<PAGE> 1
As filed with the Securities and Exchange Commission on August 16, 2000
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------
CNET NETWORKS, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 7812 13-3696170
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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150 CHESTNUT STREET
SAN FRANCISCO, CA 94111
(415) 395-7800
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
---------
SHELBY BONNIE
CHIEF EXECUTIVE OFFICER
CNET NETWORKS, INC.
150 CHESTNUT STREET
SAN FRANCISCO, CA 94111
(415) 395-7800
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
---------
COPIES TO:
Richard Capelouto, Esq. Alan J. Sinsheimer, Esq.
Daniel Clivner, Esq. Sullivan & Cromwell
Simpson Thacher & Bartlett 125 Broad Street
3373 Hillview Avenue New York, New York 10004
Palo Alto, California 94304 (212) 558-4000
(650) 251-5000
---------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective and all
other conditions to the proposed merger described herein have been satisfied or
waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, 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. [ ]
---------
CALCULATION OF REGISTRATION FEE
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===================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM MAXIMUM AMOUNT
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE OF REGISTRATION
REGISTERED REGISTERED (1) PER SHARE PRICE (2) FEE (2)
------------------------- ------------- --------------- -------------- ---------------
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Common Stock, par value
$0.0001 per share....... 52,626,381 Not applicable Not applicable $191,045
===================================================================================================================
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(1) Based on the maximum number of shares of CNET common stock to be issued in
connection with the merger, calculated as the sum of (i) the product of
(A) 109,628,800, the aggregate number of shares, par value $0.01 per
share, of ZD common stock outstanding as of August 9, 2000, assuming
exercise of all vested stock options, and (B) 0.3397, the number of shares
of common stock of the Registrant issuable in respect of each share of ZD
common stock and (ii) the product of (A) 25,936,409, the aggregate number
of shares, par value $0.01 per share, of ZDNet common stock outstanding as
of August 9, 2000, assuming exercise of all vested stock options, and (B)
0.5932, the number of shares of common stock of the Registrant issuable in
respect of each share of ZDNet common stock.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rules 457(f) and 457(c) of the Securities Act of 1933, as amended, and
based upon (i) the average of the high and low per share prices of ZD
common stock as reported on the New York Stock Exchange ($13.40) on August
11, 2000 and (ii) the average of the high and low per share prices of ZDNet
common stock as reported on the New York Stock Exchange ($14.60) on August
9, 2000.
---------
THE REGISTRANT HEREBY AMENDS THIS 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 THIS 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> 2
SUBJECT TO COMPLETION -- DATED AUGUST 15, 2000
[CNET LOGO]
CNET NETWORKS, INC.
150 CHESTNUT STREET
SAN FRANCISCO, CALIFORNIA 94111
[DATE]
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders
of CNET Networks, Inc., which we will hold on _______________, 2000, at 10:00
a.m., local time at 150 Chestnut Street, San Francisco, California.
At the special meeting, you will be asked to vote on the issuance of
CNET common stock under an Agreement and Plan of Merger pursuant to which a
wholly owned subsidiary of CNET will merge into Ziff-Davis Inc., with Ziff-Davis
continuing as the surviving corporation and becoming a wholly owned subsidiary
of CNET. We will continue to be called CNET Networks, Inc. after the merger. You
will also be asked to vote for the approval of the CNET 2000 Stock Option Plan.
CNET's acquisition of Ziff-Davis will create the leading online
provider of technology information focused on products and services, with
operations in 23 countries and 16 languages. The combined company is projected
to be a top-ten web property.
When the merger is completed, each share of ZD common stock will be
converted into 0.3397 of a share of CNET common stock and each share of ZDNet
common stock will be converted into 0.5932 of a share of CNET common stock.
After the merger, the current stockholders of CNET will own approximately 65%
of the combined company.
ZD common stock is listed on the New York Stock Exchange under the
trading symbol "ZD". On _____ __, 2000, ZD common stock closed at $_____ per
share. ZDNet common stock is listed on the New York Stock Exchange under the
trading symbol "ZDZ". On ___________ __, 2000, ZDNet common stock closed at
$_____ per share.
We cannot complete the merger or adopt the CNET 2000 Stock Option Plan
unless holders of a majority of the CNET shares represented in person or by
proxy and entitled to vote at the special meeting at which a quorum is present
vote for these proposals. Halsey Minor, the Chairman of our Board, and I have
agreed to vote our CNET shares, which represent approximately __% of the
outstanding CNET common stock, in favor of the issuance of CNET common stock in
the merger.
BEFORE VOTING, YOU SHOULD CAREFULLY REVIEW ALL THE INFORMATION
CONTAINED IN THE ATTACHED PROXY STATEMENT/PROSPECTUS AND IN PARTICULAR YOU
SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS" BEGINNING ON PAGE 26.
<PAGE> 3
After careful consideration, your board of directors has unanimously
determined that the merger is in the best interests of CNET and its
stockholders. Further, your board of directors has unanimously approved and
adopted the CNET 2000 Stock Option Plan. YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE ISSUANCE OF CNET SHARES IN THE MERGER AND FOR
THE APPROVAL OF THE CNET 2000 STOCK OPTION PLAN.
Whether or not you expect to attend the meeting, please complete,
date, sign and promptly return the accompanying proxy in the enclosed postage
paid envelope so that your shares may be represented at the meeting, regardless
of the number of shares you own.
Sincerely,
Shelby Bonnie
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved the merger described in this
proxy statement/prospectus or the CNET capital stock to be issued in connection
with the merger, or determined if this proxy statement/ prospectus is accurate
or adequate. Any representation to the contrary is a criminal offense.
THIS PROXY STATEMENT/PROSPECTUS IS DATED _____ __, 2000 AND IS FIRST
BEING MAILED TO STOCKHOLDERS ON OR ABOUT _____ __, 2000.
<PAGE> 4
SUBJECT TO COMPLETION -- DATED AUGUST 15, 2000
CNET NETWORKS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _____________, 2000
To the Stockholders of CNET Networks, Inc.:
A special meeting of stockholders of CNET Networks, Inc. will be held
at 150 Chestnut Street, San Francisco, California 94111, on ___________ ___,
2000 at 10:00 a.m. local time, for the following purposes:
1. To consider and vote upon a proposal to approve the issuance
of CNET common stock in connection with an Agreement and Plan
of Merger, dated as of July 19, 2000, among TD Merger Sub,
Inc. a wholly owned subsidiary of CNET, Ziff-Davis Inc. and
CNET under which:
o TD Merger Sub will be merged into Ziff-Davis, with
Ziff-Davis continuing as the surviving corporation
and becoming a subsidiary of CNET;
o each issued and outstanding share of ZD common stock
will be canceled and converted into the right to
receive 0.3397 of a share of CNET common stock; and
o each issued and outstanding share of ZDNet common
stock will be canceled and converted into the right
to receive 0.5932 of a share of CNET common stock.
2. To consider and vote upon a proposal to approve the CNET
Networks, Inc. 2000 Stock Option Plan.
Our board of directors has unanimously approved the merger agreement
and the merger and recommends that you vote FOR approval of the issuance of
shares of CNET common stock in the merger. Further, our board of directors has
unanimously approved and adopted the CNET 2000 Stock Option Plan and recommends
that you vote FOR approval of the CNET 2000 Stock Option Plan. The proposals
are described in more detail in the accompanying proxy statement/prospectus,
which you should read in its entirety before voting. A copy of the merger
agreement is attached as Annex A to the accompanying proxy
statement/prospectus. A copy of the CNET Networks, Inc. 2000 Stock Option Plan
is attached as Annex B to the accompanying proxy statement/prospectus.
Only stockholders of record at the close of business on _____ __, 2000
are entitled to notice of the special meeting, and to vote at the special
meeting and at any adjournments thereof. For ten days prior to the special
meeting, a complete list of CNET stockholders entitled to vote at the special
meeting will be available for examination by any stockholder for any purpose
germane to the special meeting, during ordinary business hours at the principal
executive offices of CNET located in San Francisco, California.
<PAGE> 5
All CNET stockholders are cordially invited to attend the special
meeting in person. However, to ensure your representation at the special
meeting, I urge you to complete, sign and return the enclosed proxy card as
promptly as possible in the enclosed postage-prepaid envelope. You may revoke
your proxy in the manner described in the accompanying proxy statement/
prospectus at any time before it is voted at the special meeting.
We cannot complete the merger or adopt the CNET 2000 Stock Option Plan
unless holders of a majority of the CNET shares represented in person or by
proxy and entitled to vote at the special meeting at which a quorum is present
vote for these proposals. Halsey Minor, the Chairman of our Board, and I have
agreed to vote the CNET shares we own, which represent approximately __% of the
outstanding CNET common stock, in favor of the issuance of CNET common stock in
the merger.
By order of the board of directors,
Shelby Bonnie
Chief Executive Officer
San Francisco, California
_____ __, 2000
<PAGE> 6
REFERENCE TO ADDITIONAL INFORMATION
This proxy statement/prospectus "incorporates by reference" important
business and financial information about CNET and Ziff-Davis from documents
that are not included in or delivered with this proxy statement/prospectus. You
may obtain documents incorporated by reference in this proxy
statement/prospectus without charge by requesting them in writing or by
telephone from the appropriate company at the following addresses:
CNET Networks, Inc. Ziff-Davis Inc.
150 Chestnut Street 28 East 28th Street
San Francisco, California 94111 New York, New York 10016
Tel: (415) 364-8000 Tel: (212) 503-3500
Attn: Corporate Secretary Attn: Corporate Secretary
IF YOU WOULD LIKE TO REQUEST ANY DOCUMENTS, PLEASE DO SO BY _____,
2000 IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
For a more detailed description of the information incorporated by
reference into this proxy statement/prospectus and how you may obtain it, see
"Summary of the Proxy Statement/ Prospectus - Where You Can Find More
Information" on page 14.
<PAGE> 7
SUBJECT TO COMPLETION -- DATED AUGUST 15, 2000
[ZIFF-DAVIS LOGO]
ZIFF-DAVIS INC.
28 EAST 28TH STREET
NEW YORK, NEW YORK 10016
[DATE]
Dear Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of Ziff-Davis Inc., which we will hold on ______, 2000, at 1:00
p.m., local time, at 28 East 28th Street, New York, New York.
At the special meeting, you will be asked to vote on the approval of
an Agreement and Plan of Merger pursuant to which a wholly owned subsidiary of
CNET will merge into Ziff-Davis, with Ziff-Davis continuing as the surviving
corporation and becoming a wholly owned subsidiary of CNET. The combined
company will continue to be called CNET Networks, Inc.
CNET's merger with Ziff-Davis will create the leading online provider
of technology information focused on products and services, with operations in
23 countries and 16 languages. The combined company is projected to be a
top-ten web property.
When the merger is completed, each share of ZD common stock will be
converted into 0.3397 of a share of CNET common stock and each share of ZDNet
common stock will be converted into 0.5932 of a share of CNET common stock.
After the merger, Ziff-Davis stockholders will own approximately 35% of the
shares of the combined company.
CNET common stock is listed on NASDAQ under the trading symbol "CNET".
On _______, 2000, CNET common stock closed at $_______ per share.
We cannot complete the merger unless holders of shares of ZD common
stock and ZDNet common stock representing a majority of the votes entitled to
be cast at the special meeting at which a quorum is present, voting together as
a single class, vote to adopt the merger agreement. Softbank America, Inc.,
which owns ZD common stock entitled to cast a majority of the total votes at
the special meeting, has agreed to vote to adopt the merger agreement. Thus, we
expect the merger agreement to be adopted by our stockholders regardless of how
other stockholders vote.
BEFORE VOTING, YOU SHOULD CAREFULLY REVIEW ALL THE INFORMATION
CONTAINED IN THE ATTACHED PROXY STATEMENT/PROSPECTUS AND IN PARTICULAR YOU
SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS" BEGINNING ON PAGE
26.
After careful consideration, your board of directors has unanimously
determined that the merger is in the best interests of Ziff-Davis and its
stockholders. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
ADOPTION OF THE MERGER AGREEMENT.
<PAGE> 8
Whether or not you expect to attend the meeting, please complete,
date, sign and promptly return the accompanying proxy in the enclosed postage
paid envelope so that your shares may be represented at the meeting, regardless
of the number of shares you own. If you do not vote, it will have the same
effect as voting against the merger.
Sincerely,
Eric Hippeau
Chairman, Chief Executive
Officer and Director
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved the merger described in this
proxy statement/prospectus or the CNET capital stock to be issued in connection
with the merger, or determined if this proxy statement/prospectus is accurate
or adequate. Any representation to the contrary is a criminal offense.
THIS PROXY STATEMENT/PROSPECTUS IS DATED _____ __, 2000 AND IS FIRST
BEING MAILED TO STOCKHOLDERS ON OR ABOUT _____ ___, 2000.
<PAGE> 9
SUBJECT TO COMPLETION -- DATED AUGUST 15, 2000
ZIFF-DAVIS INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _____________, 2000
To the Stockholders of Ziff-Davis Inc.:
A special meeting of stockholders of Ziff-Davis Inc. will be held at
28 East 28th Street, New York, New York on _________ ___, 2000 at 1:00 p.m.
local time, for the following purposes:
I To consider and vote upon a proposal to adopt an Agreement and
Plan of Merger, dated as of July 19, 2000, among CNET Networks, Inc., TD Merger
Sub, Inc., a wholly owned subsidiary of CNET, and Ziff-Davis under which:
o TD Merger Sub will be merged into Ziff-Davis, with
Ziff-Davis continuing as the surviving corporation and
becoming a wholly-owned subsidiary of CNET;
o each issued and outstanding share of ZD common stock will
be canceled and converted into the right to receive 0.3397
of a share of CNET common stock; and
o each issued and outstanding share of ZDNet common stock
will be canceled and converted into the right to receive
0.5932 of a share of CNET common stock.
II To transact any other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
Our board of directors has unanimously approved the merger agreement
and the merger and recommends that you vote FOR adoption of the merger
agreement. The proposal is described in more detail in the accompanying proxy
statement/prospectus, which you should read in its entirety before voting. A
copy of the merger agreement is attached as Annex A to the accompanying proxy
statement/prospectus.
Only stockholders of record at the close of business on _____ __, 2000
are entitled to notice of the special meeting, and to vote at the special
meeting and at any adjournments thereof. For ten days prior to the special
meeting, a complete list of Ziff-Davis stockholders entitled to vote at the
special meeting will be available for examination by any stockholder for any
purpose germane to the special meeting during ordinary business hours at the
principal executive offices of Ziff-Davis located in New York, New York.
Holders of ZD common stock and ZDNet common stock are not entitled to
appraisal rights under Section 262 of the Delaware General Corporation Law
because the conditions set forth in Section 262 have not been met.
<PAGE> 10
All Ziff-Davis stockholders are cordially invited to attend the
special meeting in person. However, to ensure your representation at the
special meeting, we urge you to complete, sign and return the enclosed proxy
card as promptly as possible in the enclosed postage-prepaid envelope. You may
revoke your proxy in the manner described in the accompanying proxy statement/
prospectus at any time before it is voted at the special meeting. If you fail
to return a properly executed proxy card or to vote in person at the special
meeting, the effect will be a vote against the proposal to adopt the merger
agreement.
We cannot complete the merger unless holders of shares of ZD common
stock and ZDNet common stock representing a majority of the votes entitled to
be cast at the special meeting at which a quorum is present, voting together as
a single class, vote to adopt the merger agreement. Softbank America, Inc.,
which owns ZD common stock entitled to cast a majority of the total votes at
the special meeting, has agreed to vote to adopt the merger agreement. Thus, we
expect the merger agreement to be adopted by our stockholders regardless of how
other stockholders vote.
PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
By order of the board of directors,
J. Malcolm Morris
Secretary
New York, New York
____ __, 2000
THE INFORMATION IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE
AND MAY BE CHANGED. CNET MAY NOT SELL ITS SECURITIES PURSUANT TO THE PROPOSED
MERGER UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THE ACCOMPANYING PROXY STATEMENT/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.
<PAGE> 11
TABLE OF CONTENTS
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Page
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QUESTIONS AND ANSWERS ABOUT THE MERGER............................................................................1
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS.........................................................................6
The Companies............................................................................................6
Summary of the Merger....................................................................................7
Summary of the CNET 2000 Stock Option Plan..............................................................13
Where You Can Find More Information.....................................................................13
CNET Networks, Inc.
Selected Historical Financial Data.............................................................17
Ziff-Davis Inc.
Selected Historical Financial Data.............................................................18
Selected Unaudited Pro Forma Combined Financial Information.............................................20
Unaudited Comparative per Share Data....................................................................21
Comparative per Share Market Price
Information....................................................................................23
RISK FACTORS.....................................................................................................25
THE CNET SPECIAL MEETING.........................................................................................45
THE ZIFF-DAVIS SPECIAL MEETING...................................................................................49
PROPOSAL ONE -- THE MERGER AND RELATED MATTERS...................................................................53
THE PROPOSED MERGER..............................................................................................53
Structure of the merger; merger consideration...........................................................53
Background of the merger................................................................................54
Joint reasons for the merger............................................................................60
CNET's reasons for the merger...........................................................................61
Recommendation of CNET's board of directors.............................................................63
Opinion of CNET's financial advisor.....................................................................63
Ziff-Davis' reasons for the merger......................................................................72
Recommendation of Ziff-Davis' board of directors........................................................74
Opinion of Ziff-Davis' financial advisor................................................................74
Material United States federal income tax consequences..................................................80
Exchange of Ziff-Davis stock certificates for CNET stock certificates...................................82
No dividends............................................................................................82
Regulatory matters......................................................................................83
Accounting treatment....................................................................................83
Restrictions on sales of shares by affiliates...........................................................83
Interests of certain directors, officers and affiliates in the merger...................................84
Material contacts between Ziff-Davis and CNET...........................................................84
Indemnification and insurance...........................................................................85
No appraisal rights.....................................................................................85
Listing on NASDAQ of CNET common stock to be issued in the merger.......................................86
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Delisting and deregistration of ZD common stock and ZDNet common stock after the
merger.........................................................................................86
THE MERGER AGREEMENT.............................................................................................87
General ...............................................................................................87
Representations and warranties..........................................................................87
Conditions to the completion of the merger..............................................................88
No solicitation.........................................................................................90
Termination.............................................................................................91
Termination fees........................................................................................92
Conduct of business pending the merger..................................................................95
Other agreements........................................................................................97
Amendment; extension and waiver.........................................................................98
Expenses ...............................................................................................98
AGREEMENTS RELATED TO THE MERGER.................................................................................99
CNET stockholders' voting agreements....................................................................99
Softbank voting agreement...............................................................................99
Softbank stockholder agreement.........................................................................100
Stockholder agreements of Mr. Bonnie and Mr. Minor.....................................................102
Affiliate agreement....................................................................................102
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS...............................................................103
COMPARISON OF RIGHTS OF HOLDERS OF
CNET COMMON STOCK AND
ZIFF-DAVIS COMMON STOCK................................................................................108
PROPOSAL TWO -- APPROVAL OF THE CNET 2000 STOCK OPTION PLAN.....................................................122
Administration.........................................................................................122
Eligibility............................................................................................123
Terms of options.......................................................................................123
Other stock-based awards...............................................................................123
Adjustments............................................................................................124
No right to continued employment.......................................................................125
Nontransferability of awards...........................................................................125
Amendments.............................................................................................125
Certain federal income tax consequences................................................................126
Interests of certain persons in matters to be acted upon...............................................127
PRINCIPAL STOCKHOLDERS OF CNET NETWORKS, INC....................................................................128
PRINCIPAL STOCKHOLDERS OF ZIFF-DAVIS INC........................................................................129
Certain Beneficial Owners..............................................................................129
Management.............................................................................................129
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<PAGE> 13
CNET NETWORKS, INC.
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EXECUTIVE COMPENSATION..........................................................................................131
Summary compensation table.............................................................................131
Director compensation..................................................................................132
Employment agreements..................................................................................133
Incentive plan.........................................................................................133
Compensation Committee interlocks and insider participation............................................133
Compensation Committee's report on executive compensation..............................................133
SUBMISSION OF STOCKHOLDER PROPOSALS.............................................................................135
EXPERTS .......................................................................................................135
LEGAL MATTERS...................................................................................................135
RECITALS .......................................................................................................A-1
AGREEMENT.......................................................................................................A-2
ANNEX A (Agreement and Plan of Merger, dated as of July 19, 2000, among the
Registrant, Ziff-Davis Inc, and TD Merger Sub, Inc.)............................................................A-1
ANNEX B (CNET 2000 Stock Option Plan)...........................................................................B-1
ANNEX C (Opinion of Lazard Freres & Co.) .......................................................................C-1
ANNEX D (Opinion of Morgan Stanley & Co. Incorporated)..........................................................D-1
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<PAGE> 14
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE MERGER?
A: The merger will combine the business of CNET and Ziff-Davis. Upon
consummation of the merger, Ziff-Davis will become a wholly-owned
subsidiary of CNET. After the merger, the current stockholders of
Ziff-Davis will own approximately 35% of the combined company.
Q: WHY ARE ZIFF-DAVIS AND CNET PROPOSING THE MERGER?
A: CNET's merger with Ziff-Davis will create the leading online provider
of technology information focused on products and services, with
operations in 23 countries and 16 languages. The combined company is
projected to be a top-ten web property, according to the Media Metrix
statistics for May 2000. We believe that the combined company will be
uniquely positioned to address the technology information needs of all
segments of technology users, from new technology buyers to mainstream
computer enthusiasts to active participants in the technology
industry. By combining the complementary strengths and management
teams of the two leading interactive technology companies, we believe
that we will be able to broaden our audience of users, realize
opportunities to enhance revenues and content, leverage our respective
strengths to enhance revenues and EBITDA, and capitalize on potential
business development opportunities. The combination provides the
potential for stronger combined operating and financial results than
either company could achieve on its own.
Q: WHAT WILL ZIFF-DAVIS STOCKHOLDERS RECEIVE IN THE MERGER?
A: If we complete the merger, holders of ZD common stock will receive, in
exchange for each share of ZD common stock held by them on the date of
the merger, 0.3397 of a share of CNET common stock and holders of
ZDNet common stock will receive, in exchange for each share of ZDNet
common stock held by them on the date of the merger, 0.5932 of a share
of CNET common stock. We will make a cash payment in lieu of issuing
fractional shares in the merger.
Q: WILL CNET ISSUE TRACKING STOCK IN THE MERGER?
A: No. CNET will issue only one class of common stock. The shares of both
ZD common stock and ZDNet common stock will be canceled and exchanged
for shares of CNET common stock.
Q: WILL ZIFF-DAVIS ELIMINATE ITS TRACKING STOCK STRUCTURE BEFORE THE
MERGER?
A: No. Ziff-Davis will not eliminate its tracking stock structure prior
to completion of the merger. If the merger is abandoned prior to its
completion, Ziff-Davis expects to eliminate its tracking stock
structure as soon as possible after termination of the merger
agreement on the terms described in its proxy statement dated February
7, 2000.
1
<PAGE> 15
Q: WILL ZIFF-DAVIS STOCKHOLDERS RECOGNIZE A TAXABLE GAIN OR LOSS FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES IN THE MERGER?
A: We expect that, if the merger is completed, you would not recognize
gain or loss for United States federal income tax purposes, except
with respect to the cash, if any, received instead of fractional
shares of CNET common stock. However, we strongly encourage you to
consult your own tax advisor to determine your particular tax
consequences.
For a more complete description of the tax consequences of the merger,
see the section titled "The Proposed Merger - Material United States
federal income tax consequences" on page 81.
Q: ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE
MERGER AGREEMENT AND THE MERGER OR THE ISSUANCE OF CNET COMMON STOCK?
A: Yes. In evaluating the merger agreement and the merger or the issuance
of CNET common stock, you should carefully read this proxy
statement/prospectus and especially consider the factors discussed in
the section entitled "Risk Factors" on page 26.
Q: WHAT VOTE IS REQUIRED BY CNET STOCKHOLDERS TO APPROVE THE ISSUANCE OF
CNET COMMON STOCK?
A: The affirmative vote of the holders of a majority of the CNET shares
represented in person or by proxy and entitled to vote at the CNET
special meeting at which a quorum is present is required to approve
the issuance of CNET common stock in the merger. As of the record
date, CNET directors and executive officers and their affiliates,
including Mr. Bonnie and Mr. Minor, owned approximately __% of the
CNET common stock entitled to vote at the CNET special meeting. Mr.
Bonnie and Mr. Minor have agreed with Ziff-Davis to vote all of their
CNET common stock in favor of the issuance of CNET common stock in the
merger. As of the record date, Mr. Bonnie's and Mr. Minor's CNET
common stock represented approximately __% of the outstanding CNET
common stock.
Q: WHAT VOTE IS REQUIRED BY ZIFF-DAVIS SHAREHOLDERS TO ADOPT THE MERGER
AGREEMENT?
A: The affirmative vote of holders of ZD common stock and ZDNet common
stock representing a majority of the votes entitled to be cast at the
Ziff-Davis special meeting at which a quorum is present, voting
together as a single class, is required to adopt the merger agreement.
Softbank, which owns ZD common stock entitled to cast a majority of
the total votes at the Ziff-Davis special meeting, has agreed with
CNET to vote to adopt the merger agreement. Thus, we expect the merger
agreement to be adopted by Ziff-Davis stockholders regardless of how
other Ziff-Davis stockholders vote.
Q: DOES CNET'S BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE
ISSUANCE OF CNET COMMON STOCK IN THE MERGER AND THE APPROVAL OF THE
CNET 2000 STOCK OPTION PLAN?
A: Yes. After careful consideration, CNET's board of directors
unanimously determined that the merger and adoption of the CNET 2000
Stock Option Plan are in the best interests of CNET and its
stockholders and has declared the merger and the CNET 2000 Stock
Option Plan advisable. CNET's board of directors unanimously
recommends that you vote FOR
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<PAGE> 16
the issuance of CNET common stock in the merger and FOR the CNET 2000
Stock Option Plan.
Q: DOES ZIFF-DAVIS' BOARD OF DIRECTORS RECOMMEND VOTING FOR ADOPTION OF
THE MERGER AGREEMENT?
A: Yes. After careful consideration, Ziff-Davis' board of directors
unanimously determined that the merger is in the best interests of
Ziff-Davis and its stockholders and has declared the merger advisable.
Ziff-Davis' board of directors unanimously recommends that Ziff-Davis
stockholders vote FOR adoption of the merger agreement.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working to complete the merger as quickly as possible. We
expect to complete the merger during the fourth calendar quarter of
2000.
For a description of the conditions to completion of the merger, see
the section titled "The Merger Agreement - Conditions to the completion
of the merger" on page 90.
Q: ARE ZIFF-DAVIS STOCKHOLDERS ENTITLED TO APPRAISAL RIGHTS?
A: No. Under Delaware law, holders of Ziff-Davis stock do not have the
right to an appraisal of the value of their shares of ZD common stock
or ZDNet common stock in connection with the merger. See "The Proposed
Merger -- No appraisal rights" on page 86.
Q: ARE CNET STOCKHOLDERS ENTITLED TO APPRAISAL RIGHTS?
A: No. Under Delaware law, holders of CNET stock do not have the right to
an appraisal of the value of their shares of CNET common stock in
connection with the merger. See "The Proposed Merger -- No appraisal
rights" on page 86.
Q: WHAT IS THE CNET 2000 STOCK OPTION PLAN?
A: The CNET 2000 Stock Option Plan is designed to make available a
sufficient number of shares in order to attract and retain the best
available personnel for positions of substantial responsibility and
provide incentives to such personnel to promote the success of our
business. A total of 5,000,000 shares of common stock have been
authorized and reserved for issuance upon exercise of options granted
under the CNET 2000 Stock Option Plan.
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<PAGE> 17
Q: WHAT VOTE IS REQUIRED BY CNET STOCKHOLDERS TO APPROVE THE CNET 2000
STOCK OPTION PLAN?
A: The affirmative vote of the holders of a majority of the CNET shares
represented in person or by proxy and entitled to vote at the CNET
special meeting at which a quorum is present is required to approve
the CNET 2000 Stock Option Plan. As of the record date, CNET directors
and executive officers and their affiliates owned approximately __% of
the CNET common stock outstanding.
Q: WHY IS CNET PROPOSING THE CNET 2000 STOCK OPTION PLAN?
A: At the May 24, 2000 CNET annual meeting, stockholders approved an
amendment to the 1997 Stock Option Plan to increase the number of CNET
shares available under the plan by 5,000,000. Due to an administrative
error in the amendment, the increase was deemed to be void and the
plan remains at its previous limit which is insufficient to meet
current requirements. In order to ensure that sufficient stock options
are available to reward and motivate existing CNET employees and to
attract new employees, the CNET board has approved the issuance of
5,000,000 shares of CNET common stock pursuant to the CNET 2000 Stock
Option Plan. Further, we are seeking stockholder approval in order to
enable grants under the CNET 2000 Stock Option Plan to qualify as
incentive stock options and to avoid limitations on tax deductibility
of options granted under the plan.
Q: IS THE APPROVAL OF THE ISSUANCE OF CNET COMMON STOCK IN CONNECTION
WITH THE MERGER CONDITIONED ON THE APPROVAL OF THE CNET 2000 STOCK
OPTION PLAN?
A: No. The approval of the issuance of CNET common stock in the merger
and the approval of the CNET 2000 Stock Option Plan are not
conditioned on each other. Therefore, a vote for or against one
proposal will have no effect on the approval of the other proposal.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in
this proxy statement/ prospectus, please complete and sign your proxy
card and return it in the enclosed return envelope as soon as possible
so that your shares may be represented at your special meeting.
Q: SHOULD ZIFF-DAVIS STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A: No, Ziff-Davis stockholders should not send in their stock
certificates. After the merger is completed we will send Ziff-Davis
stockholders written instructions for exchanging their Ziff-Davis
stock certificates. CNET stockholders will keep their existing stock
certificates.
Q: HOW DO I VOTE?
A: Simply indicate on your proxy card how you want to vote, and sign and
mail your proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at the special
meeting. If you return your proxy card but do not include instructions
on how to vote your proxy, we will vote your shares FOR the proposals
being
4
<PAGE> 18
made at your special meeting unless your shares are held in "street
name" in a brokerage account. You may also vote by telephone as
described on the enclosed proxy card.
The Ziff-Davis special meeting and the CNET special meeting will take
place on _____ __, 2000. You may attend your special meeting and vote
your shares in person rather than voting by proxy.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on
how to vote in accordance with the information and procedures provided
to you by your broker. If you are a holder of ZD common stock and/or
ZDNet common stock and you do not instruct your broker to vote your
shares, it will be equivalent to voting against the proposals being
made at your special meeting.
For a more complete description of voting shares held in "street
name," see the section titled "The CNET Special Meeting" on page 46
and "The Ziff-Davis Special Meeting" on page 50.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: If you want to change your vote, send the secretary of CNET or
Ziff-Davis, as relevant, a later-dated, signed proxy card before the
special meeting or attend the applicable special meeting and vote in
person. You may also revoke your proxy by sending written notice to
the relevant secretary before the meeting or by calling the toll free
number on the enclosed proxy card and changing your vote.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: If you have any questions about the merger or if you need additional
copies of this proxy statement/prospectus or the enclosed proxy, you
should contact:
<TABLE>
<S> <C>
CNET stockholders: Ziff-Davis stockholders:
[name of agent] [name of agent]
[address] [address]
or or
CNET Networks, Inc. Ziff-Davis Inc.
150 Chestnut Street 28 East 28th Street
San Francisco, California 94111 New York, New York 10016
Tel: (415) 364-8000 Tel: (212) 503-3500
Attn: Corporate Secretary Attn: Corporate Secretary
</TABLE>
You may also obtain additional information about CNET and Ziff-Davis
from documents filed with the Securities and Exchange Commission by
following the instructions in the section entitled "Summary of the
Proxy Statement/Prospectus - Where You Can Find More Information" on
page 14.
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<PAGE> 19
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
We are sending this proxy statement/prospectus to CNET and Ziff-Davis
stockholders. This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important
to you. To better understand the merger, you should read this entire document
carefully, including the Agreement and Plan of Merger attached as Annex A, the
opinion of Lazard Freres & Co. ("Lazard") attached as Annex C, the opinion of
Morgan Stanley & Co. Incorporated ("Morgan Stanley") attached as Annex D, and
the other documents to which we refer. In addition, we incorporate by reference
in this proxy statement/prospectus important business and financial information
about CNET and Ziff-Davis. You may obtain the information incorporated by
reference into this proxy statement/prospectus without charge by following the
instructions in the section entitled "- Where You Can Find More Information" on
page 14. We have included page references parenthetically to direct you to a
more complete description of the topics presented in this summary.
THE COMPANIES
CNET NETWORKS, INC.
150 Chestnut Street
San Francisco, CA 94111
Tel: (415) 364-8000
CNET Networks, Inc. is a global media company, producing a branded
Internet network, a computer product database and television and radio
programming for both consumers and businesses. Using unbiased content as its
platform, CNET has built marketplaces for technology products, and serves
millions of users every day. Through its CNET Data Services subsidiary, CNET
provides information powering the computer and electronics sales and
distribution channels. CNET Data Services licenses its multi-lingual product
database to U.S. and European online computer retailers, resellers and
e-commerce companies. CNET television programming airs on CNBC and in national
syndication, and in nearly 100 countries worldwide. CNET Radio airs in the San
Francisco Bay Area on KNEW 910 AM.
ZIFF-DAVIS INC.
28 East 28th Street
New York, NY 10016
(212) 503-3500
Ziff-Davis Inc. owns ZDNet, a leading online content site focused on
technology products and services. Ziff-Davis currently has two series of common
stock: ZDNet common stock and ZD common stock. The ZDNet common stock is
intended to track the performance of ZDNet, which is the online business
division of Ziff-Davis. The ZD common stock is intended to track the performance
of ZD, which is the division of Ziff-Davis that historically engaged in a
variety of offline media and marketing businesses. ZD has disposed of
substantially all of its businesses, and now owns only Computer Shopper, Smart
Planet, an investment in Red Herring Communications Inc. and a retained interest
in ZDNet which is currently the equivalent of 60 million shares of ZDNet common
stock.
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<PAGE> 20
SUMMARY OF THE MERGER (SEE PAGE 54)
THE MERGER
In the merger, TD Merger Sub, a newly-formed wholly owned subsidiary of
CNET, will merge into Ziff-Davis, and Ziff-Davis will be the surviving
corporation. As a result, Ziff-Davis will become a wholly owned subsidiary of
CNET. At the effective time of the merger, each share of ZD common stock will be
exchanged for 0.3397 of a share of CNET common stock, and each share of ZDNet
common stock will be exchanged for 0.5932 of a share of CNET common stock. After
the merger, each share of CNET common stock will remain outstanding.
Holders of ZD common stock and ZDNet common stock will receive cash for
any fractional shares they would otherwise be entitled to receive in the merger.
The amount of cash paid will be calculated by multiplying the fractional share
interest each holder of ZD common stock or ZDNet common stock would otherwise be
entitled to receive by the closing price per share of CNET common stock on the
trading day following completion of the merger.
Based on the number of shares of ZD common stock, ZDNet common stock
and CNET common stock outstanding on the date of this proxy
statement/prospectus, Ziff-Davis stockholders will be entitled to receive shares
of CNET common stock representing approximately 35.5% of the total number of
shares of CNET common stock outstanding following the merger, based on shares
and share equivalents outstanding. On __________ __, 2000, the last trading day
before the date of this proxy statement/prospectus, CNET common stock closed at
$____ per share on NASDAQ.
We have attached the merger agreement, which is the legal document that
governs the merger, as Annex A to this proxy statement/prospectus. We
incorporate the merger agreement by reference into this proxy
statement/prospectus. We encourage you to read the merger agreement carefully.
VOTE REQUIRED FOR APPROVAL OF THE MERGER
The holders of a majority of the shares of CNET common stock present in
person or by proxy and entitled to vote at the special meeting at which a quorum
is present must approve the issuance of CNET common stock in the merger. CNET
stockholders are entitled to cast one vote per share of CNET common stock owned
as of the record date. The approval of the CNET 2000 Stock Option Plan and the
approval of the issuance of CNET common stock in the merger are not conditioned
on each other. Therefore, a vote for or against one proposal will not have an
effect on the approval of the other proposal.
The holders of shares of ZD common stock and ZDNet common stock
representing a majority of the votes entitled to be cast at the special meeting
at which a quorum is present in person or by proxy, voting together as a single
class, must adopt the merger agreement. Holders of ZD common stock are entitled
to cast one vote per share of ZD common stock owned as of the record date.
Holders of ZDNet common stock are entitled to cast _____ votes per share of
ZDNet common stock owned as of the record date.
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<PAGE> 21
CNET STOCKHOLDER VOTING AGREEMENTS (SEE PAGE 101)
As more fully described in this proxy statement/prospectus, Shelby
Bonnie and Halsey Minor, who on the record date for the CNET special meeting
together owned approximately __% of CNET's outstanding common stock, have
entered into voting agreements with Ziff-Davis under which they agreed to vote
their CNET common stock in favor of the issuance of CNET common stock in the
merger.
We have filed these voting agreements as exhibits to CNET's
registration statement for the shares of CNET common stock to be issued in the
merger. Please see the section titled "-- Where You Can Find More Information,"
on page __, for instructions on how to obtain copies of these agreements.
SOFTBANK VOTING AGREEMENT (SEE PAGE 101)
As more fully described in this proxy statement/prospectus, Softbank
America Inc. ("Softbank"), a principal stockholder of Ziff-Davis that owns
approximately 70 million shares of ZD common stock, which at the special meeting
will represent approximately __% of the aggregate voting power of all Ziff-Davis
capital stock, has entered into a voting agreement with CNET under which
Softbank has agreed to vote its shares of ZD common stock in favor of adoption
of the merger agreement. Because Softbank owns shares of Ziff-Davis common stock
representing a majority of the voting power of ZD capital stock, we expect the
merger agreement to be adopted by Ziff-Davis stockholders regardless of how
other stockholders vote.
We have filed this voting agreement as an exhibit to CNET's
registration statement for the shares of CNET common stock to be issued in the
merger. Please see the section titled "-- Where You Can Find More Information,"
on page __, for instructions on how to obtain a copy of this agreement.
