<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 000-26303
DIGITAS INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 04-3494311
(State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Identification No.)
The Prudential Tower
800 Boylston Street, Boston, Massachusetts 02199
(Address of Principal Executive (Zip Code)
Offices)
617-867-1000
(Registrant's Telephone Number, Including Area Code)
NA
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X].
The registrant has been subject to such filing requirements since March 13,
2000, less than 90 days.
As of March 31, 2000 there were 57,425,645 shares of Common Stock, $.01 par
value, outstanding.
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DIGITAS INC.
Form 10-Q
Table of Contents
March 31, 2000
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Operations for the Three Months Ended
March 31, 2000 and 1999..................................... 3
Balance Sheet as of March 31, 2000 and
December 31, 1999............................................. 4
Statement of Cash Flows for the Three Months
Ended March 31, 2000 and 1999................................. 5
Notes to Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds...................... 9
Signatures............................................................. 10
Exhibit 10.1........................................................... 11
Exhibit 11.1........................................................... 17
Exhibit 27.1........................................................... 18
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DIGITAS INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
Revenue..................................................... $ 63,094 $ 38,813
Operating expenses:
Professional services costs............................... 33,413 20,041
Selling, general and administrative expenses.............. 21,649 13,905
Stock-based compensation.................................. 3,661 -
Amortization of intangible assets......................... 9,171 9,172
----------- -----------
Total operating expenses.................................. 67,894 43,118
----------- -----------
Loss from operations........................................ (4,800) (4,305)
Other income (expense):
Interest income........................................... 230 -
Interest expense.......................................... (1,510) (1,647)
Unrealized gain on investment............................. 504 -
Other miscellaneous income................................ 98 -
----------- -----------
Loss before provision for income taxes...................... (5,478) (5,952)
Provision for income taxes.................................. (406) (91)
----------- -----------
Loss from continuing operations............................. (5,884) (6,043)
Extraordinary loss relating to early extinguishment of
debt (net of tax benefit of $175).......................... (1,653) -
----------- -----------
Net loss.................................................... $ (7,537) $ (6,043)
=========== ===========
Net loss per share (Note 2)- basic and diluted
Loss from continuing operations............................ $ (0.11) $ (0.12)
Extraordinary loss......................................... (0.03) -
----------- -----------
Net loss................................................... $ (0.14) $ (0.12)
=========== ===========
Weighted average common shares outstanding (Note 2)
Basic and diluted......................................... 51,982 50,086
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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DIGITAS INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 44,661 $ 441
Accounts receivable, net of allowance for doubtful accounts
of $1,134 and $1,053 at March 31, 2000 and December 31, 1999,
respectively.................................................. 44,843 40,296
Accounts receivable, unbilled.................................. 38,775 25,521
Other current assets........................................... 2,777 1,999
-------- --------
Total current assets.......................................... 131,056 68,257
Fixed assets, net................................................ 20,721 20,237
Intangible assets, net........................................... 153,001 162,172
Other assets..................................................... 317 2,223
-------- --------
Total assets.................................................. $305,095 $252,889
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................... $ 13,160 $ 15,352
Current portion of long-term debt.............................. 194 7,530
Billings in excess of cost and estimated earnings on
uncompleted contracts......................................... 20,090 17,761
Accrued expenses............................................... 9,780 12,717
Accrued compensation........................................... 8,648 16,369
Capital lease obligations...................................... 397 398
-------- --------
Total current liabilities..................................... 52,269 70,127
Long-term debt, less current portion............................. 1,207 62,422
Capital lease obligation, long-term portion...................... 372 456
Other long-term liabilities...................................... 48 48
--------- ---------
Total liabilities............................................. 53,896 133,053
Commitments
Shareholders' equity:
Preferred shares, $.01 par value per share; 25,000,000 shares
authorized and none issued and outstanding at March 31, 2000. - -
