from the accounts, and any resulting
     gains or losses are included in income in the year of disposition.
     Depreciation and amortization are being computed over the estimated useful
     lives of the assets, generally three to seven years, using the
     straight-line method. Repairs and maintenance costs are expensed as
     incurred.

     INTANGIBLE ASSETS
     Intangible assets consist of costs incurred in connection with establishing
     business and consumer information databases that the Company sells to third
     parties for use in various types of marketing campaigns. These costs, which
     principally consist of direct external costs, are capitalized and amortized
     using the straight-line method over expected useful lives of three years.
     Website development costs that the Company has incurred in connection with
     developing the Friendsand internet social networking and other specific
     purpose websites include direct external costs, which are capitalized and
     amortized using the straight-line method over expected useful lives of
     three to five years. In addition, the Company purchased a customer list
     that it characterized as an intangible asset (Notes 7 and 9) that is being
     amortized using the straight-line method over expected useful life of three
     years.

     IMPAIRMENT OF LONG-LIVED ASSETS
     In accordance with Statement of Financial Accounting Standards (SFAS) No.
     144, "Accounting for the Impairment or Disposal of Long-Lived Assets," The
     Company periodically reviews its long-lived assets for impairment whenever
     events or changes in circumstances indicate that the carrying amount of the
     assets may not be fully recoverable. The Company recognizes an impairment
     loss when the sum of expected undiscounted future cash flows is less than
     the carrying amount of the asset. The amount of impairment is measured as
     the difference between the asset's estimated fair value and its book value.
     The Company did not consider it necessary to record any impairment charges
     during the year ended December 31, 2005.

                                     F - 12



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     EARNINGS PER SHARE
     In accordance with SFAS No. 128 "Earnings Per Share," Basic earnings per
     share is computed by dividing net income by the weighted average number of
     shares of common stock outstanding during the period. Diluted earnings per
     share is computed by dividing net income by the weighted average number of
     shares of common stock, common stock equivalents and potentially dilutive
     securities outstanding during each period. Diluted loss per common share is
     not presented because it is anti-dilutive. The Company's common stock
     equivalents at December 31, 2005 include the following:

                   Options                                    3,288,000
                   Warrants                                   6,786,757
                   Convertible Preferred Stock                7,621,991
                                                             ----------
                                                             17,696,748
                                                             ----------

     As described in Note 14, the Company issued, upon its completion of an
     acquisition subsequent to December 31, 2005, 10,081,607 common stock
     purchase warrants to debenture investors who financed the acquisition,
     9,506,380 shares of common stock to members of the acquired company's
     management, and converted (pursuant to a mandatory conversion feature) its
     Series A Preferred into 7,621,991 shares of its common stock. In addition,
     the debentures that were used to finance the acquisition are convertible
     into 23,300,000 shares of the Company's common stock at $1.50 per share.
     Certain of the debenture investors subsequently elected to exercise
     2,664,398 of their common stock purchase warrants. Subsequent to December
     31, 2005, the Company also issued 500,000 shares of its common stock to
     debenture holders in connection with an amendment and waiver of certain
     provisions in the debenture agreement, 520,000 shares in private placement
     transactions, granted options to purchase 1,700,000 shares of stock and
     issued, upon the exercise of other warrants, an additional 250,000 shares
     of stock (Note 14).

     In accordance with the provisions of Issue No. 5 of EITF 03-6
     "Participating Securities and the Two-Class Method under FASB Statement No.
     128," the Company has not included the Series A Preferred in its
     determination of basic EPS for the year ended December 31, 2005 because the
     holders of these securities are not contractually obligated to fund the
     Company's losses nor do these securities include any provisions for the
     reduction of their contractual principal amount as a result of any losses
     incurred by the Company.

     INCOME TAXES
     Income taxes are accounted for under the asset and liability method of SFAS
     No. 109, "Accounting for Income Taxes ("SFAS 109"). Under SFAS 109 deferred
     tax assets and liabilities are recognized for the future tax consequences
     attributable to differences between the financial statement carrying
     amounts of existing assets and liabilities and their respective tax bases.
     Deferred tax assets and liabilities are measured using enacted tax rates
     expected to apply to taxable income in the years in which those temporary
     differences are expected to be recovered or settled. Under SFAS 109, the
     effect on deferred tax assets and liabilities of a change in tax rates is
     recognized in income in the period that includes the enactment date.

     Omni Point and Friends, LLC as the predecessors to the Company, were
     organized as limited liability companies for federal income tax purposes.
     Accordingly, any amounts earned during the period of January 1, 2005
     through May 15, 2005 and for the year ended December 31, 2004 are being
     reported by the members of these entities on their individual tax returns.
     Accordingly, the Company has not recognized any income tax expense in the
     accompanying financial statements for the period of January 1, 2005 through
     May 15, 2005 and for the year ended December 31, 2004. Due to net losses
     for the periods presented, there is no income tax expense recognized using
     an effective tax rate of 38% under the method prescribed by SFAS 109 for
     the years ended December 31, 2005 and 2004, respectively.

     USE OF ESTIMATES
     The preparation of financial statements in conformity with generally
     accepted accounting principles in the United States ("US GAAP") requires
     management to make estimates and assumptions that affect certain


                                     F - 13



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     reported amounts and disclosures. Accordingly, actual results could differ
     from those estimates. Significant estimates in 2005 and 2004 include the
     allowance for doubtful accounts, stock-based compensation, and the useful
     lives of property and equipment and intangible assets.

     FAIR VALUE OF FINANCIAL INSTRUMENTS
     The carrying amounts reported in the balance sheet for cash, accounts
     receivable, prepaid expenses, other assets, accounts payable, accrued
     expenses, and customer deposits approximate fair value based on the
     short-term maturity of these instruments.

     COMMON STOCK PURCHASE WARRANTS
     The Company accounts for common stock purchase warrants in accordance with
     the provisions of Emerging Issues Tack Force Issue ("EITF") issue No. 00-19
     "Accounting for Derivative Financial Instruments Indexed to, and
     Potentially Settled in, a Company's Own Stock" ("EITF 00-19"). Based on the
     provisions of EITF 00-19, the Company classifies as equity any contracts
     that (i) require physical settlement or net-share settlement, or (ii) gives
     the company a choice of net-cash settlement or settlement in its own shares
     (physical settlement or net-share settlement). The Company classifies as
     assets or liabilities any contracts that (i) require net-cash settlement
     (including a requirement to net cash settle the contract if an event occurs
     and if that event is outside the control of the company), or (ii) give the
     counterparty a choice of net-cash settlement or settlement in shares
     (physical settlement or net-share settlement).

     REGISTRATION RIGHTS AGREEMENTS
     The Company has adopted View C of EITF 05-4 "Effect of a Liquidated Damages
     Clause on a Freestanding Financial Instrument Subject to EITF 00-19" ("EITF
     05-4"). Accordingly, the Company classifies as liability instruments, the
     fair value of registration rights agreements when such agreements (i)
     require it to file, and cause to be declared effective under the Securities
     Act, a registration statement with the SEC within contractually fixed time
     periods, and (ii) provide for the payment of liquidating damages in the
     event of its failure to comply with such agreements. Under View C of EITF
     05-4, (i) registration rights with these characteristics are accounted for
     as derivative financial instruments at fair value and (ii) contracts that
     are (a) indexed to and potentially settled in an issuer's own stock and (b)
     permit gross physical or net share settlement with no net cash settlement
     alternative are classified as equity instruments. At December 31, 2005, the
     Company recorded a registration rights penalty expense of $75,000, which
     has been included on the accompanying consolidated balance sheet.

     STOCK-BASED COMPENSATION
     The Company accounts for stock options issued to employees in accordance
     with the provisions of Accounting Principles Board ("APB") Opinion No. 25,
     "Accounting for Stock Issued to Employees," and related interpretations. As
     such, compensation cost is measured on the date of grant as the excess of
     the current market price of the underlying stock over the exercise price.
     Such compensation amounts are amortized over the shorter of the respective
     vesting or service periods of the option grant. The Company adopted the
     disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
     Compensation" and SFAS 148, "Accounting for Stock-Based Compensation -
     Transition and Disclosure", which permits entities to provide pro forma net
     income (loss) and pro forma earnings (loss) per share disclosures for
     employee stock option grants as if the fair-valued based method defined in
     SFAS No. 123 had been applied.

     The exercise prices of all options granted by the Company equal the market
     price at the dates of grant. Accordingly, no compensation expense has been
     recognized. Had compensation cost for the stock option plan been determined
     based on the fair value of the options at the grant dates consistent with
     the method of SFAS 123, "Accounting for Stock Based Compensation", the
     Company's net loss and loss per share for the years ended December 31, 2005
     and 2004 would have been changed to the following pro-forma amounts:


                                     F - 14



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------





                                                                        2005                     2004
                                                                   ------------------     ------------------

     Net (loss) income, as reported                                  $  (2,788,289)                30,280
     Less:  stock-based employee compensation expense
     determined under fair value based method, net of related
     tax effect                                                           (239,586)                     -
                                                                   ------------------     ------------------

     Pro forma net (loss) income                                     $  (3,027,875)          $     30,280
                                                                   ==================     ==================

     Basic and diluted net (loss) income per common share:
              As reported                                            $       (0.19)          $      (0.00)
                                                                   ==================     ==================
              Pro forma                                              $       (0.20)          $      (0.00)
                                                                   ==================     ==================



================================================================================
     The option grants were estimated as of the date of grant using the
     Black-Scholes option-pricing model with the following assumptions: expected
     volatility of 50%-83%; risk free interest rate of 3.53%; expected life of
     four to five years and annual dividend rate of 0%. The above pro forma
     disclosures may not be representative of the effects on reported net
     earnings for future years as options vest over several years and the
     Company may continue to grant options to employees.

     NON-EMPLOYEE STOCK BASED COMPENSATION
     The cost of stock based compensation awards issued to non-employees for
     services are recorded at either the fair value of the services rendered or
     the instruments issued in exchange for such services, whichever is more
     readily determinable, using the measurement date guidelines enumerated in
     Emerging Issues Task Force Issue ("EITF") 96-18, "Accounting for Equity
     Instruments That Are Issued to Other Than Employees for Acquiring, or in
     Conjunction with Selling, Goods or Services" ("EITF 96-18").

     ADVERTISING COSTS
     Advertising costs are expensed as incurred. The Company's advertising
     expense amounted to $653,484 and $493,713 for the years ended December 31,
     2005 and 2004, respectively.

     CONCENTRATION OF CREDIT RISK

         CASH
         The Company maintains cash accounts in financial institutions insured
         by the Federal Deposit Insurance Corporation ("FDIC"). Management
         monitors the soundness of these institutions and considers the
         Company's risk to be minimal.

         ACCOUNTS RECEIVABLE
         The Company has three customers whose accounts receivable balances
         amount to an aggregate of approximately $1,370,000 or 58% of the
         outstanding balances at December 31, 2005.

     RECLASSIFICATIONS
     Certain amounts in the 2004 financial statements have been reclassified to
     conform to the 2005 consolidated financial statement presentation. These
     reclassifications had no impact on previously reported net results of
     operations.

     RECENT ACCOUNTING PRONOUNCEMENTS
     In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based
     Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No.
     123R requires companies to recognize in the statement of operations the
     grant-date fair value of stock options and other equity-based compensation
     issued to


                                     F - 15



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     employees. FAS No. 123R is effective for the first fiscal year beginning
     after December 15, 2005. The Company is in process of evaluating the impact
     of this pronouncement on its financial statements.

     In April 2005, the Securities and Exchange Commission's Office of the Chief
     Accountant and its Division of Corporation Finance has released Staff
     Accounting Bulletin (SAB) No.107 to provide guidance regarding the
     application of FASB Statement No. 123 (revised 2004), Share-Based Payment.
     Statement No. 123(R) covers a wide range of share-based compensation
     arrangements including share options, restricted share plans,
     performance-based awards, share appreciation rights, and employee share
     purchase plans. SAB 107 provides interpretative guidance related to the
     interaction between Statement No. 123R and certain SEC rules and
     regulations, as well as the staff's views regarding the valuation of
     share-based payment arrangements for public companies.

     In May 2005, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards No. 154, "Accounting Changes
     and Error Corrections-a replacement of APB Opinion No. 20 and FASB
     Statement No. 3" ("SFAS 154"). This Statement replaces APB Opinion No. 20,
     Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes
     in Interim Financial Statements, and changes the requirements for the
     accounting for and reporting of a change in accounting principle. This
     Statement applies to all voluntary changes in accounting principle. It also
     applies to changes required by an accounting pronouncement in the unusual
     instance that the pronouncement does not include specific transition
     provisions. When a pronouncement includes specific transition provisions,
     those provisions should be followed.

     APB Opinion No. 20 previously required that most voluntary changes in
     accounting principle be recognized by including in net income of the period
     of the change the cumulative effect of changing to the new accounting
     principle. This Statement requires retrospective application to prior
     periods' financial statements of changes in accounting principle, unless it
     is impracticable to determine either the period-specific effects or the
     cumulative effect of the change. When it is impracticable to determine the
     period-specific effects of an accounting change on one or more individual
     prior periods presented, this Statement requires that the new accounting
     principle be applied to the balances of assets and liabilities as of the
     beginning of the earliest period for which retrospective application is
     practicable and that a corresponding adjustment be made to the opening
     balance of retained earnings (or other appropriate components of equity or
     net assets in the statement of financial position) for that period rather
     than being reported in an income statement. When it is impracticable to
     determine the cumulative effect of applying a change in accounting
     principle to all prior periods, this Statement requires that the new
     accounting principle be applied as if it were adopted prospectively from
     the earliest date practicable. This Statement shall be effective for
     accounting changes and corrections of errors made in fiscal years beginning
     after December 15, 2005. The Company does not believe that the adoption of
     SFAS 154 will have a significant effect on its financial statements.

     On June 29, 2005, the EITF ratified Issue No. 05-2, "The Meaning of
     `Conventional Convertible Debt Instrument' in EITF Issue No. 00-19,
     `Accounting for Derivative Financial Instruments Indexed to, and
     Potentially Settled in, a Company's Own Stock.'" EITF Issue 05-2 provides
     guidance on determining whether a convertible debt instrument is
     "conventional" for the purpose of determining when an issuer is required to
     bifurcate a conversion option that is embedded in convertible debt in
     accordance with SFAS 133. Issue No. 05-2 is effective for new instruments
     entered into and instruments modified in reporting periods beginning after
     June 29, 2005. The adoption of this pronouncement did not have a material
     effect on the Company's financial statements.

     In September 2005, Issue No. 05-4, "The Effect of a Liquidated Damages
     Clause on a Freestanding Financial Instrument Subject to EITF Issue No.
     00-19, `Accounting for Derivative Financial Instruments Indexed to, and
     Potentially Settled in, a Company's Own Stock.'" EITF 05-4 provides
     guidance to issuers as to how to account for registration rights agreements
     that require an issuer to use its "best efforts" to file a registration
     statement for the resale of equity instruments and have it declared
     effective by the end of a specified grace period and, if


                                     F - 16



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------



     applicable, maintain the effectiveness of the registration statement for a
     period of time or pay a liquidated damage penalty to the investor. The
     Company has adopted view C of this pronouncement. Accordingly, the Company
     has bifurcated registration rights from their related free standing
     financial instruments and recorded them at fair value. The fair value of
     the common stock purchase warrants subject to registration rights are
     accounted for in accordance classified as equity.

     In September 2005, the FASB ratified the Emerging Issues Task Force's
     ("EITF") Issue No. 05-7, "Accounting for Modifications to Conversion
     Options Embedded in Debt Instruments and Related Issues," which addresses
     whether a modification to a conversion option that changes its fair value
     affects the recognition of interest expense for the associated debt
     instrument after the modification and whether a borrower should recognize a
     beneficial conversion feature, not a debt extinguishment if a debt
     modification increases the intrinsic value of the debt (for example, the
     modification reduces the conversion price of the debt). This issue is
     effective for future modifications of debt instruments beginning in the
     first interim or annual reporting period beginning after December 15, 2005.
     The Company is currently in the process of evaluating the effect that the
     adoption of this pronouncement may have on its financial statements.

     In September 2005, the FASB also ratified the EITF's Issue No. 05-8,
     "Income Tax Consequences of Issuing Convertible Debt with a Beneficial
     Conversion Feature," which discusses whether the issuance of convertible
     debt with a beneficial conversion feature results in a basis difference
     arising from the intrinsic value of the beneficial conversion feature on
     the commitment date (which is recorded in the shareholder's equity for book
     purposes, but as a liability for income tax purposes), and, if so, whether
     that basis difference is a temporary difference under FASB Statement No.
     109, "Accounting for Income Taxes." This Issue should be applied by
     retrospective application pursuant to Statement 154 to all instruments with
     a beneficial conversion feature accounted for under Issue 00-27 included in
     financial statements for reporting periods beginning after December 15,
     2005. The Company is currently in the process of evaluating the effect that
     the adoption of this pronouncement may have on its financial statements.

     Other accounting standards that have been issued or proposed by the FASB or
     other standards-setting bodies that do not require adoption until a future
     date are not expected to have a material impact on the consolidated
     financial statements upon adoption.

NOTE 5 - Investment in SendTec Acquisition Corp.

     On August 9, 2005, the Company entered into an asset purchase agreement
     (the "Asset Purchase Agreement"), as amended on August 23, 2005, with
     theglobe.com, Inc. and its wholly-owned subsidiary, SendTec, Inc.
     ("SendTec"). The Asset Purchase Agreement provided for the Company to
     purchase, through SendTec Acquisition Corp. ("STAC"), the business and
     assets of SendTec (the "Asset Purchase").

     Investment in STAC includes a $10,000,000 investment that the Company made
     in STAC, plus $309,083 of transaction expenses that the Company incurred in
     connection with completing its planned acquisition of Send Tec, less the
     Company's proportionate share of its losses in STAC for the period October
     31, 2005 through December 31, 2005. The Company formed STAC solely to
     purchase the business and assets of SendTec.

     The Asset Purchase Agreement, as originally contemplated by the parties,
     provided for the closing of this transaction to occur through STAC, as a
     wholly-owned or majority-owned subsidiary of the Company, on or prior to
     October 31, 2005.

     As a result of the financing arrangement described herein, the Asset
     Purchase was restructured to include certain additional conditions for the
     Company to satisfy prior to completing its acquisition of SendTec. In
     connection therewith, the Company, on October 31, 2005 assigned its rights
     under the Agreement to STAC with


                                     F - 17



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     the consent of the sellers in the transaction and entered into certain
     other agreements providing for the financing of the transaction. As a
     result of such financing arrangements, STAC temporarily ceased to be a
     wholly-owned subsidiary of the Company upon closing the Asset Purchase and
     upon STAC's concurrent issuance, in a private placement, of preferred stock
     representing 64% of the aggregate voting interests in STAC. STAC completed
     the Asset Purchase on October 31, 2005. The aggregate purchase
     consideration (paid by STAC to the sellers) amounted to approximately
     $40,430,000 including cash of approximately $39,850,000 plus transaction
     expenses of approximately $580,000 incurred in connection with closing this
     transaction.

     STAC financed its purchase of SendTec by issuing (a) 10,000,000 shares of
     its par value $0.001 common stock ("STAC Common Stock") to the Company for
     $10,000,000 in cash and (b) pursuant to a Securities Purchase Agreement
     (the "STAC Debenture Agreement"), $34,950,000 of its 6% Senior Secured
     Convertible Debentures due October 30, 2009 (the "STAC Debentures") to
     institutional investors (the "Investors"). In addition, certain Investors
     of the STAC Debentures also purchased 280,351 shares of STAC's Series A
     Redeemable Preferred Stock (the "STAC Preferred Stock") at a price of $1.00
     per share for net proceeds of approximately $280,000 and STAC Management
     purchased 531,700 shares of STAC common stock for $531,700. STAC also
     issued, for no consideration, and additional 4,774,323 shares of its common
     stock to STAC management concurrent with its purchase of SendTec on
     October 31, 2005. Each share of STAC Preferred Stock possesses 100 votes
     per share, representing approximately 64% of the total voting interests of
     STAC. The Company retained approximately 23% of the total voting interests
     in STAC. The remaining voting interests in STAC include 5,306,023 shares of
     STAC common stock held by STAC management, including an aggregate of
     531,700 shares purchased by individual STAC managers for cash and an
     aggregate of 4,774,323 shares granted by STAC to the individual managers as
     compensation.

     The Asset Purchase, STAC Debenture Agreement, STAC Preferred Stock,
     RelationServe Preferred and certain other contemporaneous agreements
     entered into with the management of STAC provide for the mandatory
     consolidation of STAC, as defined in the Securities Purchase Agreement (the
     "Consolidation") with the Company upon the attainment of certain
     contractual milestones (the "Consolidation Milestones").

     Such Consolidation Milestones, as defined in the Securities Purchase and
     related agreements, principally included the delivery, by the Company to
     the Investors and their agent in the transaction, of its audited financial
     statements for the nine months ended September 30, 2005 (the "Audited
     Financial Statements"), (b) satisfactory evidence that it had achieved
     certain minimum levels of revenue, earnings and cash flow as specified
     aforementioned agreements (the "Financial Covenants") (c) a letter from its
     legal counsel providing negative assurance that reports the Company has
     filed with SEC since June 10, 2005 through the date of the letter contain
     no material misstatements or omissions of fact and (d) satisfactory
     evidence that certain former members of Omni Point and Affiliate Company
     relinquished their equity or other interest in the Company (as of the time
     of the Consolidation) and have given the Company a general release of all
     claims and entered into non-competition and non-solicitation agreements
     reasonably satisfactory to the purchasers of the STAC Debentures.

     The Company, STAC and the purchasers of the debenture also entered into an
     Investor Rights Agreement (the "Investor Rights Agreement") providing,
     among other things, for the formation a five member board, including one
     member to jointly represent the Company and a debenture investor, and
     mandatory effectuation of a liquidity event, as defined, in the event that
     the Consolidation Milestones and related Consolidation were not completed.

     The Company accounted for its investment in STAC in accordance with the
     provision of APB 18, "The Equity Method of Accounting for Investments in
     Common Stock," which provides for companies to record, in results of
     operations, their proportionate share of earnings or losses of investees
     when they are deemed to influence but not control the affairs of the
     investee enterprise. Accordingly, the Company recorded a $1,034,102 charge
     for its proportionate share of STAC's losses for the period of October 31,
     2005 through December 31, 2005.

                                     F - 18



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     As described in Note 14, the Company delivered satisfactory evidence of its
     completion of the Consolidation Milestones on or about February 3, 2006 and
     completed its consolidation with STAC on February 3, 2006.

     The Company accounts for its investment under the equity method if the
     investment gives the Company the ability to exercise significant influence,
     but not control, over the investee. Significant influence is generally
     deemed to exist if the Company has an ownership interest in the voting
     stock of the investee of between 20% and 50%, although other factors, such
     as representation on the investee's Board of Directors and the impact of
     commercial arrangements, are considered in determining whether the equity
     method of accounting is appropriate. The Company has the ability to
     exercise significant influence, but not control these investees.
     Accordingly, under the equity method of accounting, the Company's share of
     the investee's earnings or loss is included in the consolidated statements
     of operations. The Company records its investments in equity-method
     investees on the consolidated balance sheet as "Investment in prospective
     acquiree" and its share of the investee's earnings or losses in "Loss on
     equity-method investment." In the statement of operations for the year
     ended December 31, 2005, the Company recorded a loss on equity-method
     investment of $1,034,102.

NOTE 6 - PROPERTY AND EQUIPMENT

     At December 31, 2005, property and equipment consist of the following:

              Computer equipment                                  $600,185
              Office equipment                                     167,267
              Furniture and fixtures                               225,040
              Leasehold improvements                               127,011
              Software                                              75,930
                                                                 1,195,433
              Less:  accumulated depreciation                     (413,047)
                                                         ---------------------
                                                                  $782,386
                                                         =====================

================================================================================
     Depreciation expense amounted to $198,235 and $187,031 for the years ended
     December 31, 2005 and 2004, respectively. In addition, the Company recorded
     an asset impairment charge of approximately $135,000 for the year ended
     December 31, 2004.

NOTE 7 - INTANGIBLE ASSETS

     At December 31, 2005, intangible assets consist of the following:

            Email database                                     $3,478,162
            Customer list                                         320,000
            Web properties                                        155,274
                                                                3,633,436
            Less:  accumulated amortization                    (1,072,138)
                                                        ---------------------
                                                               $2,561,298
                                                        =====================

     Amortization expense amounted to $701,895 and $325,475 for the years ended
     December 31, 2005 and 2004, respectively, including $619,650 and $325,475
     relating to the amortization of the email database that is included in cost
     of sales.

                                     F - 19



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     The Company recorded asset impairment charge of $63,371 for the year ended
     December 31, 2004 for email addresses that were removed from the email
     database.

     Amortization expense subsequent to the year ended December 31, 2005 is as
follows:

                    Years ending December 31:
                    2006                                 $1,163,856
                    2007                                    864,967
                    2008                                    519,601
                    2009                                     12,874
                                                         ----------
                                                         $2,561,298
                                                         ==========

NOTE 8 - NOTES PAYABLE - FORMER MEMBER OF FRIENDSAND LLC

     In accordance with a Termination and Quit Claim Agreement for an Operating
     Agreement previously entered into with a related party, the Company issued
     notes payable in the face amounts of $700,000 and $150,000 in August 2003.
     The $700,000 note was non-interest bearing with monthly payments of $38,889
     through January 2005. The notes were secured by the assets of the Company.
     Within the note agreements, the Company had the option to make any payment
     through the delivery of valid email addresses to the third party.

     On March 26, 2004, the Company entered into a Settlement Agreement and
     agreed to pay $500,000 in satisfaction of its remaining obligations of
     $662,705 under the Termination and Quit Claim Agreement. Accordingly,
     $162,955 of notes forgiven has been treated as gain on the extinguishment
     of debt in the financial statements for the year ended December 31, 2004,
     and has been included in "Other income (expense)" in the accompanying
     financial statements for the year ended December 31, 2004.

     As described in Note 2, on May 13, 2005 the Company assumed the $700,000
     promissory note to the former member of Friends LLC as partial
     consideration in the merger of Friends LLC and RelationServe. The note,
     which bears interest at the rate of 6% per annum, was due with all
     principal, plus all accrued interest, on May 13, 2007, subject to
     acceleration (i) in the principal amount of $350,000, plus accrued
     interest, on such amount to the date on which the Company closes on a
     private placement or public offering of its securities with aggregate gross
     proceeds of not less than $5,000,000; and (ii) in the principal amount of
     $350,000, plus accrued interest on such amount to the date on which the
     Company closes on a private placement or public offering of its securities
     with aggregate gross proceeds of not less than $10,000,000. As of December
     31, 2005, the Company repaid the entire principal balance of $700,000 of
     this note.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

     EMPLOYMENT AGREEMENTS
     Effective June 17, 2005, the Company entered into a three-year employment
     agreement with its Chief Executive Officer ending on June 16, 2008, which
     automatically renews for successive 24-month terms unless earlier
     terminated by the Company or the employee. In addition to an annual salary
     of $200,000, the agreement entitled the officer to receive an option to
     purchase 100,000 shares of common stock of the Company at fair market
     value. The Board of Directors approved the grant of this option on June 21,
     2005 at an exercise price of $3.85 per share. The fair value of the
     Company's common stock was deemed to be $1.00 per share at the date of
     grant based on the selling price of shares issued in a recently completed
     private placement transaction. Subject to the terms of the 2005 Incentive
     Stock Plan (Note 11), this option vests as to 25% six months following the
     date of grant and 25% on each of the first, second and third anniversaries
     of the date of grant. The option expires on the earlier of June 21, 2015 or
     upon the executive's termination of employment. The agreement also provides
     for an annual bonus at the discretion of the Board of Directors. On July
     13, 2005, the


                                     F - 20



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     Board of Directors also approved a grant of 300,000 shares of common stock
     to the executive, of which one-third vested at the date of grant, one-third
     vests upon the first anniversary of the date of grant and the remaining
     one-third vests upon the second anniversary of the date of grant (Note 11).

     Effective November 10, 2005, the Company's chief executive officer resigned
     as an employee, officer, and director of the Company. Under the terms of a
     separation agreement, the Company made a $25,000 cash payment during 2005,
     committed to make an additional $25,000 cash payment on or before April 6,
     2006 (which is included in accrued expenses in the accompanying balance
     sheet), and permitted the executive to retain options to purchase 100,000
     shares of its common stock, and 100,000 shares of restricted common stock
     granted and issued under the Plan in June 2005. The Company also agreed to
     register for resale, the shares of common stock and common stock underlying
     the stock option on its next registration statement filed with the SEC.

     Effective June 17, 2005, the Company entered into a three-year employment
     agreement with its President ending on June 16, 2008, which automatically
     renews for successive 24-month terms unless earlier terminated by the
     Company or the employee. The Agreement provides for an initial base salary
     of $100,000 per year, which shall be increased by at least $25,000, as the
     Board of Directors may determine, on each anniversary of the effective
     date. In addition, the agreement entitled the officer to receive an option
     to purchase 100,000 shares of common stock of the Company at fair market
     value. The Board of Directors approved the grant of this option at an
     exercise price of $3.85 per share. The fair value of the Company's common
     stock was deemed to be $1.00 per share on the date of grant based on the
     price of shares issued in a recently competed private placement
     transaction. Subject to the terms of the 2005 Incentive Stock Plan (see
     Note 11), this option vests 25% six months following the date of grant and
     25% on each of the first, second and third anniversaries of the date of
     grant. This option expires on the earlier of June 21, 2015 or upon the
     termination of the executive. The agreement also provides for the payment
     of an annual bonus at the discretion of the Board of Directors.

     As described in Note 14, the President resigned from her position and
     entered into a termination agreement with the Company effective February 3,
     2006.

     Effective June 27, 2005, the Company entered into a three-year employment
     agreement with its Chief Operating Officer expiring on June 27, 2008, which
     automatically renews for successive 24-month terms unless earlier
     terminated by the Company or the employee. The agreement provides for the
     payment of an annual salary in the amount of $180,000, plus options to
     purchase 100,000 shares of the Company's common stock at fair market value
     on the date of grant. This option vests as to 25% six months following the
     date of grant and 25% on each of the first, second and third anniversaries
     of the date of grant and expire on June 21, 2015, or earlier due to
     employment termination. The Board of Directors approved the grant of this
     option at an exercise price of $3.85 per share. The fair value of the
     Company's common stock was deemed to be $1.00 per share on the date of
     grant based on the price of shares issued in a recently completed private
     placement transaction. The agreement also provides for the payment of an
     annual bonus at the discretion of the Board of Directors and a grant of
     300,000 shares of common of which one-third of such shares would vest at
     the date of grant, one-third would vest upon the first anniversary of the
     date of grant and the remaining one-third would vest upon the second
     anniversary of the date of grant. The Board of Directors approved such
     grant effective July 13, 2005 (Note 11).

     Effective November 16, 2005, the Company's Board of Directors appointed a
     new senior vice president of sales and marketing who is also serving as the
     Company's interim chief executive officer. Under the terms of the
     employment agreement, the executive will serve for an initial term one
     year, renewable automatically for successive terms of an additional year
     unless cancelled by either the executive or the Company on not less that 60
     days notice prior to the expiration of the then effective term. The
     agreement provides for the payment of a $30,000 signing bonus paid upon
     entering into the agreement and base salary in the amount of $180,000 per
     annum. The Board of Directors also approved the grant of a five-year option
     to purchase 100,000 shares and


                                     F - 21



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     10,000 shares of the Company's common stock. The stock options vest as to
     one third of such shares on each of the six month, first, and second year
     anniversaries of the date of grant, provided, however, that all of such
     options shall be immediately exercisable upon any change in control as
     defined in the Plan.

     CONSULTING AGREEMENTS
     In May 2005, the Company entered into a one year consulting agreement with
     Summit Financial Partners, LLC ("Summit") in which Summit agreed to provide
     the Company with certain corporate finance and strategic advisory services.
     Compensation under this arrangement consists of (a) 1,050,000 fully vested
     and non-forfeitable shares of the company's restricted common stock (Note
     10), and (b) success fees ranging from 3% to 7% of the gross amount of
     certain types of investing and financing transactions in which the
     consultant has acted in the capacity of an intermediary or transaction
     advisor. In August 2005, the Company paid a $28,500 success fee to Summit
     for services rendered in connection with a private placement of its common
     stock. The fair value of the Company's common stock was deemed to be $1.00
     per share on the date of grant based on the price of shares issued in a
     recently completed private placement transaction. The Company cancelled its
     consulting agreement with Summit effective October 6, 2005. Summit retained
     200,000 shares of the Company's common stock in connection with the
     termination of this agreement.

