<PAGE>
As filed with the Securities and Exchange Commission on March 11, 1999
Registration No. 333-71043
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
RAZORFISH, INC.
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 7379 13-3804503
(State or other
jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
107 Grand Street, 3rd Floor
New York, New York 10013
(212) 966-5960
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------
Jeffrey A. Dachis
President and Chief Executive Officer
Razorfish, Inc.
107 Grand Street, 3rd Floor
New York, New York 10013
(212) 966-5960
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Mark L. Mandel, Esq. William J. Whelan, III, Esq.
Morrison & Foerster LLP Cravath, Swaine & Moore
1290 Avenue of the Americas Worldwide Plaza
New York, New York 10104-0012 825 Eighth Avenue
(212) 468-8000 New York, New York 10019-7475
(212) 474-1000
</TABLE>
---------------
Approximate date of commencement of the proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of Each Class of Securities to Proposed Maximum Amount of
be Registered Aggregate Offering Price(1)(2) Registration Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, $.01 par value...... $41,400,000 $11,509.20
- -----------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) In accordance with Rule 457(o) under the Securities Act of 1933, the
number of shares of Common Stock being registered and the proposed maximum
offering price per share are not included in this table.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
The Registrant hereby amends the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
3,000,000 Shares
Razorfish, Inc.
Class A Common Stock
--------
Prior to this offering, there has been no public market for our Class A Common
Stock. The initial public offering price is expected to be between $10.00 and
$12.00 per share. We have applied to list our Class A Common Stock on The
Nasdaq Stock Market's National Market under the symbol "RAZF."
The underwriters have an option to purchase a maximum of 450,000 additional
shares to cover over-allotments of shares.
Investing in the Class A Common Stock involves risks. See "Risk Factors" on
page 5.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Razorfish
------------- ------------- -------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total...................................... $ $ $
</TABLE>
Delivery of the shares of Class A Common Stock will be made on or about
,1999, against payment in immediately available funds.
Neither the Securities and Exchange Commission nor any other state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
BancBoston Robertson Stephens
BT Alex. Brown
Lehman Brothers
Prospectus dated , 1999.
<PAGE>
The covers of the prospectus are comprised of a double gate fold* printed in
full color. The prospectus is stapled inside.
The cover page of the prospectus includes the Razorfish logo, financial data and
all other information required under the Securities Act rules and formatted in
accordance with the Credit Suisse First Boston corporation style guidelines.
Upon opening the front cover, a panel is displayed with the Razorfish tagline
"Everything that can be digital, will be." The tagline is printed in a bold
font on top of a solid background of dark teal. Set below the tagline is the
Razorfish logo and a description of Razorfish's business.
This panel "flips open" to reveal two panels inside to the left of the text of
the prospectus. These panels each have a three inch horizontal band of light
green running through the middle of the page visually connecting the panels.
Within this band the headings "Design," "Technology," "Branding," and "Strategy"
are displayed in a bold font followed by two short paragraphs titled
"perspective" and "values". Above and below the light green band, four
individual case studies are displayed setting forth examples of digital
communications solutions that Razorfish has created. Each case study contains a
small screen shot of the client's Web page, the client's name, and short textual
description of the project.
To the right of the text of the prospectus is a dark teal panel with a short
paragraph about Razorfish locations and offices with a color photo of
Razorfish's New York office to the right. At the bottom of the page, a world map
is displayed with each Razorfish location plotted and the corresponding city
listed.
This panel "flips open" to reveal two panels that are displayed with a
continuation of the horizontal light green band in the middle of each page.
Within the band on these two pages there is a list of Razorfish's clients and a
short paragraph about the people at Razorfish with various square headshots of
employees (mono-toned red and yellow) placed in a grid-like layout to the right.
Mirroring the layout on the inside front two panels, placed above and below the
horizontal light green band are three case studies depicting examples of digital
communications solutions that Razorfish has created. Each case study contains a
small screen shot of the client's Web page, the client's name, and short
textual description of the project.
The back cover of the prospectus is printed a dark teal and set forth on
horizontal bands of white near the bottom of the page are the Razorfish logo and
URL.
* A double gate fold is a printing term which means a single piece of paper that
has been folded in the center, and each half of the whole is folded again
creating four sections on both sides equaling 8 pages.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Currency and Exchange Rates.............. 2
Prospectus Summary....................... 3
Risk Factors............................. 5
Use of Proceeds..........................13
Dividend Policy..........................13
Capitalization...........................14
Dilution.................................15
Selected Consolidated Financial
Information of Razorfish................17
Selected Consolidated Financial
Information of Spray....................18
Unaudited Pro Forma Condensed
Consolidated Financial Information......19
</TABLE>
<TABLE>
Page
----
<S> <C>
Management's Discussion and Analysis of
Financial Condition and Results of
Operations..............................28
Business.................................41
Management...............................56
Principal Stockholders...................67
Certain Transactions.....................69
Description of Capital Stock.............72
Shares Eligible for Future Sale..........74
Underwriting.............................76
Notice to Canadian Residents.............78
Legal Matters............................79
Experts..................................79
Where You Can Find More Information......80
Index to Financial Statements...........F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this document may be accurate only
on the date of this document.
------------
Unless otherwise indicated, all references to "Razorfish" and "we" refer to
Razorfish, Inc. and, subsequent to their acquisition or formation, its
subsidiaries, including Spray Network AB ("Spray").
Razorfish, the Razorfish symbol, Webspy and the Blue Dot are trademarks or
service marks and in some jurisdictions (including the United States)
registered trademarks or service marks of Razorfish. Other trademarks appearing
in this prospectus are the property of their respective owners.
------------
Dealer Prospectus Delivery Obligation
Until , 1999 (25 days after the commencement of the offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
1
<PAGE>
CURRENCY AND EXCHANGE RATES
Unless otherwise noted, in this prospectus all references to "dollars,"
"U.S. dollars" or "$" are to the lawful currency of the United States,
references to "SEK" or "kroner" are to the lawful currency of the Kingdom of
Sweden and references to "(Pounds)" or "pounds sterling" are to the lawful
currency of the United Kingdom.
Solely for your convenience, this prospectus contains translations of
certain amounts in kroner or pounds sterling into dollars at specified rates.
Except for information set forth in or derived from the financial statements
included in this prospectus,
. all translations from kroner to dollars were made (unless otherwise
indicated) at the noon buying rate for cable transfers in kroner as
certified for customs purposes by the Federal Reserve Bank of New York in
effect on March 4, 1999, which was SEK 8.2779 = $1.00; and
. all translations from pounds sterling to dollars were made (unless otherwise
indicated) at the noon buying rate for cable transfers in pounds sterling as
certified for customs purposes by the Federal Reserve Bank of New York in
effect on March 4, 1999, which was (Pounds)1.00 = $1.6065.
All assets and liabilities of foreign subsidiaries of Razorfish were
translated into dollars at fiscal year-end exchange rates. Income and expense
items were translated at average exchange rates prevailing during the
applicable fiscal year. No representation is made that the pounds sterling or
kroner amounts have been, could have been or could be converted into dollars at
the rates indicated or at any other rates.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in Razorfish's Class A Common Stock (the
"Common Stock"). You should read this entire prospectus carefully.
Except as otherwise indicated, all references to the number of outstanding
shares of Razorfish's Common Stock do not include the number of shares that
Razorfish will issue if the underwriters exercise their over-allotment option
in full. In addition, the information in this prospectus assumes that the
initial public offering price will be $11.00 per share, the midpoint of the
range disclosed on the cover of this prospectus.
The Company
Razorfish is a leading-edge international digital communications solutions
provider. Digital communications solutions are business solutions that use
digital technologies to enhance communications and interactions between people
and companies. Examples of our solutions include (1) a re-designed on-line
trading system for Charles Schwab, (2) a user-interface for theglobe.com, (3)
an enhanced on-line business identity for IBM's RS/6000 product line and (4) a
user-interface for Road Runner, the high-speed on-line service that is owned by
ServiceCo, a joint venture among Time Warner, MediaOne, Microsoft, Compaq and
Advance Newhouse. Our digital communications solutions help clients increase
sales, improve communications and create business identities.
We provide an integrated service offering consisting of strategic
consulting, design of information architectures and user-interfaces and
creation and customization of software necessary to implement our digital
communications solutions. Information architecture establishes how content is
organized and accessed while a user-interface refers to the presentation of a
website or software application to the end-user. We primarily use Internet-
based technologies to create digital communications solutions for the World
Wide Web. However, our solutions will increasingly incorporate additional
communications technologies, such as wireless, satellite and broadband
communications, for use with a variety of digital devices and information
appliances, including mobile phones, pagers and personal digital assistants.
With the growth in the use of the Internet, companies are increasingly
seeking to improve their business practices through Internet-based digital
communications solutions. Forrester Research, Inc. projects that the size of
the worldwide Internet professional services market will grow from $2.4 billion
in 1997 to $32.8 billion in 2002, a compound annual growth rate of 68.7%.
As the informational requirements of companies have become more complex,
organizations have required a broader range of information technology services
including strategy, architecture design, application development and systems
integration. As a result, numerous firms are active in the information
technology services market; few, however, offer the creativity, breadth of
services and technical expertise necessary to fully address an organization's
needs. In addition, because the information technology services market is
fragmented by the cultural and language differences among countries, firms that
lack a presence and expertise in local markets are unable to compete
effectively in those markets. The growing demand for creative digital
communications solutions has led to a significant market opportunity for firms,
such as Razorfish, that provide an integrated service offering while combining
an international presence with local expertise.
We have grown rapidly since our inception in 1995. In 1998, we expanded our
geographic presence by acquiring five companies. In January 1999, we acquired
Spray for 50% of our Common Stock on a fully diluted basis (after giving effect
to this acquisition). Spray had $15.4 million in revenues for 1998. We
currently have offices in New York, San Francisco, Los Angeles, London,
Stockholm, Oslo, Helsinki and Hamburg.
Our principal executive office is located at 107 Grand Street, 3rd Floor,
New York, New York 10013, and our telephone number is (212) 966-5960. We
maintain a site on the World Wide Web at www.razorfish.com; however, the
information found on our website is not a part of this prospectus. We
originally incorporated in New York, but we reincorporated in Delaware in
February 1999.
3
<PAGE>
The Offering
Common Stock offered by Razorfish....
3,000,000 shares.
Common Stock to be outstanding after
this offering....................... 24,087,875 shares or 24,537,875 shares
if the underwriters exercise their
over-allotment option in full. These
shares do not include 801,886 options
reserved for issuance or 647,995
options granted and not exercised
pursuant to our two option plans as of
March 10, 1999.
Use of proceeds......................
General corporate purposes, including
expanding our human resources
department and hiring additional
personnel, developing a formal sales
and marketing department, strategic
acquisitions or investments,
international expansion, technical
upgrades of internal systems and
working capital requirements.
Proposed Nasdaq Symbol.......... RAZF
Summary Condensed Consolidated and Pro Forma Financial Information
The following table presents summary condensed consolidated and pro forma
financial information with respect to Razorfish and has been derived from (1)
the audited financial statements of Razorfish for the three-year period ended
December 31, 1998 included elsewhere in this prospectus, and for the year ended
December 31, 1995 not included in this prospectus and (2) the unaudited pro
forma condensed consolidated financial statements included elsewhere in
this prospectus that give effect to the acquisitions that Razorfish completed
in 1998 and 1999 and the exercise of an option to purchase 1,976,810 shares (or
10%) of our Common Stock in 1999. The information set forth below should be
read in conjunction with "Unaudited Pro Forma Condensed Consolidated Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Razorfish's consolidated financial statements and
the notes thereto, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Actual Pro forma
-------------------------------------------- ------------------------
Year ended December 31, Year ended December 31,
-------------------------------------------- ------------------------
1995 1996 1997 1998 1997 1998
---------- ---------- ---------- ---------- ----------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Information:
Revenues................ $ 312 $ 1,218 $ 3,618 $ 13,843 $ 17,813 $ 30,974
Direct salaries and
costs.................. 107 895 1,906 7,770 15,129 22,562
Gross profit............ 205 323 1,712 6,073 2,684 8,412
Operating expenses...... 158 629 1,051 3,335 5,131 7,289
Amortization of good-
will................... -- -- -- 107 2,401 2,460
Non-cash compensation
expense................ -- -- 79 2,278 79 2,278
Net income (loss)....... 36 (254) 297 (343) (4,699) (3,570)
Net income (loss) per
share
Basic.................. $0.00 $(0.03) $0.03 $(0.04) $(0.22) $(0.17)
Diluted................ $0.00 $(0.03) $0.03 $(0.04) $(0.22) $(0.17)
Weighted average common
shares outstanding
Basic.................. 9,090,906 9,090,906 9,156,819 9,223,821 21,014,663 21,081,665
Diluted................ 9,537,607 9,537,607 9,886,241 9,670,522 21,205,525 21,528,366
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------
Pro forma
Actual Pro forma as adjusted
-------- ---------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Information:
Cash and cash equivalents....................... $ 599 $17,320 $45,892
Total assets.................................... 12,085 69,891 98,462
Total long-term debt............................ 3,212 3,236 3,236
Total debt...................................... 5,542 5,566 5,566
Stockholders' equity............................ 2,729 54,543 83,115
</TABLE>
4
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus,
including our consolidated financial statements and the related notes, before
you purchase any shares of our Common Stock. The risks and uncertainties
described below are not the only ones facing Razorfish. Additional risks and
uncertainties, including those not presently known to us or that we currently
deem immaterial, may also impair our business.
Our four-year operating history makes it difficult to predict our future
success.
Because we were formed in January 1995, we have a limited operating history
upon which you can evaluate our business. The limited amount of information
about us makes it more difficult for you to predict whether or not we will be
successful. You should evaluate our chances of financial and operational
success in light of the risks, uncertainties, expenses, delays and difficulties
associated with starting a new business, many of which may be beyond our
control. In addition, we compete in a relatively new market known as the
information technology services market. Because this market is new and rapidly
evolving, companies competing in it may face many uncertainties. Our success
will depend on many factors, including those described in the following
paragraphs.
The loss of our professionals would make it difficult to complete existing
projects and bid for new projects.
Our business is labor intensive, and our success depends on identifying,
hiring, training and retaining professionals. If a significant number of our
current employees or any of our senior managers or key project managers leave,
we may be unable to complete or retain existing projects or bid for new
projects of similar scope and revenue. We have entered into employment
agreements and non-competition agreements with some of our senior managers, but
these key personnel may still leave us or compete with us. In addition, there
is no guarantee that the non-competition provisions of these agreements would
be enforced by a court if Razorfish were to seek to enforce its rights under
these provisions. Even if we retain our current employees, our management must
continually recruit talented professionals in order for our business to grow.
These professionals must have skills in business strategy, marketing, branding,
technology and creative design. There is currently a shortage of qualified
personnel in the information technology services market, and this shortage is
likely to continue. We compete intensely for qualified personnel with our
competitors. If we cannot attract, motivate and retain qualified professionals,
our business and results of operations could be materially and adversely
affected. See "Management--Employment and non-competition agreements" for a
more complete description of the employment and non-competition agreements with
our senior managers.
Our revenues are difficult to predict because they are generated on a project-
by-project basis.
We derive our revenues primarily from fees for services generated on a
project-by-project basis. These projects vary in size and scope. Therefore, a
client that accounts for a significant portion of our revenues in a given
period may not generate a similar amount of revenues, if any, in subsequent
periods. In addition, after we complete a project, we have no assurance that a
client will retain us in the future.
We derive a portion of our revenues from fixed-fee contracts. If the costs
of completing these projects exceed the fixed fees for such projects, our
operating results could be materially and adversely affected.
In general, our clients may terminate the agreements entered into in
connection with a project, whether time and materials or fixed-fee based, upon
30-days' prior written notice. We cannot give any assurances that a client will
not terminate a project before its completion. If our clients terminate
existing agreements or if we are unable to enter into new agreements, our
business, financial condition and results of operations could be materially and
adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operation--Overview" for a more complete description of our sources of
revenues and the impact of the nature of our business on our financial
condition.
5
<PAGE>
We generate a large part of our revenues from a small number of clients.
We derive a significant portion of our revenues from a limited number of
large clients. For example, Charles Schwab accounted for approximately 27.1% of
our actual revenues in 1998 and four clients accounted for approximately 63.5%
of our actual revenues in 1997. The volume of work performed for these clients
may not be sustained from year to year, and there is a risk that these
principal clients may not retain us in the future. Any cancellation, deferral
or significant reduction in work performed for these principal clients or a
significant number of smaller clients could have a material adverse effect on
our business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview" and "Business--Clients" for more information relating to our clients.
Our recent acquisitions created financial and other challenges.
We acquired five businesses during 1998 and acquired Spray in January 1999.
We are experiencing certain financial, operational and managerial challenges in
integrating these acquired companies. To the extent our management must devote
significant time and attention to the integration of technology, operations and
personnel as a result of these acquisitions, our ability to service current
clients and win new clients may suffer. In addition, our management faces the
difficult and potentially time consuming challenge of implementing uniform
standards, controls, procedures and policies throughout our U.S. and European
offices.
We could also experience financial or other setbacks if any of the acquired
businesses experienced problems in the past of which our management is not
presently aware. For example, if an acquired business had dissatisfied
customers or had any performance problems, our reputation could suffer as a
result of our association with that business. Our management is unaware of any
material legal liabilities of the acquired companies. However, to the extent
any customer or other third party asserts any material legal claims against any
of the acquired companies, our business, financial condition and results of
operations could be materially and adversely affected. See "Business--Spray
acquisition" and "Business--Other acquisitions" for descriptions of the
acquisitions we have completed.
We may be unable to implement our acquisition growth strategy.
Our business strategy includes increasing our market share and global
presence through strategic acquisitions of other digital communications
solutions providers and web design or consulting firms. Our continued growth
will depend on our ability to identify and acquire companies that complement or
enhance our business on acceptable terms. We may not be able to complete or
identify future acquisitions or realize the anticipated results of future
acquisitions. Some of the risks that we may encounter in implementing our
acquisition growth strategy include:
.expenses and difficulties in identifying potential targets and the costs
associated with incompleted acquisitions;
.expenses, delays and difficulties of integrating the acquired company into
our existing organization;
.disruption of our ongoing business;
.diversion of management's attention;
.expenses of amortizing the acquired company's intangible assets;
.impact on our financial condition due to the timing of the acquisition;
.failure to retain key personnel; and
.expense of any undisclosed or potential legal liabilities of the acquired
company.
If realized, any of these risks could have a material adverse effect on our
business, results of operations and financial condition.
6
<PAGE>
Our continued growth will further strain our resources.
Our recent growth has strained our managerial and operational resources. A
key part of our strategy is to grow, both by hiring more personnel and by
acquiring companies, which will continue to strain our resources. We cannot
assure you that our managers will be able to manage our growth effectively. To
manage future growth, our management must continue to improve our operational
and financial systems, procedures and controls and expand, train, retain and
manage our employee base. If our systems, procedures and controls are
inadequate to support our operations, our expansion would be halted, and we
could lose our opportunity to gain significant market share. Any inability to
manage growth effectively could have a material adverse effect on our business,
results of operations and financial condition.
We may have difficulty in managing our international operations and expansion.
A key element of our strategy is to expand our business into international
markets. In addition to our domestic operations, we have operations in five
European cities: London, England; Stockholm, Sweden; Oslo, Norway; Helsinki,
Finland; and Hamburg, Germany. Our management may have difficulty in managing
our international operations because of distance, as well as language and
cultural differences. Our management cannot assure you that they will be able
to market and operate our services successfully in foreign markets.
Other risks related to our international operations include:
. fluctuations in currency exchange rates and the conversion to the euro by
several members of the European Union;
. difficulties arising from staffing and managing foreign operations;
. legal and regulatory requirements of different countries;
. potential political and economic instability; and
. overlapping or differing tax laws.
If any of these risks materialize, our international and domestic
businesses, results of operations and financial condition could be materially
and adversely affected.
We have a history of losses and may need additional financing.
Razorfish and Spray have experienced operating losses, as well as net
losses, for some of the years during which they have operated. Similarly, in
the future, we may not generate sufficient revenue from operations to pay all
of our operating or other expenses. If we fail to generate sufficient cash from
our operations to pay these expenses, our management will need to identify
other sources of funds. We may not be able to borrow money or issue more shares
of Common Stock to meet our cash needs. Even if we can complete such
transactions, they may not be on terms that are favorable or reasonable from
our perspective. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a more complete description of our
historical financial condition, results of operations and liquidity.
A decrease in the number or size of our projects may adversely impact our
quarter-to-quarter results and the price of our Common Stock.
A high percentage of our expenses, including those related to employee
compensation and equipment, are relatively fixed. If the number or size of our
projects decreases in any quarter, then our revenues and operating results may
also decrease.
If our operating results fall short of investors' expectations, the trading
price of our Common Stock could decrease materially, even if such results do
not signal any longer-term problems. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Quarter-to-quarter
fluctuations in margins" for additional factors that may cause variations in
our quarterly results.
7
<PAGE>
We are controlled by a small number of stockholders.
If the stockholders listed below choose to act or vote in concert, they will
have the power to influence the election of our directors, the appointment of
new management and the approval of any other action requiring the approval of
our stockholders, including any amendments to our Certificate of Incorporation
and mergers or sales of all of our assets. In addition, without the consent of
these stockholders, we could be prevented from entering into certain
transactions that could be beneficial to us. Also, third parties could be
discouraged from making a tender offer or bid to acquire our company at a price
per share that is above the price at which the Common Stock will trade on
Nasdaq.
Immediately following this offering, the following stockholders collectively
will own approximately 84.8% of the outstanding shares of our Common Stock and
will own individually the percentage set forth opposite their respective names:
<TABLE>
<S> <C>
Spray Ventures AB.................................................. 32.8%
Communicade Inc.................................................... 33.0
Jeffrey A. Dachis.................................................. 9.5
Craig M. Kanarick.................................................. 9.5
</TABLE>
Communicade Inc. is a wholly owned subsidiary of Omnicom Group, Inc. Per
Bystedt, Jonas Svensson, Thomas Randerz and Johan Ihrfelt, each of whom is an
officer or director of Razorfish, collectively own more than 50% of the
outstanding voting stock of Spray Ventures AB.
We must maintain our reputation and expand our name recognition to remain
competitive.
We believe that establishing and maintaining a good reputation and name
recognition is critical for attracting and expanding our targeted client base.
We also believe that the importance of reputation and name recognition will
increase due to the growing number of information technology service providers.
If our reputation is damaged or if potential clients do not know what services
we provide, we may become less competitive or lose our market share. Promotion
and enhancement of our name will depend largely on our success in continuing to
provide high quality services and digital communications solutions, which
cannot be assured. If clients do not perceive our digital communications
solutions to be effective or of high quality, our brand name and reputation
could be materially and adversely affected.
In addition, we license two trademarks and our symbol to Razorfish Studios,
Inc., a company controlled by Communicade and Messrs. Dachis and Kanarick.
Because the "Razorfish" trademarks and symbol are closely associated with both
Razorfish Studios and Razorfish, our name and reputation could be materially
and adversely affected by content published or actions taken by Razorfish
Studios. See "Certain Transactions" for a more complete description of the
business relationship between Razorfish and Razorfish Studios.
Misappropriation of our trademarks and other proprietary rights could harm our
reputation, affect our competitive position and cost us money.
We believe our trademarks and other proprietary rights are important to our
success and competitive position. If we are unable to protect our trademarks
and other proprietary rights against unauthorized use by others, our reputation
among existing and potential clients could be damaged and our competitive
position adversely affected. We have registered certain of our trademarks in
the United States and abroad. We also limit access to and distribution of our
proprietary information, as well as proprietary information licensed from
third-parties. We cannot ensure that these strategies will be adequate to deter
misappropriation of our proprietary information and material.
Our strategies to deter misappropriation could be inadequate in light of the
following risks:
. non-recognition or inadequate protection of our proprietary rights in
certain foreign countries;
. undetected misappropriation of our proprietary information or materials;
. development of similar software or applications by our competitors; and
. unenforceablity of the non-competition agreements entered into by our key
employees.
8
<PAGE>
If any of these risks materialize, we could be required to spend significant
amounts to defend our rights and our managerial resources could be diverted. In
addition, our trademarks and other proprietary rights may decline in value or
not be enforceable. See "Business--Intellectual property rights" for more
information concerning our intellectual property.
We compete in a new and highly competitive market that has low barriers to
entry.
We compete in the information technology services market which is relatively
new and intensely competitive. We expect competition to intensify as the market
evolves. We compete with:
. Internet service firms;
. technology consulting firms;
. technology integrators;
. strategic consulting firms; and
. in-house information technology, marketing and design departments of our
potential clients.
Many of our competitors have longer operating histories, larger client
bases, longer relationships with clients, greater brand or name recognition and
significantly greater financial, technical, marketing and public relations
resources than we have.
There are relatively few barriers preventing competitors from entering the
information technology services market. As a result, new market entrants pose a
threat to our business. We do not own any patented technology that precludes or
inhibits competitors from entering the information technology services market.
Existing or future competitors may develop or offer services that are
comparable or superior to ours at a lower price, which could have a material
adverse effect on our business, results of operations and financial condition.
See "Business--Industry background" and "Business--Competition" for a more
complete description of the industry in which we compete, a list of our
competitors and the competitive factors within our industry.
We need to keep pace with changing communications technologies in order to
provide effective digital communications solutions.
Our success depends on our ability to keep pace with the rapid changes
occurring in communications technologies and the new and improved devices and
services that result from these changes. Our inability to respond quickly and
cost-effectively to changing communications technologies and devices could make
our existing service offering non-competitive and may cause us to lose our
market share. For example, if the Internet is rendered obsolete or less
important by faster, more efficient technologies, we must be prepared to offer
non-Internet-based solutions or risk losing current and potential clients. In
addition, to the extent that mobile phones, pagers, personal digital assistants
or other devices become important aspects of digital communications solutions,
we need to have the technological expertise to incorporate them into our
solutions.
Our business depends on continued growth in the use of the Internet.
Our future success is substantially dependent upon continued growth in the
use of the Internet because we primarily use Internet-based technology to
create our solutions. To the extent that businesses do not consider the
Internet a viable commercial medium, our client base may not grow. The adoption
of the Internet for commerce and communications, particularly by those
individuals and companies that have historically relied upon alternative means
of commerce and communication, generally requires the understanding and
acceptance of a new way of conducting business and exchanging information. In
particular, companies that have already invested substantial resources in other
means of conducting commerce and exchanging information may be particularly
reluctant or slow to adopt a new, Internet-based strategy that may make their
existing personnel and infrastructure obsolete.
In addition, our business may be indirectly impacted if the number of users
on the Internet does not increase or if commerce over the Internet does not
become more accepted and widespread. The use and acceptance of the Internet may
not increase for a number of reasons, including:
. actual or perceived lack of security of information, such as credit card
numbers;
9
<PAGE>
. high cost or lack of availability of access;
. congestion of traffic or other usage delays on the Internet;
. inconsistent quality of service or the lack of availability of cost-
effective, high-speed service;
. possible outages due to Year 2000 difficulties or other damage to the
Internet;
. governmental regulation;
. uncertainty regarding intellectual property ownership; and
. lack of high-speed modems and other communications equipment.
Published reports have also indicated that capacity constraints caused by
growth in the use of the Internet may impede further development of the
Internet to the extent that users experience delays, transmission errors and
other difficulties. If the necessary infrastructure, products, services or
facilities are not developed, or if the Internet does not become a viable and
widespread commercial medium, our business, results of operations and financial
condition could be materially and adversely affected.
Our business is subject to U.S. and foreign government regulation of the
Internet.
Both the U.S., at the state, local and federal government levels, and the
European Union have recently passed legislation relating to the Internet.
Because these laws are still being implemented, we are not certain how our
business will be impacted by them. We may be indirectly affected by this new
legislation to the extent it impacts our clients and potential clients. In
addition, U.S. and foreign governmental bodies are considering, and may
consider in the future, other legislative proposals that would regulate the
Internet. We cannot predict if or how any future legislation would impact our
business, results of operations or financial condition. See "Business--U.S. and
foreign government regulation" for a more complete description of the
regulations that govern our industry.
The Year 2000 problem may adversely affect our business.
The Year 2000 issue is the potential for system and processing failures of
date-related data arising from the use of two digits by computer-controlled
systems, rather than four digits, to define the applicable year. We believe
that our internal software and hardware systems will function properly with
respect to dates in the year 2000 and thereafter, but we can give you no
assurance in this regard until such systems are operational in the year 2000.
In addition, Year 2000 problems of our clients could affect our systems or
operations. Widespread Year 2000 difficulties could also decrease demand for
our services as companies expend resources upgrading their computer systems. As
part of our analysis of the Year 2000 problem, we have analyzed the impact of
the "worst case scenario" on our business. The "worst case scenario" would
occur if the statements and warranties of our vendors concerning their Year
2000 compliance and upgrade programs were entirely false, our current upgrades
were unsuccessful and our contingency plan failed, resulting in a critical
systems failure throughout Razorfish.
Although, as a general matter, we do not specifically warrant to clients
that our work will be Year 2000 compliant, certain clients have requested and
received such warranties. In such cases, we do not warrant the compliance of
third-party software; rather, we warrant only that software created by us will
be Year 2000 compliant. However, even absent a specific Year 2000 warranty,
there is a risk that clients for whom we have created or implemented software
will attempt to hold us liable for any damages that result in connection with
Year 2000 issues.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a more complete description of the Year 2000 risks that we
face and the steps we have taken to reduce those risks.
10
<PAGE>
The conversion to the euro may adversely affect our business in Europe.
Due to our operations in the United Kingdom, Sweden, Finland, Norway and
Germany, we may be exposed to certain risks as a result of the conversion
process by certain European Union member states of their respective currencies
to the euro that commenced on January 1, 1999. The conversion rates between the
member states' currencies and the euro are fixed by the Council of the European
Union. We are unsure as to whether the conversion to the euro will have an
adverse impact on our business, but potential risks include (1) the costs of
modifying our software and information systems and (2) changes in the conduct
of business and in the principal European markets for our products and
services. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Currency fluctuation and the euro conversion" for a more
complete description of the impact of the conversion to the euro on our
financial condition.
The volume of trading and price of our Common Stock could fluctuate
significantly.
Currently there is no public market for our Common Stock. We do not know the
extent to which investor interest will lead to the development of a trading
market or how liquid it may be. Although in recent months investors have shown
great interest in technology companies focused on the Internet, many
publications indicate that the stock of these companies trade at overly
inflated prices. If investor interest in these stocks declines, the price for
our Common Stock could drop suddenly and significantly, even if our operating
results are positive. In addition, the trading volume of Internet-related
stocks has been volatile in recent months. If the trading volume of our Common
Stock experiences significant changes, the price of our Common Stock could be
adversely affected.
Wide fluctuations in our trading price or volume could also be caused by:
.quarterly variations in our operating results;
.investor perception of our company and the information technology services
market in general;
.announcements or implementation of technological innovations;
.announcements or implementation by us or our competitors of new products or
services;
.changes in financial estimates by securities analysts; and
.general economic and information technology services market conditions.
Declines in the trading or price of our Common Stock could also materially
and adversely affect employee morale and retention, our access to capital and
other aspects of our business.
The sale of a substantial number of shares of our Common Stock in the public
market could adversely affect the market price.
Following this offering, a portion of our shares of Common Stock will be
eligible for sale in the public market. Sales or the expectation of sales of a
large number of shares of our Common Stock in the public market could adversely
affect the prevailing market price of our Common Stock. We and our directors
and executive officers have agreed, except in limited circumstances, not to
sell any shares of Common Stock for 180 days after the date of this prospectus
without the prior consent of Credit Suisse First Boston Corporation; however,
Credit Suisse First Boston Corporation may release the shares from these
restrictions at any time. See "Shares Eligible for Future Sale" for a more
detailed description of the restrictions on selling shares of our Common Stock
after this offering.
Our management has broad discretion over the use of proceeds from this
offering.
Our management has significant flexibility in applying the proceeds we
receive in this offering. Because the proceeds are not required to be allocated
to any specific investment or transaction, you cannot determine the value or
propriety of our management's application of the proceeds on our behalf. See
"Use of Proceeds" for a more detailed description of how management intends to
apply the proceeds of this offering.
11
<PAGE>
The value of your investment in our Common Stock will be diluted.
If you purchase Common Stock in this offering, you will pay more for your
shares than the amount paid by existing stockholders or individuals or
companies which acquired shares by exercising options granted before this
offering. As a result, the value of your investment based on the value of our
net tangible assets, as recorded in our books, will be less than the amount you
pay for shares of Common Stock in this offering. In addition, the total amount
of our capital will be less than what it would have been had you and all of the
existing stockholders and optionees paid the same amount per share of Common
Stock as you will pay in this offering. See "Dilution" for a more complete
description of how the value of your investment in our Common Stock will be
diluted upon the completion of this offering.
Our charter documents could make it more difficult for a third party to acquire
us.
Our Certificate of Incorporation and By-laws are designed to make it
difficult for a third party to acquire control of us, even if a change in
control would be beneficial to stockholders. For example, our certificate of
incorporation authorizes our Board of Directors to issue up to 10,000,000
shares of "blank check" preferred stock. Without stockholder approval, the
Board of Directors has the authority to attach special rights, including voting
and dividend rights, to this preferred stock. With these rights, preferred
stockholders could make it more difficult for a third party to acquire our
company.
Our By-laws do not permit any person other than the Board of Directors or
certain executive officers to call special meetings of the stockholders. In
addition, a stockholders' proposal for an annual meeting must be received 45
days prior to the meeting in order to be placed on the agenda. Because
stockholders do not have the power to call meetings and are subject to timing
requirements in submitting stockholder proposals for consideration at an annual
or special meeting, any third-party takeover not supported by the Board of
Directors would be subject to significant delays and difficulties. See
"Description of Capital Stock" for a more detailed description of the terms of
our charter documents that could hinder a third party's attempt to acquire
control of Razorfish.
12
<PAGE>
USE OF PROCEEDS
Razorfish estimates that it will receive net proceeds of approximately $28.6
million or approximately $33.2 million if the underwriters' overallotment
option is exercised in full from the sale of the shares of Common Stock offered
by us, at an assumed initial public offering price of $11.00 per share, after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by Razorfish.
Razorfish expects to use such net proceeds for general corporate purposes,
including:
.expanding its human resources department and hiring additional personnel;
.the development of a formal sales and marketing department;
.strategic acquisitions or investments;
.international expansion;
.technical upgrades of internal systems; and
.working capital requirements.
Razorfish's management continually evaluates potential strategic
acquisitions or investments, but at the present time Razorfish has no
understandings, commitments or agreements with respect to any such acquisition
or investment. Pending such uses, Razorfish intends to invest the net proceeds
from the offering in U.S. government securities and other investment-grade,
interest-bearing instruments.
The foregoing represents Razorfish's present intentions with respect to the
allocation of proceeds of this offering based upon its present plans and
business conditions. The occurrence of certain unforeseen events or changed
business conditions could result in the application of the proceeds of the
offering in a manner other than as described in this prospectus. See "Risk
Factors--Our management has broad discretion over the use of proceeds from this
offering" for discussion of this risk.
DIVIDEND POLICY
Razorfish's Board of Directors has never declared or paid any cash dividends
on its Common Stock and does not expect to do so in the foreseeable future.
Razorfish currently intends to retain any earnings to finance the expansion and
development of its business. Razorfish's Board of Directors will make any
future determination of the payment of dividends based upon conditions then
existing, including Razorfish's earnings, financial condition and capital
requirements, as well as such economic and other conditions as the Board of
Directors may deem relevant. In addition, the payment of dividends may be
limited by financing agreements that Razorfish may enter into in the future.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Razorfish (1) on an
actual basis as of December 31, 1998, (2) on a pro forma basis assuming the
acquisition of Spray and the exercise by Communicade of an option to purchase
1,976,810 shares (or 10%) of Razorfish's Common Stock had been completed as of
December 31, 1998 and (3) pro forma as adjusted to give pro forma effect to the
sale of 3,000,000 shares of Common Stock offered hereby. The non-voting shares
of Class B Common Stock were a portion of the purchase price paid by Razorfish
in connection with the acquisition of Spray, and they were issued to
Communicade and Spray Ventures in February 1999. See "Business--Spray
acquisition" and "Description of Capital Stock--Common stock."
This table should be read in conjunction with "Unaudited Pro Forma Condensed
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and each of Razorfish's and
Spray's consolidated financial statements and the notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------
Pro forma
Actual Pro forma as adjusted
------ --------- -----------
(in thousands)
<S> <C> <C> <C>
Total long-term debt............................. $3,212 $ 3,236 $ 3,236
Stockholders' equity:
Class A Common Stock, $.01 par value:
29,999,950 shares authorized, 9,223,821 shares
issued and outstanding, actual (29,999,950
shares authorized, 21,081,665 issued and
outstanding, pro forma; 24,081,665 issued and
outstanding, pro forma as adjusted)(1)........ 92 211 241
Class B Common Stock, $.01 par value: 50 shares
authorized, no shares issued and outstanding,
actual (50 shares authorized, 50 shares issued
and outstanding, pro forma and pro forma as
adjusted)..................................... -- -- --
Preferred Stock, $.01 par value: no shares
authorized, no shares issued and outstanding,
actual (10,000,000 shares authorized, no
shares issued and outstanding, pro forma and
pro forma as adjusted)........................ -- -- --
Additional paid-in capital(2).................. 2,752 54,447 82,989
Retained earnings (accumulated deficit)........ (119) (119) (119)
Cumulative foreign currency translation
adjustments................................... 4 4 4
------ ------- -------
Total stockholders' equity(2)................ 2,729 54,543 83,115
------ ------- -------
Total capitalization....................... $5,941 $57,779 $86,351
====== ======= =======
</TABLE>
- --------
(1) Does not include (a) options to purchase 659,955 shares of Common Stock
issued pursuant to Razorfish's 1997 Stock Option Plan and outstanding as of
December 31, 1998 (of which options to purchase 132,161 shares were
exercisable as of December 31, 1998) or the remaining 196,136 shares of
Common Stock reserved for issuance as of December 31, 1998 pursuant to the
1997 Stock Option Plan, all of which will be granted concurrently with the
consummation of this offering or (b) 600,000 shares of Common Stock
reserved for issuance pursuant to Razorfish's 1999 Stock Incentive Plan of
which no options are outstanding but 78,402 options of which will be
granted concurrently with the consummation of this offering. See
"Management--Employee benefit plans."
(2) The purchase price paid by Communicade in connection with the exercise of
the option described in the introduction to the table above was based on a
discount of 20% from an assumed offering price of $10.00 per share (or
$8.00 per share). The purchase price for these shares will be adjusted
based on a discount of 20% from the actual offering price of the shares
sold in this offering. At the closing of this offering, Communicade will
pay, or Razorfish will refund, the difference between the amount paid by
Communicade and the amount payable based on the actual offering price, as
applicable. An increase or decrease in the offering price of $1.00 will
result in an increase or decrease in the aggregate purchase price payable
by Communicade of $1,581,448. Assuming that the actual offering price of
the shares offered hereby is $11.00 per share (the midpoint of the range
disclosed on the cover of the prospectus), the purchase price payable by
Communicade will increase by $1,581,448 to $17,395,928.
14
<PAGE>
DILUTION
Assuming that the acquisition of Spray and the exercise by Communicade of an
option to purchase 1,976,810 shares (or 10%) of Razorfish's Common Stock had
been completed as of December 31, 1998, Razorfish's pro forma net tangible book
value as of December 31, 1998 would have been approximately $14.4 million, or
$0.68 per share. Net tangible book value per share is equal to the total
tangible assets of Razorfish minus total liabilities divided by the number of
shares of Common Stock outstanding. Assuming Razorfish had also sold the
3,000,000 shares of Common Stock offered hereby (at an assumed initial public
offering price of $11.00 per share), and after deducting underwriting discounts
and commissions and estimated offering expenses payable by Razorfish,
Razorfish's pro forma net tangible book value at December 31, 1998 would have
been approximately $43.0 million, or $1.78 per share. This represents an
immediate increase in pro forma net tangible book value of $1.10 per share to
existing stockholders (including Spray Ventures and Communicade) and an
immediate dilution of $9.22 per share to new investors. Dilution is determined
by subtracting pro forma net tangible book value per share after the offering
from the amount of cash paid by a new investor for a share of Common Stock. The
following table illustrates the substantial and immediate per share dilution to
new investors:
<TABLE>
<CAPTION>
Per share
------------
<S> <C> <C>
Assumed initial public offering price per share............... $11.00
Pro forma net tangible book value per share as of December
31, 1998................................................... $0.68
Increase per share attributable to new investors............ 1.10
-----
Pro forma net tangible book value per share after giving
effect to the offering....................................... 1.78
------
Dilution per share to new investors........................... $ 9.22
======
</TABLE>
The following table sets forth as of December 31, 1998 the number of shares
of Common Stock purchased from Razorfish, the total consideration paid and the
average price per share paid by existing stockholders and by new investors at
an assumed offering price of $11.00 per share:
<TABLE>
<CAPTION>
Shares Total
purchased consideration
-------------- --------------- Average price
Number Percent Amount Percent per share
------ ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)...... 21,082 87.5% $54,659 62.4% $2.59
New investors................. 3,000 12.5 33,000 37.6 11.00
------ ----- ------- -----
Total....................... 24,082 100.0% $87,659 100.0% $3.64
====== ===== ======= =====
</TABLE>
- --------
(1) Includes 7,904,827 shares acquired by Spray Ventures and 1,976,207 shares
acquired by Communicade at $3.64 per share, pursuant to the Spray
acquisition, and 1,976,810 shares acquired by Communicade at $8.00 per
share pursuant to the exercise of its option to purchase up to 10% of
Razorfish's Common Stock. The purchase price paid by Communicade in
connection with the exercise of the 10% option was based on a discount of
20% from an assumed offering price of $10.00 per share (or $8.00 per
share). The purchase price for these shares will be adjusted based on a
discount of 20% from the actual offering price of the shares sold in this
offering. See "Capitalization."
If the underwriters exercise their over-allotment in full, the pro forma net
tangible book value per share of Common Stock as of December 31, 1998 would
have been $1.94 per share, which would result in dilution to the new investors
of $9.06 per share, and the number of shares held by the new investors will
increase to 3,450,000, or 14.1% of the total number of shares to be outstanding
after this offering, and the number of shares held by the existing stockholders
will be 21,081,665 shares, or 85.9% of the total number of shares to be
outstanding after this offering.
15
<PAGE>
The foregoing tables assume no exercise of any outstanding stock options to
purchase Common Stock. As of December 31, 1998, there were outstanding options
to purchase an aggregate of 659,955 shares of Common Stock, 132,161 of which
were then exercisable, and Razorfish had also reserved for issuance as of
December 31, 1998 an additional 196,136 shares of Common Stock for issuance
upon the exercise of options which had not yet been granted under the 1997
Stock Option Plan but which Razorfish intends to grant concurrently with the
consummation of this offering. Razorfish has reserved a total of 600,000 shares
of Common Stock for issuance under the 1999 Stock Incentive Plan of which no
options are outstanding but 78,402 options of which will be granted
concurrently with the consummation of this offering. To the extent options are
exercised, there will be accretion to both new and existing investors. See
"Capitalization," "Management--Employee benefit plans" and note 8 to
Razorfish's consolidated financial statements.
The following table illustrates the accretion to investors as of December
31, 1998 (assuming that the acquisition of Spray, the exercise by Communicade
of its option to purchase 1,976,810 shares (or 10%) of Razorfish's Common Stock
and the sale of 3,000,000 shares of Common Stock offered hereby at an assumed
offering price of $11.00 had been completed as of December 31, 1998) after
giving pro forma effect to the exercise of all outstanding nominal issuances of
options to purchase Common Stock, including proceeds received upon exercise of
these options:
<TABLE>
<CAPTION>
Per share
---------
<S> <C>
Net tangible book value per share as of December 31, 1998........ $1.78
Increase per share attributable to exercise of nominal issuances
of options to purchase Common Stock as of December 31, 1998..... 0.02
-----
Pro forma net tangible book value per share........................ $1.80
=====
</TABLE>
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF RAZORFISH
The following selected consolidated financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Razorfish's consolidated financial statements
and the notes thereto included elsewhere in this prospectus. The statement of
operations information for the three-year period ended December 31, 1998 and
the balance sheet information as of December 31, 1997 and 1998 is derived from
the consolidated financial statements of Razorfish, which have been audited by
Arthur Andersen LLP, independent public accountants, and is included elsewhere
in this prospectus. The statement of operations information for the year ended
December 31, 1995 and the balance sheet information as of December 31, 1995 and
1996 is derived from the consolidated financial statements of Razorfish, which
have been audited by Arthur Andersen LLP, independent public accountants, and
is not included in this prospectus.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1995 1996 1997 1998
--------- --------- --------- ---------
(in thousands, except share and per
share data)
<S> <C> <C> <C> <C>
Statement of Operations Information:
Revenues............................ $312 $1,218 $3,618 $13,843
Direct salaries and costs........... 107 895 1,906 7,770
--------- --------- --------- ---------
Gross profit........................ 205 323 1,712 6,073
Sales and marketing................. 16 129 175 438
General and administrative.......... 142 500 877 2,897
Amortization of goodwill............ -- -- -- 107
Non-cash compensation expense....... -- -- 79 2,278
--------- --------- --------- ---------
Income (loss) from operations....... 47 (306) 581 353
Interest expense, net............... -- 5 19 241
--------- --------- --------- ---------
Income (loss) before income taxes... 47 (311) 562 112
Provision (benefit) for income
taxes.............................. 11 (57) 265 455
--------- --------- --------- ---------
Net income (loss)................... $ 36 $ (254) $ 297 $ (343)
========= ========= ========= =========
Net income (loss) per share
Basic.............................. $0.00 $(0.03) $0.03 $(0.04)
Diluted............................ $0.00 $(0.03) $0.03 $(0.04)
Weighted average common shares
outstanding
Basic.............................. 9,090,906 9,090,906 9,156,819 9,223,821
Diluted............................ 9,537,607 9,537,607 9,886,241 9,670,522
<CAPTION>
December 31,
----------------------------------------
1995 1996 1997 1998
--------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Information:
Cash and cash equivalents........... $-- $ 63 $1,176 $ 599
Total assets........................ 123 593 4,267 12,085
Total long-term debt................ 17 55 77 3,212
Total debt.......................... 21 91 1,953 5,542
Stockholders' equity................ 36 281 657 2,729
</TABLE>
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF SPRAY
The following selected consolidated financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Spray's consolidated financial statements and
the notes thereto included elsewhere in this prospectus. The statement of
operations information for the three-year period ended December 31, 1998 and
the balance sheet information as of December 31, 1997 and 1998 is derived from
the consolidated financial statements of Spray, which have been audited by
Arthur Andersen LLP, independent public accountants, and is included elsewhere
in this prospectus. The balance sheet information as of December 31, 1996 is
derived from the consolidated financial statements of Spray, which have been
audited by Arthur Andersen LLP, independent public accountants, and is not
included in this prospectus. The statement of operations information for the
two-year period ended December 31, 1995 and the balance sheet information as of
December 31, 1994 and 1995 is unaudited and has been prepared on the same basis
as the audited consolidated financial statements of Spray included elsewhere in
this prospectus. In the opinion of management, this unaudited information
includes all adjustments, consisting of only normally recurring adjustments
necessary for a fair presentation of such information. The historical results
are not necessarily indicative of the operating results to be expected in the
future.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1994 1995 1996 1997 1998
---- ------ ------ ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Information:
Revenues.................................. $458 $2,192 $5,319 $7,818 $15,402
Direct salaries and costs................. 323 1,734 4,391 7,258 13,111
---- ------ ------ ------ -------
Gross profit.............................. 135 458 928 560 2,291
Sales and marketing....................... 38 97 350 395 757
General and administrative................ -- -- 256 965 2,763
Amortization of goodwill.................. -- -- -- 89 331
---- ------ ------ ------ -------
Income (loss) from operations............. 97 361 322 (889) (1,560)
Interest income (expense), net............ -- 1 -- 84 (235)
---- ------ ------ ------ -------
Income (loss) before minority interest and
income taxes............................. 97 362 322 (805) (1,795)
Minority interest......................... -- -- -- 88 319
---- ------ ------ ------ -------
Income (loss) before income taxes......... 97 362 322 (717) (1,476)
Provision (benefit) for income taxes...... -- 66 241 (24) --
---- ------ ------ ------ -------
Net income (loss)......................... $ 97 $ 296 $ 81 $ (693) $(1,476)
==== ====== ====== ====== =======
<CAPTION>
December 31,
----------------------------------
1994 1995 1996 1997 1998
---- ------ ------ ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Information:
Cash and cash equivalents................. $110 $ 184 $ 240 $ 581 $ 907
Total assets.............................. 325 1,036 1,239 4,664 6,827
Total long-term debt...................... -- -- -- 45 24
Total debt................................ -- -- -- 542 1,623
Stockholders' equity...................... 142 476 269 1,617 836
</TABLE>
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements as of the year ended December 31, 1998 and for the two-year period
ended December 31, 1998 have been derived from the application of pro forma
adjustments to the historical consolidated financial statements of Razorfish,
Spray, Spray Ventures and Avalanche Systems, which are included elsewhere in
this prospectus. The historical accounts of Spray for the year ended December
31, 1997 do not include the results of operations of Spray Ventures prior to
September 1, 1997, the date on which Spray acquired the operating subsidiaries
of Spray Ventures. The historical accounts of Spray for the year ended December
31, 1997 include the results of operations of two insignificant subsidiaries of
Spray that were not purchased by Razorfish in the Spray acquisition. The
unaudited pro forma condensed consolidated balance sheet gives effect to the
acquisition of Spray and the exercise by Communicade of an option to purchase
1,976,810 shares (or 10%) of Razorfish's Common Stock as if such transactions
had occurred on December 31, 1998. The unaudited pro forma consolidated
statement of operations information for the two-year period ended December 31,
1998 gives effect to the acquisitions that Razorfish completed in 1998 and 1999
and Communicade's exercise of the 10% option as if such transactions had
occurred on January 1, 1997.
The unaudited pro forma condensed consolidated financial statements do not
purport to be indicative of what Razorfish's actual results of operations or
financial condition would have been assuming the acquisitions that Razorfish
completed in 1998 and 1999 and the exercise by Communicade of an option to
purchase up to 10% of Razorfish's Common Stock had been completed on such
dates, nor does it purport to be indicative of results of operations or
financial condition that may be achieved in the future.
The acquisitions that Razorfish completed in 1998 and 1999 have been
accounted for using the purchase method of accounting. The purchase method of
accounting allocates the aggregate purchase price to the assets acquired and
liabilities assumed based upon their respective fair values. The excess
purchase price over the fair value of net assets acquired, which equals $35.1
million for Spray, $0.8 million for Avalanche Systems and an aggregate of $2.8
million for the other acquisitions, has been allocated to goodwill, customer
lists and workforce. The estimated fair value of the net assets acquired from
Spray was determined based on independent third-party valuations and
management's knowledge of current industry trends and transactions. Management
considers such estimates to be reasonable.
19
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1998
<TABLE>
<CAPTION>
Historical Pro forma adjustments
------------------------ -----------------------------
Spray
Razorfish Spray acquisition(a) 10% option(b) Pro forma
----------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 598,720 $ 907,000 $ -- $15,814,476 $17,320,196
Accounts receivable,
net................... 2,373,006 2,437,000 -- -- 4,810,006
Other current assets... 2,602,822 534,000 -- -- 3,136,822
----------- ----------- ----------- ----------- -----------
Total current assets.. 5,574,548 3,878,000 -- 15,814,476 25,267,024
Property and equipment,
net.................... 1,185,544 1,436,000 -- -- 2,621,544
Intangibles............. 3,454,582 1,513,000 35,164,000(a) -- 40,131,582
Investments and other
assets................. 1,870,809 -- -- -- 1,870,809
----------- ----------- ----------- ----------- -----------
Total assets........ $12,085,483 $ 6,827,000 $35,164,000 $15,814,476 $69,890,959
=========== =========== =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Due to Omnicom......... $ 1,782,380 $ -- $ -- $ -- $ 1,782,380(d)
Accounts payable and
accrued expenses...... 1,791,417 2,854,000 -- -- 4,645,417
Related party debt..... 500,000 -- -- -- 500,000
Deferred tax
liabilities........... 1,395,884 -- -- -- 1,395,884
Current portion of
capital lease
obligations........... 47,107 -- -- -- 47,107
Other current
liabilities........... 609,213 2,830,000 -- -- 3,439,213
----------- ----------- ----------- ----------- -----------
Total current
liabilities.......... 6,126,001 5,684,000 -- -- 11,810,001
Long-term debt.......... 3,206,506 24,000 -- -- 3,230,506
Capital lease
obligations............ 5,671 -- -- -- 5,671
Other long-term
liabilities............ 18,655 283,000 -- -- 301,655
----------- ----------- ----------- ----------- -----------
Total liabilities... 9,356,833 5,991,000 -- -- 15,347,833
Stockholders' equity:
Preferred Stock......... -- -- -- -- --
Common stock:
Class A................ 92,238 37,000 61,810(c) 19,768 210,816
Class B................ -- -- 1(c) -- 1
Additional paid-in
capital............... 2,751,863 3,492,000 32,409,189(c) 15,794,708 54,447,760
Retained deficit....... (119,311) (2,581,000) 2,581,000(c) -- (119,311)
Cumulative foreign
translation
adjustments............ 3,860 (112,000) 112,000(c) -- 3,860
----------- ----------- ----------- ----------- -----------
Total stockholders'
equity............... 2,728,650 836,000 35,164,000 15,814,476 54,543,126
----------- ----------- ----------- ----------- -----------
Total liabilities and
stockholders'
equity.............. $12,085,483 $ 6,827,000 $35,164,000 $15,814,476 $69,890,959
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated financial statements are integral parts of this
statement.
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) Spray acquisition
On January 5, 1999, Razorfish acquired all of the issued and
outstanding shares of capital stock of Spray from Spray Ventures and
Communicade in exchange for an aggregate of 9,881,034 shares of
Common Stock (representing 50% of Razorfish's outstanding shares of
Common Stock on a fully diluted basis after giving effect to this
acquisition) and 50 shares of non-voting Class B Common Stock.
Set forth below is Razorfish's allocation of the purchase price of
the Spray acquisition:
<TABLE>
<S> <C>
Aggregate purchase price................................. $36,000,000
Less: net book value of assets acquired................ 836,000
-----------
Excess of cost over net book value of assets acquired.... $35,164,000
===========
Allocation of excess cost over net book value of assets
acquired:
Goodwill............................................... $26,664,000
Customer lists......................................... 7,600,000
Workforce.............................................. 900,000
-----------
Total................................................ $35,164,000
===========
</TABLE>
The allocation of excess cost over net book value of assets
acquired to the intangible assets relating to the Spray acquisition
was determined based upon an independent third-party valuation. The
estimated useful lives are as follows:
<TABLE>
<S> <C>
Goodwill...................................................... 20 years
Customer lists................................................ 16 years
Workforce..................................................... 6 years
</TABLE>
(b) Communicade's 10% option
On February 3, 1999, Communicade exercised its option to purchase
up to 10% of Razorfish's Common Stock and acquired 1,976,810 shares
of Common Stock for total proceeds of $15,814,476 million. The
purchase price paid by Communicade in connection with the exercise
of this option was based on a discount of 20% from an assumed
offering price of $10.00 per share (or $8.00 per share). The
purchase price for these shares will be adjusted based on a discount
of 20% from the actual offering price of the shares offered hereby.
At the closing of this offering, Communicade will pay, or Razorfish
will refund, the difference between the amount paid by Communicade
and the amount payable based on such actual offering price, as
applicable. Assuming that the actual offering price of the shares
offered hereby is $11.00 per share (the midpoint of the range
disclosed on the cover of this prospectus), the purchase price
payable by Communicade will increase by $1,581,448 to $17,395,928.
21
<PAGE>
(c) Reflects the adjustments to stockholders' equity as follows:
<TABLE>
<CAPTION>
Acquisitions
------------
<S> <C>
Elimination of Spray common stock....................... $ (37,000)
Issuance of Common Stock in connection with the
acquisition of Spray................................... 98,810
-----------
Subtotal............................................. 61,810
-----------
Issuance of Class B Common Stock in connection with the
acquisition of Spray................................... 1
-----------
Additional paid-in capital:
Elimination of Spray additional paid-in capital........ (3,492,000)
Additional paid-in capital from issuance of Class A and
B Common Stock in connection with the acquisition of
Spray................................................. 35,901,189
-----------
Subtotal............................................. 32,409,189
Retained deficit:
Elimination of Spray historical retained deficit........ 2,581,000
Cumulative foreign translation adjustment:
Elimination of Spray historical cumulative foreign
translation adjustment................................. 112,000
-----------
Total................................................ $35,164,000
===========
</TABLE>
(d) "Due to Omnicom" was reduced subsequent to December 31, 1998 by
$1,103,998 to $678,382 in connection with the exercise of Communicade's 10%
option; however, this adjustment has not been reflected in the Pro Forma
Condensed Consolidated Balance Sheet.
22
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Historical Pro forma adjustments
---------------------------------------------------------------- ----------------------------------------
Spray Other Other 10%
Razorfish Spray Ventures(a) Avalanche acquisitions(b) Spray acquisitions option
---------- ---------- ----------- ----------- --------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $3,617,688 $7,818,000 $ 1,585,000 $ 2,313,863 $3,007,745 $ -- $ (529,750)(c) $ --
Direct salaries
and costs....... 1,906,111 7,258,000 2,644,000 2,356,000 2,108,185 -- (1,143,775)(d) --
---------- ---------- ----------- ----------- ---------- ----------- ---------- --------
Gross profit
(loss).......... 1,711,577 560,000 (1,059,000) (42,137) 899,560 -- 614,025 --
Sales and
marketing....... 174,550 395,000 53,000 -- 136,379 -- (53,000)(e) --
General and
administrative.. 876,567 965,000 450,000 2,052,058 385,727 -- (304,385)(f) --
Non-recurring
charges......... -- -- 238,000 -- -- -- (238,000)(g) --
Amortization of
intangibles..... -- 89,000 -- -- -- 1,958,200 (h) 354,067 (h) --
Non-cash
compensation
expense......... 78,819 -- -- -- -- -- -- --
---------- ---------- ----------- ----------- ---------- ----------- ---------- --------
Income (loss)
from
operations...... 581,641 (889,000) (1,800,000) (2,094,195) 377,454 (1,958,200) 855,343 --
Gain on disposal
of subsidiary... -- -- (100,000) -- -- -- -- --
Interest expense
(income), net... 19,489 (84,000) 44,000 -- 12,952 -- (65,090)(i) (53,441)
Minority
interests....... -- (88,000) (147,000) -- 16,610 -- (139,900)(j) --
---------- ---------- ----------- ----------- ---------- ----------- ---------- --------
Income (loss)
before income
taxes........... 562,152 (717,000) (1,597,000) (2,094,195) 347,892 (1,958,200) 1,060,333 53,441
Provision
(benefit) for
income taxes.... 264,963 (24,000) -- -- 85,237 -- 30,030 (k) --
---------- ---------- ----------- ----------- ---------- ----------- ---------- --------
Net income
(loss).......... $ 297,189 $ (693,000) $(1,597,000) $(2,094,195) $ 262,655 $(1,958,200) $1,030,303 $ 53,441
========== ========== =========== =========== ========== =========== ========== ========
Per share
information:
Net income (loss)
per share:
Basic........... $ 0.03
==========
Diluted......... $ 0.03
==========
Weighted average
common shares
outstanding:
Basic........... 9,156,819
==========
Diluted......... 9,886,241
==========
<CAPTION>
Pro forma
--------------
<S> <C>
Revenues......... $17,812,546
Direct salaries
and costs....... 15,128,521
--------------
Gross profit
(loss).......... 2,684,025
Sales and
marketing....... 705,929
General and
administrative.. 4,424,967
Non-recurring
charges......... --
Amortization of
intangibles..... 2,401,267
Non-cash
compensation
expense......... 78,819
--------------
Income (loss)
from
operations...... (4,926,957)
Gain on disposal
of subsidiary... (100,000)
Interest expense
(income), net... (126,090)
Minority
interests....... (358,290)
--------------
Income (loss)
before income
taxes........... (4,342,577)
Provision
(benefit) for
income taxes.... 356,230
--------------
Net income
(loss).......... $(4,698,807)
==============
Per share
information:
Net income (loss)
per share:
Basic........... $ (0.22)
==============
Diluted......... $ (0.22)
==============
Weighted average
common shares
outstanding:
Basic........... 21,014,663(l)
==============
Diluted......... 21,205,525(l)
==============
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated financial statements are integral parts of this
statement.
23
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Historical Pro forma adjustments
----------------------------------------- --------------------------------------
Other Other 10%
Razorfish Spray acquisitions(b) Spray acquisitions option Pro forma
----------- ----------- --------------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $13,843,289 $15,402,000 $1,728,763 $ -- $ -- $ -- $30,974,052
Direct salaries and
costs.................. 7,769,752 13,111,000 1,681,737 -- -- -- 22,562,489
----------- ----------- ---------- ----------- -------- -------- -----------
Gross profit............ 6,073,537 2,291,000 47,026 -- -- -- 8,411,563
Sales and marketing..... 438,204 757,000 164,222 -- -- -- 1,359,426
General and
administrative......... 2,897,064 2,763,000 269,223 -- -- -- 5,929,287
Amortization of
intangibles............ 106,634 331,000 -- 1,958,200 (h) 64,126 (h) -- 2,459,960
Non-cash compensation
expense................ 2,278,281 -- -- -- -- -- 2,278,281
----------- ----------- ---------- ----------- -------- -------- -----------
Income (loss) from
operations............. 353,354 (1,560,000) (386,419) (1,958,200) (64,126) -- (3,615,391)
Interest expense
(income), net.......... 241,342 235,000 5,342 -- -- (481,684)(i) --
Minority interests...... -- (319,000) -- -- -- -- (319,000)
----------- ----------- ---------- ----------- -------- -------- -----------
Income (loss) before
income taxes........... 112,012 (1,476,000) (391,761) (1,958,200) (64,126)(k) 481,684 (3,296,391)
Provision (benefit) for
income taxes........... 454,813 -- (181,227) -- -- -- 273,586
----------- ----------- ---------- ----------- -------- -------- -----------
Net (loss) income....... $ (342,801) $(1,476,000) $ (210,534) $(1,958,200) $(64,126) $481,684 $(3,569,977)
=========== =========== ========== =========== ======== ======== ===========
Per share information:
Net loss per share:
Basic................... $ (0.04) $ (0.17)
=========== ===========
Diluted................. $ (0.04) $ (0.17)
=========== ===========
Weighted average common
shares outstanding:
Basic................... 9,223,821 21,081,665(l)
=========== ===========
Diluted................. 9,670,522 21,528,366(l)
=========== ===========
</TABLE>
The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated financial statements are integral parts of this
statement.
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(a)Spray Services acquisition
On September 1, 1997, Spray acquired substantially all of the
assets of the Spray Services AB group of companies from Spray
Ventures for 1,162 newly issued shares of Spray, representing 51% of
the then outstanding shares of common stock of Spray. The new shares
were valued at $1,967,000; Spray paid $86,000 in direct costs,
resulting in a total purchase price of $2,053,000. This acquisition
was accounted for as a purchase; accordingly, the operating results
of Spray Services since September 1, 1997 have been included in
Spray's consolidated financial statements.
The historical Spray Ventures consolidated statement of
operations include the results of operations of Spray Services and
two subsidiaries of Spray not acquired by Razorfish. All revenue for
the year ended December 31, 1997 was generated by Spray Services and
the two subsidiaries not acquired by Razorfish. Spray Ventures, on a
stand-alone basis, incurred certain costs for the year ended
December 31, 1997.
(b) Other acquisitions
The historical "Other acquisitions" column for the year ended
December 31, 1997 includes the full-year results of operations for
the acquired companies, other than Spray, Spray Services and
Avalanche Systems which are presented in separate columns.
The historical "Other acquisitions" column for the year ended
December 31, 1998 includes the results of operations for the
acquired companies, other than Spray, for the period of January 1,
1998 through the respective acquisition dates described below.
Avalanche Systems acquisition
On January 15, 1998, the Company purchased a 66 2/3% ownership
interest from the shareholders of a newly formed corporation,
Avalanche Solutions, Inc. In connection with this transaction,
Avalanche Solutions acquired substantially all of the assets of
Avalanche Systems, Inc. from Fleet Bank National Association and
Fleet Bank Capital Corporation in a foreclosure sale. These assets
were seized from Avalanche Systems, whose shareholders were the
holders of the remaining 33 1/3% of the capital stock of Avalanche
Solutions. In April 1998, the Company purchased this 33 1/3%
ownership interest in Avalanche Solutions. The total cash
consideration for all stock and net assets acquired was
approximately $1,294,000.
These acquisitions have been accounted for under the purchase
method of accounting; accordingly, the purchase price has been
allocated to the tangible and intangible assets acquired and
liabilities assumed on the basis of their respective fair values on
their respective acquisition dates. As a result of these
acquisitions, the Company has recorded goodwill of approximately
$789,000, which is the excess cost of net assets acquired and is
being amortized over a useful life of 20 years.
CHBi acquisition
On May 21, 1998, Razorfish acquired all of the outstanding stock
of CHBi Limited for cash consideration of $2,028,000. Razorfish is
required to make certain cash earn-out payments to the former
shareholders of CHBi based upon the achievement of targeted
operating performance of the company through May 2001. No earn-out
payments have been earned to date. Further earn-out payments, if
any, will be recorded as additional purchase price and, as such, a
corresponding
25
<PAGE>
adjustment to goodwill. This acquisition was accounted for as a
purchase; accordingly, the operating results of CHBi since June 1,
1998 have been included in Razorfish's consolidated financial
statements.
Plastic acquisition
On June 26, 1998, Razorfish acquired substantially all of the
assets of Alpha On-line, Inc. d/b/a Plastic and Plasticweb for cash
consideration of $686,000. Razorfish is required to make certain
cash earn-out payments to the former shareholders of Plastic based
upon the achievement of targeted operating performance of the
company through December 2001. No earn-out payments have been earned
to date. Further earn-out payments, if any, will be recorded as
additional purchase price and, as such, a corresponding adjustment
to goodwill. This acquisition was accounted for as a purchase;
accordingly, the operating results of Plastic since June 1, 1998
have been included in Razorfish's consolidated financial statements.
<tag> Media acquisition
On July 30, 1998, Razorfish acquired substantially all of the
assets of Titus Anspach Group, LLC d/b/a <tag> Media for cash
consideration of $256,000. Razorfish is required to make certain
cash earn-out payments to the former shareholders of <tag> Media
based upon the achievement of targeted operating performance of the
company through December 2001. No earn-out payments have been earned
to date. Further earn-out payments, if any, will be recorded as
additional purchase price and, as such, a corresponding adjustment
to goodwill. This acquisition was accounted for as a purchase;
accordingly, the operating results of <tag> Media since August 1,
1998 have been included in Razorfish's consolidated financial
statements.
Sunbather acquisition
On October 26, 1998, Razorfish acquired substantially all of the
assets of Sunbather Limited from an administrator appointed for the
company for cash consideration of $289,653. This acquisition was
accounted for as a purchase; the purchase price has been allocated
to the tangible and intangible net assets acquired and liabilities
assumed on the basis of their respective fair values on the
acquisition date. The operating results of Sunbather since October
1, 1998 have been included in Razorfish's consolidated financial
statements.
(c) Revenues
Reflects the elimination of revenues related to two subsidiaries
of Spray not acquired by Razorfish.
(d) Direct salaries and costs
Reflects the elimination of direct salaries and costs related to
Spray Ventures and two subsidiaries of Spray not acquired by
Razorfish.
(e) Sales and marketing
Reflects the elimination of sales and marketing expenses related
to Spray Ventures and two subsidiaries of Spray not acquired by
Razorfish.
(f) General and administrative
Reflects the elimination of general and administrative expenses
related to Spray Ventures and two subsidiaries of Spray not acquired
by Razorfish.
26
<PAGE>
(g) Non-recurring charges
Reflects the elimination of non-recurring charges for Spray
Ventures.
(h) Amortization of intangibles
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1997 1998
----------- -----------
<S> <C> <C>
Amortization of Spray intangibles............. $1,958,200 $ 1,958,200
Amortization of Avalanche Systems goodwill
prior to
January 15, 1998............................. 39,463 --
Amortization of other acquisitions' goodwill
prior to their respective acquisition dates.. 314,604 64,126
----------- -----------
Total pro forma goodwill adjustments........ $ 2,312,267 $ 2,022,326
=========== ===========
</TABLE>
(i) Interest expense (income), net
Reflects the elimination of interest expense for Razorfish,
Spray, Spray Services, Avalanche Systems and the other acquisitions
for the years ended December 31, 1997 and 1998, as if the 10% option
had been exercised on January 1, 1997 and, therefore, no borrowings
would have been incurred by each of the entities due to available
cash resources.
(j) Minority interests
Reflects the elimination of minority interest related to two
subsidiaries of Spray not acquired.
(k) Provision (benefit) for income taxes
Reflects the elimination of benefit for income taxes related to
two subsidiaries of Spray not acquired.
(l) Set forth below are the weighted average shares of Common Stock
outstanding during the periods for the basic and diluted
computations:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Basic:
Historical Razorfish basic................... 9,156,819 9,223,821
Shares issued in acquisition of Spray........ 9,881,034 9,881,034
Shares issued on exercise of Communicade's
10% option.................................. 1,976,810 1,976,810
----------- -----------
Pro forma basic............................. 21,014,663 21,081,665
=========== ===========
Diluted:
Historical Razorfish diluted................. 9,886,241 9,670,522
Shares issued in acquisition of Spray........ 9,881,034 9,881,034
Shares issued on exercise of Communicade's
10% option.................................. 1,976,810 1,976,810
Effect of anti-dilutive common stock
options..................................... (538,560) --
----------- -----------
Pro forma diluted........................... 21,205,525 21,528,366
=========== ===========
</TABLE>
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
each of Razorfish's and Spray's consolidated financial statements and notes
thereto and "Unaudited Pro Forma Condensed Consolidated Financial Information"
included elsewhere in this prospectus. This prospectus contains forward-looking
statements relating to future events and Razorfish's future financial
performance. Actual results could be significantly different than those
discussed in this prospectus. Factors that could cause or contribute to such
differences include those set forth in the section entitled "Risk Factors," as
well as those discussed elsewhere in this prospectus.
Unless otherwise indicated, all references to Razorfish refer to Razorfish
and, subsequent to their acquisition or formation, its subsidiaries, including
Spray.
Overview
Razorfish is a leading-edge international digital communications solutions
provider. Razorfish's digital communications solutions help clients increase
sales, improve communications and create business identities. Razorfish
provides an integrated service offering consisting of strategic consulting,
design of information architectures and user-interfaces and creation and
customization of software necessary to implement its digital communications
solutions. Razorfish primarily uses Internet-based technologies to create
digital communications solutions for the World Wide Web. However, Razorfish's
solutions will increasingly incorporate additional communications technologies,
such as wireless, satellite and broadband communications, for use with a
variety of digital devices and information appliances, including mobile phones,
pagers and personal digital assistants. Prior to its acquisition, Spray was
engaged in the same business, with the same business philosophy and strategy as
Razorfish.
Razorfish's revenues are derived from fees for services generated on a
project-by-project basis. In general, clients are charged for the time,
materials and expenses incurred on a particular project; however, a portion of
Razorfish's revenues is derived from fixed-fee contracts. Historically,
Razorfish has not operated on a retainer basis; however, in the future,
Razorfish may utilize such arrangements.
Razorfish recognizes revenues for time and materials-based arrangements and
fixed-fee arrangements on the percentage-of-completion method of accounting
based on the ratio of costs incurred to total estimated costs. At the beginning
of each fixed-fee engagement, Razorfish estimates the total cost of the
project. Razorfish reassesses its estimated costs for each project on a
quarterly basis, and provisions for estimated losses on unfinished projects are
made over the life of the project in the period in which such losses are
determined.
The agreements entered into in connection with a project, whether time and
materials or fixed-fee based, are generally terminable by the client upon 30-
days' prior written notice. If the client terminates the agreement, it is
required to pay Razorfish for all time, materials and expenses incurred by
Razorfish through the effective date of termination. If clients terminate
existing agreements or if Razorfish is unable to enter into new engagements,
Razorfish's business, financial condition and results of operations could be
materially and adversely affected.
In addition, because a proportion of Razorfish's expenses are relatively
fixed, a variation in the number of client engagements can cause significant
variations in operating results from quarter to quarter.
Razorfish's projects vary in size and scope; therefore, a client that
accounts for a significant portion of Razorfish's revenues in one period may
not generate a similar amount of revenue in subsequent periods. On a pro forma
basis assuming all of the 1998 and 1999 acquisitions had occurred on January 1,
1997, Charles Schwab would have accounted for approximately 12.1% of revenues
for 1998, and no client would have accounted for more than 10.0% of revenues in
1997.
28
<PAGE>
Charles Schwab accounted for approximately 27.1% of Razorfish's actual
revenues in 1998. In 1997, the following clients accounted for the percentage
of Razorfish's actual revenues set forth opposite their respective names:
<TABLE>
<CAPTION>
Percent of
Client 1997 revenues
------ -------------
<S> <C>
CBS......................................................... 19.5%
AT&T........................................................ 16.2
Road Runner................................................. 14.1
Charles Schwab.............................................. 13.7
</TABLE>
Hagstromer & Qviberg accounted for 15.0% of Spray's actual revenues for 1998.
Telia and SAS accounted for approximately 17.0% and 12.0% of Spray's actual
revenues, respectively, during 1997. No other client of Razorfish or Spray
accounted for more than 10% of Razorfish's or Spray's actual revenues in 1998
or 1997.
Razorfish believes that it will continue to derive a significant portion of
its revenues from a limited number of larger clients. Any cancellation,
deferral or significant reduction in work performed for these principal clients
or a significant number of smaller clients could have a material adverse effect
on our business, financial condition and results of operations.
Operating and other expenses
Razorfish's direct salaries and costs are comprised primarily of salaries,
employee benefits and incentive compensation of billable employees and a
proportionate share of all other operating expenses based on the ratio of
billable to total employees.
Razorfish's sales and marketing expenses are comprised of the salaries of
employees who engage in sales and marketing activities and the costs of those
activities.
Razorfish's general and administrative expenses are comprised of the
salaries, employee benefits and incentive compensation of non-billable
employees and a proportionate share of all other operating expenses based on
the ratio of non-billable to total employees.
Razorfish's non-cash compensation expense is comprised of the compensation
cost associated with the difference between the fair market value of options
granted and the exercise price of such options over the vesting period of the
options. Razorfish will incur a maximum of approximately $341,000 in 1999,
$141,000 in 2000 and $28,000 in 2001 in non-cash compensation expense relating
to the grant of certain options to employees in 1997 and 1998. Such amounts may
decrease if employees depart Razorfish before their options are fully vested.
Acquisitions
Razorfish completed five acquisitions during 1998. Razorfish also acquired
Spray and certain of its subsidiaries in the first quarter of 1999. Razorfish
acquired substantially all of the assets of:
(1) Sunbather, a London-based new media company, in October 1998;
(2) <tag> Media, a Los Angeles-based new media entertainment consultant, in
July 1998;
(3) Plastic, a San Francisco-based new media company, in June 1998; and
(4) Avalanche Systems, a New York-based new media company, in January 1998.
In May 1998, Razorfish acquired all of the capital stock of CHBi, a London-
based new media company. In January 1999, Razorfish acquired all of the capital
stock of Spray for 50% of Razorfish's Common Stock on a fully diluted basis
(after giving effect to this acquisition). See "Business--Other
acquisitions"and "Business--Spray acquisition."
The following table sets forth, for each line item shown, the amounts
attributable to certain of Razorfish's 1998 acquisitions. When Razorfish
acquired Avalanche Systems it combined Avalanche Systems' operations with
Razorfish's existing New York operations; therefore, no separate information
for Avalanche Systems is presented.
29
<PAGE>
In addition, when Razorfish acquired Sunbather, it combined Sunbather's
operations with CHBi's existing operations; therefore, the amounts for those
companies are presented together.
<TABLE>
<CAPTION>
Razorfish Los Angeles Razorfish Limited
(formerly <tag> Razorfish San Francisco (formerly CHBi
Media) (formerly Plastic) and Sunbather)
--------------------- ----------------------- -----------------
(in thousands)
<S> <C> <C> <C>
Revenue................. $398 $1,228 $1,700
Direct salaries and
costs.................. 300 602 1,199
---- ------ ------
Gross profit............ 98 626 501
Sales and marketing..... 27 35 48
General and
administrative......... 123 163 173
Amortization of
goodwill............... 5 6 --
---- ------ ------
Income (loss) from
operations............. (57) 422 280
Interest expense, net... 5 6 2
---- ------ ------
Income (loss) before
income taxes........... (62) 416 278
Provision (benefit) for
income taxes........... (20) 171 94
---- ------ ------
Net income (loss)....... $(42) $ 245 $ 184
==== ====== ======
</TABLE>
Spray Ventures was incorporated in July 1995 and had a total of seven
operating companies by early 1997. In August 1997, Spray Ventures established a
wholly owned subsidiary, Spray Services, and transferred all but one of its
operating subsidiaries to Spray Services. Spray Ventures then transferred
substantially all of the assets of Spray Services to Tetre AB in consideration
for shares equal to 51% of Tetre immediately following the transfer. In
connection with this transfer, Spray Ventures also granted the Tetre
shareholders an option to purchase shares equal to 1% of Tetre, and Tetre AB
changed its name to Spray.
In February 1998, Spray Ventures transferred its remaining operating company
to Spray in consideration for additional shares in Spray such that Spray
Ventures' holdings in Spray equaled 58%. In connection with this transfer,
Spray Ventures cancelled the option granted to the former Tetre shareholders to
purchase 1% of Spray.
During the second quarter of 1998, the former Tetre shareholders converted
their remaining 42% ownership interest in Spray into 42% of Spray Ventures,
and, as a result, Spray became 100% owned by Spray Ventures. See "Business--
Spray acquisition."
Seasonality
In general, the laws of the European countries in which Razorfish operates
mandate that all employees receive significantly more vacation days than in the
United States. For example, in Sweden, each employee must receive a minimum of
25 days paid vacation per year. These vacations are typically taken in the
third quarter, resulting in declining revenues during this period due to a
reduction in both billable hours and client demand.
Quarter-to-quarter fluctuations in margins
Razorfish's operating results and quarter-to-quarter margins may fluctuate
in the future as a result of many factors, some of which are beyond Razorfish's
control. Historically, Razorfish's and Spray's quarterly margins have been
impacted by:
. the number of client engagements undertaken or completed;
. a change in the scope of ongoing client engagements;
. seasonality;
. a shift from fixed-fee to time and materials-based contracts;
. the number of days during the quarter;
30
<PAGE>
. utilization rates of employees;
. marketing and business development expenses;
. charges relating to strategic acquisitions;
. pricing changes in the information technology market; and
. economic conditions generally or in the information technology services
market.
Razorfish expects this trend to continue.
Results of operations
The following table sets forth certain consolidated statement of operations
data of Razorfish both in actual dollars and as a percentage of revenues for
the period indicated:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------
1996 1997 1998
---------------- --------------- ----------------
Percent Percent Percent
of of of
Amount revenues Amount revenues Amount revenues
------ -------- ------ -------- ------ --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 1.22 100.0% $3.62 100.0% $13.84 100.0%
Direct salaries and
costs.................. 0.90 73.5 1.91 52.7 7.77 56.1
------ ----- ----- ----- ------ -----
Gross profit............ 0.32 26.5 1.71 47.3 6.07 43.9
Sales and marketing..... 0.13 10.6 0.17 4.8 0.44 3.2
General and
administrative......... 0.50 41.1 0.88 24.2 2.89 20.9
Amortization of
goodwill............... -- -- -- -- 0.11 0.8
Non-cash compensation
expense................ -- -- 0.08 2.2 2.28 16.5
------ ----- ----- ----- ------ -----
Income (loss) from
operations............. (0.31) (25.2) 0.58 16.1 0.35 2.5
Interest expense, net... -- -- 0.02 0.5 0.24 1.7
------ ----- ----- ----- ------ -----
Income (loss) before
income taxes........... (0.31) (25.2) 0.56 15.6 0.11 0.8
Provision (benefit) for
income taxes........... (0.06) (4.7) 0.26 7.3 0.45 3.3
------ ----- ----- ----- ------ -----
Net income (loss)....... $(0.25) (20.9)% $0.30 8.3% $(0.34) (2.5)%
====== ===== ===== ===== ====== =====
</TABLE>
The following table sets forth certain consolidated statement of operations
data of Spray both in actual dollars and as a percentage of revenues for the
period indicated:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1996 1997 1998
--------------- ---------------- ----------------
Percent Percent Percent
of of of
Amount revenues Amount revenues Amount revenues
------ -------- ------ -------- ------ --------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $5.32 100.0% $7.82 100.0% $15.40 100.0%
Direct salaries and costs... 4.39 82.6 7.26 92.8 13.11 85.1
----- ----- ------ ------ ------ ------
Gross profit................ 0.93 17.4 0.56 7.2 2.29 14.9
Sales and marketing......... 0.35 6.5 0.40 5.1 0.76 4.9
General and administrative.. 0.26 4.8 0.96 12.3 2.76 17.9
Amortization of goodwill.... -- -- 0.09 1.2 0.33 2.2
----- ----- ------ ------ ------ ------
Income (loss) from
operations................. 0.32 6.1 (0.89) (11.4) (1.56) (10.1)
Interest income (expense),
net........................ -- -- 0.09 1.2 (0.24) (1.6)
----- ----- ------ ------ ------ ------
Income (loss) before
minority interest and
income taxes............... 0.32 6.1 (0.80) (10.2) (1.80) (11.7)
Minority interest........... -- -- (0.09) (1.1) (0.32) (2.0)
----- ----- ------ ------ ------ ------
Income (loss) before income
taxes...................... 0.32 6.1 (0.71) (9.1) (1.48) (9.7)
Provision (benefit) for
income taxes............... 0.24 4.5 (0.02) 0.3 -- --
----- ----- ------ ------ ------ ------
Net income (loss)........... $0.08 1.6% $(0.69) (8.8)% $(1.48) (9.7)%
===== ===== ====== ====== ====== ======
</TABLE>
31
<PAGE>
Year ended December 31, 1998 compared to year ended December 31, 1997
Revenues
Razorfish's revenues increased $10.2 million, or 282.7%, to $13.8 million
for the year ended December 31, 1998 from $3.6 million for the year ended
December 31, 1997. This increase in revenues was primarily due to (1) the
growth in Razorfish's New York operations as a result of the increase in the
number, complexity and length of the projects completed, an increase in the
billing rates of Razorfish's employees and the amount spent per project by
clients and (2) the five acquisitions completed during 1998. Revenues for the
New York operations increased to $9.9 million in 1998 from $3.6 million in
1997. The increase in revenues was also partially due to a shift from fixed-fee
to time and materials based contracts.
Spray's revenues increased $7.6 million, or 97.0%, to $15.4 million for 1998
from $7.8 million for 1997. This increase in revenues was due to the growth in
Spray's Stockholm operations as a result of (1) the acquisition of Spray
Services in August 1997, an increase in the number, complexity and length of
the projects completed and the amount spent per project by clients and (2) the
inclusion of a full-year of the results of operations of three new subsidiaries
that began operations during the fourth quarter of 1997. Revenues for the
Stockholm operations increased to $12.0 million in 1998 from $7.2 million in
1997. Spray's revenues in 1998 were partially offset by the disruption of
operations in connection with the move to new office space and a change in
management in Spray's Stockholm office during the third quarter of 1998.
Pro forma revenues for Razorfish would have increased $13.2 million, or
73.9%, to $31.0 million for 1998 from $17.8 million for 1997.
Direct salaries and costs
Razorfish's direct salaries and costs increased $5.9 million, or 307.6%, to
$7.8 million for 1998 from $1.9 million for 1997. As a percentage of revenues,
direct salaries and costs increased to 56.1% during 1998 from 52.7% during
1997. The increase in direct salaries and costs in absolute dollar terms was a
result of the increase in the number of billable employees. The increase in
direct salaries and costs as a percentage of revenues was a result of higher
direct costs as a percentage of revenues for the London and Los Angeles offices
as employees were added ahead of proportionate increases in revenues. The
increase was partially offset by improvements in gross margins in New York and
the high revenues generated by the San Francisco office and an increase in the
size and complexity of projects and more efficient staffing of such projects.
Spray's direct salaries and costs increased $5.9 million, or 80.6%, to $13.1
million for 1998 from $7.3 million for 1997. As a percentage of revenues,
salaries and direct costs decreased to 85.1% during 1998 from 92.8% during
1997. This increase in absolute dollar terms was due to the increase in the
number of billable employees and an increase in January 1998 of the salary
rates of the former employees of Spray Services. The decrease in salaries and
direct costs as a percentage of revenues was due to efficiencies and higher
gross margins realized at Spray's offices.
Pro forma direct salaries and costs would have increased $7.4 million, or
49.1%, to $22.6 million for 1998 from $15.1 million for 1997. As a percentage
of pro forma revenues, pro forma direct salaries and costs would have decreased
to 72.9% during 1998 from 84.9% during 1997.
Sales and marketing
Razorfish's sales and marketing expenses increased $0.3 million, or 151.0%,
to $0.4 million for 1998 from $0.2 million in 1997. As a percentage of
revenues, sales and marketing expenses decreased to 3.2% during 1998 from 4.8%
during 1997. The increase in sales and marketing expenses in absolute dollar
terms was primarily due to an increase in the number of solutions managers
spending a portion of their time on sales and marketing activities. The
decrease in sales and marketing expenses as a percentage of revenues was the
result of efficiencies gained as a result of the growth in the size of
Razorfish's operations.
32
<PAGE>
Spray's sales and marketing expenses increased $0.4 million, or 91.7%, to
$0.8 million for 1998 from approximately $0.4 million for 1997. As a percentage
of revenues, sales and marketing expenses decreased to 4.9% during 1998 from
5.1% during 1997. The increase in absolute dollar terms was primarily due to an
increase in the number of employees participating in sales, marketing and
recruiting activities. The decrease in sales and marketing expenses as a
percentage of revenues was the result of efficiencies gained as a result of the
growth in the size of Spray's operations.
Pro forma sales and marketing expenses would have increased $0.7 million, or
92.6%, to $1.4 million for 1998 from $0.7 million in 1997. As a percentage of
pro forma revenues, pro forma sales and marketing expenses would have increased
to 4.4% during 1998 from 4.0% during 1997.
General and administrative
Razorfish's general and administrative expenses increased $2.0 million, or
230.5%, to $2.9 million in 1998 from $0.9 million in 1997. As a percentage of
revenues, general and administrative expenses decreased to 20.9% during 1998
from 24.2% in 1997. The increase in general and administrative expenses in
absolute dollar terms was the result of the increase in the number of non-
billable employees and an increase in other types of general and administrative
expenses, such as salaries, rent expense, equipment rental and depreciation.
The increase in the number of non-billable employees was the result of (1) an
increase in the number of support staff hired in connection with the
acquisitions and the growth in the size of Razorfish's operations and (2) a
shift in the classification of certain department heads in Razorfish's larger
offices from billable to non-billable employees because they spent a greater
portion of their time on management functions instead of on billable projects.
The decrease in general and administrative expenses as a percentage of revenues
was due to efficiencies gained as a result of the growth in the size of
Razorfish's operations. In addition, the expansion of Razorfish's operations to
locations where rent expenses were lower, such as San Francisco, and the
decrease in the number of non-billable employees in proportion to the total
number of employees in a given office has also contributed to the decrease in
general and administrative expenses as a percentage of revenues.
Spray's general and administrative expenses increased $1.8 million, or
186.3%, to $2.8 million for 1998 from $1.0 million for 1997. As a percentage of
revenues, general and administrative expenses increased to 17.9% during 1998
from 12.4% during 1997. This increase in general and administrative expenses in
absolute dollar terms was the result of the increase in the number of non-
billable employees and an increase in other types of general and administrative
expenses, such as salaries, rent expenses, equipment rental and depreciation.
The increase in general and administrative expenses as a percentage of revenues
was primarily due to the costs incurred in connection with the move of the
Stockholm office to new office space in the third quarter of 1998.
Pro forma general and administrative expenses would have increased $1.5
million, or 34.1%, to $5.9 million for 1998 from $4.4 million for 1997. As a
percentage of pro forma revenues, pro forma general and administrative expenses
would have decreased to 19.2% during 1998 from 24.8% during 1997.
Non-cash compensation expense
Non-cash compensation expense increased to $2.3 million in 1998 from
approximately $79,000 in 1997. This increase was due, primarily, to a one-time
compensation charge of $1.9 million that was incurred in the second quarter of
1998 as a result of the grant of fully vested options to purchase 500,000
shares of Common Stock at an exercise price below the fair market value of the
Common Stock on the date of grant. These options were granted to an officer of
Razorfish pursuant to an employment agreement entered into by Razorfish and the
officer in connection with the acquisition by Razorfish of Avalanche Systems.
See "Business--Other acquisitions."
Amortization of goodwill
Amortization of goodwill for Razorfish was approximately $0.1 million in
1998 compared to none for 1997. This increase in amortization of goodwill was
due to the goodwill resulting from the five acquisitions completed during 1998.
Amortization of goodwill for Spray was $0.3 million for 1998 compared to $0.1
33
<PAGE>
million for 1997. This increase was the result of the full-year effect of
amortizing the goodwill associated with the subsidiaries of Spray that began
operations in the fourth quarter of 1997. Pro forma amortization of goodwill
would have increased $59,000 to $2.5 million for 1998 from $2.4 million for
1997.
Income taxes
Razorfish had income taxes of $0.5 million on pre-tax profits of $0.1
million during 1998. During 1997, Razorfish had income taxes of $0.3 million on
pre-tax profits of $0.6 million. The effective income tax rate was 406.0% and
47.1% during 1998 and 1997, respectively. The differences in the effective tax
rates during 1998 and 1997 from the federal and state statutory rates are
primarily the result of non-tax deductible expenses, including (1) compensation
charges incurred in connection with the grant of incentive stock options in
1998 of $1.9 million and (2) goodwill of $0.1 million in connection with the
five acquisitions completed in 1998.
Spray had no tax charge for 1998 on pre-tax losses of $1.5 million during
such period. During 1997, Spray had a tax benefit of $24,000 on pre-tax losses
of $0.7 million. During 1997 and 1998, Spray did not book a tax benefit due to
uncertainties of its future realizability as a result of the restructuring of
Spray that occurred in August 1997 and January 1999 and the existence of net
operating losses from previous tax periods.
Pro forma income taxes would have decreased to a $0.3 million tax charge for
1998 on pro forma pre-tax losses of $3.3 million from a pro forma tax charge of
$0.4 million on pro forma pre-tax losses of $4.3 million for 1997. The pro
forma effective income tax rate would have been 8.3% and 8.2% for 1998 and
1997, respectively. The tax charges for 1998 and 1997 were primarily due to the
non-deductibility of the amortization of goodwill relating to the acquisition
of Spray and was also affected because Spray did not book a tax benefit due to
uncertainties of its future realizability and the existence of net operating
losses from previous periods.
Year ended December 31, 1997 compared to year ended December 31, 1996
Revenues
Razorfish's revenues increased $2.4 million, or 197.0%, to $3.6 million for
1997 from $1.2 million for 1996. This increase in revenues was primarily the
result of the growth in the Razorfish's business due to a larger client base
and an increase in the number, complexity and length of the projects completed
and a shift from fixed-fee to time and materials based contracts.
Spray's revenues increased $2.5 million, or 47.0%, to $7.8 million for 1997
from $5.3 million for 1996. This increase in revenues was due to the growth in
Spray's Stockholm office as a result of the acquisition of Spray Services in
August 1997, as well as the addition of the results of operations of three new
subsidiaries in the fourth quarter of 1997.
Direct salaries and costs
Razorfish's direct salaries and costs increased $1.0 million, or 112.9%, to
$1.9 million for 1997 from $0.9 million for 1996. As a percentage of revenues,
direct salaries and costs decreased to 52.7% during 1997 from 73.5% during
1996. The increase in direct salaries and costs in absolute dollar terms was
the result of an increase in the number of billable employees hired in 1997 and
an increase in billable employees' salary rates to bring them in line with
those provided by other companies in the industry. The decrease in direct
salaries and costs as a percentage of revenues was due to more efficient
staffing of larger and more complex projects.
Spray's direct salaries and costs increased $2.9 million, or 65.3%, to $7.3
million for 1997 from $4.4 million for 1996. As a percentage of revenues,
direct salaries and costs increased to 92.8% during 1997 from 82.6% during
1996. This increase in absolute dollar terms was due to an increase in the
number of billable employees. The increase in direct salaries and costs as a
percentage of revenues was primarily due to the impact of integrating Spray
Services into Spray following its acquisition which reduced the availability of
Spray's professionals to generate revenues.
34
<PAGE>
Sales and marketing
Razorfish's sales and marketing expenses increased approximately $46,000 or
35.4%, to $0.2 million during 1997 from $0.1 million for 1996. The increase in
sales and marketing expenses in absolute dollar terms was primarily due to an
increase in the number of solutions managers spending a portion of their time
on sales and marketing activities. As a percentage of revenues, sales and
marketing expenses decreased to 4.8% during 1997 from 10.6% in 1996.
Spray's sales and marketing expenses increased $0.1 million, or 12.9%, to
$0.4 million for 1997 from $0.3 million for 1996. As a percentage of revenues,
sales and marketing decreased to 5.1% during 1997 from 6.5% during 1996. This
decrease in sales and marketing expenses as a percentage of revenues was the
result of efficiencies gained as a result of the growth in the size of Spray's
operations.
General and administrative
Razorfish's general and administrative expenses increased $0.4 million, or
75.3%, to $0.9 million for 1997 from $0.5 million for 1996. As a percentage of
revenues, general and administrative expenses decreased to 24.2% during 1997
from 41.1% during 1996. The increase in general and administrative expenses in
absolute dollar terms was due to the increase in the number of non-billable
employees hired in 1997, the growth in the Razorfish's operations and the
rental of additional office space in New York City. The decrease in general and
administrative expenses as a percentage of revenues was due to efficiencies
gained as a result of the growth in the size of Razorfish's operations.
Spray's general and administrative expenses increased $0.7 million, or
277.0%, to $1.0 million for 1997 from $0.3 million for 1996. As a percentage of
revenues, general and administrative expenses increased to 12.3% during 1997
from 4.8% during 1996. This increase in general and administrative expenses,
both in absolute dollar terms and as a percentage of revenues, was the result
of the increase in the number of non-billable employees and an increase in all
the other types of general and administrative expenses.
Income taxes
Razorfish's income taxes increased to approximately $0.3 million on pre-tax
profits of $0.6 million for 1997 compared to a tax benefit of approximately
$57,000 on pre-tax losses of $0.3 million for 1996. The effective income tax
rate was 47.1% for 1997 and 18.3% for 1996. The tax benefit for 1996 was
reduced by the effect of change in Razorfish's status from an "S" corporation
to a "C" corporation in 1996.
Spray had a benefit from income taxes of approximately $24,000 on pre-tax
losses of $0.7 million during 1997. During 1996, Spray had a tax charge of $0.2
million on pre-tax profits of $0.3 million. The effective income tax rate was
3.3% and 74.8% for 1997 and 1996, respectively. The differences in the
effective tax rates for 1997 and for 1996 from the statutory Swedish tax rates
are primarily due to the non-deductibility of certain expenses.
Liquidity and capital resources
Historically, Razorfish has relied on borrowings under lines of credit
provided by Omnicom to finance its working capital requirements and capital
expenditures.
Historically, Spray has relied on cash flow from operations, capital
contributions and proceeds from the issuance of convertible debt to finance its
working capital requirements and capital expenditures.
Net cash provided by (used in) operating activities
Razorfish's net cash provided by operating activities was $2.1 million for
1998 compared to net cash used in operating activities of approximately $0.3
million for 1997. Net cash provided by operating activities in 1998 was
primarily due to an addback of $2.7 million for depreciation and amortization
and non-cash compensation expense as well as an increase in accounts payable,
accrued expenses and amounts owed to related parties.
35
<PAGE>
The net cash used in operating activities of $0.3 million in 1997 was primarily
due to an increase in accounts receivable related to the growth in Razorfish's
New York operations and an increase in the number of clients and in the number
and size of projects. Net cash used in operating activities was approximately
$0.2 million in 1996.
Spray's net cash used in operating activities was approximately $0.1 million
for 1998 compared to net cash provided by operating activities of $0.3 million
for 1997. Net cash used in operating activities for 1998 was primarily the
result of a net loss and an increase in accounts receivable, prepaid expenses
and other current assets which was partially offset by a significant increase
in other current liabilities and accrued expenses. Net cash provided by
operating activities in 1997 was primarily due to an increase in accounts
payable, accrued expenses and other current liabilities. Net cash provided by
operating activities was $0.4 million for 1996.
Net cash used in investing activities
Razorfish's net cash used in investing activities was $5.2 million for 1998
compared to net cash used in investing activities of approximately $0.3 million
for 1997. Net cash used in investing activities in 1998 was primarily used for
the acquisition of five companies during this period and was also used for
capital expenditures consisting primarily of the purchase of computer
equipment, furniture and fixtures and leasehold improvements. Net cash used in
investing activities was approximately $0.2 million in 1996.
Spray's net cash used in investing activities was $1.4 million for 1998
compared to net cash used in investing activities of $0.6 million for 1997. Net
cash used in investing activities in 1998 was primarily used for capital
expenditures and investments in the three new subsidiaries that began
operations in the fourth quarter of 1997. Net cash used in investing activities
in 1997 was due to the investment in the new subsidiaries, net of cash
acquired, and capital expenditures consisting primarily of the purchase of
computer equipment and leasehold improvements. Net cash used in investing
activities was approximately $0.1 million for 1996.
Net cash provided by financing activities
Razorfish's net cash provided by financing activities was $2.6 million and
approximately $1.7 million for 1998 and 1997, respectively. This increase was
primarily the result of additional borrowings under the lines of credit
provided by Omnicom in connection with the five acquisitions during 1998 which
was partially offset by deferred registration costs and the purchase of
treasury stock. Net cash provided by financing activities was approximately
$0.5 million in 1996.
Spray's net cash provided by financing activities was $1.8 million and $0.7
million for 1998 and 1997, respectively. The increase in net cash provided by
financing activities was primarily the result of an increase in related-party
debt, the conversion of debt to a capital contribution and the exercise of
options to purchase Common Stock. Net cash used in financing activities was
$0.3 million for 1996.
Capital expenditures, earn-out payments and rent expenses
Razorfish's capital expenditures for 1998 were approximately $0.7 million
compared to approximately $0.3 million for 1997. Capital expenditures were
approximately $0.2 million for 1996. Historically, capital expenditures have
been used to make leasehold improvements to Razorfish's leased office space and
to purchase computer hardware and software and furniture and fixtures.
Razorfish does not have any material commitments for capital expenditures for
the forseeable future. Razorfish does not expect to make payments greater than
$250,000 in 1999 in connection with earn-out arrangements under certain
acquisition agreements. Razorfish may make additional payments in subsequent
years pursuant to these agreements, the amounts of which cannot be determined
at this time.
Spray's capital expenditures were $1.0 million and $0.5 million for 1998 and
1997, respectively. Capital expenditures were approximately $0.1 million for
1996. Historically, capital expenditures have been used to make leasehold
improvements to the Spray's leased office space and to purchase computer
hardware and software. Spray does not have any material commitments for capital
expenditures for the forseeable future.
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<PAGE>
Rental payments for office space leased by Razorfish under current rental
agreements will be $2.6 million in 1999.
Lines of credit and other financings
In September 1996, Razorfish entered into a Shareholders Agreement with
Communicade (f/k/a JWL Associates Corp.), a wholly owned subsidiary of Omnicom,
and Messrs. Dachis and Kanarick, pursuant to which Omnicom agreed that, as long
as it was a shareholder of Razorfish, it would provide Razorfish with a line of
credit of up to $2.0 million for working capital purposes and a financing line
of credit in connection with Razorfish's acquisition of "new media" companies.
The Shareholders Agreement terminated upon the effectiveness of a new
Stockholders Agreement entered into by Razorfish, Communicade, Spray Ventures
and Messrs. Dachis and Kanarick in connection with the acquisition of Spray.
Pursuant to the terms of the Stockholders Agreement, Communicade has provided
the working capital line of credit and the acquisition line of credit to
Razorfish on the same terms and conditions as were set forth in the
Shareholders Agreement. Razorfish repaid all outstanding amounts under the
working capital line of credit in February 1999 with the proceeds from the
exercise of the 10% option by Communicade. As of the date of this prospectus,
Razorfish has approximately $4.0 million outstanding under the acquisition line
of credit. The principal amounts under any loans made pursuant to the
acquisition line of credit are to be repaid quarterly in equal installments
over a seven-year period beginning on the date of the applicable loan. The
Stockholders Agreement terminates on the closing of this offering; accordingly,
Razorfish will no longer have available any revolving line of credit. See
"Certain Transactions."
Pursuant to the terms of the Stockholders Agreement, Communicade was granted
an option to purchase from Razorfish the number of shares of Common Stock equal
to 10% of the Common Stock on a fully diluted basis on the date the option is
exercised. The purchase price per share upon exercise of the 10% Option is
equal to 80% of the price per share to be sold in this offering. In February
1999, Communicade exercised this option and purchased 1,976,810 shares of
Common Stock. The aggregate purchase price that Communicade paid for these
shares was approximately $15.8 million. The final purchase price will be
determined on the closing date of this offering. See "Certain Transactions."
At December 31, 1998, Spray had a loan of SEK 23,576,000 ($2.8 million) due
to Spray Ventures. The terms and conditions of this loan were the same as
Razorfish's borrowings from Omnicom. Razorfish repaid this loan with the
proceeds of the 10% option.
Razorfish provides lines of credit to certain of its subsidiaries under the
same terms and conditions as its borrowings from Omnicom.
Razorfish believes that cash generated by operations combined with the
proceeds of the exercise by Communicade of its 10% option and this offering
will be sufficient to meet its working capital needs for the next twelve
months.
Year 2000
The Year 2000 issue is the potential for system and processing failures of
date-related data arising from the use of two digits by computer-controlled
systems, rather than four digits, to define the applicable year. For example,
computer programs that contain time-sensitive software may recognize a date
using two digits of "00" as the year 1900 rather then the year 2000. This could
result in system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar ordinary business activities. The Year 2000
problem is not limited to information technology systems but may also impact
embedded systems, such as those that control elevators, alarm systems and many
other devices.
Razorfish believes that its internal software and hardware systems will
function properly with respect to dates in the year 2000 and thereafter.
Nonetheless, there can be no assurance in this regard until such systems are
operational in the year 2000. In the judgment of management, Razorfish's
exposure is minimal, the cost of recovery will be insignificant, and its
business will not be adversely impacted.
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Razorfish has examined all of its internal systems that constitute core
components of its operations, including both computer systems and elements of
the office environment. Razorfish has also conducted a complete inventory of
the hardware and software in use by Razorfish in order to verify the state of
Year 2000 compliance of all assets necessary to maintain the operations of
Razorfish during the potential disaster scenarios that Razorfish has
identified.
In connection with its Year 2000 compliance efforts, Razorfish will continue
to purchase and upgrade all desktop and server hardware and software according
to the capital budget in place for 1999. One full-time information services
specialist is dedicated to the completion of the full hardware and software
inventory and the installation of all application software. Razorfish's planned
upgrades to its telephone system and alarm system necessary to support
Razorfish's growth will also result in Year 2000 compliance. In the judgment of
management, the cost of compliance could range from $0.1 million to $0.3
million.
Razorfish has also examined Year 2000 issues as they relate to each third
party with which it has a material relationship, such as its payroll provider
and the supplier of the software used by the accounting department. Razorfish's
investigation into the capabilities of its vendors continues, but Razorfish
expects to receive statements from them of Year 2000 compliance shortly. In the
judgment of management, internally used third-party tools, such as operating
systems, databases and other design and development applications, are 90% Year
2000 compliant and will be fully compliant by June 30, 1999. Management
believes that any failures of these systems would have negligible impact on
Razorfish's operations and would take only a few days to resolve.
Razorfish has verified that its internally developed solutions are Year 2000
compliant. Although as a general matter Razorfish does not specifically warrant
to clients that its work will be Year 2000 compliant, certain clients have
requested and received such warranties. In such cases, Razorfish does not
warrant the compliance of third-party software; rather, Razorfish warrants only
that software created by Razorfish will be Year 2000 compliant. However, even
absent a specific Year 2000 warranty, there is a risk that clients for whom
Razorfish has created or implemented software will attempt to hold Razorfish
liable for any damages that result in connection with Year 2000 issues.
Razorfish has also prepared a contingency plan, which includes the
availability of Year 2000 compliant software on its servers and the
availability of a full complement of trained information services support staff
to deal with unforeseen desktop failures. Razorfish has redundant servers for a
variety of its operating systems to minimize potential outages of server
operations. Regular backups will be supplemented and relocated offsite to
ensure Razorfish's ability to reconstruct its failed systems quickly. Secondary
DNS servers throughout Razorfish will maintain Razorfish's vital Internet
connections.
As part of its analysis of the Year 2000 problem, Razorfish has analyzed the
impact of the "worst case scenario" on its business. The "worst case scenario"
would occur if the statements and warranties of Razorfish's vendors concerning
their Year 2000 compliance and upgrade programs were entirely false, its
current upgrades were unsuccessful and its contingency plan failed, resulting
in a critical systems failure throughout Razorfish. Although management does
not believe that this worst case scenario is likely to occur, if it does occur,
management estimates that it would cost approximately $7.0 million to replace
every single system and keep them operational for one month. The worst case
scenario would include replacing or rebuilding:
.all servers and the related operating systems;
.every date-aware function on the network systems;
.all workstation hardware;
.all general application software programs;
.the financial systems;
.nonfunctioning telecommunications systems;
.climate control systems; and
.every office appliance such as copiers and fax machines.
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Currency fluctuation and the euro conversion
Razorfish does not believe that it is subject to material currency
fluctuations as a result of its international operations. Revenue from the
operations of its subsidiaries, Razorfish Limited (formerly CHBi) and Spray,
are currently denominated primarily in British pounds and the Swedish kroner,
respectively. Razorfish does not plan to repatriate such revenues to the United
States in the foreseeable future. Historically, Razorfish has not experienced
any material changes in quarter-to-quarter operating results due to currency
fluctuations. However, no assurance can be given that quarterly results will
not be impacted in the future, for financial reporting purposes only, due to
the conversion into dollars of non-dollar denominated revenues.
Eleven of the fifteen member states of the European Union have agreed to
adopt the euro as their common legal currency. On January 1, 1999, these
members began the process of converting their native currencies to the euro,
and on that date the euro commenced trading on currency exchanges and became
available for non-cash transactions. For the period from January 1, 1999 to
January 1, 2002 both the euro and the native currencies will be legal tender in
the participating member states. During this period, the conversion rates for
currencies will be determined by a formula that has been established by the
European Commission. On January 1, 2002, new euro-denominated bills and coins
will be fully deployed and all native bills and coins will be withdrawn by July
1, 2002.
In addition, as of January 1, 1999, the new European Central Bank gained the
authority to direct monetary policy with respect to the euro, including money
supply and official interest rates for the euro. Some of the rules and
regulations with regard to the euro have yet to be promulgated and completed by
the European Commission.
While the United Kingdom and Sweden are members of the European Union, they
are not participating in the euro conversion; however, they may elect to
convert to the euro at a later date. Risks related to the conversion to the
euro may not impact Razorfish directly, but could have a materially adverse
effect on its clients' businesses, which could have an indirect effect on their
demand for Razorfish's services. Although Razorfish's management does not
believe that the conversion to the euro will have a material or adverse impact
on its business, they have not completed their assessment of the effect that
the introduction of the euro will have on its business, results of operations
and financial condition.
Recent accounting pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which
establishes standards for reporting and display of comprehensive income and its
components in the financial statements. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
SFAS No. 130 offers alternatives for presentation of disclosures required by
the standard. The adoption of SFAS No. 130 did not have a material impact on
Razorfish's results of operations, financial position or cash flows.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which establishes
standards for reporting information about operating segments in annual
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997. The adoption
of SFAS No. 131 did not have a material impact on Razorfish's results of
operations, financial position or cash flows.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." Statement of Position 98-5, which is
effective for fiscal years beginning after December 15, 1998, provides guidance
on the financial reporting of start-up costs and organization costs. It
requires costs of start-up activities and organization costs to be expensed as
incurred. As Razorfish has expensed these costs historically, the adoption of
this standard is not expected to have a significant impact on Razorfish's
results of operations, financial position or cash flows.
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In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" which establishes accounting and reporting standards of derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. There will be no impact to Razorfish's
results of operations, financial position or cash flows upon the adoption of
this standard.
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BUSINESS
The information in this section includes forward-looking statements which
involve risks and uncertainties. Razorfish's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under the caption "Risk
Factors" and elsewhere in this prospectus.
Overview
Razorfish is a leading-edge international digital communications solutions
provider. Digital communications solutions are business solutions that use
digital technologies to enhance communications and interactions between people
and companies. Examples of our solutions include (1) a re-designed on-line
trading system for Charles Schwab, (2) a user-interface for theglobe.com, (3)
an enhanced on-line business identity for IBM's RS/6000 product line and (4) a
user-interface for Road Runner, the high-speed on-line service that is owned by
ServiceCo, a joint venture among Time Warner, MediaOne, Microsoft and Advance
Newhouse. Razorfish's digital communications solutions help clients increase
sales, improve communications and create business identities.
Razorfish provides an integrated service offering consisting of strategic
consulting, design of information architectures and user-interfaces and
creation and customization of software necessary to implement its digital
communications solutions. Razorfish primarily uses Internet-based technologies
to create digital communications solutions for the World Wide Web. However,
Razorfish's solutions will increasingly incorporate additional communications
technologies, such as wireless, satellite and broadband communications, for use
with a variety of digital devices and information appliances, including mobile
phones, pagers and personal digital assistants.
Razorfish was established in January 1995. Since its inception, Razorfish
has focused on growing in size and expanding the scope of its business to
provide an increasingly wider range of digital communications solutions.
Razorfish's growth has been the result of internal expansion and the
acquisition of five companies in 1998. In January 1999, Razorfish also acquired
Spray, thereby expanding its geographical presence to a total of six countries.
In addition, as a result of this acquisition, Razorfish's employee base was
increased to 380 full time employees.
Industry background
Technology has enhanced the ability of companies to create, store, process
and distribute information. As companies face increasing pressure to operate
more efficiently and to better serve customer needs, information flow both
inside and outside an organization has risen in importance. However, the
escalating cost and complexity of information technology and the technical
expertise required to implement technology-based solutions have led companies
to increasingly rely on information technology service providers. This trend
toward outsourcing and a focus by companies on their core business has driven
the rapid growth of the information technology services market. The information
technology services market has grown most quickly in countries, such as the
United States and those in northern Europe, where high personal computer usage
and technology adoption rates among businesses and consumers provide for large
client bases.
With the growth in the use of the Internet, companies are increasingly
seeking to improve their business practices through digital communications
solutions. Today, digital communications solutions are largely Internet-based.
Forrester Research, Inc. projects that the size of the worldwide Internet
professional services market will grow from $2.4 billion in 1997 to $32.8
billion in 2002, a compound annual growth rate of 68.7%. Internet-based
solutions include intranets, extranets and websites. An intranet is an internal
company network that utilizes various Internet Protocols to allow employees
access to corporate information and internal business applications. An extranet
is a secure Internet Protocol network environment that links the company with
customers and suppliers and effectively integrates the stages involved in the
delivery of the company's products or services. Websites present an opportunity
for electronic commerce, Internet branding and the delivery of information and
entertainment services.
As the informational requirements of companies have become more complex,
organizations have required a broader range of information technology services,
including strategy, architecture design, application
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development and systems integration. Due to this demand for a broader range of
services, various types of service providers have entered the market for
digital communications solutions including Internet service firms, technology
consulting firms, technology integrators and strategic consulting firms.
However, management believes that these competitors generally lack the
creativity, breadth of services or technical expertise needed to fully address
an organization's needs. Furthermore, management believes that firms that focus
solely on Internet-based solutions, such as web design firms, will lack the
technical expertise to deliver non-Internet-based digital communications
solutions that companies are beginning to seek. In addition, because the
information technology services market is fragmented by the cultural and
language differences among countries, management believes that firms that lack
a presence and expertise in local markets are unable to compete as effectively
in those markets. The growing demand for creative digital communications
solutions has led to a significant market opportunity for firms, such as
Razorfish, that combine an international presence with local expertise and
provide an integrated service offering.
The Razorfish approach
Razorfish believes that with the tremendous growth in the use of digital
technologies around the world, companies must re-evaluate their traditional
business models and incorporate digital communications into their organizations
in order to remain competitive. Razorfish helps companies interact effectively,
both internally with employees and externally with vendors, suppliers and
customers, in this new digital environment. Razorfish designs and implements
digital communications solutions to enhance its clients' core business,
operations and communications. In order to service its clients, Razorfish:
Provides an integrated, full-service offering. Razorfish offers an
integrated service offering consisting of strategic consulting, design of
information architectures and end-user interfaces, and creation and
customization of software necessary to implement digital communications
solutions. Its employees have expertise in a broad range of disciplines
including business strategy, marketing, branding, technology and creative
design. Razorfish works with a client from the analysis of its business
problems to the implementation of an appropriate solution. As a result, clients
benefit not only from the time and cost savings of working with a single firm,
but also from the optimized digital communications solutions made possible by
Razorfish's integrated, full-service offering. Management believes that this
differentiates it from other service providers that focus on a single aspect of
the service offering.
Develops and implements high value-added solutions. Razorfish enables its
clients to improve their overall business practices by providing digital
communications solutions that can increase sales, improve communications and
create business identities. Solutions have included the creation of new
distribution channels, the repositioning of on-line brands and the integration
of a client's operations by opening and expanding lines of communication among
the client's employees, customers, distributors and vendors. These high value-
added solutions result in significant opportunities for revenue growth and cost
reduction for Razorfish clients. For example, Razorfish re-designed and
enhanced the on-line trading system for Charles Schwab that now accounts for
approximately 61% of Charles Schwab's daily trading volume.
Provides an end-user-focused solution. Because the end-user determines the
ultimate success of a client's product or service, Razorfish analyzes end-user
needs and applies its creativity and expertise to create digital communications
solutions that are easy-to-use, enjoyable, functional and optimized for a
particular need. Razorfish utilizes information from clients and end-user
surveys to develop user profiles and product and service characteristics that
serve as the basis for the design and development of its digital communications
solutions. Razorfish believes that this end-user-focused approach distinguishes
it from its competitors.
Leverages its international presence and local expertise. Razorfish has
offices in the United States and five European countries. Razorfish believes
that it is better able to serve multi-national and local clients because its
local consulting teams understand the nuances of local cultures, economies and
business practices. In addition, each office has the ability to draw on the
knowledge base and resources of over 285 billable Razorfish professionals
worldwide.
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Strategy
Razorfish's objective is to enhance its position as a leading-edge provider
of digital communications solutions. In order to achieve this goal, Razorfish
will:
Focus on leading-edge digital technologies. Today, Razorfish primarily uses
Internet-based technologies to create digital communications solutions for the
World Wide Web. Razorfish's solutions will increasingly incorporate additional
communications technologies, such as wireless, satellite and broadband
communications, for use with a variety of digital devices and information
appliances, including mobile phones, pagers and personal digital assistants.
Razorfish will continue to build its capabilities by (1) recruiting the most
talented people from leading technology firms and colleges and universities and
(2) providing continuous training for its employees through tuition
reimbursement and training programs. Razorfish believes that by following a
technology-neutral approach to solutions development, it will be well
positioned to capture additional market share as companies seek non-Internet-
based digital communications solutions.
Maintain creative leadership. Razorfish believes that it wins most of its
engagements due to its creativity. Furthermore, management believes that
Razorfish's design team is one of the most established in the information
technology services market. In order to maintain its creative leadership,
Razorfish sponsors cultural seminars and non-traditional special events and
provides benefits, such as a fund for creative learning opportunities, for its
employees. Razorfish will continue to invest in building the creative talents
of its employees.
Target industries that can benefit from the use of digital
communications. Razorfish believes that increased deregulation, consolidation
and global competition will lead companies in more industries to use digital
communications technology to differentiate their products and services.
Razorfish intends to target companies in those industries in order to further
expand its business.
Maintain the Razorfish culture. From its inception, Razorfish has focused on
building a working environment that encourages individuality and initiative to
promote the development of creative, cutting-edge solutions. Razorfish has
instituted programs that help maintain a productive and energetic workplace,
including a worldwide employee exchange program that allows employees to
transfer to other offices for specified periods of time. Razorfish believes
that by continuing and expanding these programs it will be able to attract top
professionals and maintain retention rates higher than the industry average.
Expand through strategic acquisitions. Razorfish believes that building a
critical mass of strategic, technical and creative talent and establishing a
multi-national presence through both acquisitions and internal growth will
provide it with a substantial competitive advantage. Razorfish has grown
rapidly since its inception in 1995. It completed five acquisitions in the
United States and Europe in 1998 and completed the Spray acquisition in January
1999. Razorfish will continue to pursue strategic acquisitions to (1) acquire
expertise in new technologies, (2) gain access to additional talented
professionals, (3) enter into new geographic markets and (4) expand its client
base.
Build partnerships with clients. Razorfish establishes strong ties with its
clients' senior management by assisting them in addressing their strategic
business issues. Razorfish intends to leverage these relationships to expand
the scope and length of current engagements and to enter into additional
engagements.
The Razorfish project management process
Razorfish utilizes a team-based approach to creating digital communications
solutions and has developed a proprietary five-phase project management process
that emphasizes client interaction to ensure creative and efficient solutions.
Razorfish's solutions managers, project managers, technologists and creative
personnel work together with the client in all five phases to guarantee that
the solution maintains a uniform look and stays within budget. At the end of
each phase, Razorfish produces a set of deliverables for client acceptance.
This process ensures that the digital communications solution meets with the
client's expectations at every stage of its development. This project
management process consists of the following phases:
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Phase I: Clarify
Phase I involves understanding the client's business and clarifying the
client's immediate business needs, as well as determining the client's long-
term goals. During this phase, Razorfish evaluates the market segment in which
the client competes and assesses the client's operating and technical
environment. Once the client's objectives are outlined, a strategic plan is
formulated, including a definition of how the success of the project will be
assessed. Razorfish also establishes the project's scope and budget and creates
a detailed work plan during this phase.
Phase II: Architect
During Phase II, Razorfish creates the architecture of the digital
communications solution for the specific business problem to be addressed and
the definition of the functional, technical and creative requirements necessary
to put the solution into effect. Each aspect of the project is documented in
writing and Razorfish collaborates with the client to refine the architecture
of the solution. Razorfish develops a prototype of the solution to test the
initial concept and its functionality.
Phase III: Design
Once the structural foundation is established, Razorfish focuses on
completing the information, interaction and interface design aspects of the
project. Razorfish develops the features of the project, refines the technology
architecture for the solution and conducts usability testing to evaluate the
performance of the solution. By the end of this phase, Razorfish delivers a
functional prototype of the solution and a detailed plan for its
implementation.
Phase IV: Implement
The final product is built and launched for the client during Phase IV. If
necessary, Razorfish integrates the solution with the client's existing
information technology infrastructure. As part of the final delivery process,
Razorfish performs quality assurance tests and ensures that the client
understands how to use and maintain the product through client training and
maintenance documentation.
Phase V: Enhance
After implementation of the solution, Razorfish monitors it for a specified
period of time and analyzes how the solution performs against the criteria
established in Phase I. At the client's option, Razorfish may also design a
marketing and promotion plan for the product. In addition, Razorfish will
encourage clients to continue to work with Razorfish to address the needs for
the next generation of the solution as new technologies are developed and end-
user's requirements evolve.
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Digital communications solutions
The following chart illustrates some of the digital communications solutions
that Razorfish has created for its clients. Razorfish has provided these
examples in order for you to get a better understanding of the type of projects
that it has completed and expects to continue to complete in the forseeable
future.
Financial & Consulting Services
<TABLE>
<C> <C> <C> <S>
Challenge: Assist Charles Schwab Solution: Razorfish redesigned its trading
in responding to floor website and on-line
increased competition marketing presence to strengthen
in on-line investment Charles Schwab's position as the
services. industry-leading e-commerce
brokerage house. Razorfish also
enhanced Schwab's on-line
business identity and developed
a new user experience which are
consistently conveyed throughout
the website. As a result,
Charles Schwab is able to
clearly highlight its distinct
competitive strengths to both
its visitors and customers.
www.schwab.com
Media & Entertainment
Challenge: Strengthen Road Solution: Razorfish developed the user-
Runner's presence in interface and front-end
the high-speed on- application of Road Runner, the
line service high-speed on-line service which
industry. is owned by ServiceCo, the joint
venture among Time Warner,
MediaOne, Microsoft, Compaq and
Advance Newhouse. Leveraging the
use of new technologies, the
front-end application provides a
dynamic and engaging multimedia
experience for users. This new
version of Road Runner is being
deployed throughout Time
Warner's regional cable
affiliates.
www.rr.com
Challenge: Enhance the end- Solution: Razorfish designed a unique, on-
user's experience and line environment to support
strengthen the on- theglobe.com's position as a
line business popular on-line community. The
identity of website features an elegant end-
theglobe.com. user interface designed to
appeal to theglobe.com's diverse
target audience and to provide a
compelling end-user experience.
Razorfish also has developed a
template system that allows both
community members and third
party providers to post content
on the website. Razorfish is
currently working with
theglobe.com to continue to
enhance the end-user's overall
experience and to expand the
features and functionality
offered by theglobe.com.
www.theglobe.com
</TABLE>
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Software, Technology & Telecommunications
<TABLE>
<C> <C> <C> <S>
Challenge: Establish a stronger Solution: Razorfish consolidated the three
on-line business existing RS/6000 websites and
identity for IBM's reorganized the information to
RS/6000, a series of be more user-friendly. Razorfish
powerful UNIX-based also created a stronger on-line
workstations, servers business identity for the
and supercomputers. RS/6000 through a dynamic
homepage, active menus and its
custom Java interface.
www.rs6000.ibm.com
Challenge: Showcase Ericsson's Solution: Spray designed a website to
Multi-Service Access present multiple views of each
group's product, including its technical
communications specifications and use in
networking equipment business solutions. The end-user
in a way that can be can access independent press
appreciated by both coverage about and support for
technicians and each product on the website.
laypersons. Spray created a three-layered
architecture to overlay a
database containing all of the
information to be presented.
This architecture gives the end-
user the ability to access
customized information based on
his or her own level of
understanding of Ericsson's
communications networking
equipment.
www.ericsson.se/access
Challenge: Enhance eBay's Solution: Razorfish is assisting eBay in
successful on-line improving the structure of
trading community eBay's website. The new graphic-
website by improving based look will enhance visual
the graphic design appeal and better convey the
and user-interface. eBay brand. Razorfish is working
with eBay to enhance the user
experience for a rapidly growing
user base and to seamlessly
integrate new features into this
design.
www.ebay.com
</TABLE>
Travel & Leisure
<TABLE>
<C> <C> <C> <S>
Challenge: Create a digital Solution: CHBi created a website that is a
solution to help key channel for product and
reposition the RAC, a service delivery. The website
U.K. motoring club, offers interactive accommodation
from a roadside planning, combined route
recovery organization planning, live traffic news and
to a travel service the ability to become a member
provider. and purchase travel and
automotive accessories and
travel-related services on-line.
Razorfish is currently working
to deliver these services via
other media platforms, including
interactive TV and mobile
phones.
www.rac.co.uk
</TABLE>
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<TABLE>
<C> <C> <C> <S>
Challenge: Create a central Solution: Spray built an on-line travel
information source service featuring an
for the customers of information-rich database that
the six international covers approximately 600
airlines, Air Canada, destinations in over
Lufthansa, SAS, Thai, 100 countries. The website is
United and Varig, automatically updated four times
that form the Star a day and gives users access to
Alliance(TM). flight schedules, maps, currency
exchange rates, three-day
weather forecasts, airport and
ground transportation
information and electrical and
cellular phone standards. Users
can also purchase airline
tickets from certain airlines
and learn about airline bonus
programs.
www.star-alliance.com
Consumer Brands & Retail
Challenge: Display Electrolux Solution: Spray designed a website
products to its featuring a 1950's-style cartoon
world-wide customer house and family. The end-user
base in a way that is invited into each room of the
accommodates country- house where a member of the
to-country family describes the history and
differences in features of the Electrolux
product names and products used in that room in a
packaging while humorous fashion. The website
maintaining a also features "fridge cam," a
consistent business camera mounted in the
identity. refrigerator of an actual
suburban Stockholm family that
snaps a photo and posts it on
the website whenever the
refrigerator door is opened.
Spray has developed tools that
enable Electrolux country
managers to translate the
contents of the website into
local languages while allowing
Electrolux's Swedish
headquarters to control the
brand image and content.
www.electrolux.se
Cultural Institutions
Challenge: Extend The Solution: Razorfish developed a multi-
Smithsonian dimensional, digital exhibit
Institution's reach that allows visitors to explore
beyond its physical cultural history through various
walls. everyday objects. The visitor to
the website controls the
experience by viewing the
exhibition pieces on the website
in any order; the selection of
an object links the visitor to
another "room" with other
related objects and information.
The end result is a
personalized, fluid experience
for the visitor. In addition,
end-users can enhance the
exhibit by donating their own
objects and stories to The
Smithsonian Institution on-line.
www.si.edu/revealingthings
</TABLE>
47
<PAGE>
Marketing and sales
Razorfish's marketing efforts are dedicated to strengthening its brand name
and enhancing its reputation as a creative provider of digital communications
solutions. Razorfish believes that the current strength of its brand name
provides it with a competitive advantage over those professional information
technology services firms whose brands may not be as well known or may not
convey the same focused message of creative digital communications solutions.
Razorfish's brand development programs are designed to reinforce the message
that Razorfish is an international company with a local presence that can
provide an integrated, full-service offering. Razorfish also intends to
increase its advertising in an effort to expand the recognition of its brand
name. Razorfish's marketing programs, advertising campaigns and marketing tools
are developed within Razorfish and can be delivered to all Razorfish offices
without incurring the additional expense of retaining a marketing firm.
Currently, Razorfish's solutions managers are responsible for marketing and
sales. This approach provides Razorfish with a flexible sales resource. Because
of the historically high demand for Razorfish's services, Razorfish has not
needed a formal marketing or sales force. There can be no assurance that this
trend will continue; therefore, Razorfish intends to use a portion of the
proceeds of the offering to develop a sales force. Razorfish intends the
marketing and sales force primarily to develop and prioritize new business
leads and to filter incoming contacts from prospective clients.
48
<PAGE>
Clients
Razorfish currently targets companies in industries that can use digital
technologies to increase sales, improve communications and create business
identities. These industries include financial and consulting services, media
and entertainment, software, technology and telecommunications, and consumer
brands and retail. Set forth below is a representative list of Razorfish's
clients during the past twelve months within each targeted industry. Because of
the project-based nature of Razorfish's business, some of the listed companies
may not be current clients of Razorfish as a result of the completion of recent
projects.
<TABLE>
<S> <C>
FINANCIAL & CONSULTING SERVICES MEDIA & ENTERTAINMENT
Bank One Canal Plus
Barclays Global Cosmopolitan Magazine/Hearst Communications
Charles Schwab Disney
Dow Jones Excite
Egg Financial Times
Guardian Life Insurance Company of America Razorfish Studios
Goldfish Road Runner/Time Warner
Hagstromer and Qviberg Stern Magazine
Husbanken Showtime Networks
KPMG LLP theglobe.com
Sparebank 1 The New Millennium Experience Company
TV4
CONSUMER BRANDS & RETAIL Warner Music Group
Allied Domecq PLC
Arla SOFTWARE, TECHNOLOGY &
Bayer AG TELECOMMUNICATIONS
Canon Acer
Electrolux British Telecom
Hennes & Mauritz eBay
Kenwood USA Ericsson
Liz Claiborne HTV
Pripps IBM
Sony Electronics Intel
Toro MCI/WorldCom
Virgin Cola Microsoft
Virgin Clothing NASA Ames Research Center
Nokia
INDUSTRIAL SegaSoft
Ashlar Inc. Sega Entertainment
British Aerospace PLC Sharp Electronics
J&W Telia
Merck Sharp & Dohme Telewest
Novartis
Shell Trading & Transport TRAVEL & LEISURE
Siemens Best Western International
Braathens
Finnair
First Hotels
RAC Motoring Services
Savoy
Scandinavian Airline Systems
Star Alliance
Statens Jarnvagar
The Tote
</TABLE>
49
<PAGE>
Razorfish has also created digital communications solutions for prestigious
cultural institutions including The Smithsonian Institution, Carnegie Hall, The
Whitney Museum and the Norwegian State Church (Norsk Kirkeiutlandet).
Razorfish believes that increased deregulation, consolidation and global
competition will lead companies in more industries to use digital
communications technology to differentiate their products and services.
Razorfish anticipates targeting those industries that it believes will most
effectively be able to use digital communications technologies to increase
sales, improve communications and create business identities.
Each of Razorfish's clients is generally charged for the time, materials and
expenses incurred on a particular project. However, the agreements entered into
in connection with a project are generally terminable by the client upon 30-
days' prior written notice. Razorfish cannot give any assurances that a client
will not terminate an engagement before its completion. If its clients
terminate existing agreements or if Razorfish is unable to enter into new
engagements, its business, financial condition and results of operations could
be materially and adversely affected.
On a pro forma basis as if all of the 1998 and 1999 acquisitions had
occurred at the beginning of 1998 and 1997, respectively, Charles Schwab would
have accounted for 12.1% of revenues in 1998, and no client would have
accounted for more than 10.0% of revenues in 1997. Charles Schwab accounted for
approximately 27.1% of Razorfish's actual revenues for 1998. Hagstromer and
Qviberg accounted for approximately 15.0% of Spray's actual revenues for 1998.
Razorfish believes that it will continue to derive a significant portion of its
revenues from a limited number of clients. The volume of work performed for
these clients may not be sustained from year to year, and there is a risk that
these principal clients may not retain Razorfish in the future. Any
cancellation, deferral or significant reduction in work performed for these
principal clients or a significant number of smaller clients could have a
material adverse affect on Razorfish's business, financial condition and
results of operations.
Spray acquisition
In January 1999, Razorfish acquired all of the issued and outstanding shares
of capital stock of Spray from Spray Ventures and Communicade in exchange for
an aggregate of 9,881,034 shares of Razorfish Common Stock and 50 shares of
Razorfish non-voting Class B Common Stock. The shares of Common Stock issued
represented 50% of the shares of Razorfish Common Stock on a fully diluted
basis immediately following this acquisition. Immediately prior to this
transaction, Communicade purchased 563 shares of Spray, which represented 20%
of the outstanding shares of Spray on a fully-diluted basis at the time of
purchase, from Spray Ventures and sold these shares to Razorfish in connection
with the Spray acquisition. Razorfish, Communicade and Messrs. Dachis and
Kanarick also entered into a Stockholders Agreement in connection with the
acquisition of Spray, which provided Communicade with the option to purchase up
to 10% of Razorfish's Common Stock. Because Omnicom is the parent corporation
of Communicade, it has an indirect interest in Razorfish, which was decreased
as a result of the Spray acquisition and then subsequently increased by
Communicade's exercise of this 10% option resulting in Omnicom's ownership
interest remaining approximately the same as it was prior to these
transactions. See "Certain Transactions" and "Principal Stockholders."
In addition, simultaneously with the Spray acquisition, Messrs. Dachis and
Kanarick sold 363,636 shares of Common Stock to Communicade, which represented
4% of the outstanding shares of Common Stock on a fully diluted basis at the
time of purchase. See "Certain Transactions."
50
<PAGE>
The table below sets forth the ownership interests of Spray Ventures,
Communicade and Messrs. Dachis and Kanarick in Razorfish before and immediately
following the acquisition of Spray:
<TABLE>
<CAPTION>
Ownership interest (%)
-----------------------
Pre- Post-
acquisition acquisition
----------- -----------
<S> <C> <C>
Spray Ventures................................... -- % 40.0%
Communicade...................................... 36.8 30.3
Jeffrey A. Dachis................................ 25.0 11.6
Craig M. Kanarick................................ 25.0 11.6
</TABLE>
Razorfish authorized 50 shares of non-voting Class B Common Stock in
connection with the Spray acquisition. These shares were issued to Communicade
and Spray Ventures at the closing of this acquisition. In addition, the total
number of outstanding shares of Razorfish Common Stock doubled as a result of
this transaction. See "Description of Capital Stock--Common stock--Class B
Common Stock."
At the time of the Spray acquisition, Spray had 171 employees. Spray had
approximately $15.4 million in revenues for the fiscal year ended December 31,
1998. Razorfish gained certain of its current clients as a result of the Spray
acquisition including Hagstromer and Qviberg, one of Sweden's largest
investment banks, Hennes & Mauritz, a Swedish retail clothing company, Canal
Digital, a Norwegian satellite TV company, and Nokia.
Spray Ventures was incorporated in Sweden in July 1995. Its business was the
development of digital solutions primarily for use on the Internet. Spray
Ventures' business grew rapidly in size and scope. By early 1997, Spray
Ventures owned a total of seven operating companies that provided a wide range
of services including web design, content and education regarding use of the
Internet and the solutions created by Spray Ventures. Spray Ventures'
operations expanded from Sweden to include operations in Norway, Finland,
Germany and the United States.
In August 1997, Spray Ventures established a wholly owned subsidiary, Spray
Services, and transferred all of its operating subsidiaries, except for Circus,
a content provider, to Spray Services. Spray Ventures then transferred
substantially all of the assets of Spray Services to Tetre AB in consideration
for 51% of Tetre immediately following the transfer. In connection with this
transaction, Spray Ventures also granted the Tetre shareholders an option to
purchase shares equa1 to 1% of Tetre, and Tetre changed its name to Spray.
During the end of 1997 and the beginning of 1998, Spray Ventures began
consolidating its operations and reorganizing its corporate structure. In
February 1998, it sold Circus to Spray in consideration for additional shares
in Spray such that Spray Ventures' holdings in Spray equalled 58%. In
connection with this transfer, Spray cancelled the 1% option granted to the
former Tetre shareholders. During the second quarter of 1998, the former Tetre
stockholders converted their remaining 42% ownership interests in Spray into
42% of Spray Ventures. As part of the consolidation, Spray Ventures shut down
four of its operating subsidiaries and incorporated those businesses into the
remaining operating subsidiaries and shut down its U.S. operations.
In September 1998, Spray also sold its interests in three non-consultancy
businesses to Spray Ventures and focused its business on interactive media
development and consultancy.
Razorfish and Spray were founded upon like principles and have had similar
growth patterns, which have generated what Razorfish believes are compatible
corporate cultures. In addition, the companies have utilized similar business
methodologies and approaches. For these reasons, Razorfish expects its
integration of Spray to be successful. In addition, Razorfish believes that the
combined strength of the companies and their common cultural outlook will help
attract and retain qualified personnel. Razorfish intends to change the name of
Spray to Razorfish AB.
Other acquisitions
In order to acquire expertise in new technologies, gain access to
professionals and expand into new geographic regions, Razorfish has completed
six acquisitions, including the acquisition of Spray, in the United
51
<PAGE>
States and Europe since its inception in 1995. In assessing a potential
acquisition candidate, Razorfish evaluates the target's internal culture,
customer base, local market share, financial characteristics, service offerings
and quality of management. In addition, Razorfish analyzes macroeconomic issues
such as technology adoption rates and the growth rates of the target's local
economy. Set forth below are descriptions of the acquisitions that Razorfish
completed in 1998.
Sunbather Limited
Razorfish, through Razorfish Limited, acquired in October 1998 substantially
all of the assets of Sunbather, a London-based new media company with
experience in interactive and digital television, from an administrator
appointed for the company. At the time of the acquisition, Sunbather had 11
employees and, in its last completed fiscal year ended March 31, 1998, had
approximately (Pounds)565,000 ($908,000) in revenues.
<tag> Media
Razorfish acquired substantially all of the assets of Los Angeles-based
<tag> Media in August 1998. <tag> Media had eight employees at the time of the
acquisition and, in its last completed fiscal year ended December 31, 1997,
approximately $322,000 in revenues. <tag> Media specialized in working with
film and record companies to deliver their messages and content through
computer-based entertainment.
Plastic
Razorfish acquired in June 1998 substantially all of the assets of San
Francisco-based Plastic, a new media company with strong technical expertise.
Razorfish acquired Plastic to expand its presence to California. At the time of
the acquisition, Plastic had 15 employees and had, in its last completed fiscal
year ended December 31, 1997, approximately $835,000 in revenues.
CHBi
In May 1998, Razorfish acquired all of the outstanding stock of London-based
CHBi (now Razorfish Limited). Razorfish's acquisition of this new media company
was its first venture into the European markets. At the time of the
acquisition, CHBi had 26 employees and had, in its last completed fiscal year
ended May 31, 1998, approximately (Pounds)835,000 ($1.3 million) in revenues.
Avalanche Systems
In January 1998, Razorfish, through its subsidiary, Avalanche Solutions,
acquired in a foreclosure sale substantially all of the assets of New York-
based Avalanche Systems, a new media company with capabilities in creative
design. Upon the closing of this transaction, Razorfish and the two founders of
Avalanche Systems owned all of the outstanding stock of Avalanche Solutions.
The two founders of Avalanche Solutions surrendered their stock to Razorfish
after the closing, and, as a result, Avalanche Solutions became a wholly owned
subsidiary of Razorfish. At the time of the acquisition, Avalanche Systems had
32 employees and had, in its last completed fiscal year ended December 31,
1997, approximately $2.3 million in revenues.
Internal information systems
Razorfish continuously works to improve its internal communication systems
and production tools for creating and maintaining digital communications
solutions for its clients. Currently, Razorfish is upgrading its intranet
system by adding new functions and faster hardware. Razorfish's intranet is a
suite of applications including a global calendar and scheduling module, a
timesheet and financial reporting module, a corporate knowledge database,
project tracking and management modules, on-line forums for fostering knowledge
sharing and other applications that increase productivity and creativity.
Razorfish has also developed several applications to improve its
productivity in other areas of service delivery, including: (1) XX, an extranet
tool for on-line collaborative project development, (2) Webspy, an internet
traffic monitoring and reporting tool, (3) Vegas, a streaming media player and
(4) Olof Engine, a multimedia presentation tool. These and other internally
developed technologies reduce development time and cost and increase
productivity at Razorfish. Razorfish believes that these additional
capabilities will improve employee productivity, client service delivery and
management of its worldwide operations.
52
<PAGE>
Competition
The information technology services market has grown dramatically in recent
years as a result of the increasing use of digital technology by businesses for
communication, marketing and information dissemination to their employees,
customers, vendors and suppliers. Different information technology service
providers focus on different types of services, including technology consulting
and marketing services. For example, Internet content providers, consulting and
advertising agencies and telecommunications companies offer very different
services that may be tied to the Internet, such as the creation of intranets
and extranets, consulting and training, website design and development and
advertising. This factor, along with the rapid pace of technological change,
makes the information technology services market an intensely competitive and
rapidly evolving market. Razorfish expects competition to persist and intensify
in the future.
Razorfish's competitors include:
. Internet service firms, such as AGENCY.COM, Icon Medialab, iXL, Modem
Media . Poppe Tyson, Organic Online, Pixelpark, Proxicom and
USWeb/CKS;
. technology consulting firms, such as Diamond Technology Partners and
Metzler Group;
. technology integrators, such as Andersen Consulting, Cambridge
Technology Partners, Cap Gemini, EDS, IBM, Sapient and WM-Data;
. strategic consulting firms, such as Bain, Booz-Allen & Hamilton,
Boston Consulting Group and McKinsey; and
. in-house information technology, marketing and design service
departments of its potential clients.
Many of Razorfish's competitors have:
. longer operating histories;
. larger installed client bases;
. longer relationships with clients;
. greater brand or name recognition; and
. significantly greater financial, technical, marketing and public
relations resources than Razorfish.
Although only a few of these competitors have to date offered a package of
services as fully integrated as Razorfish's, several have announced their
intention to offer a broader range of technology-based solutions. Furthermore,
greater resources may enable a competitor to respond more quickly to new or
emerging technologies and changes in customer requirements and to devote
greater resources to the development, promotion and sale of its products and
services than Razorfish. In addition, the lack of any significant barriers to
entry into this market permits new market entrants that further intensify
competition.
Razorfish believes that the principal competitive factors in its market, in
relative importance, are the ability to attract and retain professionals,
technical knowledge and creative skills, brand recognition and reputation,
reliability of the delivered solution, client service and price. Razorfish
believes that it has won most of its engagements due to its creativity and
technology-neutral approach to solving business problems. See "Risk Factors--We
compete in a new and highly competitive market that has low barriers to entry,"
"Risk Factors--We must maintain our reputation and expand our name recognition
to remain competitive" and "Business--Marketing and sales."
Intellectual property rights
Razorfish protects its intellectual property through a combination of
license agreements and trademark, service mark, copyright and trade secret
laws. Razorfish enters into confidentiality agreements with its employees and
clients and limits access to and distribution of proprietary information
licensed from third parties. In addition, Razorfish enters into non-competition
agreements with its key employees.
53
<PAGE>
Razorfish pursues the registration of its trademarks in the United States
and internationally. It has obtained U.S. registration for the "Razorfish" and
"Webspy" marks and has applied for registration of certain of its other
trademarks and servicemarks.
In addition, Razorfish licenses the "Razorfish" trademark and symbol and
"The Blue Dot" trademark on a royalty-free basis to Razorfish Studios.
Razorfish Studios produces and publishes on-line content, including art,
computer games, and literature, as well as screensavers, audio recordings,
books and films. Because the "Razorfish" trademark and symbol are closely
associated with both Razorfish Studios and Razorfish, Razorfish's name and
reputation could be materially and adversely affected by content published or
actions taken by Razorfish Studios. However, the license permits Razorfish to
terminate the license in the event Razorfish Studios takes any action to
denigrate the Razorfish trade name.
Razorfish's efforts to protect its intellectual property rights could be
inadequate to deter misappropriation of proprietary information. For example,
Razorfish may not detect unauthorized use of its intellectual property. In
addition, the legal status of intellectual property on the Internet is
currently subject to various uncertainties. See "Risk Factors--Misappropriation
of our trademarks and other proprietary rights could harm our reputation,
affect our competitive position and cost us money" and "Risk Factors--Our
business is subject to developing U.S. and foreign government regulation of the
Internet."
U.S. and foreign government regulation
Congress has recently passed legislation that regulates certain aspects of
the Internet, including on-line content, copyright infringement, user privacy,
taxation, access charges, liability for third-party activities and
jurisdiction. In addition, federal, state, local and foreign governmental
organizations also are considering, and may consider in the future, other
legislative and regulatory proposals that would regulate the Internet. Areas of
potential regulation include libel, pricing, quality of products and services
and intellectual property ownership.
The European Union also has recently enacted several directives relating to
the Internet. In order to safeguard against the spread of certain illegal and
socially harmful materials on the Internet, the European Commission has drafted
the "Action Plan on Promoting the Safe Use of the Internet." Other European
Commission directives address the regulation of privacy, e-commerce, security,
commercial piracy, consumer protection and taxation of transactions completed
over the Internet.
It is not known how courts will interpret both existing and new laws.
Therefore, we are uncertain as to how new laws or the application of existing
laws will affect our business. In addition, our business may be indirectly
affected by our clients who may be subject to such legislation. Increased
regulation of the Internet may decrease the growth in the use of the Internet,
which could decrease the demand for our services, increase our cost of doing
business or otherwise have a material adverse effect on our business, results
of operations and financial condition.
Employees
As of March 1, 1999, Razorfish had 380 full time employees, 152 of whom were
located in the United States and 228 of whom were located in Europe.
Razorfish's employees include 36 solutions managers (business, marketing and
branding strategists), 69 project managers, 100 developers, 92 designers, 15
sales and marketing personnel, 49 support staff (information services, human
resources, financial and legal personnel) and 19 executives (executive vice
presidents and managing directors).
Razorfish's continuing success will depend in large part on its ability to
attract, motivate and retain highly qualified employees. Competition for such
personnel is intense, and Razorfish may not be able to retain its senior
management or other key personnel in the future. Razorfish believes it
maintains high employee retention rates as compared to industry averages by
paying competitive salaries, granting stock options and other awards and
reimbursing employees for tuition expenses in connection with information
technology-related coursework. Employees also may temporarily transfer to
another of Razorfish's domestic or European offices. Razorfish plans to
allocate a portion of the proceeds of the offering to expand programs for the
recruitment of qualified personnel. See "Use of Proceeds."
54
<PAGE>
Razorfish's employees are not represented by any union, and except for
senior management and certain other employees, are retained on an at-will
basis. However, the regulations of certain European countries in which
Razorfish operates, including Sweden, may make it difficult for Razorfish to
terminate those employees. In addition, those regulations govern the amount of
vacation time that must be given to employees, which is significantly more
vacation than in the United States. Razorfish considers its relations with its
employees to be satisfactory.
Facilities
Razorfish's headquarters are located in a leased facility in New York City
consisting of approximately 15,000 square feet of office space. The leases for
this office space expire on December 31, 2001. Razorfish also leases office
space in Los Angeles, San Francisco, London, Stockholm, Oslo, Helsinki and
Hamburg.
Legal proceedings
Razorfish is not a party to any material legal proceedings.
55
<PAGE>
MANAGEMENT
Directors and executive officers
Set forth below is certain information with respect to the directors and
executive officers of Razorfish.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Jeffrey A. Dachis....... 32 President, Chief Executive Officer, Treasurer
and Director
Craig M. Kanarick....... 32 Chief Scientist, Vice Chairman of the Board,
Secretary and Director
Per I.G. Bystedt........ 34 Chairman of the Board and Director
Jonas S.A. Svensson..... 31 Vice Chairman of the Board, Executive Vice
President--Corporate Development and Director
Peter Seidler........... 40 Chief Creative Officer
Susan Black............. 32 Chief Financial Officer
Michael S. Simon........ 35 Executive Vice President--Business Affairs and
General Counsel
Jean-Philippe Maheu..... 35 Executive Vice President--North American
Operations
Thomas L. Randerz....... 42 Executive Vice President--European Operations
Evan Orensten........... 33 Executive Vice President--Global Intelligence
and Knowledge Management
Johan Ihrfelt........... 31 Executive Vice President--Mergers and
Acquisitions--Europe
John Wren............... 46 Director
</TABLE>
Jeffrey A. Dachis, a co-founder of Razorfish, has served as President, Chief
Executive Officer, Treasurer and a director of Razorfish since its inception in
January 1995. He was a Graphic Production Specialist for Applied Graphics
Technologies, a graphic pre-press production house, from May 1994 to April
1995. From September 1993 until April 1994, Mr. Dachis served as Vice President
of Corporate Marketing of Game Financial Corp., a credit card cash advance and
electronic funds transfer company. Mr. Dachis is also Chief Executive Officer
and a director of Razorfish Studios. He will devote substantially all of his
time to the management of Razorfish. See "Certain Transactions." Mr. Dachis
holds a B.A. degree in dance and dramatic literature from SUNY Purchase and an
M.A. degree in media/entertainment business from New York University.
Craig M. Kanarick, a co-founder of Razorfish, has been a Vice Chairman of
the Board of Razorfish since January 1999, Chief Scientist of Razorfish since
August 1998 and Secretary and a director of Razorfish since its inception in
January 1995. Mr. Kanarick was Chairman of the Board of Razorfish from its
inception until January 1999. From June 1993 to January 1995, Mr. Kanarick was
a freelance digital media consultant and designer. Mr. Kanarick is Chairman of
the Board, Chief Creative Officer, Secretary and a director of Razorfish
Studios. He is also a director of the New York New Media Association and
Rhizome Communications, Inc., a non-profit digital arts corporation. Mr.
Kanarick will devote substantially all of his time to the management of
Razorfish. See "Certain Transactions." Mr. Kanarick holds a B.A. degree in
philosophy and a B.S. degree in computer science from the University of
Pennsylvania and an M.S. degree in visual studies from the MIT Media Lab at the
Massachusetts Institute of Technology.
Per I.G. Bystedt has served as Chairman of the Board of Razorfish since
January 1999. He is also Chief Executive Officer and a director of Spray
Ventures. Mr. Bystedt served as Chairman of the Board of Spray from September
1997 until the closing of the Spray acquisition in January 1999. From January
1995 until February 1997, Mr. Bystedt served as Chief Executive Officer of TV3
Broadcasting Group Ltd., a Scandinavian satellite and cable television network.
From January 1997 to April 1997, Mr. Bystedt was an Executive Vice President
for Modern Times Group AB with the primary responsibility for supervising all
of the satellite and cable TV, pay TV and smart card system companies within
this organization. Mr. Bystedt also served as Chief Executive Officer for ZTV
Group AB, a commercial television company in Scandinavia, from April 1994 to
December 1995, and for the television production company, Trash Television AB,
from September 1992 to April 1994 . Mr. Bystedt holds a degree in natural
science from Hersby Skola and an M.B.A. degree from the Stockholm School of
Economics.
56
<PAGE>
Jonas S.A. Svensson, a co-founder of Spray, has served as a Vice Chairman of
the Board and Executive Vice President--Corporate Development of Razorfish
since January 1999. Prior to the Spray Acquisition, he served as director of
brand and strategic developments of Spray and was also Chairman of the Board of
Spray. From January 1995 to June 1995, Mr. Svensson was Executive Vice
President for Everyday, a company specializing in interactive media and ISP
services that is a member of Kinnevik, the Nordic media group. He was a student
at the Stockholm School of Economics from August 1990 to January 1995.
Peter Seidler has been Chief Creative Officer of Razorfish since May 1998.
Mr. Seidler was Chief Creative Officer of Avalanche Solutions, a company that
he founded in connection with the acquisition by Razorfish of Avalanche
Systems' assets, from January 1998 to May 1998. From November 1994 until
January 1998, he was Chief Creative Officer and President of Avalanche Systems,
a strategic digital communications company that he founded. See "Business--
Other acquisitions." Mr. Seidler was also the founder and Creative Director of
Seidler Design Inc., a digital interface design company, from August 1993 until
November 1994. Mr. Seidler holds a B.A. degree from the City University of New
York and an M.F.A. degree in conceptual art from California Institute of the
Arts.
Susan Black has been Chief Financial Officer of Razorfish since January
1998. Prior to joining Razorfish, Ms. Black was Chief Financial Officer of the
New York office of TBWA Chiat/Day Inc., an advertising agency, from March 1996
to December 1997. Prior to the merger of TBWA International and Chiat/Day, Ms.
Black was International Controller for TBWA from May 1994 to February 1996.
From August 1988 to April 1994, Ms. Black worked for Arthur Andersen LLP in
various positions, including manager. Ms. Black holds a First Class B.S. degree
in economics from Loughborough University and is a member of the Institute of
Chartered Accountants of England and Wales.
Michael S. Simon has been Executive Vice President--Business Affairs of
Razorfish since November 1998 and General Counsel of Razorfish since July 1998.
Mr. Simon was Senior Vice President of Business Affairs of Razorfish from July
1998 to November 1998, and he was Razorfish's Vice President of Business
Affairs from October 1996 to July 1998. Prior to joining Razorfish, Mr. Simon
was a Senior Director of Legal Affairs for Polygram Records, Inc. from April
1995 to October 1996. From November 1993 to April 1995, he was an associate at
the law firm Levine Thall Plotkin & Mennin, LLP. Mr. Simon is also the
President and a director of Razorfish Studios. Mr. Simon was also the President
of Simon Ventures, Ltd., an artist management and management consulting firm
that he founded, from October 1996 until Simon Ventures was sold to Razorfish
Studios in February 1999. He will devote a substantial portion of his time to
the management of Razorfish. See "Certain Transactions." Mr. Simon holds a B.A.
degree in American studies from Amherst College and a J.D. degree from Columbia
University.
Jean-Philippe Maheu has served as Executive Vice President--North American
Operations of Razorfish since January 1999 and Executive Vice President of
Corporate Development of Razorfish from December 1997 until December 1998. Mr.
Maheu served as Vice President of Business Development and Strategy of
Razorfish from July 1997 until December 1997. From February 1995 to June 1997,
Mr. Maheu served as a principal of Gunn Partners, a management consulting firm.
From September 1989 to January 1995, Mr. Maheu was a consultant and manager of
A.T. Kearney, an international management consulting firm. Mr. Maheu holds a
M.S. degree in information systems from Pierre and Marie Curie University--
Paris and an M.B.A. degree in finance and marketing from the J.L. Kellogg
Graduate School of Management at Northwestern University.
Thomas L. Randerz has served as Executive Vice President--European
Operations of Razorfish since the closing of the Spray acquisition in January
1999. Following Spray's merger with Tetre AB in June 1997, Mr. Randerz was
responsible for Spray's activities in the financial sector until September 1997
when he became Spray's Chief Operating Officer. He served in such position
until January 1999. Prior to joining Spray, Mr. Randerz was the Chief Executive
Officer of Tetre AB. From May 1987 to October 1995 he was a consultant and
manager with Cap Gemini, an information technology consulting firm. Mr. Randerz
holds a degree from the University of Stockholm.
Evan Orensten has served as Executive Vice President--Global Intelligence
and Knowledge Management of Razorfish since January 1999. From June 1997 to
January 1999, he was a Managing Director of Razorfish's New York office. Mr.
Orensten served as a Vice President and Senior Interactive Strategist of Siegel
& Gale, a
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consulting firm, from January 1995 to May 1997. From April 1994 to January
1995, Mr. Orensten was a Production Associate in the multimedia department of
Smith Barney Inc., and from January 1994 to April 1994, he was an account
executive of Interbrand, Inc., a consulting firm. Mr. Orensten holds an A.B.
degree in Asian studies from Vassar College and an M.B.A. degree in
international business from L'Ecole des Haute Etudes Commerciales.
Johan Ihrfelt, a co-founder of Spray, has served as Executive Vice
President--Mergers and Acquisitions--Europe of Razorfish since the closing of
the Spray acquisition in January 1999. He was the Chief Financial Officer and
Human Resources Manager of Spray, as well as a director, from August 1997 until
January 1999. Prior thereto, he served as Chief Executive Officer of Spray from
its incorporation until July 1997. From July 1994 until June 1995, Mr. Ihrfelt
was responsible for international operations at Interactive Television AB, a
member of the Kinnevik Group. He graduated from the Stockholm School of
Economics in June 1994.
John Wren has been a director of Razorfish since September 1996. Mr. Wren
has served as Chief Executive Officer of Omnicom since January 1997 and has
also been President of Omnicom since September 1995. From May 1993 until June
1998, he served as Chairman and Chief Executive Officer of the Diversified
Agency Services division of Omnicom. Mr. Wren was appointed to Omnicom's Board
of Directors in May 1993.
Board of Directors
Razorfish currently has authorized five directors. Each director holds
office until his successor is duly elected and qualified or until his
resignation or removal, if earlier. Each of the current members of the Board of
Directors has been elected pursuant to the terms of the Stockholders Agreement
entered into as of October 1, 1998 by and among Razorfish, Spray Ventures,
Communicade and Messrs. Dachis and Kanarick, which will terminate upon the
consummation of this offering.
Prior to the consummation of this offering, Razorfish will appoint two
independent directors and will establish an Audit Committee and a Compensation
Committee with such independent directors as members.
The Audit Committee will review the preparations for and the scope of the
audit of Razorfish's annual financial statements, review drafts of such
statements, make recommendations as to the engagement and fees of the
independent auditors and monitor the functioning of Razorfish's accounting and
internal control systems by meeting with representatives of management, the
independent auditors and the internal auditors. The Committee will have direct
access to the independent auditors, the internal auditors and counsel to
Razorfish and perform such other duties relating to the maintenance of the
proper books of account and records of Razorfish and other matters as the Board
of Directors may assign from time to time. In addition, in order to maintain
listing on Nasdaq, Razorfish must maintain an audit committee with a majority
of its members who are "independent directors." Independent directors are
persons who are neither officers nor employees of Razorfish or its subsidiaries
or any other person who has a relationship which, in the opinion of the Board
of Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.
The Compensation Committee will supervise and make recommendations with
respect to compensation levels of key employees and all benefit plans involving
employees of Razorfish. It will approve, upon the recommendation of the
President or other appropriate officer, the terms of employment of all officers
of Razorfish (except the Chairman of the Board and the President) and recommend
the terms of employment of the Chairman of the Board and the President to the
Board of Directors for approval.
Compensation of Directors
Directors who are also employees of Razorfish receive no additional
compensation for their services as directors. Directors who are not employees
of Razorfish will not receive a fee for attendance in person at meetings of the
Board of Directors or committees of the Board of Directors, but they will be
reimbursed for travel expenses and other out-of-pocket costs incurred in
connection with the attendance of meetings. Non-employee director will receive
grants of stock and options to purchase stock upon their appointment to the
Board of Directors.
