<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: September 30, 1999
(Date of earliest event reported: September 16, 1999)
RAZORFISH, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 000-25847 13-3804503
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
</TABLE>
107 Grand Street, 3rd Floor, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(212) 966-5960
(Registrant's telephone number, including area code)
With a copy to:
Derek H. Wilson, Esq.
Morrison & Foerster LLP
555 West 5th Street, Suite 3500
Los Angeles, CA 90013-1024
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On September 16, 1999, the Registrant completed the acquisition of Fuel,
Inc., a California corporation ("Fuel") and Tonga, Inc., a California
corporation ("Tonga" and, together with Fuel, the "Selling Companies"). The
acquisition of the Selling Companies was consummated pursuant to an Agreement
and Plan of Merger, dated as of July 15, 1999 (the "Merger Agreement"),
providing for the merger of the Selling Companies with and into Razorfish Los
Angeles, Inc., a wholly-owned subsidiary of the Registrant (the "Merger"). Upon
consummation of the Merger, 656,000 shares of the Registrant's common stock
became issuable. In addition, if the 1999 revenues of the Selling Companies
exceed $5.8 million, then the Registrant will issue additional shares of the
Registrant's common stock, up to a total value of $14,290,000, to the former
holder of Selling Companies common stock. The Merger is expected to be
accounted for under the purchase method of accounting, and was structured to
qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as
amended.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Selling Companies.
The financial statements required by this item are not included in this
report. Such financial statements will be filed by amendment to this Form 8-K
within 60 days of the date hereof.
(b) Pro Forma Financial Information.
The financial information required by this item is not included in this
report. Such financial information will be filed by amendment to this Form 8-K
within 60 days of the date hereof.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of July 15, 1999, by and
among the Registrant, Razorfish Los Angeles, Inc., Fuel, Tonga and the sole
shareholder of the Selling Companies.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RAZORFISH, INC.
By: /s/ JEFFREY A. DACHIS
--------------------------------------
Jeffrey A. Dachis
Chief Executive Officer and Chairman
Date: September 30, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger, dated as of July 15, 1999, by and among
the Registrant, Razorfish Los Angeles, Inc., Fuel, Inc., Tonga, Inc.
and the sole shareholder of Fuel, Inc. and Tonga, Inc.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
RAZORFISH, INC.,
RAZORFISH LOS ANGELES, INC.,
FUEL, INC.,
TONGA, INC.
AND
THE SOLE SHAREHOLDER OF
FUEL, INC. AND TONGA, INC.
July 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INDEX OF SCHEDULES AND EXHIBITS.............................. I
ARTICLE I. THE MERGER........................................ 2
1.1 The Merger........................................... 2
1.2 The Effective Time................................... 2
1.3 The Merger Consideration............................. 2
1.4 The Surviving Corporation............................ 3
1.5 Escrow............................................... 3
1.6 Earnout.............................................. 3
ARTICLE II. TREATMENT OF SHARES.............................. 5
2.1 Exchange of Shares................................... 5
2.2 Mechanics of Exchange................................ 5
2.3 No Fractional Shares................................. 5
2.4 Closing of the Selling Companies Transfer Books...... 6
2.5 Closing.............................................. 6
2.6 Exemption from Registration; Fairness Hearing........ 6
2.7 Supplementary Action................................. 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
THE SELLING COMPANIES...................................... 7
3.1 Organization, Good Standing, Qualification........... 7
3.2 Articles of Incorporation and Bylaws; Records........ 7
3.3 Capitalization....................................... 8
3.4 Authority; Binding Nature of Agreements.............. 8
3.5 Non-Contravention; Consents.......................... 9
3.6 Intellectual Property................................ 10
3.7 Proceedings; Orders.................................. 11
3.8 Financial Statements................................. 11
3.9 Title to Assets...................................... 12
3.10 Contracts........................................... 13
3.11 Employees........................................... 14
3.12 Compliance with Legal Requirements.................. 14
3.13 Governmental Authorizations......................... 15
3.14 Tax Matters......................................... 15
3.15 Securities Laws Compliance; Registration Rights..... 17
3.16 Finders and Brokers; Fees........................... 17
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
3.17 Environmental Compliance............................ 17
3.18 Intentionally Omitted............................... 17
3.19 Related Party Transactions.......................... 17
3.20 Absence of Changes.................................. 18
3.21 Powers of Attorney.................................. 19
3.22 Benefit Plans; ERISA................................ 19
3.23 Bank Accounts....................................... 21
3.24 Tax Status of Reorganization........................ 21
3.25 Full Disclosure..................................... 22
3.26 Due Diligence Information........................... 23
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDER................................................ 23
4.1 Title to Common Shares.............................. 23
4.2 Capacity............................................ 23
4.3 Confirmation of Selling Companies'
Representations and Warranties...................... 23
4.4 Non-Contravention................................... 23
4.5 Proceedings......................................... 24
4.6 Orders.............................................. 24
4.7 No Brokers.......................................... 24
4.8 Tax Matters......................................... 24
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND RAZORFISH........................................ 25
5.1 Organization; Good Standing......................... 25
5.2 Razorfish Common Stock.............................. 25
5.3 Authority; Binding Nature of Agreements............. 25
5.4 Non-Contravention; Consents......................... 26
5.5 Finders and Brokers................................. 27
5.6 Reports and Financial Statements; Absence of
Certain Changes..................................... 27
5.7 Compliance with Applicable Law...................... 28
5.8 Complete Copies of Requested Reports................ 28
5.9 Full Disclosure..................................... 28
5.10 Tax Status of the Merger............................ 28
ARTICLE VI. SURVIVAL OF REPRESENTATIONS AND WARRANTIES....... 30
ARTICLE VII. COVENANTS OF SELLING COMPANIES AND SHAREHOLDER.. 30
7.1 Access and Investigation............................ 30
7.2 Operation of Business............................... 31
7.3 Filings and Consents; Cooperation................... 32
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
7.4 Notification; Updates to Disclosure Schedule........ 33
7.5 Payment of Indebtedness by Related Parties.......... 34
7.6 No Negotiation or Solicitation...................... 34
7.7 Efforts to Complete Merger.......................... 34
7.8 Confidentiality; Publicity.......................... 34
7.9 FIRPTA Certification................................ 35
7.10 Takeover Statutes................................... 35
7.11 Supplier Information................................ 35
7.12 Selling Companies Accruals and Reserves............. 36
7.13 Final Tax Returns................................... 36
7.14 Federal Income Tax Reporting........................ 37
7.15 Termination of Employment Agreements................ 37
7.16 Approval of Agreement............................... 37
7.17 Year 2000 Compliance................................ 38
ARTICLE VIII. COVENANTS OF RAZORFISH......................... 40
8.1 Access and Investigation............................ 40
8.2 Notification........................................ 40
8.3 Filings and Consents; Cooperation................... 40
8.4 Efforts to Complete Merger.......................... 41
8.5 Confidentiality; Publicity.......................... 41
ARTICLE IX. CLOSING CONDITIONS OF RAZORFISH AND
THE COMPANY.............................................. 42
9.1 Accuracy of Representations and Warranties.......... 42
9.2 Additional Conditions to Closing.................... 42
9.3 Performance of Agreements........................... 43
9.4 Compliance with Agreements.......................... 43
9.5 Consents............................................ 43
9.6 No Material Adverse Change.......................... 43
9.7 Selling Companies Closing Certificates.............. 44
9.8 Litigation.......................................... 44
9.9 Assertion of Rights................................. 45
9.10 No Violation........................................ 45
9.11 Transactional Agreements............................ 45
9.12 Proprietary Information Agreements.................. 45
9.13 Termination of Employment Agreements................ 45
9.14 Employment Agreements............................... 45
9.15 Affiliate Letter.................................... 46
9.16 Fuel/Tonga Tradenames and Trademarks................ 46
9.17 Commissioner's Determination of Fairness............ 46
9.18 Waiver of Certain Rights............................ 46
9.19 Saddleback Equipment Lease.......................... 46
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE X. CLOSING CONDITIONS OF THE SHAREHOLDER AND THE
SELLING COMPANIES........................................... 47
10.1 Employment Agreements................................ 47
10.2 Accuracy of Representations and Warranties........... 47
10.3 Additional Conditions to Closing..................... 47
10.4 Razorfish Closing Certificates....................... 48
10.5 Compliance with Agreements........................... 49
10.6 Transactional Agreements............................. 49
10.7 No Violation......................................... 49
10.8 No Material Adverse Change........................... 49
10.9 Performance of Agreements............................ 49
10.10 Consents............................................ 49
10.11 Litigation.......................................... 50
10.12 Razorfish Stock..................................... 50
10.13 Commissioner's Determination of Fairness............ 50
ARTICLE XI. FURTHER ASSURANCES................................ 50
ARTICLE XII. INDEMNIFICATION.................................. 50
12.1 Indemnification by the Shareholder.................. 50
12.2 Indemnification by the Company and Razorfish........ 51
12.3 Notification of Claims.............................. 51
12.4 Resolution of Claims................................ 51
12.5 Limitations on Indemnification Obligations.......... 52
12.6 Exclusive Remedy; Set Off........................... 52
ARTICLE XIII. RESTRICTIONS ON RAZORFISH COMMON STOCK ......... 53
13.1 Lock-Up Agreement................................... 53
ARTICLE XIV. TERMINATION...................................... 53
14.1 Termination......................................... 53
14.2 Termination Procedures.............................. 54
14.3 Effect of Termination............................... 54
14.4 Exclusivity of Termination Rights................... 55
ARTICLE XV. MISCELLANEOUS..................................... 55
15.1 Expenses............................................ 55
15.2 Entire Agreement.................................... 55
15.3 Press Releases and Public Announcements............. 55
15.4 Counterparts........................................ 56
15.5 Descriptive Headings................................ 56
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
15.6 Notices............................................ 56
15.7 Choice of Law...................................... 56
15.8 Binding Effect; Benefits........................... 56
15.9 Assignability...................................... 57
15.10 Waiver and Amendment............................... 57
15.11 Attorneys' Fees.................................... 57
</TABLE>
5
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS
Exhibits:
- --------
A. Certain Definitions
B. Form of Escrow Agreement
C. Form of Opinion Letter of Gibson, Dunn & Crutcher LLP
D. Form of Proprietary Information & Inventions Agreement
E. Form of Seth Epstein Employment Agreement
F. Form of Key Employee Employment Agreement
G. Form of Opinion Letter of Morrison & Foerster LLP
H. Form of Affiliate Letter
Schedules:
- ---------
Selling Companies Disclosure Schedule
Razorfish Disclosure Schedule
i
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of July 15,
1999 is entered into by and among Razorfish Los Angeles Inc., a California
corporation (the "Company"), Razorfish, Inc., a Delaware corporation
("Razorfish"), Fuel, Inc., a California corporation ("Fuel"), Tonga, Inc. a
California corporation ("Tonga" and, together with Fuel, the "Selling
Companies") and Seth Epstein, the sole shareholder of the Selling Companies (the
"Shareholder").
RECITALS
A. The respective Boards of Directors of each of the Company, Razorfish,
Fuel and Tonga have determined that it is in the best interests of their
respective companies and shareholders that the Company, Fuel and Tonga combine
into a single company through the statutory merger of each of the Selling
Companies with and into the Company with the Company as the surviving
corporation (the "Merger") and, in furtherance thereof, have approved the
Merger.
B. Razorfish, as the sole shareholder of the Company, has approved this
Agreement, the Merger and the transactions contemplated by this Agreement
pursuant to action taken by unanimous written consent in accordance with the
requirements of the General Corporation Law of the State of California ("CGCL")
and the Bylaws of the Company.
C. Pursuant to the Merger, among other things, the outstanding shares of
common stock of each of Fuel and Tonga shall be exchanged for Razorfish Common
Stock (as more fully defined below).
D. The parties to the Agreement intend that the Merger qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that Fuel, Tonga, the Company and
Razorfish will each be a "party to a reorganization," within the meaning of
Section 368(b) of the Code, with respect to the Merger.
E. Certain capitalized terms used in this Agreement are defined on Exhibit
-------
A.
- -
AGREEMENT
In consideration of the agreements, provisions and covenants set forth
below, Fuel, Tonga and the Shareholder, and the Company and Razorfish hereby
agree as follows:
<PAGE>
ARTICLE I.
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined below), each Selling Company shall be merged with and into the
Company, the Company shall be the surviving corporation (sometimes called the
"Surviving Corporation") in such Merger and the separate existence of Fuel and
Tonga shall thereupon cease. The Merger shall have the effects set forth in the
CGCL. Without limiting the generality of the foregoing, at the Effective Time,
all of the property, rights, privileges, powers and franchises of the Company
and the Selling Companies shall vest in the Surviving Corporation.
1.2 The Effective Time.
The Merger shall become effective when a properly executed agreement of
merger (the "Agreement of Merger"), in such form as may be agreed by the parties
hereto and as required by the relevant provisions of the CGCL, is duly filed
with the Secretary of State of the State of California, which filing shall be
made in connection with the closing of the Merger in accordance with Section 2.7
upon satisfaction or waiver of the conditions set forth in Articles IX and X.
When used in this Agreement, the term "Effective Time" shall mean the date and
time at which such Agreement of Merger has been so filed or at such later time
as is provided in the Agreement of Merger.
1.3 The Merger Consideration.
The consideration payable to the Shareholder in respect of all of the
outstanding shares of Common Stock of Fuel (the "Fuel Common Stock"), and all of
the outstanding shares of Common Stock of Tonga (the "Tonga Common Stock" and,
together with the Fuel Common Stock, the "Selling Companies Common Stock") will
be equal to the sum of the Initial Merger Consideration (as defined below) and,
if any, the Earnout Amount (as defined below) (the Initial Merger Consideration
and, if any, the Earnout Amount shall be collectively referred to herein as the
"Merger Consideration"). The "Initial Merger Consideration" shall consist of
Seven Hundred Fifty Thousand Dollars ($750,000) in cash (the "Cash
Consideration") and Six Hundred Fifty Six Thousand (656,000) shares of Class A
Common Stock, $0.01 par value per share, of Razorfish (the "Razorfish Common
Stock"); provided, however, that if the Average Razorfish Stock Price (as
determined on the Closing Date) is greater than $35 per share, then the number
of shares of Razorfish Common Stock will be reduced to such number of shares
which, when multiplied by the Average Razorfish Stock Price, equals Twenty Two
Million Nine Hundred Sixty Thousand Dollars ($22,960,000). Notwithstanding the
foregoing, the Cash Consideration shall be reduced by the amount of any costs,
expenses or obligations paid, payable or incurred by the Selling Companies in
connection with obtaining the release as provided in Section 9.18. The number
of shares of Razorfish Common Stock which constitute a portion of the Merger
Consideration shall be appropriately adjusted for any stock split, stock
dividend or recapitalization of Razorfish.
2
<PAGE>
Prior to the Closing, the parties shall agree on an allocation of the Merger
Consideration between the Fuel Common Stock and the Tonga Common Stock.
1.4 The Surviving Corporation.
(a) The Articles of Incorporation of the Company as in effect at the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until duly amended in accordance with applicable law.
(b) The Bylaws of the Company as in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation until thereafter amended in accordance
with applicable law.
(c) (i) The directors of the Company at the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise
provided by law.
(ii) The officers of the Company at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from
the Effective Time until removed or until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
1.5 Escrow.
As the non-exclusive source for the payment of the Shareholder's
indemnification obligations set forth herein and in the Escrow Agreement,
Razorfish will deliver to Escrow Agent under an Escrow Agreement (the "Escrow
Agreement") and on behalf of the Shareholder, in substantially the form attached
as Exhibit B, an amount equal to five percent (5%) of the Merger Consideration
---------
(the "Holdback Amount"). The Holdback Amount shall be treated as property of
the Shareholder for all purposes of until such time, if any, that all or a
portion of the Holdback Amount is returned to Razorfish or its affiliates
pursuant to the terms hereof and the Escrow Agreement.
1.6 Earnout.
(a) Earnout Amount. Subject to this Section 1.6 and Sections 1.3 and 12.6
hereof, Razorfish shall pay to Shareholder as part of the Merger Consideration
an amount equal to the difference between Revenues and $5.8 million, multiplied
by 3.8 (the "Earnout Amount"). Notwithstanding the foregoing, in no event shall
the Earnout Amount exceed Fourteen Million Two Hundred Ninety Thousand Dollars
($14,290,000). The Earnout Amount shall be payable on or before March 30, 2000,
and shall consist of, at the sole election of Razorfish, cash and/or that number
of shares of Razorfish Common Stock which, when multiplied by the Average
Razorfish Stock Price (as determined on February 15, 2000), equals the Earnout
Amount (net of any cash payments as provided above). From the date hereof
through December 31, 1999, the gross margins and billing rates associated with
the Acquired Business shall be maintained at levels
3
<PAGE>
which are consistent with their respective historical levels, as reflected on
the Selling Companies' books and records. By way of illustration but not
limitation, (i) if the Acquired Business receives revenues after the Closing and
during 1999 from work that is referred to it by Razorfish, then such revenue
would be included within the definition of Revenue; (ii) if the Acquired
Business refers work to Razorfish but does not perform any work itself, then any
revenue generated therefrom would not be included within the definition of
Revenue; (iii) if Razorfish or the Company (directly or indirectly) consummates
any acquisition of a business or entity having operations and activities of a
nature or kind similar to or competitive with the Acquired Business, then any
revenues generated by any such business or entity shall not be included within
the definition of Revenue; and (iv) revenue from work performed for Razorfish or
the Company by the Selling Companies' personnel will be included in Revenue in
accordance with Razorfish's and the Company's custom and practice in similar
circumstances.
(b) Notice of Objection.
(1) At such time as the Company shall determine Revenues, and in no
event later than March 30, 2000, the Company shall provide the Shareholder with
a statement setting forth the calculation of Revenues.
(2) In the event that the Shareholder does not object to the
determination by the Company of such Revenues by written notice of objection
(the "Notice of Objection") delivered to the Company within 30 days after the
Shareholder's receipt of such determination, such Notice of Objection to
describe in reasonable detail the Shareholder's proposed adjustments to the
proposed Revenues determination, the proposed Revenues shall be deemed final and
binding.