     On June 13, 2005, the Company entered into a twenty-one-month consulting
     agreement with Stronghurst LLC ("Stronghurst"), in which Stronghurst agreed
     to provide the Company with certain types of corporate finance services in
     exchange for 750,000 shares of Common Stock.

     The Company issued 375,000 of these shares to Stronghurst upon entering
     into the agreement. The remaining shares were placed in as escrow account
     from which the Company would release 187,500 shares in March 2006 and
     187,500 shares in September 2006. All shares issued under this arrangement
     were subject to rescission by the Company in the event that the Company did
     not complete its acquisition of SendTec. In January 2006, the Company
     completed its acquisition of SendTec.



                                     F - 22



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     On August 17, 2005, the Company entered into an investment banking
     agreement (the "Investment Banking Agreement") with Janney Montgomery Scott
     LLC ("Janney") in which Janney agreed to provide the Company with financial
     advisory and investment `banking services in connection with its investment
     in and proposed acquisition of SendTec (Notes 2 and 13). In exchange, the
     Company agreed to pay Janney a cash fee equal to 5% of the gross proceeds
     received upon the completion of a private placement transaction, subject to
     a reduction of 1% based on the participation of certain prospective
     investors previously identified by the Company, plus up to $25,000 in
     expense reimbursements whether or not a private placement transaction is
     consummated. The Company made a $25,000 retainer payment to Janney upon
     executing the Investment Banking Agreement, which is included in deferred
     financing costs in the accompanying balance sheet.

     The Company terminated its agreement with Janney upon the completion of its
     private placement of preferred stock (Note 10).

     On November 30, 2005, the Company purchased a customer list from, and
     entered into a one-year consulting agreement with Elite Card Services, Inc.
     ("Elite"). The purchase price for the customer list amounted to $320,000 of
     which the Company paid $220,000 upon signing and accrued an additional
     $100,000 payable in two installment of $50,000 thirty and sixty days
     following the execution agreement. The Company has agreed to pay
     compensation to the consultant for service to be rendered during the
     one-year term of the agreement of $300,000 in cash payable in equal
     semi-monthly or bi-weekly installments during the term agreement plus
     90,000 shares of common stock and 600,000 five-year options exercisable at
     $3.85 per share. This option becomes exercisable as to one-third of such
     shares on each of the six month, first, and second year anniversaries of
     the date of grant.

     The Company recorded aggregate stock based compensation of $99,054 based on
     the fair value of the common stock and common stock purchase options it
     issued under the arrangement. This amount is included as a component of
     other general and administrative expenses in the accompanying statement of
     operations for the year ended December 31, 2005.

     OPERATING LEASE
     The Company leases office space under an operating lease, originally
     entered into by Omni Point, which expires in September 2009. Rent expense
     under this arrangement is recorded using the straight-line method over the
     term of the lease. The difference between rent expense recognized on the
     straight-line method and actual rental payments is presented as a deferred
     rent liability in the accompanying consolidated balance sheet.

     Future minimum lease payments subsequent to December 31, 2005 are as
follows:

                    Years ending December 31:
                    2006                             $261,000
                    2007                              268,000
                    2008                              276,000
                    2009                              212,000
                                             -------------------
                                                   $1,017,000
                                             ===================

     Rent expense amounted to $396,157 and $239,129 for the years ended December
     31, 2005 and 2004, respectively.

     LEGAL CONTINGENCIES
     Through December 31, 2005, the Company and/or Omni Point have been named as
     defendants in two separate claims made by customers arising in the ordinary
     course of its business and one employment related claim. The



                                     F - 23



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     Company believes it has substantial defenses and intends to vigorously
     defend itself against any all actions taken by the plaintiffs in these
     matters. The Company does not believe that any potential damages that could
     arise from these claims will have a material adverse effect on its
     financial condition or the results of its operations. Omnipoint has been
     named as a defendant in a certain employment related claim which to date
     has not been asserted against the Company. Although the Company is not a
     defendant in this matter at this time, there can be no assurance that the
     plaintiffs will not attempt to assert this claim against the Company in the
     future or that such claim, if asserted, will not result in a material loss
     to the Company. The range of loss with respect to this matter, if any,
     cannot be quantified.

     Subsequent to December 31, 2005, the Company received notices of complaint
     from plaintiffs in three additional matters arising in the course of
     business, which are more fully described in Note 14.

     On December 15, 2004, the Federal Bureau of Investigation served Omni Point
     with a search warrant regarding the alleged use of unlicensed software and
     seized certain e-mail servers with a net book value of approximately
     $135,000. Management believes the investigation resulted from a former
     independent contractor of the Company using the alleged unlicensed software
     on the Company's behalf and without the Company's knowledge. Management and
     legal counsel are currently unaware of any additional developments in
     the investigation. The United States Attorney's Office had then indicated
     that it would contact with Company's legal counsel as the investigation
     continues. The Company has not received any further communications with
     respect to this matter; however, there can be no assurance that this
     matter, if further investigated, will not have a material adverse effect on
     the Company.

NOTE 10 - STOCKHOLDERS' EQUITY

     Common Stock
     As described in Note 9, the Company entered into a consulting agreement
     with Summit providing for 1,050,000 shares of stock based compensation
     including 200,000 shares issued directly to Summit by the Company and
     850,000 shares transferred to Summit by certain stockholders of the
     Company. The Company cancelled its consulting agreement with Summit
     effective October 6, 2005. Summit retained 200,000 shares of the Company's
     common stock in connection with the termination of this agreement.
     Accordingly, the Company recorded $200,000 of consulting expense under this
     arrangement for the year ended December 31, 2005. The Company recorded
     stock based compensation under these arrangements using the measurement
     date guidelines prescribed in EITF 96-18. All shares issued under this
     arrangement were fully vested and non-forfeitable at their date of
     issuance.

     As described in Note 9, the Company entered into a consulting agreement
     with Stronghurst providing for 750,000 shares of stock based compensation,
     subject to rescission by the Company in the event that the Company does not
     complete the SendTec transaction. Accordingly, the Company recorded
     $750,000 of deferred compensation at the inception of the agreement.

     The Company recorded compensation expense under these arrangements using a
     fair value for its common stock of $1.00, which is equal to the selling
     price of the Company's common stock in a recently completed private
     placement transaction.

     In June 2005, the Company under a private placement memorandum of April
     2005 (the "April Offering") issued $500,000 in Units, each Unit consisting
     of 50,000 shares of common stock with ten-year warrants to purchase 25,000
     shares of the Company's common stock exercisable at $2.00 per share.


                                     F - 24



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     On June 22, 2005, the Company commenced a private placement (the "June
     Offering") of up to $4,000,000 in units for a purchase price of $100,000
     per unit, each unit consisting of 50,000 shares of the Company's common
     stock, par value $0.001 per share and a three-year warrant to purchase
     25,000 shares of Common Stock at $3.50 per share. On June 30, 2005, the
     Company sold 20.97 units under the June offering to accredited investors
     for net proceeds of $1,955,527 and issued an aggregate of 1,000,000 shares
     of common stock, plus warrants to purchase 500,000 shares of the Company's
     common stock at $3.50 per share. The Company also issued 48,515 shares of
     its common stock and 24,257 common stock purchase warrants to its legal
     counsel for services rendered in connection with completing this
     transaction.

     The Units in the June Offering were concurrently issued with a registration
     rights agreement requiring the Company to register, within 45 days of the
     closing of the final sale under the June Offering, a registration with the
     SEC and to use its best efforts to cause such registration statement to be
     declared effective upon the earlier of (i) 120 days from the filing date,
     (ii) 10 days within following the receipt of a "No Review Letter" from the
     SEC or (iii) the first business day following the day the SEC determined
     such registration statement to eligible to become effective. The agreement
     further provides that in the event that the Company is not successful in
     its efforts to cause such registration statement to be declared effective
     within certain contractually defined periods of time, the Company would be
     obligated to pay liquidated damages of 1% of the purchase price per month,
     payable in stock, up to a maximum of 12%.

     In accordance with view C of EITF 05-04, the Company classified the common
     stock purchase warrants it issued in the June Offering as equity
     instruments. In addition, the liquidated damages, as a separate derivative
     financial instrument, were not characterized as liabilities since such
     damages, if any would be settled in shares of the Company's common stock.

     The Company was in default of its obligation register for resale, the
     shares it issued in the June offering within the contractual time period.
     On October 31, 2005 the Board of Directors of the Company ratified waivers
     obtained from a majority of the purchasers in the June 30, 2005 offering
     and entered into new Consent and Waiver Agreements containing amended
     registration obligations of the Company. The Company contemplates that the
     securities sold in the June 30, 2005 private placement will be registered
     for resale contemporaneously with the registration of the securities issued
     in connection with the financing of the Asset Purchase.

     On June 27, 2005, the Company issued 550,000 shares of common stock in
     connection with the exercise of a warrant to purchase 550,000 shares of
     common stock for net proceeds of $137,500.

     As described in Note 9, the Company granted 300,000 shares of common stock
     to its Chief Executive Officer on July 13, 2005. The Company valued these
     shares at $1.00 per share based upon the selling price of shares it issued
     in a recently completed private placement transaction. This award was
     amended upon the Chief Executive Officer's resignation on November 10,
     2005. In connection with such resignation, the Chief Executive Officer
     returned and the Company cancelled 200,000 shares of common stock
     previously issued under this arrangement. Accordingly, for the year ended
     December 31, 2005, the Company recorded salary expense of $100,000.

     As described in Note 9, the Company granted 80,000 shares of common stock
     to its Chief Operating Officer on July 13, 2005. The Company valued these
     shares at $1.00 per share based upon the selling price of shares it issued
     in a recently completed private placement transaction. In December 2005,
     the Chief Operating Officer resigned. Accordingly, for the year ended
     December 31, 2005, the Company recorded salary expense of $80,000.

     As described in Note 9, the Company granted 10,000 shares of common stock
     to its senior vice president of sales and marketing who is also serving as
     the Company's interim chief executive officer on November 16, 2005. The
     Company valued these shares at $1.35 per share based upon the selling price
     of shares it issued in a


                                     F - 25



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     recently completed private placement transaction. Accordingly, the Company
     recorded deferred compensation of $13,500, which is being amortized over
     the 12-month term of the employment agreement. For the year ended December
     31, 2005, amortization of this deferred compensation amounted to $1,125 and
     is included in salaries.

     As described in Note 9, the Company entered into a consulting agreement
     with Elite providing for 90,000 shares of stock based compensation. The
     Company recorded stock based compensation under these arrangements using
     the measurement date guidelines prescribed in EITF 96-18. Accordingly, the
     Company recorded deferred compensation of $121,500, which is being
     amortized over the 12-month term of the consulting agreement. All shares
     issued under this arrangement were fully vested and non-forfeitable at
     their date of issuance. For the year ended December 31, 2005, amortization
     of this deferred compensation amounted to $10,125 and is included in other
     general and administrative expense.

     In December 2005, the Company issued 50,000 shares of common stock in
     connection with the exercise of a warrant to purchase 50,000 shares of
     Common Stock for net proceeds of $12,500.

     NON-EMPLOYEE OPTION GRANT
     As described in Note 9, the Company granted five-year options to purchase a
     total of 600,000 shares of its common stock, exercisable at $3.85 per
     share. This option becomes exercisable as to one-third of such shares on
     each of the six month, first, and second year anniversaries of the date of
     grant. The Company has accounted for these in accordance with the
     provisions of EITF 96-18. Accordingly, the Company recorded at fair value
     the calculated value of the options vested at the end of each period until
     the options are fully vested. Accordingly, the Company recorded deferred
     compensation of $1,067,152, which is being amortized over the 12-month term
     of the consulting agreement. For the year ended December 31, 2005,
     amortization of this deferred compensation amounted to $88,929 and is
     included in other general and administrative expense.

     PREFERRED STOCK
     On October 28, 2005, the Company filed a Certificate of Designation
     authorizing the issuance of up to 1,500,000 shares of its Series A
     Convertible Preferred Stock, par value $0.001 per share (the "RelationServe
     Preferred").

     On October 31, 2005 the Company sold in a private placement 762,199 shares
     of its newly created Series A Preferred Stock for proceeds amounting to
     $10,289,690. The Series A Preferred is mandatorily convertible into shares
     of the Company's common stock at such time that the Company completes its
     consolidation with STAC or, in the event that the Company does satisfy the
     Consolidation Milestones to complete the Consolidation, at the option of
     the holder, each at the then effective conversion price. The conversion
     price is based upon a formula that currently results in a 10 to 1
     conversion ratio or price or $1.35 per share. The Company used $10,000,000
     the proceeds it received from this transaction to purchase the Common Stock
     of STAC (Note 5) and the remainder for general corporate and working
     capital purposes.

     The Series A Preferred also features (1) a liquidation preference entitling
     the holders of the Series A Preferred to be paid an amount equal to their
     original purchase price of $13.50 per share (subject to adjustment for
     stock splits, stock dividends, recapitalizations and similar events) upon a
     liquidation event as defined, and (2) a right to participate in dividends,
     on a pro rata basis with the common stockholders, based upon the number of
     common shares into which the Series A are convertible, if and when declared
     by the Board of Directors.

     The holders of the Series A Preferred are also entitled to vote separately
     and as a class, on all matters affecting the rights, value or ranking of
     the Series A Preferred and on all matters in which the common stockholders
     are entitled to vote in the same manner and with the same effect as the
     common stockholders, based on the number of common shares into which the
     then outstanding Series A Preferred is convertible.


                                     F - 26



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     The Company is also obligated to reserve at all times, such number of
     shares of its common stock sufficient for issuance upon the conversion of
     its redeemable preferred stock.

     The Company accounted for the issuance of its Series A Preferred stock in
     accordance with the provisions of EITF 98-5 and EITF 00-27, both titled
     "Convertible Securities with Beneficial Conversion Features and
     Contingently Adjustable Conversion Ratios." Accordingly the Company
     recorded a $10,289,690 deemed dividend for the beneficial conversion
     feature associated with the difference between fair value of the Company's
     Common's Stock of $3.97 per share and the active conversion price of $1.35
     per share in effect at the commitment date of this transaction.

     The Company concurrently entered into a Registration Rights Agreement with
     each of the purchasers of the RelationServe Preferred. Pursuant to such
     Registration Rights Agreement, the Company is required to file within 45
     days, and cause to be declared effective within 120 days, a registration
     statement with the SEC for the resale of the shares of common stock
     underlying this arrangement. If the Company fails to cause such
     registration statement to be declared effective within 120 days of its
     filing and/or fails to maintain the effectiveness of the registration
     statement while the shares of common stock underlying the Series A
     Preferred remain outstanding, it will be required to pay liquidated damages
     to the holders of the Series A Preferred of 1% per month of the aggregate
     purchase for such period of time that it is not in compliance.

     As described above, the Company accounts for registration rights that
     contain liquidating damage provisions as separate derivative financial
     instruments in accordance with view C of EITF 05-4. Accordingly, the
     Company recorded a registration rights liability in the amount of $75,000.
     The Company determined the amount of liability based on the present value
     of the penalty that would accrue during the period of time in which the
     transfer of the shares would be restricted under Rule 144, adjusted for its
     estimate of the probability of its failure to comply with the registration
     rights agreement.

NOTE 11 - STOCK OPTION PLANS

     2005 NON-EMPLOYEE DIRECTORS' PLAN
     On June 16, 2005, the Company granted an option to purchase 1,000,000
     shares of common stock to a non-employee director under its 2005
     Non-Employee Directors' Plan (the "Directors Plan"). The option was
     exercisable six months after the approval of the Directors' Plan by the
     Company's stockholders, expires on June 16, 2010 and is exercisable at
     $1.00 per share, which was deemed to be the fair market value of the
     Company's common stock at the date of grant based upon the selling price of
     shares it issued in the April offering. Accordingly, no compensation
     expense has been recognized.

     On August 9, 2005, by written consent, a majority of the Company's
     stockholders approved the Company's 2005 Non-Employee Directors Stock
     Option Plan (the "Plan"). The Plan was ratified by the same majority of
     stockholders in existence at the date the grant was approved. Accordingly,
     the measurement date was determined to be the date of grant. The Directors
     Plan provides for the grant of up to 2,000,000 non-qualified stock options
     to non- employee directors of the Company. The plan also provides for (a)
     each newly elected or appointed director (other than the Chairman) to be
     granted options to purchase 50,000 shares of common stock, of which 50%
     would become exercisable on the date which is one year from the date of
     grant and the remaining 50% would be come exercisable on the date which is
     two years from the date of grant, and (b) for each such director to be
     granted an additional option to purchase 50,000 shares of common stock on
     the second anniversary of their initial election or appointment of which
     50% would become exercisable on the date which is one year from the date of
     grant and the remaining 50% would become exercisable on the date which is
     two years from the date of grant. All options granted under the Directors
     Plan have a maximum term of ten years subject to accelerated vesting in the
     event of a change in control of the Company. On October 31, 2005, the
     Chairman of the Board of Directors resigned from his position. Upon such
     resignation, the Company


                                     F - 27



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     accelerated the vesting of 1,000,000 stock options previously awarded to
     the Chairman under the Directors' Plan.

     2005 INCENTIVE STOCK PLAN
     On June 21, 2005, the Company adopted the 2005 Incentive Stock Plan (the
     "Plan"), which was subsequently approved by stockholders. The Plan provides
     for the grant of options and the issuance of restricted shares. An
     aggregate of 3,300,000 shares of common stock is reserved for issuance
     under the Plan. Both incentive and nonqualified stock options may be
     granted under the Plan. The Plan terminates on June 21, 2015. As of
     December 31, 2005, options to purchase 2,719,000 shares of common stock
     have been granted under the Plan.

     The exercise price of options granted pursuant to this plan may not be less
     than 100% of the fair market value of the Company's common stock on the
     date of grant and the term of options granted under this plan may not
     exceed 10 years. For holders of 10% or more of the combined voting power of
     all classes of the Company's stock, options may not be granted at less than
     110% of the fair value of the Company's common stock on the date of grant
     and the term of such options may not exceed 5 years.

     On June 21, 2005, the Company granted options to purchase an aggregate of
     2,019,000 shares of common stock to employees of the Company. The options
     are exercisable at $3.85 per share. The fair market value of the common
     stock was deemed to be $1.00 per share at the grant date based upon the
     selling price of shares issued in a recently completed private placement
     transaction. Accordingly, under APB 25, no compensation expense was
     recognized. The options vest as to 25% six months following the date of
     grant and 25% on each of the first, second and third anniversaries of the
     date of grant and expire. These options expire upon the earlier of June 21,
     2015, or the employees' separation of employment with the Company.

     As described in Note 9, on November 30, 2005, the Company granted options
     to purchase an aggregate of 100,000 shares of common stock to an employee
     of the Company. The option is exercisable at $3.85 per share. The fair
     market value of the common stock was deemed to be $1.35 per share at the
     grant date based upon the selling price of shares issued in a recently
     completed private placement transaction. Accordingly, under APB 25, no
     compensation expense was recognized. The stock options vest as to one third
     of such shares on each of the six month, first, and second year
     anniversaries of the date of grant, provided, however, that all of such
     options shall be immediately exercisable upon any change in control as
     defined in the Plan. These options expire upon the earlier of November 16,
     2010, or the employees' separation of employment with the Company. The
     Company also granted 600,000 options to a non-employee under a consulting
     agreement described in Notes 9 and 10 that were accounted for in accordance
     with EITF 96-18.

     A summary of the status of the Company's outstanding stock options granted
     to employees and a director as of December 31, 2005 and for the year then
     ended is as follows:



                                                                                 Number              Weighted
                                                                                   of                Average
                                                                                Options           Exercise Price
                                                                              --------------     ----------------

     Outstanding at December 31, 2004                                                     --               $0.00

     Granted                                                                       3,119,000                2.98

     Forfeited                                                                     (431,000)                3.85

     Outstanding at December 31, 2005                                              2,688,000               $2.98

     Weighted Average fair value of options granted during the period                                      $2.98


                                     F - 28



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------



                           Number                                                     Number
      Range of         Outstanding at     Weighted Average                        Exercisable at
      Exercise          December 31,         Remaining       Weighted Average      December 31,     Weighted Average
       Price                2005          Contractual Life    Exercise Price           2005          Exercise Price
- -----------------  --------------------- ------------------  ------------------ ------------------- --------------------


$          1.00               1,000,000      4.46 Years      $          1.00            1,000,000    $           1.00
$          3.85               1,688,000      9.60 Years                 3.85              222,000                3.85
                              2,688,000                      $          2.98            1,222,000    $           1.51
                          =============                      =================  ===================  ===================


NOTE 12 - INCOME TAXES

     For the period of May 16, 2005 through December 31, 2005, the Company
     incurred book losses of approximately $2,800,000 and anticipates having a
     tax loss for the period of May 16, 2005 through December 31, 2005 of
     approximately $2,500,000. The Company currently estimates that it has
     deferred tax assets of approximately $1,800,000, which principally relate
     to (i) losses it incurred during the initial period in which it has been
     operating as a C Corporation, (ii) its allowance for doubtful accounts, and
     (iii) approximately $1,000,000 of book to tax basis differences arises in
     connection with its equity investment in STAC . The Company fully reserved
     for this amount due to the fact that it is still operating within its
     initial period as a C Corporation and substantial uncertainty exists as to
     the utilization of any of its deferred tax assets in future periods. In
     addition, the utilization of any net operating losses that the Company has
     generated to date may be subject to substantial limitations due to the
     "change of ownership" provisions under Section 382 of the Internal Revenue
     Code and similar state provisions.

NOTE 13 - RELATED PARTY TRANSACTIONS

     For the year ended December 31, 2005, the Company recognized revenues from
     two companies related to a stockholder of the Company in the aggregate
     amount of $590,000. At December 31, 2005, these companies did not owe the
     Company and funds. The Company also appointed a new Chairman to its Board
     of Directors to whom it made a $100,000 payment for expenses incurred
     during the course of performing services for the Company. Effective
     November 1, 2005, the Company agreed to pay its Chairman compensation in
     the amount of $4,000 per week. The Company accrued compensation expense
     under this arrangement of $35,200, which is included as a component of
     compensation expense in the accompanying statement for the year ended
     December 31, 2005.

     For the year ended December 31, 2005, the Company paid to a company 100%
     owned by its chief financial officer $40,610 for accounting services
     rendered.

NOTE 14 - SUBSEQUENT EVENTS

     CONSOLIDATION WITH STAC
     The Company delivered satisfactory evidence of its completion of the
     Consolidation Milestones on or about February 1, 2006 and as a result
     thereof completed its acquisition of the entire SendTec business through
     its consolidation with STAC on February 3, 2006. The Company acquired
     SendTec for the purpose of expanding its existing business operations to
     include a greater variety of marketing channels. The Company believes that
     its acquisition of SendTec will enable it increase its market share in the
     on-line and direct marketing business by creating superior value for its
     customers in the execution of their marketing campaigns.

     Upon Consolidation, (i) the STAC Debentures became convertible at a
     conversion price of $1.50 per share into the Company's Common Stock; (ii)
     seven-year warrants to purchase 10,081,607 shares of the Company's Common
     Stock were issued to the STAC Debenture purchasers exercisable at $0.01 per
     share; (iii) the STAC


                                     F - 29



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     Preferred Stock was redeemed by STAC for its initial purchase price
     $280,351, (iv) the Company Series A Preferred was automatically converted
     into 7,621,991 shares of the Company's Common Stock and (v) members of STAC
     Management exchanged their shares in STAC for an aggregate of 9,506,380
     shares of the Company's common stock. In addition, upon Consolidation, the
     Company and each of its subsidiaries executed and delivered a "Transaction
     Guaranty" and the "Guarantor Security Agreement" to guaranty the timely
     payment of amounts due under the STAC Debentures and pledging the assets of
     the Company and its affiliates.

     The following table provides a preliminary estimate of the Company's
     allocation of its purchase to the fair value of assets acquired and
     liabilities assumed in this transaction:

        Consideration Paid                                   $     39,850,000
                                                             -
            Transaction expenses                                      580,000
            Total purchase cost                              $     40,430,000
                                                             -

        Asset acquired                                             14,300,000
        Liabilities assumed                                      (10,700,000)
                                                                 ------------
        Net assets acquired                                        3,600,000
                                                                 ------------

        Purchase price in excess of net assets acquired     $      36,830,000
                                                            -

        Allocated to
            Covenant not to compete                                 1,866,000
            Goodwill                                        $      34,964,000
                                                            -


     The following unaudited pro-forma information reflects the results of
     continuing operations of the Company as if the acquisitions had been
     consummated as of January 1, 2005:

                                                             2005
         Revenues                                        $49,000,000
         Net Loss                                          14,550,000
         Net Loss per share                                     ($.35)


     The Company's allocation of its purchase price to the net assets of SendTec
     and presentation of the pro forma results is preliminary. This information,
     which is based on significantly limited information, is being presented for
     illustration purposes only and is not indicative of the results that the
     Company would have achieved or could potentially achieve in future periods
     had it completed this transaction as of the dates indicated. The actual
     allocation of the purchase price will be based on valuation studies that
     have not yet been performed.


                                     F - 30



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------


     LEGAL CONTINGENCY
     On February 3, 2006, InfoLink Communications, Services, Inc, (InfoLink)
     filed a complaint against the Company and Omnipoint for allegedly violating
     the federal CAN SPAM ACT of 2003, 15 U.S.C. ss. 7701, and breach of an
     alleged licensing agreement between Omni Point and InfoLink. Info Link
     seeks actual damages in an amount of approximately $100,000 and
     approximately $1,500,000 in statutory damages, which are considered to be
     highly speculative by the Company and legal counsel. This case is in its
     initial stages. The Company intends to vigorously defend itself with
     respect to this matter, however; its outcome or range of possible loss, if
     any, cannot be predicted at this time. The Company cannot provide any
     assurance that the outcome of this matter will not have a material adverse
     effect on its financial position or the results of operations.

     On February 17, 2006, the Law Offices of Robert H. Weiss PLLC ("Weiss")
     filed a complaint against the Company and Omni Point for fraud, breach of
     contract, unjust enrichment, and violation of the Uniform Deceptive
     Practices Act. Weiss seeks compensatory damages in an amount no less than
     approximately $80,000 in addition to punitive and exemplary damages with no
     specified amount. The Company also has accounts receivable due from Weiss
     of approximately $387,000 which are fully reserved. This case is initial
     stages. The Company intends to vigorously defend itself with respect to
     this matter, however; its outcome or range of possible loss, if any, cannot
     be predicted at this time. The Company cannot provide any assurance that
     the outcome of this matter will not have a material adverse effect on its
     financial position or the results of operations.

     On March 6, 2006 Boston Meridian LLC ("Boston Meridian") filed a complaint
     in the United States District Court District of Massachusetts alleging it
     is due certain fees and expense reimbursements in connection with the
     acquisition of the business of SendTec from theglobe.com inc.

     Boston Meridian seeks an aggregate of $917,302 in fees and expenses and
     100,000 shares of Company common stock. The Company believes the litigation
     is without merit and intends to vigorously defend against the complaint.
     The Company cannot provide any assurance that the outcome of this matter
     will not have a material adverse effect on its financial position or the
     results of operations.

     EMPLOYMENT AGREEMENTS
     Paul Soltoff became Chief Executive Officer of STAC pursuant to an
     Employment Agreement dated October 31, 2005 and of the Company on February
     3, 2006. The Agreement provides that Mr. Soltoff will serve as Chief
     Executive Officer for an initial five-year term, which will be renewed for
     additional one-year terms thereafter, unless written notice is provided by
     either party. The agreement provides for an annual base salary of no less
     than $400,000, as well as such incentive compensation and bonuses as the
     Board of Directors may determine and to which he may become entitled to
     pursuant to an incentive compensation or bonus program.

     Donald Gould became Chief Financial Officer of STAC pursuant to an
     Employment Agreement dated October 31, 2005 and of the Company on February
     3, 2006. The Agreement provides that Mr. Gould will serve as Chief
     Financial Officer for an initial five-year term, which will be renewed for
     additional one-year terms thereafter, unless written notice is provided by
     either party. The agreement provides for an annual base salary of no less
     than $225,000, as well as such incentive compensation and bonuses as the
     Board of Directors may determine and to which he may become entitled to
     pursuant to an incentive compensation or bonus program.

     Eric Obeck became President of STAC pursuant to an Employment Agreement
     dated October 31, 2005 and of the Company on February 3, 2006. The
     Agreement provides that Mr. Obeck will serve as President for an initial
     five-year term, which will be renewed for additional one-year terms
     thereafter, unless written notice is provided by either party. The
     agreement provides for an annual base salary of no less than $325,000, as
     well as such incentive compensation and bonuses as the Board of Directors
     may determine and to which he may become entitled to pursuant to an
     incentive compensation or bonus program.


                                     F - 31



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     Securities Purchase Agreement with Sunrise Equity Partners, L.P.

     On February 3, 2006, the Company and Sunrise Equity Partners, L.P.
     ("Sunrise") entered into a Securities Purchase Agreement pursuant to which
     the Company sold to Sunrise 500,000 shares of Company Common Stock for
     $750,000, of which the Company received net proceeds of $675,000 after
     deducting fees and expenses of $75,000. The Company granted Sunrise
     unlimited and customary "piggyback" registration rights as well as
     registration rights similar to the registration rights granted by the
     Company in connection with that certain Registration Rights Agreement dated
     October 31, 2005 with its then holders of Series A Preferred Stock. As a
     result, the Company is obligated to file a Registration Statement on or
     before 45 days after the Consolidation pursuant to the Registration Rights
     Agreement described above. The registration rights will survive until such
     time as the Company Common Stock may be sold without volume restrictions
     pursuant to Rule 144(k) of the Securities Act.

     STAC DEBENTURE AND WAIVER
     The STAC Debenture provides, among other things, for the Company to assume
     liability for the STAC Debentures on the date of Consolidation. The STAC
     Debenture also required STAC, and the Company beginning on the date of
     Consolidation to comply with certain financial covenants and provide for
     the Debenture holders to Participate in subsequent financing transactions.
     The Company and STAC were not in compliance with financial covenants
     stipulated in the STAC Debenture prior to and as of, respectively the date
     of consolidation.

     On February 3, 2006, the Company and the Debenture holders entered into a
     letter agreement pursuant to which the debenture holders agreed to (a)
     forbear to call a covenant default of STAC's breach of the financial
     covenants, (b) amend the STAC Debenture to substantially eliminate the
     requirement for the Company to comply with the financial covenants at any
     time up to the date of consolidation and during the year ended December 31,
     2006 and (c) consent to the Company's sale of common stock to Sunrise
     described above, in exchange for 525,000 shares of Common Stock with an
     aggregate fair value of 1,443,750.

     SEVERANCE AGREEMENT WITH FORMER PRESIDENT
     Effective February 3, 2006, the Company and its former President entered
     into a Release and Employment Severance Agreement pursuant which provided
     for (i) the former President to resign from her position with the Company,
     (ii) the Company to make severance payments in the aggregate amount of
     $50,000, (iii) the accelerated vesting of options to purchase 100,000
     shares of Company Common Stock, (iv) the former President's release of all
     claims, promises, causes of action that she has or may have against the
     Company and (v) the former President's promise not to disclose confidential
     information relating to the Company.

     2006 INCENTIVE STOCK PLAN
     The 2006 Incentive Plan was adopted by the Board of Directors on March 3,
     2006 but is still subject to approval by our stockholders. An aggregate of
     2,700,000 shares of Common Stock have been reserved for issuance under the
     2006 Incentive Plan. The purpose of the 2006 Incentive Plan is to provide
     an incentive to retain in the employ of and as directors, officers,
     consultants, advisors and employees of our company, persons of training,
     experience and ability, to attract new directors, officers, consultants,
     advisors and employees whose services are considered valuable, to encourage
     the sense of proprietorship and to stimulate the active interest of such
     persons into our development and financial success. Under the 2006
     Incentive Plan, we are authorized to issue incentive stock options intended
     to qualify under Section 422 of the Code, non-qualified stock options and
     restricted stock. The maximum number of shares of common stock that may be
     subject to options granted under the 2006 Incentive Plan to any individual
     in any calendar year shall not exceed 1,000,000 shares in order to qualify
     as performance-based compensation under Section 162(m) of the Code. The
     2006 Incentive Plan is currently administered by the Board or a Committee
     of the Board of Directors. As of March 13, 2005, no shares of Common Stock
     have been issued under the 2006 Incentive Plan and no options to purchase
     shares of Common Stock were outstanding.