Common shares, no par value per share, 50,703,480 shares
authorized, issued and outstanding at December 31, 1999...... - -
Common shares, $.01 par value per share, 175,000,000 shares
authorized and 57,425,645 shares issued and outstanding at
March 31, 2000............................................... 574 -
Additional paid-in capital.................................... 361,333 208,153
Accumulated deficit........................................... (47,565) (40,028)
Deferred compensation......................................... (63,143) (48,289)
--------- --------
Total shareholders' equity................................... 251,199 119,836
--------- --------
Total liabilities and shareholders' equity................... $305,095 $252,889
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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DIGITAS INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (7,537) $ (6,043)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 11,309 10,680
Gain on disposal of fixed assets.......................... - (53)
Unrealized gain on investment............................. (504) -
Stock-based compensation.................................. 3,661 -
Provision for doubtful accounts........................... 141 (153)
Extraordinary loss........................................ 1,653 -
Changes in operating assets and liabilities:
Accounts receivable...................................... (4,688) (2,579)
Accounts receivable, unbilled............................ (13,254) (11,483)
Other current assets..................................... (274) (251)
Other assets............................................. - (282)
Accounts payable......................................... (2,192) (224)
Billings in excess of costs and estimated
earnings on uncompleted contracts....................... 2,329 2,408
Accrued expenses......................................... (651) 6,078
Accrued compensation..................................... (5,400) (4,808)
-------- --------
Net cash used in operating activities................... (15,407) (6,710)
-------- --------
Cash flows from investing activities:
Purchase of fixed assets.................................. (2,544) (1,263)
Business acquired net of cash............................. - (65,200)
-------- --------
Net cash used in investing activities...................... (2,544) (66,463)
-------- --------
Cash flows from financing activities:
Principal payments under capital lease obligations........ (85) (23)
Net proceeds from line of credit, bank.................... - 7,500
Proceeds from note payable, bank, net of debt issuance
costs.................................................... - 70,558
Payment of note payable, tenant allowances................ (46) (27)
Payment of notes payable, bank............................ (68,505) -
Payment of notes payable, shareholders.................... (4,432) -
Distributions to shareholders............................. - (2,461)
Proceeds from issuance of common stock.................... 135,239 -
-------- --------
Net cash provided by financing activities.................. 62,171 75,547
-------- --------
Net increase in cash and cash equivalents.................. 44,220 2,374
Cash and cash equivalents, beginning of period............. 441 37
-------- --------
Cash and cash equivalents, end of period................... $ 44,661 $ 2,411
======== ========
Supplemental disclosure of cash flow information:
Cash paid for taxes....................................... $ 968 $ 393
Cash paid for interest.................................... 1,588 1,326
Supplemental disclosures of noncash investing and
financing activities:
Issuance of notes payable to shareholders (Note 4)........ $ 4,432 -
Change in par value of common stock....................... 507 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
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DIGITAS INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by Digitas Inc. (the "Company") in accordance with generally accepted accounting
principles. Accordingly, they do not include all of the information and
footnotes required for complete financial statements and should be read in
conjunction with the audited financial statements and notes thereto for the year
ended December 31, 1999 included in the Company's Registration Statement on Form
S-1, as amended. The accompanying unaudited financial statements reflect all
adjustments (consisting solely of normal, recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of results of
operations for the interim periods presented. The results for these periods are
not necessarily indicative of the results to be expected for any future period
or the full fiscal year.
2. NET LOSS PER SHARE
Basic and diluted earnings per share are computed in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". SFAS
No. 128 requires both basic earnings per share, which is based on the weighted
average number of common shares outstanding, and diluted earnings per share,
which is based on the weighted average number of common shares outstanding and
all dilutive potential common equivalent shares outstanding. The dilutive effect
of options is determined under the treasury stock method using the average
market price for the period. Common equivalent shares are included in the per
share calculations where the effect of their inclusion would be dilutive.
As of March 31, 1999 and 2000, no options and warrants were included in the
above calculation as their effect would have been antidilutive.