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 90)
CNET's and Ziff-Davis' obligations to complete the merger are subject
to satisfaction or waiver of closing conditions, including the following:
o Ziff-Davis stockholders must adopt the merger agreement and
CNET stockholders must approve the issuance of CNET common
stock in the merger
o the waiting period applicable to the merger under the
Hart-Scott-Rodino Act must have expired or been terminated
o there must not be any injunction or order in effect that makes
the merger illegal or otherwise prohibits the completion of
the merger
o the shares of CNET common stock issued in the merger must be
approved for listing on NASDAQ, subject to official notice of
issuance
In addition, CNET's and Ziff-Davis' obligation to complete the merger
is further subject to the satisfaction or waiver of the following additional
conditions:
8
<PAGE> 22
o the representations and warranties of the other party in the
merger agreement must be true and correct in all material
respects
o the other party must have complied in all material respects
with all agreements and covenants in the merger agreement
o each party must have received an opinion from its tax counsel
to the effect that for federal income tax purposes the merger
will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code
o with respect only to CNET's obligation to effect the merger,
Ziff-Davis must have delivered to CNET reasonably satisfactory
evidence to the effect that the spin-off of Key3Media did not
render that entity insolvent
o each of Ziff-Davis' affiliates must have entered into an
affiliate agreement
If either Ziff-Davis or CNET waives any condition, we will each
consider the facts and circumstances at that time and make a determination
whether a resolicitation of proxies from its stockholders is necessary or
appropriate.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 93)
CNET and Ziff-Davis have the right to terminate the merger agreement
before the merger is completed:
o by mutual written consent of CNET and Ziff-Davis
o by CNET or Ziff-Davis, if the merger has not been completed by
January 31, 2001
o by CNET or Ziff-Davis, if the shareholders of either CNET or
Ziff-Davis have not approved the merger proposal at its
special meeting
o by CNET or Ziff-Davis, if (A) any governmental entity enjoins
or prohibits completion of the merger or (B) any approval of
the merger by the Department of Justice or the Federal Trade
Commission is not obtained
o by CNET or Ziff-Davis, if the other party has breached or
failed to perform any of its representations, warranties,
covenants or other agreements contained in the merger
agreement, and such breach has not been or cannot be cured on
or before January 31, 2001
o by CNET, if Ziff-Davis' board fails to make the recommendation
to its stockholders to adopt the merger agreement or fails to
call the Ziff-Davis special meeting, or to prepare and mail to
its stockholders this proxy statement/prospectus
o by Ziff-Davis, if CNET's board fails to make the
recommendation to its stockholders to approve the issuance of
CNET common stock or fails to call the CNET special meeting or
to prepare and mail to its stockholders this proxy
statement/prospectus
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<PAGE> 23
TERMINATION FEES (SEE PAGE 94)
CNET or Ziff-Davis may be required to pay a termination fee to the
other as follows:
o if the stockholders of Ziff-Davis adopt the merger agreement
but the stockholders of CNET do not approve the issuance of
CNET common stock in the merger, then CNET must pay Ziff-Davis
a termination fee of $60 million and make a $15 million
unsecured loan to Ziff-Davis unless Ziff-Davis is in material
breach of the merger agreement
o CNET may be obligated to pay to Ziff-Davis a termination fee
of $105 million if the merger agreement is terminated in
connection with a proposal for an alternative transaction
involving CNET. The payment of the $105 million fee will
depend on the particular circumstances of the termination and
will be reduced by the amount of any other termination fee
paid by CNET to Ziff-Davis
o if the stockholders of CNET approve the issuance of CNET
common stock in the merger but the stockholders of Ziff-Davis
do not adopt the merger agreement, then Ziff-Davis must pay
CNET a termination fee of $33 million unless CNET is in
material breach of the merger agreement
o Ziff-Davis may be obligated to pay to CNET a termination fee
of $58 million if the merger agreement is terminated in
connection with a proposal for an alternative transaction
involving Ziff-Davis. The payment of the $58 million fee will
depend on the particular circumstances of the termination and
will be reduced by the amount of any other termination fee
paid by Ziff-Davis to CNET
THE SOFTBANK STOCKHOLDER AGREEMENT (SEE PAGE 102)
Softbank and CNET entered into a stockholder agreement under which,
among other things, Softbank will have the right to designate one member to the
board of directors of CNET and will have registration rights with respect to
shares of CNET common stock received by Softbank in the merger. The stockholder
agreement also imposes certain restrictions on the sale of the CNET common stock
to be acquired by Softbank in the merger and limits the ability of Softbank to
acquire more than 20% of CNET's common stock or to propose a merger or other
business combination of CNET.
We have filed this stockholder agreement as an exhibit to CNET's
registration statement for the shares of CNET common stock to be issued in the
merger. Please see the section titled "-- Where You Can Find More Information,"
on page 14, for instructions on how to obtain a copy of this agreement.
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<PAGE> 24
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY AFTER THE
MERGER (SEE PAGE 85)
After the merger, the board of directors of CNET will consist of seven
members, including five current members of CNET's board of directors, one member
of the board designated by Ziff-Davis, and one member selected by Softbank,
Ziff-Davis' principal stockholder. We currently expect that Ziff-Davis will
designate Daniel Rosensweig and Softbank will designate _____, each of whom is
currently a Ziff-Davis director. In connection with the merger, Douglas Woodrum,
one of CNET's directors, has agreed to resign from the CNET board of directors.
After the merger, Shelby Bonnie, the current chief executive officer of
CNET, will continue as chief executive officer of CNET and Halsey Minor, the
current chairman of the board of directors of CNET, will continue as chairman of
the board of directors of CNET. In addition, Daniel Rosensweig, the current
chief executive officer of ZDNet and a member of the Ziff-Davis board of
directors, will be president of CNET Networks, Inc.
OPINIONS OF CNET'S AND ZIFF-DAVIS' FINANCIAL ADVISORS (SEE PAGES 64 AND
75)
In deciding to approve the issuance of CNET common stock in the merger,
CNET's board of directors considered the opinion of Lazard, its financial
advisor, as to the fairness, from a financial point of view, to the holders of
CNET common stock, of the consideration to be paid in the merger. In deciding to
adopt the merger agreement, Ziff-Davis' board of directors considered an opinion
from Morgan Stanley, its financial advisor, as to the fairness, from a financial
point of view, to the holders of ZD common stock and ZDNet common stock, of the
consideration to be received by such holders in the merger pursuant to the
merger agreement. The written opinions of the financial advisors are attached to
this proxy statement/prospectus as Annex C and Annex D, and should be read
carefully in their entireties for a description of the assumptions made, matters
considered and limitations on the review undertaken. The opinion of Lazard is
directed to the CNET board, and the opinion of Morgan Stanley is directed to the
Ziff-Davis board. These opinions do not address the prices at which CNET common
stock will trade after the proposed merger, nor do they constitute a
recommendation as to how any stockholder should vote with respect to any matter
relating to the proposed merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 81)
We have structured the merger so that Ziff-Davis stockholders who
exchange their ZD common stock and ZDNet common stock for shares of CNET common
stock will not recognize gain or loss for United States federal income tax
purposes in connection with the merger, except for taxes payable because of cash
received by Ziff-Davis stockholders instead of fractional shares.
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 84)
The merger will be accounted for using the purchase method of
accounting with CNET having acquired Ziff-Davis.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 85)
When considering the recommendation of Ziff-Davis' boards of directors,
you should be aware that certain Ziff-Davis directors, officers and stockholders
have interests in the merger that are different from, or are in addition to,
yours. These interests include options held by various executive officers and
directors and the acceleration of those options upon completion of the merger,
the post-merger membership of two current Ziff-Davis directors on the board of
directors of the combined company, and the indemnification of directors and
officers of Ziff-Davis against certain liabilities both before and after the
merger.
NO APPRAISAL RIGHTS (SEE PAGE 86)
Under Delaware law, neither stockholders of CNET nor stockholders of
Ziff-Davis are entitled to appraisal rights in connection with the merger.
RESTRICTIONS ON THE ABILITY TO SELL CNET STOCK (SEE PAGE 84)
All shares of CNET common stock received by Ziff-Davis stockholders in
connection with the merger will be freely transferable unless the holder is
considered an affiliate of either CNET or Ziff-Davis under the Securities Act of
1933. Shares of CNET held by affiliates may only be sold pursuant to Rule 144 or
145 of the Securities Act or pursuant to a registration statement or an
exemption from the requirements of the Securities Act. The sale by Softbank of
shares of CNET common stock acquired by Softbank in the merger will be subject
to additional restrictions contained in the Softbank stockholder agreement.
COMPARATIVE MARKET PRICE INFORMATION (SEE PAGE 22)
CNET common stock is listed on NASDAQ. On July 18, 2000, the last full
trading day prior to the public announcement of the proposed merger, CNET's
common stock closed at $32.1875 per share. On __________ __, 2000, the last
trading day prior to the date of this proxy statement/prospectus, CNET's common
stock closed at $______ per share.
Shares of ZD common stock and ZDNet common stock are listed on the New
York Stock Exchange. On July 18, 2000, the last full trading day prior to the
public announcement of the proposed merger, ZD common stock closed at $11.375
per share and shares of ZDNet common stock closed at $12.875. On _________ __,
2000, the last trading day prior to the date of this proxy statement/prospectus,
ZD common stock closed at $_____ per share and ZDNet common stock closed at
$_____ per share.
Stockholders of both companies should obtain current market quotations.
REGULATORY APPROVAL (SEE PAGE 84)
The merger is subject to review by the Department of Justice and the
Federal Trade Commission to determine whether it is in compliance with
applicable antitrust laws.
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RECOMMENDATION OF CNET'S BOARD OF DIRECTORS (SEE PAGE 64)
After careful consideration, CNET's board of directors unanimously
determined that the merger is in the best interests of CNET and its stockholders
and has declared the merger advisable. CNET's board of directors unanimously
recommends that you vote FOR the issuance of CNET common stock in the merger.
RECOMMENDATION OF ZIFF-DAVIS' BOARD OF DIRECTORS (SEE PAGE 75)
After careful consideration, Ziff-Davis' board of directors unanimously
determined that the merger is in the best interests of Ziff-Davis and its
stockholders and has declared the merger advisable. Ziff-Davis' board of
directors unanimously recommends that you vote FOR adoption of the merger
agreement.
NASDAQ LISTING
It is a condition to the closing of the merger that the shares of CNET
common stock that will be issued in the merger be authorized for listing on
NASDAQ, subject to official notice of issuance.
SUMMARY OF THE CNET 2000 STOCK OPTION PLAN (SEE PAGE 125)
CNET stockholders will be asked to approve the adoption of the CNET
2000 Stock Option Plan. This plan authorizes the future grant of options and
other incentive compensation rights with respect to up to 5,000,000 shares of
common stock of CNET.
VOTE REQUIRED FOR APPROVAL OF THE CNET 2000 STOCK OPTION PLAN
The holders of a majority of the shares of CNET common stock
represented in person or by proxy and entitled to vote at the CNET special
meeting at which a quorum is present must approve the CNET 2000 Stock Option
Plan. CNET stockholders are entitled to cast one vote per share of CNET common
stock owned as of the record date. The approval of the CNET 2000 Stock Option
Plan and the approval of the issuance of CNET common stock in connection with
the merger are not conditioned on each other. Therefore, a vote for or against
one proposal will not have an effect on the approval of the other proposal.
RECOMMENDATION OF CNET'S BOARD OF DIRECTORS WITH RESPECT TO THE CNET
2000 STOCK OPTION PLAN
CNET's board of directors unanimously approved and adopted the CNET
2000 Stock Option Plan and unanimously recommends that you vote FOR the approval
of the CNET 2000 Stock Option Plan.
WHERE YOU CAN FIND MORE INFORMATION
CNET and Ziff-Davis file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms at the following locations:
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<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center Room 1024
Washington, D.C. 20549 Suite 1300 500 West Madison Street
New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. CNET's and Ziff-Davis' SEC filings are also available to
the public from commercial document retrieval services and at the Internet world
wide web site maintained by the SEC at www.sec.gov.
As allowed by SEC rules, this proxy statement/prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this
proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be a part of
this proxy statement/prospectus, except for any information superseded by
information contained directly in this proxy statement/prospectus. This proxy
statement/prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their financial condition.
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<TABLE>
<CAPTION>
CNET SEC FILINGS PERIOD
---------------- ------
(FILE NO. 0-20939)
<S> <C>
Annual Report on Form 10-K................................ Year ended December 31, 1999, as filed
March 30, 2000
Quarterly Report on Form 10-Q............................. Quarter ended March 31, 2000, as filed May
15, 2000
Quarterly Report on Form 10-Q............................. Quarter ended June 30, 2000, as filed August
14, 2000
Current Reports on Form 8-K............................... Filed:
o January 24, 2000
o March 3, 2000
o March 13, 2000
o April 27, 2000
o July 21, 2000
The description of CNET common stock set
forth in CNET's Registration Statement on
Form 8-A.................................................. Filed July 2, 1996
ZIFF-DAVIS SEC FILINGS PERIOD
---------------------- ------
(FILE NO. 001-14055)
Proxy Statement for the Special Meeting of
Shareholders.............................................. Filed February 9, 2000
Annual Report on Form 10-K................................ Year ended December 31, 1999, as filed April 13, 2000
Quarterly Report on Form 10-Q............................. Quarter ended March 31, 2000, as filed May 15, 2000
Quarterly Report on Form 10-Q............................. Quarter ended June 30, 2000, as filed August 14, 2000
Current Reports on Form 8-K............................... Filed:
o April 14, 2000
o April 19, 2000
o July 21, 2000
</TABLE>
CNET and Ziff-Davis also incorporate by reference into this proxy
statement/prospectus additional documents that may be filed with the SEC from
the date of this proxy statement/ prospectus to the date of the special
meetings. These include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
15
<PAGE> 29
CNET has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to CNET and Ziff-Davis has
supplied all information contained or incorporated by reference in this proxy
statement/prospectus relating to Ziff-Davis.
You may have previously received some of the documents incorporated by
reference in this proxy statement/prospectus, but you can obtain any of them
through us, the SEC or the SEC's Internet world wide web site as described
above. Documents incorporated by reference are available from us without charge,
excluding all exhibits, unless we have specifically incorporated by reference an
exhibit in this proxy statement/prospectus. You may obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from the appropriate company at the following
addresses:
CNET Networks, Inc. Ziff-Davis Inc.
150 Chestnut Street 28 East 28th Street
San Francisco, California 94111 New York, New York 10016
Tel: (415) 364-8000 Tel: (212) 503-3500
Attn: Corporate Secretary Attn: Corporate Secretary
If you would like to request documents from us, please do so by _____ __, 2000
to receive them before the special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON ADOPTION OF THE MERGER
AGREEMENT OR THE ISSUANCE OF CNET COMMON STOCK IN CONNECTION WITH THE MERGER AND
APPROVAL OF THE CNET 2000 STOCK OPTION PLAN. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED _____ __,
2000. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE
ISSUANCE OF CNET COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
INFORMATION ON CNET'S WEB SITE
Information on any CNET Internet web site or the web site of any
subsidiary of CNET is not part of this document, and you should not rely on that
information in deciding whether to approve the issuance of CNET common stock in
the merger or the CNET 2000 Stock Option Plan unless that information is also in
this document or in a document that is incorporated by reference into this
document.
INFORMATION ON ZIFF-DAVIS WEB SITES
Information on any Ziff-Davis Internet web site or the web site of any
subsidiary of Ziff-Davis is not part of this document, and you should not rely
on that information in deciding whether to adopt the merger agreement unless
that information is also in this document or in a document that is incorporated
by reference into this document.
16
<PAGE> 30
CNET NETWORKS, INC.
SELECTED HISTORICAL FINANCIAL DATA
In the table below, we provide you with selected historical
consolidated financial data of CNET. CNET prepared this information using its
consolidated financial statements and for each of the fiscal years in the
five-year period ended December 31, 1999 and for the six-month periods ended
June 30, 2000 and 1999. CNET derived the consolidated statement of operations
data below for each of the five years ended December 31, 1999, and the
consolidated balance sheet data at the end of each of the five years ended
December 31, 1999, from financial statements audited by KPMG LLP, independent
certified public accountants. CNET derived the remaining data from unaudited
consolidated financial statements. This information is only a summary and you
should read it together with the financial information we incorporate by
reference in this proxy statement/prospectus. For copies of the information we
incorporate by reference, see "- Where You Can Find More Information" on page
14.
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- -----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ---------- ---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenues ......................... $ 96,605 $ 45,628 $ 112,345 $ 57,477 $ 33,640 $ 14,830 $ 3,500
Gross profit (deficit) ................. 63,607 27,797 68,385 27,173 6,923 (503) (2,133)
Total operating expenses* .............. 151,144 21,712 129,523 24,216 41,061 15,032 6,337
Operating income (loss) ................ (87,537) 6,085 (61,138) 2,957 (34,138) (15,535) (8,470)
Total other income (expense) ........... 69,584 24,999 735,361 66 9,410 (1,413) (137)
Net income (loss) ...................... (48,345) 31,084 416,908 3,023 (24,728) (16,949) (8,607)
Basic net income (loss) per share ...... $ (0.59) $ 0.44 $ 5.80 $ 0.05 $ (0.44) $ (0.52) $ (0.23)
Diluted net income (loss) per share .... $ (0.59) $ 0.40 $ 5.05 $ 0.04 $ (0.44) $ (0.52) $ (0.23)
Shares used in basic per share
calculation .......................... 81,536 70,556 71,820 65,783 55,819 32,890 37,381
Shares used in diluted per share
calculation .......................... 81,536 78,534 83,373 71,623 55,819 32,890 37,381
CONSOLIDATED BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash equivalents .............. $ 102,825 $ 99,081 $ 53,063 $ 51,537 $ 22,554 $ 20,156 $ 703
Working capital ........................ 376,931 379,175 603,709 59,657 19,431 20,223 719
Total assets ........................... 1,487,883 502,806 1,230,311 88,357 58,262 39,842 4,657
Non-current portion of long-term
debt ................................. 197,257 178,665 179,114 569 2,612 281 467
Stockholders' equity ................... $ 1,127,586 $ 250,576 $ 705,838 $ 76,473 $ 40,643 $ 33,098 $ 2,799
</TABLE>
----------
* Operating expenses included unusual items consisting of an expense
reversal of $922,000 in 1998 related to a real estate reserve and expenses
of $9.0 million in 1997 comprised of warrant compensation expense of $7.0
million, a real estate reserve and a write-off of certain domain names.
The statement of operations data excluding per share date for 1998
includes the historical financial results of the company and the
retroactive effect of material pooling-of-interests transaction.
The shares used in calculating the basic and diluted net income (loss) per
share have been adjusted in prior periods to reflect the Sumo,
NetVentures, AuctionGate, and KillerApp pooling-of-interests transactions
as outstanding for all periods, and the two-for-one stock splits on March
8, 1999 and May 10, 1999.
17
<PAGE> 31
ZIFF-DAVIS INC.
SELECTED HISTORICAL FINANCIAL DATA
In the table below, we provide you with selected historical
consolidated financial data of Ziff-Davis. Ziff-Davis prepared this information
using its consolidated financial statements as of the dates indicated and for
each of the fiscal years in the five-year period ended December 31, 1999 and for
the six-month periods ended June 30, 2000 and 1999. Ziff-Davis derived the
consolidated statement of operations data below for each of the five years ended
December 31, 1999, and the consolidated balance sheet data at the end of each of
the five years ended December 31, 1999, from financial statements audited by
PricewaterhouseCoopers LLP, independent certified public accountants. Ziff-Davis
derived the remaining data from unaudited consolidated financial statements. An
affiliate of Ziff-Davis Inc. acquired a print publishing business, "ZDI", on
February 29, 1996; the data does not include results from the acquired business
for periods before the date of acquisition. However, because ZDI represented
Ziff-Davis Inc.'s principal operations, the following table also presents
selected historical consolidated financial data for ZDI as of and for the year
ended December 31, 1995 and as of and for the two month period ended February
28, 1996. The data as of and for the year ended December 31, 1995 and as of and
for the two months ended January 28, 1996 was derived from the unaudited
consolidated financial statements of ZDI. On May 4, 1998, Ziff-Davis Inc.
completed a reorganization described in Note 2 of the notes to the consolidated
financial statements of Ziff-Davis Inc. incorporated by reference in this proxy
statement/prospectus; results for periods before the reorganization are not
directly comparable to results for periods after the reorganization. The
selected historical consolidated financial data has been restated to reflect
Ziff-Davis Inc.'s market intelligence, education, television and events
businesses as discontinued operations. This information is only a summary and
you should read it together with the financial information we incorporate by
reference in this proxy statement/ prospectus. For copies of the information we
incorporate by reference, see "- Where You Can Find More Information" on page
14.
18
<PAGE> 32
<TABLE>
<CAPTION>
ZDI(1)
-----------------------
TWO MONTH
SIX MONTH PERIOD ENDED PERIOD ENDED YEAR ENDED
JUNE 30, YEAR ENDED DECEMBER 31, FEBRUARY DECEMBER
----------------------- ------------------------------------------------------- 28, 31,
2000 1999 1999 1998 1997 1996(2) 1995(2) 1996 1995
---------- ---------- ----------- ---------- ------- ---------- -------- ---------- ----------
(DOLLARS IN THOUSANDS, (DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS) EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue, net .............. $ 229,140 $ 333,978 $ 702,458 $ 704,058 743,848 $ 595,280 $ -- $ 108,174 $ 667,316
Loss from continuing
operations before
tax and extraordinary
item ................... (89,398) (49,377) (1,145,958) (129,268) (81,963) (70,934) -- (8,132) (40,250)
Income (loss) from
continuing operations
before extraordinary
item ................... 10,386 (44,389) (1,014,847) (93,648) (72,469) (94,498) -- (6,082) (26,002)
Net income (loss) from
discontinued
operations ............. 109,664 3,472 18,151 15,839 1,290 42,417 10,945 1,535 (12,944)
Net income (loss) ......... 96,770 (40,917) (996,696) (77,809) (71,179) (52,081) 10,945 (4,547) (38,946)
ZD earnings (loss) per
basic share (3) ........ 0.93 (0.40) (9.71) $ (0.78) -- -- --
ZD earnings per
diluted share .......... 0.91 N/A N/A N/A N/A N/A N/A N/A N/A
ZDNET earnings (loss)
per pro forma basic
share (3) .............. (0.06) 0.01 0.03 -- -- -- --
ZDNET earnings per
pro forma diluted
share (3) .............. N/A 0.01 0.02 -- -- -- --
CONSOLIDATED BALANCE SHEET
DATA (AT PERIOD END):
Cash and cash
equivalents ............ 63,616 32,529 10,207 32,566 30,301 29,915 -- 13,669 10,083
Working capital............
Total assets .............. 1,165,892 3,459,972 1,987,845 3,433,803 3,546,646 3,584,173 397,881 1,619,905 1,623,906
Non-current portion of
long-term debt ......... 500(4) 1,276,692 1,164,775 1,539,322 2,408,240 2,522,252 -- 964,153 964,153
Stockholders' equity ...... 909,640 1,581,166 708,265 1,352,598 126,130 447,756 397,881 360,717 365,150
</TABLE>
----------
(1) An affiliate of Ziff-Davis Inc. acquired ZDI on February 29, 1996.
Because ZDI represented Ziff-Davis Inc.'s principal operations, ZDI
data has been presented for periods before this date.
(2) An affiliate of Ziff-Davis Inc. acquired ZDI on February 29, 1996;
Ziff-Davis Inc. data does not include results from the acquired
business for periods before the date of acquisition.
(3) No historical earnings per share or share data are presented prior to
1998 as Ziff-Davis Inc. does not consider such data meaningful. ZD
loss per share for 1998 is presented on a pro forma basis as if the ZD
shares issued in connection with the reorganization and initial public
offering of Ziff-Davis Inc., which occurred on May 4, 1998, were
outstanding as of January 1, 1998. For more information about this
reorganization and initial public offering, see note 2 of the notes to
the consolidated financial statements appearing in Ziff-Davis Inc.'s
1999 Annual Report on Form 10-K. ZDNet earnings per share for 1999 is
presented on a pro forma basis as if the ZDNet shares issued in
connection with the ZDNet common stock initial public offering
described in note 2 to the notes to such consolidated financial
statements, which occurred on March 31, 1999, were outstanding as of
January 1, 1999.
(4) In addition, ZD Events owed $150,000 of short-term bank debt at June
30, 2000, which was repaid on August 18, 2000 in connection with the
Key3Media spin-off.
19
<PAGE> 33
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
In the table below, we provide you with selected unaudited pro forma
combined financial information for CNET as if the following transactions had
been completed at the beginning of the applicable period for income statement
purposes and on June 30, 2000 for balance sheet purposes:
o CNET's acquisition of mySimon
o the disposition by Ziff-Davis of its market intelligence,
education, television and events businesses and most of its
print publishing business
o the repayment of all Ziff-Davis debt
o the merger of TD Merger Sub into Ziff-Davis
For more information about the assumptions made in determining this pro forma
information, see the notes to "Unaudited Pro Forma Condensed Consolidated
Financial Statements" appearing later in this proxy statement/prospectus.
This selected unaudited pro forma combined financial information is
derived from the more detailed unaudited pro forma financial statements
appearing later in this proxy statement/prospectus and should be read together
with the separate historical financial statements and accompanying notes of
CNET and of Ziff-Davis, which we incorporate by reference in this proxy
statement/prospectus. You should not rely on the selected unaudited pro forma
financial information as an indication of the results of operations or
financial position that CNET would have achieved if the merger had taken place
earlier or of the results of operations or financial position of CNET after
completion of the merger.
CNET'S SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
----------------- ---------------------
(dollars in thousands, except per share amounts)
<S> <C> <C>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA:
Total revenues................................................................. $ 197,873 $ 288,362
Gross profit .................................................................. 128,411 186,600
Total operating expenses....................................................... 555,131 1,031,338
Operating loss................................................................. (426,720) (844,738)
Total other income expense..................................................... 69,137 737,469
Net loss....................................................................... (387,985) (364,584)
Basic net loss per share....................................................... $ (2.89) $ (2.83)
Diluted net loss per share..................................................... $ (2.89) $ (2.83)
Shares used in basic per share calculation..................................... 134,353 128,751
Shares used in diluted per share calculation................................... 134,353 128,751
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents...................................................... $ 173,941
Working capital................................................................ 330,406
Total assets................................................................... 3,339,003
Non-current portion of long-term debt.......................................... 197,757
Total stockholders' equity..................................................... 2,796,654
</TABLE>
20
<PAGE> 34
UNAUDITED COMPARATIVE PER SHARE DATA
In the first table below, we provide you with CNET's historical book
value and income (loss) per share information as of and for the six months ended
June 30, 2000 and the year ended December 31, 1999. In addition, in the column
labeled "CNET Pro Forma Excluding Ziff-Davis" we provide CNET pro forma
information which assumes that CNET had completed the mySimon acquisition
(excluding the impact of the Ziff-Davis merger) as of and for the six months
ended June 30, 2000 and for the year ended December 31, 1999. In the column
labeled "CNET Pro Forma Including Ziff-Davis," we have assumed that CNET had
completed the following transactions at the beginning of the applicable period
for income statement purposes and on June 30, 2000 for balance sheet purposes:
o CNET's acquisition of mySimon
o the disposition by Ziff-Davis of its market intelligence,
education, television and events businesses and most of its
print publishing business
o the repayment of all Ziff-Davis debt
o the merger of TD Merger Sub into Ziff-Davis
For more information about the assumptions made in determining this pro forma
information, see the notes to "Unaudited Pro Forma Condensed Consolidated
Financial Statements" appearing later in this proxy statement/prospectus.
Following the merger, Ziff-Davis will be a subsidiary of CNET.
In the second table below, we provide you with pro forma book value and
income (loss) per share information for the ZD common stock and the ZDNet common
stock as of and for the six months ended June 30, 2000 and the year ended
December 31, 1999. In the columns labeled "ZD Pro Forma" and "ZDNet Pro Forma"
we have assumed that Ziff-Davis had completed the disposition of its market
intelligence, education, television and events business and most of its print
publishing business, and that Ziff-Davis had repaid most of its debt, at the
beginning of the applicable period for income statement purposes and as of June
30, 2000 for balance sheet purposes. The column labeled "ZD Pro Forma
Equivalent" presents the per share data set forth in the column labeled "CNET
Pro Forma Including Ziff-Davis" multiplied by 0.3397 and the column labeled
"ZDNet Pro Forma Equivalent" presents the per share data set forth in the column
labeled "CNET Pro Forma Including Ziff-Davis" multiplied by 0.5932.
It is important that when you read this information, you also should
read the selected pro forma condensed financial information of CNET, as well as
the consolidated financial statements and accompanying notes of each of CNET
and Ziff-Davis included in the documents that are described under "- Where You
Can Find More Information" and incorporated in this proxy statement/prospectus
by reference. You should not rely on the unaudited comparative per share data
as an indication of the results of operations or the financial position that
would have been achieved if the proposed CNET/Ziff-Davis merger had taken place
earlier, or as an indication of the results of operations or financial position
of CNET after the completion of the proposed transaction.
21
<PAGE> 35
<TABLE>
<CAPTION>
CNET CNET
PRO-FORMA PRO-FORMA
CNET EXCLUDING INCLUDING
HISTORICAL ZIFF-DAVIS ZIFF-DAVIS
------------ ---------- ----------
<S> <C> <C> <C>
Book value per common share:
June 30, 2000.............................................. $ 13.09 $ 13.09 $ 21.13
December 31, 1999.......................................... 9.55 16.36 23.33
Income (loss) per common share:
Basic:
Six months ended June 30, 2000........................... $ (0.59) (1.33) (2.89)
Year ended December 31, 1999............................. $ 5.80 2.18 (2.83)
Diluted:
Six months ended June 30, 2000........................... $ (0.59) (1.33) (2.89)
Year ended December 31, 1999............................. $ 5.05 1.91 (2.83)
</TABLE>
<TABLE>
<CAPTION>
ZD ZDNET
ZD PRO FORMA ZDNET PRO FORMA
PRO FORMA EQUIVALENT PRO FORMA EQUIVALENT
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Book value per common share:
June 30, 2000..................................... $ 2.70 $ 7.18 $ 17.46 $12.53
December 31, 1999................................. 1.46 7.93 11.02 13.84
Income (loss) per common share:
Basic:
Six months ended June 30, 2000.................. (0.11) (0.98) (0.69) (1.71)
Year ended December 31, 1999.................... (0.10) (0.96) (0.74) (1.68)
Diluted:
Six months ended June 30, 2000.................. (0.11) (0.98) (0.69) (1.71)
Year ended December 31, 1999.................... (0.10) (0.96) (0.74) (1.68)
</TABLE>
22
<PAGE> 36
COMPARATIVE PER SHARE MARKET PRICE
INFORMATION
Shares of CNET's common stock are listed on NASDAQ. Shares of ZD
common stock and ZDNet common stock are listed on the New York Stock Exchange.
Public trading of CNET's common stock commenced on July 8, 1996. Public trading
of ZD common stock commenced on May 4, 1998 and of ZDNet stock commenced on
March 31, 1999.
The following table sets forth, for the fiscal quarters indicated, the
high and low sales prices for a share of:
o CNET's common stock as reported on NASDAQ
o ZD common stock and ZDNet common stock as reported on the New
York Stock Exchange Composite Transaction Tape
<TABLE>
<CAPTION>
CNET ZD ZDNET
COMMON STOCK COMMON STOCK COMMON STOCK
----------------- ------------------ ------------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter............................ 10.03 5.84 -- -- -- --
Second Quarter........................... 17.75 6.31 19 12 13/16 -- --
Third Quarter............................ 18.63 7.75 16 3/8 5 3/8 -- --
Fourth Quarter........................... 16.50 7.25 23 15/16 3 5/8 -- --
1999
First Quarter............................ 61.69 12.00 29 15 13/16 40 29
Second Quarter........................... 79.75 38.63 25 5/16 11 55 1/2 16 5/8
Third Quarter............................ 57.50 27.50 19 1/8 13 3/4 26 5/8 13 3/8
Fourth Quarter........................... 79.88 43.25 19 1/2 14 5/16 25 11/16 18
2000
First Quarter............................ 75 45.25 21 1/4 14 13/16 34 9/16 19 7/8
Second Quarter........................... 51.56 22.50 15 7/16 8 1/8 22 1/8 8 7/8
</TABLE>
The following table sets forth the closing prices per share of CNET's
common stock as reported on NASDAQ, and the closing prices per share of ZD
common stock and ZDNet common stock as reported on the New York Stock Exchange,
on:
o July 18, 2000, the last full trading day prior to the public
announcement of the proposed merger
o __________ ___, 2000, the last full trading day for which
closing prices were available prior to the printing of this
proxy statement/prospectus
The closing price per share of ZD common stock for July 18, 2000 has
been reduced by $____, the value of the August 18, 2000 Key3Media spin-off and
cash dividend. The reduction for
23
<PAGE> 37
the spin-off was computed based on the closing price of the Key3Media stock on
the first day of trading.
The following table also sets forth the equivalent prices per share of
ZD common stock and ZDNet common stock. The equivalent price per share of ZD
common stock is equal to the closing price of a share of CNET common stock on
the applicable date multiplied by 0.3397, the number of shares of CNET common
stock to be issued in the merger in exchange for each share of ZD common stock.
The equivalent price per share of ZDNet common stock is equal to the closing
price of a share of CNET common stock on the applicable date multiplied by
0.5932, the number of shares of CNET common stock to be issued in the merger in
exchange for each share of ZDNet common stock. These equivalent per share
prices reflect the market value of CNET common stock that Ziff-Davis
stockholders would receive for each share of ZD common stock or ZDNet common
stock, as the case may be, if the merger were completed on the specified dates.
Because the market price of CNET common stock may increase or decrease before
the merger is completed, Ziff- Davis stockholders are urged to obtain current
market quotations.
<TABLE>
<CAPTION>
EQUIVALENT PRICE EQUIVALENT PRICE
CNET ZD PER SHARE OF ZD ZDNET PER SHARE OF ZDNET
DATE COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
---------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
July 18, 2000............................ $ 32.1875 ________(1) 10.9350 12.875 19.0936
_______ __, 2000.........................
</TABLE>
----------
(1) Actual closing price on July 18, 2000 was $11.375, but this number has
been reduced in the table by $___, the value of the August 18, 2000
Key3Media spin-off and cash dividend.
Each of CNET's and Ziff-Davis' fiscal year ends on December 31 of each
year. Dividends have never been paid with respect to CNET common stock or with
respect to ZDNet common stock. The only dividends paid with respect to ZD
common stock were the August 18, 2000 Key3Media spin-off and cash dividend.
24
<PAGE> 38
RISK FACTORS
The proposed merger involves a high degree of risk. By voting in favor
of the merger, current Ziff-Davis stockholders will be choosing to invest in
CNET common stock, and current CNET stockholders will face dilution of their
ownership interest in CNET. An investment in CNET common stock involves a high
degree of risk. In addition to the other information contained in this proxy
statement/prospectus or incorporated by reference, you should carefully consider
the following risk factors in deciding whether to vote for the merger or for the
issuance of CNET common stock in connection with the merger.
GENERAL RISKS RELATING TO THE PROPOSED MERGER.
ZIFF-DAVIS AND CNET MAY NOT ACHIEVE THE BENEFITS THEY EXPECT FROM THE MERGER
WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON THE COMBINED COMPANY'S BUSINESS,
FINANCIAL CONDITION AND OPERATING RESULTS AND/OR COULD RESULT IN LOSS OF KEY
PERSONNEL.
The combined company will need to overcome significant issues in order
to realize any benefits or synergies from the merger, including the timely,
efficient and successful execution of a number of post-merger events, including:
o integrating the operations of the two companies
o retaining and assimilating the key personnel of each company
o retaining existing advertisers on both companies' Internet
sites and attracting additional advertisers
o developing new Internet sites and services that benefit from
the assets and resources of both companies
o retaining strategic partners of each company
o creating uniform standards, controls, procedures, policies and
information systems
The successful execution of these post-merger events will involve
considerable risk and may not be successful. These risks include:
o the potential disruption of the combined company's ongoing
business and distraction of its management
o the difficulty of incorporating acquired technology and rights
into the combined company's Internet sites and services
o unanticipated expenses and potential delays related to
integration of technology and other resources of the two
companies
o the impairment of relationships with employees and advertisers
as a result of any integration of new management personnel
25
<PAGE> 39
o the possibility that businesses that have advertised on both
CNET's and Ziff-Davis' Internet sites may reduce their
advertising purchases from the combined company
o potential unknown liabilities associated with the merger and
the recent disposition of Ziff-Davis' non-Internet operations
The combined company may not succeed in addressing these risks or any
other problems encountered in connection with the merger.
ZIFF-DAVIS STOCKHOLDERS WILL RECEIVE A FIXED NUMBER OF SHARES OF CNET COMMON
STOCK DESPITE CHANGES IN MARKET VALUE OF CNET COMMON STOCK.
Upon completion of the merger, each share of ZD common stock will be
exchanged for 0.3397 of a share of CNET common stock, and each share of ZDNet
common stock will be exchanged for 0.5932 of a share of CNET common stock. We
will not adjust the exchange ratios for changes in the market price of CNET
common stock. In addition, neither Ziff-Davis nor CNET may terminate the merger
agreement or "walk away" from the merger solely because of changes in the market
price of CNET common stock. As a result, the specific dollar value of CNET
common stock that Ziff-Davis stockholders will receive and that CNET
stockholders will retain upon completion of the merger will depend on the market
value of CNET common stock when the merger is completed and may increase or
decrease from the date you submit your proxy. The share prices of CNET common
stock, ZD common stock and ZDNet common stock are subject to the general price
fluctuations in the market for publicly-traded equity securities and have
experienced significant volatility. We urge you to obtain recent market
quotations for CNET common stock, ZD common stock and ZDNet common stock. We
cannot predict or give you any assurances as to the market price of CNET common
stock at any time before or after the completion of the merger.
THE MERGER COULD ADVERSELY AFFECT COMBINED FINANCIAL RESULTS.
Ziff-Davis and CNET expect to incur direct transaction costs of
approximately $17.5 million in connection with the merger. If the benefits of
the merger do not exceed the associated costs, including any dilution to CNET's
stockholders resulting from the issuance of shares in connection with the
merger, the combined company's financial results, including earnings per share,
could be materially and adversely affected.
CNET will account for the merger using the purchase method of
accounting. After the completion of the merger, the results of operations of
Ziff-Davis will be included in the consolidated financial statements of CNET.
The purchase price will be allocated to Ziff-Davis' assets and liabilities based
on the fair values of the assets acquired and the liabilities assumed. Any
excess of cost over the fair value of the net tangible assets of Ziff-Davis
acquired will be recorded as goodwill and other intangible assets and will be
amortized by charges against results of operations under generally accepted
accounting principles. These allocations will be made based upon valuations and
other studies that have not yet been finalized. However, it is expected that the
amortization associated with the merger will be approximately $535 million per
year, which will have a material adverse effect on CNET's results of operations.
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THE MARKET PRICE OF THE COMBINED COMPANY'S COMMON STOCK MAY DECLINE AS A RESULT
OF THE MERGER.
The market price of the combined company's common stock may decline as
a result of the merger for a number of reasons including if:
o the integration of Ziff-Davis and CNET is unsuccessful
o the combined company does not achieve the perceived benefits
of the merger as rapidly or to the extent anticipated by the
combined company or by financial or industry analysts
o the effect of the merger on the combined company's financial
results is not consistent with the expectations of the
combined company or of financial or industry analysts
ZIFF-DAVIS' OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE
THEM TO SUPPORT OR APPROVE THE MERGER.
The directors and officers of Ziff-Davis participate in arrangements
and have continuing indemnification against liabilities that provide them with
interests in the merger that are different from yours including the following:
o Current Ziff-Davis directors and officers will have all of the
Ziff-Davis options granted to them prior to July 1, 2000 fully
accelerated upon completion of the merger
o CNET has agreed to indemnify each present and former
Ziff-Davis officer and director against liabilities arising
out of such person's services as an officer or director. CNET
will maintain officers' and directors' liability insurance to
cover any such liabilities for the next six years
o Ziff-Davis and CNET have agreed that Ziff-Davis shall be
entitled to designate one individual to the combined company's
board of directors, and Softbank, a principal stockholder of
Ziff-Davis, will also have the right to designate one member
to the CNET board of directors. CNET has agreed to increase
the size of its board by one directorship to seven and Douglas
Woodrum, a current CNET director, has agreed to resign from
CNET's board
o Ziff-Davis and CNET have agreed that Daniel Rosensweig,
ZDNet's chief executive officer, will be president of the
combined company
For the above reasons, the directors and officers of Ziff-Davis could
be more likely to vote to adopt the merger agreement than if they did not hold
these interests. Ziff-Davis stockholders should consider whether these interests
may have influenced these directors and officers to support or recommend the
merger.