                                     F - 32



                                      RELATIONSERVE MEDIA, INC. AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

     EQUITY TRANSACTIONS
     In January 2006, the Company issued 50,000 shares of common stock in
     connection with the exercise of a warrant for net proceeds of $12,500.

     In February 2006, the Company issued 2,664,398 shares of common stock in
     connection with the exercise of warrants through a cashless exercise
     provision in the warrants equaling 9,549.81 shares of common stock.

     The Company also issued 200,000 shares of common stock in February 2006 in
     connection with the exercise of a warrant for net proceeds of $50,000.

     OPTION GRANTS
     In March 2006 the Company granted in the aggregate, options to purchase
     1,700,000 shares of common stock to employees of SendTec. The options have
     an exercise price of $1.80 and expire in March 2006.


                                     F - 33

EX-4.3 2 file002.htm WARRANT TO PURCHASE COMMON STOCK




                                                                     Exhibit 4.3

                                    WARRANTS

NO. [__]                       RELATIONSERVE, INC.                [_____] SHARES


                        WARRANT TO PURCHASE COMMON STOCK
                        --------------------------------

                     VOID AFTER 5:30 P.M., EASTERN STANDARD
                          TIME, ON THE EXPIRATION DATE

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

     FOR VALUE  RECEIVED,  RELATIONSERVE,  INC.,  a  Delaware  corporation  (the
"Company"),  hereby  agrees  to  sell  upon  the  terms  and on  the  conditions
hereinafter set forth,  but no later than 5:30 p.m.,  Eastern  Standard Time, on
the Expiration Date (as hereinafter defined) to __________________ or registered
assigns   (the   "Holder"),   under  the  terms  as   hereinafter   set   forth,
[________________]   (______)  fully  paid  and  non-assessable  shares  of  the
Company's Common Stock, par value $0.0001 per share (the "Warrant Stock"),  at a
purchase price of two dollars ($2.00) per share (the "Warrant Price"),  pursuant
to this warrant (this "Warrant"). The number of shares of Warrant Stock to be so
issued and the Warrant  Price are  subject to  adjustment  in certain  events as
hereinafter  set forth.  The term "Common  Stock" shall mean,  when used herein,
unless  the  context  otherwise  requires,  the stock and other  securities  and
property at the time receivable upon the exercise of this Warrant.

     Capitalized  terms used and not  otherwise  defined  herein  shall have the
respective meanings attributed thereto in Section 10.

     1.   Exercise of Warrant.

          (a) The Holder may exercise this Warrant according to its terms by
surrendering this Warrant to the Company at the address set forth in Section 11,
the subscription form attached hereto having then been duly executed by the
Holder, accompanied by cash, certified check or bank draft in payment of the
purchase price, in lawful money of the United States of America, for the number
of shares of the Warrant Stock specified in the subscription form, or as
otherwise provided in this Warrant, prior to 5:30 p.m., Eastern Standard Time,
on May __, 2008 (the "Expiration Date").



          (b) This Warrant may be exercised in whole or in part so long as any
exercise in part hereof would not involve the issuance of fractional shares of
Warrant Stock. If exercised in part, the Company shall deliver to the Holder a
new Warrant, identical in form, in the name of the Holder, evidencing the right
to purchase the number of shares of Warrant Stock as to which this Warrant has
not been exercised, which new Warrant shall be signed by the Chairman, Chief
Executive Officer or President and the Secretary or Assistant Secretary of the
Company. The term Warrant as used herein shall include any subsequent Warrant
issued as provided herein.

          (c) No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. The Company shall pay cash in lieu
of fractions with respect to the Warrants based upon the fair market value of
such fractional shares of Common Stock (which shall be the closing price of such
shares on the exchange or market on which the Common Stock is then traded) at
the time of exercise of this Warrant.

          (d) In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Stock so purchased,
registered in the name of the Holder, shall be delivered to the Holder within a
reasonable time after such rights shall have been so exercised. The person or
entity in whose name any certificate for the Warrant Stock is issued upon
exercise of the rights represented by this Warrant shall for all purposes be
deemed to have become the holder of record of such shares immediately prior to
the close of business on the date on which the Warrant was surrendered and
payment of the Warrant Price and any applicable taxes was made, irrespective of
the date of delivery of such certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of such shares at
the opening of business on the next succeeding date on which the stock transfer
books are open. Except as provided in Section 4 hereof, the Company shall pay
any and all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Common Stock on exercise of this
Warrant.

     2.   Disposition of Warrant Stock and Warrant.

          (a) The Holder hereby acknowledges that this Warrant and any Warrant
Stock purchased pursuant hereto are, as of the date hereof, not registered: (i)
under the Act on the ground that the issuance of this Warrant is exempt from
registration under Section 4(2) of the Act as not involving any public offering
or (ii) under any applicable state securities law because the issuance of this
Warrant does not involve any public offering; and that the Company's reliance on
the Section 4(2) exemption of the Act and under applicable state securities laws
is predicated in part on the representations hereby made to the Company by the
Holder that it is acquiring this Warrant and will acquire the Warrant Stock for
investment for its own account, with no present intention of dividing its
participation with others or reselling or otherwise distributing the same,
subject, nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control.

          The Holder hereby agrees that it will not sell or transfer all or any
part of this Warrant and/or Warrant Stock unless and until it shall first have
given notice to the Company describing such sale or transfer and furnished to
the Company either (i) an opinion, reasonably satisfactory to counsel for the
Company, of counsel (skilled in securities matters, selected by the Holder and
reasonably satisfactory to the Company) to the effect that the proposed sale or
transfer may be made without registration under the Act and without registration
or qualification under any state law, or (ii) an interpretative letter from the
Securities and Exchange Commission to the effect that no enforcement action will
be recommended if the proposed sale or transfer is made without registration
under the Act.

                                       2



          (b) If, at the time of issuance of the shares issuable upon exercise
of this Warrant, no registration statement is in effect with respect to such
shares under applicable provisions of the Act, the Company may at its election
require that the Holder provide the Company with written reconfirmation of the
Holder's investment intent and that any stock certificate delivered to the
Holder of a surrendered Warrant shall bear legends reading substantially as
follows:

     "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
     THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
     OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
     UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO
     THE ISSUER OF THIS CERTIFICATE THAT REGISTRATION IS NOT REQUIRED UNDER SAID
     ACT."

In addition, so long as the foregoing legend may remain on any stock certificate
delivered to the Holder, the Company may maintain appropriate "stop transfer"
orders with respect to such certificates and the shares represented thereby on
its books and records and with those to whom it may delegate registrar and
transfer functions.

     3. Reservation of Shares. The Company hereby agrees that at all times there
shall be reserved for issuance upon the exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance upon exercise of
this Warrant. The Company further agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will be duly
authorized and will, upon issuance and against payment of the exercise price, be
validly issued, fully paid and non-assessable, free from all taxes, liens,
charges and preemptive rights with respect to the issuance thereof, other than
taxes, if any, in respect of any transfer occurring contemporaneously with such
issuance and other than transfer restrictions imposed by federal and state
securities laws.

     4. Exchange, Transfer or Assignment of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations, entitling the
Holder or Holders thereof to purchase in the aggregate the same number of shares
of Common Stock purchasable hereunder. Upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be canceled. This Warrant may be divided or combined
with other Warrants that carry the same rights upon presentation hereof at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof.

                                       3



     5. Capital Adjustments. This Warrant is subject to the following further
provisions:

          (a) Recapitalization, Reclassification and Succession. If any
recapitalization of the Company or reclassification of its Common Stock or any
merger or consolidation of the Company into or with a corporation or other
business entity, or the sale or transfer of all or substantially all of the
Company's assets or of any successor corporation's assets to any other
corporation or business entity (any such corporation or other business entity
being included within the meaning of the term "successor corporation") shall be
effected, at any time while this Warrant remains outstanding and unexpired,
then, as a condition of such recapitalization, reclassification, merger,
consolidation, sale or transfer, lawful and adequate provision shall be made
whereby the Holder of this Warrant thereafter shall have the right to receive
upon the exercise hereof as provided in Section 1 and in lieu of the shares of
Common Stock immediately theretofore issuable upon the exercise of this Warrant,
such shares of capital stock, securities or other property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore issuable upon the exercise of this Warrant had such
recapitalization, reclassification, merger, consolidation, sale or transfer not
taken place, and in each such case, the terms of this Warrant shall be
applicable to the shares of stock or other securities or property receivable
upon the exercise of this Warrant after such consummation.

          (b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the number of shares of Warrant Stock purchasable upon
exercise of this Warrant and the Warrant Price shall be proportionately
adjusted.

          (c) Stock Dividends and Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall issue or pay the holders
of its Common Stock, or take a record of the holders of its Common Stock for the
purpose of entitling them to receive, a dividend payable in, or other
distribution of, Common Stock, then (i) the Warrant Price shall be adjusted in
accordance with Section 5(e) and (ii) the number of shares of Warrant Stock
purchasable upon exercise of this Warrant shall be adjusted to the number of
shares of Common Stock that Holder would have owned immediately following such
action had this Warrant been exercised immediately prior thereto.

          (d) Stock and Rights Offering to Shareholders. If the Company shall at
any time after the date of issuance of this Warrant distribute to all holders of
its Common Stock any shares of capital stock of the Company (other than Common
Stock) or evidences of its indebtedness or assets (excluding cash dividends or
distributions paid from retained earnings or current year's or prior year's
earnings of the Company) or rights or warrants to subscribe for or purchase any
of its securities (excluding those referred to in the immediately preceding
paragraph) (any of the foregoing being hereinafter in this paragraph called the
"Securities"), then in each such case, the Company shall reserve shares or other
units of such securities for distribution to the Holder upon exercise of this
Warrant so that, in addition to the shares of the Common Stock to which such
Holder is entitled, such Holder will receive upon such exercise the amount and
kind of such Securities which such Holder would have received if the Holder had,
immediately prior to the record date for the distribution of the Securities,
exercised this Warrant.

                                       4



          (e) Warrant Price Adjustment. Whenever the number of shares of Warrant
Stock purchasable upon exercise of this Warrant is adjusted, as herein provided,
the Warrant Price payable upon the exercise of this Warrant shall be adjusted to
that price determined by multiplying the Warrant Price immediately prior to such
adjustment by a fraction (i) the numerator of which shall be the number of
shares of Warrant Stock purchasable upon exercise of this Warrant immediately
prior to such adjustment, and (ii) the denominator of which shall be the number
of shares of Warrant Stock purchasable upon exercise of this Warrant immediately
thereafter.

          (f) Certain Shares Excluded. The number of shares of Common Stock
outstanding at any given time for purposes of the adjustments set forth in this
Section 5 shall exclude any shares then directly or indirectly held in the
treasury of the Company.

          (g) Deferral and Cumulation of De Minimis Adjustments. The Company
shall not be required to make any adjustment pursuant to this Section 5 if the
amount of such adjustment would be less than one percent (1%) of the Warrant
Price in effect immediately before the event that would otherwise have given
rise to such adjustment. In such case, however, any adjustment that would
otherwise have been required to be made shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to not less than one percent
(1%) of the Warrant Price in effect immediately before the event giving rise to
such next subsequent adjustment.

          (h) Duration of Adjustment. Following each computation or readjustment
as provided in this Section 5, the new adjusted Warrant Price and number of
shares of Warrant Stock purchasable upon exercise of this Warrant shall remain
in effect until a further computation or readjustment thereof is required.

     6. Notice to Holders.

          (a) Notice of Record Date. In case:

              (i) the Company shall take a record of the holders of its Common
     Stock (or other stock or securities at the time receivable upon the
     exercise of this Warrant) for the purpose of entitling them to receive any
     dividend (other than a cash dividend payable out of earned surplus of the
     Company) or other distribution, or any right to subscribe for or purchase
     any shares of stock of any class or any other securities, or to receive any
     other right;

              (ii) of any capital reorganization of the Company, any
     reclassification of the capital stock of the Company, any consolidation
     with or merger of the Company into another corporation, or any conveyance
     of all or substantially all of the assets of the Company to another
     corporation; or

                                       5



              (iii) of any voluntary dissolution, liquidation or winding-up of
     the Company;

then, and in each such case, the Company will mail or cause to be mailed to the
Holder hereof at the time outstanding a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any, is to be fixed, as of which
the holders of record of Common Stock (or such stock or securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution or winding-up. Such notice shall
be mailed at least thirty (30) days prior to the record date therein specified,
or if no record date shall have been specified therein, at least thirty (30)
days prior to such specified date, provided , however, failure to provide any
such notice shall not affect the validity of such transaction.

          (b) Certificate of Adjustment. Whenever any adjustment shall be made
pursuant to Section 5 hereof, the Company shall promptly make a certificate
signed by its Chairman, Chief Executive Officer, President, Vice President,
Chief Financial Officer or Treasurer, setting forth in reasonable detail the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated and the Warrant Price and number of shares
of Warrant Stock purchasable upon exercise of this Warrant after giving effect
to such adjustment, and shall promptly cause copies of such certificates to be
mailed (by first class mail, postage prepaid) to the Holder of this Warrant.

     7. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of
evidence satisfactory to it, in the exercise of its reasonable discretion, of
the ownership and the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company and, in the case of mutilation, upon surrender and
cancellation thereof, the Company will execute and deliver in lieu thereof,
without expense to the Holder, a new Warrant of like tenor dated the date
hereof.

     8. Warrant Holder Not a Stockholder. The Holder of this Warrant, as such,
shall not be entitled by reason of this Warrant to any rights whatsoever as a
stockholder of the Company.

     9. Definitions. As used herein, unless the context otherwise requires, the
following terms have the respective meanings:

          (a) "Affiliate": with respect to any Person, the following: (i) any
other Person that at such time directly or indirectly through one or more
intermediaries controls, or is controlled by or is under common control with
such first Person or (ii) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% of more of any class of voting or equity interests. As used in such
definition, "controls," "controlled by" and "under common control," as used with
respect to an Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.

                                       6



          (b) "Person": any natural person, corporation, division of a
corporation, partnership, limited liability company, trust, joint venture,
association, company, estate, unincorporated organization or government or any
agency or political subdivision thereof.

          (c) "Subsidiaries": with respect to any Person, any corporation,
association or other business entity (whether now existing or hereafter
organized) of which at least a majority of the securities or other ownership
interests having ordinary voting power for the election of directors is, at the
time as of which any determination is being made, owned or controlled by such
Person or one or more subsidiaries of such Person.

     10. Notices. Any notice required or contemplated by this Warrant shall be
deemed to have been duly given if transmitted by registered or certified mail,
return receipt requested, or nationally recognized overnight delivery service,
to the Company at its principal executive offices, Attention: President, or to
the Holder at the name and address set forth in the Warrant Register maintained
by the Company.

     11. Choice of Law. THIS WARRANT IS ISSUED UNDER AND SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF DELAWARE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.


                                       7




     IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
on its behalf, in its corporate name and by its duly authorized officers, as of
this __ day of May, 2005.

                                       RELATIONSERVE, INC.

                                       By:_______________________________
                                          Name:      Danielle Karp
                                          Title:     President


                                       8

EX-10.21 3 file003.htm SECURITIES PURCHASE AGREEMENT




                                                                   Exhibit 10.21

                            SENDTEC ACQUISITION CORP.
                         877 Executive Center Drive West
                                    Suite 300
                          St. Petersburg, Florida 33702

                            RELATIONSERVE MEDIA, INC.
                            6700 North Andrews Avenue
                         Fort Lauderdale, Florida 33309

                                February 3, 2006


To the Purchasers Under
The Securities Purchase Agreement
Dated as of October 31, 2005

Re:   Securities Purchase Agreement dated as of October 31, 2005

Ladies and Gentlemen:

Reference is made to the Securities Purchase Agreement (the "PURCHASE
AGREEMENT"), dated as of October 31, 2005, among SendTec Acquisition Corp., a
Delaware corporation ("STAC"), RelationServe Media, Inc., a Delaware corporation
(the "COMPANY"), and each purchaser identified on the signature pages thereto
(each, including its successors and assigns, a "PURCHASER" and collectively the
"PURCHASERS") and Christiana Corporate Services, Inc., a Delaware corporation,
in its capacity as administrative agent for the Purchasers (together with its
successors and assigns in such capacity, the "AGENT"), and the transactions
contemplated thereby. Capitalized terms used in and not otherwise defined in
this letter shall have the meanings ascribed to them in the Purchase Agreement.

In connection with and effective upon the closing of the Consolidation to be
effected today pursuant to the Purchase Agreement, STAC, the Company and the
Purchasers agree as follows:

1. STAC has not and will not satisfy the covenants set forth in Section 4.21(b)
of the Purchase Agreement to have minimum EBITDA for the fourth quarter of 2005
and fiscal year 2005 of $1,725,000 and $5,200,000 and therefore, the minimum
EBITDA for the fourth quarter shall be $650,000 and for fiscal year 2005 shall
be $4,350,000. Further, following the closing of the Consolidation, the
financial covenants under Section 4.21 will be of no further force and effect.

2. The Company financial covenant targets set forth in Schedules 4.22(a), (b)
and (c) of the Purchase Agreement are restated in their entirety as set forth in
the amended Schedules 4.22(a), (b) and (c) attached to this letter agreement.



3. Sunrise Equity Partners, L.P., has indicated its interest in a subscription
and purchase of $750,000.00 of Company Common Stock (500,000 shares at $1.50 per
share) to close contemporaneously with the Consolidation ("Investment") pursuant
to a stock purchase agreement, including the provision of rights to "piggy-back"
registration of such Company Common Stock to be effected upon the filing of the
Registration Statement. The use of proceeds from the Investment will be to
repurchase approximately an equal amount of shares owned by Scott Hirsch or his
affiliates as required in the Consolidation. The Required Purchasers hereby
consent to the Investment upon the terms and conditions described herein with
such immaterial changes and revisions as the officer executing the same shall
determine, PROVIDED, HOWEVER, that there shall be no change in the number of
shares or price of the Investment. The Required Purchasers also waive compliance
with the provisions of Section 4.15, "Participation in Future Financing," and
Section 4.16, "Subsequent Equity Sales" solely with respect to the Investment.

4. In addition, for the absence of doubt and for the purpose of satisfaction of
any covenants, conditions, or restrictions in or relating to the Purchase
Agreement, or applicable to the Company or STAC, as now in effect or as may
hereafter be modified or amended, the amount of any non-cash charges associated
with the Investment shall be included (added back) in any calculations of such
amounts.

5. (a) In consideration of the Purchasers (i) forbearing to call a covenant
default or breach of Section 4.21(b) of the Purchase Agreement, (ii) agreeing to
amend Schedules 4.22(a), (b) and (c) of the Purchase Agreement and (iii)
consenting to the Investment and waiving the provisions of Sections 4.15 and
4.16, the Company shall issue 525,000 shares (the "Shares") of its common stock,
par value $0.001 per share (the "Common Stock"), pro rata to the Purchasers in
accordance with their respective ownership of the principal amounts of the STAC
Debentures, at the closing of the Consolidation being effected today, as set
forth next to their name on the signature page hereto.

         (b) Certificates for the Shares, duly registered in the names of the
Purchasers and containing the necessary restrictive legends, shall be delivered
to Morrison & Foerster LLP by the close of business on the Consolidation Date
for delivery to the respective Purchasers.

         (c) The Shares shall be included in the "Registrable Securities" as
defined in and pursuant to the Company Registration Rights Agreement, the form
of which is attached as Exhibit D to the Purchase Agreement, and the final
version of which shall be executed and delivered in connection with the closing
of the Consolidation.

6. Except as specifically set forth in this letter agreement, the covenants,
terms and provisions of the Purchase Agreement and the other Transaction
Documents remain in full force and effect and the Purchasers have not waived, or
agreed to the amendment of, any other provisions thereof. In no event shall this
letter, any other action undertaken pursuant to the Purchase Agreement or the
other Transaction Documents, or any inaction by Agent or the Purchasers
constitute (i) a waiver, estoppel or agreement to forbear (except as
specifically set forth herein) with respect to Agent's and the Purchasers'
rights,



defenses, remedies, or privileges at law or in equity under the Purchase
Agreement, the other Transaction Documents or otherwise; or (ii) a waiver of any
Default or Event of Default under the STAC Debentures. No delay by Agent or the
Purchaser in exercising any of their respective rights or remedies shall operate
as a waiver of any rights or remedies that Agent or the Purchasers may have.

         This letter agreement shall be effective upon execution and delivery
thereof by STAC, the Company and the holders of 75% of the principal amount of
the Debentures.


                                   SENDTEC ACQUISITION CORP.


                                   By: /s/ Paul Soltoff
                                       ----------------------------
                                       Name:   Paul Soltoff
                                       Title:  CEO


                                   RELATIONSERVE MEDIA, INC.


                                   By: /s/ Shawn McNamara
                                       ------------------------------
                                       Name:   Shawn McNamara
                                       Title:  CEO





AGREED AND ACCEPTED                       SHARES OF RSVM COMMON TO BE RECEIVED

LB I GROUP INC.                           150,215 shares
($10 million principal amount)


By: /s/ Eric S. Salzman
    -----------------------------
    Name:   Eric S. Salzman
    Title:  SVP

ALEXANDRA GLOBAL MASTER FUND, LTD.        75,107 shares
($5 million principal amount)

By:_______________________________
   Name:
   Title:

CAMOFI MASTER LDC                         30,043 shares
($2 million principal amount)

By: /s/
    -------------------------------
    Name:
    Title:




JGB CAPITAL, L.P.                         11,266 shares
($750 million principal amount)

By: JGB Management Inc, as General
    Partner

By: /s/ Brett Cohen
    ---------------------------------
     Name:   Brett Cohen
     Title:  President JGB Management,
             Inc. as General Partner


MELLON HBV MASTER U.S. EVENT DRIVEN
   FUND L.P.                              22,532 shares
($1.5 million principal amount)

By: /s/
    ----------------------------------
     Name:
     Title:    Managing Director


MELLON HBV MASTER GLOBAL EVENT            67,597 shares
   DRIVEN FUND LP
($4.5 million principal amount)

By: /s/
    ----------------------------------
     Name:
     Title:    Managing Director

PALISADES MASTER FUND LP                  60,086 shares
($4 million principal amount)

By: /s/ Andrew Reckles
    -----------------------------------
     Name:   Andrew Reckles
     Title:  General Partner

PORTSIDE GROWTH AND OPPORTUNITY FUND      30,043 shares
($2 million principal amount)






By: /s/
    ------------------------------------
     Name:
     Title:


By:_____________________________________  31,004 shares
   Mark Salter
   ($200,000 principal amount)

SDS CAPITAL GROUP                         60,086 shares
SPC LTD.
($4 million principal amount)

By: /s/ Steve Derby
    -------------------------------------
    Name:   Steve Derby
    Title:  Director


RHP MASTER FUND, LTD/                     15,021 shares
($1 million principal amount)

By: /s/
    ------------------------------------
     Name:
     Title:








                                COMPANY COVENANT

                                SCHEDULE 4.22(A)




 -----------------------------------------------------------------------------------
                                 CURRENT MAXIMUM             REVISED MAXIMUM
                                   CONSOLIDATED                CONSOLIDATED
      PERIOD                   CAPITAL EXPENDITURES        CAPITAL EXPENDITURES
 -----------------------------------------------------------------------------------

 4th Quarter 2005                    $350,000                    $350,000
 -----------------------------------------------------------------------------------
 1st Quarter 2006                    $250,000                    $550,000
 -----------------------------------------------------------------------------------
 2nd Quarter 2006                    $250,000                    $375,000
 -----------------------------------------------------------------------------------
 3rd Quarter 2006                    $300,000                    $300,000
 -----------------------------------------------------------------------------------
 4th Quarter 2006                    $350,000                    $350,000
 -----------------------------------------------------------------------------------
 Fiscal Year 2006                       n/a                         n/a
 -----------------------------------------------------------------------------------
 Thereafter, per                     $350,000                    $350,000
 quarter until maturity
 -----------------------------------------------------------------------------------






                                COMPANY COVENANT

                                SCHEDULE 4.22(B)


- ---------------------------------------------------------------------------------
       PERIOD                 CURRENT MINIMUM              REVISED MINIMUM
                            CONSOLIDATED EBITDA          CONSOLIDATED EBITDA
- ---------------------------------------------------------------------------------

4th Quarter 2005                   $2,325,000                    n/a
- ---------------------------------------------------------------------------------
Fiscal Year 2005                   $7,200,000                    n/a
- ---------------------------------------------------------------------------------
1st Quarter 2006                   $2,075,000                 $1,257,000
- ---------------------------------------------------------------------------------
2nd Quarter 2006                   $2,250,000                 $2,013,000
- ---------------------------------------------------------------------------------
3rd Quarter 2006                   $2,530,000                 $2,324,000
- ---------------------------------------------------------------------------------
4th Quarter 2006                   $2,875,000                 $2,840,000
- ---------------------------------------------------------------------------------
Fiscal Year 2006                   $9,730,000                 $8,434,000
- ---------------------------------------------------------------------------------
Thereafter, per quarter            $2,875,000                 $2,840,000
until maturity
- ---------------------------------------------------------------------------------







                                COMPANY COVENANT

                                SCHEDULE 4.22(C)



- ---------------------------------------------------------------------------
          PERIOD                     CURRENT MINIMUM CASH BALANCES
- ---------------------------------------------------------------------------

Quarter during which the                     $3,000,000
Consolidation Date occurs and
each subsequent quarter of the
same fiscal year
- ---------------------------------------------------------------------------
Fiscal Year during which the                 $3,000,000
Consolidation Date occurs
- ---------------------------------------------------------------------------
Thereafter per quarter until                 $4,000,000
maturity
- ---------------------------------------------------------------------------







- ------------------------------------------------------------------------------
             PERIOD                       REVISED MINIMUM CASH BALANCES
- ------------------------------------------------------------------------------

4th Quarter 2005                                       n/a
- ------------------------------------------------------------------------------
Fiscal Year 2005                                       n/a
- ------------------------------------------------------------------------------
1st Quarter 2006                                    $2,500,000
- ------------------------------------------------------------------------------
2nd Quarter 2006                                    $2,750,000
- ------------------------------------------------------------------------------
3rd Quarter 2006                                    $3,000,000
- ------------------------------------------------------------------------------
4th Quarter 2006                                    $3,000,000
- ------------------------------------------------------------------------------
Fiscal Year 2006                                    $3,000,000
- ------------------------------------------------------------------------------
Thereafter, per quarter until                       $4,000,000
maturity
- ------------------------------------------------------------------------------

EX-10.33 4 file004.htm 2006 INCENTIVE STOCK PLAN




                                                                   Exhibit 10.33

                            RELATIONSERVE MEDIA, INC.

                            2006 INCENTIVE STOCK PLAN

           1. PURPOSE OF THE PLAN.

               This 2006 Incentive Stock Plan (the "Plan") is intended as an
incentive, to retain in the employ of and as directors, officers, consultants,
advisors and employees to RelationServe Media, Inc., a Delaware corporation (the
"Company"), and any Subsidiary of the Company, within the meaning of Section
424(f) of the United States Internal Revenue Code of 1986, as amended (the
"Code"), persons of training, experience and ability, to attract new directors,
officers, consultants, advisors and employees whose services are considered
valuable, to encourage the sense of proprietorship and to stimulate the active
interest of such persons in the development and financial success of the Company
and its Subsidiaries.

               It is further intended that certain options granted pursuant to
the Plan shall constitute incentive stock options within the meaning of Section
422 of the Code (the "Incentive Options") while certain other options granted
pursuant to the Plan shall be nonqualified stock options (the "Nonqualified
Options"). Incentive Options and Nonqualified Options are hereinafter referred
to collectively as "Options."

               The Company intends that the Plan meet the requirements of Rule
16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. Further, the Plan is intended to satisfy the
performance-based compensation exception to the limitation on the Company's tax
deductions imposed by Section 162(m) of the Code with respect to those Options
for which qualification for such exception is intended. In all cases, the terms,
provisions, conditions and limitations of the Plan shall be construed and
interpreted consistent with the Company's intent as stated in this Section 1.

           2. ADMINISTRATION OF THE PLAN.

               The Board of Directors of the Company (the "Board") shall appoint
and maintain as administrator of the Plan a Committee (the "Committee")
consisting of two or more directors who are "Non-Employee Directors" (as such
term is defined in Rule 16b-3) and "Outside Directors" (as such term is defined
in Section 162(m) of the Code), which shall serve at the pleasure of the Board.
The Committee, subject to Sections 3, 5 and 6 hereof, shall have full power and
authority to designate recipients of Options and restricted stock ("Restricted
Stock") and to determine the terms and conditions of the respective Option and
Restricted Stock agreements (which need not be identical) and to interpret the
provisions and supervise the administration of the Plan. The Committee shall
have the authority, without limitation, to designate which Options granted under
the Plan shall be Incentive Options and which shall be





Nonqualified Options. To the extent any Option does not qualify as an Incentive
Option, it shall constitute a separate Nonqualified Option.

               Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all Options and Restricted Stock granted under the Plan,
shall make such rules as it deems necessary for the proper administration of the
Plan, shall make all other determinations necessary or advisable for the
administration of the Plan and shall correct any defects or supply any omission
or reconcile any inconsistency in the Plan or in any Options or Restricted Stock
granted under the Plan in the manner and to the extent that the Committee deems
desirable to carry into effect the Plan or any Options or Restricted Stock. The
act or determination of a majority of the Committee shall be the act or
determination of the Committee and any decision reduced to writing and signed by
all of the members of the Committee shall be fully effective as if it had been
made by a majority at a meeting duly held. Subject to the provisions of the
Plan, any action taken or determination made by the Committee pursuant to this
and the other Sections of the Plan shall be conclusive on all parties.

               In the event that for any reason the Committee is unable to act
or if the Committee at the time of any grant, award or other acquisition under
the Plan does not consist of two or more Non-Employee Directors, or if there
shall be no such Committee, then the Plan shall be administered by the Board,
and references herein to the Committee (except in the proviso to this sentence)
shall be deemed to be references to the Board, and any such grant, award or
other acquisition may be approved or ratified in any other manner contemplated
by subparagraph (d) of Rule 16b-3; [provided, however, that grants to the
Company's Chief Executive Officer or to any of the Company's other four most
highly compensated officers that are intended to qualify as performance-based
compensation under Section 162(m) of the Code may only be granted by the
Committee. Don - let's discuss this provision].

           3. DESIGNATION OF OPTIONEES AND GRANTEES.

               The persons eligible for participation in the Plan as recipients
of Options (the "Optionees") or Restricted Stock (the "Grantees" and together
with Optionees, the "Participants") shall include directors, officers and
employees of, and subject to their meeting the eligibility requirements of Rule
701 promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), consultants, vendors, joint venture partners, and advisors to, the
Company or any Subsidiary; provided that Incentive Options may only be granted
to employees of the Company and any Subsidiary. In selecting Participants, and
in determining the number of shares to be covered by each Option or share of
Restricted Stock granted to Participants, the Committee may consider any factors
it deems relevant, including without limitation, the office or position held by
the Participant or the Participant's relationship to the Company, the
Participant's degree of responsibility for and contribution to the growth and
success of the Company or any Subsidiary, the Participant's length of service,
promotions and potential. A Participant who has been granted an Option or
Restricted Stock hereunder may be granted an additional Option or Options, or
Restricted Stock if the Committee shall so determine.


                                        2


           4. STOCK RESERVED FOR THE PLAN.

               Subject to adjustment as provided in Section 8 hereof, a total of
2,700,000 shares of the Company's Common Stock, par value $0.001 per share (the
"Stock"), shall be subject to the Plan. The maximum number of shares of Stock
that may be subject to Options granted under the Plan to any individual in any
calendar year shall not exceed 1,000,000 shares and the method of counting such
shares shall conform to any requirements applicable to performance-based
compensation under Section 162(m) of the Code, if qualification as
performance-based compensation under Section 162(m) of the Code is intended. The
shares of Stock subject to the Plan shall consist of unissued shares, treasury
shares or previously issued shares held by any Subsidiary of the Company, and
such amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option or Restricted Stock expire or be
canceled prior to its exercise or vesting in full or should the number of shares
of Stock to be delivered upon the exercise or vesting in full of an Option or
Restricted Stock be reduced for any reason, the shares of Stock theretofore
subject to such Option or Restricted Stock may be subject to future Options or
Restricted Stock under the Plan, except where such reissuance is inconsistent
with the provisions of Section 162(m) of the Code where qualification as
performance-based compensation under Section 162(m) of the Code is intended.