3. CAPITAL STOCK
On March 16, 2000, the Company completed an initial public offering of Common
Stock which resulted in the issuance of 6,200,000 shares of Common Stock.
Proceeds to the Company, net of underwriting discounts and costs of the
offering, were approximately $134.7 million.
During the quarter ended March 31, 2000, the Company granted approximately 2.2
million stock options to employees at an exercise price of $8.75, which at the
time of grant was below the fair market value of the Company's common stock. We
have estimated the cumulative compensation on these options to be approximately
$18.5 million, which is being recognized over the vesting period of the
underlying stock options.
4. DEBT
At December 31, 1999, the Company had outstanding $68,505,000 of a $73,399,000
term loan with a bank. Upon the completion of the initial public offering, the
Company repaid the $68,505,000 balance.
In addition, the Company repaid a total of $4,432,000, $2,111,000 of which was
included in accrued expenses and $2,321,000 of which was included in accrued
compensation at December 31, 1999, to shareholders of the Company. Prior to
repayment in March 2000, these amounts were converted to formal note payable
agreements.
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5. EXTRAORDINARY LOSS
In March 2000, an extraordinary loss of $1,653,000 (net of a tax benefit of
$175,000) was recognized upon the early retirement of the $68,505,000 of debt.
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 2000. The Company
anticipates that the adoption of SFAS No. 133 will not have a significant effect
on the financial condition of the Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
("SAB 101"), which is required to be adopted in the second calendar quarter
of 2000. SAB 101 sets forth certain criteria, including the existence of
persuasive evidence of an arrangement, which must be met in order that
revenue be recognized. The Company anticipates that the adoption of SAB 101
will not have a significant effect on the financial condition or results of
operations of the Company.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation, an Interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of Accounting Principles Board ("APB") Opinion No.
25 and among other issues clarifies the following: the definition of an
employee for purposes of applying APB Opinion No. 25; the criteria for
determining whether a plan qualifies as a noncompensatory plan; the
accounting consequences of various modifications to the terms of previously
fixed stock options or awards; and the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1,
2000, but certain conclusions in FIN 44 cover specific events that occurred
after either December 15, 1998 or January 12, 2000. The Company anticipates
that the application of FIN 44 will not have a significant effect on the
financial condition or results of operations of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Revenue. Net revenues for the first quarter of 2000 increased by 63% to $63.1
million from $38.8 million for the first quarter of 1999. Of the $24.3 million
increase in revenue, $12.2 million was attributable to new clients added since
the first quarter of 1999. The remaining growth was attributable to a 31%
increase in revenue from clients that contributed to the first quarter of 1999.
Certain of our contracts contain discretionary bonus provisions whereby we get
additional compensation based on our performance as evaluated by our clients. We
recognize bonus revenue in the period we are informed that the bonus has been
awarded. Contractually we are informed of bonuses in the first and second
quarters and accordingly, we expect that our quarterly revenue in these quarters
will be positively impacted compared to the third and fourth quarters.
Professional service costs. Professional service costs for the first quarter of
2000 increased $13.4 million, or 67%, to $33.4 million from $20.0 million in the
first quarter of 1999. As a percentage of revenue, professional service costs
increased from 52% of revenue in the first quarter of 1999 to 53% of revenue in
the first quarter of 2000. We continue to expand operations and hire
professionals to keep up with client demand.
Selling, general and administrative expense. Selling, general and administrative
expenses increased $7.7 million, or 56%, to $21.6 million from $13.9 million in
the first quarter of 1999. The increase is due to increased personnel costs,
growth in administrative headcount, and rent and other expenses related to
regional office expansions. As a percentage of revenue, selling, general and
administrative expenses decreased from 36% to 34% due to the economies of scale
associated with higher revenue levels.
Stock-based compensation. Stock-based compensation consists of non-cash
compensation arising from stock options granted to employees at exercise prices
below the estimated fair value of the underlying common stock. The Company
recognized $3.7 million of stock-based compensation expense for the quarter
ended March 31, 2000.