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FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT ZIFF-DAVIS' AND/OR CNET'S
STOCK PRICE, FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, Ziff-Davis and CNET may
be subject to a number of material risks, including the following:
o if the stockholders of Ziff-Davis approve the merger agreement
but the stockholders of CNET do not approve the issuance of
CNET common stock in the merger, then CNET must pay Ziff-Davis
a termination fee of $60 million and make a $15 million loan
to Ziff-Davis unless Ziff-Davis is in material breach of the
merger agreement
o CNET may be obligated to pay to Ziff-Davis a termination fee
of $105 million if the merger agreement is terminated in
connection with a proposal for an alternative transaction
involving CNET. The payment of the $105 million fee will
depend on the particular circumstances of the termination and
such fee will be reduced by the amount of any other
termination fee paid by CNET to Ziff-Davis
o if the stockholders of CNET approve the issuance of CNET
common stock in the merger but the stockholders of Ziff-Davis
do not approve the merger agreement, then Ziff-Davis must pay
CNET a termination fee of $33 million unless CNET is in
material breach of the merger agreement
o Ziff-Davis may be obligated to pay to CNET a termination fee
of $58 million if the merger agreement is terminated in
connection with a proposal for an alternative transaction
involving Ziff-Davis. The payment of the $58 million fee will
depend on the particular circumstances of the termination and
such fee will be reduced by any other termination fee paid by
Ziff-Davis to CNET
o costs related to the merger, such as legal, accounting,
financial advisor and printing fees, must be paid even if the
merger is not completed
In addition, Ziff-Davis' and/or CNET's advertisers and strategic
partners, in response to the announcement of the merger, may delay or defer
decisions, which could have a material adverse effect on the business of the
relevant company, regardless of whether the merger is ultimately completed.
Similarly, current and prospective Ziff-Davis and/or CNET employees may
experience uncertainty about their future roles with the combined company. This
may adversely affect Ziff-Davis' and/or CNET's ability to attract and retain key
management, sales, marketing and technical personnel. In addition, covenants in
the merger agreement may impede the ability of Ziff-Davis to make acquisitions
or complete other transactions that are not in the ordinary course pending
completion of the merger, and if the merger is terminated this may put
Ziff-Davis at a competitive disadvantage to CNET. Further, if the merger is
terminated and either company's board of directors determines to seek another
merger or business combination, there can be no assurance that it will be able
to find a partner on terms as attractive as those provided for in the merger
agreement. In addition, while the merger agreement is in effect and subject to
very narrowly defined exceptions, each party is prohibited from soliciting,
initiating or encouraging or entering into certain extraordinary transactions,
such as a merger, sale of assets or other business combination, with any third
party.
REGULATORY AGENCIES MAY IMPOSE CONDITIONS ON CONSENTS RELATING TO THE MERGER.
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A condition to completing the merger is the termination or expiration
of the waiting period under the Hart-Scott-Rodino Act. We cannot assure you that
the Department of Justice or the Federal Trade Commission will not try to
prevent the merger or seek to impose restrictions or conditions on the combined
company as a condition of their not challenging the merger. Depending on the
nature of any restrictions or conditions, these restrictions or conditions may
jeopardize or delay completion of the merger, or lessen the anticipated benefits
of the merger.
RISKS RELATING TO THE COMBINED COMPANY
CNET AND ZDNET HAVE LIMITED OPERATING HISTORIES AND HISTORIES OF NET LOSSES,
WHICH MAKE YOUR EVALUATION OF THE COMBINED COMPANY DIFFICULT AND WILL AFFECT
MANY ASPECTS OF THE COMBINED COMPANY'S BUSINESS, AND WE CANNOT ASSURE THAT THE
COMBINED COMPANY WILL REPORT NET INCOME IN THE FUTURE.
CNET and ZDNet each have a limited operating history. The combined
company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in developing industries,
particularly companies in the relatively new and rapidly evolving market for
Internet products, content and services. These risks include:
o an evolving and unpredictable business model
o uncertain acceptance of new services
o competition
o management of growth
We cannot assure you that the combined company will succeed in
addressing these risks. If the combined company fails to do so, its revenues and
operating results could be materially reduced.
Ziff-Davis has operated as a standalone company only since May 1998. In
addition, a significant part of its infrastructure has been transferred along
with the non-Internet businesses disposed of as part of its restructuring.
Ziff-Davis' success and the success of the combined company will depend on
management's ability to manage the combined company with the resources available
to it.
Additionally, the combined company's limited operating history, the
evolving nature of the Internet and the emerging nature of the markets in which
it competes makes prediction of future operating results difficult or
impossible. We cannot assure you that the combined company's revenues will
increase or even continue at their current level or that it will maintain
operating profitability or generate cash from operations in future periods. CNET
and ZDNet have each incurred significant operating losses since inception. The
combined company may incur additional losses in the future. In view of the
rapidly evolving nature of the combined company's business and the limited
operating history of CNET and the newly restructured Ziff-Davis, the period-to-
period comparisons of operating results are not necessarily meaningful and you
should not rely on them as indicating what the combined company's future
performance will be.
We expect that the combined company will continue to incur significant
sales and marketing, product development and administrative expenses, as well as
significant amortization of goodwill created in the merger. As a result, the
combined company will need to generate
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significant revenue to maintain profitability before amortization of goodwill,
and it is unlikely to generate profits after inclusion of the goodwill
amortization until the goodwill is fully amortized. The combined company cannot
be certain that it will achieve, sustain or increase profitability in the
future, with or without goodwill amortization. Any failure to significantly
increase its revenue as the combined company implements its product and
distribution strategies would materially adversely affect the combined company's
business, operating results and financial condition.
THE RECENT DISPOSITIONS OF ZIFF-DAVIS' NON-INTERNET BUSINESSES MAY ADVERSELY
AFFECT THE COMBINED COMPANY'S FUTURE BUSINESS, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS.
It is possible that the dispositions of Ziff-Davis' non-Internet businesses as
part of its recent restructuring may materially and adversely affect the
combined company's future business, financial condition, results of operations
and prospects in a number of ways, including the following:
o the remaining Ziff-Davis businesses will no longer be able to
leverage the Ziff-Davis brand and cross-market across all of
the platforms that were formerly part of the company
o ZDNet historically has relied on content that it licenses from
ZD Publishing on an exclusive basis online. Under the
agreement for the sale of ZD Publishing, ZDNet has retained
the rights to this content online only through April 5, 2005
and those rights will remain exclusive to ZDNet only through
April 5, 2003. After the three year exclusivity period
expires, the entity that bought ZD Publishing will be free to
use the content to compete with Ziff-Davis' ZDNet division on
the Internet, and after four years the buyer will be free to
license it to other online competitors
o the buyer of ZD Publishing acquired the "Ziff-Davis" brand
name and is receiving a license for the "ZD" brand name, in
each case, for use in print publishing and its future actions
may adversely affect the ZD brand
o Ziff-Davis' costs of services may increase significantly due
to the loss of certain large volume discounts or other special
pricing arrangements it received before it disposed of its
non-Internet businesses
o Ziff-Davis has retained certain tax and other liabilities
relating to its former non-Internet businesses and may also
be liable for certain contingent liabilities relating to such
businesses. While Ziff-Davis believes that it has established
adequate reserves for such liabilities, since contingent
liabilities are inherently uncertain and it is possible that
such liabilities could be materially greater than expected and
have a material adverse effect on the combined company's
financial condition and results of operations.
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THE COMBINED COMPANY MAY EXPERIENCE FLUCTUATIONS IN OPERATING RESULTS AND MAY
NOT BE ABLE TO ADJUST SPENDING IN TIME TO COMPENSATE FOR ANY UNEXPECTED REVENUE
SHORTFALL.
The combined company's operating results may fluctuate significantly in
the future as a result of a variety of factors, many of which are outside its
control. The combined company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues in relation to planned expenditures could
materially reduce the combined company's operating results and materially and
adversely affect its financial condition.
Factors that may adversely affect operating results include:
o demand for Internet advertising
o the addition or loss of advertisers, and the advertising
budgeting cycles of individual advertisers
o the level of traffic on the Internet and the combined
company's network of Internet channels in particular
o seasonal trends in Internet use and advertising
o the amount and timing of capital expenditures and other costs,
including marketing costs, relating to the combined company's
Internet, television and radio operations and costs relating
to the expansion of the combined company's operations and the
introduction of new sites and services
o competition
o the combined company's ability to manage effectively its
development of new business segments and markets
o the combined company's ability to successfully manage the
integration of operations and technology acquisitions and
other business combinations
o the combined company's ability to upgrade and develop its
systems and infrastructure
o technical difficulties, system downtime, Internet brownouts or
denial of service or other similar attacks
o general economic conditions and economic conditions specific
to the Internet and Internet media
Due to all of the foregoing factors, the combined company's operating
results may fall below its expectations or the expectations of securities
analysts or investors. If this happens, the trading price of the combined
company's common stock would likely be materially and adversely affected.
THE COMBINED COMPANY'S INTERNET, TELEVISION AND RADIO CONTENT AND SERVICES MAY
NOT BE ACCEPTED, WHICH COULD ADVERSELY AFFECT ITS PROFITABILITY.
The combined company's future success depends upon its ability to
deliver original and compelling content and services that attract and retain
users. We cannot assure you that the combined company's content and services
will be attractive to a sufficient number of users to generate revenues
sufficient to sustain operations. Costs related to developing new content and
services are expensed as they are incurred, while revenue related to new content
and services typically builds over time. As a result, the combined company's
profitability from year to year may be materially and adversely affected by the
number and timing of new launches. In addition, we
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cannot assure you that any new content or services will be developed in a timely
or cost-effective manner.
The successful development and production of content is subject to
numerous uncertainties, including the ability to:
o anticipate and successfully respond to rapidly changing
consumer tastes and preferences
o obtain favorable distribution rights
o fund new program development
o attract and retain qualified editors, producers, writers,
technical personnel and television and radio hosts
If the combined company is unable to develop content and services that
allow it to attract, retain and expand a loyal user base that is attractive to
advertisers and sellers of technology products, the combined company will be
unable to generate revenue.
COMPETITION IS INTENSE AND IS EXPECTED TO INCREASE SIGNIFICANTLY. THE COMBINED
COMPANY'S FAILURE TO COMPETE SUCCESSFULLY COULD ADVERSELY AFFECT ITS PROSPECTS
AND FINANCIAL RESULTS.
The market for Internet content and services is new, intensely
competitive and rapidly evolving and we expect the competition to increase
significantly. It is not difficult to enter this market and current and new
competitors can launch new Internet sites at relatively low cost. The combined
company will derive its revenue primarily from advertising, for which it
competes with various media including newspapers, television, radio and various
Internet sites that offer consumers information similar to that to be provided
by the combined company. We cannot assure you that the combined company will
compete successfully with current or future competitors. Moreover, increased
competition could result in price reductions, reduced margins or loss of market
share, any of which could have a material adverse effect on our future revenue
and profits.
If the combined company does not compete successfully for new users and
advertisers, its financial results may be materially and adversely affected.
TO REMAIN COMPETITIVE, THE COMBINED COMPANY MUST EXPAND ITS OPERATIONS. FAILURE
TO EFFECTIVELY MANAGE GROWTH COULD RESULT IN THE COMBINED COMPANY'S INABILITY TO
SUPPORT AND MAINTAIN ITS OPERATIONS.
Each of CNET and Ziff-Davis have rapidly and significantly expanded
their operations. We anticipate that further expansion of the combined company's
operations may be required in order to address potential market opportunities.
This rapid growth has placed, and we expect it to continue to place, a
significant strain on our management, operational and financial resources. We
cannot assure you that:
o CNET's and Ziff-Davis' current personnel, systems, procedures
and controls will be adequate to support the combined
company's future operations
o management will be able to identify, hire, train, motivate or
manage required personnel
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o management will be able to successfully identify and exploit
existing and potential market opportunities
In addition, the combined company could experience a materially
negative impact on earnings as a results of expenses associated with growing its
operations, whether through internal development or through acquisitions.
IF THE COMBINED COMPANY IS UNABLE TO CONTINUE LICENSING THE CNET DATA SERVICES
TRANSACTIVE PRODUCTS DATABASE IT COULD FAIL TO ACHIEVE EXPECTATIONS FOR REVENUE
GROWTH.
CNET receives license fees for the license of the CNET Data Services
transactive product database to manufacturers, distributors and resellers of
computer products. The combined company's ability to meet expectations for
revenue growth may depend in part upon its ability to continue to license this
product to new customers. If the combined company is unable to attract new
customers for this product, it could fail to achieve revenue growth
expectations.
IF THE COMBINED COMPANY'S INTERNET USER BASE DOES NOT CONTINUE TO GROW, IT MAY
FAIL TO ACHIEVE EXPECTATIONS FOR REVENUE GROWTH.
The rapid growth in the use of and interest in the Internet is a recent
phenomenon. We cannot assure you that acceptance and use of the Internet will
continue to develop or that the combined company will be able to attract a
sufficient number of users to support growth expectations for its business.
We also cannot assure you that the Internet infrastructure will be able
to support the demands placed upon it by:
o an increase in the number of users
o an increase in frequency of use
o an increase in bandwidth requirements of users
If use of the Internet does not continue to grow or grows more slowly
than expected, if the combined company does not attract more users despite
Internet growth, or if the Internet infrastructure does not effectively support
growth that may occur, the combined company's revenues and financial condition
would be materially and adversely affected.
THE COMBINED COMPANY WILL DEPEND ON ADVERTISING AS A PRINCIPAL SOURCE OF ITS
REVENUE. THE COMBINED COMPANY'S FINANCIAL RESULTS WILL BE ADVERSELY AFFECTED IF
IT FAILS TO SUSTAIN ADVERTISING REVENUES OR LEAD FEES.
CNET's and Ziff-Davis' revenues through December 31, 1999 were derived
in large part from the sale of advertising and other fees, such as lead fees,
from sellers of technology products on their Internet channels and from
advertising and license fees from producing television programs. It is expected
that the combined company will derive its revenue in a similar manner. Most of
the combined company's advertising contracts will be subject to termination by
the customer at any time on very short notice or it may be difficult to obtain
performance from advertisers who have longer term contracts. If the combined
company loses advertising customers, fails to attract new customers or is forced
to reduce advertising rates in order to retain or attract customers, its
revenues and financial condition will be materially and adversely affected.
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The combined company's ability to generate advertising revenue will depend on
several factors, including;
o the continued development of the Internet as an advertising
medium
o the pricing of advertising on other Internet sites
o the amount of traffic on the combined company's network of
sites
o pricing pressures, delays and new product launches
o the combined company's ability to achieve, demonstrate and
maintain attractive user demographics
o the combined company's ability to develop and retain a skilled
advertising sales force.
THE COMBINED COMPANY WILL DEPEND ON, AND RECEIVE A SIGNIFICANT PERCENTAGE OF ITS
REVENUE FROM, A LIMITED NUMBER OF ADVERTISERS.
A relatively small number of advertisers contribute a significant
percentage of the combined company's pro forma revenue. Top advertising clients,
and other advertising clients, may not continue to use the combined company's
services to the same extent, or at all, in the future. A significant reduction
in advertising by one or more of the combined company's largest advertisers
could have a material adverse effect on the combined company's profits and
liquidity.
THE COMBINED COMPANY'S ADVERTISING AND OTHER OPERATING REVENUES MAY BE SUBJECT
TO SEASONALITY AND CYCLICALITY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON
ITS REVENUES AND OPERATING RESULTS.
We believe that advertising sales in traditional media, such as
television, are generally lower in the first and third calendar quarters of each
year than in other quarters and that advertising expenditures fluctuate
significantly with economic cycles. Depending on the extent to which the
Internet is accepted as an advertising medium, seasonality and cyclicality in
the level of advertising expenditures generally could become more pronounced for
Internet advertising. Seasonality and cyclicality in advertising expenditures
generally, or with respect to Internet-based advertising specifically, could
have a material adverse effect on the combined company's business, prospects,
financial condition and operating results because advertising expenditures will
account for substantially all of the combined company's revenues.
The combined company may also experience seasonality in its operating
results, particularly in connection with its shopping services, which may
reflect seasonal trends in the retail industry. The level of consumer retail
spending generally decreases in the first and third calendar quarters.
INABILITY TO ATTRACT AND RETAIN KEY PERSONNEL COULD ADVERSELY AFFECT THE
COMBINED COMPANY'S ABILITY TO OPERATE.
The combined company's success depends to a large extent on the
continued services of Halsey M. Minor, Shelby W. Bonnie, Dan Rosensweig and the
other members of CNET's and Ziff-
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Davis' senior management team. In particular, the loss of the services of Mr.
Minor or Mr. Bonnie, CNET's founders, could have an adverse effect on the
combined company due to their crucial role in its strategic development. The
combined company's success is also dependent on our ability to identify,
attract, retain and motivate other highly skilled officers, key employees and
personnel in a very competitive job environment. CNET and Ziff-Davis do not have
long-term employment agreements with any of their key personnel and do not
maintain "key person" life insurance policies on any of their officers or other
employees. The production of our Internet, television and radio content and
services requires highly skilled writers and editors and personnel with
sophisticated technical expertise. CNET and Ziff-Davis have encountered
difficulties in attracting qualified software developers for their Internet
channels and related technologies and we cannot assure you that we will be able
to attract or retain such personnel. If the combined company does not attract,
retain and motivate the necessary technical, managerial, editorial and sales
personnel, there could be a material adverse effect on its business and
operating results.
THE COMBINED COMPANY MAY NEED TO SPEND SIGNIFICANTLY MORE MONEY ON ADVERTISING
IN THE FUTURE.
We cannot assure you that our advertising campaigns, or any other
advertising campaign the combined company may launch in the future, will be
effective. To remain competitive, the combined company may need to spend
significantly more money on advertising in the future and such additional costs
could materially and adversely affect the combined company's profits.
IF THE COMBINED COMPANY DOES NOT RESPOND ADEQUATELY TO THE INDUSTRY'S EVOLVING
TECHNOLOGY STANDARDS OR DOES NOT CONTINUE TO MEET THE SOPHISTICATED NEEDS OF ITS
CUSTOMERS, SALES OF ITS PRODUCTS AND SERVICES MAY DECLINE.
The market for Internet products and services is characterized by:
o rapid technological developments
o frequent new product introductions
o evolving industry standards
The emerging character of these products and services and their rapid
evolution requires that the combined company continually improve the
performance, features and reliability of its network infrastructure and Internet
content, particularly in response to competitive offerings and changing customer
demands. We cannot assure you that the combined company will be successful in
responding quickly, cost effectively or adequately to these developments. In
addition, the widespread adoption of new Internet technologies or standards
could require the combined company to make substantial expenditures to modify or
adapt its Internet channels and services and could fundamentally affect the
character, viability and frequency of Internet-based advertising. Finally,
technologies adopted by the combined company could fail to perform according to
expectations, resulting in system performance problems and increased costs. Any
of these events could have a material adverse effect on the combined company's
financial condition and operating results.
THE COMBINED COMPANY WILL DEPEND ON ARRANGEMENTS WITH THIRD PARTIES FOR INTERNET
TRAFFIC TO ITS SITES AND ITS FAILURE TO DEVELOP AND MAINTAIN RELATIONSHIPS WITH
THIRD PARTIES COULD ADVERSELY AFFECT THE COMBINED COMPANY'S FINANCIAL CONDITION.
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Both CNET and Ziff-Davis rely on the cooperation of owners and
operators of other Internet sites with whom they have syndication and other
arrangements to generate traffic for their Internet sites. The combined
company's ability to advertise on other Internet sites and the willingness of
the owners of these sites to direct users to the combined company's Internet
channels through hypertext links will continue to be critical to the success of
the combined company's Internet operations. If the combined company is unable to
develop and maintain satisfactory relationships with such third parties on
acceptable commercial terms, or if the combined company's competitors are better
able to capitalize on these relationships, the combined company's financial
condition and operating results will be materially and adversely affected.
THE COMBINED COMPANY MAY HAVE DIFFICULTIES WITH ITS ACQUISITIONS AND
INVESTMENTS, WHICH COULD ADVERSELY AFFECT ITS GROWTH AND FINANCIAL CONDITION.
From time to time, the combined company may consider new business
opportunities and ventures, including acquisitions, in a broad range of areas.
Any decision by the combined company to pursue a significant business expansion
or new business opportunity would be accompanied by risks, including, among
others:
o requiring the combined company to invest a substantial amount
of capital, which could have a material adverse effect on its
financial condition and its ability to implement its existing
business strategy
o requiring the combined company to issue additional equity
interests, which would be dilutive to its current stockholders
o placing additional, substantial burdens on the combined
company's management personnel and our financial and
operational systems
o the difficulty of assimilating the operations, technology and
personnel of the combined companies
o the potential disruption of our ongoing business
o the possible inability to retain key technical and managerial
personnel
o additional expenses associated with amortization of goodwill
and other purchased intangible assets
o additional operating losses and expenses associated with the
activities and expansion of acquired businesses
o the possible impairment of relationships with existing
employees and advertising customers
In addition, we cannot assure you that the combined company will be
successful in overcoming these risks or any other problems encountered in
connection with any transaction or that any transaction will be profitable.
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THE COMBINED COMPANY PLANS TO EXPAND ITS INTERNATIONAL OPERATIONS AND MAY
ENCOUNTER A NUMBER OF PROBLEMS DOING SO. THERE ARE ALSO A NUMBER OF RISKS
ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT COULD ADVERSELY AFFECT THE
COMBINED COMPANY'S BUSINESS.
EXPANSION OF INTERNATIONAL OPERATIONS. One component of the combined
company's growth strategy will be to further expand into international markets.
The combined company's international operations will be expanded into markets
where technology and online industries are less well developed than in the U.S.,
which may adversely affect the combined company's results of operations.
RISK OF INTERNATIONAL OPERATIONS. There are certain risks inherent in
doing business in international markets, such as the following:
o uncertainty of product acceptance by different cultures
o unforseen changes in regulatory requirements
o difficulties in staffing and managing multinational operations
o state-imposed restrictions on the repatriation of funds
o currency fluctuations
o difficulties in finding appropriate foreign licensees or joint
venture partners
o potential adverse tax consequences
There is a risk that such factors will have an adverse effect on the combined
company's ability to successfully operate internationally and on its profits and
liquidity.
THE COMBINED COMPANY MAY NOT BE ABLE TO ACQUIRE OR MAINTAIN DOMAIN NAMES, WHICH
COULD ADVERSELY AFFECT ITS ABILITY TO OPERATE ITS ONLINE SITES.
CNET and Ziff-Davis currently hold various Web domain names relating to
their brand and sites. The acquisition and maintenance of domain names generally
is regulated by government agencies and their designees. The regulation of
domain names in the United States and in foreign countries is subject to change.
We cannot assure you that the combined company will be able to acquire or
maintain relevant domain names in all countries where it will conduct business.
Any inability to acquire or maintain domain names could have a material adverse
effect on the combined company's business.
CHANGES IN REGULATIONS COULD ADVERSELY AFFECT THE WAY THAT THE COMBINED COMPANY
OPERATES.
It is possible that new laws and regulations in the U.S. and elsewhere
will be adopted covering issues affecting the combined company's business,
including:
o privacy
o copyrights, trademarks and domain names
o obscene or indecent communications
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o pricing, characteristics and quality of Internet products and
services
Increased government regulation, or the application of existing laws to
online activities, could:
o decrease the growth of the Internet
o reduce the combined company's revenues
o increase the combined company's operating expenses
o expose the combined company to significant liabilities
Any of these occurrences could have a material adverse effect on the combined
company's profits and liquidity.
We cannot be sure what effect any future material noncompliance by the
combined company with these laws and regulations or any material changes in
these laws and regulations could have on the combined company's business.
THE COMBINED COMPANY MAY HAVE CAPACITY CONSTRAINTS AND MAY BE SUBJECT TO SYSTEM
DISRUPTIONS, WHICH COULD ADVERSELY AFFECT ITS REVENUES.
The combined company's ability to attract and maintain relationships
with users, advertisers, merchants and strategic partners will depend on the
satisfactory performance, reliability and availability of its Internet channels
and network infrastructure. The combined company's Internet advertising revenues
will relate directly to the number of advertisements delivered to its users.
System interruptions or delays that result in the unavailability of Internet
channels or slower response times for users would reduce the number of
advertisements and sales leads delivered to such users and reduce the
attractiveness of the combined company's Internet channels to users, strategic
partners and advertisers or reduce the number of impressions delivered and
thereby reduce revenue. CNET and Ziff-Davis have experienced periodic system
interruptions in the past and the combined company will continue to suffer
future interruptions from time to time. System interruptions or slower response
times could have a material adverse effect on the combined company's revenues
and financial condition.
The combined company's Internet, television and radio systems and
operations will be vulnerable to interruption by fire, earthquake, power loss,
telecommunications failure, computer hacking and other events beyond the
combined company's control. Most of CNET's servers and television production
equipment are currently located in the Bay Area of California, an area that is
susceptible to earthquakes. CNET and Ziff-Davis have experienced system downtime
for limited periods due to power loss and telecommunications failures, and such
interruptions in service by the combined company may materially and adversely
affect the combined company's operations in the future. The combined company
will also rely on web browsers and online service providers to provide Internet
access to its sites. The combined company will have only a limited amount of
redundant facilities or systems, no formal disaster recovery plan and will not
carry sufficient business interruption insurance nor earthquake insurance to
compensate for losses that may occur. Any losses or damages incurred could have
a material adverse effect on the combined company's financial condition.
THE COMBINED COMPANY'S BUSINESS WILL INVOLVE RISKS OF LIABILITY CLAIMS FOR
INTERNET, TELEVISION AND RADIO CONTENT OR TECHNOLOGY, WHICH COULD RESULT IN
SIGNIFICANT COSTS.
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As a publisher and a distributor of content over the Internet,
television and radio, the combined company may face potential liability for:
o defamation
o negligence
o copyright, patent or trademark infringement
o other claims based on the nature and content of the materials
published or distributed
These types of claims have been brought, sometimes successfully,
against online services and publishers of television and radio content. In
addition, the combined company could be exposed to liability in connection with
material indexed or offered on the combined company's Internet sites or for
information collected from and about its users. There has been a recent increase
in the granting and attempted enforcement of business process patents that cover
practices that may be widely employed in the Internet industry. If the combined
company is found to violate any such patent and it is unable to enter into a
license agreement on reasonable turns, its ability to offer services could be
materially and adversely affected. We cannot assure you that third parties or
users will not bring claims against the combined company relating to proprietary
rights or use of personal information. Although the combined company will carry
general liability insurance, its insurance may not cover potential claims of
defamation, negligence and similar claims, and it may or may not apply to a
particular claim or be adequate to reimburse the combined company for all
liability that may be imposed. Any imposition of liability that is not covered
by insurance or is in excess of insurance coverage could have a material adverse
effect on the combined company's financial condition.
THE COMBINED COMPANY'S NETWORKS MAY BE VULNERABLE TO UNAUTHORIZED PERSONS
ACCESSING ITS SYSTEMS, WHICH COULD DISRUPT ITS OPERATIONS AND RESULT IN THE
THEFT OF ITS PROPRIETARY INFORMATION.
A party who is able to circumvent the combined company's security
measures could misappropriate proprietary information or cause interruptions or
malfunctions in its Internet operations. The combined company may be required to
expend significant capital and resources to protect against the threat of
security breaches or to alleviate problems caused by breaches in security. For
example, so-called "spiders" have and can be used in efforts to copy the
combined company's databases, including the combined company's database of
technology products and prices.
Concerns over the security of Internet transactions and the privacy of
users may also inhibit the growth of the Internet, particularly as a means of
conducting commercial transactions. To the extent that the combined company's
activities or the activities of third party contractors involve the storage and
transmission of proprietary information, such as computer software or credit
card numbers, security breaches could expose the combined company to a risk of
loss or litigation and possible liability. We cannot assure you that contractual
provisions attempting to limit the combined company's liability in these areas
will be successful or enforceable, or that other parties will accept such
contractual provisions as part of the combined company's agreements.
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THE COMBINED COMPANY WILL DEPEND ON LICENSED TECHNOLOGY FROM THIRD PARTIES AND
ITS FAILURE TO MAINTAIN THESE ARRANGEMENTS COULD ADVERSELY AFFECT ITS
OPERATIONS.
CNET and Ziff-Davis rely on technology licensed from third parties for
use in operating and managing their Internet sites and providing related
services to users and advertisers. The combined company's ability to generate
revenue from Internet commerce may also depend on data encryption and
authentication technologies that it may be required to license from third
parties. We cannot assure you that these third party technology licenses will be
available at all or will continue to be available to the combined company on
acceptable commercial terms or that they will operate as intended.
CNET'S DEBT OBLIGATIONS EXPOSE THE COMBINED COMPANY TO RISKS THAT COULD
ADVERSELY AFFECT ITS FINANCIAL CONDITION.
CNET's debt outstanding at June 30, 2000 was approximately $184.9
million. CNET may incur substantial additional debt in the future. The level of
CNET's indebtedness, among other things, could:
o make it difficult for the combined company to make payments on
its debt as described below
o make it difficult for the combined company to obtain any
necessary financing in the future for working capital, capital
expenditures, debt service, acquisitions or general corporate
purposes
o limit the combined company's flexibility in planning for or
reacting to changes in its business
o reduce funds available to use for our operations
o impair our ability to incur additional debt because of
financial and other restrictive covenants o make the combined
company more vulnerable in the event of a downturn in its
business or an increase in interest rates
If the combined company experiences a decline in revenues due to any of
the factors described in this Risk Factors section or otherwise, it could have
difficulty paying interest and other amounts due on its indebtedness. If the
combined company is unable to generate sufficient cash flow or otherwise obtain
funds necessary to make required payments, or if it fails to comply with the
various requirements of its indebtedness, the combined company would be in
default, which would permit the holders of its indebtedness to accelerate the
maturity of the indebtedness and could cause defaults under its other
indebtedness. Any default under its indebtedness could have a material adverse
effect on the combined company's financial condition.
THE PRICE OF CNET COMMON STOCK IS SUBJECT TO WIDE FLUCTUATION.
The trading price of CNET common stock is subject to wide fluctuations.
Trading prices of CNET common stock may fluctuate in response to a number of
events and factors, including:
o quarterly variations in operating results
o announcements of innovations
o new products, strategic developments or business combinations
by CNET or its competitors
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o changes in CNET's expected operating expense levels or losses
o changes in financial estimates and recommendations of
securities analysis
o the operating and securities price performance of other
companies that investors may deem comparable to CNET
o news reports relating to trends in the Internet
o other events or factors
In addition, the stock market in general, and the market prices for
Internet-related companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of these companies.
These broad market and industry fluctuations may adversely affect the trading
price of CNET common stock.
These fluctuations may make it more difficult to use stock as currency
to make acquisitions that might otherwise be advantageous, or to use stock
options as a means to attract and retain employees.
CNET HAS A SUBSTANTIAL NUMBER OF SHARES OF COMMON STOCK THAT MAY BE SOLD, WHICH
COULD AFFECT THE TRADING PRICE OF CNET COMMON STOCK.
CNET has a substantial number of shares of common stock subject to
stock options, and CNET's notes may be converted into shares of CNET common
stock. In addition, as of the record date for the CNET special meeting, CNET has
over ____ shares of authorized but unissued shares of CNET common stock that are
available for future sale. We cannot predict the effect, if any, that future
sales of shares of CNET common stock or notes, or the availability of shares of
CNET common stock or notes for future sale, will have on the market price of
CNET's common stock. In addition, after 180 days from the closing of the merger,
Softbank will have a right, pursuant to registration rights granted under the
stockholder agreement, to require the combined company to register for public
sale CNET common stock owned by Softbank. In addition, our founding stockholders
might sell shares of CNET common stock from time to time. Sales of substantial
amounts of CNET common stock, including shares issued in connection with
acquisitions, upon the exercise of stock options or warrants or the conversion
of debt securities, or the perception that such sales could occur, may adversely
affect prevailing market prices for CNET's common stock.
PROVISIONS OF CNET'S CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW COULD
DETER TAKEOVER ATTEMPTS.
Some provisions in CNET's certificate of incorporation and bylaws could
delay, prevent or make more difficult a merger, tender offer, proxy contest or
change of control. CNET's stockholders might view any transaction of this type
as being in their best interest since the transaction could result in a higher
stock price than the current market price for our common stock. Among other
things, CNET's certificate of incorporation and bylaws:
o authorize its board of directors to issue preferred stock with
the terms of each series to be fixed by our board of directors
o divide CNET's board of directors into three classes so that
only approximately one-third of the total number of directors
is elected each year
o permit directors to be removed only for cause
o specify advance notice requirements for stockholder proposals
and director nominations
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In addition, with some exceptions, the Delaware General Corporation Law
restricts or delays mergers and other business combinations between CNET and any
stockholder that acquires 15% or more of CNET's voting stock.
THERE ARE SEVERAL LAWSUITS IN WHICH CNET OR ZIFF-DAVIS ARE A DEFENDANT WHICH
COULD MATERIALLY AND ADVERSELY AFFECT THE BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE COMBINED COMPANY.
In August 1999, the Simon Property Group filed a complaint against
mySimon, Inc., which became CNET's subsidiary on February 29, 2000. The Simon
Property Group is a real estate investment trust that owns and develops mall
properties nationwide. The complaint, which was filed in the Southern District
of Indiana at Indianapolis, alleges that our "mySimon" mark infringes the Simon
Property Group's "SIMON" mark. In October 1999, the Simon Property Group moved
for a temporary restraining order in the matter, which was denied. Discovery has
been completed and a jury trial has been set for August 21, 2000. Although CNET
believes that an unfavorable outcome in this case is unlikely, it is impossible
to predict the actual outcome. If the court were to determine that the mySimon
mark infringes the Simon Property Group mark and were to require CNET to
discontinue use of the mark and/or to pay significant damages to Simon Property
Group, there could be a material adverse effect on the business, financial
condition and results of operations of the combined company.
In connection with the initial public offering of ZD common stock on
April 28, 1998 and the repricing of certain stock options, Ziff-Davis has been
named as a defendant in several lawsuits. While Ziff-Davis believes there are
substantial defenses to all claims, we cannot assure you that Ziff-Davis will
prevail. Defense costs and/or settlement costs relating to these actions could
be substantial, and the defense of these actions may divert management's
attention and resources. If the plaintiffs prevail in these actions, any
judgments awarded by the courts could have a material adverse effect on the
combined company's financial condition. For more information regarding the
lawsuits in which Ziff-Davis is a defendant, see Note 18 of the notes to
Ziff-Davis' consolidated financial statements, which are included in its 1999
Annual Report on Form 10-K.
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OWNERSHIP OF THE CNET COMMON STOCK WILL BE CONCENTRATED IN A SMALL GROUP OF
SHAREHOLDERS WHOSE INTERESTS MAY DIFFER FROM THOSE OF OTHER STOCKHOLDERS.
After the merger, Softbank, Halsey Minor, the chairman of CNET, and
Shelby Bonnie, the chief executive office of CNET, will together control
approximately ___% of the outstanding common stock of the combined company. The
concentration of ownership of the common stock of the combined company may
delay, prevent or deter a change in control, could deprive other stockholders of
an opportunity to receive a premium for their common stock as part of a sale of
the combined company or its assets and may adversely affect the market price of
CNET common stock. Also, these stockholders can exert significant control over
actions requiring the approval of a majority of the voting stock, including
amendments to our charter. Commercial and other transactions between the
combined company, on the one hand, and the directors, officers and major
stockholders of the combined company and their affiliates, on the other, create
potential for, or could result in, conflicting interests. We intend that the
combined company enter into all related party transactions on an arm's length
basis (measured against terms that would be offered by an unaffiliated third
party).
In addition, after 180 days from the closing of the merger, Softbank
will have a right, pursuant to registration rights granted under the stockholder
agreement, to require the combined company to register for public sale CNET
common stock owned by Softbank. Also, Halsey Minor and Shelby Bonnie might sell
shares of CNET common stock from time to time.
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements relate to the financial condition, results of
operations, cash flows, dividends, financing plans, business strategies,
operating efficiencies or synergies, budgets, capital and other expenditures,
competitive positions, growth opportunities for existing products, benefits from
new technology, plans and objectives of management, markets for Ziff-Davis' and
CNET's stock, and other matters. Statements in this document that are not
historical facts are identified as "forward-looking statements" for the purpose
of the safe harbor provided by Section 21E of the Securities Exchange Act of
1934 and Section 27A of the Securities Act of 1933.
These forward-looking statements, including statements relating to
future business prospects, revenues, working capital, liquidity, capital needs,
interest costs and income, wherever they occur in this proxy
statement/prospectus, are estimates reflecting the best judgment of the senior
management of CNET and Ziff-Davis, respectively. These forward-looking
statements involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by the forward-looking
statements. Forward-looking statements should, therefore, be considered in light
of various important factors, including those set forth in this proxy statement/
prospectus. Important factors that could cause actual results to differ
materially from estimates or projections contained in the forward-looking
statements include, without limitation:
o the effects of vigorous competition in the markets in which
CNET and Ziff-Davis operate, including the potential for
additional competition from major Internet service providers
and the content consumers that are currently customers of
Ziff- Davis and CNET
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o the ability to enter into agreements, and the cost of entering
new territories necessary, to provide nationwide services
o changes in technology that may increase the number of
competitors CNET or Ziff-Davis faces or require significant
capital expenditures to provide competitive services
o general economic or business conditions that may be less
favorable than expected, resulting in, among other things,
lower than expected revenues
o costs or difficulties related to the integration of the
businesses of CNET and Ziff-Davis that may be greater than
expected
o legislative or regulatory changes that may adversely affect
the businesses in which CNET and Ziff-Davis are engaged
o adverse changes in the securities markets
o the other risk factors described under "Risk Factors" in this
proxy statement/prospectus and
o other factors, including, but not limited to, economic, key
employee, competitive, regulatory, governmental and
technological factors, which may affect CNET or Ziff-Davis
When we use the words "estimate," "project," "intend," "expect,"
"believe" and similar expressions, we are making forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents we incorporate by reference
in this proxy statement/prospectus. We caution you not to place undue reliance
on these forward-looking statements, which speak only as of the date they were
made. We do not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this proxy statement/prospectus or to reflect the occurrence of
unanticipated events.
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THE CNET SPECIAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of
CNET as part of the solicitation of proxies by CNET's board of directors. The
CNET board will use the proxies at the CNET special meeting and at any
adjournment or postponement thereof. We are first mailing this proxy
statement/prospectus and the accompanying form of proxy to CNET stockholders on
or about _______, 2000.
DATE, TIME AND PLACE
We will hold the CNET special meeting on __________________, 2000, at
10:00 a.m., local time, at 150 Chestnut Street, San Francisco, California.
PURPOSE OF CNET SPECIAL MEETING
At the CNET special meeting, we are asking holders of CNET common stock
to (1) approve the issuance of CNET common stock in a merger pursuant to which a
newly formed, wholly owned CNET subsidiary will merge into Ziff-Davis, with
Ziff-Davis continuing as the surviving corporation and becoming a wholly owned
subsidiary of CNET, and (2) approve the CNET 2000 Stock Option Plan.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of CNET common stock at the close of business on
__________ __, 2000, the CNET record date, are entitled to notice of and to vote
at the CNET special meeting. On the CNET record date, there were approximately
______ shares of CNET common stock issued and outstanding and held by
approximately ______ holders of record.