           5. TERMS AND CONDITIONS OF OPTIONS.

               Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

               (a) OPTION PRICE. The purchase price of each share of Stock
purchasable under an Incentive Option shall be determined by the Committee at
the time of grant, but shall not be less than 100% of the Fair Market Value (as
defined below) of such share of Stock on the date the Option is granted;
provided, however, that with respect to an Optionee who, at the time such
Incentive Option is granted, owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or of any Subsidiary, the purchase price per share of Stock shall
be at least 110% of the Fair Market Value per share of Stock on the date of
grant. The purchase price of each share of Stock purchasable under a
Nonqualified Option shall not be less than 100% of the Fair Market Value of such
share of Stock on the date the Option is granted. The exercise price for each
Option shall be subject to adjustment as provided in Section 8 below. "Fair
Market Value" means the closing price on the final trading day immediately prior
to the grant of publicly traded shares of Stock on the principal securities
exchange on which shares of Stock are listed (if the shares of Stock are so
listed), or on the NASDAQ Stock Market (if the shares of Stock are regularly
quoted on the NASDAQ Stock Market), or, if not so listed or regularly quoted,
the mean between the closing bid and asked prices of publicly traded shares of
Stock in the over the counter market, or, if such bid and asked prices shall not
be available, as reported by any nationally recognized quotation service
selected by the Company, or as determined by the Committee in a manner
consistent with the provisions of the Code. Anything in this Section 5(a) to the
contrary notwithstanding, in no


                                        3



event shall the purchase price of a share of Stock be less than the minimum
price permitted under the rules and policies of any national securities exchange
on which the shares of Stock are listed.

               (b) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after the date
such Option is granted and in the case of an Incentive Option granted to an
Optionee who, at the time such Incentive Option is granted, owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or of any Subsidiary, no
such Incentive Option shall be exercisable more than five years after the date
such Incentive Option is granted.

               (c) EXERCISABILITY. Subject to Section 5(j) hereof, Options shall
be exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant; provided, however,
that in the absence of any Option vesting periods designated by the Committee at
the time of grant, Options shall vest and become exercisable as to one-third of
the total amount of shares subject to the Option on each of the first, second
and third anniversaries of the date of grant; and provided further that no
Options shall be exercisable until such time as any vesting limitation required
by Section 16 of the Exchange Act, and related rules, shall be satisfied if such
limitation shall be required for continued validity of the exemption provided
under Rule 16b-3(d)(3).

               Upon the occurrence of a "Change in Control" (as hereinafter
defined), the Committee may accelerate the vesting and exercisability of
outstanding Options, in whole or in part, as determined by the Committee in its
sole discretion. In its sole discretion, the Committee may also determine that,
upon the occurrence of a Change in Control, each outstanding Option shall
terminate within a specified number of days after notice to the Optionee
thereunder, and each such Optionee shall receive, with respect to each share of
Company Stock subject to such Option, an amount equal to the excess of the Fair
Market Value of such shares immediately prior to such Change in Control over the
exercise price per share of such Option; such amount shall be payable in cash,
in one or more kinds of property (including the property, if any, payable in the
transaction) or a combination thereof, as the Committee shall determine in its
sole discretion.

               For purposes of the Plan, a Change in Control shall be deemed to
have occurred if:

                    (i) a tender offer (or series of related offers) shall be
               made and consummated for the ownership of 50% or more of the
               outstanding voting securities of the Company, unless as a result
               of such tender offer more than 50% of the outstanding voting
               securities of the surviving or resulting corporation shall be
               owned in the aggregate by the stockholders of the Company (as of
               the time immediately prior to the commencement of such offer),
               any employee benefit plan of the Company or its Subsidiaries, and
               their affiliates;

                    (ii) the Company shall be merged or consolidated with
               another corporation, unless as a result of such merger or
               consolidation more than 50% of the outstanding voting securities
               of the surviving or resulting corporation shall be owned in the
               aggregate by the stockholders of the Company (as of the time


                                        4



               immediately prior to such transaction), any employee benefit plan
               of the Company or its Subsidiaries, and their affiliates;

                    (iii) the Company shall sell substantially all of its assets
               to another corporation that is not wholly owned by the Company,
               unless as a result of such sale more than 50% of such assets
               shall be owned in the aggregate by the stockholders of the
               Company (as of the time immediately prior to such transaction),
               any employee benefit plan of the Company or its Subsidiaries and
               their affiliates; or

                    (iv) a Person (as defined below) shall acquire 50% or more
               of the outstanding voting securities of the Company (whether
               directly, indirectly, beneficially or of record), unless as a
               result of such acquisition more than 50% of the outstanding
               voting securities of the surviving or resulting corporation shall
               be owned in the aggregate by the stockholders of the Company (as
               of the time immediately prior to the first acquisition of such
               securities by such Person), any employee benefit plan of the
               Company or its Subsidiaries, and their affiliates.

                    For purposes of this Section 5(c), ownership of voting
securities shall take into account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
addition, for such purposes, "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include (A) the Company or any of its
Subsidiaries; (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries; (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company.

                    (d) METHOD OF EXERCISE. Options to the extent then
exercisable may be exercised in whole or in part at any time during the option
period, by giving written notice to the Company specifying the number of shares
of Stock to be purchased, accompanied by payment in full of the purchase price,
in cash, or by check or such other instrument as may be acceptable to the
Committee. As determined by the Committee, in its sole discretion, at or after
grant, payment in full or in part may be made at the election of the Optionee
(i) in the form of Stock owned by the Optionee (based on the Fair Market Value
of the Stock which is not the subject of any pledge or security interest, (ii)
in the form of shares of Stock withheld by the Company from the shares of Stock
otherwise to be received with such withheld shares of Stock having a Fair Market
Value equal to the exercise price of the Option, or (iii) by a combination of
the foregoing, such Fair Market Value determined by applying the principles set
forth in Section 5(a), provided that the combined value of all cash and cash
equivalents and the Fair Market Value of any shares surrendered to the Company
is at least equal to such exercise price and except with respect to (ii) above,
such method of payment will not cause a disqualifying disposition of all or a
portion of the Stock received upon exercise of an Incentive Option. An Optionee
shall have the right to dividends and other rights of a stockholder with respect
to shares of Stock purchased upon exercise of an Option at such time as the
Optionee (i) has given written


                                        5



notice of exercise and has paid in full for such shares, and (ii) has satisfied
such conditions that may be imposed by the Company with respect to the
withholding of taxes.

                    (e) NON-TRANSFERABILITY OF OPTIONS. Options are not
transferable and may be exercised solely by the Optionee during his lifetime or
after his death by the person or persons entitled thereto under his will or the
laws of descent and distribution. The Committee, in its sole discretion, may
permit a transfer of a Nonqualified Option to (i) a trust for the benefit of the
Optionee, (ii) a member of the Optionee's immediate family (or a trust for his
or her benefit) or (iii) pursuant to a domestic relations order. Any attempt to
transfer, assign, pledge or otherwise dispose of, or to subject to execution,
attachment or similar process, any Option contrary to the provisions hereof
shall be void and ineffective and shall give no right to the purported
transferee.

                    (f) TERMINATION BY DEATH. Unless otherwise determined by the
Committee, if any Optionee's employment with or service to the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee under the will of the Optionee, for a
period of one (1) year after the date of such death (or, if later, such time as
the Option may be exercised pursuant to Section 14(d) hereof) or until the
expiration of the stated term of such Option as provided under the Plan,
whichever period is shorter.

                    (g) TERMINATION BY REASON OF DISABILITY. Unless otherwise
determined by the Committee, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of total and permanent
disability, any Option held by such Optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to disability (or on
such accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after ninety (90) days after the date of such termination
of employment or service (or, if later, such time as the Option may be exercised
pursuant to Section 14(d) hereof) or the expiration of the stated term of such
Option, whichever period is shorter; provided, however, that, if the Optionee
dies within such ninety (90) day period, any unexercised Option held by such
Optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of one (1) year after the date of
such death (or, if later, such time as the Option may be exercised pursuant to
Section 14(d) hereof) or for the stated term of such Option, whichever period is
shorter.

                    (h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise
determined by the Committee, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of Normal or Early Retirement (as
such terms are defined below), any Option held by such Optionee may thereafter
be exercised to the extent it was exercisable at the time of such Retirement (or
on such accelerated basis as the Committee shall determine at or after grant),
but may not be exercised after ninety (90) days after the date of such
termination of employment or service (or, if later, such time as the Option may
be exercised pursuant to Section 14(d) hereof) or the expiration of the stated
term of such Option, whichever date is earlier; provided, however, that, if the
Optionee dies within such ninety (90) day period, any unexercised Option held by
such Optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of one (1) year after the date of
such death (or, if


                                        6



later, such time as the Option may be exercised pursuant to Section 14(d)
hereof) or for the stated term of such Option, whichever period is shorter.

               For purposes of this paragraph (h), "Normal Retirement" shall
mean retirement from active employment with the Company or any Subsidiary on or
after the normal retirement date specified in the applicable Company or
Subsidiary pension plan or if no such pension plan, age 65, and "Early
Retirement" shall mean retirement from active employment with the Company or any
Subsidiary pursuant to the early retirement provisions of the applicable Company
or Subsidiary pension plan or if no such pension plan, age 55.

               (i) OTHER TERMINATION. Unless otherwise determined by the
Committee and except as is provided below, if any Optionee's employment with or
service to the Company or any Subsidiary terminates for any reason other than
death, disability or Normal or Early Retirement, the Option shall thereupon
terminate, except that the portion of any Option that was exercisable on the
date of such termination of employment or service may be exercised for the
lesser of ninety (90) days after the date of termination (or, if later, such
time as to Option may be exercised pursuant to Section 14(d) hereof) or the
balance of such Option's term, which ever period is shorter. The transfer of an
Optionee from the employ of or service to the Company to the employ of or
service to a Subsidiary, or vice versa, or from one Subsidiary to another, shall
not be deemed to constitute a termination of employment or service for purposes
of the Plan.

                    (i) In the event that the Optionee's employment or service
               with the Company or any Subsidiary is terminated by the Company
               or such Subsidiary for "cause" any unexercised portion of any
               Option shall immediately terminate in its entirety. For purposes
               hereof, "Cause" shall exist upon a good-faith determination by
               the Board, following a hearing before the Board at which an
               Optionee was represented by counsel and given an opportunity to
               be heard, that such Optionee has been accused of fraud,
               dishonesty or act detrimental to the interests of the Company or
               any Subsidiary of Company or that such Optionee has been accused
               of or convicted of an act of willful and material embezzlement or
               fraud against the Company or of a felony under any state or
               federal statute; provided, however, that it is specifically
               understood that "Cause" shall not include any act of commission
               or omission in the good-faith exercise of such Optionee's
               business judgment as a director, officer or employee of the
               Company, as the case may be, of the Company, or upon the advice
               of counsel to the Company.

                    (ii) In the event that an Optionee is removed as a director,
               officer or employee by the Company at any time other than for
               "Cause" or resigns as a director, officer or employee for "Good
               Reason" the Option granted to such Optionee may be exercised by
               the Optionee, to the extent the Option was exercisable on the
               date such Optionee ceases to be a director, officer or employee.
               Such Option may be exercised at any time within one (1) year
               after the date the Optionee ceases to be a director, officer or
               employee (or, if later, such time as to Option may be exercised
               pursuant to Section 14(d) hereof), or the date on which the
               Option otherwise expires by its terms; which ever period is
               shorter, at which time the Option shall terminate; provided,
               however, if the Optionee dies before the Options are forfeited
               and no longer exercisable, the terms and provisions of


                                        7



               Section 5(f) shall control. For purposes of this Section 5(i)
               Good Reason shall exist upon the occurrence of the following:

                    (a)  the assignment of Optionee of any duties inconsistent
                         with the position in the Company that Optionee held
                         immediately prior to the assignment;

                    (b)  a Change of Control resulting in a significant adverse
                         alteration in the status or conditions of Optionee's
                         participation with the Company or other nature of
                         Optionee's responsibilities from those in effect prior
                         to such Change of Control, including any significant
                         alteration in Optionee's responsibilities immediately
                         prior to such Change in Control; and

                    (c)  the failure by the Company to continue to provide
                         Optionee with benefits substantially similar to those
                         enjoyed by Optionee prior to such failure.

               (j) Limit on Value of Incentive Option. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.

           6. TERMS AND CONDITIONS OF RESTRICTED STOCK.

               Restricted Stock may be granted under this Plan aside from, or in
association with, any other award and shall be subject to the following
conditions and shall contain such additional terms and conditions (including
provisions relating to the acceleration of vesting of Restricted Stock upon a
Change of Control), not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:

               (a) GRANTEE RIGHTS. A Grantee shall have no rights to an award of
Restricted Stock unless and until Grantee accepts the award within the period
prescribed by the Committee and, if the Committee shall deem desirable, makes
payment to the Company in cash, or by check or such other instrument as may be
acceptable to the Committee. After acceptance and issuance of a certificate or
certificates, as provided for below, the Grantee shall have the rights of a
stockholder with respect to Restricted Stock subject to the non-transferability
and forfeiture restrictions described in Section 6(d) below.

               (b) ISSUANCE OF CERTIFICATES. The Company shall issue in the
Grantee's name a certificate or certificates for the shares of Common Stock
associated with the award promptly after the Grantee accepts such award.

               (c) DELIVERY OF CERTIFICATES. Unless otherwise provided, any
certificate or certificates issued evidencing shares of Restricted Stock shall
not be delivered to the Grantee until such shares are free of any restrictions
specified by the Committee at the time of grant.


                                        8



               (d) FORFEITABILITY, NON-TRANSFERABILITY OF RESTRICTED STOCK.
Shares of Restricted Stock are forfeitable until the terms of the Restricted
Stock grant have been satisfied. Shares of Restricted Stock are not transferable
until the date on which the Committee has specified such restrictions have
lapsed. Unless otherwise provided by the Committee at or after grant,
distributions in the form of dividends or otherwise of additional shares or
property in respect of shares of Restricted Stock shall be subject to the same
restrictions as such shares of Restricted Stock.

               (e) CHANGE OF CONTROL. Upon the occurrence of a Change in Control
as defined in Section 5(c), the Committee may accelerate the vesting of
outstanding Restricted Stock, in whole or in part, as determined by the
Committee, in its sole discretion.

               (f) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Committee at or after grant, in the event the Grantee ceases to be an employee
or otherwise associated with the Company for any other reason, all shares of
Restricted Stock theretofore awarded to him which are still subject to
restrictions shall be forfeited and the Company shall have the right to complete
the blank stock power. The Committee may provide (on or after grant) that
restrictions or forfeiture conditions relating to shares of Restricted Stock
will be waived in whole or in part in the event of termination resulting from
specified causes, and the Committee may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to Restricted Stock.

           7. TERM OF PLAN.

               No Option or Restricted Stock shall be granted pursuant to the
Plan on the date which is ten years from the effective date of the Plan, but
Options theretofore granted may extend beyond that date.

           8. CAPITAL CHANGE OF THE COMPANY.

               In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained (to the extent possible) as
immediately before the occurrence of such event. The Committee shall, to the
extent feasible, make such other adjustments as may be required under the tax
laws so that any Incentive Options previously granted shall not be deemed
modified within the meaning of Section 424(h) of the Code. Appropriate
adjustments shall also be made in the case of outstanding Restricted Stock
granted under the Plan.

               The adjustments described above will be made only to the extent
consistent with continued qualification of the Option under Section 422 of the
Code (in the case of an Incentive Option) and Section 409A of the Code.


                                        9



           9. PURCHASE FOR INVESTMENT/CONDITIONS.

               Unless the Options and shares covered by the Plan have been
registered under the Securities Act, or the Company has determined that such
registration is unnecessary, each person exercising or receiving Options or
Restricted Stock under the Plan may be required by the Company to give a
representation in writing that he is acquiring the securities for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof. The Committee may impose any additional or
further restrictions on awards of Options or Restricted Stock as shall be
determined by the Committee at the time of award.

           10. TAXES.

               (a) The Company may make such provisions as it may deem
appropriate, consistent with applicable law, in connection with any Options or
Restricted Stock granted under the Plan with respect to the withholding of any
taxes (including income or employment taxes) or any other tax matters.

               (b) If any Grantee, in connection with the acquisition of
Restricted Stock, makes the election permitted under Section 83(b) of the Code
(that is, an election to include in gross income in the year of transfer the
amounts specified in Section 83(b)), such Grantee shall notify the Company of
the election with the Internal Revenue Service pursuant to regulations issued
under the authority of Code Section 83(b).

               (c) If any Grantee shall make any disposition of shares of Stock
issued pursuant to the exercise of an Incentive Option under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions), such Grantee shall notify the Company of such disposition within
ten (10) days hereof.

           11. EFFECTIVE DATE OF PLAN.

               The Plan shall be effective on March 2, 2006; provided, however,
that if, and only if, certain options are intended to qualify as Incentive Stock
Options, the Plan must subsequently be approved by majority vote of the
Company's stockholders no later than March 2, 2007, and further, that in the
event certain Option grants hereunder are intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the Code,
the requirements as to shareholder approval set forth in Section 162(m) of the
Code are satisfied.

           12. AMENDMENT AND TERMINATION.

               The Board may amend, suspend, or terminate the Plan, except that
no amendment shall be made that would impair the rights of any Participant under
any Option or Restricted Stock theretofore granted without the Participant's
consent, and except that no amendment shall be made which, without the approval
of the stockholders of the Company would:

               (a) materially increase the number of shares that may be issued
under the Plan, except as is provided in Section 8;

               (b) materially increase the benefits accruing to the Participants
under the Plan;


                                       10



               (c) materially modify the requirements as to eligibility for
participation in the Plan;

               (d) decrease the exercise price of an Incentive Option to less
than 100% of the Fair Market Value per share of Stock on the date of grant
thereof or the exercise price of a Nonqualified Option to less than 100% of the
Fair Market Value per share of Stock on the date of grant thereof; or

               (e) extend the term of any Option beyond that provided for in
Section 5(b).

               The Committee may at any time or times amend the Plan or any
outstanding award for any purpose which may at the time be permitted by law, or
may at any time terminate the Plan as to any further grants of awards, provided
that (except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of Incentive Options under Section 422
of the Code.

               It is the intention of the Board that the Plan comply strictly
with the provisions of Section 409A of the Code and Treasury Regulations and
other Internal Revenue Service guidance promulgated thereunder (the "Section
409A Rules") and the Committee shall exercise its discretion in granting awards
hereunder (and the terms of such awards), accordingly. The Plan and any grant of
an award hereunder may be amended from time to time (without, in the case of an
award, the consent of the Participant) as may be necessary or appropriate to
comply with the Section 409A Rules.

           13. GOVERNMENT REGULATIONS.

               The Plan, and the grant and exercise of Options or Restricted
Stock hereunder, and the obligation of the Company to sell and deliver shares
under such Options and Restricted Stock shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies,
national securities exchanges and interdealer quotation systems as may be
required.

           14. GENERAL PROVISIONS.

               (a) CERTIFICATES. All certificates for shares of Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, or other
securities commission having jurisdiction, any applicable Federal or state
securities law, any stock exchange or interdealer quotation system upon which
the Stock is then listed or traded and the Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions.

               (b) EMPLOYMENT MATTERS. Neither the adoption of the Plan nor any
grant or award under the Plan shall confer upon any Participant who is an
employee of the Company or any Subsidiary any right to continued employment or,
in the case of a Participant who is a director, continued service as a director,
with the Company or a Subsidiary, as the case may be, nor shall it interfere in
any way with the right of the Company or any Subsidiary to terminate the


                                       11



employment of any of its employees, the service of any of its directors or the
retention of any of its consultants or advisors at any time.

               (c) LIMITATION OF LIABILITY. No member of the Committee, or any
officer or employee of the Company acting on behalf of the Committee, shall be
personally liable for any action, determination or interpretation taken or made
in good faith with respect to the Plan, and all members of the Committee and
each and any officer or employee of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the Company
in respect of any such action, determination or interpretation.

               (d) REGISTRATION OF STOCK. Notwithstanding any other provision in
the Plan, no Option may be exercised unless and until the Stock to be issued
upon the exercise thereof has been registered under the Securities Act and
applicable state securities laws, or are, in the opinion of counsel to the
Company, exempt from such registration in the United States. The Company shall
not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder in order to permit the exercise of an Option and the issuance and sale
of the Stock subject to such Option, although the Company may in its sole
discretion register such Stock at such time as the Company shall determine. If
the Company chooses to comply with such an exemption from registration, the
Stock issued under the Plan may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or pledge of the Stock
represented thereby, and the Committee may also give appropriate stop transfer
instructions with respect to such Stock to the Company's transfer agent.

           15. NON-UNIFORM DETERMINATIONS.

               The Committee's determinations under the Plan, including, without
limitation, (i) the determination of the Participants to receive awards, (ii)
the form, amount and timing of such awards, (iii) the terms and provisions of
such awards and (ii) the agreements evidencing the same, need not be uniform and
may be made by it selectively among Participants who receive, or who are
eligible to receive, awards under the Plan, whether or not such Participants are
similarly situated.

           16. GOVERNING LAW.

               The validity, construction, and effect of the Plan and any rules
and regulations relating to the Plan shall be determined in accordance with the
internal laws of the State of Delaware, without giving effect to principles of
conflicts of laws, and applicable federal law.

                            RelationServe Media, Inc.
                            March 2, 2006

EX-10.37 5 file005.htm LEASE



                                                                   Exhibit 10.37

                                      LEASE

THIS LEASE AGREEMENT, dated            by and between Koger Equity, Inc., a
corporation organized and existing under the laws of the State of Florida
("Landlord"), with its principal offices at 225 NE Mizner Blvd, Suite 200, Boca
Raton, FL 33432, (Federal I.D. 59-2898045) and SendTec, Inc., a corporation
organized and existing under the laws of the State of Florida ("Tenant"), with
its principal office at 877 Executive Center Drive W, Suite 300, St Petersburg,
FL 33702, (Federal I.D. 59-3626325)

1.       LEASE PROVISIONS

A.   DESCRIPTION OF PREMISES
     Suite Numbers(s)    300
     Building Name       GLADES (17)
     Address             877 EXECUTIVE CENTER DRIVE W.
     County              PINELLAS
     City                ST. PETERSBURG
     State/Zip           FL 33702
     Center              ST PETERSBURG CENTER (05)

B.   LEASED AREA
     Agreed to be approximately 14.411 rentable
     square feet (includes Tenants share of common area)

C.   LEASE TERMS
     Lease Term(Months)  72
     Commencement Date   01 MARCH 2004
     Expiration Date     28 FEBRUARY 2010
     Monthly Base Rent   $17,113.06
     Sales or Use Tax    $1,197.91
     Monthly Total       $18,310.97
     Security Deposit    $3,558.51 EXISTING
     HVAC Access Fee Per Hour/Unit $6.00

D.   PAYMENTS
     Payee               KOGER EQUITY, INC.
     Address             P.O. BOX 538269
     City/State/Zip      ATLANTA, GA 30353-8269
     Tenant Account#     051209 (note on remittance)

E. NOTICES
   Tenant       SENDTEC, INC.
                877 EXECUTIVE CENTER DRIVE W.
                SUITE 300
                ST. PETERSBURG, FL 33702

   Copy to      SENDTEC, INC.
                877 EXECUTIVE CENTER DRIVE W.
                SUITE 300
                ST. PETERSBURG, FL 33702


   Landlord     KOGER EQUITY, INC.
                877 EXECUTIVE CENTER DRIVE, W.
                SUITE 100
                ST. PETERSBURG, FL 33702

   Copy to      KOGER EQUITY, INC.
                225 NE MIZNER BLVD
                SUITE 200
                BOCA RATON, FL 33432

F. MANAGER
   N/A


G. GUARANTOR(S)
   N/A

The provisions contained in Sections 2 through 29 are incorporated into and
become a part of this Lease by reference. Tenant and Landlord have executed or
caused to be executed this Lease on the dates shown below the signatures,
effective as of the date first set forth above



Tenant:  SendTec, Inc.                                                 Landlord:  Koger Equity, Inc.


By:      /s/ David W. Gould, Jr.               (SEAL)                  By:   /s/ Ben M. Wakefield                      (SEAL)
         -------------------------------------                               -----------------------------------------
(Print Name)     David W. Gould, Jr.                                   (Print Name)  Ben M. Wakefield
                 --------------------------------------
Title    CFO                                                           Title  Vice President
         ----------------------------------------------

Attest                                                                 Attest  /s/ Vicki Cervasio
           --------------------------------------------                        ------------------------------------------------

(Print Name)                                                           (Print Name)  Vicki Cervasio
                 --------------------------------------                              ------------------------------------------
Title                                                                  Title
         ----------------------------------------------                       -------------------------------------------------
(Corporate Seal)                                                       (Corporate Seal)

Date                                                                   Date   1-30-04
         ----------------------------------------------                       -------------------------------------------------
Signed and sealed in the presence of:                                  Signed and sealed in the presence of:

(1)     /s/ Alex Liggett                                               (1)   /s/ Barbara M. Cox
        -----------------------------------------------                      --------------------------------------------------
(Print Name)     Alex Liggett                                          (Print Name)  Barbara M. Cox
                 --------------------------------------                              ------------------------------------------
(2)                                                                    (2)
        -----------------------------------------------                      --------------------------------------------------
(Print Name)                                                           (Print Name)
                 --------------------------------------                              ------------------------------------------
As to Tenant                                                           As to Landlord


                                    1 of 15




2. LEASE OF PREMISES: Landlord leases to Tenant and Tenant takes from Landlord
the premises ("Premises") shown on Exhibit "A", to be used exclusively by
Tenant, in the building ("Building") on the property ("Property") located at the
address stated in Section 1A under the terms and conditions contained in this
Lease.

3. TERM AND POSSESSION: The term of this Lease ("Term") shall commence on the
later of date ("Occupancy Date") or the later of: (i) March 1, 2004 the date
("Commencement Date"). The Term shall expire seventy-two (72) months after the
Occupancy Date all as stated in Section 1C unless modified under other
provisions in this Lease. Tenant will have access to the Premises fifteen (15)
days prior to commencement for the purpose of installing furniture and if
complete may occupy.

Landlord agrees to have the Premises substantially completed and ready for
possession on or before the Commencement Date, subject to causes or events
beyond the control of Landlord ("Unforeseen Causes") Should there be a delay,
Tenant agrees to accept possession of the Premises within 10 days after the
receipt of written notice by Landlord of substantial completion and the
Occupancy Date then shall be the first day of the calendar month immediately
following the occupancy date, and the Expiration Date shall be changed to
maintain the Term in Section 1C, and these changes shall be reflected in a Lease
Amendment. Tenant will be relieved of all liability associated with their
current Lease in the Lake Building (including payment of rent) upon the earlier
(i) occupancy of the new Premises, March 1, 2004 or (ii) Commencement Date.
However, in the event Tenant does not take occupancy of new Premises by March 1,
2004, and such delays are caused by either Tenant or events or circumstances
that are uncontrollable by the Landlord, rent will continue at the same rate
paid January, 2004 for the Lake Building Premises.

4. USE: Tenant shall use the Premises for general office or other lawful
purposes only and shall not use or permit the use or occupancy of the Premises
in any manner which: (a) is unlawful; (b) may be dangerous; (c) may invalidate
any insurance policy held by Landlord affecting the Building; (d) may create a
nuisance, disturb other Tenants of the Building or the occupants of neighboring
Property or injure the reputation of the Building; or (e) violates the "Rules
and Regulations," which are subject to change, of the Building, a copy of which
is available in Landlord's office, or any restriction, covenant or encumbrance
of record affecting the Property. Tenant shall be responsible for any costs
incurred by Landlord by reason of Tenant's and/or Tenant's agents', employees'
or invitees' misuse and/or damage of the Premises or common areas Tenant shall
pay Landlord such costs as Additional Rent.

5. RENT AND SALES/USE TAX: Monthly Rent is due in advance on the first day of
each month and will be delinquent on the 6th day of the month. "Monthly Rent"
shall mean: (a) the initial monthly base rent stated in Section 1C for the first
twelve months following the Commencement Date of the Term of this Lease ("Base
Year") and (b) the adjusted Monthly Rent, as adjusted under this Lease. Monthly
Rent and any Additional Rent ("Additional Rent") (collectively called "Rent")
plus any sales or use taxes shall be paid without notice or demand and without
any deduction. Tenant agrees to pay to Landlord all Rent and other sums under
this Lease at the address specified in Section 1D, or at any other place
designated in writing by Landlord Rent for any partial lease month shall be
prorated. Tenant's obligation to pay Rent to Landlord shall be independent of
every other covenant or obligation under this Lease. All delinquent Rent or
other sums due shall bear interest not to exceed 18% per annum, from the date
due until paid plus, Tenant shall pay a late payment service charge, not to
exceed $250.00. Tenant shall pay a charge equal to $50.00 per returned check or
the amount to which Landlord is entitled under state law, whichever is greater,
but not to exceed $150.00 No late fees and charges shall exceed the amounts
permitted by applicable state law.

Unless Tenant has tax exempt status, in addition to the Rent and other sums due
to Landlord under this Lease, Tenant shall pay to Landlord any sales, use, or
other tax, excluding Federal or State income taxes, now or hereafter imposed
upon rents and other sums due to Landlord under this Lease.