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The Delaware General Corporation Law provides that a company may indemnify
its directors and officers as to certain liabilities. Razorfish's Certificate
of Incorporation and By-laws provide for the indemnification of its directors
and officers to the fullest extent permitted by law. The effect of such
provisions is to indemnify the directors and officers of Razorfish against all
costs, expenses and liabilities incurred by them in connection with any action,
suit or proceeding in which they are involved by reason of their affiliation
with Razorfish. Razorfish may obtain directors and officers liability insurance
to effectuate these provisions.
Employment and non-competition agreements
Employment agreements with Messrs. Dachis and Kanarick
Razorfish has entered into employment agreements with each of Jeffrey A.
Dachis and Craig M. Kanarick, pursuant to which Mr. Dachis serves as President,
Chief Executive Officer and Treasurer and Mr. Kanarick serves as Chief
Scientist, Secretary and Vice Chairman of the Board. Each of Messrs. Dachis and
Kanarick is paid an annual base salary of $104,000, subject to increases in
accordance with Razorfish's salary review and budget policies. In addition,
pursuant to the terms of the agreements, Messrs. Dachis and Kanarick serve as
directors of Razorfish without any additional compensation.
The initial term of each agreement expires on December 31, 2001. Upon the
expiration of the initial term, each agreement remains in effect and may be
terminated by either party upon six months' prior written notice. In addition,
at any time after June 30, 2001, Razorfish may, at its option, elect to place
either executive on "leave of absence status" during which time such executive
will no longer be responsible for his respective duties but will be entitled to
payment of his salary and other benefits provided in the agreement.
These agreements also contain customary provisions relating to the
protection of confidential information and non-solicitation of Razorfish's
employees or clients upon the executive's termination of employment.
Employment agreements with Messrs. Bystedt, Svensson and Ihrfelt
Razorfish has entered into employment agreements with each of Per Bystedt,
Jonas Svensson and Johan Ihrfelt, pursuant to which each will perform duties
designated by Razorfish, in either Stockholm or New York, and will report to
Mr. Dachis. Each such employee is paid an annual base salary of $145,000,
subject to increases in accordance with Razorfish's salary review and budget
policies. Beginning after one year of employment, each such employee will be
eligible to participate in Razorfish's bonus and profit-sharing programs.
The initial term of each agreement expires on December 31, 2001. Upon the
expiration of the initial term, each agreement remains in effect and may be
terminated by either party upon 30 days' prior written notice.
These agreements contain customary provisions relating to assignment to
Razorfish of proprietary information developed during employment and the
protection of confidential information.
Employment agreements with other members of management
Razorfish has also entered into employment agreements with Peter Seidler,
Jean-Philippe Maheu and Evan Orensten. Mr. Seidler serves as Razorfish's Chief
Creative Officer and is paid an annual base salary of $125,000. The initial
term of his employment expires on December 31, 2001. Upon the expiration of
such initial term, Mr. Seidler's agreement continues in effect and may be
terminated by either party upon 30 days' prior written notice. Mr. Maheu serves
as Executive Vice President--North American Operations. His annual base salary
under the agreement is $125,000. The term of Mr. Maheu's employment agreement
expires on June 30, 1999 and is automatically renewable for successive one-year
terms unless terminated by either party 90 days prior to the scheduled renewal
date. Mr. Orensten serves as Executive Vice President--Global Intelligence and
Knowledge Management. His annual base salary under the agreement is $125,000.
The term of Mr. Orensten's employment agreement expires on May 31, 1999 and is
automatically renewable for successive one-year terms unless terminated by
either party 60 days prior to the scheduled renewal date.
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Each of Messrs. Seidler, Maheu and Orensten is also eligible to participate
in Razorfish's bonus and profit-sharing programs. The agreements each also
contain customary provisions relating to assignment to Razorfish of proprietary
information developed during employment, the protection of confidential
information, and non-solicitation of Razorfish's employees or clients upon the
executive's termination of employment.
Non-competition agreements with Messrs. Dachis and Kanarick
Razorfish has entered into non-competition agreements with each of Jeffrey
A. Dachis and Craig M. Kanarick. The agreements provide that each of Messrs.
Dachis and Kanarick will not, until the later of December 31, 2001 and the
termination of such person's employment with Razorfish, (1) solicit business of
the type performed by Razorfish from any Razorfish client, (2) solicit
Razorfish's employees or (3) render services of the type performed by Razorfish
for any Razorfish client. A Razorfish client includes any person that is a
client at the time of, or during the two-year period prior to, termination of
such employee's employment and prospective clients to whom Razorfish has made a
presentation during the one-year period prior to such termination.
Executive compensation
The table below summarizes information concerning the compensation paid by
Razorfish during 1998 to Razorfish's Chief Executive Officer and Razorfish's
four other most highly paid executive officers (collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
Long-term compensation
Annual compensation awards
----------------------------------------------------
Name and principal position Salary Bonus Securities underlying options
- --------------------------- ---------- --------------------------------------
<S> <C> <C> <C>
Jeffrey A. Dachis.......... $ 104,000 $ 5,000 --
President, Chief Executive
Officer and Treasurer
Craig M. Kanarick.......... 104,000 5,000 --
Chief Scientist, Vice
Chairman of the Board and
Secretary
Peter Seidler.............. 112,500(1) 2,000 13,456(2)
Chief Creative Officer
Jean-Philippe Maheu........ 125,000 13,500 --
Executive Vice President--
North American Operations
Evan Orensten.............. 110,416(3) 16,000 --
Executive Vice President--
Global Intelligence and
Knowledge Management
</TABLE>
- --------
(1) Mr. Seidler's salary was $100,000 per year from January 16, 1998 to April
30, 1998 when it was increased to $125,000 per year.
(2) 13,456 of these options were granted to Mr. Seidler in order to satisfy
certain obligations of Razorfish with respect to a previous grant of
options made to Mr. Seidler.
(3) Mr. Orensten's salary was $100,000 per year from January 1, 1998 until
August 1, 1998 when it was increased to $125,000 per year.
The amount of the bonus paid to the Named Executive Officer was partially
based upon the financial results of Razorfish during the first two quarters of
1998 and partially based on the decision of the Chief Executive Officer. An
additional bonus in the form of stock options under the 1997 Stock Option Plan
will be granted to the Named Executive Officer upon the completion of this
offering. Pursuant to these grants, Messrs. Dachis, Kanarick, Seidler, Maheu
and Orensten will hold options for 20,260, 20,260, 2,500, 5,000 and 5,000
shares of Common Stock, respectively, exercisable at the price of the shares
offered hereby.
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Option grants in fiscal 1998
The following table sets forth information regarding stock options granted
pursuant to the 1997 Stock Option Plan during Fiscal 1998 to each of the Named
Executive Officers.
<TABLE>
<CAPTION>
Potential realized
Individual Grants value at assumed
----------------------------------------------- annual rates of
Number of Percent of stock price
securities total options appreciation for
underlying granted to Exercise or option term
options employees in base price Expiration ------------------
Name granted fiscal 1998 (per share) date 5% 10%
- ---- ---------- ------------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Dachis....... -- -- % $ -- -- $ -- $ --
Craig M. Kanarick....... -- -- -- -- -- --
Peter Seidler........... 500,000 53.4 1.00 04/30/08 314,445 796,870
13,456 2.9 10.00 11/26/08 3,246,458 25,986
Jean-Philippe Maheu..... -- -- -- -- -- --
Evan Orensten........... -- -- -- -- -- --
</TABLE>
Of the options granted to Mr. Seidler, 13,456 were granted to satisfy an
obligation of Razorfish with respect to a previous grant made to Mr. Seidler.
In addition, the exercise price of the other 500,000 options was below the fair
market value of the Common Stock on the date of grant. This determination is
based on an independent third-party valuation of Razorfish's Common Stock.
Accordingly, Razorfish recorded a compensation charge of $1.9 million in 1998.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The values set forth in the last two columns of the table set forth above
represent the gain that Mr. Seidler would realize assuming that (1) he
exercises all of the options granted at the end of their respective terms and
(2) the value of a share of Razorfish's Common Stock has increased annually by
a rate of 5% and 10% during the term of the option. These growth rates are
prescribed by the Securities and Exchange Commission. By including these values
in this prospectus, Razorfish does not intend to forecast the possible
appreciation of its Common Stock or to establish a present value of these
options. In addition, Mr. Seidler will not realize any gain unless there is an
increase in Razorfish's stock price.
Aggregated option exercises in fiscal 1998 and fiscal year-end option values
The following table sets forth information concerning the value of
unexercised in-the-money options held by the Named Executive Officers as of
December 31, 1998.
<TABLE>
<CAPTION>
Number of securities Value of unexercised
underlying unexercised options in-the-money options at
at fiscal year-end fiscal year-end
Shares acquired Value ----------------------------------- -------------------------
Name on exercise realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ---------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Dachis....... -- $ -- 16,667 33,333 $60,001 $119,999
Craig M. Kanarick....... -- -- 16,667 33,333 60,001 119,999
Peter Seidler........... 500,000 1,800,000 13,456 -- (72,662) --
Jean-Philippe Maheu..... 33,334 120,002 9,597 52,525 34,549 189,090
Evan Orensten........... 33,334 120,002 8,334 50,000 30,002 180,000
</TABLE>
There was no public trading market for the Common Stock at December 31,
1998. Accordingly, these values of exercisable and unexercisable in-the-money
options have been calculated on the basis of the fair market value of the
Common Stock at December 31, 1998 ($4.60 per share) as determined by an
independent third-party valuation, less the applicable exercise price per
share, multiplied by the number of shares underlying such options.
The value realized by Messrs. Seidler, Maheu and Orensten upon the exercise
of these options represents the aggregate amount of the difference between the
fair market value for a share of Common Stock on the date of exercise ($4.60
per share) and the exercise price of such options ($1.00 per share).
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<PAGE>
The table below sets forth what the value of unexercised, in-the-money
options at December 31, 1998 would have been for each Named Executive Officer
assuming that the fair market value of Razorfish's Common Stock was $11.00 (the
midpoint of the range disclosed on the cover of this prospectus) on the date of
exercise.
<TABLE>
<CAPTION>
Value of unexercised
in-the-money options at
fiscal year-end
-------------------------
Name Exercisable Unexercisable
- ---- ----------- -------------
<S> <C> <C>
Jeffrey A. Dachis..................................... $166,670 $333,330
Craig M. Kanarick..................................... 166,670 333,330
Peter Seidler......................................... 13,456 --
Jean-Philippe Maheu................................... 95,970 525,250
Evan Orensten......................................... 83,340 500,000
</TABLE>
Employee benefit plans
1997 Stock Option Plan
General. On February 24, 1997, Razorfish's Board of Directors adopted and
its stockholders approved the 1997 Stock Option Plan. The 1997 Stock Option
Plan provides for the issuance of a total of up to 1,172,548 shares of Common
Stock. Generally, shares subject to an award that remain unissued upon
expiration or cancellation of the award are available for other awards under
the 1997 Stock Option Plan.
Awards under the 1997 Stock Option Plan. Awards under the 1997 Stock Option
Plan may be made in the form of (1) incentive stock options, (2) non-qualified
stock options (incentive and non-qualified stock options are collectively
referred to as "Options"), (3) restricted stock or (4) any combination thereof.
Awards may be granted to such directors, employees and consultants of Razorfish
(collectively, "Key Persons") as the Board of Directors or the Compensation
Committee of the Board of Directors shall in its discretion select. Only
employees of Razorfish are eligible to receive grants of incentive stock
options.
Administration. The 1997 Stock Option Plan is administered by the Board of
Directors. The Board of Directors is authorized to construe, interpret and
implement the provisions of the 1997 Stock Option Plan, to select the Key
Persons to whom awards will be granted, to determine the terms and provisions
of awards and, with the consent of the grantee, to cancel and re-grant
outstanding awards. The determinations of the Board of Directors are made in
its sole discretion and are conclusive. Razorfish intends to appoint two
independent directors to a committee to be formed that will administer the 1997
Stock Option Plan.
Grants under the 1997 Stock Option Plan
Options. The Board of Directors determines the terms and conditions of each
Option. The purchase price per share payable upon the exercise of an Option
(the "Option Exercise Price") is established by the Board of Directors, and, in
the case of an incentive stock option the Option Exercise Price must be equal
to at least 100% of the fair market value of a share of the Common Stock on the
date of grant. The Option Exercise Price is payable in cash, by surrender of
shares of Common Stock having a fair market value on the date of the exercise
equal to part or all of the Option Exercise Price, or by a combination of cash
and such shares, as the Board of Directors may determine.
As of the date of this prospectus, there are Options outstanding to purchase
an aggregate of 647,995 shares of Common Stock of which 221,713 are currently
exercisable. In addition, Razorfish intends to grant all of the remaining
201,886 shares of Common Stock reserved for issuance under the 1997 Stock
Option Plan to some officers and employees concurrently with the consummation
of this offering. Of these Options, 533,664 were granted at an exercise price
less than the fair market value of the Common Stock on the date of grant and
114,331 were granted at an exercise price equal to or in excess of the fair
market value of the Common Stock on the date of grant. The weighted average
exercise price and remaining contractual life of the outstanding Options are
$2.59 and 9 years, respectively.
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Restricted stock. The Board of Directors may grant restricted shares of
Common Stock to such Key Persons, in such amounts and subject to such terms and
conditions (which may depend on or be related to performance goals and other
conditions) as the Board of Directors shall determine in its discretion. The
restricted period for an award of restricted stock may not exceed five years.
The Board of Directors may require that the certificates for the shares of
Common Stock covered by a restricted stock award remain in the possession of a
bank, other institution or the Company until such shares are free from
restrictions. Subject to all applicable restrictions, the grantee has the
rights of a stockholder with respect to the restricted stock, provided that all
stock dividends, stock rights and stock issued upon split-ups or
reclassification shall be subject to the same restrictions as the restricted
shares to which such dividends, rights and stock relate.
In February 1997, Razorfish issued an aggregate of 65,911 shares of Common
Stock under the 1997 Stock Option Plan to seven employees pursuant to the terms
of Stock Grant Agreements entered into between Razorfish and each such
employee. These shares vested 100% on the date of grant. These shares were
issued to each employee in consideration for services rendered to Razorfish by
such employee. Each Stock Grant Agreement also requires the employee to enter
into a Stock Restriction Agreement with Razorfish. Each Stock Restriction
Agreement provides that the holder of the shares of Common Stock will not sell,
assign, pledge or otherwise transfer the shares without the written consent of
Razorfish. In the event that the holder desires to transfer all or any portion
of the shares or upon the occurrence of certain events, Razorfish has a right
of first refusal to purchase such shares at fair market value as determined by
the Board of Directors. Each Stock Restriction Agreement terminates upon the
cessation of Razorfish's business, the bankruptcy, receivership or dissolution
of Razorfish or by the agreement of the parties.
Termination of employment or service
Options. In general, the option agreements entered into pursuant to the 1997
Stock Option Plan provide that: (1) upon termination of the grantee's
employment or service by reason of discharge other than for death or permanent
and total disability, all options not yet exercised shall terminate; and (2) if
a grantee dies or becomes permanently and totally disabled while in Razorfish's
employ or service, the grantee's options will become exercisable as to all of
the shares underlying such options and generally remain exercisable for one
year after the date of such termination, but not after the expiration date of
the award.
Restricted stock. If a grantee's employment or service terminates for any
reason or if any condition established by the Board of Directors with respect
to such restricted shares shall not have occurred prior to the end of the
restricted period, the restricted shares shall be forfeited to Razorfish, and
the rights of the holder with respect to such shares shall cease.
Other features of the 1997 Stock Option Plan. The Board of Directors may,
without stockholder approval, suspend, discontinue, revise or amend the 1997
Stock Option Plan at any time or from time to time; provided, however, that
stockholder approval shall be obtained for any amendment which (1) increases
the number of shares available for issuances (subject to certain exceptions),
(2) changes who is eligible to receive awards under the 1997 Stock Option Plan
or (3) materially increases the benefits accruing to Key Persons. Unless sooner
terminated by the Board of Directors, the provisions of the 1997 Stock Option
Plan with respect to the grant of incentive stock options shall terminate on
the tenth anniversary of the adoption of the 1997 Stock Option Plan by the
Board of Directors. All awards made under the 1997 Stock Option Plan prior to
its termination shall remain in effect until they are satisfied or terminated.
In the event of a stock dividend, stock split, recapitalization or the like, to
the extent it deems necessary, the Board of Directors will equitably adjust the
aggregate number of shares subject to the 1997 Stock Option Plan. No provision
is made in the 1997 Stock Option Plan for the adjustment of outstanding awards.
Tax consequences. The following description of the tax consequences of
awards under the 1997 Stock Option Plan is based on present Federal tax laws,
and does not purport to be a complete description of the tax consequences of
the 1997 Stock Option Plan.
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<PAGE>
There are generally no Federal tax consequences either to the optionee or to
Razorfish upon the grant of an Option. On the exercise of an incentive stock
option, the optionee will not recognize any income, and Razorfish will not be
entitled to a deduction for tax purposes, although such exercise may give rise
to liability for the optionee under the alternative minimum tax provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). However, if the
optionee disposes of shares acquired upon the exercise of an incentive stock
option within two years of the date of grant or one year of the date of
exercise, the optionee will recognize ordinary income, and Razorfish will be
entitled to a deduction for tax purposes in the amount of the excess of the
fair market value of the shares of Common Stock on the date of exercise over
the Option Exercise Price (or the gain on sale, if less); the remainder of any
gain, and any loss, to the optionee will be treated as capital gain or loss. If
the shares are disposed of after the foregoing holding periods are met,
Razorfish will not be entitled to any deduction, and the entire gain or loss
will be treated as a capital gain or loss to the optionee. On exercise of a
non-qualified stock option, the amount by which the fair market value of Common
Stock on the date of exercise exceeds the Option Exercise Price will generally
be taxable to the optionee as ordinary income and will generally be deductible
for tax purposes by Razorfish. The disposition of shares upon exercise of a
non-qualified option will generally result in capital gain or loss to the
optionee but will have no tax consequences to Razorfish.
An award of restricted shares of Common Stock generally will not result in
income for the grantee or in a tax deduction for Razorfish until such time as
the shares are no longer subject to forfeiture unless the grantee elects
otherwise. At that time, the grantee generally will recognize ordinary income
equal to the fair market value of the shares less any amount paid for them, and
Razorfish generally will be entitled to a tax deduction in the same amount.
Limitations on Razorfish's compensation deduction. Section 162(m) of the
Code limits the deduction which Razorfish may take for otherwise deductible
compensation payable to certain executive officers to the extent that
compensation paid to such officers for a year exceeds $1.0 million, unless such
compensation meets certain requirements. Although Razorfish believes that
compensation realized from options that have been granted under the 1997 Stock
Option Plan generally will satisfy the requirements of Section 162(m) of the
Code, there is no assurance that such awards will satisfy such requirements.
The deduction for compensation resulting from a restricted stock award will be
subject to the limitation imposed by Code Section 162(m).
1999 Stock Incentive Plan
General. In March 1999, Razorfish's Board of Directors adopted and the
stockholders approved the 1999 Stock Incentive Plan. The 1999 Stock Incentive
Plan provides for the issuance of a total of up to 600,000 shares of Common
Stock. Generally, shares subject to an award that remain unissued upon
expiration, cancellation, settlement or forfeiture of the award are available
for other awards under the 1999 Stock Incentive Plan.
Awards under the 1999 Stock Incentive Plan. Awards under the 1999 Stock
Incentive Plan may be made in the form of (1) incentive stock options, (2) non-
qualified stock options, (3) stock appreciation rights, (4) dividend equivalent
rights, (5) restricted stock, (6) performance units, (7) performance shares or
(8) any combination thereof. Awards may be granted to such Key Persons as the
Board of Directors or a Board appointed committee (the "Administrator") shall
in its discretion select. Only employees of Razorfish are eligible to receive
grants of incentive stock options. Each award shall be evidenced by an
agreement (each an "Award Agreement") entered into by Razorfish and the
grantee. Either the Board of Directors or the Administrator shall determine the
terms and provisions of each award granted under the 1999 Stock Incentive Plan,
including the vesting schedule, repurchase provisions, rights of first refusal,
forfeiture provisions, form of payment, payment contingencies and satisfaction
of any performance criteria. The performance criteria established by the
Administrator may be based on any one, or any combination of, the following:
(1) increase in share price, (2) earnings per share, (3) total stockholders'
return, (4) net operating income, (5) personal management objectives and (6)
any other measure of performance selected by the Administrator.
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<PAGE>
As of the date of this prospectus, no awards have been granted pursuant to
the 1999 Stock Incentive Plan.
Administration. The 1999 Stock Incentive Plan is administered by the
Administrator. The Administrator is authorized to construe, interpret and
implement the provisions of the 1999 Stock Incentive Plan, to select the Key
Persons to whom awards will be granted, to determine the terms and provisions
of awards and, with the consent of the grantee, to amend the terms of any
outstanding award. The determinations of the Administrator are made in its
sole discretion and are conclusive.
Grants under the 1999 Stock Incentive Plan
Awards. The Administrator determines the terms and conditions of each
award. The purchase price per share payable upon the exercise of an Option
(the "Option Exercise Price") is established by the Administrator, and, in the
case of an incentive stock option the Option Exercise Price must be equal to
at least 100% of the fair market value of a share of the Common Stock on the
date of grant. The Option Exercise Price is payable in cash, check, by
delivery of grantee's promissory note by surrender of shares of Common Stock
having a fair market value on the date of the exercise equal to the Option
Exercise Price, by the sale of the shares through a broker-dealer or by any
combination of the foregoing methods of payment, as the Administrator may
determine.
Termination of employment or service
Awards. Upon the termination of a Key Person's employment with Razorfish or
any of its subsidiaries, as the case may be, an award granted pursuant to the
1999 Stock Incentive Plan may be exercised to the extent provided in the Award
Agreement.
Other features of the 1999 Stock Incentive Plan. The Board of Directors
may, without stockholder approval, amend, suspend or terminate the 1999 Stock
Incentive Plan at any time or from time to time; provided, however, that (1)
stockholders approval shall be obtained as required and (2) such amendment,
suspension or termination shall not affect awards that have been previously
granted. Unless sooner terminated by the Board of Directors, the provisions of
the 1999 Stock Incentive Plan shall terminate on the tenth anniversary of the
adoption of the 1999 Stock Incentive Plan by the Board of Directors. All
awards made under the 1999 Stock Incentive Plan prior to its termination shall
remain in effect until they are satisfied or terminated. Subject to any action
that may be required by the stockholders of Razorfish, the Administrator may,
in its discretion, proportionately adjust the number and price of outstanding
awards, and the number of shares authorized for issuance under the 1999 Stock
Incentive Plan, in the event of a stock dividend, stock split,
recapitalization or other corporate action having a similar effect on the
capitalization of Razorfish. In the event of a Change in Control (as defined
in the 1999 Stock Incentive Plan), the Administrator has the authority to
accelerate the vesting schedule of, release from restrictions on transfer of
and terminate repurchase or forfeiture rights with respect to any outstanding
award. The Administrator may establish programs that provide for (1) the
exchange of awards for one or more other types of awards by certain Key
Persons and (2) the grant of certain types of awards to one or more classes of
Key Persons. In addition, the Administrator may at any time offer to buy out
for cash or shares of Common Stock any outstanding award.
Tax consequences. The following description of the tax consequences of
awards under the 1999 Stock Incentive Plan is based on present Federal tax
laws, and does not purport to be a complete description of the tax
consequences of the 1999 Stock Incentive Plan.
The tax consequences of Options and restricted stock granted under the 1999
Stock Incentive Plan will generally be the same as the tax consequences of
Options and restricted stock granted under the 1997 Stock Option Plan. In the
case of a stock appreciation right, upon exercise of such right the holder
will be taxed at ordinary income rates on the amount of cash and the fair
market value of the other property received. Subject to the limitation
described below, Razorfish will be entitled to a deduction at the same time
and in the same amount as the holder has income. The tax consequences of other
kinds of awards will depend on the particular
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terms and conditions of such awards. In general, in case of other awards, it is
anticipated that such awards will result in ordinary income to the recipient
and a deduction to Razorfish; however, the amount and timing of such income and
any such deduction will depend on the time and conditions of the award.
Limitations on Razorfish's compensation deduction. Although it is
anticipated that certain awards under the 1999 Stock Incentive Plan will,
pursuant to Section 162(m) of the Code, meet the requirements to avoid a limit
on deductibility, no assurances can be given that all awards will meet such
requirements. Specifically, awards of restricted stock will be subject to the
limitation on deductability imposed by Section 162(m) of the Code.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 10, 1999 and as adjusted to reflect the
sale of the Common Stock offered hereby by:
(1) each person (or group within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934) known by Razorfish to own beneficially 5% or
more of the Common Stock, (2) Razorfish's directors and Named Executive
Officers and (3) all directors and executive officers of Razorfish as a group.
As used in this table, "beneficial ownership" means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. A person is deemed to be the beneficial owner of securities that can
be acquired within 60 days from the date of this prospectus through the
exercise of any option, warrant or right. Shares of Common Stock subject to
options, warrants or rights which are currently exercisable or exercisable
within 60 days are deemed outstanding for computing the ownership percentage of
the person holding such options, warrants or rights, but are not deemed
outstanding for computing the ownership percentage of any other person. The
amounts and percentages are based upon 21,087,875 shares of Common Stock
outstanding as of March 10, 1999, and 24,087,875 shares of Common Stock
outstanding as of the closing of this offering, respectively.
Spray Ventures, Communicade and Messrs. Dachis and Kanarick are parties to
the Stockholders Agreement. Because the Stockholders Agreement terminates on
the consummation of this offering, the shares owned by one party to the
Stockholders Agreement are not attributed to the beneficial ownership of the
other parties in this table.
Although listed in the table below, Messrs. Bystedt, Svensson and Wren do
not own directly any shares of Common Stock. They are listed due to their
affiliation with Spray Ventures, in the case of Messrs. Bystedt and Svensson,
and Communicade, in the case of Mr. Wren, both of which are direct holders of
Common Stock. See notes 8 and 12 to the table.
<TABLE>
<CAPTION>
Number of shares Percentage owned
of common stock -----------------
beneficially owned
Name and address of prior to and after Prior to After
beneficial owners(1) offering offering offering
-------------------- ------------------ -------- --------
<S> <C> <C> <C>
Spray Ventures AB (2).................... 7,904,827 37.5% 32.8%
Nybrogatan 55
114 85 STOCKHOLM
Per I.G. Bystedt (3)................... 7,904,827(4) 37.5 32.8
Jonas S.A. Svensson (3)................ 7,904,827(4) 37.5 32.8
Omnicom Group, Inc. (5).................. 7,958,333(6) 37.7 33.0
c/o Communicade Inc.
437 Madison Avenue
New York, New York 10022
John Wren.............................. 7,958,333(7) 37.7 33.0
c/o Omnicom Group, Inc.
437 Madison Avenue
New York, New York 10022
Jeffrey A. Dachis........................ 2,346,390(8) 11.1 9.7
Craig M. Kanarick........................ 2,346,390(9) 11.1 9.7
Peter Seidler............................ 515,956(10) 2.4 2.1
Jean-Philippe Maheu...................... 47,931(11) * *
Evan Orensten............................ 46,668(12) * *
All directors and executive officers as a
group (12 persons)...................... 21,201,580(13) 99.7 88.0
</TABLE>
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- --------
* Less than 1%
(1) Unless otherwise noted, the address of each of the persons listed is 107
Grand Street, 3rd Floor, New York, New York 10013.
(2) Per Bystedt, Jonas Svensson, Thomas Randerz and Johan Ihrfelt, each of whom
is an officer or director of Razorfish, collectively own more than 50% of
the outstanding voting stock of Spray Ventures AB. There is no agreement
among these individuals as to the voting of their shares of Spray Ventures.
Spray Ventures is a publicly held company in Sweden.
(3) The principal business address of Messrs. Bystedt and Svensson is c/o Spray
Network AB, Nybrogaten 55, Stockholm 11485, Sweden.
(4) Represents shares of Common Stock beneficially held by Spray Ventures.
Messrs. Bystedt and Svensson are members of the board and shareholders of
Spray Ventures. However, none of Messrs. Bystedt or Svensson or any other
member of the board of Spray Ventures, acting alone, has voting or
investment power with respect to Razorfish's Common Stock directly or
indirectly beneficially owned by Spray Ventures and, as a result, each of
Messrs. Bystedt and Svensson disclaim beneficial ownership of these shares.
Spray Ventures is a publicly held company in Sweden.
(5) The shareholder of record is Communicade, a wholly owned subsidiary of
Omnicom. Omnicom is a publicly held company. John Wren, a director of
Razorfish, is also an executive officer of Omnicom. However, Mr. Wren,
acting alone, has no voting or investment power with respect to the
Razorfish Common Stock held by Communicade.
(6) Includes (a) 2,345,160 shares acquired in connection with the Spray
acquisition and (b) 1,976,810 shares acquired upon the exercise of the 10%
option.
(7) Represents shares of Common Stock beneficially held by Communicade. Mr.
Wren is an executive officer of Omnicom, the parent company of Communicade.
However, neither Mr. Wren nor any other officer or director of Omnicom,
acting alone, has voting or investment power with respect to the Company's
Common Stock directly or indirectly beneficially owned by Omnicom and, as a
result, Mr. Wren disclaims beneficial ownership of these shares.
(8) Includes 33,334 shares of Common Stock subject to options that are
currently exercisable by Mr. Dachis and 20,260 shares of Common Stock
subject to options to be granted to Mr. Dachis concurrently with the
consummation of this offering and to be exercisable in full on grant.
(9) Includes 33,334 shares of Common Stock subject to options that are
currently exercisable by Mr. Kanarick and 20,260 shares of Common Stock
subject to options to be granted to Mr. Kanarick concurrently with the
consummation of this offering and to be exercisable in full on grant.
(10) Includes 13,456 shares of Common Stock subject to options that are
currently exercisable by Mr. Seidler and 2,500 shares of Common Stock
subject to options to be granted to Mr. Seidler concurrently with the
consummation of this offering and to be exercisable in full on grant.
(11) Includes 9,597 shares of Common Stock subject to options that are
currently exercisable by Mr. Maheu and 5,000 shares of Common Stock
subject to options to be granted to Mr. Maheu concurrently with the
consummation of this offering and to be exercisable in full on grant.
(12) Includes 8,334 shares of Common Stock that are currently exercisable by
Mr. Orensten and 5,000 shares of Common Stock subject to options to be
granted to Mr. Orensten concurrently with the consummation of this
offering and to be exercisable in full on grant.
(13) Includes (a) an aggregate of 113,106 shares of Common Stock subject to
options that are held by the directors and executive officers and are
currently exercisable or exercisable within 60 days of March 10, 1999 and
73,020 shares to be granted to the directors and executive officers
concurrently with the consummation of this offering and to be exercisable
in full on grant, (b) shares held by Communicade, the beneficial ownership
of which is attributed to but disclaimed by Mr. Wren, and (c) shares held
by Spray Ventures, the beneficial ownership of which is attributed to but
disclaimed by Messrs. Bystedt and Svensson.
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CERTAIN TRANSACTIONS
Transactions with Omnicom
In September 1996, Razorfish, Communicade (f/k/a JWL Associates Corp.) and
Messrs. Dachis and Kanarick, officers of Razorfish, entered into the
Shareholders Agreement, which remained in effect until the closing of the Spray
acquisition. Pursuant to the terms of the agreement, Omnicom agreed that, as
long as it was a shareholder of Razorfish, it would provide Razorfish with a
$2.0 million working capital line of credit and an acquisition line of credit
to be used for the purchase of "new media" companies.
In connection with the Spray acquisition, Razorfish, Communicade, Spray
Ventures and Messrs. Dachis and Kanarick entered into the Stockholders
Agreement which terminates upon the closing of this offering. Pursuant to the
terms of the Stockholders Agreement, Communicade has provided the working
capital line of credit and the acquisition line of credit to Razorfish on the
same terms and conditions as were set forth in the Shareholders Agreement.
Razorfish repaid all outstanding amounts borrowed under the working capital
line of credit in February 1999 with the proceeds from the exercise of the 10%
option by Communicade. The first $1.0 million of principal amount outstanding
bore no interest and additional amounts bore interest at a rate set from time
to time by Omnicom, which is currently 5.95%. At the time Razorfish repaid this
debt, there was a total of $1.3 million outstanding, and the applicable
interest rate was 5.95%. The working capital line of credit was secured by a
first priority lien on Razorfish's assets. This lien was released at the time
of repayment. This line of credit will terminate upon the closing of this
offering.
As of the date of this prospectus, Razorfish has approximately $4.0 million
outstanding under the acquisition line of credit. Interest on any loan made
under the acquisition line of credit accrues at the same rate applicable to the
working capital line of credit and is payable quarterly on the outstanding
principal amount. The principal under any loan under the acquisition line of
credit is payable quarterly in equal installments over a seven-year period. The
unused portion of this line of credit will terminate upon the closing of this
offering, and all amounts outstanding under this line of credit must be repaid
as described in the previous sentence. The current interest rate is 5.95%. The
table below sets forth the amount borrowed for each acquisition of a "new
media" company that Razorfish funded with a loan from Communicade:
<TABLE>
<CAPTION>
Amount
Acquisition borrowed
----------- ----------
<S> <C>
Avalanche Systems........................... $1,000,000
CHBi........................................ 1,966,000
<tag> Media................................. 250,000
Plastic..................................... 525,000
----------
Total....................................... $3,741,000
==========
</TABLE>
See "Business--Other acquisitions" for a description of the acquisitions set
forth above.
Pursuant to the terms of the Stockholders Agreement, Communicade was granted
the 10% option. The purchase price per share upon exercise of the 10% option is
equal to 80% of the price per share to be sold in this offering. In February
1999, Communicade exercised the 10% option and purchased 1,976,810 shares of
Common Stock. The aggregate purchase price that Commmunicade paid for these
shares was $15.8 million. The purchase price paid by Communicade in connection
with the exercise of this option of $8.00 per share was based on an assumed
offering price of $10.00 per share. The purchase price for these shares will be
adjusted based on the actual offering prices of the shares offered hereby. At
the closing of this offering, Communicade will pay or Razorfish will refund the
difference between the amount paid by Communicade and the amount
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<PAGE>
payable based on such actual offering price, as applicable. Assuming that the
actual offering price of the shares offered hereby is $11.00 per share (the
midpoint of the range disclosed on the cover of this prospectus) the purchase
price payable by Communicade will increase by $1,581,448 to $17,395,928. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and capital resources."
Simultaneously with the Spray acquisition, Messrs. Dachis and Kanarick each
transferred an additional 363,636 shares of Common Stock, representing a total
of 4% of the issued and outstanding shares of Common Stock on the date of
transfer, to Communicade in exchange for $1.5 million in cash.
Transactions with Spray executives
In June 1997, Per Bystedt, an officer of Razorfish, and Spray entered into a
convertible debt agreement pursuant to which Mr. Bystedt loaned Spray
approximately $182,000. This loan was due on December 31, 1997 and bore
interest at 2.0% per annum. Prior to the maturity date of this loan, Spray
converted the loan into 56 shares of common stock with a per share value of
approximately $3,000.
In September 1997, Spray executed a demand note in favor of Mr. Bystedt for
the aggregate principal amount of SEK 1.0 million ($0.1). This note bore
interest at a rate of 9.25% and was repaid in 1998. In addition, prior to 1998,
Spray Ventures periodically made advances to Spray in an aggregate amount of
SEK 2.6 million ($0.3 million). These advances were forgiven by Spray Ventures
in 1998.
Razorfish Studios
Razorfish Studios produces and publishes on-line content, including art,
computer games, and literature, as well as screensavers, audio recordings,
books and films. The majority of Razorfish Studios' common stock is owned by
Communicade and Messrs. Dachis and Kanarick, each of whom is a stockholder of
Razorfish. Michael S. Simon, an officer of Razorfish, is also a stockholder and
a director and the President of Razorfish Studios. Mr. Dachis is the Chief
Executive Officer of Razorfish Studios, and Mr. Kanarick is the Chairman of the
Board, Chief Creative Officer and Secretary of Razorfish Studios.
Razorfish Studios was formed in October 1997. Both prior to its formation,
and for a period of time after, part of the Razorfish Studios business was
operated as a division of Razorfish. In October 1997, Razorfish assigned to
Razorfish Studios all of its rights, title and interest in and to all of the
Razorfish Studios digital media properties owned by Razorfish, including the
Razorfish Studios website and RSUB, The Razorfish Subnetwork (located at
www.rsub.com), and all content located in such websites.
In exchange for the use of its facilities, Razorfish allocates a portion of
its overhead to Razorfish Studios, based on the ratio of the number of
employees of Razorfish Studios to the number of employees of both Razorfish and
Razorfish Studios. Historically, Razorfish made its employees available to
Razorfish Studios at a single discounted rate which was approximately 57% of
the average billing rate for Razorfish employees. Razorfish currently charges
Razorfish Studios its full billing rates with no discounts. In addition,
Razorfish provides Razorfish Studios with funds to cover operating expenses and
salaries which are refunded by Razorfish Studios. As of December 31, 1998,
Razorfish Studios owed approximately $601,000 to Razorfish for certain services
rendered by Razorfish employees, overhead and other advances made by Razorfish.
Messrs. Dachis and Kanarick have unconditionally guaranteed to pay this amount
to Razorfish in the event of a default by Razorfish Studios, pursuant to a
guaranty entered into in December 1998. Razorfish expects that future amounts
owed by Razorfish Studios will also be guaranteed by Messrs. Dachis and
Kanarick.
Razorfish Studios currently has four employees. Such employees occasionally
perform work for Razorfish at the same hourly rate as is charged to Razorfish
Studios for the use of Razorfish employees. Razorfish Studios also sells
limited numbers of its products to Razorfish and its employees at a discounted
rate to the retail cost. Such products are used by Razorfish primarily as
promotional items for its clients.
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Razorfish licenses the "Razorfish" trademark and symbol to Razorfish Studios
pursuant to a trademark license agreement on a royalty-free basis. The
trademark license contains customary provisions giving Razorfish the ability to
control the use of the Razorfish trademark by Razorfish Studios. Because the
"Razorfish" trademark and symbol are closely associated with both Razorfish
Studios and Razorfish, Razorfish's name and reputation could still be
materially and adversely affected by content published or actions taken by
Razorfish Studios.
Other transactions
In December 1998, Messrs. Dachis and Kanarick, officers of Razorfish, sold
500,000 shares of Common Stock to Razorfish for an aggregate purchase price of
$500,000. The purchase price is payable in full in March 1999. The 500,000
purchased shares were issued out of treasury to Mr. Seidler in connection with
the exercise in December 1998 of options held by him at an exercise price of
$1.00 per share.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Razorfish's authorized capital stock consists of 29,999,950 shares, $.01 par
value per share, of Class A Common Stock, 50 shares, $.01 par value per share,
of Class B Common Stock and 10,000,000 shares, par value $.01 per share, of
preferred stock.
The following summary of the terms and provisions of Razorfish's capital
stock are not complete, and you should read Razorfish's Certificate of
Incorporation and By-laws, which have been filed as exhibits to the
Registration Statement of which this prospectus is a part.
Common stock
Class A Common Stock
Following this offering, 24,087,875 shares of Common Stock will be
outstanding and 24,537,875 shares if the underwriters exercise their over-
allotment option in full. As of March 10, 1999, there were 16 holders of the
Company's Common Stock. Each Stockholder is entitled to one vote for each share
owned on all matters voted upon by stockholders, including the election of
directors. Subject to the rights of any then outstanding shares of preferred
stock, stockholders are entitled to dividends that the Board of Directors may
declare. The decision to declare dividends is made by the Board of Directors in
their sole discretion, but the Board of Directors may only declare dividends if
there are funds legally available to pay for the dividends. See "Dividend
Policy."
Stockholders are entitled to share ratably in the net assets of Razorfish
upon liquidation after payment or provision for all liabilities and any
preferential liquidation rights of any preferred stock then outstanding.
Stockholders have no preemptive rights to purchase shares of stock of
Razorfish. Shares of Common Stock are not subject to any redemption provisions
and are not convertible into any other securities of Razorfish. All outstanding
shares of Common Stock are, and the shares of Common Stock to be sold by
Razorfish in this offering when they are paid for will be, fully paid and non-
assessable.
Class B Common Stock
All 50 shares of the Class B Common Stock are issued and outstanding. The
Class B Common Stock was issued to Spray Ventures and Communicade in February
1999 as a part of the purchase price for Spray. The rights, privileges and
restrictions of the Class B Common Stock are the same as those of the Class A
Common Stock, except that Communicade and Spray Ventures are not entitled to
vote these shares. Communicade and Spray Ventures may have the right to vote
these shares in specific instances in accordance with the Delaware General
Corporation Law.
Preferred stock
Pursuant to the Certificate of Incorporation, the Board of Directors has the
authority, without further action by Razorfish's stockholders, to issue up to
10,000,000 shares of preferred stock. The Board of Directors may issue this
stock in one or more series and may fix the rights, preferences, privileges and
restrictions of this stock. Some of the rights and preferences that the Board
of Directors may designate include dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and sinking fund terms.
The Board of Directors may determine the number of shares constituting any
series or the designation of such series. Any or all of the rights and
preferences selected by the Board of Directors may be greater than the rights
of the Common Stock. The issuance of preferred stock could adversely affect the
voting power of holders of Common Stock and the likelihood that stockholders
will receive dividend payments and payments upon liquidation. The issuance of
preferred stock could also have the effect of delaying, deferring or preventing
a change in control of Razorfish. Razorfish has no present plan to issue shares
of preferred stock.
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Limitation on directors' liabilities
Razorfish's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors and officers for
monetary damages for breach of their fiduciary duties as directors and
officers, except for liability
. for any breach of the director's or officer's duty of loyalty to
Razorfish or its stockholders,
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
. under Section 174 of the Delaware General Corporation Law, which concerns
unlawful payments of dividends, stock purchases or redemptions or
. for any transaction from which the director or officer derived an
improper personal benefit.
Razorfish may obtain standard policies of insurance under which coverage
would be provided to its directors and officers against loss arising from
claims of breach of duty or other wrongful act. This insurance would also
provide coverage to Razorfish with respect to payments which may be made by
Razorfish to such officers and directors pursuant to the above indemnification
provision or otherwise as a matter of law.
Anti-takeover effects of provisions of Razorfish's By-laws
Razorfish's By-laws provide that the number of directors may be changed by
an amendment to the By-laws adopted by the Board of Directors or by the holders
of a majority of Razorfish's outstanding voting stock. Vacancies on the Board
of Directors may be filled by the holders of a majority of directors in office
even if such members constitute less than a quorum.
Razorfish's By-laws also provide that special meetings of the stockholders
may be called only by the Chairman of the Board, the Chief Executive Officer,
the President or a majority of the Board of Directors. Razorfish's By-laws also
require advance written notice of a proposal or directors nomination which a
stockholder desires to present at an annual meeting of stockholders.
Razorfish's Secretary must receive the notice from the stockholder at least 45
days before the meeting.
Razorfish's Certificate of Incorporation does not include a provision for
cumulative voting in the election of directors. Under cumulative voting, a
minority stockholder holding a sufficient number of shares may be able to
ensure the election of one or more directors. The absence of cumulative voting
may have the effect of limiting the ability of minority stockholders to affect
changes in Board of Directors and, as a result, may have the effect of
deterring a hostile takeover or delaying or preventing changes in control or
management of Razorfish.
Anti-takeover effects of Delaware law
Razorfish's Certificate of Incorporation contains a provision electing not
to be governed by Section 203. In general, Section 203 of the Delaware General
Corporation Law prohibits a publicly held Delaware corporation from engaging in
a broad range of "business combinations" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. A "business combination" includes a merger, asset sale
or other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns or, in certain cases, within three years prior,
did own, 15% or more of the corporation's voting stock. As a result of the
Razorfish's election not to be governed by Section 203, it may be easier for a
third party to take over Razorfish.
Transfer agent and registrar
The Transfer Agent and Registrar for the Common Stock is American Stock &
Transfer Co.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, 24,087,875 shares of Common Stock will
be outstanding or 24,537,875 shares if the underwriters exercise their over-
allotment option in full. Of these shares, the 3,000,000 shares of Common Stock
sold in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless held by an "affiliate" of
Razorfish (a "Razorfish Affiliate") as that term is defined in Rule 144. All of
the shares of Common Stock outstanding prior to this offering are "restricted
securities," as such term is defined under Rule 144. These shares are
restricted securities because they were issued in private transactions not
involving a public offering and may not be sold in the absence of registration
other than in accordance with Rule 144 or Rule 701 promulgated under the
Securities Act or another exemption from registration. This prospectus may not
be used in connection with any resale of shares of Common Stock acquired in
this offering by Razorfish Affiliates.
Each of Razorfish and its existing stockholders has agreed not to offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Securities and Exchange Commission a registration statement
under the Securities Act relating to, any shares of Razorfish Common Stock or
securities convertible into or exchangeable or exercisable for any shares of
Common Stock of Razorfish without the prior written consent of Credit Suisse
First Boston Corporation for a period of 180 days after the date of this
prospectus. The restrictions set forth in the previous sentence do not apply to
grants of employee stock options pursuant to the terms of Razorfish's stock
option plans, issuances of securities pursuant to the exercise of such options
outstanding on the date hereof or the exercise of any other stock options
outstanding on the date hereof.
In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of the restricted
securities from the issuer or from an affiliate of the issuer, a person (or
persons whose shares of Common Stock are aggregated), including persons who may
be deemed Razorfish Affiliates, would be entitled to sell within any three-
month period a number of shares of Common Stock that does not exceed the
greater of
(1) one percent of the then-outstanding shares of Common Stock, which
equals approximately 240,879 shares immediately after this offering, or
(2) the average weekly trading volume during the four calendar weeks
preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission.
Sales under Rule 144 are also subject to certain restrictions as to the
manner of sale, notice requirements and the availability of current public
information about Razorfish. In addition, under Rule 144(k), if a period of at
least two years has elapsed since the later of the date restricted securities
were acquired from Razorfish or the date they were acquired from a Razorfish
Affiliate, a stockholder who is not a Razorfish Affiliate at the time of sale
and who has not been a Razorfish Affiliate for at least three months prior to
the sale would be entitled to sell shares of Common Stock in the public market
immediately without compliance with the foregoing requirements under Rule 144.
Rule 144 does not require the same person to have held the securities for the
applicable periods. The foregoing summary of Rule 144 is not intended to be a
complete description thereof.
In addition, any employee, director or officer of, or consultant to
Razorfish who acquired shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701 of the
Securities Act, which permits non-affiliates to sell their Rule 701 shares
without having to comply with the public information, holding period, volume
limitation or notice provisions of Rule 144, and permits Razorfish Affiliates
to sell their Rule 701 shares without having to comply with the holding period
restrictions of Rule 144, in each case, commencing 90 days after the date of
this prospectus.
Immediately following the offering, none of the 21,087,875 "restricted
securities" will be available for immediate sale in the public market pursuant
to Rule 144(k). Beginning 90 days after the date of this prospectus, and
without consideration of the contractual restrictions described above, 647,995
shares either issued under the 1997 Stock Option Plan or acquired upon exercise
of options issued under the 1997 Stock
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<PAGE>
Option Plan will be outstanding and eligible for sale in reliance upon Rule
701. Additional shares may be available if options are exercised in the 180-day
period following the date of this prospectus.
Following this offering, Razorfish intends to file a registration statement
on Form S-8 under the Securities Act to register (1) 1,172,548 shares of Common
Stock reserved or to be available for issuance pursuant to the 1997 Stock
Option Plan and (2) 600,000 shares of Common Stock reserved or to be available
for issuance pursuant to the 1999 Stock Incentive Plan. Shares of Common Stock
issued pursuant to the 1997 Stock Option Plan and the 1999 Stock Incentive Plan
generally will be available for sale in the open market by holders who are not
Razorfish Affiliates and, subject to the volume and other applicable
limitations of Rule 144, by holders who are Razorfish Affiliates, unless such
shares are subject to vesting restrictions or the contractual restrictions
described above.
Prior to this offering, there has been no public market for the Common
Stock. No information is currently available and Razorfish cannot predict the
timing or amount of future sales of shares, or the effect, if any, that future
sales of shares, or the availability of shares for future sale, will have on
the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of the Common Stock (including shares issuable upon the
exercise of stock options) in the public market after the lapse of the
restrictions described above, or the perception that such sales may occur,
could materially adversely affect the prevailing market prices for the Common
Stock and the ability of Razorfish to raise equity capital in the future. See
"Risk Factors--The volume of trading and price of our Common Stock could
fluctuate significantly" and "Risk Factors--The sale of a substantial number of
shares of our Common Stock in the public market could adversely affect the
market price."
75
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, BancBoston Robertson
Stephens Inc., BT Alex. Brown Incorporated and Lehman Brothers Inc., are acting
as representatives, the following respective numbers of shares of Common Stock:
<TABLE>
<CAPTION>
Number
Underwriters of shares
------------ ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
BancBoston Robertson Stephens Inc. ................................
BT Alex. Brown Incorporated........................................
Lehman Brothers Inc. ..............................................
---------
Total.......................................................... 3,000,000
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of Common Stock offered in this offering if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults the purchase commitments of non-defaulting underwriters
may be increased or this offering of the Common Stock may be terminated.
We have granted to the underwriters a 30 day option to purchase on a pro
rata basis up to additional shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions. This option may
be exercised only to cover over-allotments of Common Stock.
The underwriters propose to offer the Common Stock initially at the public
offering price on the cover page of this prospectus and to selling group
members at that price less a concession of $ per share. The underwriters and
the selling group members may allow a discount of $ per share on sales to
other broker/dealers. After the initial public offering, the public offering
price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses that
we will pay.
<TABLE>
<CAPTION>
Total
-----------------------------
Without With
Per share over-allotment over-allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
paid by us........................... $ $ $
Expenses payable by us................ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed % of the Common Stock being offered.
We, our officers and directors and our existing stockholders have agreed not
to offer, sell, contract to sell, announce their intention to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any additional shares of our Common Stock or securities convertible into or
exchangeable or exercisable for any shares of our Common Stock without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, except in our case for grants of
employee stock options pursuant to the terms of a plan in effect on the date
hereof, issuances of securities pursuant to the exercise of employee stock
options outstanding on the date hereof or the exercise of any other stock
options outstanding on the date hereof.
76
<PAGE>
The underwriters have reserved for sale, at the initial offering price, up
to shares of Common Stock for employees and certain other persons
associated with Razorfish who have expressed an interest in purchasing Common
Stock in this offering. The number of shares of Common Stock available for sale
to the general public in this offering will be reduced to the extent these
persons purchase the reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same terms as the
other shares.
We have agreed to indemnify the underwriters against certain liabilities,
including civil liabilities under the Securities Act, or to contribute to
payments which the underwriters may be required to make in respect thereof.
We have applied to list the shares of Common Stock on The Nasdaq National
Market under the symbol "RAZF".
Prior to the offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be determined by
negotiation between us and the representatives, and does not reflect the market
price for the Common Stock following the offering. Among the principal factors
considered in determining the initial public offering price will be:
. the information set forth in this prospectus and otherwise available to
the representatives;
. market conditions for initial public offerings;
. the history of and prospects for the industry in which we will compete;
. our past and present operations;
. our past and present earnings and current financial position;
. the ability of our management;
. our prospects for future earnings;
. the present state of our development and our current financial condition;
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies;
. the general condition of the securities markets at the time of this
offering; and
. other relevant factors.
We can offer no assurances that the initial public offering price will
correspond to the price at which the Common Stock will trade in the public
market subsequent to the offering or that an active trading market for the
Common Stock will develop and continue after the offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase shares of the Common Stock so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Common Stock in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the Common Stock originally sold by
such syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions.
Such stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the Common Stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
77
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale restrictions
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Common Stock are effected. Accordingly, any resale of the Common
Stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Common Stock.
Representations of purchasers
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (1) such purchaser is entitled under
applicable provincial securities laws to purchase such Common Stock without the
benefit of a prospectus qualified under such securities laws, (2) where
required by law, that such purchaser is purchasing as principal and not as
agent and (3) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of action (Ontario purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
Enforcement of legal rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia residents
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of Common Stock acquired on the same date and under
the same prospectus exemption.
Taxation and eligibility for investment
Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
legislation.
78
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
Razorfish by Morrison & Foerster LLP, New York, New York. The underwriters have
been represented by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The audited consolidated financial statements of Razorfish and Spray as of
December 31, 1997 and 1998 and for the three years ended December 31, 1998, the
audited consolidated financial statements of Spray Ventures as of December 31,
1996 and August 31, 1997 and for the year ended December 31, 1996 and the
eight-months ended August 31, 1997 and the audited financial statements of
Avalanche Systems as of and for the year ended December 31, 1997 included in
this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of Avalanche Systems, Inc. for the year ended
December 31, 1996 have been audited by M.R. Weiser & Co., LLP, independent
certified public accountants, as indicated in their report with respect thereto
and are included herein in reliance upon the authority of said firm as experts
in accounting and auditing.
79
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Razorfish has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 with respect to the Common Stock being
offered by this prospectus. This prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to Razorfish and the
shares of Common Stock offered hereby, reference is made to the Registration
Statement, including the exhibits and schedules thereto. Statements contained
in this prospectus as to the contents of any contract or other document
referred to herein are not necessarily complete and, where such contract is an
exhibit to the Registration Statement, each such statement is qualified in all
respects by the provisions of such exhibit, to which such reference is hereby
made. Copies of the Registration Statement, including the exhibits and
schedules thereto, may be examined without charge at the Public Reference Room
of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at the Commission's regional offices located at 500 West Madison
Street, Suite 1400, Chicago, IL 60661, and Seven World Trade Center, 13th
Floor, New York, NY 10048 or on the Internet at http://www.sec.gov. Copies of
all or a portion of the Registration Statement can be obtained from the Public
Reference Room of the Securities and Exchange Commission upon payment of
prescribed fees, and information on the operation of the Public Reference Room
may be obtained by calling the Commission at (800) SEC-0330.
As a result of this offering, Razorfish will become subject to the
information and reporting requirements of the Exchange Act and, in accordance
therewith, will file periodic reports, proxy statements and other information
with the Securities and Exchange Commission. Upon approval of the Common Stock
for listing on the Nasdaq Stock Market, such reports, proxy and information
statements and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
80
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
RAZORFISH, INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets at December 31, 1997 and 1998................. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998...................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1997 and 1998......................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
SPRAY NETWORK AB AND SUBSIDIARIES
Report of Independent Public Accountants.................................. F-23
Consolidated Balance Sheets at December 31, 1997 and 1998................. F-24
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998...................................................... F-25
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1997 and 1998......................................... F-26
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998...................................................... F-27
Notes to Consolidated Financial Statements................................ F-28
SPRAY VENTURES AB AND SUBSIDIARIES
Report of Independent Public Accountants.................................. F-38
Consolidated Balance Sheets at December 31, 1996 and at August 31, 1997... F-39
Consolidated Statements of Operations for the years ended December 31,
1996 and the eight-months ended August 31, 1997.......................... F-40
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996 and the eight-months ended August 31, 1997............. F-41
Consolidated Statements of Cash Flows for the years ended December 31,
1996 and the eight-months ended August 31, 1997.......................... F-42
Notes to Consolidated Financial Statements................................ F-43
AVALANCHE SYSTEMS, INC.
Report of Independent Public Accountants.................................. F-50
Independent Auditors' Report.............................................. F-51
Statements of Operations for the years ended December 31, 1996 and 1997... F-52
Statements of Stockholders' Equity (Deficit) for the years ended December
31, 1996 and 1997........................................................ F-53
Statements of Cash Flows for the years ended December 31, 1996 and 1997... F-54
Notes to Financial Statements............................................. F-55
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Razorfish, Inc.:
We have audited the accompanying consolidated balance sheets of Razorfish,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the three years ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Razorfish, Inc. and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for the three years ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
March 5, 1999
F-2
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1998
---------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $1,176,076 $ 598,720
Accounts receivable, net of allowance for doubtful
accounts of $0 and $50,000, respectively............ 1,304,420 2,373,006
Unbilled charges..................................... 371,692 1,326,905
Prepaid expenses and other current assets............ 309,962 572,700
Deferred tax assets.................................. 381,846 102,128
Due from affiliate................................... -- 601,089
---------- -----------
Total current assets............................... 3,543,996 5,574,548
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization of $136,608 and $472,410,
respectively.......................................... 617,560 1,185,544
INTANGIBLES, net of accumulated amortization of
$106,634.............................................. -- 3,454,582
DEFERRED TAX ASSETS.................................... 35,993 620,275
DEFERRED REGISTRATION COSTS............................ -- 564,165
OTHER ASSETS........................................... 68,961 686,369
---------- -----------
Total assets....................................... $4,266,510 $12,085,483
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to Omnicom Group, Inc............................ $1,805,000 $ 1,782,380
Due to related party................................. -- 500,000
Accounts payable and accrued expenses................ 270,032 1,791,417
Income taxes payable................................. 42,217 206,024
Deferred rent........................................ 39,970 58,158
Advanced billings.................................... 455,096 345,031
Current portion of capital lease obligations......... 71,803 47,107
Deferred tax liabilities............................. 848,421 1,395,884
---------- -----------
Total current liabilities.......................... 3,532,539 6,126,001
LONG-TERM DEBT......................................... -- 3,206,506
CAPITAL LEASE OBLIGATIONS.............................. 76,662 5,671
OTHER LIABILITIES...................................... -- 18,655
---------- -----------
Total liabilities.................................. 3,609,201 9,356,833
---------- -----------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares
authorized; no shares issued or outstanding......... -- --
Common stock:
Class A, $.01 par value, 29,999,950 shares
authorized; 9,156,819 and 9,223,821 shares issued
and outstanding at December 31, 1997 and 1998,
respectively........................................ 91,568 92,238
Class B, $.01 par value, 50 shares authorized; no
shares issued or outstanding........................ -- --
Additional paid-in capital........................... 342,251 2,751,863
Cumulative foreign currency translation adjustments.. -- 3,860
Retained earnings (accumulated deficit).............. 223,490 (119,311)
---------- -----------
Total stockholders' equity......................... 657,309 2,728,650
---------- -----------
Total liabilities and stockholders' equity......... $4,266,510 $12,085,483
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------------
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES.................................. $1,218,136 $3,617,688 $13,843,289
DIRECT SALARIES AND COSTS................. 895,220 1,906,111 7,769,752
---------- ---------- -----------
Gross profit............................ 322,916 1,711,577 6,073,537
SALES AND MARKETING....................... 128,959 174,550 438,204
GENERAL AND ADMINISTRATIVE................ 500,063 876,567 2,897,064
AMORTIZATION OF GOODWILL.................. -- -- 106,634
NON-CASH COMPENSATION EXPENSE............. -- 78,819 2,278,281
---------- ---------- -----------
Income (loss) from operations........... (306,106) 581,641 353,354
INTEREST EXPENSE, NET..................... 5,161 19,489 241,342
---------- ---------- -----------
Income (loss) before income taxes....... (311,267) 562,152 112,012
PROVISION (BENEFIT) FOR INCOME TAXES...... (56,801) 264,963 454,813
---------- ---------- -----------
Net income (loss)....................... $ (254,466) $ 297,189 $ (342,801)
========== ========== ===========
PER SHARE INFORMATION:
Net income (loss) per share--
Basic................................. $ (0.03) $ 0.03 $ (0.04)
========== ========== ===========
Diluted............................... $ (0.03) $ 0.03 $ (0.04)
========== ========== ===========
Weighted average common shares
outstanding--
Basic................................. 9,090,906 9,156,819 9,223,821
========== ========== ===========
Diluted............................... 9,537,607 9,886,241 9,670,522
========== ========== ===========
PRO FORMA NET INCOME (LOSS) DATA
(Unaudited)
Net income (loss) before provision
(benefit) for income taxes............. $ (311,267) $ 562,152 $ 112,012
Pro forma income tax provision (benefit)
(actual for December 31, 1997 and 1998)
....................................... (133,845) 264,963 454,813
---------- ---------- -----------
Pro forma net income (loss)............. $ (177,422) $ 297,189 $ (342,801)
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Common Stock Treasury Stock Additional Foreign Retained Total
----------------- ------------------- Paid-in Currency Earnings Stockholders'
Shares Amount Shares Amount Capital Translation (Deficit) Equity
--------- ------- --------- -------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1,
1996................... 9,090,906 $90,909 -- $ -- $ (90,909) $ -- $ 35,767 $ 35,767
Capital contribution... -- -- -- -- 500,000 -- -- 500,000
S-Corporation
termination........... -- -- -- -- (145,000) -- 145,000 --
Net loss............... -- -- -- -- -- -- (254,466) (254,466)
--------- ------- --------- -------- ---------- ------ --------- ----------
BALANCE, December 31,
1996................... 9,090,906 90,909 -- -- 264,091 -- (73,699) 281,301
Common stock issued to
employees............. 65,913 659 -- -- 12,825 -- -- 13,484
Common stock option
compensation.......... -- -- -- -- 65,335 -- -- 65,335
Net income............. -- -- -- -- -- -- 297,189 297,189
--------- ------- --------- -------- ---------- ------ --------- ----------
BALANCE, December 31,
1997................... 9,156,819 91,568 342,251 -- 223,490 657,309
Purchase of treasury
stock................. -- -- 500,000 (500,000) -- -- -- (500,000)
Common stock issued to
employees............. 67,002 670 (500,000) 500,000 66,331 -- -- 567,001
Common stock option
compensation.......... -- -- -- -- 2,278,281 -- -- 2,278,281
Foreign currency
translation
adjustment............ -- -- -- -- -- 3,860 -- 3,860
Capital contribution... -- -- -- -- 65,000 -- -- 65,000
Net loss............... -- -- -- -- -- -- (342,801) (342,801)
--------- ------- --------- -------- ---------- ------ --------- ----------
BALANCE, December 31,
1998................... 9,223,821 $92,238 -- $ -- $2,751,863 $3,860 $(119,311) $2,728,650
========= ======= ========= ======== ========== ====== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years
Ended December 31,
----------------------------------
1996 1997 1998
--------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................... $(254,466) $ 297,189 $ (342,801)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities-
Allowance for doubtful accounts........... -- -- 50,000
Depreciation and amortization............. 26,812 107,261 442,436
Non-cash common stock option
compensation............................. -- 78,819 2,278,281
Non-cash capital contribution............. -- -- 65,000
Increase in deferred tax assets........... (64,265) (348,846) (304,564)
Decrease (increase) in accounts
receivable............................... 50,404 (1,257,482) (332,131)
Increase in unbilled charges.............. -- (371,692) (955,213)
Increase in prepaid expenses and other
current assets........................... (105,999) (203,963) (262,738)
Increase in due from affiliates........... -- -- (601,089)
Increase in other assets.................. (29,145) (40,316) (188,423)
Increase in accounts payable and accrued
expenses................................. 79,678 143,033 1,070,568
Increase (decrease) in advanced billings.. -- 455,096 (110,065)
Increase in deferred tax liabilities...... 42,840 795,634 547,463
Increase (decrease) in income taxes
payable.................................. 31,399 (1,229) 163,807
Increase in deferred rent................. -- 39,970 18,188
Increase in other liabilities............. -- -- 18,655
Increase in due to related party.......... -- -- 500,000
--------- ----------- ----------
Net cash (used in) provided by operating
activities.............................. (222,742) (306,526) 2,057,374
--------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................... (189,356) (316,043) (675,907)
Acquisitions of subsidiaries net of cash
acquired................................. -- -- (4,553,718)
--------- ----------- ----------
Net cash used in investing activities.... (189,356) (316,043) (5,229,625)
--------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred registration costs............... -- -- (564,165)
Payments under capital lease obligations.. (25,278) (68,979) (95,687)
Proceeds from capital contribution........ 500,000 -- --
Proceeds from exercise of stock options... -- -- 567,001
Net borrowings under lines of credit
options.................................. -- 1,805,000 3,183,886
Purchase of treasury stock................ -- -- (500,000)
--------- ----------- ----------
Net cash provided by financing
activities.............................. 474,722 1,736,021 2,591,035
--------- ----------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS.......................... -- -- 3,860
--------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents............................. 62,624 1,113,452 (577,356)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD.................................... -- 62,624 1,176,076
--------- ----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD... $ 62,624 $ 1,176,076 $ 598,720
========= =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for--
Income taxes paid......................... $ -- $ -- $ --
Interest paid............................. 5,161 17,775 7,442
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Equipment acquired under capital leases... 95,598 126,901 --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Razorfish, Inc. ("Razorfish"), together with its wholly owned subsidiaries
(the "Company"), is an international digital communications solutions provider.
The Company creates digital communications solutions to help its clients
increase sales, improve communications and create business identities. The
Company provides an integrated service offering consisting of strategic
consulting, design of information architectures and user interfaces and
creation and customization of software necessary to implement its digital
communications solutions. The Company primarily uses Internet-based
technologies to create digital communications solutions for the World Wide Web.
However, Razorfish's solutions will increasingly incorporate additional
communications technologies, such as wireless, satellite and broadband
communications, for use with a variety of digital devices and information
appliances, including mobile phones, pagers and personal digital assistants. In
order to service its global clients, Razorfish has completed six acquisitions
since its inception in 1995, and currently has offices in New York,
San Francisco, Los Angeles, London, Stockholm, Oslo, Helsinki and Hamburg.
Principles of Consolidation
The accompanying consolidated financial statements as of and for the year
ended December 31, 1998 include the operations of Razorfish and its wholly
owned United States subsidiaries, Avalanche Solutions, Inc., Razorfish Los
Angeles, Inc., Razorfish San Francisco, Inc. and its wholly owned United
Kingdom subsidiary, CHBi Razorfish Ltd. The Company had no subsidiaries prior
to January 1, 1998. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, specifically for the allowance for doubtful accounts for accounts
receivable and the useful lives of fixed assets and intangible assets, that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized for time and materials-based arrangements and fixed-
fee arrangements on the percentage-of-completion method of accounting based on
the ratio of costs incurred to total estimated costs. Unbilled charges
represent labor costs incurred and estimated earnings, production and other
client reimbursable costs. Advanced billings represent billings of production
and other client reimbursable out-of-pocket costs in excess of revenues earned.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
F-7
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Property and equipment are depreciated on a straight-line
basis over estimated useful lives of four to eight years. Leasehold
improvements and equipment held under capital leases are amortized utilizing
the straight-line method over the lesser of the estimated useful life of the
asset or the lease term.
Intangible Assets
Goodwill, which represents the excess of the purchase price over the fair
value of the net assets acquired, is included in intangible assets and is
presently being amortized over a period of 20 years on a straight-line basis.
Management has evaluated the amortization periods in the current period and has
determined that no impairment currently exists. These amortization periods will
be evaluated by management on a continuing basis, and will be adjusted if the
lives of the related intangible assets are impaired.
Accounting for Long-Lived Assets
The Company accounts for long-lived assets in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." This statement establishes financial accounting and reporting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of.
Management has performed a review of all long-lived assets and has determined
that no impairment of the respective carrying value has occurred as of December
31, 1998.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their tax
bases for operating profit and tax liability carryforward. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets or liabilities of
a change in tax rates is recognized in the period that the tax change occurs.
The Company has elected to file its income tax returns using the cash basis of
accounting.
Foreign Currency Translation
All assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at fiscal year-end exchange rates. Income and expense items are
translated at average exchange rates prevailing during the year. The resulting
translation adjustments are recorded as a component of stockholders' equity in
the accompanying consolidated financial statements.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, due
from affiliate and accounts payable and accrued expenses approximate fair value
due to the short-term maturity of these instruments. The carrying amounts of
due to Omnicom Group, Inc. and capital lease obligations, including current
portions, approximate fair value.
F-8
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Business Concentrations and Credit Risk
Financial instruments, which subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents and trade accounts
receivable. The Company maintains cash and cash equivalents with various
financial institutions. The Company performs periodic evaluations of the
relative credit standing of these institutions. The Company's clients are
primarily concentrated in the United States. The Company performs ongoing
credit evaluations, generally does not require collateral and establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of customers, historical trends and other information. To date, such losses
have been within management's expectations.
For the year ended December 31, 1996 four clients accounted for 25%, 21%,
11% and 10%, respectively, of total revenues.
For the year ended December 31, 1997 four clients accounted for 20%, 16%,
14% and 14%, respectively, of total revenues.
For the year ended December 31, 1998 one client accounted for 27% of total
revenues.
As of December 31, 1997, two clients accounted for 59% and 16%,
respectively, of total accounts receivable.
As of December 31, 1998, three clients accounted for 17%, 14% and 14%,
respectively, of total accounts receivable.
Net Income (Loss) Per Common Share
The Company computes net income (loss) per share in accordance with SFAS No.
128, "Earnings Per Share" ("SFAS No. 128") and SEC Staff Accounting Bulletin
No. 98 ("SAB No. 98"). Under the provisions of SFAS No. 128 and SAB No. 98,
basic net income (loss) per common share ("Basic EPS") is computed by dividing
net income (loss) by the weighted average number of common shares outstanding.
Diluted net income (loss) per common share ("Diluted EPS") is computed by
dividing net income (loss) by the weighted average number of common shares and
dilutive common share equivalents then outstanding. SFAS No. 128 requires the
presentation of both Basic EPS and Diluted EPS on the face of the consolidated
statements of operations. The impact of the adoption of this statement was not
material.
F-9
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation between the numerator and denominator of Basic EPS and
Diluted EPS is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996
-----------------------------------
Net Common Net (Loss) Per
(Loss) Shares Common Share
--------- --------- --------------
<S> <C> <C> <C>
Basic EPS:
Net loss attributable to common stock.... $(254,466) 9,090,906 $(0.03)
Effect of nominal issuances of common
stock options........................... -- 446,701 --
--------- --------- ------
Diluted EPS.......................... $(254,466) 9,537,607 $(0.03)
========= ========= ======
<CAPTION>
For the Year Ended December 31,
1997
-----------------------------------
Net Common Net Income Per
Income Shares Common Share
--------- --------- --------------
<S> <C> <C> <C>
Basic EPS:
Net income attributable to common stock.. $ 297,189 9,156,819 $ 0.03
Effect of nominal issuances of common
stock options........................... -- 446,701 --
Effect of common stock options........... -- 282,721 --
--------- --------- ------
Diluted EPS ........................... $ 297,189 9,886,241 $ 0.03
========= ========= ======
<CAPTION>
For the Year Ended
December 31, 1998
-----------------------------------
Net Common Net (Loss) Per
(Loss) Shares Common Share
--------- --------- --------------
<S> <C> <C> <C>
Basic EPS:
Net loss attributable to common stock.... $(342,801) 9,223,821 $(0.04)
Effect of nominal issuances of common
stock options........................... -- 446,701 --
--------- --------- ------
Diluted EPS............................ $(342,801) 9,670,522 $(0.04)
========= ========= ======
</TABLE>
F-10
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Diluted EPS for 1996 and 1998 does not include the impact of common stock
options then outstanding, as the effect of their inclusion would be anti-
dilutive.
Stock-Based Compensation
In 1996, the Company adopted the provisions of SFAS No. 123 "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), and elected to continue the
accounting set forth in Accounting Principles Board No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25") and to provide the necessary pro
forma disclosures as if the fair value method had been applied (Note 8).
Comprehensive Income
During 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income," which established standards for reporting and displaying comprehensive
income and its components in a financial statement that is displayed with the
same prominence as other financial statements. The components of comprehensive
income are as follows:
<TABLE>
<CAPTION>
For the Years Ended December
31,
-----------------------------
1996 1997 1998
--------- -------- ---------
<S> <C> <C> <C>
Net income (loss)............................... $(254,466) $297,189 $(342,801)
Foreign currency translation adjustment......... -- -- 3,860
--------- -------- ---------
Comprehensive income (loss)................... $(254,466) $297,189 $(338,941)
========= ======== =========
</TABLE>
Proposed Public Offering
In connection with its contemplated initial public offering of Common Stock,
the Company has incurred approximately $564,000 in registration-related costs
that are being deferred until the consummation of the offering, at which time
they will be charged against additional paid-in capital. If the offering is not
consummated, the deferred registration costs will be expensed. These amounts
are included in deferred registration costs and accrued expenses in the
accompanying consolidated balance sheet as of December 31, 1998.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information."
This statement establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. This statement is
effective for financial statements for periods beginning after December 15,
1997 and need not be applied to interim periods in the initial year of
application. Comparative information for earlier years presented is to be
restated. The adoption of this statement did not have a material impact on the
Company's results of consolidated operations, financial position or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS 133"), which establishes accounting and reporting
standards of derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. This statement is
effective for all quarters of fiscal years beginning after June 15, 1999. The
Company does not expect the adoption of this standard to have a material effect
on the Company's results of consolidated operations, financial position or cash
flows.
F-11
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. ACQUISITIONS
Avalanche Solutions, Inc. and Avalanche Systems, Inc.
In January 1998, the Company purchased a 66 2/3% ownership interest from the
shareholders of a newly formed corporation, Avalanche Solutions, Inc.
("Avalanche Solutions"). In connection with this transaction, Avalanche
Solutions acquired substantially all of the assets of Avalanche Systems, Inc.
("Avalanche Systems") from Fleet Bank National Association and Fleet Bank
Capital Corporation in a foreclosure sale. These assets were seized from
Avalanche Systems, whose shareholders were the holders of the remaining 33 1/3%
of the capital stock of Avalanche Solutions. In April 1998, the Company
purchased this 33 1/3% ownership interest in Avalanche Solutions. The total
cash consideration for all stock and net assets acquired was approximately
$1,294,000.
These acquisitions have been accounted for under the purchase method of
accounting and, accordingly, the purchase price has been allocated to the
tangible and intangible assets acquired and liabilities assumed on the basis of
their respective fair values on the respective acquisition dates. As a result
of these acquisitions, the Company has recorded goodwill of approximately
$789,000, which is the excess cost of net assets acquired and is being
amortized over a useful life of 20 years.
Furthermore, the Company entered into an employment agreement with one of
the former shareholders of Avalanche Solutions. The employment agreement has a
term through December 2001 and includes a signing bonus and base compensation.
In addition, this former shareholder received fully vested options to purchase
500,000 and 13,456 shares of Common Stock of the Company at an exercise price
of $1.00 and $10.00, respectively, per share. This former shareholder is an
executive officer of Razorfish. In December 1998, he exercised options to
purchase 500,000 shares of Common Stock for an aggregate purchase price of
$500,000. In the opinion of management, based upon a third-party valuation
using the Black-Scholes Option Pricing Model, the exercise price was deemed to
be lower than the fair market value per share of the Company's Common Stock at
the grant date and, as such, the Company recorded compensation expense of
$1,865,000 for the year ended December 31, 1998.
CHBi Limited
In May 1998, the Company acquired all of the outstanding stock of London-
based CHBi Limited and, concurrently with the acquisition, CHBi Limited changed
its name to CHBi Razorfish Ltd. The Company paid total cash consideration of
approximately $2,028,000 in cash for the purchase of CHBi Limited. The
acquisition has been accounted for under the purchase method of accounting and,
accordingly, the purchase price has been allocated to the tangible and
intangible net assets acquired and liabilities assumed on the basis of their
respective fair values on the acquisition date. As a result of this
acquisition, the Company has recorded goodwill of approximately $1,972,000,
which is the excess cost of net assets acquired and is being amortized over a
useful life of 20 years. Furthermore, the CHBi Limited Purchase Agreement calls
for certain cash earn-out payments to the former shareholders based upon the
achievement of targeted operating performance of CHBi Razorfish Ltd. through
May 2001. No earn-out amounts have been earned to date. Future earn-out
payments, if any, will be recorded as additional purchase price and will result
in an adjustment to goodwill.
Plastic
In June 1998, the Company formed a subsidiary, Razorfish San Francisco, Inc.
("Razorfish San Francisco"), which acquired substantially all of the net assets
of Alpha Online, Inc. d/b/a Plasticweb and Plastic ("Plastic"). In
consideration for the net assets acquired, the Company paid approximately
$686,000 in cash. The acquisition of the assets has been accounted for under
the purchase method of accounting and, accordingly, the purchase price has been
allocated to the tangible and intangible net assets acquired and liabilities
assumed on the basis of their respective fair values on the acquisition date.
As a result of this acquisition, the Company has recorded goodwill of
approximately $305,000, which is the excess cost of net
F-12
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
assets acquired and is being amortized over a useful life of 20 years.
Furthermore, the Plastic Purchase Agreement calls for certain cash earn-out
payments to the former shareholders based upon the achievement of targeted
operating performance of Razorfish San Francisco through December 2001. No
earn-out amounts have been earned to date. Future earn-out payments, if any,
will be recorded as additional purchase price and will result in an adjustment
to goodwill.
<tag> Media
In July 1998, the Company formed a subsidiary, Razorfish Los Angeles, Inc.
("Razorfish Los Angeles"), which acquired substantially all of the net assets
of Titus Anspach Group, LLC d/b/a <tag> Media ("<tag> Media "). In
consideration for the net assets acquired, the Company paid approximately
$256,000 in cash. The acquisition of the assets has been accounted for under
the purchase method of accounting and, accordingly, the purchase price has been
allocated to the tangible and intangible assets acquired and liabilities
assumed on the basis of their respective fair values on the acquisition date.
As a result of this acquisition, the Company has recorded goodwill of
approximately $223,000, which is the excess cost of net assets acquired and is
being amortized over a useful life of 20 years. Furthermore, the <tag> Media
Purchase Agreement calls for certain earn-out payments to the former
shareholders based upon the achievement of targeted operating performance of
Razorfish Los Angeles through December 2001. No earn-out amounts have been
earned to date. Future earn-out payments, if any, will be recorded as
additional purchase price and will result in such, an adjustment to goodwill.
Sunbather
In October 1998, the Company acquired substantially all of the assets of
London-based Sunbather Limited ("Sunbather"), from an administrator appointed
for Sunbather. The net assets were acquired for a cash consideration of
approximately $290,000 and this acquisition has been accounted for under the
purchase method of accounting, and accordingly, the purchase price has been
allocated to the tangible and intangible assets acquired and liabilities
assumed on the basis of their respective fair values on the acquisition date.
As a result of this acquisition the Company recorded goodwill of approximately
$272,000, which is the excess cost of net assets acquired and is being
amortized over a useful life of 20 years.
The acquisitions described above were valued based on management's estimate
of the fair value of the net assets acquired at the date of acquisition. Costs
in excess of net assets acquired were recorded as intangible assets as follows:
<TABLE>
<CAPTION>
Avalanche
Systems/
Avalanche CHBi
Solutions Limited Plastic <tag> Media Sunbather
---------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Accounts receivable....... $ 85,625 $ 462,706 $238,124 $ -- $ --
Fixed assets.............. -- 44,626 132,234 32,954 18,065
Other assets.............. 418,680 -- 10,305 -- --
Intangible assets......... 789,257 1,971,823 305,100 223,448 271,588
Current liabilities....... -- (450,817) -- -- --
---------- ---------- -------- -------- --------
Total purchase price.... $1,293,562 $2,028,338 $685,763 $256,402 $289,653
========== ========== ======== ======== ========
</TABLE>
Spray Network AB
In January 1999, the Company acquired all of the issued and outstanding
shares of capital stock of Spray Network AB (the "Spray Acquisition") from
Spray Ventures AB and Communicade in exchange for an aggregate of
9,881,034 shares of Razorfish Common Stock and 50 shares of Razorfish non-
voting Class B Common Stock. The shares of Common Stock issued represented 50%
of the shares of Razorfish Common Stock on a fully diluted basis immediately
following the Spray Acquisition. In addition, the Company entered into
employment agreements with certain executives of Spray Network AB.
F-13
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pro forma results of operations
The following unaudited pro forma consolidated results of operations
reflects the results of operations for the years ended December 31, 1997 and
1998, as if the aforementioned acquisitions had occurred on January 1, 1997,
and after giving effect to purchase accounting adjustments. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of what operating results would have been had the acquisitions
actually taken place on January 1, 1997 and may not be indicative of future
operating results.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Pro forma:
Revenues......................................... $17,812,546 $30,974,052
Net (loss)....................................... (4,698,807) (3,569,977)
Basic net (loss) per share....................... (0.22) (0.17)
Diluted net (loss) per share..................... (0.22) (0.17)
</TABLE>
3. RELATED PARTY TRANSACTIONS
Agreements with Omnicom
In September 1996, Omnicom Group, Inc. ("Omnicom") purchased an aggregate of
3,636,364 shares of Common Stock from Messrs. Dachis and Kanarick, the founders
of Razorfish, for an aggregate purchase price of $3.5 million in cash in
September 1996 and three additional earn-out payments pursuant to the terms of
a Stock Purchase Agreement (the "Purchase Agreement"). The first two earn-out
payments were paid in February 1998 and January 1999 in the amounts of $1.3
million and $0.6 million, respectively, and the remaining payment of $1.7
million is payable in March 1999. The amount of the February 1998 and March
1999 payments are derived from Razorfish's Annual Revenues (as defined in the
Purchase Agreement) and profit before taxation for the relevant year. The
amount of the payment in January 1999 was the result of an adjustment made to
the aggregate purchase price pursuant to a side letter entered into between
Messrs. Dachis and Kanarick and Communicade (f/k/a JWL Associates Corp.), a
wholly owned subsidiary of Omnicom. Simultaneously with the execution of the
Purchase Agreement, the Company entered into a Shareholders Agreement with
Communicade. The Shareholders Agreement stipulates that Omnicom Finance Inc.
("Omnicom Finance") would provide the Company with a line of credit for working
capital purposes of up to $2.0 million and additional financing for the purpose
of funding the Company's acquisition of "new media companies," as defined,
provided that Communicade remained a shareholder of the Company.
Amounts borrowed under the working capital line of credit bear no interest
on the first $1.0 million of principal amount outstanding and thereafter bear
interest at the rate then charged by Omnicom Finance to its subsidiaries under
Omnicom Finance's cash management program, which was 6.85% and 6.00%,
respectively, as of December 31, 1997 and 1998. As the first $1.0 million
outstanding under the working capital line of credit is non-interest bearing,
the Company has imputed interest on the outstanding amounts based upon a
weighted average imputed interest rate of 6.50%. As such, the Company recorded
a charge to interest expense and a capital contribution of approximately
$65,000 for the year ended December 31, 1998. Imputed interest in all previous
periods was deemed to be immaterial by the Company. The amounts due under the
working capital line of credit are repayable in full on the earlier of December
31, 2001 or upon the closing of an initial public offering of the Company's
Common Stock. All outstanding amounts are secured by a priority lien on all of
the Company's assets.
The Company had $0.8 million and $1.1 million of the working capital line of
credit outstanding as of December 31, 1997 and 1998, respectively. In addition,
the Company had $1.0 million and $3.9 million of the
F-14
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
acquisition funding outstanding as of December 31, 1997 and 1998, respectively,
in connection with the acquisition of "new media companies." See Note 7 for the
terms of the acquisition line of credit.
In connection with the Spray acquisition, the Shareholders Agreement
terminated and was replaced by a new Stockholders Agreement. Pursuant to the
terms of the Stockholders Agreement, Omnicom Finance is to provide the working
capital line of credit and the acquisition line of credit to the Company on the
same terms and conditions as set forth in the Shareholders Agreement. The
principal under any loan under the acquisition line of credit is payable
quarterly in equal installments over a seven year period.
Communicade 10% Option
Pursuant to the Stockholders Agreement, in the event of an initial public
offering of the Company's Common Stock, Communicade had the right, but not the
obligation, to purchase from the Company up to such number of shares of Company
Common Stock as equalled 10% of the then issued and outstanding shares of
Razorfish's Common Stock on a fully diluted basis at the time the option was
exercised (the "Option Shares"). Communicade exercised the 10% option by
sending a written notice to the Company indicating its desire to purchase such
Option Shares in January 1999. Such Option Shares are restricted as to their
resale in accordance with the terms of the new Stockholders Agreement.
Management believes that such options were granted at or near the then current
fair market value of the Company's Common Stock. Omnicom exercised the option
in February 1999 (Note 13).
Razorfish Studios
The Company conducts business with Razorfish Studios ("Studios"). The
majority of Studios' common stock is owned by the majority stockholders of the
Company and certain of these stockholders also hold executive positions at
Studios. On October 17, 1997, the Company assigned to Studios all of its right,
title and interest in and to certain Studios digital media properties owned by
the Company. The cost and fair value of such properties were deemed to be
immaterial by the Company's management and as such, there was no material
effect on the Company's consolidated financial statements as of and for the
year ended December 31, 1997.
The Company also provides certain overhead and administrative functions for
Studios for which the Company is reimbursed. In addition, the Company has
provided certain design and consulting services to Studios at discounted billing
rates. The total revenue earned was not material to the accompanying
consolidated statements of operations. Amounts owed to the Company from Studios
for services rendered, reimbursable expense and advances totaled $0 and
$601,089, respectively, as of December 31, 1997 and 1998. The Company licenses
the "Razorfish" trademark and symbol to Studios pursuant to a trademark license
agreement (the "Trademark License"). The Trademark License contains customary
provisions giving the Company the ability to control the use of the "Razorfish"
trademark by Studios.
Repurchase of Treasury Shares
In December 1998, the Company repurchased 500,000 shares of Common Stock
from two of the Company's principal shareholders, for $1.00 per share, pursuant
to an agreement between the Company and the shareholders. The resulting
$500,000 due to the shareholders as of December 31, 1998, is non-interest
bearing and is due in full in March 1999.
F-15
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
Computer equipment.................................... $ 250,861 $ 635,617
Equipment under capital leases........................ 290,183 220,583
Furniture and fixtures................................ 179,152 419,229
Leasehold improvements................................ 33,972 382,525
--------- ----------
Total property and equipment........................ 754,168 1,657,954
Less--Accumulated depreciation and amortization....... (136,608) (472,410)
--------- ----------
Property and equipment, net......................... $ 617,560 $1,185,544
========= ==========
</TABLE>
Depreciation and amortization aggregated $26,812, $107,261 and $335,802,
respectively, for the three years ended December 31, 1998.
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Goodwill........................................................ $3,561,216
Less--Accumulated amortization................................ (106,634)
----------
Intangible assets, net...................................... $3,454,582
==========
</TABLE>
Amortization aggregated $106,634 for the year ended December 31, 1998. The
Company did not have any intangible assets prior to January 1, 1998.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1998
-------- ----------
<S> <C> <C>
Accounts payable........................................ $104,130 $ 873,844
Accrued expenses........................................ 75,902 269,093
Accrued professional fees............................... 90,000 648,480
-------- ----------
Total................................................. $270,032 $1,791,417
======== ==========
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of acquisition borrowings from Omnicom in the
original principal amount of approximately $3.7 million. The loan is payable in
equal quarterly installments over a period of seven years and bears interest at
approximately 6.0% per annum.
Maturities of long-term debt outstanding as of the year ended December 31,
1998 are as follows:
<TABLE>
<S> <C>
1999.............................................................. $1,782,380
2000.............................................................. 534,418
2001.............................................................. 534,418
2002.............................................................. 534,418
2003.............................................................. 534,418
Thereafter........................................................ 1,068,834
----------
Total......................................................... $4,988,886
==========
</TABLE>
F-16
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. INCOME TAXES
Income (loss) before taxes and the provision (benefit) for taxes on income
consisted of the amounts shown below:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic.................................. $(311,267) $ 562,152 $(167,080)
International............................. -- -- 279,092
--------- --------- ---------
$(311,267) $ 562,152 $ 112,012
========= ========= =========
Provision (benefit) for taxes on income:
Current--
Federal................................. $ (13,365) $(110,105) $ 41,701
State and local......................... (22,009) (71,720) 75,822
International........................... -- -- 94,891
Deferred--
Federal................................. (12,129) (348,856) 191,224
State and local......................... (9,298) 795,644 51,175
International........................... -- -- --
--------- --------- ---------
$ (56,801) $ 264,963 $ 454,813
========= ========= =========
</TABLE>
A reconciliation of the difference between the statutory U.S. Federal income
tax rate and the Company's effective tax rate follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------
1996 1997 1998
----- ---- -----
<S> <C> <C> <C>
Statutory federal income tax rate..................... (34.0)% 34.0% 34.0%
State and local taxes on income, net of federal income
tax benefit.......................................... (6.6) 12.4 74.8
Effect on change from "S" Corp........................ 28.8 -- --
Disallowed expenses................................... -- -- 24.8
Incentive stock option expense........................ -- -- 239.6
Goodwill amortization................................. -- -- 29.0
Other................................................. (6.4) 0.7 3.8
----- ---- -----
Effective rate...................................... (18.2)% 47.1% 406.0%
===== ==== =====
</TABLE>
The tax effects of temporary differences that give rise to a significant
portion of the deferred income tax asset, net, are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Current deferred income tax assets (liabilities),
net:
Accrual to cash adjustments....................... $(466,575) $(178,064)
Bad debts......................................... -- 23,088
Other............................................. -- 15,700
Noncurrent deferred tax assets (liabilities), net:
Stock options..................................... 35,993 --
Accrual to cash adjustment........................ -- (534,205)
--------- ---------
Total deferred income taxes, net................ $(430,582) $(673,481)
========= =========
</TABLE>
F-17
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred income taxes are provided for the temporary difference between the
financial reporting basis and tax basis of the Company's assets and
liabilities. Deferred tax assets result principally from recording certain
expenses in the financial statements, which are not currently deductible for
tax purposes and differences between the tax and book basis of assets and
liabilities recorded in connection with the acquisitions. Deferred tax
liabilities result principally from expenses which are currently deductible for
tax purposes, but have not yet been expensed in the financial statements.
The Company has concluded that it is probable that it will be able to
realize these net deferred tax assets in future periods. In addition, the
company has net operating losses of approximately $200,000 which will expire at
the end of 2018.
On September 18, 1996, pursuant to a Shareholders Agreement (Note 3), the
Company's "S" Corporation status was terminated and the Company began
operations as a "C" Corporation. Accordingly, the Company became subject to
federal and state income taxes and the retained deficit of the Company was
transferred to additional paid-in capital. During the period from January 1,
1996 to September 18, 1996, the net loss incurred was $180,767. For the period
from September 19, 1996 to December 31, 1996, the net loss incurred was
$73,699.
As described above, the Company began operations as a "C" Corporation on
September 18, 1996. The following unaudited pro forma income tax information
has been determined as if the Company operated as a "C" Corporation from its
inception, without contemplating any applicable tax laws related to the
utilization of net operating losses. No pro forma income tax provision is
presented for the year ended December 31, 1997 and 1998 as the Company was
operating as a "C" Corporation during those periods.
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
------------
<S> <C>
Federal tax provision (benefit) at statutory rate............... $(105,831)
State income taxes, net of federal benefit...................... (28,014)
----------
$(133,845)
==========
</TABLE>
Certain goodwill related to international acquisitions may be deemed
nondeductible under Internal Revenue Service Regulations.
9. STOCKHOLDERS' EQUITY
Common Shares
In connection with 1-for-2 reverse stock split effected in March 1999, the
Board of Directors authorized 30,000,000 shares of common stock, of which
29,999,950 shares have been designated as Class A Common Stock and 50 shares
have been designated as Class B Common Stock. There were 9,156,819 and
9,223,821 shares of Class A Common Stock issued and outstanding as of December
31, 1997 and 1998, respectively. No shares of Class B Common Stock were issued
as of December 31, 1997 or 1998.
On September 16, 1996, the founders of the Company entered into a Stock
Purchase Agreement with Communicade pursuant to which they sold an aggregate of
3,636,364 shares of Common Stock to Communicade. Communicade made a cash
contribution of $500,000 to the Company without the issuance of any shares of
capital stock to it by the Company.
On February 24, 1997, the Company issued an aggregate of 65,913 shares of
Common Stock to seven employees pursuant to the terms of the Company's 1997
Stock Option and Incentive Plan, as amended (the "1997 Stock Option Plan"), and
Stock Grant Agreements entered into by the Company and each such
F-18
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
employee. The Company issued the shares in consideration for services rendered
to the Company by such employees and as such, the Company recorded compensation
expense of $12,825 for the year ended December 31, 1997, based upon a third-
party valuation of the fair market value of the Company's Common Stock. Each
Stock Grant Agreement also provided that each of the employees enter into a
Stock Restriction Agreement with the Company. The Stock Restriction Agreement
provides that the holder of the shares of Common Stock will not sell, assign,
pledge or otherwise transfer the shares without the written consent of the
Company.
Stock Splits
On February 24, 1997, the Board of Directors authorized a 30,000-for-1 stock
split of the Company's Common Stock and changed the par value to $0.01 per
share. On April 30, 1998, the Board of Directors authorized a 1.515151-for-1
stock split. On December 14, 1998 the Board of Directors authorized a 2-for-1
stock split of the Company's issued Common Stock. On March 4, 1999, the Board
of Directors authorized a 1-for-2 reverse stock split of the Company's issued
Common Stock and Common Stock Options under the 1997 Plan and 1999 Plan and
changed the authorized share capital to 40,000,000 (10,000,000 preferred,
29,999,950 Class A Common and 50 Class B Common). In connection with the split,
each holder of the Company's Common Stock Options amended their respective
option agreement to waive their right to have their options split effected
under this stock split. All references in the accompanying consolidated
financial statements and footnotes have been retroactively restated to give
effect to these stock splits.
Stock Options
Under the terms of the 1997 Stock Option Plan 1,172,548 shares of common
stock of the Company have been reserved for:
a. incentive stock options;
b. non-qualified stock options (incentive and non-qualified stock
options are collectively referred to as "Options");
c. restricted stock; or
d. any combination thereof.
Awards may be granted to such directors, employees and consultants of the
Company (collectively "Key Persons") as the Board of Directors shall in its
discretion select. Only employees of the Company are eligible to receive grants
of incentive stock options.
Options granted under the Stock Option Plan typically vest annually over a
three-year period and expire ten years from the date of grant.
The Company accounts for the Stock Option Plan under APB Opinion No. 25 and,
accordingly, compensation expense of $65,335 and $2,278,281, respectively, has
only been recognized for stock options granted below fair market value for the
year ended December 31, 1997 and December 31, 1998, respectively, in the
accompanying consolidated financial statements. No options were granted prior
to 1997.
F-19
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had compensation for the 1997 Stock Option Plan been determined consistent
with the provisions of SFAS No. 123, the effect on the Company's net income
(loss) and basic and diluted net income (loss) per share would have been
changed to the following pro forma amounts:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
Net income (loss), as reported........ $ 297,189 $ (342,801)
Net loss, pro forma................... (1,127,727) (2,409,308)
Basic income (loss) per share, as
reported............................. 0.03 (0.04)
Basic loss per share, pro forma....... (0.12) (0.26)
Diluted income (loss) per share, as
reported............................. 0.03 (0.04)
Diluted loss per share, pro forma..... (0.11) (0.25)
</TABLE>
A summary of the status of the Stock Option Plan as of and for the year
ended December 31, 1998 and December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1997 1998
---------------------- ----------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Shares under option, beginning
of period...................... -- $ 1.00 456,795 $1.00
Options granted................. 456,795 1.00 486,661 3.22
Options exercised............... -- 0.00 283,501 1.00
Shares under option, end of
period......................... 456,795 1.00 659,955 2.64
Options exercisable at period-
end............................ -- 0.00 132,161 1.00
Weighted average fair value of
options granted................. -- 0.50 -- 2.71
</TABLE>
The fair market value of each option grant has been estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Expected option lives...................................... 5 years 5 years
Risk free interest rates................................... 5.88% 4.98%
Expected volatility........................................ 83.9% 87.2%
Dividend yield............................................. -- --
</TABLE>
The following table summarizes information about options outstanding and
options exercisable at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- --------------------
Weighted
Shares Average Weighted Shares Weighted
Subject to Remaining Average Subject to Average
Outstanding Contractual Exercise Exercisable Exercise
Range of Exercise Price options Life Price options Price
----------------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.00.................. 331,974 8 years $1.00 88,441 $ 1.00
1.00.................. 205,900 9 years 1.04 30,264 1.00
1.00 to 10.00......... 122,081 10 years 9.78 13,456 10.00
------- -------
659,955 132,161
======= =======
</TABLE>
F-20
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. SEGMENT REPORTING
The Company began operations outside of the United States during the year
ended December 31, 1998 through its acquisition of CHBi Limited. A summary of
the Company's operations by geographical area as of and for the year ended
December 31, 1998 is presented below:
<TABLE>
<CAPTION>
United States International Consolidated
------------- ------------- ------------
<S> <C> <C> <C>
Revenues........................... $12,142,869 $1,700,420 $13,843,289
Operating profit (loss)............ 73,854 279,500 353,354
Net income (loss).................. (527,002) 184,201 (342,801)
Identifiable assets................ 10,852,538 1,232,945 12,085,483
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company is committed under operating leases principally for office space
and equipment. Certain leases are subject to rent reviews and require payment
of expenses under escalation clauses. Rent expense and equipment rental were
$85,807, $185,175 and $729,921, respectively, for the three years ended
December 31, 1998. Future minimum base rents under terms of noncancellable
operating leases, reduced by rents to be received from existing noncancellable
subleases as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Rental Rental Net Rent
Payments Income Expense
---------- -------- --------
<S> <C> <C> <C>
Year Ending December 31:
1999.......................................... $ 909,537 $264,960 $644,577
2000.......................................... 1,032,184 264,960 767,224
2001.......................................... 977,337 264,960 712,377
2002.......................................... 412,721 264,960 147,761
2003.......................................... 379,016 264,960 114,056
Thereafter.................................... 1,499,725 839,040 660,685
</TABLE>
Employment Agreements
From September 1996 through July 1998, the Company entered into various
employment agreements with certain senior executives, the expirations of which
extend through 2001. The aggregate minimum base salaries under these agreements
are approximately $1,041,200 for each of the years ended December 31, 1999,
2000 and 2001, respectively, for those agreements with terms in excess of one
year at December 31, 1998.
In January 1999, the Company entered into various employment agreements with
certain senior executives of Spray Network AB, the expirations of which extend
through December 31, 2001. The aggregate minimum base salaries under these
agreements are approximately $435,000 for each of the years ended December 31,
1999, 2000 and 2001.
Litigation
The Company from time to time becomes involved in various routine legal
proceedings in the ordinary course of its business. The Company believes that
the outcome of all pending legal proceedings and unasserted claims in the
aggregate will not have a material adverse effect on its consolidated results
of operations, consolidated financial position or liquidity.
F-21
<PAGE>
RAZORFISH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. CAPITAL LEASE OBLIGATIONS
At December 31, 1998 the Company was committed under capital leases,
principally for computer equipment and office equipment. The assets and
liabilities under the capital leases are recorded at the lower of the present
value of minimum lease payments or the fair market value of the assets. The
assets are depreciated over their estimated useful lives. The interest rate on
the capital leases ranges from 11.5% to 16.7%.
Future minimum payments under the lease agreement are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1999.......................................................... $51,459
2000.......................................................... 5,737
2001.......................................................... --
-------
Total minimum lease payments................................ 57,196
Less--
Amounts representing interest............................... 4,418
Current portion............................................. 47,107
-------
Long term portion......................................... $ 5,671
=======
</TABLE>
13. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan covering all of its eligible
employees in the United States. The Plan was effective from January 1, 1998 and
is qualified under Section 401(k) of the Internal Revenue Code of 1986.
Employees may begin participation on monthly enrollment dates provided that
they have reached 18 years of age and three months of service. The Company may
make matching and/or profit sharing contributions to the Plan at its
discretion. There is no contribution expense for the year ended December 31,
1998.
14. SUBSEQUENT EVENTS
In January 1999, the Company acquired all of the issued and outstanding
shares of capital stock of Spray Network AB from Spray Ventures AB and
Communicade in exchange for an aggregate of 9,881,034 shares of Razorfish
Common Stock and 50 shares of Razorfish non-voting Class B Common Stock. The
shares of Common Stock issued represented 50% of the shares of Razorfish Common
Stock on a fully diluted basis immediately following the Spray Acquisition.
(Note 2).
In January 1999, the Company sent notice to Omnicom that it was
substantially prepared to make the initial filing of the Registration Statement
with the Securities and Exchange Commission. Omnicom Group, Inc. sent a written
notice to the Company indicating its desire to exercise its option to purchase
10% of the then-issued and outstanding shares of Common Stock. As such, the
company issued 1,976,810 shares of common stock at $8.00 per share for total
proceeds of approximately $15,814,000.
In March 1999, the Company's Board of Directors adopted and the Company's
stockholders approved a stock incentive plan. The 1999 Stock Incentive Plan
(the "1999 Stock Incentive Plan"), provides for the issuance of a total of up
to 600,000 shares of Common Stock. Generally, shares subject to an award that
remain unissued upon expiration, cancellation or forfeiture of the award are
available for other awards under the 1999 Stock Incentive Plan.
The Company is pursuing an initial public offering of its Class A Common
Stock. The offering contemplates the sale of 3,000,000 shares of Common Stock
at an offering price between $10.00 and $12.00 before taking into account
applicable underwriting commissions and offering expenses.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Spray Network AB:
We have audited the accompanying consolidated balance sheets of Spray
Network AB (a Kingdom of Sweden corporation) and subsidiaries as of December
31, 1997 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the three years ended December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Spray Network AB and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for the three years ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
March 5, 1999
F-23
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's omitted, except share amounts and per share data)
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------ -------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents................................... $ 581 $ 907
Accounts receivable, net of allowance for doubtful accounts
of $0 and $24, respectively................................ 996 1,725
Unbilled charges............................................ 583 712
Prepaid expenses and other current assets................... 241 534
------ -------
Total current assets...................................... 2,401 3,878
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$302 and $493, respectively.................................. 1,015 1,436
INTANGIBLES AND OTHER ASSETS.................................. 1,248 1,513
------ -------
Total assets.............................................. $4,664 $ 6,827
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable............................................ $ 559 $ 1,207
Accrued expenses............................................ 583 1,647
Income taxes payable........................................ 136 --
Related party debt.......................................... 481 1,583
Current portion of long-term debt........................... 16 16
Other current liabilities................................... 772 1,231
------ -------
Total current liabilities................................. 2,547 5,684
------ -------
NON-CURRENT LIABILITIES:
Deferred tax liabilities.................................... 6 --
Long-term debt.............................................. 45 24
Minority interest........................................... 88 71
Other non-current liabilities............................... 361 212
------ -------
Total non-current liabilities............................. 500 307
------ -------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY:
Common stock, $13 par value, 8,000 shares authorized, 2,278
and 2,815 shares issued and outstanding at December 31,
1997 and 1998, respectively................................ 32 37
Additional paid-in capital.................................. 2,360 3,492
Cumulative foreign currency translation adjustments......... (68) (112)
Retained earnings (accumulated deficit)..................... (707) (2,581)
------ -------
Total stockholders' equity................................ 1,617 836
------ -------
Total liabilities and stockholders' equity................ $4,664 $ 6,827
====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-24
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------
1996 1997 1998
------ ------ -------
<S> <C> <C> <C>
REVENUES............................................... $5,319 $7,818 $15,402
DIRECT SALARIES AND COSTS.............................. 4,391 7,258 13,111
------ ------ -------
Gross profit......................................... 928 560 2,291
SALES AND MARKETING.................................... 350 395 757
GENERAL AND ADMINISTRATIVE............................. 256 965 2,763
AMORTIZATION OF GOODWILL............................... -- 89 331
------ ------ -------
Income (loss) from operations........................ 322 (889) (1,560)
INTEREST INCOME (EXPENSE), net......................... -- 84 (235)
------ ------ -------
Income (loss) before minority interest and income
taxes............................................... 322 (805) (1,795)
MINORITY INTEREST...................................... -- 88 319
------ ------ -------
Income (loss) before provision (benefit) income
taxes............................................... 322 (717) (1,476)
PROVISION (BENEFIT) FOR INCOME TAXES................... 241 (24) --
------ ------ -------
Net income (loss).................................... $ 81 $ (693) $(1,476)
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-25
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000's omitted, except share amounts)
<TABLE>
<CAPTION>
Cumulative Retained
Common Stock Additional Foreign Earnings Total
------------- Paid-in Currency (Accumulated Stockholders'
Shares Amount Capital Translation Deficit) Equity
------ ------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1,
1996................... 1,000 $ 15 $ 3 $ 21 $ 437 $ 476
Cash dividends........ -- -- -- -- (280) (280)
Foreign currency
translation
adjustment........... -- -- -- (8) -- (8)
Net income............ -- -- -- -- 81 81
----- ---- ------ ------ ------- -------
BALANCE, December 31,
1996................... 1,000 15 3 13 238 269
Cash dividends........ -- -- -- -- (223) (223)
Contribution of shares
in Spray Services AB-
Group................ 1,162 15 1,952 -- -- 1,967
Issuance of common
stock................ 60 1 194 -- -- 195
Debt converted into
common stock......... 56 1 181 -- -- 182
Transfers of amounts
not available for
distribution......... -- -- 30 -- (29) 1
Foreign currency
translation
adjustment........... -- -- -- (81) -- (81)
Net loss.............. -- -- -- -- (693) (693)
----- ---- ------ ------ ------- -------
BALANCE, December 31,
1997................... 2,278 32 2,360 (68) (707) 1,617
Issuance of common
stock................ 414 4 -- -- -- 4
Exercise of common
stock options........ 123 1 399 -- -- 400
Debt forgiven by
shareholder.......... -- -- 335 -- -- 335
Transfers of amounts
not available for
distribution......... -- -- 398 -- (398) --
Foreign currency
translation
adjustment........... -- -- -- (44) -- (44)
Net loss.............. -- -- -- -- (1,476) (1,476)
----- ---- ------ ------ ------- -------
BALANCE, December 31,
1998................... 2,815 $ 37 $3,492 $ (112) $(2,581) $ 836
===== ==== ====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-26
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------
1996 1997 1998
----- ------ -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $ 81 $ (693) $(1,476)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities--
Allowance for doubtful accounts.................... -- -- 24
Deferred income taxes.............................. 118 (158) (6)
Writeoff of leasehold improvements................. -- -- 172
Depreciation and amortization...................... 33 407 719
Minority interests................................. -- 88 (17)
Changes in operating assets and liabilities--
(Increase) decrease in accounts receivable.......... 358 (600) (753)
Increase in unbilled charges........................ (449) (134) (129)
(Increase) decrease in prepaid expenses and other
current assets..................................... 6 (184) (293)
Increase in other assets............................ -- -- (222)
Increase (decrease) in accounts payable............. (74) 456 648
Increase in accrued expenses........................ 92 391 1,064
Increase (decrease) in income taxes payable......... 118 (7) (136)
Increase in non-current liabilities................. -- 361 (149)
Increase in other current liabilities............... 158 404 459
----- ------ -------
Net cash provided by (used in) operating
activities...................................... 441 331 (95)
----- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................ (95) (502) (981)
Acquisitions, net of cash acquired.................. -- (103) (370)
----- ------ -------
Net cash used in investing activities............ (95) (605) (1,351)
----- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid................................. (280) (223) --
Related party debt, net............................. -- 663 1,102
Long-term debt, net................................. -- 61 (21)
Conversion of debt to capital contribution.......... -- -- 335
Exercise of common stock options.................... -- -- 400
Issuance of common stock............................ -- 195 --
----- ------ -------
Net cash provided by (used in) financing
activities...................................... (280) 696 1,816
----- ------ -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS.......................................... (8) (81) (44)
----- ------ -------
Net increase (decrease) in cash and cash
equivalents..................................... 58 341 326
CASH AND CASH EQUIVALENTS, beginning of period........ 182 240 581
----- ------ -------
CASH AND CASH EQUIVALENTS, end of period.............. $ 240 $ 581 $ 907
===== ====== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes....................................... $ 2 $ 62 $ 1
Interest........................................... 3 21 85
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITY:
Common stock issued for acquisition................. $ -- $1,967 $ 4
Conversion of debt to common stock.................. -- 182 --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-27
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000's omitted, except share and per share data)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Spray Network AB ("Spray Network"), formerly known as Tetre AB prior to
September 1, 1997 (Note 2), is incorporated under the laws of the Kingdom of
Sweden. Spray Network, together with its wholly owned and majority owned
subsidiaries located in Stockholm, Helsinki, and Hamburg, and a joint venture
in Oslo (collectively, the "Company"), is an international digital
communications solutions provider. The Company creates digital communications
solutions to help its clients increase sales, improve communications and create
business identities. The Company provides an integrated service offering
consisting of strategic consulting, design of information architecture and
user-interfaces and creation and customization of software necessary to
implement its digital communicating solutions. The Company primarily uses
Internet-based technologies to create digital communications solutions for the
World Wide Web. However, the Company's solutions will increasingly incorporate
additional communications technologies, such as wireless, satellite and
broadband communications, for use with a variety of digital devices and
information appliances, including mobile phones, pagers and personal digital
assistants.
In October 1998, the Company's shareholders, Spray Ventures AB (a Kingdom of
Sweden corporation) and Communicade Inc. (a Delaware corporation) entered into
an agreement to sell all of the issued and outstanding shares of common stock
of Spray Network to Razorfish, Inc. (a New York corporation) ("Razorfish") in
exchange for an aggregate of 9,881,034 shares of Razorfish common stock and an
aggregate of 50 shares of Razorfish non-voting Class B common stock. This
transaction was consummated in January 1999. The shares of Razorfish common
stock issued represent 50% of the shares of Razorfish common stock on a fully
diluted basis (after giving effect to this transaction), based upon Spray
Network having a fair market value of $36,000, as determined by a third-party
valuation. Certain insignificant subsidiaries of the Company were not included
in the sale of the Company, and ownership thereof was retained by the former
shareholders.
Principles of Consolidation
The accompanying consolidated financial statements include the operations of
Spray Network and its wholly owned, majority-owned subsidiaries and controlled
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, specifically for the allowance for doubtful accounts for accounts
receivable and the useful lives of fixed assets and intangible assets, that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized for time and materials-based arrangements and fixed-
fee arrangements on the percentage-of-completion method of accounting based on
the ratio of costs incurred to total estimated costs. Unbilled charges
represent labor costs incurred and estimated earnings, production and other
client reimbursable costs. Advanced billings represent billings of production
and other client reimbursable out-of-pocket costs in excess of revenues
recognized. Amounts billed to clients in excess of revenues recognized to date
are classified as deferred revenues. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.
F-28
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Property and equipment are depreciated on a straight-line
basis over estimated useful lives of three to ten years. Leasehold improvements
are amortized utilizing the straight-line method over the lesser of the
estimated useful life of the asset or the lease term.
Intangible Assets
Goodwill, which represents the excess of the purchase price over the fair
value of the net assets acquired, is included in intangible assets and is
presently being amortized over a period of five years on a straight-line basis.
Management has evaluated the amortization periods in the current period and has
determined that no impairment currently exists. These amortization periods will
be evaluated by management on a continuing basis, and will be adjusted if the
lives of the related intangible assets are impaired.
Accounting for Long-Lived Assets
The Company accounts for long-lived assets in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." This statement establishes financial accounting and reporting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of.
Management has performed a review of all long-lived assets and has determined
that no impairment of the respective carrying value has occurred as of December
31, 1998. During 1998, and as a result of the decision to change office
premises in 1998, management determined that certain leasehold improvements
totaling approximately $172 were permanently impaired and as such, recorded a
charge for the entire amount.
Investments in Affiliates
Investments in affiliates, included in other assets in the accompanying
consolidated balance sheet, represent purchased interest of less than 20% and
are accounted for on the cost method. The Company reviews these investments for
impairment whenever events or changes in circumstances indicate that the
carrying amounts of the assets may not be recoverable.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their tax
bases for operating profit and tax liability carryforward. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets or liabilities of
a change in tax rates is recognized in the period that the tax change occurs.
F-29
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Foreign Currency Translation
All assets and liabilities of Spray Network and its subsidiaries are
translated into U.S. dollars at fiscal year-end exchange rates. Income and
expense items are translated at average exchange rates prevailing during the
fiscal year. The resulting translation adjustments are recorded as a component
of stockholders' equity in the accompanying consolidated financial statements.
Stockholders' Equity
Certain subsidiaries and investments of the Company have had fiscal years
other than that ended December 31. Local tax returns and statutory reports have
been prepared under Swedish GAAP and tax practice and submitted to the
authorities for each legal year-end. Stockholders' equity as reported in these
consolidated financial statements has been presented under U.S. GAAP. For these
reasons, the stockholders' equity reported in these consolidated financial
statements may not be immediately available for distribution to stockholders
under the laws of Sweden.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value due to the short-
term maturity of these instruments. The carrying amounts of long-term debt and
related party debt approximate fair value.
Business Concentrations and Credit Risk
Financial instruments, which subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents and trade accounts
receivable. The Company maintains cash and cash equivalents with various
financial institutions. The Company performs periodic evaluations of the
relative credit standing of these institutions. The Company's clients are
primarily concentrated in Sweden. The Company performs ongoing credit
evaluations, generally does not require collateral and establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of
customers, historical trends and other information. To date, such losses have
been within management's expectations.
For the year ended December 31, 1996 two clients accounted for 27% and 11%,
respectively, of total revenues.
For the year ended December 31, 1997 two clients accounted for 17% and 12%,
respectively, of total revenues.
For the year ended December 31, 1998, one client accounted for 15% of total
revenues.
F-30
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Comprehensive Income
During 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," which established standards for reporting and displaying comprehensive
income and its components in a financial statement so that it is displayed with
the same prominence as other financial statements. The components of
comprehensive income are as follows:
<TABLE>
<CAPTION>
For the
Years Ended
December 31,
--------------------
1996 1997 1998
---- ----- -------
<S> <C> <C> <C>
Net income (loss)..................................... $81 $(693) $(1,659)
Foreign currency translation adjustment............... (8) (81) (44)
--- ----- -------
Comprehensive income (loss)......................... $73 $(774) $(1,703)
=== ===== =======
</TABLE>
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This statement establishes standards for the way the public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
This statement is effective for financial statements for periods beginning
after December 15, 1997 and need not be applied to interim periods in the
initial year of application. Comparative information for earlier years
presented is to be restated. The adoption of this statement did not have a
material impact on the Company's results of consolidated operations, financial
position or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards of
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. This statement is in effect for
all quarters of fiscal years beginning after June 15, 1999. The Company does
not expect the adoption of this standard to have a material effect on the
Company's results of consolidated operations, financial position or cash flows.
2. ACQUISITIONS
On September 1, 1997, the Company acquired the Spray Services AB-Group from
Spray Ventures AB (formerly Spray Interactive Media AB). Payment was made by
means of a new share issue of 1,162 shares in the Company (then known as Tetre
AB), which subsequently changed its name to Spray Network AB, which represented
51% of the then outstanding common stock of the Company. These shares were at
the time deemed to have a fair market value of approximately $1,967. In
addition, there were transaction costs associated with the acquisition
amounting to $86, which have been added to the cost of the investment for a
total purchase price of $2,053. The difference between these amounts and the
recorded net assets of the acquired entity has been recorded as goodwill and
will be amortized over five years, commencing from the acquisition date.
During 1997, the Company invested in subsidiaries in Germany, Finland and
Norway. Goodwill arising from these investments will be amortized over five
years, commencing from the acquisition date. For each of these investments the
Company's investment is for less than 100% of the shares, and thus the minority
interest in equity is shown as a liability. Losses have been incurred for all
three foreign subsidiaries. In accordance with U.S. GAAP, no receivable from
minority stockholders has been recorded when the losses have resulted in a
negative stockholders' equity. The unrecorded receivable from minority
stockholders as of December 31, 1997, amounts to $66 and relates to the
investment in a Norwegian subsidiary.
F-31
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Spray Services AB-Group acquisition described above was valued based on
management's estimate of the fair value of the assets acquired at the date of
acquisition. Costs in excess of net assets acquired were recorded as goodwill
as follows:
<TABLE>
<S> <C>
Net assets acquired................................................. $ 733
Intangible assets................................................... 1,234
Acquisition costs................................................... 86
------
Total purchase price.............................................. $2,053
======
</TABLE>
Pro forma results of operations
The following unaudited pro forma consolidated results of operations reflect
the results of operations for the years ended December 31, 1997, as if the
aforementioned Spray Services AB-Group acquisition had occurred on January 1,
1997, and after giving effect to purchase accounting adjustments. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of what operating results would have been had the
acquisitions actually taken place on January 1, 1997 and may not be indicative
of future operating results.
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Pro forma:
Revenues............................................... $ 8,955
Net loss............................................... (1,175)
</TABLE>
3. RELATED PARTY TRANSACTIONS
Convertible debt
In June 1997, the Company and its managing director entered into a
convertible debt agreement pursuant to which the managing director loaned
approximately $182 to the Company. This loan bore interest at 2% per annum and
was payable on December 31, 1997. Prior to the repayment date, the Company
converted the full amount into 56 shares of common stock at a per share value
of approximately $3,000.
In June 1997, the Company entered into several convertible debt agreements
with shareholders and officers of the Company pursuant to which such
shareholders and officers loaned the Company an aggregate total of $91. The
loans accrued interest at 2% per annum, were payable by December 31, 1997 and
the holders were granted options to purchase an aggregate of 138 shares of the
Company's common stock at a price of $3,277 per share, with an exercise period
of April 27, 1998 to June 30, 2001. All of the loans with interest were repaid
prior to December 31, 1997, except for a loan with the managing director of the
Company for approximately $22, which was converted to a demand note payable
bearing interest at 9.5% per annum and repaid in 1998. In connection with the
convertible loans, a total of 123 options have been exercised during 1998 for
total proceeds of approximately $400. The remaining 15 options were cancelled
due to the termination of certain employees by the Company.
In September 1997, the Company and Spray Ventures entered into a convertible
debt agreement pursuant to which Spray Ventures AB loaned the Company $131.00.
This loan bore interest at 2% per annum and was payable on December 31, 1997.
In connection with this loan, Spray Ventures was granted options to purchase
138 shares of the Company's common stock at a price of $3,277 per share with an
exercise period of April 27, 1998 to June 30, 2001. The Company paid this
amount.
F-32
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company imputed interest expense on the aforementioned loans, as these
loans were granted to the Company at rates below the market rate available to
the Company from third parties. The fair market value of the options issued in
connection with the convertible debt agreements was determined to be immaterial
and, as such, no charge was taken for such options.
Demand notes payable
In September 1997, two stockholders executed two demand notes in favor of
the Company for an aggregate amount of approximately $328, bearing interest at
9.25% per annum and payable on demand. The Company paid these amounts
subsequent to December 31, 1997.
During 1998, the Company received advances totaling approximately $335 from
Spray Ventures AB. These advances were subsequently forgiven by Spray Ventures
AB and recorded as a capital contribution in the accompanying consolidated
statement of stockholders' equity in 1998.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Computer equipment............................................ $ 778 $1,354
Leasehold improvements........................................ 539 575
------ ------
Total property and equipment................................ 1,317 1,929
Less--Accumulated depreciation and amortization............... 302 493
------ ------
Property and equipment, net................................. $1,015 $1,436
====== ======
Depreciation and amortization aggregated $33 and $388 for the two years
ended December 31, 1998.
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Goodwill...................................................... $1,337 $1,711
Less--Accumulated amortization.............................. 89 420
------ ------
Intangible assets, net.................................... $1,248 $1,291
====== ======
</TABLE>
Amortization aggregated $331 and $89, respectively, for the two years ended
December 31, 1998.
F-33
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. LONG-TERM DEBT:
Long-term debt consists of a loan from an outside lender in the original
principal amount of approximately $66. The loan is payable in equal monthly
installments and bears interest at 11.05% per annum.
Maturities of long-term debt outstanding as of the year ended December 31,
are as follows:
<TABLE>
<S> <C>
1999................................................................. $16
2000................................................................. 16
2001................................................................. 8
---
Total.............................................................. $40
===
</TABLE>
7. INCOME TAXES
Income before taxes and the provision for taxes on income consisted of the
amounts shown below:
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------
1996 1997 1998
---- ----- -------
<S> <C> <C> <C>
Income (loss) before income taxes:
United States........................................... $ -- $(281) $ (363)
International........................................... 322 (436) (1,113)
---- ----- -------
$322 $(717) $(1,476)
==== ===== =======
Provision (benefit) for taxes on income:
Current--
International......................................... $124 $ 112 $ (380)
U.S. Federal.......................................... -- -- --
U.S. state and local.................................. -- -- --
Deferred--
International......................................... 117 (136) (422)
U.S. Federal.......................................... -- -- --
U.S. state and local.................................. -- -- --
---- ----- -------
Valuation Allowance................................... -- -- 802
---- ----- -------
$241 $ (24) $ --
==== ===== =======
</TABLE>
A reconciliation of the difference between the statutory Swedish Income Tax
Rate and the Company's effective tax rate follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------
1996 1997 1998
---- ----- -----
<S> <C> <C> <C>
Statutory U.S. federal income tax rate.............. 34.0 % 34.0 % 34.0 %
Swedish tax rate adjustment......................... (6.0) (6.0) (6.0)
International subsidiaries' tax rates less federal
statutory rate..................................... 40.8 -- --
Loss without benefit................................ -- (28.0) (28.0)
Other............................................... 6.0 (3.3) --
---- ----- -----
Effective Rate.................................... 74.8 % (3.3)% -- %
==== ===== =====
</TABLE>
F-34
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The tax effects of temporary differences that give rise to a significant
portion of the deferred income tax asset, net, are as follows:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Current deferred income tax assets (liabilities) net:
Net operating losses....................................... $ 390 $ 741
Depreciation............................................... 12 61
Accruals................................................... (6) --
Other, net................................................. 26 --
------ ------
422 802
Less: valuation allowance 428 802
------ ------
Total deferred income taxes, net........................... $ (6) $ --
====== ======
</TABLE>
Deferred income taxes are provided for the temporary difference between the
financial reporting basis and tax basis of the Company's assets and
liabilities. Deferred tax assets result principally from recording certain
expenses in the financial statements, which are not currently deductible for
tax purposes, and differences between the tax and book bases of assets and
liabilities recorded in connection with the acquisitions. Deferred tax
liabilities result principally from expenses which are currently deductible for
tax purposes, but have not yet been expensed in the financial statements. The
Company has net operating losses of approximately $2,646 relating to its
Swedish and other international subsidiaries. Substantially all of the net
operating losses have no expiration under the applicable country tax code.
The Company has concluded that it is probable that it will be not able to
realize its net deferred tax asset in future periods and, as such, has recorded
a full valuation allowance against such assets.
8. STOCKHOLDERS' EQUITY
Common stock
The Company sold 60 shares of its common stock in June 1997, at a price of
$3.25 per share, for total proceeds of $195.00.
During 1998, the Company issued 414 shares of common stock to its majority
stockholder as consideration for the purchase of a subsidiary of the majority
shareholder. The value of the shares issued, approximately $5 in the aggregate,
was determined based on the fair market value of the acquired subsidiary. This
subsidiary was subsequently sold back to the parent in return for approximately
$5 in cash, and as such, the Company did not record a gain or loss on these
transactions.
9. SEGMENT REPORTING
The Company has operations outside of Sweden. A summary of the Company's
operations by geographical area as of and for the year ended December 31, 1998
is presented below:
<TABLE>
<CAPTION>
Sweden International Consolidated
------- ------------- ------------
<S> <C> <C> <C>
Revenues............................... $11,749 $3,653 $15,402
Operating loss......................... 280 1,280 1,560
Net income (loss)...................... (386) (1,090) (1,476)
Identifiable assets.................... 4,554 2,273 6,827
</TABLE>
F-35
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. COMMITMENTS AND CONTINGENCIES
Lease commitments
The Company is committed under operating leases, principally for office
space and equipment. Certain leases are subject to rent reviews and require
payment of expenses under escalation clauses. Rent expense and equipment rental
were $945, $180 and $128, respectively, for the three years ended December 31,
1998. Future minimum base rents under terms of noncancellable operating leases,
reduced by rents to be received from existing noncancellable subleases, are as
follows:
<TABLE>
<S> <C>
Year Ending December 31:
1999........................................................... $2,050
2000........................................................... 2,111
2001........................................................... 2,011
2002........................................................... 3,252
Thereafter..................................................... 1,150
Capital Lease Commitments
At December 31, 1998 the Company was committed under capital leases,
principally for computer equipment and office equipment. The assets and
liabilities under the capital leases are recorded at the lower of the present
value of minimum lease payments or the fair market value of the assets. The
assets are depreciated over their estimated useful lives. The interest rates on
the capital leases range from 10.5% to 13.7%.
Future minimum payments under the lease agreements are as follows:
Year Ending December 31:
1999........................................................... $140
2000........................................................... 140
2001........................................................... 86
------
Total minimum lease payments................................. 366
Less--
Amounts representing interest................................ 45
Current portion (included in other current liabilities)...... 123
------
Long-term portion (included in other noncurrent
liabilities).............................................. $198
======
</TABLE>
Litigation
The Company, from time to time, becomes involved in various routine legal
proceedings in the ordinary course of its business. The Company believes that
the outcome of all pending legal proceedings and unasserted claims in the
aggregate will not have a material adverse effect on its consolidated results
of operations, consolidated financial position or liquidity.
11. SUBSEQUENT EVENTS
In January 1999, the Company acquired all of the issued and outstanding
shares of capital stock of Spray Network AB from Spray Ventures AB and
Communicade in exchange for an aggregate of 9,881,034 shares of Razorfish
Common Stock and 50 shares of Razorfish non-voting Class B Common Stock. The
shares of Common Stock issued represented 50% of the shares of Razorfish Common
Stock on a fully diluted basis immediately following the Spray Acquisition.
F-36
<PAGE>
SPRAY NETWORK AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Subcontractors
Swedish tax legislation specifically addresses the use of subcontractors. In
the event that compensation to subcontractors is deemed to be the equivalent of
a salary as opposed to compensation for consultancy services performed, certain
adverse tax implications for the disbursing entity may occur. If the consultant
or subcontractor is not deemed to meet certain independence criteria, all
payments may be considered salary, which automatically generates the need for
the payer to report and pay social charges based on this amount. Furthermore,
Value Added Taxes billed by the consultant would not be considered deductible
and would also be considered as salary when disbursed. Should the tax
authorities contest a subcontractors' compensation, the incremental costs could
be approximately 50% of payments made, plus penalty fees. Due to the nature of
the Company's business, a large number of consultants/subcontractors is used.
For this reason management has consulted with legal experts to determine if the
independence criteria for retained consultants/subcontractors have been met.
Management believes this to be the case, and there are no known disputes at
this point in time.
F-37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Spray Ventures AB:
We have audited the accompanying consolidated balance sheets of Spray
Ventures AB (a Kingdom of Sweden corporation) and subsidiaries as of December
31, 1996 and August 31, 1997, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1996 and the eight months ended August 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Spray Ventures AB and
subsidiaries as of December 31, 1996 and August 31, 1997, and the results of
their operations and cash flows for the year ended December 31, 1996 and the
eight months ended August 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
January 18, 1999
F-38
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's omitted, except share amounts and per share data)
<TABLE>
<CAPTION>
December 31, August 31,
1996 1997
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 129 $ 671
Accounts receivable, net of allowance for doubtful
accounts of $0 and $39, respectively................. 297 1,630
Unbilled charges...................................... 75 17
Prepaid expenses and other current assets............. 101 1,084
----- -------
Total current assets................................. 602 3,402
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $103 and $242, respectively........................ 232 785
OTHER ASSETS........................................... -- 535
----- -------
Total assets......................................... $ 834 $ 4,722
===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable...................................... $ 161 $ 1,045
Accrued expenses...................................... 100 274
Income taxes payable.................................. 5 4
Short-term debt....................................... 49 --
Other current liabilities............................. 132 207
----- -------
Total current liabilities............................ 447 1,530
----- -------
NONCURRENT LIABILITIES:
Minority interests.................................... 33 15
Convertible loans..................................... 376 1,585
Other liabilities..................................... 22 36
----- -------
Total noncurrent liabilities......................... 431 1,636
----- -------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.75, $.66 par value, 476,764 shares
authorized, 120,000 and 155,000 shares issued and
outstanding at December 31, 1996 and August 31, 1997,
respectively......................................... 96 101
Additional paid-in capital............................ 88 3,277
Cumulative foreign currency translation adjustments... 3 6
Retained earnings (accumulated deficit)............... (231) (1,828)
----- -------
Total stockholders' equity (accumulated deficit)..... (44) 1,556
----- -------
Total liabilities and stockholders' equity
(deficit)........................................... $ 834 $ 4,722
===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-39
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's omitted)
<TABLE>
<CAPTION>
For the Year For the Eight
Ended Months Ended
December 31, 1996 August 31, 1997
----------------- ---------------
<S> <C> <C>
REVENUES..................................... $2,716 $ 1,585
DIRECT SALARIES AND COSTS.................... 2,691 2,644
------ -------
Gross profit (loss)........................ 25 (1,059)
SALES AND MARKETING.......................... 86 53
GENERAL AND ADMINISTRATIVE................... 130 450
NON-RECURRING CHARGES........................ -- 238
------ -------
Loss from operations....................... (191) (1,800)
GAIN ON DISPOSAL OF SUBSIDIARY............... -- 100
INTEREST EXPENSE, net........................ (31) (44)
------ -------
Loss before minority interest and income
taxes..................................... (222) (1,744)
MINORITY INTEREST............................ 41 147
------ -------
Loss before provision for income taxes..... (181) (1,597)
PROVISION FOR INCOME TAXES................... 5 --
------ -------
Net loss................................... $ (186) $(1,597)
====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-40
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000's omitted, except share amounts)
<TABLE>
<CAPTION>
Cumulative Retained
Common Stock Additional Foreign Earnings Total
-------------- Paid-in Currency (Accumulated Stockholders'
Shares Amount Capital Translation Deficit) Equity
------- ------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1,
1996................... 10,000 $ 7 $ 88 $ 3 $ 44 $ 142
Stock dividend........ 110,000 89 -- -- (89) --
Net loss.............. -- -- -- -- (186) (186)
------- ---- ------ --- ------- -------
BALANCE, December 31,
1996................... 120,000 96 88 3 (231) (44)
Issuance of common
stock................ 35,000 5 3,189 -- -- 3,194
Foreign currency
translation
adjustment........... -- -- -- 3 -- 3
Net loss.............. -- -- -- -- (1,597) (1,597)
------- ---- ------ --- ------- -------
BALANCE, August 31,
1997................... 155,000 $101 $3,277 $ 6 $(1,828) $ 1,556
======= ==== ====== === ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-41
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
For the
For the Eight Months
Year Ended Ended
December 31, August 31,
1996 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................ $(186) $(1,597)
Adjustments to reconcile net loss to net cash
used in operating activities--
Allowance for doubtful accounts.................... -- 39
Depreciation and amortization...................... 83 139
Minority interest.................................. 33 (18)
Gain on disposal of subsidiaries................... -- 100
Changes in operating assets and liabilities--
(Increase) in accounts receivable................. (243) (1,372)
(Increase) decrease in unbilled charges........... (75) 58
(Increase) in prepaid expenses and other current
assets........................................... (73) (983)
Increase in accounts payable...................... 95 884
Increase in accrued expenses...................... 92 174
Increase (decrease) in income taxes payable....... 5 (1)
Decrease in other liabilities..................... 22 14
Increase in other current liabilities............. 100 75
----- -------
Net cash used in operating activities............ (147) (2,488)
----- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................ (131) (792)
Acquisitions of subsidiaries, net of cash acquired.. -- (535)
----- -------
Net cash used in investing activities............ (131) (1,327)
----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt....................... 49 (49)
Net change in convertible loans..................... 330 1,209
Proceeds from issuance of common stock.............. -- 3,194
----- -------
Net cash provided by financing activities........ 379 4,354
----- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS......................................... -- 3
----- -------
Net increase in cash and cash equivalents........ 101 542
CASH AND CASH EQUIVALENTS, beginning of period....... 28 129
----- -------
CASH AND CASH EQUIVALENTS, end of period............. $ 129 $ 671
===== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for--
Income taxes....................................... $ -- $ --
Interest........................................... 31 44
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES:
Stock dividend..................................... $ 89 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-42
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000's omitted, except share amounts and per share data)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Spray Ventures AB ("Spray Ventures") (f.k.a. "Spray Interactive Media AB"),
through its wholly owned and majority owned subsidiaries (collectively, the
"Company") is an international digital communications solutions provider. The
Company creates digital communications solutions to help its clients increase
sales, improve communications and create business identities. The Company
provides an integrated service offering consisting of strategic consulting,
design of information architecture and user-interfaces and creation and
customization of software necessary to implement its digital communications
solutions. The Company primarily uses Internet-based technologies to create
digital communications solutions for the World Wide Web. However, the Company's
solutions will increasingly incorporate additional communications technologies,
such as wireless, satellite and broadband communications, for use with a
variety of digital devices and information appliances, including mobile phones,
pagers and personal digital assistants.
Reorganization
On August 29, 1997, the Company established a wholly owned subsidiary, Spray
Services AB, and transferred all of the operating subsidiaries of the Company
under Spray Services AB. The Company transferred the subsidiaries based upon a
merger agreement with Spray Network AB (f.k.a. "Tetre AB") entered into on June
13, 1997, whereby the Company sold Spray Services AB to Spray Network AB
effective September 1, 1997. In consideration for Spray Services AB, Spray
Network AB issued 1,162 new shares of Spray Network AB common stock,
representing 51% of the resulting outstanding stock of Spray Network AB, with a
fair market value of $1,967,000, based upon an independent valuation. In
connection with this transaction, the Company changed its name from Spray
Interactive Media AB to Spray Ventures AB.
Principles of Consolidation
The accompanying consolidated financial statements consist of Spray Ventures
and its wholly owned and majority-owned subsidiaries. As of August 31, 1997,
certain non-operating subsidiaries of Spray Ventures have been carried at cost.
The non-operating subsidiaries do not have a material impact on the
consolidated financial statements of Spray Ventures taken as a whole. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, specifically for the allowance for doubtful accounts for accounts
receivable and the useful lives of fixed assets and intangible assets, that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized for time and materials-based arrangements and fixed-
fee arrangements on the percentage-of-completion method of accounting based on
the ratio of costs incurred to total estimated costs. Unbilled charges
represent labor costs incurred and estimated earnings, production and other
client reimbursable costs. Advanced billings represent billings of production
and other client reimbursable
F-43
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
out-of-pocket costs in excess of revenues recognized. Amounts billed to clients
in excess of revenues recognized to date are classified as deferred revenues.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined.
Non-recurring Charges
The Company incurred certain non-recurring expenses of approximately $238 in
connection with the start-up of certain international subsidiaries.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Property and equipment are depreciated on a straight-line
basis over estimated useful lives of four to eight years. Leasehold
improvements and equipment held under capital leases are amortized utilizing
the straight-line method over the lesser of the estimated useful life of the
asset or the lease term.
Intangible Assets
Goodwill, which represents the excess of the purchase price over the fair
value of the net assets acquired, is included in other assets and is presently
being amortized over a period of 5 years on a straight-line basis. Management
has evaluated the amortization periods in the current period and has determined
that no impairment currently exists. These amortization periods will be
evaluated by management on a continuing basis, and will be adjusted if the
lives of the related intangible assets are impaired. Goodwill totaled $221 as
of August 31, 1997. As the goodwill was recorded on August 29, 1997, no
amortization was recorded for the period. There was no goodwill prior to
January 1, 1997.
Accounting for Long-Lived Assets
The Company accounts for long-lived assets in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." This statement establishes financial accounting and reporting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of.
Management has performed a review of all long-lived assets and has determined
that no impairment of the respective carrying value has occurred as of August
31, 1997.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their tax
bases for operating profit and tax liability carryforward. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or
F-44
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
settled. The effect on deferred tax assets or liabilities of a change in tax
rates is recognized in the period that the tax change occurs.
Foreign Currency Translation
All assets and liabilities of Spray Ventures and its subsidiaries are
translated into U.S. dollars at fiscal year-end exchange rates. Income and
expense items are translated at average exchange rates prevailing during the
fiscal year. The resulting translation adjustments are recorded as a component
of stockholders' equity in the accompanying consolidated financial statements.
Stockholders' Equity
Certain subsidiaries and investments of the Company have had fiscal years
other than December 31. Local tax returns and statutory reports have been
prepared under Swedish GAAP and tax practice and submitted to the authorities
for each legal year-end. Stockholders' equity as reported in these consolidated
financial statements has been presented under U.S. GAAP. For these reasons, the
stockholders' equity reported in these consolidated financial statements may
not be immediately available for distribution to stockholders under the laws of
Sweden.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and short-term debt approximate fair value due to the short-
term maturity of these instruments. The carrying amounts of long-term debt and
convertible loans approximate fair value.
Business Concentrations and Credit Risk
Financial instruments, which subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents and trade accounts
receivable. The Company maintains cash and cash equivalents with various
financial institutions. The Company performs periodic evaluations of the
relative credit standing of these institutions. The Company's clients are
primarily concentrated in Sweden. The Company performs ongoing credit
evaluations, generally does not require collateral, and establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of customers, historical trends and other information. To date, such losses
have been within management's expectations.
The Company did not have any customers that accounted for 10% or more of
revenues during the periods presented or of receivables at the end of each of
the periods presented.
Comprehensive Income
During 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income", which establishes standards for reporting and displaying comprehensive
income and its components in a financial statement that is displayed with the
same prominence as other financial statements. The components of comprehensive
income are as follows:
<TABLE>
<CAPTION>
For the
For the Year Eight Months
Ended Ended
December 31, August 31,
1996 1997
------------ ------------
<S> <C> <C>
Net loss......................................... $(186) $(1,597)
Foreign currency translation adjustment.......... -- 3
----- -------
Comprehensive loss............................. $(186) $(1,594)
===== =======
</TABLE>
F-45
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. RELATED PARTY TRANSACTIONS
Convertible Debt
In 1996, the Company entered into several convertible debt agreements with
certain stockholders and employees pursuant to which the stockholders and
employees loaned the Company approximately $330. These loans were non-interest
bearing and payable on January 1, 1999. In connection with these agreements,
the holders received options to purchase an aggregate of 42,400 shares of
common stock. Subsequent to August 31, 1997, 39,100 options were exercised into
common stock, in lieu of the Company repaying the related debt. The remaining
3,300 options were cancelled based upon the termination of the employment of
certain employees. As these loans were non-interest bearing, the Company
imputed interest based on a rate of 7%; however, no expense was recorded as the
amount was deemed to be immaterial.
In 1997, the Company entered into several convertible debt and debenture
agreements with stockholders, employees and outside investors of the Company.
The aggregate total proceeds received by the Company were approximately $1,408.
The loans accrued interest at 5% per annum and were payable by January 1, 1999.
In connection with the agreements, the holders received options to purchase an
aggregate of 44,928 shares of common stock. Subsequent to August 31, 1997,
19,928 were exercised into common stock, in lieu of the Company repaying the
related debt. A total of 8,700 options were cancelled and 19,600 remain
outstanding.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, August 31,
1996 1997
------------ ----------
<S> <C> <C>
Computer equipment.................................. $224 $ 520
Leasehold improvements.............................. 111 507
---- ------
Total property and equipment...................... 335 1,027
Less--Accumulated depreciation and amortization..... 103 242
---- ------
Property and equipment, net....................... $232 $ 785
==== ======
</TABLE>
Depreciation and amortization aggregated $83 for the year ended December 31,
1996 and $139 for the eight months ended August 31, 1997.
4. INCOME TAXES
Income before taxes and the provision for taxes on income consisted of the
amounts shown below:
<TABLE>
<CAPTION>
For the Eight
Year Ended Months Ended
December 31, August 31,
1996 1997
------------ -------------
<S> <C> <C>
Provision for taxes on income:
Current--International............................ $ 5 $--
Deferred--International .......................... -- --
--- ----
$ 5 $--
=== ====
</TABLE>
F-46
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
For the Eight
Year Ended Months Ended
December 31, August 31,
1996 1997
------------ -------------
<S> <C> <C>
Statutory U.S. federal income tax rate............ 34.0 % 34.0 %
Swedish tax rate adjustment....................... (6.0) (6.0)
Loss without benefit ............................. (28.0) (28.0)
Other............................................. 2.8 --
----- -----
2.8 % 0 %
===== =====
</TABLE>
Deferred income taxes are provided for the temporary difference between the
financial reporting basis and tax basis of the Company's assets and
liabilities. Deferred tax assets result principally from recording certain
expenses in the financial statements, which are not currently deductible for
tax purposes and differences between the tax and book basis of assets and
liabilities recorded in connection with the acquisitions. Deferred tax
liabilities result principally from expenses which are currently deductible for
tax purposes, but have not yet been expensed in the financial statements, and
from net operating loss carryforwards.
The Company had net deferred tax assets of approximately $44 and $317 as of
December 31, 1996 and August 31, 1997, respectively, which were primarily the
result of the difference between book and tax depreciation expense and the
difference in the book and tax treatment of certain start-up costs. The company
had net operating losses of approximately $18. These net operating losses have
no expiration under the Swedish tax code.
The Company has concluded that it is not probable that it will be able to
realize these net deferred tax assets in future periods and has, accordingly,
recorded a full valuation allowance.
5. STOCKHOLDERS' EQUITY
Common Shares
In 1996, the Company declared a stock dividend for all stockholders of
record. The Company issued 110,000 shares to its stockholders to effect this
transaction.
In June 1997, the Company issued 35,000 shares of common stock at a price of
approximately $91.25 per share for total proceeds of $3,194.
6. COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The Company was committed under operating leases, principally for office
space and equipment. Certain leases were subject to rent reviews and require
payment of expenses under escalation clauses. Rent expense was $257 for the
year ended December 31, 1996, and $180 for the eight months ended August 31,
1997. The Company has no further obligations regarding such leases, as a result
of the sale of Spray Services and Spray Network AB (Note 7):
Capital Lease Commitments
At August 31, 1997 the Company was committed under capital leases,
principally for computer equipment and office equipment. The assets and
liabilities under the capital leases are recorded at the lower of the present
value of minimum lease payments or the fair market value of the assets. The
assets are depreciated over its estimated useful lives. The interest rate on
the capital leases ranges from 11.5% to 16.7%.
F-47
<PAGE>
SPRAY VENTURES AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum payments under the lease agreement are as follows:
<TABLE>
<S> <C>
Eight Months Ended August 31:
1998............................................................... $48
1999............................................................... 29
2000............................................................... 10
---
Total minimum lease payments..................................... 87
---
Less--
Amounts representing interest.................................... 7
Current portion.................................................. 25
---
Present value of net minimum lease payments.................... $55
===
</TABLE>
Litigation
The Company, from time to time, becomes involved in various routine legal
proceedings in the ordinary course of its business. The Company believes that
the outcome of all pending legal proceedings and unasserted claims in the
aggregate will not have a material adverse effect on its consolidated results
of operations, consolidated financial position or liquidity.
Subcontractors
Swedish tax legislation specifically addresses the use of subcontractors. In
the event that compensation to subcontractors is deemed to be the equivalent of
a salary as opposed to compensation for consultancy services performed, certain
adverse tax implications for the disbursing entity may occur. If the consultant
or subcontractor is not deemed to meet certain independence criteria, all
payments may be considered salary, which automatically generates the need for
the payer to report and pay social charges based on this amount. Furthermore,
Value Added Tax billed by the consultant would not be considered deductible and
would also be considered as salary when disbursed. Should the tax authorities
contest a subcontractor's compensation, the incremental costs could be
approximately 50% of payments made, plus penalty fees. Due to the nature of the
Company's business, a large number of consultants/subcontractors is used. For
this reason management has consulted with legal experts to determine if the
independence criteria for retained consultants/subcontractors have been met.
Management believes this to be the case, and there are no known disputes at
this point in time.
7. SUBSEQUENT EVENTS
Convertible Loans
In June 1998, the Company entered into two convertible loan agreements for
total proceeds of approximately $1,955. The holders of the debt also received
options to purchase a total of 22,126 shares of common stock of which 19,435
have been exercised into common stock, in lieu of the Company repaying such
debt.
Investment by Communicade Inc.
In January 1999, Communicade Inc. (a wholly owned subsidiary of Omnicom
Group, Inc.) purchased a 20% ownership interest in the Company from the current
stockholders.
F-48
<PAGE>
Sale of Spray Network AB
In October 1998, the Company and one of its stockholders, Communicade Inc.,
entered into an agreement to sell all of the issued and outstanding shares of
common stock of Spray Network AB to Razorfish, Inc. (a New York corporation)
("Razorfish") in exchange for an aggregate of 9,881,034 shares of Razorfish
common stock and an aggregate of 50 shares of Razorfish nonvoting Class B
common stock. This transaction was consummated in January 1999. The shares of
Razorfish common stock issued represent 50% of the outstanding shares of common
stock on a fully diluted basis after giving effect to the transaction,
collectively having a fair market value of $36,000 based upon third-party
valuation. Certain insignificant subsidiaries of Spray Network AB were not
included in the transaction and as such, ownership was retained by the Company.
F-49
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Avalanche Systems, Inc.:
We have audited the accompanying statements of operations, stockholders'
equity (deficit) and cash flows of Avalanche Systems, Inc. (a Delaware
corporation) for the year ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of income, stockholders'
equity and cash flows are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of income, stockholders' equity (deficit) and cash flows. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the statements of operations, stockholders' equity (deficit)
and cash flows referred to above present fairly, in all material respects, the
results of operations, equity and cash flows of Avalanche Systems, Inc. for the
year ended December 31, 1997 in conformity with generally accepted accounting
principles.
The accompanying statements of operations, stockholders' equity (deficit)
and cash flows have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 1, due to the Company's inability to pay
its debts, the seizure of its assets and its filing for dissolution with the
State of Delaware, substantial doubt had been raised about the Company's
ability to continue as a going concern. Further information in regard to this
matter is also described in Note 1. The statements of income, stockholders'
equity (deficit) and cash flows do not include any adjustments that might
result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
New York, New York
March 5, 1999
F-50
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Avalanche Systems, Inc.
We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of Avalanche Systems, Inc. for the year ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Avalanche
Systems, Inc. for the year ended December 31, 1996 in conformity with generally
accepted accounting principles.
M.R. Weiser & Co. LLP
New York, N.Y.
March 3, 1997
F-51
<PAGE>
AVALANCHE SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------
1996 1997
---------- ------------
<S> <C> <C>
REVENUES............................................ . $2,814,080 $ 2,313,863
COST OF SERVICES...................................... 1,656,403 2,356,000
---------- ------------
Gross profit........................................ 1,157,677 (42,137)
GENERAL AND ADMINISTRATIVE............................ 1,083,994 2,052,058
---------- ------------
Income (loss) from operations....................... 73,683 (2,094,195)
INTEREST EXPENSE, NET................................. 25,792 --
---------- ------------
Income (loss) before income taxes................... 47,891 (2,094,195)
PROVISION FOR INCOME TAXES............................ 33,331 --
---------- ------------
Net income (loss)................................... $ 14,560 $ (2,094,195)
========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-52
<PAGE>
AVALANCHE SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
----------------- Paid-in Earnings Stockholders'
Shares Amount Capital (Deficit) Equity (Deficit)
--------- ------ ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1,
1996................... 150 $5,000 $ -- $ 146,965 $ 151,965
Shares redeemed as
part of corporate
merger............... (150) (5,000) -- -- (5,000)
Shares issued as part
of corporate merger.. 2,700,000 2,700 2,732 -- 5,432
Net income............ -- -- -- 14,560 14,560
--------- ------ ------ ----------- -----------
BALANCE, December 31,
1996................... 2,700,000 2,700 2,732 161,525 166,957
Net loss.............. -- -- -- (2,094,195) (2,094,195)
--------- ------ ------ ----------- -----------
BALANCE, December 31,
1997................... 2,700,000 $2,700 $2,732 $(1,932,670) $(1,927,238)
========= ====== ====== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-53
<PAGE>
AVALANCHE SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years
Ended December 31,
----------------------
1996 1997
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................... $ 14,560 $(2,094,195)
Adjustments to reconcile net income (loss) to net
cash used in operating activities--
Allowance for bad debts............................. 30,000 (30,000)
Depreciation and amortization....................... 70,361 103,225
(Increase) decrease in accounts receivable.......... (213,399) 403,473
(Increase) decrease in prepaid expenses and other
current assets..................................... (44,986) 65,573
(Increase) in other assets.......................... (521) (519)
Increase in accounts payable and accrued expenses... 64,006 1,026,184
Increase in deferred tax liabilities................ 24,602 --
Increase (decrease) in advance billings............. (24,082) (30,418)
Increase (decrease) in income tax payable........... (4,163) 1,350
--------- -----------
Net cash used in operating activities.............. (83,622) (555,327)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................ (187,721) (55,010)
--------- -----------
Net cash used in investing activities.............. (187,721) (55,010)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank notes......................... 275,000 668,000
Net proceeds from related party notes................ -- 275,000
Proceeds from long-term debt......................... 180,000 --
Principal repayments of bank notes................... -- (275,000)
Principal repayments of long-term debt............... (224,590) (60,000)
Proceeds from common stock transactions.............. 432 --
--------- -----------
Net cash provided by financing activities.......... 230,842 608,000
--------- -----------
Net (decrease) in cash and cash equivalents........ (40,501) (2,337)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR........... 43,838 3,337
--------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR................. $ 3,337 $ 1,000
========= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for--
Income taxes paid................................... $ 12,892 $ --
Interest paid....................................... 25,792 76,661
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Equipment acquired under capital leases............. $ -- $ 483,838
</TABLE>
The accompanying notes are an integral part of these statements.
F-54
<PAGE>
AVALANCHE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1.BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Avalanche Systems, Inc. (the "Company") was an interactive agency. The
Company's products included internet sites, intranets, interactive press kits,
digital video and corporate communications tools developed for the internet and
other multimedia environments.
On August 12, 1996, the Company was merged into a nonactive corporation with
identical ownership interests, incorporated under the laws of the State of
Delaware. This merger was for state tax purposes only and had no effect on
Federal income taxes.
As of January 15, 1998, the Company was indebted to its two lenders for
approximately $1,527,000. Under each specific debt agreement, each lender had a
duly perfected first priority security interest in substantially all of the
assets of the Company.
Due to the Company's inability to pay its debts and obligations, on January
15, 1998, the Company granted to its lenders all rights of possession in and to
all accounts receivable, property and equipment and general intangibles (the
"Collateral") to be disposed of by the lenders with the net proceeds resulting
from any sale or other disposition to be credited to the account of the
Company. The Collateral was subsequently sold to Avalanche Solutions, Inc. for
approximately $594,000 and the Company was relieved of all debts to these
lenders.
Due to the default of these debts and resulting sale of all operating
assets, the Company had limited working capital and cash flow which resulted in
the Company being unable to continue significant operations during 1998. The
Company filed for dissolution with the State of Delaware in February 1999 and
management believes, that at the time of the filing, there was no threatened or
pending litigation against the Company. The Company received certification of
its dissolution from the State of Delaware effective February 12, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Contract revenue is recognized as services are performed. Advances received
or services billed in advance are recorded as deferred revenue and recognized
as revenue in the period in which the related services are rendered.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
F-55
<PAGE>
AVALANCHE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are depreciated on a straight-line basis over
estimated useful lives of five to seven years. Leasehold improvements and
equipment held under capital leases are amortized utilizing the straight-line
method over the lesser of the estimated useful life of the asset or the
remaining term of the related lease.
Income Taxes
In 1994, the Company elected to be treated as an S corporation under
subchapter "S" of the Internal Revenue Code, whereby the Company's taxable
income is included pro rata in the individual income tax returns of its
stockholders. Accordingly, no provision for Federal income taxes has been made
in the accompanying financial statements. The Company is subject to certain
state and local income taxes.
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their tax
bases for operating profit and tax liability carryforward. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets or liabilities of
a change in tax rates is recognized in the period that the tax change occurs.
The Company has elected to file its income tax returns using the cash basis of
accounting.
Business Concentrations and Credit Risk
Financial instruments, which subject the Company to concentrations of credit
risk, consist primarily of cash and cash equivalents and trade accounts
receivable. The Company maintains cash and cash equivalents with various
financial institutions. The Company performs periodic evaluations of the
relative credit standing of these institutions. The Company's clients are
primarily concentrated in the United States. The Company performs ongoing
credit evaluations, generally does not require collateral and establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of customers, historical trends and other information. To date, such losses
have been within management's expectations.
For the two years ended December 31, 1997, respectively, three clients
accounted for 41% of total net revenues.
Reclassifications
Certain reclassifications have been made to the 1996 statements of
operations to conform with the 1997 presentation.
2. INCOME TAXES
Deferred income taxes are provided for the temporary difference between the
financial reporting basis and tax basis of the Company's assets and
liabilities. Deferred tax assets result principally from recording certain
expenses in the financial statements, which are not currently deductible for
tax purposes, and differences between the tax and book bases of assets and
liabilities recorded in connection with the acquisitions. Deferred tax
liabilities result principally from expenses which are currently deductible for
tax purposes, but have not yet been expensed in the financial statements.
For the year ended December 31, 1997, the Company recorded a full valuation
allowance against its deferred tax assets, primarily resulting from net
operating losses, due to the uncertainty of realizing such assets.
F-56
<PAGE>
AVALANCHE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. RENT EXPENSE
Rent expense amounted to $88,107 and $153,600, respectively, for the two
years ended December 31, 1997.
4. COMMITMENTS AND CONTINGENCIES
Benefit Plan
The Company established a 401(k) plan effective March 1, 1997 covering all
the then current employees and future employees who have met age requirements
and have completed at least one year of employment. The plan requires Company
contributions equal to 75% of each participant's contribution up to 6% of
salary.
5. STOCK OPTION PLAN
On June 27, 1996, the Company established a stock option plan whereby, under
certain circumstances, an employee has the option to purchase shares of common
stock for amounts based upon the fair market value of the shares purchased.
Under the plan, 300,000 shares of the Company's stock is reserved for future
distributions. No stock options have been granted under the plan.
F-57
<PAGE>
[LOGO OF RAZORFISH, INC.]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other expenses of issuance and distribution.
The following table sets forth the expenses to be borne by the registrant,
other than underwriting discounts, in connection with the issuance and
distribution of the Common Stock hereunder:
<TABLE>
<CAPTION>
Item Amount
---- ----------
<S> <C>
SEC registration fee........................................... $ 11,509
NASD filing fee................................................ 6,250
Nasdaq National Market listing fee............................. 96,000
Accounting fees and expenses................................... 800,000
Legal fees and expenses........................................ 800,000
Printing costs................................................. 350,000
Miscellaneous.................................................. 50,000
----------
Total........................................................ $2,113,759
==========
</TABLE>
Item 14. Indemnification of directors and officers.
Reference is made to Section 102(b)(7) of the DGCL, which permits a
corporation in its certificate of incorporation or an amendment thereto to
eliminate or limit the personal liability of a director for violations of the
director's fiduciary duty, except (1) for any breach of the director's
fiduciary duty of loyalty to the corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) pursuant to Section 174 of the DGCL (providing
for liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions), or (4) for any transaction from which the director
derived an improper personal benefit. Razorfish's Certificate of Incorporation
contains provisions permitted by Section 102(b)(7) of the DGCL.
Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including directors and officers, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such director, officer, employee or agent acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, with respect to any criminal actions or
proceedings, had no reasonable cause to believe that his conduct was unlawful.
A Delaware corporation may indemnify directors and/or officers in an action or
suit by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the director
or officer is adjudged to be liable to the corporation. Where a director or
officer is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such director or officer actually and reasonably incurred.
Razorfish's Certificate of Incorporation filed as Exhibit 3.1 to this
Registration Statement provides indemnification of directors and officers of
Razorfish to the fullest extent permitted by the DGCL.
II-1
<PAGE>
Item 15. Recent sales of unregistered securities.
On February 3, 1999, Razorfish issued 1,976,810 shares of Common Stock to
Communicade for an estimated purchase price of $15,814,476 which will be
adjusted on the closing date of the offering. Exemption from registration for
this transaction was claimed pursuant to Section 4(2) of the Securities Act
regarding transactions by the issuer not involving a public offering, in that
this transaction was made, without general solicitation or advertising, to a
sophisticated investor with access to all relevant information necessary to
evaluate this investment and who represented to Razorfish that the shares were
being acquired for investment.
On January 5, 1999, Razorfish issued an aggregate of 19,881,034 shares of
Common Stock and in February 1999 an aggregate of 50 shares of Class B Common
Stock to Spray Ventures and Communicade in exchange for all of the issued and
outstanding shares of stock of Spray and warrants exercisable for an additional
138 shares of stock of Spray. Exemption from registration for these
transactions was claimed pursuant to Section 4(2) of the Securities Act
regarding transactions by the issuer not involving a public offering, in that
these transactions were made, without general solicitation or advertising, to
sophisticated investors with access to all relevant information necessary to
evaluate these investments and who represented to Razorfish that the shares
were being acquired for investment.
In February 1997, Razorfish issued under its 1997 Stock Option Plan an
aggregate of 65,911 shares of Common Stock to seven employees pursuant to the
terms of a Stock Grant Agreement entered into by the Registrant and each such
employee. These shares were issued to each employee in consideration for
services rendered to Razorfish by such employee. Exemption from registration
for this transaction was claimed pursuant to Rule 701 of the Securities Act.
Additionally, since February 24, 1997, Razorfish has granted stock options
to certain of its employees and consultants pursuant to its 1997 Stock Option
and Incentive Plan. Such grants were made in reliance on Rule 701 promulgated
under the Securities Act. As of January 21, 1999, the Registrant had granted
options to purchase 1,326,217 shares of Common Stock to employees and
consultants pursuant to the 1997 Stock Option and Incentive Plan.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of Razorfish, Inc. (the "Company"), as
amended.
3.2 By-laws of the Company.
4.1 Stockholders Agreement, dated as of October 1, 1998, among the
Company, Spray Ventures, Communicade, Jeffrey A. Dachis and Craig M.