PERSON MAKING THE SOLICITATION
The proxy accompanying this proxy statement/prospectus is solicited on
behalf of the CNET board of directors for use at the CNET special meeting.
QUORUM AND VOTING REQUIRED
At the CNET special meeting, holders of CNET common stock on the CNET
record date will be entitled to one vote per share of common stock on the
proposals to approve the issuance of shares of CNET common stock in the merger
and to approve the CNET 2000 Stock Option Plan.
A quorum of stockholders is necessary to hold a valid meeting.
Attendance at the meeting in person or by proxy of a majority of the outstanding
CNET common stock is required for a quorum to be present. If a quorum is not
present at the CNET special meeting, we expect that the meeting will be
adjourned or postponed to solicit additional proxies. Abstentions and "broker
non-votes" count as being present and are included to establish a quorum. A
"broker non-vote" occurs when a broker is not permitted to vote because the
broker has not received instructions from the beneficial owner of the shares.
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The issuance of shares of CNET common stock in the merger and the
approval of the CNET 2000 Stock Option Plan requires the affirmative vote of a
majority of the CNET shares represented in person or by proxy and entitled to
vote at the special meeting.
As of the CNET record date, directors and executive officers of CNET
beneficially owned an aggregate of approximately ___% of the outstanding shares
of CNET common stock. Halsey Minor, the chairman of CNET's board, and Shelby
Bonnie, CNET's chief executive officer, have entered into voting agreements with
Ziff-Davis that obligate them to vote all the shares of CNET common stock that
they own in favor of the issuance of shares of CNET common stock in the merger.
Together, Mr. Minor and Mr. Bonnie owned approximately _____% of CNET's common
stock outstanding as of the record date.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time
for the CNET special meeting (and not revoked) will be voted at the CNET special
meeting in the manner specified by the grantors of those proxies. Properly
executed proxies that do not contain voting instructions will be voted FOR the
approval of the issuance of CNET common stock in connection with the merger and
FOR the approval of the CNET 2000 Stock Option Plan.
If you are a record holder of shares of CNET common stock, in order for
your shares to be included in the vote, you must vote your shares by one of the
following means:
o in person
o by proxy by completing, signing and dating the enclosed proxy
card and returning it in the enclosed postage-paid envelope
o by telephone by following the instructions printed on the
enclosed proxy card
Shares of CNET common stock represented at the CNET special meeting but
not voting, including shares of CNET common stock for which proxies have been
received but for which holders of shares have abstained, will be treated as
present at the CNET special meeting to determine the presence or absence of a
quorum for the transaction of all business.
Only shares affirmatively voted for approval of the issuance of shares
of CNET common stock in the merger and for approval of the CNET 2000 Stock
Option Plan, including properly executed proxies that do not contain voting
instructions, will be counted as votes in favor of the approval of the issuance
of such shares of CNET common stock and the approval of the CNET 2000 Stock
Option Plan. Brokers who hold shares of CNET common stock in street name for
customers who are the beneficial owners of those shares may not give a proxy to
vote those shares without specific instructions from those customers.
The persons named as proxies by CNET stockholders may propose and vote
for one or more adjournments of the CNET special meeting, including adjournments
to permit further solicitations of proxies. Proxies voted against the proposal
to issue CNET common stock in the merger will not be voted in favor of any such
adjournment or postponement.
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EXPENSES; SOLICITATION OF PROXIES
CNET will mail a copy of this proxy statement/prospectus to each holder
of record of CNET common stock on the CNET record date.
CNET will pay the expenses of soliciting proxies to be voted at the
meeting, except that Ziff-Davis will share equally the expenses incurred in
connection with filing and printing this proxy statement/prospectus. Following
the original mailing of the proxies and other soliciting materials, CNET will
request brokers, custodians, nominees and other record holders of CNET common
stock to forward copies of the proxy and other soliciting materials to persons
for whom they hold shares of CNET common stock and to request authority for the
exercise of proxies. In such cases, upon the request of the record holders, CNET
will reimburse such holders for their reasonable expenses.
In addition to solicitation by mail, directors, officers and key
employees of CNET may solicit proxies in person or by telephone, telegram or
other means of communication. These persons will not receive additional
compensation for solicitation of proxies, but may be reimbursed for reasonable
out-of-pocket expenses.
_______ will assist in the solicitation of proxies by CNET. CNET will
pay ______ fees estimated at $_____, plus reimbursement of out-of-pocket
expenses, and will indemnify ______ against any losses arising out of its proxy
soliciting services on behalf of CNET.
PROXIES; REVOCABILITY
The proxy accompanying this proxy statement/prospectus is solicited on
behalf of the CNET board of directors for use at the CNET special meeting.
Please complete, date and sign the accompanying proxy and promptly return it in
the enclosed envelope or otherwise mail it to CNET. You may also vote by
telephone, as described in the enclosed proxy card. All properly signed proxies
that CNET receives prior to the vote at the meeting that are not revoked will be
voted at the meeting according to the instructions indicated on the proxies or,
if no direction is indicated, to approve the issuance of CNET common stock in
the merger and the CNET 2000 Stock Option Plan. You may revoke your proxy at any
time before it is exercised by taking any of the following actions:
o delivering a written notice to the secretary of CNET by any
means, including facsimile, bearing a date later than the date of
the proxy, stating that the proxy is revoked
o signing and delivering a proxy relating to the same shares and
bearing a later date prior to the vote at the meeting
o attending the meeting and voting in person, although attendance
at the meeting will not, by itself, revoke a proxy. Please note,
however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must
bring to the meeting a letter from the broker, bank or other
nominee confirming your beneficial ownership of the shares
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o calling the toll-free number on the enclosed proxy and changing
your vote, even if you did not previously vote by telephone
CNET's board of directors does not know of any matter that is not
referred to in this proxy statement/prospectus to be presented for action at the
meeting. If any other matters are properly brought before the meeting, the
persons named in the proxies will have discretion to vote on such matters in
accordance with their best judgment.
NO APPRAISAL RIGHTS
Appraisal rights are not available to holders of CNET common stock.
RECOMMENDATION OF CNET'S BOARD OF DIRECTORS
CNET's board of directors has adopted the merger agreement and approved
the issuance of CNET common stock in the merger, and has determined that the
merger is in the best interests of CNET and its stockholders. Further, CNET's
board of directors has adopted the CNET 2000 Stock Option Plan. The CNET board
of directors recommends that CNET stockholders vote FOR the issuance of shares
of CNET common stock in the merger and that CNET stockholders vote FOR approval
of the CNET 2000 Stock Option Plan.
To assure that your shares of CNET common stock are represented at the
CNET special meeting, please complete, date and sign the enclosed proxy card and
mail it promptly in the postage-paid envelope provided, whether or not you plan
to attend the meeting. You may also vote by telephone, as described on the
enclosed proxy card. You may revoke your proxy at any time before it is voted.
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THE ZIFF-DAVIS SPECIAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of
Ziff-Davis Inc. as part of the solicitation of proxies by the Ziff-Davis board
of directors. Ziff-Davis' board will use the proxies at the Ziff-Davis special
meeting and at any adjournment or postponement thereof. We are first mailing
this proxy statement/prospectus and the accompanying form of proxy to Ziff-Davis
stockholders on or about _______, 2000.
DATE, TIME AND PLACE
We will hold the Ziff-Davis special meeting on _________, ________,
2000, at 1:00 p.m., local time, at 28 East 28th Street, New York, New York.
PURPOSE OF ZIFF-DAVIS SPECIAL MEETING
At the special meeting, we are asking holders of ZD common stock and
ZDNet common stock to adopt the merger agreement pursuant to which a newly
formed, wholly owned subsidiary of CNET will merge into Ziff-Davis, with
Ziff-Davis continuing as the surviving corporation and becoming a wholly owned
subsidiary of CNET.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of ZD common stock and ZDNet common stock at the
close of business on _________ __, 2000, the Ziff-Davis record date, are
entitled to notice of and to vote at the Ziff-Davis special meeting. On the
Ziff-Davis record date, approximately ______ shares of ZD common stock were
issued and outstanding and held by approximately ______ holders of record and
approximately _____ shares of ZDNet common stock were issued and outstanding and
held by approximately ______ holders of record.
PERSON MAKING THE SOLICITATION
The proxy accompanying this proxy statement/prospectus is solicited on
behalf of the Ziff-Davis board of directors for use at the Ziff-Davis special
meeting.
QUORUM AND VOTING REQUIRED
At the Ziff-Davis special meeting, holders of record of ZD common stock
on the Ziff-Davis record date will be entitled to cast one vote per share of ZD
common stock owned as of the record date on the proposal to adopt the merger
agreement. At the Ziff-Davis special meeting, holders of ZDNet common stock on
the Ziff-Davis record date will be entitled to cast ____ votes per share of
ZDNet common stock owned as of the record date, which is a number of votes per
share calculated in accordance with the Amended and Restated Certificate of
Incorporation of Ziff-Davis to equal the average market value of a share of
ZDNet common stock divided by the average market value of a share of ZD common
stock during the 20 consecutive trading day period ending on (and including) the
fifth trading day before the Ziff-Davis record date.
A quorum of stockholders is necessary to hold a valid meeting. A quorum
will be present at the Ziff-Davis special meeting if shares representing a
majority of the votes entitled to be cast are represented in person or by proxy.
If a quorum is not present at the Ziff-Davis special meeting,
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we expect that the meeting will be adjourned or postponed to solicit additional
proxies. Abstentions and "broker non-votes" count as being present to establish
a quorum. A "broker non-vote" occurs when a broker is not permitted to vote
because the broker does not have instructions from the beneficial owner of the
shares.
As of August 8, 2000, directors and executive officers of Ziff-Davis as
a group beneficially owned an aggregate of approximately [24.0]% of the
outstanding shares of Ziff-Davis. Softbank, which owns Ziff-Davis common stock
entitled to cast a majority of the total votes at the Ziff-Davis special
meeting, has agreed to vote in favor of the adoption of the merger agreement.
Thus, we expect that the merger agreement will be adopted by Ziff-Davis
stockholders regardless of how other Ziff-Davis stockholders vote.
The adoption of the merger agreement requires the affirmative vote of
holders of shares representing a majority of the total voting power of ZD common
stock and ZDNet common stock entitled to vote at the special meeting, voting
together as a single group. IF A ZIFF-DAVIS STOCKHOLDER ABSTAINS FROM VOTING OR
DOES NOT VOTE (EITHER IN PERSON OR BY PROXY), IT WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE ADOPTION OF THE MERGER AGREEMENT. THE SHARES OF ZD COMMON STOCK
WHICH ARE SUBJECT TO THE VOTING AGREEMENT ENTERED INTO BY SOFTBANK WILL BE
SUFFICIENT TO ADOPT THE MERGER AGREEMENT AT THE SPECIAL MEETING.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time
for the Ziff-Davis special meeting (and not revoked) will be voted at the
Ziff-Davis special meeting in the manner specified by the grantors of those
proxies. Properly executed proxies that do not contain voting instructions will
be voted FOR the adoption of the merger agreement, and the proxy holder may vote
the proxy in its discretion as to any other matter which may properly come
before the meeting.
If you are a record holder of shares of ZD common stock and/or ZDNet
common stock, in order for your shares to be included in the vote, you must vote
your shares by one of the following means:
o in person
o by proxy by completing, signing and dating the enclosed proxy
card and returning it in the enclosed postage-paid envelope
o by telephone by following the instructions printed on the
enclosed proxy card
Shares of ZD common stock and ZDNet common stock represented at the
Ziff-Davis special meeting but not voted, including shares of ZD common stock
and ZDNet common stock for which proxies have been received but for which
holders of shares have abstained, will be treated as present at the Ziff-Davis
special meeting to determine the presence or absence of a quorum for the
transaction of all business.
Only shares affirmatively voted for the adoption of the merger
agreement, including properly executed proxies that do not contain voting
instructions, will be counted as votes in favor of the adoption of the merger
agreement. Brokers who hold shares of ZD common stock and/or ZDNet common stock
in street name for customers who are the beneficial owners of those shares
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may not give a proxy to vote those shares without specific instructions from
those customers. These non-voted shares are referred to as "broker non-votes"
and have the same effect as a vote against the approval of the merger agreement.
The persons named as proxies by a Ziff-Davis stockholder may propose
and vote for one or more adjournments of the Ziff-Davis special meeting,
including adjournments to permit further solicitations of proxies. No proxy
voted against the proposal to adopt the merger agreement will be voted in favor
of any such adjournment or postponement.
Ziff-Davis does not expect that any matter other than the proposal to
adopt the merger agreement will be brought before the Ziff-Davis special
meeting. If, however, Ziff-Davis' board of directors properly presents other
matters, the persons named as proxies will vote in accordance with their
judgment.
EXPENSES; SOLICITATION OF PROXIES
Ziff-Davis will mail a copy of this proxy statement/prospectus to each
holder of record of ZD common stock and/or ZDNet common stock on the Ziff-Davis
record date.
Ziff-Davis will pay the expenses of soliciting proxies to be voted at
the meeting, except that CNET will share equally the expenses incurred in
connection with filing and printing this proxy statement/prospectus. Following
the original mailing of the proxies and other soliciting materials, Ziff-Davis
will request brokers, custodians, nominees and other record holders of ZD common
stock and/or ZDNet common stock to forward copies of the proxy and other
soliciting materials to persons for whom they hold shares of ZD common stock
and/or ZDNet common stock and to request authority for the exercise of proxies.
In such cases, upon the request of the record holders, Ziff-Davis will reimburse
such holders for their reasonable expenses.
In addition to solicitation by mail, directors, officers and key
employees of Ziff-Davis may solicit proxies in person or by telephone, telegram
or other means of communication. These persons will receive no additional
compensation for solicitation of proxies, but may be reimbursed for reasonable
out-of-pocket expenses.
_______ will assist in the solicitation of proxies by Ziff-Davis.
Ziff-Davis will pay ______'s fees estimated at $_____, plus reimbursement of
out-of-pocket expenses, and will indemnify ________ against any losses arising
out of its proxy soliciting services on behalf of Ziff-Davis.
Ziff-Davis stockholders should not send stock certificates with their
proxy cards. A transmittal form with instructions for the surrender of ZD common
stock and/or ZDNet common stock certificates will be mailed to Ziff-Davis
stockholders as soon as is practicable after the completion of the merger.
PROXIES; REVOCABILITY
The proxy accompanying this proxy statement/prospectus is solicited on
behalf of the Ziff-Davis board of directors for use at the Ziff-Davis special
meeting. Please complete, date and sign the accompanying proxy card and promptly
return it in the enclosed envelope or otherwise mail it to Ziff-Davis. You may
also vote by telephone, as described in the enclosed proxy card. All
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properly signed proxies that Ziff-Davis receives prior to the vote at the
meeting that are not revoked will be voted at the meeting according to the
instructions indicated on the proxies or, if no direction is indicated, to adopt
the merger agreement. You may revoke your proxy at any time before it is
exercised by taking any of the following actions:
o delivering a written notice to the secretary of Ziff-Davis by any
means, including facsimile, bearing a date later than the date of
the proxy, stating that the proxy is revoked
o signing and delivering a proxy relating to the same shares and
bearing a later date prior to the vote at the meeting
o attending the meeting and voting in person, although attendance
at the meeting will not, by itself, revoke a proxy. Please note,
however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must
bring to the meeting a letter from the broker, bank or other
nominee confirming your beneficial ownership of the shares
o calling the toll-free number on the enclosed proxy and changing
your vote, even if you did not previously vote by telephone
Ziff-Davis' board of directors does not know of any matter that is not
referred to in this proxy statement/prospectus to be presented for action at the
meeting. If any other matters are properly brought before the meeting, the
persons named in the proxies will have discretion to vote on such matters in
accordance with their best judgment.
NO APPRAISAL RIGHTS
Appraisal rights are not available to holders of ZD common stock or
ZDNet common stock.
DIRECTORS OF THE SURVIVING CORPORATION
Upon completion of the merger, Shelby Bonnie, Daniel Rosensweig and
Richard Marino will be the sole directors of Ziff-Davis. Shelby Bonnie is
currently the Chief Executive Officer of CNET, and Richard Marino is currently
CNET's President. Daniel Rosenswig is currently the Chief Executive Officer of
ZDNet.
After the merger, CNET's board of directors will be increased by one
directorship and will consist of seven directors. In addition, Douglas Woodrum,
one of CNET's current directors, will resign from the board. The two vacancies
created on CNET's board will be filled by one designee of Ziff-Davis and by one
designee of Softbank.
RECOMMENDATION OF ZIFF-DAVIS' BOARD OF DIRECTORS
Ziff-Davis' board of directors has approved the merger agreement, and
has determined that the merger is in the best interests of Ziff-Davis and its
stockholders. The Ziff-Davis board of directors recommends that Ziff-Davis
stockholders vote FOR adoption of the merger agreement.
To assure that your shares of ZD common stock and ZDNet common stock
are represented at the Ziff-Davis special meeting, please complete, date and
sign the enclosed proxy card and mail it promptly in the postage-paid envelope
provided, whether or not you plan to attend the meeting. You may also vote by
telephone, as described on the enclose proxy card. You may revoke your proxy at
any time before it is voted.
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PROPOSAL ONE -- THE MERGER AND RELATED MATTERS
THE PROPOSED MERGER
STRUCTURE OF THE MERGER; MERGER CONSIDERATION
THE MERGER
In accordance with the merger agreement and Delaware law, TD Merger Sub
will be merged with and into Ziff-Davis. As a result of the merger, the separate
corporate existence of TD Merger Sub will cease and Ziff-Davis will survive the
merger as a wholly owned subsidiary of CNET.
MERGER CONSIDERATION
In the merger, Ziff-Davis stockholders will receive 0.3397 of a share
of CNET common stock for each share of ZD common stock they hold and 0.5932 of a
share of CNET common stock for each share of ZDNet common stock they hold. The
number of shares of CNET common stock that Ziff-Davis stockholders will receive
in the merger will be appropriately adjusted for any stock splits, combinations
and other similar events that occur between the date of the merger agreement and
the completion of the merger. We will not issue fractional shares of CNET common
stock in the merger. Instead, each Ziff-Davis stockholder otherwise entitled to
a fractional share will receive cash, without interest, in lieu of a fraction of
a share of CNET common stock. Specifically, the exchange agent in the merger
will, as promptly as practicable after the determination of the amount of cash,
if any, to be paid to holders of fractional interests, notify CNET of such
amount, and CNET will deposit such amount with the exchange agent and will cause
the exchange agent to forward payments to the owners of fractional interests.
EFFECTIVE TIME OF THE MERGER
The merger will become effective when a certificate of merger is filed
with the Delaware Secretary of State or at a later time as may be specified in
the certificate of merger. The effective time of the merger will occur as soon
as practicable after the last of the conditions in the merger agreement has been
satisfied or waived. We expect the merger to occur in the fourth quarter of
2000. However, because the merger is subject to governmental approvals and other
customary conditions, we cannot predict the exact timing.
TREATMENT OF ZIFF-DAVIS STOCK OPTIONS
At the effective time of the merger, each outstanding Ziff-Davis stock
option will cease to represent a right to acquire shares of ZD common stock or
ZDNet common stock, as the case may be, and will be converted into (i) in the
case of an option to purchase shares of ZD common stock, an option to purchase a
number of shares of CNET common stock equal to the number of shares of ZD common
stock subject to such option times 0.3397, at a per share exercise price equal
to the per share exercise price of such option divided by 0.3397, and (ii) in
the case of an option to purchase shares of ZDNet common stock, an option to
purchase a number of shares of CNET common stock equal to the number of shares
of ZDNet common stock subject to such option times 0.5932, at a per share
exercise price equal to the per share exercise price of such option divided by
0.5932.
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BACKGROUND OF THE MERGER
CNET continually evaluates opportunities that could help it improve its
service offerings, gain new users of its services and expand the scale of its
operations. Accordingly, CNET representatives and its financial and legal
advisors met with Ziff-Davis representatives and its financial and legal
advisors in December 1998 for extremely preliminary discussions about the
possibility of engaging in a transaction that would combine the CNET and ZDNet
online businesses. No specific proposals were made and these discussions never
evolved beyond the preliminary stage.
In mid-1999, Ziff-Davis retained Morgan Stanley & Co. Incorporated
("Morgan Stanley") and Sullivan & Cromwell to help it explore strategic
alternatives to maximize stockholder value. As a result of this exploration,
Ziff-Davis determined to dispose of substantially all of its non-Internet assets
and eliminate its tracking stock structure.
Separately, members of CNET's senior management followed the Ziff-Davis
announcements concerning the disposition of Ziff-Davis' non-Internet assets. In
September 1999 Shelby Bonnie, CNET's Chief Executive Officer, and Halsey Minor,
the Chairman of CNET's board of directors, met with representatives of Lazard to
discuss the actions announced by Ziff-Davis. At such meeting, the
representatives of Lazard reviewed the non-Internet businesses of Ziff-Davis and
discussed the potential values for such businesses and the possible process and
timing relating to their sale.
During the Ziff-Davis restructuring process, CNET and Lazard
periodically communicated to Ziff-Davis and Morgan Stanley that CNET might have
an interest in pursuing a transaction that would result in a combination of
Ziff-Davis' online assets with CNET.
On January 18, 2000 representatives of Lazard reviewed with Mr. Bonnie
the announced results of Ziff-Davis' disposition process and plan to eliminate
Ziff-Davis' tracking stock structure. On February 28, 2000, Mr. Bonnie met again
with representatives of Lazard. At that meeting such representatives analyzed
and compared the recently announced fourth quarter financial results of
Ziff-Davis and CNET and discussed their view of the potential synergies that
could be achieved by combining Ziff-Davis with CNET.
On March 15, 2000, representatives of Lazard met with Mr. Bonnie,
Douglas Woodrum, CNET's Chief Financial Officer, and Richard Marino, CNET's
President. At that meeting, Lazard reviewed the strategic rationale for
considering an acquisition of Ziff-Davis, including their view of potential
synergies from combining the two companies. Lazard also reviewed a preliminary
financial analysis related to such a transaction.
By April 2000, Ziff-Davis had completed the sale of its market
intelligence, television and education businesses and most of its print
publishing business. In addition, Ziff-Davis had announced that it intended to
recapitalize and spin off its trade show and conference business (now known as
Key3Media) to the holders of ZD common stock and simultaneously pay those
holders a cash dividend. In this document, we sometimes refer to those
transactions as the Key3Media spin-off and cash dividend.
In late May, as Ziff-Davis neared completion of the disposition of its
non-Internet businesses, Mr. Bonnie met with Daniel Rosensweig, ZDNet's Chief
Executive Officer. At that
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meeting, Messrs. Bonnie and Rosensweig discussed the business and operations of
their two companies and the potential synergies and other benefits that might
result from a combination of CNET and Ziff-Davis. Messrs. Bonnie and Rosensweig
also discussed the potential process for considering a transaction between the
two companies but did not discuss any specific terms.
During the three week period after the May meeting of Messrs. Bonnie
and Rosensweig, members of CNET's senior management and Lazard prepared a more
comprehensive financial analysis of an acquisition of Ziff-Davis and a more
detailed review of the strategic rationale and potential synergies and other
benefits and potential risks that might result from such a transaction. During
the week of June 11, 2000, CNET engaged Simpson Thacher & Bartlett as its legal
counsel in connection with the proposed transaction.
On June 28, 2000, CNET and Ziff-Davis executed a confidentiality
agreement in connection with the ongoing discussions.
At a meeting of the CNET board of directors on June 21, 2000, Mr.
Bonnie briefed the board on his discussions with Mr. Rosensweig. In addition,
Mr. Bonnie, Mr. Marino, Sharon Le Duy, CNET's Vice President -- Legal and
Business Affairs, April Walden, Associate Vice President -- Investor Relations,
and representatives of Lazard reviewed the strategic rationale, potential
synergies and other benefits and potential risks associated with an acquisition
of Ziff-Davis. Lazard also reviewed a preliminary financial analysis related to
the proposed transaction. Following discussion, the CNET board authorized senior
management and its advisors to indicate to Ziff-Davis that CNET was interested
in discussing a potential stock-for-stock acquisition of Ziff-Davis in which
Ziff-Davis' stockholders would own 30-33% of the combined company. Prior to
completion of such transaction, Ziff-Davis would be permitted to spin-off
Key3Media and, subject to receipt of sufficient cash from Key3Media, pay the
previously contemplated cash dividend of $2.50 per share of ZD common stock.
Following the June 21,2000, meeting of the CNET board, Mr. Bonnie
called Mr. Rosensweig and Lazard spoke with representatives of Morgan Stanley.
Both Mr. Rosensweig and representatives of Morgan Stanley stated that while
Ziff-Davis would not be prepared to enter into a transaction at the valuation
level proposed by CNET, Ziff-Davis was prepared to allow CNET to conduct a more
thorough due diligence review of Ziff-Davis and to further evaluate the
potential synergies and other benefits that might result from combining the two
companies.
On June 28, 2000, Mr. Bonnie, Mr. Marino, Mr. Woodrum, Ms. Le Duy, Ms.
Walden, and representatives of Lazard met in New York City with Mr. Rosensweig,
Lauren Bonfield, Vice President -- General Counsel of ZDNet, Masimo DeNadai,
Vice President -- Business Operations of ZDNet, and representatives of Morgan
Stanley. At that meeting, the participants discussed each of CNET's and
Ziff-Davis' operations, financial results, contingent liabilities and prospects
as well as the potential synergies and other benefits that could result from a
merger of the two companies. During the week of July 3, 2000, CNET and its
counsel began to prepare a draft of the merger agreement and the other documents
required for the transaction and each party and its legal and financial advisors
continued their due diligence review of the other party. On July 6, 2000, CNET's
and Ziff-Davis' legal and financial advisors discussed the structural
alternatives for the potential transaction being discussed and agreed that any
acquisition of Ziff-Davis would be pursuant to a merger of a subsidiary of CNET
into Ziff-Davis. Members of senior management of the two companies met again in
New York City on July 7, 2000, to conduct further due diligence and analyze the
potential synergies and benefits from the proposed transaction.
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On July 9, 2000, Mr. Bonnie met with Eric Hippeau, the Chairman of
Ziff-Davis and an officer of Softbank, to discuss the potential transaction.
During the week of July 9, 2000, CNET and Ziff-Davis continued their
due diligence of each other and began to negotiate the terms of the merger
agreement, the Softbank stockholder agreement and the other agreements relating
to the merger. The parties remained significantly apart on a number of issues,
particularly the exchange ratios, the circumstances under which a termination
fee would be payable, the amount of any termination fee and the various
agreements that CNET sought from Softbank. CNET's board of directors met again
on July 12, 2000, and was updated on the status of negotiations between the
parties, the due diligence review of Ziff-Davis conducted by CNET's management
and its legal and financial advisors, management's and Lazard's analyses of the
potential synergies and benefits from the proposed transaction and Lazard's
financial analyses. After discussion, the CNET board authorized CNET's
management to indicate to Ziff-Davis that CNET would consider an acquisition in
which Ziff-Davis' stockholders would own 35% of the combined company, subject to
satisfactory completion of CNET's due diligence review of Ziff-Davis, and
negotiation of a satisfactory merger agreement and other documents.
During the period from July 13, 2000 through July 18, 2000, CNET and
Ziff-Davis continued their due diligence reviews and negotiated the terms of the
merger agreement and related documents. During this period CNET and Softbank
also negotiated the terms of the Softbank stockholder agreement. On the
afternoon of July 18, 2000, the parties reached agreement on the remaining
issues, including the restrictions to be imposed on Ziff-Davis' operations prior
to completion of the merger, the circumstances under which a termination fee
would become payable and the amount of such fee and the rights and restrictions
of Softbank arising from its ownership of CNET common stock.
Also on the afternoon of July 18, 2000, the parties decided that, if
they agreed to a merger, the holders of Ziff-Davis stock and options would
receive 35.5% of the stock of the combined company. In making this calculation,
the parties agreed to count CNET options (including options to be issued in
exchange for Ziff-Davis options) as share equivalents under the treasury method
based on the then current price for the shares of CNET common stock.
In order to implement this decision, the parties then decided that, if
they agreed to a merger, each share of ZD common stock should convert into
0.3397 of a share of CNET common stock and each share of ZDNet common stock
should convert into 0.5932 of a share of CNET common stock. We call the
relationship between the exchange ratio for the shares of ZD common stock and
the exchange ratio for the shares of ZDNet common stock the ZD/ZDNet equivalency
ratio, and in this case that ratio turned out to be approximately 0.57.
The parties and their advisors arrived at this ZD/ZDNet equivalency
ratio using a methodology similar to the methodology described in the Ziff-Davis
proxy statement dated February 7, 2000 for determining an equivalency ratio for
purposes of eliminating the Ziff-Davis tracking stock structure. Broadly
speaking, the parties hypothetically transferred the remaining assets and
liabilities of the ZD division (other than the assets and cash that Ziff-Davis
planned to transfer to holders of shares of ZD common stock as part of the
Key3Media spin-off and cash dividend) to the ZDNet division in return for a
hypothetical increase in ZD's retained interest in shares of ZDNet common stock.
After giving effect to that hypothetical transfer, ZD's only
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remaining asset would be its increased retained interest in shares of ZDNet
common stock. For this reason, each share of ZD common stock would be
hypothetically equivalent to:
o the number of shares of ZDNet common stock in ZD's increased
retained interest, divided by
o the number of shares (and share equivalents) of ZD common
stock then outstanding.
The actual calculation worked as follows:
o First, Ziff-Davis estimated the net value of ZD's remaining
assets and liabilities at $55 million.
o This estimate INCLUDED Computer Shopper, Smart Planet, an
investment in Red Herring Communications Inc. and various
other assets and liabilities.
o This estimate EXCLUDED stock option liabilities as well as
all of the assets and cash that Ziff-Davis planned to
transfer to holders of shares of ZD common stock as part of
the Key3Media spin-off and cash dividend.
o Ziff-Davis then subtracted from this $55 million estimate about
$12.8 million to reflect the amount by which the options to
purchase ZDNet common stock that had been granted to ZD employees
were in-the-money (based on the price for a share of ZDNet common
stock implied by the merger), resulting in an estimated net value
of about $43.2 million.
o This amount was subtracted because ZD was responsible for
compensating ZDNet for any options to purchase ZDNet common
stock granted to ZD employees.
o The parties assumed that the price of a share of ZDNet
common stock implied by the merger equaled the per share
closing price of the CNET common stock on July 18, 2000
($32.1875) times the ZDNet common stock exchange ratio of
0.5932, or $19.08.
o The parties then hypothetically transferred those remaining ZD
assets and liabilities to ZDNet in return for a hypothetical
increase in ZD's retained interest in shares of ZDNet common
stock.
o The parties calculated the hypothetical increase in ZD's
retained interest in shares of ZDNet common stock by
dividing the $43.2 million estimated net
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value of the transferred assets and liabilities by the price
of a share of ZDNet common stock implied by the merger
(again, $19.08).
o The hypothetical increase amounted to about 2.3 million
shares of ZDNet common stock, and as a result, the number of
retained interest shares hypothetically increased from 60
million to about 62.3 million.
o Next the parties estimated the value of the Key3Media spin-off
and cash dividend at $5.50 per share of ZD common stock and used
that estimated value, as well as the post-spin-off, post-dividend
price of a share of ZD common stock implied by the merger, to
estimate the expected adjustment to the options to purchase ZD
common stock that would be triggered by that spin-off and
dividend.
o The parties assumed that the post-spin-off, post-dividend
price of a share of ZD common stock implied by the merger
equaled the per share closing price of the CNET common stock
on July 18, 2000 ($32.1875) times the exchange ratio for the
ZD common stock of 0.3397, or $10.94.
o The parties then calculated at about 108.7 million the number of
shares (and share equivalents) of ZD common stock that would be
outstanding after giving effect to the expected adjustment to the
options to purchase ZD common stock that would be triggered by
the Key3Media spin-off and cash dividend.
o For this purpose, the parties counted the adjusted options
to purchase ZD common stock as share equivalents under the
treasury method based on the post-spin-off, post-dividend
price for a share of ZD common stock implied by the merger
(again, $10.94).
o Finally, the parties calculated the ZD/ZDNet equivalency ratio by
dividing ZD's hypothetical increased retained interest of about
62.3 million shares by the number of post-spin-off, post-dividend
shares (and share equivalents) of ZD common stock then
outstanding of about 108.7 million. The result was approximately
0.57.
Because the determination of the appropriate ZD/ZDNet equivalency ratio
involves a conflict between the interests of the holders of shares of ZD common
stock and the holders of shares of ZDNet common stock, Jonathon Lazarus acted as
a one-man special committee of the Ziff-Davis board of directors to review the
methodology and calculation of that ratio and make a recommendation to the full
board. Mr. Lazarus is the only Ziff-Davis director who is not part of management
and has no material ties to Softbank, which owns a majority of the shares of ZD
common stock. The special committee engaged Hambrecht & Quist as financial
advisors and Preston Gates & Ellis LLP as legal advisors to assist it in its
work. The special committee met frequently with its financial and legal advisors
as well as members of management of Ziff-Davis
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and Ziff-Davis' financial and legal advisors to perform this function. The
special committee, with the help of its advisors, carefully considered the
methodology for the calculation described above and the inputs to that
calculation (including the estimated value of ZD's remaining assets and
liabilities and the estimated value of the Key3Media spin-off and cash
dividend). The special committee reported its findings to the board of directors
of Ziff-Davis at the July 17, 2000 and July 18, 2000 meetings of the Ziff-Davis
board of directors referred to below and recommended that the board adopt the
methodology and calculation described above. The Ziff-Davis board of directors
followed the special committee's recommendation in all respects.
On July 18, 2000, the CNET board of directors met beginning at
4:00 p.m. San Francisco time at the offices of CNET. At this meeting, a
representative of Simpson Thacher & Bartlett discussed the board's fiduciary
duties when considering the proposed merger and reviewed the material terms of
the merger agreement, the Softbank stockholder agreement and related documents.
Representatives of Lazard presented to CNET's board a summary of its financial
analyses related to the proposed transaction. In addition, Lazard delivered its
opinion that the consideration to be paid was fair, from a financial point of
view, to CNET. Upon completing its deliberations, the CNET board by unanimous
vote of those present approved the merger agreement and the related agreements
and the transactions contemplated by those agreements, declared then advisable
and in the best interests of CNET and its stockholders and resolved to recommend
that CNET's stockholders approve the issuance of CNET common stock in the
merger.
On July 17, 2000 and again on July 18, 2000, the Ziff-Davis board met
to discuss the merger proposal. At these meetings, a representative of Sullivan
& Cromwell discussed the board's fiduciary duties when considering the proposed
merger and reviewed the material terms of the merger agreement and the other
transaction documents. Members of management presented their views as to the
prospects for the combined company as well as their views about strategic
alternatives to the merger, including the possibility of remaining independent
and the possibility of a merger with another company. Representatives of Morgan
Stanley presented to the board a summary of its financial analysis related to
the proposed merger and delivered its opinion that the consideration to be
received by the holders of ZD common stock and ZDNet common stock pursuant to
the merger agreement was fair, from a financial point of view, to such holders.
Upon completing its deliberations, the Ziff-Davis board, by unanimous vote of
those present, approved the merger agreement, declared it advisable and in the
best interests of Ziff-Davis and its stockholders and resolved to recommend that
the Ziff-Davis stockholders adopt the merger agreement.
On the early morning of July 19, 2000, Ziff-Davis and CNET entered into
a definitive merger agreement pursuant to which a subsidiary of CNET will merge
into Ziff-Davis, with Ziff-Davis as the surviving entity. As a result of the
merger, each share of ZD common stock will convert into 0.3397 of a share of
CNET common stock and each share of ZDNet common stock will convert into 0.5932
of a share of CNET common stock. The merger supersedes an alternative
transaction for eliminating Ziff-Davis' tracking stock structure described by
the Ziff-Davis proxy statement dated February 7, 2000.
Before the market opened on July 19, 2000, the parties issued a joint
press release announcing the transaction.
The merger agreement specifically authorized Ziff-Davis to complete the
Key3Media spin-off and pay a cash dividend within specified parameters. On
August 18, 2000, Ziff-Davis
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completed the Key3Media spin-off and paid a cash dividend of $2.50 per share of
ZD common stock, as permitted by the merger agreement.
JOINT REASONS FOR THE MERGER
CNET's merger with Ziff-Davis will create the leading online provider
of technology information and related services. We believe that the following
strengths of the combined company will make it uniquely positioned to address
the technology information needs of all segments of technology users as well as
participants in the technology product supply channel:
o 16.6 million monthly unique users, making it the eighth largest
web property according to Media Metrix statistics published in May
2000
o a global presence, with operations in 23 countries and 16
languages
o established brand names in CNET and ZDNet that we believe are
known and trusted for providing technology advice
o multiple platforms to distribute our information including online
and through wireless devices, television, radio and print
o management teams with many years of experience in the technology
industry
The combination provides the potential for stronger combined operating
and financial results than either company could achieve on its own.