Amortization of intangible assets. In connection with the recapitalization in
January 1999, the Company recorded $198.9 million of goodwill and other
intangible assets. This amount is being amortized over two to seven years.
Provision for income taxes. In accordance with accounting principles generally
accepted in the United States, the Company provides for income taxes on an
interim basis, using the estimated annual effective income tax rate. The
effective income
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tax rate is lower than the combined federal and state statutory rates due
primarily to an increase in the valuation allowance for deferred tax assets.
Liquidity and Capital Resources
From inception through the recapitalization, which occurred in January 1999, the
Company funded its operations primarily through cash provided by operations,
notes from shareholders and bank borrowings. In connection with the
recapitalization, the Company established credit facilities totaling $93.4
million to repay its existing bank borrowings, repay its notes to shareholders,
make transaction payments and repurchase shares in connection with the
recapitalization and provide working capital to fund ongoing operations, as well
as build out our Boston office for costs incurred in excess of the lease
allowance.
The Company's cash and cash equivalents increased from $0.4 million at the end
of 1999 to $44.7 million as of March 31, 2000. This increase is primarily from
the net proceeds totaling approximately $134.7 million from the issuance of
6,200,000 shares of common stock in the initial public offering on March 13,
2000. These proceeds were used to pay off a $68.5 million debt balance with the
bank and notes payable to shareholders totaling $4.4 million.
At March 31, 2000, the Company had no cash borrowings under its revolving credit
and $10.3 million outstanding letters of credit under its $25.0 million
revolving credit facility, which expires on December 31, 2004.
The Company believes that its current cash and cash equivalents and funds
available under the revolving line of credit will be sufficient to meet the
Company's working capital and capital expenditure requirements for at least the
next 12 to 18 months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Under the terms of our credit agreement, the Company utilized interest rate
swap agreements to fix interest rates on portions of the rate term loan and
to mitigate the effect of changes in interest rates on earnings. We entered
into separate agreements on February 22 and 24, 1999, each for a notional
amount of $20.0 million and each having a maturity date of February 2001.
Under the terms of the agreements, we locked in fixed rates of 5.36% and
5.30% on the notional amounts and we compensated the financial institution or
were compensated by the financial institution for the differential between
the fixed rates and the current LIBOR rate. Through March 14, 2000, the
interest rate differential payable or receivable on the agreements was
recognized on an accrual basis as an adjustment to interest expense. At
December 31, 1999 the fair values of the interest rate swaps, which represent
the amounts we would have received or paid to terminate the respective
agreements, were net receivables of $240,000 and $273,000 based on dealer
quotes. The variable rates at December 31, 1999 were 6.5% and 6.1%.
Immediately following the initial public offering, the Company repaid the
entire outstanding term loan balance with the bank. As a result, the interest
rate swap agreements were no longer considered necessary as a hedge. At March
31, 2000, the fair values of the interest swaps of $237,000 and $267,000,
respectively, are included in other current assets and an unrealized gain on
investments of $504,000 is included in the income statement for the quarter
ended March 31, 2000. These interest rate swap agreements were terminated in
April 2000 at a total value of $447,000.