(c) Dispute Resolution. If the Shareholder delivers a Notice of Objection
to the Company, then the dispute shall be resolved as follows:
(1) The Company's determination of Revenues and the Notice of
Objection shall be submitted, at the Company's cost, to an independent
nationally recognized firm of certified public accountants mutually acceptable
to the Company and the Shareholder (the "Arbitrator").
(2) Within 30 days of the submission of any dispute concerning the
determination of Revenues to the Arbitrator, the Arbitrator shall render a
decision in accordance with this Section 1.6(d) along with a statement of
reasons therefor. The decision of the Arbitrator shall be final and binding
upon the parties hereto.
(3) The fees and expenses of the Arbitrator for any determination
under this Section 1.6(d) hereof shall be borne equally by the Company, on the
one hand, and the Shareholder, on the other hand.
4
<PAGE>
ARTICLE II.
TREATMENT OF SHARES
2.1 Exchange of Shares.
(a) All of the shares of the Selling Companies Common Stock outstanding
immediately prior to the Effective Time shall at the Effective Time, by virtue
of the Merger and without any action on the part of the Shareholder, be
converted into the right to receive the Merger Consideration.
(b) The Holdback Amount shall be held by the Escrow Agent as provided for
in Section 1.5 hereof and in the Escrow Agreement, and the Shareholder shall be
paid the Merger Consideration less the Holdback Amount, without interest
thereon, upon the surrender of the Certificates (as defined below) formerly
representing the Selling Companies Common Stock in accordance with Section 2.2
of this Agreement.
2.2 Mechanics of Exchange.
(a) At the Effective Time, the Shareholder shall be entitled to surrender
the certificate or certificates that immediately prior to the Effective Time
represented the Selling Companies Common Stock (the "Certificates"), and which
were converted into the right to receive the Merger Consideration, to Razorfish
for cancellation in exchange for the Merger Consideration, less the Holdback
Amount. It shall be a condition of payment that the Certificates so surrendered
shall be properly endorsed or otherwise in proper form for transfer to
Razorfish.
(b) At or prior to the Effective Time of the Merger, Razorfish shall
deliver irrevocably to the Escrow Agent, on behalf of the Shareholder, shares of
Razorfish Common Stock in an aggregate amount equal to the Holdback Amount.
(c) No dividends that are declared on shares of Razorfish Common Stock
after the Effective Time (if any) will be paid to persons entitled to receive
certificates representing shares of Razorfish Common Stock until the Shareholder
surrenders his Certificates. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such shares of Razorfish
Common Stock shall be issued any dividends which shall have become payable with
respect to such shares of Razorfish Common Stock between the Effective Time and
the time of such surrender. In no event shall the person entitled to receive
such dividends be entitled to receive interest on such dividends.
2.3 No Fractional Shares.
No fraction of a share of Razorfish Common Stock shall be issued in the
Merger. In lieu of fractional shares, the Shareholder upon surrender of his
Certificates as set forth in Section 2.2 shall be paid an amount in cash,
without interest, rounded to the nearest cent, determined by multiplying the
fractional interest to which the Shareholder would otherwise be entitled by the
Average Razorfish Stock Price determined on the Closing Date.
5
<PAGE>
2.4 Closing of the Selling Companies Transfer Books.
At the Effective Time, the stock transfer books of the Selling Companies
shall be closed and no transfer of shares of the Selling Companies Common Stock
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing shares of Razorfish Common Stock in accordance with
the terms hereof. At and after the Effective Time, the holders of shares of the
Selling Companies Common Stock to be exchanged for shares of Razorfish Common
Stock pursuant to this Agreement shall cease to have any rights as shareholders
of the Selling Companies, except for the right to surrender such Certificates in
exchange for shares of Razorfish Common Stock as provided hereunder.
2.5 Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Morrison & Foerster llp, 555 W.
Fifth Street, Los Angeles, California 90013 at 9:00 a.m., local time, on the
date which is three (3) business days following the issuance of the Permit by
the Commissioner (the "Closing Date"), or as soon thereafter as is reasonably
practical; provided, however, that if all of the other conditions set forth in
-------- -------
Articles IX and X hereof are not satisfied or waived at such date, the Closing
Date shall be the business day following the day on which all such conditions
have been satisfied or waived, or at such other date, time and place as
Razorfish, the Selling Companies and the Company shall agree.
2.6 Exemption from Registration; Fairness Hearing.
Razorfish shall use commercially reasonable efforts to ensure that the
Razorfish Common Stock to be issued pursuant to this Agreement will be issued in
a transaction exempt from registration under the Securities Act by reason of
Section 3(a)(10) thereof. As promptly as practicable after the execution of
this Agreement, Razorfish shall file with the California Commissioner of
Corporations (the "Commissioner") an application (the "Application") for a
permit (the "Permit") pursuant to Section 25121 of the California Corporations
Code and for a fairness hearing to be held pursuant to the authority conferred
in Section 25142 of the California Corporations Code ("Fairness Hearing").
2.7 Supplementary Action.
If, at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of the Selling Companies, or otherwise to carry out the
provisions of this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized and empowered on behalf of the Selling
Companies in the name of and on behalf of the Selling Companies to execute and
deliver any and all things necessary or proper to vest or to perfect or confirm
title to such property or rights in the Surviving Corporation, and otherwise to
carry out the purposes and provisions of this Agreement.
6
<PAGE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLING COMPANIES
Except as set forth in the Disclosure Schedule attached hereto provided by
the Selling Companies (the "Selling Companies Disclosure Schedule"), the parts
of which are numbered to correspond to the section numbers of this Agreement,
each of the Selling Companies hereby represents and warrants to the Company and
Razorfish as of the Date hereof and as of the Closing Date, as follows:
3.1 Organization, Good Standing, Qualification.
(a) Each of the Selling Companies is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, is
qualified to conduct business and is in both corporate and tax good standing
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification. Each of the
Selling Companies has the requisite corporate power and authority to own and
operate its properties and assets, and to carry out the provisions hereof and
thereof, and to carry on its business as currently conducted.
(b) Neither Selling Company has ever approved, or commenced any
proceeding, or made any election contemplating, the dissolution or liquidation
of such Entity or the winding up or cessation of its business or affairs.
(c) Neither Selling Company has any subsidiaries nor owns, beneficially or
otherwise, any shares or other securities of, or any other direct or any
other indirect interest of any nature in, any Entity.
(d) Neither Selling Company was ever operated as a sole proprietorship, or
any other business entity, prior to its incorporation.
3.2 Articles of Incorporation and Bylaws; Records.
(a) Each of the Selling Companies has delivered to Razorfish accurate and
complete copies of:
(i) its Articles of Incorporation and Bylaws, including all amendments
thereto, as presently in effect;
(ii) the stock records of such Entity; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the sole shareholder of such Entity, the Board of such Entity and
all committees of the Board of such Entity.
7
<PAGE>
There have been no meetings or other proceedings of the shareholders of either
Selling Company, the Board of either Selling Company or any committee of the
Board of either Selling Company that are not memorialized in such minutes or
other records.
(b) Neither Selling Company has ever conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the names listed on Part 3.2
--------
of the Selling Companies Disclosure Schedule.
(c) There has not been any material violation of the Articles of
Incorporation or Bylaws of either Selling Company or of any resolution adopted
by the shareholders, the Board or any committee of the Board of either Selling
Company.
3.3 Capitalization.
(a) The authorized capital stock of Fuel consists of ten thousand (10,000)
shares of Common Stock, of which two hundred (200) shares are issued and
outstanding. The authorized capital stock of Tonga consists of one thousand
(1,000) shares of Common Stock, of which one hundred (100) shares are issued and
outstanding. No other shares of capital stock are issued or outstanding for
either Selling Company. All issued and outstanding shares of capital stock of
each Selling Company have been duly authorized and validly issued, are fully
paid and nonassessable, and have been issued in full compliance with all
applicable securities laws and other applicable Legal Requirements. No Selling
Companies Options have been granted.
(b) There is no:
(i) outstanding subscription, option, call, warrant or right (whether
or not currently exercisable) to acquire any shares of the capital stock or
other securities of either Selling Company;
(ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock
or other securities of either Selling Company; or
(iii) to the Knowledge of each of the Selling Companies, condition or
circumstance that may directly or indirectly give rise to or provide a
basis for a claim by any Person to the effect that such Person is entitled
to acquire or receive any shares of capital stock or other securities of
either Selling Company.
(c) Neither Selling Company has ever repurchased, redeemed or otherwise
reacquired (or agreed, committed or offered (in writing or otherwise) to
repurchase, redeem or otherwise reacquire) any shares of capital stock or other
securities.
3.4 Authority; Binding Nature of Agreements.
Each of the Selling Companies has the corporate power and authority to
enter into and to perform its obligations under this Agreement and the other
Transactional Agreements to which it
8
<PAGE>
is or is contemplated to be a party, and the execution, delivery and performance
by each of the Selling Companies of this Agreement and such Transactional
Agreements have been duly authorized by all necessary action on the part of the
Board and Shareholders of each of the Selling Companies. This Agreement and the
other Transactional Agreements constitute, or upon execution and delivery will
constitute, the legal, valid and binding obligations of each of the Selling
Companies, enforceable against each of the Selling Companies in accordance with
their respective terms, except to the extent that enforceability may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditor's rights generally and by general
principles of equity regardless of whether such enforceability is considered in
a proceeding in law or equity.
3.5 Non-Contravention; Consents.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Merger, by each of the Selling Companies
will not, directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of (i) its
Articles of Incorporation or Bylaws, or (ii) any resolution adopted by its
Board or any committee thereof or the Shareholder;
(b) to the Knowledge of each of the Selling Companies, contravene,
conflict with or result in a material violation of, or give any Governmental
Body or other Person the right to challenge the Merger or to exercise any remedy
or obtain any relief (other than statutory dissenters' rights) under, any Legal
Requirement or any Order to which either Selling Company or any material assets
owned or used by it are subject;
(c) to the Knowledge of each of the Selling Companies, cause any material
assets owned or used by either Selling Company to be reassessed or revalued
by any taxing authority or other Governmental Body;
(d) to the Knowledge of each of the Selling Companies, contravene,
conflict with or result in a material violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by either Selling Company, any of its employees or the Shareholder;
(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any material Selling Companies
Contract;
(f) give any Person the right to any payment by either Selling Company or
give rise to any acceleration or change in the award, grant, vesting or
determination of options, warrants, rights, severance payments or other
contingent obligations of any nature whatsoever of either Selling Company in
favor of any Person, in any such case as a result of the change in control of
either Selling Company or otherwise resulting from the Merger; or
(g) result in the imposition or creation of any Encumbrance upon or with
respect to any material asset owned or leased by either Selling Company.
9
<PAGE>
Except as contemplated in this Agreement and the other Transactional Agreements,
neither of the Selling Companies will be required to make any filing with or
give any notice to, or obtain any material Consent from, any Person in
connection with the execution and delivery of this Agreement and the other
Transactional Agreements or the consummation of the Merger.
3.6 Intellectual Property.
(a) Part 3.6 of the Selling Companies Disclosure Schedule sets forth
--------
a complete list, in all material respects, of each Selling Company's Proprietary
Assets, and any applications therefor in respect of any of the foregoing, and
specifies, where applicable, the jurisdictions in which each such Proprietary
Asset has been issued or registered or in which an application for such issuance
and registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Part 3.6 also sets
--------
forth a complete list of all material licenses, sublicenses and other agreements
as to which either Selling Company is a party and pursuant to which either
Selling Company or any other Person is currently authorized to use any of either
Selling Company's Proprietary Assets (excluding object code and end-user
licenses granted to end-users in the ordinary course of business that permit use
of software products without a right to modify, distribute or sublicense the
same ("End-User Licenses")) and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty and
the term thereof. Neither Selling Company is in material violation of any
license, sublicense or agreement described on such list except such violations
as do not materially impair either Selling Company's rights under such license,
sublicense or agreement. Except for any consents to transfer required under any
Selling Companies Contract, the execution and delivery of this Agreement by
either Selling Company, and the consummation of the transactions contemplated
hereby, (i) will not cause either Selling Company to be in material violation or
default under any such license, sublicense or agreement, (ii) will not entitle
any other party to any such license, sublicense or agreement to terminate or
modify such license, sublicense or agreement or (iii) will not require either
Selling Company to repay any funds already received by it from a third party.
(b) Each of the Selling Companies has all right, title and interest
in and to and is the sole and exclusive owner or licensee of (free and clear of
any Encumbrances) its Proprietary Assets, and has the right (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which its Proprietary Assets are being
used.
(c) No claims with respect to either Selling Company's Proprietary
Assets have been asserted in writing or, to the Knowledge of either Selling
Company, are threatened by any Person nor are there any valid grounds, to the
Knowledge of either Selling Company, for any bona fide claims: (i) to the effect
that the manufacture, sale, licensing or use of any of the products of either
Selling Company as now manufactured, sold, licensed or used or proposed for
manufacture, sale, licensing or use by either Selling Company infringes on any
third party's Proprietary Assets; (ii) against the use by either Selling Company
used in its business as currently conducted; or (iii) challenging the ownership
by either Selling Company, validity or effectiveness of any of its Proprietary
Assets. To each Selling Company's Knowledge, registered patents,
10
<PAGE>
trademarks, service marks and copyrights held by the Selling Companies, if any,
are valid and subsisting.
(d) To the Knowledge of each Selling Company, there is no material
unauthorized use, infringement or misappropriation of any of either Selling
Company's Proprietary Assets by any third party, including any employee or
former employee of either Selling Company.
(e) None of either Selling Company's Proprietary Assets or product of
either Selling Company is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by either Selling
Company.
(f) Neither Selling Company has entered into any agreement under
which either Selling Company is restricted from selling, licensing or otherwise
distributing any of its current or anticipated products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
(g) Each employee and consultant identified on the Selling Companies
Disclosure Schedule has executed such Selling Company's form of proprietary
information and invention agreement in substantially the form set forth in Part
----
3.6(g) of the Selling Companies Disclosure Schedule.
- ------
3.7 Proceedings; Orders.
(a) There is no pending Proceeding of which either Selling Company
has been notified and served, and, to each Selling Company's Knowledge, no
Person has threatened to commence any Proceeding that involves either Selling
Company or would involve either Selling Company, including without limitation as
a party thereto.
(b) Fuel has delivered to Razorfish accurate and complete copies of
all pleadings, correspondence and other written materials to which the Selling
Companies have access that relate to the Proceedings identified in Part 3.7 of
--------
the Selling Companies Disclosure Schedule, if any.
(c) There is no Order to which either Selling Company, or any of the
assets owned or leased by either Selling Company, is subject.
(d) To each Selling Company's Knowledge, no officer or employee of
either Selling Company is subject to any Order that prohibits such officer or
employee from engaging in or continuing any conduct, activity or practice
relating to either Selling Company's business.
3.8 Financial Statements.
(a) Fuel delivered to Razorfish the following unaudited financial
statements and notes (collectively, the "Financial Statements"), which are
attached in Part 3.8 of the Selling Companies Disclosure Schedule:
--------
11
<PAGE>
(i) the balance sheet of Fuel and of Tonga as of December 31, 1998,
and the related statement of operations of Fuel and of Tonga for the period
ended December 31, 1998; and
(ii) the unaudited balance sheet of Fuel and of Tonga as of March 31,
1999 (the "Unaudited Interim Balance Sheet"), and the related unaudited
statement of operations of Fuel and of Tonga for the three (3) months then
ended.
(b) All the Financial Statements are accurate and complete in all material
respects, and the dollar amount of each line item included in the Financial
Statements is accurate in all material respects. The Financial Statements are in
accordance with the books and records of the respective Selling Companies and
present fairly the financial position of the respective Selling Companies as of
the respective dates thereof and the results of operations of the respective
Selling Companies for the periods covered thereby in all material respects.
(c) As of the date of this Agreement, neither Selling Company has any
Liabilities in excess of Ten Thousand Dollars ($10,000), individually or in the
aggregate, except for Liabilities identified as such in the "liabilities" column
of the Unaudited Interim Balance Sheet and Liabilities arising out of the
Transactional Agreements and the Selling Companies Contracts.
3.9 Title to Assets.
(a) Each of the Selling Companies owns, and has good and marketable
title to, all assets purported to be owned by it, free and clear of any material
Encumbrances, except liens for current taxes and assessments not delinquent.
(b) Part 3.9(b) of the Selling Companies Disclosure Schedule
-----------
identifies all equipment, furniture, fixtures, improvements and other tangible
assets owned by each Selling Company with a value over Ten Thousand Dollars
($10,000), and sets forth the original cost and book value of each of said
assets.
(c) Each asset identified in Part 3.9(b) of the Selling Companies
-----------
Disclosure Schedule:
(i) is free of material defects and deficiencies and in good
condition and repair, consistent with its age and intended use (ordinary
wear and tear excepted); and
(ii) is adequate for the uses to which it is being put.
(d) Neither Selling Company owns any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in Part 3.9(d) of the Selling Companies Disclosure Schedule (the
-----------
"Leased Premises"). Part 3.9(d) of the Selling Companies Disclosure Schedule
-----------
lists the premises covered by said leases. Each of the Selling Companies enjoys
peaceful and undisturbed possession of such premises.
(e) Part 3.9(e) of the Selling Companies Disclosure Schedule
-----------
identifies all tangible assets that are leased to the Selling Companies that
have a value in excess of Ten Thousand Dollars ($10,000). All leases pursuant to
which either Selling Company leases real or personal
12
<PAGE>
property are in good standing and are valid and effective in accordance with
their respective terms and, to the Knowledge of each Selling Company, there
exists no default thereunder.
3.10 Contracts.
(a) Part 3.10 of the Selling Companies Disclosure Schedule identifies
---------
and describes each material Selling Companies Contract as of the date of the
Agreement. Fuel has delivered to Razorfish accurate and complete copies of all
Selling Companies Contracts identified in Part 3.10 of the Selling Companies
---------
Disclosure Schedule, including all amendments thereto.
(b) Each material Selling Companies Contract is currently valid and
in full force and effect, and is enforceable by the respective Selling Companies
in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditor's rights generally and by
general principles of equity regardless of whether such enforceability is
considered in a proceeding in law or equity.
(c) Neither of the Selling Companies is in material default under any
material Selling Companies Contract, and, to the Knowledge of each Selling
Company, (i) no Person has materially violated or breached, or declared or
committed any material default under, any material Selling Companies Contract;
and (ii) neither Selling Company has waived any material rights under any
material Selling Companies Contract.