The combined company will be a leading online provider of technology
information, with approximately:
o 30,000,000 page views per day
o 20,000,000 subscriptions to different e-mail lists
o 300,000 products with information, pricing and availability
o 20,000 expert reviews of technology products
o 80 technology related news stories each day
The following are key specific reasons why we believe the merger will
be beneficial to stockholders of the combined company:
CREATE OPERATING SYNERGIES AND NEW BUSINESS OPPORTUNITIES. We believe
that the combined company will benefit from operating synergies as well as new
business development opportunities. The following are representative of the
potential revenue growth opportunities and cost synergies from the combination:
o the largely unduplicated user and advertiser bases of CNET and
ZDNet create revenue opportunities and synergies, such as
providing
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companies with "one-stop" shopping for their online, print and
broadcast media advertising campaigns directed at all segments of
the technology user audience
o the increased scale of the combined company will enable it to
further the development of existing businesses, such as CNET's IT
supply channel services, and will enhance new business
development opportunities
o cost synergies in areas such as selling, general and
administrative expenses and advertising expenses, are expected to
result from economies of scale and cross promotion opportunities,
and lower the cost of future growth
CNET'S REASONS FOR THE MERGER
In connection with its approval of the merger, its determination that
the merger is fair to and in the best interest of CNET's stockholders and its
recommendation that stockholders approve the issuance of the CNET common stock
in the merger, the board of directors of CNET consulted with its legal advisors,
including its Vice President - Legal and Business Affairs and representatives of
Simpson Thacher & Bartlett, outside counsel on the transaction, regarding the
duties of the members of the board, as well as with members of management and
Lazard, its financial advisor. The CNET board also considered the following
material information and factors in reaching its determination to approve the
merger, to conclude that the merger is fair to and in the best interests of
CNET's stockholders, and to recommend that stockholders approve the issuance of
shares of CNET common stock in connection with the merger:
o the reasons described under "--Joint Reasons for the Merger;"
o the exchange ratio being used in the merger and the continuing
approximately 65% ownership interest in CNET by CNET stockholders
resulting from the merger and the history of the negotiations
between CNET and Ziff-Davis
o presentations by senior members of CNET's management regarding
the strategic advantages of combining with Ziff-Davis,
operational aspects of the transaction, and the results of
management's operational and legal due diligence review
o historical information concerning CNET's and Ziff-Davis'
respective businesses, financial performance and condition,
operations, technology, management, competitive position and
stock performance, including reports concerning results of
operations during the most recent fiscal quarter for each company
as filed with the SEC
o CNET management's view as to the financial condition, results of
operations and businesses of CNET and Ziff-Davis before and after
giving effect to the merger based on management's due diligence
and publicly available earnings estimates
o the strategic fit of CNET and Ziff-Davis, including the belief
that the merger has the potential to enhance stockholder value
through synergies resulting from combining the two companies's
complementary strengths and assets, including additional
opportunities for e-commerce and advertising revenues, growth in
subscribers, cross promotion and operating efficiencies
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o the opportunities and alternatives available to CNET if the
merger were not undertaken, including pursuing an acquisition of
or business combination or joint venture with entities other than
CNET and the conclusion that a combination with Ziff-Davis is
expected to result in greater benefits than the alternatives
o the analyses and presentations of Lazard on the financial aspects
of the merger, and their written opinion to the effect that, as
of July 18, 2000, and based on and subject to the various
considerations set forth in its opinion, the consideration to be
paid was fair from a financial point of view to CNET
o the terms and conditions of the merger agreement, including the
fact the exchange ratios are fixed, the agreement of Softbank to
vote in favor of the merger, the conditions to consummation of
the merger, the limitations on the interim business operations of
CNET and Ziff-Davis, the right of the parties to the merger
agreement, under certain circumstances, to respond to, evaluate
and negotiate with respect to other business combination
proposals, and the circumstances under which the merger agreement
could be terminated and the size and impact of termination fees
associated with a termination, as well as the advice of CNET's
financial and legal advisors that these provisions were
reasonable in the context of the transaction
o the corporate governance arrangements established for the
transaction, including the board composition, continuity of CNET
senior management and the rights granted to Softbank under the
terms of the stockholders agreement between CNET and Softbank
o the fact that the merger likely will be completed, including the
fact that Softbank has agreed to vote its shares in favor of the
merger and the likelihood that the merger will receive the
necessary regulatory approvals
o the expected tax-free treatment of the merger for U.S. federal
income tax purposes
o the interests of the officers and directors of CNET and
Ziff-Davis in the merger, including the matters described under
" -- Interests of certain, directors, officers and affiliates in
the merger," and the impact of the merger on CNET's stockholders,
customers and employees
The CNET board also considered the potential adverse consequences of
other factors on the proposed merger, including:
o the accounting treatment of the transaction as a purchase
transaction, including the negative effect on future earnings per
share that will result from amortizing goodwill and other
intangibles that will be recorded on the financial statements of
CNET
o the challenges of combining the businesses, assets and workforces
of two independent companies and the risks of not achieving the
expected operating efficiencies or growth
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o the risk of contingent liabilities associated with the businesses
previously owned by Ziff-Davis
o the risk of management and employee disruption associated with
the merger, including the risk of diverting management focus and
resources from other strategic opportunities while working to
implement the merger and the risk that despite the efforts of the
management of the combined company, key technical, sales and
management personnel might choose not to remain employed by the
combined company
o the risk that, despite the efforts of Ziff-Davis and CNET, key
management and technical personnel might not continue with the
combined company
o the risk that the merger may not be consummated, even if approved
by CNET's and Ziff-Davis' stockholders
o the risks that the benefits sought to be achieved by the merger
will not be realized
o the other risks described under "Risk Factors"
The discussion of the information and factors considered by CNET is not
intended to be exhaustive, but includes the material factors considered. The
CNET board did not assign particular weight or rank to the factors it considered
in approving the merger. In considering the factors described above, individual
members of the CNET board may have given different weight to various factors.
The CNET board considered all of these factors as a whole, and concluded that,
on balance, the potential benefits of the merger to CNET and its stockholders
outweighed the risks.
RECOMMENDATION OF CNET'S BOARD OF DIRECTORS
After careful consideration, CNET's board of directors unanimously
determined that the merger is in the best interests of CNET and its stockholders
and declared the merger advisable. CNET's board of directors unanimously
approved the merger agreement and unanimously recommends that CNET stockholders
vote in favor of the issuance of CNET common stock in the merger.
OPINION OF CNET'S FINANCIAL ADVISOR
On July 18, 2000, Lazard delivered its oral opinion to the
CNET board of directors to the effect that, as of the date of its opinion, based
upon and subject to the various assumptions and limitations set forth in the
opinion, the consideration being paid by CNET in the merger was fair to CNET
from a financial point of view. Lazard subsequently confirmed its opinion in
writing as of that date.
A copy of the full text of the opinion of Lazard, dated July
18, 2000, which sets forth the assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
to this proxy statement/prospectus as Annex C. This summary discussion of
Lazard's opinion is qualified in its entirety by reference to the full text of
the opinion. The engagement of Lazard and its opinion are solely for the benefit
of the CNET board
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of directors in connection with the CNET board of directors' consideration of
the merger. Lazard's opinion is directed only to the fairness to CNET, from a
financial point of view, of the consideration being paid by CNET, and does not
address any other aspect of the merger. The opinion is not intended to, and does
not, constitute a recommendation to any holder of CNET's common stock as to how
any such holder should vote in connection with the merger. Holders of CNET's
common stock are urged to read the opinion of Lazard carefully and in its
entirety.
In connection with its opinion, dated July 18, 2000, to the CNET board
of directors, Lazard:
o reviewed the financial terms and conditions of the draft merger
agreement as of July 18, 2000, the terms and conditions of draft
stockholders agreements as of July 18, 2000 between CNET and
Softbank, as a stockholder of Ziff-Davis, and between Ziff-Davis
and certain stockholders of CNET, and the terms and conditions of
the draft voting agreement between Softbank and CNET as of July
18, 2000
o analyzed certain historical business and financial information
relating to CNET and Ziff-Davis
o reviewed various publicly available forecasts prepared by
nationally recognized research analysts who report on CNET and
Ziff-Davis and various financial projections provided to Lazard
by CNET and Ziff-Davis relating to their respective businesses
o held discussions with members of senior management of CNET and
Ziff-Davis with respect to the businesses and prospects of CNET
and Ziff-Davis, respectively, and the strategic objectives of
each
o reviewed public information with respect to certain other
companies Lazard deemed to be generally comparable to those of
CNET and Ziff-Davis
o reviewed the financial terms of certain business combinations
involving companies Lazard deemed to be generally comparable to
those of CNET and Ziff-Davis, and in other industries generally
o reviewed the historical stock prices and trading volumes of CNET
common stock, Ziff-Davis common stock and ZDNet common stock
o conducted other financial studies, analyses and investigations as
Lazard deemed appropriate
Lazard relied upon the accuracy and completeness of the foregoing
information and did not assume any responsibility for any independent
verification of that information or any independent valuation or appraisal of
any of the assets or liabilities of CNET or Ziff-Davis, or concerning the
solvency or fair value of either CNET or Ziff-Davis. With the consent of CNET,
Lazard relied upon publicly available forecasts prepared by nationally
recognized research analysts who report on CNET and Ziff-Davis and relied on the
statements of the managements of
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CNET and Ziff-Davis that those forecasts were consistent with the currently
available estimates and judgments of the managements of CNET and Ziff-Davis as
to the future financial performance of CNET and Ziff-Davis. With respect to the
preliminary projections provided to Lazard by CNET and Ziff-Davis, Lazard
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of CNET and
Ziff-Davis as to the future financial performance of CNET and Ziff-Davis. Lazard
assumed no responsibility for, and expressed no view as to, such forecasts or
the assumptions on which they were based.
The opinion of Lazard was necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made available
to it as of, July 18, 2000. In rendering its opinion, Lazard did not express any
opinion as to the prices at which any securities of either CNET or Ziff-Davis
could actually trade at any time or as to the relative merits of the merger or
any other business strategies that the companies might have considered.
In rendering its opinion, Lazard assumed that the merger would be
consummated on the terms described in the merger agreement, without any waiver
of any material term or condition by CNET and that obtaining the necessary
regulatory approvals, if any, for the merger would not have an adverse effect on
CNET. Lazard also assumed that the definitive merger agreement would not differ
in any material respects from the draft furnished to it. Lazard also assumed
that the merger would qualify as a tax-free reorganization for United States
federal income tax purposes.
The following is a summary of the material financial and comparative
analyses performed by Lazard in connection with providing its opinion to the
CNET board of directors and reviewing that opinion with the board at the July 18
board of directors meeting. Unless otherwise indicated, the following
quantitative information, to the extent that it is based on market data, is
based on market data as it existed on or about July 18, 2000 and is not
necessarily indicative of current market conditions. In addition, all future
estimates of revenues, growth and earnings are based on publicly available
forecasts prepared by nationally recognized research analysts who report on CNET
and Ziff-Davis, and all such estimates for Ziff-Davis, and all historical
financial information for Ziff-Davis, relate solely to the online activities of
ZDNet and do not include the impact of Ziff Davis's investments in Computer
Shopper, Smart Planet or Red Herring unless otherwise indicated. You should
understand that the order of analyses (and results of those analyses) described
below is not intended to indicate any relative importance given to those
analyses by Lazard. The summary of financial analyses includes information
presented in tabular format, which should be read together with the text that
accompanies those tables.
SUMMARY OF PROPOSED TRANSACTION. Lazard reviewed the proposed
terms of the merger, including the structure, the exchange ratios, the implied
per share value of ZD common stock and ZDNet common stock, approximate relative
ownership composition, board composition and the accounting and tax treatment of
the merger. Lazard noted that, based upon the exchange ratios and CNET's closing
stock price on the Nasdaq National Market of $32.19 on July 18, 2000, the
implied value per share of ZD common stock was approximately $10.93 and the
implied value per share of ZDNet common stock was approximately $19.09. Lazard
further noted that, based upon the exchange ratios and the July 18 closing
price, CNET stockholders would own approximately 64.5% of the combined company
and Ziff-Davis stockholders would own approximately 35.5% (including 17.1% to be
held by Softbank based on Softbank's current ownership of Ziff-Davis) of the
combined company on a fully diluted basis (counting options under the treasury
method) following the merger.
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Lazard also noted that pursuant to the merger agreement CNET
would expand its board of directors to include one director selected by Softbank
and reasonably acceptable to CNET and another selected by Ziff-Davis and
reasonably acceptable to CNET. Lazard further noted that, in connection with
entering into the merger agreement, Softbank, CNET and certain stockholders of
CNET had entered into voting and shareholder agreements relating to voting on
the merger, and to Softbank's ability to increase its percentage ownership of
CNET following the merger.
Finally, Lazard reviewed the breakup fee payable by CNET under
certain circumstances, the January 31, 2001 termination date, the accounting and
tax treatment of the merger and the conditions to the parties' respective
obligations to effect the merger, including the condition to CNET's obligation
that Ziff-Davis complete the recapitalization and spin-off of its trade show and
conference subsidiary.
HISTORICAL TRADING ANALYSIS. Lazard reviewed the closing
prices per share of CNET common stock and ZDNet common stock for each trading
day from January 10, 2000 through July 18, 2000. Lazard also calculated the
implied exchange ratio of ZDNet common stock based on the closing prices per
share of ZDNet common stock relative to the closing prices per share of CNET
common stock for each trading day over the same period. The results of the
implied exchange ratio analysis are as follows:
<TABLE>
<CAPTION>
IMPLIED PREMIUM
EXCHANGE (DISCOUNT) TO
RATIO DATE MARKET
--------- ---- -------------
<S> <C> <C> <C>
Low 0.283 May 31, 2000 107.3%
Median 0.442 32.7%
High 0.673 February 9, 2000 (12.9%)
Average for 30 Trading Days ending July 18, 2000 0.421 39.4%
Average for 60 Trading Days ending July 18, 2000 0.384 52.7%
Average for 90 Trading Days ending July 18, 2000 0.412 42.3%
Current 0.400 July 18, 2000 46.7%
</TABLE>
PRO FORMA ANALYSIS. Based upon the fully diluted number of shares of
CNET common stock, ZD common stock and ZDNet common stock, the closing stock
prices of CNET, ZD and ZDNet, CNET and Ziff-Davis net debt (or cash and cash
equivalents) and certain assumptions regarding the value of CNET and Ziff-Davis
investments, Lazard derived enterprise values for CNET and Ziff-Davis, as well
as for the combined company on a pro forma basis. The enterprise values
determined under that analysis were $2.494 billion for CNET, $1.005 billion for
Ziff-Davis and $3.499 billion for the combined company on a pro forma basis. The
pro forma value calculation did not take into consideration qualitative factors
such as market conditions, potential investor reaction to the merger, potential
operating synergies or any other factors not expressly described above.
CURRENT PRICE VALUATIONS. Based on publicly available forecasts
prepared by nationally recognized analysts who report on CNET and ZDNet and the
enterprise values determined under Lazard's pro forma analysis, Lazard compared
certain stand-alone financial and other data for CNET and Ziff-Davis. The
results of that analysis were as follows:
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<TABLE>
<CAPTION>
CNET ZDNET
--------- --------
<S> <C> <C>
ENTERPRISE VALUE (DOLLARS IN MILLIONS) $ 2,494 $ 1,055
Enterprise Value/Revenue for:
LQA* 13.7x 7.0x
2000 Estimated 11.6x 6.1x
2001 Estimated 7.9x 4.6x
Enterprise Value/EBITDA** for:
LQA* 160.8x 56.2x
2000 Estimated 91.3x 35.4x
2001 Estimated 31.1x 17.7x
Enterprise Value/Unique Visitor*** $ 268 $ 98
Projected Revenue Growth:
2000 Estimated vs. 1999 Actual 88.8% 58.1%
2001 Estimated vs. 2000 Estimated 46.4% 33.2%
</TABLE>
----------
* As used in this description of Lazard's opinion and CNET's board
presentation, "LQA" means the results for the last quarter annualized
(i.e., results for the most recent fiscal quarter multiplied by four).
** As used in this description of Lazard's opinion and CNET's board
presentation, "EBITDA" means earnings before interest expense,income tax,
depreciation and amortization.
*** As used in this description of Lazard's opinion and CNET's board
presentation, "Unique Visitors" means the total number of different
individuals that accessed the content of the Internet sites of the
applicable company during the month of March, 2000, as estimated by the
applicable company.
CONTRIBUTION ANALYSIS. Lazard analyzed the relative
contributions by CNET and ZDNet to certain pro forma financial and other data of
the combined company. Lazard's analysis revealed the following regarding the
relative contributions of CNET and ZDNet to the pro forma results of the
combined company's revenues, EBITDA, unique visitors and daily pageviews:
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<TABLE>
<CAPTION>
RELATIVE CONTRIBUTION
---------------------
PRO FORMA CNET ZDNET
------------------------ ----- -----
<S> <C> <C>
REVENUES:
1999 Actual 52.3% 47.7%
LQA 55.8% 44.2%
2000 Estimated 56.7% 43.3%
2001 Estimated 59.0% 41.0%
EBITDA:
LQA 46.4% 53.6%
2000 Estimated 49.0% 51.0%
2001 Estimated 58.6% 41.4%
UNIQUE VISITORS 47.6% 52.4%
DAILY PAGEVIEWS* 54.1% 45.9%
MARKET VALUE (MILLIONS):
30 Day Average 63.5% 36.5%
60 Day Average 66.6% 33.4%
90 Day Average 66.2% 33.8%
Current (July 18) 64.5% 35.6%
IMPLIED PRO FORMA FULLY DILUTED OWNERSHIP 64.5% 35.5%
</TABLE>
----------
* As used in this description of Lazard's opinion and CNET's board
presentation, "daily pageviews" means the average number of total pages of
content downloaded on a daily basis over the three month period ending
March 31, 2000, as reported by the applicable company.
COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS. Lazard reviewed selected publicly
available financial and other data of certain companies that it deemed
reasonably comparable to ZDNet and compared the enterprise value of those
companies and ZDNet as multiples of revenue and in terms of dollars per unique
visitor. The results of that analysis were as follows:
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<TABLE>
<CAPTION>
ENTERPRISE VALUE
---------------------------------------------
REVENUE
--------------------------- DOLLARS PER
LQA 2000E 2001E UNIQUE VISITOR
----- ------- ----- --------------
<S> <C> <C> <C> <C>
Lycos 17.6x 14.6x 10.5x $ 198
LookSmart 24.7x 20.6x 12.5x $ 242
Go-com 4.8x 4.3x 3.3x $ 212
Go2Net 22.2x 18.2x NA $ 483
Ticketmaster Online 9.1x 8.6x 6.3x $ 467
Citysearch
Goto.com 11.6x 9.5x NA $ 110
Internet.Com 15.1x 12.9x 8.5x $ 681
Ask Jeeves 7.9x 5.5x 2.5x $ 64
About.com 6.0x 4.1x NA $ 38
Marketwatch.Com 6.4x 6.0x 4.2x $ 78
SportsLine 2.9x 2.6x 1.9x $1,009
Women.Com Networks 3.0x 2.7x 2.0x $ 50
iVillage 1.5x 1.3x 0.8x $ 27
Earthweb 2.9x 2.1x 1.3x NA
Thestreet.Com 3.1x 2.2x 1.1x $ 54
Average 9.3x 7.7x 4.6x $ 265
ZDNet* 14.7x 9.3x 7.0x $ 150
</TABLE>
----------
* Using an implied enterprise value based on the July 18, 2000 closing stock
price of CNET, the ZDNet Exchange Ratio and the fully diluted number of
ZDNet shares outstanding as of July 18, 2000.
SELECTED PRECEDENT TRANSACTIONS ANALYSIS. Lazard reviewed selected publicly
available financial and other data for five merger transactions that it deemed
reasonably comparable to the merger and compared the transaction value of those
combinations and ZDNet as a multiple of revenue and in terms of dollars per
unique visitor and pageviews. The results of that analysis are as follows:
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<TABLE>
<CAPTION>
TRANSACTION VALUE/TARGET
----------------------------------------------------------
TRANSACTION MONTHLY
TRANSACTION (ACQUIROR/TARGET) VALUE* LQA REVENUE UNIQUE VISITORS PAGEVIEWS
---------------------------- ----------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
Terra Networks/Lycos $ 12,707 31.5x $ 337 $ 3.53
CMGI/Alta Vista $ 2,252 29.4x $ 261 $14.91
Yahoo!/GeoCities $ 4,345 144.3x $ 229 $ 4.31
AtHome/Excite $ 6,425 36.5x $ 387 $ 6.67
America Online/Netscape $ 4,393 6.8x $ 259 $ 8.08
Mean -- 54.3x $ 284 $ 8.50
CNET/ZDNet* $ 1,534 10.7x $ 150 $10.16
</TABLE>
----------
* The transaction value for the CNET/ZDNet transaction is based on the July
18, 2000 closing stock price of CNET, the ZDNet Exchange Ratio and the
fully diluted number of ZDNet shares outstanding as of July 18, 2000.
PREMIUMS PAID ANALYSIS. Lazard reviewed publicly available information
regarding the premiums paid in eight selected acquisition transactions in the
web portal and content industry during 1998, 1999 and 2000. The transactions
that Lazard reviewed included (acquiror/target): Terra Networks/Lycos,
MedicaLogic/Medscape Inc., VA Linux Systems/Andover.net Inc., Multex.com/Market
Guide Inc., Yahoo!/Broadcast.Com Inc., Yahoo!/GeoCities, At Home/Excite Inc.,
America Online/Netscape Communications. The following table shows the low,
median, mean and high premiums to the target's closing stock price on the day
prior to announcement, the week prior to announcement and four weeks prior to
announcement relative to the comparable information for the proposed
CNET/Ziff-Davis transaction:
<TABLE>
<CAPTION>
PREMIUM TO TARGET CLOSING STOCK
PRICE PRIOR TO ANNOUNCEMENT:
--------------------------------------------
ONE DAY ONE WEEK FOUR WEEKS
------- -------- ----------
<S> <C> <C> <C>
Low 26.8% 39.2% 45.5%
Median 56.3% 68.3% 98.5%
Mean 60.0% 73.9% 110.3%
High 120.8% 138.9% 250.9%
ZDNet 34.0% 75.6% 61.1%
</TABLE>
PRO FORMA ACCRETION/(DILUTION) ANALYSIS. Lazard analyzed the pro forma
impact of the merger on CNET's pro forma estimated 2001 per share EBITDA based
upon a range of potential merger synergies. Lazard also computed implied pro
forma share prices of the combined company across the same range of potential
merger synergies and a range of theoretical trading multiples of estimated 2001
EBITDA to those prices.
OTHER ANALYSES. Lazard also performed such other analyses as it deemed
appropriate, including, among others, an analysis of the implied enterprise
value of ZDNet as a percentage of the theoretical enterprise value of CNET's
technology business and an analysis of the impact of the trading value of the
Ziff-Davis trade show and conference business subsidiary being spun-off prior to
the merger on the number of outstanding ZD options and the resulting impact on
the pro forma fully diluted ownership of CNET.
The summary set forth above does not purport to be a complete
description of the analyses performed by Lazard, although it is a summary of the
material financial and comparative analyses performed by Lazard in arriving at
its opinion. The preparation of a fairness opinion is a
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complex process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, is not necessarily susceptible to
partial analysis or summary description. Selecting portions of the analyses or
the summary set forth above without considering the analyses as a whole could
create an incomplete or misleading view of the process underlying the opinion of
Lazard. In arriving at its opinion, Lazard considered the results of all of its
analyses and did not attribute any particular weight to any factor or analysis
considered by it; rather, Lazard made its determination as to fairness on the
basis of its experience and professional judgment after considering the results
of all of its analyses. No company or transaction used in the above analyses as
a comparison is directly comparable to CNET, Ziff-Davis or the transactions
contemplated by the merger agreement. The analyses were prepared solely for the
purpose of Lazard providing its opinion to the CNET board of directors in
connection with the CNET board of directors' consideration of the merger and do
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold, which may be significantly more
or less favorable than as set forth in these analyses. You should understand
that estimates of values and forecast of future results contained in the
analyses, whether publicly available or provided by the managements of CNET and
Ziff-Davis, were based upon numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of CNET and Ziff-Davis, and are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses.
In performing its analyses, Lazard made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters. Because those analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or their advisors, none of CNET, Ziff-Davis, Lazard or
any other person assumes responsibility if future results or actual values are
materially different from those forecasts or estimates contained in the
analyses.
As described above, the opinion and presentation of Lazard to the CNET
board of directors was only one of many factors taken into consideration by the
CNET board of directors in making its determination to approve the merger
agreement. Consequently, the analyses described above should not be viewed as
determinative of the CNET board of directors opinion with respect to the value
of Ziff-Davis or the merger.
Lazard is an internationally recognized investment banking firm
providing a full range of financial advisory and securities services. Lazard was
selected to act as investment banker to the CNET board of directors because of
its qualifications, expertise and reputation in investment banking and mergers
and acquisitions.
Lazard, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, leveraged buyouts, and
valuations for estate, corporate and other purposes. Lazard provides a full
range of financial advisory and securities services and, in the ordinary course
of its normal trading activities, may from time to time effect transactions and
hold securities, including derivative securities, of CNET and Ziff-Davis for its
own account and for the accounts of its customers.
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CNET agreed to pay Lazard a transaction fee in connection with its
services as CNET's financial advisor, a substantial portion of which is
contingent upon the completion of the merger. CNET also agreed to reimburse
Lazard for its reasonable out-of-pocket expenses (including attorneys' fees) and
to indemnify Lazard and certain related parties against certain liabilities that
may arise out of the rendering of the opinion, including certain liabilities
under the U.S. federal securities laws.
ZIFF-DAVIS REASONS FOR THE MERGER
In connection with its approval of the merger agreement, its
determination that the merger and the merger agreement are advisable, fair to
and in the best interest of Ziff-Davis and its stockholders and its
recommendation that Ziff-Davis stockholders adopt the merger agreement, the
board of directors of Ziff-Davis consulted with members of management and
financial and legal advisors and considered the following material items:
o the Ziff-Davis board's belief about the potential of the combined
company, as described under "--Joint Reasons for the Merger"
o the Ziff-Davis board's belief that the merger offered better
short and long-term value for the Ziff-Davis stockholders than
any of the available alternatives, including the possibility of
remaining independent or the possibility of a merger with another
company
o information concerning Ziff-Davis' and CNET's respective
businesses, prospects, strategic business plans, financial
condition, results of operations, technology positions,
managements and competitive positions
o the results of the due diligence investigation conducted by
Ziff-Davis management, financial advisors and legal advisors
o current financial market conditions and historical stock market
prices, volatility and trading information
o the exchange ratio for each of the ZD common stock and the ZDNet
common stock, and the resulting percentage ownership interest
that the Ziff-Davis stockholders would have in the combined
company (in light of the businesses being contributed to the
combined company)
o the fact that, based on the pre-announcement price per share for
the CNET common stock and the exchange ratios for the ZD common
stock and ZDNet common stock, those exchange ratios represented a
substantial premium to the pre-announcement price per share of ZD
common stock and ZDNet common stock
o the belief of the Ziff-Davis board and the special committee of
that board, after consulting with their financial and legal
advisors, that the methodology used to calculate the relationship
between the exchange ratio for the ZD common stock and the
exchange ratio for the ZDNet common stock (as described under "--
Background of the Merger") is fair to the holders of ZD common
stock and holders of ZDNet common stock
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o the fact that the proposed Key3Media spin-off and cash dividend
would be completed as planned
o the impact of the merger on the stockholders, customers and
employees of Ziff-Davis
o the analyses and presentation of Morgan Stanley and its opinion
to the effect that, as of July 18, 2000, and based on and subject
to the various considerations set forth in its opinion, the
consideration to be received by the holders of shares of ZD
common stock and ZDNet common stock pursuant to the merger
agreement was fair from a financial point of view to such holders
o the terms and conditions of the merger agreement and related
documents, including the fact the exchange ratios are fixed, the
agreements of Softbank, Mr. Bonnie and Mr. Minor to vote in favor
of the issuance of CNET common stock in the merger, the
conditions to consummation of the merger, the limitations on the
interim business operations of CNET and Ziff-Davis, the
circumstances under which CNET would have the right to respond
to, evaluate and negotiate with respect to other business
combination proposals, the circumstances under which the merger
agreement could be terminated and the size and impact of
termination fees associated with a termination
o the corporate governance arrangements established for the
transaction, including the board composition, and the rights
granted to Softbank under the terms of the stockholder agreement
between CNET and Softbank
o the fact that merger likely will be completed, including the fact
that each of Softbank, Mr. Bonnie and Mr. Minor each has agreed
to vote its shares in favor of the merger and the likelihood that
the merger will receive the necessary regulatory approvals
o the expected tax-free treatment of the merger for U.S. federal
income tax purposes
The Ziff-Davis board also considered a number of potentially negative
factors in its deliberations concerning the merger, including:
o the risk that, because the exchange ratios under the merger
agreement will not be adjusted for changes in the market price of
CNET common stock, the per share values of the consideration to
be received by Ziff-Davis stockholders might be significantly
less than the per share values implied by the exchange ratios
immediately prior to the announcement of the merger
o the risk of management and employee disruption associated with
the merger and integrating the operations of the companies
o the risk that, despite the efforts of Ziff-Davis and CNET, key
management and technical personnel might not continue with the
combined company
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o the fact that, because Softbank has agreed to vote for the merger
but there is no controlling stockholder of CNET to enter into a
similar agreement, the Ziff-Davis stockholder approval is assured
while the CNET stockholder approval is not
o the potential adverse impact of the public announcement of the
merger on Ziff-Davis' ability to attract and retain customers and
employees and, more generally, on Ziff-Davis' overall competitive
position, particularly if the merger does not occur
o the potential loss of business opportunities for Ziff-Davis as a
result of covenants in the merger agreement, particularly if the
merger does not occur
o the risks that the benefits sought to be achieved by the merger
will not be realized
o the loss of control over the future operations of Ziff-Davis
following the merger
o the impact of the loss of Ziff-Davis' status as an independent
company on its stockholders and employees
o the other risks described under "Risk Factors"
The foregoing discussion of the items that the Ziff-Davis board
considered is not intended to be exhaustive, but includes all material items
that the Ziff-Davis board considered. In view of the complexity and wide variety
of factors, both positive and negative, that the Ziff-Davis board considered,
the Ziff-Davis board did not find it practical to quantify, rank or otherwise
weight the factors considered. In considering the various factors, individual
members of the Ziff-Davis board considered all of these factors as a whole, and
concluded that, on balance, the positive factors outweighed the negative ones.
RECOMMENDATION OF ZIFF-DAVIS' BOARD OF DIRECTORS
After careful consideration, Ziff-Davis' board of directors unanimously
determined that the merger is in the best interests of Ziff-Davis and its
stockholders and has declared the merger advisable. Ziff-Davis' board
unanimously approved the merger agreement and unanimously recommends that
Ziff-Davis' stockholders vote for adoption of the merger agreement.
In considering the recommendation of Ziff-Davis' board of directors
relating to the merger agreement, Ziff-Davis stockholders should be aware that
some of its directors and officers have interests in the merger that are
different from, or are in addition to, the interests of Ziff-Davis stockholders
generally. Please see the section titled "- Interests of certain directors,
officers and affiliates in the merger" below for additional information
regarding these interests.
OPINION OF ZIFF-DAVIS' FINANCIAL ADVISOR
Under an engagement letter dated July 14, 1999, and subsequently
amended on March 29, 2000 and July 18, 2000, Ziff-Davis retained Morgan Stanley
to provide it with financial advisory services and a financial fairness opinion
in connection with the merger. The Ziff-Davis board of directors selected Morgan
Stanley to act as its financial advisor based on Morgan Stanley's
qualifications, expertise and reputation and its knowledge of the business and
affairs of Ziff-Davis.
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At the meeting of the Ziff-Davis board of directors on July 18, 2000, Morgan
Stanley rendered its oral opinion, subsequently confirmed in writing, that as of
July 18, 2000, based upon and subject to the various considerations set forth in
the opinion, the consideration to be received by holders of shares of Ziff-Davis
common stock and ZDNet common stock pursuant to the merger agreement was fair
from a financial point of view to such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY, DATED AS OF
JULY 18, 2000, IS ATTACHED AS ANNEX D TO THIS PROXY STATEMENT/PROSPECTUS. THE
OPINION SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY MORGAN STANLEY IN RENDERING ITS OPINION. WE URGE YOU TO READ THE
ENTIRE OPINION CAREFULLY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE ZIFF-DAVIS
BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW OF THE CONSIDERATION TO BE RECEIVED PURSUANT TO THE MERGER AGREEMENT BY THE
HOLDERS OF SHARES OF ZD COMMON STOCK AND ZDNET COMMON STOCK AS OF THE DATE OF
THE OPINION. IT DOES NOT ADDRESS ANY OTHER ASPECTS OF THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF ZD COMMON STOCK OR ZDNET COMMON
STOCK AS TO HOW TO VOTE AT THE ZIFF-DAVIS SPECIAL MEETING. THE SUMMARY OF THE
OPINION OF MORGAN STANLEY SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
o reviewed certain publicly available financial statements and
other information of Ziff-Davis, ZDNet and CNET
o reviewed certain internal financial statements and other
financial and operating data concerning Ziff-Davis and ZDNet
prepared by the management of Ziff-Davis
o reviewed certain publicly available financial projections for
ZDNet and CNET contained in certain securities analysts' research
reports that were recommended for review by the managements of
Ziff-Davis and CNET, respectively
o discussed the past and current operations and financial condition
and the prospects of Ziff-Davis and ZDNet, including information
relating to the strategic, financial and operational benefits
anticipated from the merger, with senior executives of Ziff-Davis
and ZDNet
o discussed the past and current operations and financial condition
and the prospects of CNET, including information relating to the
strategic, financial and operational benefits anticipated from
the merger, with senior executives of CNET
o reviewed the reported prices and trading activity for the ZD
common stock, the ZDNet common stock and the CNET common stock
o compared the financial performance of ZDNet and CNET and the
prices and trading activity of the ZDNet common stock and CNET
common stock with that of certain other comparable
publicly-traded companies and their securities
o reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions
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o participated in discussions and negotiations among
representatives of Ziff-Davis and CNET and their financial and
legal advisors
o reviewed the merger agreement and certain related documents
o considered such other factors and performed such other analyses
as Morgan Stanley deemed appropriate
Morgan Stanley assumed and relied upon without independent verification
the accuracy and completeness of the information reviewed by it for the purposes
of its opinion. Morgan Stanley was not provided with projections or forecasts of
future financial performance of ZDNet or CNET. Instead, for purposes of its
analysis, Morgan Stanley relied, with the consent Ziff-Davis, on the estimates
of certain securities analysts' research reports that were recommended for
review by the managements of Ziff-Davis and CNET, respectively. Morgan Stanley
relied upon the assessment by the managements of Ziff-Davis and CNET of their
ability to retain key employees of Ziff-Davis. Morgan Stanley also relied upon,
without independent verification, the assessment by the managements of
Ziff-Davis and CNET of: (i) the strategic, financial and other benefits expected
to result from the merger; (ii) the timing and risks associated with the
integration of ZDNet and CNET; and (iii) the validity of, and risks associated
with, ZDNet's and CNET's existing and future technologies, services or business
models. Morgan Stanley did not make any independent valuation or appraisal of
the assets or liabilities or technology of Ziff-Davis or ZDNet, nor has Morgan
Stanley been furnished with any such appraisals. Morgan Stanley assumed that in
connection with the receipt of all the necessary regulatory approvals for the
proposed merger, no restrictions will be imposed that would have a material
adverse effect on the contemplated benefits expected to be derived from the
merger. In addition, Morgan Stanley assumed that the merger will be consummated
in accordance with the terms set forth in the merger agreement, including that
(i) the Spin-Off and the Cash Dividend (each as defined in the merger agreement)
will be consummated prior to the merger and (ii) the merger will be treated as a
tax-free reorganization pursuant to Section 368(a) of the Internal Revenue Code
of 1986. With Ziff-Davis' consent, Morgan Stanley assumed for purposes of
considering the relationship between the exchange ratio for the ZD common stock
and the exchange ratio for the ZDNet common stock that the net value of all of
the assets and liabilities of the ZD division of Ziff-Davis (excluding ZD's
retained interest in ZDNet and the impact of stock options) was equal to $55
million (i.e., the amount determined by the Ziff-Davis board of directors and
the special committee of the Ziff-Davis board of directors). With Ziff-Davis'
consent, Morgan Stanley also assumed that there would be no tax consequences to
holders of shares of Ziff-Davis common stock and ZDNet common stock in
connection with the merger. Morgan Stanley's opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to it as of, July 18, 2000.
The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion and the
preparation of its written opinion letter dated July 18, 2000. Some of these
summaries of financial analyses include information presented in tabular format.
In order to fully understand the financial analyses used by Morgan Stanley, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses.
EXCHANGE RATIO PREMIUM ANALYSIS. Morgan Stanley reviewed the ratios of
the closing prices of ZDNet common stock divided by the corresponding closing
prices of CNET common
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stock over various periods ending July 17, 2000. These ratios are referred to as
period average ZDNet exchange ratios. Morgan Stanley examined the premiums
represented by the exchange ratios set forth in the merger agreement over the
averages of these period average ZDNet exchange ratios, and found them to be as
follows:
<TABLE>
<CAPTION>
PERIOD TRANSACTION PREMIUM TO
PERIOD ENDING AVERAGE ZDNET PERIOD AVERAGE
JULY 17, 2000 EXCHANGE RATIO ZDNET EXCHANGE RATIO
------------------------------- -------------- ---------------------
<S> <C> <C> <C>
Since ZDNet IPO (March 31, 1999) 0.4475x 33%
Last one year 0.4266x 39%
Last six months 0.4450x 33%
Last three months 0.3839x 54%
Last one month 0.4352x 36%
Current (July 14, 2000) 0.4551x 30%
</TABLE>
PRECEDENT TRANSACTION ANALYSIS. Morgan Stanley reviewed 29
Internet-related merger transactions similar to the merger and with an aggregate
value greater than $100 million since January 1999 and compared the premiums
paid in these precedent transactions with the premium to the price of the ZDNet
common stock implied by the merger. These transactions were: (acquiree/acquiror)
ISOCOR/Critical Path, Spyglass/OpenTV, Time Warner/AOL, Verio/NTT Corporation,
Exactis.com/24-7 Media, Lycos/Terra Networks, Excite/@Home Corporation,
Geocities/Yahoo, Network Solutions/Verisign, Shopping.com/Compaq Computer,
N2K/CDNow, Telebanc Financial/E*Trade Group, Active Software/webMethods, MEDE
America/Healtheon, Ondisplay/Vignette, Market Guide/Multex.com, Flycast/CMGI,
Abacus Direct/DoubleClick, Earthlink/Mindspring, INTERVU Inc./Akamai
Technologies, Jupiter/Media Metrix, Homegrocer.com/Webvan, Moviefone Inc./AOL,
Broadcast.com Inc./Yahoo, AdForce/CMGI, iMall, Inc./Excite@Home Corporation,
Onsale/Egghead.com, NetGravity/DoubleClick, and Mapquest/AOL. Morgan Stanley
noted that the median premium paid in these Internet-related precedent
transactions was 35.1%, with a high of 132.4% and a low of (16.1)%. Morgan
Stanley noted that the price per share of ZDNet common stock implied by the
0.5932 exchange ratio and a CNET trading price of $31.31 (July 14, 2000) was
$18.57. This figure represents a 30.3% premium to the price per share of ZDNet
common stock of $14.25 on July 14, 2000 (three trading days prior to
announcement). Morgan Stanley also noted that the price per share of ZDNet
common stock implied by the 0.5932 exchange ratio and a CNET trading price of
$32.19 (July 18, 2000) was $19.09, representing a 48.3% premium to the price per
share of ZDNet common stock of $12.88 on July 18, 2000 (last day prior to
announcement). Morgan Stanley noted that the premium implied by the merger to
the price per share of ZDNet common stock as of July 14, 2000 was within the
range of the premiums paid in the Internet related precedent transactions but
below the median premium paid in such Internet related transactions, and the
premium implied by the merger to the price per share of ZDNet common stock as of
July 18, 2000 was within that same range but above such median premium.
In addition, Morgan Stanley compared the premium implied by the merger
to the price per share of ZDNet common stock as of June 14, 2000 (30 calendar
days prior to the time of the analysis and 35 calendar days prior to
announcement) to those premiums paid in 13 precedent vertical consolidation
transactions. These transactions include: (acquiror/acquiree)
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Vivendi/Seagram, SantaFe Snyder/Devon, Daimler-Benz/Chrysler, Baker
Hughes/Western Atlas, AT&T/TCI, Burlington Resources/LL&E, Berkshire
Hathaway/General Re, Exxon/Mobil, AIG/SunAmerica, BP/Amoco, Haliburton/Dresser,
BancOne/First Chicago, and Boeing/McDonnell Douglas. Morgan Stanley noted that
the median premium paid to the thirty-day prior price in these vertical
consolidation precedent transactions was 27.2%, with a high of 53.5% and a low
of 10.8%. Morgan Stanley noted that the above referenced $18.57 price per share
of ZDNet common stock implied by the merger as of July 14, 2000 represented a
premium of 42.0% to the price per share of ZDNet common stock of $13.00 as of
June 14, 2000 (30 calendar days prior to the time of the analysis and 35
calendar days prior to announcement). Morgan Stanley noted that the premium
implied by the merger to the price per share of ZDNet common stock as of June
14, 2000 was at the high end of the range of the premiums paid in the vertical
consolidation precedent transactions and above the median premium paid in such
vertical consolidation transactions.
No company or transaction utilized as a comparison in the precedent
transaction analysis is identical to Ziff Davis, CNET or the merger. In
evaluating the transactions listed above, Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Ziff Davis or CNET, such as the impact of competition on Ziff Davis,
CNET or the industry generally, industry growth and the absence of any material
adverse change in the financial condition and prospects of Ziff Davis, CNET or
the industry or the financial markets in general. Mathematical analyses such as
determining the average or median is not in itself a meaningful method of using
comparable transaction data.