This Form 10-Q contains forward-looking statements. You can identify these
statements by forward looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You
should read statements that contain these words carefully because they
discuss our future expectations, certain projections of our future results of
operation or of our financial condition or state other forward-looking
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future
that we are not able to accurately predict or control and that may cause our
actual results to differ materially from the expectations we described in our
forward-looking statements. Investors are cautioned that all forward-looking
statements involve risks and uncertainties, and actual results may differ
materially from those discussed as a result of various factors, including the
loss of a significant client, failure to meet client expectations, failure
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to create a worldwide network of offices, failure to attract and retain
qualified professionals, loss of key personnel, failure to manage our growth,
failure to maintain our reputation and expand our name recognition, failure to
keep up with technological advances, evolving industry standards and changing
client requirements, failure of the Internet to expand as a means of conducting
business, failure to compete, actual or perceived conflicts of interest
restricting our ability to obtain new clients, failure to effectively integrate
acquisitions, failure to raise additional capital if necessary, failure to
successfully defend future lawsuits, failure to protect our intellectual
property and proprietary rights and changes in government regulation of the
Internet. These factors should be considered carefully and readers should not
place undue reliance on the forward-looking statements.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 13, 2000, the Securities and Exchange Commission declared Digitas'
Registration Statement on Form S-1 (File No. 333-93585) effective. On March
16, 2000, Digitas closed its offering for an aggregate of 6,200,000 shares of
the Digitas Common Stock at an offering price of $24.00 per share. The
managing underwriters for the offering were Morgan Stanley Dean Witter,
Deutsche Banc Alex. Brown, Salomon Smith Barney, Banc of America Securities
LLC and Bear, Stearns & Co, Inc. Net proceeds to Digitas were approximately
$134,700,000 after deducting underwriting discounts and commissions of
$10,400,000 and offering expenses of $3,700,000. None of the net proceeds of
the offering were paid directly or indirectly to any of our directors or
officers or their associates, or to persons owning 10% or more of any class
of our equity securities or our affiliates.
The primary purposes of the initial public offering were to increase the
Company's equity capital, create a public market for its common stock and to
facilitate future access by Digitas to public equity markets. Digitas used $72.9
million of the net proceeds to repay long-term debt and notes payable to
shareholders and plans to use the remainder of the proceeds for working capital
and general corporate uses.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Ninth Amendment to Lease, dated as of February 24, 2000, by and
between BP Prucenter Acquisition, LLC and Digitas LLC, formerly
known as Bronnercom, LLC, formerly known as Bronner Slosberg
Humphrey, LLC.
11.1 Computation of shares used in computing Basic and Diluted Net
Income (Loss) per Share.
27.1 Financial data schedule.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIGITAS INC.
Date: May 11, 2000 By /s/ David W. Kenny
-------------------------------------
David W. Kenny
Director, Chairman and Chief Executive
Officer
Date: May 11, 2000 By /s/ Michael Goss
-------------------------------------
Michael Goss
Executive Vice President and
Chief Financial Officer
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EXHIBIT 10.1
NINTH AMENDMENT TO LEASE
------------------------
NINTH AMENDMENT TO LEASE dated as of this 24th day of February, 2000, by
and between BP PRUCENTER ACQUISITION, LLC, a Delaware limited liability
company (as successor-in-interest to The Prudential Insurance Company of
America) ("Landlord") and DIGITAS LLC, formerly known as BRONNERCOM, LLC,
formerly known as BRONNER SLOSBERG HUMPHREY, LLC, a Delaware limited
liability company, as successor-in-interest to Bronner Slosberg Humphrey,
Inc. ("Tenant").
R E C I T A L S
---------------
By Lease dated May 31, 1995, as amended by a First Amendment of Lease
dated June 21, 1996, a Second Amendment of Lease dated September 1, 1996, a
Third Amendment of Lease dated November 5, 1996, a Fourth Amendment of Lease
dated January 22, 1997, a Fifth Amendment and Partial Termination of Lease
dated July 11, 1997, a Sixth Amendment and Partial Termination of Lease dated
May 15, 1998, a Seventh Amendment to Lease dated March 29, 1999 and an Eighth
Amendment to Lease dated July 30, 1999 (the "Lease"), Landlord's
predecessor-in-interest did lease to Tenant and Tenant did hire and lease
from Landlord's predecessor-in-interest certain premises (the "Initial
Premises") located in the Tower Building (the "Building"), Prudential Center,
Boston, Massachusetts, which Initial Premises are described with greater
particularity in the Lease.
Tenant has exercised its right, pursuant to Paragraph C of the Eighth
Amendment to Lease, to lease the First Offer Space, being the balance of the
fifth (5th) floor of the Building, substantially as shown on Exhibit A to the
Eighth Amendment to Lease.