(d) (i) Neither Selling Company has ever guaranteed or otherwise
agreed to cause, insure or become liable for, nor has ever pledged any of its
assets to secure, the performance or payment of any obligation or other
Liability of any other Person; and (ii) neither Selling Company has ever been a
party to or bound by any material joint venture agreement, partnership
agreement, profit-sharing agreement, cost-sharing agreement, loss-sharing
agreement or similar Contract.
(e) No Person is renegotiating (i) any amount paid or payable to
either Selling Company under any material Selling Companies Contract or (ii) any
other material term or provision of any material Selling Companies Contract.
(f) Part 3.10(f) of the Selling Companies Disclosure Schedule
------------
identifies and provides an accurate and complete description of each proposed
Selling Companies Contract (other than this Agreement and the Transactional
Agreements) as of the date of the Agreement as to which any bid, offer, written
proposal, term sheet or similar document has been submitted to or received by
either Selling Company and is outstanding and which would be material to the
business or prospects of either Selling Company, taken together.
(g) No party to any Selling Companies Contract has notified either
Selling Company to the effect that it has failed to perform a material
obligation thereunder.
13
<PAGE>
3.11 Employees.
(a) Part 3.11(a) of the Selling Companies Disclosure Schedule
------------
contains a list of all employees of the Selling Companies as of the date of the
Agreement and their respective titles and compensation.
(b) Part 3.11(b) of the Selling Companies Disclosure Schedule
------------
contains a list of Persons who are performing services for the Selling Companies
business as of the date of the Agreement and are classified as "consultants" or
"independent contractors," and the respective compensation of each such
"consultant" or "independent contractor."
(c) Neither Selling Company has any collective bargaining agreements,
or union contracts with any of its employees. To the Knowledge of each Selling
Company, there is no labor union organizing activity pending or threatened with
respect to either Selling Company. The employment of each of such Selling
Company's employees is terminable by such Selling Company at will; and no
employee has any agreement or contract, written or verbal, regarding his or her
employment.
(d) To each Selling Company's Knowledge, (i) no employee of either
Selling Company, nor any consultant with whom either Selling Company has
contracted, is in violation of any material term of any employment contract,
proprietary information agreement or any other agreement relating to the right
of any such individual to be employed by, or to contract with, either Selling
Company because of the nature of the business to be conducted by the applicable
Selling Company, and (ii) the continued employment by either Selling Company of
its present employees, and the performance of either Selling Company's contracts
with its independent contractors, will not result in any such violation. Neither
Selling Company has received any notice (written or otherwise) alleging that any
such violation has occurred. No employee of either Selling Company has been
granted the right to continued employment by either Selling Company or to any
material compensation following termination of employment with either Selling
Company. To the Knowledge of each Selling Company, no officer or key employee,
or any group of employees, has given notice of his, her or their intent to
terminate his, her or their employment with either Selling Company, and no
employee of either Selling Company has received an offer to join a business that
is or likely would be competitive with either Selling Company`s business.
3.12 Compliance with Legal Requirements.
(a) Each of the Selling Companies is in full compliance with each
Legal Requirement that is applicable to it or to the conduct of its business or
the ownership or use of any of its assets.
(b) Neither Selling Company has received, at any time, any notice
from any Governmental Body or any other Person regarding (i) any actual,
alleged, possible or potential violation of, or failure to comply with, any
Legal Requirement by such Selling Company, or (ii) any actual, alleged, possible
or potential obligation on the part of either Selling Company to undertake, or
to bear all or any portion of the cost of, any cleanup or any remedial,
corrective or response action of any nature relating to Hazardous Materials,
except in each case to the extent
14
<PAGE>
noncompliance would not materially adversely effect either Selling Company`s
business prospects or financial condition, taken together.
3.13 Governmental Authorizations.
(a) Part 3.13 of the Selling Companies Disclosure Schedule identifies
---------
each material Governmental Authorization held by the Selling Companies. Fuel has
delivered to Razorfish accurate and complete copies of all such Governmental
Authorizations, including all renewals thereof and all amendments thereto. Each
Governmental Authorization identified or required to be identified in Part 3.13
---------
of the Selling Companies Disclosure Schedule is valid and in full force and
effect.
(b) The Governmental Authorizations identified in Part 3.13 of the
---------
Selling Companies Disclosure Schedule constitute all the Governmental
Authorizations necessary (i) to enable each of the Selling Companies to conduct
its business in the manner in which its business is currently being conducted,
and (ii) to permit each of the Selling Companies to own and use its assets in
the manner in which they are currently owned and used.
3.14 Tax Matters.
(a) Each Tax required to have been paid by either Selling Company
(whether pursuant to any Tax Return or otherwise) on or before the Closing has
been or will be duly paid in full on a timely basis. Any Tax required to have
been withheld or collected by either Selling Company has been duly withheld and
collected, and (to the extent required) each such Tax has been paid to the
appropriate Governmental Body. Each of the Selling Companies has complied with
all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid or owing to any employee, creditor, independent contractor, or other third
party.
(b) All Tax Returns required to be filed by or on behalf of either
Selling Company with any Governmental Body on or before the Closing Date
("Selling Companies Returns") (i) have been, or will be, filed when due (taking
valid extensions of time into account), and (ii) have been, or will be when
filed, accurately and completely prepared pursuant to applicable law. All
amounts shown on the Selling Companies Returns to be due on or before the
Closing Date have been or will be paid on or before the Closing Date. Fuel has
delivered or made available to Razorfish copies of all the Selling Companies
Returns filed by or on behalf of the Selling Companies or any other entity
acquired by or merged into either Selling Company prior to the Closing Date.
(c) The Selling Companies' liability for unpaid Taxes for all periods
ending on or before the date of the Financial Statements does not, in the
aggregate, materially exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred taxes) reported in the Financial
Statements .
(d) Part 3.14 of the Selling Companies Disclosure Schedule identifies
---------
each examination or audit of any Selling Companies Return that has been
conducted by any
15
<PAGE>
Governmental Body. Selling Companies has delivered to Razorfish copies of all
audit reports and similar documents (to which either Selling Company has access)
relating to the Selling Companies Returns. No extension or waiver of the
limitation period applicable to any of the Selling Companies Returns has been
granted (by either Selling Company or any other Person), and no such extension
or waiver has been requested from either Selling Company.
(e) Neither Selling Company has been informed in writing or orally
(formally or informally) of a pending or threatened claim or other Proceeding
against or with respect to either Selling Company in respect of any Tax that has
not been finally resolved. Neither Selling Company has entered into or become
bound by any agreement or consent pursuant to Section 341(f) of the Code.
Neither Selling Company has been, nor will be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 of the Code as a result of transactions or events occurring, or
accounting methods employed, prior to the Closing, except for any such
adjustment arising on or after the Closing as a result of a change in a method
of accounting from cash to accrual. Each Selling Company is and has been in full
compliance with Section 263A of the Code. Neither Selling Company has ever been
in a "consolidated group" within the meaning of Treasury Regulations Section
1.1502-1(h), nor is liable for Taxes incurred by any individual, trust,
corporation, partnership or any other Entity either as a transferee, pursuant to
Treasury Regulations Section 1.1502-6, or pursuant to any other provision of
federal, territorial, state, local or foreign law or regulations. Neither
Selling Company is a party to any joint venture, partnership or other
arrangement or contract which could be treated as a partnership for United
States federal income tax purposes. None of the assets of either Selling Company
(i) directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code or (ii) is "tax exempt use property" within the
meaning of Section 168(h) of the Code. Neither Selling Company has participated
in an international boycott as defined in Code Section 999. Neither Selling
Company has a "permanent establishment," as defined in any applicable Tax treaty
or convention of the United States of America, or fixed place of business in any
foreign country.
(f) Neither Selling Company is party to any agreement, plan,
arrangement or other Contract covering any employee or independent contractor or
former employee or independent contractor of either Selling Company that,
individually or collectively, could give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G or
Section 162(m) of the Code. Neither Selling Company is, nor has ever been, a
party to or bound by any material tax indemnity agreement, material tax-sharing
agreement, material tax allocation agreement or similar material Contract, and
has not otherwise assumed the material tax liability of any other Person under
contract.
(g) Neither Selling Company is a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code, nor has been a
United States real property holding corporation within the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(h) Neither Selling Company has any net operating losses or other tax
attributes presently subject to limitation under Code Section 382, 383 or 384,
or the federal consolidated return regulations.
16
<PAGE>
(i) The Shareholder is a "United States person," within the meaning
of Section 7701(a)(30) of the Code.
(j) Each of the Selling Companies has made an election to be taxed as
an "S" corporation under Section 1362(a) of the Code. Fuel has been an S
corporation for federal and state income tax purposes since January 1, 1997, and
Tonga has been an S corporation for federal and state income tax purposes since
its formation.
3.15 Securities Laws Compliance; Registration Rights.
Each of the Selling Companies has complied in all material respects with
all federal and state securities laws in connection with all offers and sales of
securities issued by either Selling Company prior to the date of this Agreement.
Neither Selling Company has heretofore granted any other purchaser of its
securities the right to require either Selling Company to register any
securities under the Securities Act or to qualify for any exemption thereunder.
3.16 Finders and Brokers; Fees.
(a) Neither of the Selling Companies nor any Person acting on behalf
of either Selling Company has engaged any finder, broker, intermediary or any
similar Person in connection with the Merger.
(b) Neither Selling Company has entered into a contract or other
agreement that provides that a fee shall be paid to any Person or Entity if the
Merger is consummated, but the Selling Companies are liable for fees and
expenses of professionals.
3.17 Environmental Compliance.
(a) Each of the Selling Companies is in compliance in all material
respects with all Environmental Laws and the requirements of all environmental
permits required for the handling, use, storage and disposition of Hazardous
Materials under Environmental Laws that are applicable to either Selling
Company's operations as presently conducted.
(b) There are no pending, or to the Knowledge of each Selling
Company, threatened Environmental Claims against the Selling Companies.
(c) To the Knowledge of each Selling Company, there are no facts,
circumstances, conditions or occurrences regarding either Selling Company or its
operations that could form the basis of an Environmental Claim against either
Selling Company.
3.18 Intentionally Omitted.
3.19 Related Party Transactions.
(a) No Related Party has, and no Related Party has at any time since
December 31, 1998, had, any direct or indirect material interest of any nature
in any material asset of either Selling Company or any Selling Companies
Contract.
17
<PAGE>
(b) No Related Party is, or has at any time since December 31, 1998,
been, indebted to either Selling Company for an amount, individually or in the
aggregate, in excess of Ten Thousand Dollars ($10,000).
(c) Since December 31, 1998, no Related Party has entered into, or
has had any direct or indirect material financial interest in, any Selling
Companies Contract, transaction or business dealing of any nature involving
either Selling Company.
(d) No Related Party is competing, or has at any time since December
31, 1998, competed, directly or indirectly, with either Selling Company in any
market served by either Selling Company.
3.20 Absence of Changes.
Since March 31, 1999:
(a) there has not been any material adverse change in either Selling
Company's business, assets, liabilities or operations, taken together, and, to
the Knowledge of each Selling Company, no event has occurred that is likely to
have a material adverse effect on either Selling Company's business (when taken
together as a whole), assets, liabilities or operations (or on any aspect or
portion thereof);
(b) neither Selling Company has declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of capital
stock;
(c) neither Selling Company has amended its Articles of Incorporation
or Bylaws nor has effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(d) neither Selling Company has made any individual capital
expenditure in excess of Twenty Five Thousand Dollars ($25,000);
(e) neither Selling Company has pledged or hypothecated any of its
material assets or otherwise permitted any of its material assets to become
subject to any Encumbrance;
(f) neither Selling Company has made any loan or advance in excess of
Ten Thousand Dollars ($10,000) to any Person;
(g) neither Selling Company has paid any bonus or made any profit-
sharing or similar payment to, or increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees;
(h) there has been no resignation or termination of employment of any
officer or key employee of either Selling Company;
(i) there has been no borrowing or agreement to borrow by either
Selling Company or material change in the contingent obligations of either
Selling Company by way of guaranty,
18
<PAGE>
endorsement, indemnity, warranty or otherwise or grant of a mortgage or security
interest in any property of either Selling Company;
(j) Neither Selling Company has discharged any Encumbrance or
discharged, paid or forgiven any indebtedness or other Liability in excess of
Ten Thousand Dollars ($10,000), except for accounts payable that (i) are
reflected as current liabilities in the "liabilities" column of the Unaudited
Interim Balance Sheet or have been incurred by either Selling Company since the
date of the Unaudited Interim Balance Sheet in the Ordinary Course of Business
and (ii) have been discharged or paid in the Ordinary Course of Business;
(k) neither Selling Company has released or waived any material right
or claim;
(l) neither Selling Company has changed any of its accountants or its
methods of accounting or accounting practices in any material respect;
(m) neither Selling Company has received notice that there has been a
loss of, or cancellation of a material order by, any customer of either Selling
Company; and
(n) except where noted in Part 3.20 and each of its subsections,
---------
neither Selling Company has agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses (c) through (m) above.
3.21 Powers of Attorney.
Neither Selling Company has given a power of attorney to any Person.
3.22 Benefit Plans; ERISA.
(a) Part 3.22 of the Selling Companies Disclosure Schedule lists (i)
---------
all "employee benefit plans" within the meaning of Section 3(3) of ERISA, (ii)
all employment agreements, including, but not limited to, any individual benefit
arrangement, policy or practice with respect to any current or former employee
or director of either Selling Company or Member of the Controlled Group, and
(iii) all other employee benefit, bonus or other incentive compensation, stock
option, stock purchase, stock appreciation, severance pay, lay-off or reduction
in force, change in control, sick pay, vacation pay, salary continuation,
retainer, leave of absence, educational assistance, service award, employee
discount, fringe benefit plans, arrangements, policies or practices which either
Selling Company or any Member of the Controlled Group maintains, contributes to
or has any obligation to or liability for (collectively, the "Plans").
(b) None of the Plans is a Defined Benefit Plan, and neither of the
Selling Companies nor any Member of the Controlled Group has ever sponsored,
maintained or contributed to, or ever been obligated to contribute to, a Defined
Benefit Plan that could reasonably be expected to result in a material amount of
liability under Title IV of ERISA.
(c) None of the Plans is a Multiemployer Plan, and neither of the
Selling Companies nor any Member of the Controlled Group has ever contributed
to, or ever been obligated to
19
<PAGE>
contribute to, a Multiemployer Plan that could reasonably be expected to result
in a material amount of liability under Title IV of ERISA.
(d) Neither Selling Company maintains or contributes to any welfare
benefit plan which provides health benefits to an employee after the employee's
termination of employment or retirement except as required under Section 4980B
of the Code and Sections 601 through 608 of ERISA.
(e) Each Plan that is an "employee benefit plan," as defined in
Section 3(3) of ERISA, complies in all material respects by its terms and in
operation with the requirements provided by any and all statutes, orders or
governmental rules or regulations currently in effect and applicable to the
Plan, including but not limited to ERISA and the Code.
(f) There is no material violation of any reporting or disclosure
requirement imposed by ERISA or the Code with respect to any Plan.
(g) All insurance premiums have been paid in full, subject only to
normal retrospective adjustments in the ordinary course, with regard to the
Plans for plan years ending on or before the Closing Date.
(h) With respect to each Plan:
(i) no prohibited transactions (as defined in Section 406 or 407
of ERISA or Section 4975 of the Code) have occurred for which an exemption is
not available that could reasonably be expected to result in a material amount
of liability to either Selling Company;
(ii) to each Selling Company's Knowledge, no actions or claims
(other than routine claims for benefits made in the ordinary course of Plan
administration for which Plan administrative review procedures have not been
exhausted) are pending, threatened or imminent against or with respect to the
Plan, any employer who is participating (or who has participated) in the Plan or
any fiduciary (as defined in Section 3(21) of ERISA) of the Plan that could
reasonably be expected to result in a material amount of liability to either
Selling Company;
(iii) to each Selling Company's Knowledge, no facts exist which
could give rise to any such action or claim; and
(iv) each "pension plan" (as defined in Section 3(2) of ERISA)
provides that it may be amended or terminated at any time in accordance with the
terms of such plan and, except for benefits protected under any applicable law
or provision of any such plan, all benefits payable to current, terminated
employees or any beneficiary may be amended or terminated by either Selling
Company at any time without a material amount of liability.
(i) Neither of the Selling Companies nor any Member of the Controlled
Group has any Plan-related liability or to each Selling Company's Knowledge, is
threatened with any
20
<PAGE>
liability (whether joint or several) (i) for any excise tax imposed by Section
4971, 4975, 4976, 4977 or 4979 of the Code, or (ii) for a fine under Section 502
of ERISA that could reasonably be expected to result in a material amount of
liability to either Selling Company.
(j) All the "group health plans" (as defined in Section 607(1) or
733(a)(1) of ERISA or Section 4980B(g)(2) of the Code) that are part of the
Plans listed in the Selling Companies Disclosure Schedule are in material
compliance with the continuation of group health coverage provisions contained
in Section 4980B of the Code and Sections 601 through 608 of ERISA.
(k) Copies of all documents creating or evidencing any Plan listed in
the Selling Companies Disclosure Schedule, and all reports, forms and other
documents required to be filed with any governmental entity (including, without
limitation, summary plan descriptions, Forms 5500 and summary annual reports for
all plans subject to ERISA), have been delivered or made available to Razorfish.
There are no material negotiations, demands or proposals which are pending or
have been made which concern matters now covered, or that would be covered, by
any Plan listed in the Selling Companies Disclosure Schedule.
(l) All expenses and liabilities relating to contributions required
by law and the terms of the Plans described in the Selling Companies Disclosure
Schedule have been, and on the Closing Date will be, fully and properly accrued
on either Selling Company's books and records and disclosed in accordance with
GAAP and in Plan financial statements.
3.23 Bank Accounts.
Part 3.23 of the Selling Companies Disclosure Schedule sets forth with
---------
respect to each account maintained by or for the benefit of either Selling
Company at any bank or other financial institution:
(a) the name and location of the institution at which such account is
maintained;
(b) the name in which such account is maintained and the account
number of such account;
(c) a description of such account and the purpose for which such
account is used;
(d) the then current balance in such account;
(e) the rate of interest then being earned on the funds in such
account; and
(f) the names of all individuals authorized to draw on or make
withdrawals from such account.