EQUITY RESEARCH ANALYST PRICE TARGETS ANALYSIS. Morgan Stanley noted
that there are ten equity research analysts from major financial institutions
that publish research reports on CNET and there are seven equity research
analysts from major financial institutions who publish research reports on
ZDNet. Morgan Stanley noted that the average of the most recent price targets
published for CNET was $70 per share and the average of the most recent price
targets published for the ZDNet common stock was $37 per share. Morgan Stanley
noted that the pro forma ZDNet ownership in the combined company implied by the
ratio of the two average price targets per share is 32.6% and that this is below
the 35.5% Ziff-Davis pro forma ownership agreed upon in the merger. With respect
to three specific equity research analysts who publish price targets for both
companies, Morgan Stanley further noted that the implied ZDNet ownership levels
utilizing the price targets for each company published by the same equity
research analyst range from a low of 24.2% to a high of 35.7%.
RELATIVE CONTRIBUTION ANALYSIS. Morgan Stanley compared ZDNet's and
CNET's respective percentage contribution to the combined company using revenues
and EBITDA, or earnings before interest, taxes, deductions or amortization, over
various applicable periods based on projections utilized for purposes of this
analysis (and adjusting for other assets of Ziff-Davis and CNET). Morgan Stanley
noted that ZDNet's implied pro forma ownership percentage is 39.7% and 37.7%
using estimated revenues for 2000 and 2001, respectively, and 43.9% using
estimated EBITDA for 2001. Morgan Stanley noted that the pro forma Ziff-Davis
ownership of the combined company of 35.5% agreed upon in the merger was less
than most of the implied pro forma ownership percentages calculated by Morgan
Stanley based on the relative contribution analyses. However, Morgan Stanley
noted that CNET's financial statistics are expected to grow at a more rapid rate
than ZDNet, thus decreasing the ZDNet implied ownership from near term
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levels, and that CNET is valued at a higher multiple of revenues and EBITDA in
the public equity markets than ZDNet.
CORE BUSINESS PARITY ANALYSIS. Morgan Stanley analyzed the implied pro
forma ZDNet ownership in the combined entity by assuming a level of parity for
the core CNET Internet business and ZDNet's business as a whole. Morgan Stanley
calculated the core Internet business value of CNET by subtracting from CNET's
total equity value the assumed value of the mySimon, Television & Radio, and
CNET Data Services businesses and the value of cash and cash equivalents and
investments in private and public securities. Assuming that this is the value
which is most comparable to ZDNet's business, Morgan Stanley calculated the
implied ownership assuming that the ratio of CNET to ZDNet's core Internet
business is from 60%/40% to 55%/45% and adjusting for the above mentioned CNET
other assets and other assets owned by Ziff-Davis. Morgan Stanley noted that the
implied ZDNet ownership under this analysis is 32.0% and 36.3% assuming that the
ratio of CNET to ZDNet's core Internet business is 60%/40% and 55%/45%,
respectively.
In connection with the review of the merger by the Ziff-Davis board of
directors, Morgan Stanley performed a variety of financial and comparative
analyses for purposes of rendering its opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to a partial
analysis or summary description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor it considered. Morgan Stanley
believes that selecting any portion of its analyses, without considering all
analyses as a whole, would create an incomplete view of the process underlying
its analyses and opinion. In addition, Morgan Stanley may have given various
analyses and factors more or less weight than other analyses and factors, and
may have deemed various assumptions more or less probable than other
assumptions. As a result, the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of Ziff-Davis and CNET. In performing its analyses, Morgan Stanley
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters. Many of these assumptions are beyond
the control of Ziff-Davis and CNET. Any estimates contained in Morgan Stanley's
analyses are not necessarily indicative of future results or actual values,
which may be significantly more or less favorable than those suggested by such
estimates.
Morgan Stanley conducted the analyses described above solely as part of
its analysis of the fairness of the consideration pursuant to the merger
agreement from a financial point of view to holders of shares of ZD common stock
and ZDNet common stock and in connection with the delivery of its opinion to the
Ziff-Davis board of directors. These analyses do not purport to be appraisals or
to reflect the prices at which shares of ZD common stock, ZDNet common stock or
CNET common stock might actually trade.
The consideration pursuant to the merger agreement was determined
through arm's length negotiations between Ziff-Davis and CNET and was approved
by the Ziff-Davis board of directors and a special committee of the Ziff-Davis
board of directors. Morgan Stanley provided advice to Ziff-Davis during these
negotiations. Morgan Stanley did not, however, recommend any specific level of
consideration to Ziff-Davis or that any specific level of consideration
constituted the only appropriate consideration for the merger.
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Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate, estate and
other purposes. In the past, Morgan Stanley and its affiliates have provided
financial advisory and financing services to Ziff-Davis and CNET and have
received customary fees for the rendering of these services. In the ordinary
course of business, Morgan Stanley or its affiliates may at any time hold long
or short positions, may trade or otherwise effect transactions, for its own
account, for the accounts of its investment funds and other clients under
management of Morgan Stanley or for the account of customers in the equity and
other securities of Ziff-Davis, CNET or any other parties involved in the
merger.
Under the engagement letter, Morgan Stanley provided financial advisory
services and a financial fairness opinion in connection with the merger, and
Ziff-Davis agreed to pay Morgan Stanley a fee of $6.0 million upon consummation
of the merger. Ziff-Davis has also agreed to reimburse Morgan Stanley for its
expenses incurred in performing its services. In addition, Ziff-Davis has agreed
to indemnify Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Morgan
Stanley or any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws, related to or
arising out of Morgan Stanley's engagement.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a description of the material United States federal
income tax consequences of the merger. This discussion does not address any tax
consequences arising under the laws of any state, locality or foreign
jurisdiction. This discussion is not a comprehensive description of all of the
tax consequences that may be relevant to you. For example, we have not described
tax consequences that arise from rules that apply generally to all taxpayers or
to some classes of taxpayers. We have also not described tax consequences that
we assume to be generally known by investors. This discussion is based upon the
Internal Revenue Code, the regulations of the U.S. Treasury Department and court
and administrative rulings and decisions in effect on the date of this
prospectus. These laws may change, possibly retroactively, and any change could
affect the continuing validity of this discussion.
This discussion assumes that you hold your shares of ZD common stock or
ZDNet common stock as a capital asset and does not address the tax consequences
that may be relevant to you in light of your particular circumstances. In
addition, it does not present a description of the United States federal income
tax laws applicable to you if you are subject to special treatment under the
United States federal income tax laws, including if you are:
o a bank
o a tax-exempt organization
o an S corporation or other pass-through entity
o an insurance company
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o a dealer in securities or foreign currencies
o a trader in securities that elects to use a mark to market method
of accounting for federal income tax purposes
o a Ziff-Davis stockholder who received your ZD common stock or
ZDNet common stock through the exercise of employee stock options
or otherwise as compensation
o not a U.S. person
o a Ziff-Davis stockholder who holds ZD common stock or ZDNet
common stock as part of a hedge, straddle or conversion
transaction
It is a condition to the merger that each of CNET and Ziff-Davis
receive an opinion from its tax counsel that the merger qualifies as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. The opinions will be based on customary assumptions and factual
representations and will assume that the merger will be completed according to
the terms of the merger agreement. The following discussion of United States
federal income tax consequences of the merger assumes that, if completed, the
merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code for United States federal income tax purposes.
Accordingly, if we complete the merger:
o you will not recognize gain or loss when you exchange your ZD
common stock or ZDNet common stock solely for CNET common stock
o you will generally recognize capital gain or loss on any cash
received in lieu of a fractional share of CNET common stock equal
to the difference between the amount of cash received and the
basis allocated to such fractional share
o the aggregate tax basis of CNET common stock you receive will be
the same as the aggregate tax basis of the ZD common stock or
ZDNet common stock you surrender in exchange, decreased by the
tax basis allocated to any fractional share interest exchanged
for cash
o the holding period of CNET common stock you receive will include
the holding period of shares of Ziff-Davis or ZDNet common stock
you surrender in the exchange and
o you may be required to retain records and file with your United
States federal income tax return a statement setting forth facts
relating to the merger
CNET and Ziff-Davis have not and will not seek any ruling from the
Internal Revenue Service regarding any matters relating to the merger, and as a
result, there can be no assurance that the IRS will not disagree with or
challenge any of the conclusions described above. The IRS has announced that it
will not issue advance rulings on the classification of an instrument similar to
the ZDNet common stock. In addition, there are no court decisions or other
authorities bearing directly on the classification of instruments with
characteristics similar to those of ZDNet common stock.
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BACKUP WITHHOLDING. If you are a noncorporate holder of ZD common stock
or ZDNet common stock you may be subject to backup withholding at a 31% rate on
any cash payments received in lieu of a fractional share interest in CNET common
stock. You will not be subject to backup withholding, however, if you:
o furnish a correct taxpayer identification number and certify that
you are not subject to backup withholding on the substitute Form
W-9 or successor form included in the letter of transmittal to be
delivered to you following the completion of the merger
o provide a certification of foreign status on Form W-8 or a
successor form
o are otherwise exempt from backup withholding
Any amounts withheld under the backup withholding rules will be allowed
as a refund or credit against your United States federal income tax liability,
provided you furnish the required information to the Internal Revenue Service.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE
MERGER TO YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. WE
ENCOURAGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT OF
ANY CHANGE IN THE TAX LAWS.
EXCHANGE OF ZIFF-DAVIS STOCK CERTIFICATES FOR CNET STOCK CERTIFICATES
When the merger is completed, CNET's exchange agent will mail to
Ziff-Davis stockholders a letter of transmittal and instructions for use in
surrendering ZD common stock certificates and ZDNet common stock certificates in
exchange for CNET stock certificates. When Ziff-Davis stockholders deliver their
ZD common stock certificates and ZDNet common stock certificates to the exchange
agent along with an executed letter of transmittal and any other required
documents, the ZD common stock certificates and ZDNet common stock certificates
will be canceled and holders of ZD stock common certificates and ZDNet common
stock certificates will receive the number of shares of CNET common stock and
any cash payment in lieu of fractional shares that they are entitled to receive
under the merger agreement.
Holders of ZD common stock and ZDNet common stock should not submit
their stock certificates for exchange until they receive the transmittal
instructions and a letter of transmittal from the exchange agent.
NO DIVIDENDS
Until they have exchanged their certificates for CNET stock
certificates, Ziff-Davis stockholders are not entitled to receive any dividends
or other distributions on CNET common stock.
Subject to applicable laws, promptly following the surrender of ZD
common stock certificates and ZDNet common stock certificates, Ziff-Davis
stockholders will be paid the amount
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of any dividends or other distributions declared on shares of CNET common stock
held of record after the effective date of the merger, without interest.
CNET will only issue CNET stock certificates or checks in lieu of
fractional shares to the person in whose name the surrendered ZD common stock
certificate or ZDNet common stock certificate is registered. If Ziff-Davis
stockholders wish to have their certificates issued in the name of a transferee
that has not been recorded in the transfer records of Ziff-Davis, they must
present the exchange agent with all documents required to show and effect the
unrecorded transfer of ownership and show that any applicable stock transfer
taxes have been paid.
REGULATORY MATTERS
HSR ACT AND ANTITRUST
The merger is subject to the requirements of the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended, and the rules promulgated under
that act by the Federal Trade Commission, which prevent some transactions from
being completed until required information and materials are furnished to the
Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade
Commission and the waiting periods end or expire. On August 1, 2000, we filed
the requisite Pre-Merger Notification and Report Forms with the U.S. Federal
Trade Commission and the U.S. Department of Justice. The Antitrust Division of
the Department of Justice, the Federal Trade Commission and others may challenge
the merger on antitrust grounds either before or after expiration of the
applicable waiting periods. Accordingly, at any time before or after the
completion of the merger, the Antitrust Division of the Department of Justice,
the Federal Trade Commission or others could take action under the antitrust
laws as they deem necessary or desirable in the public interest, including,
without limitation, seeking to enjoin the completion of the merger or permitting
completion subject to regulatory concessions or conditions. We cannot assure you
that a challenge to the merger will not be made or that, if a challenge is made,
it will not prevail.
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of
accounting, with CNET treated as the acquiror. As a result, CNET will record the
assets and liabilities of Ziff-Davis at their estimated fair values and will
record as goodwill the excess of the purchase price over the estimated fair
values. From the date of the merger, the operating results of Ziff-Davis will be
combined with the results of CNET. See "Selected Unaudited Pro Forma Condensed
Consolidated Financial Information".
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES
The shares of CNET common stock to be issued in the merger will be
registered under the Securities Act. These shares will be freely transferable
under the Securities Act, except for shares of CNET common stock issued to any
person who is an affiliate of Ziff-Davis. Persons who may be deemed to be
affiliates include individuals or entities that control, are controlled by, or
are under common control with Ziff-Davis and may include some of their
respective officers and directors, as well as their respective principal
stockholders. Affiliates may not sell their shares of CNET common stock acquired
in the merger except pursuant to (i) an effective registration statement under
the Securities Act covering the resale of those shares, (ii) an exemption under
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paragraph (d) of Rule 145 under the Securities Act or (iii) any other applicable
exemption under the Securities Act.
As an inducement to CNET to enter into the merger agreement, Ziff-Davis
has agreed to use its reasonable best efforts to cause its affiliates to execute
affiliate agreements not less than 30 days prior to the closing of the merger.
Pursuant to these affiliate agreements, CNET will be entitled to place
appropriate legends on the certificates evidencing any CNET common stock to be
received by these persons, or entities, and to issue stop transfer instructions
to the transfer agent for the CNET common stock received by the affiliates.
Further, these individuals have also acknowledged the resale restrictions
imposed by Rule 145 under the Securities Act on shares of CNET common stock to
be received by them in the merger.
INTERESTS OF CERTAIN DIRECTORS, OFFICERS AND AFFILIATES IN THE MERGER
When considering the recommendation of Ziff-Davis' boards of directors,
you should be aware that certain Ziff-Davis directors, officers and stockholders
have interests in the merger that are different from, or are in addition to,
yours. These interests include options held by various executive officers and
directors and the acceleration of those options upon completion of the merger,
the post-merger membership of two current Ziff-Davis directors on the board of
directors of CNET, and the indemnification of directors and officers of
Ziff-Davis against certain liabilities both before and after the merger.
Ziff-Davis and CNET have agreed that Ziff-Davis shall be entitled to
designate one individual to the combined company's board of directors, and
Softbank, a principal stockholder of Ziff-Davis, will also have the right to
designate one member to the CNET board of directors. CNET has agreed to increase
the size of its board by one directorship and Douglas Woodrum, a current CNET
director has agreed to resign from CNET's board.
Ziff-Davis and CNET have agreed that Daniel Rosensweig, president and
chief executive officer of ZDNet, will be president of the combined company.
STOCK OPTIONS
Ziff-Davis' directors and employees hold options to purchase ZD common
stock and ZDNet common stock. As described above under "The Proposed Merger -
Treatment of Ziff-Davis Stock Options", at the effective time of the merger,
each outstanding Ziff-Davis stock option will be converted into an option to
purchase shares of CNET common stock.
As a result of completing the merger, all unvested outstanding options
to purchase shares of ZD common stock and ZDNet common stock that were granted
before July 1, 2000 will vest and become fully exercisable. As of _______, 2000,
employees and directors of Ziff-Davis collectively hold unvested options to
purchase an aggregate of __ shares of ZD common stock and ______ shares of ZDNet
common stock.
MATERIAL CONTACTS BETWEEN ZIFF-DAVIS AND CNET
As of the date of this proxy statement/prospectus, neither Ziff-Davis
nor CNET is aware of any past, present or proposed material relationship between
Ziff-Davis or its directors, executive
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officers or affiliates, on the one hand, and CNET or its directors, executive
officers or affiliates, on the other hand, except as contemplated by the merger,
since the beginning of 1996.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that, following the merger:
o CNET will indemnify and hold harmless, and advance expenses,
including fees of counsel to Ziff-Davis' present and former
officers and directors, against all liabilities for acts or
omissions in those capacities occurring at or prior to the
completion of the merger, to the fullest extent permitted under
applicable law.
o For at least six years after the merger is completed, CNET will
maintain in effect Ziff-Davis' existing officers' and directors'
liability insurance, or to provide insurance containing terms and
conditions which are not materially less advantageous, covering
matters or events occurring prior to completion of the merger.
However, CNET is not required to pay an annual premium for this
insurance in excess of $750,000.
NO APPRAISAL RIGHTS
Appraisal rights under Delaware law are not available to stockholders
of a Delaware corporation if:
o the securities of the corporation are listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.
o in the case of stockholders of the corporation who are required
to take consideration different from that previously held by
them, such stockholders accept in exchange for their stock (a)
stock in the surviving corporation and (b) cash in lieu of
fractional shares
Ziff-Davis' stockholders will not have appraisal rights under Delaware
law with respect to the merger because:
o ZD common stock and ZDNet common stock are traded on the NYSE
o Ziff-Davis stockholders are being offered only shares of common
stock of CNET, and cash in lieu of fractional shares
CNET's stockholders will not have appraisal rights under Delaware law
with respect to the merger because:
o CNET's common stock is traded on NASDAQ
o CNET stockholders will continue to hold their shares after the
merger
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LISTING ON NASDAQ OF CNET COMMON STOCK TO BE ISSUED IN THE MERGER
CNET has agreed to cause the shares of common stock to be issued in the
merger to be approved for listing on NASDAQ, subject to official notice of
issuance prior to the effective time of the merger.
DELISTING AND DEREGISTRATION OF ZD COMMON STOCK AND ZDNET COMMON STOCK AFTER
THE MERGER
If the merger is completed, ZD common stock and ZDNet common stock
will be delisted from the NYSE and will no longer be registered under the
Securities and Exchange Act of 1934.
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THE MERGER AGREEMENT
The following description summarizes the material provisions of the
merger agreement. You are urged to read carefully the merger agreement in its
entirety, a copy of which is attached as Annex A and incorporated by reference
to this proxy statement/prospectus.
GENERAL
The merger agreement provides that TD Merger Sub, Inc., a wholly owned
subsidiary of CNET, will merge with and into Ziff-Davis. Ziff-Davis will survive
the merger as a wholly owned subsidiary of CNET.
The closing of the merger will occur on the second business day after
the last of the conditions to the merger have been satisfied or waived, or at
another time as Ziff-Davis and CNET agree. As soon as practicable after the
closing, Ziff-Davis and CNET will deliver certificates of merger to the
Secretary of State of the State of Delaware for filing. The merger will become
effective upon the filing of these certificates or at another time as CNET, TD
Merger Sub and Ziff-Davis agree. Although no assurances can be given, we
currently expect that the closing of the merger will take place in the fourth
calendar quarter of 2000. However, because the merger is subject to governmental
approvals and other customary conditions, we cannot predict the exact timing.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties
of Ziff-Davis and CNET relating to, among other things:
o corporate organization and power and similar corporate matters
o subsidiaries
o capital structure
o authorization, execution, delivery, performance and
enforceability of, and required consents, approvals, orders and
authorizations of governmental authorities or third parties
relating to, the merger agreement and related matters
o the absence of any conflicts or violations of each party's
governing documents or agreements as a result of the merger or
the merger agreement
o documents filed with the Securities and Exchange Commission, the
accuracy of information contained in those documents and the
absence of undisclosed liabilities
o the accuracy of information supplied in connection with this
proxy statement/prospectus and the registration statement of
which it is a part
o the approval of the merger and related matters by the boards of
directors of CNET, TD Merger Sub and Ziff-Davis
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o absence of material changes or events
o compliance with applicable laws
o filing of tax returns and payment of taxes
o required stockholder votes
o the engagement and payment of fees of brokers, investment
bankers, finders and financial advisors
o the receipt of fairness opinions from financial advisors
o intellectual property
o pending litigation
The merger agreement also contains customary representations and
warranties exclusive to Ziff-Davis relating to, among other things:
o the disclosure to CNET of and validity of material contracts to
which Ziff-Davis or its subsidiaries are a party and the absence
of conflicts between such contracts and the merger
o employee benefits and related matters
o maintenance of insurance
o ownership and condition of material properties and assets
o disclosure to CNET of affiliate transactions
o the terms on which Ziff-Davis has disposed of its non-Internet
businesses and related matters
o the valuation methodology used to establish the relationship
between the exchange ratios for ZD common stock and ZDNet common
stock
The representations and warranties made by the parties to the merger
agreement will not survive the merger, but their accuracy forms the basis of one
of the conditions to the obligations of CNET and Ziff-Davis to complete the
merger.
CONDITIONS TO THE COMPLETION OF THE MERGER
Each party's obligation to effect the merger is subject to the
satisfaction or waiver of various conditions which include the following:
o holders of shares of CNET common stock representing a majority of
the votes present and entitled to vote at the CNET special
meeting at which a quorum is
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present having approved the issuance of CNET common stock
pursuant to the merger
o holders of shares of ZD common stock and ZDNet common stock
representing a majority of all the votes entitled to be cast at
the Ziff-Davis special meeting at which a quorum is present
having voted, together as a single class, to adopt the merger
agreement
o the waiting period applicable to the merger under the
Hart-Scott-Rodino Act having expired or having been terminated
o no laws being adopted or promulgated and no temporary restraining
order, preliminary or permanent injunction or other order issued
by any court or other governmental entity of competent
jurisdiction being in effect that makes the merger illegal or
otherwise prohibits the consummation of the merger
o the shares of CNET common stock to be issued in the merger and
such other shares of CNET common stock to be reserved for
issuance in connection with the merger having been approved for
listing on NASDAQ, subject to official notice of issuance and
o the registration statement on Form S-4, of which this proxy
statement/prospectus is a part, having been declared effective by
the Securities and Exchange Commission under the Securities Act
of 1933 and not having been the subject of any stop order and no
proceedings seeking a stop order having been initiated or
threatened
In addition, each party's obligation to effect the merger is further
subject to the satisfaction or waiver of the following additional conditions:
o the representations and warranties of the other party set forth
in the merger agreement that are qualified as to material adverse
effect (as defined in the merger agreement) being true and
correct with the same force and effect as if made on the date of
the merger agreement and on the date on which the merger is to be
completed or, if such representations and warranties expressly
relate to an earlier date, then as of that earlier date
o the representations and warranties of the other party set forth
in the merger agreement that are not qualified as to material
adverse effect being true and correct in all respects on the date
of the merger agreement and on the date on which the merger is to
be completed or, if such representations and warranties expressly
relate to an earlier date, then as of that earlier date, except
where the failure of these representations and warranties (other
than Ziff-Davis' representation and warranty as to its capital
structure, which shall be true and correct in all material
respects) to be true and correct, individually or in the
aggregate, does not have, and is not reasonably expected to have,
a material adverse effect on the party making the representations
and warranties, and the party making the representations and
warranties having provided to the other party a certificate of a
senior executive and a senior financial officer to that effect
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o the other party to the merger agreement having performed or
complied in all material respects with all material agreements
and covenants required to be performed or complied with by it on
or before the date on which the merger is to be completed, and
that party having provided to the other party a certificate of a
senior executive and a senior financial officer to that effect
o with respect only to CNET's obligation to effect the merger, CNET
having received from Simpson Thacher & Bartlett, counsel to CNET,
on the date on which the merger is to be completed, a written
opinion to the effect that, for federal income tax purposes, the
merger will qualify as a reorganization within the meaning of
section 368(a) of the Internal Revenue Code
o with respect only to Ziff-Davis' obligation to effect the merger,
Ziff-Davis having received from Sullivan & Cromwell, counsel to
Ziff-Davis, on the date on which the merger is to be completed, a
written opinion to the effect that, for federal income tax
purposes, the merger will qualify as a reorganization within the
meaning of section 368(a) of the Internal Revenue Code
o with respect only to Ziff-Davis' obligation to effect the merger,
the conditions set forth in the merger agreement regarding
additional conditions to obligations of CNET to consummate the
merger having been satisfied or waived by CNET
Each of the conditions listed in the previous two paragraphs is
waivable by the party or parties whose obligations to complete the merger are so
conditioned, except to the extent the condition must be satisfied in order to
comply with applicable law.
The merger agreement provides that a "material adverse effect" means,
when used with respect to Ziff-Davis or CNET, any event, change, circumstance or
effect that is or is reasonably likely to be materially adverse to (i) the
business, assets, liabilities, financial condition or results of operation of
such entity and its subsidiaries taken as a whole or (ii) the ability of such
entity to consummate the transactions contemplated by the merger agreement.
NO SOLICITATION
In the merger agreement, each of Ziff-Davis and CNET has agreed that it
will not, nor will it permit any of its subsidiaries nor any of the officers and
directors of it or its subsidiaries to, and it shall direct and use its
reasonable best efforts to cause its and its subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly
through another person:
o solicit, initiate, encourage or knowingly facilitate an
acquisition proposal (as defined in the merger agreement)
o have a discussion with or provide confidential information or
engage in negotiations regarding an acquisition proposal
o approve or recommend or publicly propose an acquisition proposal
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o approve, recommend, propose or enter into a letter of intent or
similar arrangement relating to an acquisition proposal
The foregoing restrictions will not restrict CNET's or Ziff-Davis' board of
director's ability to comply with applicable securities laws.
An "acquisition proposal" includes:
o a transaction to effect a merger, reorganization, share exchange,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving
Ziff-Davis or CNET or any of either company's significant
subsidiaries
o any purchase or sale of 20% or more of the consolidated assets of
either CNET or Ziff-Davis and their subsidiaries, taken as a
whole
o any purchase or sale of, or tender or exchange offer for, the
equity securities of such party that, if consummated, would
result in any person (or the stockholders of such person)
beneficially owning securities that represent 20% or more of the
total voting power of Ziff-Davis or CNET (or of the surviving
parent entity in such transaction) or any of their significant
subsidiaries
Further, each of CNET and Ziff-Davis or their respective board of
directors will be permitted to (i) have a discussion with or provide
confidential information or engage in negotiations regarding an acquisition
proposal, (ii) approve or recommend or publicly propose an acquisition proposal
or (iii) approve or recommend, or propose to approve or recommend an acquisition
proposal to the extent that: (x) such acquisition proposal was not solicited by
such party and such party's board of directors, after consultation with outside
counsel, concludes that such action is necessary in order for it to comply with
its fiduciary obligations; (y) provides notice to the other party to this merger
of any inquiries, proposals or offers received before furnishing any information
or data, including the name of the third party and the material terms and
conditions of such inquiries, proposals or offers and (z) obtains a customary
confidentiality agreement covering any nonpublic information to be disclosed to
the third party.
The merger agreement also provides that each party will promptly advise
the other of the status and terms of any competing proposal or any inquiry or
request for information relating to that competing proposal and the status and
terms of any such discussions or negotiations.
In addition, CNET may pursue a transaction that its board concludes
will not materially delay or interfere with the consummation of the proposed
CNET/Ziff-Davis merger, which does not require rescission of the merger
agreement and where the other party to the proposed transaction expressly
supports the proposed CNET/Ziff-Davis merger.
TERMINATION
The merger agreement may be terminated at any time before the
completion of the merger, whether before or after the stockholder approvals have
been obtained at the special meetings:
o by mutual written consent of CNET and Ziff-Davis
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o by CNET or Ziff-Davis, if the merger has not been completed by
January 31, 2001; but this right to terminate the merger
agreement will not be available to any party whose failure to
fulfill its obligations under the merger agreement is the reason
that the merger cannot be completed by January 31, 2001
o by CNET or Ziff-Davis, if the shareholders of CNET have not
approved the issuance of CNET common stock in the merger or if
the shareholders of Ziff-Davis have not approved the merger
agreement, in each case at the applicable shareholders meeting or
at any adjournment or postponement of the applicable meeting
o by CNET or Ziff-Davis, if (A) any governmental entity issues an
order, decree or ruling or takes any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the merger agreement and such order, decree,
ruling or other action has become final and nonappealable, or (B)
any governmental entity has failed to issue an order, decree or
ruling or take any other action, in each case which is necessary
to fulfill the conditions to the merger with respect to the HSR
Act, approval of shares for listing on NASDAQ and the
effectiveness of the registration statement on Form S-4 of which
this proxy statement/prospectus forms a part and such denial of a
request to issue such order, decree, ruling or take such other
action shall have become final and nonappealable. The right to
terminate the merger agreement under this provision will not be
available to any party whose failure to comply with its
obligations under the merger agreement has caused or resulted in
such action or inaction
o by CNET or Ziff-Davis, if the other party has breached or failed
to perform any of its representations, warranties, covenants or
other agreements contained in the merger agreement, and such
breach has not been or cannot be cured on or before January 31,
2001
o by CNET, if Ziff-Davis' board has failed to make the
recommendation to its stockholders for adoption of the merger
agreement or materially breached its obligations under the merger
agreement by failing to call the Ziff-Davis special meeting of
stockholders, or to prepare and mail to its stockholders this
proxy statement/prospectus
o by Ziff-Davis, if CNET's board has failed to make the
recommendation to its stockholders of the approval of the
issuance of CNET common stock or materially breached its
obligations under the merger agreement by failing to call the
CNET special meeting of stockholders or to prepare and mail to
its stockholders this proxy statement/prospectus
TERMINATION FEES
FEES PAYABLE BY ZIFF-DAVIS
If the merger agreement is terminated by CNET because any of the
following events occurs, Ziff-Davis will pay CNET a termination fee of $58
million:
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o the Ziff-Davis board of directors fails to recommend the merger
to its stockholders
o Ziff-Davis materially breaches its obligation by failing to call
the Ziff-Davis special meeting of stockholders
o Ziff-Davis fails to prepare and mail to its stockholders this
proxy statement/prospectus
Ziff-Davis will also pay CNET a termination fee of $58 million if
either party terminates the merger agreement because the merger is not
consummated by January 31, 2001 and the Ziff-Davis stockholders meeting has not
been held by that date or if Ziff-Davis' stockholders do not approve the merger
agreement and:
o prior to the termination of the merger agreement, a third party
has publicly announced an intention to:
- acquire or purchase more than 20% of the consolidated assets
of Ziff-Davis,
- initiate any tender offer or exchange offer that would
result in any person or group beneficially owning 20% or
more of Ziff-Davis, or
- solicit, initiate, encourage or knowingly facilitate an
alternative transaction with Ziff-Davis and
o within 12 months following the termination of the merger
agreement one of the following transactions is consummated or
Ziff-Davis enters into a definitive agreement providing for one
of the following transactions:
- a merger or similar transaction involving Ziff-Davis,
- a sale of assets of Ziff-Davis representing more than 40% of
the consolidated assets of Ziff-Davis just prior to the
proposed sale, or
- a tender offer or exchange offer by any person or group that
would result in the beneficial ownership or a right to
acquire beneficial ownership of more than 40% of the voting
power of Ziff-Davis
If the merger agreement is terminated by CNET or Ziff-Davis because
Ziff-Davis' shareholders fail to adopt the merger agreement, Ziff-Davis will pay
CNET $33 million, provided that the $58 million termination fee described above
has not been paid.
FEES PAYABLE BY CNET
If the merger agreement is terminated by Ziff-Davis because any of the
following events occurs, CNET will pay Ziff-Davis a termination fee of $105
million:
o the CNET board of directors fails to recommend the issuance of
CNET common stock to its stockholders
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o CNET materially breaches its obligation by reason of a failure to
call the CNET special meeting of stockholders or
o CNET fails to prepare and mail to its stockholders this proxy
statement/prospectus. CNET will also pay to Ziff-Davis a
termination fee of $105 million if either party terminates the
merger agreement because the merger is not consummated by January
31, 2001 or if CNET's stockholders do not approve the issuance of
CNET common stock in the merger and:
o prior to the termination of the merger agreement, a third party
has publicly announced an intention to:
- acquire or purchase more than 20% of the consolidated assets
of CNET,
- initiate any tender offer or exchange offer that would
result in any person or group beneficially owning 20% or
more of CNET, or
- solicit, initiate, encourage or knowingly facilitate an
alternative transaction with CNET and
o within 12 months following the termination of the merger
agreement one of the following transactions is consummated or
CNET enters into a definitive agreement providing for one of the
following transactions:
- a merger or similar transaction involving CNET,
- a sale of assets of CNET representing more than 40% of the
consolidated assets of CNET just prior to the proposed sale,
or
- a tender offer or exchange offer by any person or group that
would result in the beneficial ownership or a right to
acquire beneficial ownership of more than 40% of the voting
power of CNET
CNET may, however, pursue a transaction that its board concludes will
not materially delay or interfere with the consummation of the proposed
CNET/Ziff-Davis merger, which does not require rescission of the merger
agreement and where the other party to the proposed transaction expressly
supports the proposed CNET/Ziff-Davis merger.
If the merger agreement is terminated by CNET or Ziff-Davis because
CNET's shareholders fail to approve the issuance of CNET common stock in the
merger, CNET will pay Ziff-Davis $60 million. In addition, CNET will make an
unsecured loan to Ziff-Davis in the principal amount of $15 million if CNET's
shareholders fail to approve the issuance of common stock in the merger. Such
loan will be due and payable in full at the option of Ziff-Davis in cash or
Ziff-Davis common stock on the earlier of the second anniversary of the making
of the loan or the consummation by any person of an acquisition proposal with
respect to Ziff-Davis. CNET will not make such payment or loan if CNET pays
Ziff-Davis a termination fee for another reason. In addition, this fee will only
be paid if Ziff-Davis' shareholders approve the merger agreement and Ziff-Davis
is not in material breach of the merger agreement.
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CONDUCT OF BUSINESS PENDING THE MERGER
Both CNET and Ziff-Davis agreed that they will:
o confer on a reasonable basis with the other
o report to the other to the extent permitted by law or regulation
or any applicable confidentiality agreement on operational
matters
o file all reports required to be filed with the SEC and
o if requested by the other party and to the extent permitted by
law or regulation or any applicable confidentiality agreement,
deliver to the other party copies of all reports, announcements
and publications promptly after such request.
CNET agreed that it will:
o carry on its business diligently and consistent with past
practice
o preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has
business dealings
o maintain for a period of one year, starting upon the completion
of the merger, employment compensation and benefit plans that
will provide benefits to each employee of Ziff-Davis who
continues employment with CNET after the merger that are no less
favorable than those provided to similarly situated CNET
employees
CNET also agreed that it would conduct its business in compliance with
certain specific restrictions relating to:
o dividends or other distributions
o any split, combination or reclassification of any of its capital
stock
o its ability to repurchase, redeem or otherwise acquire any shares
of its capital stock
o any modification of its charter documents and bylaws
o any merger, consolidation or similar transaction with another
entity or the acquisition of assets or other entities
o actions jeopardizing the tax-free status of the merger
o income tax elections that would be material to CNET
Ziff-Davis agreed that it will:
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o carry on its business diligently and consistent with past
practice, except with respect to the transactions in connection
with the Key3Media spin-off and cash dividend
o use its reasonable best efforts to preserve its relationships
with customers, suppliers, distributors, licensors, licensees,
and others with which it has business dealings, to the extent
necessary to prevent any material impairment of its business
o use its reasonable best efforts to retain the services of its
officers, key employees and consultants, to the extent necessary
to prevent any material impairment of its business
Ziff-Davis agreed that it would conduct its business in compliance with
certain specific restrictions relating to:
o entrance into a new material line of business
o commitment to any capital expenditures, obligations or
liabilities
o dividends or other distributions or changes in share capital,
other than the transactions in connection with the Key3Media
spin-off
o any split, combination or reclassification of any of its capital
stock
o its ability to repurchase, redeem or otherwise acquire any shares
of its capital stock
o the issuance of securities, other than in connection with
previously-issued and certain newly-issued options, issuances by
a wholly owned subsidiary to such subsidiary's parent or another
wholly owned subsidiary, or the Key3Media spin-off
o any modification of charter documents and bylaws
o any merger, consolidation or similar transaction with another
entity or the acquisition of assets of other entities
o the sale, lease and disposition of assets, except for the
transactions in connection with the Key3Media spin-off and the
cash dividends, and for sales in the ordinary course of business
o the incurrence or guarantee of indebtedness
o actions jeopardizing the tax-free status of the merger
o compensation of any executive officer or employee of Ziff-Davis
or any subsidiary of Ziff-Davis
o actions affecting accounting methods and tax elections
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o the entrance into agreements which grant of exclusive rights to
third parties or which could reasonably be expected to limit or
restrict CNET or any of its affiliates from engaging or competing
in any line of business or in any geographic area
o settlement of material claims
o actions jeopardizing the validity of the representations and
warranties pertaining to Key3Media
OTHER AGREEMENTS
Each of CNET and Ziff-Davis has agreed to use its reasonable best
efforts to:
o take all actions and do all things necessary, proper or advisable
under applicable laws and regulations to complete the merger
o obtain and maintain all approvals, consents, waivers,
registrations, permits, authorizations, clearances and other
confirmations required to be obtained from any third party and/or
any governmental entity that are reasonably necessary to complete
the merger
o cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or
other inquiry, including any proceeding initiated by a private
party
o promptly inform the other party of any communication received
from or given by such party to the Antitrust Division of the
Department of Justice (the "DOJ"), the Federal Trade Commission
(the "FTC") or any other governmental entity and of any material
communication received or given in connection with any proceeding
by a private party, in each case regarding any transactions
contemplated by the merger agreement
o consult with each other in advance of any meeting or conference
with the DOJ, FTC or other governmental entity to the extent
practicable and to the extent permitted by the DOJ, FTC or other
governmental entity
o contest and resist any administrative or judicial action or
proceeding, including any proceeding by a private party, that is
instituted, or threatened to be instituted, challenging any
transaction contemplated by the merger agreement or any statute,
rule, regulation, executive order, decree, injunction or
administrative order that is enacted, entered, promulgated or
enforced by a governmental entity which would make the merger
illegal or would otherwise prohibit or materially impair or delay
the completion of the merger and
o if any state takeover statute or similar statute becomes
applicable to this merger, ensure that the merger and other
transactions contemplated by the
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merger agreement are consummated as promptly as practicable on
the terms contemplated by the merger or otherwise minimize the
effect of such statute or regulation would have on the merger.
AMENDMENT; EXTENSION AND WAIVER
Subject to applicable law:
o the merger agreement may be amended by the parties in writing at
any time, except that after the merger agreement has been
approved by the CNET and Ziff-Davis shareholders, no amendment
which by law or in accordance with the rules of the NASDAQ or the
New York Stock Exchange requires further approval by CNET or
Ziff-Davis shareholders shall be made without such further
approval
o at any time prior to the completion of the merger, a party may,
by written instrument signed on behalf of such party, extend the
time for performance of any of the obligations or acts of the
other party to the merger agreement, waive any inaccuracies in
the representations and warranties of the other party contained
in the merger agreement or in any related document and waive
compliance with any agreement or condition in the merger
agreement
EXPENSES
Whether or not the merger is completed, all fees and expenses incurred
in connection with the merger, the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring such
fees or expenses, except that (i) Ziff-Davis will pay any and all property or
transfer taxes imposed in connection with the merger upon consummation of the
merger and (ii) CNET and Ziff-Davis will share equally the expenses incurred in
connection with filing, printing and mailing of this proxy statement/prospectus
and the registration statement of which it is a part.
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<PAGE> 112
AGREEMENTS RELATED TO THE MERGER
This section of the proxy statement/prospectus describes certain
agreements related to the merger agreement, including the CNET stockholders'
voting agreements, the Ziff-Davis stockholder voting agreement and the
stockholder agreement among CNET, Softbank America, Inc., which we refer to as
Softbank, and Softbank Corp. While we believe that these descriptions cover the
material terms of these agreements, these summaries may not contain all of the
information that is important to you.