Kanarick.
4.2 Amendment to Stockholders Agreement, dated February 3, 1999, among
the Company, Spray Ventures, Communicade, Jeffrey A. Dachis and
Craig M. Kanarick.
4.3 Specimen Common Stock Certificate of the Company.*
5.1 Form of Opinion of Morrison & Foerster LLP.*
10.1 The Amended and Restated 1997 Stock Option and Incentive Plan.
10.2 1999 Stock Incentive Plan.
10.3 Employment Agreement, dated September 18, 1996, between the Company
and Jeffrey A. Dachis.
10.4 Non-competition Agreement, dated September 18, 1996, between the
Company and Jeffrey A. Dachis.
10.5 Employment Agreement, dated September 18, 1996, between the Company
and Craig M. Kanarick.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.6 Non-competition Agreement, dated September 18, 1996, between the
Company and Craig M. Kanarick.
10.7 Employment Agreement, dated April 30, 1998, between the Company and
Peter Seidler.
10.8 Amendment to Employment Agreement, dated November 26, 1998, between
the Company and Peter Seidler.
10.9 Employment Agreement, dated June 19, 1997, between the Company and
Jean-Philippe Maheu.
10.10 Employment Agreement, dated June 1, 1997, between the Company and
Evan Orensten.
10.11 Employment Agreement, dated as of October 1, 1998, between the
Company and Per Bystedt.
10.12 Employment Agreement, dated as of October 1, 1998, between the
Company and Jonas Svensson.
10.13 Employment Agreement, dated as of October 1, 1998, between the
Company and Johan Ihrfelt.
10.14 Lease Agreement, dated October 28, 1996, between the Company and Man
Yun Real Estate Corporation.
10.15 Lease Agreement, dated April 30, 1997, between the Company and Man
Yun Real Estate Corporation.
10.16 Lease Agreement, dated December 23, 1998, between C.H.B.I. Razorfish
Limited and The Mayor and Commonalty and Citizens of the City of
London.
10.17 Lease Agreement, dated March 10, 1998, between J&R Bechelli and
Alpha Online, Inc., as amended by letter dated February 9, 1999.*
10.18 Lease Agreement No. 731 100, dated April 12, 1996, between Spray
(f/k/a Spray Interactive Media Agency AB) and Bojner Estate AB
("Bojner") and the English translation thereof.
10.19 Lease Agreement No. 741 100, dated September 30, 1997, between Spray
(f/k/a Spray Interactive Media AB) and Bojner and the English
translation thereof.
10.20 Lease Contract No. 01009 001 024 ("Trygg-Hansa Lease"), dated April
30, 1998, between Spray and Trygg-Hansa ("Trygg-Hansa") and the
English translation thereof.
10.21 Supplement No. 1, dated April 30, 1998, to Trygg-Hansa Lease and the
English translation thereof.
10.22 Supplement No. 2, dated August 18, 1998, to Trygg-Hansa Lease and
the English translation thereof.
10.23 Personal Guarantee for Premises, dated April 29, 1998, made by Lars
T. Andersson and Per Bystedt in favor of Trygg-Hansa with respect to
Trygg-Hansa Lease and the English translation thereof.
10.24 Personal Guarantee for Premises, dated April 29, 1998, made by Johan
Ihrfelt and Jonas Svensson in favor of Trygg-Hansa with respect to
Trygg-Hansa Lease and the English translation thereof.
10.25 Rent Contract Covering Business Premises, dated February 3, 1998,
between Spray Interactive Media AB and DEGI Deutsche Gesellschaft
fur Immobilienfonds mbH and the English translation thereof.
10.26 Rental Agreement for Office Space No. 910539, dated April 25, 1997,
between Spray Interactive Media Oy and Valtion Kiinteistolaitos
(State Real Property Authority)/Uusimaa ("State Real Property
Authority") and the English translation thereof.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.27 Rental Agreement for Office Space No. 910539, dated May 14, 1997,
between Spray Interactive Media Oy and State Real Property Authority
and the English translation thereof.
10.28 Lease Contract, dated June 17, 1998, between Spray Geelmuyden.Kiese
A.S. and Kongensgate 2 ANS and the English translation thereof.
10.29 Subscription and Exchange Agreement, dated as of October 1, 1998,
among the Company, Spray Ventures AB and Communicade.
10.30 First Amendment to the Subscription and Exchange Agreement, dated
November 25, 1998, among the Company, Spray Ventures AB, Spray
Network AB and Communicade.
10.31 Second Amendment to the Subscription and Exchange Agreement, dated
December 10, 1998, among the Company, Spray Ventures AB, Spray
Network AB and Communicade.
10.32 Stock Purchase Agreement, dated as of October 1, 1998, among
Communicade, Jeffrey A. Dachis and Craig M. Kanarick.
10.33 Stock Purchase Agreement, dated October 23, 1998, between
Communicade and Spray Ventures AB.
10.34 Amendment to Stock Purchase Agreement, dated December 10, 1998,
between Communicade and Spray Ventures AB.
10.35 Razorfish, Inc. Form of Standard Service Agreement.*
10.36 Loan Agreement, dated September 18, 1996, between the Company and
Omnicom Finance Inc.
22.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of M.R. Weiser.
23.3 Consent of Morrison & Foerster LLP (set forth in Exhibit 5.1).*
24.1 Power of Attorney (set forth on the signature page to this
Registration Statement).**
27.1 Financial Data Schedule.**
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
II-4
<PAGE>
Item 17. Undertakings.
The Registrant hereby undertakes the following:
(1) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(2) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required
by the Underwriters to permit prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on March 12, 1999.
RAZORFISH, INC.
*
By: _________________________________
Jeffrey A. Dachis
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name and Signatures Title Date
------------------- ----- ----
<C> <S> <C>
* President, Chief March 12, 1999
____________________________________ Executive Officer,
Jeffrey A. Dachis Treasurer and Director
* Chief Scientist, Vice March 12, 1999
____________________________________ Chairman of the Board,
Craig M. Kanarick Secretary and Director
* Executive Vice March 12, 1999
____________________________________ President, Chairman of
Per Bystedt the Board and Director
* Vice Chairman of the March 12, 1999
____________________________________ Board and Director
Jonas Svensson
* Chief Financial Officer March 12, 1999
____________________________________ (Chief Financial and
Susan Black Accounting Officer)
* Director March 12, 1999
____________________________________
John Wren
</TABLE>
* By power of attorney.
/s/ Michael S. Simon
_______________________________ March 12,
Michael S. Simon 1998
Attorney-in-fact
II-6
<PAGE>
Report of Independent Public Accountants
To Razorfish, Inc:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Razorfish, Inc. and subsidiaries included in this
registration statement and have issued our report thereon dated March 5, 1999.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of valuation and qualifying accounts
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commissions rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
March 5, 1999
S-1
<PAGE>
Report of Independent Public Accountants
To Spray Ventures AB:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Spray Ventures AB and subsidiaries included in this
registration statement and have issued our report thereon dated January 18,
1999. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of valuation and qualifying
accounts is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commissions rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
January 18, 1999
S-2
<PAGE>
Report of Independent Public Accountants
To Spray Network AB:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Spray Network AB and subsidiaries included in this
registration statement and have issued our report thereon dated March 5, 1999.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of valuation and qualifying accounts
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commissions rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
March 5, 1999
S-3
<PAGE>
Schedule II
RAZORFISH, INC. AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
of Year Expenses Accounts Deductions End of Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
For the fiscal year
ended December 31, 1996
Allowance for doubtful
accounts............. $-- $-- $-- $-- $--
==== ==== ==== ==== ====
For the fiscal year
ended December 31, 1997
Allowance for doubtful
accounts............. $-- $-- $-- $-- $--
==== ==== ==== ==== ====
For the fiscal year
ended December 31, 1998
Allowance for doubtful
accounts............. $-- $ 50 $-- $-- $ 50
==== ==== ==== ==== ====
</TABLE>
S-4
<PAGE>
Schedule II
SPRAY VENTURES AB AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
of Year Expenses Accounts Deductions End of Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
For the fiscal year
ended December 31, 1996
Allowance for doubtful
accounts............. $-- $-- $-- $-- $--
==== ==== ==== ==== ====
For the eight months
ended August 31, 1997
Allowance for doubtful
accounts............. $-- $ 39 $-- $-- $ 39
==== ==== ==== ==== ====
</TABLE>
S-5
<PAGE>
Schedule II
SPRAY NETWORK AB AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
of Year Expenses Accounts Deductions End of Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
For the fiscal year
ended December 31, 1996
Allowance for doubtful
accounts............. $-- $-- $-- $-- $--
==== ==== ==== ==== ====
For the fiscal year
ended December 31, 1997
Allowance for doubtful
accounts............. $-- $-- $-- $-- $--
==== ==== ==== ==== ====
For the fiscal year
ended December 31, 1998
Allowance for doubtful
accounts............. $-- $ 24 $-- $-- $ 24
==== ==== ==== ==== ====
</TABLE>
S-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of Razorfish, Inc. (the "Company"), as
amended.
3.2 By-laws of the Company.
4.1 Stockholders Agreement, dated as of October 1, 1998, among the
Company, Spray Ventures, Communicade, Jeffrey A. Dachis and Craig M.
Kanarick.
4.2 Amendment to Stockholders Agreement, dated February 3, 1999, among the
Company, Spray Ventures, Communicade, Jeffrey A. Dachis and Craig M.
Kanarick.
4.3 Specimen Common Stock Certificate of the Company.*
5.1 Form of Opinion of Morrison & Foerster LLP.*
10.1 The Amended and Restated 1997 Stock Option and Incentive Plan.
10.2 1999 Stock Incentive Plan.
10.3 Employment Agreement, dated September 18, 1996, between the Company
and Jeffrey A. Dachis.
10.4 Non-competition Agreement, dated September 18, 1996, between the
Company and Jeffrey A. Dachis.
10.5 Employment Agreement, dated September 18, 1996, between the Company
and Craig M. Kanarick.
10.6 Non-competition Agreement, dated September 18, 1996, between the
Company and Craig M. Kanarick.
10.7 Employment Agreement, dated April 30, 1998, between the Company and
Peter Seidler.
10.8 Amendment to Employment Agreement, dated November 26, 1998, between
the Company and Peter Seidler.
10.9 Employment Agreement, dated June 19, 1997, between the Company and
Jean-Philippe Maheu.
10.10 Employment Agreement, dated June 1, 1997, between the Company and Evan
Orensten.
10.11 Employment Agreement, dated as of October 1, 1998, between the Company
and Per Bystedt.
10.12 Employment Agreement, dated as of October 1, 1998, between the Company
and Jonas Svensson.
10.13 Employment Agreement, dated as of October 1, 1998, between the Company
and Johan Ihrfelt.
10.14 Lease Agreement, dated October 28, 1996, between the Company and Man
Yun Real Estate Corporation.
10.15 Lease Agreement, dated April 30, 1997, between the Company and Man Yun
Real Estate Corporation.
10.16 Lease Agreement, dated December 23, 1998, between CHBi Razorfish
Limited and The Mayor and Commonalty and Citizens of the City of
London.
10.17 Lease Agreement, dated March 10, 1998, between J&R Bechelli and Alpha
Online, Inc., as amended by letter dated February 9, 1999.*
10.18 Lease Agreement No. 731 100, dated April 12, 1996, between Spray
(f/k/a Spray Interactive Media Agency AB) and Bojner Estate AB
("Bojner") and the English translation thereof.
10.19 Lease Agreement No. 741 100, dated September 30, 1997, between Spray
(f/k/a Spray Interactive Media AB) and Bojner and the English
translation thereof.
10.20 Lease Contract No. 01009 001 024 ("Trygg-Hansa Lease"), dated April
30, 1998, between Spray and Trygg-Hansa ("Trygg-Hansa") and the
English translation thereof.
10.21 Supplement No. 1, dated April 30, 1998, to Trygg-Hansa Lease and the
English translation thereof.
10.22 Supplement No. 2, dated August 18, 1998, to Trygg-Hansa Lease and the
English translation thereof.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.23 Personal Guarantee for Premises, dated April 29, 1998, made by Lars T.
Andersson and Per Bystedt in favor of Trygg-Hansa with respect to
Trygg-Hansa Lease and the English translation thereof.
10.24 Personal Guarantee for Premises, dated April 29, 1998, made by Johan
Ihrfelt and Jonas Svensson in favor of Trygg-Hansa with respect to
Trygg-Hansa Lease and the English translation thereof.
10.25 Rent Contract Covering Business Premises, dated February 3, 1998,
between Spray Interactive Media AB and DEGI Deutsche Gesellschaft fur
Immobilienfonds mbH and the English translation thereof.
10.26 Rental Agreement for Office Space No. 910539, dated April 25, 1997,
between Spray Interactive Media Oy and Valtion Kiinteistolaitos (State
Real Property Authority)/Uusimaa ("State Real Property Authority") and
the English translation thereof.
10.27 Rental Agreement for Office Space No. 910539, dated May 14, 1997,
between Spray Interactive Media Oy and State Real Property Authority
and the English translation thereof.
10.28 Lease Contract, dated June 17, 1998, between Spray Geelmuyden.Kiese
A.S. and Kongensgate 2 ANS and the English translation thereof.
10.29 Subscription and Exchange Agreement, dated as of October 1, 1998,
among the Company, Spray Ventures AB and Communicade.
10.30 First Amendment to the Subscription and Exchange Agreement, dated
November 25, 1998, among the Company, Spray Ventures AB, Spray Network
AB and Communicade.
10.31 Second Amendment to the Subscription and Exchange Agreement, dated
December 10, 1998, among the Company, Spray Ventures AB, Spray Network
AB and Communicade.
10.32 Stock Purchase Agreement, dated as of October 1, 1998, among
Communicade, Jeffrey A. Dachis and Craig M. Kanarick.
10.33 Stock Purchase Agreement, dated October 23, 1998, between Communicade
and Spray Ventures AB.
10.34 Amendment to Stock Purchase Agreement, dated December 10, 1998,
between Communicade and Spray Ventures AB.
10.35 Razorfish, Inc. Form of Standard Service Agreement.*
10.36 Loan Agreement, dated September 18, 1996, between the Company and
Omnicom Finance Inc.
22.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of M.R. Weiser.
23.3 Consent of Morrison & Foerster LLP (set forth in Exhibit 5.1).*
24.1 Power of Attorney (set forth on the signature page to this
Registration Statement).**
27.1 Financial Data Schedule.**
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
RAZORFISH, INC.
The undersigned, for the purpose of organizing a corporation (the
"Corporation") pursuant to the provisions of the General Corporation Law of the
State of Delaware ("General Corporation Law"), does make and file this
Certificate of Incorporation and does hereby certify as follows:
FIRST: Name: The name of the corporation is Razorfish, Inc.
----- ----
SECOND: Registered Office: The registered office of the Corporation
------ -----------------
is to be located at 1209 Orange Street, City of Wilmington, County of New
Castle, State of Delaware 19801. The name of its registered agent is The
Corporation Trust Company, whose address is Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801.
THIRD: Purposes: The purpose of the Corporation is to engage in any
----- --------
lawful act or activity for which corporations may be organized under the General
Corporation Law.
FOURTH. The total number of shares of stock the Corporation shall
------
have authority to issue is 57,000,000 shares, of which (i) 47,000,000 shares
shall be Common Stock, $.01 par value per share ("Common Stock"), of which (A)
46,999,995 shares shall be Class A Common Stock (the "Class A Common Stock"),
having the terms, powers and rights set forth below and (B) 50 shares shall be
Class B Common Stock (the "Class B Common Stock") having the terms, powers and
rights set forth below and (ii) 10,000,000 shares shall be Preferred Stock, $.01
par value per share ("Preferred Stock").
The following is a statement of the designations and the powers, privileges and
rights, and the qualifications, limitations or restrictions in respect of each
class of capital stock of the Corporation.
A. COMMON STOCK.
------------
Certain terms, powers and participating, optional and other rights,
and the qualifications, limitations and restrictions of the Common Stock are as
follows:
1. Class A Common Stock.
(a) Voting. Each holder of shares of Class A Common Stock shall
be entitled to one vote for each share of Class A Common
Stock held on all matters as to which holders of Class A
Common Stock shall be entitled
<PAGE>
to vote. In any election of directors, no holder of shares
of Class A Common Stock shall be entitledto cumulate his or
her votes by giving one candidate more than one vote per
share.
(b) Other Rights. Each share of Class A Common Stock issued and
outstanding shall be identical in all respects one with the
other. In the event any dividend is paid on any shares of
Class A Common Stock, the same dividend shall be paid on all
shares of Class A Common Stock outstanding at the time of
such payment. Except for and subject to those rights
expressly granted to the holders of the Preferred Stock and
the Class B Common Stock, or except as may be provided by
the laws of the State of Delaware, the holders of Class A
Common Stock shall have exclusively all other rights of
stockholders.
2. Class B Common Stock. The rights (including, but not limited to,
--------------------
rights to dividends), privileges and restrictions of the Class A Common Stock
and the Class B Common Stock shall be identical in all respects, except that
holders of Class B Common Stock shall not be entitled to vote such shares,
except as required by law.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed in this Section B
of Article FOURTH and/or in the resolution or resolutions providing for the
issue of such series adopted by the Board of Directors of the Corporation as
hereinafter provided. Any shares of Preferred Stock which may be redeemed,
purchased or acquired by the Corporation may be reissued except as otherwise
provided by law. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purposes of voting by classes
unless expressly provided.
Authority is hereby granted to the Board of Directors from time to
time to issue the Preferred Stock in one or more series, and in connection with
the creation of any such series, by resolution or resolutions providing for the
issuance of the shares thereof, to determine and fix such voting powers, full or
limited, or no voting powers, and such designations, preferences, powers and
relative participating, optional or other special rights and qualifications,
limitations, or restrictions thereof, including without limitation dividend
rights, conversion rights, redemption privileges and liquidation preferences, as
shall be stated and expressed in such votes, all to the full extent now or
hereafter permitted by the General Corporation Law. Without limiting the
generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as provided in this Article FOURTH, no vote of the
holders of the Preferred Stock or Common Stock shall be prerequisite to the
issuance of any shares of any series of Preferred Stock authorized by and
complying with the conditions of this Certificate of Incorporation, the right to
enjoy such vote being expressly waived by all present and future holders of the
capital stock of the Corporation. The resolutions providing for issuance of any
series of Preferred Stock may provide that such resolutions may be amended by
subsequent resolutions adopted in the same manner as the
2
<PAGE>
preceding resolutions. Such resolutions shall be effective upon adoption,
without the necessity of any filing, with the State Secretary of Delaware or
otherwise.
C. NO PREEMPTIVE RIGHTS. No holder of shares of capital stock of the Corporation
--------------------
shall, by reason of his holding such shares, possess any preemptive or
preferential right to purchase or subscribe to additional, unissued or treasury
shares, or rights to purchase shares, of any class or series of capital stock of
the Corporation, now or hereafter to be authorized, or any notes, debentures,
bonds or other securities convertible into or carrying rights to purchase shares
of any class or series, now or hereafter to be authorized; provided, however,
that in connection with the issuance of any such shares or securities, the Board
of Directors of the Corporation may, in its sole discretion, offer such shares
or securities, or any part thereof, for purchase or subscription by the holders
of shares of the Corporation, except as may otherwise be provided by this
Certificate of Incorporation, as amended from time to time.
FIFTH: Indemnity: The Corporation shall, to the fullest extent legally
----- ---------
permissible, indemnify (fully or, if not possible, partially) each of its
directors and officers, and persons who serve at its request as directors or
officers of another organization in which it owns shares or of which it is a
creditor, against all liabilities (including expenses) imposed upon or
reasonably incurred by him in connection with any action, suit or other
proceeding, civil or criminal (including investigations, audits, the activities
of, or service upon special committees of the board) in which he may be involved
or with which he may be threatened, while in office or thereafter, by reason of
his acts or omissions as such director or officer, unless in any proceeding he
shall be finally adjudged not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Corporation; provided,
--------
however, that such indemnification shall not cover liabilities in connection
- -------
with any matter which shall be disposed of through a compromise payment by such
director or officer, pursuant to a consent decree or otherwise, unless such
compromise shall be approved as in the best interest of the Corporation, after
notice that it involved such indemnification, (a) by a vote of the directors in
which no interested director participates, or (b) by a vote or the written
approval of the holders of a majority of the outstanding stock at the time
having the right to vote for directors, not counting as outstanding any stock
owned by any interested director or officer. Such indemnification may include
payment by the Corporation of expenses incurred in defending a civil or criminal
action or proceeding in advance of the final disposition of such action or
proceeding, upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be adjudicated to be not entitled to indemnification
under these provisions. The rights of indemnification hereby provided shall not
be exclusive of or affect other rights to which any director or officer may be
entitled. As used in this paragraph, the terms "director" and "officer" include
their respective heirs, executors and administrators, and an "interested"
director or officer is one against whom as such the proceedings in question or
another proceeding on the same or similar grounds is then pending.
Indemnification of employees and other agents of the Corporation (including
persons who serve at its request as employees or other agents of another
organization in which it owns shares or of which it is a creditor) may be
provided by the Corporation to whatever extent shall be authorized by the
directors before or after the occurrence of any event as to or in consequence
3
<PAGE>
of which indemnification may be sought. Any indemnification to which a person is
entitled under these provisions may be provided although the person to be
indemnified is no longer a director, officer, employee or agent of the
Corporation or of such other organization. It is the intent of these provisions
to indemnify directors and officers to the fullest extent not specifically
prohibited by law, including indemnification against claims brought
derivatively, in the name of the Corporation, and that such directors and
officers need not exhaust any other remedies.
SIXTH: Meetings: Elections: Meetings of the stockholders may be held
----- --------------------
within or without the State of Delaware, as the Bylaws may provide. Subject to
the provisions of any law or regulation, the books of the Corporation may be
kept outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.
The election of directors need not be by written ballot unless the Bylaws so
provide.
SEVENTH: Bylaws: The board of directors of the Corporation is authorized
------- ------
and empowered from time to time in its discretion to make, alter, amend or
repeal Bylaws of the Corporation, except as such power may be restricted or
limited by the General Corporation Law.
EIGHTH: Compromise or Arrangement: Whenever a compromise or arrangement
------ -------------------------
is proposed between the Corporation and its creditors or any class of them
and/or between the Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or receivers
appointed for the Corporation under the provision of (S) 291 of the General
Corporation Law, or on the application of trustees in dissolution or of any
receiver or receivers appointed for the Corporation under (S) 279 of the General
Corporation Law, order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of the Corporation, as the case may be,
and also on the Corporation.
NINTH: Exculpation: No director shall be personally liable to the
----- -----------
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under (S) 174 of the General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after the date of incorporation of the Company to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
4
<PAGE>
liability of a director of the Company shall be deemed to be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law,
as so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the Company shall not adversely affect any right or protection of a director
of the Company existing at the time of such repeal or modification.
TENTH: Reservation of Amendment Power: Subject to the limitations set
----- ------------------------------
forth herein, the Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
ELEVENTH: Management: Except as otherwise required by law, by the
-------- ----------
Certificate of Incorporation or by the Bylaws of the Corporation, as from time
to time amended, the business of the Corporation shall be managed by its board
of directors, which shall have and may exercise all the powers of the
Corporation. The board of directors of the Corporation is hereby specifically
authorized and empowered from time to time in its discretion to determine the
extent, if any, to which and the time and place at which, and the conditions
under which any stockholder of the Corporation may examine books and records of
the Corporation, other than the books and records now or hereafter required by
statute to be kept open for inspection of stockholders of the Corporation.
TWELFTH: Liquidation: Any vote or votes authorizing liquidation of the
------- -----------
Corporation or proceedings for its dissolution may provide, subject to the
rights of creditors and rights expressly provided for particular classes or
series of stock, for the distribution pro rata among the stockholders of the
Corporation of the assets of the Corporation, wholly or in part in kind, whether
such assets be in cash or other property, and may authorize the board of
directors of the Corporation to determine the value of the different assets of
the Corporation for the purpose of such liquidation and may authorize the board
of directors of the Corporation to divide such assets or any part thereof among
the stockholders of the Corporation, in such manner that every stockholder will
receive a proportionate amount in value (determined as aforesaid) of cash or
property of the Corporation upon such liquidation or dissolution even though
each stockholder may not receive a strictly proportionate part of each such
asset.
THIRTEENTH: Purchase of Shares: Subject to the terms of any outstanding
---------- ------------------
Preferred Stock, the Corporation may purchase directly or indirectly its own
shares to the extent the money or other property paid or the indebtedness issued
therefor does not (i) render the Corporation unable to pay its debts as they
become due in the usual course of business or (ii) exceed the surplus of the
Corporation, as defined in the General Corporation Law. Notwithstanding the
limitations contained in the preceding sentence, the Corporation may purchase
any of its own shares for the following purposes, provided that the net assets
of the Corporation, as defined in the General Corporation Law, are not less than
the amount of money or other property paid or the indebtedness issued therefor:
(i) to eliminate fractional shares; (ii) to collect or compromise indebtedness
owed by or to the Corporation; (iii) to pay dissenting shareholders entitled to
5
<PAGE>
payment for their shares under the General Corporation Law; and (iv) to effect
the purchase or redemption of redeemable shares in accordance with the General
Corporation Law.
FOURTEENTH: Section 203 Opt Out
---------- -------------------
The Corporation hereby elects not to be governed by (S) 203 of the General
Corporation Law of the State of Delaware as from time to time in effect or any
successor provision thereto.
FIFTEENTH: The name and address of the Incorporator is:
---------
Lisa J. Brovender, Esq.
c/o Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this __ day
of December, 1998.
INCORPORATOR:
/s/ Lisa J. Brovender
--------------------------------
Lisa J. Brovender
6
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RAZORFISH, INC.
Razorfish, Inc. a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
FIRST: That the name of the Corporation is Razorfish, Inc.
SECOND: That the Certificate of Incorporation of the Corporation was filed
with the Delaware Secretary of State on January 27, 1999.
THIRD: That the first paragraph of Paragraph FOURTH of said Certificate of
Incorporation is hereby deleted and added in its place is the following:
"FOURTH. The total number of shares of stock the Corporation shall
------
have authority to issue is 40,000,000 shares, of which (i) 30,000,000
shares shall be Common Stock, $.01 par value per share ("Common Stock"), of
which (A) 29,999,950 shares shall be Class A Common Stock (the "Class A
Common Stock"), having the terms, powers and rights set forth below and (B)
50 shares shall be Class B Common Stock (the "Class B Common Stock") having
the terms, powers and rights set forth below and (ii) 10,000,000 shares
shall be Preferred Stock, $.01 par value per share ("Preferred Stock").
Upon the filing of this Certificate of Amendment with the Secretary of
State of the State of Delaware (the "Effective Time"), (i) every two shares
of Class A Common Stock outstanding as of the Effective Time shall
automatically be deemed split and converted into one share of Class A
Common Stock (ii) all shares of Class A Common Stock reserved for issuance
under the Corporation's 1997 Stock Option and Incentive Plan and the awards
granted thereunder shall automatically be deemed split so that (A) every
two shares of Class A Common Stock reserved for issuance pursuant to such
plan shall be converted into one share of Class A Common Stock and (B) the
number of shares of Class A Common Stock to be purchased upon exercise of
outstanding options shall be reduced by one half and (iii) all shares of
Class A Common Stock reserved for issuance under the Corporation's 1999
Stock Incentive Plan shall automatically be
<PAGE>
deemed split and every two shares reserved for issuance pursuant to such
plan shall be converted into one share of Class A Common Stock."
FOURTH: That the amendment to the Certificate of Incorporation set forth
herein was authorized by unanimous written consent of the Board of Directors
followed by the written consent of the holders of a majority of all outstanding
shares entitled to vote thereon pursuant to Section 228 of the General
Corporation Law of the State of Delaware.
FIFTH: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 228 and Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Jeffrey A. Dachis, its President and Chief Executive Officer, and
attested by Craig M. Kanarick, its Vice Chairman of the Board, Chief Scientist
and Secretary, this 4th day of March, 1999.
By: /s/ Jeffrey A. Dachis
--------------------------
Name: Jeffrey A. Dachis
Title: President and Chief Executive Officer
ATTEST:
By: /s/ Craig M. Kanarick
-----------------------
Name: Craig M. Kanarick
Title: Secretary
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
RAZORFISH, INC.
a Delaware corporation
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
ARTICLE I Offices and Agent...................................... 1
Section 1 Principal Office....................................... 1
Section 2 Registered Office and Agent............................ 1
ARTICLE II Stockholders' Meetings................................. 1
Section 1 Annual Meetings........................................ 1
Section 2 Special Meetings....................................... 1
Section 3 Place of Meetings...................................... 1
Section 4 Notice of Meetings..................................... 2
Section 5 Waiver of Notice....................................... 2
Section 6 Fixing of Record Date.................................. 2
Section 7 Stockholders List...................................... 3
Section 8 Proxies................................................ 3
Section 9 Voting................................................. 4
Section 10 Quorum and Required Vote............................... 4
Section 11 Voting Procedures and Inspections of Elections......... 4
Section 12 Stockholder Proposals at Annual Meetings............... 5
Section 13 Nominations of Persons for Election to the
Board of Directors..................................... 6
Section 14 Conduct at Meetings.................................... 7
Section 15 Adjournment............................................ 7
Section 16 Informal Action by Stockholders........................ 8
ARTICLE III Board of Directors..................................... 8
Section 1 Number, Qualifications and Term of Office.............. 8
Section 2 Vacancies.............................................. 8
Section 3 Resignation............................................ 9
Section 4 Compensation........................................... 9
ARTICLE IV Meetings of the Board.................................. 9
Section 1 Place of Meetings...................................... 9
Section 2 Regular Meetings....................................... 9
Section 3 Special Meetings....................................... 9
Section 4 Notice of Special Meetings............................. 9
Section 5 Waiver of Notice....................................... 10
Section 6 Quorum and Action at Meeting........................... 10
Section 7 Presumption of Assent.................................. 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 8 Committees............................................. 10
Section 9 Informal Action by Directors........................... 11
Section 10 Telephonic Meetings.................................... 11
ARTICLE V Officers and Agents.................................... 11
Section 1 Enumeration, Election and Term......................... 11
Section 2 General Duties......................................... 11
Section 3 Vacancies.............................................. 12
Section 4 Compensation........................................... 12
Section 5 Resignation and Removal................................ 12
Section 6 Chairman of the Board.................................. 12
Section 7 Vice Chairman of the Board............................. 12
Section 8 Chief Executive Officer................................ 13
Section 9 President.............................................. 13
Section 10 Chief Financial Officer................................ 13
Section 11 Vice Presidents........................................ 13
Section 12 Secretary.............................................. 14
Section 13 Delegation of Duties................................... 14
ARTICLE VI Indemnification of Officers, Directors and Others...... 14
Section 1 Indemnification........................................ 14
Section 2 Authority to Advance Expenses.......................... 15
Section 3 Right of Claimant to Bring Suit........................ 15
Section 4 Provisions Nonexclusive................................ 15
Section 5 Authority to Insure.................................... 16
Section 6 Survival of Rights..................................... 16
Section 7 Settlement of Claims................................... 16
Section 8 Effect of Amendment.................................... 16
Section 9 Subrogation............................................ 16
Section 10 No Duplication of Payments............................. 16
ARTICLE VII Capital Stock.......................................... 16
Section 1 Certificates of Stock.................................. 16
Section 2 Issuance of Stock...................................... 17
Section 3 Lost Certificates...................................... 17
Section 4 Transfer of Shares..................................... 17
Section 5 Stockholders........................................... 17
Section 6 Stock Ledger........................................... 18
Section 7 Restriction on Transfer of Shares...................... 18
ARTICLE VIII Fiscal Year............................................ 18
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX Dividends.............................................. 18
ARTICLE X Amendments............................................. 18
ARTICLE XI Miscellaneous.......................................... 19
Section 1 Gender................................................. 19
Section 2 Invalid Provision...................................... 19
Section 3 Governing Law.......................................... 19
</TABLE>
iii
<PAGE>
RAZORFISH, INC.
BYLAWS
ARTICLE I
Offices and Agent
-----------------
1. Principal Office. The principal office of the Corporation may be
----------------
located within or without the State of Delaware, as designated by the board of
directors. The Corporation may have other offices and places of business at
such places within or without the State of Delaware as shall be determined by
the directors or as may be required by the business of the Corporation.
2. Registered Office and Agent. The Corporation shall have and
---------------------------
maintain at all times (a) a registered office in the State of Delaware, which
office shall be located at 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801, and (b) a registered agent located at such address whose name is
The Corporation Trust Company, until changed from time to time as provided by
the General Corporation Law of the State of Delaware ("Delaware Corporation
Law").
ARTICLE II
Stockholders' Meetings
----------------------
1. Annual Meetings. The annual meeting of stockholders for the
---------------
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on such date and at such
time as determined by resolution of the board of directors. If this date falls
upon a legal holiday, then such meeting shall be held on the next succeeding
business day at the same hour. If no annual meeting is held in accordance with
the foregoing provisions, the board of directors shall cause the meeting to be
held as soon thereafter as convenient.
2. Special Meetings. Special meetings of the stockholders of the
----------------
Corporation may be called for any purpose at any time by the Chairman of the
Board of Directors, Chief Executive Officer or President, and shall be called by
the Secretary if directed by the board of directors. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons. No business may be transacted at any special meeting except that
referred to in the notice thereof. Any amendment, change or repeal of this
Section 2 of Article II, or any other amendment to these Bylaws that will have
the effect of permitting circumvention of or modifying this Section 2 of Article
II, shall require the favorable vote, at a stockholders' meeting, of the holders
of at least sixty-six and two-thirds percent (66 2/3%) of the then-outstanding
shares of stock of the Corporation entitled to vote.
3. Place of Meetings. All meetings of stockholders of the
-----------------
Corporation shall be held within or without the State of Delaware as may be
designated by the board of directors or the President, or, if not designated, at
the principal office of the Corporation.
1
<PAGE>
4. Notice of Meetings.
------------------
(a) Except as otherwise provided in these Bylaws or Delaware
Corporation Law, written notice of any meeting of stockholders, stating the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose for which the meeting is called, shall be delivered either personally or
by mail to each stockholder of record entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the date of the meeting by or
at the direction of the board of directors, the President or the Secretary. If
mailed, such notice shall be deemed to be delivered as to any stockholder of
record when deposited in the United States mail addressed to the stockholder at
his address as it appears on the stock transfer books of the Corporation, with
postage prepaid.
(b) When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
5. Waiver of Notice. Any stockholder, either before or after any
----------------
stockholders' meeting, may waive in writing notice of the meeting, and his
waiver shall be deemed the equivalent of giving notice. Attendance at a meeting
by a stockholder shall constitute a waiver of notice, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
6. Fixing of Record Date. For the purpose of determining the
---------------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors of the Corporation may fix in
advance a record date, which shall be not more than sixty (60) days nor less
than ten (10) days prior to the date of such meeting, nor more than sixty (60)
days prior to any other action. If no record date is fixed, the record date for
determining the stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. The record date
for determining stockholders for any purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the board of directors may fix a new record date for the
- -------- -------
adjourned meeting.
2
<PAGE>
7. Stockholders List. The officer who has charge of the stock ledger
-----------------
of the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting at a place within the city where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
8. Proxies.
-------
(a) A stockholder entitled to vote at a meeting of stockholders
may authorize another person or persons to act for him by proxy, which proxy
shall be filed with the Secretary at or before the meeting at which it is used.
No proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy provides for a longer period.
(b) Without limiting the manner in which a stockholder may
authorize another person or persons to act for him as proxy pursuant to
subsection (a) of this Section, the following shall constitute a valid means by
which a stockholder may grant such authority:
(1) A stockholder may execute a writing authorizing another
person or persons to act for him as proxy. Execution may be accomplished by the
stockholder or his authorized officer, director, employee or agent signing such
writing or causing his signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile signature.
(2) A stockholder may authorize another person or persons to
act for him as proxy by transmitting or authorizing the transmission of a
telegram, cablegram or other means of electronic transmission to the person who
will be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, provided, that any such
--------
telegram, cablegram or other means of electronic transmission must either set
forth or be submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by the
stockholder. Such authorization can be established by the signature of the
stockholder on the proxy, either in writing or by a signature stamp or facsimile
signature, or by a number or symbol from which the identity of the stockholder
can be determined, or by any other procedure deemed appropriate by the
inspectors or other persons making the determination as to due authorization. If
it is determined that such telegrams, cablegrams or other electronic
transmissions are valid, the inspectors or, if there are no inspectors, such
other persons making that determination shall specify the information upon which
they relied.
(c) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to subsection (c)
of this section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for
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which the original writing or transmission could be used, provided, that such
--------
copy, facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
9. Voting. Each stockholder shall have one vote for each share of
------
stock entitled to vote held of record by such stockholder and a proportionate
vote for each fractional share so held, unless otherwise provided in the
Certificate of Incorporation.
Persons holding stock in a fiduciary capacity shall be entitled to
vote the shares so held. Persons whose stock is pledged shall be entitled to
vote, unless in the transfer by the pledgor on the books of the Corporation he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent such stock and vote thereon.
If shares having voting power stand of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety, or otherwise, or if two or more
persons have the same fiduciary relationship respecting the same shares, unless
the Secretary is given written notice to the contrary and is furnished with a
copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (i) if only one votes, his act binds all; (ii) if more than
one vote, the act of the majority so voting binds all; and (iii) if more than
one vote, but the vote is evenly split on any particular matter, each fraction
may vote the securities in question proportionately, or any person voting the
shares or a beneficiary, if any, may apply to the Court of Chancery or any court
of competent jurisdiction in the State of Delaware to appoint an additional
person to act with the persons so voting the shares. The shares shall then be
voted as determined by a majority of such persons and the person appointed by
the court. If a tenancy is held in unequal interests, a majority or even-split
for the purpose of this sub-section shall be a majority or even-split in
interest.
10. Quorum and Required Vote. Except as otherwise provided by law,
------------------------
the Certificate of Incorporation or these Bylaws, the holders of a majority of
the shares entitled to vote at the meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the shares present or represented by proxy
at the meeting and entitled to vote on the subject matter shall be the act of
the stockholders, and, if there are two or more classes of stock entitled to
vote as separate classes, then, in the case of each such class, the affirmative
vote of a majority of the shares of that class present or represented by proxy
at the meeting shall be the vote of such class unless a different vote is
required by an express provision of law, the Certificate of Incorporation or
these Bylaws.
11. Voting Procedures and Inspections of Elections.
----------------------------------------------
(a) The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors to act at the meeting and make a
written report thereof. The Corporation may designate one or more persons as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate is able to act at a meeting of stockholders, the person presiding
at the meeting shall appoint one or more inspectors to act at the meeting. Each
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inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
(c) The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting shall
be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Court of Chancery upon application by a
stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of the proxies, any
envelopes submitted with those proxies, any information provided in accordance
with Section 212(c)(2) of the Delaware Corporation Law, the ballots and the
regular books and records of the corporation, except that the inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees
or similar persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes than the stockholder holds
of record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to sub-section (b)(v) above shall specify the precise
information considered by them, including the person or persons from whom they
obtained the information, when the information was obtained, the means by which
the information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
12. Stockholder Proposals at Annual Meetings.
----------------------------------------
(a) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors or otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation, not
less than 45 days nor more than 75 days prior to the date on which the
corporation first mailed its proxy materials for the previous year's annual
meeting of stockholders (or the date on which the corporation mails its proxy
materials for the current year if
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during the prior year the corporation did not hold an annual meeting or if the
date of the annual meeting was changed more than 30 days from the prior year). A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the corporation which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business.
(b) Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 12 of Article II; provided, that nothing in
--------
this Section 12 of Article II shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting in
accordance with said procedure.
(c) The presiding officer of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 12 of Article II, and any such business not properly brought before the
meeting shall not be transacted.
13. Nominations of Persons for Election to the Board of Directors.
-------------------------------------------------------------
(a) In addition to any other applicable requirements, only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors. Nominations of persons for election to the
board of directors may be made at a meeting of stockholders by or at the
direction of the board of directors, by any nominating committee or person
appointed by the board of directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 13 of Article II.
(b) Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely notice in
writing to the Secretary. To be timely, a stockholder's notice must be delivered
to or mailed and received at the principal executive offices of the corporation,
not less than 45 days nor more than 75 days prior to the date on which the
corporation first mailed its proxy materials for the previous year's annual
meeting of stockholders (or the date on which the corporation mails its proxy
materials for the current year if during the prior year the corporation did not
hold an annual meeting or if the date of the annual meeting was changed more
than 30 days from the prior year). Such stockholder's notice shall set forth (i)
as to each person whom the stockholder proposes to nominate for election or re-
election as a director, (A) the name, age, business address and residence
address of the person, (B) the principal occupation or employment of the person,
(C) the class and number of shares of the Corporation which are beneficially
owned by the person, and (D) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to Rule 14a under the Securities Exchange Act of 1934; and
(ii) as to the stockholder giving the notice, (A) the name and record address of
the stockholder, and (B) the
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class and number of shares of the Corporation which are beneficially owned by
the stockholder. The Corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
These provisions shall not apply to nomination of persons, if any, entitled to
be separately elected by holders of preferred stock.
(c) The presiding officer of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and the defective nomination shall be
disregarded.
14. Conduct of Meetings. The board of directors may adopt by
-------------------
resolution such rules and regulations for the conduct of meetings of
stockholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations as adopted by the board of directors, the
presiding officer of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such presiding officer, are appropriate for the
proper conduct of the meeting. Such rules, regulations and procedures, whether
adopted by the board of directors or prescribed by the presiding officer of the
meeting, may include, without limitation, the following: (i) the establishment
of an agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record, their duly authorized and constituted proxies or such other persons as
the presiding officer of the meeting shall determine; (iv) restrictions on entry
to the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions and/or comments by participants.
Unless and to the extent determined by the board of directors or the presiding
officer of the meeting, meetings of stockholders shall not be required to be
held in accordance with the rules of parliamentary procedure.
15. Adjournment. In case a quorum shall not be present at any
-----------
meeting, the presiding officer of the meeting or a majority in interest of the
stockholders entitled to vote thereat present in person or by proxy shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be represented. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed, but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof. In addition, the board of directors may adjourn a meeting of the
stockholders if the board of directors determines that adjournment is necessary
or appropriate in order to enable the stockholders (i) to consider fully
information that the board of directors determines has not been made
sufficiently or timely available to stockholders or (ii) to otherwise
effectively exercise their voting rights.
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ARTICLE III
Board of Directors
------------------
1. Number, Qualifications and Term of Office.
-----------------------------------------
(a) The Board of Directors shall be constituted as follows:
(1) Except as otherwise provided in the Certificate of
Incorporation or the Delaware Corporation Law, the business and affairs of the
Corporation shall be managed by or under the direction of a board of directors
consisting of one or more members.
(2) Directors need not be stockholders of the Corporation.
(3) The number of directors of the Corporation shall not be
less than three (3) nor more than twelve (12) until changed by amendment of the
Certificate of Incorporation or by a Bylaw amending this Section 1 of Article
III duly adopted by the vote or written consent of holders of a majority of the
outstanding shares or by the board of directors. The exact number of directors
shall be fixed from time to time, within the limits specified in the Certificate
of Incorporation or in this Section 1 of Article III, by a Bylaw or amendment
thereof duly adopted by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present or by the board
of directors. Subject to the foregoing provisions for changing the number of
directors, the number of directors of the Corporation has been fixed at five
(5).
(4) Except as provided in Section 2 of Article III of these
Bylaws, the directors shall be elected by a plurality vote of the shares
represented in person or by proxy at the stockholders annual meeting in each
year and entitled to vote on the election of directors. Elected directors shall
hold office until the next annual meeting for the years in which their terms
expire and until their successors shall be duly elected and qualified. If, for
any cause, the board of directors shall not have been elected at an annual
meeting, they may be elected as soon thereafter as convenient at a special
meeting of the stockholders called for that purpose in the manner provided in
these Bylaws.
2. Vacancies. Except as otherwise provided by the Certificate of
---------
Incorporation or any amendments thereto, vacancies and newly created
directorships resulting from any increase in the number of authorized directors
may be filled by a majority of the directors then in office, although less than
a quorum, or by a sole remaining director, and each director so elected shall
hold office for the unexpired portion of the term of the director whose place
shall be vacant, and until his successor shall have been duly elected and
qualified. A vacancy in the board of directors shall be deemed to exist under
this Section 2 of Article III in the case of the death, removal or resignation
of any director, or if the stockholders fail at any meeting of stockholders at
which directors are to be elected to elect the number of directors then
constituting the whole board.
3. Resignation. Any director may resign by delivering his written
-----------
resignation to the Corporation at its principal office, addressed to the
President or Secretary. Such
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resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event. When one
or more directors shall resign from the board, effective at a future date, a
majority of the directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
director so chosen shall hold office for the unexpired portion of the term of
the director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
4. Compensation. Directors may be paid such compensation for their
------------
services and such reimbursements for expenses of attendance at meetings as the
board of directors may from time to time determine. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE IV
Meetings of the Board
---------------------
1. Place of Meetings. The regular or special meetings of the board
-----------------
of directors or any committee designated by the board shall be held at the
principal office of the Corporation or at any other place within or without the
State of Delaware that a majority of the board of directors or any such
committee, as the case may be, may designate from time to time by resolution.
2. Regular Meetings. The board of directors shall meet each year
----------------
immediately after and at the same place as the annual meeting of the
stockholders for the purpose of electing officers and transacting such other
business as may come before the meeting. The board of directors or any
committee designated by the board may provide, by resolution, for the holding of
additional regular meetings within or without the State of Delaware without
notice of the time and place of such meeting other than such resolution;
provided, that any director who is absent when such resolution is made shall be
- --------
given notice of said resolution.
3. Special Meetings. Special meetings of the board of directors or
----------------
any committee designated by the board may be held at any time and place, within
or without the State of Delaware, designated in a call by the chairman of the
board, if any, by the President or by a majority of the members of the board of
directors or any such committee, as the case may be.
4. Notice of Special Meetings. Except as otherwise provided by
--------------------------
these Bylaws or the laws of the State of Delaware, written notice of each
special meeting of the board of directors or any committee thereof setting forth
the time and place of the meeting shall be given to each director by the
Secretary or by the officer or director calling the meeting not less than two
(2) days prior to the time fixed for the meeting. Notice of special meetings
may be either given in person, by telephone, or by sending a copy of the notice
through the United States mail or by telegram, telex or telecopy, charges
prepaid, to the address of each director appearing on the books of the
Corporation. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail so addressed, with postage prepaid thereon.
If notice be given by telegram, telex or telecopy, such notice shall be deemed
to be delivered when the
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telegram, telex or telecopy is delivered to the telegraph, telex or telecopy
operator. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
5. Waiver of Notice. A director may waive, in writing, notice of
----------------
any special meeting of the board of directors or any committee thereof, either
before, at, or after the meeting, and his waiver shall be deemed the equivalent
of giving notice. By attending or participating in a regular or special
meeting, a director waives any required notice of such meeting unless the
director, at the beginning of the meeting, objects to the holding of the meeting
or the transaction of business at the meeting.
6. Quorum and Action at Meeting. At meetings of the board of
----------------------------
directors or any committee designated by the board, a majority of the total
number of directors, or a majority of the members of any such committee, as the
case may be, shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each such director so
disqualified; provided, that in no case shall less than one-third (1/3) of the
--------
number so fixed constitute a quorum. If a quorum is present, the act of the
majority of directors in attendance shall be the act of the board of directors
or any committee thereof, as the case may be, unless the act of a greater number
is required by these Bylaws, the Certificate of Incorporation or the Delaware
Corporation Law. If a quorum shall not be present at any meeting of the board
of directors, the directors present thereat may adjourn that meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present.
7. Presumption of Assent. A director who is present at a meeting of
---------------------
the board of directors or a committee thereof when action is taken is deemed to
have assented to the action taken unless: (i) he objects at the beginning of
such meeting to the holding of the meeting or the transacting of business at the
meeting; (ii) he contemporaneously requests that his dissent from the action
taken be entered in the minutes of such meeting; or (iii) he gives written
notice of his dissent to the presiding officer of such meeting before its
adjournment or to the Secretary of the Corporation immediately after adjournment
of such meeting. The right of dissent as to a specific action taken at a
meeting of the board or a committee thereof is not available to a director who
votes in favor of such action.
8. Committees. The board of directors may, by a resolution passed
----------
by a majority of the whole board of directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of the absent or disqualified member. Any such committee,
to the extent provided in the resolution of the board of directors and subject
to the provisions of Delaware Corporation Law, shall have and may exercise all
the powers and authority of the board of directors in the management of the
business and affairs of
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the Corporation, and may authorize the seal of the Corporation to be affixed to
all such papers which may require it. Each such committee shall keep minutes and
make such reports as the board of directors may from time to time request.
Except as the board of directors may otherwise determine, any committee may make
rules for the conduct of its business, but, unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Bylaws for the board of
directors.
9. Informal Action by Directors. Except as otherwise provided in
----------------------------
the Certificate of Incorporation, any action required or permitted by Delaware
Corporation Law to be taken at any meeting of the board of directors or any
committee thereof may be taken without a meeting if all members of the board or
committee, as the case may be, consent to the action in writing and the written
consents are filed with the minutes of proceedings of the board or committee.
10. Telephonic Meetings. Directors or any members of any committee
-------------------
may participate in a meeting of the board or committee by means of a conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other at the same time. Such participation shall
constitute presence in person at the meeting.
ARTICLE V
Officers and Agents
-------------------
1. Enumeration, Election and Term. The officers of the Corporation
------------------------------
shall consist of a president, a secretary, a treasurer and such other officers
with such other titles as may be deemed necessary or desirable by the board of
directors, including a chief executive officer, chief financial officer, one or
more vice presidents, a controller, assistant treasurers and assistant
secretaries and a chairman of the board. Any number of offices may be held by
the same person, and no officer need be a stockholder or a resident of the State
of Delaware. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, each officer shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal. The officers of the Corporation shall be elected annually by the board
of directors at the first meeting of the board held after each annual meeting of
the stockholders.
2. General Duties. All officers and agents of the Corporation, as
--------------
between themselves and the Corporation, shall have such authority and shall
perform such duties in the management of the Corporation as may be provided in
these Bylaws or as may be determined by resolution of the board of directors not
inconsistent with these Bylaws. In all cases where the duties of any officer,
agent or employee are not prescribed by these Bylaws or by the board of
directors, such officer, agent or employee shall follow the orders and
instructions of the President.
3. Vacancies. The board of directors may fill any vacancy occurring
---------
in any office for any reason and may, in its discretion, leave any vacancy
unfilled for such period as it may determine, other than a vacancy in the office
of president or secretary. The officer so selected shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal.
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4. Compensation. The board of directors from time to time shall fix
------------
the compensation of the officers of the Corporation. The compensation of other
agents and employees of the Corporation may be fixed by the board of directors,
by any committee designated by the board or by an officer to whom that function
has been delegated by the board.
5. Resignation and Removal. Any officer may resign by delivering
-----------------------
his written resignation to the Corporation at its principal office, addressed to
the President or Secretary. Such resignation shall be effective upon receipt,
unless it is specified to be effective at some other time or upon the happening
of some other event. Any officer or agent of the Corporation may be removed,
with or without cause, by a vote of the majority of the members of the board of
directors whenever in its judgment the best interests of the Corporation may be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or an agent shall not of itself create contract rights.
6. Chairman of the Board. The Chairman of the Board, if any, shall
---------------------
preside as chairman at meetings of the stockholders and the board of directors.
He shall, in addition, have such other duties as the board may prescribe that he
perform. At the request of the President, the Chairman of the Board may, in the
case of the President's absence or inability to act, temporarily act in his
place. In the case of death of the President or in the case of his absence or
inability to act without having designated the Chairman of the Board to act
temporarily in his place, the Chairman of the Board shall perform the duties of
the President, unless the board of directors, by resolution, provides otherwise.
If the Chairman of the Board shall be unable to act in place of the President,
the Vice Chairman, or if none, the Vice Presidents, may exercise such powers and
perform such duties as provided below.
7. Vice Chairman of the Board. The Vice Chairman of the Board, if
--------------------------
any, shall perform duties commonly incident to this office and shall perform
such other duties and have such other powers as the President or board of
directors may from time to time prescribe. In the event the position of
chairman of the board shall not be occupied or the chairman shall be absent or
otherwise unable to act, the Vice Chairman shall preside at meetings of the
stockholders and directors and shall discharge the duties of the presiding
officer.
8. Chief Executive Officer. The Chief Executive Officer, if any,
-----------------------
shall see that all orders and resolutions of the board of directors are carried
into effect and shall oversee the strategic planning and policy development of
the Corporation. The Chief Executive Officer shall have the authority to
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the Corporation, except where required by law to be otherwise signed and
executed and except where the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent of the
Corporation. The Chief Executive Officer shall perform other duties commonly
incident to this office and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
9. President. The President shall have general supervision of the
---------
business of the Corporation. In the event the position of chairman of the board
or vice chairman of the board
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shall not be occupied or the chairman or vice chairman shall be absent or
otherwise unable to act, the President shall preside at meetings of the
stockholders and directors and shall discharge the duties of the presiding
officer. The President shall have the authority to execute bonds, mortgages and
other contracts requiring a seal under the seal of the Corporation, except where
required by law to be otherwise signed and executed and except where the signing
and execution thereof shall be expressly delegated by the board of directors to
some other officer or agent of the Corporation. At each annual meeting of the
stockholders, the President shall give a report of the business of the
Corporation for the preceding fiscal year and shall perform whatever other
duties the board of directors may from time to time prescribe.
10. Chief Financial Officer. The chief financial officer, or if none
-----------------------
the treasurer, shall have custody of corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements and shall deposit
all corporate monies and other valuable effects in the name and to the credit of
the Corporation in the depository or depositories of the Corporation, and shall
render an account of his or her transactions as chief financial officer and of
the financial condition of the Corporation to the President and/or the board of
directors upon request. Such power given to the treasurer to deposit and
disburse funds shall not, however, preclude any other officer or employee of the
Corporation from also depositing and disbursing funds when authorized to do so
by the board of directors. The chief financial officer shall, if required by
the board of directors, give the Corporation a bond in such amount and with such
surety or sureties as may be ordered by the board of directors for the faithful
performance of the duties of his office. The chief financial officer shall have
such other powers and perform such other duties as may be from time to time
prescribed by the board of directors or the President. In the absence of the
chief financial officer or his inability to act, the treasurer (or, in his
absence, the assistant treasurers or controller, if any) shall act with the same
authority and shall be subject to the same restrictions as are applicable to the
chief financial officer.
11. Vice Presidents. Each Vice President shall have such powers and
---------------
perform such duties as the board of directors may from time to time prescribe or
as the President may from time to time delegate to him. At the request of the
President, in the case of the President's absence or inability to act, any Vice
President may temporarily act in his place. In the case of the death of the
President, or in the case of his absence or inability to act without having
designated a Vice President or Vice Presidents to act temporarily in his place,
the board of directors, by resolution, may designate a Vice President or Vice
Presidents to perform the duties of the President. If no such designation shall
be made, the chief executive officer, if any, shall exercise such powers and
perform such duties, as provided above, but, if the Corporation has no chief
executive officer, or if the chief executive officer is unable to act in place
of the President, all of the Vice Presidents may exercise such powers and
perform such duties.
12. Secretary. The Secretary shall keep or cause to be kept in books
---------
provided for that purpose, the minutes of the meetings of the stockholders,
executive committee, if any, and any other committees, and of the board of
directors; shall see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law; shall be custodian of the
records and of the seal of the Corporation and see that the seal is affixed to
all documents, the execution of which on behalf of the Corporation under its
seal is duly authorized and in
13
<PAGE>
accordance with the provisions of these Bylaws; and, in general, shall perform
all duties incident to the office of Secretary and such other duties as may,
from time to time, be assigned to him by the board of directors or by the
President. In the absence of the Secretary or his inability to act, the
assistant secretaries, if any, shall act with the same powers and shall be
subject to the same restrictions as are applicable to the Secretary.
13. Delegation of Duties. Whenever an officer is absent, or
--------------------
whenever, for any reason, the board of directors may deem it desirable, the
board may delegate the powers and duties of an officer to any other officer or
officers or to any director or directors.
ARTICLE VI
Indemnification of Officers, Directors and Others
-------------------------------------------------
1. Indemnification.
(a) Each person who was or is a party or is threatened to be
made a party to or is involved (as a party, witness or otherwise), in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "Proceeding"), by
reason of the fact that he, or a person of whom he is the legal representative,
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director or officer of another corporation or of
a partnership, joint venture, trust, or other enterprise, including service with
respect to employee benefit plans, whether the basis of the Proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
Corporation Law, as the same exists or may hereafter be amended or interpreted
(but, in the case of any such amendment or interpretation, only to the extent
that such amendment or interpretation permits the Corporation to provide broader
indemnification rights than were permitted prior thereto) against all expenses,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties, and amounts paid or to be paid in settlement, and any
interest, assessments or other charges imposed thereon, and any federal, state,
local or foreign taxes imposed on any person indemnified hereby as a result of
the actual or deemed receipt of any payments under this Article VI) reasonably
incurred or suffered by such person in connection with investigating, defending,
being a witness in, or participating in (including on appeal), or preparing for
any of the foregoing in, any Proceeding (hereinafter "Losses"); provided,
--------
however, that except as to actions to enforce indemnification rights pursuant to
- -------
Section 3 of Article VI, the Corporation shall indemnify any officer or director
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the Corporation. The right to indemnification
conferred in this Article VI shall be a contract right.
(b) Each person who was or is a party or is threatened to be
made a party to or is involved (as a party, witness or otherwise), in any
threatened, pending or completed Proceeding, by reason of the fact that he, or a
person of whom he is the legal representative, is or was an employee or agent
(other than an officer or director) of the Corporation or is or was
14
<PAGE>
serving at the request of the Corporation as an employee or agent (other than an
officer or director) of another corporation or of a partnership, joint venture,
trust, or other enterprise, including service with respect to employee benefit
plans, whether the basis of the Proceeding is alleged action in an official
capacity as an employee or agent or in any other capacity while serving as an
employee or agent, may be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware Corporation Law, as the same
exists or may hereafter be amended or interpreted (but, in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Corporation to provide broader indemnification rights
than were permitted prior thereto) against all Losses.
2. Authority to Advance Expenses. Expenses incurred by an officer
-----------------------------
or director (acting in his capacity as such) in defending a Proceeding shall be
paid by the Corporation in advance of the final disposition of such Proceeding,
provided, that if required by the Delaware Corporation Law, as amended, such
- --------
expenses shall be advanced only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VI or otherwise. Expenses
incurred by employees or other agents of the Corporation (or by the directors or
officers not acting in their capacity as such, including service with respect to
employee benefit plans) may be advanced upon such terms and conditions as the
Board of Directors deems appropriate. Any obligation to reimburse the
Corporation for expense advances shall be unsecured and no interest shall be
charged thereon.
3. Right of Claimant to Bring Suit. If a claim under Section 1 or 2
-------------------------------
of Article VI is not paid in full by the Corporation within 30 days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense (including attorneys' fees) of prosecuting such
claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending a Proceeding in advance of
its final disposition where the required undertaking has been tendered to the
corporation) that the claimant has not met the standards of conduct that make it
permissible under the Delaware Corporation Law for the Corporation to indemnify
the claimant for the amount claimed. The burden of proving such a defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper under the circumstances because he has met the applicable
standard of conduct set forth in the Delaware Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or stockholders) that the claimant had not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct.
4. Provisions Nonexclusive. The rights conferred on any person by
-----------------------
this Article VI shall not be exclusive of any other rights that such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, as may be amended from
15
<PAGE>
time to time, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office. To the extent that any provision of the
Certificate of Incorporation, agreement or vote of the stockholders or
disinterested directors is inconsistent with these bylaws, the provision,
agreement or vote shall take precedence.
5. Authority to Insure. The corporation may purchase and maintain
-------------------
insurance to protect itself and any director, officer, employee or other agent
(collectively, "Agents") against any Losses, whether or not the Corporation
would have the power to indemnify the Agent against such Losses under applicable
law or the provisions of these Bylaws.
6. Survival of Rights. The rights provided by this Article VI shall
------------------
continue as to a person who has ceased to be an Agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
7. Settlement of Claims. The Corporation shall not be liable to
--------------------
indemnify any Agent under this Article VI (a) for any amounts paid in settlement
of any action or claim effected without the Corporation's written consent, which
consent shall not be unreasonably withheld; or (b) for any judicial award if the
Corporation was not given a reasonable and timely opportunity, at its expense,
to participate in the defense of such action.
8. Effect of Amendment. Any amendment, repeal or modification of
-------------------
this Article VI shall not adversely affect any right or protection of any Agent
existing at the time of such amendment, repeal or modification.
9. Subrogation. In the event of payment under this Article VI, the
-----------
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Agent, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.
10. No Duplication of Payments. The Corporation shall not be liable
--------------------------
under this Article VI to make any payment in connection with any claim made
against the Agent to the extent the Agent has otherwise actually received
payment (under any insurance policy, agreement, vote or otherwise) of the
amounts otherwise indemnifiable hereunder.
ARTICLE VII
Capital Stock
-------------
1. Certificates of Stock. The shares of the Corporation shall be
---------------------
represented by certificates, provided that the board of directors of the
Corporation may, by resolution, provide that some or all of any or all classes
or series of its stock shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until such certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the board of directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the
16
<PAGE>
Corporation by, the Chairman or Vice Chairman of the board of directors, or the
President or Vice President, and by the Treasurer or an assistant treasurer, or
the Secretary or an assistant secretary, representing the number of shares
registered in certificate form. Any or all the signatures on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
2. Issuance of Stock. Unless otherwise voted by the stockholders
-----------------
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
Corporation or the whole or any part of any unissued balance of the authorized
capital stock of the Corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by resolution of the board of directors in
such manner, for such consideration and on such terms as the board of directors
may determine. Consideration for such shares of capital stock shall be
expressed in dollars, and shall not be less than the par value or stated value
therefor, as the case may be. The par value for shares, if any, shall be stated
in the Certificate of Incorporation, and the stated value for shares, if any,
shall be fixed from time to time by the board of directors.
3. Lost Certificates. The board of directors may direct a new
-----------------
certificate to be issued in place of any previously issued certificate alleged
to have been destroyed or lost if the owner makes an affidavit or affirmation of
that fact and produces such evidence of loss or destruction as the board may
require. The board, in its discretion, may as a condition precedent to the
issuance of a new certificate require the owner to indemnify the Corporation
(including providing the Corporation with a bond) against any claim that may be
made against the Corporation relating to the allegedly destroyed or lost
certificate.
4. Transfer of Shares. Subject to applicable law, shares of stock
------------------
of the Corporation may be transferred on its books upon the surrender to the
Corporation or its transfer agent of the certificates representing such shares,
if any, duly endorsed or accompanied by a written assignment or power of
attorney duly executed and with such proof of authority or authenticity of
signature as the Corporation or its transfer agent may reasonably require. In
that event, the surrendered certificates shall be cancelled, new certificates
issued to the persons entitled to them, if any, and the transaction recorded on
the books of the Corporation.
5. Registered Stockholders. The Corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of the other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
17
<PAGE>
6. Stock Ledger. An appropriate stock journal and ledger shall be
------------
kept by the Secretary or such registrars or transfer agents as the directors by
resolution may appoint in which all transactions in the shares of stock of the
Corporation shall be recorded.
7. Restriction on Transfer of Shares. Notice of any restriction on
---------------------------------
the transfer of the stock of the Corporation shall be placed on each certificate
of stock issued or, in the case of uncertificated shares, contained in the
notice sent to the registered owner of such shares in accordance with the
provisions of the Delaware Corporation Law.
ARTICLE VIII
Fiscal Year
-----------
The fiscal year of the Corporation shall be determined by the board of
directors and set forth in the minutes of the meetings of the directors. Said
fiscal year may be changed from time to time by the board of directors in its
discretion.
ARTICLE IX
Dividends
---------
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation. Before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think in the best interests of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE X
Amendments
----------
These Bylaws may be repealed, altered or amended or new Bylaws adopted
at any meeting of the stockholders, either annual or special, by the affirmative
vote of a majority of the stock entitled to vote at such meeting, unless a
larger vote is required by these Bylaws or the Certificate of Incorporation.
The board of directors shall also have the authority to repeal, alter or amend
these Bylaws or adopt new Bylaws (including, without limitation, the amendment
of any Bylaws setting forth the number of directors who shall constitute the
whole board of directors) by unanimous written consent or at any annual, regular
or special meeting by the affirmative vote of a majority of the whole number of
directors, subject to the power of the stockholders to change or repeal such
Bylaws; provided, that the board of directors shall not make or alter any Bylaws
--------
fixing the qualifications, classifications, or term of office of directors.
18
<PAGE>
ARTICLE XI
Miscellaneous
-------------
1. Gender. Whenever required by the context, the singular shall
------
include the plural, the plural the singular, and one gender shall include all
genders.
2. Invalid Provision. The invalidity or unenforceability of any
-----------------
particular provision of these Bylaws shall not affect the other provisions
herein, and these Bylaws shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
3. Governing Law. These Bylaws shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
I, Craig M. Kanarick, as Chairman of the Board and Secretary of the
Corporation, do hereby certify that the foregoing Bylaws were adopted by the
Board of Directors of Razorfish, Inc. effective as of December ___, 1998.
/s/ Craig M. Kanarick
__________________________________________________
Craig M. Kanarick, Chairman of the Board and
Secretary
19
<PAGE>
EXHIBIT 4.1
_____________________________________________________________________________
STOCKHOLDERS AGREEMENT
by and among
RAZORFISH, INC.,
COMMUNICADE INC.,
SPRAY VENTURES AB,
JEFFREY A. DACHIS
AND
CRAIG M. KANARICK
______________________________________________________________________________
Dated as of October 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
TERM
<S> <C>
Section 1.1 Term.................................................... 1
ARTICLE II
RESTRICTIONS ON TRANSFERS; OPTIONS; RIGHTS OF FIRST OFFER
Section 2.1 Restrictions on Transfers............................... 1
Section 2.2 Third Parties; Legend................................... 2
Section 2.3 Transfers in Violation of Agreement..................... 2
Section 2.4 Communicade Ten Percent Option.......................... 2
2.4.1 Communicade Ten Percent Option........................ 2
2.4.2 Communicade Option Notice............................. 3
2.4.3 Closing............................................... 3
2.4.4 Price Adjustment...................................... 3
2.4.5 Repurchase of Purchased Shares........................ 3
Section 2.5 Right of First Offer.................................... 4
2.5.1 Grant of Option....................................... 4
2.5.2 Exercise of Option.................................... 4
2.5.3 Contract with Proposed Purchaser...................... 4
2.5.4 Non-Impairment of Certain Rights...................... 5
Section 2.6 Financing Right and Call Option......................... 5
2.6.1 Financing Right....................................... 5
2.6.2 Call Option........................................... 5
2.6.3 Call Option Notice.................................... 5
2.6.4 Call Option Purchase Price............................ 6
2.6.5 Closing............................................... 6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 2.7 Pledge of Company Stock by Spray Ventures................ 6
ARTICLE III
COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
Section 3.1 Financial Reporting and Budgeting........................ 6
Section 3.2 Board of Directors....................................... 7
Section 3.3 Management of the Company................................ 7
3.3.1 Board of Directors Action.............................. 7
3.3.2 Stockholder Action..................................... 9
3.3.3 Related Provisions..................................... 9
ARTICLE IV
COVENANTS OF COMMUNICADE
Section 4.1 Line of Credit........................................... 9
Section 4.2 Acquisition Financing.................................... 9
ARTICLE V
MISCELLANEOUS
Section 5.1 Notices.................................................. 10
Section 5.2 Entire Agreement......................................... 12
Section 5.3 Employment............................................... 12
Section 5.4 The Spray Name and Trademark............................. 12
Section 5.5 Waiver................................................... 12
Section 5.6 Severability............................................. 12
Section 5.7 Assignment............................................... 12
Section 5.8 Headings................................................. 12
Section 5.9 Further Assurances....................................... 12
Section 5.10 Specific Performance.................................... 12
Section 5.11 Governing Law........................................... 13
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 5.12 Counterparts......................... 13
</TABLE>
iii
<PAGE>
STOCKHOLDERS AGREEMENT
AGREEMENT dated as of October 1, 1998 by and among RAZORFISH, INC., a
New York corporation (the "COMPANY"); COMMUNICADE INC., a Delaware corporation
("COMMUNICADE") and wholly-owned subsidiary of Omnicom Group Inc., a New York
corporation ("OMNICOM"); SPRAY VENTURES AB, a corporation incorporated under the
laws of the Kingdom of Sweden with identification number 556506-7997 ("SPRAY
VENTURES"); JEFFREY A. DACHIS ("DACHIS") and CRAIG M. KANARICK ("KANARICK")
(Communicade, Spray, Dachis and Kanarick are sometimes individually referred to
as a "STOCKHOLDER" and collectively as the "STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, entering into this Agreement is a condition of closing under
the Stock Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT")
among the Company, Spray Ventures and Communicade pursuant to which the Company
purchased 100% of the issued and outstanding shares of capital stock of Spray
Network AB, a corporation incorporated under the laws of the Kingdom of Sweden
with identification number 556503-3247 ("SPRAY NETWORK"); and
WHEREAS, the parties desire to enter into certain agreements with
respect to the purchase and sale of common stock, par value $.01 per share, of
the Company (the "COMPANY STOCK") and the management and operations of the
Company and certain other provisions;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
TERM
----
SECTION 1.1 Term. This Agreement shall continue in effect until the
----
closing of the Company's first firm commitment underwritten public offering
pursuant to an effective Registration Statement (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act") covering the
offer and sale of Company Stock to the public (the "Offering") or until the
Stockholders otherwise agree in writing. The period during which this Agreement
is in effect is sometimes referred to herein as the "Term."
ARTICLE II
RESTRICTIONS ON TRANSFERS; OPTIONS; RIGHTS OF FIRST OFFER
---------------------------------------------------------
SECTION 2.1 RESTRICTIONS ON TRANSFERS. No Stockholder shall have the right
-------------------------
or the power to, and each Stockholder covenants and agrees that he or it will
not, directly or indirectly, by any means and whether or not for consideration,
sell, assign, pledge or otherwise transfer or
<PAGE>
dispose any Company Stock or assign any of his or its rights or delegate any
duties or obligations under this Agreement except in compliance with this
Article II or as provided in Section 5.6 below. If a Stockholder who has become
obligated to sell shares of Company Stock hereunder shall fail to deliver the
certificates representing such shares of Company Stock in accordance with the
terms of this Agreement, the purchasing Stockholder(s) shall, at its option and
in addition to all other remedies they may have, send to such selling
Stockholder the purchase price, as provided herein, and shall give notice of
such action to the Company. Thereupon the Company shall cancel on its books the
certificate or certificates representing the shares of Company Stock to be sold,
shall issue, in lieu thereof, a new certificate registered in the name of the
purchasing Stockholder(s) representing such shares of Company Stock and shall
deliver such new certificate to the purchasing Stockholder(s), and thereupon,
such selling Stockholder shall have no further rights whatsoever with respect to
such shares of Company Stock, except to receive payment of any unpaid portion of
the purchase price as provided herein.
SECTION 2.2 THIRD PARTIES; LEGEND. In the event that a Stockholder shall
---------------------
sell or otherwise transfer shares of Company Stock to a third party as permitted
by this Agreement, such third party shall be bound by the terms of this
Agreement and shall be required to sign an agreement to such effect prior to the
effectiveness of such transfer. In addition, prior to any such transfer being
effective, such third party shall execute and deliver to the Company an
investment letter in a form customarily given in connection with such private
placement transfers. From and after such transfer, such transferee shall be
deemed to be included with the definition of "STOCKHOLDER" as used herein. The
fact that Company Stock is subject to the restrictions set forth in this
Agreement (including, but not limited to the provision of Article III) shall be
reflected on all stock certificates representing shares of Company Stock.
SECTION 2.3 TRANSFERS IN VIOLATION OF AGREEMENT. Any purported transfer by
-----------------------------------
a Stockholder of all or any of his Company Stock, any purported assignment by
any Stockholder of any of his or its rights under this Agreement, and any
purported delegation by a Stockholder of any of his or its duties or obligations
under this Agreement in contravention of any of the provisions of this Article
II will be null and void ab initio and of no force and effect.
SECTION 2.4 COMMUNICADE TEN PERCENT OPTION.
-------------------------------------------
2.4.1 Communicade Ten Percent Option. In the event that the Company
------------------------------
shall contemplate effecting an Offering, Communicade shall have the right, but
not the obligation (the "COMMUNICADE TEN PERCENT OPTION"), to purchase from the
Company, up to such number of shares of Company Stock as shall equal 10% of the
then issued and outstanding Company Stock on a fully diluted basis (the "OPTION
SHARES"). For purposes of this Agreement, "fully diluted basis" shall mean all
shares of Company Stock issued and outstanding together with (a) all shares of
Company Stock issuable upon the exercise of all outstanding options, warrants,
rights, subscriptions, calls, commitments, understandings, rights of exchange,
plans or other agreements to acquire shares of Company Stock other than shares
issuable pursuant to the Communicade Ten Percent Option, and (b) all shares of
Company Stock into which any other class of the Company's outstanding securities
are convertible; provided, however, any shares of Company Stock expected to be
issued and sold by the Company in the Offering shall not be included.
2
<PAGE>
2.4.2 Communicade Option Notice. Communicade shall exercise the
-------------------------
Communicade Ten Percent Option in whole or in part by sending a written notice
(the "COMMUNICADE OPTION NOTICE") to the Company indicating its desire to
purchase such Option Shares within 10 days following notice to Communicade from
the Company (the "COMPANY OPTION NOTICE") that it is substantially prepared to
make the initial filing of the Registration Statement with the Securities and
Exchange Commission (the "SEC"). If Communicade exercises its Communicade Ten
Percent Option, then Communicade shall be obligated to purchase and the Company
shall be obligated to sell the Option Shares, at a per share price equal to 80%
of the amount stated in the Company Option Notice, such amount to be equal to
the bottom of the range for the per share price to public as estimated by Credit
Suisse First Boston (or such other underwriter then advising the Company) (the
"ESTIMATED IPO PRICE").
2.4.3 Closing. The closing for the purchase and sale of the Option
-------
Shares under the provisions of this Section 2.4 shall be held within 5 days
following delivery of the Communicade Option Notice. At such closing, (i)
Communicade shall pay in cash the purchase price in full, (ii) the Company shall
issue and deliver to Communicade the certificate or certificates evidencing the
Option Shares to be purchased by Communicade at such closing free and clear of
all claims, liens, encumbrances, mortgages, security interests, charges and
restrictions of any kind or character, except for the restrictions set forth
herein and such other restrictions as may otherwise be required or imposed by
applicable law and (iii) Communicade shall execute and deliver to the Company an
investment letter in a form customarily given in connection with the private
placement issuance of securities. Any cash payment shall be by certified check
or wire transfer in accordance with instructions from the Company.
2.4.4 Price Adjustment. Subject to Section 2.4.5, upon the closing
----------------
of the Offering, the Company shall adjust the total purchase price paid by
Communicade for the Option Shares, as follows:
(i) If the Estimated IPO Price is less than the per share price to
public set forth on the final prospectus filed by the Company with the SEC
in connection with the Offering (the "IPO PRICE"), then Communicade shall
pay to the Company 80% of the product of (x) the number of Option Shares
and (y) the difference between the IPO Price and the Estimated IPO Price;
(ii) If the Estimated IPO Price is greater than the IPO Price, then
the Company shall pay Communicade 80% of the product of (x) the number of
Option Shares and (y) the difference between the Estimated IPO Price and
the IPO Price.
Any payments required under this Section 2.4.4 shall be made simultaneously
with the closing of the Offering.
2.4.5 Repurchase of Purchased Shares. If the Offering does not close
------------------------------
within nine months after the Communicade Option Notice is delivered, (x)
Communicade can cause the Company and the Company agrees to repurchase the
Option Shares and (y) upon the affirmative vote of a majority of the
Stockholders, the Company can cause Communicade and Communicade agrees to sell
the Option Shares to the Company, in each instance at a price per share equal to
the
3
<PAGE>
Estimated IPO Price. The Company shall repurchase such shares within 10 days
following written notice to the Company, which notice must be given within 12
months after the Communicade Option Notice is delivered. If the Company
repurchases the Option Shares in accordance with this Section 2.4.5, the parties
agree that the Communicade Ten Percent Option shall be automatically reinstated
and that the provisions of this Section 2.4 shall be interpreted as if no
Communicade Option Notice shall have been delivered nor an initial filing of a
Registration Statement made.
SECTION 2.5 RIGHT OF FIRST OFFER.
--------------------
2.5.1 Grant of Option. If any Stockholder desires to sell, assign,
---------------
transfer, encumber or otherwise dispose ("DISPOSE") of shares of Company Stock
then owned by such Stockholder (the "SELLING STOCKHOLDER"), the Selling
Stockholder shall deliver a written notice (a "NOTICE OF FIRST OFFER") to each
other Stockholder (an "OFFEREE STOCKHOLDER"). The Notice of First Offer shall
describe in reasonable detail the shares of Company Stock being offered (the
"OFFERED STOCK"), the purchase price (which, if not in cash, may be reduced, at
the option of any Offeree Stockholder, to its cash equivalent as reasonably
determined by the Company and its accountants) requested for each share of
Offered Stock (the "TARGET PRICE") and all other material terms and conditions
of the offer.
2.5.2 Exercise of Option. If the Selling Stockholder delivers a
------------------
Notice of First Offer, each Offeree Stockholder shall have the option to
purchase all, but not less than all, of his pro-rata share of the Offered Stock
at the Target Price and on the other terms contained in the Notice of First
Offer by notifying the Selling Stockholder in writing within 30 days after
receipt of a Notice of First Offer (the "OFFER PERIOD") that such Offeree
Stockholder elects to purchase his pro-rata share of the Offered Stock
("EXERCISE NOTICE"). Each Offeree Stockholder may also elect to purchase all,
but not less than all, of the Offered Stock not elected to be purchased by any
other Offeree Stockholders (the "REMAINING OFFERED STOCK"), by so indicating in
his Exercise Notice. If only one Offeree Stockholder makes such an election,
such Offeree Stockholder shall purchase all of the Remaining Offered Stock. If
more than one Offeree Stockholder makes such an election, such Offeree
Stockholders shall purchase a pro rata portion of the Remaining Offered Stock.
If the Offeree Stockholders do not collectively elect to purchase all of the
Offered Stock pursuant to this Section, the Offeree Stockholders will not have
the right to purchase any of the Offered Stock hereunder. Any purchase and sale
pursuant to the provisions of this Section 2.5.2 shall occur not later than 60
days after the date of the delivery of the Notice of First Offer to the Offeree
Stockholders, subject to the satisfaction of any regulatory requirements.
2.5.3 Contract with Proposed Purchaser. If any Selling Stockholder
--------------------------------
has given the Offeree Stockholders a Notice of First Offer and the Offeree
Stockholders have failed to exercise their right to purchase all, but not less
than all, of the Offered Stock under Section 2.5.3, the Selling Stockholder may
within 90 days after the end of the Offer Period, execute a contract with a
third party (the "PROPOSED PURCHASER") providing for the bona fide sale of the
Offered Stock at the Target Price or any amount in excess of the Target Price
and on the other terms contained in the Notice of First Offer (the "PURCHASE
CONTRACT"). Within 10 days after the
4
<PAGE>
execution of the Purchase Contract, the Selling Stockholder shall deliver a
written notice of such Purchase Contract (a "NOTICE OF PROPOSED TRANSFER") to
each Offeree Stockholder together with a copy of the Purchase Contract. Such
Notice of Proposed Transfer will also include the name of the Proposed Purchaser
and a statement of the material relationships, if any, between each Selling
Stockholder and the Proposed Purchaser. If the Proposed Purchaser is not an
individual, the Notice of Proposed Transfer shall also include a brief
description of the business of the Proposed Purchaser and copies of the Proposed
Purchaser's financial statements (audited, to the extent available) for the
preceding three fiscal years.
2.5.4 Non-Impairment of Certain Rights. The failure by an Offeree
--------------------------------
Stockholder to exercise his right to purchase his pro-rata share of Company
Stock under this Section 2.5 in connection with any one proposed sale will not,
in any manner, waive or otherwise impair the rights of such Offeree Stockholder
to purchase shares of Company Stock in connection with any other proposed sale.
SECTION 2.6 FINANCING RIGHT AND CALL OPTION
-------------------------------
2.6.1 Financing Right. In the event that prior to the Offering, the
---------------
Company desires to raise capital solely for the purpose of financing operations
in the ordinary course of business through a private placement of its securities
(the "PRIVATE PLACEMENT"), prior to requesting the Board of Directors of the
Company to authorize and approve such matter, the Company shall negotiate and
obtain a bona fide term sheet with respect to the private placement of such
securities and shall give notice of such offer to Communicade (the "PLACEMENT
NOTICE"), which Placement Notice shall be accompanied by a detailed written
description of the terms and conditions of the proposed Private Placement.
Communicade shall then have the right (the "FINANCING RIGHT"), but not the
obligation, to provide such financing in whole or in part on the terms and
conditions specified in the Placement Notice; such right to be exercisable by
Communicade giving the Company notice of such election within 30 days after the
giving of the Placement Notice. In the event that Communicade elects to exercise
its Financing Right, the Company and Communicade (or another company within the
Omnicom Group designated by Communicade) shall enter into such agreements and
take such actions as are reasonable and customary under the circumstances to
carry out such financing within a reasonable time period.
2.6.2 Call Option. In the event that Communicade does not exercise
-----------
its Financing Right and votes against the Private Placement, the Stockholders
other than Communicade (the "CALLING STOCKHOLDERS") shall have the option (the
"CALL OPTION"), but not the obligation, exercisable for 30 days following such
negative vote by Communicade to purchase all, but not less than all, of the
Company Stock then owned by Communicade.
2.6.3 Call Option Notice. The Call Option may be exercised by the
------------------
Calling Stockholders by giving written notice of exercise to Communicade. If the
Calling Stockholders exercise the Call Option, then the Calling Stockholders
shall be obligated to purchase and Communicade shall be obligated to sell all
the shares of Company Stock then owned by it at the purchase price and on the
terms as provided in Section 2.6.4. Each Calling Stockholder shall purchase from
Communicade his pro rata share of Communicade's Company Stock in
5
<PAGE>
accordance with his or its then respective ownership of Company Stock, unless
otherwise agreed among the Calling Stockholders, and Communicade shall sell such
Company Stock to each such Calling Stockholder in accordance with the foregoing.
2.6.4 Call Option Purchase Price. The aggregate purchase price to
--------------------------
be paid by the Calling Stockholders upon their exercise of the Call Option shall
be such amount and on such terms to be negotiated between Communicade and the
Calling Stockholders in good faith, such aggregate purchase price to be
allocated among the Calling Stockholders in accordance with the number of shares
of Company Stock purchased by each such Calling Stockholder.
2.6.5 Closing. The closing for the purchase and sale of shares of
-------
Company Stock under the provisions of this Section 2.6 shall be held at the
offices of the Company within 30 days after the exercise of the Call Option. At
such closing, (i) the Calling Stockholders shall pay the purchase price in full
by certified check or wire transfer in accordance with instructions from
Communicade, (ii) the Company shall repay in full any indebtedness owed by it to
Communicade and/or any of its affiliates, including, but not limited to, the
Line of Credit and the acquisition financing referred to in Sections 4.1 and 4.2
respectively hereto, and (iii) Communicade shall execute and deliver to the
Calling Stockholders the certificate or certificates evidencing the shares of
Company Stock to be sold by Communicade at such closing, duly endorsed for
transfer to the Calling Stockholders (or accompanied by a stock power duly
endorsed for transfer to the Calling Stockholders), free and clear of all
claims, liens and encumbrances.
SECTION 2.7 PLEDGE OF COMPANY STOCK BY SPRAY VENTURES. Notwithstanding
-----------------------------------------
anything in this Article II to the contrary, Spray Ventures shall be entitled to
pledge the shares of Company Stock held by it (the "Pledged Shares") in
connection with the Pledge Agreement (the "Pledge Agreement") dated as of the
date hereof between Spray Ventures and Omnicom Finance Inc., a Delaware
corporation ("OFI"), and OFI shall be permitted to have ownership of such shares
of Company Stock transferred to it in accordance with such Pledge Agreement. In
the event that OFI shall take ownership of the Pledged Shares in accordance with
this Section 2.7, OFI shall be deemed to be included within the definition of
"Stockholder" as used herein.
ARTICLE III
COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
SECTION 3.1 FINANCIAL REPORTING AND BUDGETING. The Stockholders agree to
---------------------------------
abide by, and to cause the Company to comply on a timely basis with the
Communicade financial reporting and budgeting process as from time to time in
effect, which procedures require the approval by Communicade of annual profit
and capital expenditure plans. The financial reporting and budgeting procedures
for companies which are not majority-owned by Communicade require the completion
of the following items: (i) a monthly abbreviated profit and loss statement,
(ii) a quarterly balance sheet and income statement, (iii) a year-end balance
sheet and income statement, together with supporting schedules and (iv) annual
profit and capital expenditure budgets and quarterly reforecasts thereof.
6
<PAGE>
SECTION 3.2 BOARD OF DIRECTORS. The Stockholders agree that during the
------------------
Term and as long as Communicade shall own less than 51% of the Company Stock,
the Board of Directors of the Company shall consist of seven directors.
Communicade shall be entitled to designate one director, Dachis and Kanarick
shall be entitled to designate a total of three directors and Spray Ventures
shall be entitled to designate three directors for as long as they own any
shares of Company Stock. The Stockholders agree to vote their shares to elect
directors in accordance with the provisions of this paragraph.
SECTION 3.3 MANAGEMENT OF THE COMPANY.
-------------------------
3.3.1 Board of Directors Action. The parties agree that during the
-------------------------
Term, the taking of any of the actions listed below by the Company shall require
the unanimous vote of all of the directors of the Company:
(i) the sale, lease or other disposition of all or substantially
all of the Company's assets or business;
(ii) the creation of, or the modification of any of the terms of,
any of the following financial arrangements: any security interest on any
of the Company's material assets or properties other than in the ordinary
course of the Company's business; any guarantee by the Company of the
obligations of any third party, whether a Stockholder, a director or
employee of the Company or otherwise; or any indebtedness for borrowed
money, except for (x) indebtedness for borrowed money incurred in the
ordinary course of the Company's business not in excess of $100,000 and (y)
indebtedness for borrowed money to Omnicom or any subsidiary thereof;
(iii) entering into any business other than, or any transaction
outside, the normal business activities of the Company and related
activities;
(iv) the amendment of the Company's Certificate of Incorporation or
By-Laws;
(v) any increase or decrease in the capitalization of the Company
including any creation of or increase in the Company's bonded indebtedness;
(vi) the issuance or sale of stock or other securities of the
Company, or stock options, warrants or obligations convertible into such
stock or securities, except pursuant to options granted or to be granted
under any option plan existing as of the date hereof;
(vii) any acquisition by the Company of the stock, assets or
business of another corporation or entity or any investment by the Company
of corporate funds in another corporation or entity;
(viii) the merger, consolidation or amalgamation of the Company with
and into another corporation or entity, or of any other corporation or
entity with and into the Company;
7
<PAGE>
(ix) the liquidation or dissolution of the Company;
(x) the entering into any lease agreement for real property or any
capital expenditure relating to property, plant, equipment and intangibles,
or commitment therefor, involving an amount in excess of $50,000 for each
related expenditure or commitment or aggregating more than $250,000 during
any calendar year not otherwise approved in accordance with Section 3.1;
(xi) the making of any loans by the Company to any employee other
than (x) travel and business expense advances to employees in the ordinary
course of the Company's business or (y) loans with outstanding principal
and interest not in excess of $20,000 to any one employee or $100,000 in
the aggregate;
(xii) the entering into any transaction with any stockholder,
director or executive officer of the Company (including the entering into
or modification of any employment agreement) or any entity which controls,
is controlled by or under common control with, any of such parties, except
for transactions with Omnicom or any subsidiary thereof;
(xiii) any increase in the compensation payable to any Stockholder or
any other executive officer or director of the Company and the adoption or
amendment of any profit sharing or other employee benefit plan; except for
increases in the compensation payable to executive officers which are
within the parameters of the Company's approved budget;
(xiv) any change in the accounting policies, auditors (currently
Arthur Andersen), bankers, fiscal year or authorized signatories in respect
of bank accounts or loan documents of the Company;
(xv) the granting or entering into any license or agreement
concerning any portion of the Company's name not in the ordinary course of
business;
(xvi) causing or permitting any of the Company's subsidiaries to
take any actions as set forth in the foregoing clauses; and
(xvii) the delegation to any committee of the Board of Directors or
to any officer of the Company of the power to take any of the actions
referred to in the foregoing clauses before obtaining the authorization
required by this Section.
8
<PAGE>
3.3.2 Stockholder Action. Notwithstanding that a lesser percentage
------------------
vote may be specified by law or otherwise, the Stockholders agree that during
the Term, the taking of any action requiring the authorization of the
stockholders of the Company shall require the affirmative vote of the holders of
not less than 80% of the issued and outstanding Company Stock (or such greater
percentage as required by law).
3.3.3 Related Provisions.
------------------
(i) As long as any of the provisions of this Section 3.3 are
operative and this Agreement is in full force and effect, the Company shall
keep on file at its principal office a copy of this Agreement. The Company
shall make such copy available to any stockholder of the Company during
normal business hours and upon reasonable advance written notice.
(ii) To the extent permitted by applicable law, as long as the
provisions of this Section 3.3 are operative, the Company and the
Stockholders agree that they shall cause any and all controlled
subsidiaries of the Company to comply with the provisions of this Section
3.3 as if such provisions were applicable to such subsidiary and shall
cause each subsidiary's charter documents to include provisions consistent
with the provisions contained in this Section 3.3.
ARTICLE IV
COVENANTS OF COMMUNICADE
------------------------
SECTION 4.1 LINE OF CREDIT.. Communicade shall, or shall cause OFI to
--------------
(whether directly or through one of its affiliates), to continue to provide a
line of credit to the Company (a "LINE OF CREDIT") during the term of this
Agreement pursuant to the terms and conditions of that certain Loan Agreement,
dated September 18, 1996 by and between the Company and OFI; provided that
Omnicom, directly or indirectly, then owns Company Stock. Such Line of Credit
shall be in an amount equal to $2,000,000 for use in the operation of the
Company's business. Except as otherwise provided in this Section 4.1, such
credit line shall be subject to the terms and conditions applicable generally to
the subsidiaries of Omnicom under the Omnicom cash management program. The
initial $1,000,000 of such line of credit at any time outstanding shall be
without interest and any borrowings outstanding at any time over and above
$1,000,000 shall bear interest at the rate then charged by Omnicom to its
subsidiaries under the Omnicom cash management program, such interest rate to
change when and as such rate shall change (the "APPLICABLE INTEREST RATE"). Any
borrowings hereunder shall be secured by a first priority lien on all assets
(and the proceeds thereof) of the Company, which security arrangement shall be
evidenced by appropriate documentation reasonably satisfactory to Communicade or
Omnicom, as the case may be, and the Company.
SECTION 4.2 ACQUISITION FINANCING. During the term of this Agreement
---------------------
provided that Omnicom, directly or indirectly, then owns Company Stock,
Communicade shall, or shall cause Omnicom (whether directly or through one
9
<PAGE>
of its affiliates), to provide financing to the Company for "new media"
acquisitions as shall have been approved in accordance with the provisions of
Section 3.3 of this Agreement. The interest rate charged by Communicade or
Omnicom with respect to any such financing will be the Applicable Interest Rate.
Unless otherwise agreed between Communicade and the Company on a case-by-case
basis, interest on any such loan shall be paid quarterly on the then outstanding
principal amount and principal shall be repaid quarterly in equal installments
over a seven year period.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.1 NOTICES. Any notice or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed effective (a) upon
personal delivery, or (b) on the next business day if mailed by an overnight
courier service or sent by facsimile transmission, or (c) three days after the
date of deposit in the mails, if mailed by registered or certified mail, postage
prepaid, and in each case at the respective addresses or numbers set fort below
or to such other address or number as such party may have fixed by notice:
If to Communicade, to it c/o:
Communicade Inc.
437 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
Fax No. (212) 415-3530
with a copy to:
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian, Esq.
Fax No. (212) 468-4888
If to the Company, Dachis or Kanarick, to:
Razorfish, Inc.
107 Grand Street
New York, New York 10013
Attention: Jeffrey A. Dachis
Fax No. (212) 966-6915
with a copy to:
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10014
10
<PAGE>
Attention: Mark L. Mandel, Esq.
Fax No. (212) 468-7900
If to Spray Ventures, to:
Spray Ventures AB
Nybrogatan 55
114 85 Stockholm
Attention: Per Bystedt
Fax No. 011-46-8-660 15 95
with a copy to:
Mannheimer Swartling Advokatbyra
Norrmalmstorg 4
Box 1711
SE-111 87 Stockholm
Attention: Axel Calissendorff
Fax No. 011-46-8-613 55 01
11
<PAGE>
SECTION 5.2 ENTIRE AGREEMENT. This writing constitutes the entire
----------------
agreement of the parties with respect to the subject matter hereof and may not
be modified, amended or terminated, except by a written agreement signed by the
parties hereto (or such of them that still then own Company Stock). This
Agreement supersedes all prior agreements and understandings between the parties
with respect to the subject matter hereof, including without limitation, that
certain Shareholders Agreement, dated September 18, 1996, by and among the
Company, Communicade, Dachis and Kanarick.
SECTION 5.3 EMPLOYMENT. Nothing contained in this Agreement shall give
----------
any Stockholder any right to be retained in the employ of the Company or affect
the right of the Company to terminate a Stockholder's employment with the
Company.
SECTION 5.4 THE SPRAY NAME AND TRADEMARKS. Spray Ventures has granted to
-----------------------------
the Company a royalty-free, non-exclusive and non-assignable license to use the
Spray tradename and trademarks on the terms and conditions set forth in the
License Agreement attached hereto as Exhibit A.
SECTION 5.5 WAIVER. No waiver of any breach or default hereunder shall be
------
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
SECTION 5.6 SEVERABILITY. If any provision of this Agreement shall be
------------
held invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render invalid or
unenforceable any other provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
SECTION 5.7 ASSIGNMENT. Communicade shall have the right to assign its
----------
rights and/or obligations to purchase shares of Company Stock pursuant to this
Agreement to any member of the Omnicom Group, provided that upon any such
transfer such member agrees in writing to be bound by the terms of this
Agreement, and any such transferee shall be deemed to be included within the
defined term "Communicade" for purposes of this Agreement. This Agreement shall
be binding upon the parties hereto, their respective heirs, executors,
administrators, successors and assigns.
SECTION 5.8 HEADINGS. The paragraph headings contained herein are for the
--------
purpose of convenience only and are not intended to define or limit the contents
of such paragraphs.
SECTION 5.9 FURTHER ASSURANCES. Each party hereto shall cooperate and
------------------
shall take such further action and shall execute and deliver such further
documents as may be reasonably requested by any other party in order to carry
out the provisions of this Agreement.
SECTION 5.10 SPECIFIC PERFORMANCE. It is agreed that the parties will be
--------------------
irreparably damaged if this Agreement is not specifically enforced. In the event
of a breach or threatened breach of the terms, covenants and/or conditions of
this Agreement by any of the parties hereto, the other parties shall, in
addition to all other remedies, be entitled to a temporary or permanent
12
<PAGE>
injunction, without showing any actual damage, and/or a decree for specific
performance, in accordance with the provisions hereof.
SECTION 5.11 GOVERNING LAW. This Agreement shall be construed under the
-------------
laws of the State of New York, without reference to its conflict of laws
provisions.
SECTION 5.12 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one instrument.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto caused this
Agreement to be duly executed, as of the day and year first written.
RAZORFISH, INC.
By: /s/ Jeffrey A. Dachis
_______________________________
Jeffrey A. Dachis, President
COMMUNICADE INC.
By: /s/ Jerry Neumann
________________________________
Name: Jerry Neumann
Title: Chief Financial Officer
SPRAY VENTURES AB
By: /s/ Per Bystedt
_______________________________
Name: Per Bystedt
Title: Chief Executive Officer
/s/ Jeffrey A. Dachis
___________________________________
JEFFREY A. DACHIS
/s/ Craig M. Kanarick
___________________________________
CRAIG M. KANARICK
14
<PAGE>
EXHIBIT 4.2
AMENDMENT TO STOCKHOLDERS AGREEMENT
This AMENDMENT TO STOCKHOLDERS AGREEMENT (the "Amendment"), dated as of
February 3, 1999, by and among RAZORFISH, INC., a New York corporation (the
"Company"); COMMUNICADE INC., a Delaware corporation ("Communicade") and wholly-
owned subsidiary of Omnicom Group Inc., a New York corporation ("Omnicom");
SPRAY VENTURES AB, a corporation incorporated under the laws of the Kingdom of
Sweden with identification number 556506-7997 ("Spray Ventures"); Jeffrey A.
Dachis ("Dachis") and Craig M. Kanarick ("Kanarick") (Communicade, Spray, Dachis
and Kanarick are sometimes individually referred to as a "Stockholder" and
collectively as the "Stockholders"), amends the Stockholders Agreement, dated as
of October 1, 1998, by and among the Company and the Stockholders (the
"Stockholders Agreement"). Capitalized terms used and not otherwise defined
herein shall have the meaning ascribed to such terms in the Stockholders
Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to Section 2.4 of the Stockholders Agreement, Communicade
is entitled to exercise the Communicade Ten Percent Option;
WHEREAS, the Company has delivered the Company Option Notice and
Communicade has delivered the Communicade Option Notice in accordance with the
terms of the Stockholders Agreement;
WHEREAS, the Company has notified Communicade that, at the request of the
underwriters of a proposed Offering, the Company is contemplating a change in
its capitalization through a reverse stock split to be effected before the
Offering but subsequent to the closing of the purchase of the Option Shares;
WHEREAS, Section 2.4 of the Stockholders Agreement, as agreed to by the
Stockholders and the Company, did not contemplate a change in the capitalization
of the Company between the closing of the purchase of the Option Shares and the
closing of an Offering;
WHEREAS, the Stockholder and the Company wish to amend the Stockholders
Agreement in order to modify Section 2.4 of the Stockholders Agreement to
reflect the intent of the parties thereto with respect to the Communicade Ten
Percent Option.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
ARTICLE I
---------
AMENDMENTS
----------
Section 1.1 Amendment of Section 2.4.1. Section 2.4.1 of the
--------------------------
Stockholders Agreement is amended by deleting the phrase "(the "Option Shares")"
where it appears in such
<PAGE>
section and inserting in lieu thereof "(as such shares shall be appropriately
adjusted for any stock dividends, splits, reverse splits, subdivisions,
combinations or any other changes in the capitalization of the Company after the
date hereof, the "Option Shares")";
Section 1.2 Amendment of Section 2.4.2. Section 2.4.2 of the
--------------------------
Stockholders Agreement is amended by deleting the phrase "(the "Estimated IPO
Price")" where it appears in such section and inserting in lieu thereof ", such
per share price to be adjusted to reflect the capitalization of the Company used
in determining the number of Option Shares (as so adjusted, the "Estimated IPO
Price")";
Section 1.3 Amendment of Section 2.4.3. Section 2.4.3 of the
--------------------------
Stockholders Agreement is amended in the following manner:
(i) by deleting the phrase "purchase price" in the second
sentence in such section and inserting in lieu thereof "Purchase Price
(as defined below)"; and
(ii) by adding the sentence "The "Purchase Price" to be paid by
Communicade shall equal the product of (x) the number of Option Shares
multiplied by (y) 80% of the Estimated IPO Price." at the end of such
section.
Section 1.4 Amendment of Section 2.4.4. Section 2.4.4 of the
--------------------------
Stockholders Agreement shall be deleted in its entirety and replaced with the
following:
"2.4.4 Price Adjustment. Subject to Section 2.4.5, upon the
----------------
closing of the Offering, the Company shall adjust the total purchase price paid
by Communicade for the Option Shares, as follows:
(i) If the product of (x) 80% multiplied by (y) the per share
price to public set forth on the final prospectus filed by the Company
with the SEC in connection with the Offering (the "IPO Price")
multiplied by (z) the number of Option Shares, as adjusted (such product
referred to as the "Revised Purchase Price") is less than the Purchase
Price, then Communicade shall pay to the Company the difference between
the Revised Purchase Price and the Purchase Price;
(ii) If the Purchase Price is greater than the Revised Purchase
Price, then the Company shall pay Communicade the difference between the
Purchase Price and the Revised Purchase Price.
Any payments required under this Section 2.4.4 shall be made simultaneously with
the closing of the Offering."
Section 1.5 Amendment of Section 2.4.5. Section 2.4.5 of the
--------------------------
Stockholders Agreement is amended by deleting the phrase "in each instance at a
price per share equal to the Estimated IPO Price" at the end of the first
sentence in such section and inserting in lieu thereof "in each instance at a
price equal to the Purchase Price".
2
<PAGE>
ARTICLE II
----------
MISCELLANEOUS
-------------
Section 2.1 Expenses. The parties hereto shall pay all of their own
--------
expenses relating to the transactions contemplated by this Amendment, including,
without limitation, the fees and expenses of their respective counsel and
financial advisors.
Section 2.2 Governing Law. The interpretation and construction of this
-------------
Amendment, and all matters relating hereto, shall be governed by the laws of the
State of New York without reference to its conflict of laws provisions.
Section 2.3 Captions. The Article and Section captions used herein are
--------
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Amendment.
Section 2.4 Severability. In the event any provision of this Amendment
------------
is found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Amendment shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
Section 2.5 Further Assurances. Each of the parties shall execute and
------------------
deliver such documents and take such other actions as reasonably requested by
any other party hereto in furtherance of the transactions contemplated hereby.
Section 2.6 Counterparts. This Amendment may be executed in two or
------------
more counterparts, all of which taken together shall constitute one instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, on the
day and year first above written.
RAZORFISH, INC.
By: /s/ Jeffrey A. Dachis
-------------------------------
Jeffrey A. Dachis, President
COMMUNICADE INC.
By: /s/ Jerry Neumann
-------------------------------
Name: Jerry Neumann
Title: Chief Financial Officer
SPRAY VENTURES AB
By: /s/ Per Bystedt
-------------------------------
Name: Per Bystedt
Title: Chief Executive Officer
/s/ Jeffrey A. Dachis
----------------------------------
Jeffrey A. Dachis
/s/ Craig M. Kanarick
----------------------------------
Craig M. Kanarick
4
<PAGE>
EXHIBIT 10.1
RAZORFISH, INC.
THE AMENDED AND RESTATED 1997 STOCK OPTION AND INCENTIVE PLAN
RAZORFISH, INC.
107 GRAND STREET, THIRD FLOOR
NEW YORK, NEW YORK 10013
<PAGE>
RAZORFISH, INC.
THE AMENDED AND RESTATED 1997 STOCK OPTION AND INCENTIVE PLAN
Razorfish, Inc. established the 1997 Stock Option and Incentive Plan
(the "Plan") promoting the growth and profitability of Razorfish, Inc. (the
"Company") by providing its directors, key employees, consultants and any other
persons who perform substantial services for or on behalf of the Company, its
subsidiaries and certain other entitics with an incentive to achieve long-term
corporate objectives, to attract and retain persons of outstanding competence,
and to provide such persons with an equity interest in the Company. The
subsidiaries of the Company included in this Plan (the "Subsidiaries" shall be
any subsidiary of the Company as defined in Section 424 of the Internal Revenue
Code of 1986, as amended (the "Code").
1. STOCK SUBJECT TO PLAN. An aggregate of 2,345,096 shares (the "Shares")
---------------------
of the common Stock, par value $.01 per share ("Common Stock") of the Company
may be subject to awards granted under the Plan. Such Shares may be authorized
by unissued Common Stock or authorized and issued Common Stock that has been or
may be acquired by the Company. Shares that are subject to an award which
expires or is terminated unexercised, or which are reacquired by the Company
upon the forfeiture of restricted Shares, shall again be available for issuance
under the Plan.
2. ADMINISTRATION.
--------------
A. COMMITTEE. The Plan shall be administered by the Compensation
---------
Committee (the "Committee") of the Board of Directors of the Company (the
"Board"). The Committee shall be comprised of the entire Board or, if the
Board so determines, of two or more members of the Board.
B. POWERS AND DUTIES. The Committee shall have the authority to make
-----------------
rules and regulations governing the administration of the Plan; to select
the eligible directors, employees and consultants to whom awards shall be
granted; to determine the type, amount, size and terms of awards; to
determine the time when awards shall be granted; to determine whether any
restrictions shall be placed on Shares purchased pursuant to any option or
issued pursuant to any award; and to make all other determinations need not
be uniform, and may be made by it selectively among persons who are
eligible to receive awards under the Plan, whether or not such persons are
similarly situated. All interpretations, decision, or determinations made
by the Committee pursuant to the Plan shall be final and conclusive.
3. ELIGIBILITY. All employees of the Company or any of its Subsidiaries
-----------
(including officers, whether or not they are members of the Board of Directors)
who are employed at the time of the adoption of this Plan or thereafter, any
directors of the Company and any other consultants or persons who perform
substantial services for or on behalf of the Company or any of its Subsidiaries,
affiliates or any entity in which the Company has an interest (collectively, the
-2-
<PAGE>
"optionees") shall be eligible to be granted Non-incentive Stock Options to
purchase shares of Common Stock under this Plan. All employees of the Company or
any of its Subsidiaries who are employed at the time of adoption of this Plan or
thereafter shall be eligible to be granted Incentive Stock Options under this
Plan. A person who has been granted an award under this Plan, or under any
predecessor plan, may be granted additional awards if the Committee shall so
determine. Except to the extent otherwise provided in the agreement evidencing
an award, the granting of an award under this Plan shall not affect any
outstanding award previously granted under this Plan or under any other plan of
the Company.
4. AWARDS. The Committee may make awards to eligible persons in the form
-------
of stock options which are intended to qualify as "Incentive Stock Options"
within the meaning of Section 422 of the Code, or stock options which are not
intended to so qualify ("Nonqualified Options" and together with Incentive Stock
Options, "Options"), or awards of restricted stock, or any combination thereof.
5. STOCK OPTIONS. A stock option granted pursuant to the Plan shall
-------------
entitle the optionee, upon exercise, to purchase Shares at a specified price
during a specified period. Options shall be subject to such terms and conditions
as the Committee shall from time to time approve; provided, that each option
--------
shall be subject to the following requirements:
A. TYPE OF OPTION. Each option shall be identified in the agreement
--------------
pursuant to which it is granted as an Incentive Stock Option or as a
Nonqualified Option, as the case may be.
B. TERM. No option shall be exercisable more then 121 months after
----
the date on which it is granted.
C. PAYMENT. The purchase price of Shares subject to an option shall
-------
be payable in full at the time the option is exercised. Payment may be made
in cash, in shares of Common Stock having an aggregate fair market value on
the date of exercise which is not less than the option price, or by a
combination of cash and such shares, as the Committee may determine, and
subject to such terms and conditions as the Committee deems appropriate.
D. MANNER OF EXERCISE. To the extent that an option is exercisable,
------------------
options may be exercised in full at one time or in part from time to time,
by giving written notice, signed by the person or persons exercising the
option, to the Company, stating the number of shares with respect to which
the option is being exercised, accompanied by payment in full for such
shares as provided in Section 5(c) hereof. Upon such exercise, delivery of
a certificate for paid-up, non-assessable shares shall be made by the
Company to the person or persons exercising the option within 30 business
days after receipt of such notice by the Company.
E. OPTIONS NOT TRANSFERABLE. Options shall not be transferable except
------------------------
to the extent permitted by the agreement evidencing such option; provided,
that in no event
-3-
<PAGE>
shall any option be transferable by the optionee, other than by will or the laws
of decent and distribution. Options shall be exercisable during an optionee's
lifetime only by such optionee. If, pursuant to the agreement evidencing any
option, such option remains exercisable after the optionee's death, it may be
exercised, to the extent permitted by such agreement, by the personal
representative of the optionee's estate or by any person who acquired the right
to exercise such option by bequest, inheritance, or otherwise by reason of the
optionee's death.
F. INCENTIVE STOCK OPTIONS.
-----------------------
(A) If an option is an Incentive Stock Option, it shall be subject to
the following additional requirements:
I. Incentive Stock Options may be granted only to persons who
are employees of the Company or its Subsidiaries.
II. The purchase price of Shares that are subject to an
Incentive Stock Option shall not be less than 100% of the fair market value
of such Shares at the time the option is granted, as determined in good
faith by the Committee.
III. The aggregate fair market value (determined at the time the
option is granted) of the Shares with respect to which Incentive Stock
Options are exercisable by the optionee for the first time during any
calendar year, under this Plan or any other plan of the Company, shall not
exceed $100,000.
IV. An Incentive Stock Option shall not be exercisable more
than ten years after the date on which it is granted.
V. The purchase price of Shares that are subject to an
Incentive Stock Option granted to an employee who, at the time such option
is granted, owns 10% or more of the total combined voting power of all
classes of stock of the Company shall not be less that 110% of the fair
market value of such Shares on the date such option is granted, and such
option may not be exercisable more than five years after the date on which
it is granted. For the purposes of this subparagraph, the rules of Section
424(d) of the Code shall apply in determining the stock ownership of any
employee.
(B) Subject to the foregoing, options may be made exercisable in one
or more installments, upon the happening of certain events, upon the fulfillment
of certain conditions, or upon such other terms and conditions as the Committee
shall determine.
G. MODIFICATION OF OUTSTANDING OPTIONS. Subject to any applicable
-----------------------------------
limitations contained herein, the Board of Directors may authorize the amendment
of any outstanding option with the consent of the optionee when and subject to
such conditions
-4-
<PAGE>
as are deemed to be in the best interests of the Company and in accordance
with the purposes of the Plan. Without limiting the foregoing, the
Committee shall have the authority to effect, at any time and from time to
time, with the consent of the affected optionees, the cancellation of any
or all outstanding options under the Plan and to grant in substitution
therefor new options under the Plan covering the same or different numbers
of Shares and having, at the discretion of the Board and subject to Section
5(f) hereof, an exercise price, in the case of options designated as non-
qualified stock options, as shall be determined by the Committee and, in
the case of options designated as incentive stock options, of not less than
one hundred percent (100%) of the fair market value of the Common Stock on
the new grant date.
H. DISQUALIFYING DISPOSITION. If an optionee makes a "disposition"
-------------------------
(within the meaning of Section 424(c) of the Code) of shares of Common
Stock issued upon exercise of an incentive stock option within two years
from the date of grant or within one year from the date the shares of
Common Stock are transferred to the optionee, the optionee shall, within
ten days of disposition, notify the Board in order that any income realized
as a result of such disposition can be properly reported by the Company on
IRS forms W-2 or 1099.
I. PUBLIC OFFERING. In the event that a direct or indirect "parent
---------------
corporation" of the Company that has a Stock Option Plan consummates a
"public offering", and such parent corporation agrees to allow
participants in the Plan to exchange options granted under the Plan for
options in the stock option plan of the parent corporation, the Committee
shall determine the terms of the conversion which shall be no less than the
fair market value of the Shares on the effective date of the exchange, as
determined in good faith by the Board. Upon the consummation of such
exchange, the Plan shall be terminated. For purposes of this Section 5(i),
the term "parent corporation" shall have the meaning ascribed to such tenn
is Section 424(e) of the Code and the term "public offering" shall mean an
offering of any class of equity securities of the parent corporation
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), in which the aggregate gross proceeds
received by the parent corporation in connection with such registration
statement equals or exceeds $10 million, and such class of equity
securities is listed for trading on the New York Stock Exchange or the
American Stock Exchange or authorized for trading on NASDAQ, including
without limitation its National Market System.
6. RESTRICTED STOCK. Restricted stock awards granted pursuant to the Plan
----------------
shall entitle the holder to receive Shares, subject to forfeiture if specified
conditions are not satisfied at the end of a specified period. Restricted stock
awards shall be subject to such terms and conditions as the Committee shall from
time to time approve; provided, that each award shall be subject to the
following requirements:
A. RESTRICTED PERIOD. The Committee shall establish a period (the
-----------------
"Restricted Period") of not more than five years, commencing on the date of
award, during which the holder will not be permitted to sell, transfer,
pledge, encumber, or
-5-
<PAGE>
assign the Shares subject to the award. Within these limits, the Committee may
provide for the lapse of restrictions in installments, or upon the occurrence of
certain events, where deemed appropriate, or for the immediate vesting of the
Shares. Any attempt by a holder to dispose of restricted Shares in a manner
contrary to the applicable restrictions shall be void, and of no force and
effect.
B. RIGHTS DURING RESTRICTED PERIOD. Except to the extent otherwise
-------------------------------
provided in this paragraph 6 or under the terms of any restricted stock
agreement, during the Restricted Period, the holder of restricted Shares shall
have all of the rights of a stockholder in the Company with respect to such
Shares, including the right to vote the Shares and to receive dividends and
other distributions with respect to the Shares; provided, that all stock
--------
dividends, stock rights, and stock issued upon split-ups or reclassifications of
Shares shall be subject to the same restrictions as the Shares with respect to
which such stock dividends, rights, or additional stock are issued, and may be
held in custody as provided below in this paragraph 6 until the restrictions
thereon shall have lapsed.
C. FORFEITURES. Except to the extent otherwise provided in the restricted
-----------
stock agreement, all Shares then subject to any restriction shall be forfeited
to the Company without future obligation of the Company to the holder thereof,
and all rights of the holder with respect to such Shares shall terminate, if the
holder shall cease to be a director, employee or consultant of the Company, or
if any condition established by the Committee for the release of any restriction
shall not have occurred, prior to the expiration of the Restricted Period.
D. CUSTODY. The committee may provide that the certificates evidencing
-------
restricted Shares shall be held in custody by a bank or other institution, or by
the Company, until the restrictions thereon have lapsed, and may require that
the holder of any restricted Shares shall have delivered to the Company one or
more stock powers, endorsed in blank, relation to the restricted Shares as a
condition of receiving the award.
E. CERTIFICATES. A recipient of a restricted stock award shall be issued a
------------
certificate or certificates evidencing the Shares subject to such award. Such
certificates shall be registered in the name of the recipient, and may bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such award, which legend shall be in substantially the following
form:
"The transferability of this certificate and the shares represented hereby
are subject to the terms and conditions (including forfeiture) of the
Amended and Restated Razorfish, Inc. 1997 Stock Option and Incentive Plan
and an Agreement entered into between the registered owner and Razorfish,
Inc. Copies of such Plan and Agreement are on file in the office of
Razorfish, Inc."
-6-
<PAGE>
F. GIFTS, ETC. Notwithstanding any other provision of this paragraph
----------
6, the Committee may permit a gift of restricted stock to the holder's
spouse, child, stepchild, grandchild, or legal dependent, or to a trust
whose sole beneficiary or beneficiaries shall be the holder and/or any one
or more of such persons; provided, that the donee shall have entered into
an agreement with the Company pursuant to which it agrees that the
restricted stock shall be subject to the same restrictions in the hands of
such donee as it was in the hands of the donor.
7. AGREEMENTS. Each option or award granted pursuant to the Plan shall be
----------
evidenced by an agreement setting forth the terms and conditions upon which it
is granted. Multiple options or awards may be evidenced by a single agreement.
Subject to the limitations set forth in the Plan, the Committee may, with the
consent of the person to whom an award has been granted, amend any such
agreement to modify the terms or conditions governing the award evidenced
thereby.
8. ADJUSTMENTS. In the event of any change in the outstanding Shares of
-----------
Common Stock by reason of any stock dividend or split, recapitalization,
reclassification, combination, or exchange of Shares or other similar corporate
change, then if the Committee shall determine, in its sole discretion, that such
change necessarily or equitably requires an adjustment in the maximum number of
Shares subject to this Plan, such adjustments shall be made by the Committee and
shall be conclusive and binding for all purposes of this Plan. No adjustment
shall be made in connection with the issuance by the Company of any warrants,
rights, or options to acquire additional Common Stock or of securities
convertible into Common Stock. Notwithstanding the foregoing, if any adjustment
in the number of shares which may be issued and sold pursuant to Options is
required by the Code or regulations issued pursuant thereto to be approved by
the shareholders in order to enable the Company to issue Incentive Stock Options
pursuant to this Plan, then no such adjustment shall be made without the
approval of the shareholders.
9. MERGER, CONSOLIDATION, REORGANIZATION, LIQUIDATION, ETC. Subject to
-------------------------------------------------------
the provisions of the agreement evidencing any award, if the Company shall
become a party to any corporate merger, consolidation, major acquisition of
property for stock, reorganization, or liquidation, the Board of Directors of
the Company shall have the power to make any arrangement it deems advisable with
respect to outstanding awards and in the number of Shares subject to this Plan,
which shall be binding for all purposes of this Plan, including, but not limited
to, the substitution of new awards for any awards then outstanding, the
assumption of any such awards, and the termination of such awards.
10. EXPENSES OF PLAN. The expenses of administering this Plan shall be
----------------
borne by the Company.
11. RELIANCE ON REPORTS. Each member of the Committee and each member of
-------------------
the Board of Directors shall be fully justified in relying or acting in good
faith upon any report made by the independent public accountants of the company
and upon any other information furnished in connection with this Plan by any
person or persons other than himself. In no event shall any
-7-
<PAGE>
person who is or shall have been a member of the Committee or of the Board of
Directors be liable for any determination made or other action taken or omitted
in reliance upon any such report or information, or for any action taken or
omitted, including the furnishing of information, in good faith.
12. RIGHTS AS STOCKHOLDER. Except to the extent otherwise specifically
---------------------
provided herein, no recipient of any award shall have any rights as a
stockholder with respect to Shares sold or issued pursuant to the Plan until
certificates for such Shares have been issued to such person.
13. GENERAL RESTRICTIONS.
--------------------
a. Each award granted pursuant to the Plan shall be subject to
the requirement that if, in the opinion of the Committee:
i. the listing, registration, or qualification of any Shares
related thereto upon any securities exchange or under any state or
federal law;
ii. the consent or approval of any regulatory body; or
iii. an agreement by the recipient with respect to the
disposition of any such Shares;
is necessary or desirable as a condition of the issuance or sale of such
Shares, such award shall not be consummated unless and until such listing,
registration, qualification, consent, approval, or agreement is effected or
obtained in form satisfactory to the Committee.
b. The Company shall be under no obligation to qualify shares subject
to any award or to cause a registration statement or a post-effective
amendment to any registration statement to be prepared for the purpose of
covering the issuance of shares subject to any award or the issuance of
such shares to be exempt from registration and qualification under
applicable Federal and state securities acts now in force or as hereinafter
amended, except as otherwise agreed to by the Company in writing in its
sole discretion.
14. PURCHASE FOR INVESTMENT: RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION.
--------------------------------------------------------------------
Unless and until the shares to be issued upon exercise of an option granted
under the Plan have been effectively registered under the 1933 Act, as now in
force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any
-8-
<PAGE>
such shares, and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer
under the 1933 Act, or any other applicable law, and that if shares are issued
without such registration, a legend to this effect may be endorsed upon the
securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an option shall have been exercised, or to qualify any
such shares for exemption from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each optionee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus, offering circular or
any other document that is reasonable necessary for such purpose and may require
reasonable indemnity to the Company and its officers and directors from such
holder against all losses, claims, damages and liabilities arising from such use
of the information so furnished and caused by any untrue statement of any
material fact therein or caused by the omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made.
15. EMPLOYMENT RIGHTS. Nothing in this Plan, or in any agreement entered
-----------------
into hereunder, shall confer upon any person the right to continue to serve as a
director, employee or consultant of the Company, or affect the right of the
Company to terminate such person's service at any time, with or without cause.
16. WITHHOLDING. If the Company proposes or is required to issue Shares
-----------
pursuant to the Plan, it may require the recipient to remit to it, or may
withhold from such award or from the recipient's other compensation, an amount,
in the form of cash or Shares, sufficient to satisfy any applicable federal,
state, or local tax withholding requirements prior to the delivery of any
certificates for such Shares.
17. AMENDMENTS. The Board of Directors of the Company may at any time, and
----------
from time to time, amend the Plan in any respect, except that no amendment:
a. increasing the number of Shares available for issuance pursuant to
the Plan (other than as permitted by paragraphs 8 and 9);
b. changing the classification of persons eligible to participate in
the Plan; or
c. materially increasing the benefits accruing to participants under
the Plan;
shall be made without the affirmative vote of stockholders holding at least a
majority of the voting stock of the company represented in person or by proxy at
a duly held stockholders' meeting.
18. STOCKHOLDER APPROVAL. The Plan shall become effective upon adoption by
--------------------
the Board; provided, however, that the Plan shall be submitted for approval by
the stockholders of
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<PAGE>
the Company no earlier than 12 months prior to, and no later than 12 months
after, the date of adoption of the Plan by the Board of Directors. Should the
stockholders of the Company fail to approve the Plan as set forth in the
preceding sentence, all incentive stock options granted thereunder shall be and
become non-qualified stock options.
19. DURATION. No option or rights shall be granted under the Plan after
--------
the earlier of: (a) the date on which the Plan is terminated by the
Board of Directors of the Company; or (b) February 24, 2007.
20. CORRECTIONS OF PLAN. The Board of Directors may correct any defect or
-------------------
any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem desirable to more fully
implement the intent or the Plan and shall be the sole and final judge of such
expediency.
21. GOVERNING LAW. The Plan and all options and restricted stock awards
-------------
shall be governed by and construed under the laws of the State of New York,
without giving effect to principles of conflicts of law.
22. NOTICES. Any communication or notice required or permitted to be given
-------
under the Plan shall be in writing, and mailed by registered or certified mail
or delivered by hand, if to the Company, to the attention of the President at
the Company's principal place of business; and, if to an optionee, to his or her
address as it appears on the records of the Company.
23. HEADINGS. The headings contained in this Plan are for convenience of
--------
reference only and in no way define, limit or describe the scope or intent of
the Plan or in any way affect this Agreement.
-10-
<PAGE>
EXHIBIT 10.2
RAZORFISH, INC.
1999 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
--------------------
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants and to promote the success of the
Company's business.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of the Committees appointed
-------------
to administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
(c) "Applicable Laws" means the legal requirements relating to the
----------------
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "Award" means the grant of an Option, SAR, Dividend Equivalent
-----
Right, Restricted Stock, Performance Unit, Performance Share, or other right or
benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the
---------------
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "Board" means the Board of Directors of the Company.
-----
(g) "Cause" means, with respect to the termination by the Company or a
-----
Related Entity of the Grantee's Continuous Service, that such termination is for
"Cause" as such term is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee's: (i) refusal or failure to
act in accordance with any specific, lawful direction or order of the Company or
a Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any act
or failure to perform any act in bad faith and to the detriment of the Company
or a Related Entity; (iv) dishonesty, intentional misconduct or material breach
of any agreement with the Company or a Related Entity; or (v) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person.
(h) "Change in Control" means a change in ownership or control of the
-----------------
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or by a
Company-sponsored
1
<PAGE>
employee benefit plan or by a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than eighty percent (80%) of the total combined voting power of
the Company's outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which a majority of the Continuing
Directors who are not Affiliates or Associates of the offeror do not recommend
such stockholders accept, or
(ii) a change in the composition of the Board over a period of thirty-
six (36) months or less such that a majority of the Board members (rounded up to
the next whole number) ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who are Continuing Directors.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
----
(j) "Committee" means any committee appointed by the Board to administer
---------
the Plan.
(k) "Common Stock" means the Class A common stock of the Company.
------------
(l) "Company" means Razorfish, Inc., a Delaware corporation.
-------
(m) "Consultant" means any person (other than an Employee or a Director,
----------
solely with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(n) "Continuing Directors" means members of the Board who either (i) have
--------------------
been Board members continuously for a period of at least thirty-six (36) months
or (ii) have been Board members for less than thirty-six (36) months and were
elected or nominated for election as Board members by at least a majority of the
Board members described in clause (i) who were still in office at the time such
election or nomination was approved by the Board.
(o) "Continuous Service" means that the provision of services to the
------------------
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any leave of absence approved by the Company,
(ii) transfers between locations of the Company or among the Company, any
Related Entity, or any successor, in any capacity of Employee, Director or
Consultant, or (iii) any change in status as long as the individual remains in
the service of the Company or a Related Entity in any capacity of Employee,
Director or Consultant (except as otherwise provided in the Award Agreement).
For purposes of Incentive Stock Options, no such approved leave of absence may
exceed ninety (90) days, unless re-employment upon expiration of such leave is
guaranteed by statute or contract.
(p) "Corporate Transaction" means any of the following transactions:
---------------------
2
<PAGE>
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company;
(iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than eighty percent (80%) of the total
combined voting power of the Company's outstanding securities are transferred to
a person or persons different from those who held such securities immediately
prior to such merger; or
(iv) an acquisition by any person or related group of persons (other
than the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than eighty percent (80%) of the total combined voting power of
the Company's outstanding securities (whether or not in a transaction also
constituting a Change in Control), but excluding any such transaction that the
Administrator determines shall not be a Corporate Transaction.
(q) "Director" means a member of the Board or the board of directors of any
--------
Related Entity.
(r) "Disability" means that a Grantee is permanently unable to carry out
----------
the responsibilities and functions of the position held by the Grantee by reason
of any medically determinable physical or mental impairment. A Grantee will not
be considered to have incurred a Disability unless he or she furnishes proof of
such impairment sufficient to satisfy the Administrator in its discretion.
(s) "Dividend Equivalent Right" means a right entitling the Grantee to
-------------------------
compensation measured by dividends paid with respect to Common Stock.
(t) "Employee" means any person, including an Officer or Director, who is
--------
an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.
(u) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(v) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
(i) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price was
reported on that date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq
3
<PAGE>
Small Cap Market for the day prior to the time of the determination (or, if no
such prices were reported on that date, on the last date on which such prices
were reported), in each case, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock of
the type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
(w) "Grantee" means an Employee, Director or Consultant who receives an
-------
Award pursuant to an Award Agreement under the Plan.
(x) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(y) "Non-Qualified Stock Option" means an Option not intended to qualify as
--------------------------
an Incentive Stock Option.
(z) "Officer" means a person who is an officer of the Company or a Related
-------
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(aa) "Option" means an option to purchase Shares pursuant to an Award
------
Agreement granted under the Plan.
(bb) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(cc) "Performance Shares" means Shares or an Award denominated in Shares
------------------
which may be earned in whole or in part upon attainment of performance criteria
established by the Administrator.
(dd) "Performance Units" means an Award which may be earned in whole or in
-----------------
part upon attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination
of cash, Shares or other securities as established by the Administrator.
(ee) "Plan" means this 1999 Stock Incentive Plan.
----
(ff) "Registration Date" means the first to occur of (i) the closing of the
-----------------
first sale to the general public of (A) the Common Stock or (B) the same class
of securities of a successor corporation (or its Parent) issued pursuant to a
Corporate Transaction in exchange for or in substitution of the Common Stock,
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as amended;
and (ii) in the event of a Corporate Transaction, the date of the consummation
of the Corporate Transaction if the same class of securities of the successor
corporation (or its Parent) issuable in such Corporate Transaction shall have
been sold to the general public pursuant to a registration statement filed with
and declared effective by, on or prior to the date of
4
<PAGE>
consummation of such Corporate Transaction, the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
(gg) "Related Entity" means any Parent, Subsidiary and any business,
--------------
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(hh) "Restricted Stock" means Shares issued under the Plan to the Grantee
----------------
for such consideration, if any, and subject to such restrictions on transfer,
rights of first refusal, repurchase provisions, forfeiture provisions, and other
terms and conditions as established by the Administrator.
(ii) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
----------
any successor thereto.
(jj) "SAR" means a stock appreciation right entitling the Grantee to Shares
---
or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(kk) "Share" means a share of the Common Stock.
-----
(ll) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
(mm) "Related Entity Disposition" means the sale, distribution or other
--------------------------
disposition by the Company of all or substantially all of the Company's
interests in any Related Entity effected by a sale, merger or consolidation or
other transaction involving that Related Entity or the sale of all or
substantially all of the assets of that Related Entity.
3. Stock Subject to the Plan.
-------------------------
(a) Subject to the provisions of Section 10, below, the maximum aggregate
number of Shares which may be issued pursuant to all Awards (including Incentive
Stock Options) is 1,200,000 Shares. The Shares to be issued pursuant to Awards
may be authorized, but unissued, or reacquired Common Stock.
(b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise price
for such Award or any withholding taxes due with respect to such Award, such
retained Shares subject to such Award shall become available for future issuance
under the Plan (unless the Plan has terminated). Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
5
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Plan Administrator.
(i) Administration with Respect to Directors and Officers.
-----------------------------------------------------
With respect to grants of Awards to Directors or Employees who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.
(ii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Awards to Employees or Consultants who are
- ---------
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. The Board may authorize one or more
Officers to grant such Awards and may limit such authority as the Board
determines from time to time.
(iii) Administration Errors. In the event an Award is granted
---------------------
in a manner inconsistent with the provisions of this subsection (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and the
---------------------------
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom
Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the
Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under
the Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
6
<PAGE>
(vii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan, including without limitation, any notice of
Award or Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and
(ix) to take such other action, not inconsistent with the
terms of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be conclusive and binding on all
persons.
5. Eligibility. Awards other than Incentive Stock Options may be granted to
-----------
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
6. Terms and Conditions of Awards.
------------------------------
(a) Type of Awards. The Administrator is authorized under the Plan to
--------------
award any type of arrangement to an Employee, Director or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions, or (iii) any other security with the value derived from the
value of the Shares. Such awards include, without limitation, Options, SARs,
sales or bonuses of Restricted Stock, Dividend Equivalent Rights, Performance
Units or Performance Shares, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
--------------------
Agreement. In the case of an Option, the Option shall be designated as either
an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Non-Qualified Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.
7
<PAGE>
(c) Conditions of Award. Subject to the terms of the Plan, the
-------------------
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Acquisitions and Other Transactions. The Administrator may issue
-----------------------------------
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.
(e) Deferral of Award Payment. The Administrator may establish one or more
-------------------------
programs under the Plan to permit selected Grantees the opportunity to elect to
defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Grantee to payment or receipt of Shares or other consideration under an Award.
The Administrator may establish the election procedures, the timing of such
elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.
(f) Award Exchange Programs. The Administrator may establish one or more
-----------------------
programs under the Plan to permit selected Grantees to exchange an Award under
the Plan for one or more other types of Awards under the Plan on such terms and
conditions as determined by the Administrator from time to time.
(g) Separate Programs. The Administrator may establish one or more
-----------------
separate programs under the Plan for the purpose of issuing particular forms of
Awards to one or more classes of Grantees on such terms and conditions as
determined by the Administrator from time to time.
(h) Early Exercise. The Award Agreement may, but need not, include a
--------------
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be
subject to a repurchase right in favor of the Company or a Related Entity or to
any other restriction the Administrator determines to be appropriate.
(i) Term of Award. The term of each Award shall be the term stated in the
-------------
Award Agreement, provided, however, that the term of an Incentive Stock Option
shall be no more than ten (10) years from the date of grant thereof. However,
in the case of an Incentive
8
<PAGE>
Stock Option granted to a Grantee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Award Agreement.
(j) Transferability of Awards. Incentive Stock Options may not be sold,
-------------------------
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Grantee, only by the Grantee; provided, however, that
the Grantee may designate a beneficiary of the Grantee's Incentive Stock Option
in the event of the Grantee's death on a beneficiary designation form provided
by the Administrator. Other Awards shall be transferable to the extent provided
in the Award Agreement.
(k) Time of Granting Awards. The date of grant of an Award shall for all
-----------------------
purposes be the date on which the Administrator makes the determination to grant
such Award, or such other date as is determined by the Administrator. Notice of
the grant determination shall be given to each Employee, Director or Consultant
to whom an Award is so granted within a reasonable time after the date of such
grant.
7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
-----------------------------------------------------------------
Options.
(a) Exercise or Purchase Price. The exercise or purchase price, if any,
---------------------------
for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant; or
(B) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be not less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant unless otherwise determined by the
Administrator.
(iii) In the case of other Awards, such price as is determined by the
Administrator.
(iv) Notwithstanding the foregoing provisions of this Section 7(a), in
the case of an Award issued pursuant to Section 6(d), above, the exercise or
purchase price for the Award shall be determined in accordance with the
principles of Section 424(a) of the Code.
9
<PAGE>
(b) Consideration. Subject to Applicable Laws, the consideration to
-------------
be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following, provided that the portion of the
consideration equal to the par value of the Shares must be paid in cash or other
legal consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;
(iv) if the exercise or purchase occurs on or after the
Registration Date, surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall
be exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used to
pay the exercise price unless otherwise determined by the Administrator);
(v) with respect to Options, if the exercise occurs on or after
the Registration Date, payment through a broker-dealer sale and remittance
procedure pursuant to which the Grantee (A) shall provide written instructions
to a Company designated brokerage firm to effect the immediate sale of some or
all of the purchased Shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased Shares and (B) shall provide written
directives to the Company to deliver the certificates for the purchased Shares
directly to such brokerage firm in order to complete the sale transaction; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any
-----
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax
--------------
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with
10
<PAGE>
terms identical to the Award Agreement under which the Option was exercised, but
at an exercise price as determined by the Administrator in accordance with the
Plan.
8. Exercise of Award.
-----------------
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at such times
and under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised upon the later of
receipt by the Company of (i) written notice of such exercise has been given to
the Company in accordance with the terms of the Award by the person entitled to
exercise the Award and (ii) full payment for the Shares with respect to which
the Award is exercised, including, to the extent selected, use of the broker-
dealer sale and remittance procedure to pay the purchase price as provided in
Section 7(b)(v). Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Shares subject to an Award, notwithstanding the exercise of an Option or other
Award. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Award. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Award Agreement or Section 10,
below.
(b) Exercise of Award Following Termination of Continuous Service.
(i) An Award may not be exercised after the termination date of such
Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided in the
Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an Award
following the termination of the Grantee's Continuous Service for a specified
period, the Award shall terminate to the extent not exercised on the last day of
the specified period or the last day of the original term of the Award,
whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the extent
not exercised within the time permitted by law for the exercise of Incentive
Stock Options following the termination of a Grantee's Continuous Service shall
convert automatically to a Non-Qualified Stock Option and thereafter shall be
exercisable as such to the extent exercisable by its terms for the period
specified in the Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to buy out
-----------------
for a payment in cash or Shares, an Award previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Grantee at the time that such offer is made.
11
<PAGE>
9. Conditions Upon Issuance of Shares.
----------------------------------
(a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
------------------------------------------
action by the stockholders of the Company, the Administrator may, in its
discretion, proportionately adjust the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, as well as any other terms that the Administrator determines
require adjustment for (i) any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, (ii) any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company, or (iii) as the Administrator may determine in its
discretion, any other transaction with respect to Common Stock to which Section
424(a) of the Code applies; provided, however that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Administrator
and its determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.
11. Corporate Transactions/Changes in Control/Related Entity Dispositions.
---------------------------------------------------------------------
Except as may be provided in an Award Agreement:
(a) The Administrator shall have the authority, exercisable either in
advance of any actual or anticipated Corporate Transaction, Change in Control or
Related Entity Disposition or at the time of an actual Corporate Transaction,
Change in Control or Related Entity Disposition and exercisable at the time of
the grant of an Award under the Plan or any time while an Award remains
outstanding, to provide for the full automatic vesting and exercisability of one
or more outstanding unvested Awards under the Plan and the release from
restrictions on transfer and repurchase or forfeiture rights of such Awards in
connection with a Corporate Transaction, Change in Control or Related Entity
Disposition, on such terms and conditions as the Administrator may specify. The
Administrator also shall have the authority to condition any such Award vesting
and exercisability or release from such limitations upon the subsequent
termination of the Continuous Service of the Grantee within a specified period
following the effective date of the Corporate Transaction, Change in Control or
Related Entity Disposition. The Administrator may provide that any Awards so
vested or released from such
12
<PAGE>
limitations in connection with a Change in Control or Related Entity
Disposition, shall remain fully exercisable until the expiration or sooner
termination of the Award. Effective upon the consummation of a Corporate
Transaction, all outstanding Awards under the Plan shall terminate unless
assumed by the successor company or its parent.
(b) The portion of any Incentive Stock Option accelerated under this
Section 11 in connection with a Corporate Transaction, Change in Control or
Related Entity Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. Effective Date and Term of Plan. The Plan shall become effective upon
-------------------------------
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
13. Amendment, Suspension or Termination of the Plan.
------------------------------------------------
(a) The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted, and such Awards shall remain in full force and effect as if the Plan
had not been amended, suspended or terminated, unless mutually agreed otherwise
between the Grantee and the Administrator, which agreement must be in writing
and signed by the Grantee and the Company.
14. Reservation of Shares.
---------------------
(a) The Company, during the term of the Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
(b) The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall
--------------------------------------------------------
not confer upon any Grantee any right with respect to the Grantee's Continuous
Service, nor shall it
13
<PAGE>
interfere in any way with his or her right or the Company's right to terminate
the Grantee's Continuous Service at any time, with or without cause.
16. No Effect on Retirement and Other Benefit Plans. Except as specifically
-----------------------------------------------
provided in a retirement or other benefit plan of the Company or a Related
Entity, Awards shall not be deemed compensation for purposes of computing
benefits or contributions under any retirement plan of the Company or a Related
Entity, and shall not affect any benefits under any other benefit plan of any
kind or any benefit plan subsequently instituted under which the availability or
amount of benefits is related to level of compensation. The Plan is not a
"Retirement-Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended.
17. Stockholder Approval. The grant of Incentive Stock Options under the
--------------------
Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is
not obtained within the twelve (12) month period provided above, all Incentive
Stock Options previously granted under the Plan shall be exercisable as Non-
Qualified Stock Options.
14
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT made this 18th day of September 1996, by and between
RAZORFISH, INC., a New York corporation (the "COMPANY"), and JEFFREY A. DACHIS
(the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, entering into this Agreement is a condition of closing under
a certain Stock Purchase Agreement dated the date hereof (the "PURCHASE
AGREEMENT") pursuant to which JWL Associates Corp. ("JWL"), a wholly-owned
subsidiary of Omnicom Group Inc. ("OMNICOM") acquired a 40% equity interest in
the Company and, under certain conditions, an option to increase this to an 80%
equity interest; and
WHEREAS, the Executive was employed by the Company, and JWL and the
Company wish to ensure the continued employment of the Executive with the
Company and the Executive wishes to accept such employment upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. EMPLOYMENT
----------
The Company agrees to employ the Executive during the Term specified
in paragraph 2, and the Executive agrees to accept such employment, upon the
terms and conditions hereinafter set forth.
2. TERM
----
Subject to Section 6 below and the other terms and conditions of this
Agreement, the Executive's employment by the Company shall be for a term
commencing on the date hereof
<PAGE>
and expiring on the close of business on December 31, 2001 (the "INITIAL TERM");
provided, however, the term of the Executive's employment by the Company shall
continue thereafter unless and until either party shall give to the other six
month's advance written notice ("NOTICE OF TERMINATION") of expiration of the
term (the Initial Term and the period, if any, thereafter, during which the
Executive's employment shall continue are collectively referred to as the
"TERM"). Any Notice of Termination given under this paragraph 2, shall specify
the date of expiration (which may not be earlier than the close of business on
December 31, 2001) and may be given at any time on or after June 30, 2001. The
Company shall have the right at any time during any such six month notice period
which commences on or after June 30, 2001 to relieve the Executive of his
offices, duties and responsibilities and to place him on a paid leave-of-absence
status, provided that during such notice period the Executive shall remain a
full-time employee of the Company and shall continue to receive his salary
compensation and other benefits as provided in this Agreement. The effective
date of the termination of the Executive's employment with the Company,
regardless of the reason therefor, is referred to in this Agreement as the "DATE
OF TERMINATION".
3. DUTIES AND RESPONSIBILITIES
---------------------------
(a) During the Term, the Executive shall have the positions of
President/Chief Executive Officer/Director of Marketing, Finance and Operations.
The Executive shall report to the Board of Directors of the Company (the
"BOARD") and in addition, after the Company is a majority-owned subsidiary of
Omnicom, the President of Omnicom and/or his designee, at such times and in such
detail as he or they, as the case may be, shall reasonably require. In addition,
during the Term, the Executive shall serve as a Director of the Company without
additional compensation.
(b) The Executive shall have all of the powers, duties and
responsibilities customary to his offices as are reasonably necessary to the
operations of the Company and as may be assigned to him from time to time by or
under authority of the Board and/or after the
2
<PAGE>
Company is a majority-owned subsidiary of Omnicom, the President of Omnicom,
consistent with his position as designated in paragraph 3(a) above.
(c) The Executive shall use his best efforts to ensure that the
Company and its subsidiaries, if any, comply on a timely basis with all
budgetary and reporting requirements reasonably requested by the Board. In no
event will the Executive without the approval of the Board incur obligations on
behalf of the Company other than in the ordinary course of business or enter
into any transaction on behalf of the Company not in the ordinary course of
business. In addition, as long as the provisions of Section 3.3 to the
Shareholders Agreement of even date herewith by and among JWL, the Company, the
Executive and others are operative, the Executive will not cause the Company to
take any of the actions listed in Section 3.3 without such action having
received the written approval of JWL.
(d) The Executive's employment by the Company shall be full-time and
exclusive, and during the Term, the Executive agrees that he will (i) devote
substantially all of his business time and attention, his best efforts, and all
his skill and ability to promote the interests of the Company and its
subsidiaries; (ii) carry out his duties in a competent and professional manner;
(iii) work with other employees of the Company and its subsidiaries in a
competent and professional manner; and (iv) generally promote the interests of
the Company and its subsidiaries. Notwithstanding the foregoing, the Executive
shall be permitted to engage in other business or charitable activities (as an
active participant or a passive investor), provided that such activities are not
rendered for a company which transacts business with the Company or engages in
business competitive with that conducted by the Company (or, if such company
does transact business with the Company or does engage in a competitive
business, it is a publicly held corporation and the Executive's participation is
limited to owning less than 1/4 of 1% of its outstanding shares) and further
provided that such activities (individually or collectively) do not materially
interfere with the performance of his duties or responsibilities under this
Agreement.
4. COMPENSATION
------------
3
<PAGE>
As compensation for his services hereunder and in consideration of his
agreement not to compete as set forth in paragraph 8 below, during the Term, the
Company shall pay the Executive, in accordance with its normal payroll
practices, direct salary compensation at an annual rate of $104,000. The
Executive's annual rate of salary compensation may be increased (but not
decreased) by or under the authority of the Board in accordance with the salary
review policy and budgeting procedures of the Company.
5. EXPENSES; FRINGE BENEFITS
--------------------------
(a) In addition to the compensation provided for under paragraph 4,
the Company agrees to pay or to reimburse the Executive during the Term for all
reasonable, ordinary and necessary vouchered business or entertainment expenses
incurred in the performance of his services hereunder in accordance with the
policy of the Company as from time to time in effect. The Executive, as a
condition precedent to obtaining such payment or reimbursement, shall provide to
the Company any and all statements, bills or receipts evidencing the travel or
out-of-pocket expenses for which the Executive seeks payment or reimbursement,
and any other information or materials, as the Company may from time to time
reasonably require.
(b) During the Term, the Executive and, to the extent eligible, his
dependents, shall be entitled to participate in and receive all benefits under
any welfare benefit plans and programs provided by the Company (including
without limitation, medical, dental, disability, group life (including
accidental death and dismemberment) and business travel insurance plans and
programs) applicable generally to the employees of the Company.
(c) During the Term, the Executive shall be entitled to participate
in all retirement plans and programs (including without limitation any profit
sharing/401(k) plan) applicable generally to the employees of the Company,
subject, however, to generally applicable eligibility and other provisions of
the various plans and programs in effect from time to time. In addition, during
the Term, the Executive shall be entitled to receive fringe benefits and
4
<PAGE>
perquisites in accordance with the plans, practices, programs and policies of
the Company from time to time in effect and available generally to the senior
executives of the Company.
(d) The Executive shall be entitled to four weeks paid vacation
during each calendar year of the Term, to be taken at such time(s) as shall not,
in the reasonable judgment of the Board, materially interfere with the
Executive's fulfillment of his duties hereunder, and shall be entitled to as
many holidays, sick days and personal days as are in accordance with the
Company's policy then in effect for its senior executives generally, upon such
terms as may be provided of general application to senior executives of the
Company.
(e) Notwithstanding anything to the contrary contained above, the
Company shall be entitled to terminate or reduce any employee benefit or
perquisite enjoyed by the Executive pursuant to the provisions of paragraph
5(b), (c) or (d) above if such reduction is part of an across-the-board
reduction applicable to all executive officers of the Company.
6. TERMINATION
-----------
The Company, by direction of the Board, shall be entitled to terminate
the Term and to discharge the Executive for "CAUSE" effective upon the giving of
written notice. The term "cause" shall be limited to the following grounds:
(i) The Executive's repeated failure or refusal to materially
perform his duties and responsibilities as set forth in paragraph 3
hereof, or the failure of the Executive to devote substantially all of
his business time and attention exclusively to the business and
affairs of the Company in accordance with the terms hereof, in each
case if such failure or refusal is not cured within 10 days after
written notice thereof to the Executive by the Company;
(ii) The willful misappropriation of the funds or property of the
Company;
5
<PAGE>
(iii) Conviction in a court of law of, or entering a plea of
guilty or no contest to, any felony or any crime involving moral
turpitude, dishonesty or theft;
(iv) The commission by the Executive of any willful or
intentional act which injures or could reasonably be expected to
injure the reputation, business or business relationships of the
Company, including without limitation, a willful or intentional breach
of the provisions of Section 8 of this Agreement; and
(v) Any material breach (not covered by any of the clauses
(i) through (iv)) of any term, provision or condition of this
Agreement, if such breach is not cured within 30 days after written
notice thereof to the Executive by the Company.
7. DISABILITY: DEATH
-----------------
In the event the Executive shall be unable to perform his duties
hereunder by virtue of illness or physical or mental incapacity or disability
(from any cause or causes whatsoever) in substantially the manner and to the
extent required hereunder prior to the commencement of such disability (all such
causes being herein referred to as "DISABILITY") and the Executive shall fail to
perform such duties for periods aggregating 180 days, whether or not continuous,
in any continuous period of 270 days, the Company shall have the right to
terminate the Executive's employment hereunder as at the end of any calendar
month during the continuance of such disability upon at least 30 days' prior
written notice to him. In the event of the Executive's death, the Date of
Termination shall be the date of such death.
8. NON-COMPETITION AND PROTECTION OF CONFIDENTIAL INFORMATION
----------------------------------------------------------
(a) The Executive agrees that his services hereunder are of a
special, unique, extraordinary and intellectual character, and his position with
the Company places him in a position of confidence and trust with the clients
and employees of the Company. The Executive acknowledges that the rendering of
services to the clients of the Company necessarily requires the disclosure to
the Executive of confidential information and trade secrets of the Company
6
<PAGE>
(such as without limitation, proprietary software programs, marketing plans,
media plans, budgets, corporate policies, client preferences and policies, and
identity of appropriate personnel of clients with sufficient authority to
influence a shift in suppliers). The parties hereto agree that in the course of
the Executive's employment with the Company, the Executive has and will continue
to develop a personal relationship with the Company's clients and a knowledge of
those clients' affairs and requirements, and that the relationship of the
Company with its established clientele will therefore be placed in the
Executive's hands in confidence and trust. The Executive consequently agrees
that it is reasonable and necessary for the protection of the trade secrets,
goodwill and business of the Company that the Executive make the covenants
contained herein. Accordingly, the Executive agrees that while he is in the
employ of the Company and for a one year period after the Date of Termination,
he shall not except on behalf of the Company, directly or indirectly, and
regardless of the reason for his ceasing to be employed by the Company:
(i) attempt in any manner to solicit from any client business
of the type performed by the Company or to persuade any client to
cease to do business or to reduce the amount of business which any
such client has customarily done or is reasonably expected to do with
the Company, whether or not the relationship between the Company and
such client was originally established in whole or in part through his
efforts; or
(ii) employ as an employee or retain as an exclusive consultant
any person who is then or at any time during the preceding twelve
months was an employee of or exclusive consultant to the Company, or
persuade or attempt to persuade any employee of or exclusive
consultant to the Company to leave the employ of the Company or to
become employed as an employee or retained as a consultant by anyone
other than the Company; or
(iii) render to or for any client any services of the type
rendered by the Company.
7
<PAGE>
As used in this paragraph 8, the noun "COMPANY" shall include subsidiaries of
the Company and the term "CLIENT" shall mean (1) anyone who is a client of the
Company on the Date of Termination or, if the Executive's employment shall not
have terminated, at the time of the alleged prohibited conduct (the
"DETERMINATION DATE"); (2) anyone who was a client of the Company at any time
during the two year period immediately preceding the Determination Date; and (3)
any prospective clients to whom the Company had made a new business presentation
at any time during the one year period immediately preceding the Determination
Date.
(b) The Executive also agrees that he will not at any time (whether
during the Term or after termination of this Agreement), disclose to anyone any
confidential information or trade secret of the Company, or any client of the
Company, or utilize such confidential information or trade secret for his own
benefit, or for the benefit of third parties and all memoranda, notes, records
or other documents compiled by him or made available to him during the Term
pertaining to the business of the Company or its respective clients shall be the
property of the Company and shall be delivered to the Company on the termination
of his employment or at any other time, upon request. The term "confidential
information or trade secret" does not include information which (i) becomes
generally available to the public other than by breach of this provision or (ii)
the Executive learns from a third party who is not under an obligation of
confidence to the Company. In the event that the Executive becomes legally
required to disclose any confidential information or trade secret, he will
provide the Company with prompt notice thereof so that the Company may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this paragraph 8(b). In the event that such protective order or
other remedy is not obtained, or that the Company waives compliance with the
provisions of this paragraph 8(b), the Executive will furnish only that portion
of the confidential information or trade secret which is legally required and
will exercise his best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the confidential
information or trade secret.
(c) If the Executive commits a breach, or is about to commit a
breach, of any of the provisions of paragraphs 8(a) or (b) above, the Company
shall have the right to have the
8
<PAGE>
provisions of this Agreement specifically enforced by any court having equity
jurisdiction without being required to post bond or other security and without
having to prove the inadequacy of the available remedies at law, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company. In addition, the Company may take all such other
actions and remedies available to it under law or in equity and shall be
entitled to such damages as it can show it has sustained by reason of such
breach.
(d) The parties acknowledge that the type and periods of restriction
imposed in the provisions of paragraphs 8(a) and (b) above are fair and
reasonable and are reasonably required for the protection of the Company and the
goodwill associated with the business of the Company (including without
limitation the business acquired pursuant to the Purchase Agreement); and that
the time, scope, geographic area and other provisions of this paragraph 8 have
been specifically negotiated by sophisticated commercial parties and are given
as an integral part of the transactions contemplated by the Purchase Agreement,
it being understood that the clients of the Company may be serviced from any
location and accordingly it is reasonable that the restrictive covenants set
forth herein are not limited by narrow geographic area but generally by the
location of such clients and potential clients. The Executive specifically
acknowledges that his being restricted from servicing clients and prospective
clients as contemplated by this Agreement will not prevent him from being
employed or earning a livelihood in the type of business conducted by the
Company. If any of the covenants in paragraphs 8(a) or (b) above, or any part
thereof, is hereafter construed to be invalid or unenforceable, the same shall
not affect the remainder of the covenant or covenants, which shall be given full
effect, without regard to the invalid portions. If any of the covenants
contained in paragraphs 8(a) or (b), or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination shall have
the power to reduce the duration and/or areas of such provision and, in its
reduced form, such provision shall then be enforceable. The parties hereto
intend to and hereby confer jurisdiction to enforce the covenants contained in
paragraphs 8(a) and (b) above
9
<PAGE>
upon the courts of any state or other jurisdiction within the geographical scope
of such covenants in which a breach or alleged breach of a covenant contained in
paragraph 8(a) or (b) has been alleged to have occurred. In the event that the
courts of any one or more of such states or other jurisdictions shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the right of the Company to the relief provided above
in the courts of any other states or other jurisdictions within the geographical
scope of such covenants, as to breaches of such covenants in such other
respective states or other jurisdictions, the above covenants as they relate to
each state or other jurisdiction being, for this purpose, severable into diverse
and independent covenants.
9. INTELLECTUAL PROPERTY
---------------------
During the Term, the Executive will disclose to the Company all ideas,
inventions and business plans developed by him during such period which relate
directly or indirectly to the business of the Company, including without
limitation, any design, logo, slogan or campaign or any process, operation,
product or improvement which may be patentable or copyrightable. The Executive
agrees that all patents, licenses, copyrights, tradenames, trademarks, service
marks, advertising campaigns, promotional campaigns, designs, logos, slogans and
business plans developed or created by the Executive in the course of his
employment hereunder, either individually or in collaboration with others, will
be deemed works for hire and the sole and absolute property of the Company. The
Executive agrees, that at the Company's request, he will take all steps
necessary to secure the rights thereto to the Company by patent, copyright or
otherwise.
10. ENFORCEABILITY
--------------
The failure of any party at any time to require performance by another
party of any provision hereunder shall in no way affect the right of that party
thereafter to enforce the same, nor shall it affect any other party's right to
enforce the same, or to enforce any of the other provisions in this Agreement;
nor shall the waiver by any party of the breach of any provision
10
<PAGE>
hereof be taken or held to be a waiver of any subsequent breach of such
provision or as a waiver of the provision itself.
11. ASSIGNMENT
----------
This Agreement is a personal contract and the Executive's rights and
obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive. The rights and obligations of the Company
hereunder shall be binding upon and run in favor of the successors and assigns
of the Company; provided, however, the Company may not assign or transfer its
rights under this Agreement except in connection with a merger or consolidation
(whether or not the Company is the continuing entity), or the sale or
liquidation of all or substantially all the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company as contained in this Agreement, either contractually or as a matter of
law.
12. MODIFICATION
------------
This Agreement may not be orally canceled, changed, modified or
amended, and no cancellation, change, modification or amendment shall be
effective or binding, unless in writing and signed by the parties to this
Agreement and approved by the President of Omnicom.
13. SEVERABILITY: SURVIVAL
----------------------
In the event any provision or portion of this Agreement is determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the invalid or unenforceable part had
been severed and deleted. The respective rights and obligations of the parties
hereunder shall survive the termination of the Executive's employment to the
extent necessary to the intended preservation of such rights and obligations.
14. LIFE INSURANCE
--------------
11
<PAGE>
The Executive agrees that the Company shall have the right to obtain
life insurance on the Executive's life, at the sole expense of the Company, as
the case may be, and with the Company as the sole beneficiary thereof. The
Executive shall (a) cooperate fully in obtaining such life insurance, (b) sign
any necessary consents, applications and other related forms or documents and
(c) take any reasonably required medical examinations.
15. NOTICES
-------
Any notice, request, instruction or other document to be given
hereunder by any party hereto to another party shall be in writing and shall be
deemed effective (a) upon personal delivery, if delivered by hand, or (b) three
days after the date of deposit in the mails, postage prepaid if mailed by
certified or registered mail, or (c) on the next business day, if sent by
facsimile transmission or prepaid overnight courier service, and in each case,
addressed as follows:
If to the Executive:
-------------------
Mr. Jeffrey A. Dachis
c/o Razorfish, Inc.
580 Broadway
Suite 210
New York, NY 10012
Fax: (212) 966-6915
with a copy to:
Winthrop & Weinstine
3000 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Eric O. Madson, Esq.
Fax: (612) 347-0600
If to the Company:
-----------------
Razorfish, Inc.
580 Broadway
Suite 210
New York, NY 10012
12
<PAGE>
Attention: Chairman
Fax: (212) 966-6915
and
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
Diversified Agency Services Division
Fax: 212-415-3530
with a copy to:
Davis & Gilbert
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian
Fax: 212-468-4888
Any party may change the address to which notices are to be sent by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
16. APPLICABLE LAW
--------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without application of conflict of law
provisions applicable herein.
17. NO CONFLICT
-----------
The Executive represents and warrants that he is not subject to any
agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent him from entering
into this Agreement or which would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.
18. ENTIRE AGREEMENT
----------------
This Agreement represents the entire agreement between the Company and
the Executive with respect to the subject matter hereof, and all prior
agreements, plans and
13
<PAGE>
arrangements relating to the employment of the Executive by the Company are
nullified and superseded hereby, including but not limited to the Employment
Agreement dated May 30, 1996.
19. HEADINGS
--------
The headings contained in this Agreement are for reference purposes
only, and shall not affect the meaning or interpretation of this Agreement.
20. MISCELLANEOUS
-------------
(a) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(b) Following the date hereof and regardless of any dispute that may
arise in the future, the Executive will not, and will use his best efforts to
cause his business associates to not, disparage, criticize or make statements to
the detriment of the Company, Omnicom, or any of their affiliates; and the
Company will not, and will use their best efforts to cause their affiliated
companies to not, disparage, criticize or make statements to the detriment of
the Executive.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RAZORFISH, INC.
BY: /S/ CRAIG M. KANARICK
-------------------------------
NAME: CRAIG M. KANARICK
TITLE: CHAIRMAN
/S/ JEFFREY A. DACHIS
-------------------------------
JEFFREY A. DACHIS
15
<PAGE>
EXHIBIT 10.4
JD NON-COMPETITION AGREEMENT
September 18, 1996
JWL Associates Corp.
and Razorfish, Inc.