Landlord and Tenant are entering into this instrument to set forth said
leasing of the Fourth Floor Substitution Space, the Ninth Amendment Space and
the First Offer Space into the Lease and to amend the Lease.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration in hand this date paid by each of the parties to the
other, the receipt and sufficiency of which are hereby severally
acknowledged, and in further consideration of the mutual promises herein
contained, Landlord and Tenant hereby agree to and with each other as follows:
A. EIGHTH AMENDMENT SPACE B
Reference is made to the Eighth Amendment Space B demised by Tenant
pursuant to Paragraph B of the Eighth Amendment to Lease.
Notwithstanding anything to the contrary contained in the Eighth
Amendment to Lease, the parties desire to revise the Eighth
Amendment Space B Commencement Date.
<PAGE>
Therefore, Paragraph B(2) of said Eighth Amendment is hereby deleted
and the following is hereby substituted in its place:
"The Eighth Amendment Space B Commencement Date shall be the
day after the date that the present tenant of the Eighth
Amendment Space B vacates the Eighth Amendment Space B. The
parties hereby acknowledge that the present tenant of the
Eighth Amendment Space B is currently holding over in the
Eighth Amendment Space B after the expiration of the term of
its lease on January 31, 2000. Landlord hereby represents that
Landlord is diligently pursuing its rights and remedies
against such tenant to obtain possession of the Eighth
Amendment Space B. Therefore, Landlord currently estimates
that the Eighth Amendment Space B Commencement Date will be on
or about March 15, 2000. Tenant shall lease the Eighth
Amendment Space B in "as-is" condition, broom clean and clear
of all occupants, in the condition in which the Eighth
Amendment Space B is in as of the Eighth Amendment Space B
Commencement Date, without any obligation on the part of
Landlord to prepare or construct the Eighth Amendment Space B
for Tenant's occupancy, expect that Landlord shall provide to
Tenant an allowance of $5.00 per square foot of rentable
floor area of the Eighth Amendment Space B (the "Eighth
Amendment Space B Allowance") towards the cost of improvements
to be performed by Tenant on the fifth (5th) floor in
accordance with the terms of the Lease after Tenant delivers
to Landlord paid invoices indicating the actual cost of such
improvements reasonably satisfactory to Landlord.
Notwithstanding the foregoing, Landlord shall be under no
obligation to apply any portion of the Eighth Amendment Space
B Allowance for any purposes other than as provided in this
Ninth Amendment, nor shall Landlord be deemed to have assumed
any obligations, in whole or in part, of Tenant to any
contractors, subcontractors, suppliers, workmen or
materialmen. In addition, Landlord shall not be obligated to
make any application of any portion of the Eighth Amendment
Space B Allowance if (i) there shall be existing any default
of Tenant under the Lease (as defined in Section 8.1), beyond
the expiration of applicable notice and grace periods, or (ii)
there are any liens which are not bonded to the reasonable
satisfaction of the Landlord against Tenant's interest in the
Lease or against the Premises, the Building, or the Prudential
Center arising out of any work performed pursuant to the Lease
by Tenant or any litigation in which Tenant is a party."
-2-
<PAGE>
B. FIRST OFFER SPACE
1. Reference is made to the fact that Tenant has exercised its right,
pursuant to Paragraph C of the Eighth Amendment to Lease, to lease
the First Offer Space. Reference is further made to the fact that,
as a result of such exercise by Tenant, Tenant has demised the
entirety of the fifth (5th) floor of the Building and that those
portions of the fifth (5th) floor which were previously common
areas shall now be included as a part of the First Offer Space.
Therefore, notwithstanding anything to the contrary in said
Paragraph C of the Eighth Amendment to Lease, the RFO Premises is
hereby agreed to consist of 5,815 rentable square feet, provided
however, that for the purposes of determining the rent and
Tenant's Share in respect of the First Offer Space, the First
Offer Space shall be deemed to be 3,298 rentable square feet.