CNET STOCKHOLDERS VOTING AGREEMENTS
As an inducement for Ziff-Davis to enter into the merger agreement,
each of Shelby Bonnie and Halsey Minor have entered into voting agreements with
Ziff-Davis. By entering into voting agreements, each of these CNET stockholders
has agreed to vote his shares of CNET common stock in favor of the issuance of
CNET common stock in the merger. Each stockholder has also granted Ziff-Davis a
proxy (in case that stockholder fails for any reason to vote his shares in favor
of the merger) with the limited right to vote the shares of CNET common stock
owned by such stockholder (including any additional shares of CNET common stock
acquired after the date of the voting agreements), in favor of the approval of
the issuance of CNET common stock in the merger, of which this proxy
statement/prospectus is a part.
As of July 19, 2000, these stockholders together owned 18,667,336
shares of CNET common stock, all of which shares, representing approximately 23%
of the outstanding CNET common stock, are subject to the voting agreements. None
of the CNET stockholders who are parties to the voting agreements were paid
additional consideration in connection with the voting agreements.
Pursuant to the voting agreements, each of these stockholders agrees
not to sell the CNET common stock and options owned, controlled or acquired,
either directly or indirectly, by that person until the earlier of the
termination of the merger agreement or the completion of the merger, unless the
transfer is in accordance with the voting agreement and each person to whom any
shares or any interest in any shares is transferred agrees to be bound by the
terms and provisions of the voting agreement. The voting agreements will
terminate upon the earlier to occur of the termination of the merger agreement
and the completion of the merger.
We have filed these voting agreements as exhibits to CNET's
registration statement for the shares of CNET common stock to be issued in the
merger, of which this proxy statement/prospectus is a part. Please see the
section titled "Summary of the Proxy Statement/Prospectus -- Where You Can Find
More Information," on page 14, for instructions on how to obtain copies of these
agreements.
SOFTBANK VOTING AGREEMENT
As an inducement for CNET to enter into the merger agreement, CNET and
Softbank entered into a voting agreement in which Softbank agreed to vote its
shares of ZD common stock in favor of the merger agreement and the merger.
Softbank also granted CNET a proxy with the limited right to vote the shares of
ZD common stock beneficially owned by Softbank if Softbank fails for any reason
to vote its shares (including any additional shares of ZD common stock acquired
after the date of the voting agreement) in favor of the approval of the merger
agreement.
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<PAGE> 113
As of July 19, 2000, Softbank beneficially owned 71,619,355 shares of
ZD common stock, all of which shares, representing approximately 69.10% of the
outstanding ZD common stock and __% of the aggregate voting power of all
Ziff-Davis capital stock entitled to vote at the Ziff-Davis special meeting, are
subject to the voting agreement. The votes represented by the Softbank shares
will be sufficient to constitute a quorum and to adopt the merger agreement at
the special meeting regardless of the votes cast by any other stockholder of
Ziff-Davis. Softbank was not paid additional consideration in connection with
the voting agreement.
Pursuant to the voting agreement, Softbank agreed not to sell the ZD
common stock and options owned, controlled or acquired, either directly or
indirectly, by it until the earlier of the termination of the merger agreement
or the completion of the merger, unless the transfer is in accordance with the
voting agreement and each person to which any shares or any interest in any
shares is transferred agrees to be bound by the terms and provisions of the
voting agreement. The voting agreement will terminate upon the earlier to occur
of the termination of the merger agreement and the completion of the merger.
We have filed the Softbank voting agreement as an exhibit to CNET's
registration statement for the shares of CNET common stock to be issued in the
merger, of which this proxy statement/prospectus is a part. Please see the
section titled "Summary of the Proxy Statement/Prospectus -- Where You Can Find
More Information," on page 14, for instructions on how to obtain copies of these
agreements.
SOFTBANK STOCKHOLDER AGREEMENT
As an inducement for CNET to enter into the merger agreement, CNET,
Softbank and Softbank Corp. entered into a stockholder agreement. The following
description summarizes the material provisions of the Softbank stockholder
agreement. We have filed the Softbank stockholder agreement as an exhibit to
CNET's registration statement for the shares of CNET common stock to be issued
in the merger, of which this proxy statement/prospectus is a part. Please see
the section titled "Summary of the Proxy Statement/Prospectus -- Where You Can
Find More Information," on page 14, for instructions on how to obtain a copy of
this agreement.
BOARD OF DIRECTORS OF CNET
At the closing of the merger, CNET will appoint to its board of
directors one nominee of Softbank. As long as Softbank and its subsidiaries own
at least 7.5% of CNET's voting stock, to the extent that any designee of
Softbank to the CNET board of directors is up for election or a designee of
Softbank is not then serving on the CNET board of directors, Softbank will have
a right to designate one member of the management slate nominated by CNET for
election as directors. CNET must provide the Softbank designee with the same
support as CNET provides to other persons nominated for election as directors as
part of the management slate. Any person designated by Softbank for election as
a CNET director will be subject to the reasonable approval of a majority of the
members of the CNET board of directors. As long as Softbank has the right to
designate at least one nominee to the CNET board of directors, each committee of
the CNET board of directors (other than the audit and compensation committees
and any committee established due to a Softbank conflict of interest) shall at
all times include at least one Softbank designee.
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<PAGE> 114
VOTING OF CNET SHARES BY SOFTBANK
As long as Softbank can designate a nominee for election as a CNET
director, Softbank will vote all of the shares of CNET owned by Softbank at
Softbank's discretion either (i) for the entire slate of directors proposed by
CNET's board of directors or (ii) in the same proportion as all votes cast by
disinterested stockholders on such matters.
STANDSTILL AGREEMENT
Subject to certain exceptions, during the standstill period described
below Softbank Corp. and its subsidiaries are restricted from:
o offering to acquire any businesses or assets of CNET having a
fair market value in excess of 10% of CNET assets
o owning more than 20% of CNET's common stock
o making or participating in any solicitation of proxies to vote
CNET voting securities
o joining a group with respect to the ownership or voting of any
CNET voting securities, other than a group that consists
solely of Softbank, Softbank Corp. and their direct and
indirect subsidiaries
o financing any third party's purchase of voting securities of
CNET
o proposing or assisting any person in connection with a merger
or other change of control transaction relating to CNET
o nominating any person as a director (other than the director
nominee to which it is entitled) or proposing any matter to be
voted on by the stockholders of CNET
o soliciting, initiating or encouraging any affiliate of
Softbank to take any action that Softbank is prohibited from
taking
The standstill period is the period ending on the earliest of the
following:
o the four year anniversary of the effective date of the merger
o a change of control of CNET occurs or CNET enters into a
definitive agreement providing for a change in control of CNET
o a third party tender offer is commenced for a majority of
CNET's common stock, other than an offer by Softbank or its
affiliates
o Softbank owns less than 7.5% of CNET's voting securities
The standstill period is subject to reinstatement if the circumstances
relating to a change in control of CNET or a third party tender offer are no
longer present and certain other conditions are satisfied.
TRANSFER RESTRICTIONS
During the one-hundred eighty day period after the merger, Softbank may
not transfer any CNET common stock owned by it or enter into any hedging
transaction relating to such stock other than transfers:
o to a subsidiary of Softbank or Softbank Corp. that agrees to
be bound by the Softbank stockholder agreement
o with the consent of CNET
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<PAGE> 115
o pursuant to a third party tender offer that is either
recommended by the CNET board or is not prohibited by any CNET
stockholder rights plan
o pursuant to a merger, consolidation or reorganization to which
CNET is a party
During the period commencing on the 180-day anniversary of the merger
and ending on the earlier of the four year anniversary of the merger, or the
date on which Softbank owns less than 7.5% of CNET's voting securities, Softbank
may not transfer CNET common stock owned by it other than transfers:
o to a subsidiary of Softbank Corp. that agrees to be bound by
the Softbank stockholder agreement
o with the consent of CNET
o pursuant to a third party tender offer that is either
recommended by the CNET board or is not prohibited by any CNET
stockholder rights plan
o pursuant to a merger, consolidation or reorganization to which
CNET is a party
o in an underwritten public offering o pursuant to Rule 144 or
Rule 145 under the Securities Act of 1933 as long as such
transfers are not made to any person that would own more than
7.5% of CNET's common stock. In addition, the amount of all
such transfers in any three month period cannot exceed 2.5% of
the shares of CNET common stock outstanding at the beginning
of that period
o in private sales not made through any securities exchange, as
long as the purchaser is not acquiring the shares for resale
and will not own more than 7.5% of CNET's common stock
REGISTRATION RIGHTS
Commencing on the six month anniversary of the merger and subject to
certain restrictions, Softbank may make up to four demands for registration
under the Securities Act of its shares of CNET common stock for sale in
underwritten offerings. In addition, subject to customary limitations, Softbank
will have the right to require that their shares be included in other
underwritten offerings of CNET common stock. CNET will pay all expenses related
to any such registration other than underwriting discounts and commissions and
transfer taxes, if any. CNET will also indemnify Softbank against various
liabilities associated with such registration.
STOCKHOLDER AGREEMENTS OF MR. BONNIE AND MR. MINOR
As an inducement for Ziff-Davis to enter into the Merger Agreement,
each of Mr. Bonnie and Mr. Minor entered into a stockholder agreement with
Softbank in which they agreed to vote in favor of any nominee for election as a
director of CNET that is nominated by Softbank pursuant to the Softbank
stockholder agreement.
AFFILIATE AGREEMENT
As a condition to CNET's obligation to complete the merger, each of
Ziff-Davis' affiliates must execute an affiliate agreement. Under this type of
affiliate agreement, CNET will be entitled to place appropriate legends on the
certificates evidencing any CNET common stock to be received by these persons
and to issue stop transfer instructions to the transfer agent for CNET common
stock. Further, these persons have also acknowledged the resale restrictions
imposed by Rule 145 under the Securities Act of 1933 on shares of CNET common
stock to be received by them in the merger. Ziff-Davis has agreed to use its
reasonable best efforts to cause its affiliates to execute affiliate agreements
not less than 30 days prior to the closing of the merger.
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<PAGE> 116
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information for CNET
set forth below gives effect to the acquisitions of MySimon Inc. and Ziff-Davis.
The columns labeled "CNET and MySimon pro forma" give pro forma effect to
the CNET acquisition of MySimon on February 29, 2000. The columns labeled
"Ziff-Davis pro forma" give pro forma effect to the sale of its market
intelligence business in the fourth quarter of 1999, the sale of its education,
television and print publishing businesses (except for Computer Shopper, Smart
Planet and an investment in Red Herring Communications, Inc.), the repayment of
all but $500,000 of Ziff-Davis' debt in the first six months of 2000, and the
Key3Media spin-off and cash dividend paid on August 18, 2000. The unaudited pro
forma condensed combined balance sheet as of June 30, 2000 gives pro forma
effect to the CNET acquisition of Ziff-Davis and certain post June 30, 2000
transactions as if they had occurred on June 30, 2000. The unaudited pro forma
condensed combined statement of operations for the six months ended June 30,
2000 gives pro forma effect to the CNET acquisition of Ziff-Davis and certain
post December 31, 1999 transactions as if they had occurred immediately prior to
January 1, 2000. The unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1999 gives pro forma effect to the
CNET acquisition of Ziff-Davis and all of the previously mentioned transactions
as if they had occurred immediately prior to January 1, 1999. These statements,
including the notes thereto, should be read in conjunction with the Form 8-K's
filed by CNET and Ziff-Davis on ____________ and ___________, respectively, and
the consolidated financial statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations for CNET and Ziff-Davis, all of
which we incorporate by reference in this proxy statement/prospectus. For copies
of the information we incorporate by reference, see "Summary of Proxy
Statement/Prospectus - Where You Can Find More Information on page ___.
The pro forma condensed combined financial information does not purport to
represent what the consolidated results of operations or financial condition of
CNET would actually have been if the MySimon and Ziff-Davis acquisitions had in
fact occurred on such dates or the future consolidated results of operations or
financial condition of CNET.
103
<PAGE> 117
CNET NETWORKS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED - IN THOUSANDS)
JUNE 30, 2000
<TABLE>
<CAPTION>
PRO FORMA
CNET/ZIFF-
DAVIS
ZIFF-DAVIS ACQUISITION
ASSETS CNET PRO FORMA ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 102,825 $ 71,116 $ -- $ 173,941
Investments in marketable debt securities 126,237 -- -- 126,237
Investments in marketable equity securities 259,421 7,653 -- 267,074
Accounts receivable, net 29,349 45,906 -- 75,255
Prepaid expenses and other current assets 22,139 14,148 (3,796)(a) 32,491
----------- ----------- ----------- -----------
Total current assets 539,971 138,823 (3,796) 674,998
Investments in marketable debt securities 108,904 -- -- 108,904
Investments in marketable equity securities 15,704 -- -- 15,704
Property and equipment, net 42,619 9,853 -- 52,472
Goodwill and other intangible assets 685,015 175,808 1,429,190 (a) 2,290,013
Other assets 95,670 68,758 32,484 (a) 196,912
----------- ----------- ----------- -----------
Total assets $ 1,487,883 $ 393,242 $ 1,457,878 $ 3,339,003
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 10,737 $ 3,569 $ -- $ 14,306
Accrued liabilities 30,833 89,158 75,800 (a) 195,791
Due to affiliates and management -- 13,025 -- 13,025
Current portion of long-term debt 6,389 -- -- 6,389
Tax related liabilities 115,081 -- -- 115,081
----------- ----------- ----------- -----------
Total current liabilities 163,040 105,752 75,800 344,592
Long-term debt 197,257 500 -- 197,757
Stockholders' equity:
CNET-Common stock 9 -- 5 (a) 14
ZD common stock -- 1,061 (1,061)(a) --
ZDNet common stock -- 165 (165)(a) --
Additional paid-in capital 922,843 1,416,604 252,459 (a) 2,541,906
Other comprehensive income, net of tax (89,697) 1,032 (1,032)(a) (89,697)
Retained earnings (deficit) 317,406 (1,118,897) 1,118,897 (a) 317,406
Treasury stock, at cost (22,975) -- -- (22,975)
Deferred compensation -- (12,975) 12,975 (b) --
----------- ----------- ----------- -----------
Total stockholders' equity 1,127,586 286,990 1,382,078 2,796,654
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 1,487,883 $ 393,242 $ 1,457,878 $ 3,339,003
=========== =========== =========== ===========
</TABLE>
104
<PAGE> 118
CNET NETWORKS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PRO FORMA
CNET/ZIFF-
CNET AND DAVIS
MYSIMON ZIFF-DAVIS ACQUISITION
PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Revenues:
Internet $ 92,338 $ 76,213 $ -- $ 168,551
Publishing -- 23,995 -- 23,995
Broadcast 5,327 -- 5,327
--------- --------- ----------- ---------
Total revenues 97,665 100,208 -- 197,873
--------- --------- ----------- ---------
Cost of revenues:
Internet 27,084 24,297 -- 51,381
Publishing -- 13,266 -- 13,266
Broadcast 4,815 -- -- 4,815
--------- --------- ----------- ---------
Total cost of revenues 31,899 37,563 -- 69,462
--------- --------- ----------- ---------
Gross profit 65,766 62,645 -- 128,411
--------- --------- ----------- ---------
Operating expenses:
Other operating expenses 60,449 56,524 116,973
Stock-based compensation -- 3,002 (3,002)(b) --
Depreciation and amortization of property and equipment 2,973 1,765 -- 4,738
Amortization of goodwill and intangible assets 150,074 15,846 267,500 (c) 433,420
--------- --------- ----------- ---------
Total operating expenses 213,496 77,137 264,498 555,131
--------- --------- ----------- ---------
Operating loss (147,730) (14,492) (264,498) (426,720)
Other income (expense): --
Gain (loss) on investments 69,584 -- -- 69,584
Other income (expense), net 96 (1,323) -- (1,227)
Minority interest -- 780 -- 780
--------- --------- ----------- ---------
Total other income (expense) 69,680 (543) -- 69,137
--------- --------- ----------- ---------
Loss before income taxes (78,050) (15,035) (264,498) (357,583)
Income tax benefit (expense) (30,402) 3,648 (3,648)(d) (30,402)
--------- --------- ----------- ---------
Net loss $(108,452) $ (11,387) $ (268,146) $(387,985)
========= ========= =========== =========
Basic net loss per share $ (1.33) $ (2.89)
========= =========
Diluted net loss per share $ (1.33) $ (2.89)
========= =========
Shares used in calculating basic per share data 81,536 134,353
========= =========
Shares used in calculating diluted per share data 81,536 134,353
========= =========
</TABLE>
105
<PAGE> 119
CNET NETWORKS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
CNET/ZIFF-
CNET AND DAVIS
MYSIMON ZIFF-DAVIS ACQUISITION
PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C>
Revenues:
Internet $ 106,570 $ 107,317 $ -- $ 213,887
Publishing -- 67,017 -- 67,017
Broadcast 7,458 -- -- 7,458
----------- ----------- ----------- -----------
Total revenues 114,028 174,334 -- 288,362
----------- ----------- ----------- -----------
Cost of revenues:
Internet 33,756 35,531 -- 69,287
Publishing -- 24,654 -- 24,654
Broadcast 7,821 -- -- 7,821
----------- ----------- ----------- -----------
Total cost of revenues 41,577 60,185 -- 101,762
----------- ----------- ----------- -----------
Gross profit 72,451 114,149 -- 186,600
----------- ----------- ----------- -----------
Operating expenses:
Other operating expenses 126,057 102,194 -- 228,251
Stock-based compensation -- 4,535 (4,535)(b) --
Depreciation and amortization of property and equipment 7,874 10,406 -- 18,280
Amortization of goodwill and other intangible assets 236,800 13,008 534,999 (c) 784,807
----------- ----------- ----------- -----------
Total operating expenses 370,731 130,143 530,464 1,031,338
----------- ----------- ----------- -----------
Operating loss (298,280) (15,994) (530,464) (844,738)
Other income (expense):
Gain (loss) on investments 734,138 -- -- 734,138
Interest income (expense), net 1,742 1,472 -- 3,214
Minority interest -- 117 -- 117
----------- ----------- ----------- -----------
Total other income 735,880 1,589 -- 737,469
----------- ----------- ----------- -----------
Income (loss) before income taxes 437,600 (14,405) (530,464) (107,269)
Income tax benefit (expense) (257,315) 4,295 (4,295)(d) (257,315)
----------- ----------- ----------- -----------
Net income (loss) $ 180,285 $ (10,110) $ (534,759) $ (364,584)
=========== =========== =========== ===========
Basic net income (loss) per share $ 2.18 $ (2.83)
=========== ===========
Diluted net income (loss) per share $ 1.91 $ (2.83)
=========== ===========
Shares used in calculating basic per share data 82,545 128,751
=========== ===========
Shares used in calculating diluted per share data 94,332 128,751
=========== ===========
</TABLE>
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<PAGE> 120
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Basis of Presentation
The unaudited pro forma condensed combined balance sheet as of June 30,
2000 gives pro forma effect to the CNET acquisition of Ziff-Davis and the post
June 30, 2000 transactions referred to in the next paragraph as if they had
occurred on June 30, 2000. The unaudited pro forma condensed combined statement
of operations for the six months ended June 30, 2000 gives pro forma effect to
the CNET acquisition of Ziff-Davis and the post December 31, 1999 transactions
referred to in the next paragraph as if they had occurred immediately prior to
January 1, 2000. The unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1999 gives pro forma effect to the
CNET acquisition of Ziff-Davis and the transactions referred to in the next
paragraph as if they had occurred immediately prior to January 1, 1999. These
statements, including the notes thereto, should be read in conjunction with the
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for CNET and Ziff-Davis, which we
incorporate by reference in this proxy statement/prospectus. For copies of the
information we incorporate by reference, see "Summary of Proxy
Statement/Prospectus - Where You Can Find More Information" on page 14.
The columns labeled "CNET and mySimon pro forma" in the statements set
forth above are derived from unaudited pro forma combined financial statements
of CNET filed on August 14, 2000 in a CNET Form 8-K and incorporated herein by
reference. The columns labeled "Ziff-Davis pro forma" in the statements set
forth above are derived from unaudited pro forma consolidated financial
statements of Ziff-Davis filed on August 14, 2000 in a Ziff-Davis Form 8-K and
incorporated herein by reference. The CNET and MySimon pro forma columns give
pro forma effect to the CNET acquisition of MySimon on February 29, 2000 in a
manner described in more detail in the CNET Form 8-K. The Ziff-Davis pro forma
columns give pro forma effect to the sale of its market intelligence business in
the fourth quarter of 1999, the sale of its education, television and print
publishing businesses (except for Computer Shopper, Smart Planet and an
investment in Red Herring Communications Inc.), the repayment of all but
$500,000 of Ziff-Davis' debt in the first six months of 2000 and the Key3Media
spin-off and cash dividend paid on August 18, 2000, in each case in a manner
described in more detail in the Ziff-Davis Form 8-K.
The CNET and mySimon pro forma columns do not give effect to CNET's
acquisitions of Apollo Solutions Inc., Winfiles.com, GDT, Nordby International,
SavvySearch Limited, MSSI, and Digital Media Services, Inc. because, both
individually and in aggregate, they are immaterial.
Certain CNET and Ziff-Davis pro forma amounts have been reclassified to
conform with CNET's expected presentation upon consummation of the proposed
merger.
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<PAGE> 121
CNET expects that it may incur additional costs to integrate the merged
entities over the course of the next several years. Such costs have not been
considered in the pro forma financial statements and will be recorded as
operating expenses if and when they are determined.
These statements are not necessarily indicative of CNET's actual financial
position or results of operations as of the date or for the periods indicated or
the financial position or results of operations that CNET would have experienced
if the transactions for which the statements give pro forma effect had in fact
occurred at the times assumed. Also, the statements do not purport to represent
CNET's future financial position or results of operations.
(2) Pro Forma Adjustments
(a) Reflects the issuance of shares of CNET common stock in the merger, and
allocation of the purchase price to the assets and liabilities acquired and
elimination of Ziff-Davis' common stock, other comprehensive deficit and
retained deficit. The purchase price was allocated based on the estimated fair
value of the assets and liabilities acquired in the merger. This allocation is
subject to change pending a final analysis of the value of the assets acquired
and liabilities assumed. The preliminary allocation is as follows (in
thousands):
<TABLE>
<S> <C> <C>
Purchase price $1,696,568
Assets acquired
Cash $ 71,116
Accounts receivable, net 45,906
Property and equipment, net 9,853
Other assets 119,247
----------
246,122
Liabilities assumed 154,552
---------- ----------
Net assets acquired 91,570
----------
Goodwill and other intangible assets $1,604,998
==========
</TABLE>
The purchase price reflects the 46,205,000 shares of CNET's common stock
expected to be issued in the merger, the fair value of options to purchase
8,291,000 shares of CNET's common stock that will be exchanged in the merger for
outstanding Ziff-Davis stock options, and an estimated $27.5 million in
merger-related transaction and anticipated direct costs.
(b) Reflects the elimination of deferred stock-based compensation.
(c) Reflects amortization of increased goodwill and other intangible assets
during the period.
(d) Reflects an adjustment to tax expense.
(3) Pro forma net income (loss) per share
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<PAGE> 122
The pro forma basic and diluted net income (loss) per share calculation
assumes that the 10,725,927 and 46,205,000 shares of CNET common stock issued in
the mySimon and Ziff-Davis acquisitions, respectively, were outstanding for the
entire year in 1999 and for the six-month period ended June 30, 2000. The
options issued in connection with these acquisitions are not included in the per
share calculation because their effect is anti-dilutive.
109
<PAGE> 123
COMPARISON OF RIGHTS OF HOLDERS OF
CNET COMMON STOCK AND
ZIFF-DAVIS COMMON STOCK
This section of the proxy statement/prospectus describes certain
differences between CNET common stock, on the one hand, and ZD common stock and
ZDNet common stock, on the other hand. While we believe that the description
covers the material differences between the two, this summary may not contain
all of the information that is important to both CNET and Ziff-Davis
stockholders, including the certificate of incorporation and bylaws of CNET and
the certificate of incorporation and bylaws of Ziff-Davis. CNET and Ziff-Davis
stockholders should read this entire document and the other documents referred
to carefully for a more complete understanding of the differences between CNET
common stock and ZD common stock and ZDNet common stock.
Ziff-Davis' certificate of incorporation and bylaws currently govern
the rights of stockholders of Ziff-Davis. After the completion of the merger, ZD
common stockholders and ZDNet common stockholders will become stockholders of
CNET. As a result, former Ziff-Davis stockholders' rights will be governed by
CNET's certificate of incorporation and bylaws. The following table summarizes
certain differences between the rights of CNET stockholders and Ziff-Davis
stockholders under the certificate of incorporation and bylaws of CNET and of
Ziff-Davis.
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<PAGE> 124
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
COMMON STOCK....................... One class issued and Two classes of common stock:
outstanding. Holders have one
vote per share on all matters o ZD common stock
submitted to a vote of o ZDNet common stock
stockholders, including election
of directors. Holders do not ZDNet common stock is intended to
have cumulative voting rights. reflect the performance of ZDNet,
Ziff- Davis' online business
division. The ZD common stock is
intended to track the performance of
ZD, which is the division of
Ziff-Davis that historically engaged
in a variety of non-online media and
marketing businesses. ZD has disposed
of substantially all of its
businesses, and now owns only
Computer Shopper, Smart Planet, an
investment in Red Herring
Communications Inc. and a retained
interest in ZDNet that is currently
the equivalent of 60 million ZDNet
shares.
At every meeting of the stockholders,
the holders of ZD common stock and
the holders of ZDNet common stock
vote together as a class on all
matters as to which common
stockholders generally are entitled
to vote, unless a separate vote is
required by applicable law. On all
matters for which no separate vote is
required, holders of ZD common stock
are entitled to one vote for each
share of stock held and holders of
ZDNet common stock are entitled to a
number of votes per share equal to
the average market value of a share
of ZDNet common stock divided by the
average market value of a share of ZD
common stock during the twenty
consecutive trading day
period ending on (and
including) the fifth trading day
before the applicable record date.
</TABLE>
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<PAGE> 125
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
DIVIDENDS.......................... Holders of CNET common Holders of ZD common stock and ZDNet
stock are entitled to dividends common stock receive dividends if, as
or other distributions when, as and when the board declares them out
and if declared by the board of of legally available funds, and the
directors. The right of the board board may declare dividends in equal
of directors to declare dividends or unequal amounts on each series (or
is subject to the rights of may declare dividends on one series
holders of preferred stock and and not the other), but the dividends
the availability of funds. on ZD common stock and the ZDNet
common stock cannot be greater than
the amount that the corresponding
Ziff-Davis divisions could pay if
those divisions were separate
corporations.
SALE OF ALL OR CNET is not permitted to sell If Ziff-Davis disposes of all or
SUBSTANTIALLY all or substantially all of its substantially all of the assets of
ALL ASSETS......................... assets unless it receives its ZD division, it is required to
stockholder approval to do so. distribute to holders of its ZD
common stock their proportionate
interest in the net proceeds or issue
ZDNet common stock for ZD common
stock at a 10% premium. Similarly, if
Ziff- Davis disposes of all or
substantially all of the assets of
its ZDNet division, it is required to
distribute to holders of ZDNet common
stock their proportionate interest in
the net proceeds or issue ZD common
stock for ZDNet common stock at a 10%
premium. In addition, Ziff-Davis is
not permitted to sell all or
substantially all of the assets of
Ziff-Davis Inc. unless it receives
stockholder approval to do so.
</TABLE>
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<PAGE> 126
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
OPTIONAL EXCHANGE.................. The CNET certificate of Ziff-Davis is permitted in certain
incorporation does not contain circumstances to exchange ZD common
an analogous provision. stock for ZDNet common stock or vice
versa, to redeem ZD common stock in
return for stock of a subsidiary
holding all of the assets and
liabilities of the ZD division or to
redeem ZDNet common stock in return
for the stock of a subsidiary holding
all of the assets and liabilities of
ZDNet.
LIQUIDATION........................ CNET's certificate of If Ziff-Davis liquidates, holders of
incorporation does not contain ZD common stock and ZDNet common
a provision for liquidation. stock will share in the assets
remaining after satisfaction in full
of the prior rights of creditors and
payment of the aggregate liquidation
preference for all outstanding shares
of preferred stock, pro rata in
relation to the aggregate market
value of their holdings over a
specified averaging period prior to
announcement of the liquidation.
PREFERRED STOCK.................... The CNET certificate of Ziff-Davis preferred stock may
incorporation authorizes the be issued from time to time in
board to issue preferred stock in one or more series. Ziff-Davis'
one or more series and to set board of directors is authorized
the designations and powers, to fix the designations and the
liquidation preferences, powers, preferences and rights,
conversion and other rights, and the qualifications,
qualifications, voting power, limitations and restrictions of
limitations and restrictions, and each series of preferred stock.
the terms of redemption of The Ziff-Davis certificate of
preferred stock. The CNET incorporation authorizes the
certificate of incorporation board to issue up to
authorizes the board to issue up 10,000,000 shares of preferred
to 5,000,000 shares of preferred stock. Ziff-Davis does not
stock. CNET does not currently currently have any shares of
have any shares of preferred preferred stock outstanding.
stock outstanding.
</TABLE>
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<PAGE> 127
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
PREEMPTIVE AND
PREFERENTIAL RIGHTS................ CNET stockholders do not have Ziff-Davis' certificate of
preemptive or preferential rights incorporation does not contain
to purchase or subscribe for a provision for preemptive and
additional shares of any class of preferential rights.
CNET capital stock. The board
of directors may issue shares of
any class of stock, or any notes,
debentures, bonds or other
securities convertible into or
warrants, rights or options to
purchase shares of any class of
stock, without offering any
shares of any class, to the
existing holders.
SPECIAL MEETING OF
STOCKHOLDERS....................... Under Delaware law, a special Ziff-Davis' bylaws authorize
meeting of stockholders may be only the chairman or vice
called by the board of directors president of the board of
or any other person authorized directors, the president or the
to do so in the certificate of board of directors to call a
incorporation or the bylaws. special meeting of
CNET's certificate of stockholders. Any power of
incorporation and bylaws stockholders to call a special
authorize only the chief meeting is explicitly denied.
executive officer or a majority
of the members of the board to
call a special meeting of
stockholders.
</TABLE>
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<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
ACTION BY WRITTEN CONSENT IN LIEU
OF A STOCKHOLDERS' MEETING....... Under Delaware law, stockholders may Under Delaware law, stockholders may
take action by written consent in take action by written consent in
lieu of voting at a meeting. Delaware lieu of voting at a meeting. Delaware
law allows corporations to eliminate law allows corporations to eliminate
this provision from its certificate this provision from its certificate
of incorporation. CNET's certificate of incorporation. Ziff-Davis'
of incorporation does not eliminate certificate of incorporation
the ability of a stockholder to act eliminates the ability of a
by written consent. CNET's bylaws stockholder to act by written
allow for any action that may be consent. Any action required or
taken at any annual or special permitted to be taken by the
meeting of stockholders to be taken stockholders of Ziff-Davis must be
without a meeting, without prior taken at a duly called annual or
notice and without a vote, if CNET special meeting of such holders.
obtains the written consent of a
majority of the holders of
outstanding stock that would be
entitled to vote at a duly convened
meeting.
VOTING BY WRITTEN
BALLOT........................... Under Delaware law, the right to vote Under Delaware law, the right to vote
by written ballot may be restricted by written ballot may be restricted
if the certificate of incorporation if the certificate of incorporation
so provides. CNET's certificate of so provides. Ziff-Davis' certificate
incorporation does not allow holders of incorporation does not allow
the right to vote by written ballot. holders the right to vote by written
ballot.
RECORD DATE FOR DETERMINING
STOCKHOLDERS.....................
CNET's bylaws provide that the board Ziff-Davis' bylaws provide that the
of directors may fix a record date board of directors may fix a record
that is not more than 60 days nor date that is not more than 60 days
less than 10 days before the date of nor less than 10 days before the date
the meeting. If the board does not of the meeting. If the board does not
fix a record date, then the record fix a record date, then the record
date to determine the stockholders date to determine the stockholders
entitled to receive notice of the entitled to receive notice of the
meeting will be the close of business meeting will be the close of business
on the day preceding the day the on the day preceding the day the
notice is given, or, if the notice is given, or, if the
stockholders waive notice, the close stockholders waive notice, the close
of business on the day preceding the of business on the day preceding the
date of the meeting. A determination date of the meeting. A determination
of stockholders of record entitled to of stockholders of record entitled to
notice or to vote at a meeting also notice or to vote at a meeting also
applies to any adjournment of the applies to any adjournment of the
meeting, unless the board of meeting, unless the board of
directors fixes a new date. directors fixes a new date.
</TABLE>
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<PAGE> 129
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
The bylaws also provide that the The record date to determine the
record date for determining the stockholders entitled to receive a
stockholders entitled to consent to dividend payment or other
corporate action without a distribution of rights or for any
stockholder meeting will be no more other action, is a date that is not
than 10 days prior to the date the more than 60 days prior to any such
subject action is taken. If the board action.
does not fix a record date, the
record date to determine stockholders If the board does not fix a record
entitled to vote without a date for the payment of a dividend,
stockholder meeting is the first date the record date is the day on which
on which CNET receives a signed the board of directors adopts the
written consent setting forth the resolution relating to the subject
action taken or proposed to be taken. matter.
If a record date is not set as
described above and a statute requires
prior action by the board, the record
date for determining stockholders
entitled to consent to corporate
action in writing is the close of
business on the date the board adopts
the resolution taking such action.
The record date to determine the
stockholders entitled to receive a
dividend payment or other distribution
of rights or for any other action, is
a date that is not more than 60 days
prior to any such action.
</TABLE>
116
<PAGE> 130
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
ADVANCE NOTICE PROVISIONS FOR
BOARD NOMINATIONS AND OTHER
STOCKHOLDER BUSINESS -- ANNUAL
MEETINGS......................... Any stockholder that beneficially has The Ziff-Davis bylaws provide
owned for at least one year at least stockholders may nominate persons for
$1,000 of CNET securities entitled to election to the board of directors
vote at an annual meeting may request and propose business at an annual or
consideration of a matter to be special meeting of stockholders only
submitted to a vote at a duly by giving advance notice to the
convened annual meeting if the secretary of Ziff-Davis not less than
secretary of CNET receives written 60 days nor more than 90 days prior
notice that complies with federal to the date set for the meeting.
securities laws, by certified mail However, if the date of the meeting
from the stockholder, no later than is first publicly announced less than
120 days in advance of the date set 70 days prior to the date of the
for CNET's annual meeting as meeting, the stockholder will be
disclosed in the prior year's proxy required to give notice within 10
statement. days after the public announcement.
If a stockholder wants to nominate a
person for election to the board, the
stockholder must submit a notice that
sets forth the name, principal
business or occupation during the past
five years, and any affiliation with
or material interest in Ziff-Davis or
any transaction involving Ziff-Davis.
If a stockholder wants to propose
other business, the stockholder must
provide a description of such
business, the reasons for conducting
such business at the meeting and any
material interest the stockholder may
have in bringing the matter before the
meeting.
</TABLE>
117
<PAGE> 131
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
ADVANCE NOTICE PROVISIONS FOR
BOARD NOMINATION AND OTHER
STOCKHOLDER BUSINESS -- SPECIAL
MEETINGS......................... CNET's bylaws provide that at special The same provisions apply as for
meetings of stockholders the only annual meetings.
business that can be conducted will
be the items of business set forth in
the notice of special meeting.
NUMBER OF DIRECTORS.............. CNET's bylaws provide that the board The Ziff-Davis bylaws provide that
of directors shall be fixed by the board of directors shall be fixed
resolution of the board. Any decrease by resolution of the board but in any
in the number of directors will not case must consist of at least one
shorten the term of any incumbent director. Any decrease in the number
director. Any new directorship of directors will not shorten the
resulting from an increase in the term of any incumbent director. Any
number of directors is to be new directorship resulting from an
apportioned by the board among the increase in the number of directors
three classes of directors so as to is to be apportioned by the board
maintain such classes as nearly equal among the three classes of directors
in number as possible. so as to maintain such classes as
nearly equal in number as possible.
CLASSIFIED BOARD................. Delaware law provides that a Delaware law provides that a
corporation's board of directors may corporation's board of directors may
be divided into various classes with be divided into various classes with
staggered terms of office. CNET's staggered terms of office.
certificate of incorporation provides Ziff-Davis' certificate of
for a classified board of directors, incorporation provides for a
with the board divided into three classified board of directors, with
classes. Each class of directors the board divided into three classes.
shall have as close as possible to Each class of directors shall have as
the same number of directors. close as possible to the same number
of directors.
</TABLE>
118
<PAGE> 132
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
REMOVAL OF DIRECTORS............... CNET's certificate of Ziff-Davis' certificate of
incorporation provides for the incorporation provides for the
removal of a director only upon removal of a director only upon
showing cause and only by the showing cause, provided that a
affirmative vote of a majority of director who is also an officer
the stockholders then entitled to of Ziff-Davis will resign or be
vote in the election of directors. removed upon termination of
employment as an officer. The article
in the certificate of incorporation
governing the removal of directors
may only be amended, modified or
repealed by the affirmative vote of
at least 80% of the outstanding
shares of capital stock of Ziff-Davis
entitled to vote in the election of
directors.
BOARD OF DIRECTOR
VACANCIES.......................... Under Delaware law, vacancies Under Delaware law,
and newly created directorships vacancies and newly created
may be filled by a majority of directorships may be filled by
the directors then in office, even a majority of the directors then
if less than a quorum, unless the in office, even if less than a
certificate of incorporation or quorum, unless the certificate
bylaws provide otherwise. of incorporation or bylaws
CNET's bylaws provide that provide otherwise. Ziff-Davis'
whenever a vacancy occurs or bylaws provide that if a
the number of directors is vacancy occurs or the number
increased, a majority of the of directors is increased, the
remaining directors may choose directorship may be filled only
a successor to fill the new by the vote of the remaining
directorship who will hold directors of the class in which
office for the unexpired term of the vacancy occurs, or by a
the director in respect of which majority of the directors in the
such vacancy occurred and in other classes if no directors of
the case of a new directorship, the class remain, or by the
until the next annual meeting of stockholders at an annual
the stockholders at which stockholders' meeting. Any
members of the director's class director elected or appointed to
are elected. fill a vacancy will hold office
until the next election of the
class of directors.
</TABLE>
119
<PAGE> 133
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
-------------- --------------------
<S> <C> <C>
NOTICE OF SPECIAL MEETINGS OF THE
BOARD OF DIRECTORS ............... CNET's bylaws provide that special Ziff-Davis' bylaws provide that
meetings of the board of directors special meetings of the board of
may be called by the President or the directors may be called by the
Chairman of the board on 24 hours Chairman or the Vice Chairman of the
notice to each director delivered board or by any 2 directors, upon
personally or by mail, telegram or reasonable notice to each other
telecopier. Special meetings may also director by the person or persons
be called by the President or the calling the meeting.
Secretary of the board upon written
request of one director.