437 Madison Avenue
New York, New York 10022
Gentlemen:
Pursuant to the Stock Purchase Agreement of even date herewith (the
"PURCHASE AGREEMENT"), JWL Associates Corp. ("PURCHASER"), acquired a 40% equity
interest in Razorfish, Inc., a New York corporation (the "COMPANY") and, under
certain circumstances, an option to increase this to an 80% equity interest in
the Company. The undersigned is a shareholder in the Company and has an
interest in the purchase price paid and to be paid under the said Purchase
Agreement. Capitalized terms used herein but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
As an inducement to the Purchaser to consummate the transactions
contemplated by the Purchase Agreement, the undersigned hereby covenants and
agrees that from the date hereof through the later of (x) December 31, 2001 and
(y) one year after termination of employment with the Company, he will not,
except on behalf of the Company, directly or indirectly, and regardless of his
continuing to be employed by the Company or the reason for his ceasing to be
employed by the Company:
(1) attempt in any manner to solicit from any client business of the
type performed by the Company or to persuade any client to cease to do
business or to reduce the amount of business which any such client has
customarily done or is reasonably expected to do with the Company, whether
or not the relationship between the Company and such client was originally
established in whole or in part through his efforts; or
(2) employ as an employee or retain as an exclusive consultant any
person who is then or at any time during the preceding twelve months was an
employee of or exclusive consultant to the Company, or persuade or attempt
to persuade any employee of or exclusive consultant to the Company to leave
the employ of the Company or to become employed as an employee or retained
as a consultant by anyone other than the Company; or
<PAGE>
(3) render to or for any client any services of the type which are
rendered by the Company.
As used herein, the term "Company" shall include subsidiaries of the
Company; and the term "client" shall mean (i) anyone who is a client of the
Company at the time of the termination of the undersigned's employment with the
Company, or if the undersigned's employment shall not have terminated, at the
time of the alleged prohibited conduct (the "DETERMINATION DATE"); (ii) anyone
who was a client of the Company at any time during the two year period
immediately preceding the Determination Date; and (iii) any prospective clients
to whom the Company made a new business presentation at any time during the one
year period immediately preceding the Determination Date.
The undersigned acknowledges that his position with the Company
requires the performance of services which are special, unique, extraordinary
and of an intellectual character, and places and will continue to place him in a
position of confidence and trust with the clients of the Company. Accordingly,
the undersigned acknowledges that the restrictive covenants above are necessary
in order to protect and maintain the trade secrets, business and assets and
goodwill of the Company.
The undersigned acknowledges that a breach of the covenants contained
in this Agreement may cause the Purchaser irreparable damage, the exact amount
of which will be difficult to ascertain, and that the remedies at law for any
such breach will be inadequate. Accordingly, the undersigned agrees that each
of the Purchaser and the Company shall, in addition to all other available
remedies (including without limitation seeking such damages as it can show it
has sustained by reason of such breach), be entitled to specific performance and
injunctive relief without being required to post bond or other security and
without having to prove the inadequacy of the available remedies at law.
The parties acknowledge that the time, scope, geographic area and
other provisions of this Agreement have been specifically negotiated by
sophisticated commercial parties and agree that all such provisions are
reasonable under the circumstances of the transactions contemplated by the
Purchase Agreement and are given as an integral and essential part of the
transactions contemplated by the Purchase Agreement, it being understood that
the clients of the Company may be serviced from any location and accordingly it
is reasonable that the restrictive covenants set forth herein are not limited by
narrow geographic area but generally by the location of such clients and
potential clients. The undersigned specifically acknowledges that his being
restricted from servicing clients and prospective clients as contemplated by
this Agreement will not prevent him from being employed or earning a livelihood
in the type of business conducted by the Company. In the event that any
covenant contained in this Agreement shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over too great a geographical area or by reason of its
being too extensive in any other respect, it shall be interpreted to extend only
over the maximum period of time for which it may be enforceable and/or over the
maximum geographical area as to which it
2
<PAGE>
may be enforceable and/or to the maximum extent in all other respects as to
which it may be enforceable, all as determined by such court in such action. The
existence of any claim or cause of action which the undersigned may have against
the Purchaser or the Company shall not constitute a defense or bar to the
enforcement of any of the provisions of this Agreement and shall be pursued
through separate court action by the undersigned.
The undersigned acknowledges that the Purchaser, the Company and the
undersigned intend to and hereby confer jurisdiction to enforce the covenants
contained in this Agreement upon the courts of any state or other jurisdiction
within the geographical scope of such covenants in which a breach or alleged
breach of a covenant contained herein has been alleged to have occurred. In the
event that the courts of one or more of such states or other jurisdictions shall
hold such covenants unenforceable (in whole or in part) by reason of the breadth
of such scope or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the right of the Purchaser and/or the
Company to the relief provided above in the courts of any other states or other
jurisdictions within the geographical scope of such covenants, as to breaches of
such covenants in such other respective states or other jurisdictions, the above
covenants as they relate to each state or other jurisdiction being, for this
purpose, severable into diverse and independent covenants.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (without reference to choice of law provisions
of New York law).
In the event any provision of this Agreement is found to be void and
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall nevertheless be binding upon the parties hereto with the
same effect as though the void or unenforceable part had been severed and
deleted.
3
<PAGE>
This Agreement may not be changed orally, but only by an agreement in
writing signed by the Purchaser and the undersigned.
Yours very truly,
/s/Jeffrey A. Dachis
-------------------------------------
Jeffrey A. Dachis
c/o Razorfish, Inc.
580 Broadway
New York, NY 10012
Fax No. (212) 966-6915
AGREED TO AND ACCEPTED:
JWL ASSOCIATES CORP.
By: /s/ Barry J. Wagner
---------------------------------
Name: Barry J. Wagner
Title: Secretary
Razorfish, Inc.
By: /s/ Craig M. Kanarick
--------------------------------
Name: Craig M. Kanarick
Title: Chairman
4
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
AGREEMENT made this 18th day of September 1996, by and between
RAZORFISH, INC., a New York corporation (the "COMPANY"), and CRAIG M. KANARICK
(the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, entering into this Agreement is a condition of closing under
a certain Stock Purchase Agreement dated the date hereof (the "PURCHASE
AGREEMENT") pursuant to which JWL Associates Corp. ("JWL"), a wholly-owned
subsidiary of Omnicom Group Inc. ("OMNICOM") acquired a 40% equity interest in
the Company and, under certain conditions, an option to increase this to an 80%
equity interest; and
WHEREAS, the Executive was employed by the Company, and JWL and the
Company wish to ensure the continued employment of the Executive with the
Company and the Executive wishes to accept such employment upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. EMPLOYMENT
----------
The Company agrees to employ the Executive during the Term specified
in paragraph 2, and the Executive agrees to accept such employment, upon the
terms and conditions hereinafter set forth.
2. TERM
Subject to Section 6 below and the other terms and conditions of this
Agreement, the Executive's employment by the Company shall be for a term
commencing on the date hereof
<PAGE>
and expiring on the close of business on December 31, 2001 (the "INITIAL TERM");
provided, however, the term of the Executive's employment by the Company shall
continue thereafter unless and until either party shall give to the other six
month's advance written notice ("NOTICE OF TERMINATION") of expiration of the
term (the Initial Term and the period, if any, thereafter, during which the
Executive's employment shall continue are collectively referred to as the
"TERM"). Any Notice of Termination given under this paragraph 2, shall specify
the date of expiration (which may not be earlier than the close of business on
December 31, 2001) and may be given at any time on or after June 30, 2001. The
Company shall have the right at any time during any such six month notice period
which commences on or after June 30, 2001 to relieve the Executive of his
offices, duties and responsibilities and to place him on a paid leave-of-absence
status, provided that during such notice period the Executive shall remain a
full-time employee of the Company and shall continue to receive his salary
compensation and other benefits as provided in this Agreement. The effective
date of the termination of the Executive's employment with the Company,
regardless of the reason therefor, is referred to in this Agreement as the "DATE
OF TERMINATION".
3. DUTIES AND RESPONSIBILITIES
(a) During the Term, the Executive shall have the positions of
Chairman of the Board/Executive Vice President/Director of Design and
Technology. The Executive shall report to the Board of Directors of the Company
(the "Board") and in addition, after the Company is a majority-owned subsidiary
of Omnicom, the President of Omnicom and/or his designee, at such times and in
such detail as he or they, as the case may be, shall reasonably require. In
addition, during the Term, the Executive shall serve as a Director of the
Company without additional compensation.
(b) The Executive shall have all of the powers, duties and
responsibilities customary to his offices as are reasonably necessary to the
operations of the Company and as may be assigned to him from time to time by or
under authority of the Board and/or after the
2
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Company is a majority-owned subsidiary of Omnicom, the President of Omnicom,
consistent with his position as designated in paragraph 3(a) above.
(c) The Executive shall use his best efforts to ensure that the
Company and its subsidiaries, if any, comply on a timely basis with all
budgetary and reporting requirements reasonably requested by the Board. In no
event will the Executive without the approval of the Board incur obligations on
behalf of the Company other than in the ordinary course of business or enter
into any transaction on behalf of the Company not in the ordinary course of
business. In addition, as long as the provisions of Section 3.3 to the
Shareholders Agreement of even date herewith by and among JWL, the Company, the
Executive and others are operative, the Executive will not cause the Company to
take any of the actions listed in Section 3.3 without such action having
received the written approval of JWL.
(d) The Executive's employment by the Company shall be full-time and
exclusive, and during the Term, the Executive agrees that he will (i) devote
substantially all of his business time and attention, his best efforts, and all
his skill and ability to promote the interests of the Company and its
subsidiaries; (ii) carry out his duties in a competent and professional manner;
(iii) work with other employees of the Company and its subsidiaries in a
competent and professional manner; and (iv) generally promote the interests of
the Company and its subsidiaries. Notwithstanding the foregoing, the Executive
shall be permitted to engage in other business or charitable activities (as an
active participant or a passive investor), provided that such activities are not
rendered for a company which transacts business with the Company or engages in
business competitive with that conducted by the Company (or, if such company
does transact business with the Company or does engage in a competitive business
it is a publicly held corporation and the Executive's participation is limited
to owning less than 1/4 of 1% of its outstanding shares) and further provided
that such activities (individually or collectively) do not materially interfere
with the performance of his duties or responsibilities under this Agreement.
4. COMPENSATION
------------
3
<PAGE>
As compensation for his services hereunder and in consideration of
his agreement not to compete as set forth in paragraph 8 below, during the Term,
the Company shall pay the Executive, in accordance with its normal payroll
practices, direct salary compensation at an annual rate of $104,000. The
Executive's annual rate of salary compensation may be increased (but not
decreased) by or under the authority of the Board in accordance with the salary
review policy and budgeting procedures of the Company.
5. EXPENSES; FRINGE BENEFITS
-------------------------
(a) In addition to the compensation provided for under paragraph 4,
the Company agrees to pay or to reimburse the Executive during the Term for all
reasonable, ordinary and necessary vouchered business or entertainment expenses
incurred in the performance of his services hereunder in accordance with the
policy of the Company as from time to time in effect. The Executive, as a
condition precedent to obtaining such payment or reimbursement, shall provide to
the Company any and all statements, bills or receipts evidencing the travel or
out-of-pocket expenses for which the Executive seeks payment or reimbursement,
and any other information or materials, as the Company may from time to time
reasonably require.
(b) During the Term, the Executive and, to the extent eligible, his
dependents, shall be entitled to participate in and receive all benefits under
any welfare benefit plans and programs provided by the Company (including
without limitation, medical, dental, disability, group life (including
accidental death and dismemberment) and business travel insurance plans and
programs) applicable generally to the employees of the Company.
(c) During the Term, the Executive shall be entitled to participate
in all retirement plans and programs (including without limitation any profit
sharing/401(k) plan) applicable generally to the employees of the Company,
subject, however, to generally applicable eligibility and other provisions of
the various plans and programs in effect from time to time. In addition, during
the Term, the Executive shall be entitled to receive fringe benefits and
4
<PAGE>
perquisites in accordance with the plans, practices, programs and policies of
the Company from time to time in effect and available generally to the senior
executives of the Company.
(d) The Executive shall be entitled to four weeks paid vacation
during each calendar year of the Term, to be taken at such time(s) as shall not,
in the reasonable judgment of the Board, materially interfere with the
Executive's fulfillment of his duties hereunder, and shall be entitled to as
many holidays, sick days and personal days as are in accordance with the
Company's policy then in effect for its senior executives generally, upon such
terms as may be provided of general application to senior executives of the
Company.
(e) Notwithstanding anything to the contrary contained above, the
Company shall be entitled to terminate or reduce any employee benefit or
perquisite enjoyed by the Executive pursuant to the provisions of paragraph
5(b), (c) or (d) above if such reduction is part of an across-the-board
reduction applicable to all executive officers of the Company.
6. TERMINATION
-----------
The Company, by direction of the Board, shall be entitled to terminate
the Term and to discharge the Executive for "CAUSE" effective upon the giving of
written notice. The term "cause" shall be limited to the following grounds:
(i) The Executive's repeated failure or refusal to materially
perform his duties and responsibilities as set forth in paragraph 3
hereof, or the failure of the Executive to devote substantially all of
his business time and attention exclusively to the business and
affairs of the Company in accordance with the terms hereof, in each
case if such failure or refusal is not cured within 10 days after
written notice thereof to the Executive by the Company;
(ii) The willful misappropriation of the funds or property of the
Company;
5
<PAGE>
(iii) Conviction in a court of law of, or entering a plea of guilty
or no contest to, any felony or any crime involving moral turpitude,
dishonesty or theft;
(iv) The commission by the Executive of any willful or intentional
act which injures or could reasonably be expected to injure the reputation,
business or business relationships of the Company, including without
limitation, a willful or intentional breach of the provisions of Section 8
of this Agreement; and
(v) Any material breach (not covered by any of the clauses (i)
through (iv)) of any term, provision or condition of this Agreement, if
such breach is not cured within 30 days after written notice thereof to the
Executive by the Company.
7. DISABILITY: DEATH
-----------------
In the event the Executive shall be unable to perform his duties hereunder
by virtue of illness or physical or mental incapacity or disability (from any
cause or causes whatsoever) in substantially the manner and to the extent
required hereunder prior to the commencement of such disability (all such causes
being herein referred to as "DISABILITY") and the Executive shall fail to
perform such duties for periods aggregating 180 days, whether or not continuous,
in any continuous period of 270 days, the Company shall have the right to
terminate the Executive's employment hereunder as at the end of any calendar
month during the continuance of such disability upon at lease 30 days' prior
written notice to him. In the event of the Executive's death, the Date of
Termination shall be the date of such death.
8. NON-COMPETITION AND PROTECTION OF CONFIDENTIAL INFORMATION
----------------------------------------------------------
(a) The Executive agrees that his services hereunder are of a
special, unique, extraordinary and intellectual character, and his position with
the Company places him in a position of confidence and trust with the clients
and employees of the Company. The Executive acknowledges that the rendering of
services to the clients of the Company necessarily requires
6
<PAGE>
the disclosure to the Executive of confidential information and trade secrets of
the Company (such as without limitation, proprietary software programs,
marketing plans, media plans, budgets, corporate policies, client preferences
and policies, and identity of appropriate personnel of clients with sufficient
authority to influence a shift in suppliers). The parties hereto agree that in
the course of the Executive's employment with the Company, the Executive has and
will continue to develop a personal relationship with the Company's clients and
a knowledge of those clients' affairs and requirements, and that the
relationship of the Company with its established clientele will therefore be
placed in the Executive's hands in confidence and trust. The Executive
consequently agrees that it is reasonable and necessary for the protection of
the trade secrets, goodwill and business of the Company that the Executive make
the covenants contained herein. Accordingly, the Executive agrees that while he
is in the employ of the Company and for a one year period after the Date of
Termination, he shall not except on behalf of the Company, directly or
indirectly, and regardless of the reason for his ceasing to be employed by the
Company:
(i) attempt in any manner to solicit from any client business of
the type performed by the Company or to persuade any client to cease
to do business or to reduce the amount of business which any such
client has customarily done or is reasonably expected to do with the
Company, whether or not the relationship between the Company and such
client was originally established in whole or in part through his
efforts; or
(ii) employ as an employee or retain as an exclusive consultant
any person who is then or at any time during the preceding twelve
months was an employee of or exclusive consultant to the Company, or
persuade or attempt to persuade any employee of or exclusive
consultant to the Company to leave the employ of the Company or to
become employed as an employee or retained as a consultant by anyone
other than the Company; or
7
<PAGE>
(iii) render to or for any client any services of the type
rendered by the Company.
As used in this paragraph 8, the noun "COMPANY" shall include subsidiaries of
the Company and the term "CLIENT" shall mean (1) anyone who is a client of the
Company on the Date of Termination or, if the Executive's employment shall not
have terminated, at the time of the alleged prohibited conduct (the
"DETERMINATION DATE"); (2) anyone who was a client of the Company at any time
during the two year period immediately preceding the Determination Date; and
(3) any prospective clients to whom the Company had made a new business
presentation at ant time during the one year period immediately preceding the
Determination Date.
(b) The Executive also agrees that he will not at any time (whether
during the Term or after termination of this Agreement), disclose to anyone any
confidential information or trade secret of the Company, or any client of the
Company, or utilize such confidential information or trade secret for his own
benefit, or for the benefit of third parties and all memoranda, notes, records
or other documents complied by him or made available to him during the Term
pertaining to the business of the Company or its respective clients shall be the
property of the Company and shall be delivered to the Company on the termination
of his employment or at any other time, upon request. The term "confidential
information or trade secret" does not include information which (i) becomes
generally available to the public other than by breach of this provision or (ii)
the Executive learns from a third party who is not under an obligation of
confidence to the Company. In the event that the Executive becomes legally
required to disclose any confidential information or trade secret, he will
provide the Company with prompt notice thereof so that the Company may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this paragraph 8(b). In the event that such protective order or
other remedy is not obtained, or that the Company waives compliance with the
provisions of this paragraph 8(b), the Executive will furnish only that portion
of the confidential information or trade secret which is legally required and
will exercise his best efforts to obtain a
8
<PAGE>
protective order or other reliable assurance that confidential treatment will be
accorded the confidential information or trade secret.
(c) If the Executive commits a breach, or is about to commit a breach, of
any of the provisions of paragraphs 8(a) or (b) above, the Company shall have
the right to have the provisions of this Agreement specifically enforced by any
court having equity jurisdiction without being required to post bond or other
security and without having to prove the inadequacy of the available remedies at
law, it being acknowledged and agreed that any such breach or threatened breach
will cause irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company. In addition, the Company may take all
such other actions and remedies available to it under law or in equity and shall
be entitled to such damages as it can show it has sustained by reason of such
breach.
(d) The parties acknowledge that the type and periods of restriction
imposed in the provisions of paragraphs 8(a) and (b) above are fair and
reasonable and are reasonably required for the protection of the Company and the
goodwill associated with the business of the Company (including without
limitation the business acquired pursuant to the Purchase Agreement); and that
the time, scope, geographic area and other provisions of this paragraph 8 have
been specifically negotiated by sophisticated commercial parties and are given
as an integral part of the transactions contemplated by the Purchase Agreement,
it being understood that the clients of the Company may be serviced from any
location and accordingly it is reasonable that the restrictive covenants set
forth herein are not limited by narrow geographic area but generally by the
location of such clients and potential clients. The Executive specifically
acknowledges that his being restricted from servicing clients and prospective
clients as contemplated by this Agreement will not prevent him from being
employed or earning a livelihood in the type of business conducted by the
Company. If any of the covenants in paragraphs 8(a) or (b) above, or any part
thereof, is hereafter construed to be invalid or unenforceable, the same shall
not affect the remainder of the covenant or covenants, which shall be given full
effect, without regard to the invalid portions. If any of the covenants
contained in
9
<PAGE>
paragraphs 8(a) or (b), or any part thereof, is held to be unenforceable because
of the duration of such provision or the area covered thereby, the parties agree
that the court making such determination shall have the power to reduce the
duration and/or areas of such provision and, in its reduced form, such provision
shall then be enforceable. The parties hereto intend to and hereby confer
jurisdiction to enforce the covenants contained in paragraphs 8(a) and (b) above
upon the courts of any state or other jurisdiction within the geographical scope
of such covenants in which a breach or alleged breach of a covenant contained in
paragraph 8(a) or (b) has been alleged to have occurred. In the event that the
courts of any one or more of such states or other jurisdictions shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the right of the Company to the relief provided above
in the courts of any other states or other jurisdictions within the geographical
scope of such covenants, as to breaches of such covenants in such other
respective states or other jurisdictions, the above covenants as they relate to
each state or other jurisdiction being, for this purpose, severable into diverse
and independent covenants.
9. INTELLECTUAL PROPERTY
---------------------
During the Term, the Executive will disclose to the Company all
ideas, inventions and business plans developed by him during such period which
relate directly or indirectly to the business of the Company, including without
limitation, any design, logo, slogan or campaign or any process, operation,
product or improvement which may be patentable or copyrightable. The Executive
agrees that all patents, licenses, copyrights, tradenames, trademarks, service
marks, advertising campaigns, promotional campaigns, designs, logos, slogans and
business plans developed or created by the Executive in the course of his
employment hereunder, either individually or in collaboration with others, will
be deemed works for hire and the sole and absolute property of the Company. The
Executive agrees, that at the Company's request, he will take all steps
necessary to secure the rights thereto to the Company by patent, copyright or
otherwise.
10
<PAGE>
10. ENFORCEABILITY
--------------
The failure of any party at any time to require performance by another
party of any provision hereunder shall in no way affect the right of that party
thereafter to enforce the same, nor shall it affect any other party's right to
enforce the same, or to enforce any of the other provisions in this Agreement;
nor shall the waiver by any party of the breach of any provision hereof be taken
or held to be a waiver of any subsequent breach of such provision or as a waiver
of the provision itself.
11. ASSIGNMENT
----------
This Agreement is a personal contract and the Executive's rights and
obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive. The rights and obligations of the Company
hereunder shall be binding upon and run in favor of the successors and assigns
of the Company; provided, however, the Company may not assign or transfer its
rights under this Agreement except in connection with a merger or consolidation
(whether or not the Company is the continuing entity), or the sale or
liquidation of all or substantially all the assets of the Company as contained
in this Agreement, either contractually or as a matter of law.
12. MODIFICATION
------------
This Agreement may not be orally canceled, changed, modified or
amended, and no cancellation, change, modification or amendment shall be
effective or binding, unless in writing and signed by the parties to this
Agreement and approved by the President of Omnicom.
13. SEVERABILITY: SURVIVAL
----------------------
In the event any provision or portion of this Agreement is determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this
11
<PAGE>
Agreement shall nevertheless be binding upon the parties with the same effect as
though the invalid or unenforceable part had been severed and deleted. The
respective rights and obligations of the parties hereunder shall survive the
termination of the Executive's employment to the extent necessary to the extent
necessary to the intended preservation of such rights and obligations.
14. LIFE INSURANCE
--------------
The Executive agrees that the Company shall have the right to obtain
life insurance on the Executive's life, at the sole expense of the Company, as
the case may be, and with the Company as the sole beneficiary thereof. The
Executive shall (a) cooperate fully in obtaining such life insurance, (b) sign
any necessary consents, applications and other related forms or documents and
(c) take any reasonably required medical examinations.
15. NOTICES
-------
Any notice, request, instruction or other document to be given
hereunder by any party hereto to another party shall be in writing and shall be
deemed effective (a) upon personal delivery, if delivered by hand, or (b) three
days after the date of deposit in the mails, postage prepaid if mailed by
certified or registered mail, or (c) on the next business day, if sent by
facsimile transmission or prepaid overnight courier service, and in each case,
addressed as follows:
If to the Executive:
Craig M. Kanarick
c/o Razorfish, Inc.
580 Broadway
Suite 210
New York, NY 10012
Fax No: (212) 966-6915
with a copy to:
Winthrop & Weinstine
3000 Dain Bosworth Plaza
60 South Sixth Street
12
<PAGE>
Minneapolis, Minnesota 55402
Attention: Eric O. Madson, Esq.
Fax: (612) 347-0600
If to the Company:
Razorfish, Inc.
580 Broadway
Suite 210
New York, NY 10012
Attention: President
Fax: (212) 966-6915
and
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
Diversified Agency Services Division
Fax: 212-415-3530
with a copy to:
Davis & Gilbert
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian
Fax: 212-468-4888
Any party may change the address to which notices are to be sent by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
16. APPLICABLE LAW
--------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without application of
conflict of law provisions applicable herein.
17. NO CONFLICT
-----------
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<PAGE>
The Executive represents and warrants that he is not subject to any
agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent him from entering
into this Agreement or which would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.
18. ENTIRE AGREEMENT
----------------
This Agreement represents the entire agreement between the Company and
the Executive with respect to the subject matter hereof, and all prior
agreements, plans and arrangements relating to the employment of the Executive
by the Company are nullified and superseded hereby, including but not limited to
the Employment Agreement dated May 30, 1996.
19. HEADINGS
--------
The headings contained in this Agreement are for reference purpose
only, and shall not affect the meaning or interpretation of this Agreement.
20. MISCELLANEOUS
-------------
(a) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(b) Following the date hereof and regardless of any dispute that may
arise in the future, the Executive will not, and will use his best efforts to
cause his business associates to not, disparage, criticize or make statements to
the detriment of the Company, Omnicom, or any of their affiliates; and the
Company will not, and will use their best efforts to cause their affiliated
companies to not, disparage, criticize or make statements to the detriment of
the Executive.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RAZORFISH, INC.
By:/s/ Jeffery A. Dachis
--------------------------------
Name: Jeffery A. Dachis
Title: President
/s/ Craig M. Kanarick
-----------------------------------
Craig M. Kanarick
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EXHIBIT 10.6
CK NON-COMPETITION AGREEMENT
September 18, 1996
JWL Associates Corp.
and Razorfish, Inc.
437 Madison Avenue
New York, New York 10022
Gentlemen:
Pursuant to the Stock Purchase Agreement of even date herewith (the
"PURCHASE AGREEMENT"), JWL Associates Corp. ("PURCHASER"), acquired a 40% equity
interest in Razorfish, Inc., a New York corporation (the "COMPANY") and, under
certain circumstances, an option to increase this to an 80% equity interest in
the Company. The undersigned is a shareholder in the Company and has an
interest in the purchase price paid and to be paid under the said Purchase
Agreement. Capitalized terms used herein but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
As an inducement to the Purchaser to consummate the transactions
contemplated by the Purchase Agreement, the undersigned hereby covenants and
agrees that from the date hereof through the later of (x) December 31, 2001 and
(y) one year after termination of employment with the Company, he will not,
except on behalf of the Company, directly or indirectly, and regardless of his
continuing to be employed by the Company or the reason for his ceasing to be
employed by the Company:
<PAGE>
(1) attempt in any manner to solicit from any client business of
the type performed by the Company or to persuade any client to cease to do
business or to reduce the amount of business which any such client has
customarily done or is reasonably expected to do with the Company, whether
or not the relationship between the Company and such client was originally
established in whole or in part through his efforts; or
(2) employ as an employee or retain as an exclusive consultant
any person who is then or at any time during the preceding twelve months
was an employee of or exclusive consultant to the Company, or persuade or
attempt to persuade any employee of or exclusive consultant to the Company
to leave the employ of the Company or to become employed as an employee or
retained as a consultant by anyone other than the Company; or
(3) render to or for any client any services of the type which
are rendered by the Company.
As used herein, the term "Company" shall include subsidiaries of the Company;
and the term "client" shall mean (i) anyone who is a client of the Company at
the time of the termination of the undersigned's employment with the Company, or
if the undersigned's employment shall not have terminated, at the time of the
alleged prohibited conduct (the "DETERMINATION DATE"); (ii) anyone who was a
client of the Company at any time during the two year period immediately
preceding the Determination Date; and (iii) any prospective clients to whom the
Company made a new business presentation at any time during the one year period
immediately preceding the Determination Date.
The undersigned acknowledges that his position with the Company
requires the performance of services which are special, unique, extraordinary
and of an intellectual character, and places and will continue to place him in a
position of confidence and trust with the clients of the Company. Accordingly,
the undersigned acknowledges that the restrictive covenants above are necessary
in order to protect and maintain the trade secrets, business and assets and
goodwill of the Company.
The undersigned acknowledges that a breach of the covenants contained
in this Agreement may cause the Purchaser irreparable damage, the exact amount
of which will be difficult to ascertain, and that the remedies at law for any
such breach will be inadequate. Accordingly, the undersigned agrees that each
of the Purchaser and the Company shall, in addition to all other available
remedies (including without limitation seeking such damages as it can show it
has sustained by reason of such breach), be entitled to specific performance and
injunctive relief without being required to post bond or other security and
without having to prove the inadequacy of the available remedies at law.
The parties acknowledge that the time, scope, geographic area and
other provisions of this Agreement have been specifically negotiated by
sophisticated commercial parties and agree that all such provisions are
reasonable under the circumstances of the
2
<PAGE>
transactions contemplated by the Purchase Agreement and are given as an integral
and essential part of the transactions contemplated by the Purchase Agreement,
it being understood that the clients of the Company may be serviced from any
location and accordingly it is reasonable that the restrictive covenants set
forth herein are not limited by narrow geographic area but generally by the
location of such clients and potential clients. The undersigned specifically
acknowledges that his being restricted from servicing clients and prospective
clients as contemplated by this Agreement will not prevent him from being
employed or earning a livelihood in the type of business conducted by the
Company. In the event that any covenant contained in this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action. The
existence of any claim or cause of action which the undersigned may have against
the Purchaser or the Company shall not constitute a defense or bar to the
enforcement of any of the provisions of this Agreement and shall be pursued
through separate court action by the undersigned.
The undersigned acknowledges that the Purchaser, the Company and the
undersigned intend to and hereby confer jurisdiction to enforce the covenants
contained in this Agreement upon the courts of any state or other jurisdiction
within the geographical scope of such covenants in which a breach or alleged
breach of a covenant contained herein has been alleged to have occurred. In the
event that the courts of one or more of such states or other jurisdictions shall
hold such covenants unenforceable (in whole or in part) by reason of the breadth
of such scope or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the right of the Purchaser and/or the
Company to the relief provided above in the courts of any other states or other
jurisdictions within the geographical scope of such covenants, as to breaches of
such covenants in such other respective states or other jurisdictions, the above
covenants as they relate to each state or other jurisdiction being, for this
purpose, severable into diverse and independent covenants.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (without reference to choice of law provisions
of New York law).
In the event any provision of this Agreement is found to be void and
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall nevertheless be binding upon the parties hereto with the
same effect as though the void or unenforceable part had been severed and
deleted.
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<PAGE>
This Agreement may not be changed orally, but only by an agreement in
writing signed by the Purchaser and the undersigned.
Yours very truly,
/s/ Craig M. Kanarick
---------------------------------
Craig M. Kanarick
c/o Razorfish, Inc.
580 Broadway
New York, NY 10012
Fax No. (212) 966-6915
AGREED TO AND ACCEPTED:
JWL ASSOCIATES CORP.
By: /s/ Barry J. Wagner
---------------------------------
Name: Barry J. Wagner
Title: Secretary
Razorfish, Inc.
By: /s/ Jeffrey A. Dachis
---------------------------------
Name: Jeffrey A. Dachis
Title: President
4
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the 30th day of April, 1998, is
made by and between Peter Seidler residing at 10 Sheridan Square, Apartment 11A,
New York, New York 10014 (hereinafter the "Employee") and Razorfish, Inc., a New
York Corporation having its principal executive offices at 107 Grand Street,
Third Floor, New York, NY 10013 (hereinafter the "Company").
WHEREAS, Company desires to employ Employee and Employee desires to
accept such employment on the terms set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Position and Responsibilities.
-----------------------------
1.1 During the Term, as hereafter defined, Company agrees to employ
Employee to render Employee's exclusive services as both Company's Chief
Creative Officer and as the Solutions Director of Razorfish Solutions New York,
and Employee agrees to perform such services for and at the direction of Company
on the terms and conditions hereinafter set forth. During the Term, Employee
shall render such services as are requested from time to time by Company, and
Employee shall perform the duties assigned to Employee hereunder.
1.2 Employee shall, to the best of Employee's ability, devote
Employee's full business time and best efforts to the performance of Employee's
duties hereunder and the business and affairs of Company in accordance with the
reasonable instructions and directions of Company in all matters, including
those involving creative decisions and judgments, and, in doing so, shall duly,
punctually and faithfully perform and observe any and all rules and policies
which Company may now or shall hereafter establish governing the conduct of its
business so long as such rules and policies are reasonable and applied on a non-
discriminatory basis.
1.3 Company shall not relocate Employee, without Employee's prior
consent, beyond a radius of seventy-five (75) miles of the New York metropolitan
area.
2. Term of Employment.
------------------
2.1 The Term of this Agreement shall commence as of the date hereof
and continue through and including December 31, 2001, unless sooner terminated
by Company as provided in Section 2.2 (the "Initial Term"). After the expiration
of the Initial Term, Employee's employment shall continue on an at-will basis
unless and until it is terminated by either party, effective at any time on or
after the expiration of the Initial Term, on thirty (30) days prior notice. The
Initial Term together with the period of Employee's employment hereunder after
the expiration of the Initial Term shall constitute the "Term" hereof.
<PAGE>
2.2 Company shall have the right, upon written notice to Employee, to
terminate Employee's employment and the Term hereof at any time for cause, as
defined in Section 2.3 below, provided, however, that such termination shall not
affect or limit Company's rights under Sections 4, 6 and 7 hereof.
2.3 For purposes of Section 2.2 above, "cause" shall mean:
(a) material breach by Employee of this Agreement, provided,
that solely with respect to any such material breach which is capable of being
cured, Company has given Employee written notice specifying such failure and:
(1) Employee fails to cure the same within thirty (30) days
after Employee's receipt of such notice; or
(2) if such failure is not capable of being cured within
said thirty (30) day period:
(A) Employee fails to take reasonable steps and to
proceed with diligence to cure the same within such thirty (30) day period; or
(B) if Employee has taken reasonable steps and
proceeded with diligence to cure the same within such thirty (30) day period but
has failed to cure the same no later than forty-five (45) days after Employee's
receipt of notice with respect thereto;
(b) gross negligence, gross neglect of duties, gross
insubordination Employee's unauthorized appropriation of Company's property,
violation of any law which has or would reasonably be expected to have a
material adverse effect upon the Company, conviction of or plea of no contest to
any felony involving moral turpitude and habitual insobriety, drug abuse or
excessive absenteeism.
2.4 Subject to Section 2.2, Employee's employment under this
Agreement shall terminate immediately upon Employee's death, without further
notice, provided, however, that Employee's base salary hereunder shall continue
to be paid by Company to Employee's designated beneficiary for the period of
twelve (12) months immediately following Employee's death. Subject to Section
2.2, if Employee becomes disabled from performing Employee's duties under this
Agreement, Company may terminate Employee's employment under this Agreement. For
purposes of this Section 2.4, Employee may be deemed to be disabled if Employee
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than three (3) months or six (6) months in any twelve (12)
month period.
3. Compensation.
------------
3.1 (a) During the Term of this Agreement, Company shall pay to
Employee a base salary at an annual rate of One Hundred Twenty-Five Dollars
($125,000), payable in
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installments in accordance with Company Policy. The Board of Directors shall
review the base salary annually in the Initial Term and no less frequently than
semi-annually thereafter, and may in its sole discretion increase it to reflect
performance, appropriate industry guideline data and other factors. However, the
Board is not obligated to provide for any increases.
(b) Company shall pay Employee an amount equal to Fifty Thousand
Dollars ($50,000) as a signing bonus upon complete execution of this agreement.
3.2 (a) Beginning June 15, 1998, Employee shall be eligible from time
to time to receive bonuses. Eligibility will be determined through a review
process that will consider Employee's work performance and contribution to
Company, and Company's performance, as determined by, and at the discretion of
the Board of Directors. Employee performance reviews will be conducted by
Company in accordance with Company policy.
(a) Notwithstanding the terms of paragraph 3.2(a) to the
contrary, Company and Employee hereby acknowledge that Company intends to
establish a so-called "Executive Bonus Pool" to provide the Company's key
executives with the opportunity to share in the Company's profits after taxes.
Participation in the Executive Bonus Pool will be granted in the discretion of
the Board of Directors of the Company (or a Committee thereof) and is expected
to be granted principally to recognize professional performance over the
preceding fiscal year. Employee will be eligible to participate in the Executive
Bonus Pool, when implemented, on par with Company's "key executives" as such
term is generally understood by Company .
3.3 (a) Company shall reimburse Employee for reasonable business
expenses incurred on behalf of Company upon presentation of appropriate
receipts, including, without limitation, entertainment of clients and guests of
Company as deemed appropriate in the sole discretion of Company, cellular phone
charges and online access charges.
(b) Company shall provide to Employee for Employee's use for
business purposes during the Term hereof in connection with the payment of the
expenses described in Section 3.3(a) above a corporate charge card (e.g.,
American Express or Visa).
(c) Employee shall be entitled to participate in the sports and
fitness gymnasium membership program offered to all Company employees.
(d) The Company shall provide to Employee for Employee's use
during the Term hereof one (1) desktop computer and one (1) portable computer
together with appropriate peripherals.
(e) The Company shall provide to Employee for Employee's use
during the Term hereof a private office and access to an administrative
assistant and all such other prerequisites which are or shall from time to time
be deemed by Company to be commensurate with Employee's title and position
hereunder.
(f) The Company shall reimburse Employee for the reasonable
costs and expenses incurred in connection with the attendance by Employee no
more than once during any year of the Term at the Harvard Business School
Management Training Course, provided,
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however, that Employee's attendance at such program shall not materially
interfere with the performance by Employee of Employee's services hereunder.
3.4 In addition to the compensation and benefits payable to Employee
pursuant to Section 3.1, Section 3.2 and Section 3.3 above, Employee shall:
(a) participate in any benefits which Company from time to time
may offer to or provide for its employees generally, including, but not limited
to, participation in pension plans and hospitalization, disability and medical
benefit plans. The Board of Directors may in its sole discretion increase
insurance coverage for all employees as permitted by business conditions.
However, the Board is not obligated to provide any increases;
(b) be entitled to four (4) weeks vacation accrued in accordance
with Company's rules and policies; and
(c) be entitled to receive stock of Company in accordance with
the terms and conditions of the Stock Option Agreement attached hereto as
Exhibit A and the Stock Restriction Agreement attached hereto as Exhibit B.
3.5 Employee recognizes that the compensation, benefits and other
amounts provided by Company under this Agreement may be subject to federal,
state or local income taxes. It is expressly understood and agreed that all such
taxes (excluding Company's portion of FICA) shall be the responsibility of
Employee. To the extent that federal, state or local law requires withholding of
taxes on compensation, benefits or other amounts provided under this Agreement,
Company shall withhold the necessary amounts from the amounts payable to
Employee under this Agreement.
4. Ownership of and Rights to Proprietary Information.
--------------------------------------------------
4.1 Employee hereby agrees to assign and does assign to Company all
of Employee's right, title and interest in any and all proprietary information
discovered, conceived, developed, created or reduced to practice by Employee
personally or jointly with others in the course of performing services under
this Agreement. Employee agrees to disclose to Company the existence of all such
proprietary information, and further agrees to execute and deliver promptly all
proper papers and perform a proper legal acts without expense to Employee
(including, without limitation, the assignment by Employee to Company of rights)
which Company deems necessary or desirable to vest in Company all of Employee's
right, title and interest in and to such proprietary information, to enable
Company to file patent applications, and obtain and maintain Letters Patent with
respect to patentable material and to enable Company to confirm or perfect its
rights in copyrightable material. Employee agrees that all proprietary
information which is subject to United States Copyright Law is a "work made for
hire," and in the event that it is determined that any such work is deemed not
to be a work made for hire, the foregoing assignment and agreement to assign
shall apply.
4.2 Company agrees that it shall have no right, title or interest in
any proprietary information for which no equipment, supplies, facility or trade
secret information of Company was used, or which was developed entirely apart
from the services performed by
4
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Employee under this Agreement, or which does not relate to or result from
Employee's work under this Agreement. Employee represents that, except as
disclosed to Company in writing, all material created or submitted by Employee
for or to Company (excluding any material which is assigned by Company to
Employee for preparation) shall not be subject to an obligation of
confidentiality in favor of, or infringe upon or violate any rights of any third
person, including but not limited to any right or interest in any copyright,
patent or trade secret rights.
4.3 "Proprietary information," for purposes of this Agreement,
includes but shall not be limited to any trade secret (as defined in the Uniform
Trade Secrets Act), any inventions, improvements and ideas, whether or not
patentable, or know-how relating thereto, any material which is protected by
copyright and any other Confidential Information (as defined in paragraph 6.3
below).
5. Name and Likeness. Company shall have the right to use Employee's
-----------------
name as well as Employee's biography and likeness in the form approved by
Employee in connection with its business, including in advertising its products
and services, and may, with Employee's permission, which shall not be withheld
unreasonably, grant this right to others, but not for use as a direct
endorsement.
6. Confidentiality.
---------------
6.1 Employee shall not, during the Term and thereafter, disclose
confidential information of Company (other than to an employee of Company or to
a person to whom disclosure is reasonably necessary or appropriate in connection
with the performance by Employee of services hereunder) and shall not use
confidential information of Company for any purpose beyond the performance of
services under this Agreement without the prior written consent of Company. All
confidential information shall remain the property of Company. Upon expiration
or termination of employment, Employee shall return to Company all documents,
records, plans, designs, notebooks and other evidences, including all copies
thereof, of information, including proprietary information or confidential
information, obtained by Employee during employment.
6.2 The obligation of confidentiality under this Agreement shall not
apply to information which Employee can show from documented records is or
becomes generally available to the public without fault of Employee, or which is
obtained without restriction on publication or use from a third party having the
right to disclose the same.
6.3 "Confidential information," for purposes of this Agreement shall
mean all information maintained in confidence by Company. It includes, but is
not limited to, all information that derives independent economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable through proper means by, other persons who can derive economic
value from its disclosure or use. It includes, but is not limited to,
proprietary information and information relating to such business matters as
research and development, manufacturing processes, management systems and
techniques, the identity and profiles of customers and suppliers and sales and
marketing plans and information. Such information may be marked as confidential
or proprietary, or received under circumstances
5
<PAGE>
reasonably interpreted as imposing an obligation of confidentiality. Such
information does not lose its status as confidential information merely because
it was known by a limited number of persons or entities or because it was not
entirely originated by Company. Employee acknowledges that the confidential
information of Company is a valuable, special and unique asset of Company, and
that any disclosure of such confidential information may be materially damaging
to Company.
7. Restrictions on Competitive Activities. Employee acknowledges that
--------------------------------------
Employee will have access to significant confidential and valuable information
which can be used unfairly and to the harm of Company by present or potential
competitors in the digital new media industry. Employee therefore agrees as
follows:
7.1 (a) During the Term hereof, Employee will not render services or
give advice to, affiliate with (as an employee, shareholder, partner, consultant
or otherwise), or invest or acquire any interest in, in whole or in significant
part, any other person or organization which is engaged in or about to become
engaged in commercial development of digital new media products or services,
including developing home pages, web sites or other interactive environments on
the World Wide Web, or any proprietorship, partnership, corporation or other
entity which is engaged anywhere in the world in developing, owning or operating
any such environment (a Conflicting Organization).
(b) Notwithstanding the terms of paragraph 7.1 (a) above,
Employee shall not be prohibited from:
(1) investing in securities of any company that is listed
on a national securities exchange or traded on The NASDAQ Stock Market, provided
that Employee does not hereafter own, or have the right to acquire, more than
five (5%) of the outstanding voting securities of such company; and
(2) authoring for publication books and periodical
articles.
7.2 For a period of six months after termination with cause by
Company of Employee's employment or for a period of six months after the
termination by Employee of Employee's employment prior to the expiration of the
Term, without prior written approval of Company's Board of Directors, which
shall not be withheld unreasonably, Employee will not:
(i) render services or give advice to, or affiliate with
(as an employee, shareholder, lender, partner, consultant or otherwise) or
invest or acquire any interest in, any Conflicting Organization.
Notwithstanding the foregoing, if the business of the Conflicting
Organization has separate and distinct divisions, Employee may, following
termination of such employment, render services or give advice to, or
affiliate with, a division which would not itself constitute a Conflicting
Organization if, prior thereto, Company receives written assurances
satisfactory to Company from the Conflicting Organization and Employee that
Employee will not directly or indirectly render services or give advice or
information to any division of such Conflicting Organization which would
itself constitute a Conflicting Organization; or
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<PAGE>
(ii) solicit, endeavor to induce the termination of
employment of, or otherwise interfere with the relationship of Company
with, any person who is employed by or otherwise engaged to perform
services for Company, or any person or entity who is, or was within the
term of this Agreement, a customer or client of Company, whether for
Employee's own account or for the account of any other individual,
partnership, firm, corporation or other business organization. For the
purposes of this Section, Company shall mean and include Company's
distributors and suppliers.
7.3 During the periods described in Sections 7.1 and 7.2, Employee
will not assist or encourage, directly or indirectly, any other person to carry
out, directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 7 if such activity were carried out by Employee,
either directly or indirectly; and in particular Employee agrees that Employee
will not induce, directly or indirectly, any shareholder of Company to carry
out, directly or indirectly, any such activity.
8. Equitable Remedies. Employee acknowledges and agrees that Company will
------------------
not have an adequate remedy at law in the event of any breach by Employee of
Sections 4, 6 and 7 and Company shall therefore be entitled, in addition to any
other remedies that may be available, to injunctive and/or other equitable
relief to prevent or remedy a breach of such sections by Employee.
9. Miscellaneous.
-------------
9.1 Survival. Employee's duties under Sections 4, 6 and 7 shall
survive termination of Employee's employment with Company to the extent provided
under such Section.
9.2 Assignment. Company may, at its election, assign this agreement
or any of its rights hereunder to any subsidiary, affiliate or division of
Company, or to any entity which acquires a controlling interest in Company by
merger or otherwise. No such assignment shall relieve Company of its obligations
hereunder, it being understood and agreed that Company shall remain, and its
permitted assignees shall be, each, primarily liable with respect thereto.
This Agreement and the rights and obligations of the Company
shall bind and inure to the benefit of any successor or assign of Company. This
Agreement and the rights or benefits hereunder may not be assigned by Employee.
9.3 Interpretation. In case any one or more of the provisions
contained in the Agreement shall be held to be invalid, illegal or unenforceable
in any respect, for any reason, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall be held to be excessively broad, for any
reason, it shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.
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<PAGE>
9.4 Notices. Any notice which Company is required or may desire to
give to Employee shall be given by personal delivery or registered or certified
mail, return receipt requested, addressed to Employee at his address of record
with Company or at such other place as Employee may from time to time designate
in writing. Any notice which Employee is required or may desire to give to
Company hereunder shall be given by personal delivery or by registered or
certified mail, return receipt requested, addressed to Company at its principal
office, or at such other office as Company may from time to time designate in
writing. The date of personal delivery or the date of mailing such notice shall
be deemed to be the date of delivery thereof.
9.5 Waiver. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provisions of this
Agreement.
9.6 Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by both parties hereto.
9.7 Applicable Law. This Agreement has been negotiated in, and shall
be governed by, the internal laws of the State of New York.
9.8 Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
9.9 Expectations Regarding Employment, Service as Officer or Director
and Ownership of Shares of Company.
(i) COMPANY AND EMPLOYEE AGREE THAT THIS AGREEMENT
EXPRESSES ALL OF THE EXPECTATIONS BETWEEN EMPLOYEE AND COMPANY REGARDING
THE TERM OF EMPLOYEE'S EMPLOYMENT AND EMPLOYEE'S AND COMPANY'S RIGHT TO
TERMINATE THAT EMPLOYMENT. EMPLOYEE SHALL HAVE NO GREATER RIGHTS AS AN
EMPLOYEE OR AS AN OFFICER, DIRECTOR OR SHAREHOLDER, AS THE CASE MAY BE, OF
COMPANY (OR OF ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF
COMPANY) THAN ANY OTHER PERSON WHO IS NOT RELATED TO COMPANY OR SUCH
AFFILIATE IN MORE THAN ONE SUCH CAPACITY. COMPANY HEREBY ADVISES EMPLOYEE
THAT COMPANY WOULD NOT ENTER INTO THIS AGREEMENT OR ELECT EMPLOYEE AS AN
OFFICER OR DIRECTOR, AS THE CASE MAY BE, IF EMPLOYEE HAD ANY EXPECTATION
THAT EMPLOYEE'S OWNERSHIP OF STOCK OR SERVICE AS AN OFFICER OR DIRECTOR
WOULD ENTITLE EMPLOYEE TO CONTINUED EMPLOYMENT WITH (OR CONTINUED STATUS AS
AN OFFICER OR DIRECTOR OF) COMPANY OR ANY AFFILIATE OF COMPANY OTHER THAN
AS SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE FOREGOING SENTENCES,
EMPLOYEE ACKNOWLEDGES THAT COMPANY, IN ITS SOLE DISCRETION, MAY DECLINE IN
THE FUTURE
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TO RENEW HIS EMPLOYMENT UPON TERMINATION OF THIS AGREEMENT FOR ANY REASON.
(ii) EMPLOYEE CONFIRMS THAT EMPLOYEE HAS REVIEWED THIS AGREEMENT
CAREFULLY AND UNDERSTANDS IT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS
CONSULTED WITH OR BEEN AFFORDED AMPLE OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND ANY OTHER
AGREEMENTS BETWEEN OR AMONG EMPLOYEE, COMPANY AND ANY OF ITS PRESENT OR
PROSPECTIVE SHAREHOLDERS AND/OR DIRECTORS, WHICH MAY HAVE BEEN ENTERED INTO
SUBSTANTIALLY CONTEMPORANEOUSLY WITH THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have hereunto set their hand as of the
date first set forth above.
/s/ Peter Seidler
----------------------------
PETER SEIDLER
RAZORFISH, INC.
BY:/s/ Jeffrey A. Dachis
-------------------------
Authorized Officer
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EXHIBIT 10.8
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment"), dated as of
November 26, 1998, by and between Peter Seidler, residing at 10 Sheridan
Square, Apartment 11A, New York, New York 10014 (the "Employee") and Razorfish,
Inc., a New York corporation having its principal executive offices at 107 Grand
Street, New York, New York 10013 (the "Company"), amends the Employment
Agreement, dated April 30, 1998, between the Employee and the Company (the
"Employment Agreement").
WHEREAS, the parties are currently party to the Employment Agreement
which sets forth, among other things, the circumstances under which the
employment of Employee may be terminated for cause; and
WHEREAS, concurrently with this Amendment, the parties are entering
into an amendment to the Stock Option Agreement, dated April 30, 1998, between
the parties, (the "Option Agreement Amendment") pursuant to which certain rights
of Employee in options in the Company's common stock will be amended.
NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
ARTICLE I
AMENDMENTS
SECTION 1.1. Amendment of Section 1.1. Section 1.1 of the Employment
------------------------
Agreement shall be amended by deleting the phrase "and as the Solutions Director
of Razorfish Solutions New York" as it appears in the third line of such
section.
SECTION 1.2. Amendment of Section 2.3(a).
---------------------------
(a) Section 2.3(a) of the Employment Agreement shall be amended by
deleting the phrase "thirty (30) day period" in each place it appears in such
subsection and inserting in its place the following:
sixty (60) day period
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ARTICLE II
MISCELLANEOUS
SECTION 2.1. Governing Law. This Amendment shall be construed in
-------------
accordance with, and governed in all respects by, the internal laws of the State
of New York (without giving effect to principles of conflict of laws).
SECTION 2.2. Severability. In case any provision of this Amendment shall
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 2.3. Further Assurances. Each of the parties shall execute and
------------------
deliver such documents and take such other actions as reasonably requested by
any other party hereto in furtherance of the transactions contemplated hereby.
SECTION 2.4. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Amendment as of the date first set forth above.
RAZORFISH, INC.
By: /s/ Jeffrey A. Dachis
----------------------------------
Name: Jeffrey A. Dachis
Title:
/s/ Peter Seidler
________________________________
Peter Seidler
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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the 19th day June, 1997, is
made by and between Jean-Philippe Maheu, 315 Riverside Drive #7A, New York, New
York 10025 (hereinafter the "Employee") and Razorfish, Inc., a New York
corporation having its principal executive offices at 107 Grand Street, 3rd
Floor, New York, NY 10013 (hereinafter the "Company").
WHEREAS, Company desires to employ Employee and Employee desires to
accept such employment on the terms set forth in this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
1. Position and Responsibilities.
-----------------------------
1.1 (a) Employee shall serve as Vice President of Business
Development and Strategy. During Employee's employment hereunder, the Employee's
principal place of business shall be Company's principal offices in the New York
metropolitan area; but it is agreed that the Employee will be expected to engage
in reasonable travel from time to time. Employee shall report to Jeffrey A.
Dachis, the President of the Company.
(b) Employee shall perform such duties as are commonly performed
by employees holding the aforesaid title and as the Company shall from time to
time designate. The Company will conduct a review of Employee's job
responsibilities on a semi-annual basis.
1.2 Employee shall, to the best of his ability, devote his full time
and best efforts to the performance of his duties hereunder and the business and
affairs of the Company in accordance with the instructions and directions of
Company in all matters, including those involving creative decisions and
judgments, and, in doing so, shall duly, punctually and faithfully perform and
observe any and all rules and policies which the Company may now or shall
hereafter establish governing the conduct of its business. Notwithstanding the
foregoing and subject to Company's prior approval, it is understood and agreed
that Employee shall be entitled to engage in non-Company projects during non-
business time.
2. Term of Employment.
------------------
2.1 (a) (i) Employee's employment under this Agreement shall
commence as of June 30, 1997 and terminate on June 30, 1998, unless sooner
terminated by either party hereto in accordance with paragraph 2. 1 (a)(ii)
below or by the Company as provided in Section 2.2.
(ii) Notwithstanding the terms of Section 2. 1 (a)(i)
above, either party hereto may terminate the term hereof by sending the other
party written notice of such termination prior to September 30, 1997.
<PAGE>
(b) Notwithstanding the foregoing, beginning July 1, 1998 this
Agreement and Employee's employment under this Agreement shall renew for
successive one (1) year terms on the terms and conditions set forth herein
unless either party gives written notice to the other of non-renewal, within
ninety (90) days prior to scheduled renewal. Except as expressly provided to the
contrary in Section 2.5(c), Employee's rights to pay and benefits shall cease on
the date his employment hereunder terminates.
2.2 The Company shall have the right, upon written notice to Employee, to
terminate Employee's employment at any time for cause, as defined in Section 2.3
below.
2.3 For purposes of Section 2.2, "cause" shall include material breach by
Employee of this Agreement, gross negligence, gross neglect of duties, gross
insubordination, Employee's unauthorized appropriation of the Company's
property, willful violation of any law applicable to the conduct of the
Company's business and affairs the violation of which has or would reasonably be
expected to have a material adverse effect upon the business or financial
condition of the Company, conviction of or plea of no contest to any felony
involving moral turpitude and habitual insobriety, drug abuse or absenteeism.
2.4 Subject to Section 2.2, Employee's employment under this Agreement
shall terminate immediately upon his death, without further notice. Subject to
Section 2.2, if Employee becomes disabled from performing his duties under this
Agreement, Company may terminate his employment under this Agreement, provided
that Employee also shall be entitled to such disability, medical and other
benefits as may be provided generally for disabled employees of the Company
during the period he remains disabled. For purposes of this Section 2.4,
Employee may be deemed to be disabled if he is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
2.5 (a) Except as is provided in paragraph 2.5(b) below, if Company
terminates Employee's employment for any reason other than for Cause as set
forth in Sections 2.2 and 2.3 or if Employee's employment terminates for death
or disability as set forth in Section 2.4, then the Company shall pay Employee
or Employee's lawful estate an amount equal to the remainder of Employee's
salary as provided by Section 3.1 below in installments in accordance with
Company policy.
(b) If either Company or Employee terminates the term hereof in
accordance with the terms of Section 2.1(a)(h) above or if Company breaches
Section 1. 1 (a) and fails to cure such breach within thirty (30) days after
receiving notice thereof from Employee, then the Company shall pay Employee an
amount equal to three months' base compensation.
(c) In the event that Company fails to provide Employee with the
notice required in Section 2.1(b) above, Employee shall be entitled to receive
no less than an amount equal to three months' base compensation calculated from
the date Company actually provides to Employee the aforesaid notice.
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(d) In the event that Employee terminates the term hereof after
the date set forth in Section 2.1 (a)(ii), then Company shall pay Employee an
amount equal to one months' base compensation.
3. Compensation.
------------
3.1 During the period of this Agreement, the Company shall pay to
Employee a base salary at an annual rate of One Hundred Thousand Dollars
($100,000), payable in installments in accordance with Company policy. The Board
of Directors shall review the base salary semi-annually, and may in its sole
discretion increase it to reflect performance, appropriate industry guideline
data and other factors. However, the Board is not obligated to provide for any
increases.
3.2 Beginning after six months of employment, Employee shall be
eligible from time to time to receive bonuses or to participate in profit
sharing. Eligibility will be determined through a review process that will
consider Employee's work performance and contribution to the Company, and the
Company's performance, as determined by, and at the discretion of the Board of
Directors. Percentage of profit sharing or bonus, if any, will be determined
during the review by the Board of Directors, provided, however, that Company and
Employee acknowledge that a bonus hereunder may be in a range of Fifty Percent
(50%) to One Hundred Percent (100%) of annual base compensation. Employee
performance reviews will be conducted by the Company in accordance with company
policy.
3.3 Intentionally Omitted.
3.4 (a) (i) The Company shall reimburse Employee for reasonable
business expenses incurred on behalf of the Company upon presentation of
appropriate receipts, including, without limitation, entertainment of clients
and guests of the Company as deemed appropriate in the sole discretion of
Company, reasonable approved business travel, cellular phone charges and on-line
access charges.
(ii) The Company shall provide to Employee for Employee's
use during the term hereof in connection with the payment of the expenses
described in Section 3.4(a)(i) above a corporate charge card (e.g., American
Express or Visa).
(b) The Company shall reimburse Employee during the term of his
employment hereunder for the actual, reasonable, out-of-pocket expenses incurred
by Employee in connection with the maintenance by Employee of a membership to
one (1) sports and fitness gym (the "Gym") which Gym has been mutually approved
by the Company and Employee.
(c) The Company shall provide to Employee for Employee's use
during the term hereof one (1) desktop computer and one (1) portable computer
together with appropriate peripherals.
3.5 In addition to the compensation payable to Employee pursuant to
Section 3.1 and Section 3.2 above, Employee shall participate in any benefits
which Company from time to time may offer to or provide for its employees,
including, but not limited to, vacation,
3
<PAGE>
participation in pension plans, profit sharing plans, the Stock Option and
Incentive Plan described in the Incentive Stock Option Agreement attached hereto
as Schedule A and made a part hereof as restricted by the stock restriction
agreement attached hereto as Schedule B and made a part hereof and
hospitalization and medical benefit plans. The Board of Directors may in its
sole discretion increase insurance coverage for all employees as permitted by
business conditions. However, the Board is not obligated to provide any
increases. It is expressly understood and agreed that, notwithstanding any so-
called "waiting periods" or other delays in the commencement of health insurance
coverage, Company shall provide Employee with health insurance as detailed in
the standard policies of the Company as of the commencement of this Agreement.
3.6 Employee recognizes that the compensation, benefits and other
amounts provided by the Company under this Agreement may be subject to federal,
state or local income taxes. It is expressly understood and agreed that all such
taxes shall be the responsibility of Employee. To the extent that federal, state
or local law requires withholding of taxes on compensation, benefits or other
amounts provided under this Agreement, the Company shall withhold the necessary
amounts from the amounts payable to Employee under this Agreement.
4. Ownership of and Rights to Proprietary Information.
--------------------------------------------------
4.1 Employee hereby agrees to assign and does assign to the Company
all of Employee's right, title and interest in any and all proprietary
information discovered, conceived, developed, created or reduced to practice by
Employee personally or jointly with others in the course of performing services
under this Agreement. Employee agrees to disclose to the Company the existence
of all such proprietary information, and further agrees to execute and deliver
promptly all proper papers and perform all proper legal acts which the Company
deems necessary or desirable to vest in the Company all of Employee's right,
title and interest in and to such proprietary information, to enable the Company
to file patent applications, and obtain and maintain Letters Patent with respect
to patentable material and to enable the Company to confirm or perfect its
rights in copyrightable material. Employee agrees that all proprietary
information which is subject to United States Copyright Law is a "work made for
hire," and in the event that it is determined that any such work is deemed not
to be a work made for hire, the foregoing assignment and agreement to assign
shall apply.
4.2 The Company agrees that it shall have no right, title or interest
in any proprietary information for which no equipment, supplies, facility or
trade secret information of the Company was used, and which was developed
entirely apart from the services performed by Employee under this Agreement, and
which does not relate to or result from Employee's work under this Agreement.
Employee represents that, except as disclosed to the Company in writing, all
material created or submitted by Employee for or to Company (excluding any
material which is assigned by Company to Employee for preparation) shall not be
subject to an obligation of confidentiality in favor of, or infringe upon or
violate any rights of any third person, including but not limited to any right
or interest in any copyright, patent or trade secret rights.
4.3 "Proprietary information," for purposes of this Agreement,
includes but shall not be limited to any trade secret (as defined in the Uniform
Trade Secrets Act), any
4
<PAGE>
inventions, improvements and ideas, whether or not patentable, or know-how
relating thereto, any material which is protected by copyright and any other
Confidential Information (as defined in paragraph 6.3 below).
5. Name and Likeness. The Company shall have the right to use Employee's
-----------------
name as well as Employee's biography and likeness in the form approved by
Employee in connection with its business, including in advertising its products
and services, and may, with Employee's permission, which shall not be withheld
unreasonably, grant this right to others, but not for use as a direct
endorsement.
6. Confidentiality.
---------------
6.1 Employee shall not, during the term and thereafter, disclose
confidential information of the Company (other than to an employee of the
Company or to a person to whom disclosure is reasonably necessary or appropriate
in connection with the performance by Employee of services hereunder) and shall
not use confidential information of the Company for any purpose beyond the
performance of services under this Agreement without the prior written consent
of the Company. All confidential information shall remain the property of the
Company. Upon termination of employment, Employee shall return to the Company
all documents, records, plans, designs, notebooks and other evidences, including
all copies thereof, of information, including proprietary information or
confidential information, obtained by Employee during employment.
6.2 The obligation of confidence under this Agreement shall not apply
to information which Employee can show from documented records is or becomes
generally available to the public without fault of Employee, or which is
obtained without restriction on publication or use from a third party having the
right to disclose the same.
6.3 "Confidential information," for purposes of this Agreement shall
mean all information maintained in confidence by the Company. It includes, but
is not limited to, all information that derives independent economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable through proper means by, other persons who can derive economic
value from its disclosure or use. It includes, but is not limited to,
proprietary information and information relating to such business matters as
research and development, manufacturing processes, management systems and
techniques, the identity and profiles of customers and suppliers and sales and
marketing plans and information. Such information may be marked as confidential
or proprietary, or received under circumstances reasonably interpreted as
imposing an obligation of confidentiality. Such information does not lose its
status as confidential information merely because it was known by a limited
number of persons or entities or because it was not entirely originated by the
Company. Employee acknowledges that the confidential information of the Company
is a valuable, special and unique asset of the Company, and that any disclosure
of such confidential information may be materially damaging to the Company.
5
<PAGE>
7. Restrictions on Competitive Activities. Employee acknowledges he or
--------------------------------------
she will have access to significant confidential and valuable information which
can be used unfairly and to the harm of the Company by present or potential
competitors in the digital new media industry. Employee therefore agrees as
follows:
7.1 During any period during Employee's employment with the Company,
Employee will not render services or give advice to, affiliate with (as an
employee, shareholder, partner, consultant or otherwise), or invest or acquire
any interest in, in whole or in significant part, any other person or
organization which is engaged in or about to become engaged in commercial
development of digital new media products or services including developing home
pages, web sites or other interactive environments on the World Wide Web, or any
proprietorship, partnership, corporation or other entity which is engaged in
developing, owning or operating any such environment (a Conflicting
Organization). Employee shall not be prohibited, however, from investing in
securities of any company that is listed on a national securities exchange or
traded on The NASDAQ Stock Market, provided that Employee does not hereafter
own, or have the right to acquire, more than 5% of the outstanding voting
securities of such company.
7.2 For a period of six months after termination with cause by
Company of Employee's employment or for a period of six months after the
voluntary termination by Employee of Employee's employment, without prior
written approval of the Company's Board of Directors, which shall not be
withheld unreasonably, Employee will not:
(i) render services or give advice to, or affiliate with
(as an employee, shareholder, partner, consultant or otherwise) or invest
or acquire any interest in, any Conflicting Organization. Notwithstanding
the foregoing, if the business of the Conflicting Organization has separate
and distinct divisions, Employee may, following termination of such
employment, render services or give advice to, or affiliate with, a
division which would not itself constitute a Conflicting Organization if,
prior thereto, the Company receives written assurances satisfactory to the
Company from the Conflicting Organization and Employee that Employee will
not directly or indirectly render services or give advice or information to
any division of such Conflicting Organization which would itself constitute
a Conflicting Organization; or
(ii) solicit, endeavor to entice away from the Company, or
otherwise interfere with the relationship of the Company with any person
who is employed by or otherwise engaged to perform services for the
Company, or any person or entity who is, or was within the term of this
Agreement, a customer or client of the Company, whether for Employee's own
account or for the account of any other individual, partnership, firm,
corporation or other business organization. For the purposes of this
Section, the Company shall mean and include the Company's distributors and
suppliers.
7.3 During the periods described in Sections 7.1 and 7.2, Employee
will not assist or encourage, directly or indirectly, any other person to carry
out, directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 7 If such activity were carried out by Employee,
either directly or indirectly; and in particular Employee agrees
6
<PAGE>
that Employee will not induce, directly or indirectly, any Shareholder of the
Company to carry out, directly or indirectly, any such activity.
8. Equitable Remedies. Employee acknowledges and agrees that the Company
------------------
will not have an adequate remedy at law in the event of any breach by Employee
of Sections 4, 6 and 7 and the Company shall therefore be entitled, in addition
to any other remedies that may be available, to injunctive and/or other
equitable relief to prevent or remedy a breach of such sections by Employee.
9. Miscellaneous.
-------------
9.1 Survival. Employee's duties under Sections 4, 6 and 7 shall
survive termination of Employee's employment with the Company to the extent
provided under such Section.
9.2 Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by way of reorganization, or merger and any assignee
of all or substantially all of its business and properties, but, except as to
any such successor or assignee of the Company, neither this Agreement nor any
rights or benefits hereunder may be assigned by the Company or by Employee.
9.3 Interpretation. In case any one or more of the provisions
contained in the Agreement shall be held to be invalid, illegal or unenforceable
in any respect, for any reason, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall be held to be excessively broad, for any
reason, it shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.
9.4 Notices. Any notice which the company is required or may desire
to give to Employee shall be given by personal delivery or registered or
certified mail, return receipt requested, addressed to Employee at his address
of record with the Company or at such other place as Employee may from time to
time designate in writing. Any notice which Employee is required or may desire
to give to the Company hereunder shall be given by personal delivery or by
registered or certified mail, return receipt requested, addressed to the Company
at its principal office, or at such other office as the company may from time to
time designate in writing. The date of personal delivery or the date of mailing
such notice shall be deemed to be the date of delivery thereof.
9.5 Waiver. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provisions of this
Agreement.
7
<PAGE>
9.6 Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by both parties hereto.
9.7 Applicable Law. This Agreement has been negotiated in, and shall
be governed by, the internal laws of the State of New York.
9.8 Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
9.9 Expectations Regarding Employment, Service as Officer or Director
and Ownership of Shares of the Company.
(i) THE COMPANY AND EMPLOYEE AGREE THAT THIS AGREEMENT
EXPRESSES ALL OF THE EXPECTATIONS BETWEEN EMPLOYEE AND THE COMPANY
REGARDING THE TERM OF EMPLOYEE'S EMPLOYMENT AND EMPLOYEE'S AND THE
COMPANY'S RIGHT TO TERMINATE THAT EMPLOYMENT. EMPLOYEE SHALL HAVE NO
GREATER RIGHTS AS AN EMPLOYEE OR AS AN OFFICER, DIRECTOR OR SHAREHOLDER, AS
THE CASE MAY BE, OF THE COMPANY (OR OF ANY DIRECT OR INDIRECT SUBSIDIARY OR
OTHER AFFILIATE OF THE COMPANY) THAN ANY OTHER PERSON WHO IS NOT RELATED TO
THE COMPANY OR SUCH AFFILIATE IN MORE THAN ONE SUCH CAPACITY. THE COMPANY
HEREBY ADVISES EMPLOYEE THAT THE COMPANY WOULD NOT ENTER INTO THIS
AGREEMENT OR SELL SHARES OF COMPANY STOCK TO EMPLOYEE OR ELECT EMPLOYEE AS
AN OFFICER OR DIRECTOR, AS THE CASE MAY BE, IF EMPLOYEE HAD ANY EXPECTATION
THAT EMPLOYEE'S PURCHASE OF STOCK (IF ANY) OR SERVICE AS AN OFFICER OR
DIRECTOR WOULD ENTITLE EMPLOYEE TO CONTINUED EMPLOYMENT WITH (OR CONTINUED
STATUS AS AN OFFICER OR DIRECTOR OF) THE COMPANY OR ANY AFFILIATE OF THE
COMPANY OTHER THAN AS SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE
FOREGOING SENTENCES, EMPLOYEE ACKNOWLEDGES THAT THE COMPANY, IN ITS SOLE
DISCRETION, MAY DECLINE IN THE FUTURE TO RENEW HIS EMPLOYMENT UPON
TERMINATION OF THIS AGREEMENT FOR ANY REASON.
(ii) EMPLOYEE CONFIRMS THAT EMPLOYEE RAS REVIEWED THIS
AGREEMENT CAREFULLY AND UNDERSTANDS IT. EMPLOYEE FURTHER CONFIRMS THAT
EMPLOYEE HAS CONSULTED WITH OR BEEN AFFORDED AMPLE OPPORTUNITY TO CONSULT
WITH LEGAL COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND ANY
OTHER AGREEMENTS BETWEEN OR AMONG EMPLOYEE, THE COMPANY AND ANY OF ITS
PRESENT OR PROSPECTIVE SHAREHOLDERS AND/OR DIRECTORS, WHICH MAY HAVE BEEN
ENTERED INTO SUBSTANTIALLY CONTEMPORANEOUSLY WITH THIS AGREEMENT.
8
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hand as
of the date first set forth above.
/s/ Jean-Phillippe Maheu
----------------------------------
JEAN-PHILLIPPE MAHEU
RAZORFISH, INC.
BY: /s/ Jeffrey A. Dachis
-------------------------------
Authorized Officer
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EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the 1st day June, 1997, is made
by and between Evan Orensten residing at 67 Jane Street #1BB, New York, New York
10014 (hereinafter the "Employee") and Razorfish, Inc., a New York corporation
having its principal executive offices at 107 Grand Street, 3rd Floor, New York,
NY 10013 (hereinafter the "Company").
WHEREAS, Company desires to employ Employee and Employee desires to
accept such employment on the terms set forth in this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
1. Position and Responsibilities.
-----------------------------
1.1 Employee shall serve in such capacity and shall perform such
duties at such place or places as the Company shall from time to time designate.
The Company will conduct a review of Employee's job responsibilities on an
annual basis.
1.2 Employee shall, to the best of his ability, devote his full time
and best efforts to the performance of his duties hereunder and the business and
affairs of the Company in accordance with the instructions and directions of
Company in all matters, including those involving creative decisions and
judgments, and, in doing so, shall duly, punctually and faithfully perform and
observe any and all rules and policies which the Company may now or shall
hereafter establish governing the conduct of its business.
2. Term of Employment.
------------------
2.1 Employee's employment under this Agreement shall commence as of
June 1, 1997 and terminate on May 31, 1998, unless sooner terminated by the
Company as provided in Section 2.2 (the "Initial Term"). Notwithstanding the
foregoing, beginning June 1, 1998 this Agreement and Employee's employment under
this Agreement shall renew for successive one (1) year terms unless either party
gives written notice to the other of non-renewal, within 60 days prior to
scheduled renewal. Except as expressly provided to the contrary in Section 2.2,
Employee's rights to pay and benefits shall cease on the date his employment
hereunder terminates.
2.2 The Company shall have the right, upon written notice to
Employee, to terminate Employee's employment at any time for cause, as defined
in Section 2.3 below.
2.3 For purposes of Section 2.2, "cause" shall include material
breach by Employee of this Agreement, gross negligence, gross neglect of duties,
gross insubordination, Employee's unauthorized appropriation of the Company's
property, willful violation of any law applicable to the conduct of the
Company's business and affairs the violation of which has or
<PAGE>
would reasonably be expected to have a material adverse effect upon the business
or financial condition of the Company, conviction of or plea of no contest to
any felony involving moral turpitude and habitual insobriety, drug abuse or
absenteeism.
2.4 Subject to Section 2.2, Employee's employment under this
Agreement shall terminate immediately upon his death, without further notice.
Subject to Section 2.2, if Employee becomes disabled from performing his duties
under this Agreement, Company may terminate his employment under this Agreement,
provided that Employee also shall be entitled to such disability, medical and
other benefits as may be provided generally for disabled employees of the
Company during the period he remains disabled. For purposes of this Section 2.4,
Employee may be deemed to be disabled if he is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
2.5 If Company terminates Employee's employment for any reason other
than for Cause as set forth in Sections 2.2 and 2.3, or for death or disability
as set forth in Section 2.4, then the Company shall pay Employee an amount equal
to three months' base compensation.
3. Compensation.
------------
3.1 During the period of this Agreement, the Company shall pay to
Employee a base salary at an annual rate of One Hundred Thousand Dollars
($100,000), payable in installments in accordance with Company policy. The Board
of Directors shall review the base salary semi-annually in the Initial Period
and annually thereafter, and may in its sole discretion increase it to reflect
performance, appropriate industry guideline data and other factors. However, the
Board is not obligated to provide for any increases.
3.2 Employee shall be eligible from time to time to receive bonuses
and/or to participate in profit sharing in accordance with the bonus agreement
(the "Bonus Agreement") to be executed by the parties hereto separately and made
a part hereof. The amount of any bonus made pursuant to the Bonus Agreement will
be determined as set forth in such Bonus Agreement. Although the Bonus Agreement
has not been completed as of the date hereof, the parties hereto intend that
such bonuses will be calculated based on a variety of mutually agreed upon
factors including, without limitation: the completion of certain specific
mutually agreed upon projects by Employee; the Company's successfully reaching
mutually agreed upon acquisition, revenue or profit targets; and Employee's work
performance and contribution to the Company.
3.3 Intentionally Omitted.
3.4 (a) (i) The Company shall reimburse Employee for reasonable
business expenses incurred on behalf of the Company upon presentation of
appropriate receipts, including, without limitation, entertainment of clients
and guests of the Company as deemed appropriate in the sole discretion of
Company, cellular phone charges and online access charges.
(ii) The Company shall provide to Employee for Employee's
2
<PAGE>
use during the term hereof in connection with the payment of the expenses
described in Section 3.4(a)(i) above a corporate charge card (e.g., American
Express or Visa).
(b) The Company shall reimburse Employee during the term of his
employment hereunder for the actual, reasonable, out-of-pocket expenses incurred
by Employee in connection with the maintenance by Employee of a membership to
one (1) sports and fitness gym (the "Gym") which Gym has been mutually approved
by the Company and Employee.
(c) The Company shall provide to Employee for Employee's use
during the term hereof one (1) desktop computer and one (1) portable computer
together with appropriate peripherals.
3.5 In addition to the compensation payable to Employee pursuant to
Section 3.1 and Section 3.2 above, Employee shall participate in any benefits
which Company from time to time may offer to or provide for its employees,
including, but not limited to, vacation, participation in pension plans, profit
sharing plans, the Stock Option and Incentive Plan described in the Incentive
Stock Option Agreement attached hereto as Schedule A and made a part hereof as
restricted by the stock restriction agreement attached hereto as Schedule B and
made a part hereof and hospitalization and medical benefit plans. The Board of
Directors may in its sole discretion increase insurance coverage for all
employees as permitted by business conditions. However, the Board is not
obligated to provide any increases.
3.6 Employee recognizes that the compensation, benefits and other
amounts provided by the Company under this Agreement may be subject to federal,
state or local income taxes. It is expressly understood and agreed that all such
taxes shall be the responsibility of Employee. To the extent that federal, state
or local law requires withholding of taxes on compensation, benefits or other
amounts provided under this Agreement, the Company shall withhold the necessary
amounts from the amounts payable to Employee under this Agreement.
4. Ownership of and Rights to Proprietary Information.
--------------------------------------------------
4.1 Employee hereby agrees to assign and does assign to the Company
all of Employee's right, title and interest in any and all proprietary
information discovered, conceived, developed, created or reduced to practice by
Employee personally or jointly with others in the course of performing services
under this Agreement. Employee agrees to disclose to the Company the existence
of all such proprietary information, and further agrees to execute and deliver
promptly all proper papers and perform all proper legal acts which the Company
deems necessary or desirable to vest in the Company all of Employee's right,
title and interest in and to such proprietary information, to enable the Company
to file patent applications, and obtain and maintain Letters Patent with respect
to patentable material and to enable the Company to confirm or perfect its
rights in copyrightable material. Employee agrees that all proprietary
information which is subject to United States Copyright Law is a "work made for
hire," and in the event that it is determined that any such work is deemed not
to be a work made for hire, the foregoing assignment and agreement to assign
shall apply.
4.2 The Company agrees that it shall have no right, title or interest
in any proprietary information for which no equipment, supplies, facility or
trade secret information of
3
<PAGE>
the Company was used, and which was developed entirely apart from the services
performed by Employee under this Agreement, and which does not relate to or
result from Employee's work under this Agreement. Employee represents that,
except as disclosed to the Company in writing, all material created or submitted
by Employee for or to Company (excluding any material which is assigned by
Company to Employee for preparation) shall not be subject to an obligation of
confidentiality in favor of, or infringe upon or violate any rights of any third
person, including but not limited to any right or Interest in any copyright,
patent or trade secret rights.
4.3 "Proprietary information," for purposes of this Agreement,
includes but shall not be limited to any trade secret (as defined in the Uniform
Trade Secrets Act), any inventions, improvements and ideas, whether or not
patentable, or know-how relating thereto, any material which is protected by
copyright and any other Confidential Information (as defined in paragraph 6.3
below).
5. Name and Likeness. The Company shall have the right to use Employee's
-----------------
name as well as Employee's biography and likeness in the form approved by
Employee in connection with its business, including in advertising its products
and services, and may, with Employee's permission, which shall not be withheld
unreasonably, grant this right to others, but not for use as a direct
endorsement.
6. Confidentiality.
---------------
6.1 Employee shall not, during the term and thereafter, disclose
confidential information of the Company (other than to an employee of the
Company or to a person to whom disclosure is reasonably necessary or appropriate
in connection with the performance by Employee of services hereunder) and shall
not use confidential information of the Company for any purpose beyond the
performance of services under this Agreement without the prior written consent
of the Company. All confidential information shall remain the property of the
Company. Upon termination of employment, Employee shall return to the Company
all documents, records, plans, designs, notebooks and other evidences, including
all copies thereof, of information, including proprietary information or
confidential information, obtained by Employee during employment.
6.2 The obligation of confidence under this Agreement shall not apply
to information which Employee can show from documented records is or becomes
generally available to the public without fault of Employee, or which is
obtained without restriction on publication or use from a third party having the
right to disclose the same.
6.3 "Confidential information," for purposes of this Agreement shall
mean all information maintained in confidence by the Company. It includes, but
is not limited to, all information that derives independent economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable through proper means by, other persons who can derive economic
value from its disclosure or use. It includes, but is not limited to,
proprietary information and information relating to such business matters as
research and development, manufacturing processes, management systems and
techniques, the identity and profiles of customers and suppliers and sales and
marketing plans and information. Such
4
<PAGE>
information may be marked as confidential or proprietary, or received under
circumstances reasonably interpreted as imposing an obligation of
confidentiality. Such information does not lose its status as confidential
information merely because it was known by a limited number of persons or
entities or because it was not entirely originated by the Company. Employee
acknowledges that the confidential information of the Company is a valuable,
special and unique asset of the Company, and that any disclosure of such
confidential information may be materially damaging to the Company.
7. Restrictions on Competitive Activities. Employee acknowledges he or
--------------------------------------
she will have access to significant confidential and valuable information which
can be used unfairly and to the harm of the Company by present or potential
competitors in the digital new media industry. Employee therefore agrees as
follows:
7.1 During any period during Employee's employment with the Company,
Employee will not render services or give advice to, affiliate with (as an
employee, shareholder, partner, consultant or otherwise), or invest or acquire
any interest in, in whole or in significant part, any other person or
organization which is engaged in or about to become engaged in commercial
development of digital new media products or services, including developing home
pages, web sites or other interactive environments on the World Wide Web, or any
proprietorship, partnership, corporation or other entity which is engaged in
developing, owning or operating any such environment (a Conflicting
Organization). Employee shall not be prohibited, however, from investing in
securities of any company that is listed on a national securities exchange or
traded on The NASDAQ Stock Market, provided that Employee does not hereafter
own, or have the right to acquire, more than 5% of the outstanding voting
securities of such company.
7.2 For a period of six months after termination with cause by
Company of Employee's employment or for a period of six months after the
voluntary termination by Employee of Employee's employment, without prior
written approval of the Company's Board of Directors, which shall not be
withheld unreasonably, Employee will not:
(i) render services or give advice to, or affiliate with
(as an employee, shareholder, partner, consultant or otherwise) or invest
or acquire any interest in, any Conflicting Organization. Notwithstanding
the foregoing, if the business of the Conflicting Organization has separate
and distinct divisions, Employee may, following termination of such
employment, render services or give advice to, or affiliate with, a
division which would not itself constitute a Conflicting Organization if,
prior thereto, the Company receives written assurances satisfactory to the
Company from the Conflicting Organization and Employee that Employee will
not directly or indirectly render services or give advice or information to
any division of such Conflicting Organization which would itself constitute
a Conflicting Organization; or
(ii) solicit, endeavor to entice away from the Company, or
otherwise interfere with the relationship of the Company with any person
who is employed by or otherwise engaged to perform services for the
Company, or any person or entity who is, or was within the term of this
Agreement, a customer or client of the
5
<PAGE>
Company, whether for Employee's own account or for the account of any other
individual, partnership, firm, corporation or other business organization.
For the purposes of this Section, the Company shall mean and include the
Company's distributors and suppliers.
7.3 During the periods described in Sections 7.1 and 7.2, Employee
will not assist or encourage, directly or indirectly, any other person to carry
out, directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 7 if such activity were carried out by Employee,
either directly or indirectly; and in particular Employee agrees that Employee
will not induce, directly or indirectly, any Shareholder of the Company to carry
out, directly or indirectly, any such activity.
8. Equitable Remedies. Employee acknowledges and agrees that the Company
------------------
will not have an adequate remedy at law in the event of any breach by Employee
of Sections 4, 6 and 7 and the Company shall therefore be entitled, in addition
to any other remedies that may be available, to injunctive and/or other
equitable relief to prevent or remedy a breach of such sections by Employee.
9. Miscellaneous.
-------------
9.1 Survival. Employee's duties under Sections 4, 6 and 7 shall
survive termination of Employee's employment with the Company to the extent
provided under such Section.
9.2 Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by way of reorganization, or merger and any assignee
of all or substantially all of its business and properties, but, except as to
any such successor or assignee of the Company, neither this Agreement nor any
rights or benefits hereunder may be assigned by the Company or by Employee.
9.3 Interpretation. In case any one or more of the provisions
contained if the Agreement shall be held to be invalid, illegal or unenforceable
in any respect, for any reason, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall be held to be excessively broad, for any
reason, it shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.
9.4 Notices. Any notice which the company is required or may desire
to give to Employee shall be given by personal delivery or registered or
certified mail, return receipt requested, addressed to Employee at his address
of record with the Company or at such other place as Employee may from time to
time designate in writing. Any notice which Employee is required or may desire
to give to the Company hereunder shall be given by personal delivery or by
registered or certified mail, return receipt requested, addressed to the Company
at its principal
6
<PAGE>
office, or at such other office as the company may from time to time designate
in writing. The date of personal delivery or the date of mailing such notice
shall be deemed to be the date of delivery thereof.
9.5 Waiver. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provisions of this
Agreement.
9.6 Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by both parties hereto.
9.7 Applicable Law. This Agreement has been negotiated in, and shall
be governed by, the internal laws of the State of New York.
9.8 Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
9.9 Expectations Regarding Employment, Service as Officer or Director
and Ownership of Shares of the Company.
(i) THE COMPANY AND EMPLOYEE AGREE THAT THIS AGREEMENT
EXPRESSES ALL OF THE EXPECTATIONS BETWEEN EMPLOYEE AND THE COMPANY
REGARDING THE TERM OF EMPLOYEE'S EMPLOYMENT AND EMPLOYEE'S AND THE
COMPANY'S RIGHT TO TERMINATE THAT EMPLOYMENT. EMPLOYEE SHALL HAVE NO
GREATER RIGHTS AS AN EMPLOYEE OR AS AN OFFICER, DIRECTOR OR SHAREHOLDER, AS
THE CASE MAY BE, OF THE COMPANY (OR OF ANY DIRECT OR INDIRECT SUBSIDIARY OR
OTHER AFFILIATE OF THE COMPANY) THAN ANY OTHER PERSON WHO IS NOT RELATED TO
THE COMPANY OR SUCH AFFILIATE IN MORE THAN ONE SUCH CAPACITY. THE COMPANY
HEREBY ADVISES EMPLOYEE THAT THE COMPANY WOULD NOT ENTER INTO THIS
AGREEMENT OR SELL SHARES OF COMPANY STOCK TO EMPLOYEE OR ELECT EMPLOYEE AS
AN OFFICER OR DIRECTOR, AS THE CASE MAY BE, IF EMPLOYEE HAD ANY EXPECTATION
THAT EMPLOYEE'S PURCHASE OF STOCK (IF ANY) OR SERVICE AS AN OFFICER OR
DIRECTOR WOULD ENTITLE EMPLOYEE TO CONTINUED EMPLOYMENT WITH (OR CONTINUED
STATUS AS AN OFFICER OR DIRECTOR OF) THE COMPANY OR ANY AFFILIATE OF THE
COMPANY OTHER THAN AS SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE
FOREGOING SENTENCES, EMPLOYEE ACKNOWLEDGES THAT THE COMPANY, IN ITS SOLE
DISCRETION, MAY DECLINE IN THE FUTURE TO RENEW HIS EMPLOYMENT UPON
TERMINATION OF THIS AGREEMENT FOR ANY REASON.
7
<PAGE>
(ii) EMPLOYEE CONFIRMS THAT EMPLOYEE HAS REVIEWED THIS AGREEMENT
CAREFULLY AND UNDERSTANDS IT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS
CONSULTED WITH OR BEEN AFFORDED AMPLE OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND ANY OTHER
AGREEMENTS BETWEEN OR AMONG EMPLOYEE, THE COMPANY AND ANY OF ITS PRESENT OR
PROSPECTIVE SHAREHOLDERS AND/OR DIRECTORS, WHICH MAY HAVE BEEN ENTERED INTO
SUBSTANTIALLY CONTEMPORANEOUSLY WITH THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have hereunto set their hand as of the
date first set forth above.
/s/ Evan Orensten
--------------------------------
Evan Orensten
RAZORFISH, INC.
BY /s/ Jeffrey A. Dachis
------------------------------
Authorized Officer
8
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of October 1, 1998,
is made by and between PER BYSTEDT, residing at Grev Turegatan 69, 114 38
Stockholm, Sweden (hereinafter "Employee"), and RAZORFISH, INC., a New York
corporation, having its principal executive offices at 107 Grand Street, New
York, NY 10013 (hereinafter "Company"). This Agreement shall be effective on
the Closing Date (as defined in that certain Subscription and Exchange
Agreement, dated as of October 1, 1998, among the Company, Spray Ventures AB and
Communicade Inc.) (the "Effective Date").
WHEREAS, Company desires to employ Employee and Employee desires to accept
such employment on the terms set forth in this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
1. Position and Responsibilities.
-----------------------------
1.1 Employee shall have reporting authority to Jeffrey A.
Dachis or such other senior executive officer as he reasonably shall designate
after consultation with Employee, and Employee shall perform such duties as
Company shall from time to time designate. Employee shall be located in either
New York, New York, Stockholm, Sweden or at such other locations as mutually
agreed by Employee and Company. Company will conduct a review of Employee's job
responsibilities on an annual basis. Employee's authority shall be commensurate
with that of other employees of Company having positions and salaries comparable
to Employee's.
1.2 Employee shall, to the best of Employee's ability, devote
Employee's substantially full time and best efforts to the performance of
Employee's duties hereunder and the business and affairs of Company in
accordance with the reasonable instructions and directions of Company in all
matters, including those involving creative decisions and judgments, and, in
doing so, shall duly and faithfully perform and observe any and all rules and
policies which Company may now or shall hereafter establish governing the
conduct of its business.
2. Term of Employment.
------------------
2.1 Employee's employment under this Agreement shall commence
on the Effective Date and continue through December 31, 2001, unless sooner
terminated as provided in Section 2.2 (the "Initial Term"). Subject to Section
2.2, beginning the day following the last day of the Initial Term, this
Agreement and Employee's employment under this Agreement shall continue on an
at-will basis, terminable by either party as set forth in the last sentence of
Section 2.2.
2.2 During the Initial Term, Company shall have the right, upon
written notice to Employee, to terminate Employee's employment at any time for
"Cause," as defined in Section 2.3 below. If, prior to the end of the Initial
Term, Company terminates Employee's employment for Cause, or Employee
voluntarily terminates his employment with Company, then Company's obligations
to compensate Employee under Section 3 of this Agreement will terminate
immediately, except for compensation through the date of such termination of
employment. If, prior to the end of the Initial Term, Company terminates
Employee's employment without Cause, then Company will be obligated to
compensate Employee as set forth in Section 3 of this Agreement through the end
of the Initial Term, it being understood and agreed that if Employee obtains
other employment during the period Company remains obligated
<PAGE>
to compensate Employee as set forth in Section 3, Employee shall promptly notify
Company thereof and of the aggregate gross compensation payable to Employee in
respect of such other employment, and Company shall have the right to deduct
from the amount payable by Company to Employee pursuant to Section 3 the gross
aggregate amount of compensation Employee receives from such other employment.
At the end of the Initial Term, either Company or Employee may terminate this
Agreement immediately or at any time thereafter, upon thirty (30) days' prior
written notice, with or without Cause, in which case, Company's obligation to
compensate Employee under Section 3 of this Agreement will terminate
immediately, except for compensation through the date of such termination of
employment.
2.3 For purposes of Section 2.2, "Cause" shall mean Employee's:
(i) material misconduct which has a material adverse effect on the business and
affairs of Company; (ii) Employee's (A) material breach of any provision of this
Agreement, (B) willful or continued failure to substantially perform his
material job duties hereunder, or (C) material misconduct which reasonably could
be expected to have a material adverse effect on Company, including without
limitation disregard of lawful written instructions of Company's Board of
Directors consistent with Employee's position relating to the business of
Company or neglect of duties or failure to act, provided in each such case
Company has given at least thirty (30) days' prior written notice describing the
alleged breach, failure or misconduct in detail and Employee has failed to cure
such deficiency within such thirty-day (30-day) period (provided such breach,
failure or misconduct is capable of being cured within such period); (iii) gross
negligence, gross neglect of duties or gross insubordination; (iv) conviction or
plea of no contest to common law fraud, a felony criminal act or a crime
involving moral turpitude; (v) abuse of alcohol or other drugs or controlled
substances to the material detriment of Company; (vi) unauthorized appropriation
of Company's property; or (vii) death or a disability that causes Employee to be
deemed "permanently disabled" under Company's disability insurance policy, or
renders Employee otherwise unable to perform the essential functions of
Employee's job under this Agreement. The term "disability" as used herein shall
mean Employee shall have been prevented from properly performing his duties
hereunder by reason of any physical or mental incapacity, in either case for a
period of more than ninety (90) consecutive days or one hundred twenty (120)
days in the aggregate in any twelve-month (12-month) period.
3. Compensation.
------------
3.1 During the period of this Agreement, Company shall pay to
Employee a base salary at an annual rate of $145,000, payable in installments in
accordance with Company policy.
3.2 Beginning after one year of employment, Employee shall be
eligible from time to time to receive bonuses or to participate in profit
sharing. Eligibility will be determined through a review process that will
consider Employee's work performance and contribution to Company, and Company's
performance, as determined by, and at the discretion of the Board of Directors.
Percentage of profit sharing, if any, will be determined during the review by
the Board of Directors. Employee performance reviews will be conducted by
Company in accordance with Company policy.
3.3 Company shall reimburse Employee for reasonable business
expenses incurred on behalf of Company upon presentation of appropriate receipts
in accordance with Company's written policies with respect thereto. Company
shall also reimburse Employee for any expenses incurred in connection with
Employee obtaining a "green card" or other documentation necessary to enable
Employee to work in the United States to the extent required.
3.4 In addition to the compensation payable to Employee pursuant
to Sections 3.1 and 3.2 above, Employee shall be eligible to participate, on no
less favorable a basis
2
<PAGE>
than other employees of Company of similar position, authority and compensation
package to Employee's, in any benefits which Company from time to time may offer
to or provide for its employees, including, but not limited to, vacation,
pension plans, profit sharing plans, hospitalization and medical, dental and
vision benefit plans. Except for Company's vacation benefits and pension and
profit sharing plans which shall vest in accordance with Company's employment
policies and manual, the foregoing benefits and plans shall be deemed vested as
of the date hereof (subject to the processing of any applicable benefit plan
documentation). In addition, Company agrees to obtain a life insurance policy on
behalf of Employee. The Board of Directors may, in its sole discretion, increase
insurance coverage for all employees as permitted by business conditions.
However, the Board is not obligated to provide any increases.
3.5 Employee recognizes that the compensation, benefits and
other amounts provided by Company under this Agreement may be subject to
federal, state or local income taxes. It is expressly understood and agreed that
all such taxes shall be the responsibility of Employee. To the extent that
federal, state or local law requires withholding of taxes on compensation,
benefits or other amounts provided under this Agreement, Company shall withhold
the necessary amounts from the amounts payable to Employee under this Agreement.
4. Ownership of and Rights to Proprietary Information.
--------------------------------------------------
4.1 Employee hereby agrees to transfer and assign and does
hereby transfer and assign to Company all of Employee's rights, title and
interests in and to any and all Proprietary Information (as defined in Section
4.4) discovered, conceived, developed, created or reduced to practice by
Employee personally or jointly during Employee's employment with Company.
Employee agrees to disclose to Company the existence of all such Proprietary
Information, and further agrees to execute and deliver promptly all proper
papers and perform all legal acts which Company deems necessary or desirable to
vest in Company all of Employee's right, title and interest in and to such
proprietary information, to enable Company to file patent applications, and to
obtain and maintain Letters Patent with respect to patentable material and to
enable Company to confirm or perfect its rights in copyrightable material.
Employee agrees that all Proprietary Information described herein is a "work
made for hire," and in the event that it is determined that any such work is
deemed not to be a "work made for hire," the foregoing assignment and agreement
to transfer and assign shall apply.
4.2 Company agrees that it shall have no right, title or
interest in or to any proprietary information for which Employee can establish
(i) that no equipment, supplies, facility or trade secret information of Company
was used, (ii) the proprietary information was developed entirely apart from the
services performed by Employee under this Agreement, and (iii) the proprietary
information does not relate to or derive or result from any Proprietary
Information or Employee's work under this Agreement.
4.3 Employee acknowledges, agrees, represents and warrants that,
except solely (i) for any proprietary information or invention subject to
Section 4.2, any and all ideas, inventions, materials or works created or
submitted by Employee for or to Company hereunder (excluding any material which
is assigned by Company to Employee for preparation) (A) shall not be subject to
an obligation of confidentiality of any nature or kind in favor of, or infringe
upon or violate any rights of any third person, including but not limited to any
right or interest in any copyright, patent or trade secret rights, and (B) shall
be owned exclusively by Company, and Employee shall not assert or claim any
right, title or interest therein or thereto.
4.4 "Proprietary Information," for purposes of this Agreement
means proprietary information, technology or know how of, concerning or related
to Company or its business or operations, including but not limited to (i)
source code and documentation for proprietary computer software and any other
trade secrets, software, work product, processes,
3
<PAGE>
formulas, schematics, analyses, inventions, ideas, improvements of Company or
know-how relating thereto; (ii) any material which is protected by copyright,
(iii) advertising, product development, strategic and business plans and
information, including customer and prospect lists, of Company; and (iii)
confidential financial information (including prices and costs) concerning the
business of the Company.
5. Name and Likeness. During the period this Agreement remains in
-----------------
effect, Company shall have the right to use Employee's name as well as
Employee's biography and likeness in the form approved by Employee in connection
with its business, including in advertising its products and services, and may,
with Employee's permission, which shall not be withheld unreasonably, grant this
right to others, but not for use as a direct endorsement.
6. Confidentiality.
---------------
6.1 Employee shall not, during the term and thereafter, disclose
Confidential Information of Company (other than to an employee of Company or to
a person to whom disclosure is reasonably necessary or appropriate in connection
with the performance by Employee of services hereunder) and shall not use
Confidential Information of Company for any purpose beyond the performance of
services under this Agreement without the prior written consent of Company. All
Confidential Information shall remain the property of Company. Upon termination
of employment, Employee shall return to Company all documents, records, plans,
designs, notebooks and other evidences, including all copies thereof, of
information, including proprietary information and/or Confidential Information,
obtained by Employee during employment.
6.2 The obligation of confidence under this Agreement shall not
apply to information which Employee can show from documented records is or
becomes generally available to the public without fault of Employee, or which is
obtained without restriction on publication or use from a third party having the
right to disclose the same.
6.3 "Confidential Information," for purposes of this Agreement,
shall mean all information maintained in confidence by Company. It includes, but
is not limited to, all information that derives independent economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable through proper means by, other persons who can derive economic
value from its disclosure or use. It also includes, but is not limited to,
proprietary information and information relating to such business matters as
research and development, manufacturing processes, management systems and
techniques, the identity and profiles of customers and suppliers and sales and
marketing plans and information, as well as Company personnel information. Such
information may be marked as confidential or proprietary, or received under
circumstances reasonably interpreted as imposing an obligation of
confidentiality. Such information does not lose its status as Confidential
Information merely because it was known by a limited number of persons or
entities or because it was not entirely originated by Company. Employee
acknowledges that the Confidential Information of Company is a valuable, special
and unique asset of Company, and that any disclosure of such Confidential
Information may be materially damaging to Company.
7. Enforcement. Except for claims for workers' compensation, claims for
-----------
unemployment insurance, claims relating to the agreements, obligations or
covenants set forth in Sections 4 and 6 of this Agreement, and claims within the
exclusive jurisdiction of the Department of Labor Standards Enforcement or the
National Labor Relations Board, any and all controversies or claims arising out
of, in connection with, or in relation to any aspect of this Agreement or
Employee's employment with Company (or termination thereof) shall be resolved by
arbitration in New York, New York; such arbitration to be conducted in
accordance with the then applicable rules of the American Arbitration
Association. The arbitration award shall be
4
<PAGE>
final and binding upon the parties to the arbitration and judgment thereon may
be entered in any court having jurisdiction. Notwithstanding the foregoing,
either party may, at its option, seek injunctive relief in state or federal
court. For the purposes hereof, Employee hereby submits to the jurisdiction of
the federal and state courts in New York and notice of demand, process and/or
summons in connection with legal proceedings, may be served upon Employee by
registered or certified mail in accordance with Section 8.5 with the same effect
as if personally served.
Employee understands and agrees that this Section 7 contains a full and
complete statement of any agreements and understandings regarding resolution of
disputes between Company and Employee, and agrees that this Section 7 supersedes
all previous agreements, whether written or oral, express or implied, relating
to the subjects covered in this Section 7.
EMPLOYEE UNDERSTANDS AND AGREES THAT THIS AGREEMENT TO ARBITRATE
CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A TRIAL BY JURY OF ANY MATTERS
SUBJECT TO ARBITRATION UNDER THIS AGREEMENT.
8. Miscellaneous.
-------------
8.1 Survival. Employee's duties under Sections 4 and 6 shall
--------
survive termination of Employee's employment with Company to the extent provided
under each such Section.
8.2 Assignment. Employee agrees not to assign, sell, transfer,
----------
delegate, or otherwise dispose of, whether voluntarily or involuntarily, or by
operation of law, any rights or obligations under this Agreement. Any such
purported assignment, transfer, or delegation shall be null and void. Nothing
in this Agreement shall prevent the consolidation of Company with, or its merger
into, any other entity, or the sale by Company of all or substantially all of
its assets, or the otherwise lawful assignment by Company of any rights or
obligations under this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns, and
shall not benefit any person or entity other than those specifically enumerated
in this Agreement.
8.3 Interpretation. In case any one or more of the provisions
--------------
contained in the Agreement shall be held to be invalid, illegal or unenforceable
in any respect, for any reason, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall be held to be excessively broad, for any
reason, it shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the then applicable law. In the event
of any inconsistency between this Agreement and Company's employment manual,
this Agreement shall govern. By way of illustration but not limitation,
Company's policy of having employees subject to a 30-day trial period of
employment shall not apply to Employee.
8.4 Notices. Any notice which Company is required or may
-------
desire to give to Employee shall be given by personal delivery or registered or
certified mail, return receipt requested, addressed to Employee at Employee
address of record with Company or at such other place as Employee may from time
to time designate in writing (with a copy to Employee's counsel, Axel
Calissendorff, Esq., at Mannheimer Swartling Advokatbyra, Norrmalmstorg 4, P.O.
Box 1711, 111 87 Stockholm, Sweden). It will be Employee's responsibility to
immediately notify Company, in writing, of any change in employee's address of
record. Any notice which Employee is required or may desire to give to Company
hereunder shall be given
5
<PAGE>
by personal delivery or by registered or certified mail, return receipt
requested, addressed to Company at its principal office, or at such other office
as Company may from time to time designate in writing (with a copy to Company's
counsel, Mark L. Mandel, Esq., at Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, New York 10104). The date of personal delivery or the date
of mailing such notice shall be deemed to be the date of delivery thereof.
8.5 Waiver. A waiver by either party of the breach of any
------
provisions of this Agreement shall not thereby be deemed to have been a waiver
of any preceding or succeeding breach of the same or any other provisions of
this Agreement.
8.6 Complete Agreement; Amendments. The foregoing is the entire
------------------------------
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by both parties hereto.
8.7 Applicable Law. This Agreement has been negotiated in,
--------------
and shall be governed by the internal laws of the State of New York without
regard to the principles of conflicts of law.
8.8 Headings. The headings of the sections hereof are inserted
--------
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.9 Expectations Regarding Employment.
(a) COMPANY AND EMPLOYEE AGREE THAT THIS AGREEMENT
EXPRESSES ALL OF THE EXPECTATIONS BETWEEN EMPLOYEE AND COMPANY REGARDING THE
TERM OF EMPLOYEE'S EMPLOYMENT AND EMPLOYEE'S AND COMPANY'S RIGHT TO TERMINATE
THAT EMPLOYMENT. EMPLOYEE SHALL HAVE NO GREATER RIGHTS AS AN EMPLOYEE OF COMPANY
(OR OF ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF COMPANY) THAN ANY
OTHER PERSON WHO IS NOT RELATED TO COMPANY OR SUCH AFFILIATE IN MORE THAN ONE
SUCH CAPACITY. WITHOUT LIMITING THE FOREGOING SENTENCES, EMPLOYEE ACKNOWLEDGES
THAT, FOLLOWING THE INITIAL TERM IN SECTION 2.1, EMPLOYEE'S EMPLOYMENT WITH
COMPANY WILL BE ON AN AT-WILL BASIS.
(b) EMPLOYEE CONFIRMS THAT EMPLOYEE HAS REVIEWED THIS
AGREEMENT CAREFULLY AND UNDERSTANDS IT, THAT EMPLOYEE IS FULLY AWARE OF ITS
LEGAL EFFECT, AND THAT EMPLOYEE HAS ENTERED INTO IT FREELY AND VOLUNTARILY AND
BASED ON EMPLOYEE'S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES
OTHER THAN THOSE CONTAINED IN THIS AGREEMENT. EMPLOYEE FURTHER CONFIRMS THAT
EMPLOYEE HAS CONSULTED WITH OR BEEN AFFORDED AMPLE OPPORTUNITY TO CONSULT WITH
LEGAL COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND ANY OTHER
AGREEMENTS BETWEEN OR AMONG EMPLOYEE, COMPANY WHICH MAY HAVE BEEN ENTERED INTO
SUBSTANTIALLY CONTEMPORANEOUSLY WITH THIS AGREEMENT.
8.10 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hand as of the date
first set forth above.
/s/ Per Bystedt
___________________________
Per Bystedt
RAZORFISH, INC.
By: /s/ Jeffrey A. Dachis
--------------------------
Name: Jeffrey A. Dachis
Title:
7
<PAGE>
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of October 1,
1998, is made by and between JONAS SVENSSON, residing at Sibyllegatan 41, 114 42
Stockholm, Sweden (hereinafter "Employee"), and RAZORFISH, INC., a New York
corporation, having its principal executive offices at 107 Grand Street, New
York, NY 10013 (hereinafter "Company"). This Agreement shall be effective on
the Closing Date (as defined in that certain Subscription and Exchange
Agreement, dated as of October 1, 1998, among the Company, Spray Ventures AB and
Communicade Inc.) (the "Effective Date").
WHEREAS, Company desires to employ Employee and Employee desires to
accept such employment on the terms set forth in this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
1. Position and Responsibilities.
-----------------------------
1.1 Employee shall have reporting authority to Jeffrey
A. Dachis or such other senior executive officer as he reasonably shall
designate after consultation with Employee, and Employee shall perform such
duties as Company shall from time to time designate. Employee shall be located
in either New York, New York, Stockholm, Sweden or at such other locations as
mutually agreed by Employee and Company. Company will conduct a review of
Employee's job responsibilities on an annual basis. Employee's authority shall
be commensurate with that of other employees of Company having positions and
salaries comparable to Employee's.
1.2 Employee shall, to the best of Employee's ability,
devote Employee's substantially full time and best efforts to the performance of
Employee's duties hereunder and the business and affairs of Company in
accordance with the reasonable instructions and directions of Company in all
matters, including those involving creative decisions and judgments, and, in
doing so, shall duly and faithfully perform and observe any and all rules and
policies which Company may now or shall hereafter establish governing the
conduct of its business.
2. Term of Employment.
------------------
2.1 Employee's employment under this Agreement shall
commence on the Effective Date and continue through December 31, 2001, unless
sooner terminated as provided in Section 2.2 (the "Initial Term"). Subject to
Section 2.2, beginning the day following the last day of the Initial Term, this
Agreement and Employee's employment under this Agreement shall continue on an
at-will basis, terminable by either party as set forth in the last sentence of
Section 2.2.
2.2 During the Initial Term, Company shall have the
right, upon written notice to Employee, to terminate Employee's employment at
any time for "Cause," as defined in Section 2.3 below. If, prior to the end of
the Initial Term, Company terminates Employee's employment for Cause, or
Employee voluntarily terminates his employment with Company, then Company's
obligations to compensate Employee under Section 3 of this Agreement will
terminate immediately, except for compensation through the date of such
termination of employment. If, prior to the end of the Initial Term, Company
terminates Employee's employment without Cause, then Company will be obligated
to compensate Employee as set forth in Section 3 of this Agreement through the
end of the Initial Term, it being understood and agreed that if Employee obtains
other employment during the period Company remains obligated
<PAGE>
to compensate Employee as set forth in Section 3, Employee shall promptly notify
Company thereof and of the aggregate gross compensation payable to Employee in
respect of such other employment, and Company shall have the right to deduct
from the amount payable by Company to Employee pursuant to Section 3 the gross
aggregate amount of compensation Employee receives from such other employment.
At the end of the Initial Term, either Company or Employee may terminate this
Agreement immediately or at any time thereafter, upon thirty (30) days' prior
written notice, with or without Cause, in which case, Company's obligation to
compensate Employee under Section 3 of this Agreement will terminate
immediately, except for compensation through the date of such termination of
employment.
2.3 For purposes of Section 2.2, "Cause" shall mean Employee's:
(i) material misconduct which has a material adverse effect on the business and
affairs of Company; (ii) Employee's (A) material breach of any provision of this
Agreement, (B) willful or continued failure to substantially perform his
material job duties hereunder, or (C) material misconduct which reasonably could
be expected to have a material adverse effect on Company, including without
limitation disregard of lawful written instructions of Company's Board of
Directors consistent with Employee's position relating to the business of
Company or neglect of duties or failure to act, provided in each such case
Company has given at least thirty (30) days' prior written notice describing the
alleged breach, failure or misconduct in detail and Employee has failed to cure
such deficiency within such thirty-day (30-day) period (provided such breach,
failure or misconduct is capable of being cured within such period); (iii) gross
negligence, gross neglect of duties or gross insubordination; (iv) conviction or
plea of no contest to common law fraud, a felony criminal act or a crime
involving moral turpitude; (v) abuse of alcohol or other drugs or controlled
substances to the material detriment of Company; (vi) unauthorized appropriation
of Company's property; or (vii) death or a disability that causes Employee to be
deemed "permanently disabled" under Company's disability insurance policy, or
renders Employee otherwise unable to perform the essential functions of
Employee's job under this Agreement. The term "disability" as used herein shall
mean Employee shall have been prevented from properly performing his duties
hereunder by reason of any physical or mental incapacity, in either case for a
period of more than ninety (90) consecutive days or one hundred twenty (120)
days in the aggregate in any twelve-month (12-month) period.
3. Compensation.
------------
3.1 During the period of this Agreement, Company shall pay to
Employee a base salary at an annual rate of $145,000, payable in installments in
accordance with Company policy.
3.2 Beginning after one year of employment, Employee shall be
eligible from time to time to receive bonuses or to participate in profit
sharing. Eligibility will be determined through a review process that will
consider Employee's work performance and contribution to Company, and Company's
performance, as determined by, and at the discretion of the Board of Directors.
Percentage of profit sharing, if any, will be determined during the review by
the Board of Directors. Employee performance reviews will be conducted by
Company in accordance with Company policy.
3.3 Company shall reimburse Employee for reasonable business
expenses incurred on behalf of Company upon presentation of appropriate receipts
in accordance with Company's written policies with respect thereto. Company
shall also reimburse Employee for any expenses incurred in connection with
Employee obtaining a "green card" or other documentation necessary to enable
Employee to work in the United States to the extent required.
3.4 In addition to the compensation payable to Employee pursuant
to Sections 3.1 and 3.2 above, Employee shall be eligible to participate, on no
less favorable a basis
2
<PAGE>
than other employees of Company of similar position, authority and compensation
package to Employee's, in any benefits which Company from time to time may offer
to or provide for its employees, including, but not limited to, vacation,
pension plans, profit sharing plans, hospitalization and medical, dental and
vision benefit plans. Except for Company's vacation benefits and pension and
profit sharing plans which shall vest in accordance with Company's employment
policies and manual, the foregoing benefits and plans shall be deemed vested as
of the date hereof (subject to the processing of any applicable benefit plan
documentation). In addition, Company agrees to obtain a life insurance policy on
behalf of Employee. The Board of Directors may, in its sole discretion, increase
insurance coverage for all employees as permitted by business conditions.
However, the Board is not obligated to provide any increases.
3.5 Employee recognizes that the compensation, benefits and other
amounts provided by Company under this Agreement may be subject to federal,
state or local income taxes. It is expressly understood and agreed that all
such taxes shall be the responsibility of Employee. To the extent that federal,
state or local law requires withholding of taxes on compensation, benefits or
other amounts provided under this Agreement, Company shall withhold the
necessary amounts from the amounts payable to Employee under this Agreement.
4. Ownership of and Rights to Proprietary Information.
--------------------------------------------------
4.1 Employee hereby agrees to transfer and assign and does hereby
transfer and assign to Company all of Employee's rights, title and interests in
and to any and all Proprietary Information (as defined in Section 4.4)
discovered, conceived, developed, created or reduced to practice by Employee
personally or jointly during Employee's employment with Company. Employee
agrees to disclose to Company the existence of all such Proprietary Information,
and further agrees to execute and deliver promptly all proper papers and perform
all legal acts which Company deems necessary or desirable to vest in Company all
of Employee's right, title and interest in and to such proprietary information,
to enable Company to file patent applications, and to obtain and maintain
Letters Patent with respect to patentable material and to enable Company to
confirm or perfect its rights in copyrightable material. Employee agrees that
all Proprietary Information described herein is a "work made for hire," and in
the event that it is determined that any such work is deemed not to be a "work
made for hire," the foregoing assignment and agreement to transfer and assign
shall apply.
4.2 Company agrees that it shall have no right, title or interest
in or to any proprietary information for which Employee can establish (i) that
no equipment, supplies, facility or trade secret information of Company was
used, (ii) the proprietary information was developed entirely apart from the
services performed by Employee under this Agreement, and (iii) the proprietary
information does not relate to or derive or result from any Proprietary
Information or Employee's work under this Agreement.
4.3 Employee acknowledges, agrees, represents and warrants that,
except solely for any proprietary information or invention subject to Section
4.2, any and all ideas, inventions, materials or works created or submitted by
Employee for or to Company hereunder (excluding any material which is assigned
by Company to Employee for preparation) (A) shall not be subject to an
obligation of confidentiality of any nature or kind in favor of, or infringe
upon or violate any rights of any third person, including but not limited to any
right or interest in any copyright, patent or trade secret rights, and (B) shall
be owned exclusively by Company, and Employee shall not assert or claim any
right, title or interest therein or thereto.
4.4 "Proprietary Information," for purposes of this Agreement
means proprietary information, technology or know how of, concerning or related
to Company or its business or operations, including but not limited to (i)
source code and documentation for proprietary computer software and any other
trade secrets, software, work product, processes,
3
<PAGE>
formulas, schematics, analyses, inventions, ideas, improvements of Company or
know-how relating thereto; (ii) any material which is protected by copyright,
(iii) advertising, product development, strategic and business plans and
information, including customer and prospect lists, of Company; and (iii)
confidential financial information (including prices and costs) concerning the
business of the Company.
5. Name and Likeness. During the period this Agreement remains in effect,
-----------------
Company shall have the right to use Employee's name as well as Employee's
biography and likeness in the form approved by Employee in connection with its
business, including in advertising its products and services, and may, with
Employee's permission, which shall not be withheld unreasonably, grant this
right to others, but not for use as a direct endorsement.
6. Confidentiality.
---------------
6.1 Employee shall not, during the term and thereafter,
disclose Confidential Information of Company (other than to an employee of
Company or to a person to whom disclosure is reasonably necessary or appropriate
in connection with the performance by Employee of services hereunder) and shall
not use Confidential Information of Company for any purpose beyond the
performance of services under this Agreement without the prior written consent
of Company. All Confidential Information shall remain the property of Company.
Upon termination of employment, Employee shall return to Company all documents,
records, plans, designs, notebooks and other evidences, including all copies
thereof, of information, including proprietary information and/or Confidential
Information, obtained by Employee during employment.
6.2 The obligation of confidence under this Agreement shall
not apply to information which Employee can show from documented records is or
becomes generally available to the public without fault of Employee, or which is
obtained without restriction on publication or use from a third party having the
right to disclose the same.
6.3 "Confidential Information," for purposes of this
Agreement, shall mean all information maintained in confidence by Company. It
includes, but is not limited to, all information that derives independent
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable through proper means by, other persons who can
derive economic value from its disclosure or use. It also includes, but is not
limited to, proprietary information and information relating to such business
matters as research and development, manufacturing processes, management systems
and techniques, the identity and profiles of customers and suppliers and sales
and marketing plans and information, as well as Company personnel information.
Such information may be marked as confidential or proprietary, or received under
circumstances reasonably interpreted as imposing an obligation of
confidentiality. Such information does not lose its status as Confidential
Information merely because it was known by a limited number of persons or
entities or because it was not entirely originated by Company. Employee
acknowledges that the Confidential Information of Company is a valuable, special
and unique asset of Company, and that any disclosure of such Confidential
Information may be materially damaging to Company.
7. Enforcement. Except for claims for workers' compensation, claims for
-----------
unemployment insurance, claims relating to the agreements, obligations or
covenants set forth in Sections 4 and 6 of this Agreement, and claims within the
exclusive jurisdiction of the Department of Labor Standards Enforcement or the
National Labor Relations Board, any and all controversies or claims arising out
of, in connection with, or in relation to any aspect of this Agreement or
Employee's employment with Company (or termination thereof) shall be resolved by
arbitration in New York, New York; such arbitration to be conducted in
accordance with the then applicable rules of the American Arbitration
Association. The arbitration award shall be
4
<PAGE>
final and binding upon the parties to the arbitration and judgment thereon may
be entered in any court having jurisdiction. Notwithstanding the foregoing,
either party may, at its option, seek injunctive relief in state or federal
court. For the purposes hereof, Employee hereby submits to the jurisdiction of
the federal and state courts in New York and notice of demand, process and/or
summons in connection with legal proceedings, may be served upon Employee by
registered or certified mail in accordance with Section 8.5 with the same effect
as if personally served.
Employee understands and agrees that this Section 7 contains a full and
complete statement of any agreements and understandings regarding resolution of
disputes between Company and Employee, and agrees that this Section 7 supersedes
all previous agreements, whether written or oral, express or implied, relating
to the subjects covered in this Section 7.
EMPLOYEE UNDERSTANDS AND AGREES THAT THIS AGREEMENT TO ARBITRATE
CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A TRIAL BY JURY OF ANY MATTERS
SUBJECT TO ARBITRATION UNDER THIS AGREEMENT.
8. Miscellaneous.
-------------
8.1 Survival. Employee's duties under Sections 4 and 6 shall survive
--------
termination of Employee's employment with Company to the extent provided under
each such Section.
8.2 Assignment. Employee agrees not to assign, sell, transfer,
----------
delegate, or otherwise dispose of, whether voluntarily or involuntarily, or by
operation of law, any rights or obligations under this Agreement. Any such
purported assignment, transfer, or delegation shall be null and void. Nothing
in this Agreement shall prevent the consolidation of Company with, or its merger
into, any other entity, or the sale by Company of all or substantially all of
its assets, or the otherwise lawful assignment by Company of any rights or
obligations under this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns, and
shall not benefit any person or entity other than those specifically enumerated
in this Agreement.
8.3 Interpretation. In case any one or more of the provisions
--------------
contained in the Agreement shall be held to be invalid, illegal or unenforceable
in any respect, for any reason, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If, moreover, any one or more of the provisions
contained in this Agreement shall be held to be excessively broad, for any
reason, it shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the then applicable law. In the event
of any inconsistency between this Agreement and Company's employment manual,
this Agreement shall govern. By way of illustration but not limitation,
Company's policy of having employees subject to a 30-day trial period of
employment shall not apply to Employee.
8.4 Notices. Any notice which Company is required or may desire to
-------
give to Employee shall be given by personal delivery or registered or certified
mail, return receipt requested, addressed to Employee at Employee address of
record with Company or at such other place as Employee may from time to time
designate in writing (with a copy to Employee's counsel, Axel Calissendorff,
Esq., at Mannheimer Swartling Advokatbyra, Norrmalmstorg 4, P.O. Box 1711, 111
87 Stockholm, Sweden). It will be Employee's responsibility to immediately
notify Company, in writing, of any change in employee's address of record. Any
notice which Employee is required or may desire to give to Company hereunder
shall be given
5
<PAGE>
by personal delivery or by registered or certified mail, return receipt
requested, addressed to Company at its principal office, or at such other office
as Company may from time to time designate in writing (with a copy to Company's
counsel, Mark L. Mandel, Esq., at Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, New York 10104). The date of personal delivery or the date
of mailing such notice shall be deemed to be the date of delivery thereof.
8.5 Waiver. A waiver by either party of the breach of any provisions of
------
this Agreement shall not thereby be deemed to have been a waiver of any
preceding or succeeding breach of the same or any other provisions of this
Agreement.
8.6 Complete Agreement; Amendments. The foregoing is the entire
------------------------------
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented, canceled or discharged except by
written instrument executed by both parties hereto.
8.7 Applicable Law. This Agreement has been negotiated in, and shall be
--------------
governed by the internal laws of the State of New York without regard to the
principles of conflicts of law.
8.8 Headings. The headings of the sections hereof are inserted for
--------
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
8.9 Expectations Regarding Employment.
(a) COMPANY AND EMPLOYEE AGREE THAT THIS AGREEMENT EXPRESSES ALL OF
THE EXPECTATIONS BETWEEN EMPLOYEE AND COMPANY REGARDING THE TERM OF EMPLOYEE'S
EMPLOYMENT AND EMPLOYEE'S AND COMPANY'S RIGHT TO TERMINATE THAT EMPLOYMENT.
EMPLOYEE SHALL HAVE NO GREATER RIGHTS AS AN EMPLOYEE OF COMPANY (OR OF ANY
DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF COMPANY) THAN ANY OTHER
PERSON WHO IS NOT RELATED TO COMPANY OR SUCH AFFILIATE IN MORE THAN ONE SUCH
CAPACITY. WITHOUT LIMITING THE FOREGOING SENTENCES, EMPLOYEE ACKNOWLEDGES THAT,
FOLLOWING THE INITIAL TERM IN SECTION 2.1, EMPLOYEE'S EMPLOYMENT WITH COMPANY
WILL BE ON AN AT-WILL BASIS.
(b) EMPLOYEE CONFIRMS THAT EMPLOYEE HAS REVIEWED THIS AGREEMENT
CAREFULLY AND UNDERSTANDS IT, THAT EMPLOYEE IS FULLY AWARE OF ITS LEGAL EFFECT,
AND THAT EMPLOYEE HAS ENTERED INTO IT FREELY AND VOLUNTARILY AND BASED ON
EMPLOYEE'S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN
THOSE CONTAINED IN THIS AGREEMENT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS
CONSULTED WITH OR BEEN AFFORDED AMPLE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL
REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND ANY OTHER AGREEMENTS BETWEEN
OR AMONG EMPLOYEE, COMPANY WHICH MAY HAVE BEEN ENTERED INTO SUBSTANTIALLY
CONTEMPORANEOUSLY WITH THIS AGREEMENT.
8.10 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hand as of the date
first set forth above.
/s/ Jonas Svensson
-----------------------------
Jonas Svensson
RAZORFISH, INC.
By: /s/ Jeffrey A. Dachis
--------------------------
Name: Jeffrey A. Dachis
Title:
7
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of October 1, 1998,
is made by and between JOHAN IHRFELT, residing at Packhusjrand 6, 111 30
Stockholm, Sweden (hereinafter "Employee"), and RAZORFISH, INC., a New York
corporation, having its principal executive offices at 107 Grand Street, New
York, NY 10013 (hereinafter "Company"). This Agreement shall be effective on
the Closing Date (as defined in that certain Subscription and Exchange
Agreement, dated as of October 1, 1998, among the Company, Spray Ventures AB and
Communicade Inc.) (the "Effective Date").
WHEREAS, Company desires to employ Employee and Employee desires to accept
such employment on the terms set forth in this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
1. Position and Responsibilities.
- -- -----------------------------
1.1 Employee shall have reporting authority to Jeffrey A. Dachis or such other
senior executive officer as he reasonably shall designate after consultation
with Employee, and Employee shall perform such duties as Company shall from time
to time designate. Employee shall be located in either New York, New York,
Stockholm, Sweden or at such other locations as mutually agreed by Employee and
Company. Company will conduct a review of Employee's job responsibilities on an
annual basis. Employee's authority shall be commensurate with that of other
employees of Company having positions and salaries comparable to Employee's.
1.2 Employee shall, to the best of Employee's ability, devote Employee's
substantially full time and best efforts to the performance of Employee's duties
hereunder and the business and affairs of Company in accordance with the
reasonable instructions and directions of Company in all matters, including
those involving creative decisions and judgments, and, in doing so, shall duly
and faithfully perform and observe any and all rules and policies which Company
may now or shall hereafter establish governing the conduct of its business.
2. Term of Employment.
- -- ------------------
2.1 Employee's employment under this Agreement shall commence on the Effective
Date and continue through December 31, 2001, unless sooner terminated as
provided in Section 2.2 (the "Initial Term"). Subject to Section 2.2, beginning
the day following the last day of the Initial Term, this Agreement and
Employee's employment under this Agreement shall continue on an at-will basis,
terminable by either party as set forth in the last sentence of Section 2.2.
2.2 During the Initial Term, Company shall have the right, upon written notice
to Employee, to terminate Employee's employment at any time for "Cause," as
defined in Section 2.3 below. If, prior to the end of the Initial Term, Company
terminates Employee's employment for Cause, or Employee voluntarily terminates
his employment with Company, then Company's obligations to compensate Employee
under Section 3 of this Agreement will terminate immediately, except for
compensation through the date of such termination of employment. If, prior to
the end of the Initial Term, Company terminates Employee's employment without
Cause, then Company will be obligated to compensate Employee as set forth in
Section 3 of this Agreement through the end of the Initial Term, it being
understood and agreed that if Employee obtains other employment during the
period Company remains obligated
1
<PAGE>
to compensate Employee as set forth in Section 3, Employee shall promptly notify
Company thereof and of the aggregate gross compensation payable to Employee in
respect of such other employment, and Company shall have the right to deduct
from the amount payable by Company to Employee pursuant to Section 3 the gross
aggregate amount of compensation Employee receives from such other employment.
At the end of the Initial Term, either Company or Employee may terminate this
Agreement immediately or at any time thereafter, upon thirty (30) days' prior
written notice, with or without Cause, in which case, Company's obligation to
compensate Employee under Section 3 of this Agreement will terminate
immediately, except for compensation through the date of such termination of
employment.
2.3 For purposes of Section 2.2, "Cause" shall mean Employee's: (i) material
misconduct which has a material adverse effect on the business and affairs of
Company; (ii) Employee's (A) material breach of any provision of this Agreement,
(B) willful or continued failure to substantially perform his material job
duties hereunder, or (C) material misconduct which reasonably could be expected
to have a material adverse effect on Company, including without limitation
disregard of lawful written instructions of Company's Board of Directors
consistent with Employee's position relating to the business of Company or
neglect of duties or failure to act, provided in each such case Company has
given at least thirty (30) days' prior written notice describing the alleged
breach, failure or misconduct in detail and Employee has failed to cure such
deficiency within such thirty-day (30-day) period (provided such breach, failure
or misconduct is capable of being cured within such period); (iii) gross
negligence, gross neglect of duties or gross insubordination; (iv) conviction or
plea of no contest to common law fraud, a felony criminal act or a crime
involving moral turpitude; (v) abuse of alcohol or other drugs or controlled
substances to the material detriment of Company; (vi) unauthorized appropriation
of Company's property; or (vii) death or a disability that causes Employee to be
deemed "permanently disabled" under Company's disability insurance policy, or
renders Employee otherwise unable to perform the essential functions of
Employee's job under this Agreement. The term "disability" as used herein shall
mean Employee shall have been prevented from properly performing his duties
hereunder by reason of any physical or mental incapacity, in either case for a
period of more than ninety (90) consecutive days or one hundred twenty (120)
days in the aggregate in any twelve-month (12-month) period.
3. Compensation.
- -- ------------
3.1 During the period of this Agreement, Company shall pay to Employee a base
salary at an annual rate of $145,000, payable in installments in accordance with
Company policy.
3.2 Beginning after one year of employment, Employee shall be eligible from
time to time to receive bonuses or to participate in profit sharing.
Eligibility will be determined through a review process that will consider
Employee's work performance and contribution to Company, and Company's
performance, as determined by, and at the discretion of the Board of Directors.
Percentage of profit sharing, if any, will be determined during the review by
the Board of Directors. Employee performance reviews will be conducted by
Company in accordance with Company policy.
3.3 Company shall reimburse Employee for reasonable business expenses incurred
on behalf of Company upon presentation of appropriate receipts in accordance
with Company's written policies with respect thereto. Company shall also
reimburse Employee for any expenses incurred in connection with Employee
obtaining a "green card" or other documentation necessary to enable Employee to
work in the United States to the extent required.
3.4 In addition to the compensation payable to Employee pursuant to Sections
3.1 and 3.2 above, Employee shall be eligible to participate, on no less
favorable a basis
2
<PAGE>
than other employees of Company of similar position, authority and compensation
package to Employee's, in any benefits which Company from time to time may offer
to or provide for its employees, including, but not limited to, vacation,
pension plans, profit sharing plans, hospitalization and medical, dental and
vision benefit plans. Except for Company's vacation benefits and pension and
profit sharing plans which shall vest in accordance with Company's employment
policies and manual, the foregoing benefits and plans shall be deemed vested as
of the date hereof (subject to the processing of any applicable benefit plan
documentation). In addition, Company agrees to obtain a life insurance policy
on behalf of Employee. The Board of Directors may, in its sole discretion,
increase insurance coverage for all employees as permitted by business
conditions. However, the Board is not obligated to provide any increases.
3.5 Employee recognizes that the compensation, benefits and other amounts
provided by Company under this Agreement may be subject to federal, state or
local income taxes. It is expressly understood and agreed that all such taxes
shall be the responsibility of Employee. To the extent that federal, state or
local law requires withholding of taxes on compensation, benefits or other
amounts provided under this Agreement, Company shall withhold the necessary
amounts from the amounts payable to Employee under this Agreement.
4. Ownership of and Rights to Proprietary Information.
- -- --------------------------------------------------
4.1 Employee hereby agrees to transfer and assign and does hereby transfer and
assign to Company all of Employee's rights, title and interests in and to any
and all Proprietary Information (as defined in Section 4.4) discovered,
conceived, developed, created or reduced to practice by Employee personally or
jointly during Employee's employment with Company. Employee agrees to disclose
to Company the existence of all such Proprietary Information, and further agrees
to execute and deliver promptly all proper papers and perform all legal acts
which Company deems necessary or desirable to vest in Company all of Employee's
right, title and interest in and to such proprietary information, to enable
Company to file patent applications, and to obtain and maintain Letters Patent
with respect to patentable material and to enable Company to confirm or perfect
its rights in copyrightable material. Employee agrees that all Proprietary
Information described herein is a "work made for hire," and in the event that it
is determined that any such work is deemed not to be a "work made for hire," the
foregoing assignment and agreement to transfer and assign shall apply.
4.2 Company agrees that it shall have no right, title or interest in or to any
proprietary information for which Employee can establish (i) that no equipment,
supplies, facility or trade secret information of Company was used, (ii) the
proprietary information was developed entirely apart from the services performed
by Employee under this Agreement, and (iii) the proprietary information does not
relate to or derive or result from any Proprietary Information or Employee's
work under this Agreement.
4.3 Employee acknowledges, agrees, represents and warrants that, except solely
for any proprietary information or invention subject to Section 4.2, any and all
ideas, inventions, materials or works created or submitted by Employee for or to
Company hereunder (excluding any material which is assigned by Company to
Employee for preparation) (A) shall not be subject to an obligation of
confidentiality of any nature or kind in favor of, or infringe upon or violate
any rights of any third person, including but not limited to any right or
interest in any copyright, patent or trade secret rights, and (B) shall be owned
exclusively by Company, and Employee shall not assert or claim any right, title
or interest therein or thereto.
4.4 "Proprietary Information," for purposes of this Agreement means proprietary
information, technology or know how of, concerning or related to Company or its
business or operations, including but not limited to (i) source code and
documentation for proprietary computer software and any other trade secrets,
software, work product, processes,
3
<PAGE>
formulas, schematics, analyses, inventions, ideas, improvements of Company or
know-how relating thereto; (ii) any material which is protected by copyright,
(iii) advertising, product development, strategic and business plans and
information, including customer and prospect lists, of Company; and (iii)
confidential financial information (including prices and costs) concerning the
business of the Company.
5. Name and Likeness. During the period this Agreement remains in effect,
- -- -----------------
Company shall have the right to use Employee's name as well as Employee's
biography and likeness in the form approved by Employee in connection with its
business, including in advertising its products and services, and may, with
Employee's permission, which shall not be withheld unreasonably, grant this
right to others, but not for use as a direct endorsement.
6. Confidentiality.
- -- ---------------
6.1 Employee shall not, during the term and thereafter, disclose Confidential
Information of Company (other than to an employee of Company or to a person to
whom disclosure is reasonably necessary or appropriate in connection with the
performance by Employee of services hereunder) and shall not use Confidential
Information of Company for any purpose beyond the performance of services under
this Agreement without the prior written consent of Company. All Confidential
Information shall remain the property of Company. Upon termination of
employment, Employee shall return to Company all documents, records, plans,
designs, notebooks and other evidences, including all copies thereof, of
information, including proprietary information and/or Confidential Information,
obtained by Employee during employment.
6.2 The obligation of confidence under this Agreement shall not apply to
information which Employee can show from documented records is or becomes
generally available to the public without fault of Employee, or which is
obtained without restriction on publication or use from a third party having the
right to disclose the same.
6.3 "Confidential Information," for purposes of this Agreement, shall mean all
information maintained in confidence by Company. It includes, but is not
limited to, all information that derives independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable through proper means by, other persons who can derive economic
value from its disclosure or use. It also includes, but is not limited to,
proprietary information and information relating to such business matters as
research and development, manufacturing processes, management systems and
techniques, the identity and profiles of customers and suppliers and sales and
marketing plans and information, as well as Company personnel information. Such
information may be marked as confidential or proprietary, or received under
circumstances reasonably interpreted as imposing an obligation of
confidentiality. Such information does not lose its status as Confidential
Information merely because it was known by a limited number of persons or
entities or because it was not entirely originated by Company. Employee
acknowledges that the Confidential Information of Company is a valuable, special
and unique asset of Company, and that any disclosure of such Confidential
Information may be materially damaging to Company.
7. Enforcement. Except for claims for workers' compensation, claims for
- -- -----------
unemployment insurance, claims relating to the agreements, obligations or
covenants set forth in Sections 4 and 6 of this Agreement, and claims within the
exclusive jurisdiction of the Department of Labor Standards Enforcement or the
National Labor Relations Board, any and all controversies or claims arising out
of, in connection with, or in relation to any aspect of this Agreement or
Employee's employment with Company (or termination thereof) shall be resolved by
arbitration in New York, New York; such arbitration to be conducted in
accordance with the then applicable rules of the American Arbitration
Association. The arbitration award shall be
4
<PAGE>
final and binding upon the parties to the arbitration and judgment thereon may
be entered in any court having jurisdiction. Notwithstanding the foregoing,
either party may, at its option, seek injunctive relief in state or federal
court. For the purposes hereof, Employee hereby submits to the jurisdiction of
the federal and state courts in New York and notice of demand, process and/or
summons in connection with legal proceedings, may be served upon Employee by
registered or certified mail in accordance with Section 8.5 with the same effect
as if personally served.
Employee understands and agrees that this Section 7 contains a full and
complete statement of any agreements and understandings regarding resolution of
disputes between Company and Employee, and agrees that this Section 7 supersedes
all previous agreements, whether written or oral, express or implied, relating
to the subjects covered in this Section 7.
EMPLOYEE UNDERSTANDS AND AGREES THAT THIS AGREEMENT TO ARBITRATE
CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A TRIAL BY JURY OF ANY MATTERS
SUBJECT TO ARBITRATION UNDER THIS AGREEMENT.
8. Miscellaneous.
- -- -------------
8.1 Survival. Employee's duties under Sections 4 and 6 shall survive
- --- --------
termination of Employee's employment with Company to the extent provided under
each such Section.
8.2 Assignment. Employee agrees not to assign, sell, transfer, delegate, or
- --- ----------
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement. Any such purported
assignment, transfer, or delegation shall be null and void. Nothing in this
Agreement shall prevent the consolidation of Company with, or its merger into,
any other entity, or the sale by Company of all or substantially all of its
assets, or the otherwise lawful assignment by Company of any rights or
obligations under this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns, and
shall not benefit any person or entity other than those specifically enumerated
in this Agreement.
8.3 Interpretation. In case any one or more of the provisions contained in the
- --- --------------
Agreement shall be held to be invalid, illegal or unenforceable in any respect,
for any reason, such invalidity, illegality or unenforceability shall not affect
the other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein. If, moreover, any one or more of the provisions contained in this
Agreement shall be held to be excessively broad, for any reason, it shall be
construed by limiting and reducing it so as to be enforceable to the extent
compatible with the then applicable law. In the event of any inconsistency
between this Agreement and Company's employment manual, this Agreement shall
govern. By way of illustration but not limitation, Company's policy of having
employees subject to a 30-day trial period of employment shall not apply to
Employee.
8.4 Notices. Any notice which Company is required or may desire to give to
- --- -------
Employee shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to Employee at Employee address of record
with Company or at such other place as Employee may from time to time designate
in writing (with a copy to Employee's counsel, Axel Calissendorff, Esq., at
Mannheimer Swartling Advokatbyra, Norrmalmstorg 4, P.O. Box 1711, 111 87
Stockholm, Sweden). It will be Employee's responsibility to immediately notify
Company, in writing, of any change in employee's address of record. Any notice
which Employee is required or may desire to give to Company hereunder shall be
given
5
<PAGE>
by personal delivery or by registered or certified mail, return receipt
requested, addressed to Company at its principal office, or at such other office
as Company may from time to time designate in writing (with a copy to Company's
counsel, Mark L. Mandel, Esq., at Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, New York 10104). The date of personal delivery or the date
of mailing such notice shall be deemed to be the date of delivery thereof.
8.5 Waiver. A waiver by either party of the breach of any provisions of this
- --- ------
Agreement shall not thereby be deemed to have been a waiver of any preceding or
succeeding breach of the same or any other provisions of this Agreement.
8.6 Complete Agreement; Amendments. The foregoing is the entire agreement of
- --- ------------------------------
the parties with respect to the subject matter hereof. This Agreement may not
be amended, supplemented, canceled or discharged except by written instrument
executed by both parties hereto.
8.7 Applicable Law. This Agreement has been negotiated in, and shall be
- --- --------------
governed by the internal laws of the State of New York without regard to the
principles of conflicts of law.
8.8 Headings. The headings of the sections hereof are inserted for convenience
- --- --------
only and shall not be deemed to constitute a part hereof nor to affect the
meaning thereof.
8.9 Expectations Regarding Employment.
(a) COMPANY AND EMPLOYEE AGREE THAT THIS AGREEMENT EXPRESSES ALL OF THE
EXPECTATIONS BETWEEN EMPLOYEE AND COMPANY REGARDING THE TERM OF EMPLOYEE'S
EMPLOYMENT AND EMPLOYEE'S AND COMPANY'S RIGHT TO TERMINATE THAT EMPLOYMENT.
EMPLOYEE SHALL HAVE NO GREATER RIGHTS AS AN EMPLOYEE OF COMPANY (OR OF ANY
DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF COMPANY) THAN ANY OTHER
PERSON WHO IS NOT RELATED TO COMPANY OR SUCH AFFILIATE IN MORE THAN ONE
SUCH CAPACITY. WITHOUT LIMITING THE FOREGOING SENTENCES, EMPLOYEE
ACKNOWLEDGES THAT, FOLLOWING THE INITIAL TERM IN SECTION 2.1, EMPLOYEE'S
EMPLOYMENT WITH COMPANY WILL BE ON AN AT-WILL BASIS.
(b) EMPLOYEE CONFIRMS THAT EMPLOYEE HAS REVIEWED THIS AGREEMENT CAREFULLY AND
UNDERSTANDS IT, THAT EMPLOYEE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT
EMPLOYEE HAS ENTERED INTO IT FREELY AND VOLUNTARILY AND BASED ON EMPLOYEE'S
OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE
CONTAINED IN THIS AGREEMENT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS
CONSULTED WITH OR BEEN AFFORDED AMPLE OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND ANY OTHER
AGREEMENTS BETWEEN OR AMONG EMPLOYEE, COMPANY WHICH MAY HAVE BEEN ENTERED
INTO SUBSTANTIALLY CONTEMPORANEOUSLY WITH THIS AGREEMENT.
8.10 Counterparts. This Agreement may be executed in multiple counterparts,
- ---- ------------
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hand as of the date
first set forth above.
/s/ Johan Ihrfelt
-----------------------------
Johan Ihrfelt
RAZORFISH, INC.
By: /s/ Jeffrey A. Dachis
--------------------------
Name: Jeffrey A. Dachis
Title:
7
<PAGE>
EXHIBIT 10.14
DRAFT
Agreement of Lease, made as of this 28th day of October 1996, between
MAN YUN REAL ESTATE CORPORATION with a principal office at 87 Bowery, N.Y.C., NY
10002, party of the first part, hereinafter referred to as OWNER, and RAZORFISH,
INC., with a principal office at 580 Broadway, Suite 210, N.Y.C., NY. ________
party of the second part, hereinafter referred to as TENANT.
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from
Owner the entire 3rd floor in the building known as 107 Grand Street, in the
Borough of Manhattan, City of New York, for the term of five (5) years (or until
such term shall sooner cease and expire as hereinafter provided) to commence on
the lst day of January nineteen hundred and ninety seven, and to end on the 31st
day of December Two Thousand and two both dates inclusive, at an annual rental
rate as set forth on the annexed rider, which Tenant agrees to pay in lawful
money of the United States which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment, in equal monthly
installments in advance on the first day of each month during said term, at the
office of Owner or such other place as Owner may designate, without any set off
or deduction whatsoever, except that Tenant shall pay the first monthly
installments(s) on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
<PAGE>
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Rent:
----
1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy:
----------
2. Tenant shall use and occupy demised premises for offices and for
no other purpose.
Tenant Alterations:
------------------
3. Except as otherwise provided herein Tenant shall make no
structural changes in or to the demised premises of any nature without Owner's
prior written consent. Subject to the prior written consent of Owner, and to the
provisions of this article, Tenant at Tenant's expense, may make alterations,
installations, additions or improvements which are non-structural and which do
not affect utility services or plumbing and electrical lines, in or to the
interior of the demised premises by using contractors or mechanics first
approved by Owner. Tenant shall, before making any alterations, additions,
installations or improvements, at its expense, obtain all permits, approvals and
certificates required by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval thereof and shall deliver promptly
duplicates of all such permits, approvals and certificates to Owner and Tenant
agrees to carry and will cause Tenant's Contractors and Sub-Contractors to carry
such workman's compensation, general liability, personal and property damage
insurance as Owner may require. If any mechanic's lien is filed against the
demised premises, or the building of which the same forms a part, for work
claimed to have been done for, or materials furnished to, Tenant, whether or not
done pursuant to
2
<PAGE>
this article, the same shall be discharged by Tenant within ___ days thereafter,
at Tenant's expense, by filing the bond required by law. All fixtures and all
paneling, partitions, railings and like installations, installed in the premises
at any time, either by Tenant or by Owner in Tenant's behalf, shall upon
installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to Tenant no later
than twenty days prior to the date fixed as the termination of this lease,
elects to relinquish Owner's right thereto and to have them removed by Tenant,
in which event the same shall be removed from the premises by Tenant prior to
the expiration of the lease, at Tenant's expense. Nothing in this Article shall
be construed to give Owner title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment , but upon removal of any such
from the premises or upon removal of other installations as may be required by
Owner, Tenant shall immediately and at its expense, repair and restore the
premises to the condition existing prior to installation and repair any damage
to the demised premises or the building due to such removal. All property
permitted or required to be removed, by Tenant at the end of the term remaining
in the premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or may be removed from
the premises by Owner, at Tenant's expense.
Maintenance and Repairs:
-----------------------
4. Tenant shall, throughout the term of this lease, take good care of the
demised premises and the fixtures and appurtenances herein. Tenant shall be
responsible for all damage or injury to the demised premises or any other part
of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting
3
<PAGE>
from carelessness, omission, neglect or improper conduct of Tenant, Tenant's
subtenants, agents, employees, invitees or licensees, or which arise out of any
work, labor, service or equipment done for or supplied to Tenant or any
subtenant or arising out of the installation, use or operation of the property
or equipment of Tenant or any subtenant. Tenant shall also repair all damage to
the building and the demised premises caused by the moving of Tenant's fixtures,
furniture and equipment. Tenant shall promptly make, at Tenant's expense, all
repairs in and to the demised premises for which Tenant is responsible, using
only the contractor for the trade or trades in question, selected from a list of
at least two contractors per trade submitted by Owner. Any other repairs in or
to the building or the facilities and systems thereof for which Tenant is
responsible shall be performed by Owner at the Tenant's expense. Owner shall
maintain in good working order and repair the exterior and the structural
portions of the building, including the structural portions of its demised
premises, and the public portions of the building interior and the building
plumbing, electrical, heating and ventilating systems (to the extent such
systems presently exist) serving the demised premises. Tenant agrees to give
prompt notice of any defective condition in the premises for which Owner may be
responsible hereunder. There shall be no allowances to Tenant for diminution of
rental value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or others making repairs,
alterations, additions or improvements in or to any portion of the building or
the demised premises or in and to the fixtures, appurtenances or equipment
thereof. It is specifically agreed that Tenant shall not be entitled to any
setoff or reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this Lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of an action for
damages for
4
<PAGE>
breach of contract. The provisions of this Article 4 shall not apply in the case
of fire or other casualty which are dealt with in Article 9 hereof.
Window Cleaning:
---------------
5. Tenant will not clean nor require, permit, suffer or allow any window
in the demised premises to be cleaned from the outside in, violation of Section
202 of the Labor Law or any other applicable law or of the Rules of the Board of
Standards and Appeals, or of any other Board or body having or asserting
jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads:
------------------------------------------------
6. Tenant, at Tenant's sole cost and expense, shall promptly comply with
all present and future laws, orders and regulations of all state, federal,
municipal and local governments, departments, commissions and boards and any
direction of any public officer pursuant to law, and all orders, rules and
regulations of the New York Board of Fire Underwriters, Insurance Services
Office, or any similar body which shall impose any violation, order or duty upon
Owner or Tenant with respect to the demised premises, arising out of Tenant's
use or manner of use thereof, (including Tenant's permitted use) or, with
respect to the building if arising out of Tenant's use or manner of use of the
premises or the building (including the use permitted under the lease). Nothing
herein shall require Tenant to make structural repairs or alterations unless
Tenant has, by its manner of use of the demised premises or method of operations
therein, violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant may, after securing Owner to Owner's
reasonable satisfaction against all damages, interest, penalties and expenses
including, but not limited to, reasonable attorney's fees, by cash deposit or by
surety bond in an amount and in a company reasonably satisfactory to
5
<PAGE>
Owner, contest and appeal any such laws, ordinances, orders, rules, regulations
or requirements provided same is done with all reasonable promptness and
provided such appeal shall not subject Owner to prosecution for a criminal
offense or constitute a default under any lease or mortgage under which Owner
may be obligated, or cause the demised premises or any part thereof to be
condemned or vacated. Tenant shall not do or permit any act or thing to be done
in or to the demised premises which is contrary to law, or which will invalidate
or be in conflict with public liability, fire or other policies of insurance at
any time carried by or for the benefit of Owner with respect to the demised
premises or the building of which the demised premises form a part, or which
shall or might subject Owner to any liability or responsibility to any person or
for property damage. Tenant shall not keep anything in the demised premises
except as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization or other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or
damages, which may be imposed upon Owner by reason of Tenant's failure to comply
with the provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all fire insurance premiums
thereafter paid by Owner which shall have been charged because of such failure
by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a
schedule or "make-up" of rate for the building or demised premises issued by the
New York First Insurance Exchange, or other body making fire insurance
6
<PAGE>
rates applicable to said premises shall be conclusive evidence of the facts
therein stated and of the several items and charges in the first insurance rates
then applicable to said premises. Tenant shall not place a load upon any floor
of the demised premises exceeding the floor load per square foot area which it
was designed to carry and which is allowed by law. Owner reserves the right to
prescribe the weight and position of all safes, business and mechanical
equipment. Such installations shall be placed and maintained by Tenant, at
Tenant's expense, in settings sufficient, in Owner's reasonable business
judgement, to absorb and prevent vibration, noise and annoyance.
Subordination:
-------------
7. This lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases or the
real property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by and ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property - Loss, Damage, Reimbursement, Indemnity:
-------------------------------------------------
8. Owner or its agents shall not be liable for any damage to property of
tenant or of others entrusted to employees of the building, nor for loss of or
damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its
7
<PAGE>
contractor's agents, servants or employees. Owner or its agents will not be
liable for any such damage caused by other tenants or persons in, upon or about
said building or caused by operations in construction of any private, public or
quasi public work. If at any time any windows of the demised premises are
temporarily closed, darkened or bricked up (or permanently closed, darkened or
bricked up, if required by law) for any reason whatsoever including, but not
limited to Owner's own acts, Owner shall not be liable for any damage Tenant may
sustain thereby and Tenant shall not be entitled to any compensation therefor
nor abatement or diminution of rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction. Tenant shall indemnify and
save harmless Owner against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Owner shall not be reimbursed by
insurance, including reasonable attorneys fees, paid, suffered or incurred as a
result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel reasonably approved by Owner in writing such
approval not to be unreasonably withheld or delayed.
Destruction, Fire and Other Casualty:
------------------------------------
9. (a) If the demised premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give immediate notice thereof to Owner and
this lease shall continue in full force and effect except as hereinafter set
forth. (b) If the demised premises are partially
8
<PAGE>
damaged or rendered partially unusable by fire or other casualty, the damages
thereto shall be repaired by and at the expense of Owner and the rent, until
such repair shall be substantially completed, shall be apportioned from the day
following the casualty according to the part of the premises which is useable.
(c) If the demised premises are totally damaged or rendered wholly unusable by
fire or other casualty, then the rent shall be proportionately paid up to the
time of the casualty and thenceforth shall cease until the date when the
premises shall have been repaired and restored by Owner, subject to Owner's
right to elect not to restore the same as hereinafter provided. (d) If the
demised premises are rendered wholly unusable or (whether or not the demised
premises are damages in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within 90 days after such fire or casualty, specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Landlord's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant. Unless Owner shall serve a termination
notice as provided for herein, Owner shall make the repairs and restorations
under the conditions of (b) and (c) hereof, with all reasonable expedition,
subject to delays due to adjustment of insurance claims, labor troubles and
causes beyond Owner's control. After any such casualty, Tenant shall cooperate
with Owner's restoration by removing from the premises as promptly as reasonably
possible, all of
9
<PAGE>
Tenant's salvageable inventory and movable equipment, furniture, and other
property. Tenant's liability for rent shall resume ten (10) days after written
notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery against the
other or any one claiming through or under each of them by way of subrogation or
otherwise. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefiting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
10
<PAGE>
Eminent Domain:
--------------
10. If the whole or any part of the demised premises shall be acquired
or condemned by Eminent Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim for
the value of any unexpired term of said lease and assigns to Owner, Tenant's
entire interest in any such award.
Assignment, Mortgage, Etc.:
--------------------------
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, under tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise by construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
11
<PAGE>
Electric Current:
----------------
12. Rates and conditions in respect to submetering or rent inclusion,
as the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installation or interfere with
the use thereof by other tenants of the building. The change at any time of the
character of electric service shall in no wise make Owner liable or responsible
to Tenant, for any loss, damages or expenses which Tenant may sustain.
Access to Premises:
------------------
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and maintain
and replace pipes and conduits in and through the demised premises and to erect
new pipes and conduits therein provided they are concealed within the walls,
floor, or ceiling. Owner may, during the progress of any work in the demised
premises, take all necessary materials and equipment into said premises without
the same constituting an eviction nor shall the Tenant be entitled to any
abatement of rent while such work is in progress nor to any damages by reason of
loss or interruption of business or other wise. Throughout the term hereof Owner
shall have the right on notice to tenant to enter the demised premises at
reasonable hours for the purpose of showing the same to prospective purchasers
or mortgagees of the building, and during the last six
12
<PAGE>
month's of the term for the purpose of showing the same to prospective
purchasers or mortgagees of the building, and during the last 6 months of the
term for the purpose of showing the same to prospective tenants. If Tenant is
not present to open and permit an entry into the premises, Owner or Owner's
agents may enter the same whenever such entry may be necessary or permissible by
master key or forcibly and provided reasonable care is exercised to safeguard
Tenant's property, such entry shall not render Owner or its agents liable
therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
substantially all of Tenant's property therefrom, Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligations hereunder.
Vault, Vault Space, Area:
------------------------
14. No Vault, vault space or area, whether or not enclosed or covered,
not within the property line of the building is leased hereunder, anything
contained in or indicated on any sketch, blue print or plan, or anything
contained elsewhere in this lease to the contrary notwithstanding. Owner makes
no representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, free or charge of municipal
authorities for such vault or area shall be paid by Tenant.
13
<PAGE>
Occupancy:
---------
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record.
Bankruptcy:
----------
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtors, or (2) the making by
Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender, the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) it is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term
14
<PAGE>
demised and the fair and reasonable rental value of the demised premises for the
same period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
-------
17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payment of rent or additional rent; or if
the demised premises becomes vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under (S)235 of Title 11 of the U.S. Code (bankruptcy
code); or then, in any one or more of such events, upon Owner serving a written
five (5) days notice upon Tenant specifying the nature of said default and upon
the expiration of said (5) days, if Tenant shall have failed to comply with or
remedy such default, or if the said default or omission
15
<PAGE>
complained of shall be of a nature that the same cannot be completely cured or
remedied within said five (5) day period, and if Tenant shall not have
diligently commenced during such default within such five (5) day period, and
shall not thereafter with reasonable diligence and in good faith, proceed to
remedy or cure such default, then Owner may serve a written three (3) days'
notice of cancellation of this lease upon Tenant, and upon the expiration of
said three (3) days this lease and the term thereunder shall end and expire as
fully and completely as if the expiration of such three(3) day period were the
day herein definitely fixed for the end and expiration of this lease and the
term thereof and Tenant shall then quit and surrender the demised premises to
Owner but Tenant remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid: or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
16
<PAGE>
Remedies of Owner and Waiver of Redemption:
------------------------------------------
18. In the case of any such default, re-entry expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent shall become due
thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or any part of parts thereof,
either in the name of Owner or otherwise, for a term or terms, which may at
Owner's option to less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a high rental than that in this lease, and/or (c) Tenant or
the legal representatives of Tenant shall also pay Owner as liquidated damages
for the failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the rent hereby reserved and/or covenanted to
be paid and the net amount, if any, of the rents collected on account of the
lease or leases of the demised premises for each month of the period which would
otherwise have constituted the balance of the term of this lease. The failure of
Owner to re-let the premises or any part or parts thereof shall not release or
affect Tenant's liability for damages. In computing such liquidated damages
there shall be added to the said deficiency such expenses as Owner may incur in
connection with re-letting, such as reasonable legal expenses, attorneys' fees,
brokerage, advertising and for keeping the demised premises in good order or for
preparing the same for re-letting. Any such liquidated damages shall be paid in
monthly installments by Tenant on the rent day specified in this lease and any
suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any month
shall not prejudice in any way the rights of Owner to collect the deficiency of
any subsequent month by a similar proceeding. Owner, in putting the demised
premises in good order or preparing the same for re-rental may, at Owner's
option, make such alterations, repairs, replacements, and/or decorations in the
demised premises as Owner, in Owner's judgment,
17
<PAGE>
considers advisable and necessary for the purpose of re-letting the demised
premises, and the making of such alterations, repairs, replacements, and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever
for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such re-
letting, and in no event shall Tenant be entitled to receive any excess, if any,
of such net rents collected over the sums payable by Tenant to Owner hereunder.
In the event of a breach or threatened breach by Tenant of any of the covenants
or provisions hereof, Owner shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Owner obtaining
possession of demised premises, by reason of the violation by Tenant of any of
the covenants and conditions of this lease, or otherwise.
Fees and Expenses:
-----------------
19. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, then, unless
otherwise provided elsewhere in this lease, Owner may immediately or at any time
thereafter and without notice perform the obligation of Tenant thereunder. If
Owner, in connection with the foregoing or in connection with any default by
Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs
any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting
18
<PAGE>
or defending any action or proceeding, then Tenant will reimburse Owner for such
sums so paid or obligations incurred with interest and costs. The foregoing
expenses incurred by reason of Tenant's default shall be deemed to be additional
rent hereunder and shall be paid by Tenant to Owner within five (5) days of
rendition of any bill or statement to Tenant therefor. If Tenant's lease term
shall have expired at the time of making of such expenditures or incurring of
such obligations, such sums shall be recoverable by Owner as damages.