2. Effective as of the "RFO Premises Commencement Date" (as defined
in Section 3 hereof) the RFO Premises shall constitute a part of
the "Premises" (as defined and used in the Lease), so that the
Premises (as defined and used in the Lease) shall include the
Initial Premises and the RFO Premises.
3. The RFO Premises Commencement Date shall be February 1, 2000.
Tenant shall lease the RFO Premises in "as-is" condition,
broom clean and clear of all occupants, in the condition in which
the RFO Premises are in as of the RFO Premises Commencement Date,
without any obligation on the part of Landlord to prepare or
construct the RFO Premises for Tenant's occupancy and without
any obligation to provide any allowance to Tenant in respect of
the RFO Premises, except that Landlord shall, at Landlord's cost,
perform such work in the women's restroom in the RFO Premises
as is necessary to bring such restroom into compliance with the
Americans with Disabilities Act ("Landlord's ADA Work"). Landlord
shall use reasonable efforts to perform Landlord's ADA Work on
or before March 31, 2000.
4. The Term of the Lease for the RFO Premises shall commence on the RFO
Premises Commencement Date and shall expire on November 30, 2005,
unless sooner terminated in accordance with the provisions of the
Lease as herein amended, upon all the same terms and conditions
contained in the Lease as herein amended.
5. Tenant's obligation to pay rent, Increased Operating Expenses and
increased Real Estate Taxes in respect of the RFO Premises shall
not commence to accrue until the date ("RFO Premises Rent
Commencement Date") which is the earlier of (x) the Commencement
Date in respect of Eighth Amendment Space B, as defined in
Paragraph A of this Ninth Amendment to Lease, or (y) the date that
Tenant begins to move into the RFO Premises furniture and
equipment for its regular business operations.
-3-
<PAGE>
6. Rent for the RFO Premises from the RFO Premises Rent
Commencement Date through the expiration of the RFO Premises
Lease Term shall be payable at the annual rate of $148,410.00
(being the product of (i) $45.00 and (ii) the rentable floor
area of the RFO Premises (being 3,298 square feet).
7. Commencing on the RFO Premises Rent Commencement Date, Tenant
shall reimburse Landlord for Increased Operating Expenses
(pursuant to Section 3.2 of the Lease) for the RFO Premises
in excess of the Operating Expenses incurred by Landlord
during calendar year 1999 (being January 1, 1999 through
December 31, 1999).
8. Commencing on the RFO Premises Rent Commencement Date, Tenant
shall reimburse Landlord for increased Real Estate Taxes
(pursuant to Section 3.4 of the Lease) for the RFO Premises in
excess of the Real Estate Taxes paid by Landlord in fiscal year
2000 (being July 1, 1999 through June 30, 2000).
9. Tenant's Share with respect to the RFO Premises consisting of
a total of 3,298 rentable square feet with be .27%.
10. Tenant shall reimburse Landlord monthly in arrears within thirty
(30) days of receipt of Landlord's invoice for the cost of
electricity consumed in the RFO Premises as determined by a
check meter (which check meter is presently installed) at
Landlord's cost of electricity from time to time.
11. Tenant shall not be entitled to any additional parking passes in
connection with Tenant's demise of the RFO Premises.
12. Tenant's extension rights set forth in Section 12.15 of the
Lease, as amended by Section II(1) of the Fourth Amendment of
Lease, shall apply to the RFO Premises.
13. There shall be no modification of the terms regarding the
reduction and/or increase in the Original LC and/or the Third
Amendment LC in connection with Tenant's demise of the RFO
Premises.
C. OTHER TERMS
1. Tenant hereby acknowledges and confirms that the indemnity set
forth in Section 11.1 of the Lease shall apply, and always has
applied, to the use or occupancy by Tenant of the Premises in
its entirety and to the acts or omissions of Tenant, its agents,
employees or any contractors brought onto the Premises in its
entirety by Tenant.