6. RENT ADJUSTMENT: Monthly Rent for each successive twelve-month period ("Lease
Year") subsequent to the Base Year shall be increased by 2.5% of the Monthly
Rent for the previous Lease Year. Landlord shall endeavor to notify Tenant of
the amount of the adjusted Monthly Rent, in writing, prior to the effective date
of such adjustment Tenant agrees to pay the adjusted Monthly Rent, regardless of
whether or when Landlord provides such notice

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The "Operating Expense Stop" is an amount equal to the actual Operating Expenses
(as defined herein) for Calendar Year 2004 (the "Operating Expense Base Calendar
Year")

The following terms shall have the following meanings: "Escalation Year" shall
mean each calendar year falling, in whole or in part, within the term of this
Lease, commencing with the calendar year in which the Commencement Date occurs;
"Tenant's Share" (subject to final measurements per BOMA)shall mean that number,
stated as a percentage, determined by dividing the number of rentable square
feet in the Premises by the number of rentable square feet in the Building
(which shall be 21.74%%), "Operating Expenses" shall mean the expenses paid or
incurred by Landlord for the operation and maintenance of the Building,
including, but not limited to, janitorial expenses, ad valorem real estate taxes
(and the costs of reasonable legal and consulting fees incurred in actually
reducing the aforesaid taxes), electric and gas expenses, water and sewer
expenses, grounds maintenance expense, general maintenance expense, mechanical
maintenance expense, security services expense, miscellaneous expenses, property
insurance expense, management cost, and the reasonable amortization of capital
improvements which will improve the efficiency of operating, managing or
maintaining the Building or which will reduce Landlord's operating expenses or
the rate of increase thereof; "Estimated Operating Expenses" shall mean an
amount equal to the product of multiplying the Operating Expense Stop set forth
above by the number of rentable square feet in the Building; "Operating
Statement" shall mean a statement certified by an official of Landlord as being
correct and complete setting forth the Operating Expenses for such Escalation
Year and a computation of any Additional Rent for such Escalation Year; and
"Additional Rent" shall mean, for each Escalation Year, Tenant's Share of the
increase, if any, in the Operating Expenses for such calendar year over the
Operating Expense Stop

NOTWITHSTANDING THE FOREGOING, "OPERATING EXPENSES" SHALL EXCLUDE THE FOLLOWING:

1. Repairs or other work, except capital improvements, unless covered by
insurance, occasioned by fire, windstorm, or other insurable casualty of any
nature except to the extend of the reasonable deductible contained in the policy
or by the exercise of the right of eminent domain;

2. Leasing commissions, attorneys' fees, costs and disbursements, and other
expenses incurred in connection with the negotiations for and the execution of
Leases and disputes in connection with tenants, other occupants, or prospective
tenants or other occupants;

3. Renovating or otherwise improving or decorating, painting, or redecorating
space for new tenants or other occupants of vacant space;

4. Landlord's cost of electricity and other services and materials furnished to
tenants and for which Landlord is entitled to be directly reimbursed by the
benefited tenants as an additional charge or rental over and above the basic
rent payable under the lease with such tenants. Provided, however, that as an
accounting procedure such costs may be charged as a part of Operating Expenses
with the reimbursement received credited to Operating Expenses;

5. Costs incurred by Landlord for alterations which are considered capital
improvements and replacements under generally accepted accounting and operating
principles employed on a consistent basis by Landlord, except for reasonable
costs of improvements as a replacement of a labor-saving measure, or that reduce
costs of operation and maintenance, or that are hereafter required under any
governmental law or regulation for energy conservation, fire, life, safety or
other purposes, such reasonable costs to be amortized over the useful life of
the improvement in accordance with Generally Accepted Accounting Principles;

6. Depreciation and amortization (except as included pursuant to Paragraph 5, or
as to which credit is received from a benefited Tenant);

7. Costs of a capital nature, including capital improvements, capital repairs,
capital equipment, all in accordance with generally accepted accounting and
operating principles employed on a consistent basis by Landlord (except as
included pursuant to Paragraph 5);

8. Expenses in connection with services or other benefits of a type which are
not provided Tenant but which are provided to another Tenant or occupant;


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9. Overhead and profit increments paid to subsidiaries or affiliates of Landlord
for services on or to the Building, to the extent only that the costs of such
services were they not so rendered by a subsidiary or affiliate;

10. Interests on any debt or any amortization payments on any mortgage or
mortgages encumbering the Building, and rental under any ground or underlying
leases or lease for the Building;

11. Landlord's general overhead or general administrative expenses not
specifically incurred in the operation of the Premises, except for allocated
overhead costs to cover accounting, audit, management, and related costs;

12. Rentals and other related expenses incurred in leasing permanent
air-conditioning systems, elevators, or other building equipment ordinarily
considered to be of a capital nature, except temporary equipment or equipment
which is used in providing janitorial, repair, maintenance, or engineering
services and which is not permanently affixed to the Building;

13. All items and services for which Tenant reimburses Landlord or pays to other
persons. Provided, however, that as an accounting procedure such costs
reimbursed by Tenant to Landlord may be charged as a part of Operating Expenses
with the reimbursement received credited to Operating Expenses;

14. Advertising and promotional expenditures associated with obtaining Tenants
for the Building or not having a reasonably foreseeable benefit for Tenant;

15. Wages, salaries, commissions, or other compensation paid to employees above
the level of Building Manager (except Landlord may allocate other direct
compensation of employees of Landlord, not to exceed in the aggregate the
compensation payable to an employee with the title of Building Manager);

16. Charitable contributions of Landlord;

17. Purchase cost of painting, sculptures, or other artwork purchased for
display in the Building;

18. Rental costs of office space occupied by the Landlord, its agents'
employees, or independent contractors, for leasing offices;

19. Management fees accrued by Landlord or paid to subsidiaries or affiliates of
Landlord to the extent that such fees exceed competitive costs of such services
were they no so accrued by Landlord or rendered by a subsidiary or affiliate and
management fees in excess of four percent (4%) of gross revenues of Landlord
from the Building;

20. Environmental or hazardous waste clean-up costs incurred by Landlord with
respect to pre-existing conditions at the Building;

21. Any Operating Expense representing an amount paid to a related corporation,
entity, or person which is in excess of the amount which would be paid in the
absence of such relationship; or any amounts paid to any person, firm or
corporation related to or otherwise affiliated with Landlord or any general
partner, officer, director or shareholder or Landlord or any of the foregoing,
to the extent the same exceeds arms-length competitive prices paid in the
business area in which the Building is located for similar services or goods
provided;

22. The cost of overtime or other expense to Landlord in curing its defaults or
performing work expressly provided in this Lease to be borne at Landlord's
expense;

23. Inheritance, gift, transfer, franchise, excise, net income and profit taxes
or capital levies imposed on Landlord;

24. Ground rent or similar payments to a ground lessor;

25. Cost of installing, operating and maintaining any specialty service operated
by Landlord, such as a luncheon, athletic or recreational club in the Building.

26. Reserves for repairs, maintenance and replacements;


                                    4 of 15




27. Costs relating to maintaining Landlord's existence, either as a corporation,
partnership or other entity, such as trustee's fees, annual fees, partnership
organization or administration expenses, deed recordation expenses, legal and
accounting fees (other than with respect to Building operations; and

28. INTEREST OR PENALTIES ARISING BY REASON OF LANDLORD'S FAILURE TO TIMELY PAY
ANY TAXES OR OPERATING EXPENSES.

For each Escalation Year, Tenant shall pay the Additional Rent to Landlord
without demand, deduction or set-off in 12 equal monthly installments during
each Escalation Year based upon a reasonable estimate by Landlord of the
Additional Rent for such Escalation Year, each such installment being due with
installments of Base Rent

If the Additional Rent paid by Tenant for any given Escalation Year, based upon
Landlord's estimate, differs from the actual amount of the Additional Rent for
such Escalation Year, the difference shall be payable by Landlord or Tenant, as
the case may be, in a lump sum on the first day of the second month following
the month in which Landlord renders its Operating Statement to Tenant with
respect to such Escalation Year. Notwithstanding the foregoing, Landlord's
obligation to refund Tenant's payment in excess of the estimated Additional Rent
shall be conditional upon Tenant having first paid all of its monthly
installments of estimated Additional Rent. In no event shall Landlord be
required to pay to Tenant in any Escalation Year an amount in excess of the
estimated Additional Rent actually paid by Tenant

Upon request by Tenant, Landlord shall furnish Tenant such information as may be
necessary for Tenant to verify Operating Expenses and shall cooperate with
Tenant in verifying the Operating Statement. The Operating Statement shall be
rendered by Landlord to Tenant within one month after calculation of such
Operating Expenses by Landlord Tenant shall have 90 days after receipt of any
Operating Statements to dispute the correctness or completeness thereof, after
which time the Operating Statement shall be deemed to be complete. Tenant shall
have the right to audit Landlord's Operating Statement. In the event that
Tenant's audit reveals a mistake in Tenant's favor in excess of five percent
(5%) of the total operating expenses payable by Tenant, Landlord shall reimburse
Tenant for the cost of Tenant's audit, together with Tenant's share of the
difference. Tenant shall not be entitled to withhold Additional Rent for any
reason but payment of any Additional Rent shall not preclude Tenant from
thereafter disputing the correctness or completeness of any Operating Statement
In the event Tenant shall dispute any Operating Statement and Landlord and
Tenant cannot resolve the dispute within four months after Landlord renders the
Operating Statement, then the matter may be referred to arbitration.

Any dispute between the parties with respect to Operating Expenses shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association as amended and in effect on the date notice
is given of the intention to arbitrate. The determination of the arbitrators
shall be final, binding and conclusive on all the parties, and judgement may be
rendered thereon by any court having jurisdiction, upon application of either
Landlord or Tenant.

If the Building is not fully occupied during any given Escalation Year, the
Operating Expenses and the Operating Expense Stop shall be equitably adjusted so
that such of those expenses as constitute variable rather than fixed costs (as
determined in accordance with sound accounting practices and principles) shall
be adjusted to reflect vacancies in the Building by projecting such variable
costs as though the Building were 95% occupied throughout such Operating Year;
provided, however, that in no event shall Landlord, by reason of any such
adjustment, be entitled to receive more than 100% of the actual Operating
Expenses.

All amounts, other than the Base Rent, which Tenant is required to pay pursuant
to this Lease, including the Additional Rent, shall constitute additional rent
under this Lease, and if Tenant shall fail to pay any such amounts, Landlord
shall have all the rights, powers and remedies with respect thereto as are
provided herein or by law in the case of nonpayment of rent

7. ORDINANCES AND REGULATIONS: Tenant shall comply promptly, at Tenant's sole
cost and expense, with all current and future laws, codes, ordinances, rules and
regulations of any municipal, county, state, federal or other governmental
authority, applicable to Tenant's use or occupancy of the Premises provided that
all ordinance and regulations as defined above are in compliance upon
Commencement. Tenant agrees for itself and for its subtenants, employees,
agents, and invitees to comply with the "Rules and Regulations" of the Building


                                     5 of 15




Landlord's Compliance: During the Term of this Lease, Landlord shall be
responsible for making any modifications to the Building and Property or its
appurtenances, excluding the Premises, but including the parking lot, common
areas, elevators and entrances serving the Property and Building, required
pursuant to any federal, state or local laws, ordinances, building codes, and
rules and regulations of governmental entities having jurisdiction over the
Property, including, but not limited to the Board of Fire Underwriters and the
Americans with Disabilities Act (the "ADA") and all regulations and orders
promulgated pursuant to the ADA (collectively, "Applicable Laws"). Any
modifications to the Property and/or the Building made by Landlord pursuant to
the provisions of this paragraph shall initially be at Landlord's expense;
however, Landlord will warrant that to the best of its knowledge, the Premises
is compliant with all applicable laws at the time Tenant assumes occupancy.

Landlord has no knowledge that any hazardous substances defined in "Rules and
Regulations" or petroleum products, other than small quantities of typical
cleaning and office equipment supplies, are located on or within the Premises or
common areas within the building in which the Premises are located To Landlord's
knowledge, there are no hazardous substances or petroleum products disposed of
on or in the property which, if present, would materially or adversely affect
Tenant's use or enjoyment of the Premises, common areas of the building, or
common parking areas serving the building. To Landlord's knowledge, there is no
existing environmental condition caused by hazardous substances affecting the
Premises, common areas, or parking areas which would adversely or materially
affect Tenant's use and enjoyment of the Premises. Landlord and Tenant agree
each will use and dispose of all hazardous materials and petroleum products in
compliance with applicable laws, and each agrees to indemnify and hold the other
harmless from any actual loss suffered due to the other's failure to properly
dispose of hazardous materials and petroleum products

8. SIGNS: Initial placement of Building standard directional and identification
signage shall be provided by Landlord and shall be limited to Tenant directory
of the Building and individual Tenant entry suite identification signage and
subsequent modifications shall be at Tenant's expense

9. SERVICES: Landlord shall provide, at Landlord's expense and according to its
customary standards, similar to those of a Class "A" Building in St. Petersburg,
Florida), excluding national holidays, which shall be defined as New Years Day,
the Friday prior to Easter (Good Friday), Memorial Day, Independence Day, Labor
Day, Thanksgiving, the day after Thanksgiving (Thanksgiving Friday) and
Christmas: (a) water from regular building fixtures; (b) electricity for normal
business usage excluding any special uses such as computer rooms; (c) janitorial
services five times per week; (d) non-exclusive parking proximate to the
building. Landlord, at its expense in accordance with its customary standards,
shall provide heating and cooling (HVAC) of the Premises Monday through Friday,
8:00 a.m. to 8:00 p.m. , excluding national holidays HVAC may be provided at
other times, at the sole cost and expense of Tenant, paid as Additional Rent,
according to the HVAC Access Fee Per Hour/Unit provided in Section 1C Other
Tenant requested services may be provided by Landlord at sole cost and expense
of Tenant, paid as Additional Rent including maintenance or replacement of
non-standard items defined in the "Rules and Regulations" of the Building.

Landlord shall not be liable for damages with the exception of Landlord's gross
negligence and/or intentional misconduct for failure to furnish any service in a
timely manner due to any causes described in Section 12 and 13, or as a result
of Unforeseen Causes. Any failure or delay as a result of these reasons shall
not be considered an eviction or disturbance of Tenant's quiet enjoyment, use or
possession of the Premises

Tenant's Actions: If Tenant provides written notice to Landlord of an event or
circumstance which requires the action of Landlord with respect to an obligation
of Landlord under the terms of this Lease (hereinafter, a "Required Action"),
and Landlord fails to proceed to take such action as required by the terms of
this Lease within ten (10) business days or less in the event of an Emergency
(defined below), (and thereafter to proceed with due diligence to complete the
Required Action), then Tenant may proceed to take the Required Action upon
delivery of an additional fifteen (15) business days notice or one (1) business
day notice in event of an Emergency to Landlord specifying that Tenant is taking
such Required Action, and if such action was required under the terms of this
Lease to be taken by Landlord, then Tenant shall be entitled to prompt
reimbursement by Landlord of Tenant's reasonable, out-of-pocket costs and
expenses in taking such action plus interest at the Interest Rate (defined
below). In the event Tenant takes such action and such work will affect the
systems and equipment structure of the Project or exterior appearance of the
Project, Tenant shall use only those contractors used by Landlord in the Project
for such work unless such contractors are unwilling or unable to perform such
work, in which event Tenant may utilize the services of any other qualified
contractor which normally and regularly performs similar work in


                                     6 of 15




Comparable Buildings. For purposes of this Section, the term "Emergency" shall
mean the occurrence of a situation or circumstance which threatens to cause
imminent harm to the health or safety of any of the occupants of the Premises or
to the property located in the Premises.

10. ALTERATIONS: Tenant accepts the Premises as being in good repair and
condition, and Tenant shall maintain the Premises in good repair and condition,
reasonable use, wear and tear excepted. Tenant shall not make any alterations,
additions or cosmetic improvements in excess of $1,500.00 annually (provided
such improvements will not be made to any structures or systems) to the Premises
without Landlord's prior written consent and shall permit no lien or claim for
lien of a mechanic, laborer, or supplier or any other lien to be filed against
the Property arising out of work performed, or alleged to have been performed
by, or at the direction of, or on behalf of Tenant

The interest of Landlord in the Property shall not be subject to liens for
improvements made by Tenant or by persons claiming by, through or under it, and
Tenant agrees it shall notify any person making any improvements on its behalf
of this provision Upon request of Landlord, Tenant will execute a short form of
this Lease which may be recorded which states that the terms of this Lease
expressly prohibit any liability to Landlord or its property for any
improvements made by, through or under Tenant

11. RIGHT OF ENTRY: Landlord shall endeavor to provide, at least twenty-four
(24) hours in advance, notice to Tenant, except in the event of an emergency.
Landlord and its agents shall have the right, at all reasonable times during the
Term of this Lease, to enter and inspect the Premises and to make repairs and
alterations Landlord deems necessary, with reasonable notice, except in cases of
emergency. In such cases, no notice shall be required Landlord has the right to
show the Premises to prospective tenants during the last 90 days of the lease
term or at any time after a lease cancellation notice is received. Landlord
shall have the right at all times to alter, renovate, and repair portions of the
Building which do not include the Premises, notwithstanding any temporary
inconvenience or disturbance to Tenant

12. DESTRUCTION OF PREMISES: If a fire or other casualty (collectively,
"Casualty") which damages the Premises or the Building occurs and materially
affects the use of the Premises, Landlord shall employ a Florida licensed Class
"A" contractor ("Contractor") to determine whether the Premises are rendered
substantially untenantable and make an initial estimate of the time needed to
complete necessary repairs to the Building and Premises, Within 10 business days
after the Casualty, Landlord shall notify Tenant in writing of Contractor's
determinations ("Landlord's Notice") as follows:

A. If Landlord's Notice states that the Premises are rendered substantially
untenantable by the Casualty and Contractor's initial estimate of the time
needed for repair exceeds 120 days, Landlord or Tenant may, by written notice,
terminate this Lease as of the date of the Casualty. If Landlord's Notice states
that the Premises are rendered substantially untenantable by the Casualty but
Contractor's initial estimate of the time needed for repair is 120 days or less,
Landlord will proceed with the restoration of the Premises and Building as set
forth in 12D below. Landlord will use reasonable efforts to make other office
space owned by Landlord available to Tenant for the operation of Tenant's
business or to make other alternate arrangements which are suitable to Tenant
during the time the Premises are being restored If the work is not completed
within 120 days or alternate arrangements are not provided, Tenant may terminate
this Lease as of the date of the Casualty by providing written notice to
Landlord, given no later than 150 days after the date of the Casualty

B. If Landlord's notice states that the Contractor has determined that the
Premises are still substantially tenantable after the Casualty, then neither
Landlord nor Tenant shall have the right to terminate this Lease provided that
Tenant is able to operate its day to day business in a manner consistent with
its operations prior to the Casualty and Tenant's day to day business operations
have not changed prior to the Casualty.

C. Either party may terminate this lease if the Casualty occurs within the last
6 months of the Lease and Contractor's estimate of the time needed to repair the
damage caused by the Casualty exceeds more than 20% of the remaining term of the
Lease.

D. Written notice of Landlord's or Tenant's election to terminate the Lease
pursuant to A and C above will be given by the 15th business day after receipt
of Landlord's Notice or as otherwise provided in 12(A). Unless the Lease is
terminated, Landlord will repair the Premises and Building (other than leasehold
improvements installed

                                     7 of 15




by Tenant and personal property) to substantially the same condition as existed
immediately prior to the Casualty Tenant shall relocate, at Tenant's expense,
all personal property from the Premises prior to and during the repairs.

E. If the Premises are damaged by Casualty and the Lease is not terminated, the
Rent shall abate for that part of the Premises which is rendered untenantable
and not occupied by Tenant on a per-diem and proportionate area basis from the
date of the Casualty until the date on which Landlord has substantially
completed the required work. In the event that the portion of the Premises
rendered untenantable prevents the Tenant from conducting its business, rent
shall completely abate from the date of the Casualty until the date on which
Landlord has substantially completed the required work. If Landlord makes other
space available to Tenant, Rent for the substitute premises shall be payable as
mutually agreed by both parties, but no more than the Base Rent per square foot
provided herein.

F. Tenant shall carry insurance covering all of Tenant's furniture, fixtures,
machinery, equipment and other personal property located within the Premises and
any leasehold improvements constructed at Tenant's expense in an amount not less
than the full replacement cost thereof, providing coverage on a broad form basis
insuring against all risks of direct physical loss. Unless this Lease is
terminated, the proceeds of such policy shall be used for the repair or
replacement of the insured property. Tenant waives all right of recovery against
Landlord for all losses covered by the insurance policy required to be carried
hereunder and shall cause such policy to contain a waiver of subrogation clause

13. CONDEMNATION: If all or part of the Building is taken or condemned by any
authority for any public use or purpose (including a deed given in lieu of
condemnation), which renders the Premises substantially untenantable, this Lease
shall terminate as of the date title vests in such authority, and the Rent shall
be apportioned as of such date

If any part of the Building is taken or condemned but the Premises are still
substantially tenantable (including a deed given in lieu of condemnation), this
Lease shall not terminate If the taking reduces the leased area in the Premises,
Rent shall be equitably reduced for the period of such taking by an amount which
bears the same ratio to the Rent then in effect as the leased area so taken or
condemned bears to the Leased Area set forth in Section 1B Landlord, upon
receipt and to the extent of the award in condemnation or proceeds of sale,
shall make necessary repairs and restorations (inexclusive of leasehold
improvements and personal property installed by Tenant) to restore the Premises
remaining to as near their former condition as circumstances will permit, and to
the Building and the Property to the extent necessary to constitute the portion
not so taken or condemned as complete.

Landlord shall be entitled to receive the entire price or award from any sale,
taking or condemnation without any payment to Tenant. Tenant shall have the
right separately to pursue against the condemning authority an award in respect
to the loss, if any, to leasehold improvements paid by Tenant without any credit
or allowance for Landlord and for any loss for injury, damage, or destruction of
Tenant's business resulting from such taking. Under no circumstances shall
Tenant seek or be entitled to any compensation for the value of its leasehold
estate which Tenant hereby assigns to Landlord

14. ASSIGNMENT AND SUBLEASE: Tenant may, with Landlord's prior written consent,
which will not be unreasonably withheld, sublease the Premises, or assign or
transfer or permit the transfer of this Lease or the interest of Tenant in the
Lease, in whole or in part If Tenant desires to assign this Lease or to enter
into any sublease of the Premises, Tenant shall deliver written notice of such
intent to Landlord together with a copy of the proposed assignment or sublease
at least 15 days prior to the effective date of the proposed assignment or
commencement date of the term of the proposed sublease and Landlord will strive
to approve or decline within five (5) business days of written notice from
Tenant or consent will be considered waived Any approved sublease shall be
expressly subject to the terms and conditions of this Lease. In the event of any
approved sublease or assignment, Tenant shall not be released or discharged from
any liability, whether past, present, or future, under this Lease, including any
renewal term of this Lease, and if the sublease or assignment provides for rent
in excess and provided Tenant has recaptured subleasing cost of the Rent payable
to Landlord under the terms of this Lease, 50% of the difference between the
Rent payable by the assignee or subtenant and the Rent payable to Landlord under
the terms of this Lease shall be paid to Landlord in consideration of its
consent to the assignment or sublease. An assignment shall be considered to
include a change in the majority ownership or

                                     8 of 15




control of Tenant if Tenant is a corporation whose shares of stock are not
traded publicly, or, if Tenant is a partnership, a change in the general partner
of the partnership or a change in the persons holding more than 50% interest in
the partnership, or a change in majority ownership or control of any general
partner of the partnership Tenant shall not mortgage, pledge or hypothecate its
leasehold interest without Landlord's prior written consent, which may be
withheld at Landlord's sole discretion.

15. SUBORDINATION, ATTORNMENT, AND ESTOPPEL: This Lease and the rights of Tenant
are expressly subject and subordinate to the lien and provisions of any
mortgage, deed of trust, deed to secure debt, ground lease, assignment of
leases, or other security instrument or operating agreement (collectively a
"Security Instrument") now or hereafter encumbering the Premises, Building,
Property, or any part thereof, and all amendments, renewals, modifications and
extensions of and to any such Security Instrument and to all advances made or
hereafter to be made upon such Security Instrument. Tenant shall, within 7 days
after receipt of written notice by Landlord, execute and deliver such further
instruments, in such form as may be required by Landlord or any holder of a
proposed or existing Security Instrument, subordinating this Lease to the lien
of any such Security Instrument as may be requested in writing by Landlord or
holder from time to time

In the event of the foreclosure of any such Security Instrument by voluntary
agreement or otherwise, or the commencement of any judicial action seeking such
foreclosure, Tenant, at the request of the then Landlord, shall attorn to such
mortgagee or purchaser in foreclosure Tenant agrees to execute and deliver at
any time upon request of such mortgagee, purchaser, or their successors, any
instrument to further evidence such attornment.

Tenant shall, within 7 days of receipt of written notice by Landlord, deliver to
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect, or, if there have been modifications, that this Lease, as
modified, is in full force and effect; providing a true, correct and complete
copy of the Lease and any and all modifications of the Lease; the amount of each
item of the Rent then payable under this Lease and the date to which the Rent
has been paid; that Landlord is not in default under this Lease or, if in
default, a detailed description of such default; that Tenant is or is not in
possession of the Premises, as the case may be; and containing such other
information and agreements as may be reasonably requested

If requested, Landlord will use commercially reasonable efforts to obtain a
Subordination and Non-Disturbance Agreement from the Lender or mortgage-holder
of the Building All costs relating to the securing of this agreement shall be a
direct cost paid for by Tenant.

16. WAIVER AND INDEMNIFICATION: Landlord agrees to indemnify and hold harmless
Tenant, and its respective agents and employees, from and against any and all
liabilities, claims, demands, costs and expenses of every kind and nature,
arising from any injury or damage (including death) to any person or property
sustained in or about the Building proximately caused by the gross negligence or
willful act or omission of Landlord; provided, however, Landlord's obligations
under this section shall not apply to injury or damage resulting from the gross
negligence or willful act or omission of Tenant, or its agents or employees.

Tenant agrees to indemnify and hold harmless Landlord and its agents and
employees, from and against any and all liabilities, claims, demands, costs, and
expenses of every kind and nature, including those arising from any injury or
damage (including death) to any person or property sustained in the Premises, or
resulting from the failure of Tenant to perform its obligations under this
Lease; provided, however, Tenant's obligations under this section shall not
apply to injury or damage resulting from the gross negligence or willful act of
Landlord or its agents or employees. To the full extent permitted by law, Tenant
hereby releases and waives all claims against Landlord and its agents,
employees, officers, directors, and independent contractors, for injury or
damage to person, property or business sustained in or about the Property,
Building, or Premises by Tenant, other than damage proximately caused by the
gross negligence or willful act of Landlord or its agents or employees

Tenant shall obtain and keep in force during the Term of this Lease, including
any extension and renewal, comprehensive general liability insurance, including
contractual liability coverage, insuring Tenant against any liability arising
out of the use, occupancy or maintenance of the Premises, and all areas
appurtenant thereto. Such policy shall provide minimum limits of one million
dollars for damage to property or for death or injury to any one person in any
one accident and shall name Landlord as an additional insured. Landlord shall
not be responsible or liable to Tenant for any event, act or omission to the
extent covered by insurance maintained or required to be maintained by Tenant
with respect to the Premises and its use and occupancy thereof (whether or

                                     9 of 15




not such insurance is actually obtained or maintained) At the request of
Landlord, Tenant shall from time to time cause its insurers to provide effective
waivers of subrogation for the benefit of Landlord and its agents or employees
and insurers, in a form reasonably satisfactory to Landlord

17. RELOCATION: This section was intentionally left blank.

18. DEFAULT: Each of the following shall constitute an event of default by
Tenant: (a) Tenant fails to pay any installment of Rent or Additional Rent after
five (5) days notice that such payments are due; (b) Tenant fails to observe or
perform its obligations under Section 4 and such violation continues for more
than 24 hours after notice or Tenant fails to observe or perform any of the
covenants, conditions or provisions of this Lease other than the payment of any
installment of Rent or Additional Rent, and fails to cure such default within 15
days after written notice from Landlord unless the violation is such that it
cannot reasonably be cured within 15 days in which event, Tenant shall have a
reasonable time to cure such default provided it commences cure within such 15
days and thereafter diligently pursues cure to completion; (c) Tenant fails a
second time to observe or perform any of the covenants, conditions or provisions
of this Lease other than the payment of any installment of Rent or Additional
Rent after written notice of a prior failure; (d) a petition is filed by or
against Tenant or Guarantor (and such petition is not discharged within 60 days
of filing) to declare Tenant or Guarantor, as the case may be, bankrupt or to
seek relief for Tenant or Guarantor under any chapter of the Bankruptcy Code, as
amended, or under any other law imposing a moratorium on, or granting debtor's
relief with respect to, the rights of creditors; (e) Tenant or any Guarantor
becomes or is declared insolvent by law or Tenant or any Guarantor makes an
assignment for the benefit of creditors; (f) a receiver is appointed for Tenant
or Tenant's property or for any Guarantor or any of Guarantor's property; or,
(g) interest of Tenant in this Lease is levied upon under execution or other
legal process.

Upon the occurrence of an event of default by Tenant, and provided that Tenant
has not commenced to cure, Landlord, at its option, without further notice or
demand to Tenant, may in addition to all other rights and remedies provided
herein, at law or in equity:

A. Terminate this Lease and Tenant's right of possession of the Premises, and
recover all damages to which Landlord is entitled herein, at law and in equity,
specifically including, without limitation, all Landlord's expenses of reletting
(including repairs, alterations, improvements, additions, decorations,
reasonable legal fees and brokerage commissions)

B. Terminate Tenant's right of possession of the Premises without terminating
this Lease, in which event Landlord may, but shall not be obligated to, relet
the Premises, or any part thereof, for the account of Tenant, for rent, term and
conditions acceptable to Landlord. For the purposes of any reletting of the
Premises, Landlord is authorized to redecorate, repair, alter and improve the
Premises to the extent necessary or desirable in Landlord's judgment For any
period during which the Premises have not been relet, Tenant shall pay Landlord
monthly on the first day of each month during the period that Tenant's right of
possession is terminated, a sum equal to the amount of Rent due under this Lease
for such month. If and when the Premises are relet and a sufficient sum is not
realized after payment of all Landlord's expenses of reletting (including
repairs, improvements, additions, decorations, legal fees and brokerage
commissions) to satisfy the payment of Rent due for any month, Tenant shall pay
to Landlord any deficiency monthly upon demand. Tenant agrees that Landlord may
file suit to recover any sums due to Landlord and that suit or recovery of any
amount due Landlord shall not be any defense to any subsequent action brought
for any amount not previously reduced by judgment in favor of Landlord. If
Landlord elects to terminate Tenant's right to possession only without
terminating this Lease, Landlord may, at its option, enter into the Premises,
remove Tenant's signs and other evidence of tenancy, and take possession
provided that such entry and possession shall not terminate this Lease or
release Tenant, in whole or in part, from Tenant's obligation to pay the Rent
for the full Term or from any other obligation of Tenant

C. In the case of failure to observe or perform any of the covenants, conditions
or provisions of the Lease other than the payment of any installment of Rent or
Additional Rent, Landlord may perform the same for the account of and at the
expense of Tenant (but shall not be obligated to do so) upon ten (10) days'
notice to Tenant or without notice in a case of emergency and in any other case
after the cure period stated above. Bills for all amounts paid by Landlord and
all losses, costs, and expenses incurred by landlord in connection with any such
performance by Landlord pursuant to this clause, including, without limitation,
all amounts paid and costs and expenses incurred by Landlord for any property,
material, labor, or services provided, furnished, or rendered, or caused to be


                                    10 of 15




provided, furnished or rendered, by Landlord to Tenant (together with interest
at the maximum rate permitted by applicable law or 18% per annum, whichever is
less, from the date Landlord pays the amount or incurs the loss, cost, or
expense until the date of full repayment by Tenant) may be sent by Landlord to
Tenant monthly or immediately, at Landlord's option, and shall be due and
payable by Tenant to Landlord as Additional Rent within five days after the same
is sent to Tenant by Landlord.

In the event of any legal action under this Section 18, the prevailing party
shall be entitled to recover its costs and reasonable attorney's fees, both at
trial and on appeal

19. SURRENDER OF PREMISES: Upon expiration, termination or default of this
Lease, Tenant shall surrender and vacate the Premises immediately and deliver
possession to Landlord in a clean, good, and tenantable condition, except for
(a) damage beyond the control of Tenant; (b) reasonable use; (c) ordinary wear
and tear. Charges incurred by Landlord for removal of boxes and debris left in
Premises which exceed normal janitorial costs shall be at the expense of Tenant
No personal property shall be removed from the Premises unless Tenant has
fulfilled all Lease obligations. If there are no amounts owed by Tenant, any
movable trade fixtures, personal property. All items authorized to be removed
but subsequently not removed shall, at Landlord's option, be presumed to have
been abandoned by Tenant, and title thereto shall pass to Landlord, or Landlord
may, at its option, either store or dispose of these items at Tenant's expense
If any improvements are made by Tenant, with or without Landlord's approval,
Tenant will, at its expense and upon request by Landlord, restore the Premises
to their original condition

20. HOLDING OVER: If Tenant, or any assignee or sublessee of Tenant, shall
continue to occupy the Premises after the termination or expiration of this
Lease without the prior written consent of Landlord, such tenancy shall be a
Tenancy at sufferance. During the period of any holdover tenancy by Tenant, or
any assignee or sublessee, Landlord, by notice to Tenant, may adjust the Rent by
150% or to an amount equal to the maximum allowed by law Acceptance by Landlord
of any Rent after termination shall not constitute a renewal of this Lease or a
consent to such holdover occupancy, nor shall it waive Landlord's right of
re-entry or any other right contained in this Lease or provided by law

21. AUTOMATIC RENEWAL: This section was intentionally left blank.

22. SECURITY DEPOSIT: As security for the performance of its obligations under
this Lease, Tenant, upon its execution of this Lease, has paid to Landlord a
security deposit ("Security Deposit") in the amount stated in Section 1C The
Security Deposit may be applied by Landlord to cure or partially cure any
default of Tenant, and upon notice by Landlord of application, Tenant shall
replenish the Security Deposit in full by promptly paying to Landlord the amount
so applied. Landlord shall not pay interest on the Security Deposit The Security
Deposit shall not be deemed an advance payment of Rent or a measure of damages
for any default by Tenant, nor shall it be a bar or defense to any action which
Landlord may at any time commence against Tenant

If Tenant has fulfilled all terms and conditions of this Lease including the
payment of Rent and returns Premises to Landlord in accordance with Section 19,
then Landlord will refund the Security Deposit within 45 days of Lease
Expiration Date Landlord may retain any or all of the Security Deposit to repair
any damage to Premises caused by Tenant or remove any abandoned personal
property including all communication and data lines.