3.24 Tax Status of Reorganization.
(a) Immediately prior to the Merger, each Selling Company will hold
at least ninety percent (90%) of the fair market value of its net assets and at
least seventy percent (70%) of the fair market value of its gross assets. For
purposes of this Section 3.24, assets of the Company
21
<PAGE>
held immediately prior to the Merger include amounts paid or incurred by either
Selling Company in connection with the Merger, including amounts used to pay
Merger expenses and all payments, redemptions and distributions (except for
regular, normal dividends) made by either Selling Company contemporaneously
with, in contemplation of or as part of the Merger.
(b) The liabilities of the Selling Companies, if any, to be assumed
by the Company in the Merger and the liabilities to which the transferred assets
of the Selling Companies are subject, if any, were incurred by the Selling
Companies in the Ordinary Course of Business.
(c) Except as provided in Section 15.1, each of the Selling Companies
and the Shareholder will pay any of its own expenses incurred in connection with
the Merger.
(d) There is no intercorporate indebtedness existing between the
Company and either Selling Company that was issued, was acquired, or will be
settled at a discount.
(e) Neither Selling Company is under the jurisdiction of a court in a
"title 11 or similar case," within the meaning of Section 368(a)(3)(A) of the
Code, nor is it an investment company for purposes of Section 368(a)(2)(F) of
the Code.
(f) Neither Selling Company has nor will it prior to the Merger
redeem capital stock of either Selling Company or make any "extraordinary
distribution," within the meaning of Section 1.368-1T(e)(1)(ii)(A), with respect
to any capital stock of either Selling Company in connection with the Merger. No
"related person" with respect to either Selling Company, within the meaning of
Section 1.368-1(e)(3) of the Treasury Regulations, has purchased or will
purchase prior to the Effective Time any Company capital stock in connection
with the Merger.
(g) Each of the Selling Companies' business conducted immediately
before the Effective Time will be its "historic business" and its assets held
immediately before the Effective Time will be its "historic business assets" for
purposes of Section 368 of the Code.
3.25 Full Disclosure.
(a) Neither this Agreement (including all Schedules and Exhibits
hereto), nor any of the Transactional Agreements, contains any untrue statement
of material fact; and none of such documents omits to state any material fact
necessary to make any of the representations, warranties or other statements or
information contained therein when read collectively not misleading. All the
information set forth in the Selling Companies Disclosure Schedule is accurate
and complete in all material respects.
(b) Information regarding the Selling Companies and the Shareholder
provided by the Selling Companies for inclusion in the Information Statement,
Application and Notice of Hearing will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statement therein in light of the circumstances under
which they were made not misleading.
22
<PAGE>
3.26 Due Diligence Information.
Each of the Selling Companies has provided Razorfish and Razorfish's
Representatives with full and complete access to all of the Selling Companies'
records and other documents and data, and has produced all documents and related
materials in response to the reasonable requests of Razorfish.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
Except as set forth in the Selling Companies Disclosure Schedule, the
Shareholder hereby represents and warrants to the Company and Razorfish as of
the date hereof and as of the Closing Date as follows:
4.1 Title to Common Shares.
The Shareholder is the record and beneficial owner of all of the issued and
outstanding common stock of the Selling Companies, and the Shareholder holds
title to such common stock free and clear of all Encumbrances, voting
agreements, proxies, options or transfer restrictions.
4.2 Capacity.
The Shareholder has the legal capacity (exclusive of his spouse) to enter
into and to perform his obligations under this Agreement and the other
Transactional Agreements to which he is contemplated to be a party. This
Agreement and the other Transactional Agreements constitute, or upon execution
and delivery will constitute, the legal, valid and binding obligations of the
Shareholder, enforceable against him in accordance with their respective terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditor's rights generally and by general principles of equity
regardless of whether such enforceability is considered in a proceeding in law
or equity.
4.3 Confirmation of Selling Companies' Representations and Warranties.
The Shareholder represents and warrants that, except as set forth in the
Selling Companies Disclosure Schedule, the representations and warranties of the
Selling Companies in Article III are true and correct as of the date hereof and
as of the Closing Date.
4.4 Non-Contravention.
To the Knowledge of the Shareholder, the execution and delivery of this
Agreement and the other Transactional Agreements, and the consummation of the
Merger, by the Shareholder will not, directly or indirectly (with or without
notice or lapse of time), contravene, conflict with or result in a violation of,
or give any Governmental Body or other Person the right to challenge the Merger
or to exercise any remedy or obtain any relief under, any Legal Requirement or
any Order to which the Shareholder is subject.
23
<PAGE>
4.5 Proceedings.
There is no pending Proceeding of which the Shareholder has been served or
notified, and, to the Knowledge of the Shareholder, no Person has threatened to
commence any Proceeding, that challenges, or that may have the effect of
preventing, delaying or making illegal, the Merger or the Shareholder's ability
to comply with or perform his obligations and covenants under the Transactional
Agreements; and, to the Knowledge of the Shareholder, no event has occurred, and
no claim, dispute or other condition or circumstance exists, that might directly
or indirectly give rise to or serve as a basis for the commencement of any such
Proceeding.
4.6 Orders.
(a) The Shareholder is not subject to any Order that relates to
either Selling Company's business or to any of the assets owned or used by
either Selling Company.
(b) To the Knowledge of the Shareholder, there is no proposed Order
that, if issued or otherwise put into effect, may have a material adverse effect
on the ability of the Shareholder to comply with or perform any covenant or
obligation under this Agreement and the other Transactional Agreements.
4.7 No Brokers.
The Shareholder nor any Person acting on his behalf has negotiated with any
finder, broker, intermediary or any similar Person in connection with the
Merger.
4.8 Tax Matters.
None of the employee compensation received by the Shareholder or any
employees of either Selling Company is or will be separate consideration for, or
allocable to, any of their shares of the Selling Companies Common Stock to be
surrendered in the Merger. None of the Razorfish Common Stock received by the
Shareholder will be separate consideration for, or allocable to, any employment,
consulting or similar arrangement. Any compensation paid or to be paid to the
Shareholder as an employee or in connection with the provision of advisory
services for the Selling Companies, the Company, Razorfish or any affiliate
thereof after the Merger will be determined by bargaining at arm's length.
24
<PAGE>
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND RAZORFISH
The Company and Razorfish hereby represent and warrant to the Selling
Companies and the Shareholder as of the date hereof and as of the Closing,
except as disclosed in the Disclosure Schedule provided by Razorfish and
attached hereto (the "Razorfish Disclosure Schedule"):
5.1 Organization; Good Standing.
(a) Razorfish is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, is qualified to
conduct business and is in both corporate and tax good standing under the laws
of each jurisdiction in which the nature of its business or the ownership or
leasing of its properties requires such qualification. Razorfish has the
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as currently conducted.
(b) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, is qualified to
conduct business and is in both corporate and tax good standing under the laws
of each jurisdiction in which the nature of its business or the ownership or
leasing of its properties requires such qualification. The Company has the
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as currently conducted.
5.2 Razorfish Common Stock.
The Razorfish Common Stock to be issued to the Shareholder, when issued in
connection with this Agreement and the other Transactional Agreements, will be
duly authorized, validly issued and nonassessable, and will be listed on the
NASDAQ National Market.
5.3 Authority; Binding Nature of Agreements.
(a) The execution, delivery and performance of this Agreement, the
Transactional Agreements, and all other agreements and instruments contemplated
to be executed and delivered by Razorfish or the Company, as the case may be, in
connection herewith have been duly authorized by all necessary action on the
part of Razorfish and the Company and their respective boards of directors and
shareholders or stockholders.
(b) This Agreement, the Transactional Agreements, and all other
agreements and instruments contemplated to be executed and delivered by
Razorfish and the Company each constitute the legal, valid and binding
obligation of Razorfish and the Company, enforceable against Razorfish and the
Company in accordance with their terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting the enforcement of creditors' rights generally and by
general principles of equity regardless of whether such enforceability is
considered in a proceeding in law or equity.
25
<PAGE>
(c) There is no pending Proceeding, and, to Razorfish's Knowledge, no
Person has threatened to commence any Proceeding that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or Razorfish's or the Company's ability to comply with or
perform its obligations and covenants under the Transactional Agreements, and,
to the Knowledge of Razorfish, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that might directly or indirectly give
rise to or serve as a basis for the commencement of any such Proceeding.
5.4 Non-Contravention; Consents.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Merger, by Razorfish and the Company
will not, directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of
(i) Razorfish and the Company's Certificate (or Articles) of Incorporation or
Bylaws, or (ii) any resolution adopted by Razorfish and the Company Board or any
committee thereof or the stockholders of Razorfish and the Company;
(b) to the Knowledge of Razorfish and the Company, contravene,
conflict with or result in a material violation of, or give any Governmental
Body the right to challenge the Merger or to exercise any remedy or obtain any
relief under, any legal requirement or any Order to which Razorfish and the
Company or any material assets owned or used by it are subject;
(c) to the Knowledge of Razorfish and the Company, cause any material
assets owned or used by Razorfish and the Company to be reassessed or revalued
by any taxing authority or other Governmental Body;
(d) to the Knowledge of Razorfish and the Company, contravene,
conflict with or result in a material violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is
held by Razorfish or the Company or any of their respective employees or that
otherwise relates to Razorfish and the Company's business or to any of the
material assets owned or used by Razorfish and the Company;
(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any Contract to which Razorfish
or the Company is a party;
(f) give any Person the right to any payment by Razorfish or the
Company or give rise to any acceleration or change in the award, grant, vesting
or determination of options, warrants, rights, severance payments or other
contingent obligations of any nature whatsoever of Razorfish or the Company in
favor of any Person, in any such case as a result of the change in control of
the Company or otherwise resulting from the Merger; or
(g) result in the imposition or creation of any material Encumbrance
upon or with respect to any material asset owned or used by Razorfish and the
Company.
26
<PAGE>
Except as contemplated in this Agreement and the other Transactional
Agreements, Razorfish and the Company will not be required to make any filing
with or give any notice to, or obtain any Consent from, any Person in connection
with the execution and delivery of this Agreement and the other Transactional
Agreements or the consummation or performance of the Merger.
5.5 Finders and Brokers.
(a) Neither Razorfish or the Company nor any Person acting on behalf
of Razorfish or the Company has engaged any finder, broker, intermediary or any
similar Person in connection with the Merger.
(b) Neither Razorfish nor the Company has entered into a contract or
other agreement that provides that a fee shall be paid to any Person or Entity
if the Merger is consummated.
5.6 Reports and Financial Statements; Absence of Certain Changes.
(a) Razorfish has filed an amended Registration Statement on Form S-1
dated April 26, 1999 and all reports required to be filed with the SEC pursuant
to the Exchange Act, if any, since its initial public offering on April 26, 1999
(such registration statement, each related prospectus and all such reports,
including those to be filed prior to the Closing Date, collectively, the
"Razorfish SEC Filings"), and has previously furnished or made available to the
Company true and complete copies of all the Razorfish SEC Filings filed, if any,
with respect to periods ending after April 26, 1999 (including any exhibits
thereto) and will promptly deliver to the Company any Razorfish SEC Filings
filed between the date hereof and the Effective Time. All of such Razorfish SEC
Filings complied at the time they were filed in all material respects with
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations thereunder. None of such Razorfish SEC Filings, as of their
respective dates (as amended through the date hereof), contained or, with
respect to Razorfish SEC Filings filed after the date hereof, will contain any
untrue statement of a material fact or omitted or, with respect to Razorfish SEC
Filings filed after the date hereof, will omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
financial statements of Razorfish included in the Razorfish SEC Filings comply
in all material respects with the published rules and regulations of the SEC
with respect thereto, and such audited financial statements (i) were prepared
from the books and records of Razorfish, (ii) were prepared in accordance with
GAAP applied on a consistent basis (except as may be indicated therein or in the
notes or schedules thereto) and (iii) present fairly the financial position of
Razorfish as of the dates thereof and the results of operations and cash flows
for the periods then ended. The unaudited financial statements included in the
Razorfish SEC Filings comply in all material respects with the published rules
and regulations of the SEC with respect thereto; and such unaudited financial
statements (i) were prepared from the books and records of Razorfish, (ii) were
prepared in accordance with GAAP, except as otherwise permitted under the
Exchange Act and the rules and regulations thereunder, on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto) and
(iii) present fairly the financial position of Razorfish as of the dates thereof
and the results of operations and cash flows (or changes in financial condition)
in all
27
<PAGE>
material respects for the periods then ended, subject to normal year-end
adjustments and any other adjustments described therein or in the notes or
schedules thereto. The foregoing representations and warranties shall also be
deemed to be made with respect to all filings made with the SEC on or before the
Effective Time.
(b) Except as specifically contemplated by this Agreement or
reflected in the Razorfish SEC Filings, since March 31, 1999 there has not been
(i) any change or event having a material adverse effect on Razorfish, (ii) any
declaration setting aside or payment of any dividend or distribution with
respect to the common stock of Razorfish, or (iii) any material change in
Razorfish's accounting principles, procedures or methods.
5.7 Compliance with Applicable Law.
Except as disclosed in the Razorfish SEC Filings filed prior to the date of
this Agreement, Razorfish holds all Governmental Authorizations necessary for
the lawful conduct of its business under and pursuant to, and the business of
Razorfish is not being conducted in violation of, any Governmental Authorization
applicable to Razorfish, except to the extent that the failure or violation
would not in the aggregate have a material adverse effect.
5.8 Complete Copies of Requested Reports.
Razorfish has delivered or made available (through public sources or
directly) true and complete copies of each document that has been reasonably
requested by the Company or its counsel in connection with their legal and
accounting review of Razorfish.
5.9 Full Disclosure.
(a) Neither this Agreement (including all Schedules and Exhibits
hereto) nor any of the Transactional Agreements contemplated to be executed and
delivered by Razorfish or the Company in connection with this Agreement contains
any untrue statement of material fact; and none of such documents omits to state
any material fact necessary to make any of the representations, warranties or
other statements or information contained therein not misleading. All of the
information set forth in the Prospectus is accurate and complete in all material
respects.
(b) The Information Statement, Application and Notice of Hearing, as
to information regarding Razorfish and the Company, and as of the respective
dates thereof, will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statement therein in light of the circumstances under which they were made not
misleading.
5.10 Tax Status of the Merger.
(a) Prior to the Merger and at the Effective Time, Razorfish will be
in "control" of the Company within the meaning of Section 368(c) of the Code.
Neither Razorfish nor the Company has any plan or intention to, and will not (to
the extent it would cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368 of the Code), cause the Company
28
<PAGE>
to issue additional shares of stock after the Merger, or take any other action
that would result in Razorfish losing control of the Company for purposes of the
Merger qualifying as a reorganization within the meaning of Section 368 of the
Code.
(b) Except for (i) repurchases or redemptions of Razorfish Common
Stock that are consistent with past practices and purchase programs that were
not created or modified in connection with the Merger, (ii) possible repurchases
of unvested shares of employees or consultants in connection with the
termination of their services, and (iii) possible reacquisitions of Razorfish
Common Stock pursuant to the Escrow Agreement, neither Razorfish nor or any
"related person" of Razorfish (within the meaning of Treasury Regulations
Section 1.368-1(e)(3)) has any plan or intention to, and will not (to the extent
it would cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368 of the Code), repurchase or redeem any of the Razorfish
Common Stock to be issued in the Merger in exchange for shares of Fuel Common
Stock and Tonga Common Stock.
(c) Razorfish has no plan or intention to, and will not (to the
extent it would cause the Merger to fail to qualify as a reorganization within
the meaning of Section 368 of the Code), liquidate the Company; to merge the
Company with Razorfish or into any other corporation; or to sell, distribute or
otherwise dispose of the capital stock or assets of the Company.
(d) Following the Merger, the Company will continue the historic
business of each of the Selling Companies or use a significant portion of each
of the Selling Companies' historic business assets in a business for purposes of
applying Section 1.368-1(d) of the Treasury Regulations to the Merger.
(e) Except as provided in Section 15.1, each of the Selling Companies
and the Shareholder will pay any of its own expenses incurred in connection with
the Merger.
(f) There is no intercorporate indebtedness existing between the
Company and either Selling Company that was issued, was acquired, or will be
settled at a discount.
(g) Neither Razorfish nor the Company is under the jurisdiction of a
court in a "title 11 or similar case," within the meaning of Section
368(a)(3)(A) of the Code. Neither Razorfish nor the Company is an investment
company for purposes of Section 368(a)(2)(F) of the Code.
(h) No stock of the Company will be issued in the Merger.
(i) None of the employee compensation received by the Shareholder or
any employees of either Selling Company is or will be separate consideration
for, or allocable to, any of their shares of the Selling Companies Common Stock
to be surrendered in the Merger. None of the Razorfish Common Stock received by
the Shareholder will be separate consideration for, or allocable to, any
employment, consulting or similar arrangement. Any compensation paid or to be
paid to the Shareholder as an employee or in connection with the provision of
advisory services for the Selling Companies, the Company, Razorfish or any
affiliate thereof after the Merger will be determined by bargaining at arm's
length.
29
<PAGE>
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties included or provided for in this
Agreement or in any schedule or certificate or other document delivered pursuant
to this Agreement, and the covenants of the Selling Companies and the
Shareholder set forth in Sections 7.17 and 7.19, will survive the Closing Date
for a period of two (2) years; provided, however, that the representations and
--------
warranties given under Sections 3.1, 3.3, 4.1, 5.1 and 5.3 shall survive
indefinitely, and the representations and warranties given under Sections 3.14,
3.17, 3.24, 4.8 and 5.10 shall survive until the expiration of the applicable
statutes of limitations. No claim may be made by any party hereto under this
Article VI unless written notice of the claim is given within the applicable
periods specified above; provided, however, that the foregoing limitation
--------
periods will not apply to any fraudulent breach, representation or warranty
actually known to any party before the Closing Date.
ARTICLE VII.