-4-
<PAGE>
2. (A) Tenant warrants and represents that Tenant has not dealt
with any broker in connection with the consummation of this
Ninth Amendment other than Meredith & Grew, Incorporated
(the "Recognized Broker"); and in the event any claim is made
against Landlord relative to dealings by Tenant with brokers
other than the Recognized Broker, Tenant shall defend the
claim against Landlord with counsel of Tenant's selection
first approved by Landlord (which approval will not be
unreasonably withheld) and save harmless and indemnify
Landlord on account of loss, cost or damage which may arise
by reason of such claim.
(B) Landlord warrants and represents that Landlord has not
dealt with any broker in connection with the consummation of
this Ninth Amendment other than the Recognized Broker; and
in the event any claim is made against Tenant relative to
dealings by Landlord with brokers other than the Recognized
Broker, Landlord shall defend the claim against Tenant with
counsel of Landlord's selection and save harmless and
indemnify Tenant on account of loss, cost or damage which
may arise by reason of such claim. Landlord shall be
responsible for paying the commission due to the Recognized
Broker in connection with this Ninth Amendment.
3. Except as otherwise expressly provided herein, all capitalized
terms used herein without definition shall have the same
meanings as are set forth in the Lease.
4. Except as herein amended the Lease shall remain unchanged and in
full force and effect. All references to the "Lease" shall be
deemed to be references to the Lease as herein amended.
-5-
<PAGE>
EXECUTED as a sealed instrument as of the date and year first above
written.
WITNESS: LANDLORD:
/s/ Susan J. Murphy BP PRUCENTER ACQUISITION, LLC
--------------
By: BOSTON PROPERTIES LIMITED
PARTNERSHIP, its Manager
By: BOSTON PROPERTIES, INC.,
its general partner
By /s/ Claude B. Hoopes
-----------------------
Name Claude B. Hoopes
-----------------------
Title Senior Vice President
-----------------------
WITNESS: TENANT:
------------
DIGITAS LLC
By /s/ Marschall I. Smith
-----------------------
Name Marschall I. Smith
-----------------------
Title Secretary and
General Counsel
-----------------------
-6-
<PAGE>
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
DIGITAS INC.
ARTICLE 6.01 OF REGULATION S-K
COMPUTATION OF SHARES USED IN COMPUTING BASIC AND DILUTED NET INCOME PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31 MARCH 31,
2000 1999
------- -------
<S> <C> <C>
Net (loss) from continuing operations....................... $(5,884) $(6,043)
Extraordinary loss.......................................... $(1,653) $ -
Net loss.................................................... $(7,537) $(6,043)
Weighted average common shares outstanding.................. 51,982 50,086
------- -------
Shares used in computing per share amount................... 51,982 50,086
======= =======
Basic net (loss) per share:
Continuing operations....................................... $ (0.11) $ (0.12)
Extraordinary loss.......................................... $ (0.03) $ -
Net loss.................................................... $ (0.14) $ (0.12)
======= =======
Antidilutive options........................................ 30,445 21,029
======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 44,661
<SECURITIES> 0
<RECEIVABLES> 84,752
<ALLOWANCES> 1,134
<INVENTORY> 0
<CURRENT-ASSETS> 2,777
<PP&E> 42,130
<DEPRECIATION> 21,409
<TOTAL-ASSETS> 305,095
<CURRENT-LIABILITIES> 52,269
<BONDS> 2,170
0
0
<COMMON> 574
<OTHER-SE> 250,625
<TOTAL-LIABILITY-AND-EQUITY> 305,095
<SALES> 63,094
<TOTAL-REVENUES> 63,094
<CGS> 33,413
<TOTAL-COSTS> 67,894
<OTHER-EXPENSES> (678)
<LOSS-PROVISION> 141
<INTEREST-EXPENSE> 1,280
<INCOME-PRETAX> (5,478)
<INCOME-TAX> 406
<INCOME-CONTINUING> (5,884)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,653)
<CHANGES> 0
<NET-INCOME> (7,537)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