Building Alterations and Management:
-----------------------------------
20. Owner shall have the right at any time without the same
constituting an eviction and without incurring liability to Tenant therefore to
change the arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name number or designation by which the building may
be known. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representations by Owner:
---------------------------
21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which it is ________ or the demised premises, the rents, leases, expenses of
operation or any other _____ or thing
19
<PAGE>
affecting or related to the premises except as herein expressly set forth and no
rights, easements or licenses are acquired by Tenant by implication or otherwise
except as expressly set forth in the provisions of this lease. Tenant has
inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take the same "as is" and acknowledges that
the taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a part
were in good and satisfactory condition at the time such possession was so
taken, except as to latent defects. All understandings and agreements heretofore
made between the parties hereto are merged in this contract, which alone fully
and completely expresses the agreement between Owner and Tenant and any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in part, unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
End of Term:
-----------
22. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender and surrender to Owner the demised
premises, broom clean, in good order and condition, ordinary wear and damages
which Tenant is not required to repair as provided elsewhere in this lease
excepted, and Tenant shall remove all its property. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of this lease. If the last day of the term of this Lease or any
renewal thereof, falls on Sunday, this lease shall expire at noon on the
preceding Saturday unless it be a legal holiday in which case it shall expire at
noon on the preceding business day.
20
<PAGE>
Quiet Enjoyment:
---------------
23. Owner covenants and agrees with Tenant that upon Tenant paying
the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
Failure to Give Possession:
--------------------------
24. If Owner is unable to give possession of the demised premises on
the date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease shall
not be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease, Tenant covenants and agrees that such
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent. The provisions
of this article are
21
<PAGE>
intended to constitute "an express provision to the contrary" within the meaning
of Section 223-a of the New York Real Property Law.
No Waiver:
---------
25. The failure of Owner or Tenant to seeks redress for violation of,
or to insist upon the strict performance of any covenant or condition of this
lease or of any of the Rules or Regulation, set forth or hereafter adopted by
Owner, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Owner of rent with knowledge of the breach of any
covenant of this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by Owner unless such
waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner
of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement of any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Owner may accept such check or
payment without prejudice to Owner's right to recover the balance of such rent
or pursue any other remedy in this lease provided. No act or thing done by Owner
or Owner's agents during the term hereby demised shall be deemed an acceptance
of a surrender of said premises, and no agreement to accept such surrender shall
be valid unless in writing signed by Owner. No employee of Owner or Owner's
agent shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
22
<PAGE>
Waiver of Trial by Jury:
-----------------------
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any summary proceeding for
possession of the premises. Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding including a counterclaim
under Article 4.
Inability to Perform:
--------------------
27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from to so doing by reason of strike
or labor troubles or any cause whatsoever including, but not limited to,
government preemption in connection with a National Emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.
23
<PAGE>
Bills and Notices:
-----------------
28. Except as otherwise in this lease provided, a bill, statement,
notice or communication which Owner may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant at
the building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Services Provided by Owners:
---------------------------
29. As long as Tenant is not in default under any of the covenants of
this lease, Owners shall provide: (a) necessary elevator facilities on business
days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m. and have one
elevator subject to call at all other times; (b) heat to the demised premises
when and as required by law, on business days from 8 a.m. to 6 p.m. and on
Saturday from 8 a.m. to 1 p.m.; (c) water for ordinary lavatory purposes, but if
Tenant uses or consumes water for any other purposes or in unusual quantities
(of which fact Owner shall be the sole judge), Owner may install a water meter
at Tenant's expense which Tenant shall thereafter maintain at Tenant's expense
in good working order and repair to register such water consumption and Tenant
shall pay for water consumed as shown on said meter as additional rent as and
when bills are rendered; (d) said premises are to be kept clean by Tenant, it
shall be done at Tenant's sole expense, in a manner satisfactory to Owner and no
one other than
24
<PAGE>
persons approved by Owner shall be permitted to enter said premises or the
building of which they are a part for such purpose. Tenant shall pay Owner the
cost of removal of any of Tenants refuse and rubbish from the building; (e) if
the demised premises is serviced by Owner" air conditioning/cooling and
ventilating system, air-conditioning/cooling will be furnished to tenant from
May 15th through September 30th on business days (Mondays through Fridays,
holidays excepted) from 8:00 a.m. to 6:00 p.m., and ventilation will be
furnished on business days during the aforesaid hours except when air
conditioning/cooling is being furnished as aforesaid. If Tenant requires air
conditioning/cooling or ventilation for more extended hours or on Saturday,
Sundays or on holidays, as defined under Owner's contract with Operating
Engineers Local 94-94A, Owner will furnish the same at Tenant's expense. RIDER
to be added in respect to rates and conditions for such additional service; (f)
Owner reserves the right to stop services of the heating, elevators, plumbing,
air-conditioning, power systems or cleaning or other services, if any, when
necessary by reason of accident or for repairs, alterations, replacements or
improvement necessary or desirable in the judgment of Owner for as long as may
be reasonably required by reason thereof. If the building of which the demised
premises are a part supplies manually operated elevator service, Owner at any
time may substitute automatic-control elevator service and upon ten days'
written notice to Tenant, proceed with alterations necessary therefor without in
any wise affecting this lease or the obligation of Tenant hereunder. The same
shall be done with a minimum of inconvenience to Tenant and Owner shall pursue
the alteration with due diligence.
Captions:
--------
30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.
25
<PAGE>
Definitions:
-----------
31. The term "office", or "offices", whenever used in this lease,
shall not be construed to mean premises used as a store or stores, for the sale
or display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, thereafter arising, and it
shall be deemed and construed without further agreement between the parties or
their successors in interest, or between the parties and the purchaser, at any
such sale, or the said lessee of the building, or of the land and building, that
the purchaser or the lessee of the building has assumed and agreed to carry out
any and all covenants and obligations of Owner, hereunder. The words "re-enter"
and "re-entry" as used in this lease are not restricted in their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturday
(except such portion thereof as is covered by specific hours in Article 29
hereof), Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
26
<PAGE>
Adjacent Excavation Sharing:
---------------------------
32. If an excavation shall be made upon land adjacent to the demised
premises, as shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.
Rules and Regulations:
---------------------
33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations and such other and further reasonable Rules and Regulations as Owner
or Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additional Rule or Regulation hereafter made
or adopted by Owner or Owner's agents, the parties hereto agree to submit the
questions of the reasonableness of such Rule or Regulation for decision to the
New York office of the American Arbitration Association, whose determination
shall be final and conclusive upon the parties hereto. The right to dispute the
reasonableness of any additional Rule or Regulation upon Tenant's part shall be
deemed waived unless the same shall be asserted by service of notice, in writing
upon Owner within ten (10) days after the giving of notice thereof. Nothing in
this lease contained shall be construed to impose upon Owner any duty or
obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Owner shall not
be liable to Tenant for violation of the same by any other tenant, its servants,
employees, agents, visitors or licensees.
27
<PAGE>
Security:
--------
34. Tenant has deposited with Owner the sum of $29,146.00 as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which Owner may expend as may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look to
the new Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every assignment made of the security to a new
Owner. Tenant further covenants that it will not assign or encumber or attempt
to assign or encumber the monies deposited herein as security and that neither
Owner nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
28
<PAGE>
Estoppel Certificate:
--------------------
35. Either Party, at any time, and from time to time, upon at least
10 days' prior notice by the other shall execute , acknowledge and deliver to
the other, and/or to any other person, firm or corporation specified by the
other, a statement certifying that this Lease is unmodified and in full force
and effect (or, if there have been modifications, that the same is in full force
and effect as modified and stating the modifications), stating the dates to
which the rent and additional rent have been paid, and stating whether or not
there exists any default under this Lease, and, if so, specifying each such
default.
Successors and Assigns:
----------------------
36. The covenants, conditions and agreements contained in this lease
shall bind and inure to the benefit of Owner and Tenant and their respective
heirs, distributees, executors, administrators, successors, and except as
otherwise provided in this lease, their assigns.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
Witness for Owner: MAN YUN REAL ESTATE CORPORATION
/s/ Michael L. Carlin By: /s/ Tom Yuan
- ---------------------------------- -----------------------------
Tom Yuan
President
Witness for Tenant: -----------------------------
RAZORFISH, INC.
/s/ Michael Steven Simon
- ----------------------------------
By: /s/ Craig M. Kanarick
-----------------------------
Craig M. Kanarick
ACKNOWLEDGMENTS
Corporate Owner
State of New York, ss.:
29
<PAGE>
County of New York
On this 30th day of October 1996, before me personally came Tom Yuan
to me known, who being by me duly sworn, did depose and say that he resides in
New York City, N.Y. that he is the President of Man Yua Real Estate Corporation,
the corporation described in and which executed the foregoing instrument, as
OWNER: that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
/s/ Michael L. Carlin
______________________________
Michael L. Carlin
Notary Public, State of New York
No. 0566995
Qualified in Westchester County
Commission Expires 7/31/97
On this day of _____________ 19___, personally came ___________ to me
known and known to me to be the individual described in and who, as OWNER,
executed the foregoing instrument and acknowledged to me that _______ he execute
the same.
30
<PAGE>
Individual Owner
State of New York, ss.:
County of
Corporate Tenant
State of New York, ss.:
County of New York
On this 28th day of October 1996, before me personally came Craig
Kanarick to me known, who being by me duly sworn, did depose and say the he
resides in 580 Broadway, New York, N.Y. 10012 in Manhattan, that he is the
Executive Vice President of Razorfish, Inc., the corporation described in and
which executed the foregoing instrument, as TENANT that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of directors of said
corporation, and that he signed his name thereto by like order.
/s/ Michael Steven Simon
-------------------------------
Notary Public, State of New York
No. 4884510
Qualified in New York County
Commission Expires February 2, 1997
Individual Owner
State of New York, ss.:
County of
On this day of _____________ 19___, personally came ___________ to me
known and known to me to be the individual described in and who, as OWNER,
executed the foregoing instrument and acknowledged to me that _______ he execute
the same.
31
<PAGE>
RIDER WITH ADDITIONS TO PRINTED LEASE
BETWEEN
MAN YUN REAL ESTATE CORPORATION, AS OWNER
AND
RAZORFISH, INC., AS TENANT
1. As a condition to Tenant's subordination of this Lease, Landlord shall
use its best efforts to obtain non-disturbance agreements from the holders of
all present and future ground or underlying leases, and/or mortgages now or
hereafter affecting the property, in a form reasonably satisfactory to Tenant.
2. Unless the remainder of the demised premises which is not damaged
cannot reasonably be operated by Tenant in an economically feasible manner, in
which case the fixed rent payable hereunder shall be fully abated until
restoration of the demised premises, provided, however, this provision shall not
apply if the Tenant, its agents or employees caused the fire.
3. ; provided, however, Tenant shall have the right to cancel this Lease
without cost or penalty, on ten (10) day's notice to Landlord, if the
restoration of the demised premises is, for any reason whatsoever, except
Tenant's interference of failure to cooperate, not fully completed by Landlord
within 180 days of the casualty.
4. Provided, however, Tenant shall have the right to make its own claim
for a lease hold improvements, trade fixtures, and moving expenses from the
condemning authority.
5. on notice to Tenant and during Tenant's regular business hours.
6. Provided Landlord shall use best efforts to cause the least practical
interference with Tenant's business. Landlord, at its expense, shall repair and
restore the demised premises subsequent to conducting any work therein to the
condition substantially existing prior thereto.
7. after notice, except in emergency.
8. which has not been discharged within ninety (90) days.
9. for monetary default - thirty (30) day's notice for non-monetary
defaults.
10. after notice and the expiration of any applicable grace or cure
periods.
11. provided Landlord shall prevail therein.
12. unless same substantially interferes with Tenant's use of or access to
the premises.
<PAGE>
13. subject to completion of Landlord's work and to the extent the same
affects the demised premises.
14. and reasonable matters not ascertainable after due diligence.
15. except as herein set forth
16. upon notice and provided Landlord diligently causes services to be
restored. If not restored within a reasonable time, or if Landlord has not
commenced restoring services and diligently pursues its efforts to do so within
such time, which in no event shall be less than thirty (30) days, Tenant shall
receive abatement until the services are restored.
17. The rules and regulations shall be consistent with the provisions of
this Lease, and enforced in a nondiscriminatory manner.
18. unless Landlord is given a key.
19. which consent shall not be unreasonably withheld or delayed.
<PAGE>
RIDER TO LEASE BETWEEN
MAN YUN REAL ESTATE CORPORATION, AS LANDLORD
AND
RAZORFISH, INC., AS TENANT
FOR ENTIRE THIRD FLOOR AT 107 GRAND STREET
37. Conflict Between Lease and Rider - Any conflict between this Rider and the
--------------------------------
underlying printed Lease shall be determined in favor of the Rider.
38. Landlord's Work - Landlord's base building work ("Landlord's Work") and
---------------
Landlord's build-out of Tenant improvements ("Tenant's Improvements") are
described in schedules annexed hereto, and the plans for the floor dated and
initialed by each of the parties.
39. Rent - Rent shall be paid in equal monthly installments on the first day of
----
each month. Rent for the first lease year shall be $174,867.00 per annum; rent
for the second lease year shall be $183,194.00 per annum; rent for the third
lease year shall be $191,521.00 per annum; rent for the fourth lease year shall
be $199,848.00 per annum; and, rent for the fifth lease year shall be
$208,175.00.
40. Rent Commencement Date - Tenant shall commence paying rent sixty (60) days
----------------------
after the Possession Date or Adjusted Possession Date, (as defined in paragraph
42) provided, however, in no event shall the Possession Date or the Adjusted
Possession Date, for the purposes of this paragraph only, be before December 1,
1996.
41. Tenant's Plans and specifications - Within seven (7) days from the signing
---------------------------------
of this Lease, the Tenant shall supply Landlord with rudimentary drawings
(sufficient to permit Landlord to prepare the plans) and specifications for the
build-out of Tenant improvements.
1
<PAGE>
42. Tenant's Possession - Provided Tenant has complied with paragraph 41 above,
-------------------
Landlord shall tender possession of the premises to Tenant no later than January
15, 1997 ("Possession Date"). Provided, however, for each day Tenant is late in
providing drawings and specifications, two (2) days shall be added to the
Possession Date ("Adjusted Possession Date"). In the event that the Landlord
cannot tender the possession by the Possession Date or the Adjusted Possession
Date, as the case may be, Landlord will credit Tenant for any hold over
penalties thereafter incurred by it at its present location. Tenant shall supply
Landlord with a copy of its current lease, or copies of the terms pertaining to
hold over penalties, and will make no agreement with its current landlord
without Landlord's prior consent. If any proceeding is commenced by Tenant's
current landlord, Tenant shall give Landlord prompt notice of same and an
opportunity to defend the proceeding at Landlord's cost, by attorneys of
Landlord's own choosing.
43. Right of First-Refusal - For a period of twelve (12) months from the
----------------------
Possession Date or the Adjusted Possession Date, whichever is later, the Tenant,
shall have the right of first refusal to any contiguous floor that Landlord
offers to lease. Tenant's right shall be continuing, so that its failure to
exercise the right shall not terminate it, and the right shall continue until
the Landlord actually accepts a bona fide rental offer from a third party of
which the Tenant has been given notice and the right of first refusal which
Tenant has rejected or failed to exercise as hereinafter set forth. The right of
first refusal is subject to the following conditions and procedures:
A. Landlord's Notice - At such time that a contiguous floor is available
-----------------
or Landlord learns that it is to be vacated, Landlord shall notify Tenant, in
writing, of the vacancy or anticipated vacancy. Further, upon Landlord receiving
a bona fide written arms length offer to
2
<PAGE>
rent a contiguous floor, from a third party, which Landlord considers accepting,
Landlord shall notify Tenant, in writing, that the offer has been made.
B. Tenant's Notice - In each case, Tenant shall have ten (10) working
---------------
days, after Landlord's Notice, to exercise its right of first refusal, by
written notice to Landlord.
C. Lease for Continuous Floor - The lease for the contiguous floor shall
--------------------------
be substantially in form as this Lease, as modified by the following :
(i) Term - The new term shall be for the balance of the term
----
remaining on this Lease.
(ii) Rent - The annual rents for the contiguous space shall be 115%
----
of the base rent under this Lease.
(iii) Security - Tenant shall deposit with Landlord additional
----- --------
security equal to two months rent.
(iv) Landlord's Work - Landlord shall provide Tenant with a work
---------------
letter for the contiguous space substantially equivalent to Landlord's work
under this Lease.
D. Tenant's Rights after Twelve (12) Months - After the expiration of
----------------------------------------
the twelve month period noted above, the Tenant may nevertheless request the
Landlord supply additional space, as the Tenant deems it requires; provided,
however, Tenant shall not be required to pay any premium rent for such
additional space, but shall pay the prevailing market rate for equivalent space
and for an equivalent term.
44. Permitted Subleases -
-------------------
A. Tenant may sublease the premises, in whole or in part, to two
subleasees, for use described in Article 2 hereof with the written consent of
the Landlord which consent shall not be unreasonably withheld, conditioned or
delayed more than thirty (30) days.
3
<PAGE>
B. In the event that the Landlord shall consent to a subleasing, the
subleasee shall be of good financial stability and reputation and provided
further that:
(i) the subleasee shall, in writing, assume and agree to keep,
observe and perform all the terms, provisions, covenants and conditions of this
Lease.
(ii) a duplicate original of such sublease and assumption duly
executed and acknowledged by the Tenant and its subleasee, shall be delivered to
the Landlord within three days after the execution of the same.
(iii) the Landlord's consent shall not be construed as a waiver on
its part releasing the Tenant from any and all the terms, provisions and
conditions of this Lease.
(iv) to the extent tenant receives rent from the subleasee in excess
of the rent the Tenant pays for such space, 50% of the excess shall be paid to
the Landlord as additional rent.
45. Security - The security deposited with the Landlord by the Tenant shall
---------
bear no interest.
46. No Residential Use - Neither the premises or any part thereof shall be used
------------------
for residential purposes and a violation of this restriction shall be a material
breach of the lease.
47. No Abatement - Except as otherwise provided herein, there shall be no
------------
abatement of rent in the event there is a breakdown of the heating, air-
conditioning system, elevator services or other services or systems, provided
Landlord repairs same within fifteen (15) days, or if repairs cannot be
completed within 15 days, Landlord has commenced the repairs within said time
and diligently continues the repairs until completed.
48. Electric Current - Tenant shall be responsible for its own electric
----------------
current, by direct meter which Landlord shall install as part of Landlord's
work. Any additional electrical demand or HVAC service desired by Tenant must be
approved in advance, in writing, by Landlord, and
4
<PAGE>
performed or installed by building contractors in accordance to existing
maintenance contracts, guarantees and warranties as applicable.
49. Pornographic Uses Prohibited - Tenant agrees that the value of the demised
----------------------------
premises and the reputation of the Owner will be seriously injured if the
premises are used for any sort of commercial sex establishment. Tenant agrees
that Tenant will not permit or conduct any nude, or semi-nude live performances
on the premises, nor permit use of the premises for nude modeling, rap sessions,
or as a so-called rubber goods shops, or as a sex club of any sort, or as a
"massage parlor." Tenant agrees further that Tenant will not permit any of these
uses by any sublessee or assignee of the premises. This Article shall directly
bind any successors in interest to the Tenant. Tenant agrees that if at any time
Tenant violates any of the provisions of this Article, such violation shall be
deemed a breach of a substantial obligation of the terms of this Lease.
50. Repairs - Except for the work to be done by the Landlord pursuant to
-------
paragraph 38, Tenant shall be responsible for and shall make all work and
repairs within the demised premises.
51. Insurance - Tenant shall secure liability insurance from a carrier
---------
authorized to do business in the State of New York, in a sum of no less than one
million dollars and shall name Landlord as an additional insured on said policy,
which must provide that it cannot be terminated without thirty (30) days prior
notice to Landlord. Tenant shall give Landlord a duplicate copy of the policy.
52. Operation Cost Escalation - In lieu of operation cost escalations,
-------------------------
commencing January 1, 1998, and on January 1st of each year thereafter, Tenant
shall pay as additional rent, 2% of the prior year's base rent. Such payments
shall be cumulative.
53. Real Estate Tax Escalation Cap - Anything contained in the standard
------------------------------
escalation clause rider pertaining to real estate taxes notwithstanding, tenants
annual obligation to pay increases
5
<PAGE>
due to real estate tax escalation shall not exceed $2,082 for the 1997/98 tax
year, $4,164 for the 1998/99 tax year, $6,245 for the 1999/2000 tax year, $8,327
for the 2001 tax year, or $10,409 for the 01/02 tax year.
54. Tenant's Telecommunications and Wiring - Landlord shall not be responsible
--------------------------------------
for Tenant's telecommunications and/or wiring, provided, however, Landlord shall
allow Tenant access to the existing conduits and risers in the building without
charge to facilitate its installation of fiber optic cabling, and the Landlord
will cooperate with Tenant in bringing such optic lines into the building and
the Tenant's premises.
55. Daily Garbage - Anything contained in paragraph 29 notwithstanding, on a
-------------
daily basis, (except Saturdays, Sundays and holidays) Tenant shall securely bag
its own garbage leaving it in such location as Landlord designates in an area
near the freight elevator, and Landlord shall remove said garbage from the
premises.
56. Sole Broker - Each party represents to the other that it has dealt with no
-----------
real estate broker, except Goldsmith Murphy Inc. of 425 Madison Avenue, New York
City, NY 10017, in entering this lease, and each party shall hold the other
harmless from any claim made by any other broker based on that brokers alleged
dealings with that party.
57. In clarification of paragraph 29, Tenant shall keep the premises clean,
including the inside and outside of the windows, at its own cost and expense.
6
<PAGE>
58. Landlord shall provide Tenant, without charge, listings on its lobby
directory as Tenant may reasonably require, but not to exceed one-eighth (1/8 of
all available listings).
MAN YUK REAL ESTATE CORPORATION
/s/ Tom Yuan
By: _____________________________________
Tom Yuan
President
RAZORFISH, INC.
/s/ Craig M. Kanarick
BY: _____________________________________
7
<PAGE>
Rider No. , attached to and made a part of Lease dated as of , 1996
between Man Yun Real Estate Corporation
as Landlord and Razorfish, Inc.
as Tenant.
TAXES
Tenant agrees to pay as additional rent 12.5% of any and all increases in
Real Estate Taxes above the Real Estate Taxes for the 1996 - 1997 New York City
fiscal year (hereinafter referred to as the "Base Tax Year") imposed on the
Property with respect to every Tax Year or part thereof during the term of this
lease, whether any such increase results from a higher tax rate or an increase
in the assessed valuation of the property, or both. "Property" shall mean the
land and building, including any "air rights", of which the demised premises are
a part. "Real Estate Taxes" shall mean taxes and assessments imposed upon the
Property including any special assessment imposed thereon for any purpose
whatsoever and also including taxes payable by Landlord to a ground lessor with
respect thereto. If due to a change in the method of taxation any franchise,
income, profit, or other tax, however designated, shall be levied against
Landlord's interest in the property in whole or in part for or in lieu of any
tax which would otherwise constitute Real Estate Taxes, such change in method of
taxation shall be included in the term "Real Estate Taxes" for purposes hereof.
"Tax Year" shall mean each period of twelve months commencing on the first day
of July subsequent to the Base Tax Year, in which occurs any part of the term of
this lease or such other period of twelve months occurring during the term of
this lease as hereafter may be duly adopted as the fiscal year for real estate
tax purposes of the City of New York. All such payments shall be appropriately
pro-rated for any partial Tax Years occurring during the first and last years of
the term of this lease. A copy of the Tax Bill of the
<PAGE>
City of New York shall be sufficient evidence of the amount of Real Estate Taxes
and for calculation of the amount to be paid by Tenant.
Only Landlord shall be eligible to institute tax reduction or other
proceedings to reduce the assessed valuation. Should Landlord be successful in
any such reduction proceedings and obtain a rebate for periods during which
Tenant has paid Tenant's share of increases, Landlord shall, after deducting
Landlord's expenses in connection therewith including without limitation
attorney's fees and disbursements, return to Tenant, Tenant's pro-rata share of
such rebate except that Tenant may not obtain any portion of the benefits which
may accrue to Landlord from any reduction in Real Estate Taxes for any Tax Year
below those imposed in the Base Tax Year.
If any such Tax or Wage Rate statement is furnished to Tenant after
the commencement of the effective date of any such adjustment, there shall be
promptly paid by Tenant to Landlord an amount equal to the portion of such
adjustment allocable to that part of the Operation or Tax Year, as the case may
be, which shall have elapsed prior to the first day of the calendar month next
succeeding the calendar month in which said statement was furnished to tenant.
Landlord's failure during the lease term to prepare and deliver any of
the foregoing tax bills, statements or bills, or Landlord's failure to make a
demand, shall not in any way waive or cause Landlord to forfeit or surrender its
rights to collect any of the foregoing items of additional rent which may have
become due during the term of this lease. Tenant's liability for the amounts
due under this article shall survive the expiration of the term.
In no event shall any rent adjustment hereunder result in a decrease
in the fixed annual rent.
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration that, and as are investment on
Owner, making the written lease with Tenants, the undersigned guarantees the
Owner, Owner's successors and assigns, the full performance and observance of
all covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non-payment, non-performance, or non-
observance, or proof, or notice, or demand, whereby to charge the undersigned
thereof, all of which the undersigned hereby expressly waives and expressly
agrees that the validity of his agreement and the obligations of the guarantor
hereunder shall in no wise be terminated, affected or impaired by reason of the
assertion by Owner against Tenant of any of the rights or remedies reserved to
Owner pursuant to the provisions of the within lease. The undersigned further
covenants and agrees that this guaranty shall remain and continue in full force
and effect as to any renewal, modification or extension of this lease and during
any period when Tenant is occupying the premises as a "statutory tenant". As a
further inducement to Owner to make this lease and in consideration thereof,
Owner and the undersigned covenant and agree that in any action or proceeding
brought by either Owner or the undersigned against the other on any matters
whatsoever arising out of, under, or by virtue of the terms of this lease or of
this guaranty that Owner and the undersigned shall and do hereby waive trial by
jury.
Dated New York City _________ 19____
WITNESS:
- ------------------------------------
STATE OF NEW YORK,)
County of )
On this day of ,19 , before me personally came to me known and known
to me to be the individual described in, and who executed the foregoing Guaranty
and acknowledged to me that the executed the same.
----------------------
Notary
- --------------------------------(L.S)
<PAGE>
Residence.........................
Business Address..................
Firm Name
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A
PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 33
1. The sidewalks, entrances, driveways, passages courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purposes other than for ingress or egress form the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and/or vibrations, or interfere in any way with other Tenants or
2
<PAGE>
those having business therein, nor shall any animals or birds be kept in or
about the building. Smoking or carrying lighted cigars or cigarettes in the
elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability, and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that same shall come in direct contact with the
floor of the demised premises, and, if linoleum or other similar floor covering
is desired to be used an interlining of builder's deadening felt shall be first
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of this Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
3
<PAGE>
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited in
each Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building between the
hours of 6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all
persons who do not present a pass to the building signed by Owner. Owner will
furnish passes to persons for whom any Tenant requests same in writing. Each
Tenant shall be responsible for all persons for whom he requests such pass and
shall be liable to Owner for all acts of such persons.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or
emanate from the demised premises.
13. If the building contains central air conditioning and ventilation,
Tenant agrees to keep all windows closed at all times and to abide by all rules
and regulations issued by the Owner with respect to such services. If Tenant
requires air conditioning or ventilation after the usual hours, Tenant shall
give notice in writing to the building superintendent prior to 3:00 P.M. in the
case of services required on week days, and prior to 3:00 P.M. on the day prior
in the case of after hours service required on weekends or on holidays.
4
<PAGE>
14. Tenant shall not move any safe, heavy machinery, heavy equipment,
bulky matter, or fixtures into or out of the building without Landlord's prior
written consent. If such safe, machinery, equipment, bulky matter or fixtures
requires special handling, all work in connection therewith shall comply with
the Administrative Code of the City of New York and all other laws and
regulations applicable thereto and shall be done during such hours as Owner may
designate.
5
<PAGE>
MAN YUN REAL ESTATE CORPORATION
87 Bowery Street
New York, New York 10002
November 20, 1996
Razorfish, Inc
580 Broadway, Ste 210
New York, NY 10012
Re: Correction/Clarification of Lease Term.
Ladies and Gentlemen:
As previously discussed, our lease agreement dated October 28, 1996, for
the third floor of 107 Grand Street, New York City, was intended to be a five
(5) year lease. Through error, the opening paragraph of the lease indicates it
ends December 31, 2002, when it should have terminated December 31, 2001. This
letter is to set forth our agreement that the lease is amended or clarified so
that it will be for a term of five (5) years, ending on the 31st day of
December, Two Thousand and one.
If I have correctly set forth the understanding, please sign the lower left
hand corner of two copies of this letter and return them to our attorney,
Michael L. Carlin. The two signed copies are for your records.
Sincerely,
MAN YUN REAL ESTATE CORPORATION
/s/ Tom Yuan
By:____________________________________
Tom Yuan, President
AGREED:
RAZORFISH, INC.
/s/ Jeffrey A. Dachis
By:_______________________
<PAGE>
Sept. 11, 1996
Mr. Tom Yuan
President
Man Yun Realty
87 Bowery
New York, NY 10002
Sub: Construction cost Estimate No. 96086.01
Re: Razorfish - Plans submitted
Dear Mr. Yuan:
We are pleased to submit our proposal for work on the above referenced location.
Listed below is an itemized scope of work with the final costs for your review
and approval.
Scope of Work:
<TABLE>
<S> <C> <C>
- -- partition work............................... $ 16,350.00
- -- ceiling work................................. $ 5,400.00
- -- finish carpentry and millwork................ $ 4,000.00
- -- doors, frames & hardware..................... $ 2,700.00
- -- finish wood base work........................ $ 1,800.00
- -- glass work................................... $ 2,500.00
- -- painting..................................... $ 2,700.00
- -- sprinkler work............................... $ 4,000.00
- -- fire protection work......................... $ 500.00
- -- mechanical work.............................. $ 14,000.00
- -- electrical work.............................. $ 18,500.00
___________
- -- Subtotal..................................... $ 72,450.00
- -- General conditions........................... $ 3,622.50
- -- Overhead / Profit............................ $ 11,410.88
___________
- -- Total estimated costs for above.............. $ 87,483.38
</TABLE>
<PAGE>
Page 2
T. Yuan
Exclusions and Clarifications:
- - light fixtures to be supplied by tenant
- - telephone and computer wiring work not in contract
- - cable tray system not in contract
- - sales tax not included
Please contact us, if there are clarifications or questions needed on this
proposal.
Respectfully submitted
Lop K. Moy
cc: L. Lee
M. Salpepi
K. Wong
<PAGE>
LANDLORD'S WORK:
. Provide base building specifications.
. Install HVAC system, cooling towers, main truck and distribution lines.
. Landlord to install lighting fixtures to be purchased by tenant.
. Install pantry as per plans to be submitted
. Landlord to provide, install and distribute Class E system(s) as required
by law.
. Landlord to acquire ACP5 form prior to tenants possession.
. Landlord to build and fully fixture bathrooms as required by code.
. Landlord to scrape, paint, reglaze and replace window panes as necessary
and to assure all windows are fully operational.
. Paint perimeter walls with at least two coats to adequately cover.
. Sand and adequately varnish/polyurethane floors. Distribute electricity as
per plans to be submitted.
OTHER:
. Landlord to clean building exterior as indicated. (Completed)
. Landlord to install main lobby and elevator prior to tenants possession.
. Landlord to provide freight/delivery elevator as indicated.
. Landlord to provide adequate signage in main lobby
. Landlord to install keyless entry system in main lobby and elevator cabs.
. Landlord to provide a minimum of 400 amps per floor as discussed.
<PAGE>
107 - 113 GRAND STREET/32 MERCER STREET
-----------------------------------------
BUILDING SERVICES- TENANT FLOOR (TYPICAL)
-----------------------------------------
- -- ELECTRICAL - (2) panels @ 200 amps per, total of 400 amps.
SERVICE - individual meter per floor.
- meters all electrical consumption.
- billed directly from Con Edison.
- applications for services to be direct with Con Edison.
- -- HVAC - (2) ten ton heat pump units.
SERVICE - units are ceiling mounted in storage room.
- system uses building cooling/heating lines from
building cooling/heating tower.
- building system is on from 8:00 AM to 6:00 PM.
- tenant units are independently operated with it's own
thermostat controls.
- all units are tied into tenant's electric meter.
- -- BATHROOM - tenant's have (2) restrooms.
- men's room with (1) urinal, (2) stalls and (2) sinks.
- women's room with (2) stalls and (2) sinks.
- exhaust fan, electric hand dryer and lights.
- all the above electrical units is on tenant's electric
meter.
- -- UTILITY RM - slop sink.
- electrical hot water heater unit.
- unit is on tenant's electric meter.
<PAGE>
EXHIBIT 10.15
AGREEMENT OF LEASE
AGREEMENT OF LEASE made as of this 30th day of April, 1997, between MAN
YUN REAL ESTATE CORPORATION, as Owner or Landlord and RAZORFISH, INC., as
Tenant.
W I T N E S S E T H :
WHEREAS, Landlord and Tenant have entered a Lease (the "Main Lease")
and Side Letter during October, 1996, and a Second Side Letter dated November
20, 1996, (the Side Letter and Second Letter are collectively referred to herein
as the "Side Letters") for the third floor of a building known as 107 Grand
Street, New York city, New York (the "Building"), and
WHEREAS, the Main Lease gave Tenant the right of first refusal to lease
any contiguous floor, and
WHEREAS, Landlord and Tenant have agreed on the Tenant's exercise of
its right of first refusal to lease the entire 4th floor (the "4th floor
promises") in the Building on the terms and conditions of the Main Lease, except
as herein modified,
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein set forth, and other good and valuable consideration, it is agreed as
follows:
1. Adoption of Main Lease. Except as specifically modified in this
----------------------
Agreement, all the terms and conditions of the Main Lease (including, but not
limited to the Real Estate Tax escalation Rider and paragraphs 52 and 53) and
the Side Letter referred to above are incorporated herein by reference and the
terms of said Main Lease and Side Letters shall apply to the Tenant's leasing of
the 4th floor premises.
2. Term. The term of the lease on the 4th floor premises shall
----
commence May 1, 1997, and end December 31, 2001.
<PAGE>
3. Base Rent. The base rent shall be 115% of the rent set forth in the
---------
Main Lease, more particularly, rent for the first lease year, May 1, 1997
through April 30, 1998, is $201,097 per year, payable in equal monthly
installments of $16,758.08.
4. Security. Paragraph 34 of the Main Lease is modified to provide the
--------
security for the 4th floor is $33,516.16.
5. No Landlord's Work. Paragraph 38 of the Main Lease is deleted, and
------------------
there shall be no landlord's work.
6. Rent Commencement Rate. Paragraph 40 of the Main Lease is deleted but
----------------------
Tenant shall commence paying rent December 6, 1997.
7. Permitted Subleases. In addition to the subleasing permitted under
-------------------
paragraph 44 of the Main Lease, the Tenant may sublease the fourth floor for
periods of ten days or less during the first three months of the term for use as
a motion picture location, social functions, or similar use. Landlord will not
unreasonably withhold or delay its consent to such use; provided, however, the
Landlord and the Building shall be protected by appropriate insurance covering
each particular use. All other terms and conditions of the Main Lease and
particularly paragraph 44 shall to the subleasing described in this paragraph.
8. Additional Clauses Deleted From Rider to Main Lease.
---------------------------------------------------
The following clauses being part of the Rider to the Main Lease are
deleted:
Paragraph 41 - Tenant's Plans and Specifications,
---------------------------------
Paragraph 42 - Tenant's Possessions, Tenant acknowledges that the
--------------------
Premises are now ready for its possession,
Paragraph 43 -Right of First Refusal.
----------------------
<PAGE>
9. Breach of Leases. Any breach under this Lease shall be also a breach
----------------
under the Main Lease, and vice versa.
IN WITNESS WHEREOF, the parties have set their hands as of the day and year
first above written.
MAN YUN REAL ESTATE CORPORATION RAZORFISH, INC.
/s/ Tom Yuan /s/ Jeffrey A. Dachis
By: ___________________________ By: _______________________
<PAGE>
MAN YUN REAL ESTATE CORPORATION
87 Bowery Street
New York, New York 10002
April 30, 1997
Razorfish, Inc.
107 Grand Street, 3rd Floor
New York, NY 10013
Re: Lease for entire Fourth floor at 107 Grand Street
Ladies and Gentlemen:
This letter is to confirm our understanding pertaining to the lease we are
simultaneously entering for the entire fourth floor at 107 Grand Street, New
York City.
First, in consideration for the terms and conditions of the lease, you
shall "build out" the entire space of the fourth floor and all plans,
specifications, and all filing fees and approvals required by New York or
otherwise, shall be at your own cost and expense.
Second, the work shall be done by the building contractor, with whom we
both have worked in the past and have confidence.
Third, the "build out" must be of a character and quality that equals or
exceeds the work done on the third floor so that the fourth floor will be a
first class office space.
Fourth, the "build out" must be done in a single phase, and not in parts,
and must be commenced on or before April 1, 1998, and be substantially completed
within a reasonable time thereafter, and in any event, no later than August 1,
1998.
Fifth, your plans and specifications are subject to our reasonable
approval, which will not be unreasonably withheld or delayed.
Sixth, your plans and specifications must be presented to us on or before
March 1, 1998.
Lastly, it is understood that the obligations assumed by you pursuant to
this letter are a significant part of our agreement, and a breach of this letter
shall be a breach of the lease.
<PAGE>
Page 2
If I have correctly set forth our understanding, please sign the original
and one copy of this letter and return it to me with the lease. The two signed
copies are for your use.
Very truly yours,
MAN YUN REAL ESTATE CORPORATION
/s/ Tom Yuan
By: _______________________________
Tom Yuan, President
AGREED:
RAZORFISH, INC..
/s/ Jeffrey A. Dachis
By: ________________________________
<PAGE>
EXECUTION COPY
EXHIBIT 10.16
SUBSCRIPTION AND EXCHANGE AGREEMENT
AMONG
RAZORFISH, INC.
SPRAY VENTURES AB
AND
COMMUNICADE INC.
DATED AS OF OCTOBER 1, 1998
<PAGE>
DATED 23rd December 1998
LONDON CENTRAL MARKETS
THE MAYOR AND COMMONALTY AND
CITIZENS OF THE CITY OF LONDON
-and-
C.H.B.I RAZORFISH LIMITED
LEASE
-of-
Second Floor (Suite P)
West Meat Market Building
2 East Poultry Avenue
London Central Markets London ECI
Commencing 31st January 1999
Expiring 24th December 2008
RENT: Pounds 108,300 per annum (in advance)
(subject to review) plus additional
charges as within mentioned
(subject to determination)
<PAGE>
THIS LEASE made the 23rd day of December 1998 BETWEEN THE MAYOR AND
COMMONALTY AND CITIZENS OF THE CITY OF LONDON of Guildhall London EC2P 2EJ
(hereinafter called "the Landlords" which expression shall where the context so
requires or admits include the person or persons for the time being entitled to
the reversion immediately expectant on the determination of the term hereby
created) of the one part and the person or persons or Company named in Paragraph
1 of the Schedule hereto (hereinafter whether one or more persons called "the
Tenant" which expression shall include also the persons deriving title under the
Tenant where the context so requires or admits) of the other part
W I T N E S S E T H as follows:-
1. (1) WHENEVER the Tenant shall be more than one person the obligations of
the Tenant shall be deemed to be joint and several
(2) "the Wholesale Market" shall mean the land and buildings shown on the
plan deposited at the office of the Chamberlain and numbered 468/1
(hereinafter called "the deposited plan") forming the East and West
Meat Market Buildings and the Poultry Market Building of the London
Central Markets in the City of London or such other area as the
Landlords shall from time to time designate as being the Wholesale
Market
(3) (i) "the BUILDING" shall mean the West Meat Market Building forming
part of the Wholesale Market
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<PAGE>
(ii) "Common Parts" shall mean those parts of the ground first and
second floor of the north and south wing of the Building not
exclusively demised or intended to be demised to tenants shown
coloured blue on the plans attached hereto
(4) (i) "the Chamberlain" shall mean the Town Clerk and Chamberlain to
the Landlords
(ii) "the Comptroller and City Solicitor" shall mean the Comptroller
of the Chamber and Bridge House Estates and City Solicitor
(iii) "the City Surveyor" shall mean the Surveyor to the Landlords
(iv) "the Clerk and Superintendent" shall mean the Clerk and
Superintendent of London Central Markets
(vi) "the Director of Technical Services" shall mean the Director of
Technical Services to the Landlords
(5) "the Byelaws" shall mean the Byelaws for the time being governing the
London Central Markets
(6) "the Committee" shall mean the Central Markets Committee for the time
being of the Landlords or such other Committee to which the Landlords
shall from time to time delegate the functions of the Wholesale Market
or any other authorised person or persons who may from time to time
exercise the functions of the Committee in respect thereof
2
<PAGE>
(7) "The Quarter Days" shall mean the 1st January 1st April 1st July and
1st October in each year
(8) "The Service Charge" shall mean the total cost each year of providing
the various services set out in Paragraph 5(C) of the Schedule hereto
(9) "Financial Year" shall mean the 1st day of April to the following 31st
day of March or such other dates as the Landlords shall specify
(10) "The Insured Perils" shall mean fire lightning explosion (including
terrorist activity) aricraft earthquake riot civil commotion storm
tempest flood and bursting of pipes leakage or overflow of water tanks
or apparatus impact by road vehicles and malicious damage and where
the context permits any other reasonable risks from time to time
covered by any insurance maintained by the Landlords in respect of the
Wholesale Market and loss of rent for three years or such period as
the Landlords shall reasonably require Provided Always that the
Landlords are able to obtain insurance cover for the insured perils
from a reputable insurance company
(11) "The Interest Rate" shall mean the base rate of Barclays Bank plc from
time to time or such comparable rate as the Landlords may from time to
time specify
(12) Reference to any officer of the Landlords shall be deemed to include
where the context so admits any person for the time being appointed
for the purpose of the Officer's functions hereunder
3
<PAGE>
(13) Reference to a statute shall refer to the statute as amended at the
date of this lease and shall include any subsequent statutory
amendment or re-enactment thereof
(14) "Normal Business hours" shall mean 8.30 a.m to 6.30 p.m Monday to
Friday inclusive in each week excluding Bank Holidays
2. THE Landlords hereby demise unto the Tenant ALL THOSE premises described
in Paragraph 2 of the Schedule (hereinafter called "the Premises") together with
the rights set out in Paragraph 2(B) of the Schedule EXCEPT AND RESERVING to the
Landlords the easements and rights specified in Paragraph 3 of the Schedule to
hold the Premises for the term specified in Paragraph 4 of the Schedule and
paying on and from the start date of the term of this Lease the rent as set out
in paragraphs 5(A) and 5(B) of the Schedule hereto
All rent to be payable quarterly in advance at the office of the Clerk and
Superintendent or at the office of such other person as may be appointed by the
Landlords and notified to the Tenant by four equal payments on the Quarter Days
ALSO yielding and paying unto the Landlords at the office of the Clerk and
Superintendent or at the office of such other person as may be appointed by the
Landlords and notified to the Tenant with effect on and from the date hereof
(1) a charge for any additional works carried out to the Premises by the
Landlords at the request of the Tenant provided that the whole of any
such charge shall be payable within 14 days of receiving written
request for payment
4
<PAGE>
(2) on account hereof by way of Service Charge such sum or such other sums as
shall be in the opinion of the Landlords a fair and proper percentage or
percentages of the cost of providing the services specified in Paragraph
5(C) of the Schedule hereto being estimated Service Charge for the
following Financial Year calculated by the Clerk and Superintendent in a
sum which shall be a proper and reasonable estimate of what the annual
expenditure is likely to be Together with if required by the Landlords such
sum as shall be a reasonable part of all other expenditure hereinbefore
described which is of a periodically recurring nature (whether recurring by
regular or irregular periods) whenever disbursed incurred or made and
whether prior to the commencement of the term or otherwise including a sum
or sums of money by way of reasonable provision for anticipated expenditure
in respect thereof as the Clerk and Superintendent may in his discretion
allocate to the period in question as being fair and reasonable in the
circumstances PROVIDED THAT:-
(i) the percentage or percentages may from time to time vary to represent
the proportion fairly and properly attributable to the Premises in
relation to the Building (in accordance with good estate management
principles)
(ii) if the actual Service Charge for any Financial Year shall exceed the
provisional sum collected for that Financial Year
5
<PAGE>
the proportion of the excess fairly and properly attributable to the
Premises shall be due to the Landlords on demand
(iii) if the actual Service Charge for any Financial Year shall be less
than such provisional sum collected the overpayment shall be
credited to the Tenant against the next quarterly payment of the
Service Charge except in respect of the final year of the term when
unless this Lease is being renewed it shall be refunded to the
Tenant
(3) The cost of insuring the Premises against the Insured Perils being a fair
and proper percentage of the cost to the Landlord of insurance and any
increased or additional premiums payable in respect of the whole or any
part of the Building as a result of the use of the Premises by the Tenant
or any person occupying the Premises with the consent or by the sufferance
of the Tenant
(4) Until such time as the Premises shall be separately metered and charged by
the appropriate undertaker quarterly in arrears on demand on the Quarter
Days a fair and proper electricity charge for current used at the Premises
by the Tenant
AND PROVIDED FURTHER that such sums as are prescribed by sub-clause (1) (2) and
(3) hereof shall be recoverable by action or distress in the same manner as for
rent in arrears
6
<PAGE>
3. THE Certificate of the Chamberlain and the Clerk and Superintendent shall
be conclusive as to the amount actually spent of any of the charges mentioned in
Clause 2 hereof (save for manifest error)
4. THE Tenant HEREBY covenants with the landlords that the Tenant:-
(1) WILL pay the said yearly rents and other sums hereinbefore mentioned on the
days and in the manner hereinbefore appointed for payment thereof
(2) WILL pay on demand the proportion properly attributable to the Premises of
all rates not included in the service charge taxes including value added tax and
other impositions whether local or parliamentary which shall from time to time
become payable in respect of the Premises or of any property of which the
Premises form part such proportion to be determined from time to time by the
Chamberlain and the Clerk and Superintendent acting fairly and properly and in
accordance with good estate management principles (except tax payable by the
Landlords in respect of rents and other payments arising under this Lease or tax
payable by the Landlords as a result of any dealing with any reversion
immediately or mediately expectant on the tenancy hereby created) and once
separately assessed will pay the Uniform Business Rates and all other taxes
rates charges assessments duties outgoings Value Added Tax and impositions
whatsoever parliamentary municipal and parochial which now are or at any time
during the term shall be charged assessed or imposed upon the Premises or upon
the landlord or tenant thereof in respect of the same whether newly or by way of
increase and whether any such future taxes rates charges assessments duties
outgoings or impositions shall or shall
7
<PAGE>
not be in the nature of those now in being (except income tax deductible by the
Tenant under any statutory provision for the time being in force)
(3) WILL at all times observe obey and comply with
(i) any statutory requirements and byelaws including all laws rules orders
or regulations or directives which may from time to time be made and
affect the Premises and will indemnify the Landlords against all
claims costs losses demands or damages which may become payable as a
result of the breach by the Tenant or its employee or employees
servants or licenses of such laws rules orders or regulations or
directives or byelaws and
(ii) the proper and reasonable directors of the Clerk and Superintendent in
relation to the matters set out in sub-clause (i) hereof AND
particularly and without prejudice to the generality of the foregoing
provisions of this sub-clause will at the expense of the Tenant do and
execute all of such works as under or by virtue of any Act of
Parliament or regulation or directive of the European Community for
the time being in force shall be required to be done or executed upon
the Premises whether by the landlord or by the tenant thereof save to
the extent that the Landlords covenant to provide the relevant
services or to carry out any such works set out in Paragraph 5(C) of
the Schedule hereto.
(4) WILL during the term at the Tenant's own cost (other than during such
period as the relevant items are covered under any guarantee period):-
8
<PAGE>
(i) Keep the Premises together with the entrance doors in good and
substantial repair and decoration in such colours and materials as
may be reasonably required by the City Surveyor (damage by the
Insured Perils excepted to the extent that the insurance money shall
not have been irrecoverable because of some act or default of the
Tenant its servants or authorised agents) but excluding any work
which may be required to remedy inherent defects or faults arising
from the works of refurbishment carried out by the Landlords
(ii) Replace all fixtures and fittings that may be cracked or broken or
beyond repair with items of equal standard and quality and pay the
cost of replacement or reglazing of any window glass that may be
broken or cracked (damage by the Insured Perils excepted)
(iii) Make good to the reasonable satisfaction of the Landlords all damage
occurring to the Premises or to the Building or any part thereof
caused wilfully or by negligence on the part of the Tenant or its
servants or authorised agents save to the extent that the Landlords
as the insured party under its insurance against the Insured Perils
are compensated by any policy in force and excluding any works
required to remedy inherent defects or faults as set out in sub-
clause (a) above
(iv) Keep the Premises in a proper tidy clean and sanitary condition
(v) Keep in repair and maintain the electrical installation including all
switchgear and services exclusively serving the Premises and will
9
<PAGE>
not carry out any electrical work or any alteration to the said
electrical installation switchgear and services without the previous
consent in writing of the Landlords which shall not be unreasonably
withheld or delayed PROVIDED that the Tenant shall at all times comply
with the current edition of the regulations for electrical equipment
of buildings as published by the Institution of Electrical Engineers
(vi) Carpet the Premises with good quality carpet to the reasonable
satisfaction of the City Surveyor within 6 weeks of the date hereof
(5) WILL permit the Landlords their representatives and others authorised by
them with or without workmen and others at all reasonable times after making
prior appointment for that purpose except in cases of emergency to enter upon
the Premises for the purpose of examining into the state and condition and user
thereof PROVIDED that all reasonable steps shall be taken by the persons
exercising such right so as to minimise disruption to the Tenant and in case any
defect or want of reparation shall appear for which the Tenant is liable
hereunder the Tenant will upon notice thereof in writing being given to the
Tenant or left upon the Premises cause the same to be repaired in compliance
with the aforesaid covenants within three months of the date of such notice or
within such other reasonable period as may be agreed between the parties and
will pay all architects and/or surveyors and/or legal fees properly and
reasonably incurred in respect of any such notice as aforesaid PROVIDED THAT in
case of default it shall be lawful for the workmen or agents of the Landlords
(without prejudice to their right of re-entry) to enter the
10
<PAGE>
Premises and execute such works of repair or remediation as appropriate and all
costs and expenses incurred in relation thereto shall be a debt payable on
demand by the Tenant to the Landlords and shall be recoverable as if the same
were rent in arrears together with interest thereon calculated at the rate of
four per centum (4%) above the Interest Rate calculated on a daily basis with
rests on the Quarter Days for the whole period from the date of expenditure
until the date of payment to the Landlords (whether before or after any
judgement) AND will permit the agents or workmen engaged or authorised by the
Landlords to enter and remain upon the Premises at all reasonable times after
making prior appointment for such purpose except in cases of emergency so far as
may be necessary or useful in order to carry out any works or repairs to the
Premises or electrical conduits air conditioning plant and equipment adjoining
or passing through over or under the same for which the Landlords may be liable
or desire to carry out or to repair or rebuild any adjoining or contiguous
premises belonging to the Landlords including the installation of any new
services in the electrical conduits pipes wires ducts or other conducting media
pipes wires ducts or other conducting media adjoining or passing through over or
under the Premises or to cleanse empty replace or repair any of the sewers
drains or gutters or other conducting media belonging to the same or to carry
out any works in connection with matters referred to in Paragraph 5(C) of the
Schedule hereto the persons exercising the right doing as little damage as
possible causing as little nuisance and interference to the Tenants' business as
may be possible and making good all damage to the Premises or any chattels
thereon occasioned by the exercise of such right but without payment of
compensation for any annoyance nuisance
11
<PAGE>
damage noise vibration or inconvenience caused to the Tenant in connection with
the use by the Tenant of the Premises And also that in the event of any dispute
or controversy may at any time or times arise between the Tenant and the tenants
or occupiers of any adjoining or contiguous premises belonging to the Landlords
relating to the said sewers drains gutters or other conducting media or to any
easements or privileges whatsoever affecting or relating to the Premises or any
adjoining or contiguous premises belonging to the Landlords the same shall from
time to time be settled and determined by the Landlords in such manner as they
shall direct to which determination the Tenant shall from time to time submit
(6) WILL at the end or sooner determination of the term deliver up
peaceable and quiet possession of the Premises to the Landlords in the state and
condition in which they should be in accordance with the provisions hereof to
the satisfaction of the City Surveyor and if required by the Landlords with all
additions and alterations removed with the removal thereof being made good so
that the Premises are restored and reinstated to the condition that they were in
before the alteration or addition was made
(7) WILL not carry on or permit to be carried on upon the Premises or any
part thereof the business to be carried on thereon in a noisy noisome offensive
or dangerous manner or do or permit to suffer to be done in or upon the Premises
or any part thereof any act matter or thing which may in the reasonable opinion
of the Landlords be or grow to be or become a nuisance or an annoyance to or to
the prejudice of the Landlords their tenants or lessees or to the owners lessees
or occupiers for the time being of any premises in the neighbourhood
12
<PAGE>
(8) WILL not use the Premises otherwise than as set out in paragraph 6 of the
Schedule hereto
(9) WILL not make any material change in the use of the Premises nor make any
application under the Town and Country Planning Act 1990 to any local planning
authority for permission for any change of use of the Premises without the
Landlord's consent which shall not be unreasonably withheld or delayed
(10) WILL not permit or suffer any person other than and except the Tenant or an
associated company of the Tenant (as defined by Section 42(1) of the Landlord
and Tenant Act 1954) or a related company of the Tenant (as defined by Section
736 of the Companies Act 1985) to occupy or use the Premises Provided Always
that any such occupation shall not create the relationship of landlord and
tenant
(11) (i) In this Clause 4(11) the following definitions shall apply;-
"permitted assignment" means an assignment of the whole of the
Premises
"permitted underletting" means an underletting of the whole of the
Premises or the whole of either or both of the individual suites
compromised in the Premises
(ii) Will not at any time during the term by any ways or means whatsoever
(except by testamentary disposition) assign underlet share or part
with possession or occupation of the Premises or any part thereof or
any interest therein for all or any part of the term except by way of
a permitted assignment or a permitted underletting and then only with
the Licence in writing of the Landlords first
13
<PAGE>
obtained and paying the reasonable and proper costs of the Comptroller and City
Solicitor therefor such Licence not to be unreasonably withheld or delayed and
otherwise in accordance with the following provisions:-
(a) Prior to any permitted assignment will procure that the assignee enters
into direct covenants with the Landlords to perform and observe all the
tenant covenants of this tenancy as defined in the Landlord and Tenant
(Covenants) Act 1995 ("the tenant covenants" and the "the 1995 Act"
respectively) during the residue of the term or until the assignee is
released from such performance and observance in accordance with the 1995
Act
(b) Prior to any permitted assignment will enter into an authorised guarantee
agreement (as defined in Section 16 of the 1995 Act) in such form as the
Landlords may reasonably require under which:-
(i) The Tenant agrees to be liable as sole or principal debtor in respect
of each of the tenant covenants to the extent that and for so long as
the assignee has any liability therefor
(ii) the Tenant guarantees the assignee's performance of those covenants
for so long as the assignee has any liability therefor
14
<PAGE>
(iii) The Tenant agrees that in the event of this Lease being
disclaimed it will enter into a new Lease whose term
expires no later than the term of this Lease and whose
tenant covenants are no more onerous than those under
this Lease
(iv) the Tenant enters into other provisions incidental or
supplementary to any provisions made by virtue of
paragraphs (i) to (iii) of this Clause 4(11)(ii)(b)
(c) If the Tenant desires to assign the Premises to a limited company
the Landlords shall be entitled (in addition to imposing such
other reasonable requirements or conditions as may be
appropriate) to require one or two directors of such company or
its parent company or some other person or persons reasonably
acceptable to the Landlords to join in the Licence to Assign as
guarantors and to covenant with the Landlords in such term as the
Landlords reasonably require and the Tenant shall procure that
the guarantors so covenant
(d) If at a time when an application for the Landlords' Licence or
consent to an assignment of the premises is made there exists any
material breach of any of the tenant covenants the Tenant shall
(if the Landlords reasonably so require) remedy such breach of
covenant to the reasonable satisfaction of the
15
<PAGE>
Landlords before the Tenant shall be permitted to complete
the proposed assignment
(iii) Will not enter into a permitted underletting otherwise
than by means of an underlease which complies with the
provisions of Clause 4(11)(iv) granted at a full open
market rent without any fine or premium being taken
(iv) In any permitted underletting referred to in Clause
4(11)(i):
(a) such underlease shall contain the same provisions as
those contained in this Lease save as to rent with
such amendments as may be approved in writing by the
Landlords
(b) the rent reserved by such underlease shall not be
payable more than three months in advance
(c) if the term of the underlease shall extend beyond a
date upon which the yearly rent payable under this
Lease is to be reviewed such underlease shall contain
provisions for the upwards only review of rent to
take effect at the same intervals on the same dates
as those provided in this Lease and on like terms
(d) no underlessee shall have the right to underlet hold
on trust share or part with the possession or
occupation of the whole or any part of the premises
contained in such underlease (or to assign or charge
part only of the said premises) but shall
16
<PAGE>
have only the right (with the prior consent in writing of the
Landlords) to assign or charge the whole of the premises
contained in such underlease
(e) the Tenant shall not demise any part of the structure or common
parts of the Premises and such underlease shall contain
provisions for a service charge under which the underlessee is
liable to pay a fair proportion of the cost of repairing the
structure and common parts and of other services provided in
connection with the Premises
(v) Will procure that the operation of the Landlord and Tenant Act 1954
Sections 24-28 (inclusive) is excluded in relation to the tenancy
created by each and every permitted underletting and will produce to
the Landlords before the grant of any such tenancy an Order of the
Court authorising an agreement between the parties to such tenancy
excluding the operation of the said Sections from such tenancy
(vi) Will within one month next after the making thereof without any demand
by the Landlords produce for registration at the office of the
Comptroller and City Solicitor a certified copy of all assignments
underleases (or the counterparts thereof) mortgages charges by way of
legal mortgage probates of wills letters of administration and other
dispositions which shall be made of the Premises and leave the same
with him for that purpose and shall pay the reasonable costs of
17
<PAGE>
the Comptroller and City Solicitor for the registration of every
such disposition
(vii) Will not release or waive any of the covenants set out in Clause
4(11)(iii) and (iv) but will use all reasonable endeavours to
enforce the performance thereof by every such underlessee and the
persons deriving title under him
(12) WILL not at any time during the term cut injure alter or divide the
Premises or any part thereof or unite or annex the Premises or any part thereof
to any premises adjoining without the consent of the Landlords PROVIDED THAT the
Tenant may carry out the works detailed in the schedule and plans annexed at the
end of this Lease ("the Works") (but for the avoidance of doubt not the
installation of a shower) provided that the Tenant
(i) provides full details of the Works to the Director and obtains his
prior written approval to the materials method and detail of
construction and any connection into any of the services within the
Building
(ii) carried out the Works in accordance with any conditions imposed in
such consent
(iii) obtains supplies and complies with any other consent(s) necessary in
order to carry out the Works and
(iv) if required by the Landlords at the end or sooner determination of
the term hereby granted at the Lessee's cost removes the Works and
18
<PAGE>
makes good any damage caused by such removal to the satisfaction of
the Director
(13) WILL not permit any sale by auction to be held upon the Premises or any
part thereof without the written consent of the Landlords
(14) WILL not by building or otherwise stop or obstruct any access of light as
enjoyed in fact by any premises the estate or interest whereof in possession or
reversion now is or hereafter may be in the Landlords or in any person in trust
for them not knowingly permit any new window light opening doorway path passage
drain or other encroachment right or easement to be made or acquired into
against or upon the Premises which might be or grow to the damage annoyance or
inconvenience to the Landlords their tenants or other occupiers or users of the
Wholesale Market And in case any such window light opening doorway path passage
drain or other encroachment shall be made or attempted to be made or any such
right or easement attempted to be acquired the Tenant upon being aware of an
encroachment and/or easement shall give notice to the Landlords and will at the
request of the Landlords and at the Landlord's cost adopt such means as may be
reasonably required or deemed proper for preventing any such encroachment or the
acquisition of any such easement
(15) WILL not suffer the Premises or any part thereof to be used for the
purpose of any exhibition of pictures or views or other things or any kind of
show or spectacle to which admission shall be by payment or where although no
payment be asked for admission to the Premises any kind of payment or fee shall
be charged or demanded after admission has been obtained or where the purchase
of any article is
19
<PAGE>
made a condition of such admission but this agreement is not to limit prejudice
or affect any other agreement condition or stipulation herein contained
(16) WILL not at any time during the term affix or exhibit or permit to be
affixed or exhibited upon any part of the Premises any sign notice placard or
advertisement without the prior consent of the Clerk and Superintendent
(17) WILL not so far as the Landlord and Tenant Act 1954 permits agreement
excluding the right of the Tenant to claim compensation make any claim for
compensation under the provisions of the said Act on the determination of the
tenancy
(18) (i) Will not without the prior written approval of the Clerk and
Superintendent whose approvals shall not be unreasonably withheld
or delayed remove from or bring into the Premises via the front
entrance hall any furniture or heavy or bulky goods between the
hours of 5.00 p.m and 9.00 a.m and will not install safes and
or heavy articles except as and where approved by the Landlords
whose approvals shall not be unreasonably withheld or delayed
(ii) Will only bring furniture bulky or heavy goods into the Premises
between the hours of 9.30 am to 3.30 pm
(iii) Will not without the prior consent of the Clerk and
Superintendent whose approvals shall not be unreasonably withheld
or delayed use the passenger lifts for the carrying of furniture
bulky or heavy goods
20
<PAGE>
(19) WILL not permit any goods to remain in or adjacent to the entrance to the
Building or Wholesale Market or upon the lifts or upon any other part of the
Building or Wholesale Market used in common with other occupiers thereof
(20 SAVE where the Tenant has expressed a willingness to remain in the Premises
by service of the appropriate statutory notice or counternotice will permit the
Landlords at any time during the three months immediately preceding the
determination of the term to enter upon the Premises and affix and retain
without interference upon any part thereof a notice for reletting or selling
the same which does not obstruct the Tenant's enjoyment or use of the Premises
AND WILL permit all persons with authority from the Landlords on giving
reasonable prior notice and at all reasonable times during the day-time to enter
and view the Premises or any part thereof
(21) WILL pay all proper and reasonable costs charges and expenses (including
Solicitors' costs and Surveyors' fees) properly incurred by the Landlords for
the purpose of or incidental to
(i) the preparation and service of a notice under Section 146 of the Law
of Property Act 1925 requiring the Tenant to remedy a breach of any
of the agreements conditions and stipulations herein contained
notwithstanding that forfeiture for such breach shall be avoided
otherwise than by relief granted by the Court PROVIDED that before
serving any such Notice as aforesaid upon the Tenant the Landlords
shall advise the Tenant in writing of their intention to serve such
Notice specifying the particular clause or clauses in
21
<PAGE>
respect of which the breach or non-performance is alleged
and no such costs charges and expenses as aforesaid shall
be payable by the Tenant unless the Tenant shall
thereafter make default
(a) in commencing the works or other step necessary to
remedy such breach or non-performance within two
calendar months or such other reasonable period as
may be agreed or
(b) in proceeding to complete such works or other step
with due diligence
(ii) in preparing a Schedule of Dilapidations recording breaches
of the Tenant's covenant to yield up the Premises in repair
and decoration at the termination of the term hereby
granted
(22) WILL if the rent or additional rent or any part thereof or any
payment due under this Lease or any part thereof (whether formally
demanded or not) shall be in arrear and unpaid for twenty one days
after the date upon which the same ought to have been paid pay
interest to the Landlords upon the sum of money owing calculated at
the rate of four per centum (4%) above the Interest Rate calculated on
a daily basis with rests on the Quarter Days for the whole period from
the date upon which such sum ought to have been paid until the date of
payment (whether before or after any judgment) Nothing in this clause
entitles the Tenant to withhold or delay any payment or affects the
rights of the Landlords in relation to non-payment
5. PROVIDED ALWAYS and it is hereby agreed and declared as follows:-
(1) If the yearly rent and other sums payable hereunder or any part
thereof shall be in arrear for fourteen days after the same shall
have become due whether
22
<PAGE>
the same shall have been legally demanded or not or if the Tenant shall
fail to observe or perform any of the agreements conditions and
stipulations herein contained on the part of the Tenant to be observed and
performed or if the Tenant not being a limited company shall become
bankrupt or enter into any composition or arrangement for the benefit of
creditors or being a limited company shall enter into liquidation whether
compulsory or voluntary (save for the purposes of reconstructions or
amalgamation) or if the Tenant shall suffer any distress or execution to be
levied on his or their goods on the Premises then and in any or either of
the said cases it shall be lawful for the Landlords to re-enter upon the
Premises or any part thereof in the name of the whole and to repossess and
enjoy the same as in their former estate
(2) The Premises are demised to the Tenant and this Lease is made subject and
without prejudice to all such rights and privileges as the Tenant and all
persons resorting to the Wholesale Market may have under the provisions of
all or any of the Acts of Parliament relative to or concerning the
Wholesale Market or otherwise
(3) Nothing herein contained or implied shall impose or be deemed to impose any
restriction on the use of any land or buildings not comprised in this Lease
or give the Tenant the benefit of or the right to enforce or to have
enforced or to prevent the release or modification of any covenant
agreement or condition entered into by any purchaser from or any lessee
tenant or occupier of the Landlords in respect of property not comprised in
23
<PAGE>
this Lease or to prevent or restrict in any way the development of any land
not comprised in this Lease
(4) Section 23 of the Landlord and Tenant Act 1927 shall apply to all notices
required to be served hereunder
(5) The Landlords shall not be liable to the Tenant in respect of any claims
arising from the breakdown from any cause whatsoever of any water cooling
or heating or air conditioning and ancillary apparatus from any cause
outside the reasonable control of the Landlords acting as Landlords and not
as a public authority save to the extent that such loss injury or damage is
covered by the Insured Perils
(6) (i) if the Tenant wishes to determine this Lease on the 25th day of
December 2003 and gives to the Landlords not less than six months
previous notice in writing then on the expiration of such notice
provided that there are no outstanding material breaches of covenant
on the part of the Tenant this Lease and the term shall cease and
determine but without prejudice to any rights and remedies that may
have accrued to either party against the other PROVIDED THAT time
shall be of the essence in respect of the serving of such notice
(ii) within 4 weeks of such notice the Landlords shall inspect the
Premises and notify the Tenant in writing whether or not there are
any outstanding material breaches of covenant on the part of the
Tenant under this Lease
24
<PAGE>
(iii) if the Landlords fail to notify the Tenant within the said 4 week
period then the Tenant shall have the right at its own cost to request
the appointment by the President of the RICS for the time being of an
independent expert who shall be deemed to act jointly for the
Landlords and the Tenant and who shall determine whether there are any
outstanding material breeches of covenant on the part of the Tenant
(iv) the Tenant shall act with due diligence on any notification from the
Landlords or on the findings of the independent expert (as
appropriate) and shall remedy any identified material breaches of
covenant forthwith and the Landlords or the independent expert (as
appropriate) shall reinspect the Premises on completion of such works
and confirm in writing whether or not the Tenant has remedied any
relevant material breaches of covenant PROVIDED THAT on expiry of the
said notice the Tenant shall leave the Premises in no worse condition
than as required either to comply with the notification from the
Landlords or as deemed necessary by the independent expert to comply
with the terms of the Lease
(v) for the avoidance of doubt the provisions of Clauses 5(6)(ii) to (iv)
relate only to the validity of a notice pursuant to Clause 5(6)(i) and
do not affect the rights of either party against the other in respect
of any breach of any covenant contained within this Lease
6. THE Landlords hereby covenant with the Tenant that:-
25
<PAGE>
(1) the Landlords will subject to the proviso in Clause 1(10) hereof insure
and keep insured at all times during the term of the lease at a valuation
of not less than that recommended by the City Surveyor to be the full
reinstatement value thereof (acting reasonably and in accordance with good
estate management principles) the buildings comprised in the Wholesale
Market and all additions thereto and any landlords' fixtures of an
insurable nature against loss or damage by the Insured Perils (subject to
obtaining insurance cover for the same from a reputable insurance office)
TOGETHER WITH fifteen per centum of the amount of such valuation for
architects' and others fees in relation to the reinstatement of the
Wholesale Market and three years loss of rent and the Tenant will accept
the Certificate of the Chamberlain that insurance in such form has been
effected and is in force In case the Premises or any part thereof or
access thereto shall from time to time be destroyed or damaged by any of
the Insured Perils then as often as the same shall happen the Landlords
will with all due diligence take such steps as may be requisite and proper
to obtain any and all necessary planning consents building licences and
permits under any regulations or enactments for the time being in force to
enable the Landlords to rebuild and reinstate the same and will as soon
as such consents licences and permits have been obtained rebuild reinstate
replace and make good the same free of expense to the Tenant PROVIDED
ALWAYS that if for any reason other than the fault of the Landlords the
obligation on their part hereinbefore contained to rebuild or otherwise
make
26
<PAGE>
good such destruction or damage as aforesaid becomes impossible of
performance within three years commencing on the date of damage or
destruction to the Premises the said obligation shall thereupon be deemed
to have been discharged and the Landlords shall stand possessed of all
moneys paid to them under any by virtue of the policy of insurance
hereinbefore required to be maintained upon trust to pay to the Tenant
such portion (if any) of the said moneys as may be agreed in writing
between the Landlords and the Tenant or in default of agreement as
aforesaid as shall be determined by a Surveyor appointed by the President
for the time being of the Royal Institution of Chartered Surveyors upon
the request of the Landlords or the Tenant to be fair and reasonable
having regard only to the relative values of the respective interests of
the Landlords and the Tenant in the Premises immediately before the
occurrence of the said destruction or damage and it is hereby declared
that any such determination as aforesaid shall be deemed to be made by the
said Surveyor as an expert and not as an arbitrator and that in such an
event this Lease will cease and absolutely determine but without prejudice
to the rights of either party in respect of any antecedent breach hereof
(2) the Landlords will use all reasonable endeavours promptly and efficiently
unless prevented by strikes lock-outs or matters outside the Landlords'
control to perform the services in as reasonable and diligent fashion as
possible PROVIDED THAT the Landlords shall not be liable to the Tenant in
respect of any loss damage or inconvenience occasioned by the failure or
27
<PAGE>
breakdown at any time or times in respect of water electricity gas
fuel or other supplies or by any breakdown bursting stopping leak or
defect in the pipes or apparatus connected thereto caused for any
reason other than the default of the Landlord nor shall the Landlords
be obliged to provide the services outside Normal Business Hours
(3) the Tenant duly paying the said rent and other sums hereinbefore
mentioned and performing and observing the agreements conditions and
stipulations on the part of the Tenant hereinbefore contained may
peaceably hold and enjoy the Premises during the term without any
interruption by the Landlords or any person claiming through under or
in trust for them
(4) if during the term the Premises or any part thereof or the Common
Parts or the means of access thereto shall be destroyed or damaged by
any of the Insured Perils so as to be unfit for occupation and use by
the Tenant than (if the insurance effected by the Landlords pursuant
to the terms of this Lease shall not have been vitiated or prejudiced
by some act or default of the Tenant in its obligations under the
terms of this Lease) the said rent and other sums payable hereunder or
a fair proportion thereof according to the nature and extent of the
destruction or damage sustained shall as from the date of such
destruction or damage and until the Premises the Common Parts and/or
the means of access thereto shall have been completely rebuilt or
reinstated (so as to be fit for occupation and use as aforesaid) be
suspended and cease to be payable and any dispute as to the extent
proportion or period of such suspension shall be determined by an
arbitrator
28
<PAGE>
to be agreed by both parties or failing agreement by two arbitrators (one
nominated by each party) or by the umpire appointed by such arbitrators
before proceeding with the reference under and in accordance with the
provisions of the Arbitration Act 1996
(5) The Landlords shall at their own expense remedy to the reasonable
satisfaction of the Tenant any latent or inherent defects in the Building
and any disrepair to the Building caused directly or indirectly by any such
latent or inherent defects
7. IF any dispute or difference shall arise between the Landlords and the
Tenant hereto as to their respective rights duties or obligations hereunder or
method or manner of performance thereof then (unless provision has been made
elsewhere in this Lease for settlement of the same and subject to the
jurisdiction of any Court of Law) such dispute or difference shall be referred
to the decision of a single arbitrator to be agreed between the Landlords and
Tenant or in default of agreement to be nominated upon the application of either
party to the President for the time being of the RICS (who shall be requested to
nominate a person with wide experience of the type of matter in dispute) and
every such arbitrator shall act under and pursuant to the provisions of the
Arbitration Act 1996
8. NOTHING herein contained (and in particular none of the provisions of
Clause 6(3) hereof) shall be deemed in any way to waive diminish or affect any
existing or future powers and duties of the Landlords in relation to the
Premises in any capacity other than their capacity as owners of the revision
expectant on the determination of the Lease
29
<PAGE>
9. ANY sums from time to time payable to the Landlords under the provisions
of this Lease are exclusive of Value Added Tax and the Tenant will on production
of a suitable and valid V.A.T. invoice pay any Value Added Tax which may be or
become payable in respect of any such sum
10. BY executing this Lease the parties hereto certify that there is no
Agreement for Lease to which this Lease gives effect
11. THIS Lease is a New Lease under the 1995 Act
IN WITNESS whereof the Landlords and the Tenant have executed this Lease
as a Deed and delivered it the day and year first above written
THE SCHEDULE
------------
1.A Tenant: C.H.B.I. RAZORFISH LIMITED (registered in England No.
3016034) whose registered office is at Carmelite 50 Victoria Embankment
London EC4Y ODY
2. Premises:
(A) ALL THOSE Offices known as Suite P situate on the second
floor of the south block of the Building shown coloured pink on the
attached plan which for the avoidance of doubt shall include the plaster
surfaces of the walls the raised floor system the underfloor trunking
and power distribution system and the void above the floor slab the
suspended ceilings and lighting and the void beneath the structural
ceiling slab but excluding therefrom the Landlords air-conditioning
equipment and conduits and other services which may pass through the
Premises but which do no exclusively serve the Premises
30
<PAGE>
(B) Together with the following rights:
(i) The right in common with all others having the like
right to pass to and from the Premises and lavatories
and other communal facilities within the south block of
the Building over and along and through the relevant
common parts
(ii) to use the lavatories above referred to subject to any
reasonable rules which may be made by the Landlords as
to the appropriation of parts thereof for exclusive use
by ladies or gentlemen
(iii) of passage in the lifts situate in the Building during
Normal Business Hours in common with all others having
the like right and for the goods of the Tenant for the
purpose of gaining access to and from the Premises and
lavatories subject to any reasonable rules which may be
made by the Landlords for the operation of the said
lifts Provided always that the Landlords shall not be
responsible to any person using the said lifts for any
neglect or default of any servant or agent of the
Landlords in the operation of the said lifts or for any
loss damage or injury resulting therefrom or for any
interruption of the working of the said lifts for the
purpose of carrying our repairs or owing to a breakdown
strike lock-out shortage of fuel or labour or other
cause beyond the control of the Landlords
(iv) the right to place (at the cost and expense of the
Tenant) a name plate on the entrance board provided by
the Landlords in the ground
31
<PAGE>
floor entrance to the Building and on the entrance door
to the Premises Such name to be displayed in a type
design material and colour to match existing names and
to the satisfaction of the City Surveyor
(v) The right (in common with all others having a like
right) of passage and running of water and soil gas
electricity telephone or other services or supplies from
and to the Premises through such of the sewers drains
conduits gutters watercourses pipes cables wires and
mains serving the Premises which now are or hereafter
during the tenancy may be in on or under adjoining
premises belonging to the Landlords Provided that the
foregoing shall not imply any right permitting the
Tenant to place in on or under such adjoining premises
any sewers drains conduits gutters watercourses pipes
cables wires or mains except such of the same and in
such position as may be approved by the City Surveyor
whose approval shall not be unreasonably withheld or
delayed
(vi) The right for the Tenant with the servants agents
contractors and workmen of the Tenant so far as may be
necessary at all reasonable times to enter on such
adjoining premises of the Landlords if authorised in
writing by the Landlords so to do save in case of an
emergency and in any event such consent not to be
unreasonably withheld for the purpose of connecting
laying repairing cleansing maintaining and amending such
sewers drains conduits gutters
32
<PAGE>
watercourses pipes cables wires and mains and
for the purpose of undertaking any permitted
works additions and alterations to the Premises
the Tenant doing as little damage as possible
and making good all damage occasioned by the
exercise of such right but without payment of
compensation for any annoyance nuisance damage
noise vibration or inconvenience caused to the
lessees or tenants of such adjoining premises in
connection with their use thereof
(vii) The right of support and protection from the
remainder of the Building
3. Exceptions and Reservations
(i) the right of water gas electricity supply (including telephone lines)
and drainage through the existing pipes wires drains sewers and conduits in on
or under the Premises
(ii) the right of water gas electricity supply (including telephone lines)
and drainage through any pipes wires drains sewers or other conduits which the
Landlords may hereafter at any time or times within the period of eighty years
from the date hereof (which period shall be the perpetuity period applicale
hereto) lay construct or place in on or under the Premises for the benefit of
any other parts or parts of the Wholesale Market or for the purposes of the
combined heat and power scheme of Citigen Limited or such other supplier
(iii) the rights of entry upon giving prior written notice for the purpose of
the foregoing exceptions and reservations and also the right to enter upon the
Premises
33
<PAGE>
upon giving such notice as aforesaid and do any necessary works thereon for the
purpose of repair maintenance reconstruction or rebuilding of the Premises or
any part or parts of the Wholesale Market the person so entering causing as
little inconvenience and interference with the business of the tenant as
possible and making good all damage caused by such entry to the reasonable
satisfaction of the Tenant
(iv) the right of entry at reasonable times to read the electricity meter
4. Term:
To Hold (subject to determination) the Premises for a term commencing on and
from the 31st of January 1999 and expiring in the 24th day of December 2008 and
for the avoidance of doubt the expression "the term" shall include both the
contractual term of this Lease and any period of holding over or extension or
continuation of the contractual term whether by statute or common law
5. Yearly Rents (excluding VAT)
(A) Rent
On and from the 31st day of January 1999 until the 30th day of July 1999 the
yearly rent of a peppercorn (if demanded) thereon and from the 31st day of July
1999 the yearly rent of One hundred and eight thousand three hundred pounds
(/pounds/ 108,300)
(B) PROVIDED Further
(i) That the yearly rent shall be reviewed by the Landlords as at the 25th
day of December 2003 which date is hereinafter called "the review date" and if
upon any such review the Landlords consider that the open market value of the
Premises has
34
<PAGE>
increased the yearly rent shall be increased to the open market value of the
Premises from the review date and if the Landlords and the Tenant shall fail to
agree the amount of the greater yearly rent within three months of the date of
the Landlord's notification to the Tenant in writing of the Landlords proposals
for the amount of the greater yearly rent the same shall be determined by an
independent Surveyor to be appointed by agreement the matter or failing
agreement shall be determined by an independent Surveyor to be nominated on the
application of either party by the President of The Royal Institution of
Chartered Surveyors for the time being the determination by the surveyor shall
be as an expert and not as an arbitrator and such determination shall be final
and binding upon the Landlord and the Tenant. The surveyor's costs in connection
with such determination shall be borne in equal proportions by the Landlords and
the Tenant
(ii) If any such independent surveyor shall die delay or be or become
unwilling or incapable of acting or if for any other reason the said President
shall in his absolute discretion think fit the President shall in his absolute
discretion and as often as necessary by writing discharge any surveyor and
appoint another in his place
(iii) For the purposes of this Lease "open market rental value" shall mean the
rent at which the Premises might reasonably be expected to be let in the open
market by a willing lessor to a willing lessee with vacant possession of the
whole of the Premises for a term of equal length to the residue of the length of
the term originally hereby created as is remaining at the date of the review
date but upon the assumption that the Tenant has complied with all the covenants
imposed by the
35
<PAGE>
Lease upon the Tenant including the Tenant's obligations as to repair and
redecoration but disregarding the matters referred to in Section 34(1)(a) (b)
and (c) of the Landlord and Tenant Act 1954 as amended by the Law of Property
Act 1969
(iv) The rent (hereinafter in this sub-clause called "the revised rent")
payable by the Tenant as from the review date shall be the greater of:
(a) any rent fixed by agreement between the parties or by an
independent surveyor as hereinbefore provided or
(b) the rent payable immediately prior to the review date and if the
revised rent has no been fixed as aforesaid before the review
date then rent shall continue to be payable at the existing rate
until the revised rent has been fixed and as soon as the revised
rent has been so fixed the Lessee shall pay to the Landlords a
sum equal to the amount (if any) by which the rent already paid
falls short of the revised rent together with interest upon the
whole of the revised rent or such shortfall (as the case may be)
at the Interest Rate calculated from the first Quarter Day
following the review date to the date of actual payment
(v) Time shall not be of the essence in respect of any part of the review
procedure hereinbefore contained
(C) The Service Charge shall be the reasonable and proper outlay on the
following:
PART I The Building
-------------------
36
<PAGE>
(a) The maintenance renewal repair cleaning and decoration of the exterior
of the Building including the external wall and window frame roof
foundation main structure and foundations
(b) The maintenance repair renewal of all pipes wires sewers and conduits
and other conducting media
(c) Any ways roads pavements or structures party walls or anything which may
belong to or be used for the Building or any part of it exclusively
or in common with any other part of the Wholesale Market
(d) The Landlords liability insurance
(e) All tests of the Building and equipment installed therein or connected
thereto as the Landlords shall deem desirable and necessary
(f) The cost of valuations for the reinstatement of the Building for
insurance purposes but not more than once in every third year
(g) The mantenance repair renewal hire and servicing of all sprinkler
systems smoke detection and fire alarm systems emergency lighting and
fire extinguishers in the Common Parts
(h) The cost of all management fees
(i) The cost of any other services provided from time to time in the
interests of good estate management by the Landlords which are for the
benefit of all tenants or occupiers of the Building
PART II Common Services to the north and south blocks
-----------------------------------------------------
of the first and second floor of the Building
---------------------------------------------
37
<PAGE>
(j) The cost of gas electricity and the supply of cooling and heating for
the Landlords air-conditioning system to the commercial offices
including the maintenance repair and replacement of the plant and
machinery forming the air-conditioning
(k) The cost of all management and accountancy fees incurred in relation to
the services provided
(l) any other services which are provided for the common benefit of the
commercial office tenants or occupiers of the north and south wings
(m) The cost of the provisions of water supplies environmental sewage and
other water company charges and refuse disposal charges
PART III Common Services to the south block first and second floors
------------------------------------------------------------------
(n) The repair maintenance and renewal of the common parts
(o) The supply of toilet requisites
(p) The supply of plants furnishings and such other fittings to the common
parts
(q) Repairing maintaining and renewing as appropriate the lifts
(r) The cost of electricity provided to common services and to the common
areas of the building including entrance halls passages toilets lifts
and all other areas not exclusively demised or intended to be demised to
tenants
(s) The cleaning of the common parts
(t) The cleaning of the internal and external surfaces of the windows
(u) The provision of signs notice boards directional signs as may be
required
38
<PAGE>
EXHIBIT 10.18
SVERIGES FASTIGHETSAGARE
HYRESKONTRAKT
FOR LOKAL
Nr 731100
<TABLE>
<CAPTION>
Undertecknade har denna dag traffat totjande hyresavtal: Kryss I ruta Innebar att den darefter foljande texten galler
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Bojner Estate AB
- -----------------------------------------------------------------------------------------------------------------------------------
Personner/orgnr
SPRAY Interactive Media Agency AB 556506-7997
- -----------------------------------------------------------------------------------------------------------------------------------
Kommun Kvarter/stadsaga
Stockholms Havssvalget 2
- -----------------------------------------------------------------------------------------------------------------------------------
Gata Trappor Lagenhet nr
Riddargatan 17 C bv 731100
- -----------------------------------------------------------------------------------------------------------------------------------
Lokalen med tillhorande utrymmen uthyrs. om inte
annat anges, I befintligt skick an anvandas ull: kontor med utbildningsverksamhet
- -----------------------------------------------------------------------------------------------------------------------------------
Butiksarea i Kontorsarea i Lagerarea i Ovnga utrymmen
plan m/2/ plan m/2/ plan m/2/ plan m/2/ plan m/2/
bv 479
- -----------------------------------------------------------------------------------------------------------------------------------
bilaga
[X] Omfattningen av de forhyrda lokalema har markerats a bifogade nining(ar) 1
- -----------------------------------------------------------------------------------------------------------------------------------
dilfart for bil parkeringsplats(er) garageplats(er)
for I- och plats plats for for for
skytt
[_] urfastning [_] plats for skytt [_] skap/automat [_] bil(ar) [_] bil(ar) [_] uthus
- -----------------------------------------------------------------------------------------------------------------------------------
Lokalon urthyrs Vid hyrasfornaltandeta upphorande skall bilaga
hyrasgasten, om inte annan overens-
kommelse traffats, borfora honom
utan sarskild for verksamheten med sarskild for verksamheten lillhorig inredning och aterstalia
[_] avsedd inredning [_] avsedd inredning eni bil lokalerna i godtagbart skick.
- -----------------------------------------------------------------------------------------------------------------------------------
Fran och med den Till och med den
april 1996 31 mars 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Uppsagning av detta kontrakt lore den avialade hyrastidens utgang
skall ske skriftligen minst 9 manader i annat fall ar kontraktet fonangt med 3 ar for varje gang
- -----------------------------------------------------------------------------------------------------------------------------------
Kronor
hyra exkl nedan
574.800:-, se sarsk best bil 2 per at utgorande [_] total hyra [_] markerade tillagg
- -----------------------------------------------------------------------------------------------------------------------------------
bilaga
[X] Andring av ovan angiven hyra sker i enlighet med bifogade indexklausul 3
- -----------------------------------------------------------------------------------------------------------------------------------
Erforderlig uppvarmning av lokalon ombesorjas av Varmvatten tillhandahalls
[X] hyrosvarden [_] hyresgasten [X] hela aroi [_] inte alls [_]
- -----------------------------------------------------------------------------------------------------------------------------------
bilaga
[_] Bransle/Varmetillagg utgar i enlighet med bifogade klausul
- -----------------------------------------------------------------------------------------------------------------------------------
bilaga
[_] Va-tillagg utgar i enlighet med bifogade klausul
- -----------------------------------------------------------------------------------------------------------------------------------
bilaga
[_] Kostnader for drift av sarskild kyl- och ventilationsaniaggning orsatts i enlighet med bifogade klausul
- -----------------------------------------------------------------------------------------------------------------------------------
[_] Ingar i hyran [X] hyresgasten har eget abonnernang
- -----------------------------------------------------------------------------------------------------------------------------------
[_] Ingar i hyran [X] ombesorjs och bekostas av hyresgasten
- -----------------------------------------------------------------------------------------------------------------------------------
ombesorjs och bekostas av hyresgasten, se sarsk best bil 2 bilaga
[_] Ingar i hyran [X] (dock allgger det hyresvarden att tilthandahalla sopkari och erforderligt soputrymme)
- -----------------------------------------------------------------------------------------------------------------------------------
[_] Ingar i hyran [_] ombesorjs och bekostas av hyresgasten
- -----------------------------------------------------------------------------------------------------------------------------------
bilaga
[_] Ingar i hyran [X] ersattning harior ertaggas enligt sarskild overenskommelse, se sarsk best bil 2
- -----------------------------------------------------------------------------------------------------------------------------------
Skulle efter avtalels locknande - for avtal lopande pa langre tid an tre ar - oforutsedda kostnadsokningar uppkomma for
fastigheten pa grund av
a) inforande eller hojning av sarskild for fastigheten gallande skatt, avgivt eller palaga varom riksdag, regering,
kommun eller myndighat kan komma an besluta
b) generelle ombyggnadsatgardor eller liknande pa fastigheten som ej enbart avser lokalen och som hyresvarden alaggs
att utfora till foljd av beslut av riksdag, regering, kommun eller myndighet
skall hyresgasten med verkan fran intradd kastnedsokning enaggs ersartning till hyresvarden for pa lokalen belopande andal
av den totala arliga kostnadsokningen for fastigheten. av fastighetens yta
Lokalens andol ar 8, 8 procent (har andelen ej angivits beraknas don i fornallande till i fastigheten utgaende hyror vid
tiden for kostnadsokningen)
Med skatt enligt a) ovan avses ej moms och fastighetsskatt i den man ersattning hartor ertaggs i enlighet med sarskild
overenskommolse ovan.
Ersattningen erlaggs enligt nedanstaende regler om hyrans betalning
- -----------------------------------------------------------------------------------------------------------------------------------
[X] Fastighetsagaren/hyresvarden ar skanskyldig till moms for uthyming av lokalen. Hyresgasten skall utover hyran
erlagga vid varje tillfalle gallande moms
[_] Om fastighetsagaren/hyresvarden efter boslut av skattemyndighoten blir skattskyldig till moms for uthyrning av
lokalen skall hyresgasten utover hyran ertagga vid varje tillfalle gallande moms.
Danna som erlaggs samtidigt med hyran boraknas pa angivet hyresbelopp jamte, enligt varje tidppunkt gallande reglor
for moms pa hyra. pa i forokommende fall enligt hyreskontraktet utgaende tillagg och andra ersattningar.
- -----------------------------------------------------------------------------------------------------------------------------------
Sveriges Fastighetsagaretforbunds formular nr 12A upprattet 1991 i samrad med Sveriges Kopmannaforbund / Lokalhyresgasterna
och Foretgana Riksorganisation. Efter____ for__ludas
</TABLE>
1
<PAGE>
SARSKILDA BESTAMMELSER
bil 2.
till kontrakt nr 731100 av den 4 april 1996 mellan Bojner Estate AB (hyresvard)
och SPRAY Interactive Media Agency AB (hyresgast).
0. Tidigare brev gallande uthyrningen av lokalen av den 29/2-1996, 4/3-1996
och 3/4-1996 ar forutsattningar for uthyrning av lokalen dar ej annat anges
och bifogas dessa sarskilda bestammelser.
1. Hyra utgar fran och med den 1 juli 1996 med 1.200:-/kvm,ar, exklusive moms
och fastighetsskatt. Hyresbeloppet ar reducerat under tiden fram till detta
datum.
2. Hyresgasten skall val varda lokalen med inredning och ersatta skador till
foljd av ovarshamhet och bristande tillsyn som inte ar att hanfora till
normalt slitage.
Hyresvarden forutsatter att hyresgastens forsakring tacker skador av denna
art liksom inbrott och skadegorelse.
3. Uthyrning i andra hand av hela lokalen eller delar av denna till annan
person, foretag eller utomstaende medgives forst efter hyresvardens
skriftliga medgivande med sedvanlig provning. Bl a forutsattes att detta
inte medfor nagra som helst komplikationer eller kostnader for hyresvarden.
4. Till kontraktet skall senast den sista april 1996 fogas ett aktuellt
registreringsbevis avseende hyresgastens bolag, samt uppgifter om
borgensman.
5. Utover i klausulen "oforutsedda kostnader" i gallande kontrakt sid 1
angivna kostnadsokningar skall hyresgasten vid varje tillfalle aven betala
sin andel av gallande fastighetsskatt eller annan sarskild skatt eller
annan palaga avseende fastighreten. Dessa kostnader fordelas efter yta i
fastigheten. Lokalens andel i fastigheten ar 8,82%. Vad avser
fastighetsskatten fordelas denna enligt instruktioner fran
skattemyndigheten och anpassas vid varje tillfalle till fastighetens typ
och art.
6. Hyresgasten ager inte parkera bilar pa garden forutom vid inflyttning
respektive avflyttning och da endast efter tillstand fran hyresvarden.
Overtradelse medfor bortforsling pa agarens bekostnad.
7. Alla ingrepp i lokalen skall av hyresgasten dokumenteras skriftligen och
far endast utforas efter skriftligt godkannande av hyresvarden. Detta
galler sarskilt installation av el, vvs, och ventilation, som alla regleras
av bestammelser av myndighet eller forsakringsbolag. Ovanstaende galler
aven provisoriska atgarder.
8. Betraffande sophantering galler foljande:
Hyresvarden tillhandahaller ett soprum placerat till hoger pa garden
(Riddargatan 17) for normalt kontorsavfall. Detta maste ovillkorligen
placeras i storre sopsackar av plast och forslutas med snore eller sarskild
plasttrad. Nagon annan typ av forpackning godkannes icke av SKAFAB som
genom Sellbergs later hamta sackarna.
Sasom grovavfall raknas grovre emballage, kartonger, inredninsdetaljer,
fargburker
2
<PAGE>
tralador, maskindelar, travirke m.m. Hyresgasten svarar sjalv for
upplagring och borttransport av detta avfall genom direktkontakt med
entreprenor for hamtning av avfallet, eller hyra av container, vilken bor
vara lasbar.
Da upprepade papekanden inte lett till godtagbart resultat kommer den
hyresgast, som bryter mot dessa bestammelser och darigenom avbryter,
forhindrar eller forsvarar hamtning av sopsackar eller fororsakar
nedskrapning i soprummet eller pa garden, att sjalv fa bara kostnaden for
extra stadning. Detsamma galler for nedsmutsning av trapphus, kallargangar
samt garage.
Hyresgasten forpliktigar sig vidare att anpassa sin verksamhet till
kommande myndighetsbeslut som kan komma att reglera avfallshantering vad
avser upplagring, kallsortering och borttransport.
9. Da lokalen innehaller vatten- och avloppsledningar maste hyresvarden ha
tilltrade till dar belagna ventiler. Nycklar eller kodkort skall darfor i
ett exemplar finnas hos hyresvarden.
10. Hyresgasten ager pa grund av fastighetens lokalisering mitt i ett
bostadsomrade inte ratt organisera storande aktiviteter som bryter mot
gangse orningsforeskrifter gallande saval lokaler som bostader.
11. Elens matarplatsbeteckning ar H2. Abonnemangets nummer ar 70 218 512.
Overlatelsen av elen fran tidigare abonnent skall utforas samtidigt med
patecknande av detta kontrakt.
12. Meddelanden gallande fastigheten kan lamnas skriftligen till Bojner Estate
AB, c/o Torkapparater, Box 14207, 104 40 Stockholm, fax. 08-661 11 12,
eller per telefon 08-660 90 00.
Efter ombyggnad av garden och flera andra delar av fastigheten vilka nu lider
mot sitt slut, ar det troligt att flera ordningsregler nodvandigtvis maste
uppstallas for att skapa en for alla hyresgaster trivsam miljo. Bestammelser
och synpunkter liksom forslag och fragor kommer fran hyresvarden huvudsakligen
att lamnas via fax.
Stockholm den 4 april 1996 Stockholm den 4 april 1996
Bojner Estate AB Spray Interactive Media Agency AB
/s/ Ulf Bojner /s/ Johan Ihrfelt
Ulf Bojner Johan Ihrfelt
3
<PAGE>
FORUTSaTTNINGAR FOR FORHYRNING AV INDUSTRILOKALEN, RIDDARGATAN 17.
I lokalen far endast utbildningsverksamhet forekomma. Cafe- eller
utskankningsrorelse med forsaljning av mat och dryck tillats ej.
Tilltrade till lokalen i befintligt skick med utnyttjande av fastighetens
nuvarande funktioner medges den 1/4-1996 till en kostnad av 1.200:-/kvm,ar under
avtalstiden. Lokalen uthyres under forutsattning att hyresgasten eller
hyresgastens verksamhet inte fororsakar storande verksamhet for hyresvarden
eller for ovriga hyresgaster i fastigheten. Betraffande storande verksamhet
galler denna aven eventuella andrahandshyresgaster som efter hyresvardens
eventuella medgivande kan beviljas tilltrade till lokalen. Sadan storande
verksamhet ar, forutom lukt-, avfalls- och transportproblem, ordningsmassiga
problem, varvid galler polisens gallande ordningsstadga. Harutover galler vara
egna sarskilda bestammelser enligt kontraktbilaga.
For lokalen skall vad avser underhall, myndighetskontakter etc nedanstaende
galla, ur fastighetesagareforeningens standardkontraktsformular:
Det aligger Hyresgasten skall pa eget ansvar och egen bekostnad svara for de
atgarder, som av forsakringsbolag eller byggnadsnamnd, miljo- eller
halsoskyddsnamnd, brandmyndighet eller annan myndighet kan komma att kravas for
lokalens nyttjande for avsedd anvandning.
Hyresgasten skall samrada med hyresvarden innan atgarder vidtages.
Om hyresgasten utan erforderligt bygglov vidtager andringar i lokalerna och
varden till foljd harav enligt reglerna i PBL (plan- och byggnadslagstiftningen)
(tvingas utge byggnads- eller tillaggsavgift skall hyresgasten till varden utge
motsvarande belopp.
I ovrigt skall arbetet i lokalen utforas enligt SFS 1987:246 (PBL) samt 1987:383
(Plan- och byggforordningen).
Kontraktmassigt skall tilltrade till husets fasta installationer, vars
genomforningar gar genom lokalen, medges hyresvarden. Rivning av befintliga
installationer enbart avseende den gallande lokalen kraver hyresvarden
tillstand. Skadestand gallande bristfalliga rivnings- och byggnadsarbeten utges
av hyresgasten.
Nytt entreparti mot garden Riddargatan 17 utfores och bekostas av hyresvarden.
Hyresvarden tar definierad del av lokalen i ansprak for genomforing av
ventilationsschakt.
Ovansaende prelimnara bestammelser godkannes. Utokade bestammelser i huvudsak
enligt tidigare ingangna hyreskontrakt bekraftas i separat kontrakt den 1/3-
1996.
Stockholm den 29/2-1996 Bojner Estate AB
Spray Interactive Media AB Anna Bojner
Johan Ihrfelt
4
<PAGE>
SVERIGES FASTIGHETSAGARE INDEXKLAUSUL
for lokal
Anvisningar se omstaende sida.
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Auser Hyreskontrakt nr I fastigheten
731100 Havssvalget 2
- ---------------------------------------------------------------------------------------------------------
Hyresvard
Bojner Estate AB
- ---------------------------------------------------------------------------------------------------------
Hyresgast
SPRAY Interactive Media Agency AB
- ---------------------------------------------------------------------------------------------------------
Klausul
Av det i kontraktet angivna hyresbeloppet kronor 574.800: skall 100% eller
____________ kronor utgora bashyra. Under hyrestiden skall med hansyn till
forandringama i konsumentprisindex (totalindex med 1980 som basar) tillagg till
hyresbeloppet utga med en viss procent a bashyran enligt nedanstaende grunder.
For hyresavtal som borjar lopa nagon gang under tiden 1/1 - 30/6 anses bashyran
anpassad till indextalet for oktober manad aret innan.
For hyresavtal som borjar lopa nagon gang under tiden 1/7 - 31/12 anses bashyran
istallet anpassad till indextalet for oktober manad under samma tid.
Indextalet for den oktobermanad till vilken bashyran enligt ovan anses anpassad utgor
bastal savida Inte annat avtalats enligt foljande genom angivande av ar.
Annat overenskommet bastal, namligen indextalet for oktober manad ar 1996
Skulle indextalet nagon pafoljande oktobermanad ha stigit med minst tre (3,0) enheter i
forhallande till bastalet, skall tillagg utga med det procenttal varmed indextalet
andrats i forhallande till bastalet.
I fortsattningen skall tillagg utga i forhallande till indexandringarna, varvid
hyresforandringen beraknas pa basis av den procentuella forandringen mellan bastalet
och indextalet for respektive oktobermanad. For att hyresandring i fortsattningen
skall ske fordras att index for nagon oktobermanad hojts eller sankts med minst tre
(3,0) enheter i forhallande till det indextal, som gallde vid det senaste tillfallet da
hyran andrats enligt denna klausul.
Utgaende hyra skall dock aldrig sattas lagre an det i kontraktet angivna hyresbeloppet.
Hyresandringen sker alltid fr o m 1 Januari efter det att oktoberindex foranlett
omrakning.
- ---------------------------------------------------------------------------------------------------------
Underskrift Ort, datum Ort, datum
Stockholm den april 1996 Stockholm den 12 april 1996
----------------------------------------------------------------------------------------
Hyresvard Hyresgast
Bojner Estate AB SPRAY Interactive Media Agency AB
/s/ Johan Ihrfelt
/s/ Ulf Bojner ---------------------------------------
Hyresgast
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Hyresvardens egen notering om bastal:
5
<PAGE>
<TABLE>
<S> <C>
Lease for non-residential premises No 731100
The undersigned have on this day agreed to the following lease terms: An x in
the box means that the text immediately following shall apply.
LESSOR Bojner Estate AB
LESSEE Spray Interactive Media Agency AB
Civil registration no. _____________
Comp. reg. no. 556506-7997
ADDRESS OF PREMISES Municipality: Stockholm
Street address: Riddargatan 17C
Block: Havssvalget 2
Floor: Ground
Suite no 731100
CONDITION AND USE OF Unless otherwise stated, the premises with appurtenant spaces
PREMISES are let in their present condition for use as: office and training
SIZE AND EXTENT OF PREMISES Retail space floor
(e.g. in basement, on ground floor, on first floor, etc.)
____m/2/
Office space Ground floor
(e.g. in basement, on ground floor, on first floor, etc.)
479 m/2/
Storage space floor
(e.g. in basement, on ground floor, on first floor, etc.)
____ m/2/
Other space floor
(e.g. in basement, on ground floor, on first floor, etc.)
____ m/2/
[X] The location and extent of the premises are indicated in
the appended drawing(s). Appendix 1
[_] Vehicle access for loading and unloading.
[_] Place for sign
[_] Place for display case/automatic dispensers
[_] Parking space for car(s)
[_] Garaging space for car(s)
[_] Outbuilding
FURNISHING [X] The premises are let without special fittings and fixtures
intended for the Lessee's business.
[_] The premises are let with special fittings and fixtures
intended for the Lessee's business, as indicated in
Appendix 2.
On expiry of this Lease and any previous agreement
concluded between the Lessee and the Lessor regarding these
premises, the Lessee shall, unless otherwise agreed, remove
all furnishings belonging to him, and restore the premises to
an acceptable condition. Appendix
TERM OF LEASE From and including April 1996
To and including 31 March 2001
</TABLE>
<PAGE>
<TABLE>
<S> <C>
NOTICE OF TERMINATION Notice of termination of this Lease shall be given in writing at
PROLONGATION least 9 months prior to the expiration date agreed upon.
The Lease shall otherwise be automatically prolonged by a
term of 3 years each time.
RENT SEK574,800, see special provisions Appendix 2 constituting
[_] total rent
[X] rent exclusive of surcharges marked below.
INDEX CLAUSE [X] The rent specified above shall be adjusted in accordance
with the index clause appended. Appendix 3
HEATING AND HOT WATER Heating shall be arranged as necessary by
[X] the Lessor
[_] the Lessee
Hot water shall be provided
[X] throughout the year
[_] shall not be provided
[_]
CHARGES [_] A surcharge for fuel/heating shall be paid as per the
clause appended hereto. Appendix ___
WATER AND SEWAGE CHARGES [_] A surcharge for water/sewage shall be paid as per the
clause appended hereto. Appendix ___
COOLING AND VENTILATION [_] A surcharge for the operation of special cooling and
ventilation equipment shall be paid as per the clause
appended hereto. Appendix ___
ELECTRICITY [_] Included in the rent.
[X] The Lessee is responsible for his own subscription.
CLEANING OF STAIRWAY [_] Included in the rent.
[X] To be arranged and paid for by the Lessee
REFUSE AND WASTE REMOVAL [_] Included in the rent.
[X] To be arranged and paid for by the Lessee (the Lessor
shall, however, provide waste receptacles and requisite
space for the collection of refuse and waste.) See Special
Provisions, Appendix 2.
SNOW CLEARANCE AND SANDING [X] Included in the rent as regards the property.
[_] To be arranged and paid for by the Lessee.
PROPERTY TAX [_] Included in the rent.
[X] Compensation to be paid under a separate agreement.
Appendix 2
UNFORESEEN COSTS The following applies to Leases covering more than three
years. If, after this Lease has been signed, the property is
affected by unforeseen cost increases as a result of
(a) the introduction of, or an increase in, special taxes, fees or
surcharges applicable to the property through a decision of
Parliament, the Government, the municipal authority or
</TABLE>
<PAGE>
<TABLE>
<S> <C>
other authority
(b) general conversion work or other measures affecting the
property and not only the premises in question and which
the Lessor is obliged to carry out following a decision
of Parliament, the Government, the municipal authority or
other authority the Lessee shall compensate the Lessor in
an amount corresponding to the premises' share of the
annual cost increase affecting the property starting at
the time of the cost increase in question.
The premises' share is 8.8 per cent (if the share is not
specified, it shall be calculated as a proportion of the
area of the property at the time of the cost increase).
Reference to tax in (a) above does not include sales tax
nor does it include property tax if compensation for this
tax is paid under separate agreement stipulated above.
Compensation is paid in accordance with the rules for
payment of rent as set out below.
SALES TAX [X] The property-owner/Lessor is liable to sales tax for letting
the premises. In addition to the rent the Lessee shall on
each due date pay the sales tax at the rate then applicable.
[_] If the property-owner/Lessor is found by the tax authorities
to be liable to sales tax for the letting of the premises the
Lessee shall, in addition to the rent, pay the sales tax at
the rate then applicable.
</TABLE>
The Swedish Federation for Rental Property Owners, Lease form No. 1.2A. Prepared
1991 in co-operation with the Swedish Retail Federation, The Organisation for
Tenants of Premises and Swedish Federation of free Enterprises.
<PAGE>
MEASURED PURSUANT TO SWEDISH STANDARDS SS 02 10 52
AREA CATEGORY COMMERCIAL AREA (BRA) THEREFORE SPECIFIED AS PREMISES (LOA).
MEASURED AND ROUNDED DOWN
PREMISES 479.0M2
HAVSVALGET 2, STOCKHOLM
RIDDARGATAN 17, BACK BLDG
MEASUREMENT DRAWING
GROUND FLOOR
SCALE 1:100
LARS SCHOLDSTROM ARKITEKTKONTOR AB
STUREPLATAN 17
181 32 LIDINGO
SWEDEN
TELEPHONE: 08 765 37 95
TELEFAX: 08 765 37 82
DRAWN BY LS
<PAGE>
Appendix 2
SPECIAL PROVISIONS
pertaining to contract no. 731 100 of 4 April 1995 between Bojner Estate AB
(hereinafter referred to as the Lessor) and Spray Media Agency AB (hereinafter
referred to as the Lessee)
0. Unless otherwise stated, the conditions for lease of the premises are as
outlined in previous letters concerning the lease of the premises dated 29
February 1996, 4 March 1996 and 3 April 1996 (appended to these special
provisions).
1. Rent shall be payable as of 1 July 1996 and amounts to SEK 1,200/m2 and
year, not including sales tax and property tax. The rent has been reduced
for the period up to this date.
2. The Lessee shall take due care of the premises and furnishings and pay the
cost of any damage arising as a result of negligence or lack of maintenance
and which cannot be deemed normal wear and tear. The Lessor assumes that
the Lessee's insurance covers damage of this type, as well as burglary and
vandalism. The Lessee shall take due care of the premises and furnishings
and pay the cost of any damage arising as a result of negligence or lack of
maintenance and which cannot be deemed normal wear and tear. The Lessor
assumes that the Lessee's insurance covers damage of this type, as well as
burglary and vandalism.
3. The Lessee shall take due care of the premises and furnishings and pay the
cost of any damage arising as a result of negligence or lack of maintenance
and which cannot be deemed normal wear and tear. The Lessor assumes that
the Lessee's insurance covers damage of this type, as well as burglary
and vandalism.
4. Subletting of the entire premises or parts thereof to another person,
company or outsider may be permitted after the written consent of the
Lessor after customary credit assessment, on condition that this does not
involve any kind of complication or cost whatsoever for the Lessor.
5. A current registration certificate for the Lessee's company shall be
appended to the contract not later than 30 April 1996. It is also requested
that the name of a bank reference be provided at the same time.
6. In addition to the clause entitled 'Unforeseen costs' in the present
contract, page 1, the Lessee shall on each occasion pay his share of the
current property tax or other special tax or other surcharge relating to
the property. The premises' share of the total area of the property is 8.82
per cent. Property tax will be levied according to instructions from the
tax authorities and adjusted to the type and nature of the property in
individual cases.
7. The Lessee is not entitled to park a motor vehicle in the grounds of the
property except in conjunction with moving in or out and only with the
consent of the Lessor. Breach of this clause will result in the vehicle
being towed away at the owner's expense.
8. All modifications of the premises shall be documented in writing by the
Lessee and may only be performed with the written approval of the Lessor.
This applies particularly to electrical, heating, water, drainage and
ventilation installations, all of which are subject to official regulations
or insurance provisions. The above also applies to temporary modifications.
9 The following shall apply to refuse and waste removal:
The Lessor shall make available a refuse storage chamber for normal waste
situated to the right of the grounds (Riddargatan 17). The waste shall
unconditionally be placed in large plastic waste sacks which are securely
closed with string or special plastic thread. This is essential in order to
prevent waste paper being spread around the grounds. No other type of
packaging will be approved by SKAFAB, which has the sacks collected by
Sellbergs.
<PAGE>
Bulky waste is taken to mean heavier packaging, cardboard boxes,
furnishings, paint tins, wooden boxes, machine parts, timber, etc. The
Lessee is himself responsible for storage and removal of such waste through
direct contact with the contractor for the removal of the waste or the hire
of a container, which should be lockable.
In cases where repeated reminders have not had any acceptable result, a
Lessee who contravenes these regulations and thereby impedes or obstructs
the removal of waste sacks and causes littering of the refuse storage
chamber and the grounds will be liable to pay the cost of any extra
cleaning required. This applies equally to stairways and cellar passages.
The Lessee undertakes furthermore to adapt his operations to forthcoming
decisions by the authorities which may regulate waste management in terms
of storage, source separation and removal, and likewise to the Lessor's
regulations concerning the storage of waste.
10. Since the premises contain water and sewage pipes, the Lessor must be
afforded access to the valves pertaining thereto. The property owner shall
therefore be provided with one copy of the keys or code cards.
11. Because of the location of the premises in a residential area, the Lessee
is not entitled to arrange disruptive activities in the leased premises
which contravene current regulations applicable both to business premises
and residential premises.
12. The electricity metre designation is H2. The subscription number is 70 218
512. Transfer of the electricity subscription from the previous subscriber
is to be carried out at the same time as this contract is signed.
13. Communications concerning the property may be submitted in writing to
Bojner Estate AB, c/o Torkapparater, Box 14207, 104 40 Stockholm, or by fax
08 6611112 or by telephone 08-6602060.
Following extensive refurbishment of the grounds and certain of the larger
premises, which will soon be completed, it is possible that further regulations
must be drawn up in order to create a pleasant and friction-free atmosphere for
all tenants. Regulations and views, including suggestions and questions will be
put forward by the Lessee mainly by telefax.
Stockholm, 4 April 1996 Stockholm, 4 April 1996
Bojner Estate AB Spray Interactive Media Agency AB
(Signed) (Signed)
Ulf Bojner Johan Ihrfelt
<PAGE>
CONDITIONS OF LEASE, INDUSTRIAL PREMISES, RIDDARGATAN 17
Only training activities may be conducted on the premises. Cafe operations or
sale of food and drink are not permitted.
Access to the premises in their existing condition and with the use of present
facilities is permitted on 1 April 1996 at a cost of SEK 1,200/m2 and year
during the term of the lease. The premises are leased on condition that the
Lessee or the Lessee's operations do not cause any disturbance to the Lessor or
other lessees in the property. As regards disturbing activities, this also
applies to any sublessees who are allowed access to the premises with the
consent of the Lessor. Such disturbances, apart from odor, waste and transport
problems, also include disorderliness, which comes under police regulations. In
addition to this, our own special regulations apply pursuant to the appendix to
the lease.
As regards maintenance, contacts with the authorities, etc., the following
clause in the Swedish Federation for Rental Property Owners' standard lease form
applies:
"It shall be the responsibility of the Lessee at his own risk and at his own
expense, to take any measures as may be required by an insurance company, a
municipal building committee, a municipal environmental protection and public
health committee, a fire-fighting authority or any other authority for the
premises to be used as intended. The Lessee shall consult with the Lessor before
such measures are taken."
If the Lessee undertakes modification to the premises without the necessary
building permission and the Lessor as a result thereof is required to pay a
building fee or surcharge pursuant to the Swedish Planning and Building Act
(PBL) the Lessee shall pay the corresponding sum to the Lessor.
In other respects, work on the premises shall be performed pursuant to Swedish
Code of Statutes SFS 1987:246 (PBL) and 1987:383 (Planning and Building
Ordinance).
The contract requires that the Lessor be afforded access to all the fixed
installations in the building whose through-connections go through the premises.
Removal of existing installations for the premises in question requires the
permission of the Lessor. The Lessee shall be liable for defective demolition
and building work.
A new entrance towards the grounds at Riddargatan 17 is to be built and paid for
by the Lessor. The Lessor will use a pre-defined part of the premises to lead
through a ventilation duct.
The above preliminary conditions are hereby approved. More detailed conditions,
mainly in accordance with existing leases, will be confirmed in a separate
contract on 1 March 1996.
Stockholm, 29 February 1996
Spray Interactive Media Agency AB Bojner Estate AB
Johan Ihrfelt Anna Bojner
<PAGE>
Appendix 3
INDEX CLAUSE
FOR PREMISES
FOR Contract no: 731 100
Property: Havssvalget 2
LESSOR Bojner Estate AB
LESSEE Spray Interactive Media Agency AB
CLAUSE Of the rent stipulated in the contract, amounting to
SEK574,800, 100% or SEK _______ shall constitute the basic
rent. During the term of the contract, in the light of
changes in the consumer price index (total index with 1980
as the base year), a rental increment shall be payable
amounting to a certain percentage of the basic rent and
calculated according to the following criteria.
For rental contracts which begin during the period 1
January to 30 June, the basic rent is considered adjusted
to the index for October of the previous year.
For rental contracts which begin during the period 1 July
to 31 December, the basic rent is considered adjusted to
the index for October of the same year.
The index for the October to which the basic rent as above
is considered adjusted constitutes the base figure unless
otherwise agreed to as follows by stating a year.
Basic figure otherwise agreed, i.e. index for October of___
Should the index in any subsequent October have risen by
more than three (3.0) units in relation to the base figure,
an increment shall be payable pursuant to the percentage
according to which the index has changed in relation to the
base figure. Thereafter, increments shall be payable in
relation to index changes, whereby the change in rent shall
be calculated on the basis of the percentage change between
the base figure and the index for each October. A criterion
for a fut the index for any October shall have risen or
fallen by at least three (3.0) units in relation to the
index which applied at the last occasion when the rent was
adjusted pursuant to this clause.
The rent payable shall, however, never fall below the
amount stipulated in the contract. Changes shall always
take effect on 1 January after the October in which the
index has given cause for adjustment.
SIGNATURES Place, date Place, date
Stockholm, 12 April 1996 Stockholm, 12 April 1996
Lessor Lessee
Bojner Estate AB Spray Interactive Media AB
(Signed) (Signed)
<PAGE>
Lessor's notes concerning index:
<PAGE>
EXHIBIT 10.19
HYRESKONTRAKT
FOR LOKAL Nr 741 100
<TABLE>
<S> <C>
Undertecknade her denna dag traffat foljande hyresavtal: Kryss i ruta innebar att den darefter foljande texten galler
- ----------------------------------------------------------------------------------------------------------------------------
Hyresvard
Bojner Estate AB
- ----------------------------------------------------------------------------------------------------------------------------
Hyresgast Personnl/Orgnr
Spray Interactive Media AB 556506-7997
- ----------------------------------------------------------------------------------------------------------------------------
Lokalens Kommun Kvarter/stadsaga
address
Stockholm Havssvalget 2
- ----------------------------------------------------------------------------------------------------------------------------
Gata Trappor Lagenhet nr
Riddargatan 17 E bv 741 100
- ----------------------------------------------------------------------------------------------------------------------------
Lokalens
skick Lokalen med tillhorande utrymmen uthyrs, om inte
och anvandning annat anges, i beflngtligt skick att anvadas till: Kontor
- ----------------------------------------------------------------------------------------------------------------------------
Lokalens Butlksarea 1 Kontosarea 1 Lagerarea i Ovriga utrymmen Total:
storiek och
omfattning plan m2 plan m2 plan m2 plan m2 plan m2
1 68 ----
------------------------------------------------------------------------------------------------------------
bilaga
---
X Omfattningen av de forhyrda lokalema har markerata a bifogada ritning(ar) 1
------------------------------------------------------------------------------------------------------------
tillfart for bil parkeringsplats(or) garageplats(er)
for I och plats for plats for skyli for for
urfastning skylt skap/automat bil(ar) bil(ar) uthus
- -----------------------------------------------------------------------------------------------------------------------------------
Inredning Lokalen uthyrs bilaga
-------------
Vid hyresforhallandels
upphoorande skall hyresgasten,
om inta annen overenskommelse
med sarskild for traffats, bortfora honom tilhorig
utan sarskild for verksamheten verksamheten avsedd inredning och aterstalla lokalema
X avsedd inredning inredning enl bil I godtagbart skick
- -----------------------------------------------------------------------------------------------------------------------------------
Kontraktstid Fran och med den Till och med den
1 april 1997 31 mars 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Uppsagninstid
Fotlangninstid
Uppsagning av delta kontraki 9 manader fore den avtalade hyrestidens
skall ske skriftligen minst utgang i annal fall ar
kontraktel forlangt med 3 ar for varje gang
-------------------------------------------------------------------------------------------------------------------
Hyra Kronor
126.956 per ar utgorande total hyra X
-------------------------------------------------------------------------------------------------------------------
Index- bilaga
klausul
X Andring av ovan angiven hyra skeri 3
i enlighet med bifogade indexklausul
---------------------------------------------------------------------------------------------------------------------------------
Varme och Erforderlig uppvarmning av lokalen Varmvatten tillhandahails
varmvatten ombesorjes av
hyresvarden hyresgasten X hela arct inte alls
---------------------------------------------------------------------------------------------------------------------------------
Kostnad bilaga
Bransle/Varmetlliagg utgar i enlighet med
bifogada klausul
---------------------------------------------------------------------------------------------------------------------------------
Va-kost-nad bilaga
Va-tillagg utgar i enlighet med bifogade klausal
---------------------------------------------------------------------------------------------------------------------------------
Kyla bilaga
Ventilation
Kostnader for drift av sarskild kyl-och
ventilationsanlaggning arsalls i enlighet
med hifogade klausul
---------------------------------------------------------------------------------------------------------------------------------
El
ingar I hyran X hyresgasten har
eget abonnemang
---------------------------------------------------------------------------------------------------------------------------------
Trapp-
stadning
ingar I hyran X ombesorjs och bokostas
av hyresgasten
---------------------------------------------------------------------------------------------------------------------------------
Embalage-
och sop-
hamtning ingar I hyran X ombesorjs och bekostas av hyresgasten
(dock aligger del hyresvarden all tillhandahalla sopkarl och
erforderligt soputrymme) se best. bil 2
---------------------------------------------------------------------------------------------------------------------------------
Snorojning
och sandning
ingar I hyran ombesorjs och bekostas av
hyresgasten
---------------------------------------------------------------------------------------------------------------------------------
Fastighetsekatt bilaga
ingar I X ersattning hafor erlaggs enlight sarskild overanskommelse 2
hyran
---------------------------------------------------------------------------------------------------------------------------------
Oforut-sedda kulle efter avtslete tecknande - for avtal lopande pa langre tid an tre ar - oforutsedda kostnadsokningar
kostnader ppkomma for fastigheten pa grund av
a) inforanda clier hojning av sarskild for fastigheten gallande skatt, avgift eller palaga varom rlkedag,
regering, kommun eller myndighet kan komma att besluta
b) generella ombyggnadsatgarder eller liknande pa fastigheten som ej enbart avser lokalen och som
hyresvarden alaggs att utfora till foljd av beslut av riksdag, regering, kommun eller myndighet
skall hyresgasteb med vorkan fran intradd kostnadsokning criagga ersaltning till hyresvarden for pa lokolon
belopande andel av den totala arliga kostnadsokningen for fastigheten.
Lokalens andel ar 2% procent (har andelen ej angivits beraknas den i forhallande till I fastigheten utgaende
hyror vid tiden for kostnadsokningen).
Med skat enligt a) oven avses ej moms och fastighatsskatt i den man ersattning harfore erlaggs i enlighet med
sarsklld overenskommelse ovan.
Ersattningen erlaggs enlight nedanstaende regler om hyrans betalning.
- -----------------------------------------------------------------------------------------------------------------------------------
Mervarde- X Fastighetsagaren/hyresvarden ar skattskyldig till moms for uthyrning av lokolon. Hyresgarten skall utover
skatt hyran erlagga vid varje tillfalle gallande moms
(moms)
Om fastighetsagaren/hyresvarden efter beslut av skattemyndigeten blir skattskyldig til moms for uthyrning
av lokalen skall hyresgasten utover hyran erlagga vid varjo tillfalle gallande morns.
Denna som erlaggs samtidigt med hyran beraknas pa angivet hyresbelopp jamte, enligt vid varge tidpunkt
gallande regler for morns pa hyra, pa i forekommande fall enligt hyreskonraktet utgaende tillagg och andra
ersattningar.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Sveriges Fastighetsagareforbunds formular nr 12A upprattat 1991 i samrad med
Sveriges Kopmannaforbund/Lokalhyresgasterna och Foretagens
Riksorganization. Eftertryck forbjudes
1
<PAGE>
SARSKILDA BESTAMMELSER till kontrakt nr 741 100 bil. 2
1. Till kontraktet skall fogas aktuellt registreringsbevis samt uppgift om
eventuella borgensman.
2. Utover klausulen "oforutsedda kostnader" i gallande konstrakt sid l skall
hyresgasten vid varje tillfalle betala sin andel av gallande fastighetsskatt
eller annan sarskild skatt eller annan palaga avseende fastigheten. Som
berakningsgrund anvands lokalens andel av fastighetens totala lokalyta, vilken
for avsedd lokal ar ca 2 procent. Vad betraffar fastighetsskatten beraknas den
arligen som en viss procent pa fastighetens taxeringsvarde. Taxeringavardet
forandras varje ar, och for 1997 ar fastighetens taxeringsvarde 31.590.000
kronor och skattesatsen 1 procent . 1997 ar fastighetsskatten per kvadratmeter
94,16 kronor.
3. Uthyrning i andra hand av hela lokalen eller delar av denna till annan
person, foretag eller utomstaende medgives efter hyresvardens skriftliga
medgivande med sedvanlig kreditprovning, forutsatt att detta inte medfor nagra
som helst komplikationer eller kostnader for hyresvarden.
4. Hyresgasten skall val varda lokalen med inredning och ersatta skador till
foljd av ovarsamhet och bristande tillsyn som inte ar att hanfora till normalt
slitage. Med inredning avses utrustning som ar anskaffad, bekostad och uppsatt
av hyresvarden. Egna intallationer och ingrepp som paverkar fastighetens
fasader, el, VVS eller andra fastighetssystem kraver fastighetsagarens
godkannande.
5. Hyresgasten ager inte ratt att parkera motorfordon pa fastighetens gard, ej
heller utan fastighetsagarens godkannande nyttja denna for speciella evenemang.
6. Da lokalen innehaller vatten- och avloppsledningar maste hyresvarden ha
tilltrade till dar belagna ventiler. Nycklar, kort och kod skall darfor i ett
exemplar finnas hos fastighetsagaren.
7. Betraffande sophantering galler foljande:
Hyresvarden tillhandahaller ett soprum placerat till hoger pa garden for
normalt kontorsavfall. Detta maste ovillkorligen placeras i storre sopsackar av
plast och val forslutas. Nagon annan typ av forpackning godkannes inte.
Sasom grovavfall raknas grovre emballage, kartonger, inredningsdetaljer,
fargburkar, tralador, maskindelar, travirke m.m. Hyresgasten svarar sjalv for
upplagring och borttransport av detta avfall genom direktkontakt med entreprenor
for hamtning av avfallet, eller hyra av container, vilken bor vara lasbar.
Da upprepade papekanden inte lett till godtagbart resultat kommer den
hyresgast som bryter mot dessa bestammelser och darigenom forhindrar eller
forsvarar hamtning av sopsackar och fororsaker nedskrapning i soprummet och pa
garden att sjalv fa bara kostnaderna for den extra stadning som maste utforas.
Detta galler lilkasa trapplan och kallargangar.
Hyresgasten forpliktigar sig vidare att anpassa sin verksamhet till kommande
myndighetsbeslut som kan komma att reglera avfallshantering vad avser
upplagring, kallsortering och borttransport, och likasa till hyresvardens
forhallningsregler gallande upplagring av avfall.
8. Meddelanden gallande fastigheten kan lamnas skriftligen till Bojner Estate
AB, Box 14207, 104 40 Stockholm, per fax. 08-6611112, eller per telefon
08-6609000.
Stockholm den 1997 Stockholm den 30/8 1997
/s/ Anders Rynell /s/ Johan Ihrfelt
Bojner Estate AB Spray Interactive Media AB
2
<PAGE>
INDEXKLAUSUL
for lokal
Anvisningar se omstaende sida.
<TABLE>
<S> <C>
Avser Hyreskontrakt nr i fastigheten
741 100 Havssvalget 2
- --------------------------------------------------------------------------------------------------------------------------------
Hyresvard Bojner Estate AB
- --------------------------------------------------------------------------------------------------------------------------------
Hyresgast Spray Interactive MediagAB
- --------------------------------------------------------------------------------------------------------------------------------
Klausul Av det i kontraktet angivna hyresbeloppet - kronor 126.956 skall 100% eller kronor utgora bashyra. Under
hyrestiden skall med hansyn till forandringarna i konsumentprisindex (totalindex med 1980 som basar) tillagg
till hyresbeloppet otga med en viss procent a bashyran enligt nedanstaende grunder.
For hyresavtal som borjar lopa nagon gang under tiden 1/1 - 30/6 anses bashyran anpassad till indextalet far
oktober manad aret innan.
For hyresavtal som borjar lopa nagon gang under tiden 1/7 - 31/12 anses bashyran istallet anpassad till
indextalet for oktober manad under samma tid.
Indextalet for den oktobermanad till vilken bashyran enligt ovan anses anpassad utgor bastal savida inte annat
avtalats enligt foljande genom angivande av ar.
Annat overenskommet bastal, namligen indextalet for oktober manad ar...
Skulle indextalet nagon pafoijande oktobermanad ha stigit med minst tre (3,0) enheter i forhallande till
bastalet, skall tillagg utga med det procenttal varmed indextalet andrats i forhallande till bastalet. I
fortsattningen skall tillagg utga i forhallande till indexandringarna, varvid hyresforandringen beraknas pa
basis av den procentuella forandringen mellan bastalet och indextalet for respektive oktobermanad. For
att hyresandring i fortsattningen skall ske fordras att index for nagon oktobermanad hojts eller sankts med
minst tre (3,0) enheter i forhallande till det indextal, som gallde vid det senaste tillfallet da hyran andrats
enligt denna klausul.
Utgaende hyra skall dock aldrig sattas lagre an det i kontraktet angivna hyresbeloppet. Hyresandringen sker
alltid fr o m 1 januarl efter det att oktoberindex foranlett omrakning.
- ---------------------------------------------------------------------------------------------------------------------------------
Underskrift Ort/datum Ort/datum
Stockholm den September 1997 Stockholm den 30/8 1997
----------------------------------------------------------------------------------------------------------------
Hyresvard Hyregast
Bojner Estate AB Spray Interactive Media AB
/s/ Anders Rynell /s/ Johan Ihrfelt
--------------------------------------
Hyregast
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hyresvardens egen notering om bastal:
3
<PAGE>
LEASE FOR NON-RESIDENTIAL PREMISES NO 741100
The undersigned have on this day agreed to the following lease terms: An x in
the box means that the text immediately following shall apply.
LESSOR Bojner Estate AB
LESSEE Spray Interactive Media AB
Company registration number: 556506-7997
ADDRESS OF PREMISES Municipality: Stockholm
Street address: Riddargatan 17E
Block: Havssvalget 2
Floor: Ground
Suite no 741100
CONDITION AND USE OF PREMISES Unless otherwise stated, the premises with
appurtenant spaces are let in their present
condition for use as: Office
SIZE AND EXTENT OF PREMISES Retail space floors
____ m/2/
Office space 1 floors
68 m/2/
Storage space floors
____ m/2/
Other space floors
____ m/2/
[X] The location and extent of the premises
are indicated in the appended
drawing(s). Appendix 1
[_] Vehicle access for loading and
unloading.
[_] Place for sign
[_] Place for display case/automatic
dispensers
[_] Parking space for car(s)
[_] Garaging space for car(s)
[_] Outbuilding
FURNISHING [X] The premises are let without special
fittings and fixtures intended for the
Lessee's business.
[_] The premises are let with special
fittings and fixtures intended for the
Lessee's business, as indicated in
appendix.
On expiry of this Lease and any previous
agreement concluded between the Lessee and
the Lessor regarding these premises, the
Lessee shall, unless otherwise agreed, remove
all furnishings belonging to him, and restore
the premises to an acceptable condition.
Appendix _________
TERM OF LEASE From and including 1 April 1997
To and including 30 March 2001
NOTICE OF TERMINATION Notice of termination of this Lease shall be
PROLONGATION given in writing at least 9 months prior to
the expiration date agreed upon.
The Lease shall otherwise be automatically
prolonged by a term of 3 years each time.
<PAGE>
RENT SEK126,956 per year constituting
[_] total rent
[X] rent exclusive of surcharges marked
below.
INDEX CLAUSE [X] The rent specified above shall be
adjusted in accordance with the index
clause appended. Appendix 3
HEATING AND HOT WATER Heating shall be arranged as necessary by
[X] the Lessor
[_] the Lessee
Hot water shall be provided
|X] throughout the year
[_] shall not be provided
[_]
CHARGES [_] A surcharge for fuel/heating shall be
paid as per the clause appended hereto.
Appendix ___
WATER AND SEWAGE CHARGES [_] A surcharge for water/sewage shall be
paid as per the clause appended hereto.
Appendix ___
COOLING AND VENTILATION [_] A surcharge for the operation of special
cooling and ventilation equipment shall
be paid as per the clause appended
hereto. Appendix ___
ELECTRICITY [_] Included in the rent.
[X] The Lessee is responsible for his own
subscription.
CLEANING OF STAIRWAY [_] Included in the rent.
[X] To be arranged and paid for by the
Lessee
REFUSE AND WASTE REMOVAL [_] Included in the rent.
[X] To be arranged and paid for by the
Lessee (the Lessor shall, however,
provide waste receptacles and requisite
space for the collection of refuse and
waste.) See
Appendix 2
SNOW CLEARANCE AND SANDING [_] Included in the rent.
[_] To be arranged and paid for by the
Lessee.
PROPERTY TAX [_] Included in the rent.
[X] Compensation to be paid under a separate
agreement. Appendix 2
UNFORESEEN COSTS The following applies to Leases covering more
than three years. If, after this Lease has
been signed, the property is affected by
unforeseen cost increases as a result of
(a) the introduction of, or an increase in,
special taxes, fees or surcharges
applicable to the property through a
decision of Parliament, the Government,
the municipal authority or other
authority
(b) general conversion work or other
measures affecting the property and not
only the premises in question and which
the Lessor is obliged to carry out
following a decision of Parliament, the
Government, the municipal authority or
other authority
<PAGE>
the Lessee shall compensate the Lessor
in an amount corresponding to the
premises' share of the annual cost
increase affecting the property starting
at the time of the cost increase in
question.
The premises' share is approx. 2 per
cent (if the share is not specified, it
shall be calculated as a proportion of
the rents charged on the property at the
time of the cost increase).
Reference to tax in (a) above does not
include sales tax nor does it include
property tax if compensation for this
tax is paid under separate agreement
stipulated above.
Compensation is paid in accordance with
the rules for payment of rent as set out
below.
SALES TAX [X] The property-owner/Lessor is liable to
sales tax for letting the premises. In
addition to the rent the Lessee shall on
each due date pay the sales tax at the
rate then applicable.
[_] If the property-owner/Lessor is found by
the tax authorities to be liable to
sales tax for the letting of the
premises the Lessee shall, in addition
to the rent, pay the sales tax at the
rate then applicable.
The sales tax is to be paid at the same
time as the rent and calculated on the
rental amount and on any surcharges, and
compensation specified in the Lease
according to the rules for sales tax
payment on rent then applicable.
The Swedish Federation for Rental Property Owners. Lease form No. 1.2A. Prepared
1991 in co-operation with The Swedish Retail Federation, The Organisation for
Tenants of Premises and Swedish Federation of free Enterprises.
<PAGE>
MEASURED PURSUANT TO SWEDISH STANDARDS SS 02 10 52
AREA CATEGORY COMMERCIAL AREA (BRA) THEREFORE SPECIFIED AS PREMISES (LOA).
MEASURED AND ROUNDED DOWN
PREMISES 127.0 M/2/
REVISED DUE TO NEW LAYOUT AND CHANGED AREAS
HAVSVALGET 2, STOCKHOLM
RIDDARGATAN 17, BLDG 4
MEASUREMENT DRAWING
GROUND FLOOR
SCALE 1:100
LARS SCHOLDSTROM ARKITEKTKONTOR AB
STUREPLATAN 17
181 32 LIDINGO
SWEDEN
TELEPHONE: 08 765 37 95
TELEFAX: 08 765 37 82
DRAWN BY LS
STOCKHOLM 24 MAY 1994
(SIGNED)
KONTOR OFFICE
WC-DUSCH TOILET-SHOWER
PENTRY KITCHENETTE
KONFERENSRUM MEETING ROOM
FORRAD STORE ROOM
KVM M/2/
<PAGE>
Appendix 2
SPECIAL PROVISIONS PERTAINING TO CONTRACT NO. 741100
1. A current registration certificate and information concerning any
guarantors shall be appended to the contract.
2. In addition to the clause entitled `Unforeseen Costs' in the present
contract, page 1, the Lessee shall no each occasion pay his share of the
current property tax or other special tax or other surcharge relating to
the property. The premises' share of the total area of the property, which
for the premises concerned is approximately 1.6 per cent, shall be used as
the basis for calculation thereof. Property tax is calculated annually on a
certain percentage of the taxation value of the property. The taxation
value is adjusted each year; for 1997 the taxation value of this property
is SEK 31,590,000 and the tax rate is 1 per cent. In 1997, the taxation
value per square meter is SEK 94.16.
3. Subletting of the entire premises or parts thereof to another person,
company or outsider may be permitted after the written consent of the
Lessor after customary credit assessment, on condition that this does not
involve any kind of complication or cost whatsoever for the Lessor.
4. The Lessee shall take due care of the premises and furnishings and pay the
cost of any damage arising as a result of negligence or lack of maintenance
and which cannot be deemed normal wear and tear. Furnishings are taken to
mean equipment which has been acquired, paid for and installed by the
Lessor. Any installation and measures by the Lessee which affect the facade
of the property, or the electricity, water, heating, sanitation or other
systems in the property require the approval of the Lessor.
5. The Lessee is not entitled to park a motor vehicle in the grounds of the
property, nor to use the grounds for special events without the consent of
the owner of the property.
6. Since the premises contain water and sewage pipes, the Lessor must be
afforded access to the valves pertaining thereto. The property owner shall
therefore be provided with one copy of the keys, cards and codes.
7. The following shall apply to refuse and waste removal:
The Lessor shall make available a refuse storage chamber for normal
office waste situated to the right of the grounds. The waste shall
unconditionally be placed in large plastic waste sacks which are securely
closed. No other type of packaging will be approved.
Bulky waste is taken to mean heavier packaging, cardboard boxes, furnishings,
paint tins, wooden boxes, machine parts, timber, etc. The Lessee is himself
responsible for storage and removal of such waste through direct contact with
the contractor for the removal of the waste or the hire of a container, which
should be lockable.
In cases where repeated reminders have not had any acceptable result, a Lessee
who contravenes these regulations and thereby impedes or obstructs the removal
of waste sacks and causes littering of the refuse storage chamber and the
grounds will be liable to pay the cost of any extra cleaning required.
This applies equally to stairways and cellar passages.
The Lessee undertakes furthermore to adapt his operations to forthcoming
decisions by the authorities which may regulate waste management in terms of
storage, source separation and removal, and likewise to the Lessor's regulations
concerning the storage of waste.
8. Communications concerning the property may be submitted in writing to
Bojner Estate AB, Box 14207, 104 40 Stockholm, or by telephone 08 6609000.
STOCKHOLM, SEPTEMBER 1997 STOCKHOLM, 30 AUGUST 1997
BOJNER ESTATE AB SPRAY INTERACTIVE MEDIA AB
<PAGE>
Appendix 3
INDEX CLAUSE
FOR PREMISES
FOR Contract no: 741 100
Property: Havssvalget 2
LESSOR Bojner Estate AB
LESSEE Spray Interactive Media AB
CLAUSE Of the rent stipulated in the contract, amounting to
SEK126,956, 100% or SEK _______ shall constitute the basic
rent. During the term of the contract, in the light of
changes in the consumer price index (total index with 1980
as the base year), a rental increment shall be payable
amounting to a certain percentage of the basic rent and
calculated according to the following criteria.
For rental contracts which begin during the period 1 January
to 30 June, the basic rent is considered adjusted to the
index for October of the previous year.
For rental contracts which begin during the period 1 July to
31 December, the basic rent is considered adjusted to the
index for October of the same year.
The index for the October to which the basic rent as above
is considered adjusted constitutes the base figure unless
otherwise agreed as follows by stating a year. Basic figure
otherwise agreed, i.e. index for October of ______
Should the index in any subsequent October have risen by
more than three (3.0) units in relation to the base figure,
an increment shall be payable pursuant to the percentage
according to which the index has changed in relation to the
base figure. Thereafter, increments shall be payable in
relation to index changes, whereby the change in rent shall
be calculated on the basis of the percentage change between
the base figure and the index for each October. A criterion
for a future change in rent is that the index for any
October shall have risen or fallen by at least three (3.0)
units in relation to the index which applied at the last
occasion when the rent was adjusted pursuant to this clause.
The rent payable shall, however, never fall below the amount
stipulated in the contract. Changes shall always take effect
on 1 January after the October in which the index has given
cause for adjustment.
SIGNATURES Place, date Place, date
Stockholm, September 1997 Stockholm, 30 August 1997
Lessor Lessee
Bojner Estate AB Spray Interactive Media AB
(Signed) (Signed)
Lessor's notes concerning index:
<PAGE>
MEASURED PURSUANT TO SWEDISH STANDARDS SS 02 10 52
AREA CATEGORY COMMERCIAL AREA (BRA) THEREFORE SPECIFIED AS PREMISES (LOA).
MEASURED AND ROUNDED DOWN
PREMISES 479.0 M/2/
HAVSVALGET 2, STOCKHOLM
RIDDARGATAN 17, BACK BUILDING
MEASUREMENT DRAWING
GROUND FLOOR
SCALE 1:100
LARS SCHOLDSTROM ARKITEKTKONTOR AB
STUREPLATAN 17
181 32 LIDINGO
SWEDEN
TELEPHONE: 08 765 37 95
TELEFAX: 08 765 37 82
DRAWN BY LS
STOCKHOLM 24 MAY 1994
(SIGNED)
<PAGE>
EXHIBIT 10.20
<TABLE>
<CAPTION>
HYRESKONTRAKT Sid 1(2)
FOR LOKAL Nr 01009 001 024
Undertecknade her denna dag traffat forfjanda hyresavtal: Kryss i ruta innobar att den darefter foljande texten galler
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Hyresvard
Trygg-Hansa Livfororsakrings AB (Publ) 516401-6536
- ------------------------------------------------------------------------------------------------------------------------------------
Hyresgast Personnl/Orgnr
Spray Network AB 556503-3247
- ------------------------------------------------------------------------------------------------------------------------------------
Lokalens Kommun Kvarter/stadsaga
address
Stockholm Guldfisken 31
- ------------------------------------------------------------------------------------------------------------------------------------
Gata Trappor Lagenhet nr
Nybrogatan 55 Bv 0001
- ------------------------------------------------------------------------------------------------------------------------------------
Lokalens skick
och anvandning
Lokalen med tillhorande utrymmen uthyrs, om inte
annat anges, I beflngtligt skick att anvadas till: Kontor
- ------------------------------------------------------------------------------------------------------------------------------------
Lokalens Butlksarea 1 Kontosarea 1 Lagerarea i Ovriga utrymmen Total:
storick och
omfattning plan m2 plan m2 ca plan m2 ca plan m2 plan m2 ca Se sammanstallning
BV 470 4-7 2.365 -1 546 bilaga 1 3 381
- ------------------------------------------------------------------------------------------------------------------------------------
bilaga
[X] Omfattningen av dc forhyrda lokalema har markerata a bifogada ritning(ar) 3
- ------------------------------------------------------------------------------------------------------------------------------------
parkeringsplats(or) garageplats(er)
for for
tillfart
for bil plats for
for I och plats for skylt
[_] urfastning [_] skylt [_] skap/automat [_] bil(ar) [_] bil(ar) [_] uthus
- ------------------------------------------------------------------------------------------------------------------------------------
Inredning Lokalen uthyrs Vid hyresforhallandels bilaga
--------------------------
upphoorande skall
hyresgasten, om inta
annen overenskommelse
traffats, bortfora
honom tilhorig
utan sarskild for med sarskild for inredning och
verksamheten avsedd verksamheten avsedd aterstalla lokalema I
[X] inredning [_] inredning enl bil godtagbart skick
- ------------------------------------------------------------------------------------------------------------------------------------
Kontraktstid Fran och med den Till och med den
1998 08 01 se bilaga 1 2003 09 30
- ------------------------------------------------------------------------------------------------------------------------------------
Uppsagninstid
Fotlangninstid
Uppsagning av delta kontraki 9 manader fore den avtalade hyrestidens utgang i
skall ske skriftligen minst annal fall ar kontraktel forlangt med 3 ar for varje gang
- ------------------------------------------------------------------------------------------------------------------------------------
Hyra Kronor
hyra exki nedan
7.074.400 per ar utgorande [_] total hyra [X] markerade tillagg
- ------------------------------------------------------------------------------------------------------------------------------------
Index- bilaga
klausul
[X] Andring av ovan angiven hyra skeri i enlighet med bifogade indexklausul 1
- ------------------------------------------------------------------------------------------------------------------------------------
Varme och Erforderlig uppvarmning av lokalen Varmvatten tillhandahails
varmvatten ombesorjes av
[_] hyresvarden [_] hyresgasten [X] hela arct [_] inte alls [_]
- ------------------------------------------------------------------------------------------------------------------------------------
Kostnad bilaga
[_] Bransle/Varmetlliagg utgar i enlighet med bifogada klausul
- ------------------------------------------------------------------------------------------------------------------------------------
Va-kost-nad bilaga
[_] Va-tillagg utgar i enlighet med bifogade klausal
- ------------------------------------------------------------------------------------------------------------------------------------
Kyla bilaga
Ventilation
Kostnader for drift av sarskild kyl-och ventilationsanlaggning arsalls i
[_] enlighet med hifogade klausul
- ------------------------------------------------------------------------------------------------------------------------------------
El
[_] ingar I hyran [X] hyresgasten har eget abonnemang se bilaga 1
- ------------------------------------------------------------------------------------------------------------------------------------
Trapp-
stadning
[_] ingar I hyran [_] ombesorjs och bekostes av hyresgasten
- ------------------------------------------------------------------------------------------------------------------------------------
Embalage- ombesorjs och bekostas av hyresgasten galler s.k. affars - och ind. sopor
och sop- (dock aligger del hyresvarden all tillhandahalla sopkarl och erforderligt
hamtning [_] ingar I hyran [X] soputrymme)
- ------------------------------------------------------------------------------------------------------------------------------------
Snorojning
och sandning
[X] ingar I hyran [_] ombesorjs och bekostas av hyresgasten
- ------------------------------------------------------------------------------------------------------------------------------------
Fastighetsekatt bilaga
[_] ingar I [X] ersattning hafor erlaggs enlight sarskild overanskommelse 1
hyran
- ------------------------------------------------------------------------------------------------------------------------------------
Oforut-sedda Skulle efter avtslete tecknande oforutsedda kostnadsokningar uppkomma for fastigheten pa grund av
kostnader ___________________________________________________________________________________________________________________
a) inforanda clier hojning av sarskild for fastigheten gallande skatt, avgift eller palaga varom rlkedag,
regering, kommun eller myndighet kan komma att besluta
b) generella ombyggnadsatgarder eller liknande pa fastigheten som ej enbart avser lokalen och som hyresvarden
alaggs att utfora till foljd av beslut av riksdag, regering, kommun eller myndighet
skall hyresgasteb med vorkan fran intradd kostnadsokning criagga ersattning till hyresvarden for pa lokolon
belopande andel av den totala arliga kostnadsokningen for fastigheten.
Lokalens andel ar 60,20 procent (har andelen ej angivits beraknas den i forhallande till I fastigheten utgaende
hyror vid tiden for kostnadsokningen).
Med skat enligt a) oven avses ej moms och fastighatsskatt i den man ersattning harfor erlaggs i enlighet med
sarsklld overenskommelse ovan.
Ersattningen erlaggs enlight nedanstaende regler om hyrans betalning.
- ------------------------------------------------------------------------------------------------------------------------------------
Mervarde- [X] Fastighetsagaren/hyresvarden ar skattskyldig till moms for uthyrning av lokolon. Hyresgasten
skatt skall utover hyran erlagga vid varje tillfalle gallande moms
(moms)
[_] Om fastighetsagaren/hyresvarden efter beslut av skattemyndigheten blir skattskyldig til morns for uthyrning av
lokalen skall hyresgasten utover hyran erlagga vid varjo tillfalle gallande morns.
Denna som erlaggs samtidigt med hyran beraknas pa angivet hyresbelopp jamte, enligt vid varge tidpunkt
gallande regler for morns pa hyra, pa i forekommande fall enligt hyreskontraktet utgaende tillagg och andra
ersattningar.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Sveriges Fastighetsagareforbunds formular nr 12A upprattat 1991 i samrad med
Sveriges Kopmannaforbund/Lokalhyresgasterna och Foretagens
Riksorganization, Blankettide i Stockholm AB 91.06. Eftertryck forbjudes
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Hyrans Hyran _________ utan anfordran I forskott senast sista vardagen fora varja postgiro nr bankgiro nr
betaining ___________________________________________________________________________________________________________________
[X] [_] 473 33 00-0 5913-5210
- ------------------------------------------------------------------------------------------------------------------------------------
_________ Vid forsenad hyresbetaining skall hyresgasten erlagga dols ranta enligt rantelagen, _____ arsottning for skriftlig
Betainings betainingspominnalse enligt lagen om arsattning for inkassokasinader m m. Ersattning for paminnelse utgar
pominnals mad belopp som vid varje tilfalle galler enligt forordningan om ersattning for inkassokostnader m m.
- ------------------------------------------------------------------------------------------------------------------------------------
Underhall mm [_] Hyresvarden skall uttora och bekosta Dock att hyrasgasten svarar for bilaga
erforderligt underhall av lokalerna
och av honom tillhandahallen inredning
-------------------------------------------------------------------------------------------------------------------
[X] Hyresgasten skall utfora och bekosta Hyresgastens underhallsskydighet omfatter bilaga
erforderligt in re underhall av derutover
ytskikt pa golv, vaggar och tak jamie
av inredning tillhandallen av
hyresvardon.
-------------------------------------------------------------------------------------------------------------------
Hyrasgastan ager inia evhalla nadsattning I hyran for hinder eller men i nyttjanderattan for tid varunder
hyresvarden later verkstalla sedvangligt underhall av fastighetan eler de forhyrda lokalema. Det aligger dck
hyresvarden all i god tid underralla hyresgasten om arbetets art och omfattning samt nar och under vilken tid
arbetet skall utioras. I det fall forhyrningen galler butikslokal/hantverkslokal med verksamhet beroende av
kundtillstromning skall klausulen aga giltighet endast om sarskild overenskommelse harom traffats.
-------------------------------------------------------------------------------------------------------------------
Det aligger att pa aget ansvar ach agen bkokstnad svara for de atgarder, som av
forsokringsbolag eller byggnadsnamnd, miljo - och halsokskyddsnamnd,
brandmyndighet eller annan myndighet kan komma att kravas for lokalens nyttjande
for avsedd anvadning. Hyresgasten skall samrada med hyrasvarden innan atgarder
vidtas.
[_] hyrasvarden [X] hyrasgasten
-------------------------------------------------------------------------------------------------------------------
Om hyresgasten utan erforderligt byggiov vidtar andringar i lokalerna och varden till foljd harav enligt reglerna i
PBL tvingas utgo byggnadsavgift eller tillaggsavgift skall hyreagasten till vardan utgo motsvarando bolopp.
- ------------------------------------------------------------------------------------------------------------------------------------
____________ Hyresgasten ager efter samrad med varden upsatta for verksamhaten sedvanlig skylt, under forutsattning, att
____________ hyresvarden ej har bofogad anledning vagra och att hyresgasten inhamtat artorderliga _______ av berorda
____________ myndighoter. Vid avflyttning aligger det hyresgasten att aterstalla husfasaden i godtagbart skick.
Vid mera omfattande fastighetsunderhall sasom fasadranovering aligger det hyresgasten att pa egen bekostnad och
utan ersattning nedmantera och aler uppmonters skyltar, markiser och antennar. Hyresvarden forbinder sig att inte
uppsatta automater och skyliskap a yttarvaggarna till de av hyresgasten forhyrda lokalerna utan hyresgastens
________________ medger hyresgasten optionsratt att uppsatta automater och skyltskap a _______ vaggar.
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
[_] Hyresvarden [X] Hyresgasten savar for skador pa grund av averkan a ___________, entredorrar och skyltar
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
[_] Hyresgasten ar skyldig att teckna och vidmakthalla glasforskakring betraffande samtliga till lokalerna horande
skyltfonster och entredorrar.
- ------------------------------------------------------------------------------------------------------------------------------------
Las Det allgger
anordningar --------------------------------
att utrusta lokalorna med sadana las - och stoldskyddsanordningar sam kravs for
[_] hyresvarden [X] hyresgasten gillighet av hyresgastens affars - eller foretagsfosakring
- ------------------------------------------------------------------------------------------------------------------------------------
Force majeure Hyresvarden fritager sig fran skyidighet att fullgora sin dol av avtalet och fran skyldighet att erlagga skadestand
om hans ataganden inte alls eller endast till onormalt hog kostnad kan fullgoras pa grund av krig eller upplopp, pa
grund av saden arbetsinstallelse, blockad, elsvada, explosion eller ingrepp av offentlig myndighet som hyresvarden
inte rader over och into hollor kunnat forutse.
- ------------------------------------------------------------------------------------------------------------------------------------
Sakerhot Forutsattning for detta avtals gultighet ar att sakarhet I form av bilaga
- --------------------
[X] bankgaranti [_] borgen [_] [_] l&mnas genast den se bilaga 1
- ------------------------------------------------------------------------------------------------------------------------------------
Sarskilda SARSKILDA BESTAMMELSER bilaga 1
bestammelser TEKNISK BESKRIVNING MED DIMENSIONERANDE FORUTSATTNINGAR 2
RITNINGAR 3
DETTA HYRESKONTR. AR BINDANDE ENDAST EFTER HYRESV. UNDERSKRIFT.
- ------------------------------------------------------------------------------------------------------------------------------------
Underskrift Detta kontrakt, com inte utan sarskilt medgivande far inskrivas, har upprattats I tva likalydnade exemplar, av
vilka partema tagit var sitt. Tidigara avtal mellan partarma avseende danna lokal upphor att galla fr o m detta
avtals ________________.
- ------------------------------------------------------------------------------------------------------------------------------------
Ort/datum Ort/datum
Stockholm den den 30/4 1998 Stockholm den 29/4 - 98
-------------------------------------------------------------------------------------------------------------------
Hyresvard for Hyresgast
Trygg-Hansa Livforsakrings AB (Publ) Spary Network AB
/s/ Andres Rynell /s/ Per Bystedt
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------ -------------------------------------------------------------------------------------------------------------------
- ------------ -------------------------------------------------------------------------------------------------------------------
- --------- Ort/datum Hyresvard Hyrosgast
- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
_____________ Ovanstaend hyreskontrakt overlates _________________
-------------------------------------------------------------------------------------------------------------------
pa
-------------------------------------------------------------------------------------------------------------------
Frantradanda hyresgast _____________ hyresgast Pers nr/org nr
- ------------------------------------------------------------------------------------------------------------------------------------
Ovanstaende Ort/datum Hyresvard
overtatalse
godkannes
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Bilaga 1 1(4)
Hyreskontrakt nr: 01009-0001 024, Nybrogatan 55, Stockholm
Hyresvard: Trygg-Hansa Livforsakrings AB (publ)
Hyresgast: Spray Network AB
S A R S K I L D A B E S T A M M E L S E R
L O K A L E N S U T F O R M N I N G O C H S T A N D A R D
Lokalen med tillhorande utrymmen uthyres, med beaktande av vad som framgar
nedan, i omfattning och skick enligt bilaga 2 och 3.
Lokalen skall fore hyrestidens borjan iordningstallas for hyresgastens
verksamhet i enlighet med vad som foljer av bilaga 2 och 3 till detta avtal.
Hyresvarden bekostar erforderlig hyresgastanpassning enligt till hyreskontraktet
bilagda ritningar och rumsbeskrivning omfattande samtliga byggkostnader och
byggherreomkostnader. Dessa innefattar icke hyresgastens kostnader for
projektledning eller andra arbeten for vilka hyresgasten skall svara.
<TABLE>
<CAPTION>
L O K A L E N S S T O R L E K , O M F A T T N I N G O C H A N V A N D N I N G
<S> <C> <C>
Genom detta hyreskontrakt uthyres:
a) kontor, sammantradesrum etc. plan 7 397 m2 a 2.400:-/m2
b) kontor, sammantradesrum etc. plan 6 633 m2 a 2.300:-/m2
c) kontor, sammantradesrum etc. plan 5 666 m2 a 2.300:-/m2
d) kontor, sammantradesrum etc. plan 4 669 m2 a 2.300:-/m2
e) reception, kontor etc plan B.V. 470 m2 a 2.000:-/m2
f) kok, konferens plan -- 1 546 m2 a 1.200:-/m2
- ----------------------------------------------- --- ---------------------
Summa 381 m2
</TABLE>
T I L L T R A D E S D A G
Hyrestiden raknas fran tilltradesdagen. Tilltradesdagen ar den dag da lokalema
ar tillgangliga for hyresgasten att anvandas i enlighet med detta avtal. Pa
tilltradesdagen skall gemensam syn genomforas av parterna i aktuella lokaler
samt protokoll upprattas och justeras. Hyresgasten forbinder sig att godtaga de
eventuella provisoriska anordningar, injunsteringsarbeten,
malningskompletteringar etc. som anses normala i samband med inflyttningen och
aven sedan lokalen tagits i bruk.
1
<PAGE>
TRYGG HANSA Bilaga 1 2(4)
Tilltradesdagen ar preliminart bestamd till plan 5 till 7 1998 08 01
" " " " " " 4 1998 08 14
" " " " " " B.v. och - 1 1998 08 14
Besked avseende definitiva tilltradesdagar lamnas av hyresvarden senast 1998
04 17.
Hyresgasten ager ratt att Jata sidoentreprenorer eller egen personal utfora
arbeten i lokalen fran 1998 07 01 for att paborja egna installations -- och
inredningsarbeten. Dessa entreprenader forutsatter medegivande och samordning
fran hyresvardens entreprenor.
Hyresgasten ar inforstadd med att avvikelser fran den angivna tilltradesdagen
kan intraffa, vilket ej skall medfora annan pafoljd an att hyresbetalningen kan
komma att andras i tiden.
Besked avseende planlosning i form av ritningsunderlag samt tillhorande teknisk
beskrivning skall vara hyresvarden tillhanda senast 1998 04 09.
I N D E X K L A U S U L
Under hyrestiden skall med hansyn till forandringar i Statistiska Centralbyrans
(SCB) konsumentprisindex totalindex med 1980 som basar, tillagg till hyran
erlaggas enligt nedanstaende grund.
Det i kontraktet angivna hyresbeloppet 7.074.400 kronor ar anpassat till
indextalet for oktober 1997. Detta tal kallas bastal. Skulle indextalet nagon
pafoljande oktobermanad ha forandrats i forhallande till bastalet skall hyRan
andras i forhallande till den procentuella forandringen. Debitering sker fran
och med narmast efterfoljande kvartal. Tillagget avrundas till heltal kronor.
Utgaende hyra skall dock aldrig sattas lagre an det i kontraktet angivna
hyresbeloppet. Indextillagget jamstalls med hyra.
Forsta tillagg debiteras fran och med den 1 januari 1999.
E L T I L L A G G
For elforbrukning skall hyresgasten erlagga ersattning enligt sarskild
debitering och uppsatt elmatare. Ersattningen debiteras efter sjalvkostnad.
Elkostnaden forsta aret skall baseras pa en antagen forbrukning om 135.000
kronor per ar. Ersattningen preliminardebiteras efter tidigare forbrukning.
Ersattningen jamstalls med hyra och debiteras tillsammans med den. Avrakning
sker en gang per ar.
Der aligger hyresgasten att halla sig underattat om sin forbrukning.
2
<PAGE>
TRYGG HANSA Bilaga 1 3 (4)
F A S T I G H E T S S K A T T
Hyresgasten skall utover den i hyreskontraktet angivna hyran under hyrestiden
till hyresvarden erlagga sin del av den statliga fastighetsskatt som vid varje
tillfalle belastar fastigheten och som debiteras hyresvarden. Detta galler aven
annan liknande statlig eller kommunal skatt eller palaga som kan komma att
beslutas under hyrestiden. Lokalens andel av fastighetsskatten ar 60,20%, vid
kontraktstidpunkten motsvarande ca 335 200 kronor per ar. Ersattningen
jamstalls med hyra och debiteras tillsammans med den.