COVENANTS OF SELLING COMPANIES AND SHAREHOLDER
7.1 Access and Investigation.
Each of the Selling Companies and the Shareholder shall ensure that, at all
times during the Pre-Closing Period:
(a) Each of the Selling Companies and its Representatives provide
Razorfish and its Representatives with access, at reasonable times and with
reasonable notice from Razorfish to the Selling Companies, to all of the Selling
Companies' premises and assets, to all existing books, records, Tax Returns,
work papers and other documents and information relating to the Selling
Companies, and to responsible officers and employees of the Selling Companies,
and the Selling Companies and its Representatives shall provide Razorfish and
its Representatives with copies of such existing books, records, Tax Returns,
work papers and other documents and information relating to the Selling
Companies as Razorfish may reasonably request in good faith;
(b) Each of the Selling Companies and its Representatives compile and
provide Razorfish and its Representatives with such additional financial,
operating and other data and information regarding the Selling Companies as
Razorfish may reasonably request in good faith; and
(c) Each of the Selling Companies and its Representatives confer
regularly (not less than semi-monthly and as Razorfish may otherwise request)
with Razorfish concerning operational matters and otherwise report regularly
(not less than semi-monthly and as Razorfish may otherwise request) to Razorfish
and discuss with Razorfish and its Representatives concerning the status of the
Selling Companies' business, condition, assets, liabilities, operations,
financial performance and prospects, and promptly notify Razorfish of any
material
30
<PAGE>
change in the Selling Companies' business, condition, assets, liabilities,
operations, financial performance or prospects, or any event reasonably likely
to lead to any such change.
7.2 Operation of Business.
Except as set forth in Part 7.2, each of the Selling Companies and the
--------
Shareholder shall ensure that, during the Pre-Closing Period, without the
Consent of Razorfish, which Consent shall not be unreasonably withheld or
delayed:
(a) Except as contemplated hereby, each of the Selling Companies
conducts its operations exclusively in the Ordinary Course of Business and does
not enter into any transaction or take any other action outside the Ordinary
Course of Business;
(b) Each of the Selling Companies uses commercially reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and maintain its relations and
goodwill with all suppliers, customers, landlords, creditors, licensors,
licensees, employees and other Persons having business relationships with the
Selling Companies;
(c) Each of the Selling Companies keeps in full force all insurance
policies identified in Part 3.18 of the Selling Companies Disclosure Schedule;
---------
(d) Each of the Selling Companies promptly notifies Razorfish in
writing of any inquiry, proposal or offer from any Person relating to any
Acquisition Proposal;
(e) Neither Selling Company declares, accrues, sets aside or pays any
dividend or makes any other distribution in respect of any shares of capital
stock, other than to the Shareholder in accordance with past practice, nor
repurchases, redeems or otherwise reacquires any shares of capital stock or
other securities;
(f) Neither Selling Company sells or otherwise issues (or grants any
warrants, options or other rights to purchase) any shares of capital stock or
any other securities;
(g) Neither Selling Company amends its Articles of Incorporation or
Bylaws, nor effects or becomes a party to any transaction related to an
Acquisition Proposal or any recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(h) Neither Selling Company forms any subsidiary or acquires any
equity interest or other interest in any other Entity;
(i) Neither Selling Company establishes or adopts any Employee
Benefit Plan, nor pays any bonus or makes any profit sharing or similar payment
to, or increases the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees;
(j) Neither Selling Company changes any of its methods of accounting
or accounting practices in any respect;
31
<PAGE>
(k) Neither Selling Company makes any Tax election;
(l) Neither Selling Company commences any Proceeding, other than
collection matters in the Ordinary Course of Business;
(m) Neither Selling Company (i) acquires, disposes of, transfers,
leases, licenses, mortgages, pledges or encumbers any fixed or other assets,
other than in the Ordinary Course of Business; (ii) incurs, assumes or prepays
any indebtedness, Liability or obligation or any other liabilities or issue any
debt securities, other than in the Ordinary Course of Business; (iii) assumes,
guarantees, endorses or otherwise becomes liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person,
other than in the Ordinary Course of Business; or (iv) makes any loans, advances
or capital contributions to, or investments in, any other Person, other than in
the Ordinary Course of Business;
(n) Each Selling Company pays all debts and Taxes, files all Selling
Companies Returns (as provided herein) and pays or performs all other
obligations, when due;
(o) Neither Selling Company transfers to any Person any material
Proprietary Asset, other than in the Ordinary Course of Business;
(p) Neither Selling Company enters into or amends any material
Selling Companies Contracts pursuant to which any other Person is granted
distribution, marketing or other similar rights with respect to any of its
services, products or technology other than in the Ordinary Course of Business;
(q) Neither Selling Company hires any new officer-level employee or
any other employee whose total annual compensation would exceed $125,000; and
(r) Neither Selling Company revalues any of its assets, including,
without limitation, writing down the value of inventory or writing off notes or
accounts receivable, except as required under GAAP and in the Ordinary Course of
Business.
7.3 Filings and Consents; Cooperation.
Each Selling Company and the Shareholder shall use commercially reasonable
efforts to ensure that:
(a) Each filing or notice required to be made or given (pursuant to
any applicable Legal Requirement, Order or Contract, or otherwise) by the
Selling Companies or the Shareholder in connection with the execution and
delivery of any of the Transactional Agreements, or in connection with the
consummation or performance of the Merger, is made or given as soon as possible
after the date of this Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by the Selling Companies or
the Shareholder in connection with the execution and delivery of any of the
Transactional Agreements, or in connection with the consummation or performance
of the Merger (including each of the Consents
32
<PAGE>
identified in Part 3.5 of the Selling Companies Disclosure Schedule), is
obtained as soon as reasonably practicable after the date of this Agreement and
remains in full force and effect through the Closing Date;
(c) Each Selling Company promptly delivers to Razorfish a copy of
each filing made, each notice given and each Consent obtained by the Selling
Companies during the Pre-Closing Period; and
(d) During the Pre-Closing Period, each Selling Company and its
Representatives cooperate with Razorfish and Razorfish's Representatives, and
prepare and make available such documents and take such other actions as
Razorfish may request in good faith, in connection with any filing, notice or
Consent that Razorfish is required or elects to make, give or obtain.
7.4 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, each Selling Company and the
Shareholder shall promptly notify Razorfish in writing of:
(i) the discovery by the Selling Companies or the Shareholder of
any event, condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or constitutes a breach
of any representation or warranty made by the Selling Companies or the
Shareholder in this Agreement; and
(ii) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article IX or
Article X impossible or unlikely.
(b) If any event, condition, fact or circumstances that is required
to be disclosed pursuant to Section 7.4(a) requires any material change in the
Selling Companies Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming the Selling Companies
Disclosure Schedule were dated as of the date of the occurrence, existence or
discovery of such event, condition, fact or circumstances, then the Selling
Companies shall promptly deliver to Razorfish an update to the Selling Companies
Disclosure Schedule specifying such change (a "Disclosure Schedule Update").
(c) Upon delivery of any Disclosure Schedule Update during the Pre-
Closing Period, Razorfish shall have the sole and exclusive right to:
(i) terminate this Agreement and abandon the merger upon written
notice to the Selling Companies; or
(ii) elect to continue to be bound to the terms and conditions of
this Agreement and proceed toward completion of the merger, subject to such
adjustment to the Merger Consideration as is mutually agreed upon by the
parties based upon the exposure or cost of the material change set forth in
the Disclosure Schedule Update.
33
<PAGE>
(d) Fuel will promptly update any relevant and material information
provided to Razorfish after the date hereof pursuant to the terms of this
Agreement.
7.5 Payment of Indebtedness by Related Parties.
Except as otherwise provided in Part 3.19 of the Selling Companies
---------
Disclosure Schedule, the Selling Companies shall cause all indebtedness and
other Liabilities of each Related Party to the Selling Companies to be
discharged and paid in full at or prior to the Closing.
7.6 No Negotiation or Solicitation.
Each of the Selling Companies and the Shareholder shall ensure that neither
the Selling Companies nor any of the Selling Companies' Representatives directly
or indirectly, from the date hereof until the earlier of termination of this
Agreement or consummation of the Merger, (a) initiate, solicit or encourage, or
take any other action to facilitate any inquiries or the making of any proposal
with respect to, or (b) consider the merits or engage or participate in
negotiations concerning, provide any nonpublic information or data to, or have
any discussions with, any person other than a party hereto or their
Representatives relating to, any (i) acquisition, (ii) tender offer (including a
self-tender offer), (iii) exchange offer, (iv) merger, (v) consolidation, (vi)
acquisition of beneficial ownership of (or the right to vote securities
representing) any securities of the Selling Companies, or any rights to acquire,
or other instruments convertible into, securities of the Selling Companies,
(vii) dissolution, (viii) business combination, (ix) purchase of all or any
significant portion of the assets or any division of (or any equity interest in)
the Selling Companies or any subsidiary, or (x) any similar transaction other
than the Merger (such proposals, announcements, or transactions being referred
to as "Acquisition Proposals"). Fuel will notify Razorfish in writing (as
promptly as practicable) if any such Acquisition Proposals (including the
identity of the persons making such proposals and the terms of such proposals)
are received and furnish to Razorfish a copy of any written proposal relating
thereto.
7.7 Efforts to Complete Merger.
During the Pre-Closing Period, each of the Selling Companies shall use
commercially reasonable efforts to file the Application no later than July 22,
1999 and to cause the conditions set forth in Article IX and Article X to be
satisfied on a timely basis and so that the Closing can take place on or before
August 27, 1999 or as soon thereafter as is reasonably practical, in accordance
with Section 2.7, and shall not take any action or omit to take any action, the
taking or omission of which would or could reasonably be expected to result in
any of the representations and warranties of the Selling Companies or the
Shareholder set forth in this Agreement becoming untrue, or in any of the
conditions of Closing set forth in Article IX or Article X not being satisfied.
7.8 Confidentiality; Publicity.
Each of the Selling Companies and the Shareholder shall use their
commercially reasonable efforts to ensure that, during the Pre-Closing Period:
34
<PAGE>
(a) The Selling Companies and their respective Representatives keep
strictly confidential the existence and terms of this Agreement and, not in any
way limiting the generality of the foregoing, comply with the terms and
provisions of the letter agreement by and between Razorfish and Fuel, dated as
of May 27, 1999 (the "Nondisclosure Agreement"); and
(b) neither the Selling Companies nor any of their Representatives
issues or disseminates any press release or other publicity or, except for the
purpose of obtaining Consent to the Merger and only after obtaining Razorfish's
prior consent, otherwise makes any disclosure of any nature (to any of the
Selling Companies' suppliers, customers, landlords, creditors or employees or to
any other Person) regarding the Merger;
except in each case to the extent that the Selling Companies are required by law
to make any such disclosure regarding such transactions or as separately agreed
by the parties; provided, however, that if the Selling Companies are required by
-------- -------
law to make any such disclosure, the Selling Companies advise Razorfish, at
least five business days before making such disclosure, of the nature and
content of the intended disclosure.
7.9 FIRPTA Certification.
Each of the Selling Companies shall furnish to Razorfish on or within
thirty days prior to the Closing Date certification in the form required by
Treasury Regulation (S) 1.1445-2(c)(3) that the stock of such Entity is not a
U.S. real property interest. In addition, simultaneously with delivery of such
certification, each of the Selling Companies shall have provided Razorfish, as
agent for the Selling Companies, a form of notice to the Internal Revenue
Service in accordance with the requirements of Treasury Regulation Section
1.897-2(h)(2) along with written authorization for Razorfish to deliver such
notice form to the Internal Revenue Service on behalf of the Selling Companies
upon the Closing of the Merger.
7.10 Takeover Statutes.
If any Takeover Statute shall become applicable to the Merger, the Selling
Companies and the members of the Board of the Selling Companies shall grant such
approvals and take such actions as are necessary so that the Merger may be
commenced as promptly as practicable in the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
in the Merger.
7.11 Supplier Information.
Promptly following the date hereof, the Selling Companies shall provide
Razorfish with a written statement that accurately identifies, and provides an
accurate and complete breakdown of the amounts paid to, each supplier or other
Person that received more than $50,000 from the Selling Companies in the fiscal
year ended December 31, 1998 or the period from January 1, 1999 to March 30,
1999 (on an annualized basis), other than amounts paid to employees or
consultants and described in Part 3.11 of the Selling Companies Disclosure
---------
Schedule.
35
<PAGE>
7.12 Selling Companies Accruals and Reserves.
Prior to the Closing Date, the Selling Companies shall review and, to the
extent determined necessary or advisable and requested in writing by Razorfish,
consistent with GAAP, modify and change its accrual, reserve and provision
policies and practices to (a) reflect the Surviving Corporation's plans with
respect to the conduct of the Selling Companies' business following the Merger
and (b) make adequate provision for the costs and expenses relating thereto so
as to be applied consistently on a mutually satisfactory basis with those of
Razorfish. The parties agree to cooperate in preparing for the implementation
of the adjustments contemplated by this Section 7.12. The parties further agree
that no such modifications or changes made at the written request of Razorfish
shall constitute a breach of any obligation or representation or warranty or
covenant of the Selling Companies hereunder by virtue of the Selling Companies'
compliance with such Razorfish request or by virtue of the Selling Companies
making such changes.
7.13 Final Tax Returns.
(a) At the Company's expense not to exceed $7,500, the Shareholder
shall cause each of the Selling Companies' accountants to prepare, and the
Shareholder shall timely file, all of the Selling Companies' IRS Form 1120S and
any comparable state and local tax returns for all tax periods of the Selling
Companies ended or ending on or before the Closing Date (the "Final Income Tax
Returns"); provided, however, that the Shareholder shall be responsible
-------- -------
for and shall pay when due all amounts owed on the Final Income Tax Returns.
Razorfish shall cause the Company and the Selling Companies to cooperate as
reasonably requested by the Shareholder in the preparation of the Final Income
Tax Returns. The Final Income Tax Returns shall be prepared in a manner
consistent with previously filed Selling Companies Returns; provided that in all
events the Final Income Tax Returns shall be prepared in a manner consistent
with applicable law. The Shareholder shall send a copy of all Final Income Tax
Returns to Razorfish for its review and comment and, if required, appropriate
execution, at least fifteen (15) days prior to the filing thereof.
(b) Except as provided in Section 7.13(a), Razorfish shall be
responsible for the filing of all Tax Returns for the Selling Companies due on
or after the Closing and any payment due thereon. Such Tax Returns shall be
prepared in a manner consistent with previously filed Selling Companies Returns;
provided that in all events the Tax Returns for the Selling Companies shall be
prepared in a manner consistent with applicable law.
(c) Razorfish, the Company and their affiliates (including, following
the Closing, the Selling Companies) shall not file or permit to be filed any
amendment to any Tax Return of the Selling Companies for any period ending on or
before or including the Closing Date, without the prior written consent of the
Shareholder, not to be unreasonably withheld.
(d) Nothing in this Section 7.13 shall be deemed to reduce any
party's indemnification obligations under Article XII hereof.
36
<PAGE>
7.14 Federal Income Tax Reporting.
Each of the Selling Shareholders and the Shareholder agree to report the
Merger as a "reorganization," within the meaning of Section 368(a) of the Code.
7.15 Termination of Employment Agreements.
Prior to or on the Closing Date, each of the Selling Companies shall at the
request of Razorfish cause the termination of any employment agreement between
the Selling Companies and their respective officers and employees which provides
for (i) employment on an other than at-will basis or (ii) a contractual right to
compensation or other payment on termination, in each case in such a manner that
the Selling Companies will not be required to bear any Liability, before or
after the Closing, with respect to "excess parachute payments" within the
meaning of Section 280G of the Code.
7.16 Approval of Agreement.
The Selling Companies and the Shareholder shall ensure that during the Pre-
Closing Period each of the Selling Companies approves or adopts, as applicable,
as promptly as practicable after the date hereof, by all necessary further
action of their respective Boards, and shall use commercially reasonable efforts
to ensure that the Shareholder approves or adopts, as applicable, this Agreement
and the other Transactional Agreements to which the Selling Companies are a
party. In furtherance, and not in limitation, of the foregoing:
(a) As promptly as practicable after the execution of this Agreement,
Razorfish shall file with the Commissioner the Application for the Permit and
request for a Fairness Hearing for review by the Department of Corporations.
The Selling Companies shall assist in the preparation of the Application,
including the Notice of Hearing, by providing pertinent information concerning
the Selling Companies for inclusion therein and by reviewing and commenting on
drafts of the documents supplied to the Selling Companies by Razorfish.
Following clearance from the Commissioner to do so, Razorfish will cause the
Notice of Hearing to be mailed to the Shareholder at the address provided by the
Selling Companies.
(b) After the signing of this Agreement, the Selling Companies will
prepare a Notice of Hearing and an Information Statement (the "Information
Statement"). Following clearance from the Commissioner to do so, the Selling
Companies will use their commercially reasonable efforts to cause the
Information Statement to be mailed to the Shareholder in connection with
obtaining the approval of the Shareholder of this Agreement and the other
Transactional Agreements to which the Selling Companies are a party.
(c) The Selling Companies will cooperate fully with respect to all
reasonable requests by Razorfish to facilitate the mailing of the Notice of
Hearing and the Information Statement. The Selling Companies shall furnish
Razorfish with all information concerning the Selling Companies, its capital
stock, the Shareholder and other matters, and shall take all other actions, as
Razorfish may reasonably request in connection with the Information Statement,
Notice of Hearing, Application and Permit. Whenever the Selling Companies
obtain any
37
<PAGE>
Knowledge of any event which should be set forth in an amendment or a
supplement to the Information Statement, Notice of Hearing or Application, the
Selling Companies will promptly inform Razorfish and will cooperate in mailing
to the Shareholder such amendment or supplement.
(d) On or prior to the mailing of the Information Statement, each of
the Selling Companies, acting through its respective Boards, shall, in
accordance with all applicable Legal Requirements and such Selling Company's
Articles of Incorporation and Bylaws (i) promptly and duly call, give notice to,
convene and hold as soon as practicable a meeting (or solicit an action by
written consent in lieu thereof) of its shareholders for the purpose of voting
to approve and adopt this Agreement and the other Transactional Agreements to
which such Selling Company is a party, and (ii) recommend approval and adoption
of this Agreement and the other Transactional Agreements to which such Selling
Company is a party by the shareholders of such Selling Company, and to include
in the Information Statement such recommendation, and take all lawful action to
solicit such approval. The timing and procedures of such meeting (or consent
solicitation) shall be subject to the reasonable approval of Razorfish and shall
be completed as promptly as practicable after the issuance of the Permit
following the Fairness Hearing and after the solicitation of shareholder proxies
following the issuance of the Permit.