23. LIMITATION OF LANDLORD'S LIABILITY: As used in this Lease, "Landlord" shall
mean the entity herein named as such, and its successors and assigns No person
holding Landlord's interest under this Lease (whether or not such person is
named as "Landlord") shall have any liability after such person ceases to hold
such interest, except for any liability accruing while such person held such
interest. No principal, officer, employee, or partner (general or limited) of
Landlord shall have any personal liability under any provision of this Lease. If
Landlord defaults in the performance of any of its obligations under this Lease
or otherwise, Tenant shall look solely to Landlord's interest in the Building
and not to the other assets of Landlord or the assets, interest, or rights of
any principal, officer, employee, or partner (general or limited) for
satisfaction of Tenant's remedies

24. ENCUMBRANCES ON LANDLORD'S TITLE: Upon request of Landlord, Tenant will
promptly release or modify, or cause to be released or modified at Tenant's
expense, any financing statement given by Tenant to a third party, any notice of
commencement filed by Tenant with respect to work on the Premises, or any other
recorded document filed by or on account of Tenant ("Document"), which, in
Landlord's sole opinion, adversely


                                    11 of 15




affects, clouds, or otherwise encumbers Landlord's title to any part of the
Building or Property, so that the Document shall not encumber any portion of the
Building or Property other than Tenant's leasehold interest in the Premises and
Tenant's furniture, fixtures and equipment Tenant's obligations in this Lease
shall survive termination of this Lease

25. NOTICES: For the purpose of any notice or demand under this Lease, the
parties shall be served by overnight delivery, personal delivery or certified or
registered mail, return receipt requested, addressed to the other party at the
address in Section 1E or such other addresses designated in writing by Landlord
or Tenant. Any notice shall be effective when delivered

26. SUCCESSOR AND ASSIGNS: This Lease shall bind and inure to the benefit of the
successors, assigns, heirs, executors, administrators, and legal representatives
of the parties In the event of the sale, assignment, or transfer by Landlord of
its interest in the Building or in this Lease (other than a collateral
assignment to secure a debt of Landlord prior to enforcement) to a successor in
interest who expressly assumes the obligations of Landlord, Landlord shall be
released and discharged from all of its covenants and obligations, except such
obligations as Landlord shall have accrued prior to any such sale, assignment or
transfer; and Tenant agrees to look solely to such successor of Landlord for
performance of such obligations. Any securities or funds given by Tenant to
Landlord to secure performance by Tenant of its obligations may be assigned by
Landlord to such successor of Landlord and, upon acknowledgment by such
successor of receipt of such security and its assumption of the obligation to
account for such security in accordance with the terms of the Lease, Landlord
shall be discharged of any further obligation. Landlord's assignment of the
Lease or of any or all of its rights shall in no manner affect Tenant's
obligations Landlord shall have the right to freely sell, assign or otherwise
transfer its interest in the Building and/or this Lease.

27. MISCELLANEOUS: When the consent of either Landlord or Tenant is required
before the other party acts, both will make reasonable decisions honestly,
equitably, suitably and in an ordinary and usual manner that is fit and
appropriate to the end in view. The reasonable decisions by Landlord and Tenant
will apply to all terms and conditions set forth in this Lease. This Lease, the
Exhibits, the Riders and Incorporated Addenda contain the entire agreement
between Landlord and Tenant and there are no other agreements, either oral or
written. This Lease shall not be modified or amended except by a written
document signed by Landlord and Tenant which specifically refers to this Lease
The captions in this Lease are for convenience only and in no way define, limit,
construe or describe the scope or intent of the provisions of this Lease.

No waiver of any covenant or condition of this Lease by either party shall be
deemed to imply or constitute a further waiver of any other covenant or
condition of this Lease. This Lease is construed in accordance with the laws of
the state in which the Building is located. If any provision of this Lease or
amendment is invalid or unenforceable in any instance, such invalidity or
unenforceability shall not affect the validity or enforceability of any other
provision, or such provision in any circumstance not controlled by such
determination

Tenant shall on demand pay or reimburse Landlord for payment of Landlord's
reasonable attorney's fees, expenses and court costs in negotiation, at trial,
and on appeal incurred by Landlord or in connection with any action or
proceeding arising out of or occasioned by any lien or claim of lien on the
Premises, or the Building or in defending or otherwise participating in any
legal proceeding initiated by Tenant or against Tenant, or in connection with
the investigation of a response to any request for consent or other amendments
to the Lease by Tenant.

"Common Areas" mean all areas, improvements, space or equipment (owned or
controlled by Landlord) in or at the Property, provided by Landlord for the
common or joint use and benefit of tenants and invitees Landlord may add to or
reduce or otherwise modify common areas at any time

Except as specifically designated in this Lease, neither this Lease nor any
memorandum of this Lease may be recorded or filed for record in any public
records without the separate express written consent, in recordable form, of
Landlord.

Radon is a naturally occurring radioactive gas which, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over time Levels of radon that exceed federal and


                                    12 of 15




state guidelines have been found in buildings in Florida Additional information
regarding radon and radon testing may be obtained from your county public health
unit. Tenant acknowledges this disclosure by signing this Lease.

28. JURY WAIVER; COUNTERCLAIMS: Landlord and Tenant waive trial by jury in any
action, proceeding, or counterclaim involving any matter whatsoever arising out
of or in any way connected with (i) this lease, (ii) the relationship of
Landlord and Tenant, (iii) Tenant's use or occupancy of the Premises, or (iv)
the right to any statutory relief or remedy. The waivers set forth in this
section are made knowingly, intentionally, and voluntarily by Tenant. Tenant
further acknowledges that it has been represented (or has had the opportunity to
be represented) in the signing of this lease and in the making of this waiver by
independent counsel, selected of its own free will, and that it has had the
opportunity to discuss these waivers with counsel This provision is a material
inducement to Landlord in agreeing to enter into this lease

In any action to enforce the terms of this Lease, including any suit by Landlord
for the recovery of rent or possession of the Premises, the then non- prevailing
party shall pay a reasonable sum for attorneys' fees and costs in such suite and
such attorneys' fees and costs shall be deemed to have accrued prior to the
commencement of such action and shall be paid whether or not such action is
prosecuted to judgment.

29. RIDERS AND ADDENDA: All Riders and Addenda contained in or attached to this
Lease shall be deemed to be a part of and are incorporated in this Lease by
reference

         29A TENANT IMPROVEMENTS
         29B OPTION TO CANCEL
         29C RENTAL CONCESSION
         29D RIGHT OF FIRST REFUSAL
         29E EXTERIOR BUILDING SIGNAGE
         29F HVAC
         29G OPTION TO RENEW
         29H ROOF TOP COMMUNICATIONS
         29I SUBLEASE ASSIGNMENT
         29J NON-DISTURBANCE
         29K VACATING OF CURRENT PREMISES
         29L PARKING
         29M LANDLORD'S INSURANCE


                                    13 of 15





                                   LEASE RIDER

This rider is attached to and made part of the Lease dated                by and
between Koger Equity, Inc., a corporation organized and existing under the laws
of the State of Florida ("Landlord"), with its principal offices at 225 NE
Mizner Blvd, Suite 200, Boca Raton, FL 33432, (Federal I.D. 59-2898045) and
SendTec, Inc., a corporation organized and existing under the laws of the State
of Florida ("Tenant"), with its principal office at 877 Executive Center Drive
W., Suite 300, St. Petersburg, FL 33702, (Federal I.D. 59-3626325).

29A TENANT IMPROVEMENTS: Landlord shall grant to Tenant a Tenant Improvement
allowance of Twenty Dollars, ($20.00) per Rentable Square Foot to construct
Leasehold Improvements below the ceiling, which shall be provided by Landlord.
Ceiling package shall be provided in the premises consisting of 2x2 Grid System
with acoustical tiles and 2x4 high efficiency parabolic lighting systems Any "up
grades" to the Ceiling Package shall be made using the Tenant Improvement
allowance. Tenant Improvement allowance not to exceed $288,220.00 Any unused
portion of said allowance may be used by the Tenant to offset moving and other
expenses at the Tenant's sole discretion All improvements, to include finishes
to the premises must be mutually agreed upon by both Tenant and Landlord. Any
amounts above the said allowance shall be reimbursed to Landlord thirty (30)
days after job completion or can be amortized in the current rental rate.
Improvements to be completed per Exhibit B attached hereto.

29B OPTION TO CANCEL: Providing Tenant is not in Default under the Terms of this
Lease, Tenant shall have the right to Terminate this Lease Agreement after the
forty-fifth (45th) month of term by providing Landlord ninety (90) days prior
written notice of such intent. Cancellation Fees shall include all unamortized
occupancy costs to landlord which include, but not limited to all Leasehold
improvements to the premises and Real Estate Brokerage Commissions All
Cancellation Fees due to Landlord thirty (30) days prior to re-establish
Expiration Date.

All Leasing commissions and Leasehold Improvement costs shall be amortized at
seven percent (7%) per annum over a sixty (60) month period commencing at the
Lease Commencement Date.

29C. RENTAL CONCESSION: The initial nine (9) months of rent shall be abated.
(March 1, 2004 thru November 1, 2004 or the first nine (9) months following
occupancy).

29D RIGHT OF FIRST REFUSAL: At such time as Landlord has entered into a verbal
agreement with a third-party prospective tenant for any vacant space on the
second floor of the Glades Building, Landlord shall notify Tenant in writing of
its intentions to lease said space to said third-party prospective tenant and
its material terms Tenant shall then have seven (7) business days with which to
notify Landlord of its intentions to lease or reject said space upon the same
terms and conditions as offered to the third-party.

Likewise, Tenant shall have a second right of refusal on any and all vacant
space on the third floor of the Glades Building under the same notification
procedures as outlined herewith pertaining to the second floor vacancies of the
Glades Building.

29E. EXTERIOR BUILDING SIGNAGE: Tenant shall have the right to install exterior
building signage on the top band of the Glades Building on one (1) side only at
its sole cost and expense or with Tenant Improvement dollars. Landlord shall
pre-approve both the design and placement of this signage. Tenant shall be
responsible, at their sole cost and expense, for the removal of said signage at
the vacation of premises or if any sign changes are made during the term of the
Lease. Tenant shall further be responsible, at their sole cost and expense, for
any repairs necessary to the building "skin" to restore it to the same condition
prior to signage installation The Glades Building was painted in 2003

29F. HVAC: Landlord, at its sole cost and expense, shall provide Tenant with
four (4) supplemental HVAC units; placement and tonnage to be determined for
Edit suites and Server room. Tenant shall have control of these units
twenty-four (24) hours, seven (7) days a week at Landlord's cost. House air to
be provided to Tenant, Monday through Friday, 8 am to 8 pm daily. After hours
air shall be at the Tenant's cost at $6 00 per hour, per unit; not to exceed
Twenty-Four dollars ($24 00) per hour total


                                    14 of 15




29G. OPTION TO RENEW: Tenant shall have a one (1) time Option to Renew this
Lease for a minimum period of sixty (60) months firm at ninety-five percent
(95%) of the existing market terms with six (6) months prior written notice to
Landlord

29H. ROOF TOP COMMUNICATIONS: Tenant shall have the right to install an antenna
on the Glades Building roof with placement to be approved by the Landlord.

29I. SUBLEASE ASSIGNMENT: Tenant shall have the right to Sublease or Assign this
Lease to an affiliated entity without Landlord's prior consent.

29J. NON-DISTURBANCE: Landlord shall deliver to Tenant to the best of their
ability a Non-Disturbance Agreement from any current or future lenders or
mortgagees in favor of the Tenant so that Tenant's occupancy will not be
disturbed in the event of a sale, foreclosure or other event of transfer

29K. VACATING OF CURRENT PREMISES: Tenant shall have the right to leave existing
cubicles and cabling in their existing Premises in the Lake Building. Landlord
may offer to another Tenant or dispose of at Landlord's cost.

29L PARKING: Tenant shall have the right to a total of sixty (60) parking spaces
at no charge for the Term of this Lease and any subsequent renewal or extensions

29M LANDLORD'S INSURANCE: During the Term, Landlord will carry and maintain the
following types of insurance with respect to the Building and Property in such
amount or percentage of replacement value as Landlord or its insurance advisor
deems reasonable in relation to the age, location, type of construction and
physical conditions of the Building and Property and the availability of such
insurance at reasonable rates: (i) broad form or extended coverage insurance on
the Building (excluding any property with respect to which the Tenant and other
Tenants are obliged to insure pursuant to Section 5.1 or similar sections of
their respective leases); (ii) public liability and property damage insurance
with respect to the Landlord's operations in the Building; and (iii) such other
forms of insurance as the Landlord or its mortgagee reasonably considers
advisable Such insurance shall be in such reasonable amounts and with such
reasonable deductibles as would be carried by a prudent owner of a similar
building, having regard to size, age, and location All policies referred to
above shall be taken out with insurers licensed to do business in Florida having
an A M Best's rating of A-, Class 9, or better Landlord shall have the right to
self insure any or all of its liabilities with respect to the Building or the
Property so long as Landlord, maintains a new worth of at lease $100,000,000 00.


                                    15 of 15

EX-10.38 6 file006.htm LEASE AMENDMENT NO.1



                                                                   Exhibit 10.38

                               LEASE AMENDMENT # 1

         THIS LEASE AMENDMENT pertains to that certain lease (the "Lease") dated
January 30, 2004 by and between CRT Properties, Inc., a Florida corporation, as
landlord ("CRT"), and SendTec, Inc., a Florida Corporation, as Tenant. Pursuant
to that certain Bill of Sale and General Assignment Agreement dated September
27, 2005, DRA CRT Acquisition Corp., as successor by merger to CRT, assigned all
of its right, title and interest as landlord under the Lease to DRA CRT St.
Petersburg Center LLC, a Delaware limited liability company ("Landlord").

         NOW THEREFORE, in consideration of the mutual covenants and agreements
between the parties, Landlord and Tenant hereby reaffirm and desire to keep in
force all currently existing terms and conditions of the Lease except for the
following revisions/changes that shall have priority and become effective on
April 1, 2006: "Commencement Date".

     1. COMMENCEMENT: "Commencement Date" shall be the date which is the earlier
to occur of (a) the date when Tenant takes possession of the Expansion Space, ad
defined below for the conduct of its business, or (b) the date of Substantial
Completion of the Tenant Improvements to the Expansion Space. "Substantial
Completion" shall mean the date on which the Tenant Improvements are
substantially completed so that Tenant may use the Expansion Space for its
intended purposes notwithstanding that punchlist items or insubstantial details
concerning construction, decoration, or mechanical adjustments remain to be
performed. Tenant shall, if Landlord so requests, execute a letter confirming
the commencement Date and the Expiration Date of the Term.

Landlord shall cause the Commencement Date for the Expansion Space to occur by
no later than April 1, 2006 and shall cause the substantial completion of Tenant
Improvements to the existing Premises to occur by no later than April 1, 2006;
subject, however, to delays caused by Tenant, its agents or employees, and
circumstances outside the reasonable control of Landlord, including force
majeure, and labor and material shortages. If the Commencement Date or
completion of any work is not accomplished by such dates through no default of
Landlord, Landlord shall not be in default under the Lease, but the Commencement
Date shall be adjusted day for day until the actual Commencement Date. If the
actual Commencement Date is other than April 1, 2006, Landlord and Tenant shall
enter into a Lease Amendment memorializing the Commencement Date and expiration
of the Lease term.

     2. SQUARE FOOTAGE: The revised Premises Square Footage shall be 19,804
Rentable Feet. (Existing 14,411 Rentable Square Feet, plus Expansion Space of
5,393 Rentable Square Feet). The Expansion Space is shown on the drawing by Lisa
Smaus' plans as described in Section 5.

     3. RENT SCHEDULE: Monthly Rent effective April 1, 2006 shall be:



                                                                              TOTAL MONTHLY
           TERM                         MONTHLY BASE RENT     SALES TAX @7%        RENT
- ---------------------------------       -----------------     -------------   --------------

April 1, 2006 - February 28, 2007          $ 25,844.22         $ 1,809.10      $ 27,653.32
March 1, 2007 - March 31, 2007             $ 26,293.69         $ 1,840.56      $ 28,134.25
April 1, 2007 - February 28, 2008          $ 26,568.96         $ 1,859.83      $ 28,428.79
March 1, 2008 - March 31, 2008             $ 27,029.68         $ 1,892.08      $ 28,921.76
April 1, 2008 - February 28, 2009          $ 27,314.58         $ 1,912.02      $ 29,226.60
March 1, 2009 - March 31, 2009             $ 27,786.82         $ 1,945.08      $ 29,731.90
April 1, 2009 - February 28, 2010          $ 28,081.70         $ 1,965.72      $ 30,047.42



     4. OPERATING AND EXPENSE COST BASE YEAR: Percentage of occupancy increased
now to be 29.88 %.



                                       1



     5. TENANT IMPROVEMENTS: Landlord at its sole cost and expense, shall
provide Tenant Improvements, per the drawings by Lisa Smaus dated December 25,
2005 and July 12, 2005 rev. 2 dated January 3, 2006 attached as Exhibits "B" and
"C".

     6. Paragraph 29B, "Option To Cancel" is deleted in its entirety.

         IN WITNESS WHEREOF, this Amendment has been executed on behalf of
Landlord and Tenant.



Tenant:  SendTec, Inc., a Florida corporation                 Landlord:  DRA CRT TRS Corp., a Delaware
                                                              corporation, its sole member


By:  /s/ Donald Gould, Jr.                  (SEAL)            By: /s/                                     (SEAL)
     ----------------------------------------                     -----------------------------------------
(Print Name)     Donald Gould, Jr.                            Name
                 -------------------------------------
Title   CFO                                                   Title   Vice President
        ----------------------------------------------

Date:           1/12/06                                       Date:          1/27/05
       -----------------------------------------------              ------------------------------------------------

Signed in the presence of:                                    Signed in the presence of:

(1)  /s/ Paul Soltoff, CEO STAC                               (1) /s/
     -------------------------------------------------            --------------------------------------------------
(Print Name)    Paul Soltoff                                  (Print Name)
                --------------------------------------                       ---------------------------------------

(2)  /s/ Danielle Caianiello                                  (2) /s/
     -------------------------------------------------            --------------------------------------------------
(Print Name)    Danielle Caianiello                           (Print Name)
                --------------------------------------                       ---------------------------------------
As to Tenant                                                  As to Landlord



                                       2

EX-10.39 7 file007.htm STANDARD FORM OF OFFICE LEASE






                                                                  Exhibit 10.39

                          STANDARD FORM OF OFFICE LEASE
                (The Real Estate Board of New York, Inc. 3/1/86)

           AGREEMENT OF LEASE, made as of this 23rd day of May, 2005, between
386 PAS PARTNERS, L.L.C., party of the first part, hereinafter referred to as
Owner, and SENDTEC, INC., party of the second part, hereinafter referred to as
Tenant.

           WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires
from Owner

PORTION OF 7TH FLOOR COMPRISING 2,500 SQUARE FEET, AS SHOWN ON EXHIBIT A
ATTACHED HERETO, IN THE BUILDING KNOWN AS 386 PARK AVENUE SOUTH IN THE BOROUGH
OF MANHATTAN, CITY OF NEW YORK,

FOR THE TERM BEGINNING UPON SUBSTANTIAL COMPLETION OF OWNER'S WORK DESCRIBED IN
ARTICLE 46 HEREOF AND TO END ON THE 31ST DAY OF DECEMBER, 2009, BOTH DATES
INCLUSIVE (OR UNTIL SUCH TERM SHALL SOONER CEASE AND EXPIRE AS HEREINAFTER
PROVIDED),

at a rental rate as set forth in Article 38 hereof, which Tenant agrees to pay
in lawful money of the United States which shall be legal tender in payment of
all debts and dues, public and private, at the time of payment, in equal monthly
installments in advance on the first day of each month during said term, at the
office of Owner or such other place as Owner may designate, without any set off
or deduction whatsoever, except that Tenant shall pay the first monthly
installment on the execution hereof (unless this lease be a renewal). In the
event that, at the commencement of the term of this lease, or thereafter, Tenant
shall be in default in the payment of rent to Owner pursuant to the terms of
another lease with Owner or with Owner's predecessor in interest, Owner may at
Owner's option and without notice to Tenant add the amount of such arrears to
any monthly installment of rent payable hereunder and the same shall be payable
to Owner as additional rent.

         The parties hereto, for themselves, their heirs, distributes,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:

RENT:
           1. Tenant shall pay the rent as above and as hereinafter provided.

OCCUPANCY:
           2. Tenant shall use and occupy the demised premises for general and
executive offices and for no other purpose.

TENANT ALTERATIONS:
           3. Tenant shall make no changes of any nature in or to the demised
premises without Owner's prior written consent. Subject to the prior written
consent of Owner, and to the provisions of this Article, Tenant, at Tenant's
expense, may make alterations,





installations, additions or improvements which are nonstructural and which do
not affect utility services or plumbing and electrical lines, in or to the
interior of the demised premises by using contractors or mechanics first
approved by Owner. Tenant shall, before making any alterations, additions,
installations or improvements, at its expense, obtain all permits, approvals and
certificates required by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval thereof and shall deliver promptly
duplicates of all such permits, approvals and certificates to Owner, and Tenant
agrees to carry and will cause Tenant's contractors and subcontractors to carry
such workman's compensation, general liability, personal and property damage
insurance as Owner may require. If any mechanics' lien is filed against the
demised premises, or the building of which the same forms a part, for work
claimed to have been done for, or materials furnished to, Tenant, whether or not
done pursuant to this Article, the same shall be discharged by Tenant within
thirty days thereafter, at Tenant's expense, by filing the bond required by law.
All fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner in Tenant's
behalf, shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises unless Owner, by notice to
Tenant no later than twenty days prior to the date fixed as the termination of
this lease, elects to relinquish Owner's right thereto and to have them removed
by Tenant, in which event the same shall be removed from the premises by Tenant
prior to the expiration of the lease, at Tenant's expense; provided, however,
that Tenant shall not be obligated to remove any walls or permanent partitions
constructed in the demised premises. Nothing in this Article shall be construed
to give Owner title to, or to prevent Tenant's removal of, trade fixtures,
moveable office furniture and equipment, but upon removal of any such items from
the premises or upon removal of other installations as may be required by Owner,
Tenant shall immediately and at its expense, repair and restore the premises to
the condition existing prior to installation and repair any damage to the
demised premises or the building due to such removal. All property permitted or
required to be removed, by Tenant at the end of the term remaining in the
premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or may be removed from
the premises by Owner, at Tenant's expense.

MAINTENANCE AND REPAIRS:
           4. Tenant shall, throughout the term of this lease, take good care of
the demised premises and the fixtures and appurtenances therein. Tenant shall be
responsible for all damage or injury to the demised premises or any other part
of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor, service
or equipment done for or supplied to Tenant or any subtenant or arising out of
the installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for


                                      -2-



which Tenant is responsible, using only the contractor for the trade or trades
in question, selected from a list of at least two contractors per trade
submitted by Owner. Any other repairs in or to the building or the facilities
and systems thereof for which Tenant is responsible shall be performed by Owner
at the Tenant's expense. Owner shall maintain in good working order and repair
the exterior and the structural portions of the building, including the
structural portions of its demised premises, and the public portions of the
building interior, the building plumbing, electrical, heating and ventilating
systems (to the extent such systems presently exist) serving the demised
premises and the air conditioning compressor presently serving the demised
premises and certain other premises. Tenant agrees to give prompt written notice
of any defective condition in the premises for which Owner may be responsible
hereunder. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or others making repairs, alterations,
additions or improvements in or to any portion of the building or the demised
premises or in and to the fixtures, appurtenances or equipment thereof. It is
specifically agreed that Tenant shall not be entitled to any setoff or reduction
of rent by reason of any failure of Owner to comply with the covenants of this
or any other Article of this Lease. Tenant agrees that Tenant's sole remedy at
law in such instance will be by way of an action for damages for breach of
contract. The provisions of this Article 4 shall not apply in the case of fire
or other casualty which are dealt with in Article 9 hereof.

WINDOW CLEANING:
           5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction.

REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS:
           6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, Insurance Services Office, or any similar body which shall impose
any violation, order or duty upon Owner or Tenant with respect to the demised
premises, whether or not arising out of Tenant's use or manner of use thereof,
(including Tenant's permitted use) or, with respect to the building if arising
out of Tenant's use or manner of use of the premises or the building (including
the use permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to Owner's satisfaction against all damages,
interest, penalties and expenses, including, but not limited to, reasonable
attorney's fees, by cash deposit or by surety bond in an amount and


                                      -3-



in a company satisfactory to Owner, contest and appeal any such laws,
ordinances, orders, rules, regulations or requirements provided same is done
with all reasonable promptness and provided such appeal shall not subject Owner
to prosecution for a criminal offense or constitute a default under any lease or
mortgage under which Owner may be obligated, or cause the demised premises or
any part thereof to be condemned or vacated. Tenant shall not do or permit any
act or thing to be done in or to the demised premises which is contrary to law,
or which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner with
respect to the demised premises or the building of which the demised premises
form a part, or which shall or might subject Owner to any liability or
responsibility to any person or for property damage. Tenant shall not keep
anything in the demised premises except as now or hereafter permitted by the
Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization
or other authority having jurisdiction, and then only in such manner and such
quantity so as not to increase the rate for fire insurance applicable to the
building, nor use the premises in a manner which will increase the insurance
rate for the building or any property located therein over that in effect prior
to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses,
fines, penalties, or damages, which may be imposed upon Owner by reason of
Tenant's failure to comply with the provisions of this Article and if by reason
of such failure the fire insurance rate shall, at the beginning of this lease or
at any time thereafter; be higher than it otherwise would be, then Tenant shall
reimburse Owner, as additional rent hereunder, for that portion of all fire
insurance premiums thereafter paid by Owner which shall have been charged
because of such failure by Tenant. In any action or proceeding wherein Owner and
Tenant are parties, a schedule or "make-up" of rate for the building or demised
premises issued by the New York Fire Insurance Exchange, or other body making
fire insurance rates applicable to said premises shall be conclusive evidence of
the facts therein stated and of several items and charges in the fire insurance
rates then applicable to said premises. Tenants shall not place a load upon any
floor of the demised premises exceeding the floor load per square foot area
which it was designed to carry and which is allowed by law. Owner reserves the
right to prescribe the weight and positions of all safes, business machines and
mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Owner's judgment, to
absorb and prevent vibration, noise and annoyance.

SUBORDINATION:
           7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or the
real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgage, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request. Owner
represents that


                                      -4-



there are no ground leases affecting the real property of which the demised
premises are a part.

PROPERTY--LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY:
           8. Owner or its agents shall not be liable for any damage to property
of Tenant or of others entrusted to employees of the building, nor for loss of
or damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees. Owner or its agents will not be liable for any such damage caused by
other tenants or persons in, upon or about said building or caused by operations
in construction of any private, public or quasi-public work. If at any time any
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefore nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable
attorneys' fees, paid, suffered or incurred as a result of any breach by Tenant,
Tenant's agents, contractors, employees, invitees, or licensees, of any covenant
or condition of this lease, or the carelessness, negligence or improper conduct
of the Tenant, Tenant's agents, contractors, employees, invitees or licensees.
Tenant's liability under this lease extends to the acts and omissions of any
subtenant, and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reason
of any such claim, Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.

DESTRUCTION, FIRE AND OTHER CASUALTY:
           9. (a) If the demised premises or any part thereof shall be damaged
by fire or other casualty, Tenant shall give immediate notice hereof to Owner
and this lease shall continue in full force and effect except as hereinafter set
forth. (b) If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by and
at the expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner, subject to Owner's right to elect not to restore
the same as hereinafter provided. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that Owner shall


                                      -5-



decide to demolish it or to renovate or rebuild it, then, in any of such events,
Owner may elect to terminate this lease by written notice to Tenant, given
within 60 days after such fire or casualty, specifying a date for the expiration
of the lease, which date shall not be more than 60 days after the giving of such
notice. In addition, if the demised premises are rendered wholly unusable and
Owner determines that the demised premises cannot reasonably be repaired and
restored to substantially the same condition as the demised premises were in
immediately prior to such fire or casualty within 180 days after such fire or
casualty, Tenant may elect to terminate this lease by written notice to Owner,
given within 60 days after such fire or casualty, specifying a date for the
expiration of the lease, which date shall not be more than 10 days after the
giving of such notice. Upon the date specified in any such notice of termination
from Owner or Tenant, the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner or Tenant shall serve a termination notice as provided for
herein, Owner shall make the repairs and restorations under the conditions of
(b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery against the
other or any one claiming through or under each of them by way of subrogation or
otherwise. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefiting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this Article shall govern and
control in lieu thereof.


                                      -6-



EMINENT DOMAIN:
           10. If the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or quasi-public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease, and assigns to
Owner Tenant's entire interest in any such award.

ASSIGNMENT, MORTGAGE, ETC.:
           11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody than Tenant, Owner may, after default
by Tenant, collect rent from the assignee, under-tenant or occupant, and apply
the net amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, under-tenant or occupant as tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Owner to an assignment or
underletting shall not in any wise be construed to relieve Tenant from obtaining
the express consent in writing of Owner to any further assignment or
underletting.

ELECTRIC CURRENT:
           12. Rates and conditions in respect to submetering or rent inclusion,
as the case may be, are to be added in the RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.

ACCESS TO PREMISES:
           13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times upon reasonable notice to Tenant, to examine the same and
to make such repairs, replacements and improvements or additions and alterations
as Owner may deem necessary and reasonably desirable to the demised premises or
to any other portion of the building or which Owner may elect to perform. Tenant
shall permit Owner to use and maintain and replace pipes and conduits in and
through the demised premises and to erect new pipes and conduits therein
provided they are concealed within the walls, floor, or ceiling. Owner may,
during the progress of any work in the demised premises, take all


                                      -7-



necessary materials and equipment into said premises without the same
constituting an eviction, nor shall the Tenant be entitled to any abatement of
rent while such work is in progress nor to any damages by reason of loss or
interruption of business or otherwise. Throughout the term hereof Owner shall
have the right to enter the demised premises at reasonable hours for the purpose
of showing the same to prospective purchasers or mortgagees of the building, and
during the last six months of the term for the purpose of showing the same to
prospective tenants. If Tenant is not present to open and permit an entry into
the premises, Owner or Owner's agents may enter the same whenever such entry may
be necessary or permissible, by master key or forcibly, and, provided reasonable
care is exercised to safeguard Tenant's property, such entry shall not render
Owner or its agents liable therefor, nor in any event shall the obligations of
Tenant hereunder be affected. If during the last month of the term Tenant shall
have removed all or substantially all of Tenant's property therefrom, Owner may
immediately enter, alter, renovate or redecorate the demised premises without
limitation or abatement of rent, or incurring liability to Tenant for any
compensation, and such act shall have no effect on this lease or Tenant's
obligations hereunder.

VAULT, VAULT SPACE, AREA:
           14. No vaults, vault space or area, whether or not enclosed or
covered, not within the property line of the building is leased hereunder,
anything contained in or indicated on any sketch, blue print or plan, or
anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability, nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant.

OCCUPANCY:
           15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record.

BANKRUPTCY:
           16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be canceled by Owner by the sending of a written
notice to Tenant within a reasonable time after the happening of any one or more
of the following events: (1) the commencement of a case in bankruptcy or under
the laws of any state naming Tenant as


                                      -8-



the debtor; or (2) the making by Tenant of an assignment or any other
arrangement for the benefit of creditors under any state statute; or (3) the
appointment of a receiver, trustee, custodian or similar officer for Tenant or
for all or a substantial portion of Tenant's assets. Neither Tenant nor any
person claiming through or under Tenant, or by reason of any statute or order of
court, shall thereafter be entitled to possession of the premises demised but
shall forthwith quit and surrender the premises. If this lease shall be assigned
in accordance with its terms, the provisions of this Article 16 shall be
applicable only to the party then owning Tenant's interest in this lease.

               (b) It is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent and additional rent reserved hereunder for the
unexpired portion of the term demised and the fair and reasonable rental value
of the demised premises (including the additional rent) for the same period
(conclusively presuming the additional rent for each year thereof to be the same
as was payable for the year immediately preceding the termination of this
lease). In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such relating
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.