M E R V A R D E S K A T T
Om hyresgasten under hyrestiden upphor att bedriva verksamhet som medfor
skattskyldighet till mervardeskatt (moms) eller hyresgasten i ovrigt vidtar
atgard som medfor att hyresvarden blir aterforingsskyldig for moms skall
hyresgasten ersatta hyresvarden for dennes merkostnader i anledning harav.
Hyresgasten ar skyldig att till hyresvarden lamna aktuellt
momsregistreringsbevis.
S A K E R H E T
Senast vid detta hyreskontrakts tecknande skall hyresgasten till hyresvarden
overlamna en for hyresvarden godtagbar sakerhet i form av bankgaranti till ett
belopp motsvarande 6 manaders hyra.
F O R H A N D S R A T T T I L L Y T T E R L I G A R E F O R H Y R N I N G
For det fall att hyresvarden avser att hyra ut vaningsplan 1 eller 3 (669 m2
vardera) till annan hyresgast skall hyresgasten forst tillfragas om dennes
intresse av att forhyra denna yta. Sadan forfragan fran hyresvarden skall vara
skriftlig och det aligger hyresgasten att inom tva (2) veckor, fran det att
hyresvarden tillskrivit hyresgasten, skiriftligen besvara hyresvardens
forfragan. Besvaras ej hyresvardens forfragan i tid eller om hyresgasten cj
onskar forhyra den aktuella ytan ager hyresvarden ratt att avtala om uthyrning
till annan part. Hyresgasten erhaller 6 manaders hyresfrihet dock langst t o m
1999 02 15 for plan 1 eller 3 med start vid kontraktstidens borjan (1998 08 15)
for det fall att hyresgasten valjer att hyra endera planet.
Hyresvillkor for tillaggsforhyrningar skall forhandlas fran fall till fall.
3
<PAGE>
TRYGG HANSA Bilaga 1 4 (4)
T I L L A G G S H Y R A
Hyresvarden svarar for ombyggnad av de forhydra lokalerna i omfattning enligt
teknisk beskrivning bilaga 2 samt ritningar bilaga 3.
Hyresgasten onskar darutover genomfora en lokalanpassning och en standardhojning
som redovisas i bilaga 2 och 3. Kostnaden harfor har av hyresvarden bedomts
till 2,0 Mkr exklusive moms. Besked avseende definitiv kostnad for
standardhojning lamnas av hyresvarden 1998 04 17.
Hyresvarden upphandlar och genomfor aven denna del av entreprenaden.
Ombyggnadskostnaden omraknad med faktom 0,25 debiteras som tillagg till bashyran
under hyresperioden.
Ort Datum Ort Datum
Stockholm 30/4 98 Stockholm 29/4 98
for for
Trygg-Hansa Spray Netwok AB
Livforsakrings AB (publ)
/s/ Jan Wiksell /s/ P Bystedt
- --------------------------- ------------------------
Hyresvard Hyresgast
Anders Rynell P Bystedt
- --------------------------- ------------------------
Namnfortydligande Namnfortydligande
4
<PAGE>
TRYGG-HANSA LEASE CONTRACT Page 1(2)
FOR PREMISES No. 01009 0001 024
The undersigned have on this day agreed to the following lease terms: A x in a
box means that the text immediately following shall apply
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Lessor Tygg-Hansa Livsforsakrings AB (Publ) 516401-6536
- ------------------------------------------------------------------------------------------------------------------------------------
Lessee Civil reg./Org. no.
Spray Network AB
- ------------------------------------------------------------------------------------------------------------------------------------
Address of premises Municipality Block
Stockholm Guldfisken 31
--------------------------------------------------------------------------------------------------------
Street address Floor Suite no.
Nybrogatan 55 Ground Floor 0001
- ------------------------------------------------------------------------------------------------------------------------------------
Conditions and use of Unless otherwise stated, the premises with appurtenant spaces are let in their present condition for
premises use as: Offices
- ------------------------------------------------------------------------------------------------------------------------------------
Size and extent of Retail space Office space on Floor 4-7 Storage space Other space on Total: See
premises on floor floor approx. 2,365 m2 on floor m2 floor-1 compilation
m2 Basement approx. Approx. 546 m2 Appendix 1
470 m2 3,381
--------------------------------------------------------------------------------------------------------
X The locations and extent of the premises are indicated in the appended drawing(s). Appendix 3
--------------------------------------------------------------------------------------------------------
Vehicle access Place for sign Place for display Parking space Garage space Outbuilding
for leading case/automatic for ...... for .......
and dispensers car(s) car(s)
unloading
- ------------------------------------------------------------------------------------------------------------------------------------
Furnishing The premises are let On expiry of this Lease and any previous
X without special fittings and fixtures intended agreement concluded between the Lessee and the
for the Lessee's Business Lessor regarding these premises, the Lessee
shall, unless otherwise agreed, remove all
furnishing belonging to him and restore the
premises to an acceptable condition.
Appendix ....
- ------------------------------------------------------------------------------------------------------------------------------------
Term of lease From and including To and including
--------------------------------------------------------------------------------------------------------
01.08.198 30.09.1003
- ------------------------------------------------------------------------------------------------------------------------------------
Notice or termination Notice of termination of this contract shall be given in writing at least 9 months prior to the
Prolongation expiration date agreed upon.
The Lease shall otherwise be automatically prolonged by a term of 3 years each time.
- ------------------------------------------------------------------------------------------------------------------------------------
Rent SEK 7,074,400 per year constituting total rent X rent exclusive of surcharges marked below.
- ------------------------------------------------------------------------------------------------------------------------------------
Index Clause X The rent specified above shall be adjusted in accordance with the index clause appended. Appendix 1
- ------------------------------------------------------------------------------------------------------------------------------------
Heating and hot water The heating shall be arranged as necessary by Hot water shall be provided
X the Lessor the Lessee X throughout the year shall not be provided
- ------------------------------------------------------------------------------------------------------------------------------------
Charges A surcharge for fuel/heating shall be paid as per the clause appended hereto. Appendix
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewage Charges A surcharge for water/sewage shall be paid as per the clause appended hereto. Appendix
- ------------------------------------------------------------------------------------------------------------------------------------
Cooling and Ventilation A surcharge for the operation of special cooling and ventilation equipment shall be paid as per the
clause appended
hereto. Appendix
- ------------------------------------------------------------------------------------------------------------------------------------
Electricity Included in the rent X To be arranged and paid for by the Lessee See appendix 1
- ------------------------------------------------------------------------------------------------------------------------------------
Cleaning of Stairway Included in the rent X To be arranged and paid for by the Lessee
- ------------------------------------------------------------------------------------------------------------------------------------
Refuse and Waste Removal Included in the rent X To be arranged and paid for by the Lessee (the Lessor shall, however,
provide waste receptacles and requisite space for the collection of
refuse and waste) Applies for so-called commercial and industrial waste
- ------------------------------------------------------------------------------------------------------------------------------------
Snow Clearance and Sanding Included in the rent X To be arranged and paid for by the Lessee
- ------------------------------------------------------------------------------------------------------------------------------------
Property tax Included in the rent X compensation to be paid under a separate agreement. Appendix 1
- ------------------------------------------------------------------------------------------------------------------------------------
Unforeseen Costs If, after the lease has been signed, the property is affected by unforeseen costs as a result of
a) the introduction of, or an increase in, special taxes, fees or surcharges applicable to the property
through a decision of Parliament, the Government, the municipal authority or other authority.
b) general conversion work or other measures affecting the property and not only the premises in
questions and which the Lessor is obliged to carry out following a decision of Parliament, the
government, the municipal authority or other authority
the Lessee shall compensate the Lessor in an amount corresponding to the premises' share of the annual
cost increase affecting the property starting at the time of the cost increase in questions.
The premises' share is 60.20 percent (if the share is not specified, it shall be calculated as a
proportion of the rents charged on the property at the time of the cost increase).
Reference to tax in a) above does not include VAT nor does it include property tax if compensation for
this tax is paid under separate agreement stipulated above.
Compensation is paid in accordance with the rules for payment of rent as set out below.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Valued-added Tax (VAT) X The property-owner/Lessor is liable to VAT for letting the premises. In addition to the rent the
Lessee shall on each due date pay the VAT at the rate then applicable.
If the property-owner/Lessor is found by the tax authorities to be liable to VAT for the letting of the
premises, the Lessee shall, in addition to the rent, pay the VAT at the rate then applicable.
- ------------------------------------------------------------------------------------------------------------------------------------
Payment of rent Rent shall be paid in advance, without prior reminder, no and shall be paid into postal giro
later than the last weekday before the beginning of each account no. bank giro account no.
calendar quarter calendar month.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest, Reminders In the case of late rental payment, the Lessee shall pay the interest due under The Interest Act, as
well as compensation for written reminders as set out in the Act concerning Remuneration for Debt
Recovery Costs, etc. Compensation for reminders shall be paid in the amount then applicable under The
Ordinance concerning Remuneration for Debt Recovery Costs, etc.
- ------------------------------------------------------------------------------------------------------------------------------------
Maintenance, etc The Lessor shall carry out at his expense any necessary The Lessee shall, however, be
maintenance of the premises and of fittings and fixtures responsible for: Appendix
provided by him.
--------------------------------------------------------------------------------------------------------
The Lessee shall carry out at his expense any necessary The Lessee shall also be responsible
maintenance of the interior floor, wall and ceiling surfaces for the following maintenance:
and of the fittings and fixtures provided by the Lessor. Appendix
--------------------------------------------------------------------------------------------------------
See separate Appendix for the details of the allocation of Appendix
responsibility for maintenance.
--------------------------------------------------------------------------------------------------------
The Lessee shall not be entitled to a reduction in rent for any obstruction to his use and enjoinment
of the premises for the period during which the Lessor carries out customary forms of maintenance on
the property or the premises hereby rented. The Lessor shall, however, notify the Lessee in good time
about the type and extent of the work as well as of the period during which such work is to be carried
out.
When the Lease is for a ship or handicraft business that is dependent on a flow of customers, this
clause shall apply only if a separate agreement to that effect has been concluded.
--------------------------------------------------------------------------------------------------------
It shall be the responsibility of the Lessor the Lessee at his own risk and at his own expense,
to take any measures as may be required
by an insurance company, a municipal
building committee, a municipal
environment protection and public health
committee, a fire-fighting authority or
any other authority for the premises to
be used as intended. The Lessee shall
consult with the Lessor before such
measures are taken.
--------------------------------------------------------------------------------------------------------
If the Lessee makes any changes to the premises without required building permit, as a consequence of
which the Lessor must pay a building fee or supplementary charge under the provisions of the Planning
and Building Act, the Lessee shall pay the Lessor a corresponding amount in compensation.
- ------------------------------------------------------------------------------------------------------------------------------------
Signs, Awnings, Windows, The Lessee shall be entitled, having consulted the Lessor, to put up signs customary for the business
Doors, etc. in question provided he has obtained any permits as may be required by the appropriate authorities and
the Lessor has no reasonable grounds for refusal.
Upon vacating the premises, the Lessee shall undertake to restore the facade of the building to an
acceptable condition. Should more extensive maintenance of the property be required, e.g. renovation of
the facade, the Lessee shall at his own expense and without compensation take down and replace signs,
awnings and aerials.
The Lessor undertakes not to put up automatic dispensers or display cases on the exterior walls of the
premises rented by the Lessee without the permission of the Lessee and hereby grants the Lessee the
option of himself installing automatic dispensers and display cases on such walls.
--------------------------------------------------------------------------------------------------------
The Lessor The Lessee Shall be responsible for any damage due to negligence or
malicious intent to display windows, entrance doors and
signs.
--------------------------------------------------------------------------------------------------------
The Lessee shall be responsible for arranging and maintaining plate-glass insurance for all display
windows and entrance doors belonging to the premises.
- ------------------------------------------------------------------------------------------------------------------------------------
Locks and Theft-Prevention The Lessor The Lessee Shall fit the premises with such locks and theft-prevention
Devices devices as may be required to ensure the validity of the
Lessee's business insurance.
- ------------------------------------------------------------------------------------------------------------------------------------
Force majeure Circumstances beyond the control of the Lessor and which the Lessor could not have been expected to
foresee, such as war, riot ,strike, blockade, fire, explosion or action by a public authority, shall
release the Lessor from his obligations under this Lease, provided such obligations cannot be met at
all or only at abnormally high cost, and from liability to pay compensation.
- ------------------------------------------------------------------------------------------------------------------------------------
Security This agreement shall only be valid provided security in the form of
A band guarantee a personal guarantee is provided not later than Appendix
- ------------------------------------------------------------------------------------------------------------------------------------
Special provisions Appendix
- ------------------------------------------------------------------------------------------------------------------------------------
Signature This Lease, which may not be registered without special permission, has been drawn up in two identical
copies of which the parties have each taken one copy. Previous agreement between the parties relating
to the premises shall lapse as of the date on which this Lease takes effect.
--------------------------------------------------------------------------------------------------------
Place, date Place, Date
--------------------------------------------------------------------------------------------------------
Lessor Lessee
- ------------------------------------------------------------------------------------------------------------------------------------
Agreement to vacate the As a result of the agreement to vacate the premises reached on this day, the above Lease is terminated
premises as of , on which day the Lessee undertakes to vacate the premises.
--------------------------------------------------------------------------------------------------------
Place, date Lessor Lessee
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Transfer The above Lease is transferred as of
to
- ------------------------------------------------------------------------------------------------------------------------------------
Vacating lessee New Lessee Civil reg. no./Org. no
- ------------------------------------------------------------------------------------------------------------------------------------
The above transfer is Place, date Lessor
approved
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TRYGG-HANSA Appendix 1 1(4)
LEASE CONTRACT NO.: 01009-0001 024, Nybrogatan 55, Stockholm
LESSOR: Trygg-Hansa Livsforsakrings AB (publ)
LESSEE: Spray Network AB
SPECIAL PROVISIONS
DESIGN AND STANDARD OF THE PREMISES
The premises with appurtenant areas shall be leased observing what is stated
below to an extent an in a condition according to Appendix 2 and 3.
Before the commencement of the lease period, the premises shall be put in order
for the lessee's activity in accordance with what follows from Appendix 2 and 3
to this agreement.
The lessor shall pay for the necessary lessee's adjustment according to drawings
enclosed with the lease contract and a room description covering all building
costs and owner's costs. These do not cover the lessee's costs for project
management or other works for which the lessee shall be responsible.
SIZE, SCOPE AND USE OF THE PREMISES
The following shall be leased through this contract:
a) offices, conference room, etc, floor 7 397 m2 @ SEK 2,400.00/m2
b) offices, conference room, etc, floor 6 633 m2 @ SEK 2,300.00/m2
c) offices, conference room, etc, floor 5 663 m2 @ SEK 2,300.00/m2
d) offices, conference room, etc, floor 4 669 m2 @ SEK 2,300.00/m2
e) reception, offices, etc., ground floor 470 m2 @ SEK 2,200.00/m2
f) kitchen, conference room, floor - 1 546 m2 @ SEK 1,200.00/m2
- -----------------------------------------------------------------------------
Total 3,381 m2
TAKE-OVERDATE
The lease period is counted from the take-over date. The take-over date is the
day when the premises are available for the lessee to be used in accordance with
this agreement. On the take-over date, a joint inspection shall be carried out
by the parties in the relevant premises and a record shall be drawn up and
approved. The lessee undertake to accept any temporary arrangements, adjustment
works, supplementary painting, etc., which are considered normal in connection
with occupation and also when the premises are taken into use.
<PAGE>
TRYGG-HANSA Appendix 1 2(4)
The take-over date is preliminarily determined for floor 5 to 7 01.08.1998
" " " " 4 14.08.1998
" " " ground floor and -1 28.08.1998
NOTIFICATION REGARDING DEFINITIVE TAKE-OVER DATES SHALL BE GIVEN BY THE LESSOR
BY 17.04.1998 AT THE LATEST.
The lessee has a right to allow joint contractors or his own personnel to carry
out works in the premises from 01.07.1998 in order to start his own installation
and fitting works. These contracts require the consent of and co-ordination by
the lessor's contractor.
The lessee accepts that deviations from the specified take-over date may occur
which shall not entail any consequence other than that the rent payment may be
changed in time.
Notification regarding a floor solution in the form of drawings and an
associated technical description shall be made available to the lessor by
09.04.1998 at the latest.
INDEX CLAUSE
During the lease period, with regard to changes in Statistics Sweden's (SCB)
consumer price total index, using 1980 as a base year, a supplement to the rent
shall be paid according to the grounds below.
The rent sum of SEK 7,074,400 specified in the contract is adjusted to the index
figure for October 1997. This is called a basic figure. Should the index figure
in any subsequent month of October have changed in relation to the basic figure,
the rent shall be changed in relation to the percentage change. Charging shall
occur from and including the next subsequent quarter. The supplement shall be
rounded to whole Swedish kronor.
However, the rent paid shall never be set lower than the rent sum specified in
the contract. The index supplement shall be on a par with the rent.
The first supplement shall be charged from and including I January 1999.
ELECTRICITY SUPPLEMENT
The lessee shall pay compensation for electricity consumption according to
special charging and an installed electricity meter. The compensation shall be
paid according to the cost price. In the first year, the electricity cost shall
be based on an assumed consumption of SEK 135,000 per annum. The compensation
shall preliminarily be charged according to previous consumption. The
compensation is on a par with the rent and shall be charged together with the
same. Settlement shall be performed once annually.
It is incumbent upon the lessee to keep himself informed of his consumption.
<PAGE>
TRYGG-HANSA Appendix 1 3(4)
PROPERTY TAX
During the lease period, the lessee shall over and above the rent specified in
the lease contract pay to the lessor his share of the national property tax
charged on the property at any time and which is charged to the lessor. This
also applies for another equivalent national or municipal tax or surcharge which
may be determined during the lease period. The premises' share of the property
tax I 60.20% at the time of the contract corresponding to approx. SEK 335,200
per annum. The compensation is on a par with the rent and shall be charged
together with the same.
VALUE-ADDED TAX
If during the lease period the lessee ceases to operate activity which entails a
liability to pay value-added tax (VAT) or the lessee otherwise adopts a measure
which means that the lessor becomes liable to reverse VAT, the lessee shall
compensate the lessor for his additional costs in connection with the same.
SECURITY
Upon signature of this lease contract at the latest, the lessee shall provide
the lessor with a security which is acceptable to the lessor in the form of a
bank guarantee for a sum corresponding to 6 months' rent.
PRIOR RIGHT TO FURTHER LEASING
In the event that the lessor intends to lease floor 1 or 3 (669 m2 each) to
another lessee, the lessee shall first be asked whether he is interested in
leasing this area. Such an enquiry from the lessor shall be made in writing and
it is incumbent upon the lessee within two (2) weeks after the lessor has
written to the lessee to answer the lessor's enquiry in writing. If the lessor's
enquiry is not answered in time or if the lessee does not wish to lease the
relevant area, the lessor has a right to agree on leasing to another party. The
lessee shall receive 6 months' exemption from rent but to and including
15.06.1999 for floor I or 3 starting upon the commencement of the contract
period (15.08.1998) in the event that the lessee chooses to lease either floor.
The lease terms and conditions for additional leases shall be negotiated from
case to case.
<PAGE>
TRYGG-HANSA Appendix 1 4(4)
ADDITIONAL RENT
The lessor is responsible for conversion of the premises to an extent according
to a technical description, Appendix 2, and drawings, Appendix 3.
The lessor also wishes to implement an adjustment of the premises and a raising
of standards as reported in Appendix 2 and 3. The cost for the same has been
estimated by the lessor at SEK 2.0 million excluding VAT. Notification regarding
a definitive cost for the raising of standard shall be provided by the lessor by
17.04.1998 at the latest.
The lessor shall also procure and implement this part of the contract. The
conversion cost calculated using the factor 0.25 shall be charged as a
supplement to the basic rent during the lease period.
<TABLE>
<CAPTION>
Place Date Place Date
<S> <C> <C> <C>
Stockholm 30.04.98 Stockholm 29.04.98
for for
Trygg-Hansa Livsforsakrings AB (Publ) Spray Network AB
[Signature] [Signature] [Signature]
Lessee Lessee
ANDERS RYNELL Jan Wiksell P. BYSTEDT
Name in print Name in print
</TABLE>
<PAGE>
EXHIBIT 10.21
HYRESKONTRAKT NR: 01009-0001 024, Nybrogatan 55, Stockholm
HYRESVARD: Trygg-Hansa Livforsakrings AB (publ)
HYRESGAST: Spray Network AB
T I L L A G G N R 1.
T I L L A G G S H Y R A
1. Utover vad som anges i huvudavtalet har kostnaden for den av hyresgasten
onskade lokalanpassningen bestamts till 2,350 Mkr exklusive moms for de
enligt bilaga 2 och 3 angivna atgarderna. Utover ovan angivna belopp, 2,350
Mkr exklusive moms, har hyresgasten mojlighet att finansiera ytterligare
anpassningsatgarder som ett tillagg till hyran upp till en total kostnad om
maximalt 3,0 Mkr exklusive moms ( 2,350 + 0,650 mkr. ). Omrakning till
hyreskostand sker enligt huvudavtalet, bilaga 1.
En eventuell kostnad over 3 Mkr exklusive moms bekostas genom
kontantreglering och beloppet skall erlaggas till hyresvarden senast den
dag da motsvarande belopp av hyresvarden skall utges till entreprenoren.
T I L L T R A D E S D A G
2. De i huvudkontraktet angivna tilltradesdagarna:
<TABLE>
<CAPTION>
<S> <C>
plan 5 till 7 1998 08 08
plan 4 1998 08 20
plan bv. och 1 1998 08 29
</TABLE>
galler for hyresgastens tilltrade till de olika ytorna.
<PAGE>
S A K E R H E T
3. Hyresgasten forbinder sig att att senast 1998 07 01 overlamna en
bankgaranti utfardad i Sverige verksam bank till ett belopp av
(3 500 000 kr ).
For perioden fran detta avtals undertecknande t o m den tidpunkt da
bankgaranti overlamnas skall sakerheten utgoras av en borgensforbindelse
till samma belopp ( 3 500 000 kr ), bilaga 4.
Detta tillagg har upprattats i tvalikalydande exemplar av vilka hyresvard och
hyresgast tagit var sitt.
Ort datum Ort datum
Stockholm 30/4-98 Stockholm 29/4-98
for for
Trygg-Hansa Livforsakrings AB (publ) Spray Network AB
/s/ Anders Rynell /s/ Per Bystedt
- ------------------------------------ ----------------------------------
Hyresvard Hyresgast
Jan Wiksell
ANDERS RYNELL P BYSTEDT
- ------------------------------------ ----------------------------------
Namnfortydligande Namnfortydligande
<PAGE>
TRYGG HANSA
LEASE CONTRACT NO.: 01009-0001 024, Nybrogatan 55, Stockholm
LESSOR: Trygg-Hansa Livsforsakrings AB (publ)
LESSEE: Spray Network AB
SUPPLEMENT NO. 1.
ADDITIONAL RENT
1. Over and above what is stated in the Main Agreement, the cost for the
adjustment to the premises requested by the lessee has been determined at
MSEK 2,350 excluding VAT for the measures specified according to Appendix 2
and 3. Over and above the amount specified above, MSEK 2,350 excluding VAT,
the lessee has a possibility for financing further adjustments as an
addition to the rent up to a total cost of a maximum of MSEK 3.0 excluding
VAT (2,350 + 0.652). Recalculation of the rent cost shall be performed
according to the Main Agreement, Appendix 1.
Any cost above MSEK 3 excluding VAT shall be paid through a cash adjustment
and the sum shall be paid to the lessor at the latest on the day when a
corresponding sum shall be paid by the lessor to the contractor.
TAKE-OVER DATE
2. The take-over days specified in the Main Contract:
floor 5 to 7 8.08.1998
floor 4 0.08.1998
ground floor and -1 29.08.1998
apply for the lessee's take-over of the different areas.
<PAGE>
TRYGG HANSA
SECURITY
3. The lessee undertakes by 01.07.1998 to provide a bank guarantee issued in a
bank active in Sweden for a sum of (SEK 3,500,000).
For the period from the signature of this agreement until the time when a
bank guarantee is provided, the security shall comprise a personal
guarantee for the same amount (SEK 3,500,000), Appendix 4.
This supplement has been drawn up in two identical copies of which the lessor
and lessee have each taken their own.
<TABLE>
<CAPTION>
Place Date Place Date
<S> <C> <C> <C>
Stockholm 30.04.98 Stockholm 29.04.98
for for
Trygg-Hansa Livsforsakrings AB (publ) Spray Network AB
[Signature] [Signature] [Signature]
Lessor Lessee
ANDERS RYNELL Jan Wiksell P. BYSTEDT
Name in print Name in print
</TABLE>
<PAGE>
EXHIBIT 10.22
Hyreskontrakt nr: 01009-0001 024, Nybrogatan 55, Stockholm
Hyresvard: Trygg-Hansa Livforsakrings AB (publ)
Hyresgast: Spray Network AB
T I L L A G G N R 2 T I L L K O N T R A K T 0 1 0 0 9-0 0 0 1 0 2 4 ,
N Y B R O G A T A N 5 5 , S T O C K H O L M
1. UTOKAD YTA, HYRA
Den av hyresgasten forhyrda ytan utokas enligt:
a) kontor, sammantradesrum etc. plan 3 669 m2 a 2.300:-/m2
b) kontor, sammantradesrum etc. plan 2 669 m2 a 2.400:-/m2
c) kontor, sammantradesrum etc. plan 1 669 m2 a 2.400:-/m2
varvid bashyran okas med 4.749.900:-kr/ar till totalt 11.824.300:- kr/ar.
2. TILLTRADESDAG
Tillradesdagen ar preliminart bestamd till plan 3 1998 10 21
" " " " " " 1 1998 10 03
" " " " " " 2 1998 10 14
3. FASTIGHETSSKATT
I och med den utokade forhyrningen okas lokalens andel av
fastighestsskatten till 95,99%.
1
<PAGE>
4. TILLAGGSHYRA
Hyresvarden svarar for ombyggnad av lokalerna i omfattning enligt teknisk
beskrivning bilaga 2, och ritningar bilaga 3.
Hyresgasten onskar darutover genomfora en lokalanpassning och en
standardhojning som redovisas i bilaga 2a och 3a avseende plan 1-3.
Kostnaden harfor har av hyresvarden bedomts till 1,8 mkr exklusive moms.
Besked avseende definitiv kostnad for standardhojning lamnas av
hyresvarden senast 1998 07 10.
Utover ovan angivna kostnad ( 1,8 Mkr ) har hyresgasten mojlighet att
finansiera ytterligare anpassningsatgarder som ett tillagg till hyran,
avseende plan 1-3, upp till en total kostnad om maximalt 2,5 Mkr exklusive
moms ( 1,8 + 0,7 Mkkr ). Totalt innebar detta, jamfor tillagg nr 1, for
plan <T043> 1 till 7 en kostnad av 5,5 Mkr exklusive moms. Hyresvarden
upphandlar och genomfor aven denna del av entreprenaden.
Ombyggnadskostnaden omraknad med faktorn 0,25 debiteras som tillagg till
bashyran under hyresperioden. Eventuell kostnad over 5,5 Mkr exklusive
moms bekostas genom kontant reglering och beloppet skall erlaggas till
hyresvarden senast den dag da motsvarande belopp av hyresvarden skall
utges till entreprenoren.
5. HYRESREDUCERING
For plan 3 utgar hyra fran och med 1999 02 15. Under perioden 1998 10 01
<T043> 2000 09 30 reduceras hyran for plan 1-2 med 321.000:-kr/ar.
Hyresreduceringen utgar ej om hyresgasten nyttjar plan 1-2 for egen
verksamhet dvs. ytorna ej hyrs ut i andra hand.
6. ANDRAHANDSUTHYRNING
Hyresgasten ager ratt att hyra ut ytorna pa plan 1 och 2 i anda hand
dock endast till andrahandshyresgast som bedriver momspliktig verksamhet.
2
<PAGE>
7. SAKERHET
Den enligt huvudkontraktet begarda bankgarantin ( 3.500.000 kr ) utokas
till totalt 5.000.000 kr och overlamnas till hyresvarden senast 1998 07 17.
Bankgarantin om 5.000.000 kr minskas fran och med 1999 09 30 till 3.000.000
kr samt upphor helt fran och med 2000 09 30 forutsatt att hyresgasten under
denna tids- period fullfoljt samtliga forpliktelser enligt detta
hyreskontrakt samt att hyresgasten av hyresvarden kan bedomas vara sa
kreditvardig att behov av kompletterande sakerhet ej foreligger.
Oaktat vad som ovan angivits skall hyresvardens krav pa bankgaranti upphora
fran den dag hyresgasten noterats pa Stockholms Fondbors.
I ovrigt galler huvudavtalet pa oforandrade villkor.
Detta tillagg ar upprattat I tva likalydande exemplar av vilka hyresvard
och hyresgast tagit var sitt.
Ort Datum Ort Datum
Stockholm 1998-08-18 Stockholm 980725
for for
Trygg-Hansa Livforsakrings AB (publ) Spray Network AB
/S/ ANDREW RYNELL /S/ JONAS SVENSON
- --------------------------------- ------------------------------
Hyresvard Hyresgast
ANDERS RYNELL JONAS SVENSON
- --------------------------------- ------------------------------
Namnfortydligande Namnfortydligande
/S/ PER BYSTEDT
------------------------------
PER BYSTEDT
3
<PAGE>
t y p r u m s b e s k r i v n i n g
Kontorshus Nybrogatan for SPRAY plan 1 - plan 3 98 06 24
koncept ab sibyllegatan 53 114 43 stockholm
4
<PAGE>
<TABLE>
G E N E R E L L T
<S> <C>
Forsorjningssystem
Ventilation Enligt rambeskrivning.
Varme Enligt rambeskrivning.
Vatten, avlopp Se rumsbeskrivning i ramhandling.
Kyla Oppen installation med raster som skydd for kyllameller.
Styr och Enligt rambeskrivning.
overvakning
El, Tele, data Sex eluttag per arbetsplats,
kanalisation till tele och data forberds. I ovrigt
Ingen avvikelse.
Kanalisation Kommer att ske centriskt i kontorsrumsfil pa tat
lackad kabelranna vid tak. Fran denna pendlas
kanalisation for el, tele och data ner till
bordsniva dar uttag till el Installeras. Se
undertak belysningsritningar.
Sakerhet Klass-2 skalskydd erfordras.
Brandlarm Enligt rambeskrivning.
Markiser Eldrivna mot gard, grupperade i sa stora grupper
som mojlig, styrda per halvt vaningsplan.
Belysning Centralbrytare for all belysning pa vaningsplanen
vid trapphuset (Dataeluttag skall inte ga att
stanga av) All eldragning gors dold, eller pa skena
tak. All glodljusbelysning pa dimmer.
</TABLE>
5
<PAGE>
<TABLE>
O V R I G T G E N E R E L L T
<S> <C>
Vaggar Slata, ej glasfibervav. Vaggar spacklas, slipas,
grundmalas och malas tva ganger i kulor S 0500-N,
glans 7.
Socket Teaksockel, hojd 70mm spikas ej synligt.
Tak Tak lagas, grundmalas och malas tva ganger i
kritvit takfarg, glans 3.
Oppningar Foder vid dorrar se dorruppstallning ritning
A36.5:31. Oppningar utan dorrar utfores som
muroppningar utan foder. Skos med Inspacklat
homstal.
</TABLE>
6
<PAGE>
<TABLE>
T Y P R U M
<S> <C>
Forrad slutna.
Golv Beige linoleum Walton nr 162.
Sockel Malad standardsockel.
Vaggar Se generell beskrivning.
Tak Se generell beskrivning.
Belysning 1 st glodljus i glasglober.
Vent -
Forrad oppna, kontorsplan (tidigare toalett)
Golv Beige linoleum Walton nr 162.
Sockel Se generell beskrivning.
Vaggar Se generell beskrivning.
Tak Se generell beskrivning.
Belysning 2 st glodljus i glasglober.
Vent -
Oppet kontorslandskap
Golv Heltackningsmatta av typ Les Tisses, louis de poortere. Se golvritning.
Sockel Se generell beskrivning.
Vaggar Se generell beskrivning.
Tak Se generell beskrivning.
Kanalisation Se generell beskrivning.
Belysning Anslutes pa skena vid tat elstege. Se undertak/belysningsplaner.
Ventilation Se generell beskrivning.
Kyla Se generell beskrivning.
Ljudkrav Luft-, ljudsisolering mot omgivande rum, tat vagg
35 dB. Ljudniva fasta installationer 45 dB(A).
Ovrigt
</TABLE>
7
<PAGE>
<TABLE>
Slutna kontorsrum
<S> <C>
Golv Heltackningsmatta av typ Les Tisses, louis de poortere. Se golvritning.
Sockel Se generell beskrivning.
Vaggar Vid glasvaggar se ritning A36.2:11.
Tak Se generell beskrivning.
Kanalisation Se generell beskrivning.
Belysning Anslutes pa skena vid tat elstege. Se undertak/belysningsplaner.
Vent Se generell beskrivning.
Kyla Se generell beskrivning.
Ljudkrav Luft-, ljudsisolering mot omgivande rum, tat vagg
35 dB. Ljudniva fasta installationer 45 dB(A).
Ovrigt
Konferensrum pa kontorsplan
Golv Heltackande textilmatta. Se golvritning.
Sockel Se generell beskrivning.
Vaggar Se generell beskrivning. Vid glasvaggar se ritning A36.2:11.
Sockel Se generell beskrivning.
Tak Se generell beskrivning.
Kanalisation Dras i den tata gipsvaggen. Bestyckning se generellt.
Belysning Lag belysning centriskt over bord och skena
bestyckad med tre Erco spotlights. Se
undertak/belysningsplaner.
Ventilation Se generell beskrivning.
Kyla Se generell beskrivning.
Ovrigt
</TABLE>
8
<PAGE>
<TABLE>
Mote pa kontorsplan
<S> <C>
Golv Heltackande textilmatta. Se golvritning.
Sockel Se generell beskrivning
Vaggar Se generell beskrivning. Vid glasvaggar se ritning A36.2:11.
Sockel Se generell beskrivning
Tak Se generell beskrivning.
Kanalisation Dras i den tata gipsvaggen. Bestyckning se generellt.
Belysning Golvplacerad belysning. Se undertak/belysningsplaner.
Ventilation Se generell beskrivning.
Kyla Ej kylbaffel, i ovrigt se generell beskrivning.
Ovrigt
Pentry
Golv Olandskalksten (rodbrun) i fallande langder, bredd minimum 200mm.
Sockel Olandskalksten 100mm hog.
Vaggar Se generell beskrivning.
Sockel Se generall beskrivning
Tak Se generell beskrivning.
Belysning Se undertak/belysningsplaner och pentry uppstallning A36.2:15.
Ventilation Se generell beskrivning.
Kanalisation Se generell beskrivning.
Pentry Se pentry uppstallning A36.2:15.
Ovrigt Timer till kokplattor och kaffebryggare.
Relax
Golv Heltackningsmatta av typ Les Tisses, louis de poortere, uford i syntetfiber.
Sockel Se generell beskrivning.
Vaggar Se generell beskrivning.
Tak Se generell beskrivning.
Belysning Lag belynsning golvplacerad. Se undertak/belysningsplaner.
Ventilation Se generell beskrivning.
Kanalisation Dras dolt i upphojt golv. I ovrigt se generellt.
</TABLE>
9
<PAGE>
<TABLE>
Korridorer
<S> <C>
Golv Heltackningsmatta av typ Les Tisses, louis de poortere. Se golvritning.
Sockel Se generell beskrivning.
Vaggar Se generell beskrivning.
Tak Se generell beskrivning.
Belysning Se undertak/belysningsplaner.
Ovrigt Staduttag
Toaletter kontorsplan
Golv Befintligt.
Sockel Befintligt.
Vaggar Befintligt.
Tak Tak lagas, grundmalas och malas tva ganger i kulor enligt senare besked.
Belysning Befintligt.
Vent Se generell beskrivning.
Ovrigt Befintligt.
</TABLE>
10
<PAGE>
TRYGG-HANSA
LEASE CONTRACT NO.: 01009-0001 024, Nybrogatan 55,
Stockholm
LESSOR: Trygg-Hansa Livforsakrings AB (publ)
LESSEE: Spray Network AB
SUPPLEMENT NO. 2 TO CONTRACT 01009-0001 024, NYBROGATAN 55, STOCKHOLM
1. INCREASED AREA, RENT
The area leased by the lessee is increased as follows:
a) offices, conference room, etc, floor 3 668 m2 @ SEK 2,300.00/m2
b) offices, conference room, etc, floor 2 668 m2 @ SEK 2,400.00/m2
c) offices, conference room, etc, floor 1 668 m2 @ SEK 2,400.00/m2
whereupon the basic rent is increased by SEK 4,749,900.00/year to a total of
SEK 11,824,300.00/year.
2. TAKE-OVER DATE
The take-over date is preliminarily 21.10.1998
determined for floor 3
The take-over date is preliminarily 3.10.1998
determined for floor 2 [Initials]
The take-over date is preliminarily 14.10.1998
determined for floor 1 [Initials]
3. PROPERTY TAX
With the increased rental, the premises' share of the property tax
is increased to 95.99%.
4. ADDITIONAL RENT
The lessor is responsible for conversion of the premises to an
extent according to a technical description, Appendix 2, and
drawings, Appendix 3.
The lessor also wishes to implement an adjustment of the premises
and a raising of standards reported in Appendix 2a and 3a referring
to floor 1-3. The cost for the same has been estimated by the
lessor at SEK 1.8 million excluding VAT. Notification regarding a
definitive cost for the raising of standard shall be provided by
the lessor by 10.07.1998 at the latest.
<PAGE>
TRYGG-HANSA
Over and above the stated cost (SEK 1.8 million), the lessee has
a possibility for financing further adjustment measures as an
addition to the rent, referring to floor 1-3, up to a total cost
of a maximum of SEK 2.5 million excluding VAT (SEK 1.8 + 0.7
million). This entails a total cost, cf. supplement no. 1, for
floor 1 - 7 of SEK 5.5 million excluding VAT. The conversion cost
calculated using the factor 0.25 shall be charged as a supplement
to the basic rent during the lease period. Any cost above SEK 5.5
million excluding VAT shall be paid through settlement in cash
and the sum shall be paid to the lessor at the latest on the day
when the lessor shall pay a corresponding amount to the
contractor.
5. RENT REDUCTION
Rent shall be paid for floor 3 from 15.02.1999 inclusive.
During the period 01.10.1998 - 30.09.2000, the rent shall be
reduced for floor 1-2 by SEK 321,000.00/year. The rent reduction
shall not be paid if the lessee uses floor 1-2 for his own
activity, i.e. the areas are not sub-leased.
6. SUB-LEASING
The lessee has a right to sub-lease the areas on floor 1 and 2
but only to a sub-lessee who operates activity liable to VAT.
7. SECURITY
The bank guarantee (SEK 3,500,000) requested according to the
Main Contract shall be increased to a total of SEK 5,000,000 and
transferred to the lessor by 17.07.1998 at the latest.
The bank guarantee for SEK 5,000,000 shall be reduced from
30.09.1999 inclusive to SEK 3,000,000 and shall cease in full
from 30.09.2000 inclusive provided that during this period the
lessee has fulfilled all the obligations according to this lease
contract and that the lessee can be judged by the lessor to be so
credit-worthy that there is no need for supplementary security.
Regardless of what is stated above, the lessor's demand for a
bank guarantee shall cease from the day when the lessee is listed
on the Stockholm Stock Exchange.
The Main Agreement otherwise applies on unchanged terms and
conditions.
This supplement has been drawn up in two identical copies of
which the lessor and lessee have each taken their own.
PLACE DATE PLACE DATE
Stockholm for 18.08.98 Stockholm 27.07.98
Trygg-Hansa Livsforsakrings AB for
(Publ) Spray Network AB
<PAGE>
TRYGG-HANSA
[Signature] [Signature] [Signature]
Lessor Lessee
ANDERS RYNELL JONAS SVENSSON
Name in print Name in print
PER BYSTEDT
<PAGE>
TRYGG-HANSA
APPENDIX 2A
TYPE ROOM DESCRIPTION
office building Nybrogatan for Spray floor 1 - floor 3 24.06.98
koncept ab sibyllegatan 53 114 43 stockholm
<PAGE>
TRYGG-HANSA
GENERAL
SUPPLY SYSTEM
VENTILATION According to a framework description.
HEATING According to a framework description.
WATER AND SEWAGE CHARGES See room description in framework document.
COOLING Open installation with a screen as protection
for cooling lamella.
CONTROL AND MONITORING According to a framework description.
ELECTRICITY, Six electrical outlets per workplace,
channelisation Telecommunications, Data for
telecommunications and data to be prepared.
Otherwise no deviation.
CHANNELISATION Will be executed centrally in an office room
file in a sealed varnished cable duct next to
the ceiling. From this channelisation will be
shuttled for electricity, telecommunications
and data down to desk level where electricity
outlets will be installed. See false ceiling
lighting descriptions.
SAFETY Class-2 shell protection is required.
FIRE ALARM According to a framework description.
AWNINGS Electrically operated towards the courtyard
in as large groups as possible, controlled
per half-floor.
LIGHTING Central switch for all lighting on the floor
next to the stairwell. (It shall not be
possible to switch off data electricity
outlets.)
All electricity cable laying shall be
concealed or in a ceiling strip.
All incandescent lighting shall be on a dimmer
switch.
<PAGE>
OTHER GENERAL
WALLS Smooth, not fibreglass fabric. Walls shall
be filled, ground, undercoated and painted
with two coats in colour S 0500-N, gloss 7.
SKIRTING Teak skirting, height 70 mm, no visible
nails.
CEILINGS Ceilings shall be made, undercoated and
painted with two coats in dead white
ceiling paint, gloss 3.
OPENINGS Lintels for doors, see door arrangement
drawing A36.5:31. Openings without doors
shall be executed as wall openings without
lintels. Edged with filled corner steel.
<PAGE>
TYPE ROOM
STORES, CLOSED
Floor Beige linoleum Walton no. 162.
Skirting Painted standard skirting.
Walls See general description.
Ceilings See general description.
Lighting 1 no. incandescent light in glass globes
Vent. -
STORES, OPEN, OFFICE FLOOR (FORMER TOILET)
Floor Beige linoleum Walton no. 162.
Skirting See general description.
Walls See general description.
Ceilings See general description.
Lighting 2 no. incandescent light in glass globes
Vent. -
OPEN OFFICE LAYOUT
Floor Wall-to-wall carpeting of Les Tisses,
louis de pootere, type. See floor
drawing.
Skirting See general description.
Walls See general description.
Ceilings See general description.
Channelisation See general description.
Lighting To be connected to a strip on a sealed
cable ladder. See false ceiling/lighting
plans.
Ventilation See general description.
Cooling See general description.
Sound requirements Air and sound insulation against
adjacent rooms, sealed wall 35 dB. Sound
level fixed installations 45 dB(A).
Other
<PAGE>
CLOSED OFFICE LAYOUT
Floor Wall-to-wall carpeting of Les Tisses,
louis de pootere, type. See floor
drawing.
Skirting See general description.
Walls For glass walls, see drawing A36.2:11.
Ceilings See general description.
Channelisation See general description.
Lighting To be connected to a strip on a sealed
cable ladder. See false ceiling/lighting
plans.
Ventilation See general description.
Cooling See general description.
Sound requirements Air and sound insulation against
adjacent rooms, sealed wall 35 dB. Sound
level fixed installations 45 dB(A).
Other
CONFERENCE ROOM ON OFFICE FLOOR
Floor Wall-to-wall textile carpeting. See
floor drawing.
Skirting See general description.
Walls See general description. For glass
walls, see drawing A36.2:11.
Skirting See general description.
Ceilings See general description.
Channelisation To be laid in the sealed plasterboard
wall. Fittings, see general.
Lighting Low lighting centrally above table and
strips fitted with three Erco
spotlights. See false ceiling/lighting
plans.
Ventilation See general description.
Cooling See general description.
Other
<PAGE>
MEETING ON OFFICE FLOOR
Floor Wall-to-wall textile carpeting. See
floor drawing.
Skirting See general description.
Walls See general description. For glass
walls, see drawing A36.2:11.
Skirting See general description.
Ceilings See general description.
Channelisation To be laid in the sealed plasterboard
wall. Fittings, see general.
Lighting Floor lighting. See false
ceiling/lighting plans.
Ventilation See general description.
Cooling No cooling baffle, otherwise see general
description.
Other
KITCHENETTE
Floor Oland limestone (red-brown) in
descending lengths, width minimum 200
mm.
Skirting Oland limestone 100 m high.
Walls See general description.
Skirting See general description.
Ceilings See general description.
Lighting See false ceiling/lighting plans and
kitchenette layout A36.2:15.
Ventilation See general description.
Channelisation See general description.
Kitchenette See kitchenette layout A36.2:15.
Other Timer for hotplates and coffee
percolator.
RELAX
Floor Wall-to-wall carpeting of Les Tisses,
louis de pootere, type executed in
synthetic fibre.
Skirting See general description.
Walls See general description.
Ceilings See general description.
<PAGE>
Lighting Low floor lighting. See false
ceiling/lighting plans.
Channelisation To be laid concealed in raised floor.
Otherwise see general.
CORRIDORS
Floor Wall-to-wall carpeting of Les Tisses,
louis de pootere, type. See floor
drawing.
Skirting See general description.
Walls See general description.
Ceilings See general description.
Lighting See false ceiling/lighting plans.
Other Cleaning sockets.
TOILETS OFFICE FLOOR
Floor Existing.
Skirting Existing.
Walls Existing.
Ceiling Ceiling to be made, undercoated and
painted with two coats in a colour
according to later notification.
Lighting Existing.
Vent. See general description.
Other Existing
<PAGE>
EXHIBIT 10.23
TRTGG HANSA
BORGENSFORBINDELSE
for lokal Bilaga nr 4
- --------------------------------------------------------------------------------
Tillnor Hyreskontrakt nr i fastigheten upprattat den
01009 0001 024 Guldfisken 31
- --------------------------------------------------------------------------------
Hyrosvard Trygg-Hansa Livforsokrings AB (Pub1)
- --------------------------------------------------------------------------------
Hyresgast Spray Network AB
- --------------------------------------------------------------------------------
Borgen For hyresgastens fullgorande av skyldigheterna
saval enligt ovan namnda hyresavtal som enligt hyreslagen
(12 kap jordabalken)
avensom
att ersatta varden for
- inkassokostnader
- av domstol utdomda rattegangskostnader
- ranta a samtliga ovan angivna obetalda belopp
samt att ersatta varden for
kostnader uppkomna i anledning av mal som handlagts vid
kronofogdemyndighet enligt lag (1990:746)
om betalningsforelaggande och handrackning
gar undertecknade i borgen en for bada och bada for en
sasom for egen skuld. Denna forbindelse
gakker aven vid forlangning av hyresavtalet.
Borgensforbindelsen for varje borgensman ar maximalt
1.100.000:-kronor
- --------------------------------------------------------------------------------
Underskrift Ort/datum Ort/datum
Stockholm 29/4-98 Stockholm 29/4-98
- --------------------------------------------------------------------------------
Namnteckning Namnteckning
/s/ /s/ Per Bystedt
- --------------------------------------------------------------------------------
Namnfortydligande Namnfortydligande
Lars T Andersson Per Bystedt
- --------------------------------------------------------------------------------
Persnr/org nr Persnr/org nr
61 08 15 2736 65 03 10 1070
- --------------------------------------------------------------------------------
Adress Adress
c/o Vestermark Grev Turegatan 69, 4 tr
Asogatan 161, 4 tr 114 38 Stockholm
116 32 Stockholm
- --------------------------------------------------------------------------------
Upplysningar Borgen ar ett atagande av en eller flera personer att
ansvara for att annan i detta fall hyresgast fullgor sina
forpliktelser.
Den som gar i borgen kallas borgensman.
Att borgen ingas som for egen skuld innebar att
hyresvarden kan krava betalning direkt av borgensmannen
sa snart hyresgasten forsummar sin betalningsskyldighet.
Om tva borgensman svarar en for bada och bada for en for
exempelvis en hyresfordran svarar de solidariskt, dvs
envar av dem kan av varden kravas att betala hela
skulden.
Den borgensman som tvingas betala hela beloppet kan
aterkrava sin andel av den andre borgensmannen. Nar
borgen tecknas for en hyresgast bor envar borgensman
erhalla kopia av borgensforbindelsen jamte kopia av
hyresavtalet.
Skulle hyresgasten inte uppfylla sina ataganden,
exempelvis inte betala hyran, bor varden
underratta borgensmannen sa snart som mojligt sa att
denne har mojlighet att vidta atgarder innan
skulden blivit alltfor stor.
Denna borgensforbindelse forfaller i sin helhet nar
bankgaranti enligt Tillagg nr 1 till detta hyreskontrakt
overlamnats till hyresvarden.
- --------------------------------------------------------------------------------
1
<PAGE>
TRYGG HANSA
PERSONAL GUARANTEE
FOR PREMISES APPENDIX NO. 4
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lease contract no. In the property Drawn up on
01009 0001 024 Guldfisken 31
- ---------------------------------------------------------------------------------------------------------
Lessor Trygg-Hansa Livsforsakrings AB (Publ)
- ---------------------------------------------------------------------------------------------------------
Lessee Spray Network AB
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Guarantee For the lessee's fulfillment of the obligations both according to the
above-mentioned lease agreement and according to the Rent Restriction Act (Chap. 12
of the Real Property Code) and
to compensate the lessor for
- collection costs
- legal costs awarded by a court
- confirmed costs for the lessee's eviction
- interest for all the unpaid amounts specified above
and to compensate the lessor for
- costs arising in connection with cases processed by the Crown Bailiffs according
to an Act (1990:746) on orders to pay and assistance
the undersigned guarantee one for both and both for one as for his own debt. This
undertaking also applies for an extension of the lease agreement.
the guarantee for each guarantor is a maximum of SEK 1,100,000.00.
- ---------------------------------------------------------------------------------------------------------
Signature Place/date Place/date
Stockholm, 29/4/98 Stockholm, 29/4/98
- ---------------------------------------------------------------------------------------------------------
Signature Signature
[Signature] [Signature]
- ---------------------------------------------------------------------------------------------------------
Name in print Name in print
Lars T. Andersson Per Bystedt
- ---------------------------------------------------------------------------------------------------------
Civil reg./org. no. Civil reg./org. no.
61 08 15 - 2736 65 03 10 - 1070
- ---------------------------------------------------------------------------------------------------------
Address Address
c/o Vestermark
Asogatan 161, 4th floor Grev Turegatan 69, 4th floor
116 32 Stockholm 114 38 Stockholm
- ---------------------------------------------------------------------------------------------------------
Information The guarantee is an undertaking by one or more persons to be liable for another
person's - in this case a lessee - fulfillment of their obligations.
The person setting the guarantee is called a guarantor.
The fact that the security is set as for his own debt means that the lessor can
demand payment directly from the guarantor as soon as the lessee neglects his
payment obligation.
If two guarantors are liable one for both and both for one, for example they are
jointly and severally liable for a rent, i.e. each of them can be required by the
lessor to pay the whole debt.
The guarantor who is compelled to pay the full sum can reclaim his share from the
other guarantor.
When a guarantee is signed for a lessee, each guarantor should receive a copy of
the personal guarantee as an appendix to the lease agreement.
Should the lessee not fulfil his obligations, for example not pay the rent, the
lessor should inform the guarantor as soon as possible so that he has an
opportunity to adopt measures before the debt becomes too large.
This personal guarantee lapses is its entirety when a bank guarantee according to
Supplement no. 1 to this lease contract is submitted to the lessor.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.24
TRIGG HANSA
BORGENSFORBINDELSE
for lokal Bilaga nr 4
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Tillnor Hyreskontrakt nr i fastigheten upprettat den
01009 0001 024 Guldfisken 31
- ---------------------------------------------------------------------------------------------------------------------------
Hyresvard Trygg-Hansa Livforsakrings AB (Pub1)
- ---------------------------------------------------------------------------------------------------------------------------
Hyresgast Spray Network AB
- ---------------------------------------------------------------------------------------------------------------------------
Borgen For hyresgastens fullgorande av skyldigheterna
saval enligt ovan namnda hyresavtal som enligt hyreslagen (12 kap jordabalken)
avensom
att ersatta varden for
- inkassokostnader
- av domstol utdomda rattegangskostnader
- styrkta kostnader for hyresgastens avhysning och
- ranta a samtliga ovan angivna obetalda belopp
samt att ersatta varden for
kostnader uppkomna i anledning av mal som handlagts vid kronofogdemyndighet enligt lag (1990:746)
om betalningsforelaggande och handrackning
gar undertecknade i borgen en for bada och bada for en sasom for egen skuld. Denna forbindelse
galler aven vid forlangning av hyresavtalet.
Borgensforbindelsen for varge borgensman ar maximelt 1.100.000:-kronor
- ---------------------------------------------------------------------------------------------------------------------------
Underskrift Ort/datum Ort/datum
Stockholm 980429 Stockholm 980429
- ---------------------------------------------------------------------------------------------------------------------------
Namnteckning Namnteckning
/s/ /s/ Johan Ihrfelt
- ---------------------------------------------------------------------------------------------------------------------------
Namnfortydligande Namnfortydligande
Johan Ihrfeldt Jonas Svensson
- ---------------------------------------------------------------------------------------------------------------------------
Persnr/org nr Persnr/org nr
67 08 19 - 5075 68 01 13 - 3312
- ---------------------------------------------------------------------------------------------------------------------------
Adress Adress
Fredhallsgatan 9, 2 tr Sibyllegatan 41, 3 tr
112 54 Stockholm 114 42 Stockholm
- ---------------------------------------------------------------------------------------------------------------------------
Upplysningar Borgen ar ett atagande av en eller flera personer att ansvara for att annan i detta fall hyresgast
-- fullgor sina forpliktelser.
Den som gar i borgen kallas borgensman.
Att borgen ingas som for egen skuld innebar att hyresvarden kan krava betalning direkt av
borgensmannen sa snart hyresgasten forsummar sin betalningsskyldighet.
Om tva borgensman svarar en for bada och bada for en for exempelvis en hyresfordran svarar de
solidariskt, dvs envar av dem kan av varden kravas att betala hela skulden.
Den borgensman som tvingas betala hela beloppet kan aterkrava sin andel av den andre
borgensmannen. Nar borgen tecknas for en hyresgast bor envar borgensman erhalla kopia av
borgensforbindelsen jamte kopia av hyresavtalet. Hyresvarden och hyresgasten fogar sina ex av
borgensforbindelsen som bilaga till hyresavtalet.
Skulle hyresgasten inte uppfylla sina ataganden, exempelvis inte betala hyran, bor varden
underratta borgensmannen sa snart som mojligt sa att denne har mojlighet att vidta atgarder innan
skulden blivit alltfor stor.
Denna borgensforbindelse forfaller i sin helhet nar bankgaranti enligt Tillagg nr 1 till detta
hyreskontrakt overlamnats till hyresvarden.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
TRYGG HANSA
PERSONAL GUARANTEE
FOR PREMISES
Appendix no.4
- --------------------------------------------------------------------------------
Lease contract no. In the property Drawn up on
01009 0001 024 Guldfiskan 31
- --------------------------------------------------------------------------------
Lessor Trygg-Hansa Livsforsakrings AB (Publ)
- --------------------------------------------------------------------------------
Lessee Spray Network AB
- --------------------------------------------------------------------------------
Guarantee For the lessee's fulfillment of the obligations both according to
the above-mentioned lease agreement and according to the Rent
Restriction Act (Chap. 12 of the Real Property Code) and to
compensate the lessor for
- collection costs
- legal costs awarded by a court
- confirmed costs for the lessee's eviction
- interest for all the unpaid amounts specified above
and to compensate the lessor for
- costs arising in connection with cases processed by the Crown
Bailiffs according to an Act (1990:746) on orders to pay and
assistance
the undersigned guarantee one for both and both for one as for his
own debt. This undertaking also applies for an extension of the
lease agreement.
The guarantee for each guarantor is a maximum of SEK 1,100,000.00
- --------------------------------------------------------------------------------
Signature Place/date Place/date
Stockholm, 29/4/98 Stockholm, 29/4/98
- --------------------------------------------------------------------------------
Signature Signature
[Signature] [Signature]
- --------------------------------------------------------------------------------
Name in print Name in print
Johan Ihrfeldt Jonas Svensson
- --------------------------------------------------------------------------------
Civil reg./org. no. Civil reg./org. no.
67 08 19 -5075 68 01 13 -3312
- --------------------------------------------------------------------------------
Address Address
Fredhallsgatan 9, 2nd floor Sibyllegatan 41, 3rd floor
112 54 Stockholm 114 42 Stockholm
- --------------------------------------------------------------------------------
Information The guarantee is an undertaking by one or more persons to be liable
for another person's - in this case a lessee - fulfillment of their
obligations.
The person setting the guarantee is called a guarantor.
The fact that the security is set as for his own debt means that the
lessor can demand payment directly from the guarantor as soon as the
lessee neglects his payment obligation.
If two guarantors are liable one for both and both for one, for
example they are jointly and severally liable for a rent, i.e each
of them can be required by the lessor to pay the whole debt.
The guarantor who is compelled to pay the full sum can reclaim his
share from the other guarantor.
When a guarantee is signed for a lessee, each guarantor should
receive a copy of the personal guarantee as an appendix to the lease
agreement.
Should the lessee not fulfill his obligations, for example no pay
the rent, the lessor should inform the guarantor as soon as
possible so that he has an opportunity to adopt measures before the
debt becomes too large. This personal guarantee lapses in its
entirety when a bank guarantee according to Supplement no.1 to this
lease contract is submitted to the lessor.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.25
MIETER-NR. 1020710
GESCHAFTSRAUMMIETVERTRAG
ZWISCHEN DEGI Deutsche Gesellschaft fur Immobillenfonds
mbH, Bettinastrabe 53 - 55, 60325 Frankfurt am
Main.
- nachfolgend VERMIETERIN genannt -
UND Spray Interactive Media AG
vertreten durch Harn Jan Hokan Lejdstrand
Bottgerstrabe 1 c. 20148 Hamburg
- nachfolgend MIETERIN genannt -
wird folgender Mietvertrag, bestenend aus
TEIL I BESONDERE VERTRAGSBEDINGUNGEN
(S)1 Mietgegenstand
(S)2 Mietzeit, Kundigung
(S)3 Ubergabe des Mietgegenstandes
(S)4 Mietzins, Nebenkosten und Mehrwertsteuer
(S)5 Wertsicherungsklausel
(S)6 Sicherheitsleistung
(S)7 Konkurrenz-/Sortimentsschutz
(S)8 Weitere Vereinbarungen
TEIL II ALLGEMEINE VERTRAGSBEDINGUNGEN
(S)9 Versicherungen
(S)10 Minderung, Aufrechnung, Zuruckbehaltung, Haftung
(S)11 Benutzung der Mietraume, Untervermietung
(S)12 Einwirkungen Dritter
<PAGE>
(S)13 Energie- und Wasserversorgung
(S)14 Verkehrssicherungspflicht
(S)15 Werbe- und Schilderanlagen, sonstige Vor- bzw. Einrichtungen
(S)16 Instandhaltung und Instandsetzung/Schonheitsreparaturen
(S)17 Bauliche Veranderungen
(S)18 Mehrere Personen als Mieterin
(S)19 Allgemeine Ordnungsbestimmungen
(S)20 Brandschutz-Bestimmungen
(S)21 Beendigung ces Mietverhaltnisses
(S)22 Schriftform/Sarvatorische Klausel/Gerichtsstand
TEIL III ANLAGEN
Anlage 1 Nebenkosten
Anlage 2 Burgschaftsmuster
Anlage 3 Lageplan
Anlage 4 Raumaufteilungsplan
Anlage 5 Ausstattungsbeschreibung
Anlage 6 Gesamtkostenaufstellung
Anlage 7 Ausbaurelhenfolgeplan
wie folgt geschlossen:
TEIL I
BESONDERE VERTRAGSBEDINGUNGEN
(S) 1
MIETGEGENSTAND
2
<PAGE>
(1) Die Vermieterin vermietet an die Mieterin in der Liegenschaft
GROBE BLEICHEN 31/BLEICHENBRUCKE 10 - KAUFMANNSHAUS - LN 20354 HAMBURG
die im zwelten Obergeschob gelagenen Buroraume und die hiermit vergundenen
Nebenfiachen (wie z. B. Flure und Sanitarraume), deren Flachen in dem
diesen Vertrag als Anlage 3 beigefugten Plan markiert ist und mit einer
Grobe von ca. 970,00 m vereinbart wird:
(2) -entfallt-
(3) Die Mietraume sind zum Betrieb eines Unternehmans fur die Entwicklung und
Produktion von interaktiven Medien sowie die Esratung und jede Tatigkeit im
Zusammenhang mit interaktiven Medien geeignet.
Sofern wegen des Geschaftsbetriebes der Mieterin eine besondere Genehmigung
erforderlich ist. ist diese von der Mieterin selbst einzuholen. Die
Vermieterin ubernimmt keine Haftung daur. dab Genehmigungen fur den
vorgesehenen Betrieb und seine Anlagen erteilt werden bzw. erteilte
Genehmigungen fortbestehen. Das gilt insbesondere fur Konzessionen. Die
Mieterin hat auf ihre Kosten samtliche Voraussetzungen fur den Betrieb
ihres Gewerbes zu schaffen bzw. aufrechtzuerhalten.
(4) Der Mietgegenstand ist vertragsgemab. wenn er den Anforderungen dar im
Zeitpunkt der Errichtung des Gebaudes allgemein anerkannten Regeln des
Bautechnik entspricht.
(S) 2
MEITZEIT, KUNDIGUNG
(1) Das Mietverhaltnis beginnt mit Ubergabe der ersten ausgebauten Flache, die
in Anlage 7 farblich markiert ist, voraussichtlich zum 01.05.1998 und wird
auf die Dauer von 7 Jahren abgeschlossen. Die Mieterin ist berechtigt, 1
mal die Verlangerung des Mietverhaltnisses um 5 Jahre zu erklaren Die
Ausubung des Optionsrechtes kann wirksam nur schriftlich bis 9 Monate vor
Vertragsende erfolgen.
(2) Steht dar Mieterin kein Optionsrecht zu oder macht sie von einem
bestehenden Optionsrecht keinen Gebrauch, verlangert sich des
Mietverhaltnis um jeweils 1 Jahr, sofem as nicht von der Vermieterin oder
der Mieterin mit einer Kudigungsfrist von 6 Monaten im voraus zum
Vertragsende gekundigt wird.
(3) Vermieterin und Meiterin konnen das Mietverhaltnis aus wichtigem Grund mit
sofortiger Wirkung ohne Einhaltung einer Kundigungsfrist kundigen Die
Vermieterin ist hierzu insbesondere berechtigt, wenn die Mieterin
ungeachtet einer schriftlichen Abmahnung ihran vartraglichen
Verpflichtungen nicht nachkommt, mit Zahlungen in Hohe von mindestens zwel
Monatsmieten im
3
<PAGE>
Ruckstand ist oder aber uber ihr Vermogen das Konkurs- oder
Vergleichsverfahren eroffnet oder aber die Eroffnung mangels Masse
abgelehnt wird.
(S) 3
UBERGABE DES MIETGEGENSTANDES
(1) Die Ubergabe erfelgt spatestens zum Mietbeginn, Der Anspruch der Mieterin
auf Ubergabe des Mietgegenstandes ensteht erst nach Leistung der
vereinbarten Sicherheit.
(2) AniaBlich der Ubergabe werden die Vertragsparteien etwaige Viangel des
Mietgegenstandes in einem Ubergabavbeotokell feststellen. das von beiden
Vertragspartaien zu unterzeichnan ist.
(S) 4
MEITZINS, NEBENKOSTEN UND MEHRWERTSTEUER
(1) Dar Mietzins, die Nebenkostenvorauszahlung und die gesetzliche
Mehrwertsteuer werden monatlich wei folgt vereinbart:
<TABLE>
<S> <C> <C>
Buronache (einschlieBlich Neberflachen), netto DM 26.190,00
DM 27.00/m2
Nebenkostenvorauszahlung, netto DM 9.700,00
-----------------------
Zwischensumme, netto DM 35.890,00
Mehrwertsteuer, derzeit 15% DM 5.383,50
-----------------------
Insgesamt, brutto DM 41.273,50
=======================
</TABLE>
(2) Mietzins, Nebenkostenvorauszahlung und Mehrwertsteuer sind monatlich im
voraus, spatestens bis zum 3. Werktag eines Monats, auf das Konto der
Vermieterin Nr.: 9 923 093 00 (BLZ 500 800 00) bel der Dresdner Bank AG in
Frankfurt am Main zu uberweisen. Fur die Rechtzeitigkeit der Zahlung kommt
es auf die Gutschrift des Betrages an.
(3) Bei verspateter Zahlung ist die Vermieterin bereschtigt, pauschalierte
Mahnkosten je Mahnung in Hohe von DM 10.00 inklusive Mehrwertsteuer
zuzuglich Verzugszinsen in Hohe des ihr entstandenen Schadens zu berechnen.
(4) Die Mieterin tragt neben dem Mietzins die Nebenkosten gemaB Anlage 1, auf
die monatliche Vorauszahlungen in der genannten Hohe zu leisten sind. Die
Hohe der Nebenkostenvorauszahlung kann die Vermieterin nach billigem
Ermessen neu bestimmen.
4
<PAGE>
Die von der Mieterin gemaB Anlage 1 zu tragenden Nebenkosten umfassen
samlliche auf die Miet- und Gemeinschaftsflachen und - einrichtungen
entfallenden Kosten der instandhaltung, instandsetzung und der
Schonheitsreparaturen - soweit diese nicht die instandhaltungs- und
Erneuerungsverpflichtung der Vermieterin gemaB (S) 16 Abs. 1 betreffen -
sowle samtliche mit dem Betrieb und der Wartung der Liegenschaft
verbundenen Kosten.
Die Nebenkosten werden von allen Mietern gleichmaBig im Verhaltnis ihrer
Mietflachen zur Gesamtmiatflache der Wirtschaftseinheit, jeweils mit
Ausnahme von Kfz-Abstellplatzen und Lagerflachen, getragen, Nebenkosten,
die wegen ausschlleBlicher Nutzung von Anlagen oder Gebaudeflachen oder
Zahlern bestimmten Mieterinnen unmittelbar zugeordnet werden konnen, werden
ausschlieBlich von diesen Mieterinnen getragen.
Die Vermieterin ist jederzeit - und zwar auch mit Wirkung fur die jeweils
laufende Abrechnungsperiode - berechtigt, fur die Nebenkosten (im) ganzen
oder fur einzeine Kostenarten) einen neuen VerteilungsmaBstab nach billigem
Ermessen zu bestimmen.
(5) Soweit MeBeinrichtungen verhanden sind. werden die Kosten des Betriebes der
Heizungsanlage nach den Bestimmungen der Haizkostenverordnung abgerechnet.
wobei 70 % der Kosten nach Verbrauch und 30 % auf der Basis der behalzbaren
Mietflachen (Grundkosten) varrechnet werden.
Kosten einer notwendig werdenden Zwischenablesung tragt die betreffende
Mieterin.
(6) Die Vermieterin rechnet die wehrend aines Abrechnungszeltraumes
angefallenen Nebenkosten jeweils fur die Zeit vom 01.10. bis zum 30.09 des
Folgejahres gegenuber der Mieterin ab. Die Vermieterin kann durch
einseitige Erklarung gegenuber der Mieterin den Abrechnungszeitraum
verandem.
Auch wenn das Mietverhaltnis innerhalb sines Abrechnungszeltraumes endet.
erfolgt die Abrechnung geganuber der Mieterin und die zeitantellige
Kostenverteilung erst mit der nachsten Nebenkostenabrechnung.
Nachzahlungen bsw. Gutschriften sind innerhalb von 14 Tagen auszugleichen.
(S) 5
WERTSICHERUNGSKLAUSEL
(1) Hat sich der vom Statistischen Bundesamt monatlich festgestellte
Lebenshaltungskostenindex aller privaten Haushalte fur das gesamte
Bundesgebiet (Index 1991 * 100) kunftig gegenuber dem Stand des Monats vor
Mietbeginn oder dem Stand, der der letzten Neufestsetzung zugrunde lag bis
zum Zeitpunkt des Ablaufes von jeweils zwei Mietjahren verandert, andert
sich die
5
<PAGE>
Miete automatisch ab dem darauf folgenden Monatsersten im prozentualen
Verhaltnis der eaingetretenen Veranderung. Die Mietzinsanpassung (ggf. auch
ruckwirkend) kann nur schriftlich geltend gemach twerden.
(2) Die Vertragsparteien sind sich daruber einig, daB die vereinbarte
Wertsicherungsklausel der Genehmigung der Landeszentralbank bedarf. Beide
Vertragsparteien verpflichten sich, bei der Beantragung der Genehmigung
erforderlichenfalls mitzuwirken und dafur notwendige Erklarungen abzugeben
(S) 6
SICHERHEITSLEISTUNG
Einen Monat vor Ubargabe des Mietgegenstandes lelstet die Mierterin
gegenuber der Vermieterin eine Barsicherhait in Hohe von 4 Bruttomonatsmleten,
DM 156.000,00
(IN WORTEN: DEUTSCHE MARK ZWEIHUNDERTSIEBENUNDVIERZIGTAUSENDSECHSHUNDERT).
Die Vermieterin ist verpflichtet, diese Sicherheit auf einem Sparkonto zu
dern fur Spareinlegen mit dreimonatiger Kundigungfirist ublichen Zinssatz
anzulegen.
Die Sicherheit kann auch durch Burgschaft eines als Zoll- und Steuerburge
zugelassenen Kreditinstitutes in gleicher Hohe eroracht werden, sofern diese
nach dam Burgschaftsmuster der Vermieterin ubernommen wird Teil III. Anlage 2).
Die Sicherhalt wird nach Beendigung des Mietverhaltnisses und Erfullung der
vertraglichen Verpflichtungen zuruckgegeban. Bei Nichterfullung des Vertrages
nur insoweit, als kaine Gegenanspruche bestahan. Bis zum Zeitpunkt der
Abrechnung samticher Nebenkosten kann die Vermleterin einen angemessenen
Tsilbertrag der Sicherheitsleisrung einbehalten.
(S) 7
KONKURRENZ- / SORTIMENTSSCHUTZ
Konkurrenz- oder Sortimentsschutz fur die Mieterin ist ausdrucklich
ausgeschlossen.
(S) 8
WEITERE VEREINBARUNGEN
(1) Nach AbschluB der Umbau- und Renovierungsarbeiten wird ein fur beide
Vertragsparteien verbindliches AufmaB nach den Richtlinien zur Berechnung
der Mietfiache fur Buroraum (MF-B) der gif -- Gesellschaft fur
6
<PAGE>
immobilienwirtschaftliche Forschung a. V. erstellt. Das Ergebnis dieses
AufmaBes ist Grundlage fur die endgultige Mietzinsberechnung.
Das AufmaB gilt fur beide Seiten als verbindlich anerkannt, sofern nicht
innerhalb von 2 Wochen ab Zugang Einspruch erhoben wird.
Sollten sich nach Anerkennung des AufmaBes bei nachtraglichar Vermessung
der Mietflache Abweichungen von der mit dem verbindlichen AufmaB
festgestellten Mietflache ergeben, ist keine der Parteien berechtigt, von
diesem Vertrag zuruckzutreten, lhn zu kundigen oder eine Anderung des
Mietzinses zu verlangen. Die angegebenen Flachen sind zugrundezulegen,
soweit es nach den Bestimmungen dieses Vertrages auf die Grobe der
vermietetan Flachen ankommt.
(2) Die Vermieterin wird die Umbau- und Renovierungsarbeiten gemaB des ais
Anlage 4 beigafugten Raumaufteilungsplanes und der Ausstattungsbes-
chreibung gamaB Anlage 5 dieses Vertrages schnellstmoglich auf ihre Kosten
ausfuhren lassen. Dabei durfen die in Anlage 6 aufgefuhrten Kosten
insgesamt nicht uberschritten werden, woben die einzelnen Gewerkekosten
gegeneinander aufgerechnet werden durfen. Sofam eine
Gesamtkostenuberschreitung auf Mieterwunsche zuruckzufuhren ist, sind die
entstehenden Mehrkosten von der Mieterin zu tragen.
(3) Eine Mitbestimmung und ein GestaltungeinfluBrecht des Mieters bei Umbau
und/oder Renovierungsarbeit ist ausdrucklich gewahrleistet.
(4) Der Mieterin ist es gestattet. die Mietraurne tellweise schon vor Ubergabe
mietfrei zu nutzen. Jedoch wird wahrend dieser Zeit eine
Nebenkostenpauschale von netto DM 1.300,00 zzgl. gesetzlicher Mehrwsteur
gemaB den Regelungen diesers Vertrags monatlich im voraus zur Zahlung
fallig.
Nach Fertigstellung der Umbauarbeiten wird die Mieterin in den umgebauten
Teil der Mietflache umzieben, so daB der Restumbau erfolgen kann.
(5) Die Ubergabe der Mietflachen arfolgt aufgrund der kurzen Zeitspanne bis zum
Mietbeginn sukzessive je nach Fertigstellung. Entsprechend ensteht die
Mietzahlungspflicht fur die ubergebenen Flachen. Mietminderungen wegen
Baularm und anderer Beeintrachtigungen aus dem Umbau der Flachen fur die
Mieterin Spray sind wahrend der gesamten Umbauphase ausgeschlossen, soweit
nicht die Vermieterin eine Verzogerung der Fertigstellung zu vertreten hat.
Das Mietverhaltnis beginnt unabhangig von etwaigen Teilubergaben am 01.05.
1998.
(6) Dieser Vertrag wird unter der aufschiebenden Bedingung abgeschlossen, daB
das Mietverhaltnis fur die entsprechenden Flachen mit der Firma Mitsubishi
international GmbH einvemehmlich aufgelost werden kann. Weist die
Vermieterin der Mieterin den Eintritt der aufschlebenden Bedingung nicht
bis zum Ablauf des 28.02. 1998 nach, so kann die Mieterin von diesem
Vertrag zurucktreten.
7
<PAGE>
(7) Die ersten 4 Monate ab Mietbeginn sind mietfrei. In diesen vier Monaten
ist lediglich die Nebenkostenvorauszahlung zzgi. gesetzlicher
Mehrwertsteuer zu zahlen.
(8) Die Untervermietungen an Tochtergesellschaften der Mieterin mit dem
gleichen bzw. Ahnlichen Betriebszweck ist entgenen den Regelungen des (S)
11 dieses Vertrages nicht genehmigungs-, sondern lediglich
anzeigepflichtig. Da ein Konkurrenzschutz fur eine in der Liegenschaft
ansassige Mieterin fur den Betrieb einer Werbeagantur besteht, verpflichtet
sich die Mieterin, nicht an eine Tochtergesellschaft mit diesem
Betriebszweck unterzuvermieten.
TEIL II
ALLGEMEINE VERTRAGSBEDINGUNGEN
(S) 9
VERSICHERUNGEN
Die Vermieterin ist gegen Risiken aus Feuer-, Leitungswasser- und SturmschAden
versichert. Nicht versichert ist der GebAudeinhalt (Einrichtung, Ware). Es
obliegt der Mieterin, diesen zu versichern.
(S) 10
MINDERUNG, AUFRECHNUNG, ZURUCKBEHALTUNG, HAFTUNG
(1) Der Mieter kann wegen eines Mangels nicht mindern, wenn der Mangel die
Gebrauchsfahigkeit der Mietraume nur unwesentlich herabsent. Die Minderung
ist im ubrigen nur zulassig. wenn der Mieter sie mit einer Frist von zwei
Wochen vor Falligkeit der ersten herabzusetzannden Mietzinszahlung
gegenuber dem Vermieter schriftlich angekundigt. hat:
(2) Aufrechnung und Ausubung des Zuruckbehaitungsrechts sind nur zulassig.
sofern die Gegenforderung unstraing oder rechtskraftig festgestellt ist.
(3) Die Geitendmachung von Schadensersatzanspruchen duren die Mieterin wegen
Mangeln am Mietgegenstand oder wegen Verzugs der Vermieterin mit der
Beseitigung eines Mangels ((S) 538 Abs. 1 BGB) ist ausgeschlossen, es sei
denn, die Vermieterin oder deren Erfullungsgehilfen haben vorsatzlich oder
grob fahrlAssig gehandelt.
(4) Die Mieterin haftet der Vermieterin fur Schaden, die durch sie salbst, ihre
Angehorigen oder Angestellten sowie die von ihr beautragten Handwerker,
Lieferanten. Kunden oder anderen zu ihr in beziehung stehende Fersonen am
Mietgegenstand oder am Gebaude verursacht werden. Sie haftse fur Schaden,
die durch unsachgemabe Behandlung, insbesondere von technischen oder
sonstigen Einrichtungsgegenstanden, entstehen. Der Mieterin obliegt
innerhalb der Mietraume der Beweis, dab ein schuldhaftes Verhalten nicht
vorgelegen hat.
8
<PAGE>
(S) 11
BENUTZUNG DER MIETRAUME, UNTERVERMIETUNG
(1) Der Mietgegenstand wird der Mieterin ausschlie lich zu dem vereinbarten
Nutzungszweck berlassen.
Nutzungsanderungen bedurfen der vorherigen schriftlichen Zustimmung durch
die Vermieterin.
(2) Die Untervermietung oder sonstige Gebrauchsuberlassung an Dritte bedarf der
vornerigen schritflichen Zustimmung der Vermieterin und darf nur zu dem
vereinbarten gewerblichen Zweck erfolgen.
Soweit die Mieterin neben dem Mietzins und den Nebenkosten zur Zahlung der
Mehrwersteuer vertraglich verpflichtet ist, darf die Untervermietung oder
Gebrauchsuberlassung nur an Dritte erfolgen, die Unternehmer im Sinne des
Umsatzsteuergesetzes sind.
(3) Im Falle einer Untervermietung oder Gebrauchsuberlassung haftet die
Mieterin fur alle Handlungen oder Unterlassungen der Untermieterin oder
derjenigen, der sie den Gebrauch der Mietraume uberlassen hat.
(S) 12
EINWIRKUNGEN DRITTER
Einwirkungen durch Dritte, die nicht von der Vermieterin zu vertreten sind. wia
z. B. Verkehrsumleitungen, Autgrabungen, Strabensperren, Gerausch- , Geruchs-
und Staubbelastigungen oder ahnlichem, begrunden unabhangig vom Ausmab keinen
Fehler des Mietgegenstandes.
(S) 13
ENERGIE- UND WASSERVERSORGUNG
(1) Eine Anderung der Energieversorgung durch das Varsorgungsunternehmen
berechtigt die Mieterin nicht zu Ersatzanspruchen gegen die Vermieterin.
(2) Werden die Strom-, Gas- und/oder Wasserversorgung etc. durch einen nicht
von der Vermieterin zu vernetenden Umstand unterbrochen oder treten
Unregeimabigkeiten in der Belieferung ein, hat die mieterin kein
Mietminderungsrecht und keine Ersatzanspruche gegen die Vermieterin.
Soweit die Lieferungsbedingungen fur Unterbrechungen der Versorgung und bei
Unregeimabigkeiten in der Belieferung die Haltung des Versorgungstragers
vorsehen, tritt die Vermieterin hiermit ihre Anspruche gegen den
Versorgungstrager an die Mieterin ab, die diese annimmt.
9
<PAGE>
(S) 14
VERKEHRSSICHERUNGSPFLICHT
Der Mieterin obliegt fur ihren Mietbereich die Verkehrssicherungspflicht
entsprechend den gesetzlichen Bestimmungen.
(S) 15
WERBE- UND SCHILDERANIAGEN,
SONSTIGE TECHNISCHE VOR- BZW, EINRICHTUNGEN
(1) Vorhandene Anlagen fur die Anbringung von Firmen- oder Namensschildern
stehen der Mieterin zur mitbenutzung zur Verfugung, soweit sie die Kosten
fur die Herstellung des Schildes und dessen Montage tragt.
(2) Sonstige Vorrichtungen bzw, technische Einrichtungen, die die Mieterin
beabsichtigt, auberhalb des Mietbereiches anzubringen, wie Z.B.
Werbeanlagen an der Fassade, bedurfen einer vorherigen schriftlichen
Vereinbarung zwischen den Vertragsparteien.
(S) 16
INSTANDHALTUNG UND INSTANDSETZUNG/SCHONHEITSREPARATUREN
(1) Der Vermieterin obliagt die instandhaltung des Daches, der kongstruktivan
Teile des Gebaudes wie Aubenmauern, tresgende innenwande, Stutzen und
Fundamente sowie der Fassade, mit Ausnahme der Verglasung der Fenster und
Turen, die den Mietbereich umschlieban, und der zu diesen gehorenden
Beschlagstelle.
Daruber hinaus obliegt der Vermieterin die Ernauerung (Ersatzbeschaffung)
einzeiner technischer Gebaudesinrichtungen jeweils in ihrer Gesamtheit.
sofern trotz ordnungsgemaber Wartung und instandhaltung, deren Kosten
germab (S) 4 Abs. 4 umlagefahig sind. ein Ersd notwendig ist, weil mit
angemessenen Mittain (bezogen auf die jeweilige Anlage) eine Reparatur
nicht mehr moglich ist.
(2) Der Mieterin obliegen die Schonheits reparaturen sowie die sonstigen
instandhaltungs- und instandsatzungsarosen innerhalb der Mietraume. Dies
gilt auch fur die technischen Einrichtungen __sbesondere elektrische und
sanitare. Heizungs- und Klima-instailationen; soweit sich diese im oder am
Mietgegenstand befinden und ausschlieblich von der Mieterin in Anspruch
genommen werden, sowie die Verglasung der zum Mietbereich gehorenden
Fenster und Turen die wen Mietbereich umschlieben und die zu diesen
gehoren- den Beschlagsteile.
(3) Sind Durchlauferhitzer und/oder Boiter zur Warmwasserbereitung in den
Mietauman vorhanden, tragt die Mieterin unmittelbar samtliche
instandhaltungs-, Betriebs-, Wartungs- und Reinigungskosten sowie die
Kosten einer Erneuerung.
10
<PAGE>
(4) Die Kostenbeteiligung der Mieterin fur instandhaltungs- und
instandsetzungs-mabnahmen betragt innerhalb eines Abrechnungszeitraumas
((S) 4abs. 6) hochsten 5 % der jahrlichen Nettomiete, mit Ausnahme der
Kosten gemab Abs. 2 und 3, die die Mieterin in voller Hohe zu tragen hat.
(5) Sofern die unter Teil 1 Nr. 1.1 dieses Vertrages vereinbarte Nutzung den
gewerb-lichen Betrieb einer Kuche einschliebt oder aber der Mieterin der
Betrieb einer Kantine Zugestanden wurde, wird die Vermieterin die
regelmabige Reinigung bzw. Wartung des vorhandenen Fettabscheiders sowie
der Kuchenablufkanale auf Kosten der Mieterin ausfuhren lassen.
(6) Die Mieterin hat in regelmabigen Abstanden durch Sachverstandige die Uber-
prufung der elektrotechnischen Anlagen innerhalb des Mietbereiches germab
den einschl gigen VDE-Bestimmungen und Unfaliverhutungsvorschriften (VBG 4)
vornehmen zu lassen und auf Verlangen der Vermieterin nachzuweisen.
(S) 17
BAULLCHE VERANDERUNGEN
(1) Bauliche Veranderungen durch die Mieterin durfen nur nach vorheriger
schriftilicher Zustimmung der Vermieterin vorgenommen werden.
(2) Die Vermieterin Kann veriangen, dab die Mieterin bei Beendigung des
Mietver- haltnisses die auf ihre Kosten vorgenommenen Um-und Einbauten ohne
Zahlung einer Entschadigung zurucklabt oder den ursprunglichen Zustand auf
ihre Kosten weiderherstellt.
(3) Bauliche Veranderungen und Ausbesserungen durch die Vermieterin konnen ohne
Zustimmung der Mieterin durchgefuhrt werden, falls diese zur erhaltung des
Gebaudes oder der Mietraume, der Abwendung drohender Gefahren, zur
Beseitigung von Schaden oder zur Erfullung von behordlichen Auflagen not-
wendig werden.
(S) 18
MEHRERE PARSONEN ALS MIETER
Mehrere naturliche oder juristische Personen als Mieterin haften fur alle
Verpflichtun- gen aus diesem Vertrag als Gesamtschuldner. Jeder Gesamtschuldner
ist borechtigt, rachtswirksame Erklarungen fur und gegen die Mieterin abzugeben.
Erklarungen gegenuber einem Gesamtschuldner gelten auch den ubrigen
Gesamtschuldnem als zugegangen.
(S) 19
ALLGEMEINE ORDNUNGSBESTIMMUNGEN
11
<PAGE>
(1) Die Mietraume sind von der Mieterin sorgfaitig zu behandein und regelmabig
fachgerecht zu reinigen.
(2) Die hochstzulassige Stockwerksbelastung ist zu beachten.
(3) Abfalle aus der gewerblichen Taitgkeit der Mieterin, soweit es sich nicht
um die ublichen Buroabfalle handeit, sowie sperrige Abfalle, durfen nicht
in die sietens der Vermieterin fur den allgemeinen Bedarf bereitgestellten
Behalter gebracht werdem, sondem sind von der Mieterin unmittelbar separat
entsorgen zu lassen.
(4) Soweit Moglichkeiten der getrennten Abfallentsorgung von beispielsweise
Alt-paplar, Kartonagen, Glas, Kunststoffe gegeben sind, sind diese von der
Mieterin zu nutzen. Sondermull, wei z. B. Batterien, Lacke, Ole sind
entsprechenden Sammelstellen zuzufuhren.
(5) Etwaige besondere Benutzungsordnungen, die im Einzelfall zu beachten sind,
werden gegebenenfalls als Bestandteil dieses Vertrages als Anlage beigefugt
und/oder konnen von der Vermieterin bei Bedarf auch nachtraglich erlassen
werden.
(6) Die auberen Fensterflachen einschlieblich der Fensterrahmen sind regelmabig
von der Mieterin zu reinigen, soweit es sich nicht um eine geschlossene
Fassade handelt.
(7) Schaden sind unverzuglich der Vermieterin mitzuteilin.
(8) Fur die Gemeinschaftsanlagen und -einrichtungen (Aufzuge, Mullbeseitigungs-
anlagen, Klimaanlagen, Heizungsanlagen usw.) sind die gesonderten Benut-
zungsbestimmungen zu beachten.
(S) 20
BRANDSCHUTZ-BESTIMMUNGEN
(1) Samtliche allgemeinen und behordlichen Vorschriften sind im Rahmen das
vorbeugenden Brandschutzes zu beachten.
(2) Fiuchtwege innerhalb und auberhaib der Mieterraume sind unbedingt
freizuhalten.
(3) An brandschutztechnischen- und anderen sicherheitstachnischen Einrichtungen
durfen keine Veranderungen und Eingriffe vorgenommen werden.
(4) Soweit die Brandschutzbehorde bzw. Feuerwehr empfiehlt oder es zur Auflage
macht, im Rahmen des vorbaugandan Brandschutzes einen Brandschutzbe-
autragten zu benennan, ist die Mieterin verpflichtet, einen oder auch
mehrare ensprechpartner hierfur zu benennen, die eine entsprechende
Einweisung erhalten.
12
<PAGE>
(5) Bei Ausbruch eines Brandes ist nach der Feuerwehr und sonstigen
Rettungsdiensten die Vermieterin oder ein von ihr Beauftragter umgehend zu
verstandigen.
(6) Soweit vorhanden oder aber nachtraglich erforderlich, wird sine
Brandschutzverordnung der Mieterin zue Verfugung gestellt, die von ihr zu
beachten und einzuhalten ist.
(7) Offenes Licht und das Rauchen in den Untergesschossen und sonstigen
Berelchen, in denen dies beschildert ist, ist nicht gestattet.
(8) Leicht entzund, feuergefahrliche und explosive Stoffe durfem ohne
vorhereige Genehmigung im gesamten Gebade nicht gelagert werden.
(9) Soweit erforderlich bzw, verrnieterselts nicht vorhande, hat die Misterin
inner-halb ihrer Mietraume geeignete Loschgerate, wie z. B. Feuerloscher
bereit zu halten. Daruber hinaus sind etwaige betriebsbedingte,
brandschutztechnische Auflagen von der Mieterin algenverantwortlich zu
erfullen.
(S) 21
BEENDIGUNG DES MIETVERHALTNISSES
(1) Die Mietrame sind bei Beandigung ges Mietverhaltnisses garaumt und in
fachgerecht renoviertem Zustand der Vermieterin zu ubergeben. Teppichboden
hat die Mieterin fachgerecht schamponieren zu lassen. Doppelboden und
Kabelkanale sind von der au ardem verlegte Kabel, wie belspielsweise fur
EDV und Telefon.
(2) Hat die Mieterin ihr obliegende Arbalten nicht bis zum Ende des
Mietverhaltnisses durchfuhren lassen, so kann die Verrnieterin die
Durchfuhrung auf Kosten der Mieterin in Auftrag gen, ohne da es einer
Nachfristsetzung bedarf. In diesem falle hafte die Mieterin fur Schaden,
der ver Vermieterin durch die verspate Ausfuhrung der Arbelten entsteht
(inbesondere Miestausfall).
Abweichend von vorstehender Regelung kann die Vermieterin einen Ausgleich
des ihr zustehenden Renovierungsanspruches in geld verlangen, wenn die
Schonheltsreparaturen durch eienen Umbau nach Vertragsende wieder zerstort
wurden.
(S) 22
SCHRIFTFORM/SALVATORISCHE KLAUSEL/GERICHTSSTAND
(1) Nachtragliche Anderungen und Erganzungen dieses Vertrages bedurfen der
Schriftform. Dies kann nicht mundilch abbedungen werden.
13
<PAGE>
(2) Solten eien oder mehrere der Bestimmungen dieses Vertrages ganz oder
tellweise rechsunwirksam sein oder werden, so wird die Gultigkeit der
ubrigen Bestimmungen dadurch nicht beruht. In einem scichen Fall ist der
Vertrag vielmehr sainem Sinn Gemao zur Durchfuhrung zu bringen. Beruht die
Ungultigkeit auf einer Leistungs- oder Zeitbestimmung, so tritt an ihre
Stelle das gesetzlich zulassige Ma.
(3) Gerichtsstand ist Hamburg, soweit nicht ein anderer Gerichtsstand
gesetzlich vorgeschriegen ist.
Frankfurt am Main, den 03.02.98 Hamburg, den 03.02.98
DEGI
Deutsche Gesellschaft fur Immobilien Spray Interactive Media AG
fonds mbH /s/ Per Bystedt
---------------
Per Bystedt
/s/ Kleinert /s/ Kuster Interschrift
- ------------ ---------- 20148 Hamburg, Germany
Tel: -49
Kleinert Kuster Info e spraynetwork.de
www.spraynetwork.de
(Vermieterin)
14
<PAGE>
RENT CONTRACT COVERING BUSINESS PREMISES
The following rent contract, which consists of
SECTION I SPECIFIC CONTRACTUAL TERMS AND CONDITIONS
(S)1 Rented object
(S)2 Rental period, notice of termination
(S)3 Handing over the rented object
(S)4 Rent, additional costs and VAT
(S)5 Index clause
(S)6 Surety
(S)7 Protection against competition and range of products offered
(S)8 Further agreements
SECTION II GENERAL CONTRACTUAL TERMS AND CONDITIONS
(S)9 Insurance
(S)10 Reduction, off-setting, retention, liability
(S)11 Use of the rented premises, subletting
(S)12 Effects produced by third parties
(S)13 Power and water supplies
(S)14 Responsibility for road safety
(S)15 Advertising boards and nameplates, other devices or
installations
(S)16 Maintenance and renovation/cosmetic repairs
(S)17 Structural changes
(S)18 Several persons as the tenant
(S)19 General regulations as regards tidiness and cleanliness
(S)20 Regulations as regards protection against fire
(S)21 Termination of tenancy
(S)22 The written form/remedial clause/place of jurisdiction
SECTION III APPENDICES
Appendix 1 Additional costs
Appendix 2 Example of a guarantee
Appendix 3 Site plan
Appendix 4 Layout of rooms plan
Appendix 5 Description of fittings and equipment
Appendix 6 List of total costs
Appendix 7 Plan covering sequence of events as regards extension work
is concluded
<PAGE>
between DEGI Deutsche Gesellschaft fur Immobilienfonds mbH,
Bettinastra(beta)e 53-55, 60325 Frankfurt am Main,
- hereinafter called the LANDLORD
and Spray Interactive Media AG
represented by Mr. Jan Hokan Leidstrand
Bottgerstra(beta)e 1 c, 20148 Hamburg
- hereinafter called the TENANT
as follows:
SECTION 1
SPECIFIC CONTRACTUAL TERMS AND CONDITIONS
(S) 1
RENTED OBJECT
(1) The landlord rents out the offices situated on the second floor within the
real estate
GRO(BETA)E BLEICHEN 31/BLEICHENBRUCHEN 10 - KAUFMANNHAUS -
IN 20354 HAMBURG
to the tenant and the adjoining areas (such as, for example corridors and
sanitary rooms) in respect of which the surface areas are marked in the plan
attached to this contract as Appendix 3 and it is agreed that the size of the
area is about 970.00 m/2/;
(2) - not applicable -
(3) The rented rooms are suitable for running a company which is involved in
the development and production of interactive media, as well as consultancy work
on and any activity connected with interactive media.
If, owing to the nature of the business carried out by the tenant, a special
license is required, then the tenant himself must obtain this. The landlord is
not responsible for ensuring that licenses are granted for the planned
operations and for the designs and plans relating thereto or that licenses which
have been granted continue to exist. This applies to concessions in particular.
At his own expense, the tenant must obtain and maintain all the qualifications
needed in order to carry out his trade.
2
<PAGE>
(4) The rented object is as stipulated in the contract when it corresponds with
the requirements of the civil engineering regulations which were generally
accepted at the time that the building was constructed.
(S) 2
RENTED PERIOD, NOTICE OF TERMINATION
(1) The tenancy begins when the first completed area is handed over, which is
marked in colour in Appendix 7. This is expected to be on 01.05.1998 and the
tenancy is agreed for a period of 7 years. The tenant is entitled to make a
declaration to the effect that the tenancy is extended by 5 years. Taking up
this right of option can only be effective if it is made in writing up to 9
months before the end of the contract.
(2) If the tenant does not have any right of option or if he does not make use
of any existing right of option, the tenancy is extended by 1 year each time
provided that it has not been terminated by the landlord or the tenant who has
given 6 months' notice of termination before the contract ends.
(3) The landlord or the tenant can terminate the tenancy if there are
significant grounds for doing so and this will take effect immediately without
notice of termination being served. The landlord is entitled to do this in
particular if the tenant, having ignored a written warning, does not comply with
his contractual obligations, if he is at least two months behind with his rent
or bankruptcy or insolvency proceedings are opened as regards his assets or if
such proceedings are not opened because there are no assets.
(S) 3
HANDING OVER THE RENTED OBJECT
(1) The rented object is to be handed over at the time that rent commences at
the latest. The tenant can only demand that the object be handed over once the
agreed surety has been paid.
(2) On the occasion of the object being handed over, the contractual parties
will identify any possible defects in the rented object in a statement which
covers the handing over of the object and which is to be signed by both
contractual parties.
(S) 4
RENT, ADDITIONAL COSTS AND VAT
(1) The rent, the additional costs and the statutory VAT are agreed upon as
follows on a monthly basis:
Office area (including adjoining areas) DM 26,190.00
3
<PAGE>
Advance payment of additional costs, net DM 9,700.00
Subtotal, net DM 35,890.00
VAT, currently 15% DM 5,383.50
Total, gross DM 41,273.50
(2) Rent, advance payment of additional costs and VAT are to be transferred in
advance each month, and by the third working day of the month at the latest, to
the account of the landlord, No.: 9 923 093 00 (Sort code 500 800 00) which is
with Dresdner Bank AG in Frankfurt am Main. When it comes to assessing whether
payment was made on time, it will be that point in time when the amount was
credited to the account which will be taken into account.
(3) If payment is late, the landlord is entitled to charge lump sum reminder
costs per reminder amounting to DM 10.00 including VAT plus interest on arrears
amounting to the damage caused to him.
(4) In addition to the rent, the tenant pays the additional costs in accordance
with Appendix 1, in respect of which monthly payments in advance are to be made
for the amount specified. The landlord can re-determine the amount of the
advance payment of additional costs using reasonable discretion.
The additional costs which are to be borne by the tenant in accordance with
Appendix 1 include all costs for maintenance, renovation and cosmetic repairs
appertaining to the rented and communal areas and equipment and fittings - in so
far as these are not the landlord's responsibility as regards maintenance and
renovation work in accordance with (s).16, Paragraph 1 - as well as all costs
connected with the running and servicing of the real estate.
The additional costs are borne equally by all the tenants and are on a
proportionate basis, taking their rented areas in relation to the whole of the
rented area of the commercial unit into account, and in each case with the
exception of vehicle parking areas and storage areas. Additional costs, which
can be directly allocated due to exclusive use of installations or building
areas or due to meters assigned to specific tenants, are to be borne exclusively
by these tenants.
The landlord is entitled at any time - and also in fact for the accounting
period which is current at any time to determine a new set of criteria for
apportioning additional costs (as a whole or for individual types of cost) using
reasonable discretion.
(5) If measuring equipment exists, the costs of running the heating plant are
accounted for in accordance with the regulations of the decree governing heating
costs, whereby 70% of the costs is charged according to consumption and 30% on
the basis of the rented areas which can be heated (fundamental costs).
If an interim reading is necessary, then the tenant concerned bears the costs.
4
<PAGE>
(6) The landlord charges the tenant for the additional costs falling due during
an accounting period for the period from 01.10. up until 30.09. of the following
year. With a unilateral declaration, the landlord can change the accounting
period as far as the tenant is concerned.
Also, if the tenancy ends within an accounting period, the tenant will be
charged on the next additional costs invoice, together with the allocation of
costs worked out in proportion to the period involved.
Additional payments or credit notes are to be settled within 14 days.
(S) 5
INDEX CLAUSE
(1) If the cost-of-living index for all private households within the whole of
the Federal Territory (Index 1991-100), as determined on a monthly basis by the
Statistical Federal Office, has changed from now on as regards the level for the
month before the rent commences or as regards the level which formed the basis
of the last new assessment up until the time that two rent years expire, then
the rent automatically changes from the first of the month following and on a
proportionate basis which is expressed as a percentage of the change which has
taken place. The rent adjustment (which can also be retrospective if necessary)
can only be enforced in writing.
(2) The contractual parties approve that the agreed index clause needs to be
approved by the National Central Bank. Both contractual parties undertake to
help in applying for approval if necessary and to hand over the necessary
declarations in this respect.
(S) 6
SURETY
One month before the rented object is handed over, the tenant will pay a cash
surety to the landlord which amounts to 4 gross monthly rents,
DM 156,100.00
(IN WORDS: TWO HUNDRED AND FORTY SEVEN THOUSAND SIX HUNDRED
DEUTSCH MARKS)
The landlord is obligated to deposit this surety in a savings account which is
bearing the usual interest rate for savings deposits with a three-month notice
period.
The surety can also be provided by means of a guarantee for the same amount from
a credit institution which is permitted to act as a guarantor for duties and
tax, provided that this is issued in the guarantee format as provided by the
landlord (Section III, Appendix 2).
5
<PAGE>
The surety will be given back after the tenancy ends and after all the
contractual obligations have been fulfilled. Non-fulfillment of contract only
applies if there are no counter-claims. Until that point in time when all
additional costs have been settled, the landlord can retain an appropriate
partial amount of the surety.
(S) 7
PROTECTION AGAINST COMPETITION AND RANGE OF PRODUCTS OFFERED
Protection for the tenant against competition and range of products offered is
expressly excluded.
(S) 8
FURTHER AGREEMENTS
(1) Once the conversion and renovation work is completed, measurements will be
taken in accordance with the guidelines produced by gif - Registered Association
for Real Estate Economic Research - for calculating the rented surface area for
offices (MF-B) which will be binding for both contractual parties. The results
produced by taking these measurements will form the basis for the final
calculation of rent.
The measurements are accepted as being binding for both parties provided that no
objection is raised within 2 weeks of receipt.
If, following acceptance of the measurements, subsequent measuring of the rented
area produces differences to the rented area as determined by the contractually
binding measurements, neither of the parties is entitled to withdraw from this
contract, to give notice of termination or to demand a change in rent. The
specified areas are to be taken as the basis in so far as it depends on the size
of the rented areas in accordance with the regulations of this contract.
(2) The landlord will ensure that the conversion and renovation work is carried
out as quickly as possible and at his expense in accordance with the layout of
rooms plan attached as Appendix 4 and in accordance with the description of
fittings and equipment attached as Appendix 5 to this contract. At the same
time, the costs drawn up in Appendix 6 must not be exceeded in total and the
individual labour costs must be offset against each other. If total costs are
exceeded due to requests made by the tenant, then the ensuing additional costs
are to be borne by the tenant.
(3) Co-determination and a right to influence arrangements by the tenant are
expressly guaranteed as regards conversion and/or renovation work.
(4) The tenant is allowed to partially use the rented rooms rent-free even
before they are handed over. However, during this period, a lump sum covering
additional payment which amounts to DM 1,500.00 net plus statutory VAT is due
for payment in advance in accordance with the regulations of this contract.
6
<PAGE>
Once the conversion work is completed, the tenant must move into the converted
part of the rented area so that the rest of the conversion work can take place.
(5) Due to the short time span until the rent begins, the rented areas will be
handed over successively, depending on completion. Correspondingly, the
obligation to pay rent exists for those areas which have been handed over. Rent
reductions due to noise caused by construction work and other disturbances
resulting from converting the areas for the tenant, Spray, are not allowed
during the whole of the conversion phase, in so far as the landlord does not
have to justify a delay in completion. The tenancy begins on 01.05.1998
regardless of the fact that the object may possibly be handed over in parts.
(6) This contract is concluded on the suspensive condition that the tenancy can
be cancelled on a mutually agreed basis with the company, Mitsubishi
International GmbH, for the areas in question. If the landlord does not provide
evidence to the tenant by the end of 28.02.1998 that the suspensive condition
has commenced, the tenant can withdraw from this contract.
(7) The first 4 months from the time that rent should begin are rent-free. In
these four months, only the advance payment in respect of additional costs plus
statutory VAT need to be paid.
(8) Subletting to subsidiaries of the tenant whose operating aims are the same
or similar is, contrary to the regulations of ss.11 of this contract, not
subject to approval but simply to notification. As a protection against
competition exists for a tenant situated within the real estate concerning
the running of an advertising agency, the tenant undertakes not to sublet
to a subsidiary who shares this line of business.
SECTION II
GENERAL CONTRACTUAL TERMS AND CONDITIONS
(S) 9
INSURANCE
The landlord is insured against risks resulting from fire, tap water and storm
damages. The building contents are not insured (furniture, fittings, goods). It
is the responsibility of the tenant to insure these.
(S) 10
REDUCTION, OFF-SETTING, RETENTION, LIABILITY
(1) The tenant cannot make a reduction in rent due to a defect if the defect
does not reduce the usability of the rented rooms to any great extent. As for
the rest, a reduction is only permissible if the tenant has given notice of it
in writing to the landlord two weeks before the first payment of rent which is
to be reduced.
7
<PAGE>
(2) Off-setting and exercising the right of retention are only permissible if
the counterclaim is determined as being undisputed or legally binding.
(3) Compensation claims by the tenant due to defects within the rented object
or due to the landlord delaying the removal of a defect (ss.538, Paragraph 1 of
the Civil Code) cannot be enforced unless the landlord or his agents have
committed an act of culpable negligence or have acted intentionally.
(4) The tenant is liable to the landlord for damages to the rented object or to
the building which are caused by himself, his dependents or employees as well as
by workmen appointed by him, suppliers, customers or other persons connected
with himself. He is liable for damages which occur due to improper treatment,
particularly as far as technical or other pieces of equipment are concerned. It
is incumbent upon the tenant to provide evidence within the rented rooms that
culpable conduct has not taken place.
(S) 11
USE OF THE RENTED PREMISES, SUBLETTING
(1) The rented object is exclusively rented out to the tenant for the agreed
intended use.
Any changes in the use of the rented object need approval in writing and
inadvance from the landlord.
(2) Subletting or any other form of surrendering the rented object for use by
third parties needs approval in writing and in advance from the landlord and it
can only be used for commercial purposes which have been agreed upon.
In so far as the tenant is contractually obliged to pay VAT as well as the rent
and additional costs, subletting or surrendering the rented object for use by
third parties can only occur if the third parties are business persons in the
sense of the law governing value added tax.
(3) In the case of subletting or surrendering for use, the tenant is liable for
any action taken by the subtenant or if he fails to act and this also applies to
third parties to whom the tenant has surrendered the rented rooms for use.
(S) 12
EFFECTS PRODUCED BY THIRD PARTIES
Effects produced by third parties who are not represented by the landlord, such
as, for example, traffic diversions, excavation work, road-blocks, disturbances
caused by noise, smells and dust or similar, do not, regardless of the extent,
constitute a fault as far as the rented object is concerned.
8
<PAGE>
(S) 13
POWER AND WATER SUPPLIES
(1) A change in the power supply caused by the supply company does not entitle
the tenant to claim compensation from the landlord.
(2) If the electricity, gas and/or water supplies etc. are interrupted by a
circumstance which is not attributable to the landlord or if irregularities
occur as far as the supply is concerned, the tenant cannot claim compensation
from the landlord nor does he have any right to a reduction in rent.
If the terms and conditions governing supplies provide for interruptions in the
supply and make a provision that the supplier is liable when irregularities
occur as far as the supply is concerned, then the landlord transfers his claims
against the supplier to the tenant who accepts these.
(S) 14
RESPONSIBILITY FOR ROAD SAFETY
In accordance with the statutory regulations, it is incumbent upon the tenant to
be responsible for road safety within his rented area.
(S) 15
ADVERTISING BOARDS AND NAMEPLATES,
OTHER DEVICES OR INSTALLATIONS
(1) There is communal equipment to hand for putting company signs or nameplates
which is available for use by the tenant, provided that he bears the cost of
producing the signs and their assembly.
(2) Other devices or technical installations which the tenant intends to put up
outside the rented area, such as for example, advertising equipment on the
facade, require agreement in writing and in advance between the contractual
parties.
(S) 16
MAINTENANCE AND RENOVATION/COSMETIC REPAIRS
(1) It is incumbent upon the landlord to maintain the roof, the structural
parts of the building such as outside walls, supporting inner walls, supports
and foundations, as well as the facade, with the exception of the glasswork on
the windows and doors which surround the rented area and the mountings in
connection with these.
9
<PAGE>
In addition, it is incumbent upon the landlord to renew (supply a replacement
for) individual technical building installations in their entirety each time, in
so far as a replacement is necessary despite regular servicing and maintenance
in respect of which the costs can be apportioned in accordance with ss.4,
Paragraph 4, because repairs are no longer possible using appropriate means (in
relation to the particular installation).
(2) It is incumbent upon the tenant to carry out cosmetic repairs as well as
other maintenance and renovation work within the rented rooms. This also applies
to the technical equipment, particularly electrical and sanitary equipment,
heating and air-conditioning installations, in so far as these are situated in
or on the rented object and are to be used by the tenant, as well as the
glasswork on the windows and doors appertaining to the rented area which
surround the rented area and the mountings relating to these.
(3) If there are flow heaters and/or boilers for heating up water in the rented
rooms, the tenant bears all the costs directly for maintenance, running,
servicing and cleaning such apparatus, as well as the costs for replacement.
(4) Within an accounting period (ss.4, Paragraph 6), the sharing of costs by
the tenant for maintenance and renovation work amounts to a maximum of 5% of the
annual net rent, with the exception of costs according to Paragraphs 2 and 3,
which the tenant must bear in full.
(5) If the agreed use, as stated under Section I No. 1.1. of this contract,
includes the commercial use of a kitchen or the tenant is entitled to run a
canteen, the landlord will allow regular cleaning or servicing of the fat
separator and the waste air ducts to take place at the expense of the tenant.
(6) At regular intervals, the tenant must let experts test the electrical
installations within the rented area in accordance with the relevant regulations
of the German Electrical Engineers Association and the regulations governing the
prevention of accidents (The Trade Associations' Regulations Manual 4) and he
must prove that this has been done if the landlord so requests.
(S) 17
STRUCTURAL CHANGES
(1) The tenant can only make structural changes if he has obtained the prior
written agreement of the landlord.
(2) When the tenancy ends, the landlord can demand that the tenant leaves the
alterations and installations which he has carried out at his own expense and he
will not be paid any compensation for this or he can demand that the premises be
reverted back to their original condition at the expense of the tenant.
(3) Structural changes and repairs can be carried out by the landlord without
the agreement of the tenant if these are necessary for maintaining the building
or the rented
10
<PAGE>
rooms, for the prevention of impending hazards, for removing damages or for
complying with official orders.
(S) 18
SEVERAL PERSONS AS THE TENANT
Several natural or juristic persons acting as the tenant are liable for all
obligations arising under this contract as co-debtors. Each co-debtor is
entitled to deliver legally binding declarations for and against the tenant. Any
declarations made against a co-debtor also apply as declarations made against
the other co-debtors.
(S) 19
GENERAL REGULATIONS AS REGARDS TIDINESS AND CLEANLINESS
(1) The rented rooms are to be treated carefully by the tenant and are to be
cleaned regularly and professionally.
(2) The highest weight allowable for loading onto the floor must be adhered to.
(3) Rubbish resulting from the commercial activities of the tenant, if this is
not the usual office rubbish, as well as bulky rubbish, must not be put in
containers provided by the landlord for general needs. It must be disposed of
directly and separately by the tenant.
(4) If facilities are provided for disposing of the separate rubbish, such as
for example, waste paper, cardboard boxes, glass, synthetic materials, then
these should be used by the tenant. Special refuse, such as for example,
batteries, paints and oil are to be taken to the appropriate dumps.
(5) Any possible specific rules governing usage, which must be observed in
every instance, are, if necessary, attached as an Appendix to this contract and
form a component part thereof and/or can be cancelled by the landlord if
required at a later date.
(6) The external window surfaces, including the window frames, must be
regularly cleaned by the tenant, provided that it does not involve a closed
facade.
(7) The landlord must be notified immediately of any damages.
(8) As far as the communal installations and equipment are concerned (lifts,
rubbish removal equipment, air-conditioning equipment, heating equipment etc.),
the separate regulations governing usage are to be observed.
11
<PAGE>
(S) 20
REGULATIONS AS REGARDS PROTECTION AGAINST FIRE
(1) All general and official regulations must be observed within the context of
prevention of and protection against fire.
(2) Escape routes inside and outside the rented rooms must be kept absolutely
free.
(3) Technical equipment for fire prevention and other technical safety
equipment must not be altered or interfered with.
(4) If the fire prevention authorities or the fire brigade recommend or
stipulate that a fire prevention representative be appointed within the context
of protection against fire, then the tenant is obligated to nominate one or
several contacts who will receive the appropriate instruction.
(5) If a fire breaks out, the landlord or one of his authorized representatives
must be informed immediately after the fire brigade and other rescue services
have been told.
(6) If an order governing fire prevention is made available to the tenant now
or is required at a later date, then the tenant must observe and comply with
this.
(7) Naked lights and smoking are not allowed in the basement and other areas
where there is a notice stating that naked lights and smoking are forbidden.
(8) Easily inflammable materials, combustibles and explosive materials must not
be stored anywhere in the building without prior agreement.
(9) In so far as it is necessary or has not been provided by the landlord, the
tenant must have suitable extinguishing equipment to hand, such as for example,
fire extinguishers, within his rented rooms. In addition, the tenant is directly
responsible for meeting any operational and technical fire prevention
instructions.
(S) 21
TERMINATION OF THE TENANCY
(1) When the tenancy ends, the rented rooms are to be vacated and handed over
to the landlord in a professionally renovated condition. The tenant must arrange
for carpets to be shampooed professionally. The tenant must remove his own
installations from false bottoms and cable channels. This also applies to
additional cables laid down by him, such as for example, for computers and
telephones.
(2) If the work which must be carried out by the tenant has not been carried
out by the end of the tenancy, then the landlord can place an order that the
work be carried out at the expense of the tenant, without an extension of time
being required. In this instance, the
12
<PAGE>
tenant is liable for the damage suffered by the landlord due to the work being
carried out late (particularly, loss of rent).
Notwithstanding the preceding regulation, the landlord can demand compensation
in cash for the renovation claim which he is entitled to make, if the cosmetic
repairs are damaged again due to alteration work carried out after the contract
has ended.
(S) 22
THE WRITTEN FORM/REMEDIAL CLAUSE/PLACE OR JURISDICTION
(1) Changes and additions to this contract at a later date must be in writing.
These can not be made orally.
(2) If one or several of the regulations under this contract are or become
legally invalid in whole or in part, then the validity of the other regulations
will not be affected by this. What is more, in such an instance, the contract is
to be carried out in accordance with its purpose. If the invalidity is caused by
a regulation concerning performance or time, then it will be replaced by the
legally permissible rule.
(3) The place of jurisdiction is Hamburg provided that another place of
jurisdiction is not legally stipulated.
Frankfurt am Main, 03.02.98 Hamburg, 03.02.98
DEGI Deutsche Gesellschaft <company stamp>
fur Immobilienfonds mbH
Kleinert Kuster SPRAY
(Landlord) [SIGNATURE]
13
<PAGE>
EXHIBIT 10.26
TOIMITILAN VUOKRASOPIMUS
VALTION KIINTEISTOLAITOS/UUSIMA
SOPIMUSNUMERO: 910539
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------
Vuokranantaja Nime: VALTION KIINTEISTOLAITOS/UUSIMA
Osolte: HAAPANIEMENSKATU 4, PL 236
OO531 HELSINKI
Yhteyshanidio: AIMO SAARENEN Puh: 09-329 911
Tili: Vulokra maksetaan vuokralaskussa mainitulle tilille
vitenumeroa katttaen
- ---------------------------------------------------------------------------------------------------------------------
Vuokralainon Nimi: SPRAY - INTERACTIVEMEDIA
Osoite: KALEVAANKATU 47
00180 helsinki Puh: 040-5006776
Yhteyshanidio: ANTTI KOSKINEN
- ---------------------------------------------------------------------------------------------------------------------
Vuokrauskohde Nimi: TOIMISTOTILAT
Osoite: KALEVANKATU 48
Kunta: 091 HELSINKI
Ala: 264.0 htm2 Kayttotarkoitus: Toimisto
Eritely vuokrauskohteen tilatyypeista:
Tilatyypol htm2 mk/m2 mk/kk
---------- ---- ----- -----
Toimistoiolat 264,0 60,00 15840,00
Yhteensa 264,0 60,00 15840,00
- ---------------------------------------------------------------------------------------------------------------------
Vuokraalka Alkaminen: 01.06.1997 Voimassaolo: Toistaisaksi
Irtisanomisaika: 8 kk. Ensimmainen irtisanomispalva:
ja taman jakeen kunkin kuukauden viimeninen paiva
- ---------------------------------------------------------------------------------------------------------------------
Vuckra Vuokra: 15 840,00 mk/kk 60,00 mk/m2/kk
Sahko: 528,00 mk/kk
Vuokra maksetaanatukateen kunkin kuukauden 3.paivena.
Vii vastyskorko on voimassa olevan korkaiain ukainen.
- ---------------------------------------------------------------------------------------------------------------------
Vuokranlarkistus On Indeksietito Elinkustannusindeksi 9151: 10=100
Perusindeksi: 197:06 Tarkistusind: 11
Preusvuokra: 15 840,00 mk/kk
Indekain muutos otataan huomioon taysimaaraisasti.
Tarkistus suoritetaan vuostttain. Taridstettus vuokraa
maksataan tammikuun alusta alkeen vuokranantajan
kirjallisen llmoitukeen parusteella.
- ---------------------------------------------------------------------------------------------------------------------
Vuokrauskohteen Vuokranantaja vastaa sitta etia vuokrauskohdo luovutetaan siina kunnossa missa se oli
kunto vuokraauthteen vuokrauskohdetta esitaltaessa.
alkoassa
- ---------------------------------------------------------------------------------------------------------------------
Vuokrauskohteen Vuokraiainen ei aas suorittaa vuokrauskohteessa muutos ja korjaustoita ilman
kunto vuokraauthteen vuokranantajan lupas.
asaessa
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------
Vuokrauskohteen Vuokralainen ei saa ilman vuokranantajan lupaa luovuttaa
luovuius vuokrauskohdetta toiselle.
- ---------------------------------------------------------------------------------------------------------------------
Muutsopimus-shdot Sahkokorvaus maksetaan vuokran yhteydeasa ja sita voidaan
tarkistaa tariffien tai todellisen kulutuksen muuttusssa.
Vuokraiainen voi Kustannukaellaan suorittaa tarvittavat muutostyot.
Muutostyoauunnitaimat on hyvaksytottava vuokranantajatta.
Vuokrasuhteen paattyessa muutostyon kohteena olevat tilat on pa-
lautettava ennalieen mikali Yokranantaja vaatii.
Vuokralainen voi ottaa Kayttoonsa ennen sopimuskauden alkamista
muutaman huoneen rakennuksen 1.kerroksen tyhjista tiloista.
Ehdoista sovitaan erikseen.
- ---------------------------------------------------------------------------------------------------------------------
Muutoin noudatetaan lakia liikehuoneiston
vuokrauksesta. Tata sopimusta on tehty kaksi
yhtapitavaa kappaletta, yksi kummaiiekin
sopijapuolelle.
- ---------------------------------------------------------------------------------------------------------------------
Alleidr-joitus Vuokranantaja: Vuokraiainen:
Heisinki 25.4.1997 Heisinki
VALTION KIINTEISTOLAITOS/UUSIMAA SPRAY - INTERACTIVEMEDIA
Antti Vayrynen
Ylltarkastaja
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STATE REAL PROPERTY AUTHORITY
RENTAL AGREEMENT FOR OFFICE SPACE
AGREEMENT NO. 910539
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lessor Name: STATE REAL PROPERTY AUTHORITY/UUSIMAA
Address: HAAPANIEMENKATU 4, P.O. BOX 236
00531 HELSINKI
Contact person: AIMO SAARINEN tel. 09-329911
Account: Rent shall be paid to the account mentioned in the
rental invoice, using the reference number.
- --------------------------------------------------------------------------------------------------------------------------
Lessee Name: SPRAY - INTERACTIVEMEDIA [sic]
Address: KALEVANKATU 48
00180 HELSINKI tel. 040-5008776
Contact person ANTTI KOSKINEN
- --------------------------------------------------------------------------------------------------------------------------
Rental site Name: OFFICE SPACE
Address: KALEVANKATU 48
Municipality: 091 HELSINKI
Area: 264.0 m2 Purpose of use: Office
Specification of rental site:
Space type rooms/m2 FIM/m2 FIM/month
----------- --------- -------- ---------
Office Space 264.0 60.00 15,840.00
Total 264.0 15,840.00
- --------------------------------------------------------------------------------------------------------------------------
Rental period Initiated: 01 June 1997 Period of validity: until further notice
Notice of rental termination 8 months First date of notice:
and after this the last day of each month
- --------------------------------------------------------------------------------------------------------------------------
Rent Rent FIM 15,840.00/month FIM 80/m2/kk
Electricity FIM 528/month
Rent is paid in advance each month on the 3rd day.
Default charges in accordance with the legislation-related interest rates.
- --------------------------------------------------------------------------------------------------------------------------
Rent review Escalator clause in effect Cost of living index 1951:10=100
Basic index: 1997:06 Verification index: 11
Basic rent: FIM
15,840.00/month
Change in index is taken into full account.
Review is carried out each year.
The reviewed rent is paid as of the beginning of January on the basis of written notice by the
lessor.
Condition of The lessor is responsible for ensuring that the rental site is turned over in the same
rental site condition as when originally shown.
at outset
of rental
agreement
- --------------------------------------------------------------------------------------------------------------------------
Condition of The lessee is not allowed to make alterations or renovations on the rental site without the
rental site permission of the lessor.
as rental
agreement
continues
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Transfer of The lessee is not allowed to relinquish the rental site to another party without permission of
rental site the lessor.
- --------------------------------------------------------------------------------------------------------------------------
Other
agreement
conditions Electricity-related charges are remitted in conjunction with the rent, and they may be reviewed
in the event that tariffs or real consumption change.
The lessee may, at his own expense, carry out required alterations. Such alterations must be
approved by the lessor. Upon termination of rental agreement, the space subjected to
alterations must, in the event that the lessor demands it, be returned to its original
condition.
The lessee may take into his use, prior to the rental period, a few rooms representing empty
space on the first floor of the building. Conditions to be agreed separately.
- --------------------------------------------------------------------------------------------------------------------------
In other respects, the business premises are in accordance with the law in respect to rental.
This agreement is rendered in two identical copies, one to each contracting party.
- --------------------------------------------------------------------------------------------------------------------------
Signature Lessor: Lessee:
Helsinki 25 April 1997 Helsinki
STATE REAL PROPERTY AUTHORITY SPRAY-INTERACTIVEMEDIA [sic]
Antti Vayrynen
Senior Inspector
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.27
TOIMITLLAN VUOKRASOPIMUS
VALTION KIINTEISTOLAITOS
SOPIMUSNUMERO: 910539
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Vuokranantaja Nime: VALTION KIINTEISTOLAITOS/UUSIMAA
Osolte: HAAPANIEMENKATU 4, PL 236
00531 HELSINKI
Yhteyshenkilo: AIMO SAARINEN Puh: 09-329 911
Tili: Vuokra maksetaan vuokralaskussa mainitulle tilille
viitenumeroa loaytttaen
- ------------------------------------------------------------------------------------------------------------------------------
Vuokralainon Nimi: SPRAY INTERACTIVE MEDIA OY
Osolte: KALEVANKATU 48
00180 HELSINKI Puh: 040-5006776
Yhteyshenkilo: ANTTI KOSKINEN
- ------------------------------------------------------------------------------------------------------------------------------
Vuokrauskohde Nimi: TOIMISTOTILAT
Osoite: KALEVANKATU 48
Kunta: 091 HELSINKI
Ala: 284.0 htm2 Kayttotarkoitus: Toimisto
Erittely vuokrauskohteen tilatyypeista:
Tlletyypoli htm2 mk/m2 mk/kk
----------- ---- ----- -----
Tolmistotilat 281,0 60,00 16860,00
Yhteensa 281,0 16860,00
- ------------------------------------------------------------------------------------------------------------------------------
Vuokraalka Alkaminen: 01.09.1997 Voimassaolo: Tolstaiseksi
Irtisanomisaika: 6 kk. Ensimmainen irtisanomispaiva: 28.02.1999
ja taman jalkeen kunkin kuukauden viimeinen paiva
- ------------------------------------------------------------------------------------------------------------------------------
Vuckra Vuokra: 16 860,00 mk/kk 60,00 mk/m2/kk
Sahko: 1 000,00 mk/kk
Vuokra maksetaan etukateen kunkin kuukauden 3. paivana.
Viivastyskorko on voimassa olevan korkolain mukainen.
- ------------------------------------------------------------------------------------------------------------------------------
Vuokranlarkistus On indeksiehto Elinkustannusindeksi 1951: 10=100
Perusindeksi: 1997:09 Tarkistusind: 11
Perusvuokra: 16 860,00 mk/kk
Indeksin muutos otetaan huomioon taysimaaraisesti.
Tarkistus suoritetaan vuosittain.
Tarkistettua vuokraa maksetaan tammikuun alusta alkaen vuokranantajan
kirjallisen llmoitukeen perusteella.
- -----------------------------------------------------------------------------------------------------------------------------
Vuokrauskohteen Vuokranantaja vastaa sitta etta vuokrauskohde luovutetaan siina kunnossa missa se oli
kunto vuokraauthteen vuokrauskohdetta esitaltaessa.
alkoassa
- -----------------------------------------------------------------------------------------------------------------------------
Vuokrauskohteen Vuokralainen ei saa suorittaa vuokrauskohteessa muutos ja korjaustoita ilman vuokranantajan lupas.
kunto vuokraauthteen
asaessa
- -----------------------------------------------------------------------------------------------------------------------------
Vuokrauskohteen Vuokralainen ei saa vuokranantajan lupaa luovuttaa vuokrauskohdetta toesalle
luovutus
- -----------------------------------------------------------------------------------------------------------------------------
Muutsoptnureahdot Sahkokorvaus maksetaan vuokran yhteydessa ja aita voidaan tarkistaa tariffen tai todelliasen
kulutuksen muutuesaa.
Vuokralainen voi kustannuksellaan suorittaa tarvittavat muutostyot.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Muutostyosuunnitelmat on hyvaksytettava vuokranantajalla.
- -----------------------------------------------------------------------------------------------------------------------------
Muutoin noudatetaan lakia liikehuoneiston vuokrauksesta.
Tata sopimusta on tehty kaksi yhtapitavaa kappaletta.
yksi kummallekin sopijapuolelle.
- -----------------------------------------------------------------------------------------------------------------------------
Allaloirjoitus Vuokranantaja: Vuokralainen:
Helsinki 14.5.1997 Helsinki
VALTION KIINTEISTOLAITOS/UUSIMAA SPRAY INTERACTIVE MEDIA OY
- -----------------------------------------------------------------------------------------------------------------------------
Antti Vayrynan
Ylitarkastaja
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RENTAL AGREEMENT FOR OFFICE SPACE
STATE REAL PROPERTY AUTHORITY AGREEMENT NO. 910539
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lessor Name: STATE REAL PROPERTY AUTHORITY/UUSIMAA
Address: HAAPANIEMENKATU 4, P.O. BOX 236
00531 HELSINKI
Contact Person AIMO SAARINEN tel. 09-329911
Account: Rent shall be paid to the account mentioned in the
rental invoice, using the reference number.
- ----------------------------------------------------------------------------------------------------------------------
Lessee Name: SPRAY - INTERACTIVE MEDIA OY
Address:
KALEVANKATU 48
00180 HELSINKI tel. 040-5008776
Contact Person: ANTTI KOSKINEN
- ----------------------------------------------------------------------------------------------------------------------
Rental Site Name OFFICE SPACE
Address: KALEVANKATU 48
Municipality: 091 HELSINKI
Area: 281.0 m2 Purpose of use: Office
Specification of rental site:
Space type rooms/m2 FIM/m2 FIM/month
---------- -------- ------ ---------
Office space 281.0 60.00 16,860.00
Total 281.0 16,860.00
- ----------------------------------------------------------------------------------------------------------------------
Rental period Initiated: 01 September 1997 Period of validity: until further notice
Notice of rental
termination: 6 months first date of notice: 28 February 1999
and after this the last day of each month
- ----------------------------------------------------------------------------------------------------------------------
Rent Rent FIM 16,860.00/month FIM 60/m2/kk
Electricity FIM 1000.00/month
- ----------------------------------------------------------------------------------------------------------------------
Rent is paid in advance each month on the 3/rd/ day.
Default charges in accordance with the legislation-related interest rates.
- ----------------------------------------------------------------------------------------------------------------------
Rent review Escalator clause in effect Cost of living index 1951:10=100
Basic index: 1997:09 Verification index: 11
Basic rent: FIM
16860.00/month
Change in index is taken into full account.
Review is carried out each year.
The reviewed rent is paid as of the beginning of January on the basis of written notice by the
lessor.
----------------------------------------------------------------------------------------------------
Condition of The lessor is responsible for ensuring that the rental site is turned over in the same
rental site at condition as when originally shown.
outset of rental
agreement
----------------------------------------------------------------------------------------------------
Condition of The lessee is not allowed to make alterations or renovations on the rental site without the
rental site as permission of the lessor.
rental
agreement
continues
- ----------------------------------------------------------------------------------------------------------------------
(18)
- ----------------------------------------------------------------------------------------------------------------------
Relinquishment The lessee is not allowed to relinquish the rental site to another party without permission of
of rental site lessor
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Other agreement Electricity-related charges are remitted in
conditions conjunction with the rent, and may be reviewed
in the event that tariffs or real consumption
change.
The lessee may, at his own expense, carry out
required alterations. Such alterations must be
approved by the lessor
- ----------------------------------------------------------------------------------------------------------------------
In other respects, the business premises observe the law with respect to rental.
This agreement has been prepared in two identical copies, of which each contractual party has
taken one.
- ----------------------------------------------------------------------------------------------------------------------
Signature Lessor: Lessee:
Helsinki 14 May 1997 Helsinki
STATE REAL PROPERTY AUTHORITY/UUSIMAA SPRAY-INTERACTIVEMEDIA OY
[signature] [signature]
Antti Vayrynen Antti Koskinen
Senior Inspector Managing Director
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(19)
2
<PAGE>
EXHIBIT 10.28
L E I E K O N T R A K T
---------------------------
Mellom
KONGENSGATE 2 ANS
(heretter kalt utleieren)
og
SPRAY GK
Person/foretaksnr . .......
(heretetter kalt leietakeren)
er i dag inngatt f0lgende kontrakt om leie av lokaler i Kongensgate 2 Gnr 207,
Bnr 133 i Oslo kommune.
1. LEIEFORHOLDETS OMFANG
Leieforholdet omfatter f0lgende lokaler og ytre rom:
Kontorlokaler:
190 m2 brutto kontorlokaler inkl. andel fellesarealer i 2. etasje som
omfatter rom 214-215-216-217-218-219-220-221-223 og224.
545 m2 brutto kontorlokaler inkl. andel av fellesarealer i 3. etasje,
som omfatter rom 302 t.o.m. 329.
Samlet leieareal i 2. og 3. etasje utgj0 735 m2 brutto kontorlokaler
inkl. andel av fellesarealer.
2. BRUK AV LEIEOBJEKT
Leieobjektet ma kun benyttes til kontor.
Skifte av bransje eller forandring av virksomheten i lokalene er ikke
tillatt uten utleiers forutgaende, skriftlige samtykke.
Det samme gjelder salg, eksponering etc. i fellesarealer.
3. LOKALENES STAND VED OVERTAGELSE
Leieobjektet overtas i den stand det var ved besiktigelsen den
14.4.1998. I lokalene pa 190 m2 i 2. etasje vil vegger bli sparklet og
malt, og gulv slipt og lakkert.
Leietakeren ma gi skriftlig melding om mulige skader og mangler m.v.
ved leieobjektet innen rimelig tid etter at han burde ha oppdaget dem.
Feil og mangler som leietakeren kjente eller burde kjent til ved
avtaleinngaelsen, kan ikke gj0res gjeldende.
<PAGE>
2
4. LEIEFORHOLDETS VARIGHET
KONTORLOKALENE I 2. ETASJE:
Leieforholdet for kontorlokalene i 2. etasje pa 190 m2 brutto l0per
fra 1.7.98 til 30.6.2003, hvilken dag det utl0per uten forutgaende
oppsigelse fra noen av partene. Ved fraflytting etter 30.6.2001
frafalles kravet om avbruddsbel0p i. h. til pkt. 20.3.
KONTORLOKALENE I 3. ETASJE:
Leieforholdet for kontorlokalene i 3. etasje pa 545 m2 brutto l0per
fra 1.1.1999 til 30.06.2003. For lokalene i 3. etasje har leietaker
rett til a si opp leieforholdet med 6 mnd. varsel frem til 1.6.1999.
Deretter gjelder samme oppsigelsesbetingelser som for 2. etasje.
Leietakeren skal ha rett til a fornye leieforholdet for ny leieperiode
pa 3-5 ar. Kontrakten skal da reforhandles pa fritt grunnlag. 0nske om
ny avtale, ma meddeles utleieren skriftlig senest 6 - seks - maneder
f0r 30.6.2003. I motsatt fall er retten bortfalt.
5. HUSLEIEN
HUSLEIE 2. ETASJE:
Husleien for kontorlokalene i 2. etasje utgj0r kr. 199 500 , - pr. ar
etter 1.9.998, dvs. kr.1050.- pr. m2 / ar, og betales forskuddsvis og
ukrevet den 1. i hvert kvartal med kr. 49 875 ,-.
For juli og august 1998 betales 50 % leie for lokalene i 2. etasje.
Husleie 3. etasje:
Husleien for kontorlokalene i 3. etasje er i henhold til navaerende
leieavtale frem til 1.1.1999. Etter 1.1.1999 vil leien for
kontorlokalene vaere kr. 572 250.- pr. ar tilsvarende kr. 1050.- pr.
m2 / ar som betales forskuddsvis den 1. i hvert kvartal med kr. 143
063. -
Utleieren kan med virkning fra den 1. januar hvert ar (f<M059>rste
gang den 1. januar 1999) forlange leien regulert overensstemmende med
mulig stigning i Statistisk Sentralbyras konsumprisindeks, eller -
dersom denne blir opphevet - annen tilsvarende offentlig indeks. Basis
for f<M059>rste gangs regulering er den i kontrakten fastsatte leie og
indeksens utvisende pr. 15.05.1998 frem til 15.11.1998. Grunnlag for
senere arlige reguleringer pr. 1.1 er den til enhver tid gjeldende
leie og stigningen i indeksen gjennom de siste 12 maneder frem til
15.11. foregaende ar.
Dersom offentlige bestemmelser skulle vaere til hinder for
gjennomf<M059>ring av den avtalte leieregulering, skal leien uavhengig
av de fastsatte regulerings-punkter straks kunne kreves regulert i den
utstrekning og fra det tidspunkt det blir lovlig adgang til dette.
Ved forsinket betaling av leie svares morarenter iht. lov av 1976 nr.
100 eller lov som trer i stedet for denne. Utleier har rett til a
kreve gebyr ved purring.
6. FELLESUTGIFTER
<PAGE>
3
I tillegg til leien betaler leietakeren forholdsmessig andel av eiendommens
fellesutgifter som spesifisert nedenfor:
Energi:
- ------
Str<M059>m til oppvarming og belysning av fellesarealer og trapper, heiser,
kj0leanlegg, ventilasjonsanlegg, varmtvannstanker, utelys, varmekabler, oljefyr
og fyringsolje.
Offentlige avgifter:
- -------------------
For tide; vann-, kloakk-, feie og renovasjonsavgift.
Nye avgifter kommer evt. i tillegg, likesa merverdiavgift dersom dette skal
tillegges leien.
Dersom det blir innf<M059>rt merverdiavgift ved utleie av lokaler som omfatter
naervaerende leieforhold, kan utleier <M059>ke husleien tilsvarende
avgiftssatsen, med fradrag for en forholdsmessig andel av inngaende avgift
forutsatt at utleier er momspliktig.
Rengj<M059>ring:
Trappevask, rengj0ring av fellesarealer samt eventuelt leie av matter.
Renovasjon:
- ----------
S0ppeleontainer; leie, bortkj<M059>ring og t<M059>mming.
Tilsyn, service og vedlikehold:
- ------------------------------
Heiser, sanitaeranlegg, kj0leanlegg, ventilasjonsanlegg, alle branntekniske
alarm-/sikkerhetsanlegg, vakthold, porter, fyringsanlegg, gr<M059>ntanlegg i
innend<M059>rs fellesareal.
Gartner ute, sn<M059>making og renhold av utearealer/fortau, vaktmestertjenester
generelt.
Kvartalsvis a konto forskuddsinnbetaling, utgj<M059>r pa kontraktstidspunktet
for lokalenc i 2. etasje
kr. 8 883 ,-, for kontorlokalene i 3. etasje kr. 25 479.- og for lagerlokalene
(50 % fellesutgifter) i 4. etasje kr. 587.-
Andel fellesutgifter for lokalene i 2. etasje og 4. etasje betales fra 1.6.1998.
For ovennevnte andel av fellesutgifter betales kvartalsvis a-konto bel0p sammen
med husleien, med avregning og eventuelt restoppgj<M059>r etter avsluttet
regnskap. Fellesutgiftene fordeles etter byggets fordelingsn<M059>kkel. Andel
for mulige ledige lokaler i garden dekkes av utleier, i den utstrekning
ledigheten ikke gir seg uttrykk i reduserte utgifter.
Neste ars a-konto innbetaling baseres pa forrige ars regnskap.
Direkte for egen regning betaler leietakeren:
Energi til egne lokaler, etter egen maler, dersom dette ikke inngar i
fellesutgiftene.
Rengj0ring av egne lokaler. Vask av vinduer inn- og utvendig, samt
rengj<M059>ring av solavskjerming. (Utleier forbeholder seg a la utvendig
vindusvask samt rengj0ring av
<PAGE>
4
solavskjerming skje pa fellesbasis.)
Vaktmestertjenester for eget bruk.
Der hvor det kreves vann til annet enn toalettbruk og vanlig renhold, ma
leietaker selv holde egen vannmaler og utrede utgiftene til dette samt betale
vannforbruket. Ved forsinket betaling av andel fellesutgifter, svares morarente
iht. lov av 1976 nr. 100 eller lov som trer i stedet for denne. Utleier har rett
til a kreve gebyr ved purring.
7. SIKKERHET - DEPOSITUM - GARANTI
Leietaker stiller selvskyldnergaranti fra finansinstitusjon som driver
virksomhet her i riket etter konsesjon gitt av norske myndigheter,
eller annen av utleier godkjent garanti, alternativt depositum etter
utleiers valg, for riktig oppfyllelse av leietakers forpliktelser av
enhver art i samsvar med norsk lov og etter denne leiekontrakt,
herunder rettidig betaling av leie og andel fellesomkostninger.
Garantien skal til hver tid tilsvare 6 maneders leie + andel
fellesomkostninger, og den skal vaere gyldig for leietiden + to
maneder. Garantibel<M059>pet skal ved overtakelsen av lokalene vaere
kr. 450 000.-Denne avtale er ikke bindende for utleier f0r garantien
foreligger. Garantien ma foreligge senest innen en maned etter
kontraktsunderskrift, og under enhver omstendighet f<M059>r
innflytting.
8. FREMLEIE/OVERDRAGELSE/SELSKAPSMESSIGE ENDRINGER
Fremleie og overdragelse av kontrakten, helt eller delvis, er ikke tillatt uten
utleiers skriftlige forhandssamtykke. Fremleie kan ikke nektes uten saklig
grunn. Overdragelse av minst 50% av aksjene, selskapsandelene eller
eierinteressene hos leietaker anses som overdragelse av kontrakten. Det samme
gjelder leietakers skifte av selskapsform.
Som overdragelse regnes ogsa avhendelse av det mindre antall aksjer eller
andeler som i seg selv utgj0r bestemmende innflytelse (alminnelig flertall) i
selskapet. Utleier skal pa foresp<M059>rsel gis opplysninger bekreftet av
leietakers revisor, om slik overtagelse har funnet sted.
Enhver selskapsmessig endring som forringer leietakers <M059>konomiske stilling
overfor utleier, krever utleiers samtykke.
9. UTLEIERENS OG LEIETAKERS PLIKTER
Det pahviler utleier a s0rge for at bygningen med tekniske innretninger til
enhver tid er i god stand. Utleier plikter a s0rge for godt vedlikehold, drift
og renhold av inn- og utvendige fellesarealer.
Leietaker plikter a behandle savel de leide lokaler som eiendommen for0vrig med
<PAGE>
5
tilb<M059>rlig aktsomhet.
Lokalene ma ikke brukes pa en mate som forringer eiendommens omd<M059>mme
eller utseende eller ved st0v, st0y, lukt, rystelse eller pa annen mate
sjenerer andre leietagere eller naboer. Kostnadene ved utbedring og
eventuell erstatning i forbindelse med disse forhold, er leietakers ansvar.
Leietaker plikter a f<M059>lge de ordensregler,
brann/r<M059>mminginstrukser samt instrukser for heiser og <M059>vrige
tekniske anlegg, som til enhver tid gjelder for eiendommen. Knuste ruter i
ethvert rom som omfattes av leieforholdet, ma straks erstattes av nye. Rom
med vann- og/eller avl<M059>psr<M059>r ma holdes sa oppvarment at frysing
unngas.
Medf0rer virksomheten forh<M059>yelse av eiendommens forsikringspremier
eller faste avgifter, plikter leietakeren selv a betale forh0yelsen.
Leietaker plikter a inhente alle nodvendige tillatelser for sin bruk av
lokalene. Krav eller palegg fra arbeidstilsyn, helserad, brannvern,
sivilforsvar, industrivern eller annen offentlig myndighet, foranlediget av
den virksomhet som drives i lokalene, er leietakers ansvar.
Avfall ma legges i eiendommens s0ppelkasser. Avfall av ekstraordinaert
omfang eller karakter ma leietaker selv bes0rge fjernet for egen regning. I
motsatt fall vil utleier la avfallet fjerne for leietakers regning.
Leietaker plikter a gi utleier adgang til lokalene i kontor-/forretningstid
alle dager, for ettersyn, reparasjon, vedlikehold, taksering, etc. I alle
tilfeller der det anses n0dvendig for a forebygge eller begrense skade pa
eiendommen, har utleier rett til a skaffe seg adgang til lokalene.
Tilfeldige avbrudd i forsyninger av vann, str<M059>m, luft etc. plikter
leietaker a tale uten erstatning eller leiereduksjon.
10. ENDRING AV LEIEOBJEKT
Innredning, ominnredning eller noen som helst forandring i eller
av de leide lokaler ma ikke finne sted uten utleiers skriftlige
forhandsgodkjenning. Slik forhandsgodkjenning kan gis pa
betingelse av at forandringene tilfaller utleier uten
godtgj0relse ved leieforholdets slutt, eller at leietakeren
bringer lokalene tilbake til opprinnelig stand.
Forhandsgodkjenning kreves ogsa om leietaker <M059>nsker a bruke
mer str<M059>m, vann, luft, avl<M059>p mv. enn hva lokalene ved
kontrakstidspunktet var utstyrt med. Dersom slik godkjenning gis,
er leietager ansvarlig for a innhente de n<M059>dvendige
offentlige tillatelser.
Reklameskilt har leietaker, med utleiers skriftlige
forhandsgodkjenning rett til a
<PAGE>
6
sette opp som sedvanlig etter virksomhetens og eiendommens art og karakter.
Solavskjerming, radio-og TV-anlegg m.v. ma ikke settes opp uten at utleier
pa forhand skriftlig har godkjent utseende og plassering av disse.
Uthengsskap, automater o.l. ma heller ikke settes opp uten utleiers
skriftlige forhands- godkjenning. Dersom slik godkjenning gis, er leietaker
ansvarlig for a innhente de n<M059>dvendige offentlige tillatelser.
Leietaker ma selv bekoste sitt firmanavn pasatt det felles anvisningskilt
etter naermere avtale med utleier. Endringsarbeider beskrevet i dette ledd
tilfaller utleier etter endt leieperiode, med mindre utleier forlanger
lokalene satt tilbake i sin opprinnelige stand.
11. VEDLIKEHOLD
Det pahviler utleier a bekoste alt utvendig bygningsmessig vedlikehold.
Likeledes er utskifting av tekniske innretninger, slik som heiser,
ventilasjonsanlegg, fyringsanlegg etc. utleiers ansvar.
Det pahviler leietaker a bekoste vedlikehold av de leide lokaler, herunder
ogsa utvendig og innvendig vedlikehold av inngangsd<M059>rer og innvendig
vinduer med omramming, samt evt. solavskjerming, slik at disse til enhver
tid er i handverksmessig god stand. Vedlikeholdsplikten for leietaker
omfatter ogsa fornyelse av tapet og gulvbelegg og annen oppussing og
istandsetting innvendig, herunder overflatebehandling av gulv, vegger og
tak. Videre omfatter vedlikeholdsplikten ledninger og lampepunkter og
stikkontakter, samt ventilasjons- og kj0leanlegg innenfor leietakers
eksklusive leieforhold. Alt arbeid leietakeren plikter a utf<M059>re, skal
han foreta uten ugrunnet opphold og pa en handverksmessig forsvarlig mate.
Leietaker blir erstatningsansvarlig for all skade som skyldes ham selv
eller folk i hans tjeneste, faste eller tilfeldige, samt fremleietagere,
kunder og/eller andre personer som han har gitt adgang til eiendommen.
Erstatningsplikten omfatter ogsa utgifter som matte f0lge utrydding av
ut0y.
Leietakers vedlikeholdsplikt omfatter ogsa skader etter innbrudd i de leide
lokaler.
Leietaker plikter a s0rge for reparasjon og vedlikehold av de skilt etc.
som utleier har gitt tillatelse til a sette opp, jfr. pkt. 10.
Oppfyller ikke leietaker disse forpliktelsene er utleieren berettiget til,
etter skriftlig varsel med 14 dagers oppfyllelsesfrist, a utf0re
vedlikeholdsarbeidene for leietakers regning.
Utleier skal ha uhindret adgang til lokalene for inspeksjon med hensynet
til vedlikeholdspliktens oppfyllelse, samt for besiktigelser i anledning
takst og skj0nn.
<PAGE>
7
Utleier er berettiget til a foreta alle arbeider som matte vaere
n<M059>dvendige til eiendommens forsvarlige vedlikehold eller fornyelse, og
til i samme utstrekning a foreta ethvert forandringsarbeid savel i som
utenfor de leide lokaler. Leietaker plikter a medvirke til at ledninger,
kanaler og r<M059>r etc. til andre deler av eiendommen, kan f<M059>res
gjennom det leide lokale uten hinder av leietakers innredning etc.
Leietaker plikter a finne seg i slike arbeider uten erstatning eller avslag
i leien, med mindre ulempene for ham er vesentlige. Utleier skal pase at
arbeidene blir til minst mulig sjenanse for leietakeren, og i st<M059>rst
mulig grad varsle leietaker pa forhand.
12. LEIETAKERS AVTALEBRUDD - UTKASTELSE
Leietakeren vedtar at tvangsfravikelse kan kreves hvis leien eller avtalte
tilleggsytelser ikke blir betalt, jfr. ss. 13-2 3. ledd (a) i
tvangsfullbyrdelsesloven. Leietakeren vedtar at tvangsfravikelse kan kreves
nar leietiden er l<M059>pt ut, jfr. ss. 13-2 3. ledd (b) i
tvangsfullbrydelsesloven.
Gj0r leietakeren seg skyldig i annet vesentlig mislighold av leieavtalen
kan utleier heve denne, og leietakeren plikter da a fraflytte lokalene.
En leietaker som blir kastet ut eller flytter etter krav fra utleier pga.
mislighold eller fraviker lokalene som f0lge av konkurs, plikter a betale
leie for den tid som matte vaere igjen av leietiden, med fradrag av det
utleier matte fa inn ved ny utleie. Leietaker ma ogsa betale de
omkostninger som utkastelse, s0ksmal og rydding/rengj0ring av lokalene
f0rer med seg, samt utgifter til ny utleie. I tilfelle av fraflytting pga.
mislighold, far pkt. 13 tilsvarende anvendelse.
13. FRAFLYTTING
Leietakeren skal ved fraflytting tilbakelevere de leide lokaler
ryddiggjort, rengjort, med hele vindusruter og for0vrig i kontrakts- og
handverksmessig forsvarlig vedlikeholdt stand. Dersom vedlikeholdsplikten
etter pkt. 11 er oppfylt med normale intervaller i leieperioden, aksepterer
utleier normalt slit og elde frem til fraflytting. Fast inventar, ledninger
o.l. som leietaker har anbrakt eller latt anbringe i lokalene, ma ikke
fjernes med mindre leietaker bringer lokalene tilbake i samme stand som ved
overtagelsen. Leietakers rettigheter til sadant inventar som ikke er
fjernet, tilfaller utleier uten godtgj0relse.
Mangler som leietaker ikke har utbedret, kan utleier la utf0re for
leietakers regning.
I god tid f0r leieforholdets opph0r skal det avholdes en felles befaring
mellom leietaker og utleier for a fastlegge eventuelt n0dvendige arbeider
for a bringe lokalene i den stand de skal vaere ved tilbakelevering.
<PAGE>
8
I de siste 6 maneder f0r fraflytting har utleier rett til a sette opp skilt
pa fasaden, med informasjon om at lokalene blir ledige. I samme periode
plikter leietaker, etter forhandsavtale, a gi leies0kende adgang til
lokalene 2 dager pr. uke i kontor/forretningstid. Ved fraflytting skal
utleier umiddelbart gis adgang til lokalene.
Senest siste dag av leieforholdet skal leietager pa egen bekostning fjerne
sine eiendeler. Eiendeler som ikke fjernes skal anses etterlatt og
tilfaller utleier etter 14 dager. S0ppel kan utleier fjerne pa leietagers
regning.
14. KONKURS
Ved leietagers konkurs kan utleier bringe leieforholdet til opph0r
umiddelbart, med mindre boet trer inn i leietagers rettigheter og plikter
etter kontraken, jfr. dekningslovens ss. 7- 10.
15. FORSIKRING
Hver av partene holder sine interesser forsikret. Utleier har ikke ansvar
for skader eller tap som matte oppsta ved brann, vannledningskade mv., ut
over det som dekkes av de forsikringer utleier har som huseier.
Leitaker forsikrer egen bygningsmessig innredning, fast og l0st inventar,
l0s0re, maskiner, varer, driftstap og ansvar pa kombinert
bedriftforsikring. I tillegg til egne interesser, skal leietageren dekke
glassforsikring. Leietagers forsikring skal vaere slik utformet at utleier
holdes skadesl0s i forbindelse med skader som oppstar i de leide lokaler
eller pa annen mate som f0lge av leieforholdet. Skade paf0rt leietagers
medkontrahenter som f0lge av avbrudd, forsinkelser eller oppgj0r i henhold
til dette punkt, er leietagers ansvar. Utleier kan kreve at leietager
legger frem forsikringsbevis med vilkar.
16. FORCE MAJEURE
Streik, lock-out, blockade eller andre forhold som partene ikke rar over,
som f.eks. brann, eksplosjon, maskinskade, ukontrollert ustr0mming av van,
avbrytelse av tilf0rsel av vann, str0m, telefon mv. oppt0yer, krig eller
inngrep av offentlig myndighet, fritar utleier fra a oppfylle sin
forpliktelser i henhold til denne kontrakt i den grad de ikke kan oppfylles
uten unormalt h0ye kostnader. Likedan bortfaller under slike forhold plikt
til a betalc taps- eller skadeserstatning.
17. PANTSETTELSE - TINGLYSING
Leiekontrakten kan ikke tinglyses uten utleiers skriftlige samtykke.
Samtykker utleieren, skal leietager dekke omkostninger forbundet med
tinglysingen. Dersom kontrakten tinglyses, er partene enige om at den skal
slettes senest en maned etter
<PAGE>
9
leieforholdets opph0r, uten noen ytterligere medvirkning fra partene, idet
denne klausul anses tilstrekkelig som begjaering til
tinglysningsmyndigheten for slik avlysning.
Leiekontrakten kan ikke pantsettes uten utleiers skriftlig samtykke.
Samtykke kan under enhver omstendighet nektes om ikke pantsettingen skjer
som sikkerhet for de engasjementer som er knyttet til driften av leietagers
virksomhet i lokalene.
18. FORHOLDET TIL HUSLEIELOVEN
Husleieloven gjelder i den utstrekning denne kontrakt ikke regulerer
forholdet. Kontraktens pkt. 3, 8, 9, 10, 11 og 13 gir leietager faerre
og/eller flere plikter enn husleielovens bestemmelser.
19. VERNETING
Partene vedtar eiendommens verneting i alle tvister som gjelder
leieforholdet.
20. SAERLIGE BESTEMMELSER.
1. Fortrinnsrett til arealutvidelse.
Leietaker har fortrinnsrett til leie av 201 m2 brutto kontorlokaler i 2.
etasje fra 1.6.1999, eller sa snart navaerende leietaker John Holm AS
fraflytter lokalene.
2. Tilbakelevering av lokalene i 3. etasje.
Leietaker har utleiers tillatelse til a pusse opp / og forandre de
eksisterende lokalene, sa lenge hever og ikke senker standarden pa
utleieobjektet. Arbeidene skal utf0res av profesjonelle handverkere, og
lokalene skal tilbakeleveres i god stand. Utleier har rett til a kreve at
d0rer, vegger, og tak tilbakef0res der di tidligere var plassert, i bedre
stand en de var ved overtagelsestidspunktet. All elektriske installasjoner
tilfaller om 0nskelig utleieren. Som sikkerhet for istandsettelsen av
lokalene ved fraflytting, krever utleier et garantibel0p eller depositum pa
kr. 200000.- innestaende pa sperret konto.
3. Fraflytting.
Leietaker skal etter 1.12.1998 ha rett til a fraflytte lokalene med 6 mnd.
varsel med f0rste fraflytningstidspunkt 1.7.1999, mot a betale et
avbruddsbel0p tilsvarende 4 mnd. husleie og andel av fellesutgifter for de
lokalene som fraflyttes. Utleier skal vaere behjelpelig med snarest mulig a
skaffe ny leietaker for a unnga eller redusere avbruddsbel0pets st0rrelse.
Annonser og andre markedsf0ringsmidler i denne forbindelse skal dekkes av
leietaker. Dersom leietaker og utleier i fellesskap ikke finner frem til en
annen leietaker i l.a. 4 mnd, skal leietaker dekke husleien for lokalene i
2. og 3. etasje i denne perioden pa 4 mnd. fra 1.7.1999 til 1.11.1999.
<PAGE>
10
21. SIGNATUR
Senest ved underskrift av kontrakten skal leietager fremlegge gyldig
firmaattest som bekrefter leietagers signatur, evt. stiftelsespapirer
eller annen gyldig dokumentasjon som bekrefter at selskapet er under
etablering.
Denne kontrakt er undertegnet i to eksemplarer, hvorav utleier og
leietager har fatt hvert sitt.
Oslo, 17/6-98
__________________
/S/ /S/
___________________________________ ____________________________________
KONGENSGATE 2 ANS SPRAY GK
Vedlegg:
<PAGE>
[Hand-written] App. 8
LEASE CONTRACT
--------------
Between
KONGENSGATE 2 ANS
(hereinafter called the lessor)
and
SPRAY GK
Civil Reg. no./Company no. ____
(hereinafter called the lessee)
has this day been concluded the following contract regarding the leasing of
premises at Kongensgate 2, G. no. 207, B. no. 133 in Oslo municipality.
1. SCOPE OF THE LEASE
The lease covers the following premises and outer rooms:
Office premises:
---------------
190 m2 gross office premises inc. other common areas on the 2/nd/ floor
which cover rooms 214-215-216-217-218-219-220-221-223 and 224.
545 m2 gross office premises inc. a share of common areas on the 3/rd/
floor, which cover rooms 302 to 329 inclusive.
The total leased area on the 2/nd/ and 3/rd/ floor amounts to 735 m2 gross
office premises inc. a share of common areas.
2. USE OF THE LEASING OBJECT
The leasing object must only be used for offices.
A change of industry or a change of activity in the premises is not
permitted without the lessor's prior written consent.
The same applies for sales, exposure, etc., in common areas.
3. THE CONDITION OF THE PREMISES ON TAKE-OVER
The leasing object is taken over in the conditions it was during the
inspection on 14.4.1998.
In the premises of 190 m2 on the 2/nd/ floor, the walls will be filled and
painted and the floors will be sanded and varnished.
<PAGE>
The lessee must give written notification of possible damage and defects,
etc., with regard to the leasing object within a reasonable period after he
should have discovered them. Faults and defects which the lessee was aware
of or ought to have been aware of when entering into the agreement cannot
be claimed.
4. DURATION OF THE LEASE
OFFICE PREMISES ON THE 2/ND/ FLOOR:
The lease for the office premises on the 2/nd/ floor of 190 m2 gross runs
from 1.7.98 to 30.6.2003, on which date it expires without prior
termination on the part of any of the parties. In the event of removal
after 30.6.2001, the requirement for a sum for loss of profit in accordance
with point 20.3 lapses.
OFFICE PREMISES ON THE 3/RD/ FLOOR:
The lease for the office premises on the 3/rd/ floor of 545 m2 gross runs
from 1.1.1999 until 30.06.2003. For the premises on the 3/rd/ floor, the
lessee has a right to terminate the lease with 6 month's notice up until
1.6.1999. Thereafter the same conditions for termination apply as for the
2/nd/ floor. The lessee shall have a right to renew the lease for a new
leasing period of 3-5 years. The contract shall then be renegotiated on an
unrestricted basis. A desire for a new agreement must be reported to the
lessor in writing 6 - six - months at the latest before 30.6.2003. This
right lapses in the reverse case.
5. RENT
RENT, 2/ND/ FLOOR:
The rent for the office premises on the 2/nd/ floor amounts to NOK
199,500.00 per annum after 1.9.1998, i.e. NOK 1050.00 per m2/year, and is
paid in advance with a sum of NOK 49,875.00 required on the 1/st/ of each
quarter.
A 50% lease is paid for July and August 1998 for the premises on the 2/nd/
floor.
RENT, 3/RD/ FLOOR:
The rent for the office premises on the 3/rd/ floor is in accordance with
the present leasing agreement up until 1.1.1999. After 1.1.1999, the rent
for the office premises will be NOK 572,250.00 per annum, corresponding to
NOK 1050.00 per m2/year which is paid in advance with a sum of NOK
143,063.00 on the 1/st/ of each quarter.