7.17 Year 2000 Compliance.
On or before the Closing Date, (i) the Selling Companies shall deliver
to Razorfish a complete list of all software and hardware (including without
limitation telephone and voice mail systems) and other assets owned, licensed or
leased by the Selling Companies that, to the Knowledge of either of the Selling
Companies, may not be or are not Year 2000 Compliant (the "Non-Year 2000
Compliant Assets"), (ii) the Selling Companies will provide to the licensors,
lessors and sellers of the Non-Year 2000 Compliant Assets questionnaires, in a
form reasonably requested by Razorfish, in a good-faith effort to determine
whether or not the Non-Year 2000 Compliant Assets are Year 2000 Compliant and,
to the extent any Non-Year 2000 Compliant Assets are not Year 2000 Compliant,
what remedial actions are necessary to be performed in order to cause any such
Non-Year 2000 Compliant Assets to become Year 2000 Compliant and (iii) the
Selling Companies shall deliver to Razorfish any information provided to the
Selling Companies in response to any such questionnaire. The term "Year 2000
Compliant" as used herein means that (i) each such technology, equipment or
system, on dates on and after January 1, 2000 (the "Millennial Dates"), will
calculate any information dependent on or relating to dates on or after January
1, 2000 in the same manner, and with the same functionality, data integrity and
performance, as such technology, equipment or system records, stores, processes,
calculates and presents calendar dates on or before any Millennial Date, and
(ii) the Millennial Dates will not adversely affect the operation of such
technology, equipment or system with respect to date-dependent data or
computations, output, or other routines or functions.
7.18 Release.
On or before the Closing Date, the Selling Companies shall obtain the
release and waiver of any and all of Gretchen Humbert's rights to an equity
interest in the Selling Companies as disclosed in Part 3.3(b)(iii) of the
Selling Companies Disclosure Schedule.
38
<PAGE>
7.19 Insurance.
(a) On or before the Closing Date, Fuel shall have delivered each
insurance policy maintained by or at the expense of, or for the direct or
indirect benefit of, either Selling Company, including the following information
(the "Insurance Schedule"):
(i) the name of the insurance carrier that issued such policy
and the policy number of such policy;
(ii) whether such policy is a "claims made" or an "occurrences"
policy;
(iii) a description of the coverage provided by such policy and
the material terms and provisions of such policy (including all applicable
coverage limits, deductible amounts and co-insurance arrangements);
(iv) the annual premium payable with respect to such policy, and
the cash value (if any) of such policy; and
(v) a description of any claims pending, and any claims that have
been asserted in the past, with respect to such policy.
The Insurance Schedule shall also identify (1) each pending application for
insurance that has been submitted by or on behalf of either Selling Company, and
(2) each self-insurance or risk-sharing arrangement affecting either Selling
Company or any of its assets.
(b) On or before the Closing Date, Fuel shall have delivered to
Razorfish copies of all of the insurance policies identified in the Insurance
Schedule (including all renewals thereof and endorsements thereto) and binders
relating thereto.
(c) Each of the policies identified in the Insurance Schedule shall
be in full force and effect. All of the information contained in the
applications submitted in connection with said policies shall be (at the times
said applications were submitted) accurate and complete, and all premiums and
other amounts owing with respect to said policies shall have been paid in full
on a timely basis. The Selling Companies shall have paid all premiums due, and
have otherwise performed all of their obligations necessary to keep such
policies in force, under each policy to which either Entity is a party or that
provides coverage to either Entity or any of their respective directors or
officers in connection with their performance of services to either Selling
Company.
(d) There shall be no pending claim under or based upon any of the
policies identified in the Insurance Schedule, and, to each Selling Company's
Knowledge, no event shall have occurred, and no condition or circumstance shall
exist, that might (with or without notice or lapse of time) directly or
indirectly give rise to or serve as a basis for any such claim.
(e) Neither Selling Company shall have received:
(i) any notice or other communication (in writing or otherwise)
regarding the actual or possible cancellation or invalidation of any of the
policies
39
<PAGE>
identified in the Insurance Schedule or regarding any actual or possible
adjustment in the amount of the premiums payable with respect to any of
said policies; or
(ii) any notice or other communication (in writing or otherwise)
regarding any actual or possible refusal of coverage under, or any actual
or possible rejection of any claim under, any of the policies identified in
the Insurance Schedule.
ARTICLE VIII.
COVENANTS OF RAZORFISH
8.1 Access and Investigation.
Razorfish and its Representatives will, at all times during the Pre-Closing
Period, provide the Selling Companies and their Representatives with access, at
reasonable times and with reasonable notice from the Selling Companies to
Razorfish, to such financial and business records as they may reasonably request
in relation to Razorfish and the Company.
8.2 Notification.
During the Pre-Closing Period, Razorfish shall promptly notify the Selling
Companies in writing of:
(a) the discovery by Razorfish of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a breach of any representation or warranty made
by Razorfish in this Agreement;
(b) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement (except as a result of actions taken
pursuant to the written consent of the Selling Companies) and that would cause
or constitute a Breach of any representation or warranty made by Razorfish or
the Company in this Agreement if (i) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (ii) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(c) any breach of any covenant or obligation of Razorfish or the
Company; and
(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article IX or Article
X impossible or unlikely.
8.3 Filings and Consents; Cooperation.
Razorfish and the Company shall use commercially reasonably efforts to
ensure that:
(a) Each filing or notice required to be made or given (pursuant to
any applicable Legal Requirement, Order or Contract, or otherwise) by Razorfish
in connection with the execution and delivery of any of the Transactional
Agreement, or in connection with the
40
<PAGE>
consummation or performance of the Merger, is made or given as soon as possible
after the date of this Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by Razorfish in connection
with the execution and delivery of any of the Transactional Agreements, or in
connection with the consummation or performance of the Merger, is obtained as
soon as reasonably practicable after the date of this Agreement and remains in
full force and effect through the Closing Date;
(c) Razorfish promptly delivers to the Selling Companies a copy of
each filing made, each notice given and each Consent obtained by Razorfish
during the Pre-Closing Period; and
(d) During the Pre-Closing Period, Razorfish and its Representatives
cooperate with the Selling Companies and the Selling Companies' Representatives,
and prepare and make available such documents and take such other actions as
Selling Companies may request in good faith, in connection with any filing,
notice or Consent that the Selling Companies are required or elects to make,
give or obtain.
8.4 Efforts to Complete Merger.
During the Pre-Closing Period, Razorfish shall use its commercially
reasonable efforts to file the Application no later than July 22, 1999 and to
cause the conditions set forth in Article IX and Article X to be satisfied on a
timely basis and so that the Closing can take place on or before August 27, 1999
or as soon thereafter as is reasonably practicable, in accordance with Section
2.7, and shall not take any action or omit to take any action, the taking or
omission of which would or could reasonably be expected to result in any of the
representations and warranties or Razorfish set forth in this Agreement becoming
untrue or in any of the conditions of closing set forth in Article IX or Article
X not being satisfied.
8.5 Confidentiality; Publicity.
Razorfish shall use its commercially reasonable efforts to ensure that,
during the Pre-Closing Period:
(a) Razorfish and its Representatives keep strictly confidential the
existence and terms of this Agreement prior to the issuance or dissemination of
any mutually agreed upon press release or other disclosure of the Merger and,
not in any way limiting the generality of the foregoing, comply with the terms
and provisions of the Nondisclosure Agreement; and
(b) neither Razorfish nor any of its Representatives issues or
disseminates any press release or other publicity or, except for the purpose of
obtaining Consents to the Merger and only after obtaining the Selling Companies'
prior consent, otherwise makes any disclosure of any nature (to any of the
Selling Companies' suppliers, customers, landlords, creditors or employees or to
any other Person) regarding the Merger;
except, in each case, to the extent that Razorfish is required by law to make
any such disclosure regarding the Merger or as otherwise agreed by the parties;
provided, however, that if Razorfish
- -------- -------
41
<PAGE>
is required by law to make any disclosure regarding the Merger, Razorfish
advises Selling Companies in writing, at least five business days before making
such disclosure, if reasonably practical, of the nature and content of the
intended disclosure.
Notwithstanding the foregoing, Razorfish and Selling Companies shall cooperate
to make a joint announcement and issue a press release with respect to the
execution of this Agreement at or promptly following the execution hereof.
ARTICLE IX.
CLOSING CONDITIONS OF RAZORFISH AND THE COMPANY
Razorfish and the Company's obligations to effect the Closing and
consummate the Merger are subject to the satisfaction of each of the following
conditions:
9.1 Accuracy of Representations and Warranties.
The representations and warranties of the Shareholder and the Selling
Companies in this Agreement shall have been true and correct in all material
respects as of the date of this Agreement and shall be true and correct on and
as of the Closing and the Shareholder and the Selling Companies shall have
performed in all material respects all obligations in this Agreement required to
be performed or observed by them on or prior to the Closing.
9.2 Additional Conditions to Closing.
(a) This Agreement and the Merger shall have been approved and
adopted by the favorable vote of a majority of the shares of the outstanding
capital stock of each of the Selling Companies entitled to vote thereon at a
shareholders meeting at which a quorum is present in accordance with Legal
Requirements.
(b) This Agreement and the Merger shall have been approved and
adopted by the favorable vote of a majority of the shares of the outstanding
capital stock of each of the Selling Companies entitled to vote thereon at a
shareholders meeting at which a quorum is present in accordance with Legal
Requirements.
(c) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the Merger shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated or enforced by any court or
governmental authority which prohibits or restricts the consummation of the
Merger. Other than the filing of the Agreement of Merger with the Secretary of
State of California, all authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods imposed by,
any Governmental Body which are necessary for the consummation of the Merger,
other than those the failure to obtain which would not materially adversely
affect the consummation of the Merger or in the aggregate have a material
adverse effect on the Surviving Corporation and its subsidiaries, taken as a
whole, shall have been filed, occurred or been obtained (all such permits,
approvals, filings and consents and the lapse of all such waiting
42
<PAGE>
periods being referred to as the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Approvals shall be in full force and effect.
(d) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, by any federal or state Governmental Body which, in connection with the
grant of a Requisite Regulatory Approval, imposes any condition or restriction
upon the Surviving Corporation or its subsidiaries (or, in the case of any
disposition of assets required in connection with such Requisite Regulatory
Approval, upon Razorfish or its subsidiaries or the Selling Companies),
including, without limitation, requirements relating to the disposition of
assets, which in any such case would so materially adversely impact the economic
or business benefits of the Merger as to render inadvisable the consummation of
the Merger.
9.3 Performance of Agreements.
The Selling Companies or the Shareholder, as the case may be, shall have
executed and delivered each of the agreements, instruments and documents
required to be executed and delivered, and performed all actions required by the
Selling Companies or the Shareholder, as the case may be, pursuant to this
Agreement, except as Razorfish has otherwise consented in writing.
9.4 Compliance with Agreements.
All of the other covenants and obligations that the Selling Companies or
the Shareholder are required to comply with or to perform pursuant to this
Agreement or any other Transactional Agreement at or prior to the Closing
(considered collectively) shall have been duly complied with and performed in
all material respects.
9.5 Consents.
Each of the Consents identified or required to have been identified in Part
----
3.5 of the Selling Companies Disclosure Schedule shall have been obtained and
- ---
shall be in full force and effect, other than those Consents the absence of
which shall not have a material adverse effect on the Company or Razorfish. In
addition, Razorfish shall have received (i) a consent and estoppel agreement, in
form and substance reasonably satisfactory to Razorfish, executed by the
landlord with respect to Fuel's lease of the premises in the building located at
150 Pico Boulevard, Santa Monica, California (the "Premises"), and (ii) a Non-
Disturbance and Attornment Agreement, in form and substance reasonably
satisfactory to Razorfish, executed by the landlord of the Premises and the
beneficiary under the deed of trust encumbering the real property on which the
Premises is located.
9.6 No Material Adverse Change.
There shall not have been any material adverse change in the Selling
Companies' business, condition, assets, liabilities, operations or financial
performance (taken together) since the date of this Agreement.
43
<PAGE>
9.7 Selling Companies Closing Certificates.
In addition to the documents required to be received under this Agreement,
Razorfish and the Company shall also have received the following documents:
(a) the opinion letter from Gibson Dunn & Crutcher LLP, counsel to
the Selling Companies, dated the Closing Date, in the form attached as Exhibit
-------
C;
- -
(b) a certificate (the "Selling Companies Closing Certificate"),
dated the Closing Date, duly executed by each Selling Company and the
Shareholder, certifying that (A) each of the representations and warranties made
by the Selling Companies or any Shareholder in this Agreement and in the other
Transactional Agreements was accurate in all material respects as of the date of
the applicable Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date, (B) each of the covenants and
obligations that the Selling Companies or the Shareholder is required to have
complied with or performed pursuant to this Agreement or any of the other
Transactional Agreements at or prior to the Closing has been duly complied with
and performed in all material respects, and (C) each of the conditions set forth
in Article IX has been satisfied in all respects;
(c) copies of resolutions of each Selling Company, certified by a
Secretary, Assistant Secretary or other appropriate officer of each Entity,
authorizing the execution, delivery and performance of the Transactional
Agreements and the Merger, and copies of resolutions of the meeting of
shareholders of each Selling Company (or written consent in lieu thereof),
certified by a Secretary, Assistant Secretary or other appropriate officer of
each Selling Company, authorizing the execution, delivery and performance of the
Transactional Agreements and the Merger;
(d) good standing certificates for the State of California; and
(e) such other documents as Razorfish may request in good faith for
the purpose of (i) evidencing the accuracy of any representation or warranty
made by the Selling Companies or the Shareholder, (ii) evidencing the compliance
by the Selling Companies, or the performance by the Selling Companies of, any
covenant or obligation set forth in this Agreement or any of the other
Transactional Agreements, (iii) evidencing the satisfaction of any condition set
forth in Article X or this Article IX, or (iv) otherwise facilitating the
consummation or performance of the Merger.
9.8 Litigation
Since the date of this Agreement, there shall not have been commenced or
threatened against Razorfish, or against any Person affiliated with Razorfish,
any Proceeding (i) involving any challenge to, or seeking Damages or other
relief in connection with, the Merger, or (ii) that may have the effect of
preventing, delaying, making illegal or otherwise interfering with the Merger or
any of the Transactional Agreements or having a material adverse effect on the
Selling Companies.
44
<PAGE>
9.9 Assertion of Rights.
No Person shall have made or threatened any claim asserting that such
Person (i) may be the holder or the beneficial owner of, or may have the right
to acquire or to obtain beneficial ownership of, any capital stock or other
securities of the Selling Companies, or (ii) may be entitled to all or any
portion of the consideration to be issued in connection with the Merger pursuant
to this Agreement.
9.10 No Violation.
Neither the consummation nor the performance of the Merger or any of the
Transactional Agreements will, directly or indirectly (with or without notice or
lapse of time), contravene or conflict with or result in a violation of, or
cause Razorfish or any Person affiliated with Razorfish to suffer any material
adverse consequence under (i) any applicable Legal Requirement or Order or (ii)
any Legal Requirement or Order that has been proposed by or before any
Governmental Body.
9.11 Transactional Agreements.
Each Person (other than Razorfish and the Company) shall have executed and
delivered prior to or on the Closing Date all Transactional Agreements to which
it is to be a party.
9.12 Proprietary Information Agreements.
Each of the Selling Companies' employees and consultants as requested by
Razorfish shall have entered into a Proprietary Information and Inventions
Agreement substantially in the form of Exhibit D hereto or such other form as
---------
shall have been provided to and approved by Razorfish.
9.13 Termination of Employment Agreements.
Each of the employment agreements between the Selling Companies and their
respective officers and employees which provides for (i) employment on an other
than at-will basis or (ii) a contractual right to compensation on termination
shall have been terminated if so requested by Razorfish, as required by this
Agreement, and Razorfish shall be satisfied in its reasonable discretion that
there are no Selling Companies' employee benefit plans, arrangements, agreements
or understandings that would, whether upon the closing of the Merger or
otherwise in connection with the Merger (including after the passage of time and
the taking of any action such as the termination of an employee), constitute
"excess parachute payments" within the meaning of Section 280G of the Code.
9.14 Employment Agreements.
(a) Seth Epstein shall have entered into an employment agreement,
effective as of the Closing, with the Company on substantially the terms set
forth in Exhibit E hereto.
---------
45
<PAGE>
(b) Each other Key Employee of the Selling Companies shall have
entered into an employment agreements with the Company on terms satisfactory to
the Company in substantially the form attached hereto as Exhibit F.
---------
9.15 Affiliate Letter.
The Shareholder shall have executed and delivered an Affiliate Letter in
the form attached hereto as Exhibit H.
---------
9.16 Fuel/Tonga Tradenames and Trademarks.
The Shareholder shall have assigned and transferred any and all of his
rights, title and interests in and to the "Fuel" and "Tonga" trademarks, service
marks and tradenames to the respective Selling Companies pursuant to an
assignment agreement in form and substance reasonably satisfactory to Razorfish.
9.17 Commissioner's Determination of Fairness.
The Commissioner shall have approved the terms and conditions of the
issuance of Razorfish Common Stock pursuant to this Agreement after the Fairness
Hearing, and the Permit shall have been issued.
9.18 Waiver of Certain Rights.
Gretchen Humbert shall have released and waived any and all of her rights
to an equity interest in the Selling Companies as disclosed in Part 3.3(b)(iii)
----------------
of the Selling Companies Disclosure Schedule.
9.19 Saddleback Equipment Lease.
The Shareholder shall have assigned any and all of his rights in and to
that certain equipment lease with Saddleback Financial Corporation, as amended,
to the Company.
9.20 Spousal Consent.
The spouse of the Shareholder shall have executed a consent to this
Agreement and the other Transactional Documents and the consummation of the
transactions contemplated hereby and thereby, in form and substance reasonably
satisfactory to Razorfish.
9.21 Schedule Describing Tax Basis in Assets and Federal Tax Elections.
The Shareholder shall have delivered to Razorfish a schedule setting forth,
as of December 31, 1998, an accurate and complete description of each Selling
Company's federal income tax basis in its assets and of each Selling Company's
material federal income tax elections.