DEFAULT:
           17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payment of rent or additional rent; or if
the demised premises, becomes vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under Section 365 of Title 11 of the U.S. Code
(Bankruptcy Code); or if Tenant shall fail to move into or take possession of
the premises within fifteen (15) days after the commencement of the term of this
lease; or if Tenant shall be in default under any other lease for space in the
building, then, in any one or more of such events, upon Owner serving a written
five (5) days notice upon Tenant specifying the nature of said default and upon
the expiration of said five (5) days, if Tenant shall have failed to comply with
or remedy such default, or if


                                      -9-



the said default or omission complained of shall be of a nature that the same
cannot be completely cured or remedied within said five (5) day period, and if
Tenant shall not have diligently commenced curing such default within said five
(5) day period, or shall not thereafter with reasonable diligence and in good
faith, proceed to remedy or cure such default, then Owner may serve a written
three (3) days' notice of cancellation of this lease upon Tenant, and upon the
expiration of said three (3) days this lease and the term thereunder shall end
and expire as fully and completely as if the expiration of such three (3) day
period were the day herein definitely fixed for the end and expiration of this
lease and the term thereof and Tenant shall then quit and surrender the demised
premises to Owner but Tenant shall remain liable as hereinafter provided.

           (2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid, or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required,
then and in any of such events, Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.

REMEDIES OF OWNER AND WAIVER OF REDEMPTION:
           18. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent and additional rent
shall become due thereupon and be paid up to the time of such re-entry,
dispossess and/or expiration, (b) Owner may (but shall not be obligated to)
re-let the demised premises or any part or parts thereof, either in the name of
Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, and/or (c) Tenant or the legal representatives
of Tenant shall also pay Owner as liquidated damages for the failure of Tenant
to observe and perform said Tenant's covenants herein contained, any deficiency
between the rent and additional rent hereby reserved and/or covenanted to be
paid and the net amount, if any, of the rent and additional rent collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the demised premises or any part or parts
thereof shall not release or affect Tenant's liability for damages. In computing
such liquidated damages there shall be added to the said deficiency such
expenses as Owner may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage, advertising and alteration costs and for
keeping the demised premises in good order or for preparing the same for
re-letting. Any such liquidated


                                      -10-



damages shall be paid in monthly installments by Tenant on the rent day
specified in this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of Owner to
collect the deficiency for any subsequent month by a similar proceeding. Owner,
in putting the demised premises in good order or preparing the same for
re-rental, may, at Owner's option, make such alterations, repairs, replacements,
and/or decorations in the demised premises as Owner, in Owner's sole judgment,
considers advisable or necessary for the purpose of re-letting the demised
premises, and the making of such alterations, repairs, replacements, and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever
for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent and additional rent thereof
under such re-letting, and in no event shall Tenant be entitled to receive any
excess, if any, of such net rents collected over the sums payable by Tenant to
Owner hereunder. In the event of a breach or threatened breach by Tenant of any
of the covenants or provisions hereof, Owner shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity as if re-entry,
summary proceedings and other remedies were not herein provided for. Mention in
this lease of any particular remedy, shall not preclude Owner from any other
remedy, in law or in equity. Tenant hereby expressly waives any and all rights
of redemption granted by or under any present or future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the event of Owner
obtaining possession of demised premises, by reason of the violation by Tenant
of any of the covenants and conditions of this lease, or otherwise.

FEES AND EXPENSES:
           19. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any Article of this lease, then, unless
otherwise provided elsewhere in this lease, Owner may immediately or at any time
thereafter and without notice perform the obligation of Tenant thereunder. If
Owner, in connection with the foregoing or in connection with any default by
Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs
any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting or defending any action or
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant thereof. If Tenant's lease term shall have expired at the
time of making of such expenditures or incurring of such obligations, such sums
shall be recoverable by Owner as damages.

BUILDING ALTERATIONS AND MANAGEMENT:
           20. Owner shall have the right at any time, upon reasonable notice to
Tenant, without the same constituting an eviction and without incurring
liability to Tenant therefore, to change the arrangement and/or location of
public entrances, passageways, doors, doorways, corridors, elevators, stairs,
toilets or other public parts of the building


                                      -11-



and to change the name, number or designation by which the building may be
known. There shall be no allowance to Tenant for diminution of rental value and
no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.

           Owner reserves the right to change the address of the building and/or
to place signs above the entrances to the building at any time and from time to
time. Neither this Lease nor any use by Tenant shall give Tenant any easement or
other right in or to the use of any door or any passage or any concourse or any
plaza connecting the building with any subway or any other building or to any
public conveniences, or to any particular entrance ways to public streets, and
the use of such doors, passages, concourses, plazas, entrance ways and
conveniences may without notice to Tenant, be regulated or discontinued at any
time by Landlord.

NO REPRESENTATIONS BY OWNER:
           21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which it is erected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the premises,
except as herein expressly set forth, and no rights, easements or licenses are
acquired by Tenant by implication or otherwise, except as expressly set forth,
in the provisions of this lease. Tenant has inspected the building and the
demised premises and is thoroughly acquainted with their condition and agrees to
take the same "as is" and acknowledges that the taking of possession of the
demised premises by Tenant shall be conclusive evidence that the said premises
and the building of which the same form a part were in good and satisfactory
condition at the time such possession was so taken, except as to latent defects.
All understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executor agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.

END OF TERM:
           22. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If the
last day of the term of this Lease or any renewal thereof,


                                      -12-



falls on Sunday, this lease shall expire at noon on the preceding Saturday,
unless it be a legal holiday, in which case it shall expire at noon on the
preceding business day.

QUIET ENJOYMENT:
           23. Owner covenants and agrees with Tenant that upon Tenant paying
the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 30 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.

FAILURE TO GIVE POSSESSION:
           24. If Owner is unable to give possession of the demised premises on
the date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease shall
not be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease, Tenant covenants and agrees that such
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent. The provisions
of this Article are intended to constitute "an express provision to the
contrary" within the meaning of Section 223-a of the New York Real Property Law.

NO WAIVER:
           25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover


                                      -13-



the balance of such rent or pursue any other remedy provided in this lease. No
act or thing done by Owner or Owner's agents during the term hereby demised
shall be deemed an acceptance of a surrender of said premises, and no agreement
to accept such surrender shall be valid unless in writing signed by Owner. No
employee of Owner or Owner's agent shall have any power to accept the keys of
said premises prior to the termination of the lease and the delivery of keys to
any such agent or employee shall not operate as a termination of the lease or a
surrender of the premises.

WAIVER OF TRIAL BY JURY:
           26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any summary proceeding for
possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4.

INABILITY TO PERFORM:
           27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no wise be affected, impaired or excused because
Owner is unable to fulfill any of its obligations under this lease or to supply,
or is delayed in supplying, any service expressed or implied to be supplied or
is unable to make, or is delayed in making, any repair, additions, alterations
or decorations or is unable to supply, or is delayed in supplying, any equipment
or fixtures if Owner is prevented or delayed from so doing by reason of strike
or labor troubles or any cause whatsoever including, but not limited to,
government preemption in connection with a national emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.

BILLS AND NOTICES:
           28. Except as otherwise provided in this lease, a bill, statement,
notice or communication which Owner may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant at
the building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by


                                      -14-



registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.

SERVICES PROVIDED BY OWNER:
           29. As long as Tenant is not in default under any of the covenants of
this lease, Owner shall provide: (a) necessary elevator facilities on business
days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m. and have one
elevator subject to call at all other times; (b) heat to the demised premises
when and as required by law, on business days from 8 am. to 6 p.m. and on
Saturdays from 8 a.m. to 1 p.m.; (c) water for ordinary lavatory purposes, but
if Tenant uses or consumes water for any other purposes or in unusual quantities
(of which fact Owner shall be the sole judge), Owner may install a water meter
at Tenant's expense which Tenant shall thereafter maintain at Tenant's expense
in good working order and repair, to register such water consumption, and Tenant
shall pay for water consumed as shown on said meter as additional rent as and
when bills are rendered; (d) cleaning service for the demised premises on
business days at Owner's expense provided that the same are kept in order by
Tenant. If, however, said premises are to be kept clean by Tenant, it shall be
done at Tenant's sole expense, in a manner satisfactory to Owner and no one
other than persons approved by Owner shall be permitted to enter said premises
or the building of which they are a part for such purpose. Tenant shall pay
Owner the cost of removal of any of Tenant's refuse and rubbish from the
building; (e) If the demised premises is serviced by Owner's air
conditioning/cooling and ventilating system, air conditioning/cooling will be
furnished to tenant from May 15th through September 30th on business days
(Mondays through Fridays, holidays excepted) from 8:00 a.m. to 6:00 p.m., and
ventilation will be furnished on business days during the aforesaid hours except
when air conditioning/cooling is being furnished as aforesaid. If Tenant
requires air conditioning/cooling or ventilation for more extended hours or on
Saturdays, Sundays or on holidays, as defined under Owner's contract with
Operating Engineers Local 94-94A, Owner will furnish the same, at Tenant's
expense, based on a charge of $350 for every hour (or portion of an hour) that
the same is furnished to the demised premises, provided that Tenant requests the
same at least twelve (12) hours in advance; (f) Owner reserves the right to stop
services of the heating, elevators, plumbing, air-conditioning, power systems or
cleaning or other services, if any, when necessary by reason of accident or for
repairs, alterations, replacements or improvements necessary or desirable in the
judgment of Owner for as long as may be reasonably required by reason thereof.
If the building of which the demised premises are a part supplies
manually-operated elevator service, Owner at any time may substitute
automatic-control elevator service and upon ten days' written notice to Tenant,
proceed with alterations necessary therefor without in any wise affecting this
lease or the obligation of Tenant hereunder. The same shall be done with a
minimum of inconvenience to Tenant and Owner shall pursue the alteration with
due diligence. Tenant shall have access to the demised premises twenty-four
hours per day, seven days per week. Anything to the contrary notwithstanding,
Tenant shall control the air conditioning servicing the demised premises
twenty-four hours per day, seven days per week.


                                      -15-



CAPTIONS:
           30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.

DEFINITIONS:
           31. The term "office", or "offices", wherever used in this lease,
shall not be construed to mean premises used as a store or stores, for the sale
or display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturdays
(except such portion thereof as is covered by specific hours in Article 29
hereof), Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.

ADJACENT EXCAVATION -- SHORING:
           32. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.

RULES AND REGULATIONS:
           33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations and such other and further reasonable Rules and Regulations as Owner
or Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given in such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additional Rule or Regulation hereafter made
or adopted by Owner or Owner's agents,


                                      -16-



the parties hereto agree to submit the question of the reasonableness of such
Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice in writing upon Owner within ten (10)
days after the giving of notice thereof. Nothing contained in this lease shall
be construed to impose upon Owner any duty or obligation to enforce the Rules
and Regulations or terms, covenants or conditions in any other lease, as against
any other tenant, and Owner shall not be liable to Tenant for violation of the
same by any other tenant its servants, employees, agents, visitors or licensees.

SECURITY:
           34. Tenant has deposited with Owner the sum of $11,770.83 as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions, and conditions of this lease,
including, but not limited to, the payment of rent and additional rent, Owner,
upon notice to Tenant, may use, apply or retain the whole or any part of the
security so deposited to the extent required for the payment of any rent and
additional rent or any other sum as to which Tenant is in default or for any sum
which Owner may expend or may be required to expend by reason of Tenant's
default in respect of any of the terms, covenants and conditions of this lease,
including but not limited to, any damages or deficiency in the re-letting of the
premises, whether such damages or deficiency accrued before or after summary
proceedings or other re-entry by Owner. In the event that Tenant shall fully and
faithfully comply with all of the terms, provisions, covenants and conditions of
this lease, the security shall be returned to Tenant after the date fixed as the
end of the Lease and after delivery of entire possession of the demised premises
to Owner. In the event of a sale of the land and building or leasing of the
building, of which the demised premises form a part, Owner shall have the right
to transfer the security to the vendee or lessee and Owner shall thereupon be
released by Tenant from all liability for the return of such security; and
Tenant agrees to look to the new Owner solely for the return of said security,
and it is agreed that the provisions hereof shall apply to every transfer or
assignment made of the security to a new Owner. Tenant further covenants that it
will not assign or encumber or attempt to assign or encumber the monies
deposited herein as security and that neither Owner nor its successors or
assigns shall be bound by any such assignment, encumbrance, attempted assignment
or attempted encumbrance.

ESTOPPEL CERTIFICATE:
           35. Tenant, at any time, and from time to time, upon at least 10
days' prior notice by Owner, shall execute, acknowledge and deliver to Owner,
and/or to any other person, firm or corporation specified by Owner, a statement
on a form prepared by Owner certifying that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), stating the dates
to which the rent and additional rent have been paid,


                                      -17-



and stating whether or not there exists any default by Owner under this Lease,
and, if so, specifying each such default Tenant's failure to promptly deliver
such certificate shall be conclusive upon Tenant: (a) that this lease is in full
force and effect, without modification except as may be represented by Owner;
and (b) that there are 110 uncured defaults in Owner's performance and Tenant
has no right of offset, counterclaim, defenses or deduction against basic rent
or additional rent due hereunder or against Owner. Tenant's failure to comply
with the requirements of this Article 35 shall constitute a material default
under this Lease.

SUCCESSORS AND ASSIGNS:

           36. The covenants, conditions and agreements contained in this lease
shall bind and inure to the benefit of Owner and Tenant and their respective
heirs, distributees, executors, administrators, successors, and except as
otherwise provided in this lease, their assigns.

SEE RIDER ANNEXED HERETO AND MADE A PART HEREOF

           IN WITNESS WHEREOF, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written.

Witness for Owner:

/s/-------------------------            386 PAS PARTNERS, LLC

                                               By:      386 PAS PARTNERS, LLC
                                                        its member

                                        By:     MONDAY PROPERTIES GROUP, LLC
                                                its member

                                        By:     /s/-----------------------------
                                                Name:     Anthony Westreich
                                                Title:    President

                                        SENDTEC, INC.
Witness for Owner:

- ----------------------------
                                        By:     /s/-----------------------------
                                                Name:  -------------------------
                                                Title: -------------------------


                                        PARK SOUTH CONTROL, L.L.C.
Witness for Owner:

- ----------------------------            By:     /s/-----------------------------
                                                Name:  -------------------------
                                                Title: -------------------------


                                        SENDTEC, INC.
Witness for Owner:

/s/-------------------------
                                        By:     /s/-----------------------------
                                                Name:  /s/----------------------
                                                Title: -------------------------

























                                      -18-



RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE
WITH ARTICLE 33.

           1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner, using elevators and passageways designated for such delivery
by Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.

           2. The water and wash closets and plumbing fixtures shall not be used
for any purposes other than those for which they were designed or constructed
and no sweepings, rubbish, rags, acids or other substances shall be deposited
therein, and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.

           3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and/or vibrations, or interfere in any way with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.

           4. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Owner.

           5. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premise if the same is visible from the outside of the premises without the
prior written consent of Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by
any Tenant, Owner may remove same without any liability, and may charge the
expense incurred by such removal to Tenant or Tenants violating this rule.
Interior signs on doors and directory tablet shall be inscribed, painted or
affixed for each Tenant by Owner at the expense of such Tenant, and shall be of
a size, color and style acceptable to Owner.

           6. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, and as Owner may


                                      -19-



direct. No Tenant shall lay linoleum, or other similar floor covering, so that
the same shall come in direct contact with the floor of the demised premises,
and, if linoleum or other similar floor covering is desired to be used, an
interlining of builder's deadening felt shall be first affixed to the floor, by
a paste or other material, soluble in water, the use of cement or other similar
adhesive material being expressly prohibited.

           7. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.

           8. Freight, furniture, business equipment, merchandise and bulky
matter of any description shall be delivered to and removed from the premises
only on the freight elevators and through the service entrances and corridors,
and only during hours and in a manner approved by Owner. Owner reserves the
right to inspect all freight to be brought into the building and to exclude from
the building all freight which violates any of these Rules and Regulations of
the lease or which these Rules and Regulations are a part.

           9. Canvassing, soliciting and peddling in the building is prohibited
and each Tenant shall cooperate to prevent the same.

           10. Owner reserves the right to exclude from the building between the
hours of 6 p.m. and 8 a.m., and at all hours on Sundays, and legal holidays, all
persons who do not present a pass to the building, signed by Owner. Owner will
furnish passes to persons for whom any Tenant requests same in writing. Each
Tenant shall be responsible for all persons for whom he requests such pass and
shall be liable to Owner for all acts of such persons.

           11. Owner shall have the right to prohibit any advertising by any
Tenant which in Owner's opinion, tends to impair the reputation of the building
or its desirability as a building for offices, and upon written notice from
Owner, Tenant shall refrain from or discontinue such advertising.

           12. Tenant shall not bring or permit to be brought or kept in or on
the demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.

           13. If the building contains central air conditioning and
ventilation, Tenant agrees to keep all windows closed at all times and to abide
by all rules and regulations issued by the Owner with respect to such services.
If Tenant requires air conditioning or ventilation after the usual hours, Tenant
shall give notice in writing to the building superintendent prior to 3:00 p.m.,
in the case of services required on week days, and prior to 3:00 p.m. on the day
prior in the case of after hours service required on weekends or on holidays.

           14. Tenant shall not move any safe, heavy machinery, heavy equipment,
bulky matter, or fixtures into or out of the building without Owner's prior
written consent. If such safe, machinery, equipment, bulky matter or fixtures
requires special handling, all work in connection


                                      -20-



therewith shall comply with the Administrative Code of the City of New York and
all other laws and regulations applicable thereto and shall be done during such
hours as Owner may designate.


                                      -21-



                      RIDER ATTACHED TO AND FORMING PART OF
                       LEASE DATED MAY     , 2005 BETWEEN
                     386 PAS PARTNERS, L.L.C., AS OWNER AND
                            SENDTEC, INC., AS TENANT

Premises: Portion of 7th Floor, comprising 2,500 rentable square feet, at 386
Park Avenue South, New York, New York

           1. In the event that there are any discrepancies, duplications or
contradictions between the provisions contained in this Rider and the printed
lease form, it is understood and agreed that the provisions of this Rider shall
be controlling and supersede anything similar or to the contrary contained in
the printed lease form

           2. The Tenant shall pay annual base rent as follows:

           For the period from the commencement of the term of this lease
through May 31, 2006, Sixty-Two Thousand Five Hundred and 00/100 ($62,500.00)
Dollars per annum ($5,208.33 per month) plus electricity and additional rent as
set forth herein. Anything to the contrary notwithstanding, as a concession to
Tenant, provided that Tenant is not in default under any of the terms of this
lease, Tenant shall not be required to pay base rent during the first ninety
(90) days of the term of this lease. The date after such period shall constitute
the rent commencement date.

           For the period June 1, 2006 through May 31, 2007, Sixty-Four Thousand
Sixty Two and 25/100 ($64,062.25) Dollars per annum ($5,338.54 per month) plus
electricity and additional rent as set forth herein.

           For the period June 1, 2007 through May 31, 2008, Sixty-Five Thousand
Six Hundred Sixty-Three and 80/100 ($65,663.80) Dollars per annum ($5,471.98 per
month) plus electricity and additional rent as set forth herein.

           For the period June 1, 2008 through May 31, 2009, Sixty-Seven
Thousand Three Hundred Five and 40/100 ($67,305.40) Dollars per annum ($5,608.78
per month) plus electricity and additional rent as set forth herein.

           For the period June 1, 2009 through December 31, 2009, Sixty-Eight
Thousand Nine Hundred Eighty-Eight and 04/100 ($68,988.04) Dollars per annum
($5,749.00 per month) plus electricity and additional rent as set forth herein.

           Tenant shall pay such base rent, additional rent as provided in
Article 39, and electricity charges as provided in Article 40 promptly when due,
without notice or demand therefore without any set-off, offset, credit,
abatement or deduction of any kind whatsoever.

           No payment by Tenant or receipt or acceptance by Owner of a lesser
amount than the correct rental shall be deemed to be other than a payment on
account, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an accord and satisfaction, and
Owner may accept such check or payment without prejudice to Owner's right to
recover the balance or pursue any other remedy in this Lease or at law provided.




           Any apportionments or proportions of rental to be made under this
Lease shall be computed on the basis of a 360-day year consisting of twelve (12)
months of thirty (30) days each.

           3. Tenant agrees to pay as additional rent annually during the term
of this lease 1.25% of any increase in the Real Estate Taxes (as such term is
hereinafter defined) above those for the fiscal year 2005/2006. Such additional
rent shall be paid when the tax becomes fixed and within ten (10) days after
demand therefor by the Owner and shall be collectable as additional rent. For
the final year of the lease term, the Tenant shall be obligated to pay only a
pro rata share of such taxes. Tax bills (except as hereinafter provided) shall
be conclusive evidence of the amount of such taxes and shall be used for the
calculations of the amounts to be paid by the Tenant.

           The term "Real Estate Taxes" shall mean all the real estate taxes and
assessments, special or otherwise, levied, assessed or imposed by Federal, State
or Local Governments against or upon the building of which the demised premises
form a part and the land upon which it is erected. If due to a future change in
the method of taxation, any franchise, income, profit or other tax, or other
payment, shall be levied against Owner in whole or in part in substitution for
or in lieu of any tax which would otherwise constitute a Real Estate Tax, such
franchise, income, profit, or other tax or payment shall be deemed to be a Real
Estate Tax for the purposes hereof. If Owner should incur expenses in connection
with Owners endeavor to reduce or prevent increase in assessed valuation, Tenant
shall be obligated to pay as additional rent the amount computed by multiplying
the percent set forth in line 1 hereof times such expenses of Owner, and such
amount shall be due and payable upon demand by Owner and collectable in the same
manner as annual rent and Tenant shall be entitled to a proportionate reduction,
if any, in future tax bills. The obligation to make any payments of additional
rent pursuant to this Article shall survive the expiration or other termination
of this lease. Anything to the contrary notwithstanding, no escalations under
this Article shall be due during the first twelve months of the lease term.

           4. If the Owner furnishes electricity to the Tenant based on the
method of including the use thereof within the rent, then and in that event, the
Tenant agrees to have the rent reserved herein increased to compensate the Owner
for supplying the current as an additional service as hereinafter provided.
Tenant covenants and agrees that the rate used in determining the amount to be
added to the base rent will be at the same service classification under which
the Owner purchases electric current from the public utility corporation serving
the part of the city where the building is located, however, in no event will
the amount to be added to the base rent be less than $3.25 per square foot. The
Owner will furnish electricity to the Tenant through presently installed
electrical facilities for Tenant's reasonable use of such lighting, electrical
appliances and equipment as the Owner may permit to be installed in the
premises. The Tenant agrees that an electrical consultant, selected by the Owner
may make a survey of the electric lighting and powerload to determine the
average monthly electric current consumption in the demised premises. The
findings of the consultant as to the proper rent increase based on such average
monthly electric consumption shall be conclusive and binding upon the parties
and the Tenant shall pay the same as additional rent, monthly on the first day
of each and every month in advance for each month from the commencement of the
demised term, if the Owner's electric rates and/or charges be increased or
decreased, then the aforesaid additional rent shall be increased or decreased in
the same percentage. Tenant shall make no alterations or additions to


                                  Rider page 2



the electric equipment, and/or appliances without first obtaining written
consent from the Owner in each instance. This provision is to prevent the Tenant
from possible overloading of the buildings electrical distribution facilities.
The Owner, his agent or consultant, is given the right to make surveys from time
to time in the Tenant's premises covering the electrical equipment and fixtures,
and use of current. Owner shall not in any wise be liable or responsible to
Tenant for any loss or damage or expense which Tenant may sustain or incur if
either the quantity or character of electric service is changed or is no longer
available for Tenants requirements. Tenant covenants and agrees that at all
times its use of electric current shall never exceed the capacity of existing
feeders to the building or the risers or wiring installation. Any riser or
risers to supply Tenant's electrical requirements, upon written request of
Tenant, will be installed by Owner, at the sole cost and expense of Tenant, if,
in Owner's sole judgment, the same are necessary and will not cause or create a
dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other Tenants or
occupants. In addition to the installation of such risers Owner will also at the
sole cost and expense of Tenant, install all other equipment proper and
necessary in connection therewith subject to the aforesaid terms and conditions.
The Owner reserves the right to terminate the furnishing of electricity at any
time upon thirty (30) days written notice to the Tenant, in which event, the
Tenant may make application directly to the utility company servicing the
building for the Tenant's entire separate supply. The Owner upon the expiration
of the aforesaid (30) days written notice to the Tenant may discontinue
furnishing the electric current, in which latter event, the Tenants liability
for additional rent provided for this Article shall terminate as of the date of
discontinuance of the supplying of electric current but this lease shall
otherwise remain in frill force and effect and be otherwise unaffected.

           5. In the event that any installment of rent or additional rent is
not received by Owner within ten (10) days of the due date, a late charge of
four cents (.04) for each dollar ($1.00) of the installment so overdue may be
charged by the Owner for the purpose of defraying the expense incident to
handling such delinquent installments. In addition to the foregoing late charge,
interest shall accrue on such overdue installment of rent or additional rent
from the due date thereof until the date of payment at a rate per annum equal to
the prime rate as published in the Wall Street Journal plus four percent (4%).
Such late charge and any accrued interest shall be in addition to any reasonable
counsel fees and necessary disbursement incurred by Owner in collecting said
installments. In the event a check delivered to Owner for installments of rent
is dishonored, a reasonable service charge may be made for the handling of such
check.

           6. If Owner receives from Tenant any payment ("Partial Payment") less
than the sum of fixed rent, additional rent or other charges then due and owing
pursuant to the terms and conditions of this Lease, Owner, in its sole
discretion, may accept such Partial Payment and allocate the same in whole or in
part to any fixed rent, additional rent and/or any other charges or to any
combination thereof and, the acceptance of such Partial Payment shall not be
deemed a waiver of the remaining amounts due and owing.

           7. A. Tenant shall obtain and keep in full force and effect during
the term of this Lease:

           (1) a policy of commercial general public liability insurance,
including bodily injury and property damage coverage, with a broad form
contractual liability endorsement or its equivalent,


                                  Rider page 3



naming Tenant as insured and protecting Owner, Owners employees and managing
agent, and any mortgagees or lessors having an interest in the building, as
additional insureds (issued on an `occurrence' basis and not a `claims made'
basis) against claims for personal injury, death and/or third- party property
damage occurring in or about the Premises or the Building, and under which the
insurer agrees to waive any right of recovery such insurer may have had against
Owner, Owner's employees and managing agent, and any mortgagees or lessors
having an interest in the Building and to indemnify, defend and hold Owner
harmless from and against, among other things, all cost, expense and/or
liability (including, without limitation, reasonable attorneys' fees) arising
out of or based upon any and all claims, accidents, injuries and damages
occurring in, on or about the premises (whether or not such claims, accidents,
injuries and damages occurred as a result of Owner's negligence) The minimum
limits of liability applicable exclusively to the Premises shall be at least
$2,000,000 combined single limit bodily injury and property damage (or in any
increased amount (or in the form of an umbrella liability policy for "excess"
liability coverage) required by Owner in the exercise of Owner's commercially
reasonable discretion); and

           (2) insurance against loss or damage by fire and such other risks and
hazards (including burglary, theft, vandalism, sprinkler leakage, water damage,
explosion, breakage of glass within the Premises and, if the Premises are
located at or below grade, broad form flood insurance) as are insurable under
then available standard forms of "all risk" (or special form) insurance
policies, to Tenant's personal property and business equipment and fixtures
(hereinafter "Tenant's Property") and, whether or not such alterations or tenant
improvements had been paid for or performed by Tenant, any alterations and
tenant improvements in and to the Premises (hereinafter, `Tenant's work") for
the full replacement cost value thereof (with such policy having a deductible
not in excess of an amount to be determined by Owner in the exercise of owner's
commercially reasonable discretion) protecting Tenant, Owner, Owners employees
and managing agent, and any mortgagees or lessors having an interest in the
Building.

           B. At least thirty (30) days prior to the expiration or other
termination of any such policies, and prior to occupancy of the demised
premises, Tenant agrees to deliver to Owner evidence of payment for the policies
and certificates evidencing such insurance. All such policies shall contain
endorsements that (a) such insurance may not be modified or cancelled or allowed
to lapse except upon thirty (30) days' written notice to Owner by certified
mail, return receipt requested, containing the policy number and the names of
the insured and the certificate holder, and (b) Tenant shall be solely
responsible for payment of all premiums under such policies and Owner shall have
no obligation for the payment thereof notwithstanding that Owner shall be named
as an additional insured. Tenant's failure to provide and keep in force the
aforementioned insurance shall be regarded as a material default hereunder,
entitling Owner to exercise any or all of the remedies as provided in this Lease
in the event of Tenant's default. All insurance required to be carried by Tenant
pursuant to the terms of this Lease shall be effected under valid and
enforceable policies issued by reputable and independent insurers permitted to
do business in the State of New York which rate, in Best's Insurance Guide, or
any successor thereto (or if there be none, an organization having a national
reputation), as having a general policy-holder rating of at least "A-XIII."

           C. The parties hereto shall procure an appropriate clause into or
endorsement on, any "all risk" (or special form) or fire or extended coverage
insurance covering the Premises, the


                                  Rider page 4



Building, the personal property, fixtures or equipment located thereon or
therein, pursuant to which the insurance companies waive subrogation or consent
to a waiver of right of recovery by the insured prior to any loss. The waiver of
subrogation or permission for waiver of the right of recovery in favor of Tenant
shall also extend to all other persons or entities occupying or using the
Premises in accordance with the terms of the Lease. If the payment of an
additional premium is required for the inclusion of such waiver of subrogation
provisions or consent to a waiver of right of recovery, each party shall advise
the other of the amount of any such additional premiums by written notice and
the other party shall pay the same or shall be deemed to have agreed that the
party obtaining the insurance coverage in question shall be free of any further
obligations under the provisions hereof relating to such waiver or consent. It
is expressly understood and agreed that Owner will not be obligated to carry
insurance on Tenant's Property or Tenant's Work or insurance against
interruption of Tenant's business.

           D. Each party hereby waives all rights of recovery, claim, action,
cause of action and releases the other party with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party for loss, damage or destruction with respect to its property
(including rental value or business interruption) occurring during the term of
this Lease to the extent to which such party is insured under a policy
containing a waiver of subrogation or naming the other party as an additional
assured, as provided in this Article. If notwithstanding the recovery of
insurance proceeds by either party for loss, damage or destruction of its
property (or rental value or business interruption) the other party is liable to
the first party with respect thereto or is obligated under this Lease to make
replacement, repair or restoration, then provided the first party's right of
full recovery under its insurance policies is not thereby prejudiced or
otherwise adversely affected, the amount of the net proceeds of the first
party's insurance against such loss, damage or destruction shall be offset
against the second party's liability to the first party therefor, or shall be
made available to the second party to pay for the replacement, repair or
restoration, as the case may be. Tenant shall advise insurers of the foregoing
and such waiver shall be part of each policy maintained by Tenant which applies
to the Premises, any part of the Real Property or Tenant's use and occupancy of
any part thereof.

           8. This lease shall not be binding upon the Owner and Tenant unless
and until it is executed by Owner and Tenant and delivered to each other or to
their respective attorneys.

           9. Tenant represents that it has dealt with no Broker in connection
with this Lease other than Winslow & Company LLC. Tenant shall indemnify and
hold Owner harmless from and against any cost, claim or expense arising out of a
breach of this representation by Tenant. Owner represents that it has dealt with
no Broker in connection with this Lease other than Winslow & Company LLC, and
Owner shall pay the brokerage commission due such Broker pursuant to separate
agreement. Owner shall indemnify and hold Tenant harmless from and against any
cost, claim or expense arising out of a breach of this representation by Owner.
The aforesaid provisions of this Article shall survive the expiration or sooner
termination of this lease.

           10. The Tenant acknowledges that it has inspected the premises leased
hereunder and accepts the same "as-is" Should the Tenant at its sole cost and
expense seek to alter such premises or provide any other service to said
premises, the same must first be approved by the Owner in writing and in all
events, such changes being at the sole expense of the Tenant, must


                                  Rider page 5



and shall conform with all rules, regulations and laws of governmental
authorities having jurisdiction over the same. Anything to the contrary
notwithstanding, Owner at its sole cost and expense will paint and re-carpet the
demised premises, Tenant to choose style and color from building standard
materials, replace any damaged ceiling tiles, and demolish the office walls in
the locations shown on Exhibit B attached hereto and made a part hereof.
Further, Landlord will deliver the demised premises with all systems, including
HVAC, plumbing, and electrical, and existing kitchen appliances, in good working
order.