The lessor can with effect from 1 January each year (on 1 January 1999 for
the first time) demand that the rent be regulated in accordance with a
possible increase in the Central Bureau of Statistics' consumer price
index, or - if this is terminated - another corresponding public index.
The basis for the first settlement is the rent established in the contract
and the index per 15.05.1998 until 15.11. 1998.
<PAGE>
The basis for subsequent annual adjustments per 1.1. is the rent valid at
any time and the increase in the index over the last 12 months until 15.11
of the previous year. If public provisions should prevent the
implementation of the agreed rent adjustment, it shall be possible to
demand that the rent, regardless of the established regulation points,
shall be regulated immediately to the extent and from the time that there
is legal access to the same.
In the event of late payment of the rent, interest on arrears will be
charged in accordance with an Act of 1976, no. 100, or an Act which is
passed instead of the same. The lessor has a right to demand a reminder
fee.
6. COMMON CHARGES
In addition to the rent, the lessee shall pay a proportional share of the
property's common charges as specified below:
Energy:
------
Power for heating and lighting of common areas and stairs, lifts, cooling
installations, ventilation installations, hot water tanks, external
lighting, heating cables, oil heating and fuel oil.
Public charges:
--------------
At present; water, sewerage, cleaning and repair charges.
There may be new charges, as well as value-added tax if this shall be added
to the rent. If value-added tax is introduced for leasing of premises
covered by the present lease, the lessor can increase the rent
corresponding to the tax rate with a deduction for a proportional share of
tax included provided that the lessor is liable to pay VAT.
Cleaning:
--------
Washing of stairs, cleaning of common areas and possible leasing of
carpets.
Repairs:
-------
Waste container; leasing, removal and emptying.
Inspection, servicing and maintenance:
-------------------------------------
Lifts, sanitary installations, cooling installations, ventilation
installations, all fire-engineering alarms/security installations,
security, gates, heating installations, plants in an indoor common area.
Outside gardens, snow clearance and cleaning of outside areas/pavement,
security guard services in general.
Quarterly on account advance payment, amount at the time of the contract
for the premises on the 2/nd/ floor to
NOK 8,833.00, for the office premises on the 3/rd/ floor NOK 25,479.00, and
for the storage premises (50% common charges) on the 4/th/ floor NOK
587.00.
<PAGE>
A share of common charges for the premises on the 2/nd/ floor and the 4/th/
floor will be paid from 1.6.1998.
For the above-mentioned share of the common charges, a quarterly on account
sum shall be paid together with the rent, with settlement and any residual
settlement after the accounts are closed. The common charges are
distributed according to the building's distribution key. A share for
possible vacant premises in the yard is covered by the lessor to the extent
that this vacancy does not express itself in reduced charges.
The next year's on account payment is based on the previous year's
accounts.
The lessee pays directly on his own account for:
Energy to his own premises, according to a separate meter, if this is not
included in the common charges.
Cleaning of his own premises. Washing of windows inside and out, as well
as cleaning of sun screens. (The lessor reserves the right to allow
external washing of windows and cleaning of sun screens to be performed on
a common basis.)
Security guard services for his own use.
Where water is required for other use than use in toilets and normal
cleaning, the lessee must himself maintain his own water meter and defray
the charges for the same and pay for the water consumption.
In the event of late payment of a share of common charges, interest on
arrears is charged in accordance with an Act of 1976, no. 100, or an Act
which is passed instead of the same. The lessor has a right to demand a
reminder fee.
7. SECURITY - DEPOSIT - GUARANTEE
The lessee shall provide a surety from a financial institution which
operates activity in this country according to a concession issued by
Norwegian authorities, or another guarantee approved by the lessor,
alternatively a deposit according to the lessor's choice, for the correct
fulfillment of the lessee's obligations of any kind in accordance with
Norwegian law and according to this leasing contract, including prompt
payment of rent and a share of common costs.
The guarantee shall correspond at any time to 6 months' rent + a share of
common costs, and it shall be valid for the leasing period + two months.
The guarantee sum shall be NOK 450,000.00 upon take-over of the premises.
This agreement is not binding for the lessor before the guarantee exists.
The guarantee must exist one month at the latest after signature of the
contract and under any circumstances before occupation.
8. SUBLETTING/ASSIGNMENT/COMPANY CHANGES
Subletting and assignment of the contract, in full or in part, is not
permitted without the lessor's prior written consent.
Subletting cannot be refused without factual grounds.
<PAGE>
An assignment of at least 50% of the shares, company share or owner
interests in the lessee is considered to be an assignment of the contract.
The same applies for the lessee's change of company form.
An event where a smaller number of shares or fractions which in itself
constitutes a determining influence (general majority) in the company is
also counted as an assignment. The lessor shall on enquiry be given
information confirmed by the lessee's auditor as to whether such an
assignment has taken place.
Any company change which weakens the lessee's financial position with
regard to the lessor requires the lessor's consent.
9. THE LESSOR'S AND LESSEE'S OBLIGATIONS
It is incumbent upon the lessor to ensure that the building with technical
devices is in a good condition at any time. The lessor undertakes to
attend to good maintenance, operation and cleaning of internal and external
common areas.
The lessee undertakes to treat both the leased premises and the property in
general with proper care.
The premises must not be used in a way which deteriorates the property's
reputation or appearance or through noise, dust, odour, vibration or which
annoys other lessees or neighbours in any other way. The costs for repair
and possible compensation in connection with these matters are the
responsibility of the lessee.
The lessee undertakes to comply with the rules, fire/evacuation
instructions and instructions for lifts and other technical installations
which apply at any time for the property. Broken panes in any room covered
by the lease must immediately be replaced with new ones. Rooms with water
and/or waste pipes must be kept heated in order to avoid freezing.
If the activity entails an increase in the property's insurance premiums or
fixed charges, the lessee undertakes to pay the increase.
The lessee undertakes to obtain all the necessary licenses for his use of
the premises. Requirements or instructions from the labour inspectorate,
health committee, fire service, civil defence, industrial protection board
or other public authority, caused by the activity operated in the premises,
are the lessee's responsibility.
Waste must be placed in the property's waste containers. The lessee must
himself attend to the removal of waste of an extraordinary scope or nature
at his own expense. In the reverse case, the lessor will have the waste
removed at the lessee's expense.
The lessee undertakes to give the lessor access to the premises during
office/business hours every day of the week for inspection, repair,
maintenance, appraisal, etc. In all cases where this is considered
necessary in order to prevent or limit damage to the property, the lessor
has a right to obtain access to the premises.
<PAGE>
The lessee undertakes to accept a temporary suspension in supplies of
water, power, air, etc., without compensation or a reduction in rent.
10. CHANGE OF LEASING OBJECT
Fitting or refitting or any change at all in or the leased premises must
not take place without the lessor's prior written approval. Such prior
approval can be given on condition that the changes accrue to the lessor
without compensation upon the expiry of the lease, or that the lessee
returns the premises to their original condition.
Prior approval is also required if the lessee wishes to use more power,
water, air, waste, etc., than the premises are equipped with at the time of
the contract. If such approval is given, the lessee is responsible for
obtaining the necessary public licenses.
The lessee has a right with the lessor's prior written approval to set up
an advertising sign as is usual according to the nature and character of
the business and the property. Sun screens, radio and TV installations,
etc., must not be set up without the lessor approving the appearance and
positioning of the same in advance and in writing. Display cases, automats,
etc., must not be set up without the lessor's prior written approval. If
such approval is given, the lessee is responsible for obtaining the
necessary public licenses. The lessee must himself pay to have his company
name applied to the common sign late according to a more detailed agreement
with the lessor. Change works described in this paragraph accrue to the
lessor after the expiry of the leasing period unless the lessor demands
that the premises be returned to their original condition.
11. MAINTENANCE
It is incumbent upon the lessor to pay for all external building
maintenance. Similarly, the replacement of technical devices such as
lifts, ventilation installations, heating installations, etc., is the
lessor's responsibility.
It is incumbent upon the lessee to pay for maintenance of the leased
premises, also including external and internal maintenance of entrance
doors and internal windows with surrounding frame, etc., as well as any sun
screens, so that these are in a good condition at any time. The
maintenance liability for the lessee also covers the replacement of carpets
and floor coverings and other decoration and internal repairs, including
surface treatment of floors, walls and ceiling. The maintenance liability
also covers cables and lamp points and plug sockets, as well as ventilation
and cooling installations within the lessee's exclusive lease. All work
which the lessee undertakes to carry out shall be performed without undue
delay and in a proper workmanlike way.
The lessee is liable to pay compensation for all damage caused by himself
or people in his employ, permanent or temporary, as well as sub-lessees,
customers and/or other persons to whom he may have given access to the
property. The
<PAGE>
liability to pay compensation also covers expenditures which may result
from vermin clearance.
The lessee's maintenance liability also covers damage after a break-in in
the leased premises.
The lessee undertakes to attend to repair and maintenance of the signs,
etc., for which the lessor has given permission to set up, cf. point 10.
If the lessee does not fulfil these obligations, the lessor is entitled,
after a written warning with a 14-day fulfillment deadline, to carry out
the maintenance works at the lessee's expense.
The lessor shall have unhindered access to the premises for inspection with
regard to the fulfillment of the maintenance liability, as well as
inspections for appraisal and estimates.
The lessor is entitled to carry out all works which may be necessary for
the proper maintenance or renewal of the property, and to carry out any
change work to the same extent both inside and outside the leased premises.
The lessee undertakes to contribute so that cables, ducts and pipes, etc.,
to other parts of the property can be laid through the leased premises
without being impeded by the lessee's fittings, etc.
The lessee undertakes to be involved in such works without compensation or
a rent reduction unless he is significantly inconvenienced. The lessor
shall ensure that the works cause a minimum of disruption for the lessee
and shall notify the lessee in advance to the greatest possible extent.
12. LESSEE'S BREACH OF CONTRACT
The lessee accepts that an enforced removal may be demanded if the rent or
agreed additional services are not paid, cf. (S) 13-2, 3/rd/ para. (a), of
the Enforcement Act. The lessee accepts that an enforced removal may be
demanded when the leasing period has expired, cf. (S) 13-2, 3/rd/ para.
(b), of the Enforcement Act.
If the lessee renders himself liable to another significant breach of the
leasing agreement, the lessor can cancel the same and the lessee then
undertakes to leave the premises.
A lessee who is evicted from or moves after a demand from the lessor due to
a breach of contract or leaves the premises as a result of bankruptcy
undertakes to pay rent for the period of the leasing period which may
remain, but with a deduction for what the lessor may obtain through a new
lease. The lessee must also pay the costs caused by eviction, legal
proceedings and clearing/cleaning of the premises, as well as charges for a
new lease. In the event of removal due to a breach of contract, point 13
obtains corresponding application.
<PAGE>
13. REMOVAL
Upon removal, the lessee shall return the leased premises in a cleared and
cleaned condition, with whole window panes and otherwise in a contractually
and constructionally properly maintained condition. If the maintenance
liability according to point 11 is fulfilled at normal intervals in the
leasing period, the lessor shall accept normal wear and tear up until
removal. Fixtures, cables, etc., which the lessee has affixed or had
affixed in the premises must not be removed unless the lessee returns the
premises to the same condition as upon take-over. The lessee's rights to
such fittings as are not removed accrue to the lessor without compensation.
The lessor can have repaired defects which the lessee has not repaired at
the lessee's expense.
In good time before the cessation of the lease, a joint inspection shall be
held between the lessee and the lessor in order to establish any necessary
works in order to return the premises to the condition they were in upon
take-over.
During the last 6 months before removal, the lessor has a right to set up a
sign on the facade with information that the premises will become vacant.
In the same period, the lessee undertakes according to prior agreement to
give prospective lessees access to the premises 2 days per week in
office/business hours. The lessor shall be given immediate access to the
premises upon removal.
On the last day of the lease at the latest the lessee shall at his own
expense remove his property. Property which is not removed shall be
considered to have been left behind and accrues to the lessor after 14
days. The lessor can remove waste at the lessee's expense.
14. BANKRUPTCY
In the event the lessee is declared bankrupt, the lessor can terminate the
lease immediately, unless the estate enters into the lessee's rights and
obligations according to the contract, cf. The Creditors Security Act, (S)
7-10.
15. INSURANCE
Each of the parties shall keep their own interests insured.
The lessor is not liable for damage or loss which may arise in the event of
fire, water pipe damage, etc., over and above what is covered by the
insurances which the lessor has as the owner of the building.
The lessee shall insure his own building-related fixtures, fixed and loose
fittings, moveables, machines, goods, operating loss and liability on a
combined commercial insurance. In addition to his own interests, the
lessee shall cover glass insurance. The lessee's insurance shall be drawn
up so that the lessor is indemnified in connection with damage which arises
in the leased premises or in another way as a result of the lease. Damage
incurred to the lessee's joint contracting parties as a result of a
consequential loss, delays or settlement in
<PAGE>
accordance with this point is the lessee's liability. The lessor may
require that the lessee presents insurance policy, including terms.
16. FORCE MAJEURE
A strike, lock-out, blockade or other conditions beyond the parties'
control, such as e.g. fire, explosion, machine damage, uncontrolled water
flow, interruption to the water, power, telephone supply, etc., riot, war
or intervention by a public authority, exempt the lessor from fulfilling
his obligations in accordance with this contract to the extent that they
cannot be fulfilled without abnormally high costs. Under such conditions
the obligation to pay compensation for damage or loss similarly lapses.
17. MORTGAGE - REGISTRATION
The leasing contract cannot be registered without the lessor's written
consent. If the lessor consents, the lessee shall cover the costs
connected with this registration. If the contract is registered, the
parties agree that it shall be deleted one month at the latest after the
cessation of the lease without any further contribution from the parties as
this clause is considered to be sufficient as a request to the registering
authority for such deregistration.
The leasing contract cannot be mortgaged without the lessor's written
consent. Consent can be refused under any circumstances if the mortgaging
is performed as security for the commitments linked to the operation of the
lessee's activity in the premises.
18. RELATIONSHIP WITH THE RENT ACT
The Rent Act applies to the extent that this contract does not regulate the
relationship. Point 3, 8, 9, 10, 11 and 13 of the contract give the lessee
fewer and/or more obligations than the provisions in the Rent Act.
19. VENUE
The parties accept the property's venue in all disputes which refer to the
lease.
20. SPECIAL PROVISIONS
1. Preferential right to area expansion.
The lessee has a preferential right to a lease for 201 m2 gross office
premises on the 2/nd/ floor from 1.6.1999, or as soon as the present lessee
John Holm AS removes from the premises.
2. Return of the premises on the 3/rd/ floor.
The lessee has the lessor's permission to decorate/and change the existing
premises as long as the standard of the leasing object rises and does not
fall. The
<PAGE>
works shall be carried out by professional craftsmen and the premises shall
be returned in good condition.
The lessor has a right to demand that doors, walls and ceiling be restored
to where they were previously positioned, and in a better condition than
they were upon takeover.
All electrical installations accrue to the lessor if desirable.
The lessor requires a guarantee sum or a deposit of 200,000.00 Norwegian
kroner to be deposited in a frozen account as security for the
reconditioning of the premises upon removal.
3. Removal.
The lessee shall after 1.12.1998 have a right to move from the premises
with 6 months' notice, with the first removal date on 1.7.1999, against
payment of a consequential loss sum corresponding to 4 months' rent and a
share of the common charges for the premises vacated. The lessor shall
assist in procuring a new lessee as soon as possible in order to avoid or
reduce the size of the consequential loss sum. Advertisements and other
marketing means in this connection shall be covered by the lessee. If the
lessee and lessor jointly do not find another lessee within 4 months, the
lessee shall cover the rent for the premises on the 2/nd/ and 3/rd/ floor
in this period of 4 months from 1.7.1999 to 1.11.1999.
21. SIGNATURE
Upon signature of the contract at the latest, the lessee shall present a
valid company certificate which confirms the lessee's signature, or
formation papers or other valid documentation which confirms that the
company is under formation.
This contract has been signed in two copies of which the lessor and lessee
have each received their own.
Oslo, 17/6/98
[Signature] [Signature]
KONGENSGATE 2ANS SPRAY GK
<PAGE>
[Drawing]
VAREHEIS = GOODS LIFT
LAGER = STORE
HEIS = LIFT
FELLES INNG. PART 1 LEIEAREAL = COMMON ENTRY IN LEASED AREA
GARD = CLOAKROOM
KOTT = CLOSET
<PAGE>
EXECUTION COPY
EXHIBIT 10.29
SUBSCRIPTION AND EXCHANGE AGREEMENT
AMONG
RAZORFISH, INC.
SPRAY VENTURES AB
AND
COMMUNICADE INC.
DATED AS OF OCTOBER 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. DEFINITIONS AND RULES OF CONSTRUCTION........................................................ 1
SECTION 1.01. Definitions..................................................................... 1
SECTION 1.02. Certain Rules of Construction................................................... 7
ARTICLE II. AGREEMENT To EXCHANGE THE COMPANY SHARES.................................................... 8
SECTION 2.01. Exchange of the Company Shares and the Warrants................................. 8
SECTION 2.02. Purchase Price.................................................................. 8
ARTICLE III. CLOSING.................................................................................... 8
SECTION 3.01. The Closing..................................................................... 8
SECTION 3.02. Closing Conditions.............................................................. 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SPRAY VENTURES............................................ 10
SECTION 4.01. Organization, Good Standing and Qualification of the Company
And the Company Subsidiaries.................................................... 10
SECTION 4.02. Corporate Documents............................................................. 11
SECTION 4.03. Capitalization.................................................................. 11
SECTION 4.04. [Intentionally Omitted]......................................................... 12
SECTION 4.05. Non-Contravention; Consents..................................................... 12
SECTION 4.06. Proprietary Assets.............................................................. 13
SECTION 4.07. Financial Statements............................................................ 15
SECTION 4.08. Liabilities..................................................................... 15
SECTION 4.09. Books and Records............................................................... 15
SECTION 4.10. Title to Assets................................................................. 16
SECTION 4.11. Real Property................................................................... 16
SECTION 4.12. Material Company Contracts...................................................... 18
SECTION 4.13. Employees; Employee Benefits.................................................... 19
SECTION 4.14. Employment Relations............................................................ 20
SECTION 4.15. Compensation of Employees....................................................... 21
SECTION 4.16. Receivables; Major Customers.................................................... 21
SECTION 4.17. Accounts Payable; Customers and Suppliers....................................... 21
SECTION 4.18. Proceedings..................................................................... 22
SECTION 4.19. Compliance with Requirement of Laws............................................. 22
SECTION 4.20. Governmental Authorizations..................................................... 22
SECTION 4.21. Tax Matters..................................................................... 23
SECTION 4.22. Finders and Bbrokers............................................................ 24
SECTION 4.23. Absence of Changes.............................................................. 24
SECTION 4.24. Environmental Compliance........................................................ 25
SECTION 4.25. Insurance....................................................................... 26
SECTION 4.26. Full Disclosure................................................................. 26
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS........................................... 26
SECTION 5.01. Authority....................................................................... 26
SECTION 5.02. Shareholders.................................................................... 27
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................. 28
SECTION 6.01. Organization, Good Standing and Qualification of the Purchaser
and the Purchaser Subsidiaries.................................................. 28
SECTION 6.02. Corporate Documents............................................................. 29
</TABLE>
i
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<TABLE>
<S> <C>
SECTION 6.03. Capitalization....................................................................... 29
SECTION 6.04. Authority; Binding Nature of Agreements.............................................. 30
SECTION 6.05. Non-Contravention; Consents.......................................................... 30
SECTION 6.06. Proprietary Assets................................................................... 31
SECTION 6.07. Financial Statements................................................................. 33
SECTION 6.08. Liabilities.......................................................................... 34
SECTION 6.09. Books and Records.................................................................... 34
SECTION 6.10. Title to Assets...................................................................... 34
SECTION 6.11. Real Property........................................................................ 35
SECTION 6.12. Material Purchaser Contracts......................................................... 37
SeCTION 6.13. Employees; Employee Benefits......................................................... 37
SECTION 6.14. Employment Relations................................................................. 40
SECTION 6.15. Compensation of Employees............................................................ 40
SECTION 6.16. Receivables; Major Customers......................................................... 40
SECTION 6.17. Accounts Payable; Customers and Suppliers............................................ 41
SECTION 6.18. Proceedings.......................................................................... 41
SECTION 6.19. Compliance With Requirement of Laws.................................................. 41
SECTION 6.20. Governmental Authorizations.......................................................... 42
SECTION 6.21. Tax Matters.......................................................................... 42
SECTION 6.22. Finders and Brokers.................................................................. 43
SECTION 6.23. Absence of Changes................................................................... 43
SECTION 6.24. Environmental Compliance............................................................. 44
SECTION 6.25. Insurance............................................................................ 45
SECTION 6.26. Full Disclosure...................................................................... 45
ARTICLE VII. CERTAIN COVENANTS............................................................................... 45
SECTION 7.01. Best Efforts......................................................................... 45
SECTION 7.02. Conduct of Business Pending the Closing.............................................. 46
SECTION 7.03. Access to Information................................................................ 48
SECTION 7.04. Notices of Certain Events............................................................ 49
SECTION 7.05. No Solicitation...................................................................... 49
SECTION 7.06. Confidentiality...................................................................... 49
SECTION 7.07. Fulfillment of Conditions............................................................ 50
SECTION 7.08. Waiver of Encumbrance on Company Shares.............................................. 51
ARTICLE VIII. CLOSING DELIVERIES............................................................................. 51
SECTION 8.01. Closing Deliveries................................................................... 51
SECTION 8.02. Deliveries by Shareholders........................................................... 51
SECTION 8.03. Deliveries by Purchaser.............................................................. 52
SECTION 8.04. Joint Deliveries..................................................................... 53
ARTICLE IX. TERMINATION...................................................................................... 53
SECTION 9.01. Grounds for Termination.............................................................. 53
SECTION 9.02. Effect of Termination................................................................ 54
ARTICLE X. POST-CLOSING AGREEMENTS........................................................................... 54
SECTION 10.01. Tax Matters.......................................................................... 54
ARTICLE XI. INDEMNIFICATION, ETC............................................................................. 56
SECTION 11.01. Survival of Representations and Warranties........................................... 56
SECTION 11.02. Indemnification by Spray Ventures.................................................... 56
SECTION 11.03. Indemnification by Communicade....................................................... 57
SECTION 11.04. Indemnification by the Purchaser..................................................... 58
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 11.05. Interest............................................................................. 60
SECTION 11.06. Defense of Third Party Claims........................................................ 60
ARTICLE XII. MISCELLANEOUS................................................................................... 61
SECTION 12.01. Tax and Accounting Treatment Elections............................................... 61
SECTION 12.02. Governing Law........................................................................ 61
SECTION 12.03. Arbitration.......................................................................... 61
SECTION 12.04. Successors and Assigns............................................................... 62
SECTION 12.05. Entire Agreement..................................................................... 62
SECTION 12.06. Severability......................................................................... 62
SECTION 12.07. Amendment and Waiver................................................................. 62
SECTION 12.08. Notices.............................................................................. 62
SECTION 12.09. Delays or Omissions.................................................................. 63
SECTION 12.10. Remedies Cumulative.................................................................. 64
SECTION 12.11. No Contribution...................................................................... 64
SECTION 12.12. Fees and Costs....................................................................... 64
SECTION 12.13. Further Assurances................................................................... 64
SECTION 12.14. Counterparts......................................................................... 64
</TABLE>
iii
<PAGE>
SCHEDULES
---------
Schedule 2.02 Purchase Price Allocations
Schedule 4.01(b) Company Group Directors and Officers
Schedule 4.01(d) Other Subsidiaries of the Company
Schedule 4.03(a) Company Group Capitalization
Schedule 4.03(b) Company Group Derivative Securities
Schedule 4.06(a) Certain Company Group Proprietary Assets
Schedule 4.07(c) Company Group Financials
Schedule 4.10(a) Company Group Liens
Schedule 4.10(c) Company Group Leased Assets
Schedule 4.11(b) Company Group Leased Premises; Company Group Third
Party Leased Premises
Schedule 4.12(a) Material Company Contracts
Schedule 4.13(a) Company Group Employees
Schedule 4.13(b) Company Group Consultants
Schedule 4.13(m) Company Employee Benefit Plans
Schedule 4.17(b) Company Group Largest Customers and Suppliers
Schedule 4.21(h) Company Business and Assets in the United States
Schedule 4.23(e) Sale or Transfer of Assets
Schedule 4.23(h) Loans to Shareholders
Schedule 4.23(j) Certain Company Liabilities
Schedule 6.01(b) Purchaser Group Directors and Officers
Schedule 6.01(d) Other Subsidiaries of the Purchaser
Schedule 6.03(a) Purchaser Group Capitalization
iv
<PAGE>
Schedule 6.03(b) Purchaser Group Derivative Securities
Schedule 6.05(b) Purchaser Group Consents
Schedule 6.06(a) Certain Purchaser Group Proprietary Assets
Schedule 6.06(b)(ii) Restrictions on Purchaser Proprietary Assets
Schedule 6.06(b)(v) Purchaser Group Proprietary Assets Licensed to Third
Parties
Schedule 6.06(b)(vi) Purchaser Group Proprietary Assets Licensed from
Third Parties
Schedule 6.07(c) Purchaser Group Financials
Schedule 6.09 Company Group Records Not in Company Control
Schedule 6.10(b) Certain Purchaser Group Tangible Assets
Schedule 6.10(d) Purchaser Group Licensed Assets
Schedule 6.11(b) Purchaser Group Leased Premises; Purchaser Group
Third Party Leased Premises
Schedule 6.11(e) Options to Purchase Purchaser Leases
Schedule 6.12(a) Material Purchaser Contracts
Schedule 6.13(a) Purchaser Group Employees
Schedule 6.13(b) Purchaser Group Consultants
Schedule 6.13(c) Purchaser Group Employment Contracts
Schedule 6.13(f) Purchaser Employee Benefit Plans
Schedule 6.15 Purchaser Group Employee Compensation
Schedule 6.17(b) Purchaser Group Largest Customers and Suppliers
Schedule 6.18(a) Purchaser Group Proceedings
Schedule 6.20(a) Purchaser Group Government Authorizations
Schedule 6.21(d) Purchaser Group Audits
Schedule 8.02 Employees Party to Employment Agreements
v
<PAGE>
EXHIBITS
--------
Exhibit A Standard Company Group Employment Agreement
Exhibit B Form of Employment Agreement
Exhibit C Form of Opinion of Mannheimer Swartling
Exhibit D Form of Opinion of Morrison & Foerster LLP
Exhibit E Form of Stockholders Agreement
vi
<PAGE>
SUBSCRIPTION AND EXCHANGE AGREEMENT
This Subscription and Exchange Agreement (this "Agreement") is entered
into as of October 1, 1998, by and among Razorfish, Inc., a New York corporation
(the "Purchaser"), Spray Ventures AB, a corporation organized and existing under
the laws of the Kingdom of Sweden, registration number 556506-7997 ("Spray
Ventures"), and Communicade Inc., a Delaware corporation ("Communicade" and,
together with Spray Ventures, the "Shareholders" and each individually, a
"Shareholder").
W I T N E S S E T H:
Whereas, the Shareholders own, in the aggregate, 2,815 shares of
stock, par value SEK 100 per share, of Spray Network AB, a corporation organized
and existing under the laws of the Kingdom of Sweden, registration number
556503-3247 (the "Company"), which constitute all of the issued and outstanding
shares of stock of the Company (the "Company Stock"), and also own warrants
exercisable for 138 shares of stock of the Company, issued on September 1, 1997
(the "Warrants"); and
Whereas, the Purchaser desires to acquire all of the Company Stock
(the "Company Shares") and the Warrants, and the Shareholders desire to transfer
the Company Shares and the Warrants to the Purchaser upon the terms and subject
to the conditions set forth herein.
Now, Therefore, in consideration of the foregoing, and the mutual
promises, covenants, representations and warranties herein, the Purchaser, the
Company and the Shareholders, intending to be legally bound, hereby agree as
follows:
ARTICLE I.
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. Definitions.
------------- ------------
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Section 1.01:
"Affiliate" means, with respect to any Person, any other Person that,
---------
directly or indirectly, controls, is controlled by or is under common control
with, such Person. For the purposes of this definition, "control" (including
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Audited Financials" shall have the meaning set forth in Section
------------------
4.07(a).
1
<PAGE>
"Closing" shall have the meaning specified in Article III.
-------
"Closing Date" shall have the meaning specified in Article III.
------------
"Closing Receivables/Payables" shall have the meaning set forth in
----------------------------
Section 4.07(a).
"Common Stock" shall mean the common stock, par value $0.01 per share,
------------
of the Purchaser.
"Communicade" shall have the meaning specified in the first paragraph
-----------
of this Agreement.
"Company" shall have the meaning specified in the first paragraph of
-------
this Agreement.
"Company Contract" shall mean any Contract to which the Company or any
----------------
Company Subsidiary is a party or by which its properties or assets are bound or
under which it or its respective business, properties or assets receive
benefits.
"Company Employee Benefit Plan" shall mean any Employee Benefit Plan
-----------------------------
which is maintained or contributed to or is required to be maintained,
contributed to or provided by any Company Subsidiary currently or formerly
operating, under which any employee, former employee or independent contractor
(or any dependent of any such Persons) has any present or future right to
benefits or compensation or under which any such Company Subsidiary has or may
have any present or future liability or obligation.
"Company Group" shall mean the Company and the Company Subsidiaries.
-------------
"Company Shares" shall have the meaning set forth in the second
--------------
recital to this Agreement.
"Company Subsidiary" shall mean Tetre IT Management AB, a corporation
------------------
organized and existing under the laws of the Kingdom of Sweden (registration
number 556479-5549), Tetre New Media AB, a corporation organized and existing
under the laws of the Kingdom of Sweden (registration number 55614-6106), Tetre
Workgroup Solutions AB, a corporation organized and existing under the laws of
the Kingdom of Sweden (registration number 556511-7933), Spray Services AB, a
corporation organized and existing under the laws of the Kingdom of Sweden
(registration number 556541-5808), Spray Geelmuyden Kiese AS, a corporation
organized and existing under the laws of Norway, Spray Interactive Media OY, a
corporation organized and existing under the laws of Finland, and Spray
Interactive Media AG, a corporation organized and existing under the laws of
Germany, Spray Network USA, Inc., a Delaware corporation, and any Subsidiary of
such Entities. "Company Subsidiaries" shall mean, collectively, each Company
--------------------
Subsidiary.
2
<PAGE>
"Company Stock" shall have the meaning set forth in the first recital
-------------
to this Agreement.
"Consent" shall mean any approval, consent, ratification, permission,
-------
waiver or authorization (including any Governmental Authorization).
"Contract" shall mean any written or oral agreement, deed, contract,
--------
license, guaranty or other understanding of any nature.
"Current Balance Sheet" shall have the meaning set forth in Section
---------------------
4.07(a).
"Current Financials" shall have the meaning set forth in Section
------------------
4.07(a).
"Damages" shall mean all actual assessments, levies, losses, fines,
-------
penalties, obligations, payments, judgments, liabilities, damages, costs and
expenses, including, without limitation, attorneys', accountants',
investigators', and experts' fees and expenses, excluding special and
consequential damages suffered by the Indemnified Party. For the purposes of
clarification, any assessment, levy, loss, fine, penalty, obligation, payment,
liability, damage, cost or expense suffered by a member of the Company Group by
virtue of a state of facts which constitutes an inaccuracy in or breach of a
representation and warranty by Spray Ventures shall (without duplication) be
deemed to have been suffered by the Purchaser.
"Employee Benefit Plan" shall mean any and all bonus, deferred
---------------------
compensation, incentive compensation, stock purchase, stock option, stock
appreciation, phantom stock, savings, profit sharing, severance or termination
pay, health or other medical, dental, life, disability or other insurance
(whether insured or self-insured), supplementary unemployment or employment
benefit, pension (including, without limitation, employee benefit plans, as
defined in Section 3(2) of the U.S. Employee Retirement Income Security Act of
1974, as amended ("ERISA"), multiemployer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA, and
all plans of the nature described in Section 3(3) of ERISA), retirement,
registered retirement savings, supplementary retirement, change-in-control and
any other employment benefit or compensation plan, program, agreement,
arrangement, policy or practice (including any funding mechanism therefore which
is now in effect which will be required in the future as a result of the
Transactions), whether formal or informal, funded or unfunded, registered or
unregistered, oral or written.
"Encumbrance" shall mean options, proxies, voting trusts, voting
-----------
agreements, judgments, pledges, charges, escrows, rights of first refusal or
first offer, mortgages, indentures, claims, transfer restrictions, Liens,
equities, security interests and other encumbrances of every kind and nature
whatsoever, whether arising by agreement, operation of law or otherwise.
"Entity" shall mean any corporation (including any non profit
------
corporation), general partnership, limited partnership, limited liability
partnership, limited liability company, trust company, joint venture, firm or
other enterprise or association.
3
<PAGE>
"Environmental Law" shall mean any Requirement of Law relating to
-----------------
pollution, the treatment, transportation, removal, storage, discharge or
generation of hazardous or toxic materials or waste, or the protection of human
health or the environment.
"Financials" shall have the meaning specified in Section 4.07(a).
----------
"Fully Diluted Basis" shall mean, with respect to the Purchaser's
-------------------
outstanding share capital, all shares together with (a) all shares that are
issuable upon the exercise of all outstanding options to acquire shares, whether
or not such options are currently exercisable, and (b) all other shares issuable
upon the exercise of any warrants or other rights held by any Person or Entity.
"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 issued, granted, given or
otherwise made available by or under the authority of any Governmental Authority
or pursuant to any Requirement of Law; or (b) right under any Contract with any
Governmental Authority.
"Governmental Authority" shall mean any governmental or quasi-
----------------------
governmental agency, body or authority (including, without limitation, any
executive, legislative, judicial, administrative or regulatory agency, body or
authority), of whatever nature, whether local, municipal, domestic, foreign,
multinational or international.
"Indemnified Party" shall have the meaning specified in Section 11.05.
-----------------
"Indemnifying Party" shall have the meaning specified in Section
------------------
11.05.
"Key Company Employee" shall mean Per Bystedt, Jonas Svensson, Johan
--------------------
Ihrfelt, Thomas Randerz, Rikard Lindstrom, Mika Peltola, Arild Bjorn-Larsen and
Hokan Lejdstrand.
"Key Purchaser Employee" shall mean Jeffrey A. Dachis, Craig M.
----------------------
Kanarick, Peter Seidler, Sue Black, Jean-Phillipe Meheu, Evan Orensten, Richard
Titus, Stephen Anspach, Len Sellers, Shane Ginsberg, Mike Beeston, and Mark
Curtis.
"Knowledge" of any Person shall mean the actual knowledge of the
---------
directors of such Person, after due inquiry and, in the case of Spray Ventures,
shall be deemed to include the actual knowledge of the directors of the Company,
after due inquiry.
"Liability" shall mean any debt, obligation, duty or liability
---------
(matured, accrued, contingent or otherwise) of any nature, regardless of whether
such debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with Swedish GAAP or U.S. GAAP, as
applicable.
"Lien" shall mean, with respect to any asset, (a) any lien, claim,
----
pledge, hypothecation, charge, mortgage, deed of trust, security interest,
restriction, encumbrance,
4
<PAGE>
option, easement, right-of-way, or encumbrance of any kind, or (b) the interest
of a vendor or lessor under any conditional sale agreement, capital lease or
title retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such asset.
"Material Adverse Effect" shall mean events, facts or circumstances,
-----------------------
which, alone or in the aggregate, have or can reasonably be expected to have a
material adverse effect on the business, operations, prospects or financial
condition of any of the Parties or the Company Group.
"Material Company Contract" shall mean a Company Contract which has
-------------------------
annual revenues or expenses equal to or greater than SEK 784,314.
"Material Purchaser Contract" shall mean a Purchaser Contract which
---------------------------
has annual revenues or expenses equal to or greater than $100,000.
"Parties" shall mean Communicade, Purchaser and Spray Ventures.
-------
"Person" shall mean any individual, Entity or Governmental Authority.
------
"Proceeding" shall mean any action, suit, litigation, arbitration,
----------
mediation, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), inquiry,
audit, examination or investigation before, or involving any Governmental
Authority or any arbitrator, mediator or arbitration or mediation panel.
"Proprietary Asset" shall mean any patent, trademark (registered or
-----------------
unregistered), copyright, or other intellectual property.
"Purchase Price" shall have the meaning specified in Section 2.02.
--------------
"Purchaser" shall have the meaning specified in the first paragraph of
---------
this Agreement.
"Purchaser Year-End Financials" shall have the meaning set forth in
-----------------------------
Section 6.07(a).
"Purchaser Closing Receivables/Payables" shall have the meaning set
--------------------------------------
forth in Section 6.07(a).
"Purchaser Contract" shall mean any Contract to which the Purchaser or
------------------
any Purchaser Subsidiary is a party or by which its properties or assets are
bound or under which it or its respective business, properties or assets receive
benefits.
"Purchaser Current Balance Sheet" shall have the meaning set forth in
-------------------------------
Section 6.07(a).
5
<PAGE>
"Purchaser Current Financials" shall have the meaning set forth in
----------------------------
Section 6.07(a).
"Purchaser Employee Benefit Plan" shall mean any Employee Benefit Plan
-------------------------------
which is maintained or contributed to or are required to be maintained,
contributed to or provided by the Purchaser or any Purchaser Subsidiary, under
which any employee, former employee or independent contractor (or any dependent
of any such Persons) has any present or future right to benefits or compensation
or under which the Purchaser or any Purchaser Subsidiary has or may have any
present or future liability or obligation.
"Purchaser Financials" shall have the meaning set forth in Section
--------------------
6.07(a).
"Purchaser Group" shall mean the Purchaser and the Purchaser
---------------
Subsidiaries.
"Purchaser Shareholders" shall mean all of the Persons holding the
----------------------
Purchaser Common Stock immediately prior to the Closing.
"Purchaser Shares" shall have the meaning specified in Section 2.02.
----------------
"Purchaser Subsidiary" shall mean Razorfish San Francisco, Inc.,
--------------------
Razorfish Los Angeles, Inc., Avalanche Solutions, Inc. and CHBi Razorfish Ltd.
"Purchaser Subsidiaries" shall mean, collectively, each Purchaser Subsidiary.
----------------------
"Related Party" shall mean, (i) with respect to the Company, (a) Spray
-------------
Ventures, (b) each individual who is, or who has at any time been, an officer or
director of the Company or any of the Company Subsidiaries, and (c) any Entity
(other than the Company) in which any one of the Persons referred to in clauses
(i) (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, and (ii) with respect to the Purchaser, (a) the Purchaser
Shareholders, (b) each individual who is, or who has at any time been, an
officer or director of the Purchaser or any of the Purchaser Subsidiaries, and
(c) any Entity (other than the Purchaser) in which any one of the Persons
referred to in clauses (ii) (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.
"Requirement of Law" shall mean any law, statute, legislation,
------------------
constitution, principle of common law, resolution, ordinance, code, edict,
decree, order, proclamation, treaty, convention, rule, regulation, ruling,
directive, pronouncement, requirement, specification, determination, decision,
opinion or interpretation issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Authority.
"SEK" shall mean the lawful currency of the Kingdom of Sweden.
---
"Shareholder" shall have the meaning specified in the first paragraph
-----------
of this Agreement.
6
<PAGE>
"Spray Ventures" shall have the meaning specified in the first
--------------
paragraph of this Agreement.
"Subsidiary" shall mean with respect to any Person, any other Person
----------
that, directly or indirectly, is controlled by such Person. For the purposes of
this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Swedish GAAP" shall mean generally accepted accounting principles in
------------
effect in the Kingdom of Sweden, applied on a basis consistent with the
Company's past practices.
"Tax" shall have the meaning specified in Section 4.21.
---
"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, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Authority 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
Requirement of Law relating to any Tax.
"Tenant" shall have the meaning specified in Section 4.10.
------
"Transaction Documents" shall mean this Agreement, the Shareholders
---------------------
Agreement and all other agreements, certificates and instruments executed or
contemplated to be executed by any of the Parties in connection with the
Transactions.
"Transactions" shall mean the sale and purchase of the Company Shares
------------
and all of the other transactions contemplated by this Agreement.
"US$" shall mean the lawful currency of the United States of America.
---
"U.S. GAAP" shall mean generally accepted accounting principles in
---------
effect in the United States, applied on a basis consistent with the Purchaser's
past practices.
"Warrant" shall have the meaning set forth in the first recital to
-------
this Agreement.
SECTION 1.02. Certain Rules of Construction.
------------- ------------------------------
When a reference is made in this Agreement to Sections, Articles,
Exhibits or Schedules, such reference shall be to a Section, Article, Exhibit or
Schedule (as the case may be) of this Agreement, unless otherwise indicated.
The headings of the subdivisions of this Agreement are included for ease of
reference only and shall not be deemed a part of this Agreement or taken into
account in the interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
7
<PAGE>
followed by the words "without limitation." The use of any gender herein shall
be deemed to be or include the other genders and the use of the singular herein
shall be deemed to be or include the plural (and vice versa), whenever
appropriate.
ARTICLE II.
AGREEMENT TO EXCHANGE THE COMPANY SHARES
SECTION 2.01. Exchange of the Company Shares and the Warrants.
------------- ------------------------------------------------
Subject to the terms and conditions of this Agreement, at the Closing,
the Shareholders shall assign, transfer and deliver to the Purchaser all of the
Company Shares and the Warrants and the Purchaser shall acquire the same, free
of any Encumbrance.
SECTION 2.02. Purchase Price.
------------- ---------------
At the Closing, in exchange for the Company Shares and the Warrants
(the "Purchase Price"), (i) the Purchaser shall issue such number of newly
issued shares of Common Stock as shall, immediately following the Closing,
constitute fifty percent (50%) of the then issued and outstanding shares of
Common Stock on a Fully Diluted Basis (the "Purchaser Shares"), free of any
Encumbrance, and (ii) at the Purchaser's option, the Purchaser shall either pay
to the Shareholders $100 in immediately available funds or the Purchaser shall
issue $100 worth of non-voting stock of the Purchaser, free of any Encumbrance.
The Purchase Price shall be allocated among the Shareholders in accordance with
the provisions of Schedule 2.02.
-------------
ARTICLE III.
CLOSING
SECTION 3.01. The Closing. The consummation of the Transactions will
------------- --------------
take place at a closing (the "Closing") at the offices of Purchaser's legal
counsel, Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New
York, at 10:00 A.M., New York City time, when the conditions contained in this
Article III have been fulfilled or waived by the Parties. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
-
SECTION 3.02. Closing Conditions.
------------- -------------------
(a) The obligations of each of Spray Ventures and Communicade hereunder
are subject to the fulfillment, at or before the Closing, of each of the
following conditions, all or any of which may be waived in whole or in part by
Spray Ventures or Communicade, in its sole discretion:
(i) no termination event set forth in Article IX having occurred;
(ii) the delivery of the documents and the performance of the acts
set forth in Sections 8.01, 8.03 and 8.04;
8
<PAGE>
(iii) the representations and warranties made by the Purchaser in
this Agreement, or in any Schedule delivered pursuant hereto, shall be true and
correct in all material respects (except for such changes contemplated by
Section 7.02(a)(i), (ii) and (ix)) on and as of the Closing with the same force
and effect as though made on and as of the Closing or, in the case of
representations and warranties made as of a specific date earlier than the
Closing, on and as of such earlier date;
(iv) the Purchaser shall have performed and complied in all
material respects with the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by the Purchaser at or before
the Closing;
(v) there shall not be pending any litigation, proceeding,
investigation, arbitration or claim by any Person or Governmental Authority or
regulatory body or the existence of any injunction or order (whether temporary,
preliminary or permanent) then in effect, and which in any case, has or could
reasonably have the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement; and
(vi) all proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident thereto
were reasonably satisfactory in form and substance to Spray Ventures and
Communicade and their counsel and Spray Ventures and Communicade received copies
of all such documents and other evidences as it or its counsel may reasonably
request in order to establish the consummation of such transaction and the
taking of all proceedings in connection therewith.
(b) The obligations of the Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions, all
or any of which may be waived in whole or in part by the Purchaser, in its sole
discretion:
(i) no termination event set forth in Article IX having
occurred;
(ii) the delivery of the documents and the performance of the
acts set forth in Sections 8.01, 8.02 and 8.04;
(iii) the representations and warranties made by each of Spray
Ventures and Communicade in this Agreement, or in any Schedule delivered
pursuant hereto, shall be true and correct in all material respects on and as of
the Closing with the same force and effect as though made on and as of the
Closing or, in the case of representations and warranties made as of a specific
date earlier than the Closing, on and as of such earlier date;
(iv) each of Spray Ventures and Communicade shall have
performed and complied in all material respects with the agreements, covenants
and obligations required by this Agreement to be so performed or complied with
by Spray Ventures or Communicade, as the case may be, at or before the Closing;
9
<PAGE>
(v) there shall not be pending any litigation, proceeding,
investigation, arbitration or claim by any Person or Governmental Authority or
regulatory body or the existence of any injunction or order (whether temporary,
preliminary or permanent) then in effect, and which in any case, has or could
reasonably have the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement; and
(vi) all proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto were
reasonably satisfactory in form and substance to the Purchaser and its counsel
and the Purchaser received copies of all such documents and other evidences as
it or its counsel may reasonably request in order to establish the consummation
of such transaction and the taking of all proceedings in connection therewith.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SPRAY VENTURES
Spray Ventures hereby represents and warrants to the Purchaser with
respect to the Company and the Company Subsidiaries, as applicable, as follows:
SECTION 4.01. Organization, Good Standing and Qualification of the
------------- ----------------------------------------------------
Company and the Company Subsidiaries.
- -------------------------------------
(a) The Company and the Company Subsidiaries are corporations duly
organized, validly existing and, to the extent applicable, in good standing
under the laws of the jurisdictions of their formation and are duly qualified to
conduct business and, to the extent applicable, in good standing under the laws
of each jurisdiction in which the nature of their business or the ownership or
leasing of their properties require such qualification. The Company and the
Company Subsidiaries have all requisite corporate power and authority to own and
operate their properties and assets, and to carry on their business as presently
conducted and as presently proposed to be conducted. The Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Schedule 4.01(b) sets forth (i) the names of the members of the
----------------
Company's and the Company Subsidiaries' boards of directors, and (ii) the names
and titles of the Company's and the Company Subsidiaries' officers, if any.
(c) None of the Company or any of the Company Subsidiaries has filed
(or has had filed against it) a petition in bankruptcy, or is insolvent within
the meaning of applicable laws, rules, regulations or similar requirements, and
has not made any assignment in favor of its creditors or any class thereof, nor
has any petition for a receivership or administration order been presented in
respect of the Company or any of the Company Subsidiaries. Neither the Company
nor any of the Company Subsidiaries has initiated any proceedings with respect
to a compromise or arrangement with their creditors or for the dissolution,
liquidation or reorganization of such
10
<PAGE>
Persons, or the winding up or cessation of the business or affairs of such
Persons. No receiver or administration receiver or liquidator has been appointed
in respect of the Company or any of the Company Subsidiaries, or any of their
assets and no execution has been levied upon any of their assets.
(d) Except as set forth in Schedule 4.01(d), the Company Subsidiaries
----------------
are the only Subsidiaries of the Company and, except for the outstanding shares
of the Company Subsidiaries held by the Company and such other shares as set
forth on Schedule 4.01(d), the Company has never owned, beneficially or
----------------
otherwise, any shares or other securities of, or any direct or indirect interest
in, any Person. The Company Subsidiaries have no Subsidiaries and have never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect interest in, any Person.
SECTION 4.02. Corporate Documents.
------------- --------------------
(a) The Company has delivered to the Purchaser accurate and complete
copies of:
(i) the memorandum of association, articles of association,
articles of incorporation and bylaws, or similar organizational documents,
including all amendments thereto, of the Company and each of the Company
Subsidiaries;
(ii) the share transfer registers of the Company and each of
the Company Subsidiaries; and
(iii) the minutes and other records of the official meetings and
other official proceedings (including any actions taken by written consent
or otherwise without a meeting) of the shareholders and boards of directors
of the Company and each of the Company Subsidiaries.
(b) There have been no official meetings or other official
proceedings of the shareholders or the board of directors of the Company or any
of the Company Subsidiaries that are not properly reflected in such minutes or
other records.
(c) None of the Company or the Company Subsidiaries is in violation
of its memorandum of association, articles of association, or articles of
incorporation and bylaws, as applicable.
SECTION 4.03. Capitalization.
------------- ---------------
(a) The authorized share capital of the Company consists of 2,815
Company Shares, all of which are issued and are outstanding. There are no
shares of capital stock of the Company of any other class authorized, issued or
outstanding. All of such shares are owned and held beneficially and of record
by the Shareholders as set forth on Schedule 4.03(a), free and clear of all
----------------
options, proxies, voting trusts, voting agreements, judgments, pledges, charges,
escrows, rights of first refusal or first offer, mortgages, indentures, claims,
transfer restrictions,
11
<PAGE>
Liens, equities, security interests and other encumbrances of every kind and
nature whatsoever, whether arising by agreement, operation of law or otherwise.
The authorized and issued capital stock of each of the Company Subsidiaries is
as set forth on Schedule 4.03(a). All outstanding shares of such capital stock
----------------
are held directly by the Company except as set forth on Schedule 4.03(a). All
----------------
issued and outstanding shares described in this Section 4.03(a) have been duly
authorized and validly issued in full compliance with all applicable
Requirements of Law, are fully paid and non-assessable, and have not been issued
in violation of any preemptive or similar rights.
(b) Except as set forth on Schedule 4.03(b), there are no: (i)
----------------
outstanding subscriptions, options, calls, warrants or rights (whether or not
currently exercisable) to acquire any shares in the capital or other securities
of the Company or any of the Company Subsidiaries, (ii) outstanding securities,
instruments or obligations that are or may become convertible into or
exchangeable for any shares in the capital or other securities of the Company or
any of the Company Subsidiaries, (iii) Contracts under which the Company or any
of the Company Subsidiaries is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities, or (iv)
conditions or circumstances that may directly or indirectly give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares in the capital, or
other securities of, the Company or any of the Company Subsidiaries.
(c) The Company has never repurchased, redeemed or otherwise
reacquired or reduced in value (and has not agreed, committed or offered (in
writing or otherwise) to reacquire or reduce in value) any shares of its
capital.
(d) Any and all dividends (including stock dividends) or other
distributions (together with all interest or other amounts owed in connection
therewith) accrued but unpaid with respect to any of the Company Shares have
been cancelled and terminated, and all Persons to whom such dividends or other
distributions were payable have forever and irrevocably waived their rights to
receive such dividends and other distributions, and from and after the Closing
Date, neither the Company, the Purchaser nor any of their Affiliates shall have
any liability therefor or any Taxes relating thereto.
SECTION 4.04. [Intentionally Omitted]
------------- -----------------------
SECTION 4.05. Non-Contravention; Consents.
------------- ----------------------------
(a) Neither the execution and delivery of this Agreement or any
Transaction Document, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a violation of (A) any
of the provisions of the memorandum of association, articles of
association, articles of incorporation or bylaws, or similar organizational
documents, of the Company or any Company Subsidiary, or (B) any resolution
adopted by the stockholders or board of directors of the Company or any
Company Subsidiary;
12
<PAGE>
(ii) contravene, conflict with or result in a violation of, or
give any Governmental Authority or other Person the right to challenge any
of the Transactions or to exercise any remedy or obtain any relief under,
any Requirement of Law to which the Company or any Company Subsidiary or
any of the assets owned or used by the Company or any Company Subsidiary
are subject;
(iii) cause the Company or any Company Subsidiary to become
subject to, or to become liable for the payment of, any Tax;
(iv) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Authority the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the Company or any Company
Subsidiary or any of their respective employees or that otherwise relates
to the business of the Company or any Company Subsidiary, or to any of the
assets owned or used by the Company or any Company Subsidiary;
(v) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any of the
Material Company Contracts or any other Company Contract (if such
contravention, conflict, violation, breach or default has or could
reasonably be expected to have a Material Adverse Effect on the Company or
any Company Subsidiary);
(vi) give any Person the right to (i) declare a default or
exercise any remedy under any Company Contract, (ii) accelerate the
maturity or performance of any Company Contract, or (iii) cancel, terminate
or modify any Company Contract;
(vii) give any Person the right to any payment by the Company or
any Company Subsidiary 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 the Company or any Company Subsidiary in favor of any Person, in any
such case as a result of the change in control of the Company or such
Company Subsidiary, or otherwise resulting from the Transactions; or
(viii) result in the imposition or creation of any Lien upon or
with respect to any asset owned or used by the Company or any Company
Subsidiary.
(b) Neither the Company nor any of the Company Subsidiaries is
required to make any filing with or give any notice to, or to obtain any Consent
from, any Person in connection with the execution and delivery of this Agreement
or any of the other Transaction Documents or the consummation or performance of
any of the Transactions.
SECTION 4.06. Proprietary Assets.
------------- -------------------
(a) Schedule 4.06(a) sets forth a complete and accurate list
----------------
(including relevant registration information) of all registered Proprietary
Assets which are owned or used by,
13
<PAGE>
required for, or material to the Company or the Company Subsidiaries in
connection with the Company's and the Company Subsidiaries' businesses.
(b) To the Knowledge of Spray Ventures, all Proprietary Assets which
are owned or used by, required for, or material to the Company or the Company
Subsidiaries in connection with the Company's and the Company Subsidiaries'
businesses, including those listed in Schedule 4.06(a) are:
----------------
(i) except for licenses for "off-the-shelf" software, owned
solely and exclusively by the Company or one of the Company Subsidiaries;
(ii) except pursuant to applicable law, not subject to any
limit as to time or any other limitation, right of termination,
reassignment or restriction;
(iii) valid and enforceable (and, to the extent registered, in
compliance with all Requirements of Law, including payment of filing,
examination and maintenance fees and proofs of working or use), with no
past or present default on the part of the Company or the Company
Subsidiaries or past or present acquiescence in the activities of third
parties that would adversely affect validity or enforceability of such
Proprietary Assets;
(iv) not being infringed or attacked or opposed or the subject
of any claim to ownership or compensation, by any Person, and no Person has
indicated any intention to infringe, attack or oppose such Proprietary
Assets; and
(v) not subject to any license, waiver, charge, contingent
assignment, agreement, obligation, or any other encumbrance of any sort in
favor of a third party.
(c) To the Knowledge of Spray Ventures, no claims or applications
have been made against, no notifications in writing or otherwise have been
received by, and there are no circumstances in respect of the Company's and the
Company Subsidiaries' businesses which (notwithstanding any view taken by the
Company as to the merits of such claim, application, notification or
circumstances) if pursued would affect the accuracy of the representations and
warranties in Section 4.06(b) above.
(d) To the Knowledge of Spray Ventures, the Company and the Company
Subsidiaries have conducted their business without infringement or claim of
infringement of any Proprietary Asset of any other Person. Without limiting the
foregoing, the Company and the Company Subsidiaries have the right (pursuant to
a written Contract) to use and incorporate into their products the Proprietary
Assets of other Persons, as and to the extent the same are currently so used and
incorporated. Neither the Company nor the Company Subsidiaries has received any
notice or other communication (in writing or otherwise) of any infringement of
any Proprietary Asset owned or used by any other Person. To the Knowledge of
Spray Ventures, no other Person is infringing, and no Proprietary Asset owned or
used by any other Person infringes or conflicts with, any Proprietary Asset
owned or used by the Company or any of the Company Subsidiaries.
14
<PAGE>
(e) The Company and the Company Subsidiaries have taken reasonable
measures and precautions to protect the confidentiality and value of all
Proprietary Assets owned or used by the Company or the Company Subsidiaries.
SECTION 4.07. Financial Statements.
------------- ---------------------
(a) The Company has delivered to the Purchaser (i) the consolidated
balance sheet of the Company and the Company Subsidiaries as of December 31,
1997 and the related consolidated statements of operations for the Company and
the Company Subsidiaries for the year then ended (collectively, the "Year-End
Financials"), which Year-End Financials have been audited by Deloitte & Touche,
the Company's auditors, (ii) the audited consolidated balance sheet of the
Company and the Company Subsidiaries as of June 30, 1998 (the "Current Balance
Sheet") and the related audited consolidated statements of operations for the
Company and the Company Subsidiaries for the six-month period then ended
(collectively, the "Current Financials"), and (iii) a consolidated list of
accounts payable and accounts receivable for the Company and the Company
Subsidiaries as of June 30, 1998 and for the Company as of the date hereof, in
each case aged consistent with the Company's past practices (the "Closing
Receivables/Payables;" the Year-End Financials, the Current Financials and the
Closing Receivables/Payables, collectively, the "Financials").
(b) All of the Financials (and the line items contained therein) are
accurate and complete in all material respects. The Financials are in
accordance with the books and records of the Company and the Company
Subsidiaries and present fairly the assets, liabilities and financial condition
of the Company and the Company Subsidiaries as of the respective dates thereof
and the results of operations of the Company and the Company Subsidiaries for
the periods covered thereby. The Financials have been prepared in accordance
with Swedish GAAP, applied on a consistent basis throughout the periods covered.
(c) All of the Financials are attached hereto as Schedule 4.07(c).
----------------
SECTION 4.08. Liabilities.
------------- ------------
Except (a) as shown on the balance sheet included in the Current
Financials or in the list of accounts payable included in the Closing
Receivables/Payables, or (b) pursuant to the Company Contracts included on
Schedule 4.12(a), none of the Company or any of the Company Subsidiaries has any
- ----------------
material Liabilities of any nature. All reserves established by the Company and
the Company Subsidiaries and set forth in the balance sheet included in the
Current Financials are adequate for the purposes for which they were
established.
SECTION 4.09. Books and Records.
------------- ------------------
Neither the Company nor the Company Subsidiaries has any of its
records, systems, controls, data or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and possession of the Company Group.
15
<PAGE>
SECTION 4.10. Title to Assets.
------------- ---------------
(a) The Company Group owns, and has good, valid and marketable title
to, all the tangible personal property and assets used in their businesses or
purported to be owned by them, including:
(i) all assets reflected on the Current Balance Sheet;
(ii) all assets acquired by the Company Group since the date of
the Current Balance Sheet;
(iii) all assets referred to in Schedule 4.06(a) and the Closing
----------------
Receivables/Payables and all of the Company Group's rights under the
Company's Contracts; and
(iv) all other assets reflected in the Company Group's books
and records as being owned by the Company Group.
All of said assets are owned by the Company Group free and clear of
any Liens, except liens for current taxes and assessments not delinquent and
statutory liens of landlords, carriers, warehousemen, mechanics or materialmen
incurred in the ordinary course of business for sums not yet due and except as
set forth on Schedule 4.10(a). The representation and warranty set forth in
----------------
this Section 4.10(a) shall not apply to the Real Estate or the Leased Premises.
(b) The Company Group does not own any equipment, furniture,
fixtures, improvements or other tangible assets with an individual value of SEK
156,800 or more.
(c) Schedule 4.10(c) identifies all material assets other than the
----------------
Leased Premises that are being leased or licensed to the Company or the Company
Subsidiaries. All leases pursuant to which the Company Group leases personal
property are in good standing and are valid and effective in accordance with
their respective terms and, to Spray Venture's Knowledge, there exists no
material default thereunder or occurrence or condition which could result in a
default thereunder or termination thereof. The buildings, equipment and other
tangible assets used by the Company Group are in good operating condition and
are useable in the ordinary course of the Company Group's business.
SECTION 4.11. Real Property.
------------- -------------
(a) The Company and the Company Subsidiaries do not own any real
estate, buildings, improvements or structures.
(b) (i) All real estate leased, subleased or licensed by the Company
Group as lessee, sublessee or licensee is described in Schedule 4.11(b) (the
----------------
"Company Leased Premises"). The Company Leased Premises are leased to the
Company Group pursuant to written agreements (together with all amendments,
assignments, guarantees, and other
16
<PAGE>
documents relating thereto or other agreements listed therein, the "Company
Leases"), and true and correct copies of all the Company Leases have been
furnished to the Purchaser and are described on Schedule 4.11(b). The Company
----------------
Group owns all leasehold estates and other rights purported to be granted by the
Company Leases. Each of the Company Leases is in full force and effect, valid
and binding in accordance with its terms.
(ii) All real estate leased, subleased or licensed by the
Company Group as lessor, sublessor or licensor is described in Schedule
--------
4.11(b) (the "Third Party Leased Premises"). Except as set forth on
-------
Schedule 4.11(b), the Third Party Leased Premises are leased by the Company
----------------
Group to third parties (each, a "Tenant" and collectively, "Tenants")
pursuant to written agreements (together with all amendments, assignments,
guarantees, and other documents relating thereto or other agreements listed
therein, the "Third Party Leases") and true and correct copies of all the
Third Party Leases have been furnished to the Purchaser and are described
on Schedule 4.11(b). There are no security deposits held by the Company
---------------
Group or any other party under any of the Third Party Leases. The Company
Group has not received any notices from any Tenant desiring to cancel any
Third Party Lease. The Company Group has not received notification from any
Tenant that it disputes the computation of the Tenant's percentage rent,
additional rent or other amounts payable to the Company Group pursuant to
its Third Party Lease. The occupancy of each Tenant is valid and legal and,
to the Knowledge of Spray Ventures, does not violate any material
Requirement of Law.
(iii) There are no arrearages in rent, additional rent or other
amounts payable under any of the Company Leases or the Third Party Leases
(collectively, the "Leases"). There are no defaults by the Company Group
of any of its obligations under the Leases. The Company Group has not
received any notices of default under any of the Leases, and to Spray
Ventures' Knowledge, there are no defaults by any party other than the
Company Group under any of the Leases. There are no brokerage or other
leasing commissions payable pursuant to any agreements in connection with
any of the Leases or amendments thereto or renewals or expansions thereof.
(c) Neither Spray Ventures nor any member of the Company Group has
received written notice (i) of condemnation, zoning or other land-use regulation
proceedings or suspension of the right of any member of the Company Group to use
any of the Leases, (ii) of any special assessment proceedings affecting all or
any portion of the Leases, (iii) from any Governmental Authority having
jurisdiction over all or any portion of the Leases regarding or in respect of
any change in any applicable laws, regulations, statutes, rules or restrictions
relating to a change in the permitted use of all or any portion of the Leases or
the business conducted thereof or (iv) any notice from adjacent landowners or
land occupants regarding unrecorded easements and/or agreements or encroachments
in respect of all or any portion of the Leases. There is no pending or, to
Spray Venture's Knowledge, threatened or contemplated action by any Governmental
Authority or pending or contemplated action by a private party adverse to the
uses contemplated for the Leases. Upon consummation of the transactions
contemplated by this Agreement, and without obtaining the consent of any Person,
the Company will be entitled to
17
<PAGE>
continue to use or possess all of the Leases in the same manner such Leases were
used or possessed immediately prior to the Closing.
(d) All of the demised premises, buildings and structures that
comprise the Leases are in good operating condition and repair (normal wear and
tear excepted), suitable for the purposes for which they are being used and each
has adequate rights of ingress and egress for the operation of the business of
the Company Group. Since January 1, 1997, no member of the Company Group has
received any notice of any uncured unsafe or other condition which presents risk
of injury to persons or loss of or damage to property affecting or concerning
all or any portion of the Leases.
(e) There are no written or oral options to purchase, rights of first
refusal, rights of first offer in connection with any of the Leases or any other
contractual right to offer, purchase, acquire, sell, assign or dispose of any of
the Leases. Except as set forth on Schedule 4.11(b), no Person has any right,
----------------
as member, tenant, occupant or otherwise, to use, lease and/or occupy any
portion of the Leases, and there are no oral or written agreements between any
member of the Company Group and any other Person providing for the occupancy or
use of any portion of the Leases.
SECTION 4.12. Material Company Contracts.
------------- ---------------------------
(a) Schedule 4.12(a) lists all Material Company Contracts.
--- ----------------
(b) Each Material Company Contract is valid and in full force and
effect, and is enforceable by the Company or the applicable Company Subsidiary
in accordance with its terms. There are no Material Company Contracts that the
Company Group intends to terminate, and the Company Group has not received
notice from any party to any Material Company Contract that it wishes to
terminate such Contract.
(c) To Spray Venture's Knowledge, neither the Company nor any Company
Subsidiary is in breach of or default under (and no event has occurred which
with notice or the passage of time or both would constitute a breach of or
default under) any Material Company Contract and, to the Company's Knowledge, no
other Person is in breach of or default under (and no event has occurred which
with notice or the passage of time or both would constitute a breach of or
default under) any Material Company Contract.
(d) None of the Material Company Contracts contains a "change in
control," "potential change in control" or similar provision which could result
in a potential "parachute payment." The consummation of the Transactions will
not (either alone or upon the passage of time and/or occurrence of any
additional acts or events) result in any payment (severance pay or otherwise)
becoming due from the Company or any Company Subsidiary to any Person or
accelerate the time of payment or vesting, or increase the amount of
compensation due, any Person; excluding, however, any such payments,
accelerations or increases which could have occurred upon the passage of time
and/or occurrence of any additional acts or event even if the "change of
control" or "potential change of control" occurring upon the execution and
delivery of this Agreement and the consummation of the Transactions did not
occur.
18
<PAGE>
SECTION 4.13. Employees; Employee Benefits.
------------- -----------------------------
(a) Schedule 4.13(a) contains a list of all employees of the Company
----------------
and the Company Subsidiaries as of the date hereof and their salary or wages. A
standard employment contract is attached hereto as Exhibit A. No employee of the
---------
Company Group is on long-term disability leave or extended absence or in receipt
of workers' compensation benefits.
(b) Schedule 4.13(b) contains a list of individuals who are currently
----------------
performing services for the Company Group related to its business and are
classified as "consultants" or "independent contractors."
(c) To the Knowledge of Spray Ventures, no trade union or collective
bargaining agent is currently representing any of its employees with respect to
any labor actions against the Company. No employee of the Company Group, other
than the Key Company Employees, has any agreement or contract, written or oral,
regarding his employment that provides for a longer notice of termination by the
Company Group, other than pursuant to applicable law.
(d) No employee of the Company Group, nor, to Spray Venture's
Knowledge, any consultant with whom the Company or any of the Company
Subsidiaries has contracted, is in material violation of any 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, such Person because of the nature of the business to be conducted by the
Company Group, and to Spray Venture's Knowledge the continued employment by the
Company Group of its present employees, and the performance of the Company's and
the Company Subsidiaries' contracts with its independent contractors, will not
result in any such violation. The Company has not received any notice alleging
that any such violation has occurred.
(e) To the Knowledge of Spray Ventures, no officer or Key Company
Employee, or any group of Key Company Employees, intends to terminate his, her
or their employment with the Company, nor does the Company Group have a present
intention to terminate the employment of any officer, Key Company Employee or
group of Key Company Employees.
(f) The Company and the Company Subsidiaries have complied with all
obligations under applicable law to pay social security charges in respect of
the periods accrued prior to the date hereof.
(g) Each Company Employee Benefit Plan is fully funded for all
periods prior to the Closing Date. Without limiting the foregoing, all
contributions to each of the Company Employee Benefit Plans in respect of
periods of service or benefits accrued prior to the Closing Date have been made
on an accrual basis up to the Closing Date, notwithstanding that such
contributions may not be due and owing until after the Closing Date.
(h) No promises or commitments have been made by Spray Ventures, the
Company or any of the Company Subsidiaries, or any of their employees,
consultants or former
19
<PAGE>
employees or consultants to amend any Company Employee Benefit Plan or to
provide increased benefits thereunder (other than plan amendments that are
required as a matter of law).
(i) Each Company Employee Benefit Plan is, and has been, administered
in all material respects in accordance with the terms thereof and applicable
laws. All obligations under the Company Employee Benefit Plans have been
satisfied, to the extent required by the terms thereof or applicable laws.
(j) Each Company Employee Benefit Plan is in compliance with all
applicable laws and there are no outstanding material defaults or violations by
the Company in connection with any Company Employee Benefit Plan, and no order
has been made or notice given requiring (or proposing to require) the Company,
the Company Subsidiaries or any others to take or refrain from taking any action
in respect of any Company Employee Benefit Plan. All material returns, filings,
reports and disclosures relating to the Company Employee Benefit Plans required
pursuant to the terms thereof or applicable laws have been made, filed or
distributed in accordance with all such requirements and all filing fees and
levies imposed on the Company Employee Benefit Plans by any regulatory
authorities or applicable laws have been made or remitted on a timely basis.
Each Company U.S. Employee Benefit Plan that is intended to be a qualified plan
under Internal Revenue Code Section 401 is so qualified.
(k) No actions, suits, claims (other than routine claims for payment
of benefits in the ordinary course), investigations, arbitrations or other
proceedings have been commenced or threatened in respect of any of the Company
Employee Benefit Plans or its assets.
(l) None of the Company Employee Benefit Plans provides benefits to
employees following retirement. No Company Employee Benefit Plan exists that
could result in the payment to any employee of any money, benefits or other
property or accelerate or increase the funding requirements for any Company
Employee Benefit Plan, in each case as a result of the Transactions.
(m) Except as set forth in Schedule 4.13(m), there are no employment
----------------
policies or plans, including policies or plans regarding incentive compensation,
stock options, severance pay or other terms or conditions of employment or terms
or conditions upon which Employees may be terminated, which are binding, under
contract or by operation of law, upon the Company or the Company's Subsidiaries.
SECTION 4.14. Employment Relations.
------------- ---------------------
(a) The Company and the Company Subsidiaries are not engaged in any
unfair labor practice. There have been no such complaints under applicable laws
against the Company or the Company Subsidiaries.
(b) There are no complaints nor are there any threatened complaints,
against the Company or any Company Subsidiary, before any employment standards
branch or tribunal or human rights tribunal.
20
<PAGE>
SECTION 4.15. Compensation of Employees.
------------- --------------------------
No member of the Company Group has any retired employees who are
receiving or entitled to receive any healthcare or life insurance benefits or
any payments from the Company or the Company Subsidiaries not covered by any
pension plan to which the Company or the Company Subsidiaries is a party. The
Company Group has not, because of past practices or previous commitments with
respect to its employees, established any rights on the part of any of its
employees to additional compensation with respect to any period after the
Closing Date (other than wage increases in the ordinary course of business).
The present severance and vacation policy of the Company and the Company
Subsidiaries is equal to or greater than that required by applicable law.
SECTION 4.16. Receivables; Major Customers.
------------- -----------------------------
(a) The list of accounts receivable included in the Closing
Receivables/Payables provides an accurate and complete breakdown and aging of
all accounts receivable of the Company and the Company Subsidiaries as of June
30, 1998 and for the Company as of the date hereof.
(b) All such accounts receivable:
(i) represent valid obligations of customers of the Company and
the Company Subsidiaries' arising from bona fide transactions entered into
in the ordinary course of business; and
(ii) are current and will be collected in full (without any
counterclaim or setoff) in the ordinary course of business, subject to a
reserve for doubtful accounts as set forth in the Current Balance Sheet.
(c) Neither the Company nor any of the Company Subsidiaries' has
received any notice or other communication (in writing or otherwise) indicating
that any customer of the Company or the Company Subsidiaries may cease dealing
with the Company or any of the Company Subsidiaries or may otherwise reduce the
volume of business transacted by such Person with the Company or any of the
Company Subsidiaries below historical levels.
SECTION 4.17. Accounts Payable; Customers and Suppliers.
------------- ------------------------------------------
(a) The list of accounts payable included in the Closing
Receivables/Payables:
(i) provides an accurate and complete breakdown and aging of the
Company's and the Company Subsidiaries' accounts payable as of June 30,
1998 and for the Company as of the date hereof;
(ii) provides an accurate and complete breakdown of all customer
deposits and other deposits held by the Company and the Company
Subsidiaries as of June 30, 1998 and for the Company as of the date hereof;
and
21
<PAGE>
(iii) provides an accurate and complete breakdown of amounts
owed to suppliers and the Company's and the Company Subsidiaries' debt as
of June 30, 1998 and for the Company as of the date hereof.
(b) Schedule 4.17(b) accurately identifies, and provides an accurate
----------------
and complete breakdown of the amounts paid to or received from, the three
largest suppliers and 10 largest customers of the Company Group (in terms of
amounts billed and paid, respectively) for the thirteen-month period ended
September 30, 1998. Spray Ventures is not aware of any loss or threatened loss
of any such suppliers, customers or accounts.
SECTION 4.18. Proceedings.
------------- ------------
(a) There is no pending Proceeding and no Person has threatened to
commence any Proceeding:
(i) that involves the Company or any Company Subsidiary or their
assets; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the
Transactions.
(b) To the Knowledge of Spray Ventures, no acts, facts,
circumstances, events or conditions have occurred or exist which are a basis for
any Proceeding described in Section 4.18(a).
(c) No member of the Company Group is a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in any Proceeding
with any governmental authority) which could have a Material Adverse Effect.
SECTION 4.19. Compliance With Requirement of Laws.
------------- ------------------------------------
The Company and the Company Subsidiaries are in compliance with each
Requirement of Law (including, without limitations, all Environmental Laws)
applicable to them or the conduct of their businesses or use of their assets
except for any failure to comply which, individually or in the aggregate, does
not or reasonably cannot be expected to have a Material Adverse Effect on the
Company or any of the Company Subsidiaries.
SECTION 4.20. Governmental Authorizations.
------------- ----------------------------
(a) The Company Group has no Governmental Authorizations.
(b) No Governmental Authorizations are necessary (i) to enable the
Company and the Company Subsidiaries to conduct their business in the manner in
which such business is currently being conducted, or (ii) to permit the Company
and the Company Subsidiaries to own and use their assets in the manner in which
they are currently owned and used.
22
<PAGE>
SECTION 4.21. Tax Matters.
------------- ------------
(a) The Company and its Subsidiaries have filed, or caused to be
filed within the times and within the manner prescribed by law, all tax or
information returns and tax reports required under all applicable statutes,
rules or regulations to be filed by the Company and its Subsidiaries with
respect to income, franchise, capital stock, employees' income withholding,
withholding on payments to foreign persons, social security, unemployment,
disability, property, custom duties, sales, use, goods and services, excise,
transfer, value added, gross receipts, postponement and other taxes (including
but not limited to interest, penalties, or additions to tax in respect of the
foregoing) whether disputed or not (all of the foregoing collectively referred
to as "Taxes").
(b) All Taxes shown on said returns to be due and additional
assessments received prior to the date hereof have been paid.
(c) The amounts set up as accruals for Taxes on the Current
Financials are sufficient for the payment of all unpaid Taxes of the Company and
its Subsidiaries, whether or not such Taxes are disputed or have been asserted
by any Governmental Authority, for all periods or portions of periods ended on
or prior to Closing, including any Taxes due on any restructuring of the Company
or distribution of Subsidiaries of the Company to the Shareholders prior to
Closing.
(d) Neither the Company nor any of its Subsidiaries has received
notice of any proposed audit or reassessment from any taxing authorities and no
examination by the appropriate taxing authority of any return of the Company or
any of its Subsidiaries is currently in progress.
(e) No deficiency in the payment of Taxes by the Company or any of
its Subsidiaries for any period has been asserted in writing by any taxing
authority and remains unsettled at the date of this Agreement. No taxing
authority has undertaken, raised or threatened to raise any claim, proceeding or
investigation against the Company or any of its Subsidiaries, whether or not
such matter was agreed to or settled.
(f) There are no outstanding agreements or waivers extending the
statutory period of limitations for assessment applicable to any tax return of
the Company or any of its Subsidiaries.
(g) None of the Company or any of its Subsidiaries has any liability
for the Taxes of any Person other than the Company or a Company Subsidiary,
other than social charges, withholding taxes or garnishment of wages payable on
behalf of Company Group employees.
(h) Except as set forth on Schedule 4.21(h), neither the Company nor
----------------
any of its Subsidiaries is engaged in business in the United States or has
assets located in the United States. Neither the Company nor any of its
Subsidiaries is or has been a controlled foreign corporation within the meaning
of the United States tax laws.
23
<PAGE>
SECTION 4.22. Finders and Brokers.
------------- --------------------
Neither the Company, the Company Subsidiaries, Spray Ventures nor any
Person acting on behalf of the Company, the Company Subsidiaries or Spray
Ventures has negotiated with any finder, broker, intermediary or any similar
Person in connection with the transactions contemplated herein. Spray Ventures
will indemnify the Purchaser and hold it harmless from any liability or expense
arising from any claim for brokerage commissions, finder's fees or other similar
compensation based upon any agreement, arrangement or understanding made by or
on behalf of the Company or Spray Ventures.
SECTION 4.23. Absence of Changes.
------------- -------------------
Since the date of the Current Financials:
(a) the Company and the Company Subsidiaries have operated their
businesses only in the ordinary course of business and consistent with past
practice, and there have not been any facts, circumstances, events or changes in
the Company's or the Company Subsidiaries' business operations or financial
condition, which has had or can reasonably be expected to have a Material
Adverse Effect on the Company or any of the Company Subsidiaries;
(b) none of the Company or any of the Company Subsidiaries has (i)
declared, accrued, set aside or paid any dividend or made any other distribution
in respect of any shares of capital stock, or (ii) repurchased, redeemed or
otherwise reacquired or reduced in value any shares of capital stock or other
securities;
(c) none of the Company or any of the Company Subsidiaries has
purchased or otherwise acquired any asset from any other Person, except in the
ordinary course of business;
(d) none of the Company or any of the Company Subsidiaries has made
any material capital expenditure;
(e) except as set forth in Schedule 4.23(e), none of the Company or
----------------
any of the Company Subsidiaries has sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold by
the Company or any of the Company Subsidiaries from its inventory in the
ordinary course of business;
(f) none of the Company or the Company Subsidiaries has incurred any
damage, destruction, loss or interruption of use which adversely affects its
business or assets (whether or not covered by insurance);
(g) none of the Company or the Company Subsidiaries has forgiven any
debt or otherwise released or waived any right or claim;
24
<PAGE>
(h) except as set forth in Schedule 4.23(h), none of the Company or
----------------
the Company Subsidiaries has made any loans or advances to, or guaranteed any
indebtedness of, the Shareholders or any of their Affiliates;
(i) none of the Company or the Company Subsidiaries has entered into
any transaction or taken any other action outside the ordinary course of
business;
(j) except as set forth in Schedule 4.23(j), none of the Company or
----------------
the Company Subsidiaries has incurred any Liability, except (i) Liabilities
incurred in the ordinary course of business and (ii) Liabilities incurred in
connection with or as a result of the Transactions;
(k) none of the Company or the Company Subsidiaries has made any
change in its accounting methods or practices, including, without limitation,
any change with respect to establishment of reserves for unearned premiums,
losses (including incurred but not reported losses) and loss adjustment
expenses, or made any change in depreciation or amortization policies or rates
adopted by it, except as required by law or Swedish GAAP;
(l) none of the Company or the Company Subsidiaries has (A) increased
the compensation of any of its employees or directors, other than in the
ordinary course of business or (B) changed, altered or entered into any
employment, severance, retention or similar agreement with any salaried
employee, in each case other than in the ordinary course of business;
(m) the Company has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses "(a)" through "(l)" above; and
(n) without limitation by the enumeration of any of the foregoing,
entered into any transaction with a consideration in excess of SEK 196,000 other
than in the usual and ordinary course of business and except as contemplated in
this Agreement.
SECTION 4.24. Environmental Compliance.
------------- -------------------------
The Company and the Company Subsidiaries are in compliance in all
material respect with all applicable Environmental Laws. The Company and the
Company Subsidiaries have not received any notice or other communication (in
writing or otherwise) that alleges that the Company or the Company Subsidiaries
are not in compliance with any Environmental Law, and, to the Knowledge of Spray
Ventures, there are no circumstances that may prevent or interfere with the
Company's or the Company Subsidiaries' compliance with any Environmental Law in
the future.
SECTION 4.25. Insurance.
------------- ----------
(a) Each insurable asset of the Company and the Company Subsidiaries
has at all times been and is at the date of this Agreement insured to its full
replacement value (with no
25
<PAGE>
provision for deduction or excess) against each risk normally insured against by
a Person operating the types of business operated by the Company and the Company
Subsidiaries.
(b) The Company and the Company Subsidiaries have at all times been
and are at the date of this Agreement adequately insured against accident,
damage, injury, third party loss, loss of profits and any other risk normally
insured against by a Person operating the types of business operated by the
Company and the Company Subsidiaries.
(c) Each of the policies is valid and enforceable and is not void or
voidable. The Company or the Company Subsidiaries have paid all premiums due,
and have not done anything or omitted to do anything which might make any of the
policies void or voidable.
SECTION 4.26. Full Disclosure.
------------- ----------------
The Company has provided the Purchaser and the Purchaser's
representatives with full and complete access to all of the Company's and the
Company Subsidiaries' records and other documents and data requested. No
representation or warranty by Spray Ventures in this Agreement and no statement
contained in any schedule, certificate or other written statement required to be
furnished by Spray Ventures or the Company or any of its representatives
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby is inaccurate, incorrect, or incomplete in any material
respect or contains any untrue statement of a material fact or omits to state
any material fact required to be stated herein or therein or necessary in order
to make the statements made herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants, severally and not
jointly, to the Purchaser as follows:
SECTION 5.01. Authority.
------------- ----------
(a) Such Shareholder is duly organized, validly existing and, if
applicable, in good standing under the laws of the jurisdictions of its
formation. Such Shareholder has all requisite right, power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party, and the execution,
delivery and performance by such Shareholder of this Agreement and such other
Transaction Documents have been duly authorized by all necessary action on the
part of such Shareholder (or the shareholders of such Shareholder).
(b) Each of this Agreement and such other Transaction Documents
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation
26
<PAGE>
of such Shareholder party thereto, enforceable against such Shareholder in
accordance with its terms.
SECTION 5.02. Shareholders.
------------- -------------
(a) Such Shareholder has the capacity and financial capability to
comply with and perform all of its covenants and obligations under each of the
Transaction Documents to which it is or may become a party.
(b) Such Shareholder is the registered and beneficial owner and
holder of the Company Shares set forth beside its name on Schedule 4.03(a), free
----------------
and clear of any Encumbrances.
(c) Such Shareholder:
(i) has not, at any time, (A) made a general assignment for the
benefit of creditors or initiated any proceedings with respect to a
compromise or arrangement with its creditors, (B) filed, or had filed
against it, any bankruptcy petition or similar filing, (C) initiated any
proceedings for the dissolution, liquidation or reorganization of such
Shareholder, or the winding up or cessation of the business or affairs of
such Shareholder, (D) suffered the attachment or other judicial seizure of
all or a substantial portion of its assets, (E) suffered, or presented a
petition for, the appointment of a receiver or liquidator with respect to
such Shareholder or any of its assets, (F) admitted in writing its
inability to pay its debts as they become due, or (G) taken or been the
subject of any action that may have an adverse effect on its ability to
comply with or perform its respective covenants or obligations under any of
the Transaction Documents.
(ii) is not subject to any Order that may have an adverse effect
on such Shareholder's ability to comply with or perform such Shareholder's
covenants or obligations under any of the Transaction Documents.
(d) There is no Proceeding pending that may have an adverse effect on
the ability of such Shareholder to comply with or perform its covenants or
obligations under any of the Transaction Documents.
(e) No Consent of or by any Person is required in connection with the
execution, delivery and performance by such Shareholder of this Agreement or the
consummation of the Transactions contemplated hereby, except for any such
Consents that have been obtained prior to the date hereof.
27
<PAGE>
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company and the
Shareholders, with respect to itself and the Purchaser Subsidiaries, as follows:
SECTION 6.01. Organization, Good Standing and Qualification of the
------------- ----------------------------------------------------
Purchaser and the Purchaser Subsidiaries.
- -----------------------------------------
(a) The Purchaser and the Purchaser Subsidiaries are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdictions of their formation and are duly qualified to conduct business and
in good standing under the laws of each jurisdiction in which the nature of
their business or the ownership or leasing of their properties require such
qualification. The Purchaser and the Purchaser Subsidiaries have all requisite
corporate power and authority to own and operate their properties and assets,
and to carry on their business as presently conducted and as presently proposed
to be conducted. The Purchaser has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement.
(b) Schedule 6.01(b) sets forth (i) the names of the members of the
----------------
Purchaser's and the Purchaser Subsidiaries' boards of directors, and (ii) the
names and titles of the Purchaser's and the Purchaser Subsidiaries' officers.
(c) None of the Purchaser or any of the Purchaser Subsidiaries has
filed (or has had filed against it) a petition in bankruptcy, or is insolvent
within the meaning of applicable laws, rules, regulations or similar
requirements, and has not made any assignment in favor of its creditors or any
class thereof, nor has any petition for a receivership or administration order
been presented in respect of the Purchaser or any of the Purchaser Subsidiaries.
Neither the Purchaser nor any of the Purchaser Subsidiaries has initiated any
proceedings with respect to a compromise or arrangement with their creditors or
for the dissolution, liquidation or reorganization of such Persons, or the
winding up or cessation of the business or affairs of such Persons. No receiver
or administration receiver or liquidator has been appointed in respect of the
Purchaser or any of the Purchaser Subsidiaries, or any of their assets and no
execution has been levied upon any of their assets.
(d) Except as set forth in Schedule 6.01(d), the Purchaser
----------------
Subsidiaries are the only Subsidiaries of the Purchaser and, except for the
outstanding shares of the Purchaser Subsidiaries held by the Purchaser and as
set forth on Schedule 6.01(d), the Purchaser has never owned, beneficially or
----------------
otherwise, any shares or other securities of, or any direct or indirect interest
in, any Person. The Purchaser Subsidiaries have no Subsidiaries and have never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect interest in, any Person.
28
<PAGE>
SECTION 6.02. Corporate Documents.
------------- --------------------
(a) The Purchaser has delivered to the Shareholders accurate and
complete copies of:
(i) the certificate of incorporation and bylaws, including all
amendments thereto, of the Purchaser and each of the Purchaser
Subsidiaries;
(ii) the share transfer registers of the Purchaser and each of
the Purchaser Subsidiaries; 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 shareholders and boards of directors of the
Purchaser and each of the Purchaser Subsidiaries.
(b) There have been no meetings or other proceedings of the
shareholders or the board of directors of the Purchaser or any of the Purchaser
Subsidiaries that are not properly reflected in such minutes or other records.
(c) None of the Purchaser or the Purchaser Subsidiaries is in
violation of its articles of incorporation and bylaws.
SECTION 6.03. Capitalization.
------------- ---------------
(a) The authorized share capital of the Purchaser consists of
10,000,000 shares of Common Stock, of which 9,156,819 shares are issued and are
outstanding. There are no shares of capital stock of the Purchaser of any other
class authorized, issued or outstanding. All of such shares are owned and held
beneficially and of record by the Purchaser Shareholders, free and clear of all
options, proxies, voting trusts, voting agreements, judgments, pledges, charges,
escrows, rights of first refusal or first offer, mortgages, indentures, claims,
transfer restrictions, Liens, equities, security interests and other
encumbrances of every kind and nature whatsoever, whether arising by agreement,
operation of law or otherwise. The authorized and issued capital stock of each
of the Purchaser Subsidiaries is as set forth on Schedule 6.03(a). All
----------------
outstanding shares of such capital stock are held directly by the Purchaser
except as set forth on Schedule 6.03(a). All issued and outstanding shares
----------------
described in this Section 6.03(a) have been duly authorized and validly issued
in full compliance with all applicable Requirements of Law, are fully paid and
non-assessable, and have not been issued in violation of any preemptive or
similar rights.
(b) Except as set forth on Schedule 6.03(b), there are no: (i)
----------------
outstanding subscriptions, options, calls, warrants or rights (whether or not
currently exercisable) to acquire any shares in the capital or other securities
of the Purchaser or any of the Purchaser Subsidiaries, (ii) outstanding
securities, instruments or obligations that are or may become convertible into
or exchangeable for any shares in the capital or other securities of the
Purchaser or any of the Purchaser Subsidiaries, (iii) Contracts under which the
Purchaser or any of the Purchaser
29
<PAGE>
Subsidiaries is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities, or (iv) conditions or circumstances
that may directly or indirectly give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares in the capital, or other securities of, the
Purchaser or any of the Purchaser Subsidiaries.
(c) The Purchaser has never repurchased, redeemed or otherwise
reacquired (and has not agreed, committed or offered (in writing or otherwise)
to reacquire) any shares of its capital.
SECTION 6.04. Authority; Binding Nature of Agreements.
------------- ----------------------------------------
The Purchaser has the right, power and authority to enter into and to
perform its obligations under this Agreement and each of the other Transaction
Documents to which it is a party, and the execution, delivery and performance by
the Purchaser of this Agreement and each of such other Transaction Documents has
been duly authorized by all necessary action on the part of the Purchaser and
the Purchaser Shareholders. Each of this Agreement and such other Transaction
Documents constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject only to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
SECTION 6.05. Non-Contravention; Consents.
------------- ----------------------------
(a) Neither the execution and delivery of this Agreement or any other
Transaction Document to which the Purchaser is a party, nor the consummation or
performance of any of the Transactions, will directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with or result in a violation of (A)
any of the provisions of certificate of incorporation or bylaws of the
Purchaser or any of the Purchaser Subsidiaries, or (B) any resolution
adopted by the stockholders or board of directors of the Purchaser or any
of the Purchaser Subsidiaries;
(ii) contravene, conflict with or result in a violation of, or
give any Governmental Authority or other Person the right to challenge any
of the Transactions or to exercise any remedy or obtain any relief under,
any Requirement of Law to which the Purchaser or any Purchaser Subsidiary
or any of the assets owned or used by the Purchaser or any Purchaser
Subsidiary are subject;
(iii) cause the Purchaser or any Purchaser Subsidiary to become
subject to, or to become liable for the payment of, any Tax;
(iv) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Authority the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the
30
<PAGE>
Purchaser or any Purchaser Subsidiary or any of their respective employees
or that otherwise relates to the business of the Purchaser or any Purchaser
Subsidiary, or to any of the assets owned or used by the Purchaser or any
Purchaser Subsidiary;
(v) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any of the
Material Purchaser Contracts or any other Purchaser Contract (if such
contravention, conflict, violation, breach or default has or could
reasonably be expected to have a Material Adverse Effect on the Purchaser
or any Purchaser Subsidiary);
(vi) give any Person the right to (i) declare a default or
exercise any remedy under any Purchaser Contract, (ii) accelerate the
maturity or performance of any Purchaser Contract, or (iii) cancel,
terminate or modify any Purchaser Contract;
(vii) give any Person the right to any payment by the Purchaser
or any Purchaser Subsidiary 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 the Purchaser or any Purchaser Subsidiary in favor of any Person, in any
such case as a result of the change in control of the Purchaser or such
Purchaser Subsidiary, or otherwise resulting from the Transactions; or
(viii) result in the imposition or creation of any Lien upon or
with respect to any asset owned or used by the Purchaser or any Purchaser
Subsidiary.
(b) Except as set forth on Schedule 6.05(b), neither the Purchaser
----------------
nor any of the Purchaser Subsidiaries is required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution and delivery of this Agreement or any of the other Transaction
Documents or the consummation or performance of any of the Transactions. All
filings, notices and Consents required to be filed, given or obtained by the
Purchaser and the Purchaser Subsidiaries, as set forth on Schedule 6.05(b), will
----------------
have been filed, given or obtained prior to the Closing.
SECTION 6.06. Proprietary Assets.
------------- -------------------
(a) Schedule 6.06(a) sets forth a complete and accurate list
----------------
(including relevant registration information) of all registered Proprietary
Assets which are owned or used by, required for, or material to the Purchaser or
the Purchaser Subsidiaries in connection with the Purchaser's and the
Purchaser's Subsidiaries' businesses.
(b) To the Knowledge of the Purchaser, all Proprietary Assets
which are owned or used by, required for, or material to the Purchaser or the
Purchaser Subsidiaries in connection with the Purchaser's and the Purchaser's
Subsidiaries' businesses, including those listed in Schedule 6.06(a) are:
----------------
(i) other than those referred to in Section 6.06(b)(vi)
below, owned solely and exclusively by the Purchaser or one of the
Purchaser Subsidiaries;
31
<PAGE>
(ii) except as set forth on Schedule 6.06(b)(ii) or pursuant to
--------------------
applicable law, not subject to any limit as to time or any other
limitation, right of termination, reassignment or restriction ;
(iii) valid and enforceable (and, to the extent registered, in
compliance with all Requirements of Law, including payment of filing,
examination and maintenance fees and proofs of working or use), with no
past or present default on the part of the Purchaser or the Purchaser
Subsidiaries or past or present acquiescence in the activities of third
parties that would adversely affect validity or enforceability of such
Proprietary Assets;
(iv) not being infringed or attacked or opposed or the subject
of any claim to ownership or compensation, by any Person, and no Person has
indicated any intention to infringe, attack or oppose such Proprietary
Assets;
(v) not subject to any license, waiver, charge, contingent
assignment, agreement, obligation, or any other encumbrance of any sort in
favor of a third party other than those from the Purchaser or from the
Purchaser Subsidiaries to their licensees or distributors, which licenses
are currently in force and are listed in Schedule 6.06(b)(v); and
-------------------
(vi) if not owned by the Purchaser or the Purchaser
Subsidiaries, subject to licenses granted to the Purchaser or the Purchaser
Subsidiaries which licenses are currently in force and, except for licenses
for "off-the-shelf" software, are listed in Schedule 6.06(b)(vi).
--------------------
(c) In the case of the licenses of Proprietary Assets referred to in
Section 6.06(b)(vi) above:
(i) the Purchaser or the Purchaser Subsidiaries have the
exclusive, unrestricted right to use the Proprietary Assets subject to the
license, except as set forth in Schedule 6.06(b)(vi);
--------------------
(ii) each such license is valid and enforceable and neither the
Purchaser, the Purchaser Subsidiaries, nor any other party to such license
is or has been in breach of the license, and to Knowledge of Spray Ventures
no such Person has indicated any intention to breach such license;
(iii) no event has occurred which, with notice or lapse of time
or both, would constitute a material default under any such license; and
(iv) none (except as is specifically marked with an asterisk
"*") will terminate or be rendered liable to termination by virtue of the
acquisition by the Shareholders of the Purchaser Shares.
(d) To the Knowledge of the Purchaser, no claims or applications have
been made against, no notifications in writing or otherwise have been received
by, and there are no
32
<PAGE>
circumstances in respect of the Purchaser's and the Purchaser Subsidiaries'
businesses which (notwithstanding any view taken by the Purchaser as to the
merits of such claim, application, notification or circumstances) if pursued
would affect the accuracy of the warranties in Sections 4.06(b) and (c) above.
(e) To the Knowledge of the Purchaser, the Purchaser and the
Purchaser Subsidiaries have conducted their business without infringement or
claim of infringement of any Proprietary Asset of any other Person. Without
limiting the foregoing, the Purchaser and the Purchaser Subsidiaries have the
right (pursuant to a written Contract) to use and incorporate into their
products the Proprietary Assets of other Persons, as and to the extent the same
are currently so used and incorporated. Neither the Purchaser nor the Purchaser
Subsidiaries has received any notice or other communication (in writing or
otherwise) of any infringement of any Proprietary Asset owned or used by any
other Person. To the Knowledge of the Purchaser, no other Person is infringing,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Proprietary Asset owned or used by the Purchaser or any of
the Purchaser Subsidiaries.
(f) The Purchaser and the Purchaser Subsidiaries have taken
reasonable measures and precautions to protect the confidentiality and value of
all Proprietary Assets owned or used by the Purchaser or the Purchaser
Subsidiaries.
SECTION 6.07. Financial Statements.
------------- ---------------------
(a) The Purchaser has delivered to the Shareholders (i) the
consolidated balance sheet of the Purchaser and the Purchaser Subsidiaries as of
December 31, 1997 and the related consolidated statements of operations for the
Purchaser and the Purchaser Subsidiaries for the year then ended (collectively,
the "Purchaser Year-End Financials"), (ii) the unaudited consolidated balance
sheet of the Purchaser and the Purchaser Subsidiaries as of June 30, 1998 (the
"Purchaser Current Balance Sheet") and the related unaudited consolidated
statements of operations for the Purchaser and the Purchaser Subsidiaries for
the six-month period then ended (collectively, the "Purchaser Current
Financials"), and (iii) a consolidated list of accounts payable and accounts
receivable for the Purchaser and the Purchaser Subsidiaries as of the date
hereof, in each case aged consistent with the Purchaser's past practices (the
"Purchaser Closing Receivables/Payables;" the Purchaser Year-End Financials, the
Purchaser Current Financials and the Purchaser Closing Receivables/Payables,
collectively, the "Purchaser Financials").
(b) All of the Purchaser Financials (and the line items contained
therein) are accurate and complete in all material respects. The Purchaser
Financials are in accordance with the books and records of the Purchaser and the
Purchaser Subsidiaries and present fairly the assets, liabilities and financial
condition of the Purchaser and the Purchaser Subsidiaries as of the respective
dates thereof and the results of operations of the Purchaser and the Purchaser
Subsidiaries for the periods covered thereby. The Purchaser Financials have
been prepared in accordance with U.S. GAAP, applied on a consistent basis
throughout the periods covered.
(c) All of the Purchaser Financials are attached hereto as Schedule
--------
6.07(c).
- -------
33
<PAGE>
SECTION 6.08. Liabilities.
------------- ------------
Except (a) as shown on the balance sheet included in the Purchaser
Current Financials or in the list of accounts payable included in the Purchaser
Closing Receivables/ Payables, or (b) pursuant to the Purchaser Contracts
included on Schedule 6.12(a), none of the Purchaser or any of the Purchaser
----------------
Subsidiaries has any material Liabilities of any nature. All reserves
established by the Purchaser and the Purchaser Subsidiaries and set forth in the
balance sheet included in the Purchaser Current Financials are adequate for the
purposes for which they were established.
SECTION 6.09. Books and Records.
------------- ------------------
Except as set forth on Schedule 6.09, neither the Purchaser nor the
-------------
Purchaser Subsidiaries has any of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent on or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and
possession of the Purchaser Group.
SECTION 6.10. Title to Assets.
------------- ------------------
(a) The Purchaser Group owns, and has good, valid and marketable
title to, all the tangible personal property and assets used in their businesses
or purported to be owned by them (other than those listed in Schedule 6.06(vi)),
------------------
including:
(i) all assets reflected on the Purchaser Current Balance
Sheet;
(ii) all assets acquired by the Purchaser Group since the date
of the Current Balance Sheet;
(iii) all assets referred to in Schedule 6.06(a)(i), Schedule
------------------- ---------
6.10(b) and the Purchaser Closing Receivables/Payables and all of the
-------
Purchaser Group's rights under the Purchaser's Contracts; and
(iv) all other assets reflected in the Purchaser Group's books
and records as being owned by the Purchaser Group.
All of said assets are owned by the Purchaser Group free and clear of
any Liens, except liens for current taxes and assessments not delinquent and
statutory liens of landlords, carriers, warehousemen, mechanics or materialmen
incurred in the ordinary course of business for sums not yet due. The
representation and warranty set forth in this Section 6.10(a) shall not apply to
the Purchaser Real Estate or the Purchaser Leased Premises.
(b) Schedule 6.10(b) identifies all equipment, furniture, fixtures,
----------------
improvements and other tangible assets owned by the Purchaser Group with an
individual value of $20,000 or more, and sets forth either the original cost and
book value or the estimated fair
34
<PAGE>
market value of each of said assets. Schedule 6.10(b) also accurately identifies
----------------
all tangible assets leased to the Purchaser Group.
(c) Each asset identified in Schedule 6.10(b):
----------------
(i) is free of material defects and deficiencies and is in
good condition and repair, consistent with its age and intended use
(ordinary wear and tear excepted);
(ii) complies in all material respects and, to the Purchaser's
Knowledge, is being operated and otherwise used in full compliance with all
applicable Requirements of Law; and
(iii) is adequate for the uses to which it is being put.
The assets identified in Schedule 6.10(b) are adequate for the conduct
----------------
of the Purchaser Group's business in the manner in which such business is
currently being conducted
(d) Schedule 6.10(d) identifies all material assets other than the
----------------
Purchaser Leased Premises that are being leased or licensed to the Purchaser or
the Purchaser Subsidiaries. All leases pursuant to which the Purchaser Group
leases personal property are in good standing and are valid and effective in
accordance with their respective terms and, to the Purchaser's Knowledge, there
exists no material default thereunder or occurrence or condition which could
result in a default thereunder or termination thereof. The buildings, equipment
and other tangible assets used by the Purchaser Group are in good operating
condition and are useable in the ordinary course of the Purchaser Group's
business.
SECTION 6.11. Real Property.
------------- --------------
(a) The Purchaser and the Purchaser Subsidiaries do not own any real
estate, buildings, improvements or structures.
(b) (i) All real estate leased, subleased or licensed by the
Purchaser Group as lessee, sublessee or licensee is described in Schedule
--------
6.11(b) (the "Purchaser Leased Premises"). Except as set forth on Schedule
- ------- --------
6.11(b), the Purchaser Leased Premises are leased to the Purchaser Group
- -------
pursuant to written agreements (together with all amendments, assignments,
guarantees, and other documents relating thereto or other agreements listed
therein, the "Purchaser Leases"), and true and correct copies of all the
Purchaser Leases have been furnished to the Purchaser and are described on
Schedule 6.11(b). The Purchaser Group owns all leasehold estates and other
- ----------------
rights purported to be granted by the Purchaser Leases. Each of the Purchaser
Leases is in full force and effect, valid and binding in accordance with its
terms.
(ii) All real estate leased, subleased or licensed by the
Purchaser Group as lessor, sublessor or licensor is described in Schedule
--------
6.11(b) (the "Purchaser Third Party Leased Premises"). Except as set forth
-------
on Schedule 6.11(b), the Purchaser Third Party Leased Premises are leased
----------------
by the Purchaser Group to third parties (each, a "Purchaser Tenant" and
collectively, "Purchaser Tenants") pursuant to written agreements
35
<PAGE>
(together with all amendments, assignments, guarantees, and other documents
relating thereto or other agreements listed therein, the "Purchaser Third
Party Leases") and true and correct copies of all the Purchaser Third Party
Leases have been furnished to the Purchaser and are described on Schedule
6.11(b). Except as set forth on Schedule 6.11(b), there are no security
------- ----------------
deposits held by the Purchaser Group or any other party under any of the
Purchaser Third Party Leases. The Purchaser Group has not received any
notices from any Purchaser Tenant desiring to cancel any Purchaser Third
Party Lease. The Purchaser Group has not received notification from any
Purchaser Tenant that it disputes the computation of the Purchaser Tenant's
percentage rent, additional rent or other amounts payable to the Purchaser
Group pursuant to its Purchaser Third Party Lease. The occupancy of each
Purchaser Tenant is valid and legal and, to the Knowledge of the Purchaser,
does not violate any Requirement of Law.
(iii) There are no arrearages in rent, additional rent or other
amounts payable under any of the Purchaser Leases or the Purchaser Third
Party Leases (collectively, the "Purchaser Leases"). There are no defaults
by the Purchaser Group of any of its obligations under the Purchaser
Leases. The Purchaser Group has not received any notices of default under
any of the Purchaser Leases, and to the Purchaser's Knowledge, there are no
defaults by any party other than the Purchaser Group under any of the
Purchaser Leases. There are no brokerage or other leasing commissions
payable pursuant to any agreements in connection with any of the Purchaser
Leases or amendments thereto or renewals or expansions thereof.
(c) Neither the Purchaser nor any other member of the Purchaser Group
has received written notice (i) of condemnation, zoning or other land-use
regulation proceedings or suspension of the right of any member of the Purchaser
Group to use any of the Purchaser Leases, (ii) of any special assessment
proceedings affecting all or any portion of any Purchaser Leases, (iii) from any
Governmental Authority having jurisdiction over all or any portion of the
Purchaser Leases regarding or in respect of any change in any applicable laws,
regulations, statutes, rules or restrictions relating to a change in the
permitted use of all or any portion of the Purchaser Leases or the business
conducted thereof or (iv) any notice from adjacent landowners or land occupants
regarding unrecorded easements and/or agreements or encroachments in respect of
all or any portion of the Purchaser Leases. There is no pending or, to the
Purchaser's Knowledge, threatened or contemplated action by any Governmental
Authority or pending or contemplated action by a private party adverse to the
uses contemplated for the Purchaser Leases. Upon consummation of the
transactions contemplated by this Agreement, and without obtaining the consent
of any Person, the Purchaser will be entitled to continue to use or possess all
of the Purchaser Leases in the same manner such Purchaser Leases were used or
possessed immediately prior to the Closing.
(d) All of the demised premises, buildings and structures that
comprise the Purchaser Leases are in good operating condition and repair (normal
wear and tear excepted), suitable for the purposes for which they are being used
and each has adequate rights of ingress and egress for the operation of the
business of the Purchaser Group. Since January 1, 1997, no member of the
Purchaser Group has received any notice of any uncured unsafe or other condition
36
<PAGE>
which presents risk of injury to persons or loss of or damage to property
affecting or concerning all or any portion of the Purchaser Leases.
(e) Except as set forth on Schedule 6.11(e), there are no written or
----------------
oral options to purchase, rights of first refusal, rights of first offer in
connection with any of the Purchaser Leases or any other contractual right to
offer, purchase, acquire, sell, assign or dispose of any of the Purchaser
Leases. Except as set forth on Schedule 6.11(e), no Person has any right, as
----------------
member, Purchaser Tenant, occupant or otherwise, to use, lease and/or occupy any
portion of the Purchaser Leases, and there are no oral or written agreements
between any member of the Purchaser Group and any other Person providing for the
occupancy or use of any portion of the Purchaser Leases.
SECTION 6.12. Material Purchaser Contracts.
------------- -----------------------------
(a) Schedule 6.12(a) lists all Material Purchaser Contracts.
----------------
(b) Each Material Purchaser Contract is valid and in full force and
effect, and is enforceable by the Purchaser or the applicable Purchaser
Subsidiary in accordance with its terms. There are no Material Purchaser
Contracts that the Purchaser Group intends to terminate, and the Purchaser Group
has not received notice from any party to any Material Purchaser Contract that
it wishes to terminate such Contract.
(c) To the Purchaser's Knowledge, neither the Purchaser nor any
Purchaser Subsidiary is in breach of or default under (and no event has occurred
which with notice or the passage of time or both would constitute a breach of or
default under) any Material Purchaser Contract and, to the Purchaser's
Knowledge, no other Person is in breach of or default under (and no event has
occurred which with notice or the passage of time or both would constitute a
breach of or default under) any Material Purchaser Contract.
(d) None of the Material Purchaser Contracts contains a "change in
control," "potential change in control" or similar provision which could result
in a potential "parachute payment." The consummation of the Transactions will
not (either alone or upon the passage of time and/or occurrence of any
additional acts or events) result in any payment (severance pay or otherwise)
becoming due from the Purchaser or any Purchaser Subsidiary to any Person or
accelerate the time of payment or vesting, or increase the amount of
compensation due, any Person; excluding, however, any such payments,
accelerations or increases which could have occurred upon the passage of time
and/or occurrence of any additional acts or event even if the "change of
control" or "potential change of control" occurring upon the execution and
delivery of this Agreement and the consummation of the Transactions did not
occur.
SECTION 6.13. Employees; Employee Benefits.
------------- -----------------------------
(a) Schedule 6.13(a) contains a list of all employees of the
----------------
Purchaser and the Purchaser Subsidiaries as of the date hereof and their
material terms and conditions of employment including salary or wages, bonus,
position and title. Except as disclosed on
37
<PAGE>
Schedule 6.13(a), no employee of the Purchaser Group is on long-term disability
- ----------------
leave or extended absence or in receipt of workers' compensation benefits.
(b) Schedule 6.13(b) contains a list of individuals who are currently
----------------
performing services for the Purchaser Group related to its business and are
classified as "consultants" or "independent contractors."
(c) Neither the Purchaser nor any of the Purchaser Subsidiaries is a
party to or subject to any collective bargaining agreements with any trade union
or collective bargaining agent representing any of its employees. There is no
labor union organizing activity pending or threatened with respect to any
employees of the Purchaser Group. Except as identified on Schedule 6.13(c), no
----------------
employee of the Purchaser Group has any agreement or contract, written or oral,
regarding his employment, other than those deemed to exist at common law.
(d) No employee of the Purchaser Group, nor, to the Purchaser's
Knowledge, any consultant with whom the Purchaser or any of the Purchaser
Subsidiaries has contracted, is in material violation of any 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, such Person because of the nature of the business to be conducted by the
Purchaser Group, and to the Purchaser's Knowledge the continued employment by
the Purchaser Group of its present employees, and the performance of the
Purchaser's and the Purchaser Subsidiaries' contracts with its independent
contractors, will not result in any such violation. The Purchaser has not
received any notice alleging that any such violation has occurred.
(e) To the Knowledge of the Purchaser, no officer or Key Purchaser
Employee, or any group of Key Purchaser Employees, intends to terminate his, her
or their employment with the Purchaser, nor does the Purchaser Group have a
present intention to terminate the employment of any officer, Key Purchaser
Employee or group of Key Purchaser Employees.
(f) Each Purchaser Employee Benefit Plan is fully funded for all
periods prior to the Closing Date. Without limiting the foregoing, all
contributions to each of the Purchaser Employee Benefit Plans in respect of
periods of service or benefits accrued prior to the Closing Date have been made
on an accrual basis up to the Closing Date, notwithstanding that such
contributions may not be due and owing until after the Closing Date.
(g) Schedule 6.13(f) contains a true and complete list of all
----------------
Purchaser Employee Benefit Plans. The Purchaser has provided to the
Shareholders current, accurate and complete copies of each written Purchaser
Employee Benefit Plan or, where oral, a written description of the terms
thereof, as amended to date, together with the most current funding agreements
and summary plan descriptions relating to each such Purchaser Employee Benefit
Plan and the following documents (where applicable):
(i) all actuarial reports and financial statements;
38
<PAGE>
(ii) the most current copies of any insurance contracts,
investment management agreements, investment reports or funding agreements;
(iii) the most current copies of booklets or manuals prepared
for or circulated to employees with respect to any of the Purchaser
Employee Benefit Plans;
(iv) the most recently filed annual report on Form 5500; and
(v) the determination letter as to the plan's qualified status
under Internal Revenue Code Section 401.
(h) No promises or commitments have been made by the Purchaser or any
of the Purchaser Subsidiaries, or any of their employees, consultants or former
employees or consultants to amend any Purchaser Employee Benefit Plan or to
provide increased benefits thereunder (other than plan amendments that are
required as a matter of law).
(i) Each Purchaser Employee Benefit Plan is, and has been,
administered in all material respects in accordance with the terms thereof and
applicable laws. All obligations under the Purchaser Employee Benefit Plans
have been satisfied, to the extent required by the terms thereof or applicable
laws.
(j) Each Purchaser Employee Benefit Plan is in compliance with all
applicable laws and there are no outstanding material defaults or violations by
the Purchaser in connection with any Purchaser Employee Benefit Plan, and no
order has been made or notice given requiring (or proposing to require) the
Purchaser, the Purchaser Subsidiaries or any others to take or refrain from
taking any action in respect of any Purchaser Employee Benefit Plan. All
material returns, filings, reports and disclosures relating to the Purchaser
Employee Benefit Plans required pursuant to the terms thereof or applicable laws
have been made, filed or distributed in accordance with all such requirements
and all filing fees and levies imposed on the Purchaser Employee Benefit Plans
by any regulatory authorities or applicable laws have been made or remitted on a
timely basis. Each Purchaser Employee Benefit Plan that is intended to be a
qualified plan under Internal Revenue Code Section 401 is so qualified.
(k) No actions, suits, claims (other than routine claims for payment
of benefits in the ordinary course), investigations, arbitrations or other
proceedings have been commenced or threatened in respect of any of the Purchaser
Employee Benefit Plans or its assets.
(l) None of the Purchaser Employee Benefit Plans provides benefits to
employees following retirement. No Purchaser Employee Benefit Plan exists that
could result in the payment to any employee of any money, benefits or other
property or accelerate or increase the funding requirements for any Purchaser
Employee Benefit Plan, in each case as a result of the Transactions.
39
<PAGE>
SECTION 6.14. Employment Relations.
------------- ---------------------
(a) The Purchaser and the Purchaser Subsidiaries are not engaged in
any unfair labor practice. There have been no such complaints under applicable
laws against the Purchaser or the Purchaser Subsidiaries.
(b) There are no complaints nor are there any threatened complaints,
against the Purchaser or any Purchaser Subsidiaries, before any employment
standards branch or tribunal or human rights tribunal.
SECTION 6.15. Compensation of Employees.
------------- --------------------------
Schedule 6.15 is an accurate and complete list showing the names of
-------------
all retired employees, if any, of the Purchaser or the Purchaser Subsidiaries
who are receiving or entitled to receive any healthcare or life insurance
benefits or any payments from the Purchaser or the Purchaser Subsidiaries not
covered by any pension plan to which the Purchaser or the Purchaser Subsidiaries
is a party, their ages and current unfunded pension rate, if any. The Purchaser
Group has not, because of past practices or previous commitments with respect to
its employees, established any rights on the part of any of its employees to
additional compensation with respect to any period after the Closing Date (other
than wage increases in the ordinary course of business). The present severance
and vacation policy of the Purchaser and the Purchaser Subsidiaries is set forth
on Schedule 6.15.
-------------
SECTION 6.16. Receivables; Major Customers.
------------- -----------------------------
(a) The list of accounts receivable included in the Purchaser Closing
Receivables/Payables provides an accurate and complete breakdown and aging of
all accounts receivable of the Purchaser and the Purchaser Subsidiaries as of
the date hereof.
(b) All such accounts receivable:
(i) represent valid obligations of customers of the Purchaser
and the Purchaser Subsidiaries arising from bona fide transactions entered
into in the ordinary course of business; and
(ii) are current and will be collected in full (without any
counterclaim or setoff) in the ordinary course of business, subject to a
reserve for doubtful accounts as set forth in the Purchaser Current Balance
Sheet.
(c) Neither the Purchaser nor any of the Purchaser Subsidiaries has
received any notice or other communication (in writing or otherwise) indicating
that any customer of the Purchaser or the Purchaser Subsidiaries may cease
dealing with the Purchaser or any of the Purchaser Subsidiaries or may otherwise
reduce the volume of business transacted by such Person with the Purchaser or
any of the Purchaser Subsidiaries below historical levels.
40
<PAGE>
SECTION 6.17. Accounts Payable; Customers and Suppliers.
------------- ------------------------------------------
(a) The list of accounts payable included in the Purchaser Closing
Receivables/Payables:
(i) provides an accurate and complete breakdown and aging of
the Purchaser's and the Purchaser Subsidiaries' accounts payable as of the
date hereof;
(ii) provides an accurate and complete breakdown of all
customer deposits and other deposits held by the Purchaser and the
Purchaser Subsidiaries as of the date of this Agreement; and
(iii) provides an accurate and complete breakdown of amounts
owed to suppliers and the Purchaser's and the Purchaser Subsidiaries' debt
as of the date of this Agreement.
(b) Schedule 6.17(b) accurately identifies, and provides an accurate
----------------
and complete breakdown of the amounts paid to or received from, the three
largest suppliers and 10 largest customers of the Purchaser Group (in terms of
amounts billed and paid, respectively) for the six-month period ended June 30,
1998. The Purchaser is not aware of any loss or threatened loss of any such
suppliers, customers or accounts.
SECTION 6.18. Proceedings.
------------- ------------
(a) Except as set forth in Schedule 6.18(a), there is no pending
----------------
Proceeding and no Person has threatened to commence any Proceeding:
(i) that involves the Purchaser or any Purchaser Subsidiary or
their assets; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the
Transactions.
(b) To the Knowledge of the Purchaser, no acts, facts, circumstances,
events or conditions have occurred or exist which are a basis for any Proceeding
described in Section 6.18(a).
(c) No member of the Purchaser Group is a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in any Proceeding
with any governmental authority) which could have a Material Adverse Effect.
SECTION 6.19. Compliance With Requirement of Laws.
------------- ------------------------------------
The Purchaser and the Purchaser Subsidiaries are in compliance with
each Requirement of Law (including, without limitations, all Environmental Laws)
applicable to them or the conduct of their businesses or use of their assets
except for any failure to comply which,
41
<PAGE>
individually or in the aggregate, does not or reasonably cannot be expected to
have a Material Adverse Effect on the Purchaser or any of the Purchaser
Subsidiaries.
SECTION 6.20. Governmental Authorizations.
------------- ----------------------------
(a) Schedule 6.20(a) identifies each Governmental Authorization that
----------------
is held by the Purchaser and the Purchaser Subsidiaries, copies of which have
been previously provided to the Shareholders. All such Governmental
Authorizations are in full force and effect and no action or claim is pending,
nor to the Knowledge of the Purchaser, is threatened, to revoke or terminate any
of such Governmental Authorizations or declare any such Governmental
Authorizations invalid in any material respect.
(b) The Governmental Authorizations identified in Schedule 6.20(a)
----------------
constitute all of the Governmental Authorizations necessary (i) to enable the
Purchaser and the Purchaser Subsidiaries to conduct their business in the manner
in which such business is currently being conducted, and (ii) to permit the
Purchaser and the Purchaser Subsidiaries to own and use their assets in the
manner in which they are currently owned and used.
SECTION 6.21. Tax Matters.
------------- ------------
(a) The Purchaser and its Subsidiaries have filed, or caused to be
filed within the times and within the manner prescribed by law, all tax or
information returns and tax reports required under all applicable statutes,
rules or regulations to be filed by the Purchaser and its Subsidiaries with
respect to Taxes.
(b) All Taxes shown on said returns to be due and additional
assessments received prior to the date hereof have been paid.
(c) The amounts set up as accruals for Taxes on the Purchaser Current
Financials are sufficient for the payment of all unpaid Taxes of the Purchaser
and its Subsidiaries, whether or not such Taxes are disputed or have been
asserted by any Governmental Authority, for all periods or portions of periods
ended on or prior to Closing, including any Taxes due on any restructuring of
the Purchaser or distribution of Subsidiaries of the Purchaser to the Purchaser
Shareholders prior to Closing.
(d) Neither the Purchaser nor any of its Subsidiaries has received
notice of any proposed audit or reassessment from any taxing authorities and no
examination by the appropriate taxing authority of any return of the Purchaser
or any of its Subsidiaries is currently in progress.
(e) No deficiency in the payment of Taxes by the Purchaser or any of
its Subsidiaries for any period has been asserted in writing by any taxing
authority and remains unsettled at the date of this Agreement. No taxing
authority has undertaken, raised or threatened to raise any claim, proceeding or
investigation against the Purchaser or any of its Subsidiaries, whether or not
such matter was agreed to or settled.
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(f) There are no outstanding agreements or waivers extending the
statutory period of limitations for assessment applicable to any tax return of
the Purchaser or any of its Subsidiaries.
(g) None of the Purchaser or any of its Subsidiaries has any
liability for the Taxes of any Person other than the Purchaser or any of its
Subsidiaries.
SECTION 6.22. Finders and Brokers.
------------- --------------------
Neither the Purchaser, the Purchaser Subsidiaries nor any Person
acting on behalf of the Purchaser or the Purchaser Subsidiaries has negotiated
with any finder, broker, intermediary or any similar Person in connection with
the transactions contemplated herein. The Purchaser will indemnify the
Shareholders and hold it harmless from any liability or expense arising from any
claim for brokerage commissions, finder's fees or other similar compensation
based upon any agreement, arrangement or understanding made by or on behalf of
the Purchaser.
SECTION 6.23. Absence of Changes.
------------- -------------------
Since the date of the Purchaser Current Financials:
(a) the Purchaser and the Purchaser Subsidiaries have operated their
businesses only in the ordinary course of business and consistent with past
practice, and there have not been any facts, circumstances, events or changes in
the Purchaser's or the Purchaser Subsidiaries' business operations or financial
condition, which has had or can reasonably be expected to have a Material
Adverse Effect on the Purchaser or any of the Purchaser Subsidiaries;
(b) none of the Purchaser or any of the Purchaser Subsidiaries has (i)
declared, accrued, set aside or paid any dividend or made any other distribution
in respect of any shares of capital stock, or (ii) repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities;
(c) none of the Purchaser or any of the Purchaser Subsidiaries has
purchased or otherwise acquired any asset from any other Person, except in the
ordinary course of business;
(d) none of the Purchaser or any of the Purchaser Subsidiaries has
made any material capital expenditure;
(e) none of the Purchaser or any of the Purchaser Subsidiaries has
sold or otherwise transferred, and has not leased or licensed, any asset to any
other Person except for products sold by the Purchaser or any of the Purchaser
Subsidiaries from its inventory in the ordinary course of business;
(f) none of the Purchaser or the Purchaser Subsidiaries has incurred
any damage, destruction, loss or interruption of use which adversely affects its
business or assets (whether or not covered by insurance);
43
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(g) none of the Purchaser or the Purchaser Subsidiaries has forgiven
any debt or otherwise released or waived any right or claim;
(h) none of the Purchaser or the Purchaser Subsidiaries has made any
loans or advances to, or guaranteed any indebtedness of, any of the Purchaser
Shareholders or any of their Affiliates;
(i) none of the Purchaser or the Purchaser Subsidiaries has entered
into any transaction or taken any other action outside the ordinary course of
business;
(j) none of the Purchaser or the Purchaser Subsidiaries has incurred
any Liability, except (i) Liabilities incurred in the ordinary course of
business and (ii) Liabilities incurred in connection with or as a result of the
Transactions;
(k) none of the Purchaser or the Purchaser Subsidiaries has made any
change in its accounting methods or practices, including, without limitation,
any change with respect to establishment of reserves for unearned premiums,
losses (including incurred but not reported losses) and loss adjustment
expenses, or made any change in depreciation or amortization policies or rates
adopted by it, except as required by law or U.S. GAAP;
(l) none of the Purchaser or the Purchaser Subsidiaries has (A)
increased the compensation of any of its employees or directors, other than in
the ordinary course of business, (B) changed, altered or entered into any
employment, severance, retention or similar agreement with any salaried
employee, in each case other than in the ordinary course of business, or (C)
adopted any new employee benefit plan, program or arrangement or amended any
Employee Benefit Plan (except amendments required by law);
(m) the Purchaser has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses "(a)" through "(l)" above; and
(n) without limitation by the enumeration of any of the foregoing,
entered into any transaction with a consideration in excess of $25,000 other
than in the usual and ordinary course of business and except as contemplated in
this Agreement.
SECTION 6.24. Environmental Compliance.
------------- -------------------------
The Purchaser and the Purchaser Subsidiaries are in compliance in all
material respect with all applicable Environmental Laws. The Purchaser and the
Purchaser Subsidiaries have not received any notice or other communication (in
writing or otherwise) that alleges that the Purchaser or the Purchaser
Subsidiaries are not in compliance with any Environmental Law, and, to the
Knowledge of the Purchaser, there are no circumstances that may prevent or
interfere with the Purchaser's or the Purchaser Subsidiaries' compliance with
any Environmental Law in the future.
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SECTION 6.25. Insurance.
------------- ----------
(a) Each insurable asset of the Purchaser and the Purchaser
Subsidiaries has at all times been and is at the date of this Agreement insured
to its full replacement value (with no provision for deduction or excess)
against each risk normally insured against by a Person operating the types of
business operated by the Purchaser and the Purchaser Subsidiaries.
(b) The Purchaser and the Purchaser Subsidiaries have at all times
been and are at the date of this Agreement adequately insured against accident,
damage, injury, third party loss (including, without limitation, product
liability), loss of profits and any other risk normally insured against by a
Person operating the types of business operated by the Purchaser and the
Purchaser Subsidiaries.
(c) Each of the policies is valid and enforceable and is not void or
voidable. The Purchaser or the Purchaser Subsidiaries have paid all premiums
due, and have not done anything or omitted to do anything which might make any
of the policies void or voidable.
SECTION 6.26. Full Disclosure.
------------- ----------------
The Purchaser has provided the Shareholders and the Shareholders'
representatives with full and complete access to all of the Purchaser's and the
Purchaser Subsidiaries' records and other documents and data requested. No
representation or warranty by the Purchaser in this Agreement and no statement
contained in any schedule, certificate or other written statement required to be
furnished by the Purchaser or any of its representatives pursuant to the
provisions hereof or in connection with the transactions contemplated hereby is
inaccurate, incorrect, or incomplete in any material respect or contains any
untrue statement of a material fact or omits to state any material fact required
to be stated herein or therein or necessary in order to make the statements made
herein or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VII.
CERTAIN COVENANTS
SECTION 7.01. Best Efforts.
------------- -------------
(a) The Parties shall cooperate in good faith and use their respective
best efforts to close and make effective the transactions contemplated hereby as
expeditiously as possible, including using their respective best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated hereby, executing and delivering such
other documents, certificates, agreements and other writings and taking such
other actions as may be necessary or desirable in order to consummate and make
effective the transactions contemplated hereby as soon as possible.
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(b) Each Party shall use its best efforts prior to the Closing not to
take any action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement (except for such
changes contemplated by Section 7.02(a)(i), (ii) and (ix)).
SECTION 7.02. Conduct of Business Pending the Closing.
------------- ----------------------------------------
(a) Prior to the Closing, unless the Parties shall otherwise agree in
writing (which agreement shall be deemed made if given by the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of the Parties), or
as otherwise expressly contemplated by this Agreement, the Purchaser shall
conduct its business and Spray Ventures shall cause the Company Group to conduct
their businesses, only in the ordinary and usual course consistent with past
practice, and the Purchaser shall and Spray Ventures shall cause the Company
Group to use their best efforts to maintain their respective assets in
substantially their current state of repair, preserve intact their present
business organization, keep available the services of their present officers and
the Key Purchaser Employees and the Key Company Employees, respectively, and
preserve their existing business relationships and goodwill with customers,
suppliers, independent contractors, employees and other Persons material to the
operation of their businesses. Without limiting the generality of the
foregoing, prior to the Closing the Purchaser shall not, and shall not permit
any Purchaser Subsidiary, and Spray Ventures shall not permit the Company or any
Company Subsidiary to:
(i) except to the extent the Purchaser takes such actions to
facilitate and effect the Closing hereunder and the public offering, (1)
amend its memorandum of association, articles of association, articles of
incorporation, by-laws or other organizational documents, (2) split,
combine or reclassify any shares of its outstanding capital stock, (3)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property, or (4) directly or indirectly redeem or otherwise
acquire any shares of its capital stock;
(ii) except to the extent the Purchaser takes such actions to
facilitate and effect the Closing hereunder and the public offering,
authorize for issuance, issue or sell, deliver or agree to issue or sell
any shares of, or rights to acquire or convertible into any shares of, its
capital stock (whether through the issuance or granting of options,
warrants, convertible or exchangeable securities, commitments,
subscriptions, rights to purchase or otherwise), or amend any of the terms
of any such capital stock;
(iii) (1) merge, combine or consolidate with another entity, (2)
acquire or purchase an equity interest in or a substantial portion of the
assets of another corporation, partnership or other business organization
or otherwise acquire any assets outside the ordinary course of business and
consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the ordinary course of business
and consistent with past practice or (3) sell, lease, license, waive,
release, transfer, encumber or otherwise dispose of any of its material
assets outside the ordinary course of business and consistent with past
practice;
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(iv) (1) incur, assume or prepay any indebtedness or any other
liabilities in excess of $100,000 individually, or in excess of $500,000 in
the aggregate, in the case of the Purchaser Group, or SEK 784,000
individually, or in excess of SEK 3,920,000 in the aggregate, in the case
of the Company Group, (other than trade payables), (2) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person or (3)
make any loans, gifts, advances or capital contributions to, or investments
in, any other Person;
(v) pay, satisfy, discharge or settle any claim, liabilities
or obligations (absolute, accrued, contingent or otherwise) against the
Company Group or the Purchaser Group, as the case may be, or any of its
directors, officers, employees or agents in excess of $100,000
individually, or in excess of $500,000 in the aggregate, in the case of the
Purchaser Group, or SEK 784,000 individually, or in excess of SEK 3,920,000
in the aggregate, in the case of the Company Group;
(vi) modify or amend, or waive any benefit of, any non-
competition agreement to which the Company Group or the Purchaser Group, as
the case may be, is a party;
(vii) authorize or make capital expenditures in excess of
$100,000 individually, or in excess of $500,000 in the aggregate, in the
case of the Purchaser Group, or SEK 784,000 individually, or in excess of
SEK 3,920,000 in the aggregate, in the case of the Company Group;
(viii) permit any insurance policy naming the Company Group or
the Purchaser Group, as the case may be, as a beneficiary or a loss payee
to be cancelled or terminated other than in the ordinary course of
business;
(ix) except to the extent the Purchaser takes such actions to
facilitate and effect the closing hereunder and the public offering, (1)
adopt, enter into, terminate or amend in any material respect any plan,
trust, fund, agreement or other arrangement for the current or future
benefit or welfare of any director, officer or employee, (2) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee or (3) take any action to fund or in any
other way secure, or to accelerate or otherwise remove restrictions with
respect to, the payment of compensation or benefits under any employee
plan, agreement, contract, arrangement other than in the ordinary course of
business;
(x) take any action that would fail to preserve and protect
the Proprietary Assets;
(xi) make any material change in its accounting or tax policies
or procedures;
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(xii) make any Tax elections or settle or compromise any tax
liability or waive or extend the statute of limitations in respect of any
such taxes;
(xiii) make any payments to or authorize any transaction with
any Affiliate, except in the ordinary course of business;
(xiv) take any action, or enter into or authorize any contract
or transaction, other than in the ordinary course of business;
(xv) waive, release or cancel any claims against third parties
or debts owing to it, or any rights which have any value;
(xvi) terminate, modify, amend or otherwise alter or change any
of the terms or provisions of any Material Contract in any material
respect; or
(xvii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
(b) Until the Closing or the termination of this Agreement, the
Purchaser shall not, and shall not permit any Purchaser Subsidiary, and Spray
Ventures shall not permit the Company or any Company Subsidiary to make any new
commitment that will be binding on the Purchaser Company at the Closing or
following the Closing to pay any salary or bonus to any employee, except for
regular compensation and bonuses (and regular increases thereof) payable in
accordance with past practices.
(c) Prior to the Closing, the Purchaser and Spray Ventures shall
prepare and file on a timely basis all Tax returns of the Purchaser Group and
the Company Group, respectively, which are required to be filed after the date
hereof and prior to the Closing and shall pay or shall cause the Company to pay
(or establish appropriate reserves in accordance with prior practice), as the
case may be, all Taxes due with respect to the income and operations of the
Purchaser Group and the Company Group, respectively, with respect to such
period. All such Tax returns shall be accurately and completely prepared in
full compliance with all applicable legal requirements.
SECTION 7.03. Access to Information.
------------- ----------------------
The Purchaser and Spray Ventures shall cause the Company to afford and
to cause its officers, directors, employees, auditors and agents to afford, to
the other Parties and to their officers, employees, financial advisors, legal
counsel, accountants, consultants and other representatives unrestricted access
during normal business hours throughout the period prior to the Closing to all
of its books and records and its properties, plants, technology rights and
personnel and information with respect to current customers, prospects and any
third parties which may claim a proprietary right to their property (including
telephone interviews and site visits). The Purchaser shall and Spray Ventures
shall cause the Company to make the officers and employees of the Purchaser and
the Company, respectively, available to the other Parties and
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their representatives as the other Parties and their representatives shall from
time to time reasonably request.
SECTION 7.04. Notices of Certain Events.
------------- --------------------------
Until the Closing or the termination of this Agreement, each Party
shall promptly notify the other Parties of: any notice or other communication
from any Governmental Agency or authority in connection with the transactions
contemplated hereby; and any actions, suits, claims, investigations or
proceedings commenced or, to its Knowledge, threatened against such Party
relating to the consummation of the transactions contemplated hereby. Until the
Closing, each Party will promptly disclose in writing to the other Parties any
matter hereafter arising which, if existing, occurring or known at the date of
this Agreement would have been required to be disclosed to such other Parties or
which would render inaccurate any of the representations, warranties or
statements set forth herein. No information provided to a Party pursuant to
this Section shall be deemed to cure any breach of any representation, warranty
or covenant made in this Agreement.
SECTION 7.05. No Solicitation.
------------- ----------------
(a) If this Agreement is terminated for any reason, then, unless
otherwise agreed to in writing by the Purchaser and Spray Ventures, until the
third anniversary of the termination of this Agreement, the Purchaser and Spray
Ventures shall not, and shall not permit any of its Affiliates (including the
Company), directors, officers, employees, agents or representatives to, directly
or indirectly, knowingly use any information acquired by them or any of their
Affiliates, directors, officers, employees, agents or representatives pursuant
to this Agreement or otherwise in connection with the transactions contemplated
hereby to compete with or act in any other way detrimental to any other Party or
its business.
(b) From the date hereof until the Closing, none of the Parties or
their respective Subsidiaries or Affiliates, nor any of the respective
directors, officers, employees, agents or representatives of the foregoing,
will, directly or indirectly, (a) solicit, initiate (including by way of
furnishing or disclosing non-public information), encourage or respond favorably
to any inquiries or the making of any proposal with respect to any merger,
change of control, consolidation or other business combination involving any
Party or the acquisition of all or any significant part of the assets or capital
stock of any Party (an "Acquisition Transaction") or (b) negotiate, explore or
otherwise engage in discussions with any Person (other than a Party and its
representatives) with respect to any Acquisition Transaction, or which may
reasonably be expected to lead to a proposal for an Acquisition Transaction or
enter into any agreement, arrangement or understanding with respect to any such
Acquisition Transaction or which would require such Person to abandon, terminate
or fail to consummate the transactions contemplated by this Agreement.
SECTION 7.06. Confidentiality.
------------- ----------------
(a) If the transactions contemplated hereby are not consummated for
any reason, each of the Parties shall not, and shall not permit any of its
directors, officers, employees,
49
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agents or representatives or any third party on its behalf to challenge or
contest the proprietary and confidential nature of any information provided to
it by any other Party pursuant hereto. If the transactions contemplated hereby
are not consummated for any reason, the Parties will not use any due diligence
or other information obtained in connection with this Agreement to compete with
or act in any manner detrimental to the other Parties.
(b) If this Agreement shall be terminated, each Party will (i)
redeliver all documents, work papers and other materials of any other Party
relating to the transactions contemplated hereby, or of a proprietary or
confidential nature whether so obtained before or after the execution of this
Agreement, to the Party furnishing the same, and (ii) destroy all documents,
work papers and other materials developed by its accountants, agents and
employees in connection with the transactions contemplated hereby which embody
proprietary information or trade secrets furnished by any Party or deliver such
documents, work papers and other materials to the Party furnishing the same or
excise such information or secrets therefrom and all information received by any
Party with respect to the business of any other Party or any of its Subsidiaries
(other than information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental authority)
shall not at any time be used for personal advantage or disclosed by such Party
to any third person to the detriment of the Party furnishing such information or
any of its Subsidiaries. If requested by any of the other Parties each Party
will certify that it has complied with this Section.
SECTION 7.07. Fulfillment of Conditions.
------------- --------------------------
Each of the Purchaser, Communicade and Spray Ventures will (a) execute and
deliver at the Closing each agreement that any of them is required hereby to
execute and deliver as a condition to the Closing, (b) proceed diligently and in
good faith and use best efforts to satisfy each other condition to the
obligations of the Purchaser, Communicade or Spray Ventures, as the case may be,
contained in this Agreement and (c) not take or fail to take any action that
reasonably could be expected to result in the nonfulfillment of any such
condition.
50
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SECTION 7.08. Waiver of Encumbrance on Company Shares.
------------- ----------------------------------------
The Purchaser acknowledges and agrees to waive any inability of Spray
Ventures to state that Spray Ventures' representations and warranties are true
and correct as of the Closing Date solely with respect to the Encumbrance on the
Company Shares resulting from a Pledge Agreement by and between Spray Ventures
and Omnicom Finance Inc. (the "Pledge Agreement") provided that (a) there are no
other Encumbrances with respect to the Company Shares and (b) Omnicom Finance
Inc. shall have delivered the Company Shares free and clear of all Encumbrances
held by it to Razorfish at the Closing for the purpose of permitting Spray
Ventures to satisfy its delivery requirement under this Agreement.
ARTICLE VIII.
CLOSING DELIVERIES
SECTION 8.01. Closing Deliveries.
------------- -------------------
At the Closing, the Parties and the Company shall deliver the
documents, and shall perform the acts, which are set forth in this Article VIII.
All documents which the Company and the Shareholders shall deliver shall be in
form and substance reasonably satisfactory to the Purchaser and the Purchaser's
counsel. All documents which the Purchaser shall deliver shall be in form and
substance reasonably satisfactory to the Shareholders and their counsel.
SECTION 8.02. Deliveries by Shareholders.
------------- ---------------------------
Spray Ventures shall execute and deliver (or cause to be executed and
delivered) to the Purchaser all of the following; and, Communicade shall execute
and deliver (or cause to be executed and delivered) to the Purchaser the
deliveries specified in clause (a) below, but only in respect of its Company
Shares, and the deliveries specified in clauses (e), (f), (g) and (i) below:
(a) a certificate representing the Warrants and certificates
representing all outstanding Company Shares, duly endorsed in blank or with duly
executed stock powers attached, each together with such documents and
instruments, if any, as may be necessary to permit the Purchaser to acquire the
Warrants and the Company Shares, free and clear of all Encumbrances, except for
Spray Ventures' Company Shares which are held by Omnicom Finance Inc. ("OFI")
pursuant to the Pledge Agreement, which shares shall be delivered by OFI to the
Purchaser free and clear of all Encumbrances, in exchange for and upon receipt
of Purchaser Shares delivered to OFI, to permit Spray Ventures to satisfy its
delivery requirement hereunder;
(b) a written statement from OFI confirming the release as of the
Closing of its Encumbrance solely with respect to the Company Shares in exchange
for and upon receipt of the Purchaser Shares in accordance with the replacement
procedures set forth in Section 2.7.2 of the Pledge Agreement;
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(c) employment agreements in the form of Exhibit B executed by Per
---------
Bystedt, Jonas Svensson, and Johan Ihrfelt;
(d) a certified copy of the Company's and each Company Subsidiary's
memorandum of association, articles of association or articles of incorporation
and bylaws, or similar organizational documents;
(e) certified copies of resolutions of the Company's board of
directors and stockholders, and of the Shareholders' boards of directors,
authorizing the execution, delivery and performance of this Agreement and any
Transaction Documents to which the Company or the applicable Shareholder is a
Party;
(f) incumbency certificates with respect to the officers of the
Company and the Shareholders executing this Agreement, and any other Transaction
Document delivered by the Company or the Shareholders;
(g) a certificate of the Chief Executive Officer of each Shareholder
or in the case of Communicade its Chief Financial Officer, confirming that the
representations and warranties given herein by such Shareholder are true and
correct in all material respects at Closing;
(h) an opinion of Mannheimer Swartling substantially in the form of
Exhibit C;
- ---------
(i) a certificate of the Chief Executive Officer or in the case of
Communicade its Chief Financial Officer, of each Shareholder confirming that the
covenants set forth herein to be performed or complied with by such Shareholder
prior to Closing have been performed or complied with in all material respects;
and
(j) the stock records of the Company and the Company Subsidiaries.
SECTION 8.03. Deliveries by Purchaser.
------------- ------------------------
The Purchaser shall execute and deliver (or cause to be executed and
delivered) to the Shareholders all of the following:
(a) certificates representing the Purchaser Shares;
(b) the cash payment provided in Section 2.02 or certificates
representing the non-voting shares of capital stock of the Purchaser referred to
in Section 2.02;
(c) an incumbency certificate with respect to the officers of the
Purchaser executing this Agreement, and any other Transaction Document to which
the Purchaser is a party;
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(d) a certified copy of resolutions of the Purchaser's board of
directors, authorizing the issuance of the Purchaser Shares and the execution,
delivery and performance of this Agreement, and any other Transaction Document
delivered by the Purchaser;
(e) an opinion of Morrison & Forester LLP substantially in the form of
Exhibit D;
- ----------
(f) a certificate of the Chief Executive Officer of the Purchaser
confirming that the representations and warranties given herein are true and
correct in all material respects (except for such changes contemplated by
Section 7.02(a)(i), (ii) and (ix)) at Closing;
(g) a certificate of the Chief Executive Officer of the Purchaser
confirming that the covenants set forth herein to be performed or complied with
by the Purchaser prior to Closing have been performed or complied with in all
material respects.
SECTION 8.04. Joint Deliveries.
------------- -----------------
At the Closing, the Shareholders, the Purchaser and the Purchaser
Shareholders (as the case may be) shall execute and deliver a Stockholders
Agreement in the form attached hereto as Exhibit E.
---------
ARTICLE IX.
TERMINATION
SECTION 9.01. Grounds for Termination.
------------- ------------------------
This Agreement (except for Sections 7.05 and Section 7.06 and Article
XII which shall survive termination) may be terminated at any time prior to the
Closing Date:
(i) by mutual written agreement of the Parties;
(ii) by Spray Ventures if the tax deferral notice requested by
Spray Ventures in October 1998 from the Swedish Ministry of Finance has not
been obtained on or before 60 days after the date hereof; or
(iii) by any of the Parties if any permanent injunction, order,
decree or ruling by any Governmental Authority of competent jurisdiction
preventing the consummation of the transaction contemplated hereby shall
have become final and nonappealable; provided, however, that the Party
-------- -------
seeking to terminate this Agreement pursuant to this Section 9.01(iii)
shall have used reasonable best efforts to remove such injunction or
overturn such action.
Termination pursuant to clause (ii) will be effective upon delivery of
a written notice of termination by Spray Ventures to the other Parties. If such
notice of termination has not been delivered on or before the 60th day after the
date hereof, Spray Ventures shall be
53
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deemed to have waived its right to terminate this Agreement pursuant to clause
(ii) and, if none of the other termination conditions set forth above have been
met and the other closing conditions set forth in Article III have been met, the
Closing will then occur on the 61st day after the date hereof, in accordance
with Article III.
SECTION 9.02. Effect of Termination.
------------- ----------------------
If this Agreement is terminated as permitted by Section 9.01, such
termination shall be without liability of any Party (or any stockholder,
director, officer, employee, agent, consultant or representative of such Party)
to any other Party to this Agreement.
ARTICLE X.
POST-CLOSING AGREEMENTS
SECTION 10.01. Tax Matters.
-------------- ------------
The following provisions shall govern the allocation of responsibility
as between the Purchaser and Spray Ventures for certain tax matters following
the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. The Purchaser
-------------------------------------------------
shall cause the Company and the Company Subsidiaries to prepare and file all Tax
Returns for the Company and the Company Subsidiaries for all periods ending on
or prior to the Closing Date which are filed after the Closing Date other than
income Tax Returns, if any, with respect to periods for which a consolidated,
unitary or combined income Tax Return of Spray Ventures will include the
operations of the Company and the Company Subsidiaries. The Purchaser shall
permit Spray Ventures to review and comment on each such Tax Return described in
the preceding sentence prior to filing. Spray Ventures shall reimburse the
Purchaser for Taxes of the Company and its Subsidiaries with respect to such
periods within fifteen (15) days after payment by the Company and the Company
Subsidiaries of such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Current Balance Sheet. Spray Ventures will also, within fifteen
(15) days after the filing of such Tax Returns, reimburse the Purchaser, the
Company and the Company Subsidiaries for any expenses incurred in the
preparation and filing of such Tax Returns.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
---------------------------------------------------------------
The Purchaser shall cause to be prepared and filed any Tax Returns of the
Company and the Company Subsidiaries for Tax periods which begin before the
Closing Date and end after the Closing Date. Spray Ventures shall pay to the
Purchaser within fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to the
extent such Taxes are not reflected in the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Current Balance Sheet.
For purposes of this Section, in the case of any Taxes that
54
<PAGE>
are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Taxable period ending on the Closing Date shall
(x) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction the numerator of which is the number of days in the
Taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire Taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant Taxable period ended on the Closing Date. Any
credits relating to a Taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant Taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Company and the Company Subsidiaries. Spray Ventures will also, within
fifteen (15) days after the filing of any such Tax Return, reimburse the
Purchaser, the Company and the Company Subsidiaries for Spray Ventures'
allocable share of any expenses incurred in the preparation and filing of such
Tax Returns. Such allocable share of expenses shall be based on the portion of
Taxes due on such Tax Return payable by Spray Ventures.
(c) Cooperation on Tax Matters.
---------------------------
(i) The Purchaser, the Company and the Company Subsidiaries, and
Spray Ventures shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon
the other Party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
The Company and the Company Subsidiaries and Spray Ventures agree (A) to
retain all books and records with respect to Tax matters pertinent to the
Company and the Company Subsidiaries relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Purchaser or Spray
Ventures, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing
authority, and (B) to give the other Party reasonable written notice prior
to transferring, destroying or discarding any such books and records and,
if the other Party so requests, the Company and the Company Subsidiaries or
Spray Ventures, as the case may be, shall allow the other Party to take
possession of such books and records.
(ii) The Purchaser and Spray Ventures further agree, upon
request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
55
<PAGE>
(iii) The Purchaser and Spray Ventures further agree, upon
request, to provide the other Party with all information that either Party
may be required to report pursuant to the Internal Revenue Code and all
Treasury Department Regulations promulgated thereunder.
(d) Tax Sharing Agreements. All tax sharing agreements or similar
-----------------------
agreements with respect to or involving the Company and the Company Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, the
Company and the Company Subsidiaries shall not be bound thereby or have any
liability thereunder.
(e) Certain Taxes. All transfers, documentary, sales, use, stamp,
--------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Spray
Ventures when due, and Spray Ventures will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, the Purchaser will, and will cause its affiliates
to, join in the execution of any such Tax Returns and other documentation.
ARTICLE XI.
INDEMNIFICATION, ETC.
SECTION 11.01. Survival of Representations and Warranties.
-----------------------------------------------------------
The representations and warranties of each Party contained in this
Agreement shall survive the Closing for a period of eighteen (18) months;
provided that each of the representations and warranties contained in Sections
4.13, 4.21, 6.13 and 6.21, shall survive and continue for the applicable statute
of limitation period or periods legally applicable to them. Each Party shall
maintain net assets of at least $2,500,000.00 for the period ending 18 months
following the Closing.
SECTION 11.02. Indemnification by Spray Ventures.
--------------------------------------------------
(a) Spray Ventures shall indemnify, defend and hold harmless the
Purchaser, the Company, each of the Company Subsidiaries and each of their
respective officers, directors, shareholders, employees, agents and
representatives (collectively, the "Purchaser Related Indemnitees" and
individually each a "Purchaser Related Indemnitee") from and against, and shall
compensate and reimburse each of the Purchaser Related Indemnitees for, any
Damages (net of Taxes) which are suffered or incurred by any of the Purchaser
Related Indemnitees or to which any of the Purchaser Related Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third party claim) and which arise from or are due to:
(i) any inaccuracy in or breach of any representation or warranty
made by Spray Ventures in this Agreement or in any of the other Transaction
Documents; or
56
<PAGE>
(ii) any breach of, or failure to comply with, any covenant or
obligation of Spray Ventures contained in this Agreement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, Spray Ventures shall not be liable to indemnify any Purchaser Related
Indemnitee with respect to any indemnification claim made pursuant to this
Section 11.02 unless and until all Damages claimed by the Purchaser Related
Indemnitees pursuant to this Section 11.02 exceed (i) One Hundred Thousand
Dollars ($100,000) in the aggregate for any one section in Article IV or (ii)
Five Hundred Thousand Dollars ($500,000) in the aggregate and then Spray
Ventures' responsibility will be limited, in the aggregate, to the extent such
claims for Damages exceed the applicable threshold. Furthermore, the liability
of Spray Ventures under this Section 11.02 is limited to an amount equal to Two
Million Five Hundred Thousand Dollars ($2,500,000). Notwithstanding anything to
the contrary contained herein, the limitations set forth in the previous
sentence shall not apply (i) in the event of fraudulent acts committed by Spray
Ventures or any of the directors of Spray Ventures or (ii) to Spray Ventures'
liability for Damages relating to any inaccuracy in or breach of the
representations and warranties set forth in Section 4.22.
(c) The Purchaser Related Indemnitees shall not be entitled to
recover under this Section 11.02 to the extent of any recovery of any Purchaser
Related Indemnitee under insurance policies held for the benefit of any
Purchaser Related Indemnitee (net of any retrospective premium cost resulting
from such recovery), it being understood that the Purchaser Related Indemnitees
shall in good faith pursue recovery against the insurers with the same degree of
diligence as they use to pursue claims against their insurers generally in the
conduct of their business.
(d) Prior to bringing any claim against Spray Ventures with respect
to any Damages resulting from a breach of any provision of Article IV, the
Purchaser Related Indemnitees shall give written notice of such claim to Spray
Ventures and, to the extent such Damages can be eliminated through a correction
of the breached provision or other action of Spray Ventures, shall give Spray
Ventures ninety (90) days to conclude such correction or take such action.
(e) The Purchaser agrees to use reasonable commercial efforts to
minimize any Damages for which the Purchaser Related Indemnitees are entitled to
indemnification under this Section 11.02.
SECTION 11.03. Indemnification by Communicade.
-----------------------------------------------
Communicade shall indemnify, defend and hold harmless the Purchaser
Related Indemnitees from and against, and shall compensate and reimburse each of
the Purchaser Related Indemnitees for, any Damages (net of Taxes) which are
suffered or incurred by any of the Purchaser Related Indemnitees or to which any
of the Purchaser Related Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third party claim) and
which arise from or are due to:
57
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(i) any inaccuracy in or breach of any representation or
warranty made by Communicade in Article V of this Agreement; or
(ii) any breach of, or failure to comply with, any covenant or
obligation of Communicade contained in Article VIII.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, Communicade shall not be liable to indemnify any Purchaser Related
Indemnitee with respect to any indemnification claim made pursuant to this
Section 11.03 unless and until all Damages claimed by the Purchaser Related
Indemnitees pursuant to this Section 11.03 exceed (i) One Hundred Thousand
Dollars ($100,000) in the aggregate for any one section in Article V or (ii)
Five Hundred Thousand Dollars ($500,000) in the aggregate and then Communicade's
responsibility will be limited, in the aggregate, to the extent such claims for
Damages exceed the applicable threshold. Furthermore, the liability of
Communicade under this Section 11.03 is limited to an amount equal to Two
Million Five Hundred Thousand Dollars ($2,500,000). Notwithstanding anything to
the contrary contained herein, the limitations set forth in the previous
sentence shall not apply in the event of fraudulent acts committed by
Communicade or any of the directors of Communicade.
(c) The Purchaser Related Indemnitees shall not be entitled to
recover under this Section 11.03 to the extent of any recovery of any Purchaser
Related Indemnitee under insurance policies held for the benefit of any
Purchaser Related Indemnitee (net of any retrospective premium cost resulting
from such recovery), it being understood that the Purchaser Related Indemnitees
shall in good faith pursue recovery against the insurers with the same degree of
diligence as they use to pursue claims against their insurers generally in the
conduct of their business.
(d) Prior to bringing any claim against Communicade with respect to
any Damages resulting from a breach of any provision of Article V, the Purchaser
Related Indemnitees shall give written notice of such claim to Communicade and,
to the extent such Damages can be eliminated through a correction of the
breached provision or other action of Communicade, shall give Communicade ninety
(90) days to conclude such correction or take such action.
(e) The Purchaser agrees to use reasonable commercial efforts to
minimize any Damages for which the Purchaser Related Indemnitees are entitled to
indemnification under this Section 11.03.
SECTION 11.04. Indemnification by the Purchaser.
-------------------------------------------------
(a) The Purchaser shall indemnify, defend and hold harmless the
Shareholders from and against, and shall compensate and reimburse each of the
Shareholders and each of their respective officers, directors, shareholders,
employees, agent and representatives (collectively, the "Shareholder Related
Indemnitees" and individually each a "Shareholder Related Indemnitee") for, any
Damages (net of Taxes) which are suffered or incurred by any of the Shareholder
Related Indemnitees or to which any of the Shareholder Related Indemnitees may
58
<PAGE>
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third party claim) and which arise from or as a direct or indirect
result of, or are directly or indirectly connected with:
(i) any inaccuracy in or breach of any representation or
warranty made by the Purchaser in this Agreement or in any of the other
Transaction Documents; or
(ii) any breach of, or failure to comply with, any covenant or
obligation of the Purchaser set forth in the Agreement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Purchaser shall not be liable to indemnify any Shareholder
Related Indemnitee with respect to any indemnification claim made pursuant to
this Section 11.04 unless and until all Damages claimed by the Shareholder
Related Indemnitees pursuant to this Section 11.04 exceed (i) One Hundred
Thousand Dollars ($100,000) in the aggregate for any one section in Article VI
or (ii) Five Hundred Thousand Dollars ($500,000) in the aggregate and then the
Purchaser's responsibility will be limited, in the aggregate, to the extent such
claims for Damages exceed the applicable threshold. Furthermore, the liability
of the Purchaser under this Section 11.04 is limited to an amount equal to Two
Million Five Hundred Thousand Dollars ($2,500,000). Notwithstanding anything to
the contrary contained herein, the limitations set forth in the previous
sentence shall not apply (i) in the event of fraudulent acts committed by the
Purchaser or any of the directors of the Purchaser or (ii) to the Purchaser's
liability for Damages relating to any inaccuracy in or breach of the
representations and warranties set forth in Section 6.22.
(c) The Shareholder Related Indemnitees shall not be entitled to
recover under this Section 11.04 to the extent of any recovery of any
Shareholder Related Indemnitee under insurance policies held for the benefit of
any Shareholder Related Indemnitee (net of any retrospective premium cost
resulting from such recovery), it being understood that the Shareholder Related
Indemnitees shall in good faith pursue recovery against the insurers with the
same degree of diligence as they use to pursue claims against their insurers
generally in the conduct of their business.
(d) Prior to bringing any claim against the Purchaser with respect to
any Damages resulting from a breach of any provision of Article VI, the
Shareholder Related Indemnitees shall give written notice of such claim to the
Purchaser and, to the extent such Damages can be eliminated through a correction
of the breached provision or other action of the Purchaser without any out-of-
pocket cost to the Purchaser or any costs incurred by the Purchaser for remedial
measures exceeding $100,000 for every breach (such costs to be calculated based
on the actual cost (e.g., actual salary cost for employees)), shall give the
Purchaser ninety (90) days to conclude such correction or take such action.
(e) Spray Ventures agrees to use reasonable commercial efforts to
minimize any Damages for which the Shareholder Related Indemnitees are entitled
to indemnification under this Section 11.04.
59
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SECTION 11.05. Interest.
-------------------------
Any Party (the "Indemnifying Party") that is required to indemnify any
other Person (the "Indemnified Party") pursuant to this Article XI with respect
to any Damages shall also be required to pay such Indemnified Party interest on
the amount of such Damages (for the period commencing as of the date on which
such Indemnified Party first incurred or otherwise became subject to such
Damages and ending on the date on which the applicable indemnification payment
is made by such Party) at a rate per annum equal to 6%.
SECTION 11.06. Defense of Third Party Claims.
----------------------------------------------
(a) In the event of the assertion or commencement by any Person of
any claim or Proceeding (whether against the Purchaser, any Shareholder, any
other Indemnified Party or any other Person) with respect to which any
Shareholder or the Purchaser, as an Indemnifying Party, may become obligated to
indemnify, hold harmless, compensate or reimburse any Indemnitee pursuant to
this Article XI, the Indemnified Party shall reasonably promptly, following the
Indemnified Party's actual Knowledge thereof, notify such Indemnifying Party of
such claim or Proceeding. The Indemnifying Party shall have the right to assume
the defense of such claim or Proceeding at the sole expense of such Indemnifying
Party. If the Indemnifying Party so elects to assume the defense of any such
claim or Proceeding:
(i) such Indemnifying Party shall proceed to defend such claim
or Proceeding in a diligent manner with counsel reasonably satisfactory to
the Indemnified Party ;
(ii) the Indemnifying Party shall keep the Indemnified Party
informed of all material developments and events relating to such claim or
Proceeding;
(iii) the Indemnified Party shall have the right to participate
in the defense of such claim or Proceeding at its sole expense; and
(iv) the Indemnifying Party shall not settle, adjust or
compromise such claim or Proceeding without the prior written consent of
the Indemnified Party.
(b) If the Indemnified Party so proceeds with the defense of any such
claim or Proceeding on its own:
(i) all expenses incurred and relating to the defense of such
claim or Proceeding (whether or not incurred by the Indemnified Party)
shall be borne and paid exclusively by the Indemnifying Party;
(ii) the Indemnifying Party shall make available to the
Indemnified Party any documents and materials in the possession or control
of the Indemnifying Party that may be necessary to the defense of such
claim or Proceeding;
60
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(iii) the Indemnified Party shall keep the Indemnifying Party
informed of all material developments and events relating to such claim or
Proceeding; and
(iv) the Indemnified Party shall have the right to settle,
adjust or compromise such claim or Proceeding with the consent of the
Indemnifying Party, provided, that the Indemnifying Party shall not
--------
unreasonably withhold such consent.
ARTICLE XII.
MISCELLANEOUS.
SECTION 12.01. Tax and Accounting Treatment Elections.
-------------------------------------------------------
The parties hereto acknowledge and agree that the Transactions shall
be treated as a taxable purchase transaction for the purposes of applicable law,
and that the Purchaser shall account for the Transactions under the purchase
method of accounting. The parties acknowledge and agree that Purchaser may, in
its sole discretion, file an election pursuant to Section 338 of the Code, and
the Shareholders agree that they will cooperate in all respects in the making of
such election. Spray Ventures agrees that it will not take any position with
any governmental authority inconsistent with the Company's valuation of its
shares as of the date hereof.