46
<PAGE>
9.22 Schedule Identifying Income Tax Returns Required to be Filed.
The Shareholder shall have delivered to Razorfish a schedule identifying
all IRS Form 1120S and comparable state and local income Tax Returns, and all
sales Tax Returns, required to be filed by or on behalf of each of the Selling
Companies based solely on the income, assets and operations of each of the
Selling Companies prior to the Closing Date for the taxable periods ending on or
including the Closing Date.
9.23 Delivery and Acceptance of Audited Financial Statements.
Arthur Andersen shall have delivered to Razorfish audited financial
statements of each of the Selling Companies, which financial statements when
delivered shall be reasonably acceptable to Razorfish, it being acknowledged and
agreed that the disclosure of material Liabilities or material inaccuracies or
discrepancies in the information disclosed by the Selling Companies in the
Disclosure Schedule shall constitute reasonable grounds for Razorfish not to
accept such audited financial statements.
ARTICLE X.
CLOSING CONDITIONS OF THE SHAREHOLDER AND THE SELLING COMPANIES
The Shareholder's and the Selling Companies' obligations to effect the
Closing and consummate the Merger are subject to the satisfaction of each of the
following conditions:
10.1 Employment Agreements.
(a) Seth Epstein shall have entered into an employment agreement,
effective as of the Closing, with the Company on substantially the terms set
forth in Exhibit E hereto.
---------
(b) Each other Key Employee of the Selling Companies shall have
entered into an employment agreements with the Company on terms satisfactory to
the Company in substantially the form attached hereto as Exhibit F.
---------
10.2 Accuracy of Representations and Warranties.
The representations and warranties of the Company and Razorfish in this
Agreement shall have been true and correct in all material respects as of the
Closing and each of the Company and Razorfish shall have performed in all
material respects all obligations in this Agreement required to be performed or
observed by them on or prior to the Closing.
10.3 Additional Conditions to Closing.
(a) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the Merger shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated or enforced by any court or
47
<PAGE>
governmental authority which prohibits or restricts the consummation of the
Merger. Other than the filing of the Agreement of Merger with the Secretary of
State of California, all Requisite Regulatory Approvals shall have been filed,
occurred or been obtained and all such Requisite Regulatory Approvals shall be
in full force and effect.
(b) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, by any federal or state Governmental Body which, in connection with the
grant of a Requisite Regulatory Approval, imposes any condition or restriction
upon the Surviving Corporation or its subsidiaries (or, in the case of any
disposition of assets required in connection with such Requisite Regulatory
Approval, upon Razorfish or its subsidiaries or the Selling Companies),
including, without limitation, requirements relating to the disposition of
assets, which in any such case would so materially adversely impact the economic
or business benefits of the Merger as to render inadvisable the consummation of
the Merger.
10.4 Razorfish Closing Certificates.
The Selling Companies and the Shareholder shall have received the following
documents:
(a) the opinion letter from Morrison & Foerster LLP, counsel to
Razorfish, dated the Closing Date, in the form attached as Exhibit G;
---------
(b) a certificate (the "Razorfish Closing Certificate"), dated the
Closing Date, duly executed by Razorfish and the Company, certifying that (A)
each of the representations and warranties made by Razorfish and the Company in
this Agreement and in the other Transactional Agreements was accurate in all
material respects as of the date of the applicable Agreement and is accurate in
all material respects as of the Closing Date as if made on the Closing Date, (B)
each of the covenants and obligations that Razorfish or the Company is required
to have complied with or performed pursuant to this Agreement or any of the
other Transactional Agreements at or prior to the Closing has been duly complied
with and performed in all material respects, and (C) each of the conditions set
forth in Article X has been satisfied in all respects;
(c) copies of resolutions of Razorfish and the Company, certified by
a Secretary, Assistant Secretary or other appropriate officer of Razorfish and
the Company, respectively, authorizing the execution, delivery and performance
of the Transactional Agreements and the Merger, and copies of resolutions of the
meeting of shareholders of the Company (or written consent in lieu thereof),
certified by a Secretary, Assistant Secretary or other appropriate officer of
the Company, authorizing the execution, delivery and performance of the
Transactional Agreements and the Merger;
(d) with respect to Razorfish, good standing certificates for the
State of Delaware and New York, and with respect to the Company, a good standing
certificate for the State of California; and
(e) such other documents as Selling Companies may request in good
faith for the purpose of (A) evidencing the accuracy of any representation or
warranty made by Razorfish and
48
<PAGE>
the Company, (B) evidencing the compliance by Razorfish and the Company with, or
the performance by Razorfish and the Company of, any covenant or obligation set
forth in this Agreement or any of the other Transactional Agreements, (C)
evidencing the satisfaction of any condition set forth in this Article X, or (D)
otherwise facilitating the consummation or performance of the Merger.
10.5 Compliance with Agreements.
All of the covenants and obligations that either Razorfish or the Company
is required to comply with or to perform pursuant to this Agreement at or prior
to the Closing (considered collectively) shall have been duly complied with and
performed in all material respects.
10.6 Transactional Agreements.
Subject to the terms and conditions of this Agreement, Razorfish and the
Company shall have executed and delivered prior to or on the Closing Date all
Transactional Agreements to which each Person is to be a party.
10.7 No Violation.
Neither the consummation nor the performance of the Merger or any of the
Transactional Agreements will, directly or indirectly (with or without notice or
lapse of time), contravene or conflict with or result in a violation of, or
cause the Shareholders to suffer any material adverse consequences under, (a)
any applicable Legal Requirement or Order or (b) any Legal Requirement or Order
that has been proposed by or before any Governmental Body.
10.8 No Material Adverse Change.
There shall not have been any material adverse change in Razorfish's
business, condition, assets, liabilities, operations or financial performance
since the date of this Agreement; provided, however, that a decrease in the
-------- -------
trading price of Razorfish Common Stock shall not of itself be considered a
material adverse change.
10.9 Performance of Agreements.
Razorfish or the Company, as the case may be, shall have executed and
delivered each of the agreements, instruments and documents required to be
executed and delivered, and performed all actions required by Razorfish or the
Company, as the case may be, pursuant to this Agreement, except as the
Shareholder has otherwise consented in writing.
10.10 Consents.
Each of the Consents identified or required to have been identified in Part
----
5.4 of the Razorfish Disclosure Schedule shall have been obtained and shall be
- ---
in full force and effect, other than those Consents the absence of which shall
not have a material adverse effect on the Company or Razorfish.
49
<PAGE>
10.11 Litigation.
Since the date of this Agreement, there shall not have been commenced or
threatened against either of the Selling Companies, or against any Person
affiliated with either of the Selling Companies, any Proceeding (i)involving any
challenge to, or seeking Damages or other relief in connection with, the Merger,
or (ii) that may have the effect of preventing, delaying, making illegal or
otherwise interfering with the Merger or any of the Transactional Agreements or
having a material adverse effect on Razorfish.
10.12 Razorfish Stock.
On the Closing Date, (i) Razorfish Common Stock shall be listed for trading
on NASDAQ, (ii) the Average Razorfish Stock Price shall be greater than $26 per
share (giving effect to any stock split or similar event) and (iii) the Merger
Consideration shall have been approved for deposit, when permissible under the
Affiliate Letter, in an exchange fund reasonably acceptable to the Shareholder.
10.13 Commissioner's Determination of Fairness.
The Commissioner shall have approved the terms and conditions of the
issuance of Razorfish Common Stock pursuant to this Agreement after the Fairness
Hearing, and the Permit shall have been issued.
ARTICLE XI.
FURTHER ASSURANCES
Each of the parties hereto agrees that it will, from time to time after the
date of the Agreement, execute and deliver such other certificates, documents
and instruments and take such other action as may be reasonably requested by the
other party to carry out the actions and transactions contemplated by this
Agreement, including the closing conditions described in Articles IX and X.
ARTICLE XII.
INDEMNIFICATION
12.1 Indemnification by the Shareholder
(a) In the event the Closing occurs, if Shareholder or either of the
Selling Companies (i) breaches any of his or its representations and warranties
contained in Articles III and IV herein or (ii) fails to perform or comply with
any of their respective covenants and agreements set forth in this Agreement,
provided that the Company or Razorfish makes a timely written claim for
indemnification against the Shareholder pursuant to Article VI and Section 12.3,
then the Shareholder agrees to indemnify the Company and Razorfish, and each of
their directors, officers, shareholders, attorneys, representatives and agents
(except for such persons who are also Shareholders), from and against any Losses
incurred or paid by the Company or Razorfish to the
50
<PAGE>
extent such Losses arise or result from such breach or failure to perform.
"Losses" shall mean all damages, awards, judgments, and amounts paid in
settlement, all interest thereon, reasonable costs and expenses of investigating
claims, lawsuits or arbitration and any appeal from any of the foregoing and
reasonable attorneys fees incurred in connection therewith. For purposes of this
Section 12.1(a), Losses shall not include any obligations with respect to Taxes
(other than Taxes arising by reason of a breach of the representations in
Section 3.24, 4.8 or 5.10) attributable to periods or portions thereof beginning
after the Closing Date.
(b) The number of shares of Razorfish Common Stock to be released to
Razorfish pursuant to the terms of the Escrow Agreement shall be calculated by
dividing the dollar amount of the Losses incurred by the Indemnitee by the
Average Razorfish Stock Price determined on the date Escrow Agent makes a
payment to an Indemnitee.
12.2 Indemnification by the Company and Razorfish
In the event the Company or Razorfish (i) breaches or is deemed to have
breached any of its representations and warranties contained in Article V herein
or (ii) fails to perform or comply with any of the covenants and agreements set
forth in this Agreement, provided that the Shareholder makes a written claim for
indemnification against the Company or Razorfish pursuant to Section 12.3 below,
then the Company and Razorfish agree to indemnify the Shareholder from and
against any Losses incurred or paid by the Shareholder to the extent such Losses
arise or result from a breach by the Company or Razorfish of any representation
and warranty contained in Article V or a violation of any covenant in this
Agreement.
12.3 Notification of Claims
If any party or parties (the "Indemnified Party") reasonably believes that
it is entitled to indemnification hereunder, or otherwise receives notice of the
assertion or commencement of any third-party claim, action, audit or proceeding
(a "Third-Party Claim"), with respect to which such other party or parties (the
"Indemnifying Party") is or may be obligated to provide indemnification pursuant
to Section 12.1 or 12.2 above, the Indemnified Party shall promptly give the
Indemnifying Party written notice of such claim for Indemnification or Third
Party Claim (an "Indemnity Claim"); provided, however, that the failure of any
Indemnified Party hereunder to give the Indemnifying Party prompt notice as
provided herein shall not relieve the Indemnifying Party of any of its
obligations hereunder except to the extent that the Indemnifying Party is
prejudiced thereby. Notwithstanding the foregoing, any claim for
indemnification under this Section 12 must be brought prior to the expiration of
the survival period for the representation and warranty as set forth in Article
VI. The delivery of such notice of Indemnity Claim ("Claim Notice") shall be a
condition precedent to any liability of the Indemnifying Party for
indemnification hereunder.
12.4 Resolution of Claims
With respect to any Indemnity Claim involving a Third-Party Claim,
following prompt notification of the Indemnifying Party, the Indemnified Party
shall proceed with the defense of such Third-Party Claim. During such defense
proceedings, the Indemnified Party shall keep the
51
<PAGE>
Indemnifying Party informed of all material developments and events relating to
the proceedings. The Indemnifying Party shall have a right to be present at the
negotiation, defense and settlement of such Third-Party Claim. The Indemnified
Party shall not agree to any settlement of the Third-Party Claim without the
consent of the Indemnifying Party, which shall not be unreasonably withheld.
12.5 Limitations on Indemnification Obligations
Notwithstanding anything to the contrary herein:
(a) in no event shall the Shareholder, the Company or Razorfish be
liable to the other party under any warranty or representation or any covenant
of the Selling Companies or the Shareholder set forth in Sections 7.17 and 7.19
made by such party in this Agreement until the aggregate amount of liability of
all claims thereunder against such party exceeds Seventy Five Thousand Dollars
($75,000) (the "Threshold"), at which point such party shall be liable for the
full amount of liability for such claims, including the Threshold; and
(b) none of the Shareholder's, on the one hand, or the Company's or
Razorfish's, on the other hand, indemnification obligations under this Article
XII with respect to any representation or warranty or any covenant of the
Selling Companies or the Shareholder set forth in Sections 7.17 and 7.19 shall
exceed Fifteen Million Dollars ($15,000,000).
12.6 Exclusive Remedy; Set Off
(a) The parties hereto acknowledge and agree that the foregoing
indemnification provisions in this Article XII shall be the exclusive remedy of
the Company, Razorfish, the Selling Companies and the Shareholder with respect
to the Selling Companies and the transactions contemplated by this Agreement.
Any Indemnity Claim will be net of any insurance proceeds available to the
Indemnifying Party for the related losses, and of any balance sheet reserve
related thereto. Under no circumstances shall the parties be liable to each
other for consequential or punitive damages. Accordingly, the Shareholder agrees
to waive any right of contribution or right of indemnity between the Selling
Companies and the Shareholder in connection with any indemnification obligation
of the Shareholder to any Indemnitee arising under the Transactional Agreements.
The Shareholder further acknowledges that the waivers, acknowledgments and
agreements of the Shareholder contained in this Section are an essential
inducement to Razorfish in entering into this Agreement and agreeing to
consummate the Merger.
(b) In addition to any rights of setoff or other rights that any
Person may have at common law or otherwise, each Person shall have the right to
set off any amount that may be owed to it by the other under this Article XII
against any amount otherwise payable by such Person hereunder.
52
<PAGE>
ARTICLE XIII.
RESTRICTIONS ON RAZORFISH COMMON STOCK
13.1 Lock-Up Agreement.
(a) The Shareholder, if requested by an underwriter of Razorfish
common shares or other securities of Razorfish, shall not sell or otherwise
transfer or dispose of any Razorfish common shares held by the Shareholder
during the 180-day period following the effective date of Razorfish's initial
public offering of securities, which date is on October 25, 1999. If requested
by the underwriter, the Shareholder will reaffirm the agreement set forth in
this Section 13.1 in a separate writing in a form satisfactory to such
underwriter. Razorfish may impose stop-transfer instructions with respect to
such Razorfish Common Stock subject to the foregoing restriction until the end
of said period; provided, however, that in no event will the Shareholder be
subject to such a restriction unless all of the officers and directors of
Razorfish are similarly so restricted.
(b) Notwithstanding anything in this Agreement to the contrary, in
connection with any public offering of the capital stock of Razorfish (a
"Follow-On Offering"), the Shareholder agrees that, if requested by the managing
underwriter of the Follow-On Offering, the Shareholder shall not, directly or
indirectly, sell, offer, contract to sell, grant any option to purchase,
transfer the economic risk of ownership in, make any short sale, pledge or
otherwise dispose of, any Razorfish Stock, without the prior written consent of
Razorfish and the managing underwriters of the Follow-On Offering for a period
of ninety (90) days from the effective date of the registration statement under
the Securities Act relating to such Follow-On Offering and to the extent
otherwise permissible under the requirements for a tax-free Merger; provided,
--------
however, that all officers and directors of Razorfish enter into similar
- -------
agreements.
ARTICLE XIV.
TERMINATION
14.1 Termination.
This Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time, whether before or after approval by the Shareholder or
the Selling Companies:
(a) by mutual written consent of Razorfish and the Company and the
Selling Companies;
(b) by Razorfish if (i) there is a material breach of any covenant or
obligation of the Selling Companies or the Shareholder, or (ii) Razorfish
reasonably determines that the timely satisfaction of any condition set forth in
Article IX has become impossible or impractical (other than as a result of any
failure on the part of Razorfish to comply with or perform its covenants and
obligations under this Agreement or any of the other Transactional Agreements);
(c) by the Selling Companies if (i) there is a material breach of any
covenant or obligation of Razorfish or the Shareholder, or (ii) the Shareholder
reasonably determines that the
53
<PAGE>
timely satisfaction of any condition set forth in Article X has become
impossible or impractical (other than as a result of any failure on the part of
the Selling Companies or the Shareholder to comply with or perform any covenant
or obligation set forth in this Agreement or any of the other Transactional
Agreements);
(d) by Razorfish or the Selling Companies if the Closing has not
taken place on or before September 30, 1999;
(e) by either Razorfish or the Selling Companies if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or any other action shall have become final and non-appealable;
provided, however, that the party seeking to terminate this Agreement pursuant
- -------- -------
to this clause (e) shall have used all reasonable efforts (without the
expenditure of material amounts or the institution of litigation) to remove such
order, decree or ruling; or
(f) by Razorfish or the Shareholder, upon written notice to the
other, if any approval of the shareholders of the Selling Companies required for
the consummation of the Merger submitted for approval shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of shareholders or at any adjournment thereof; provided, however, that
if the Shareholder terminates this Agreement solely on the basis of this Section
14.1(f), then the Shareholder shall be obligated to pay to Razorfish a fee in
the amount of $1,000,000.
14.2 Termination Procedures.
If Razorfish wishes to terminate this Agreement pursuant to Section 14.1,
Razorfish shall deliver to the Selling Companies a written notice stating that
Razorfish is terminating this Agreement and setting forth a brief description of
the basis on which Razorfish is terminating this Agreement. If the Selling
Companies wish to terminate this Agreement pursuant to Section 14.1, the Selling
Companies shall deliver to Razorfish a written notice stating that the Selling
Companies are terminating this Agreement and setting forth a brief description
of the basis on which the Selling Companies are terminating this Agreement.
14.3 Effect of Termination.
If this Agreement is terminated pursuant to Section 14.1, all further
obligations of the parties under this Agreement shall terminate; provided,
--------
however, that:
- -------
(a) the Selling Companies and the Shareholder shall, in all events,
remain bound by and continue to be subject to Section 7.8;
(b) Razorfish and the Company shall, in all events, remain bound by
and continue to be subject to Section 8.4; and
(c) the parties shall, in all events, remain bound by the terms and
provisions of the Nondisclosure Agreement.
54
<PAGE>
Notwithstanding the above, both Razorfish and the Selling Companies shall be
entitled to announce the termination of this Agreement.
14.4 Exclusivity of Termination Rights.
The termination rights and obligations provided in this Article XIV shall
be deemed to be exclusive. The parties shall not have any other or further
Liabilities to or with respect to one another by reason of this Agreement or its
termination.
ARTICLE XV.