           11. Other than Owner's work as set forth in Article 46, the Tenant
shall, at its own expense, redecorate, paint and renovate the said premises as
it may deem necessary, to keep them in good appearance, permission being given
by the Owner to the Tenant to make, at Tenants own expense, such necessary
alteration, additions or improvements to said premises as Tenant may require,
consistent with the use for which the premises are being leased, provided,
however, that any major alterations, including storefront, which may affect the
fundamental structure of the building on the premises shall not be made without
prior written consent of the Owner therefor. All erections, alterations,
additions, replacements and improvements, whether temporary or permanent in
character, including any additional electric lighting fixtures which may be made
or installed upon the premises by the Tenant during the term of this lease or of
any renewal thereof, shall be removed by Tenant at Tenant's sole expense upon
the expiration of the term hereof or of any renewal period provided Tenant shall
restore the premises to its original condition as existed at the commencement of
this lease and if the same shall not be so removed, they shall remain upon and
be surrendered with the premises as a part thereof at the termination of this
lease, or any renewal thereof, without compensation to the Tenant. All furniture
of, or trade fixtures installed by the Tenant (excepting as aforesaid any
shelving or fixtures replacing those now in the premises) shall be removed by
the Tenant upon the expiration of the term hereof provided in so doing, no
material injury is done to the premises. The Tenant further agrees to keep said
premises and all parts thereof in a clean and sanitary condition and free from
trash, inflammable material and other objectionable matter.

           12. In any action brought to enforce the obligations of Owner under
this lease, any judgment or decree shall be enforceable against Owner only to
the extent of Owner's interest in the building of which the demised premises
form a part and no such judgment shall be the basis of execution on, or be a
lien on assets of Owner or any assets of any party being a partner or
stockholder in Owner, other than the interest in said building.

           13. Supplementing Article 22 of the lease, upon the expiration or
other termination of this lease, Tenant shall quit and surrender to Owner the
demised premises, vacant, broom clean and in good order and condition, ordinary
wear and tear, repairs and damage for which Tenant is responsible under the
terms of this Lease excepted. Tenant shall remove all of its property. Tenant
expressly waives, for itself and for any person claiming through or under
Tenant, any rights which Tenant or any such person may have under the provisions
of Section 2201 of the New York Civil Practice Law and Rules and of any
successor law of like import then in force in connection with any holdover
summary proceedings which Landlord may institute to enforce the foregoing
provisions of this Article 49.

           14. Should the Tenant hold over in possession after the expiration or
sooner termination of the original term or of any extended term of this lease,
such holding over shall not


                                  Rider page 6



be deemed to extend the term or renew the lease, but such holding over
thereafter shall continue upon the covenants and conditions herein set forth
except that the charge for use and occupancy of such holding over for each
calendar month or part thereof (even if such part shall be a small fraction of a
calendar month) shall be the sum of:

           (a) 1/12 of the then current annual rent rate set forth on page one
of this lease, times 3, plus

           (b) 1/12 of the net increase, if any, in annual fixed rental due
solely to increases in the cost of the value of electric service furnished to
the premises in effect on the last day of the term of the lease, plus

           (c) 1/12 of all other items of annual additional rental which annual
additional rental would have been payable pursuant to this lease had this lease
not expired or terminated, plus

           (d) those other items of additional rent (not annual additional rent)
which would have been payable monthly pursuant to this lease, had this lease not
expired or terminated, which total sum tenant agrees to pay to Owner promptly
upon demand, in full without set off.

           In addition to the foregoing, Tenant shall indemnify and hold Owner
harmless from and against any and all costs and expenses including, without
limitation, reasonable attorney's fees, loss of income and all consequential
damages it may suffer or incur as a result of Tenant's holdover. The aforesaid
provisions of this Article shall survive the expiration or sooner termination of
this lease.

           The provisions of this Article do not exclude Owner's right of
re-entry or any other right under this lease or at law or in equity, including,
without limitation, all rights given at law or in equity, in the case of
holdovers, to remove Tenant and anyone claiming through or under Tenant.

           15. In the event Owner gives its approval for alteration work of the
demised premises pursuant to Articles "3" and "46" hereof, Liability Insurance
in the sum of $1,000,000/$2,000,000 and $100,000 property damage and Worker's
Compensation must be carried by any contractor performing services in the
demised premises and Certificates of same must be transmitted to Owner prior to
the commencement of any alterations. Owner, Owner's employees and managing
agent, and any mortgagees or lessors having any interest in the building, shall
be named as additional insureds under all such liability insurance policies.

           16. Supplementing Article 47 (and except with respect to Owner's work
set forth in Article 46), all improvements and changes to the Premises desired
by the Tenant, shall be furnished by Tenant at Tenant's sole cost and expense.
All such improvements at any time made shall be subject to the following
conditions:

           (i) Plans and specifications shall be prepared by a licensed
architect and/or by a licensed engineer selected and paid by Tenant for any
structural alterations, and for any alterations, whether or not structural, in
connection with which plans are required to be filed by law with governmental
authorities. Such plans and specifications shall be submitted to Owner for
approval in advance of the commencement of work, which approval shall not be
unreasonably withheld. Owner agrees to respond to said plans and specifications,
and any revisions thereof,


                                  Rider page 7



within 15 days of their receipt, and Owner's approval thereto shall be deemed
given in the event Owner shall not have responded within said 15-day period.

           (ii) In performing Tenant's work in, on or upon the premises, Tenant
covenants and agrees to use only first-class materials and to do, or cause to be
done, all work in a workmanlike manner, employing contractors approved by Owner,
which approval shall not be unreasonably withheld. All such work shall be
performed in compliance with the plans and specifications therefore, if any, as
approved by Owner.

           (iii) Tenant covenants and agrees that all work performed in, or upon
the Premises shall be in strict compliance with applicable laws, ordinances,
regulations and orders of any Federal, State, County, municipal or other
governmental authorities having or acquiring jurisdiction thereof. Without
limiting the generality of the foregoing, Tenant covenants and agrees, other
than in connection with Owner's work, to procure and pay for all necessary
governmental licenses and permits in advance of the performance of the work, and
to procure all necessary governmental approvals and certificates, including
approvals of the New York Board of Fire Underwriters (or any successor
organization thereto). Owner agrees to cooperate with Tenant, at Tenant's sole
cost and expense, in procuring the foregoing licenses, permits, and approvals
and in filing the plans and specifications referred to above.

           (iv) All of the Tenant's work shall, upon completion, be inspected by
a representative of Owners fire insurer. In the event that any such work results
in an increased premium, Tenant covenants and agrees to pay the amount of such
increase in premium for Owner's fire and extended coverage insurance policy and
any renewals thereof, as additional rent, on demand.

           (v) Tenant assumes the entire responsibility and liability, including
statutory and common law liability, for any and all injuries or death of any or
all persons, including Tenant's contractors and subcontractors and their
respective employees, and for any and all damages to property caused by, or
resulting from or arising out of any act or omission on the part of Tenant,
Tenant's contractors or subcontractors' or their respective employees, in the
prosecution of Tenants Work, and with respect to such work, agrees to indemnify
and save harmless Owner, from and against all losses and/or expenses including
reasonable legal fees and actual expenses, which it may suffer or pay as the
result of claims or lawsuits due to, because of, or arising out of any and all
such injuries or death and/or damage.

           (vi) In the event that Tenant suffers or permits any mechanic's or
similar lien to be filed against the premises, the building and/or the land on
which it is located, which remains undischarged by bonding, legal proceedings or
otherwise for more than ten (10) days, for work performed or claimed to have
been performed for Tenant, or for materials furnished or claimed to have been
furnished to Tenant, in addition to all other rights and remedies Owner may have
at law and under this lease, Owner shall have the right to discharge said lien
by bonding, legal proceedings or otherwise, or to settle or compromise the same,
and to be reimbursed by Tenant for any actual expenses incurred in connection
therewith, and any interest thereon in accordance with Article 41, as additional
rent, payable within 10 days of demand.

           (vii) All alterations, fixtures and equipment, when installed in or
on the Premises, shall be free and clear of purchase money mortgages, chattel
mortgages, conditional sales obligations


                                  Rider page 8



and any and all other liens provided, however, that this provision shall not
prohibit Tenant from leasing equipment not affixed to or installed as part of
the Premises.

           (viii) Whenever Tenant shall enter into any contract for the
performance of work all such contractors and subcontractors shall be acceptable
to Owner. Tenant shall cause Tenant's contractors and subcontractors to maintain
in effect statutory workmen's compensation insurance in connection with such
work and furnish to Owner a certificate of such insurance.

           17. Tenant, at its sole cost and expense, shall procure and maintain
any and all license or licenses, permit or permits, required from any source
whatsoever for the operation and/or maintenance of the demised premises during
the term of this Lease. In the event that Tenant shall fail to apply for and/or
maintain any and all of such licenses and/or permits, Owner may, but shall not
be obligated to, apply therefore, and if Owner receives such licenses and/or
permits, Tenant agrees to pay to Owner, as additional rent, a sum equal to the
license and/or permit fees paid by Owner for such licenses and/or permits.

           18. It is hereby agreed and understood that any and all reasonable
attorney's fees and/or legal expenses incurred by the Owner in any successful
proceedings instituted by reason of the Tenant's default of any of the terms or
conditions of this Lease shall be deemed to be additional rent and such
attorney's fees and/or legal expenses shall be recovered from the Tenant.

           19. The statement in this lease of the nature of the business to be
conducted by Tenant shall not be deemed to constitute a representation or
guaranty by Owner that such use is lawful or permissible in the premises under
the certificate of occupancy for the building.

           20. Notwithstanding the provisions of Article 11 and in modification
and amplification thereof, Owner shall not unreasonably withhold its consent to
an assignment or sublet of the demised premises.

           A. If Tenant shall desire to assign this Lease or to sublet all or a
portion of the demised premises, Tenant shall submit to Owner a written request
for Owner's consent to such assignment or subletting, which request shall
contain or be accompanied by the following information: (i) the name and address
of the proposed assignee or subtenant; (ii) a description identifying the space
to be sublet and Tenant's improvements included therein; (iii) the terms and
conditions of the proposed assignment or subletting; (iv) the nature and
character of the business of the proposed assignee or subtenant and of its
proposed use of the demised premises; and (v) current financial information and
any other information Owner may reasonably request with respect to the proposed
assignee or subtenant. Owner may then, by notice to such effect given to Tenant
within fifteen (15) business days after receipt of Tenant's request for consent
and of such further information as Owner may reasonably request to elect to
terminate the Lease, only if the entire demised premises are to be assigned or
sublet. The termination of the Lease shall be set forth in the notice and shall
take place on a date not earlier than one (1) day before the effective date of
the proposed assignment or subletting or later than thirty-one (31) days after
said effective date. Tenant shall then vacate or surrender the demised premises
on or before the termination date and the term of this Lease shall end on the
termination date as if that were the


                                  Rider page 9



expiration date. Anything to the contrary notwithstanding, the provisions of
this Article 56 shall not apply to the sub-let of desk space only in the demised
premises.

           B. Tenant shall not list or otherwise publicly advertise for
assignment or subletting, without Owner's prior written consent at a rental rate
less than the rate of fixed rent and additional rent then payable hereunder for
such space.

           C. If Owner consents to a subletting, it shall be expressly subject
to all of the obligations of Tenant under this lease and the further condition
and restriction that the sublease shall not be assigned, encumbered or otherwise
transferred or the subleased premises further sublet by the sublessee in whole
or in part, or any part thereof suffered or permitted by the sublessee to be
used or occupied by others, without the prior written consent of Owner in each
instance. No subletting shall end later than one day before the Expiration Date
of this lease.

           D. Any subletting approved hereunder is subject to the express
condition, and by accepting a sublease hereunder each subtenant shall be
conclusively deemed to have agreed, that if this lease should be terminated
prior to the Expiration Date or if Owner shall succeed to Tenants estate in the
demised premises, then at Owner's election the subtenant shall attorn to and
recognize Owner as the subtenant's Owner under the sublease and the subtenant
shall promptly execute and deliver any instruction Owner may reasonably request
to evidence such attornment.

           E. Tenant shall furnish Owner with a counterpart (which may be a
conformed or reproduced copy) of each sublease or assignment made hereunder
within ten (10) days after the date of its execution. Tenant shall remain fully
liable for the performance of all of Tenant's obligations hereunder
notwithstanding any subletting provided for herein, and without limiting the
generality of the foregoing, shall remain fully responsible and liable to Owner
for all acts and omissions of any subtenant or anyone claiming under or through
any subtenant which shall be in violation of any of the obligations of this
lease and any such violation shall be deemed to be a violation by Tenant. Tenant
shall pay Owner on demand any expense which Owner may reasonably be required to
incur in acting upon any request for consent to assignment or subletting
pursuant to this Article.

           F. Notwithstanding any assignment and assumption by the assignee of
the obligations of Tenant hereunder, Tenant herein named, shall remain liable
jointly and severally (as a primary obligor) with its assignee and all
subsequent assignees for the performance of Tenants obligations hereunder, and,
without limiting the generality of the foregoing, shall remain fully and
directly responsible and liable to Owner for all acts and omissions on the part
of any assignee subsequent to it in violation of any of the obligations of this
lease.

           G. Notwithstanding anything to the contrary hereinabove set forth, no
assignment of this lease shall be binding upon Owner unless the assignee shall
execute and deliver to Owner an agreement, in recordable form, whereby such
assignee agrees unconditionally to be personally bound by and to perform all of
the obligations of Tenant hereunder and further expressly agrees that
notwithstanding such assignment the provisions of this Article shall continue to
be binding upon such assignee with respect to all future assignments and
transfers. A failure or refusal of such assignee to execute or deliver such an
agreement in recordable form shall not release the


                                 Rider page 10



assignee from its liability for the obligations of Tenant hereunder assumed by
acceptance of the assignment of this lease.

           H. For the purpose of this lease, any sale, transfer, or assignment
of a majority of the direct or indirect equity interests of Tenant (whether
stock or partnership or membership interests), or sale or other transfer of
substantially all of its assets, shall be deemed an assignment.

           I. Notwithstanding anything to the contrary hereinabove set forth
Tenant may not assign or sublet all or any portion the demised premises to any
tenant or subtenant in the building of which the demised premises form a part or
to any third party who has been shown space or inquired about space in the
building of which the demises premises form a part within the six (6) month
period immediately preceding the written request for consent as set forth in
part A above.

           J. If Owner shall consent to any assignment or subletting and Tenant
shall (i) in the case of an assignment of this Lease, receive any consideration
from its assignee in connection therewith, Tenant shall pay over to Owner as
additional rent hereunder, fifty (50%) percent of such consideration or (ii) in
the case of a sublet of all or any portion of the demised premises for rents
which for any period shall exceed the rents payable for the subleased space
under this Lease for the same period, or receive any consideration over and
above such rents then payable, Tenant shall pay Owner as additional rent
hereunder fifty (50%) percent of any "net profits" (as hereinafter defined) that
Tenant may derive from such subletting. "Net profits" shall consist of such
excess rent and/or such other consideration received by Tenant for such
subletting.

           K. Without limiting any of the foregoing provisions of this Article,
if pursuant to the Bankruptcy Code, as the same may be amended, Tenant is
permitted to assign or otherwise transfer this Lease (whether in whole or in
part in disregard of the restrictions contained in Article 57 and/or Article
16),Tenant agrees that adequate assurance of future performance by the assignee
or transferee permitted under such Code shall mean the deposit of cash security
with Owner in an amount equal to the sum of one (1) year's fixed rent then
reserved hereunder plus an amount equal to all additional rent payable by Tenant
pursuant to this Lease for the calendar year preceding the year in which such
assignment is intended to become effective, which deposit shall be held by
Owner, without interest, for the balance of the term as a security for the full
and faithful performance of all of the obligations under this Lease on the part
of Tenant yet to be performed. If Tenant receives or is to receive any valuable
consideration for such an assignment or transfer (in part or in whole) of this
Lease, such consideration, after deducting therefrom any portion of such
consideration reasonably designated by the assignee or transferee as paid for
the purchase of Tenant's personal property in the demised premises, shall be and
become the sole exclusive property of Owner and shall be paid aver to Owner
directly by such assignee or transferee. Any such assignee or transferee may
only use the demised premises as executive offices for an assignee or transferee
whose main business is the same as Tenant's and such occupancy may not increase
the number of individuals occupying the demised premises at the time a petition
for bankruptcy (or reorganization) is filed by or against Tenant. In addition,
adequate assurance shall mean that any such assignee or transferee of this Lease
shall have a net worth (exclusive of good will) equal to at least fifteen (15)
times the aggregate of the annual Fixed Rent reserved hereunder plus all
additional rent for the preceding calendar year as


                                 Rider page 11



aforesaid. Such assignee or transferee shall expressly assume this Lease by an
agreement in recordable form.

           21. Tenant shall pay to Owner as additional rent the sum of FIFTY TWO
AND 08/100 ($52.08) DOLLARS on the first day of each month during the term of
this lease, as Tenant's portion of the contract price for the sprinkler
supervisory service.

           22. With reference to Articles 3, 47 and 51 all alterations,
renovations, installations and decorations to be done by Tenant in the demised
premises shall be done only by a general contractor acceptable to Owner and a
supervisor is required to be at the premises at all times while such work is
being performed.

           23. Anything herein contained to the contrary notwithstanding, the
demised premises will be delivered in AS IS condition (except for Owner's work
set forth in Article 46).

           24. Because of requirements of Local Law 5 regarding certain fire
safety regulations, it is necessary that Owner know at all times the approximate
number of persons within the demised premises after normal business hours (i.e.
after 6:00 p.m. on weekdays and on weekends and holidays). Accordingly, within
thirty (30) days after the date hereof, Tenant shall submit to Owner its best
estimate of the number of Tenant's employees, agents, visitors and other persons
which Tenant expects to occupy the demised premises at any time after normal
business hours. Prior to 5:00 p.m. of each weekday or prior to 5:00 p.m., on the
day preceding a weekend or holiday, Tenant shall inform the building manager's
office whenever Tenant knows, or has reason to believe, that the number of its
employees, agents, visitors and other persons occupying the demised premises
after normal working or business hours that evening or the next day(s), as the
case may be, will exceed this estimate. Tenant also shall keep reasonable
records which indicate the number of persons entering and leaving the demised
premises after normal business hours, and shall provide copies of such records
to Owner at Owner's request.

           25. Tenant shall not cause or permit any Hazardous Materials (as
defined below) to be used, transported, stored, released, handled, produced or
installed in, on or from, the Demised Premises or the Building, except for such
Hazardous Materials (such as cleaning and photocopying fluids) that are
customarily used in the operation of offices, provided that such Hazardous
Materials are used in compliance with all laws and/or requirements of public
authorities. The term "Hazardous Materials" shall mean any flammable, explosive,
or radioactive materials, or hazardous wastes, hazardous and toxic substances,
or related materials, asbestos or any material, containing asbestos or any other
such substance or material, as defined by any federal, state or local
environmental law, ordinance, rule or regulation including, without limitation,
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, and in the regulations adopted and
publications promulgated pursuant to each of the foregoing. In the event of a
breach by Tenant of the provisions of this Article 61, Owner shall in addition
to all of its rights and remedies under this Lease and pursuant to law, require
Tenant to remove any such Hazardous Materials from the demised premises or the
Building in the manner prescribed for such removal by all requirements of law.
The provisions of this Article 61 shall survive the expiration or sooner
termination of this Lease.


                                 Rider page 12



           26. With reference to Article 34 and Tenant's security deposit, it is
understood and agreed that (a) the security deposit shall not be held by Owner
as a trust fund and (b) Owner shall deposit the security deposit in an
interest-bearing account and any interest thereon, less Owner's reasonable
administrative fee associated therewith, shall be added to and become a part of
the security deposit. No act or thing done by Owner or Owner's agents during the
Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Owner.

           27. Tenant acknowledges that Owner may need to recover possession of
the leased premises in connection with construction related to the releasing or
renovation of the building or a substantial portion thereof. As such, Tenant
acknowledges and agrees Owner shall have the right, at any time after the second
anniversary of the date of this lease, to terminate this lease upon nine (9)
months prior written notice (the "Termination Notice"). Upon termination by
Owner, this lease shall end and expire on the date (the "Termination Date") set
forth in the Termination Notice as if such date were the date originally set
forth in this lease for the expiration of the term demised hereunder. The
termination of this lease in accordance with the terms and provisions of this
Article shall not constitute a release or discharge of Tenant with respect to
any outstanding and unsatisfied obligation or liability, whether unbilled or
calculated, accrued or incurred applicable to the leased premises, such as, but
not limited to, basic rent, additional rent and/or other charges payable by
Tenant up to and including the Termination Date. In the event of any such
termination, Owner will use reasonable efforts to relocate Tenant pursuant to
Article 65 below if space is available and such relocation is consistent with
the renovations and/or leasing program of Owner.

           28. Tenant hereby waives trial by jury in any action, proceeding or
counterclaim brought by or against Tenant on any action, proceeding or
counterclaim brought by or against Tenant on any matter whatsoever arising out
of or in any way connected with this Lease the relationship of Owner and Tenant,
and Tenant's use or occupancy of the Premises, including, without limitation,
any claim or injury or damage, and any emergency and other statutory remedy with
respect thereto.

           29. Tenant shall not interpose any counterclaim of any kind in any
action or proceeding commenced by Owner to recover possession of the Premises,
unless the failure by Tenant to interpose such counterclaim in any such action
or proceeding would preclude Tenant from asserting the subject matter of such
counterclaim in a separate action or proceeding with any other action which may
have been or will be brought in any other court by Tenant.

           30. A. Owner shall have the right, at its sole option, upon at least
thirty (30) days' prior written notice to Tenant (the "Relocation Notice") to
relocate Tenant to, and to substitute for the leased premises, other space
within the Building (the "Substitute Premises") provided the gross rentable area
of the Substitute Premises shall be the same as or within ten percent (10%) of
(plus or minus) the gross rentable area of the leased premises and are otherwise
substantially similar to the Leased Premises.

           B. The Substitute Premises shall be improved by Owner at its expense,
with decorations and improvements that are substantially comparable in quantity
and quality to those that existed as of the Commencement Date of this Lease.
Owner shall pay the actual,


                                 Rider page 13



documented, necessary and reasonable expenses incurred by Tenant in connection
with such substitution, such as costs of moving, door lettering and telephone
relocation, provided Owner has first approved in writing all of said expenses
before Tenant incurs same.

           C. The Substitute Premises shall become the "leased premises" for
purposes of this Lease on the date, as determined solely by Owner, when Owner
has substantially completed the Substitute Premises. All of the obligations,
commitments, responsibilities, duties and liabilities of Tenant set forth in
this Lease shall apply to Tenant with respect to the Substitute Premises
beginning on said substantial completion date, as established solely by Owner.

           31. Tenant represents, warrants and covenants that neither Tenant nor
any of its partners, members or shareholders (i) is listed on the Specially
Designated Nationals and Blocked Persons List maintained by the Office of
Foreign Asset Control, Department of the Treasury ("OFAC") pursuant to Executive
Order No. 13224, 66 Fed. Reg. 49079 (Sept 25, 2001) ("Order") and all applicable
provisions of Title III of the USA PATRIOT ACT (Public Law No. 107-56 (October
26, 2001)); (ii) is listed on the Denied Persons List and Entity List maintained
by the United States Department of Commerce; (iii) is listed on the List of
Terrorists and List of Disbarred Parties maintained by the United States
Department of State, (iv) is listed on any list or qualification of "Designated
Nationals" as defined in the Cuban Assets Control Regulations 31 C.F.R. Part
515; (v) is listed on any other publicly available list of terrorists, terrorist
organizations or narcotics traffickers maintained by the United States
Department of State, the United States Department of Commerce or any other
governmental authority or pursuant to the Order, the rules and regulations of
OFAC (including without limitation the Trading with the Enemy Act, 50 U.S.C.
App. 1-44; the International Emergency Economic Powers Act, 50 U.S.C. ss.ss.
1701-06; the unrepealed provision of the Iraqi Sanctions Act, Publ.L. No.
101-513; the United Nations Participation Act, 22 U.S.C. ss. 2349 aa-9; The
Cuban Democracy Act, 22 U.S.C. ss.ss. 60-01-10; The Cuban Liberty and Democratic
Solidarity Act, 18.U.S.C. ss.ss. 2332d and 233; and The Foreign Narcotic Kingpin
Designation Act, Publ. L. No. 106-201, all as may be amended from time to time);
or any other applicable requirements contained in any enabling legislation or
other Executive Orders in respect of the Order (the Order and such other rules,
regulations, legislation or orders are collectively called the "ORDERS"); (vi)
is engaged in activities prohibited in the Orders; or (vii) has been convicted,
pleaded nolo contendere, indicted, arraigned or custodially detained on charges
involving money laundering or predicate crimes to money laundering, drug
trafficking, terrorist-related activities or other money laundering predicate
crimes or in connection with the Bank Secrecy Act (31 U.S.C. ss.ss. 5311 et.
seq.).

           32. If Tenant is in arrears in the payment of rent or additional
rent, Tenant waives Tenant's right, if any, to designate the items against which
any payments made by Tenant are to be credited, and Owner may apply any payments
made by Tenant to any items Owner sees fit.

           33. Supplementing Article 18 of this lease:

           A. In case of any default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, as provided in Article 17 of this lease,
Tenant (and all other occupants) shall vacate and surrender to Owner the demised
premises in accordance with this lease.


                                 Rider page 14



           B. Owner may recover from Tenant, and Tenant shall pay Owner on
demand, in lieu of any further deficiency pursuant to subsection (c) of Article
18 hereof, as and for liquidated damages, an amount equal to the difference
between the rent and additional rent reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental value of the
demised premises (including the additional rent) for the same period
(conclusively presuming the additional rent for each year thereof to be the same
as was payable for the year immediately preceding the default, re-entry,
expiration and/or dispossession). In the computation of such damages the
difference between any installment of rent and additional rent becoming due
hereunder and the fair and reasonable rental value of the demised premises for
the period for which such installment was payable shall be discounted at the
rate of four percent (4%) per annum. If the demised premises or any part thereof
be relet by Owner for the unexpired term of this lease, or any part thereof,
before presentation of proof of such liquidated damages to any court, commission
or tribunal, the amount of rent reserved upon such reletting shall be deemed to
be the fair and reasonable rental value for the part or the whole of the demised
premises so re-let during the term of the re-letting. Nothing herein contained
shall limit or prejudice the right of Owner to prove for and obtain as
liquidated damages an amount equal to the maximum allowed by any statute or rule
of law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.

           C. Nothing contained in this lease shall be considered to limit or
preclude the recovery by Owner from Tenant of the maximum amount allowed to be
obtained as damages or otherwise at law or in equity.

           34. A. All legal actions relating to this lease shall be adjudicated
in the state courts of the State of New York, or the federal courts, in either
case having jurisdiction in the county in which the building is located. Tenant
irrevocably consents to the personal and subject matter jurisdiction of those
courts in any legal action relating to this lease. This consent to jurisdiction
is self-operative and no further instrument or legal action, other than service
of process in any manner permitted by law or this Section, is necessary in order
to confer jurisdiction upon the person of Tenant and the subject matter in
question in any such court.

           B. Tenant irrevocably waives and shall not assert, by way of motion,
as a defense or otherwise (i) any objection to any such court being the venue of
any legal action relating to this lease, (ii) any claim that any legal action
relating to this lease brought in any such court has been brought in an
inconvenient forum or (iii) any claim that Tenant is not personally subject to
the jurisdiction of that court.

           C. Service in any legal action relating to this lease may be made
upon Tenant by delivery of the summons and complaint, or the petition and notice
of petition, by certified or registered mail, return receipt requested, sent to
Tenant at the demised premises or the last known business address of Tenant.

                           [Signature Page to Follow]


                                 Rider page 15



Witness for Owner:                      SENDTEC, INC.

- --------------------
/s/                                     By:  /s/--------------------------------
                                             Name:    --------------------------
                                             Title:   --------------------------


                                 Rider page 16



Witness for Owner:

/s/-----------------                    386 PAS PARTNERS, LLC

                                        By:  386 PAS MONDAY, LLC
                                             its member

                                        By:  MONDAY PROPERTIES GROUP, LLC
                                             its member

                                        By:  /s/--------------------------------
                                             Name:    --------------------------
                                             Title:   --------------------------


                                 Rider page 17



                                    EXHIBIT A


                                Demised Premises






                                    EXHIBIT B


                          Office Walls to be Demolished

EX-31.1 8 file008.htm CERTIFICATION





                                                                    Exhibit 31.1

          CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Shawn McNamara, certify that:

         (1)      I have reviewed this annual report on Form 10-KSB of
                  RelationServe Media, Inc.;

         (2)      Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report;

         (3)      Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects, the financial condition, results of
                  operations and cash flows of the registrant as of, and for,
                  the periods presented in this report;

         (4)      The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrant and have:

                  a)       Designed such disclosure controls and procedures, or
                           caused such disclosure controls and procedures to be
                           designed under our supervision, to ensure that
                           material information relating to the registrant,
                           including its consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this report
                           is being prepared;

                  b)       Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures and presented in
                           this quarterly report our conclusions about the
                           effectiveness of the disclosure controls and
                           procedures, as of the end of the period covered by
                           this report based on such evaluation; and

                  c)       Disclosed in the report any change in the
                           registrant's internal control over financial
                           reporting that has occurred during the registrant's
                           most recent fiscal quarter (the registrant's fourth
                           fiscal quarter in the case of the annual report) that
                           has materially affected, or is reasonably likely to
                           materially affect, the registrant's internal control
                           over financial reporting; and

         (5)      The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

                  a)       All significant deficiencies in the design or
                           operation of internal control over financial
                           reporting which are reasonably likely to adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial information; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal control over
                           financial reporting.

Date: March 20, 2006

                                                     /s/ Shawn McNamara
                                                     ---------------------------
                                                     Shawn McNamara

EX-31.2 9 file009.htm CERTIFICATION





                                                                    Exhibit 31.2

          CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Adam Wasserman, certify that:

         (1)      I have reviewed this annual report on Form 10-KSB of
                  RelationServe Media, Inc.;

         (2)      Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report;

         (3)      Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects, the financial condition, results of
                  operations and cash flows of the registrant as of, and for,
                  the periods presented in this report;

         (4)      The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrant and have:

                  a)       Designed such disclosure controls and procedures, or
                           caused such disclosure controls and procedures to be
                           designed under our supervision, to ensure that
                           material information relating to the registrant,
                           including its consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this report
                           is being prepared;

                  b)       Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures and presented in
                           this quarterly report our conclusions about the
                           effectiveness of the disclosure controls and
                           procedures, as of the end of the period covered by
                           this report based on such evaluation; and

                  c)       Disclosed in the report any change in the
                           registrant's internal control over financial
                           reporting that has occurred during the registrant's
                           most recent fiscal quarter (the registrant's fourth
                           fiscal quarter in the case of the annual report) that
                           has materially affected, or is reasonably likely to
                           materially affect, the registrant's internal control
                           over financial reporting; and

         (5)      The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

                  a)       All significant deficiencies in the design or
                           operation of internal control over financial
                           reporting which are reasonably likely to adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial information; and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal control over
                           financial reporting.

Date: March 20, 2006

                                                     /s/ Adam Wasserman
                                                     ---------------------------
                                                     Adam Wasserman

EX-32.1 10 file010.htm CERTIFICATION




                                                                    Exhibit 32.1

                CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
                       PURSUANT TO 18 U.S. C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of RelationServe Media, Inc., (the
"Company") on Form 10-KSB for the year ended December 31, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Shawn
McNamara, the Principal Executive Officer of the Company, certify, pursuant to
18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:

         (1) The Report fully complies with the requirements of Section 13 (a)
             of 15 (d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
             material respects, the financial condition and results of
             operations of the Company.

March 20, 2006

                                              /s/ Shawn McNamara
                                              ---------------------------------
                                              Name:  Shawn McNamara
                                              Title: Principal Executive Officer

EX-32.2 11 file011.htm CERTIFICATION





                                                                    Exhibit 32.2

                CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
                       PURSUANT TO 18 U.S. C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of RelationServe Media, Inc., (the
"Company") on Form 10-KSB for the year ended December 31, 2005 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Adam
Wasserman, Principal Financial Officer of the Company, certify, pursuant to 18
U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:

         (1)   The Report fully complies with the requirements of Section 13 (a)
               of 15 (d) of the Securities Exchange Act of 1934; and

         (2)   The information contained in the Report fairly presents, in
               all material respects, the financial condition and results of
               operations of the Company.

March 20, 2006

                                              /s/ Adam Wasserman
                                              --------------------------------
                                              Name: Adam Wasserman
                                              Title: Principal Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----