In the event that Spray Ventures does not obtain a tax deferral ruling
from the Swedish government substantially in the form it will request in
connection with the Transactions, the Parties will endeavor to restructure the
Transactions to obtain tax treatment which is beneficial to both the Purchaser
and Spray Ventures and to close the amended agreement reflecting such structure
as soon as possible.
SECTION 12.02. Governing Law.
------------------------------
This Agreement shall be construed in accordance with, and governed in
all respects by, the internal laws of the State of New York (without giving
effect to principles of conflict of laws).
SECTION 12.03. Arbitration.
----------------------------
Any dispute or controversy which cannot be amicably settled, shall be
solely and finally settled by arbitration pursuant to the Uncitral Arbitration
Rules, as at present in force which rules are deemed to be incorporated by
reference into this Section 12.03. The place of the arbitration shall be
Geneva, Switzerland. The appointing authority shall be the International
Chamber of Commerce in Geneva. The number of arbitrators shall be three. The
language to be used in the arbitration shall be English.
The award of the arbitrator(s) shall be the sole and exclusive remedy
among the Parties regarding any and all claims and counterclaims with respect to
the subject matter of such a dispute or controversy and shall be binding and
conclusive upon the Parties, their successors and assigns, and each shall comply
in good faith with any and all rulings of the arbitrators.
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Judgment upon the award of the arbitrators may be entered in any court
of competent jurisdiction.
SECTION 12.04. Successors and Assigns.
---------------------------------------
This Agreement shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of each of the parties
hereto. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other parties; provided, however, that the Purchaser may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or both of which cases the Purchaser nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
SECTION 12.05. Entire Agreement.
---------------------------------
This Agreement and the other Transaction Documents constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and replaces and supercedes all prior oral or written
communications or understandings.
SECTION 12.06. Severability.
-----------------------------
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 12.07. Amendment and Waiver.
-------------------------------------
This Agreement may be amended or modified only upon the mutual written
consent of the Company, the Purchaser and each of the Shareholders.
SECTION 12.08. Notices.
------------------------
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given (a) upon personal delivery to the Party to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) three (3) days after deposit with a
nationally recognized overnight courier, specifying such delivery, with written
verification of receipt. All such notices shall be sent to the following
addresses:
62
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if to Spray Ventures: Spray Ventures AB
Nybrogatan 55
114 85 STOCKHOLM
Attention: Per Bystedt
Fax: +46-8-660 15 95
with a copy to: Mannheimer Swartling Advokatbyra
-------------- Norrmalmstorg 4
P.O. Box 1711
111 87 STOCKHOLM
Attention: Axel Calissendorff, Esq.
Fax: +46-8-613 55 01
if to Communicade: Communicade Inc.
437 Madison Avenue
New York, New York 10022
Attention: Jerry Neumann
Fax: (212) 415-3530
with a copy to: Davis & Gilbert LLP
-------------- 1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian, Esq.
Fax: (212) 468-4888
if to the Purchaser: Razorfish, Inc.
107 Grand Street, 3rd Floor
New York, NY 10013
Attention: Jeffrey A. Dachis
Fax: (212) 966-6915
with a copy to: Morrison & Foerster llp
-------------- 1290 Avenue of the Americas
New York, NY 10014
Attention: Mark L. Mandel, Esq.
Fax: (212) 468-7900
SECTION 12.09. Delays or Omissions.
------------------------------------
No delay or omission to exercise any right, power or remedy accruing
to any of the Parties hereto, upon any breach or default of any other Party,
shall impair any such right, power or remedy of such Party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind
63
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or character on the part of any Party of any breach or default under this
Agreement, or any waiver on the part of any Party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing.
SECTION 12.10. Remedies Cumulative.
------------------------------------
All remedies, either under this Agreement or by law or otherwise
afforded to any Party, shall be cumulative and not alternative.
SECTION 12.11. No Contribution.
--------------------------------
Each Shareholder hereby waives, and acknowledges and agrees that it
shall not have and shall not exercise or assert or attempt to exercise or
assert, any right of contribution or right of indemnity or any other right or
remedy against the Company or any of the Company Subsidiaries in connection with
any indemnification obligation or any other Liability to which such Shareholder
may become subject under this Agreement or any of the other Transactional
Documents or otherwise in connection with any of the Transactions. Each
Shareholder further acknowledges that the waivers, acknowledgments and
agreements of the Shareholders contained in this Section 12.11 are an essential
inducement to the Purchaser in entering into this Agreement and agreeing to
consummate the Transactions.
SECTION 12.12. Fees and Costs.
-------------------------------
The Purchaser shall pay all of its costs and expenses (including,
without limitation, attorneys' and consultants' fees and costs) incurred by
Purchaser in connection with the transactions contemplated hereby. Communicade
shall pay all of its costs and expenses (including, without limitation,
attorneys' and consultants' fees and costs) incurred by Communicade in
connection with the transactions contemplated hereby. The Company shall pay all
of its reasonable costs and expenses (including, without limitation, attorneys
and consultants fees and costs and any taxes payable arising out of such costs
and expenses) incurred in connection with the transactions contemplated hereby.
The Company shall pay all of Spray Ventures' reasonable advisory costs and
expenses (including, without limitation, attorneys' and consultants' fees and
costs and any taxes payable arising out of such advisory costs and expenses but
no other taxes) incurred in connection with the transactions contemplated
hereby.
SECTION 12.13. Further Assurances.
-----------------------------------
Each of the Parties shall execute and deliver such documents and take
such other actions as reasonably requested by any other Party in furtherance of
the transactions contemplated hereby.
SECTION 12.14. Counterparts.
-----------------------------
This Agreement and the other Transaction Documents may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which, taken together, shall constitute one and the same instrument.
64
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In Witness Whereof, the Parties have executed this Agreement as of the
date set forth in the first paragraph hereof.
SHAREHOLDERS:
Spray Ventures AB
By: /s/ Per Bystedt
-----------------------------
Name: Per Bystedt
Title:
Communicade Inc.
By: /s/ Jerry Neumann
-----------------------------
Name: Jerry Neumann
Title: CEO
PURCHASER:
Razorfish, Inc.
By: /s/ Jeffrey A. Dachis
-----------------------------
Name: Jeffrey A. Dachis
Title: President and CEO
65
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EXHIBIT 10.30
MANNHEIMER SWARTLING
FIRST AMENDMENT TO
THE SUBSCRIPTION AND EXCHANGE AGREEMENT
This amendment is entered into on November 25, 1998
BETWEEN:
(1) RAZORFISH, INC. a New York Corporation;
(2) SPRAY VENTURES AB a corporation organised and existing under the laws of
the Kingdom of Sweden;
(3) COMMUNICADE INC. a Delaware corporation; and
(4) SPRAY NETWORK AB a corporation organised and existing under the laws of
the Kingdom of Sweden
(together the "Parties")
WHEREAS:
A Subscription and Exchange Agreement (the "Agreement") was entered into as of
October 1, 1998 between Razorfish Inc., Spray Ventures AB and Communicade Inc.
under the terms of which Razorfish, Inc. agreed to acquire all the issued and
outstanding capital stock and warrants of Spray Network AB.
<PAGE>
MANNHEIMER SWARTLING
2
THE PARTIES AGREE AS FOLLOWS:
In accordance with the amendment provisions set out in Section 12.07 of the
Agreement the Parties hereby agree to amend the Agreement by the amendment of
Section 9.01 (ii) to read as follows:
"(ii) by Spray Ventures if the tax deferral notice requested by Spray Ventures
in October 1998 from the Swedish Ministry of Finance has not been obtained on or
before 70 days after the date hereof "
Following on from this amendment, the references in the final paragraph of
Section 9.01 to "60th day" and "61st day" are hereby amended to read "70th day"
and "71st day" respectively.
This Agreement may be executed in any number of counterparts, each of which when
executed and delivered is an original, but all the counterparts together
constitute the same document.
In witness whereof, the Parties have executed this Agreement as of the day set
out above.
RAZORFISH, INC
By: /s/ Jeffrey A. Dachis
---------------------
SPRAY VENTURES AB
By: /s/ Thomas Randerz
---------------------
<PAGE>
MANNHEIMER SWARTLING
3
COMMUNICADE INC.
By: /s/ Jerry Neumann
-----------------
SPRAY NETWORK AB
By: /S/ Per Bystedt
----------------
<PAGE>
EXHIBIT 10.31
SECOND AMENDMENT TO
THE SUBSCRIPTION AND EXCHANGE AGREEMENT
This amendment is entered into on December 10, 1998
BETWEEN:
(1) RAZORFISH, INC. a New York Corporation;
(2) SPRAY VENTURES AB a corporation organised and existing under the laws of
the Kingdom of Sweden;
(3) COMMUNICADE INC. a Delaware corporation; and
(4) SPRAY NETWORK AB a corporation organised and existing under the laws of
the Kingdom of Sweden
(together the "Parties")
WHEREAS:
(a) A Subscription and Exchange Agreement (the "Agreement") was entered into as
of October 1, 1998 between Razorfish Inc., Spray Ventures AB and Communicade
Inc. under the terms of which Razorfish, Inc. agreed to acquire all the
issued and outstanding capital stock and warrants of Spray Network AB;
(b) The Parties agreed to amend the Agreement pursuant to the First Amendment to
the Subscription and Exchange Agreement dated November 25, 1998; and
<PAGE>
2
(c) The Parties for good and valuable consideration hereby agree to further
amend the Agreement as set forth below.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
In accordance with the amendment provisions set out in Section 12.07 of the
Agreement the Parties hereby agree to
a) amend the Agreement by the addition of a new Section 3.02 (c) reading as
follows:
"(c) Notwithstanding Section 3.02 (b) above, the obligations of the
Purchaser hereunder are also subject to, at or before the Closing,
approval by the shareholders of the Purchaser of the transactions
contemplated by this Agreement."
b) amend the Agreement by the amendment of Section 9.01 (ii) to read as
follows:
"by the Purchaser if the approval of the shareholders of the Purchaser,
described in Section 3.02 (c) above, shall not have been obtained on or
before 96 days after the date hereof; or"
c) amend the Agreement by the amendment of the final paragraph of Section
9.01 to read as follows:
"If none of the termination conditions set forth above have been met and
the other closing conditions set forth in Article III have been met, the
Closing will then occur on the 97th date after the date hereof, in
accordance with Article III."
<PAGE>
3
This Agreement may be executed in any number of counterparts, each of which when
executed and delivered is an original, but all the counterparts together
constitute the same document.
In witness whereof, the Parties have executed this Agreement as of the day set
out above.
RAZORFISH, INC
By: /s/ Jeffrey A. Dachis
----------------------
SPRAY VENTURES AB
By: /s/ Per Bystedt
----------------------
COMMUNICADE INC.
By: /s/ Jerry Neumann
-----------------
SPRAY NETWORK AB
By: /s/ Thomas Randerz
-------------------
<PAGE>
EXHIBIT 10.32
___________________________________________________________________________
STOCK PURCHASE AGREEMENT
by and among
COMMUNICADE INC.
JEFFREY A. DACHIS
and
CRAIG M. KANARICK
___________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I SALE OF THE PURCHASED SHARES
<S> <C>
Section 1.1 Sale of the Purchased Shares................................. 2
ARTICLE II PURCHASE PRICE AND CLOSING
Section 2.1 Purchase Price............................................... 2
Section 2.2 Payment of the Purchase Price................................ 2
Section 2.3 Closing...................................................... 2
ARTICLE III REPRESENTATIONS OF THE STOCKHOLDERS
Section 3.1 Execution and Validity of Agreements; Restrictive Documents.. 2
3.1.1 Execution and Validity....................................... 3
3.1.2 Stock Ownership.............................................. 3
3.1.3 No Options................................................... 3
3.1.4 No Restrictions.............................................. 3
3.1.5 Non-Contravention............................................ 3
3.1.6 Approvals and Consents....................................... 4
Section 3.2 Capital Stock................................................ 4
ARTICLE IV REPRESENTATIONS OF THE PURCHASER
Section 4.1 Existence and Good Standing.................................. 4
Section 4.2 Execution and Validity of Agreement.......................... 5
Section 4.3 No Restrictions.............................................. 5
Section 4.4 Non-Contravention; Approvals and Consents.................... 5
4.4.1 Non-Contravention............................................ 5
4.4.2 Approvals and Consents....................................... 5
ARTICLE V MUTUAL COVENANTS
Section 5.1 Best Efforts................................................. 6
Section 5.2 Fulfillment of Conditions.................................... 6
ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE PURCHASER
Section 6.1 Representations and Warranties............................... 6
Section 6.2 Performance.................................................. 7
Section 6.3 Surrender and Issuance of Certificates....................... 7
Section 6.4 No Injunctions or Restraints................................. 7
Section 6.5 Simultaneous Closings........................................ 7
Section 6.6 Stockholders Agreement....................................... 7
Section 6.7 Proceedings.................................................. 7
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS
Section 7.1 Representations and Warranties............................... 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 7.2 Performance.............................................................. 8
Section 7.3 Payment of Cash.......................................................... 8
Section 7.4 Certified Resolutions.................................................... 8
Section 7.5 No Injunctions or Restraints............................................. 8
Section 7.6 Simultaneous Closings.................................................... 8
Section 7.7 Stockholders Agreement................................................... 9
Section 7.8 Proceedings.............................................................. 9
ARTICLE VIII SURVIVAL; INDEMNITY
Section 8.1 Survival................................................................. 9
Section 8.2 Obligation of the Stockholders to Indemnify.............................. 9
8.2.1 General Indemnity........................................................ 9
8.2.2 Special Indemnity........................................................ 10
Section 8.3 Obligation of the Purchaser to Indemnify................................. 10
Section 8.4 Indemnification Procedure for Third Party Claims......................... 10
Section 8.5 Limitations on Indemnification........................................... 12
8.5.1 Termination of Indemnification Obligations of the Stockholders........... 12
8.5.2 Termination of Indemnification Obligations of the Purchaser ............. 13
8.5.3 Treatment................................................................ 13
8.5.4 Exceptions............................................................... 13
ARTICLE IX TERMINATION
Section 9.1 Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing:............................................... 13
Section 9.2 Effect of Termination.................................................... 14
ARTICLE X MISCELLANEOUS
Section 10.1 Expenses................................................................. 14
Section 10.2 Governing Law............................................................ 14
Section 10.3 "Person" Defined......................................................... 14
Section 10.4 "Knowledge" Defined...................................................... 14
Section 10.5 "Affiliate" Defined...................................................... 14
Section 10.6 Employee Options......................................................... 15
Section 10.7 Captions................................................................. 15
Section 10.8 Publicity................................................................ 15
Section 10.9 Notices.................................................................. 15
Section 10.10 Parties in Interest...................................................... 16
Section 10.11 Severability............................................................. 16
Section 10.12 Counterparts............................................................. 16
Section 10.13 Entire Agreement......................................................... 17
Section 10.14 Amendments............................................................... 17
Section 10.15 Third Party Beneficiaries................................................ 17
Section 10.16 Use of Terms............................................................. 17
</TABLE>
ii
<PAGE>
INDEX OF DEFINED TERMS
----------------------
<TABLE>
<S> <C>
20% PURCHASE AGREEMENT............................................. 1
AFFILIATE.......................................................... 14
- ---------
AGREEMENT.......................................................... 1
CLOSING............................................................ 2
CLOSING DATE....................................................... 2
COMPANY............................................................ 1
COMPANY STOCK...................................................... 1
DACHIS............................................................. 1
DEFENSE COUNSEL.................................................... 11
DEFENSE NOTICE..................................................... 11
EFFECTIVE DATE..................................................... 1
GOVERNMENTAL OR REGULATORY AUTHORITY............................... 3
INDEMNIFIED PARTY.................................................. 10
INDEMNIFYING PARTY................................................. 10
INSTRUMENTS........................................................ 4
KANARICK........................................................... 1
KNOWLEDGE.......................................................... 14
- ---------
LAWS............................................................... 3
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
LIENS............................................................... 3
LOSSES.............................................................. 9
OMNICOM............................................................. 1
OPTION SHARES....................................................... 14
OPTIONS............................................................. 3
ORDERS.............................................................. 3
ORIGINAL SHAREHOLDERS AGREEMENT..................................... 4
PERSON.............................................................. 14
- ------
PURCHASE PRICE...................................................... 2
PURCHASED SHARES.................................................... 1
PURCHASER........................................................... 1
PURCHASER INDEMNIFIED PARTIES....................................... 9
SPRAY NETWORK....................................................... 1
SPRAY VENTURES...................................................... 1
STOCKHOLDER......................................................... 1
STOCKHOLDER INDEMNIFIED PARTIES..................................... 10
STOCKHOLDERS AGREEMENT.............................................. 1
SUBSCRIPTION AND EXCHANGE AGREEMENT................................. 1
THIRD PARTY CLAIM................................................... 10
</TABLE>
iv
<PAGE>
EXHIBIT
-------
Exhibit A Sale of Shares
Exhibit B Stockholders Certificate
Exhibit C Purchaser Certificate
Exhibit D Stockholders Agreement
SCHEDULE
--------
Schedule 3.1.3 Options
Schedule 3.2 Options
v
<PAGE>
Dated as of October 1, 1998
vii
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (the "AGREEMENT") dated October 23, 1998 and
effective as of October 1, 1998 (the "EFFECTIVE DATE") by and among COMMUNICADE
INC., a Delaware corporation (the "PURCHASER"), a wholly-owned subsidiary of
Omnicom Group Inc., a New York corporation ("OMNICOM"), JEFFREY A. DACHIS
("DACHIS") and CRAIG M. KANARICK ("KANARICK"; together with Dachis, collectively
the "STOCKHOLDERS" and each individually a "STOCKHOLDER").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Purchaser owns 3,636,364 of the issued and outstanding shares
of common stock, par value $.01 per share ("COMPANY STOCK"), of Razorfish, Inc.,
a New York corporation (the "COMPANY");
WHEREAS, the Stockholders each own 2,727,272 of the issued and outstanding
shares of Company Stock;
WHEREAS, each Stockholder desires to sell, and the Purchaser desires to
purchase from each Stockholder, 181,818 shares of Company Stock, in each case
representing 2.0% of the issued and outstanding shares of Company Stock (the
"PURCHASED SHARES"), pursuant to the provisions of this Agreement; and
WHEREAS, simultaneous with the execution of this Agreement and the sale of
the Purchased Shares: (i) the Purchaser shall purchase 20% of the issued and
outstanding shares of capital stock of Spray Network AB, a corporation
incorporated under the laws of the Kingdom of Sweden with identification number
556503-3247 ("SPRAY NETWORK"), from Spray Ventures AB, a corporation
incorporated under the laws of the Kingdom of Sweden with identification number
556506-7997 ("SPRAY VENTURES") pursuant to a stock purchase agreement (the "20%
PURCHASE AGREEMENT"), (ii) the Company, Purchaser and Spray Ventures shall enter
into a subscription and exchange agreement (the "SUBSCRIPTION AND EXCHANGE
AGREEMENT") pursuant to which the Company will purchase all of the issued and
outstanding shares of capital stock of Spray Network and (iii) the Company, the
Purchaser, the Stockholders and Spray Ventures shall enter into a stockholders
agreement (the "STOCKHOLDERS AGREEMENT") with respect to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
<PAGE>
ARTICLE I
---------
SALE OF THE PURCHASED SHARES
----------------------------
SECTION 1.1 SALE OF THE PURCHASED SHARES. Subject to the terms and
----------------------------
conditions herein stated, each Stockholder agrees to sell, assign, transfer and
deliver to the Purchaser on the Closing Date (as defined in Section 2.3), and
the Purchaser agrees to purchase from the Stockholders on the Closing Date, the
number of shares of Company Stock set forth opposite the name of such
Stockholder on Exhibit A hereto. All certificates representing the Purchased
Shares shall be duly endorsed by the Stockholder transferring the same, with all
necessary transfer tax and other revenue stamps, acquired at the Stockholder's
expense, affixed and canceled.
ARTICLE II
----------
PURCHASE PRICE AND CLOSING
--------------------------
SECTION 2.1 PURCHASE PRICE. In full consideration for the purchase by
--------------
the Purchaser of the Purchased Shares, the purchase price (the "PURCHASE PRICE")
shall be an aggregate amount equal to $1,500,000 paid by the Purchaser at the
Closing, allocated among the Stockholders as set forth on EXHIBIT A hereto.
SECTION 2.2 PAYMENT OF THE PURCHASE PRICE. Payment of the Purchase Price
-----------------------------
shall be made by the Purchaser by direct wire transfer to the account of each
Stockholder, pursuant to such Stockholder's written instructions .
SECTION 2.3 CLOSING. The Closing under this Agreement (the
-------
"CLOSING") shall take place at the offices of Morrison & Foerster LLP, 1290
Avenue of the Americas, New York, New York 10104 at 10:00 A.M. on the date when
each of the conditions set forth in Articles VI and VII have been satisfied. The
date of such Closing is herein referred to as the "CLOSING DATE."
ARTICLE III
-----------
REPRESENTATIONS OF THE STOCKHOLDERS
-----------------------------------
A. Each of the Stockholders, severally, represents and warrants to the
Purchaser, as follows:
SECTION 3.1 EXECUTION AND VALIDITY OF AGREEMENTS; RESTRICTIVE DOCUMENTS.
-----------------------------------------------------------
3.1.1 Execution and Validity. Such Stockholder has the full legal right
----------------------
and capacity to enter into this Agreement and to perform his obligations
hereunder. This Agreement has been duly and validly executed and delivered by
such Stockholder and, assuming due authorization,
2
<PAGE>
execution and delivery by the Purchaser, constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
3.1.2 Stock Ownership. Such Stockholder is the true and lawful owner of
---------------
the shares of the Company Stock set forth opposite his name on EXHIBIT A and all
of such shares have been duly and validly authorized and issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof, except as such liability may be imposed
pursuant to applicable laws, and such ownership is free and clear of all
mortgages, pledges, liens, levies, security interests, leases, encumbrances,
claims, charges, any conditional sale agreement or other title retention
agreement and restrictions of any kind or character (collectively, "LIENS").
3.1.3 No Options. Except as set forth in SCHEDULE 3.1.3, there are no
----------
outstanding subscriptions, options, rights (including "phantom stock rights"),
warrants, calls, commitments, understandings, arrangements, conversion rights,
rights of exchange, plans or other agreements of any kind or character
(collectively "OPTIONS") to acquire any shares of Company Stock from such
Stockholder and there are no agreements or understandings with respect to the
sale or transfer of any shares of Company Stock by such Stockholder.
3.1.4 No Restrictions. There is no suit, action, claim, investigation
---------------
or inquiry by any Governmental or Regulatory Authority (as defined in Section
3.1.5 below), and no legal, administrative or arbitration proceeding pending or,
to such Stockholder's knowledge, threatened against such Stockholder or any of
the shares of Company Stock owned by such Stockholder, with respect to the
execution, delivery and performance of this Agreement or the transactions
contemplated hereby or any other agreement entered into by such Stockholder in
connection with the transactions contemplated hereby.
3.1.5 Non-Contravention. The execution, delivery and performance by
-----------------
such Stockholder of his obligations hereunder and the consummation of the
transactions contemplated hereby, will not: (a) result in the violation by such
Stockholder of any statute, law, rule, regulation or ordinance (collectively,
"LAWS"), or any judgment, decree, order, writ, permit or license (collectively,
"ORDERS"), of any court, tribunal, arbitrator, authority, agency, commission,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision (a
"GOVERNMENTAL OR REGULATORY AUTHORITY"), applicable to such Stockholder or any
of his shares of Company Stock, or (b) except for the Shareholders Agreement
dated September 18, 1996 by and among the Stockholders, the Company and JWL
Associates Corp. (the "ORIGINAL SHAREHOLDERS AGREEMENT"), conflict with, result
in a violation or breach of, constitute (with or without notice or lapse of time
or both) a default under, or require such Stockholder to obtain any consent,
approval or action of, make any filing with or give any notice to, or result in
or give to any Person (as defined in Section 10.3 below) any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the shares of
Company Stock of such Stockholder, under any of the terms, conditions or
provisions of any note, bond, mortgage, security agreement, indenture, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any
3
<PAGE>
kind (collectively, "INSTRUMENTS") to which such Stockholder is a party or by
which such Stockholder or any of his assets or properties is bound.
3.1.6 Approvals and Consents. No consent, approval or action of, filing
----------------------
with or notice to any Governmental or Regulatory Authority or other Person is
necessary or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any Instrument to
which such Stockholder is a party or his shares of Company Stock are bound for
the execution and delivery of this Agreement by such Stockholder, the
performance by such Stockholder of his obligations hereunder or the consummation
of the transactions contemplated hereby.
B. Each of the Stockholders, jointly and severally, represents
and warrants to the Purchaser, as follows:
SECTION 3.2 Capital Stock. The Company has an authorized capitalization
-------------
consisting of 10,000,000 shares of common stock, no par value, of which
9,156,819 shares are issued and outstanding, and no shares are held in the
treasury of the Company. All such shares have been duly authorized and validly
issued and are fully paid and non-assessable, and have not been issued in
violation of any preemptive rights of stockholders. No other class of capital
stock of the Company is authorized or outstanding. Except as set forth on
SCHEDULE 3.2, there are no outstanding Options providing for the purchase,
issuance or sale of any shares of the capital stock of the Company.
ARTICLE IV
----------
REPRESENTATIONS OF THE PURCHASER
--------------------------------
The Purchaser represents and warrants to the Stockholders, as follows:
SECTION 4.1 EXISTENCE AND GOOD STANDING. The Purchaser is a corporation
---------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own its property
and to carry on its business all as and in the places where such properties are
now owned or operated or such business is now being conducted.
SECTION 4.2 EXECUTION AND VALIDITY OF AGREEMENT. The Purchaser has the
-----------------------------------
full corporate power and authority to make, execute, deliver and perform this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby have been duly authorized by all required corporate action
on behalf of the Purchaser. This Agreement has been duly and validly executed
and delivered by the Purchaser and assuming due execution and delivery by the
Stockholders, constitutes a legal, valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms.
4
<PAGE>
SECTION 4.3 NO RESTRICTIONS. There is no suit, action, claim,
---------------
investigation or inquiry by any Governmental or Regulatory Authority, and no
legal, administrative or arbitration proceeding pending or, to the Purchaser's
knowledge, threatened against the Purchaser with respect to the execution,
delivery and performance of this Agreement or the transactions contemplated
hereby or any other agreement entered into by the Purchaser in connection with
the transactions contemplated hereby.
SECTION 4.4 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
-----------------------------------------
4.4.1 Non-Contravention. The execution, delivery and performance by the
-----------------
Purchaser of its obligations hereunder and the consummation of the transactions
contemplated hereby, will not: (a) violate, conflict with or result in the
breach of any provision of the Certificate of Incorporation or By-Laws of the
Purchaser; (b) result in the violation by the Purchaser of any Laws or Orders of
any Governmental or Regulatory Authority applicable to the Purchaser or any of
its assets or properties; or (c) conflict with, result in a violation or breach
of, constitute (with or without notice or lapse of time or both) a default
under, or require the Purchaser to obtain any consent, approval or action of,
make any filing with or give any notice to, or result in or give to any Person
any right of payment or reimbursement, termination, cancellation, modification
or acceleration of, or result in the creation or imposition of any Lien upon any
of the assets or properties of the Purchaser, under any of the terms, conditions
or provisions of any Instruments to which the Purchaser is a party or by which
the Purchaser or any of its assets or properties are bound.
4.4.2 Approvals and Consents. No consent, approval or action of, filing
----------------------
with or notice to any Governmental or Regulatory Authority or other Person is
necessary or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any Instrument to
which the Purchaser is a party or by which the Purchaser or any of its assets or
properties is bound for the execution and delivery of this Agreement by the
Purchaser, the performance by the Purchaser of its obligations hereunder or the
consummation of the transactions contemplated hereby.
ARTICLE V
---------
MUTUAL COVENANTS
----------------
SECTION 5.1 BEST EFFORTS. The Purchaser and the Stockholders shall
------------
cooperate in good faith and use their respective reasonable best efforts to
close and make effective the transactions contemplated hereby as expeditiously
as possible, including using their respective reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated hereby, executing and delivering such other documents,
certificates, agreements and other writings and taking such other actions as may
be reasonably necessary or desirable in order to consummate and make effective
the transactions contemplated hereby as soon as possible. Each of the Purchaser
and the Stockholders shall use their best efforts prior to the Closing not to
take any action, or enter into any transaction, which would cause any of their
5
<PAGE>
respective representations or warranties contained in this Agreement to be
untrue or result in a breach of any covenant made by such Person in this
Agreement.
SECTION 5.2 FULFILLMENT OF CONDITIONS. Each of the Stockholders and the
-------------------------
Purchaser will (a) execute and deliver at the Closing each agreement that any of
them is required hereby to execute and deliver as a condition to the Closing,
(b) proceed diligently and in good faith and use best efforts to satisfy each
other condition to the obligations of the Stockholders or the Purchaser, as the
case may be, contained in this Agreement and (c) not take or fail to take any
action that reasonably could be expected to result in the nonfulfillment of any
such condition.
ARTICLE VI
----------
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
------------------------------------------
The obligations of the Purchaser hereunder to purchase the Purchased
Shares on the Closing Date are subject to the fulfillment, at or before the
Closing, of each of the following conditions, all or any of which may be waived
in whole or in part by the Purchaser, in its sole discretion:
SECTION 6.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties made by the Stockholders in this Agreement, or in any Schedule
delivered pursuant hereto, shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date or, in the case of representations and warranties made as
of a specified date earlier than the Closing Date, on and as of such earlier
date (except for such changes in the Company's authorized capital stock in order
to permit the transactions contemplated by the Subscription and Exchange
Agreement), and the Stockholders shall have delivered to the Purchaser a
certificate substantially in the form of Exhibit B hereto, dated the Closing
Date, to such effect.
SECTION 6.2 PERFORMANCE. The Stockholders shall or shall have caused the
-----------
Company to have performed and complied with the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
the Stockholders at or before the Closing.
SECTION 6.3 SURRENDER AND ISSUANCE OF CERTIFICATES. Each Stockholder
--------------------------------------
shall have delivered to the Purchaser certificates representing the Purchased
Shares, together with such other documents and instruments, if any, as may be
necessary to permit the Purchaser to acquire the Purchased Shares, free and
clear of any and all Liens or voting or other restrictions of any kind
whatsoever adverse to the Purchaser.
SECTION 6.4 NO INJUNCTIONS OR RESTRAINTS. There shall not be pending any
----------------------------
litigation, proceeding, investigation, arbitration or claim by any Person or
Governmental or Regulatory Authority or the existence of any injunction or Order
(whether temporary, preliminary or permanent) then in effect, and which in any
case has or could reasonably have the effect of making illegal or otherwise
restricting, preventing or prohibiting consummation of the purchase and sale of
the Purchased Shares or the other transactions contemplated by this Agreement.
6
<PAGE>
SECTION 6.5 SIMULTANEOUS CLOSINGS. All of the conditions to closing
---------------------
pursuant to the 20% Purchase Agreement and the Subscription and Exchange
Agreement shall have been satisfied or waived.
SECTION 6.6 STOCKHOLDERS AGREEMENT. The Stockholders, Spray Ventures and
----------------------
the Company shall have executed and delivered the Stockholders Agreement,
substantially in the form of EXHIBIT D hereto.
SECTION 6.7 PROCEEDINGS. All proceedings to be taken in connection with
-----------
the transactions contemplated by this Agreement and all documents incident
thereto were reasonably satisfactory in form and substance to the Purchaser and
its counsel, and the Purchaser received copies of all such documents and other
evidences as it or its counsel reasonably requested in order to effectuate the
consummation of such transactions and the taking of all proceedings in
connection therewith.
ARTICLE VII
-----------
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS
---------------------------------------------
The obligations of the Stockholders hereunder to sell the Purchased
Shares are subject to the fulfillment, at or before the Closing, of each of the
following conditions, all or any of which may be waived in whole or in part by
the Stockholders in its sole discretion):
SECTION 7.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties made by the Purchaser in this Agreement, or in any Schedule delivered
pursuant hereto, shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date, or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
and the Purchaser shall have delivered to the Stockholders a certificate
substantially in the form of EXHIBIT C hereto, dated the Closing Date, to such
effect.
SECTION 7.2 PERFORMANCE. The Purchaser shall have performed and complied
-----------
with the agreements, covenants and obligations required by this Agreement to be
so performed or complied with by the Purchaser at or before the Closing.
SECTION 7.3 PAYMENT OF CASH. At the Closing, the Purchaser shall have
---------------
delivered the Purchase Price set forth in Section 2.1.
SECTION 7.4 CERTIFIED RESOLUTIONS. The Purchaser shall have delivered to
---------------------
the Stockholders a copy of the resolutions of the Board of Directors of the
Purchaser authorizing the execution, delivery and performance of this Agreement
and the transactions and other agreements contemplated hereby, certified to by
an officer of the Purchaser.
SECTION 7.5 NO INJUNCTIONS OR RESTRAINTS. There shall not be pending any
----------------------------
litigation, proceeding, investigation, arbitration or claim by any Person or
Governmental or Regulatory Authority or the existence of any injunction or Order
(whether temporary, preliminary or
7
<PAGE>
permanent) then in effect, and which in any case, has or could reasonably have
the effect of making illegal or otherwise restricting, preventing or prohibiting
consummation of the purchase and sale of the Purchased Shares or the other
transactions contemplated by this Agreement.
SECTION 7.6 SIMULTANEOUS CLOSINGS. All of the conditions to closing
---------------------
pursuant to the 20% Purchase Agreement and the Subscription and Exchange
Agreement shall have been satisfied or waived.
SECTION 7.7 STOCKHOLDERS AGREEMENT. The Purchaser, Spray Ventures and
----------------------
the Company shall have executed and delivered the Stockholders Agreement,
substantially in the form of EXHIBIT D hereto.
SECTION 7.8 PROCEEDINGS. All proceedings to be taken in connection with
-----------
the transactions contemplated by this Agreement, and all documents incident
thereto were reasonably satisfactory in form and substance to the Stockholders
and their counsel and the Stockholders received copies of all such documents and
other evidences as it or its counsel may reasonably request in order to
establish the consummation of such transaction and the taking of all proceedings
in connection therewith.
ARTICLE VIII
------------
SURVIVAL; INDEMNITY
-------------------
SECTION 8.1 SURVIVAL. Notwithstanding any right of any party hereto
--------
fully to investigate the affairs of any other party, and notwithstanding any
knowledge of facts determined or determinable pursuant to such investigation or
right of investigation, each party hereto shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the other
parties contained in this Agreement and the Schedules, if any, furnished by any
other party pursuant to this Agreement, or in any certificate delivered at the
Closing by any other party. Subject to the limitations set forth in Sections
8.5.1, 8.5.2 and 8.5.4, the respective representations, warranties, covenants
and agreements of the Stockholders and the Purchaser contained in this Agreement
shall survive the Closing.
SECTION 8.2 OBLIGATION OF THE STOCKHOLDERS TO INDEMNIFY.
-------------------------------------------
8.2.1 General Indemnity. Subject to the limitations contained in
-----------------
Section 8.5.1, the Stockholders hereby agree, jointly and severally, to
indemnify the Purchaser and its shareholders, officers, directors, employees,
agents, representatives and successors, permitted assignees of the Purchaser
(individually a "PURCHASER INDEMNIFIED PARTY" and collectively, the "PURCHASER
INDEMNIFIED PARTIES") against, and to protect, save and keep harmless the
Purchaser Indemnified Parties from, and to pay on behalf of or reimburse the
Purchaser Indemnified Parties as and when incurred for, any and all liabilities
(including liabilities for taxes), obligations, losses, damages, penalties,
demands, claims, actions, suits, judgments, settlements, penalties, interest,
out-of-pocket costs, expenses and disbursements (including reasonable costs of
investigation, and reasonable attorneys', accountants' and expert witnesses'
fees) of whatever kind and nature
8
<PAGE>
(collectively, "LOSSES"), that may be imposed on or incurred by any Purchaser
Indemnified Party as a consequence of, in connection with, incident to,
resulting from or arising out of or in any way related to or by virtue of: (a)
any inaccuracy or breach of any representation or warranty contained in Article
III.B hereof or in any certificate delivered by the Stockholders at the Closing;
or (b) any action, demand, proceeding, investigation or claim by any third party
(including any Governmental or Regulatory Authority) against or affecting any
Purchaser Indemnified Party which may give rise to or evidence the existence of
or relate to a misrepresentation or breach of any of the representations and
warranties of the Stockholders contained in Article III.B hereof. The term
"Losses" as used herein is not limited to matters asserted by third parties
against a Purchaser Indemnified Party but includes Losses incurred or sustained
by a Purchaser Indemnified Party in the absence of third party claims.
8.2.2 Special Indemnity. Subject to the limitations contained in
-----------------
Section 8.5.1, each of the Stockholders hereby severally agrees to indemnify the
Purchaser Indemnified Parties against, and to protect, save and keep harmless
the Purchaser Indemnified Parties from and to pay on behalf of or reimburse the
Purchaser Indemnified Parties as and when incurred for any and all Losses that
may be imposed on or incurred by any Purchaser Indemnified Party as a
consequence of, in connection with, incident to, resulting from or arising out
of or in any way related to or by virtue of (a) any misrepresentation,
inaccuracy or breach of any representation or warranty made by the Stockholder
in Article III.A hereof or (b) any action, demand, proceeding, investigation or
claim by any third party (including any Governmental or Regulatory Authority)
against or affecting any Purchaser Indemnified Party which may give rise to or
evidence the existence of or relate to a misrepresentation or breach of any of
the representations and warranties of the Stockholders contained in Article
III.A hereof. Any claim for indemnity made under this Section 8.2.2 shall not be
construed as a claim under Section 8.2.1 hereof even if a Purchaser Indemnified
Party could have made a claim under Section 8.2.1 hereof in respect of the same
matters.
SECTION 8.3 OBLIGATION OF THE PURCHASER TO INDEMNIFY. Subject to the
----------------------------------------
limitations set forth in Section 8.5.2 hereof, the Purchaser hereby agrees to
indemnify the Stockholders and their affiliates, shareholders, officers,
directors, employees, agents, representatives and successors, permitted
assignees of the Stockholders and their affiliates (individually a "Stockholder
Indemnified Party" and collectively, the "STOCKHOLDER INDEMNIFIED PARTIES")
against, and to protect, save and keep harmless the Stockholder Indemnified
Parties from and to pay on behalf of or reimburse the Stockholder Indemnified
Parties as and when incurred for any and all Losses that may be imposed on or
incurred by any Stockholder Indemnified Party as a consequence of, in connection
with, incident to, resulting from or arising out of or in any way related to or
by virtue of: (a) any inaccuracy or breach of any representation or warranty of
the Purchaser contained in Article IV hereof or in any certificate delivered by
the Purchaser at the Closing or (b) any action, demand, proceeding,
investigation or claim by any third party (including any Governmental or
Regulatory Authority) against or affecting any Stockholder Indemnified Party
which may give rise to or evidence the existence of or relate to a
misrepresentation or breach of any of the representations and warranties of the
Stockholders contained in Article IV hereof.
9
<PAGE>
SECTION 8.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. In the event
-------------------------------------------------
that any Person entitled to indemnification under this Agreement (an
"INDEMNIFIED PARTY") asserts a claim for indemnification or receives notice of
the assertion of any claim or of the commencement of any action or proceeding by
any Person who is not a party to this Agreement or an affiliate of a party to
this Agreement (a "THIRD PARTY CLAIM") against such Indemnified Party, against
which a party to this Agreement is required to provide indemnification under
this Agreement (an "INDEMNIFYING PARTY"), the Indemnified Party shall give
written notice together with a statement of any available information (other
than privileged information) regarding such claim to the Indemnifying Party
within 30 days after learning of such claim (or within such shorter time as may
be necessary to give the Indemnifying Party a reasonable opportunity to respond
to such claim). The Indemnifying Party shall have the right, upon written notice
to the Indemnified Party (the "DEFENSE NOTICE") within 15 days after receipt
from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("DEFENSE COUNSEL"), to conduct at its expense the defense against such
claim in its own name, or if necessary in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense Counsel, which approval shall not be unreasonably withheld or
delayed, and in the event the Indemnifying Party and the Indemnified Party
cannot agree upon such counsel within 10 days after the Defense Notice is
provided, then the Indemnifying Party shall propose an alternate Defense
Counsel, which shall be subject again to the Indemnified Party's approval which
approval shall not be unreasonably withheld or delayed. If the parties still
fail to agree on the Defense Counsel, then, at such time, they shall mutually
agree in good faith on a procedure to determine the Defense Counsel.
(a) In the event that the Indemnifying Party shall fail to give the
Defense Notice within such 15 day period, it shall be deemed to have
elected not to conduct the defense of the subject claim, and in such event
the Indemnified Party shall have the right to conduct the defense and to
compromise and settle the claim without prior consent of the Indemnifying
Party and the Indemnifying Party will be liable for all reasonable costs,
expenses, settlement amounts or other Losses paid or incurred in connection
therewith.
(b) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim, the
Indemnifying Party shall be entitled to have the exclusive control over the
defense and settlement of the subject claim and the Indemnified Party will
cooperate with and make available to the Indemnifying Party such assistance
and materials as it may reasonably request, all at the expense of the
Indemnifying Party; the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing. In such an event, the Indemnifying Party will not settle the
subject claim without the prior written consent of the Indemnified Party,
which consent will not be unreasonably withheld or delayed.
(c) Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive relief or specific
performance would be imposed against the Indemnified
10
<PAGE>
Party, or (ii) such settlement or cessation would lead to liability or
create any financial or other obligation on the part of the Indemnified
Party for which the Indemnified Party is not entitled to indemnification
hereunder.
(d) If an Indemnified Party refuses to consent to a bona fide offer of
settlement which provides for a full release of the Indemnified Party and
its affiliates and solely for a monetary payment which the Indemnifying
Party wishes to accept, the Indemnified Party may continue to pursue such
matter, free of any participation by the Indemnifying Party, at the sole
expense of the Indemnified Party. In such an event, the obligation of the
Indemnifying Party shall be limited to the amount of the offer of
settlement which the Indemnified Party refused to accept plus the costs and
expenses of the Indemnified Party incurred prior to the date the
Indemnifying Party notified the Indemnified Party of the offer of
settlement.
(e) Notwithstanding clause (b) above, the Indemnifying Party shall not
be entitled to control, but may participate in, and the Indemnified Party
shall be entitled to have sole control over, the defense or settlement of
any claim (i) that seeks a temporary restraining order, a preliminary or
permanent injunction or specific performance against the Indemnified Party,
(ii) to the extent such claim involves criminal allegations against the
Indemnified Party, (iii) that if unsuccessful, would set a precedent that
would materially interfere with, or have a material adverse effect on, the
business or financial condition of the Indemnified Party or (iv) if such
claim would impose liability on the part of the Indemnified Party for which
the Indemnified Party is not entitled to indemnification hereunder. In
such an event, the Indemnifying Party will still have all of its
obligations hereunder provided that the Indemnified Party will not settle
the subject claim without the prior written consent of the Indemnifying
Party, which consent will not be unreasonably withheld or delayed.
(f) Any final judgment entered or settlement agreed upon in the manner
provided herein shall be binding upon the Indemnifying Party, and shall
conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
(g) A failure by an Indemnified Party to give timely, complete or
accurate notice as provided in this Section 8.4 will not affect the rights
or obligations of any party hereunder except and only to the extent that,
as a result of such failure, any party entitled to receive such notice was
deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise directly and materially damaged as a result of
such failure to give timely notice.
SECTION 8.5 LIMITATIONS ON INDEMNIFICATION.
------------------------------
8.5.1 Termination of Indemnification Obligations of the Stockholders. The
---------------------------------------------------------------
obligation of the Stockholders to indemnify under Sections 8.2.1 and 8.2.2
hereof shall terminate on June 30, 2000, except as to matters as to which the
Purchaser Indemnified Party has made a claim for indemnification under Section
8.4 hereof on or prior to such date, in which case the right to
11
<PAGE>
indemnification with respect thereto shall survive such period until such claim
for indemnification is resolved and any obligations with respect thereto are
fully satisfied.
8.5.2 Termination of Indemnification Obligations of the Purchaser. The
-----------------------------------------------------------
obligation of the Purchaser to indemnify under Section 7.3 hereof shall
terminate on June 30, 2000, except as to matters as to which any Stockholder
Indemnified Party has made a claim for indemnification under Section 8.4 above
on or prior to such date, in which case the right to indemnification with
respect thereto shall survive such period until such claim for indemnification
is resolved and any obligations with respect thereto are fully satisfied.
8.5.3 Treatment. Any indemnity payments by an Indemnifying Party to an
---------
Indemnified Party under this Article VIII shall be treated by the parties as an
adjustment to the Purchase Price.
8.5.4 Exceptions. Each of the limitations set forth in this Section 8.5
-----------
shall in no event (a) apply to any Losses incurred by a Purchaser Indemnified
Party which relate, directly or indirectly, to (i) any fraudulent acts committed
by any Stockholder (including without limitation, fraud in connection with the
transaction contemplated hereby and any fraudulent acts by any officer,
director, employee, agent or stockholder of the Company); (ii) the Stockholders'
obligations set forth in Section 10.1 to pay certain expenses; or (b) apply to
any Losses incurred by a Stockholder Indemnified Party which relate, directly or
indirectly, to the Purchaser's obligations set forth in Section 10.1 to pay
certain expenses.
ARTICLE IX
----------
TERMINATION
-----------
SECTION 9.1 GROUNDS FOR TERMINATION. This Agreement may be terminated
-----------------------
at any time prior to the Closing:
(i) by mutual written agreement of the Purchaser and the
Stockholders;
(ii) by either the Purchaser or the Stockholders if Spray Ventures
AB has not obtained a tax deferral ruling from Swedish tax authorities
on or before 60 days after the date hereof;
(iii) by either the Purchaser or the Stockholders if any permanent
injunction, order, decree or ruling by any Governmental or Regulatory
Authority of competent jurisdiction preventing the consummation of the
transaction contemplated hereby, in the Subscription and Exchange
Agreement or in the 20% Purchase Agreement shall have become final and
nonappealable; provided, however, that the party seeking to terminate
-------- -------
this Agreement pursuant to this Section 9.1(iii) shall have used
reasonable best efforts to remove such injunction or overturn such
action; or
(iv) by either the Purchaser or the Stockholders if the Closing has
not occurred on or before April 30, 1998.
12
<PAGE>
Termination pursuant to clause (ii) will be effective upon delivery of a
written notice of termination by the Stockholders to the Purchaser.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement is terminated as
---------------------
permitted by Section 9.1, such termination shall be without liability of any
party (or any stockholder, affiliate, director, officer, employee, agent,
consultant or representative of such party) to any other party to this
Agreement.
ARTICLE X
---------
MISCELLANEOUS
-------------
SECTION 10.1 EXPENSES. The parties hereto shall pay all of their own
--------
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel and
financial advisors.
SECTION 10.2 GOVERNING LAW. The interpretation and construction of this
-------------
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York without reference to its conflict of laws provisions.
SECTION 10.3 "PERSON" DEFINED. "PERSON" shall mean and include an
---------------
individual, a company, a joint venture, a corporation (including any non-profit
corporation), an estate, an association, a trust, a general or limited
partnership, a limited liability company, a limited liability partnership, an
unincorporated organization and a government or other department or agency
thereof.
SECTION 10.4 "KNOWLEDGE" DEFINED. Where any representation and warranty
------------------
contained in this Agreement is expressly qualified by reference to the knowledge
of the Stockholders or Purchaser, as the case may be, such term shall be limited
to the actual knowledge of the Stockholders or Purchaser, as the case may be,
and unless otherwise stated such knowledge that would have been discovered by
the Stockholders or Purchaser, as the case may be, after reasonable inquiry.
SECTION 10.5 "AFFILIATE" DEFINED. As used in this Agreement, an
------------------
"AFFILIATE" of any Person, shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with such Person.
SECTION 10.6 EMPLOYEE OPTIONS. The Stockholders acknowledge and agree that
----------------
pursuant to the terms of the original Shareholders Agreement, the Company was
permitted to issue options not in excess of ten percent (10%) of the then issued
and outstanding Company Stock. The Stockholders further acknowledge and agree
that as of the date hereof the Company issued 976,520 options convertible into
976,520 shares of Company Stock (the "OPTION SHARES"), in violation of the terms
and conditions of the Original Shareholders Agreement. Accordingly, the
Stockholders do hereby agree (i) to indemnify and hold harmless the Purchaser
from any and all Losses the Purchaser may incur directly or indirectly with
respect to the Option
13
<PAGE>
Shares; provided, however, the Stockholders shall not be required to indemnify
the Purchaser for any such Losses incurred by the Company until such Losses
aggregate to $125,000 (in which case the Stockholders shall be liable only for
36.36% of the amount such Losses incurred by the Company exceed $125,000) and
(ii) to take, or to cause the Company to take, such action as to insure that the
Purchaser's equity ownership in the Company is not diluted in any manner
whatsoever upon or with respect to the issuance of the Option Shares.
SECTION 10.7 CAPTIONS. The Article and Section captions used herein are for
--------
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 10.8 PUBLICITY. Subject to the provisions of the next sentence, no
---------
party to this Agreement shall, and the Stockholders shall insure that no
representative of the Company shall, issue any press release or other public
document or make any public statement relating to this Agreement or the matters
contained herein without obtaining the prior approval of the Purchaser and the
Stockholders. Notwithstanding the foregoing, the foregoing provision shall not
apply to the extent that Omnicom is required to make any announcement relating
to or arising out of this Agreement by virtue of the federal securities laws of
the United States or the rules and regulations promulgated thereunder or other
rules of the New York Stock Exchange, or any announcement by any party or the
Company pursuant to applicable law or regulations.
SECTION 10.9 NOTICES. Unless otherwise provided herein, any notice,
-------
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand, (b) three days after the date of
deposit in the mails, postage prepaid, if mailed by certified or registered
mail, or (c) the next business day if sent by facsimile transmission (if receipt
is electronically confirmed) or by a prepaid overnight courier service, and in
each case at the respective addresses or numbers set forth below or such other
address or number as such party may have fixed by notice:
If to the Purchaser, addressed to:
Communicade Inc.
437 Madison Avenue
New York, New York 10022
Attention: Chief Financial Officer
Fax: (212) 415-3530
and to:
------
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Secretary
Fax: (212) 415-3670
with a copy to:
--------------
14
<PAGE>
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian, Esq.
Fax: (212) 468-4888
If to any Stockholder, to his address set forth on EXHIBIT A:
with a copy to:
--------------
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Mark L. Mandel, Esq.
Fax: (212) 468-7900
SECTION 10.10 PARTIES IN INTEREST. This Agreement may not be transferred,
-------------------
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
SECTION 10.11 SEVERABILITY. In the event any provision of this Agreement
------------
is found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
SECTION 10.12 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one instrument.
SECTION 10.13 ENTIRE AGREEMENT. This Agreement, including the other
----------------
documents referred to herein and the Exhibits and Schedules hereto which form a
part hereof, contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
SECTION 10.14 AMENDMENTS. This Agreement may not be amended, supplemented
----------
or modified orally, but only by an agreement in writing signed by the Purchaser
and each of the Stockholders.
SECTION 10.15 THIRD PARTY BENEFICIARIES. Each party hereto intends that
--------------------------
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto and their respective
successors and assigns as permitted under Section 8.10.
SECTION 10.16 USE OF TERMS. Whenever the context so requires or permits,
------------
all references to the masculine herein shall include the feminine and neuter,
all references to the neuter herein
15
<PAGE>
shall include the masculine and feminine, all references to the plural shall
include the singular and all references to the singular shall include the
plural.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on the
day and year first above written.
COMMUNICADE INC.
/s/ Jerry Neumann
BY: _______________________________
NAME: JERRY NEUMANN
TITLE: CHIEF FINANCIAL OFFICER
/s/ Jeffrey A. Dachis
___________________________________
JEFFREY A. DACHIS
/s/ Craig M. Kanarick
___________________________________
CRAIG M. KANARICK
17
<PAGE>
EXHIBIT A
---------
SALE OF SHARES
<TABLE>
<CAPTION>
STOCKHOLDERS SHARES SOLD PURCHASE PRICE ALLOCATION
------------ ----------- -------------------------
<S> <C> <C>
Jeffrey A. Dachis 181,818 $750,000
c/o Razorfish, Inc.
17 Grand Street
New York, NY 10013
Craig M. Kanarick 181,818 $750,000
c/o Razorfish, Inc.
17 Grand Street
New York, NY 10013
</TABLE>
<PAGE>
EXHIBIT B
---------
OFFICER'S CERTIFICATE
Each of the undersigned, pursuant to Section 6.1 of the Stock Purchase
Agreement, effective as of October 1, 1998 (the "Agreement") (terms defined in
the Agreement being used herein as so defined), by and among Jeffrey A. Dachis,
Craig M. Kanarick (together with Mr. Dachis, the "Stockholders") and
Communicade, Inc., a Delaware corporation, certify that:
1. The representations and warranties made by the Stockholders in the
Agreement, and in any Schedule delivered thereto, are true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date or, in the case of representations
and warranties made as of a specified date earlier than the Closing Date, on and
as of such earlier date.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
January 5, 1999.
/s/ Jeffrey A. Dachis
_________________________________
Jeffrey A. Dachis
/s/ Craig M. Kanarick
_________________________________
Craig M. Kanarick
<PAGE>
EXHIBIT C
---------
OFFICER'S CERTIFICATE
The undersigned, Jerry Neumann, the CEO of Communicade, Inc., a Delaware
corporation (the "Purchaser"), pursuant to Section 7.1 of the Stock Purchase
Agreement, effective as of October 1, 1998 (the "Agreement") (terms defined in
the Agreement being used herein as so defined), by and among the Purchaser,
Jeffrey A. Dachis and Craig M. Kanarick, certify, on behalf of the Purchaser
that:
1. The representations and warranties made by the Purchaser in the
Agreement, and in any Schedule delivered thereto, are true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date or, in the case of representations
and warranties made as of a specified date earlier than the Closing Date, on and
as of such earlier date.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
January 5, 1999.
COMMUNICADE, INC.
BY: /s/ Jerry Neumann
------------------------------
Jerry Neumann
CEO
<PAGE>
EXHIBIT 10.33
___________________________________________________________________________
STOCK PURCHASE AGREEMENT
by and between
COMMUNICADE INC.
and
SPRAY VENTURES AB
___________________________________________________________________________
Dated as of October 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
SALE OF THE PURCHASED SHARES
Section 1.1 Sale of the Purchased Shares................................... 1
ARTICLE II
PURCHASE PRICE AND CLOSING
Section 2.1 Purchase Price................................................. 2
2.1.1 Calculation of Purchase Price.................................. 2
Section 2.2 Payment of the Purchase Price.................................. 2
Section 2.3 Closing........................................................ 2
ARTICLE III
REPRESENTATIONS OF THE STOCKHOLDER
Section 3.1 Execution and Validity of Agreements; Restrictive Documents.... 2
3.1.1 Execution and Validity......................................... 3
3.1.2 Stock Ownership................................................ 3
3.1.3 No Options..................................................... 3
3.1.4 No Restrictions................................................ 3
Section 3.2 Existence...................................................... 3
Section 3.3 Subsidiaries and Investments; Capital Stock.................... 3
3.3.1 Subsidiaries and Investments................................... 3
3.3.2 Capital Stock.................................................. 4
Section 3.4 Financial Statements and No Material Changes................... 4
Section 3.5 Books and Records.............................................. 5
Section 3.6 Title to Properties; Encumbrances.............................. 5
Section 3.7 Real Property.................................................. 5
3.7.1 Owned Real Property............................................ 5
3.7.2 Leased Real Property........................................... 5
Section 3.8 Contracts...................................................... 6
Section 3.9 Non-Contravention; Approvals and Consents...................... 7
3.9.1 Non-Contravention.............................................. 7
3.9.2 Approvals and Consents......................................... 7
Section 3.10 Litigation..................................................... 7
Section 3.11 Taxes.......................................................... 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.12 Liabilities.................................................. 8
Section 3.13 Insurance.................................................... 8
Section 3.14 Intellectual Properties...................................... 8
3.14.1 Definitions.................................................. 9
3.14.2 Representations.............................................. 9
Section 3.15 Compliance with Laws; Licenses and Permits................... 10
3.15.1 Compliance................................................... 10
3.15.2 Licenses..................................................... 10
Section 3.16 Client Relations............................................. 10
Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable....... 11
Section 3.18 Employment Relations......................................... 11
Section 3.19 Employee Benefit Matters..................................... 11
Section 3.20 Interests in Customers, Suppliers, Etc....................... 11
Section 3.21 Bank Accounts and Powers of Attorney......................... 12
Section 3.22 Compensation of Employees.................................... 12
Section 3.23 No Changes Since the Balance Sheet Date...................... 12
Section 3.24 Corporate Controls........................................... 13
Section 3.25 Brokers...................................................... 13
Section 3.26 Disclosure................................................... 13
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
Section 4.1 Existence and Good Standing................................... 14
Section 4.2 Execution and Validity of Agreement........................... 14
Section 4.3 Non-Contravention; Approvals and Consents..................... 14
4.3.1 Non-Contravention............................................. 14
4.3.2 Approvals and Consents........................................ 14
Section 4.4 Brokers....................................................... 15
Section 4.5 Disclosure.................................................... 15
ARTICLE V
MUTUAL COVENANTS
Section 5.1 Best Efforts.................................................. 15
Section 5.2 Conduct of Business Pending the Closing....................... 15
Section 5.3 Access to Information......................................... 17
Section 5.4 Notices of Certain Events..................................... 17
Section 5.5 No Solicitation............................................... 20
Section 5.6 Waiver of Lien on Purchased Shares............................ 20
Section 5.7 Fulfillment of Conditions..................................... 18
</TABLE>
ii
<PAGE>
<TABLE>
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
<S> <C>
Section 6.1 Representations and Warranties................................ 19
Section 6.2 Performance................................................... 19
Section 6.3 Certified Resolutions......................................... 19
Section 6.4 Certified Charter Documents................................... 19
Section 6.5 Surrender and Issuance of Certificates........................ 19
Section 6.6 No Injunctions or Restraints.................................. 19
Section 6.7 Simultaneous Closings......................................... 20
Section 6.8 Stockholders Agreement........................................ 20
Section 6.9 Proceedings................................................... 19
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER
Section 7.1 Representations and Warranties................................ 20
Section 7.2 Good Standing Certificates.................................... 20
Section 7.3 Performance................................................... 20
Section 7.4 Certified Resolutions......................................... 20
Section 7.5 No Injunctions or Restraints.................................. 20
Section 7.6 Simultaneous Closings......................................... 21
Section 7.7 Stockholders Agreement........................................ 21
Section 7.8 Proceedings................................................... 21
ARTICLE VIII
SURVIVAL; INDEMNITY
Section 8.1 Survival...................................................... 21
Section 8.2 Obligation of the Stockholder to Indemnify.................... 21
Section 8.3 Obligation of the Purchaser to Indemnify...................... 22
Section 8.4 Indemnification Procedure for Third Party Claims.............. 22
Section 8.5 Limitations on Indemnification................................ 24
8.5.1 Indemnity Cushion and Cap..................................... 24
8.5.2 Termination of Indemnification Obligations of the Stockholder. 24
8.5.3 Termination of Indemnification Obligations of the Purchaser... 26
8.5.4 Treatment..................................................... 26
8.5.5 Tax Effects................................................... 26
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
8.5.6 Exceptions................................................... 26
8.5.7 Control by Omnicom........................................... 26
ARTICLE IX
TERMINATION
Section 9.1 Grounds for Termination...................................... 26
Section 9.2 Effect of Termination........................................ 27
ARTICLE X
MISCELLANEOUS
Section 10.1 Expenses..................................................... 27
Section 10.2 Governing Law................................................ 27
Section 10.3 Arbitration.................................................. 27
Section 10.4 Person Defined............................................... 28
Section 10.5 Knowledge Defined............................................ 28
Section 10.6 Affiliate Defined............................................ 28
Section 10.7 Captions..................................................... 28
Section 10.8 Publicity.................................................... 28
Section 10.9 Notices...................................................... 28
Section 10.10 Parties in Interest.......................................... 29
Section 10.11 Severability................................................. 29
Section 10.12 Counterparts................................................. 29
Section 10.13 Entire Agreement............................................. 30
Section 10.14 Amendments................................................... 30
Section 10.15 Third Party Beneficiaries.................................... 30
Section 10.16 Use of Terms................................................. 30
</TABLE>
iv
<PAGE>
INDEX OF DEFINED TERMS
----------------------
<TABLE>
<S> <C>
Acquisition Transaction................................................... 18
Affiliate................................................................. 28
Agreement................................................................. 1
Balance Sheet............................................................. 4
Balance Sheet Date........................................................ 5
Closing................................................................... 2
Closing Date.............................................................. 2
Company................................................................... 1
Dachis.................................................................... 1
Defense Counsel........................................................... 23
Defense Notice............................................................ 23
Effective Date............................................................ 1
Environmental Laws and Orders............................................. 10
GAAP...................................................................... 4
Governmental or Regulatory Authority...................................... 7
Group..................................................................... 22
Indemnified Party......................................................... 23
Indemnifying Party........................................................ 23
Instruments............................................................... 7
Intellectual Property..................................................... 9
Intellectual Property of the Company...................................... 9
Kanarick.................................................................. 1
Knowledge................................................................. 28
Laws...................................................................... 7
Liabilities............................................................... 8
Licenses.................................................................. 10
Liens..................................................................... 3
Losses.................................................................... 22
Material Adverse Effect................................................... 10
Omnicom................................................................... 1
Options................................................................... 3
</TABLE>
v
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<TABLE>
<S> <C>
Orders.................................................................... 7
Person.................................................................... 28
Plans..................................................................... 12
Purchase Price............................................................ 2
Purchased Shares.......................................................... 1
Purchaser................................................................. 1
Purchaser Indemnified Parties............................................. 22
Razorfish................................................................. 1
Real Property Leases...................................................... 5
Related Group............................................................. 12
Shares.................................................................... 1
Stockholder............................................................... 1
Stockholder Indemnified Parties........................................... 23
Stockholders Agreement.................................................... 1
Subscription and Exchange Agreement....................................... 1
Subsidiary................................................................ 3
Taxes..................................................................... 8
Third Party Claim......................................................... 23
</TABLE>
vi
<PAGE>
EXHIBITS
--------
Exhibit A Stockholder Certificate
Exhibit B Purchaser Certificate
Exhibit C Stockholders Agreement
SCHEDULES
---------
Schedule 3.3.1 Subsidiaries
Schedule 3.4(A) Financial Changes and No Material Changes
Schedule 3.4(B) GAAP Exceptions
Schedule 3.7.2 Leased Real Property
Schedule 3.8 Contracts
Schedule 3.14 Intellectual Properties
Schedule 3.16 Client Relations
Schedule 3.19 Employee Benefit Matters
Schedule 3.20 Interests in Customers, Suppliers, Etc.
Schedule 3.21 Bank Accounts and Powers of Attorney
Schedule 3.22 Compensation of Employees
Schedule 3.23 No Changes Since the Balance Sheet Date
vii
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (the "AGREEMENT") dated October 23, 1998 and
effective as of October 1, 1998 (the "EFFECTIVE DATE"), by and among COMMUNICADE
INC., a Delaware corporation (the "PURCHASER"), a wholly-owned subsidiary of
Omnicom Group Inc., a New York corporation ("OMNICOM"), and SPRAY VENTURES AB, a
corporation organized and existing under the laws of the Kingdom of Sweden with
identification number 556506-7997 (the "STOCKHOLDER").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Stockholder owns 2,815 shares representing 100% of the issued
and outstanding shares of common stock, nominal value SEK 100 per share (the
"SHARES"), of Spray Network AB, a corporation incorporated under the laws of the
Kingdom of Sweden with identification number 556503-3247 (the "COMPANY");
WHEREAS, the Stockholder desires to sell, and the Purchaser desires to
purchase 563 Shares representing 20% of the issued and outstanding Shares as of
the date hereof (the "PURCHASED SHARES") pursuant to the provisions of this
Agreement; and
WHEREAS, simultaneous with the execution and delivery of this Agreement and
the sale of the Purchased Shares: (i) the Purchaser shall purchase additional
shares of Razorfish, Inc., a Delaware corporation ("RAZORFISH"), from Jeffrey A.
Dachis ("DACHIS") and Craig M. Kanarick ("KANARICK"), increasing the Purchaser's
ownership interest in Razorfish, (ii) the Stockholder, the Company, the
Purchaser and Razorfish shall enter into a subscription and exchange agreement
(the "SUBSCRIPTION AND EXCHANGE AGREEMENT") pursuant to which Razorfish will
purchase all of the issued and outstanding shares of capital stock of the
Company, and (iii) Razorfish, the Purchaser, the Stockholder, Dachis and
Kanarick shall enter into a stockholders agreement (the "STOCKHOLDERS
AGREEMENT") with respect to Razorfish;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
ARTICLE II
SALE OF THE PURCHASED SHARES
----------------------------
SECTION 1.1 Sale of the Purchased Shares. Subject to the terms and
----------------------------
conditions herein stated, the Stockholder agrees to sell, assign, transfer and
deliver to the Purchaser on the Closing Date (as defined in Section 2.3), and
the Purchaser agrees to purchase from the Stockholder on the Closing Date, the
Purchased Shares. All certificates representing the Purchased Shares shall
<PAGE>
be duly endorsed by the Stockholder transferring the same, with all necessary
transfer tax and other revenue stamps, acquired at the Stockholder's expense,
affixed and canceled.
ARTICLE II
PURCHASE PRICE AND CLOSING
--------------------------
SECTION 2.1 Purchase Price.
--------------
2.1.1 Calculation of Purchase Price. In full consideration for the
-----------------------------
purchase by the Purchaser of the Purchased Shares, the purchase price of
US$12,000,000 (the "PURCHASE PRICE") shall be paid by the Purchaser at the
Closing.
SECTION 2.2 PAYMENT OF THE PURCHASE PRICE. Payment of the Purchase Price
-----------------------------
shall be made by the Purchaser by direct wire transfer to the account of the
Stockholder pursuant to the written instructions of the Stockholder.
SECTION 2.3 CLOSING. The Closing under this Agreement (the "CLOSING")
-------
shall take place at the offices of Morrison & Foerster LLP, 1290 Avenue of the
Americas, New York, New York 10104 at 10:00 A.M. on the date when each of the
conditions set forth in Articles VI and VII have been satisfied. The date of
such Closing is herein referred to as the "CLOSING DATE".
ARTICLE III
REPRESENTATIONS OF THE STOCKHOLDER
----------------------------------
A. The Stockholder represents, warrants and agrees to and with the
Purchaser, as follows:
SECTION 3.1 Execution and Validity of Agreements; Restrictive Documents.
2
<PAGE>
3.1.1 Execution and Validity. The Stockholder has the full legal right and
----------------------
capacity to enter into this Agreement and to perform its obligations hereunder.
This Agreement has been duly and validly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery by the
Purchaser, constitutes a legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
3.1.2 Stock Ownership. The Stockholder is the legal and beneficial owner
---------------
of the Shares and all of such Shares have been duly and validly authorized and
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof, except as such liability
may be imposed pursuant to applicable laws, and such ownership is free and clear
of all mortgages, pledges, liens, levies, security interests, leases,
encumbrances, claims, charges, any conditional sale agreement or other title
retention agreement and restrictions of any kind or character (collectively,
"LIENS").
3.1.3 No Options. There are no outstanding subscriptions, options, rights
----------
(including "phantom stock rights"), warrants, calls, commitments,
understandings, arrangements, plans or other agreements of any kind
(collectively, "OPTIONS"), to acquire any Shares from the Stockholder and there
are no agreements or understandings with respect to the sale or transfer of any
Shares by the Stockholder.
3.1.4 No Restrictions. There is no suit, action, claim, investigation or
---------------
inquiry by any Governmental or Regulatory Authority (as defined in Section 3.1.5
below), and no legal, administrative or arbitration proceeding pending or, to
the Stockholder's knowledge, threatened against the Stockholder or any of the
Stockholder's Shares, with respect to the execution, delivery and performance of
this Agreement or the transactions contemplated hereby or any other agreement
entered into by the Stockholder in connection with the transactions contemplated
hereby.
SECTION 3.2 EXISTENCE. The Company is duly formed and organized and
---------
validly subsisting under the laws of the Kingdom of Sweden, with the full
corporate power and authority to own its property and to carry on its business
all as and in the places where such properties are now owned or operated and as
such business is now being conducted.
SECTION 3.3 SUBSIDIARIES AND INVESTMENTS; CAPITAL STOCK.
-------------------------------------------
3.3.1 Subsidiaries and Investments. The term "SUBSIDIARY" as used in the
----------------------------
Agreement shall mean any Person in which the Company, directly or indirectly
through subsidiaries or otherwise, beneficially owns or controls fifty percent
or more of either the equity interests in, or the voting control of, such Person
(as defined in Section 10.4 below). SCHEDULE 3.3.1 contains a true and complete
list of all of the Company's Subsidiaries. Except as set forth in SCHEDULE
3.3.1, neither the Company nor any Subsidiary owns any capital stock or other
equity or ownership or proprietary interest in any corporation, partnership,
limited liability company, trust, joint venture or other entity (other than
investments of publicly traded debt and equity securities held for investment).
SCHEDULE 3.3.1 also sets forth the name, jurisdiction of organization and
number of outstanding shares of each of the Subsidiaries, and a list of all of
the stockholders of each Subsidiary (indicating the number of shares owned by
each such stockholder). The Company or
3
<PAGE>
another Subsidiary owns of record and beneficially and has valid title to that
percentage of the issued and outstanding shares of capital stock of each
Subsidiary as set forth on SCHEDULE 3.3.1, free and clear of any Lien. Each
Subsidiary is a corporation or limited liability entity and is duly incorporated
or formed and organized, validly existing and in good standing under the laws of
its jurisdiction of organization, with the full corporate power and authority to
own its properties and to carry on its business all as and in the places where
such properties are now owned or operated or such business is now being
conducted. Except as set forth on SCHEDULE 3.3.1, no Subsidiary has been
incorporated outside of Sweden. No Subsidiary has any employees, leases or owns
any real property or maintains any bank accounts outside of its jurisdiction of
incorporation. All of the outstanding shares of capital stock of or equity
interest in each Subsidiary have been duly authorized and validly issued (if
such interests are of a kind that is issued or certificated) and are fully paid
and non-assessable, and have not been issued in violation of any preemptive
rights of stockholders or other equity interest holders. Except as set forth on
SCHEDULE 3.3.1, there are no (a) outstanding Options obligating the Company or
any Subsidiary to purchase, issue or sell any shares of the capital stock of any
Subsidiary or other entity in which the Company or one of its Subsidiaries owns
an equity interest or outstanding agreement or commitment to grant, extend or
enter into any Option with respect thereto or (b) voting trusts, proxies or
other commitments, understandings, restrictions or arrangements in favor of any
Person other than the Company or a Subsidiary with respect to the voting of or
the right to participate in dividends or other earnings on any capital stock of,
or any other equity interest in, any Subsidiary.
3.3.2 Capital Stock. The Company has an authorized capitalization
-------------
consisting of 2,815 shares of common stock, nominal value SEK 100 per share, of
which 2,815 shares are issued and outstanding. All such shares have been duly
authorized and validly issued, are fully paid and non-assessable, and have not
been issued in violation of any preemptive rights of stockholders. No other
class of capital stock of the Company is authorized or outstanding. There are no
outstanding Options providing for the purchase, issuance or sale of any shares
of the capital stock of the Company by the Company or any Subsidiary. Neither
the Company nor any of its Subsidiaries has at any time acquired any of its
capital stock.
SECTION 3.4 Financial Statements and No Material Changes. Schedule
--------------------------------------------
3.4(A) sets forth the following: (a) an audited consolidated balance sheet of
the Company and its subsidiaries as at December 31, 1997 and the related audited
consolidated statement of income for the calendar year then ended reported on by
Deloitte & Touche, and (b) an audited consolidated balance sheet of the Company
and its subsidiaries as at June 30, 1998 (the "Balance Sheet") and the related
consolidated statement of income for the six months then ended. Such financial
statements have been prepared in accordance with Swedish generally accepted
accounting principals, consistently applied ("GAAP"), throughout the periods
indicated, except as set forth on Schedule 3.4(B) hereto. Each consolidated
balance sheet fairly presents the financial condition of the Company and its
subsidiaries at the respective date thereof and reflects all claims against and
all debts and liabilities of the Company and its subsidiaries, fixed or
contingent, as of the date thereof, required to be shown thereon under GAAP, and
the related consolidated statement of income accurately present the results of
operations of the Company and its subsidiaries for the respective periods
indicated. Since June 30, 1998 (the "Balance Sheet Date"), there has been no
material adverse change in the assets or liabilities, or in the business or
4
<PAGE>
condition, financial or otherwise, or in the results of operations of the
Company and its subsidiaries taken as a whole.
SECTION 3.5 BOOKS AND RECORDS. All accounts, books, ledgers and other
-----------------
records material to the Company and its Subsidiaries of whatsoever kind have
been properly and accurately kept and completed in all material respects, and
there are no material inaccuracies or discrepancies of any kind contained or
reflected therein. The Company and each of its Subsidiaries has unrestricted
access to all records of the Company or such Subsidiary, including without
limitation, any accountant's work papers.
SECTION 3.6 TITLE TO PROPERTIES; ENCUMBRANCES. The Company and its
---------------------------------
Subsidiaries have good and valid title to, or enforceable leasehold interests
in, or valid rights under contract to use, all the properties and assets owned
or used by it (real and personal, tangible and intangible), including, without
limitation (a) all the properties and assets reflected in the Balance Sheet, and
(b) all the properties and assets purchased or otherwise contracted for by the
Company and its Subsidiaries since the Balance Sheet Date (except for properties
and assets reflected in the Balance Sheet or acquired or otherwise contracted
for since the Balance Sheet Date that have been sold or otherwise disposed of in
the ordinary course of business), in each case free and clear of all Liens,
except for such Liens which, individually or in the aggregate, will not have a
Material Adverse Effect (as defined in Section 3.15.1) on such properties or
assets, or on the Company's use or enjoyment thereof. The property and equipment
owned or otherwise contracted for by the Company or any Subsidiary is in a state
of good maintenance and repair (ordinary wear and tear excepted) and is adequate
and suitable for the purposes for which they are presently being used.
SECTION 3.7 REAL PROPERTY.
-------------
3.7.1 Owned Real Property. Neither the Company nor any Subsidiary owns any
-------------------
real property (including ground leases) or holds any option or right of first
refusal or first offer to acquire any real property, and neither the Company nor
any Subsidiary is obligated by contract or otherwise to purchase any real
property.
3.7.2 Leased Real Property. SCHEDULE 3.7.2 contains an accurate and
--------------------
complete list of all real property leases, subleases, licenses and other
occupancy agreements, including without limitation, any modification, amendment
or supplement thereto and any other related document or agreement executed or
entered into by the Company or any Subsidiary (each individually, a "REAL
PROPERTY LEASE" and collectively, the "REAL PROPERTY LEASES") to which the
Company or any Subsidiary is a party (including, without limitation, any Real
Property Leases which the Company or any Subsidiary has subleased or assigned to
another Person and as to which the Company or any Subsidiary remains liable).
Each Real Property Lease set forth on SCHEDULE 3.7.2 (or required to be set
forth on SCHEDULE 3.7.2): (a) is valid, binding and in full force and effect;
(b) all rents and additional rents and other sums, expenses and charges due to
date have been paid thereon; (c) the lessee has been in peaceable possession
since the commencement of the original term thereof; (d) no waiver, indulgence
or postponement of the lessee's obligations thereunder has been granted by the
lessor; (e) there exists no default or event of default by the
5
<PAGE>
Company or any Subsidiary or to the knowledge of the Stockholder, by any other
party thereto; (f) there exists no occurrence, condition or act (including the
purchase of the Purchased Shares hereunder) which, with the giving of notice,
the lapse of time or the happening of any further event or condition, would
become a default or event of default by the Company or any Subsidiary
thereunder; and (g) there are no outstanding claims of breach or indemnification
or notice of default or termination thereunder. The Company and its Subsidiaries
hold the leasehold estate on all Real Property Leases free and clear of all
Liens, except the liens of any mortgagee of the real property in which such
leasehold estate is located.
SECTION 3.8 CONTRACTS. SCHEDULE 3.8 hereto contains an accurate and
---------
complete list of the following agreements, contracts and commitments to which
the Company or any Subsidiary is a party: (a) any agreement, contract or
commitment, other than employment agreements, which involves SEK 500,000 or
which is for a term of longer than one year and is not cancelable by the Company
or any Subsidiary without financial or other obligation within 90 days; (b) any
agreement, contract or commitment relating to the making of a loan or advance to
or investment in, any other Person; (c) any agreement, instrument or arrangement
evidencing or relating in any way to indebtedness for money borrowed or to be
borrowed, whether directly or indirectly, by way of loan, purchase money
obligation, guarantee (other than the endorsement of negotiable instruments for
collection in the ordinary course of business), conditional sale, purchase or
otherwise; (d) any agreement, contract or commitment limiting the Company's or
any Subsidiary's freedom to engage in any line of business or to compete with
any other Person, including agreements limiting the ability of the Company, any
Subsidiary or any of their respective affiliates (as defined in Section 10.6
below) to service competitive accounts during or after the term thereof; (e) any
collective bargaining or union agreement; (f) any agreement, contract or
commitment with any of its officers or directors or any stockholder of the
Company or any of its Subsidiaries (including indemnification agreements); (g)
any secrecy or confidentiality agreement (other than standard confidentiality
agreements in computer software license agreements or agreements with clients
entered into in the ordinary course of business); (h) any agreement with respect
to any Intellectual Property of the Company or any Subsidiary (as defined in
Section 3.14 below) other than "shrink-wrap" and similar end-user licenses; (i)
any agreement with a client required to be listed on SCHEDULE 3.16; (j) any
agreement, indenture or other instrument which contains restrictions with
respect to the payment of dividends or other distributions in respect of the
Shares; and (k) any joint venture agreement involving a sharing of profits not
covered by clauses (a) through (j) above. Notwithstanding the foregoing, (x)
commitments to media and production expenses which are fully reimbursable from
clients, and (y) estimates or purchase orders given in the ordinary course of
business relating to the execution of projects, do not have to be set forth on
SCHEDULE 3.8. Each agreement, contract and commitment of the Company and its
Subsidiaries, including without limitation, those required to be set forth on
SCHEDULE 3.8, is in full force and effect, and there exists no default or event
of default by the Company or any Subsidiary or to the knowledge of the
Stockholder, by any other party, or occurrence, condition, or act (including the
purchase of the Purchased Shares hereunder) which, with the giving of notice,
the lapse of time or the happening of any other event or condition, would become
a default or event of default thereunder by the Company or any Subsidiary, and
there are no outstanding claims of breach or indemnification or notice of
default or termination of any such agreement, contract and commitment.
6
<PAGE>
SECTION 3.9 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
-----------------------------------------
3.9.1 Non-Contravention. The execution, delivery and performance by the
-----------------
Stockholder of its obligations hereunder and the consummation of the
transactions contemplated hereby, will not (a) violate, conflict with or result
in the breach of any provision of the Articles of Association of the Company or
the Stockholder, any charter documents of any Subsidiary or any resolution
adopted by the stockholders or board of directors of the Company, any Subsidiary
or the Stockholder, (b) result in the violation by the Stockholder, the Company
or any Subsidiary of any statute, law, rule, regulation or ordinance
(collectively, "LAWS"), or any judgment, decree, order, writ, permit or license
(collectively, "ORDERS"), of any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of Sweden, any foreign country or
any domestic or foreign state, county, city or other political subdivision (a
"GOVERNMENTAL OR REGULATORY AUTHORITY"), applicable to the Stockholder, the
Company or any Subsidiary or any of their respective assets or properties, or
(c) conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, or require the
Stockholder, the Company or any Subsidiary to obtain any consent, approval or
action of, make any filing with or give any notice to, or result in or give to
any Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien upon any of the assets or properties of the Stockholder, the Company or any
Subsidiary, under any of the terms, conditions or provisions of any note, bond,
mortgage, security agreement, indenture, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind
(collectively, "INSTRUMENTS"), to which the Stockholder, the Company or any
Subsidiary is a party or by which the Stockholder, the Company or any Subsidiary
or any of their respective assets or properties are bound.
3.9.2 Approvals and Consents. No consent, approval or action of, filing
----------------------
with or notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms, conditions
or provisions of any Law or Order of any Governmental or Regulatory Authority or
any Instrument to which the Stockholder, the Company or any Subsidiary is a
party or by which their respective assets or properties are bound for the
execution and delivery of this Agreement by the Stockholder, the performance by
the Stockholder of its obligations hereunder or the consummation of the
transactions contemplated hereby.
SECTION 3.10 LITIGATION. There is no action, suit, proceeding at law or in
----------
equity by any Person, or any arbitration or any administrative or other
proceeding by or before (or to the knowledge of the Stockholder, any
investigation by) any Governmental or Regulatory Authority, pending or, to the
knowledge of the Stockholder, threatened, against the Company or any Subsidiary
with respect to this Agreement or the transactions contemplated hereby, or
against or affecting the Company or any Subsidiary or their properties or
rights; and no acts, facts, circumstances, events or conditions occurred or
exist which are a basis for any such action, proceeding or investigation.
Neither the Company nor any Subsidiary is subject to any Order entered in any
lawsuit or proceeding.
7
<PAGE>
SECTION 3.11 TAXES. The Company and its Subsidiaries have filed, or
-----
caused to be filed within the times and within the manner prescribed by law, all
tax or information returns and tax reports required under all applicable
statutes, rules or regulations to be filed by the Company and its Subsidiaries
with respect to income, franchise, capital stock, employees' income withholding,
withholding on payments to foreign persons, social security, unemployment,
disability, real property, personal property, custom duties, sales, use, goods
and services, excise, transfer and other taxes (including but not limited to
interest, penalties or additions to tax in respect of the foregoing) whether
disputed or not (all of the foregoing collectively referred to as "TAXES"). All
Taxes shown on said returns to be due and all additional assessments received
prior to the date hereof have been paid. The amounts set up as accruals for
Taxes on the financial statements of the Company or any of its Subsidiaries
referred to in Section 3.4 hereof are sufficient for the payment of all accrued
and unpaid Taxes of the Company and its Subsidiaries whether or not disputed,
for all periods ended on and prior to the respective dates thereof. Neither the
Company nor any Subsidiary has received notice of any proposed audit or
reassessment from any taxing authorities and no examination by the appropriate
taxing authority of any return of the Company or any Subsidiary is currently in
progress. No deficiency in the payment of Taxes by the Company or any Subsidiary
for any period has been asserted in writing by any taxing authority and remains
unsettled at the date of this Agreement. There are no outstanding agreements or
waivers extending the statutory period of limitation for assessment applicable
to any tax return of the Company or any Subsidiary.
SECTION 3.12 LIABILITIES. Except as set forth in the Balance Sheet,
-----------
neither the Company nor any Subsidiary has any outstanding claims, liabilities
or indebtedness of any nature whatsoever (collectively in this Section 3.12,
"LIABILITIES"), whether accrued, absolute or contingent, determined or
undetermined, asserted or unasserted, and whether due or to become due, other
than: (a) Liabilities specifically disclosed in any Schedule hereto; (b)
Liabilities under contracts, purchase orders and other agreements, leases,
licenses, arrangements and commitments of the type required to be disclosed by
the Stockholder on any Schedule and so disclosed or which because of the dollar
amount or other qualifications are not required to be listed on such Schedule;
and (c) Liabilities incurred in the ordinary course of business and consistent
with past practice since the Balance Sheet Date not involving borrowings by the
Company or any Subsidiary.
SECTION 3.13 INSURANCE. All insurance policies (including life insurance)
---------
or binders maintained by the Company or any Subsidiary are in full force and
effect and all premiums that have become due have been currently paid. None of
such policies shall lapse or terminate by reason of the transactions
contemplated hereby. Neither the Company nor any Subsidiary has received any
notice of cancellation or non-renewal of any such policy or binder. Within the
last two years neither the Company nor any Subsidiary has filed for any claims
exceeding SEK 200,000 against any of its insurance policies, exclusive of
automobile policies.
SECTION 3.14 INTELLECTUAL PROPERTIES.
-----------------------
8
<PAGE>
3.14.1 Definitions. For purposes of this Agreement, the following terms
-----------
have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
---------------------
rights associated therewith: (a) all domestic and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions,
continuations and continuations-in-part thereof; (b) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, rights of privacy and publicity, and all documentation relating to any of
the foregoing; (c) all copyrights, copyright registrations and applications
therefor (if registered outside of Sweden), and all other rights corresponding
thereto throughout the world; (d) all mask works, mask work registrations and
applications therefor; (e) all industrial designs/patterns and any registrations
and applications therefor; (f) all trade names, business names, logos,
registered and unregistered trademarks and service marks; trademark and service
mark registrations and applications therefor and all goodwill associated
therewith; and (g) all computer software including all source code, object code,
firmware, development tools, files, records and data, all media on which any of
the foregoing is recorded, and all documentation related to any of the
foregoing.
"INTELLECTUAL PROPERTY OF THE COMPANY" shall mean any Intellectual
------------------------------------
Property that: (a) is owned by or exclusively licensed to the Company or any
Subsidiary, or (b) which is necessary to the operation of the Company or any
Subsidiary, including the design, manufacture and use of the products of the
Company or any Subsidiary as it currently is operated or is reasonably
anticipated to be operated in the future, but shall specifically not include any
rights in or to materials created for clients as "work-made-for-hire" or which
are subject to an exclusive assignment or license in favor of clients of the
Company or any Subsidiary.
3.14.2 Representations. All registered Intellectual Property is listed on
---------------
SCHEDULE 3.14. Except as set forth on SCHEDULE 3.14, all registrations with
respect to such Intellectual Property are valid and subsisting, all necessary
registration and renewal fees in connection with such registrations have been
made and all necessary documents and certificates in connection with such
registrations have been filed with the relevant patent, copyright and trademark
authorities in Sweden (except for copyright) or other jurisdiction for the
purposes of maintaining such Intellectual Property registrations. Except as set
forth in SCHEDULE 3.14, (a) no Person has any rights to use any of the
Intellectual Property of the Company or any of its Subsidiaries; and (b) neither
the Company nor any Subsidiary has granted to any Person, or authorized any
Person to retain, any rights in the Intellectual Property of the Company or any
of its Subsidiaries. Except as set forth on SCHEDULE 3.14 and for "shrink wrap"
and similar commercial end-user licenses, the Company or one if its Subsidiaries
owns and has good and exclusive title to each item of Intellectual Property of
the Company or any of its Subsidiaries, free and clear of any Lien and the
Company or one if its Subsidiaries owns, or has the right, pursuant to a valid
contract to use or operate under, all other Intellectual Property of the Company
and any of its Subsidiaries. To the knowledge of the Stockholder, the operation
of the business of the Company and its Subsidiaries as it currently is conducted
does not infringe the Intellectual Property of any other Person, and neither the
Company nor any Subsidiary has received notice from any Person that the
operation of its business infringes the Intellectual Property of any Person.
There are no contracts, licenses
9
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and agreements between the Company or one of its Subsidiaries and any other
Person with respect to the Intellectual Property of the Company or any of its
Subsidiaries in respect of which there is any dispute known to the Company or
one if its Subsidiaries regarding the scope of such agreement, or performance
under such agreement, including with respect to any payments to be made or
received by the Company or any Subsidiary. To the knowledge of the Stockholder,
no Person is infringing, misappropriating or opposing any of the Intellectual
Property of the Company or its Subsidiaries.
SECTION 3.15 COMPLIANCE WITH LAWS; LICENSES AND PERMITS.
------------------------------------------
3.15.1 Compliance. The Company and each of its Subsidiaries are, and their
----------
businesses have been conducted, in compliance with all applicable Laws and
Orders, except in each case (other than with respect to compliance with Laws and
Orders relating to the regulation or protection of the environment, hereinafter
referred to as "ENVIRONMENTAL LAWS AND ORDERS") where the failure to so comply
would not reasonably be expected to have a Material Adverse Effect (as defined
below), including without limitation: (a) all Laws and Orders promulgated by any
Governmental or Regulatory Authority; (b) all Environmental Laws and Orders; and
(c) all Laws and Orders relating to labor, civil rights, and occupational safety
and health laws, worker's compensation, employment and wages, hours and
vacations, or pay equity. Neither the Company nor any Subsidiary has been
charged with, or, to the knowledge of the Stockholder, threatened with or under
any investigation with respect to, any charge concerning any violation of any
Laws or Orders. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" shall
mean any material and adverse effect on the condition (financial or otherwise),
liabilities, results of operations, assets, properties, prospects or business of
the Company and its Subsidiaries taken as a whole.
3.15.2 Licenses. The Company and its Subsidiaries have all licenses,
--------
permits and other governmental certificates, authorizations and approvals
(collectively, "LICENSES") required by any Governmental or Regulatory Authority
for the operation of its business and the use of its properties as presently
operated or used, except where the failure to have such Licenses would not
reasonably be expected to have a Material Adverse Effect. All of the Licenses
are in full force and effect and no action or claim is pending, nor to the
knowledge of the Stockholder is threatened, to revoke or terminate any of such
Licenses or declare any such License invalid in any material respect.
SECTION 3.16 CLIENT RELATIONS. Schedule 3.16 sets forth for the Company
----------------
and its Subsidiaries taken as a whole the 10 largest clients (measured by
revenues) for the thirteen months ended September 30, 1998 and the revenues from
each such client and from all clients (in the aggregate) for the twelve months
ended December 31, 1997. No client of the Company or any Subsidiary has advised
the Company, any Subsidiary or the Stockholder in writing that it is (a)
terminating or considering terminating the handling of its business by the
Company or any Subsidiary as a whole or in respect of any particular product,
project or service, or (b) planning to reduce its future spending with the
Company or any Subsidiary in any material manner; and to the knowledge of the
Stockholder, no client has orally advised the Company, any Subsidiary or the
Stockholder of any of the foregoing events.
10
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SECTION 3.17 ACCOUNTS RECEIVABLE; WORK-IN-PROCESS; ACCOUNTS PAYABLE. The
------------------------------------------------------
amount of all work-in-process, accounts receivable, unbilled invoices (including
without limitation unbilled invoices for services and out-of-pocket expenses)
and other debts due or recorded in the records and books of account of the
Company and the Subsidiaries as being due to the Company or any Subsidiary and
reflected on the Balance Sheet represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business and will be good and collectible in full (less the amount of
any provision, reserve or similar adjustment therefor reflected on the Balance
Sheet) in the ordinary course of business. There has been no material adverse
change since the Balance Sheet Date in the amount or aging of the work-in-
process, accounts receivable, unbilled invoices, or other debts due to the
Company or any Subsidiary, or the reserves with respect thereto, or accounts
payable of the Company and its Subsidiaries taken as a whole.
SECTION 3.18 EMPLOYMENT RELATIONS. (a) Neither the Company nor any
--------------------
Subsidiary is engaged in any unfair labor practice; (b) no unfair labor practice
complaint against the Company or any Subsidiary is pending before any
Governmental or Regulatory Authority; (c) there is no organized labor strike,
dispute, slowdown or stoppage actually pending or, to the knowledge of the
Stockholder, threatened against or involving the Company or any Subsidiary; (d)
no claim or grievance nor any arbitration proceeding arising out of or under any
collective bargaining agreement is pending and, to the knowledge of the
Stockholder, no such claim or grievance has been threatened; (e) neither the
Company nor any Subsidiary has any collective bargaining agreements nor is any
collective bargaining agreement currently being negotiated by the Company nor
any Subsidiary; and (f) neither the Company nor any Subsidiary has experienced
any work stoppage or similar organized labor dispute during the last three
years. There is no legal action, suit, proceeding or claim pending or, to the
knowledge of the Stockholder, threatened between the Company or any Subsidiary
and any of their employees, former employees, agents, former agents, job
applicants or any association or group of any of their employees.
SECTION 3.19 EMPLOYEE BENEFIT MATTERS. Set forth separately in Schedule
------------------------
3.19 is an accurate and complete list of all plans, contracts and agreements,
oral or written, including pension, profit sharing and other employee benefit
plans or agreements whereunder the Company or any Subsidiary has any obligations
(other than obligations to make current wage or salary payments terminable on
notice of 30 days or less or such greater period of notice required by law) to
its officers and employees or their beneficiaries, or whereunder any of such
persons owes money to the Company or any Subsidiary ("Plans"). All liabilities
under any pension, deferred compensation, profit sharing or employee benefit
plan of the Company or any Subsidiary were, as of the Balance Sheet Date, fully
funded or adequate therefore made on the Balance Sheet.
SECTION 3.20 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as set forth
--------------------------------------
on Schedule 3.20, (x) neither the Stockholder nor any Person controlled by the
Stockholder nor (y) to the knowledge of the Stockholder (without making any
inquiry of any member of the Related Group, as hereinafter defined), any
officer, director, or employee of the Company or any Subsidiary, any parent,
brother, sister, child or spouse of any such officer, director or employee
(collectively, the "Related Group"), or any entity controlled by anyone in the
Related Group:
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(i) with respect to officers and directors of the Stockholder and
the Company only, owns, directly or indirectly, any interest in
(excepting for ownership, directly or indirectly of less than 1/4 of
1% of the issued and outstanding shares of any class of securities of
a publicly held and traded company), or received or has any right to
receive payments from, or is an officer, director, employee or
consultant of, any Person which is, or is engaged in business as, a
competitor, lessor, lessee, supplier, distributor, sales agent,
customer or client of the Company or any Subsidiary;
(ii) owns, directly or indirectly (other than through the ownership
of Shares), in whole or in part, any tangible or intangible property
(including, but not limited to Intellectual Property), that the
Company or any Subsidiary uses in the conduct of the business of the
Company or any Subsidiary, other than immaterial personal items owned
and used by employees at their work stations; or
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, the Company or any Subsidiary, except for claims
in the ordinary course of business such as for accrued vacation pay,
accrued benefits under employee benefit plans, and similar matters and
agreements existing on the date hereof.
SECTION 3.21 Bank Accounts and Powers of Attorney. Set forth in
------------------------------------
Schedule 3.21 is an accurate and complete list showing (a) the name of each bank
in which the Company or any Subsidiary has an account, credit line or safe
deposit box and the names of all Persons authorized to draw thereon or to have
access thereto, and (b) the names of all Persons, if any, holding powers of
attorney from the Company or any Subsidiary.
SECTION 3.22 Compensation of Employees. Schedule 3.22 is an accurate and
-------------------------
complete list showing: the names and positions of all employees and exclusive
consultants who are currently being compensated by the Company or any Subsidiary
with a salary or at an annualized rate of SEK 600,000 or more, together with a
statement of the current annual salary, and the material fringe benefits of such
employees and exclusive consultants not generally available to all employees of
the Company or its Subsidiaries. Neither the Company nor any Subsidiary has,
because of past practices or previous commitments with respect to its employees,
established any rights on the part of any of its employees to additional
compensation with respect to any period after the Closing Date (other than wage
increases in the ordinary course of business).
SECTION 3.23 No Changes Since the Balance Sheet Date. Since the Balance
---------------------------------------
Sheet Date except as specifically stated on Schedule 3.23, neither the Company
nor any Subsidiary has: (a) incurred any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise), except in the ordinary
course of business; (b) permitted any of its assets to be subjected to any Lien;
(c) sold, transferred or otherwise disposed of any assets except in the ordinary
course of business; (d) made any capital expenditure or commitment therefor
which individually or in the aggregate exceeded SEK 200,000; (e) decided to make
or made any dividends or any distributions on any shares of its capital stock,
or redeemed, purchased or
12
<PAGE>
otherwise acquired any shares of its capital stock or any option, warrant or
other right to purchase or acquire any shares of its capital stock; (f) made any
bonus or profit sharing distribution; (g) increased or prepaid its indebtedness
for borrowed money, except current borrowings under credit lines listed on
Schedule 3.8, or made any loan to any Person other than to any employee for
normal travel and expense advances; (h) written down the value of any work-in-
process, or written off as uncollectible any notes or accounts receivable,
except write-downs and write-offs in the ordinary course of business, none of
which individually or in the aggregate, is material to the Company and its
Subsidiaries taken as a whole; (i) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any employee who, whether as a result
of such increase or prior thereto, receives aggregate compensation from the
Company or any Subsidiary with a salary of SEK 600,000 or more, or except in the
ordinary course of business to any other employees; (j) canceled or waived any
claims or rights of material value; (k) made any change in any method of
accounting procedures; (l) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner and in the ordinary course
of its business; (m) amended or terminated any agreement which is material to
its business; (n) renewed, extended or modified any Real Property Lease or
except in the ordinary course of business, any lease of personal property; (o)
adopted, amended or terminated any Plan; or (p) agreed, whether or not in
writing, to do any of the actions set forth in any of the above clauses.
SECTION 3.24 CORPORATE CONTROLS. Neither the Stockholder, nor, to the
------------------
knowledge of the Stockholder, any officer, authorized agent, employee or any
other Person while acting on behalf of the Company or any Subsidiary, has,
directly or indirectly: used any corporate fund for unlawful contributions,
gifts, or other unlawful expenses relating to political activity; made any
unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from corporate funds;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any false or fictitious entry on its books or records; made
any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment, or other payment of a similar or comparable nature, to any Person or
entity, private or public, regardless of form, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained, and neither the Company nor any
Subsidiary has participated in any illegal boycott or other similar illegal
practices affecting any of its actual or potential customers.
SECTION 3.25 BROKERS. No broker, finder, agent or similar intermediary
-------
has acted on behalf of the Stockholder, the Company or any Subsidiary in
connection with this Agreement or the transactions contemplated hereby, and no
brokerage commissions, finder's fees or similar fees or commissions are payable
by the Company, any Subsidiary or the Stockholder in connection therewith based
on any agreement, arrangement or understanding with any of them.
SECTION 3.26 DISCLOSURE. To the knowledge of the Stockholder, no
----------
representation or warranty of the Stockholder contained in this Agreement, and
no statement contained in any Schedule or in any certificate, list or other
writing furnished by the Stockholder to the Purchaser pursuant to any provision
of this Agreement (including without limitation any financial statements),
contains any untrue statement of a material fact or omits to state a material
fact
13
<PAGE>
necessary in order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
--------------------------------
The Purchaser, represents, warrants and agrees to and with the Stockholder,
as follows:
SECTION 4.1 EXISTENCE AND GOOD STANDING. The Purchaser is a corporation
---------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to own its property
and to carry on its business all as and in the places where such properties are
now owned or operated or such business is now being conducted.
SECTION 4.2 EXECUTION AND VALIDITY OF AGREEMENT. The Purchaser has the
-----------------------------------
full corporate power and authority to make, execute, deliver and perform this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby have been duly authorized by all required corporate action
on behalf of the Purchaser. This Agreement has been duly and validly executed
and delivered by the Purchaser and assuming due execution and delivery by the
Stockholder, constitutes a legal, valid and binding obligation of the Purchaser,
enforceable against it in accordance with its terms.
SECTION 4.3 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
4.3.1 Non-Contravention. The execution, delivery and performance by the
-----------------
Purchaser of its obligations hereunder and the consummation of the transactions
contemplated hereby, will not: (a) violate, conflict with or result in the
breach of any provision of the Certificate of Incorporation or By-Laws of the
Purchaser; (b) result in the violation by the Purchaser of any Laws or Orders of
any Governmental or Regulatory Authority applicable to the Purchaser or any of
its assets or properties; or (c) conflict with, result in a violation or breach
of, constitute (with or without notice or lapse of time or both) a default
under, or require the Purchaser to obtain any consent, approval or action of,
make any filing with or give any notice to, or result in or give to any Person
any right of payment or reimbursement, termination, cancellation, modification
or acceleration of, or result in the creation or imposition of any Lien upon any
of the assets or properties of the Purchaser, under any of the terms, conditions
or provisions of any Instruments to which the Purchaser is a party or by which
the Purchaser or any of its assets or properties are bound.
4.3.2 Approvals and Consents. No consent, approval or action of, filing
----------------------
with or notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms, conditions
or provisions of any Law or Order of any Governmental or Regulatory Authority or
any Instrument to which the Purchaser is a party or by which the Purchaser or
any of its assets or properties is bound for the execution and delivery of
14
<PAGE>
this Agreement by the Purchaser, the performance by the Purchaser of its
obligations hereunder or the consummation of the transactions contemplated
hereby.
SECTION 4.4 BROKERS. No broker, finder, agent or similar intermediary has
-------
acted on behalf of the Purchaser or any of its affiliates in connection with
this Agreement or the transactions contemplated hereby, and no brokerage
commissions, finders' fees or similar fees or commissions are payable by the
Purchaser or any of its affiliates in connection therewith based on any
agreement, arrangement or understanding with any of them.
SECTION 4.5 DISCLOSURE. No representation or warranty of the Purchaser
----------
contained in this Agreement, and no statement contained in any Schedule or in
any certificate, list or other writing furnished by the Purchaser to the
Stockholder pursuant to any provision of this Agreement, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE V
MUTUAL COVENANTS
----------------
SECTION 5.1 BEST EFFORTS. The Purchaser and the Stockholder shall
------------
cooperate in good faith and use their respective reasonable best efforts to
close and make effective the transactions contemplated hereby as expeditiously
as possible, including using their respective reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated hereby, executing and delivering such other documents,
certificates, agreements and other writings and taking such other actions as may
be reasonably necessary or desirable in order to consummate and make effective
the transactions contemplated hereby as soon as possible. Each of the Purchaser
and the Stockholder shall use its best efforts prior to the Closing not to take
any action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
SECTION 5.2 CONDUCT OF BUSINESS PENDING THE CLOSING. From and after the
---------------------------------------
Effective Date through and including the Closing Date, unless the Purchaser and
the Stockholder shall otherwise agree in writing, or as otherwise expressly
contemplated by this Agreement, the Stockholder shall cause the Company and its
Subsidiaries to conduct their businesses, only in the ordinary and usual course
consistent with past practice, and the Stockholder shall cause the Company and
its Subsidiaries to use their best efforts to maintain their respective assets
in substantially their current state of repair, preserve intact their present
business organization, keep available the services of their present officers and
key employees, and preserve their existing business relationships and goodwill
with customers, suppliers, independent contractors, employees and other Persons
material to the operation of their businesses. Without limiting the generality
of the foregoing, prior to the Closing, the Stockholder shall not permit the
Company or any of its Subsidiaries to:
15
<PAGE>
(i) (A) amend its memorandum of association, articles of
association, articles of incorporation, by-laws or other
organizational documents, (B) split, combine or reclassify any shares
of its outstanding capital stock, (C) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property, or
(D) directly or indirectly redeem or otherwise acquire any shares of
its capital stock;
(ii) authorize for issuance, issue or sell, deliver or agree to
issue or sell any shares of, or rights to acquire or convertible into
any shares of, its capital stock (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise), or amend
any of the terms of any such capital stock;
(iii) (A) merge, combine or consolidate with another entity, (B)
acquire or purchase an equity interest in or a substantial portion of
the assets of another corporation, partnership or other business
organization or otherwise acquire any assets outside the ordinary
course of business and consistent with past practice or otherwise
enter into any material contract, commitment or transaction outside
the ordinary course of business and consistent with past practice or
(C) sell, lease, license, waive, release, transfer, encumber or
otherwise dispose of any of its material assets outside the ordinary
course of business and consistent with past practice;
(iv) (A) incur, assume or prepay any indebtedness or any other
liabilities in excess of SEK 784,000 individually, or in excess of SEK
3,920,000 in the aggregate (other than trade payables), (B) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person or (C) make any loans, gifts, advances or capital contributions
to, or investments in, any other Person;
(v) pay, satisfy, discharge or settle any claim, liabilities or
obligations (absolute, accrued, contingent or otherwise) against the
Company or any of its Subsidiaries, or any of their directors,
officers, employees or agents in excess of SEK 784,000 individually,
or in excess of SEK 3,920,000 in the aggregate;
(vi) modify or amend, or waive any benefit of, any non-
competition agreement to which the Company or any of its Subsidiaries
is a party; (vii) authorize or make capital expenditures in excess of
SEK 784,000 individually, or in excess of SEK 3,920,000 in the
aggregate;
(viii) permit any insurance policy naming the Company or any of its
Subsidiaries as a beneficiary or a loss payee to be canceled or
terminated other than in the ordinary course of business;
(ix) (A) adopt, enter into, terminate or amend in any material
respect any plan, trust, fund, agreement or other arrangement for the
current or future benefit or
16
<PAGE>
welfare of any director, officer or employee, (B) except in the
ordinary course of business, increase in any manner the compensation
or fringe benefits of, or pay any bonus to, any director, officer or
employee or (C) take any action to fund or in any other way secure, or
to accelerate or otherwise remove restrictions with respect to, the
payment of compensation or benefits under any employee plan,
agreement, contract, arrangement other than in the ordinary course of
business;
(x) take any action that would fail to preserve and protect the
Intellectual Property of the Company;
(xi) make any material change in its accounting or tax policies
or procedures;
(xii) make any Tax elections or settle or compromise any Tax
liability or waive or extend the statute of limitations in respect of
any such Taxes;
(xiii) make any payments to or authorize any transaction with any
Affiliate, except in the ordinary course of business;
(xiv) take any action, or enter into or authorize any contract or
transaction, other than in the ordinary course of business;
(xv) waive, release or cancel any claims against third parties or
debts owing to it, or any rights which have any value;
(xvi) terminate, modify, amend or otherwise alter or change any of
the terms or provisions of any contract listed on SCHEDULE 3.8 in any
material respect; or
(xvii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
SECTION 5.3 ACCESS TO INFORMATION. The Stockholder shall cause the
---------------------
Company to afford and to cause its officers, directors, employees, auditors and
agents to afford, to the Purchaser and to its officers, employees, financial
advisors, legal counsel, accountants, consultants and other representatives
unrestricted access during normal business hours throughout the period prior to
the Closing to all of its books and records and its properties, plants,
technology rights and personnel and information with respect to current
customers, prospects and any third parties which may claim a proprietary right
to their property (including telephone interviews and site visits). The
Stockholder shall cause the Company to make the officers and employees of the
Company available to the Purchaser and its representatives as the Purchaser and
its representatives shall from time to time reasonably request.
SECTION 5.4 NOTICES OF CERTAIN EVENTS. Until the Closing or the
-------------------------
termination of this Agreement, each of the Purchaser and the Stockholder shall
promptly notify the other of (i) any notice or other communication from any
Governmental or Regulatory Authority in connection with the transactions
contemplated hereby, and (ii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of their respective knowledge, threatened
against such
17
<PAGE>
party relating to the consummation of the transactions contemplated hereby.
Until the Closing, each of the Purchaser and the Stockholder will promptly
disclose in writing to the other party any matter hereafter arising which, if
existing, occurring or known at the date of this Agreement would have been
required to be disclosed to such other party or which would render inaccurate
any of the representations, warranties or statements set forth herein. No
information provided to a party pursuant to this Section shall be deemed to cure
any breach of any representation, warranty or covenant made in this Agreement.
SECTION 5.5 NO SOLICITATION. From the date hereof until the Closing,
---------------
neither the Stockholder nor its Subsidiaries or affiliates, nor any of the
respective directors, officers, employees, agents or representatives of the
foregoing, will, directly or indirectly, (a) solicit, initiate (including by way
of furnishing or disclosing non-public information), encourage or respond
favorably to any inquiries or the making of any proposal with respect to any
merger, change of control, consolidation or other business combination involving
the Company or any of its Subsidiaries or the acquisition of all or any
significant part of the assets or capital stock of the Company or any of its
Subsidiaries (an "ACQUISITION TRANSACTION") or (b) negotiate, explore or
otherwise engage in discussions with any Person (other than the Purchaser and
Razorfish, Inc. and their representatives) with respect to any Acquisition
Transaction, or which may reasonably be expected to lead to a proposal for an
Acquisition Transaction or enter into any agreement, arrangement or
understanding with respect to any such Acquisition Transaction or which would
require such Person to abandon, terminate or fail to consummate the transactions
contemplated by this Agreement.
SECTION 5.6 Waiver of Lien on Purchased Shares. The Purchaser
----------------------------------
acknowledges and agrees to waive any inability of the Stockholder to state that
the Stockholder's representations and warranties are true and correct as of the
Closing Date solely with respect to the Lien on the Purchased Shares resulting
from a Pledge Agreement by and between the Stockholder and Omnicom Finance Inc.
provided that there are no other Liens with respect to the Purchased Shares.
SECTION 5.7 Fulfillment of Conditions. Each of the Stockholder and the
-------------------------
Purchaser will (a) execute and deliver at the Closing each agreement that either
of them is required hereby to execute and deliver as a condition to the Closing,
(b) proceed diligently and in good faith and use best efforts to satisfy each
other condition to the obligations of the Stockholder or the Purchaser, as the
case may be, contained in this Agreement and (c) not take or fail to take any
action that reasonably could be expected to result in the nonfulfillment of any
such condition.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
------------------------------------------
The obligations of the Purchaser hereunder to purchase the Purchased Shares
on the Closing Date are subject to the fulfillment, at or before the Closing, of
each of the following conditions, all or any of which may be waived in whole or
in part by the Purchaser, in its sole discretion:
18
<PAGE>
SECTION 6.1 Representations and Warranties. The representations and
------------------------------
warranties made by the Stockholder in this Agreement, or in any Schedule
delivered pursuant hereto, shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date or, in the case of representations and warranties made as
of a specified date earlier than the Closing Date, on and as of such earlier
date, and the Company shall have delivered to the Purchaser a certificate
substantially in the form of Exhibit A hereto, dated the Closing Date, to such
effect.
SECTION 6.2 PERFORMANCE. The Stockholder shall or shall have caused the
-----------
Company to have performed and complied with the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
the Stockholder at or before the Closing, and the Stockholder shall have
delivered to the Purchaser a certificate substantially in the form of EXHIBIT A
hereto, dated the Closing Date, to such effect.
SECTION 6.3 CERTIFIED RESOLUTIONS. The Stockholder shall have delivered
---------------------
to the Purchaser copies of resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, certified to by at least two members of the Board of
Directors of the Stockholder.
SECTION 6.4 CERTIFIED CHARTER DOCUMENTS. The Stockholder shall have
----------------------------
delivered to the Purchaser a copy of the Company's Articles of Association,
including all amendments, certified by the Swedish Company Register (PRV).
SECTION 6.5 SURRENDER AND ISSUANCE OF CERTIFICATES. The Stockholder
--------------------------------------
shall have delivered to the Purchaser certificates representing the Purchased
Shares, duly endorsed, together with such other documents and instruments, if
any, as may be necessary to permit the Purchaser to acquire the Purchased
Shares, free and clear of any and all Liens or voting or other restrictions of
any kind whatsoever adverse to the Purchaser.
SECTION 6.6 NO INJUNCTIONS OR RESTRAINTS. There shall not be pending any
----------------------------
litigation, proceeding, investigation, arbitration or claim by any Person or
Governmental or Regulatory Authority or the existence of any injunction or Order
(whether temporary, preliminary or permanent) then in effect, and which in any
case has or could reasonably have the effect of making illegal or otherwise
restricting, preventing or prohibiting consummation of the purchase and sale of
the Purchased Shares or the other transactions contemplated by this Agreement.
SECTION 6.7 SIMULTANEOUS CLOSINGS. All of the closing conditions and
---------------------
deliveries pursuant to the Subscription and Exchange Agreement shall have been
satisfied or waived.
SECTION 6.8 STOCKHOLDERS AGREEMENT. The Stockholder, Dachis, Kanarick
----------------------
and Razorfish shall have executed and delivered the Stockholders Agreement,
substantially in the form of EXHIBIT C hereto.
SECTION 6.9 PROCEEDINGS. All proceedings to be taken in connection with
-----------
the transactions contemplated by this Agreement and all documents incident
thereto were reasonably satisfactory in form and substance to the Purchaser and
its counsel, and the Purchaser received
19
<PAGE>
copies of all such documents and other evidences as it or its counsel reasonably
requested in order to effectuate the consummation of such transactions and the
taking of all proceedings in connection therewith.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER
--------------------------------------------
The obligations of the Stockholder hereunder to sell the Purchased Shares
are subject to the fulfillment, at or before the Closing, of each of the
following conditions, all or any of which may be waived in whole or in part by
the Stockholder in its sole discretion):
SECTION 7.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties made by the Purchaser in this Agreement, or in any Schedule delivered
pursuant hereto, shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date, or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
and the Purchaser shall have delivered to the Stockholder a certificate
substantially in the form of EXHIBIT B hereto, dated the Closing Date, to such
effect.
SECTION 7.2 GOOD STANDING CERTIFICATES. The Purchaser shall have
--------------------------
delivered to the Stockholder certificates from the Secretary of State of the
States of New York and Delaware to the effect that the Purchaser is in good
standing in New York and Delaware, respectively.
SECTION 7.3 PERFORMANCE. The Purchaser shall have performed and complied
-----------
with the agreements, covenants and obligations required by this Agreement to be
so performed or complied with by the Purchaser at or before the Closing, and the
Purchaser shall have delivered to the Stockholder a certificate, substantially
in the form of EXHIBIT B hereto, dated the Closing Date, to such effect.
SECTION 7.4 CERTIFIED RESOLUTIONS. The Purchaser shall have delivered to
---------------------
the Stockholder a copy of the resolutions of the Board of Directors of the
Purchaser authorizing the execution, delivery and performance of this Agreement
and the transactions and other agreements contemplated hereby, certified to by
an officer of the Purchaser.
SECTION 7.5 NO INJUNCTIONS OR RESTRAINTS. There shall not be pending any
----------------------------
litigation, proceeding, investigation, arbitration or claim by any Person or
Governmental or Regulatory Authority or the existence of any injunction or Order
(whether temporary, preliminary or permanent) then in effect, and which in any
case, has or could reasonably have the effect of making illegal or otherwise
restricting, preventing or prohibiting consummation of the purchase and sale of
the Purchased Shares or the other transactions contemplated by this Agreement.
SECTION 7.6 SIMULTANEOUS CLOSINGS. All of the closing conditions and
---------------------
deliveries pursuant to the Subscription and Exchange Agreement shall have been
satisfied or waived.
20
<PAGE>
SECTION 7.7 STOCKHOLDERS AGREEMENT. The Purchaser, Dachis, Kanarick and
----------------------
Razorfish shall have executed and delivered the Stockholders Agreement,
substantially in the form of EXHIBIT C hereto.
SECTION 7.8 PROCEEDINGS. All proceedings to be taken in connection with
-----------
the transactions contemplated by this Agreement, and all documents incident
thereto were reasonably satisfactory in form and substance to the Stockholder
and its counsel and the Stockholder received copies of all such documents and
other evidences as it or its counsel may reasonably request in order to
establish the consummation of such transaction and the taking of all proceedings
in connection therewith.
ARTICLE VIII
SURVIVAL; INDEMNITY
-------------------
SECTION 8.1 SURVIVAL. Notwithstanding any right of any party hereto
--------
fully to investigate the affairs of any other party, and notwithstanding any
knowledge of facts determined or determinable pursuant to such investigation or
right of investigation, each party hereto shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the other
parties contained in this Agreement and the Schedules, if any, furnished by any
other party pursuant to this Agreement, or in any certificate delivered at the
Closing by any other party. Subject to the limitations set forth in Sections
8.5.2, 8.5.3 and 8.5.5, the respective representations, warranties, covenants
and agreements of the Stockholder and the Purchaser contained in this Agreement
shall survive the Closing.
SECTION 8.2 OBLIGATION OF THE STOCKHOLDER TO INDEMNIFY. Subject to the
------------------------------------------
limitations contained in Sections 8.5.1 and 8.5.2, the Stockholder hereby agrees
to indemnify the Purchaser and its affiliates, shareholders, officers,
directors, employees, agents, representatives and successors, permitted
assignees of the Purchaser and their affiliates (individually a "Purchaser
Indemnified Party" and collectively, the "Purchaser Indemnified Parties")
against, and to protect, save and keep harmless the Purchaser Indemnified
Parties from, and to pay on behalf of or reimburse in United States dollars the
Purchaser Indemnified Parties as and when actually incurred for, any and all
liabilities (including liabilities for Taxes), obligations, losses, damages,
penalties, demands, claims, actions, suits, judgments, settlements, penalties,
interest, out-of-pocket costs, expenses and disbursements (including reasonable
costs of investigation, and reasonable attorneys', accountants' and expert
witnesses' fees) of whatever kind and nature (collectively, "Losses"), that may
be imposed on or incurred by any Purchaser Indemnified Party, the Company or any
Subsidiary (collectively, the "Group") as a consequence of, in connection with,
incident to, resulting from or arising out of or in any way related to or by
virtue of: (a) any misrepresentation, inaccuracy or breach of any warranty or
representation contained in Article III hereof or in any certificate delivered
by the Stockholder at the Closing; (b) any breach or failure by the Stockholder
to comply with, perform or discharge any obligation, agreement or covenant by
the Stockholder contained in this Agreement; and (c) any action, demand,
proceeding, investigation or claim by any third party (including any
Governmental or Regulatory Authority) against or affecting any member of the
Group. The Purchaser Indemnified Parties shall not be
21
<PAGE>
entitled to recover under this Section 8.2 to the extent of any recovery of any
Purchaser Indemnified Party under insurance policies held for the benefit of any
Purchaser Indemnified Party (net of any retrospective premium cost resulting
from such recovery), it being understood that the Purchaser Indemnified Parties
shall in good faith pursue recovery against the insurers with the same degree of
diligence as they use to pursue claims against their insurers generally in the
conduct of their business. The term "Losses" as used herein is not limited to
matters asserted by third parties against the Group but includes Losses incurred
or sustained by the Group in the absence of third party claims. For purpose of
clarification, the parties agree that (i) the Loss to the Purchaser in respect
of a Loss imposed on or incurred by the Company or any member of the Group shall
be equal to 20% of such Loss; (ii) the Loss to a Purchaser Indemnified Party in
respect of a Loss imposed on such Purchaser Indemnified Party shall be equal to
100% of such Loss and (iii) new business opportunities unable to be pursued or
exploited by a Purchaser Indemnified Party as a consequence of the matters set
forth in clauses (a), (b) or (c) of this Section 8.2 shall not be considered a
Loss hereunder.
SECTION 8.3 OBLIGATION OF THE PURCHASER TO INDEMNIFY. Subject to the
----------------------------------------
limitations set forth in Section 8.5.3 hereof, the Purchaser hereby agrees to
indemnify the Stockholder and its affiliates, shareholders, officers, directors,
employees, agents, representatives and successors, permitted assignees of the
Stockholder and their affiliates (individually a "Stockholder Indemnified Party"
and collectively, the "Stockholder Indemnified Parties") against, and to
protect, save and keep harmless the Stockholder Indemnified Parties from and to
pay on behalf of or reimburse in United States dollars the Stockholder
Indemnified Parties as and when actually incurred for any and all Losses that
may be imposed on or incurred by any Stockholder Indemnified Party as a
consequence of, in connection with, incident to, resulting from or arising out
of or in any way related to or by virtue of: (a) any misrepresentation,
inaccuracy or breach of any warranty or representation of the Purchaser
contained in Article IV hereof or in any certificate delivered by the Purchaser
at the Closing; or (b) any breach or failure by the Purchaser to comply with,
perform or discharge any obligation, agreement or covenant by the Purchaser
contained in this Agreement. For purpose of clarification, the parties agree
that new business opportunities unable to be pursued or exploited by a
Stockholder Indemnified Party as a consequence of the matters set forth in
clauses (a) and (b) of this Section 8.3 shall not be considered a Loss
hereunder.
SECTION 8.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. In the
------------------------------------------------
event that any Person entitled to indemnification under this Agreement (an
"Indemnified Party") asserts a claim for indemnification or receives notice of
the assertion of any claim or of the commencement of any action or proceeding by
any Person who is not a party to this Agreement or an affiliate of a party to
this Agreement (a "Third Party Claim") against such Indemnified Party, against
which a party to this Agreement is required to provide indemnification under
this Agreement (an "Indemnifying Party"), the Indemnified Party shall give
written notice together with a statement of any available information (other
than privileged information) regarding such claim to the Indemnifying Party
within 30 days after learning of such claim (or within such shorter time as may
be necessary to give the Indemnifying Party a reasonable opportunity to respond
to such claim). The Indemnifying Party shall have the right, upon written
notice to the Indemnified Party (the "Defense Notice") within 15 days after
receipt from the Indemnified Party
22
<PAGE>
of notice of such claim, which notice by the Indemnifying Party shall specify
the counsel it will appoint to defend such claim ("Defense Counsel"), to conduct
at its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the Indemnified
Party shall have the right to approve the Defense Counsel, which approval shall
not be unreasonably withheld or delayed, and in the event the Indemnifying Party
and the Indemnified Party cannot agree upon such counsel within 10 days after
the Defense Notice is provided, then the Indemnifying Party shall propose an
alternate Defense Counsel, which shall be subject again to the Indemnified
Party's approval which approval shall not be unreasonably withheld or delayed.
If the parties still fail to agree on the Defense Counsel, then, at such time,
they shall mutually agree in good faith on a procedure to determine the Defense
Counsel.
(a) In the event that the Indemnifying Party shall fail to give the
Defense Notice within such 15 day period, it shall be deemed to have
elected not to conduct the defense of the subject claim, and in such
event the Indemnified Party shall have the right to conduct the
defense and to compromise and settle the claim without prior consent
of the Indemnifying Party and the Indemnifying Party will be liable
for all reasonable costs, expenses, settlement amounts or other Losses
paid or incurred in connection therewith.
(b) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim,
the Indemnifying Party shall be entitled to have the exclusive control
over the defense and settlement of the subject claim and the
Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party; the Indemnified
Party shall have the right at its expense to participate in the
defense assisted by counsel of its own choosing. In such an event, the
Indemnifying Party will not settle the subject claim without the prior
written consent of the Indemnified Party, which consent will not be
unreasonably withheld or delayed.
(c) Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third
Party Claim or cease to defend against such claim, if pursuant to or
as a result of such settlement or cessation, (i) injunctive relief or
specific performance would be imposed against the Indemnified Party,
or (ii) such settlement or cessation would lead to liability or create
any financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification
hereunder.
(d) If an Indemnified Party refuses to consent to a bona fide offer
of settlement which provides for a full release of the Indemnified
Party and its affiliates and solely for a monetary payment which the
Indemnifying Party wishes to accept, the Indemnified Party may
continue to pursue such matter, free of any participation by the
Indemnifying Party, at the sole expense of the Indemnified Party. In
such an event, the obligation of the Indemnifying Party shall be
limited to the amount of the offer of settlement which the Indemnified
Party refused to accept plus the costs and expenses of
23
<PAGE>
the Indemnified Party incurred prior to the date the Indemnifying Party
notified the Indemnified Party of the offer of settlement.
(e) Notwithstanding clause (b) above, the Indemnifying Party shall not
be entitled to control, but may participate in, and the Indemnified Party
shall be entitled to have sole control over, the defense or settlement of
any claim (i) that seeks a temporary restraining order, a preliminary or
permanent injunction or specific performance against the Indemnified Party,
(ii) to the extent such claim involves criminal allegations against the
Indemnified Party, (iii) that if unsuccessful, would set a precedent that
would materially interfere with, or have a material adverse effect on, the
business or financial condition of the Indemnified Party or (iv) if such
claim would impose liability on the part of the Indemnified Party for which
the Indemnified Party is not entitled to indemnification hereunder. In such
an event, the Indemnifying Party will still have all of its obligations
hereunder provided that the Indemnified Party will not settle the subject
claim without the prior written consent of the Indemnifying Party, which
consent will not be unreasonably withheld or delayed.
(f) Any final judgment entered or settlement agreed upon in the manner
provided herein shall be binding upon the Indemnifying Party, and shall
conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
(g) A failure by an Indemnified Party to give timely, complete or
accurate notice as provided in this Section 7.4 will not affect the rights
or obligations of any party hereunder except and only to the extent that,
as a result of such failure, any party entitled to receive such notice was
deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise directly and materially damaged as a result of
such failure to give timely notice.
SECTION 8.5 LIMITATIONS ON INDEMNIFICATION.
------------------------------
8.5.1 Indemnity Cushion and Cap. Subject to Section 8.5.6 below, the
-------------------------
Stockholder shall not have any liability to any Purchaser Indemnified Party with
respect to Losses arising out of any of the matters referred to in Section 8.2
until such time as the amount of such liability shall exceed US$100,000 in the
aggregate; provided, however, that this Section 8.5.1 shall not apply to Losses
relating to a breach of a representation or warranty contained in Sections 3.1
and 3.26. Notwithstanding anything to the contrary set forth herein, the
aggregate liability of the Stockholder for indemnity payments arising out of any
of the matters referred to in clauses (a) and (c) of Section 8.2 shall not
exceed US$6,000,000.
8.5.2 Termination of Indemnification Obligations of the Stockholder. The
-------------------------------------------------------------
obligation of the Stockholder to indemnify under Section 8.2 hereof shall
terminate on June 30, 2000, except (a) as to matters as to which the Purchaser
Indemnified Party has made a claim for indemnification under Section 8.4 hereof
on or prior to such date and (b) with respect to any claim for Losses pertaining
to a misrepresentation or a breach of representation or warranty
24
<PAGE>
under Sections 3.11 or 3.19 or any other Section of Article III of this
Agreement relating to Taxes. The obligation to indemnify referred to in:
(i) the preceding clause (a) shall survive the expiration of such
period until such claim for indemnification is finally resolved and
any obligations with respect thereto are fully satisfied; and
(ii) the preceding clause (b) shall terminate 60 days after the
expiration of the relevant national, state or local statute of
limitations (taking into account any extensions or waivers thereof),
except as to matters as to which any Indemnified Party has made a
claim for indemnification under Section 8.4 above on or prior to such
date, in which case the right to indemnification with respect thereto
shall survive the expiration of any such period until such claim for
indemnification is finally resolved and any obligations with respect
thereto are fully satisfied.
25
<PAGE>
8.5.3 Termination of Indemnification Obligations of the Purchaser . The
------------------------------------------------------------
obligation of the Purchaser to indemnify under Section 8.3 hereof shall
terminate on June 30, 2000, except as to matters as to which any Stockholder
Indemnified Party has made a claim for indemnification under Section 8.4 above
on or prior to such date, in which case the right to indemnification with
respect thereto shall survive such period until such claim for indemnification
is resolved and any obligations with respect thereto are fully satisfied.
8.5.4 Treatment. Any indemnity payments by an Indemnifying Party to an
---------
Indemnified Party under this Article VIII shall be treated by the parties as an
adjustment to the Purchase Price.
8.5.5 Tax Effects. An indemnity payment due and payable by an Indemnifying
-----------
Party under this Article VIII shall be decreased to the extent of any net actual
reduction in Taxes payable by the Indemnified Party upon its payment of Losses,
determined at an assumed marginal tax rate equal to the highest marginal tax
rate then in effect for corporate taxpayers in the relevant jurisdiction, and
taking into account the tax consequences to the Indemnified Party of the receipt
of any indemnity payment due and payable by the Indemnifying Party under this
Article VIII.
8.5.6 Exceptions. Each of the limitations set forth in this Section 8.5
----------
shall in no event (a) apply to any Losses incurred by a Purchaser Indemnified
Party which relate, directly or indirectly, to (i) any fraudulent acts committed
by the Company, any Subsidiary or the Stockholder (including without limitation,
fraud in connection with the transaction contemplated hereby and any fraudulent
acts by any officer, director, employee, agent or stockholder of the Company or
any Subsidiary); (ii) any indemnification obligation under Section 8.2(b); and
(iii) the Stockholder's obligations set forth in Section 10.1 to pay certain
expenses; or (b) apply to any Losses incurred by a Stockholder Indemnified Party
which relate, directly or indirectly, to (i) any indemnification obligation
under Section 8.3(b); and (ii) the Purchaser's obligations set forth in Section
10.1 to pay certain expenses.
8.5.7 Control by Omnicom. All decisions and determinations to be made by
------------------
the Purchaser and/or a Purchaser Indemnified Party under this Article VIII shall
be made by Omnicom in the name of and on behalf of the Purchaser or such other
Purchaser Indemnified Party.
ARTICLE IX
TERMINATION
-----------
SECTION 9.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at
-----------------------
any time prior to the Closing:
(i) by mutual written agreement of the Purchaser and the Stockholder;
26
<PAGE>
(ii) by the Stockholder if the Stockholder has not obtained a tax
deferral ruling from Swedish tax authorities on or before 60 days
after the date hereof;
(iii) by either the Purchaser or the Stockholder if any permanent
injunction, order, decree or ruling by any Governmental or Regulatory
Authority of competent jurisdiction preventing the consummation of the
transaction contemplated hereby or in the Stock Purchase Agreement
shall have become final and nonappealable; provided, however, that the
-------- -------
party seeking to terminate this Agreement pursuant to this Section
9.1(iii) shall have used reasonable best efforts to remove such
injunction or overturn such action; or
(iv) by either the Purchaser or the Stockholder if the Closing has
not occurred on or before April 30, 1999.
Termination pursuant to clause (ii) will be effective upon delivery of a
written notice of termination by the Stockholder to the Purchaser.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement is terminated as
---------------------
permitted by Section 9.1, such termination shall be without liability of any
party (or any stockholder, affiliate, director, officer, employee, agent,
consultant or representative of such party) to any other party to this
Agreement.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1 EXPENSES. The parties hereto shall pay all of their own
--------
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel and
financial advisors.
SECTION 10.2 GOVERNING LAW. The interpretation and construction of this
-------------
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York without reference to its conflict of laws provisions.
SECTION 10.3 ARBITRATION. Any dispute or controversy which cannot be
-----------
amicably settled, shall be solely and finally settled by arbitration pursuant to
the Uncitral Arbitration Rules, as at present in full force which rules are
deemed to be incorporated by reference into this Section 10.3. The place of the
arbitration shall be Geneva, Switzerland. The appointing authority shall be the
International Chamber of Commerce in Geneva. The number of arbitrators shall be
three. The language to be used in the arbitration shall be English. The award of
the arbitrator(s) shall be the sole and exclusive remedy among the parties
regarding any and all claims and counterclaims with respect to the subject
matter of such a dispute or controversy and shall be binding and conclusive upon
the parties, their successors and assigns, and each shall comply in good faith
with any and all rulings of the arbitrators. Judgment upon the award of the
arbitrators may be entered in any court of competent jurisdiction.
Notwithstanding the foregoing, prior to
27
<PAGE>
seeking arbitration, the party proposing to seek arbitration shall provide
written notice to the other stating its intention to seek arbitration and
providing for a 30-day cure period.
SECTION 10.4 "PERSON" DEFINED. "PERSON" shall mean and include an
----------------
individual, a company, a joint venture, a corporation (including any non-profit
corporation), an estate, an association, a trust, a general or limited
partnership, a limited liability company, a limited liability partnership, an
unincorporated organization and a government or other department or agency
thereof.
SECTION 10.5 "KNOWLEDGE" DEFINED. Where any representation and warranty
-------------------
contained in this Agreement is expressly qualified by reference to the knowledge
of the Stockholder, such term shall be limited to the actual knowledge of the
Stockholder and unless otherwise stated such knowledge that would have been
discovered by the Stockholder after reasonable inquiry.
SECTION 10.6 "AFFILIATE" DEFINED. As used in this Agreement, an
-------------------
"AFFILIATE" of any Person, shall mean any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with such Person.
SECTION 10.7 CAPTIONS. The Article and Section captions used herein are
--------
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 10.8 PUBLICITY. Subject to the provisions of the next sentence, no
---------
party to this Agreement shall, and the Stockholder shall insure that no
representative of the Company or any of its Subsidiaries shall, issue any press
release or other public document or make any public statement relating to this
Agreement or the matters contained herein without obtaining the prior approval
of the Purchaser and the Stockholder. Notwithstanding the foregoing, the
foregoing provision shall not apply to the extent that Omnicom is required to
make any announcement relating to or arising out of this Agreement by virtue of
the federal securities laws of the United States or the rules and regulations
promulgated thereunder or other rules of the New York Stock Exchange, or any
announcement by any party or the Company or any Subsidiary pursuant to
applicable law or regulations.
SECTION 10.9 NOTICES. Unless otherwise provided herein, any notice,
-------
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand, (b) three days after the date of
deposit in the mails, postage prepaid, if mailed by certified or registered
mail, or (c) the next business day if sent by facsimile transmission (if receipt
is electronically confirmed) or by a prepaid overnight courier service, and in
each case at the respective addresses or numbers set forth below or such other
address or number as such party may have fixed by notice:
If to the Purchaser, addressed to:
Communicade Inc.
437 Madison Avenue
New York, New York 10022
28
<PAGE>
Attention: Chief Financial Officer
Fax: (212) 415-3530
and to:
------
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Secretary
Fax: (212) 415-3670
with a copy to:
--------------
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Michael D. Ditzian, Esq.
Fax: (212) 468-4888
If to the Stockholder to:
Spray Ventures AB
Nybrogatan 55
114 85 STOCKHOLM
Attention: Per Bystedt
Fax: +46-8-660 15 95
with a copy to:
--------------
Mannheimer Swartling Advokatbyra
Norrmalstorg 4
Box 1711
SE-111 87 STOCKHOLM
Attention: Alex Calissendorff
Fax: +46-8-613 55 01
SECTION 10.10 PARTIES IN INTEREST. This Agreement may not be transferred,
-------------------
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
SECTION 10.11 SEVERABILITY. In the event any provision of this Agreement
------------
is found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
SECTION 10.12 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, all of which taken together shall constitute one instrument.
29
<PAGE>
SECTION 10.13 ENTIRE AGREEMENT. This Agreement, including the other
----------------
documents referred to herein and the Exhibits and Schedules hereto which form a
part hereof, contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
SECTION 10.14 AMENDMENTS. This Agreement may not be amended,
----------
supplemented or modified orally, but only by an agreement in writing signed by
the Purchaser and the Stockholder.
SECTION 10.15 THIRD PARTY BENEFICIARIES. Each party hereto intends that
-------------------------
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto and their respective
successors and assigns as permitted under Section 10.10
SECTION 10.16 USE OF TERMS. Whenever the context so requires or permits,
------------
all references to the masculine herein shall include the feminine and neuter,
all references to the neuter herein shall include the masculine and feminine,
all references to the plural shall include the singular and all references to
the singular shall include the plural.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on the
day and year first above written.
COMMUNICADE INC.
BY: /s/ Jerry Neumann
_______________________________
Name: Jerry Neumann
TITLE: CHIEF FINANCIAL OFFICER
SPRAY VENTURES AB
BY: /s/ Per Bystedt
_______________________________
Name: Per Bystedt
TITLE: CHIEF EXECUTIVE OFFICER
31
<PAGE>
EXHIBIT A
OFFICER'S CERTIFICATE
The undersigned, ____________________, the ________________ of Spray
Ventures AB, a corporation organized and existing under the laws of the Kingdom
of Sweden (the "Stockholder"), pursuant to Sections 6.1 and 6.2 of the Stock
Purchase Agreement, effective as of October 1, 1998 (the "Agreement") (terms
defined in the Agreement being used herein as so defined), by and among the
Stockholder and Communicade, Inc., a Delaware corporation (the "Purchaser"),
certify, on behalf of the Stockholder that:
1. The representations and warranties made by the Stockholder in the
Agreement, and in any Schedule delivered thereto, are true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date or, in the case of representations
and warranties made as of a specified date earlier than the Closing Date, on and
as of such earlier date.
2. The Stockholder has or has caused Spray Network AB to have performed
and complied with the agreements, covenants and obligations required by the
Agreement to be so performed or complied with by the Stockholder at or before
the Closing.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
_______________, 1998.
SPRAY VENTURES AB
By:_______________________
<PAGE>
EXHIBIT B
OFFICER'S CERTIFICATE
The undersigned, ____________________, the ________________ of Communicade,
Inc., a Delaware corporation (the "Purchaser"), pursuant to Sections 7.1 and 7.3
of the Stock Purchase Agreement, effective as of October 1, 1998 (the
"Agreement") (terms defined in the Agreement being used herein as so defined),
by and among the Purchaser and Spray Ventures AB, a corporation organized and
existing under the laws of the Kingdom of Sweden (the "Stockholder"), certify,
on behalf of the Purchaser that:
1. The representations and warranties made by the Purchaser in the
Agreement, and in any Schedule delivered thereto, are true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date or, in the case of representations
and warranties made as of a specified date earlier than the Closing Date, on and
as of such earlier date.
2. The Purchaser has performed and complied with the agreements,
covenants and obligations required by the Agreement to be so performed or
complied with by the Purchaser at or before the Closing.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
_______________, 1998.
COMMUNICADE, INC.
By:_______________________
<PAGE>
EXHIBIT 10.34
AMENDMENT TO STOCK PURCHASE AGREEMENT
This AMENDMENT TO STOCK PURCHASE AGREEMENT (the "AMENDMENT"), dated as
of December 10, 1998, by and between Communicade Inc., a Delaware corporation
formerly known as JWL Associates Corp. ("COMMUNICADE"), a wholly-owned
subsidiary of Omnicom Group Inc., a New York corporation, and Spray Ventures AB,
a corporation organized and existing under the laws of the Kingdom of Sweden
with identification number 556506-7997 (the "STOCKHOLDER"), amends the Stock
Purchase Agreement, dated October 23, 1998 and effective as of October 1, 1998,
between Communicade and the Stockholder (the "STOCK PURCHASE AGREEMENT").
W I T N E S S E T H:
WHEREAS, the parties are currently party to the Stock Purchase
Agreement pursuant to which the Stockholder desires to sell, and Communicade
desires to purchase, 563 shares of common stock, nominal value SEK 100 per share
(the "SHARES") of Spray Network AB, a corporation organized and existing under
the laws of the Kingdom of Sweden with identification number 556503-3247 ("SPRAY
NETWORK"), representing 20% of the issued and outstanding Shares as of the date
of the Stock Purchase Agreement, pursuant to the provisions of the Stock
Purchase Agreement;
WHEREAS, Communicade is also party to the Stock Purchase Agreement
(the "EARN-OUT AGREEMENT"), dated September 18, 1996, by and among Communicade,
Jeffrey A. Dachis ("DACHIS") and Craig M. Kanarick ("KANARICK"), pursuant to
which Dachis and Kanarick have a right to receive certain payments from
Communicade based on the Annual Revenues (as defined therein) of Razorfish, Inc.
("RAZORFISH");
WHEREAS, the Stockholder and Communicade are also party to the
Subscription and Exchange Agreement, dated as of October 1, 1998, among
Razorfish, the Stockholder and Communicade, as amended (the "SUBSCRIPTION
AGREEMENT"), pursuant to which Razorfish will purchase all of the issued and
outstanding shares of capital stock of Spray Network; and
WHEREAS, the Stockholder wishes to enter into a second amendment to
the Subscription Agreement and, in order to induce the other parties thereto to
enter into such amendment, has agreed to amend the provisions of the Stock
Purchase Agreement pursuant to the provisions of this Amendment in order to
reduce the Purchase Price (as defined therein) payable thereunder by the amount
which, on the acquisition of Spray by Razorfish, Communicade will be required to
pay to Dachis and Kanarick with respect to certain agreements related to the
Earn-Out Agreement.
NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
1
<PAGE>
ARTICLE I
---------
AMENDMENTS
----------
SECTION 1.1. AMENDMENT OF SECTION 2.1.1. Subsection 2.1.1 of the Stock
--------------------------
Purchase Agreement is amended by deleting the word "US$12,000,000" where it
appears in such subsection and inserting "US$11,400,000" in its place.
ARTICLE II
----------
MISCELLANEOUS
-------------
SECTION 2.1. EXPENSES. The parties hereto shall pay all of their own
--------
expenses relating to the transactions contemplated by this Amendment, including,
without limitation, the fees and expenses of their respective counsel and
financial advisors.
SECTION 2.2. GOVERNING LAW. The interpretation and construction of this
-------------
Amendment, and all matters relating hereto, shall be governed by the laws of the
State of New York without reference to its conflict of laws provisions.
SECTION 2.3. CAPTIONS. The Article and Section captions used herein are
--------
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Amendment.
SECTION 2.4. SEVERABILITY. In the event any provision of this Amendment
------------
is found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Amendment shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
SECTION 2.5. FURTHER ASSURANCES. Each of the parties shall execute and
------------------
deliver such documents and take such other actions as reasonably requested by
any other party hereto in furtherance of the transactions contemplated hereby.
SECTION 2.6. COUNTERPARTS. This Amendment may be executed in two or more
------------
counterparts, all of which taken together shall constitute one instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, on the
day and year first above written.
COMMUNICADE INC.
By: /s/ Jerry Neumann
----------------------------
NAME: JERRY NEUMANN
TITLE: CHIEF FINANCIAL OFFICER
SPRAY VENTURES AB
BY: /s/ Per Bystedt
----------------------------
NAME: PER BYSTEDT
TITLE: CHIEF EXECUTIVE OFFICER
3
<PAGE>
EXHIBIT 10.36
LOAN AGREEMENT
--------------
LOAN AGREEMENT dated September 18, 1996, by and between RAZORFISH,
INC., a New York corporation, with its principal office at 580 Broadway, Suite
210, New York, New York 10012 (the "Borrower") and OMNICOM FINANCE INC., a
Delaware corporation with its principal office at 437 Madison Avenue, New York,
New York 10022 (the "Creditor").
WHEREAS, the Borrower has requested the Creditor to provide financing
to the Borrower in an amount of up to Two Million Dollars ($2,000,000) and the
Creditor is willing to lend the Borrower up to such amount upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, the Borrower and the Creditor hereby agree as
follows:
ARTICLE I
---------
DEFINITIONS
-----------
SECTION 1.1 Definitions. For the purposes of this Loan Agreement, the
-----------
following terms shall have the following meanings, unless otherwise defined:
(i) "Closing Date." - shall mean September 18, 1996.
------------
(ii) "Commitment." - shall mean the obligation of Creditor to make
----------
Loans to the Borrower in an aggregate amount outstanding up to
$2,000,000.
(iii) "Commitment Period." - shall mean the period from the Closing
-----------------
Date through the Termination Date.
(iv) "Events of Default." - shall mean any of the Events of Default
-----------------
set forth under Section 5.1 hereof.
(v) "Loan Agreement." - shall mean this Loan Agreement between the
--------------
Borrower and the Creditor, as amended or supplemented from time to
time.
<PAGE>
(vi) "Loan Instruments." - shall mean this Loan Agreement, the
----------------
Note, and any other instruments and documents executed between the
Creditor and the Borrower in connection herewith.
(vii) "Loans." - shall mean the loans made by the Creditor to the
-----
Borrower pursuant to the Note and Section 2.1 hereof.
(viii) "Note." - shall mean the promissory note executed by the
----
Borrower in substantially the form of Exhibit A attached hereto.
(ix) "Security Agreement." - shall mean the security agreement by
-------------------
and between Borrower and Creditor, dated the date hereof.
(x) "Termination Date." - shall mean the date which is the sooner
----------------
to occur of (x) the date Omnicom Group Inc., directly or indirectly,
ceases to own shares of common stock of the Borrower and (y) the date
of the closing of the Borrower's first firm commitment underwritten
public offering pursuant to an effective Registration Statement under
the Securities Act of 1933, as amended, covering the offer and sale of
common stock of the Borrower to the public.
ARTICLE II
----------
LOAN
----
SECTION 2.1 Loan(s). Subject to the terms and conditions and relying
------
upon the representations and warranties herein set forth being true and correct
when made, the Creditor agrees to make Loan(s) to the Borrower from time to time
during the Commitment Period as requested by the Borrower, provided that the
aggregate balance including principal and interest of all Loan(s) shall not at
any time exceed Two Million Dollars ($2,000,000). The Loan(s) shall be evidenced
by the Note dated the Closing Date.
SECTION 2.2 Use of Proceeds. The Borrower may only use the proceeds of
---------------
the Loan(s) for business purposes; and, in addition, the Borrower shall not use
the proceeds of the Loan(s) to (a) pay dividends, (b) make loans to officers or
employees of the Borrower or any
2
<PAGE>
subsidiary of the Borrower, other than travel or other expense advances in the
ordinary course of business or (c) without the prior consent of Creditor,
reacquire shares of capital stock of the Borrower or any subsidiary of the
Borrower.
SECTION 2.3 Interest. The initial $1,000,000 of the Commitment at any
--------
time outstanding shall be without interest. Any borrowings outstanding at any
time over and above $1,000,000 shall bear interest at a rate per annum equal to
Creditor's monthly floating interest rate, which rate shall be the same rate
charged by Creditor to its other borrowers owned or controlled by Omnicom Group
Inc. Interest on the Loan(s) shall be calculated based on the daily outstanding
balance thereof during the interest period and on the basis of a 360 day year
and shall be computed monthly.
SECTION 2.4 Payment of Interest. All interest calculated in
-------------------
accordance with Section 2.3 above shall be added to the balance of the Loan(s)
on the tenth day of the month immediately following the month in which interest
is computed and shall be paid on the first day of the first month of each
calendar quarter.
SECTION 2.5 Payments of Principal. The entire principal amount of the
---------------------
Loan(s), together with the interest thereon outstanding on the Termination Date,
shall be due and payable on the Termination Date.
SECTION 2.6 Prepayment. The Borrower may prepay the principal amount
----------
of the Loan(s) and all accrued and unpaid interest thereon at any time prior to
the Termination Date; provided, however, to the extent the Borrowers working
capital exceeds its expected working capital requirements for the ensuing sixty-
day period (i.e.: current assets minus current liabilities), the Borrower shall
use its then available cash to prepay the Loan(s)..
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 3.1 Representations and Warranties. The Borrower hereby
------------------------------
represents and warrants to the Creditor that the following are true and correct:
3
<PAGE>
SECTION 3.2 Organization, Corporate Power, Etc. The Borrower is a
----------------------------------
New York corporation, duly organized, validly existing, and in good standing
under the laws of New York.
SECTION 3.3 Validity of the Loan Instruments. The execution, delivery
--------------------------------
and performance by the Borrower of the Loan Instruments and the borrowings
evidenced by the Note (i) are within the corporate powers of the Borrower, (ii)
have been duly authorized by all requisite corporate action on the part of the
Borrower, (iii) have received all necessary governmental approvals and (iv) will
not violate any provisions of law now in effect, any order of any court or other
agency of government, the Certificate of Incorporation or by-laws of the
Borrower, or any indenture, agreement or other instrument to which the Borrower
is a party or by which it or any of its property is bound, or be in conflict
with or result in a breach of, or constitute (with or without the giving of
notice or lapse of time, or both) a default under any such indenture, agreement
or other instrument. The Loan Instruments, when executed by the Borrower, will
each constitute legal, valid and binding obligations in accordance with their
respective terms.
ARTICLE IV
----------
CONDITIONS
----------
SECTION 4.1 Conditions of Lending. The Creditor shall not be
---------------------
obligated to make any Loan(s) to the Borrower hereunder unless the following
conditions have been satisfied.
SECTION 4.2 Agreements, Etc. On the Closing Date, the Borrower shall
---------------
have delivered to the Creditor the following, duly authorized, executed, and in
form and substance acceptable to the Creditor:
(a) This Loan Agreement executed by the Borrower;
(b) The Note executed by the Borrower; and
(c) The Security Agreement executed by the Borrower.
4
<PAGE>
SECTION 4.3 Representations and Warranties. On each date on which
------------------------------
a Loan is to be made the representations and warranties of the Borrower in this
Loan Agreement shall be true and correct as of such borrowing date.
SECTION 4.4 No Default. On each date on which a Loan is to be
----------
made, no Event of Default, or event which with the giving of notice or lapse of
time, or both, would constitute an Event of Default, shall have occurred and be
continuing.
ARTICLE V
---------
DEFAULT
-------
SECTION 5.1 Events of Default. The occurrence of any of the following
-----------------
shall constitute an Event of Default hereunder:
5.1.1 Default in Payment. The Borrower shall fail to pay all or
------------------
any portion of the principal or interest on the Note when due and payable.
5.1.2 Bankruptcy, etc. The Borrower shall (i) apply for or
---------------
consent to the appointment of a receiver, (ii) admit in writing its
inability to pay its debts as they become due, (iii) make a general
assignment for the benefit of creditors, (iv) have filed against it an
involuntary petition in bankruptcy which is not stayed or dismissed within
sixty (60) days, (v) file a voluntary petition in bankruptcy, or a petition
or an answer seeking reorganization, or an arrangement with creditors or
(vi) file an application for judicial dissolution with the Supreme Court of
the State of New York.
5.1.3 Receiver, etc. An order, judgment or decree shall be
-------------
entered against the Borrower by any court of competent jurisdiction,
approving a petition seeking reorganization of the Borrower or of all or a
substantial part of the properties or assets of the Borrower, or appointing
a receiver, trustee or liquidator for the Borrower.
5
<PAGE>
SECTION 5.2 Remedies. If an Event of Default shall occur and be
--------
continuing, the Creditor may, at its option:
5.2.1 Acceleration. Declare the unpaid portion of the principal
------------
of the Loan(s) and all interest accrued and unpaid thereon, and all other
amounts due in connection with such Loan(s) or otherwise due hereunder, to
be immediately due and payable, with no further notice or demand (each of
which hereby is expressly waived by the Borrower), whereupon the same shall
become immediately due and payable; provided, however, that if an Event of
Default under Section 5.1.2 or 5.1.3 hereof occurs, the Commitment Period
shall immediately terminate and all such amounts shall immediately and
automatically become due and payable without any action being required of
the Creditor.
5.2.2 Other. Exercise any other remedy specifically granted
-----
hereunder or now or hereafter existing in equity, or at law, by virtue of
statute or otherwise.
ARTICLE VI
----------
MISCELLANEOUS
-------------
SECTION 6.1 Notices. All notices required to be given hereunder shall
-------
be deemed to be received if directed to the address(es) recited on page 1 of
this Agreement via facsimile, personal delivery, Certified or Registered Mail or
by an overnight delivery carrier such as Federal Express, or in such other
manner, as to either of the parties hereof, as such party shall designate in a
written notice to the other party hereto.
SECTION 6.2 Survival of Loan Agreement. All covenants, agreements,
--------------------------
representations and warranties made herein shall survive the making by the
Creditor of the Loan(s) herein contemplated and the execution and delivery to
the Creditor of the Note evidencing such Loan(s) until the Note and all other
amounts due from the Borrower to the Creditor hereunder are paid in full. This
Loan Agreement shall be binding upon the Borrower and its successors, and shall
inure to the benefit of the successor and assigns of the Creditor,
6
<PAGE>
except that the Borrower may not transfer or assign any or all of its rights or
obligations hereunder without the prior written consent of the Creditor.
SECTION 6.3 Severability. In the event that any provision hereof
------------
is deemed to be invalid by reason of the operation of any law or by reason of
the interpretation placed thereupon by any court, this Loan Agreement shall be
construed as not containing such provision and the invalidity of such provision
shall not affect the validity of any other provisions hereof, and any and all
other provisions hereof which are otherwise lawful shall remain in full force
and effect.
SECTION 6.4 Waiver. No delay on the part of either party in
------
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or practical exercise or any right, power or
privilege hereunder preclude other or further exercise thereof, or the exercise
of any other right, power or privilege.
SECTION 6.5 Indemnification. The Borrower agrees to indemnify,
---------------
defend and hold the Creditor harmless from and against any and all loss,
liability, damage, judgment, claim, deficiency or expense (including interest,
penalties, attorneys' fees and amounts paid in settlement) to which the Creditor
may become subject insofar as such loss, liability, claim, judgment, deficiency
or expense arises out of or is based upon a suit or proceeding brought or
threatened in connection with this Agreement or the other Loan Instruments.
SECTION 6.6 Expenses. The Borrower agrees to pay or reimburse the
--------
Creditor for any costs and expenses (including reasonable attorney fees)
incurred in connection with the enforcement or preservation of any rights under
the Loan Instruments.
SECTION 6.7 Modification of Loan Instruments. No modification or
--------------------------------
waiver of any provision of any of the Loan Instruments, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstances.
7
<PAGE>
SECTION 6.8 Descriptive Headings. The descriptive headings of the
--------------------
several sections of this Agreement are inserted for convenience only and shall
not be deemed to affect the meaning or construction of any of the provisions
hereof.
SECTION 6.9 Applicable Law. The Loan Instruments shall be
--------------
construed in accordance with and governed by the laws of the State of New York
without giving effect to the choice or conflict of law principles thereof.
SECTION 6.10 Counterparts. This Agreement may be executed in
------------
several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 6.11 Assignments. This Loan Agreement and the Note may be
-----------
assigned by the Creditor without the prior written consent of the Borrower.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the Borrower and the Creditor, by their duly authorized officers on the date
first set forth above.
RAZORFISH, INC.
By: /s/Jeffrey A. Dachis
---------------------
Name: Jeffrey A. Dachis
Title: President
OMNICOM FINANCE INC.
By: /s/Barry J. Wagner
-------------------
Name: Barry J. Wagner
Title: Secretary
9
<PAGE>
EXHIBIT A
---------
NOTE
----
$2,000,000 September 18, 1996
FOR VALUE RECEIVED, the undersigned, Razorfish, Inc., with its
principal address at 580 Broadway, Suite 210, New York, New York 10012
("Borrower") hereby unconditionally promises to pay on the Termination Date, or
such other date as may be required pursuant to the Loan Agreement (as
hereinafter defined), to the order of Omnicom Finance Inc., a Delaware
corporation ("Creditor") with offices at 437 Madison Avenue, New York, NY 10022,
at said address or at such other address as the Creditor may from time to time
designate, in lawful money of the United States and in immediately available
funds, the principal amount of all loans made by the Creditor together with the
interest thereon to the undersigned pursuant to Section 2.1 of the Loan
Agreement. Interest shall be paid on the unpaid principal amount of this Note,
solely with respect to any borrowings outstanding at any time over and above
$1,000,000, on the first day of the first month of each calendar quarter.
If any payment on this Note becomes due and payable on a Saturday,
Sunday or legal holiday in the State of New York, the maturity thereof shall be
extended to the next succeeding business day.
This Note is the Note referred to in the Loan Agreement of even date
herewith between the Borrower and Creditor (as amended from time to time, the
"Loan Agreement"). All capitalized terms used in this Note shall have the
meanings ascribed to them in the Loan Agreement. The provisions of the Loan
Agreement are incorporated herein by reference.
Upon the occurrence and continuance of any one or more of the Events
of Default specified in the Loan Agreement, all amounts then remaining unpaid on
this Note may be declared to be, or may automatically become, immediately due
and payable as provided therein.
10
<PAGE>
Presentment, demand, protest and notice of dishonor are hereby waived
by the Borrower.
The obligations of the Borrower shall be secured by a security
interest in all of the assets of the Borrower and evidenced by a security
agreement between the Borrower and the Creditor.
This Note shall be governed by and construed according to the laws of
the State of New York, without giving effect to the choice or conflict of law
principles thereof.
RAZORFISH, INC.
By: /s/Jeffrey A. Dachis
---------------------
Name: Jeffrey A. Dachis
Title: President
11
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF THE COMPANY
Avalanche Solutions, Inc.
Razorfish Limited
Razorfish Los Angeles, Inc.
Razorfish San Francisco, Inc.
Razorfish Network AB
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports dated March 5, 1999 for Razorfish, Inc. and subsidiaries, March 5, 1999
for Spray Network AB and subsidiaries, March 5, 1999 for Avalanche Systems, Inc.
and January 18, 1999 for Spray Ventures AB and subsidiaries included in or
made a part of this registration statement.
ARTHUR ANDERSEN LLP
New York, New York
March 11, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and the
use of our report dated March 3, 1997 relating to the financial statements of
Avalanche Systems, Inc. for the year ended December 31, 1996 included in
Amendment No. 1 to Registration Statement No. 333-71043 on Form S-1 for the
registration of the Class A Common Stock of Razorfish, Inc.
/s/ M.R. Weiser & Co. LLP
M.R. Weiser & Co. LLP
New York, New York
March 5, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 598,720 1,176,076
<SECURITIES> 0 0
<RECEIVABLES> 2,423,006 1,304,420
<ALLOWANCES> 50,000 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,574,548 3,543,996
<PP&E> 1,657,954 754,168
<DEPRECIATION> 472,410 136,608
<TOTAL-ASSETS> 12,085,483 4,266,510
<CURRENT-LIABILITIES> 6,126,001 3,532,539
<BONDS> 0 0
0 0
0 0
<COMMON> 92,238 91,568
<OTHER-SE> 2,751,863 342,251
<TOTAL-LIABILITY-AND-EQUITY> 12,085,483 4,266,510
<SALES> 13,843,289 3,617,688
<TOTAL-REVENUES> 13,843,289 3,617,688
<CGS> 7,769,752 1,906,111
<TOTAL-COSTS> 7,769,752 1,906,111
<OTHER-EXPENSES> 2,823,119 253,369
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 241,342 19,489
<INCOME-PRETAX> 112,012 562,152
<INCOME-TAX> 454,813 264,963
<INCOME-CONTINUING> (342,801) 297,189
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (342,801) 297,189
<EPS-PRIMARY> .02 .02
<EPS-DILUTED> .02 .02
</TABLE>