MISCELLANEOUS
15.1 Expenses.
Each of the parties to the Merger shall bear his, her or its own expenses
incurred in connection with the negotiation and consummation of the transactions
contemplated by this Agreement; provided, however, that the Shareholder shall
--------
bear and pay all fees, costs and expenses (including without limitation
attorneys' fees and brokers' fees and commissions) incurred on behalf of the
Selling Companies and the Key Employees in connection with the merger and the
negotiation of the Transactional Agreements.
15.2 Entire Agreement.
This Agreement and the other Transaction Agreements contain the entire
agreement of the parties hereto, and supersede any prior written or oral
agreements between them concerning the subject matter contained herein, or
therein. There are no representations, agreements, arrangements or
understandings, oral or written, between the parties to this Agreement, relating
to the subject matter contained in this Agreement and the other Transaction
Agreements, which are not fully expressed herein or therein. The schedules and
each exhibit attached to this Agreement or delivered pursuant to this Agreement
are incorporated herein by this reference and constitute a part of this
Agreement.
15.3 Press Releases and Public Announcements.
Prior to the Closing Date, none of the Company, the Shareholder nor the
Selling Companies shall issue any press release or make any public announcement
concerning the matters set forth in this Agreement (other than as required by
applicable disclosure rules or regulations) without the consent of the other
party. Razorfish, the Company, the Shareholder and the Selling Companies will
cooperate to jointly prepare and issue any press release which may be issued to
announce the closing of the transaction contemplated by this Agreement.
15.4 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.
55
<PAGE>
15.5 Descriptive Headings.
The Article and Section headings in this Agreement are for convenience only
and shall not affect the meanings or construction of any provision of this
Agreement.
15.6 Notices.
Any notices required or permitted to be given under this Agreement shall be
in writing and shall be deemed sufficiently given on the date delivered
personally, or five (5) days after posting by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company or Razorfish: Razorfish, Inc.
107 Grand Street, 3rd Floor
New York, New York 10013
Attention: Jeffrey A. Dachis,
President/CEO
With a copy to: Morrison & Foerster LLP
555 W. Fifth Street
Los Angeles, California 90013
Attention: Derek H. Wilson, Esq.
And if to the Shareholder, to the address set forth on the signature page
of this Agreement:
With a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Jennifer Bellah Maguire, Esq.
or to such other address or addresses as a party shall have previously
designated by notice to the sender given in accordance with this section.
15.7 Choice of Law
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York without regard to choice of law principles.
15.8 Binding Effect; Benefits
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer on any person other than
the parties or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
56
<PAGE>
15.9 Assignability
Neither this Agreement nor any of the parties' rights hereunder shall be
assignable by either party without the prior written consent of the other party
and any attempted assignment without such consent shall be void.
15.10 Waiver and Amendment
Any term or provision of this Agreement may be waived at any time by the
party which is entitled to the benefits thereof. The waiver by any party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach. The parties may, by mutual agreement in
writing, amend this Agreement in any respect.
15.11 Attorneys' Fees.
In the event of any action or proceeding to enforce the terms and
conditions of this Agreement, the prevailing party shall be entitled to an award
of reasonable attorneys' and experts' fees and costs, in addition to such other
relief as may be granted.
57
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above written.
THE COMPANY:
Razorfish Los Angeles, Inc.
By: /s/ Jeffrey A. Dachis
---------------------
Name: Jeffrey A. Dachis
Title: President
RAZORFISH:
Razorfish, Inc.
By: /s/ Jeffrey A. Dachis
---------------------
Name: Jeffrey A. Dachis
Title: Chief Executive Officer
FUEL:
Fuel, Inc.
By: /s/ Seth Epstein
----------------
Name: Seth Epstein
Title: Chief Executive Officer
TONGA:
Tonga, Inc.
By: /s/ Seth Epstein
----------------
Name: Seth Epstein
Title: Chief Executive Officer
58
<PAGE>
THE SHAREHOLDER:
/s/ Seth Epstein
----------------
Seth Epstein
59
<PAGE>
Exhibit A
Certain Definitions
For purposes of the Agreement (including this Exhibit A):
---------
Acquired Business. "Acquired Business" shall mean, prior to the Effective
Time, the material business and commercial activities conducted by the Selling
Companies and, at and after the Effective Time, the material business and
commercial activities which are conducted by the Key Employees, and other
employees and consultants under their direct supervision, utilizing the assets
formerly owned by the Selling Companies, as an operating division of the Company
and which are consistent with the Selling Companies' material business and
commercial activities on a historical basis.
Acquisition Proposal. "Acquisition Proposal" shall have the meaning
specified in Section 7.6 of the Agreement.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of the
Selling Companies' business or assets (other than in the Ordinary Course of
Business);
(b) the issuance, sale or other disposition of (i) any capital stock
of the Selling Companies, (ii) any option, call, warrant or right (whether or
not immediately exercisable) to acquire any capital stock of the Selling
Companies, or (iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock of the Selling Companies;
or
(c) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Selling Companies.
Agreement. "Agreement" shall mean the Amended and Restated Agreement and
Plan of Merger to which this Exhibit A is attached (including all Disclosure
---------
Schedules and all Exhibits), as it may be amended from time to time.
Agreement of Merger. "Agreement of Merger" shall have the meaning
specified in Section 1.2 of the Agreement.
Application. "Application" shall have the meaning specified in Section 2.6
of the Agreement.
Arbitrator. "Arbitrator" shall have the meaning specified in Section 1.6
of the Agreement.
60
<PAGE>
Average Razorfish Stock Price. "Average Razorfish Stock Price" shall refer
to the lesser of (i) the average of the closing price of the Common Stock of
Razorfish on the Nasdaq Stock Market for the twenty (20) trading days ending on
the last trading day prior to a given date, or (ii) the closing price of the
Common Stock of Razorfish on the Nasdaq Stock Market on the last trading day on
the day prior to the determination date.
Board. "Board" means the duly elected board of directors of either Fuel or
Tonga, as the context requires.
Certificates. "Certificates" shall have the meaning specified in Section
2.3 of the Agreement.
CGCL. "CGCL" shall have the meaning specified in the Recitals of the
Agreement.
Claim Notice. "Claim Notice" shall have the meaning specified in Section
12.3 of the Agreement.
Closing. "Closing" shall have the meaning specified in Section 2.5 of the
Agreement.
Closing Date. "Closing Date" shall have the meaning specified in Section
2.5 of the Agreement.
Code. "Code" shall have the meaning specified in the Recitals of this
Agreement.
Commissioner. "Commissioner" shall have the meaning specified in Section
2.6 of the Agreement.
Company. "Company" shall mean Razorfish Los Angeles, Inc., a California
corporation.
Company Board. "Company Board" shall mean the duly elected board of
directors of the Company.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean, with respect to any Person, any binding
written or oral agreement, contract, instrument, note, guaranty or indemnity, to
which such Person is a party.
Defined Benefit Plan. "Defined Benefit Plan" shall mean either a plan
described in Section 3(35) of ERISA or a plan subject to the minimum funding
standards set forth in Section 302 of ERISA and Section 412 of the Code.
Disclosure Schedule Update. "Disclosure Schedule Update" shall have the
meaning specified in Section 7.4 of the Agreement.
Earnout Amount. "Earnout Amount" shall have the meaning specified in
Section 1.6 of the Agreement.
61
<PAGE>
Effective Time. "Effective Time" shall have the meaning specified in
Section 1.2 of the Agreement.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage or security interest.
End-User Licenses. "End-User Licenses" shall have the meaning assigned in
Section 3.6 of the Agreement.
Entity. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
Environmental Claims. "Environmental Claims shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notice of noncompliance or violation, investigations or
proceedings relating to any law or any permit issued under any such Law
(hereafter "Claims"), including without limitation (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or other environment from release
or disposal of Hazardous Materials.
Environmental Laws. "Environmental Laws" shall mean any federal, state or
local statute, law, rule, regulation, ordinance, code, binding policy or rule of
common law in effect and in each case as amended as of the Closing Date, and any
judicial or administrative interpretation thereof as of the Closing Date,
including any judicial or administrative order, consent decree or judgment,
relating to the protection of the environment, health, safety from the release
or disposal of Hazardous Materials, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. (S) 9601 et seq.; the Resource Conservation and Recovery
-- ----
Act, as amended, 42 U.S.C. (S) 9601 et seq.; the Federal Water Pollution Control
-- ----
Act, as amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act,
-- ----
15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the
-- ---- -- ----
Safe Drinking Water Act, 42 U.S.C. (S) 300f et seq.; the Oil Pollution Act of
-- ----
1990, 33 U.S.C. (S) 2701 et seq.; and their state and local counterparts and
-- ----
equivalents.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
Escrow Agreement. "Escrow Agreement" shall have the meaning specified in
Section 1.5 of the Agreement.
Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
62
<PAGE>
Fairness Hearing. "Fairness Hearing" shall have the meaning assigned in
Section 2.6 of the Agreement.
Final Returns. "Final Returns" shall have the meaning specified in Section
7.13 of the Agreement.
Financial Statements. "Financial Statements" shall have the meaning
specified in Section 3.8 of the Agreement.
Follow-On Offering. "Follow-On Offering" shall have the meaning assigned
in Section 13.1 of the Agreement.
Fuel Common Stock. "Fuel Common Stock" shall have the meaning specified in
Section 1.3 of the Agreement.
GAAP. "GAAP" shall mean Generally Accepted Accounting Principles, applied
on a basis consistent with the basis on which the Financial Statements were
prepared.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or
(b) right under any Contract with any Governmental Body.
Governmental Body. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); or
(d) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.
Hazardous Materials. "Hazardous Materials" shall mean any hazardous
substance, pollutant, contaminant, flammable explosives, radioactive materials
and hazardous, toxic or dangerous wastes and any other chemicals, materials or
substances which are identified, defined
63
<PAGE>
or regulated pursuant to any Environmental Laws, or the release, discharge or
exposure to which is prohibited, limited or regulated by any federal, state or
local government under Environmental Law and any petroleum, waste oil and
petroleum by-products, asbestos in any form, urea formaldehyde, and transformers
or other equipment that contain levels of polychlorinated biphenyls.
Holdback Amount. "Holdback Amount" shall have the meaning assigned in
Section 1.5 of the Agreement.
HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended.
Indemnified Party. "Indemnified Party" shall have the meaning assigned in
Section 12.3 of the Agreement.
Indemnifying Party. "Indemnifying Party" shall have the meaning assigned
in Section 12.3 of the Agreement.
Indemnity Claim. "Indemnity Claim" shall have the meaning assigned in
Section 12.3 of the Agreement.
Information Statement. "Information Statement" shall have the meaning
assigned in Section 7.16 of the Agreement.
Key Employees. "Key Employees" shall refer to each of Seth Epstein and
Gretchen Humbert.
Knowledge. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter.
A corporation shall be deemed to have "Knowledge" of a particular fact or
matter only if a director or officer of such corporation has or had Knowledge of
such fact or matter.
Leased Premises. "Leased Premises" shall have the meaning specified in
Section 3.9 of the Agreement.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, or ruling that is or has
been issued, enacted, adopted, passed, approved, promulgated, made,
64
<PAGE>
implemented or otherwise put into effect by or under the authority of any
Governmental Body, and, where applicable, shall include any rule or requirement
of the Nasdaq National Market.
Liability. "Liability" shall mean any debt, obligation, duty or liability
of any nature including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability, regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
Losses. "Losses" shall have the meaning assigned in Section 12.1 of the
Agreement.
material. "material" means any fact, event, action or failure to act, or
other circumstance, that results or is reasonably likely to result in a material
financial loss to either of the Selling Companies taken together.
Member of the Controlled Group. "Member of the Controlled Group" shall
mean each trade or business, whether or not incorporated, which would be treated
as a single employer with either of the Selling Companies under Section 4001 of
ERISA or Section 414(b), (c), (m) or (o) of the Code.
Merger. "Merger" shall have the meaning specified in the Recitals of the
Agreement.
Merger Consideration. "Merger Consideration" shall have the meaning
specified in Section 1.3 of the Agreement.
Millennial Dates. "Millennial Dates" shall have the meaning assigned in
Section 3.25 of the Agreement.
Multiemployer Plan. "Mutiemployer Plan" shall mean a plan described in
Section 3(37) of ERISA.
Nondisclosure Agreement. "Nondisclosure Agreement" shall have the meaning
specified in Section 7.8 of the Agreement.
Non-Year 2000 Compliant Assets. "Non-Year 2000 Compliant Assets" shall
have the meaning specified in Section 7.17 of the Agreement.
Notice of Hearing. "Notice of Hearing" shall mean the Notice of the
Fairness Hearing sent to the Shareholder.
Notice of Objection. "Notice of Objection" shall have the meaning
specified in Section 1.6 of the Agreement.
Notice Period. "Notice Period" shall have the meaning assigned in Section
12.3 of the Agreement.
65
<PAGE>
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling, decision,
opinion, verdict, sentence, subpoena, writ or award that is issued, made,
entered, rendered or otherwise put into effect by or under the authority of any
court, administrative agency or other Governmental Body or any arbitrator or
arbitration panel; or
(b) Contract with any Governmental Body that is entered into in
connection with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of the
Selling Companies shall not be deemed to have been taken in the "Ordinary Course
of Business" unless:
(a) such action is consistent with the Selling Companies' past
practices and taken in the ordinary course of the Selling Companies' normal day
to day operations;
(b) such action is taken in accordance with such party's customary
business practices; and
(c) such action is not required to be authorized by the Selling
Companies' shareholders, the Board or any committee of the Board of either
Selling Company and does not require any other separate or special authorization
of any nature.
Permit. "Permit" shall have the meaning assigned in Section 2.6 of the
Agreement.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Plans. "Plans" shall have the meaning specified in Section 3.22 of the
Agreement.
Pre-Closing Period. "Pre-Closing Period" shall mean the period commencing
as of the date of the Agreement and ending on the Closing Date.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, or administrative proceeding brought, conducted or heard by or
before, or otherwise has involved, any Governmental Body or any arbitrator or
arbitration panel.
Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service mark (whether registered or unregistered), service mark
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know how, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset.
Proprietary Information and Inventions Agreement. "Proprietary Information
and Inventions Agreement" shall mean an agreement substantially in the form of
Exhibit C to the Agreement.
- ---------
66
<PAGE>
Prospectus. "Prospectus" has the meaning specified in Section 4.11 of the
Agreement.
Razorfish. "Razorfish" shall have the meaning specified in the first
paragraph of the Agreement.
Razorfish Closing Certificate. "Razorfish Closing Certificate" shall have
the meaning specified in Section 10.4 of the Agreement.
Razorfish Common Stock. "Razorfish Common Stock" shall have the meaning
specified in Section 1.3 of the Agreement.
Razorfish Disclosure Schedule. "Razorfish Disclosure Schedule" shall have
the meaning specified in Article V of the Agreement.
Razorfish SEC Filings. "Razorfish SEC Filings" shall have the meaning
specified in Section 5.6 of the Agreement.
Related Party. Each of the following shall be deemed to be a "Related
Party":
(a) each individual who is, or who has at any time been, an officer of
either of the Selling Companies;
(b) each member of the family of each of the individuals referred to
in clause "(a)" above;
(c) any Entity (other than the Selling Companies) in which any one of
the Persons referred to in clauses "(a)" or "(b)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest; or
(d) the Shareholder.
Representatives. "Representatives" of a specified party shall mean
officers, directors, employees, attorneys, accountants, advisors and
representatives of such party, including, without limitation, in the case of
Razorfish, all subsidiaries of Razorfish, including the Company, and all such
Persons with respect to such subsidiaries. The Related Parties shall be deemed
to be "Representatives" of the Selling Companies.
Requisite Regulatory Approval. "Requisite Regulatory Approval" shall have
the meaning assigned in Section 9.2 of the Agreement.
Revenues. "Revenues" shall mean the gross revenues of the Acquired
Business for calendar year 1999, as determined and accounted for in a manner
consistent with the past accounting practices of the Selling Companies.
SEC. "SEC" shall mean the Securities and Exchange Commission.
67
<PAGE>
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Selling Companies. "Selling Companies" shall have the meaning assigned in
the introduction to this Agreement.
Selling Companies Closing Certificate. "Selling Companies Closing
Certificate" shall have the meaning specified in Section 9.7 of the Agreement.
Selling Companies Common Stock. "Selling Companies Common Stock" shall
have the meaning assigned in Section 1.3 of the Agreement.
Selling Companies Contract. "Selling Companies Contract" shall mean any
Contract:
(a) to which either Selling Company is a party; or
(b) by which either Selling Company or any of their respective assets
is bound.
Selling Companies Disclosure Schedule. "Selling Companies Disclosure
Schedule" shall have the meaning specified in Article III of the Agreement.
Selling Companies Returns. "Selling Companies Returns" shall have the
meaning specified in Section 3.14 of the Agreement.
Straddle Period. "Straddle Period" means any taxable period that includes
(but does not end on) the Closing Date.
Surviving Corporation. "Surviving Corporation" shall have the meaning
specified in Section 1.1 of the Agreement.
Takeover Statute. "Takeover Statute" shall mean any fair price,
moratorium, control share acquisition or other similar anti-takeover statute.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), (a) imposed,
assessed or collected by or under the authority of any Governmental Body, or (b)
payable pursuant to any tax sharing agreement or similar Contract.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is required to be filed with or submitted to any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
68
<PAGE>
Third Party Claim. "Third-Party Claim" shall have the meaning assigned in
Section 12.3 of the Agreement.
Threshold. "Threshold" shall have the meaning assigned in Section 12.6 of
the Agreement.
Tonga Common Stock. "Tonga Common Stock" shall have the meaning specified
in Section 1.3 of the Agreement.
Transactional Agreements. "Transactional Agreements" shall mean:
(a) the Agreement;
(b) the Selling Companies Closing Certificate;
(c) the Razorfish Closing Certificate;
(d) the Proprietary Information and Inventions Agreements between the
Company and its employees and consultants;
(e) the Key Employee Employment Agreements between the Company and
each Key Employee;
(f) the Escrow Agreement; and
(g) the Agreement of Merger.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet" shall
have the meaning specified in Section 3.8 of the Agreement.
Year 2000 Compliant. "Year 2000 Compliant" shall have the meaning assigned
in Section 7.17 of the Agreement.
69