INDEMNIFICATION ................... The CNET certificate of incorporation The Ziff-Davis bylaws provide for
and bylaws provide that the agents, indemnification of its directors,
directors and officers shall be officers and employees, to the
indemnified to the fullest extent fullest extent authorized by law,
authorized by law against any action, against any action, proceeding or
proceeding or suit brought against suit brought against such a person by
such a person by reason of the fact reason of the fact that he or she (i)
that he or she (i) is or was an agent is or was an agent of Ziff-Davis;
of CNET; (ii) was a director or (ii) was a director or officer of a
officer of a corporation that was a corporation that was a predecessor
predecessor corporation of CNET or of corporation of Ziff-Davis or of
another enterprise at the request of another enterprise at the request of
such predecessor corporation; or such predecessor corporation; or
(iii) serves or served at any other (iii) serves or served at any other
enterprise at the request of CNET. enterprise at the request of
Ziff-Davis.
The CNET certificate of The bylaws allow Ziff-Davis to
incorporation authorizes CNET to maintain insurance, at its expense,
maintain insurance, at its expense, to protect itself and any director,
to protect itself and any director, officer, employee or agent of
officer, employee or agent of CNET Ziff-Davis against any expense,
against any expense, liability or liability or loss under the
loss. Delaware General Corporation Law.
</TABLE>
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<PAGE> 134
<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
-------------- --------------------
<S> <C> <C>
LIMITATIONS ON LIABILITY The CNET certificate of incorporation The Ziff-Davis certificate of
limits, to the fullest extent incorporation provides that a
permitted by Delaware law, the director shall not be liable to
personal liability of a director of Ziff-Davis or its stockholders for
CNET to CNET or its stockholders as a monetary damages for breach of a
director for monetary damages for fiduciary duty as a director, to the
breach of a fiduciary duty as a fullest extent permitted by Delaware
director. Under Delaware law, such law. Under Delaware law, such
provision may not eliminate or limit provision may not eliminate or limit
director monetary liability for: director monetary liability for:
o breaches of the director's o breaches of the director's
duty of loyalty to CNET or its duty of loyalty to Ziff-Davis or its
stockholders; stockholders;
o acts or omissions not in o acts or omissions not in
good faith or involving intentional good faith or involving intentional
misconduct or knowing violations of misconduct or knowing violations of
law; law;
o payment of unlawful o payment of unlawful
dividends or unlawful stock dividends or unlawful stock
repurchases or redemptions; or repurchases or redemptions; or
o any transaction in which the o any transaction in which the
director received improper personal director received improper personal
benefit. benefit.
Ziff-Davis' certificate of
incorporation provides that if
Delaware law is amended to further
limit the liability of a director, the
director will not be liable to the
fullest extent permitted by the
amended law.
</TABLE>
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<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
STOCKHOLDER APPROVAL OF
CERTAIN BUSINESS
COMBINATIONS....................... Under Delaware law, "business Same.
combinations" by corporations
with "interested stockholders",
or certain stockholders that own
more than 15% of the
corporation's outstanding voting
stock, are subject to a
moratorium of three years unless
specified conditions are met.
The prohibited transactions
include a merger with,
disposition of assets to, or the
issuance of stock to, the
interested stockholder, or
certain transactions that have the
effect of increasing the
proportionate share of the
outstanding securities held by
the interested stockholder.
Under Delaware law, an
interested stockholder may
avoid the prohibition against
effecting certain significant
transactions with the
corporation if the board of
directors, prior to the time such
stockholder becomes an
interested stockholder, approves
such transaction or the
transaction by which such
stockholder becomes an
interested stockholder or if at or
subsequent to such time the
board of directors and at least
66 2/3% of the stockholders other
than the interested stockholders
approve such transaction. These
provisions of Delaware law
apply to a Delaware
corporation unless the
corporation "opts out" of the
provisions in its certificate of
incorporation or bylaws. CNET
has not opted out of these
provisions in its certificate of
incorporation or bylaws and
consequently is subject to these
provisions.
</TABLE>
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<TABLE>
<CAPTION>
CNET (Delaware) Ziff-Davis (Delaware)
--------------- ---------------------
<S> <C> <C>
APPRAISAL RIGHTS................... Such rights are not available Same.
with respect to a merger or
consolidation by a corporation
the shares of which are either
listed on a national securities
exchange or held of record by
more than 2,000 stockholders if
such stockholders are required
to receive only shares of the
surviving corporation, shares of
any other corporation which are
either listed on a national
securities exchange or held of
record by more than 2,000
holders, cash in lieu of
fractional shares or a
combination of the foregoing.
STOCKHOLDER DERIVATIVE
SUITS.............................. Under Delaware law, a Same.
stockholder may only bring a
derivative action on behalf of
the corporation if the
stockholder was a stockholder
at the time of the transaction in
question or his or her stock
thereafter devolved upon him or
her by operation of law.
LISTING............................ CNET common stock is listed ZD common stock is listed on
on NASDAQ under the symbol The New York Stock Exchange
"CNET". under the symbol "ZD"
ZDNet common stock is listed on The
New York Stock Exchange under the
symbol "ZDZ"
</TABLE>
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<PAGE> 137
PROPOSAL TWO -- APPROVAL OF THE CNET 2000 STOCK OPTION PLAN
GENERAL INFORMATION
At the May 24, 2000 annual meeting, stockholders approved an amendment
to CNET's 1997 Stock Option Plan to increase the number of available shares by
5,000,000. Due to an administrative error in the amendment, the increase was
deemed to be void and the plan remains at its previous limit, which is
insufficient to meet current requirements. In order to ensure that sufficient
stock options are available to reward and motivate existing employees and to
attract new employees and in order to have a sufficient number of shares
available after the merger to accommodate key Ziff-Davis employees, the CNET
board has approved the issuance of 5,000,000 shares pursuant to the CNET 2000
Stock Option Plan (the "2000 Plan") in lieu of the increase under the 1997 Plan.
Without stockholder approval, any grants under the 2000 Plan would not be
eligible for treatment as Incentive Stock Options ("ISOs"). In addition, without
stockholder approval, grants under the 2000 Plan would lose the benefit of the
"qualified performance based compensation" rule which allows us to obtain full
tax deductibility with respect to options granted to certain executive officers.
Therefore, the board believes that the approval of the 2000 Plan is in our best
interests and in the best interests of CNET's stockholders and is seeking
stockholder approval of the 2000 Plan.
The 2000 Plan is not subject to the Employee Retirement Income Security
Act of 1974 ("ERISA").
The total number of shares which may be issued under the 2000 Plan is
5,000,000. Under the 2000 Plan, a maximum of 800,000 shares may be granted in
options during a calendar year to any participant. The shares may consist, in
whole or in part, of unissued shares or treasury shares. Shares that are subject
to awards which terminate or lapse may be granted again under the 2000 Plan.
The principal features of the 2000 Plan are summarized below, but this
summary is only an overview and you should refer to the 2000 Plan for complete
information. We have attached the 2000 Plan as Annex B to this proxy
statement/prospectus.
ADMINISTRATION
The 2000 Plan will be administered and interpreted by a Committee of
CNET's board of directors. Currently this is CNET's Compensation Committee. The
Compensation Committee may delegate its duties and powers to any subcommittee
consisting solely of at least two individuals who are each "non-employee
directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and "outside directors" within the meaning of Section 162(m)
of the Internal Revenue Code.
The Compensation Committee has the authority to interpret the 2000
Plan. The Compensation Committee may also adopt, amend or rescind any rules and
regulations it considers to be helpful or necessary to carry out the purpose of
the 2000 Plan. Any interpretation of the 2000 Plan and any award by the
Compensation Committee is final. The Compensation Committee will require payment
if, under federal, state or local tax laws, the participant owes any taxes due
to the exercise or settlement of an award.
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<PAGE> 138
ELIGIBILITY
Employees, directors or consultants selected by the Compensation
Committee ("participants") are eligible to participate in the 2000 Plan. The
Compensation Committee will determine the number of shares of CNET common stock
that are covered by awards granted to a participant. No award may be granted
under the 2000 Plan after the tenth anniversary of the effective date of the
2000 Plan.
TERMS OF OPTIONS
The Compensation Committee has the responsibility to determine the
terms and conditions of each option granted under the 2000 Plan. The options may
be non-qualified, incentive or other stock options and their terms and
conditions are set forth in the related award agreements. Stock options granted
under the 2000 Plan are subject to the terms and conditions in the 2000 Plan,
and to any other terms and conditions that the Compensation Committee may
determine, including the following:
o the exercise price of each option will be determined by the
Compensation Committee. The minimum exercise price will be the
fair market value of the shares subject to the option on the
date that the option is granted
o options granted under the 2000 Plan will be exercisable as
determined by the Compensation Committee. However, an option
may not be exercised more than ten years after it was granted,
except in the case of CNET Europe, S.A., in which case options
may be exercised up to 15 years from the date of grant
o an option may be exercised for all or, from time-to-time, any
part of the shares to which it relates. The exercise date of
an option is the later of the date the notice of exercise of
an option is received by CNET and, if applicable, the date
payment is received by CNET pursuant to clause (i), (ii),
(iii) or (iv) in the following sentence. The purchase price
for the CNET common stock purchased upon exercise of an option
is to be paid in full to CNET at the time of exercise. Payment
may be made (i) in cash; (ii) in CNET common stock; (iii)
partly in cash and partly in CNET common stock or (iv) by
instructing a stockbroker to deliver to CNET an amount equal
to the option price.
The Compensation Committee may grant ISOs which comply with Section 422
of the Internal Revenue Code. Participants who own more than 10% of the total
voting power of all classes of stock of CNET or any affiliate may not be granted
ISOs unless the option price for such ISO is at least 110% of the ISO's fair
market value and the ISO terminates no later than the day preceding the fifth
anniversary of the day on which such ISO was granted. If a participant disposes
of shares acquired upon the exercise of an ISO within two years after the grant
of such ISO or within one year after such shares were transferred to the
participant, such participant must notify CNET of the disposition and of the
amount realized upon disposition.
OTHER STOCK-BASED AWARDS
GENERALLY. The Compensation Committee has the sole discretion to grant
any of the following awards:
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<PAGE> 139
o CNET common stock
o restricted shares and
o awards valued in reference to the fair market value of CNET
common stock
The Compensation Committee may determine the terms and conditions of
all stock-based awards including:
o the form of the award
o the right and manner in which a participant can receive an
award
o the timing of the award
o to whom an award will be granted and
o the amount of an award
PERFORMANCE-BASED AWARDS. These stock-based awards may be granted in a
manner which is deductible by CNET under Section 162(m) of the Internal Revenue
Code. A "performance-based award" is based on the participant's reaching certain
written performance goals set by the Compensation Committee. Performance goals
are based on certain financial criteria, such as net income, stock price and
return on stockholders' equity, as described in the 2000 Plan. These criteria
may relate to CNET, its affiliates, divisions or units, or any combination
thereof, as determined by the Compensation Committee. The maximum amount of a
performance- based award will be 800,000 shares annually for any participant.
The Compensation Committee will determine whether particular performance goals
have been met and will certify the amount of the performance-based award. No
performance-based award will be paid without the certification of the
Compensation Committee. At the discretion of the Compensation Committee, the
amount paid may be less than the amount determined by the performance goal
formula. The amount of the performance-based award will be paid at a time
determined by the Compensation Committee; however, to the extent permitted by
the Compensation Committee and consistent with Section 162(m) of the Internal
Revenue Code, a participant may choose to defer payment of a performance- based
award.
ADJUSTMENTS
If, after the effective date of the 2000 Plan, there is any change in
the outstanding shares of CNET's common stock due to any share dividend or
split, reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares, other corporate exchange, any distribution to
stockholders of shares other than regular cash dividends or any similar event,
the Compensation Committee, in its sole discretion and without liability to any
person, may adjust:
o the number or kind of shares or other securities issued or
reserved for issuance pursuant to the 2000 Plan or pursuant to
outstanding awards
o the option price or
o any other affected terms of such awards
CHANGE IN CONTROL. If there is a "change in control" (as defined below)
of CNET, the Compensation Committee has sole discretion to take such actions, if
any, as it deems necessary or desirable with respect to any award, such as (i)
the acceleration of an award, (ii) the payment of cash in exchange for the
cancellation of an award and/or (iii) requiring the issuance of substitute
awards to substantially preserve the value of any affected award, as of the date
of the change of control.
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<PAGE> 140
A "change in control" of CNET generally is deemed to occur if:
o any person becomes the owner of 50% of the voting
power of CNET's voting securities
o during any twenty-four month period the majority of the
membership of the board of directors changes without approval
of two-thirds of the directors who either were directors at
the beginning of the period or whose election was previously
so approved;
o the consummation of a merger or consolidation with another
company where CNET's voting securities outstanding prior to
the transaction do not represent more than 50% of voting power
of CNET or the surviving entity; or
o CNET undergoes a complete liquidation or sale or disposition
of all or substantially all of CNET's assets.
NO RIGHT TO CONTINUED EMPLOYMENT
Receiving grants of awards under the 2000 Plan does not give a
participant any right to continued employment with CNET or with any of its
subsidiaries. Also, receiving grants of awards under the 2000 Plan does not
limit the right of CNET or any of its affiliates to terminate the employment of
a participant with CNET or with any of its affiliates.
NONTRANSFERABILITY OF AWARDS
Unless otherwise determined by the Compensation Committee, awards may
be transferred only by the laws of descent and distribution. During a
participant's lifetime, the participant is the only person who may exercise an
award. In certain circumstances, this section may be waived by the Compensation
Committee.
AMENDMENTS
The CNET board may amend, alter or discontinue the 2000 Plan from
time-to-time as it sees fit, except that:
o shareholder approval is required if such action increases the
maximum number of shares which may be issued under the 2000
Plan
o without the consent of a participant, no amendment will be
allowed if it diminishes rights of a participant under an
award and
o the Compensation Committee may amend the 2000 Plan in any way
it sees fit in order for the awards to comply with the
Internal Revenue Code or other applicable law
127
<PAGE> 141
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
rules with respect to the 2000 Plan and the awards granted thereunder. This
summary is not intended to be a complete description of all possible tax
consequences of the 2000 Plan and the awards, and participants will be urged to
consult their own tax advisor concerning the federal, state, local and other tax
implications of the 2000 Plan and of the awards granted thereunder.
INCENTIVE STOCK OPTIONS ("ISOS"). Under present law, participants will
not realize taxable income upon either the grant or the exercise of an ISO, and
CNET will not receive an income tax deduction at either time, if participants do
not sell the Shares acquired by exercising an ISO within either:
o two years after the date of grant of an ISO or
o one year after the date of exercise of an ISO
a subsequent sale will be taxed as mid-term or long-term capital gain or loss.
If, within either of the above periods, a participant disposes of the shares
acquired by exercising an ISO, a participant will, generally, realize as
ordinary income an amount equal to the lesser of:
o the gain realized on such disposition or
o the excess of the fair market value of the shares on the date
of exercise over the exercise price
In this instance, CNET generally would be entitled to an income tax deduction
equal to the amount recognized as ordinary income, subject to compliance with
Section 162(m) of the Internal Revenue Code. Any gain in excess of such amount
that a participant realizes as ordinary income will be taxed as a short-term or
long-term capital gain (depending on the holding period).
NONQUALIFIED STOCK OPTIONS ("NQSOS"). Under present law, a participant
will not realize taxable income upon the grant of a NQSO and CNET will not
receive an income tax deduction at such time. Upon exercise of a NQSO, a
participant will generally realize ordinary income in an amount equal to the
excess of the fair market value of the shares on the date of exercise over the
exercise price. Upon sale of the shares, a participant will recognize short-term
or long-term capital gain depending upon how long the participant held the
shares. The Company is generally allowed an income tax deduction equal to the
amount recognized as ordinary income, subject, where applicable, to compliance
with Section 162(m) of the Internal Revenue Code.
OTHER AWARDS. Amounts received upon the grant of other awards are
ordinarily taxed at ordinary rates when received. However, if the other awards
consist of property subject to a substantial risk of forfeiture the amounts
generally will not be taxed until the substantial risk of forfeiture lapses or
until an election is made under Section 83(b) of the Internal Revenue Code.
Under Section 162(m) of the Internal Revenue Code, CNET is generally allowed an
income tax deduction equal to the amount recognized as ordinary income.
COMPLIANCE WITH SECTION 162(m). The 2000 Plan should allow certain
ISOs, NQSOs and performance-based awards granted under the 2000 Plan to be
treated as qualified performance- based compensation under Section 162(m) of the
Internal Revenue Code. However, the Compensation Committee may, from
time-to-time, award compensation that is not deductible under Section 162(m) of
the Internal Revenue Code.
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<PAGE> 142
THE SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES UPON THE
PARTICIPANTS IN THE CNET 2000 STOCK OPTION PLAN CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS DOES NOT PURPORT TO BE COMPLETE.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering whether to vote for approval of the 2000 Plan,
stockholders should be aware that each of our directors and executive officers
will be eligible for option grants under the 2000 Plan. If the proposal is not
approved, options granted under the 2000 Plan will not be eligible for ISO
treatment, which will have negative tax consequences to the recipients of such
options.
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<PAGE> 143
PRINCIPAL STOCKHOLDERS OF CNET NETWORKS, INC.
The following table shows the number of shares of common stock
beneficially owned (as of August 8, 2000 (the latest practical date on which
information was available prior to the date of mailing of this proxy
statement/prospectus) by:
- each person who we know beneficially owns more than 5% of the
common stock;
- each director;
- each executive officer named in the Summary Compensation Table
on page ; and --
- the directors and executive officers as a group.
Unless otherwise indicated below, the address for each listed director
and executive officer is CNET Networks, Inc., 150 Chestnut Street, San
Francisco, California 94111.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE-OF PERCENT OF
BENEFICIAL OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) SHARES
------------------------------------ ------------ -----------
<S> <C> <C>
Halsey M. Minor ................................................. 9,575,46(2) 11.3%
Shelby W. Bonnie ................................................ 10,123,284(3) 11.9
Eric Robison .................................................... 15,472(4) *
John C. "Bud" Colligan .......................................... 115,416(5) *
Mitchell Kertzman ............................................... 24,216(6) *
Richard J. Marino ............................................... 112,499(7) *
Douglas N. Woodrum .............................................. 395,200(8) *
Gilder Gagnon Howe & Co. LLC .................................... 8,216,451(9) 9.7
All executive officers and directors as a group (7 persons) ..... 20,361,418(10) 24.0
</TABLE>
----------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Percentages for each person are
based on the 84,676,456 shares outstanding at , 2000, plus the total
number of outstanding options or warrants held by such person that are
exercisable within 60 days of such date. Shares issuable upon exercise
of outstanding options and warrants, however, are not deemed
outstanding for purposes of computing the percentage ownership of any
other person. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, each stockholder named
in the table has sole voting and investment power with respect to the
shares set forth opposite such stockholder's name.
(2) Also includes 996,664 shares subject to options that are exercisable
within 60 days. Excludes 337,952 shares held in trust for the benefit
of Mr. Minor's descendants as to which he disclaims beneficial
ownership.
(3) Includes 29,740 shares held by a trust of which Mr. Bonnie is a
beneficiary, and 25,000 shares subject to options that are exercisable
within 60 days.
(4) Consists of shares subject to options that are exercisable within 60
days.
(5) Consists of shares subject to options that are exercisable within 60
days.
(6) Consists of shares subject to options that are exercisable within 60
days.
(7) Consists of shares subject to options that are exercisable within 60
days.
(8) Includes 328,440 shares subject to options that are exercisable within
60 days.
(9) The address for Gilder Gagnon Howe & Co. LLC is 1775 Broadway, 26th
Floor, New York, New York 10019.
(10) Includes a total of 1,505,208 shares subject to options that are
exercisable within 60 days.
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<PAGE> 144
PRINCIPAL STOCKHOLDERS OF ZIFF-DAVIS INC.
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of ZD common stock as of August 8, 2000 (the latest
practical date on which the information was available prior to the date of this
proxy statement/prospectus) by each person or entity which beneficially owns
more than five percent of the outstanding shares of the ZD common stock of Ziff-
Davis. As of August 8, 2000 (the latest practical date on which the information
was available prior to the date of this proxy statement/prospectus) no person or
entity beneficially owned more than five percent of the outstanding shares of
ZDNet common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF ZD COMMON PERCENT OF
BENEFICIAL OWNER STOCK CLASS (1)
---------------- ---------------- ----------
<S> <C> <C>
Softbank America Inc.(2) ................... 71,489,737 67.0%
Softbank Holdings Inc.(3) .................. 71,493,382 67.0%
Softbank Corp.(4) .......................... 71,493,382 67.0%
Masayoshi Son(5) ........................... 71,493,382 67.0%
</TABLE>
----------
(1) The percentage of ownership is based on 106,690,876 shares of ZD stock
outstanding as of August 8, 2000.
(2) Softbank America Inc.'s address is 10 Langley Road, Suite 403, Newton
Center, MA 02459.
(3) Includes shares owned by Softbank America Inc. and 645 shares owned by
Softbank Kingston Inc., all of which may be deemed to be beneficially
owned by Softbank Holdings Inc. Softbank Holdings Inc.'s address is 10
Langley Road, Suite 403, Newton Center, MA 02459.
(4) Includes shares owned by Softbank America Inc. and Softbank Kingston
Inc., all of which may be deemed to be beneficially owned by Softbank
Corp. Softbank Corp.'s address is 24-1 Nihonbashi-Hakozakicho, Chuo-ku,
Tokyo 103, Japan.
(5) Includes shares owned by Softbank America Inc. and Softbank Kingston
Inc., all of which may be deemed to be beneficially owned by Mr. Son
(who owns 37.86% of Softbank Corp. and is its President). Mr. Son's
address is c/o Softbank Corp., 24-1 Nihonbashi-Hakozakicho, Chuo-Ku,
Tokyo 103, Japan.
As a result of its beneficial ownership of common stock, Softbank is
able to significantly influence matters affecting Ziff-Davis. Softbank is able
to elect all members of the board of directors and to control those actions that
require the approval of holders of a majority of the voting stock of Ziff-Davis,
including amendments to Ziff-Davis' charter and approval of any business
combinations, including the merger.
MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership (1) of ZD common stock and ZDNet common stock as of August
8, 2000 and (2) of the common stock of SOFTBANK Corp. as of August 8, 2000, in
each case by (x) each person who was an executive officer of Ziff-Davis as of
December 31, 1999, (y) each director of Ziff-Davis and (z) all such executive
officers and directors of Ziff-Davis as a group.
131
<PAGE> 145
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES OF
NUMBER OF SHARES OF COMMON STOCK
SHARES-OF-ZD PERCENT OF ZDNET COMMON PERCENT OF OF SOFTBANK PERCENT OF CLASS
BENEFICIAL OWNER COMMON STOCK CLASS(1) STOCK CLASS(1) CORP.(2) (1)
------------------------------------- ------------ ---------- ------------ ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Eric Hippeau(3)(10).................. 288,101 *% 267,500 1.57 183,222 * %
Jason E. Chudnofsky(3)(10)........... 150,125 * 44,500 * 43,043 *
Timothy C. O'Brien(3)(10)............ [ ] * [ ] * [ ] *
Michael S. Perlis(4)(10)............. 0 * 15,000 * 0 *
Terri S. Holbrooke(4)(10)............ [ ] * [ ] * [ ] *
Daniel L. Rosensweig(3).............. 100,600 * 765,625 4.51 *
Masayoshi Son(5)..................... 71,493,382 67.01 0 * 125,126,244 37.80
Ronald D. Fisher(6).................. 105,000 * 17,575 * 631,038 *
Jonathan D. Lazarus(7)............... 43,921 * 19,608 * 0 *
Jerry Yang(8)........................ 23,221 * 12,108 * 0 *
James J. Spanfeller, Jr.(9)(10)...... [ ] * [ ] * [ ] *
Jack Dolce(9)(10).................... [ ] * [ ] * 0 *
Officers and directors as a group.... [ ] [ ] [ ] 10.78 [ ] [ ]
</TABLE>
-----------
* Less than one percent.
(1) The percentage of ownership is based on (a) 106,690,876 shares of ZD common
stock outstanding as of August 8, 2000; (b) 16,977,063 shares of ZDNet
common stock outstanding as of August 8, 2000 and (c) 331,035,292 shares of
common stock of Softbank Corp. outstanding as of July 31, 2000. Shares of
common stock subject to options which are currently exercisable or
exercisable within 60 days of the date referenced above are deemed
outstanding for computing the percentages of the person holding such
options, but are not deemed outstanding for computing the percentages of
any other person. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and includes voting and
investment power with respect to shares. Unless otherwise indicated, the
persons named in the table have sole voting and sole investment control
with respect to all shares beneficially owned.
(2) Includes options granted in 1996 and 1997 to purchase common stock of
Softbank Corp. under the Softbank Group Executive Stock Option Plans.
Reflects a 3 for 1 stock split in 2000.
(3) Both a director and an executive officer.
(4) An executive officer.
(5) Includes shares owned by Softbank America Inc. and Softbank Kingston Inc.,
all of which may be deemed to be beneficially owned by Mr. Son.
(6) Includes shares owned by 1995 Fisher Family Trust.
(7) Includes shares owned by Lazarus Family Investments LLC, all of which may
be deemed to be beneficially owned by Jonathan D. Lazarus, a member of such
LLC.
(8) Including shares owned by Red Husky Foundation.
(9) An officer of Ziff-Davis.
(10) No longer employed by Ziff-Davis Inc.
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<PAGE> 146
CNET NETWORKS, INC.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation paid by CNET to its chief executive officer and to each other
executive officer of CNET who received at least $100,000 in salary and bonus
during 1999.
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION (1) COMPENSATION AWARDS
-------------------- -------------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS (#) COMPENSATION
--------------------------------------- -------- --------- ------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Halsey M. Minor........................ 1999 $ 225,000 0 400,000 0
Chairman of the Board 1998 194,000 0 1,200,000 0
1997 175,000 0 0 0
Shelby W. Bonnie....................... 1999 160,000 0 100,000 0
Chief Executive Officer 1998 160,000 0 0 0
1997 160,000 0 0 0
Richard J. Marino...................... 1999 193,868 246,538 450,000 0
President and Chief Operating Officer(2) 1998 -- -- -- --
1997 -- -- -- --
Douglas N. Woodrum..................... 1999 250,000 75,000 60,000 0
Executive Vice President and 1998 250,000 0 0 --
Chief Financial Officer(3) 1997 -- -- 740,000 --
</TABLE>
----------
(1) The aggregate value of perquisites and other personal benefits does not
exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for the Named Executive officer.
(2) Mr. Marino joined CNET in May 1999.
(3) Mr. Woodrum joined CNET in December 1997.
During 1999, options to purchase an aggregate of 5,061,920 shares of
common stock at fair market value on the date of grant were granted under our
stock options plans. The following table provides information regarding stock
options granted during 1999 to persons listed in the Summary Compensation Table.
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<PAGE> 147
OPTIONS GRANTED IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION FOR OPTION
SECURITIES OPTIONS GRANTED EXERCISE TERM (1)
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION -----------------------------
NAME GRANTED (#) DURING 1999 ($/SHARE) DATE 5% 5%
--------------------------- ------------------ --------------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Halsey M. Minor............ 400,000 8.0 % $58.6875 4/28/09 $ 14,763,301 $ 37,413,104
Shelby W. Bonnie........... 100,000 2.0 % 58.6875 4/28/09 3,690,825 9,353,276
Richard J. Marino.......... 448,006 9.0 % 48.75 5/25/09 13,735,243 34,807,802
1,994 * 50.125 6/01/09 62,858 159,293
Douglas N. Woodrum......... 60,000 1.2 % 58.6875 4/28/09 2,214,495 5,611,966
</TABLE>
----------
* Less than 1%.
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are based on the closing price of $56.75 on December 31, 1999 and are
mandated by the rules of the Securities and Exchange Commission. The
actual value, if any, that an executive officer may realize will depend on
the excess of the stock price over the exercise price on the date the
option is exercised. There is no assurance the value realized by an
executive officer will be at or near the assumed 5% or 10% levels.
The following table sets forth information regarding the exercise of
stock options by persons named in the Summary Compensation Table and year-end
option values.
OPTION EXERCISES
AND YEAR END VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT YEAR-END OPTIONS AT YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Halsey M. Minor.................. 0 $ 0 733,332 866,668 $35,704,102 $22,720,898
Shelby W. Bonnie................. -- -- 0 100,000 0 0
Richard J. Marion................ -- -- 0 450,000 0 3,597,258
Douglas N. Woodrum............... 38,280 $1,480,917 331,720 430,000 17,104,312 19,078,125
</TABLE>
----------
(1) Value based on $56.75 closing price per share of common stock on December
31, 1999, as required by the rules of the Securities and Exchange
Commission.
DIRECTOR COMPENSATION
We do not pay cash compensation to our directors, but we do reimburse
directors for expenses incurred in attending board and committee meetings. Under
our 1994 plan, each non- employee director received an automatic grant of
nonqualified stock options on June 5, 1996 to purchase 40,000 shares of common
stock at an exercise price of $7.00 per share. Non-employee directors elected to
the board in the future will automatically receive, upon such election,
nonqualified stock options to purchase 40,000 shares of common stock at an
exercise price equal to the fair market value of the common stock on the date of
grant. In addition, each non-employee director serving on June 30 of each year
(beginning on June 30, 1997) automatically receives nonqualified stock options
to purchase 10,000 shares of common stock. All of the options granted pursuant
to these provisions are immediately exercisable on the date of grant, but the
common stock issued upon exercise is subject to repurchase by us at original
cost. This repurchase right lapses, and the optionee's rights with respect to
each grant vest, in a series of 48 equal monthly installments following the date
of grant, for so long as the optionee remains a director of CNET. In addition,
vesting will automatically accelerate upon any sale of CNET through a merger,
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<PAGE> 148
recapitalization, reorganization, asset sale, tender offer or similar event. The
1997 plan contains identical terms and provisions with respect to automatic
grants of nonqualified stock options to non-employee directors; provided that,
to the extent a non-employee director receives option grants under the 1994
plan, such director will not receive a duplicate option grant under the 1997
plan.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Mr. Woodrum in December
1997. The term of the agreement expires on December 1, 2000 unless Mr. Woodrum's
employment is terminated earlier for cause. The agreement provides for an annual
base salary of $250,000 with a guaranteed bonus of $75,000 the first year of
employment and bonuses in the discretion of the board thereafter.
We entered into an employment agreement with Mr. Marino in April 1999.
The term of the agreement expires on May 24, 2003 unless Mr. Marino's employment
is terminated earlier for cause. The agreement provides for an annual base
salary of $350,000 with a guaranteed bonus of $150,000 the first year of
employment and bonuses in the discretion of the board thereafter.
INCENTIVE PLAN
The board of directors adopted our Incentive Plan on April 15, 1998.
Pursuant to the terms of the plan, certain of our key employees are eligible to
earn cash bonuses if we achieve certain financial targets. In 1999, we paid an
aggregate of approximately $1.8 million to employees with respect to our
financial performance in 1998 under the Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions concerning our executive officers for 1999 were
made by the compensation committee, subject to the terms of any pre-existing
employment agreements between us and such executive officers. Mr. Kertzman and
Mr. Colligan served as members of the compensation committee during 1999. None
of the compensation committee members is or has been a company officer or
employee. None of our executive officers currently serves on the compensation
committee or any similar committee of another public company.
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
The compensation committee is responsible for recommending to the full
board salary amounts for our executive officers and making the final
determination regarding bonus arrangements for such persons. The compensation
committee is also responsible for making the final determination regarding
awards of stock options to such persons.
COMPENSATION PHILOSOPHY. Compensation to executive officers is designed
to attract and retain highly capable executives, to motivate the performance of
executives in support of the achievement of our strategic financial and
operating performance objectives and to reward performance that meets this
standard. We are engaged in a highly competitive business and must attract and
retain qualified executives in order to be successful. In 1999, executive
compensation was comprised of the following elements:
135
<PAGE> 149
o Base Salary and Bonuses. To the extent not determined pursuant
to pre-existing employment agreements, the base salary for our
executive officers was determined after review of publicly
available information concerning the base salaries of
executives with similar responsibilities in companies engaged
in businesses similar to us, the responsibilities of each
executive officer and the subjective evaluation of each
officer's contribution and potential contribution to us. The
compensation committee also has the authority to grant
year-end cash bonuses to motivate the executive officers to
achieve annual financial and other goals.
o Stock Option Plans. Our stock option plans form the basis of
our long-term incentive plan for executive officers and other
key employees. The compensation committee believes that a
significant portion of executive compensation should be
dependent on value created for the stockholders. In selecting
recipients for option grants and in determining the size of
such grants, the compensation committee considers various
factors such as the performance of CNET and the contributions
of the individual recipient to CNET.
o Benefits. Executive officers also receive benefits typically
offered to executives by companies engaged in businesses
similar to ours, as well as various benefits generally
available to our employees (such as health insurance). The
compensation committee intends to design our compensation
programs so that compensation paid to executive officers will
qualify for deductibility under applicable provisions of the
Internal Revenue Code, including Section 162(m). However, we
may pay compensation which is not deductible in limited
circumstances when prudent management so requires.
o 1999 Compensation of Chief Executive Officer. Mr. Minor served
as our Chief Executive Officer during 1999. Mr. Minor's base
salary for 1999 was $225,000. In addition, in 1999 Mr. Minor
received option grants totaling 400,000 shares. The board
ratified decisions made by the committee with respect to Mr.
Minor's compensation. Mr. Minor's overall compensation
reflects a higher degree of responsibility with respect to the
strategic decision making authority and higher level of
responsibility with respect to our strategic direction and our
financial and operational results. The compensation committee
believes that Mr. Minor's salary was substantially below
competitive salaries paid to executives with similar
qualifications and responsibilities.
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<PAGE> 150
SUBMISSION OF STOCKHOLDER PROPOSALS
Under CNET's certificate of incorporation and bylaws and under
applicable law, CNET stockholders may present proper proposals for inclusion in
CNET's proxy statement and for consideration at the next annual meeting of its
stockholders by submitting such proposals to CNET in a timely manner. In order
to be so included for the 2001 annual meeting, stockholder proposals must be
received by CNET by __________, 2001 and must otherwise comply with the
requirements of CNET's certificate of incorporation and of applicable law.
Due to the contemplated completion of the merger, Ziff-Davis does not
currently expect to hold a 2000 annual meeting of stockholders. If the merger is
not completed and an annual meeting is held, stockholder proposals for inclusion
in proxy materials for the meeting must have been submitted to the Secretary of
Ziff-Davis in writing. Under Ziff-Davis' certificate of incorporation and bylaws
and under applicable law, Ziff-Davis stockholders may present proper proposals
for inclusion in Ziff-Davis's proxy statement and for consideration at the next
annual meeting of its stockholders by submitting such proposals to Ziff-Davis in
a timely manner and in compliance with the requirements of Ziff-Davis'
certificate of incorporation and of applicable law.
EXPERTS
The consolidated financial statements of CNET incorporated in this
proxy statement/prospectus by reference to the Annual Report on Form 10-K, filed
on March 30, 2000, for the year ended December 31, 1999, have been so
incorporated in reliance on the report of KPMG LLP, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Ziff-Davis incorporated in
this proxy statement/ prospectus by reference to the Annual Report on Form 10-K,
filed on April 13, 2000, for the year ended December 31, 1999, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent auditors, given on the authority of such firm as experts in auditing
and accounting.
LEGAL MATTERS
The validity of the shares of CNET common stock to be issued in the
merger and that are covered by this proxy statement/prospectus will be passed
upon for CNET by Simpson Thacher & Bartlett. In addition, Simpson Thacher &
Bartlett will pass upon certain United States federal tax consequences of the
merger to CNET stockholders.
Sullivan & Cromwell will pass upon certain United States federal tax
consequences of the merger to Ziff-Davis stockholders.
137
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ANNEX A - MERGER AGREEMENT
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 19, 2000
AMONG
ZIFF-DAVIS INC.,
CNET NETWORKS, INC.
AND
TD MERGER SUB, INC.
================================================================================
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS......................................................................2
1.1 The Merger.....................................................................................2
1.2 Closing........................................................................................2
1.3 Effective Time.................................................................................3
1.4 Effects of the Merger..........................................................................3
1.5 Charter and Bylaws.............................................................................3
1.6 Officers and Directors.........................................................................3
1.7 Effect on Common Stock.........................................................................3
1.8 Treatment of Stock Options and Other Equity-Based Awards.......................................4
1.9 Certain Adjustments............................................................................5
ARTICLE II
EXCHANGE OF CERTIFICATES.................................................................................6
2.1 Exchange Fund..................................................................................6
2.2 Exchange Procedures............................................................................6
2.3 Distributions with Respect to Unexchanged Shares...............................................7
2.4 No Further Ownership Rights in Z-D Common Stock................................................7
2.5 No Fractional Shares of CNET Common Stock......................................................7
2.6 Termination of Exchange Fund...................................................................8
2.7 No Liability...................................................................................8
2.8 Investment of the Exchange Fund................................................................8
2.9 Lost Certificates..............................................................................8
2.10 Withholding Rights.............................................................................8
2.11 Further Assurances.............................................................................9
2.12 Stock Transfer Books...........................................................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES...........................................................................9
3.1 Representations and Warranties of CNET and Merger Sub..........................................9
3.2 Representations and Warranties of Z-D.........................................................17
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................28
4.1 Covenants of CNET.............................................................................28
4.2 Covenants of Z-D..............................................................................30
4.3 Governmental Filings..........................................................................34
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V
ADDITIONAL AGREEMENTS...................................................................................35
5.1 Preparation of Proxy Statement; Stockholders Meetings.........................................35
5.2 Access to Information.........................................................................37
5.3 Reasonable Best Efforts.......................................................................37
5.4 Acquisition Proposals.........................................................................39
5.5 Fees and Expenses.............................................................................40
5.6 Directors' and Officers' Indemnification and Insurance........................................41
5.7 Public Announcements..........................................................................42
5.8 Accountant's Letters..........................................................................42
5.9 Board of Directors............................................................................42
5.10 Listing of Shares of CNET Common Stock........................................................42
5.11 Affiliates....................................................................................42
5.12 The Spin-Off and Cash Dividend................................................................43
ARTICLE VI
CONDITIONS PRECEDENT....................................................................................43
6.1 Conditions to Each Party's Obligation to Effect the Merger....................................43
6.2 Additional Conditions to Obligations of CNET..................................................44
6.3 Additional Conditions to Obligations of Z-D...................................................45
ARTICLE VII
TERMINATION AND AMENDMENT...............................................................................46
7.1 Termination...................................................................................46
7.2 Effect of Termination.........................................................................48
7.3 Amendment.....................................................................................49
7.4 Extension; Waiver.............................................................................49
ARTICLE VIII
GENERAL PROVISIONS......................................................................................50
8.1 Non-Survival of Representations, Warranties and Agreements....................................50
8.2 Notices.......................................................................................50
8.3 Interpretation................................................................................51
8.4 Counterparts..................................................................................51
8.5 Entire Agreement; No Third Party Beneficiaries................................................51
8.6 Governing Law.................................................................................52
8.7 Severability..................................................................................52
8.8 Assignment....................................................................................52
8.9 Submission to Jurisdiction; Waivers...........................................................52
8.10 Enforcement...................................................................................53
8.11 Further Assurances ...........................................................................53
8.12 Definitions ..................................................................................53
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Title
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<S> <C>
Exhibit A Form of Z-D Stockholder Voting Agreement
Exhibit B Form of CNET Stockholder Voting Agreement
Exhibit C Form of Stockholder Agreement
Exhibit D Form of Certificate of Incorporation of Surviving Corporation
Exhibit 6.2(c)(1) Form of Representations Letter of CNET
Exhibit 6.2(c)(2) Form of Representations Letter of Z-D
</TABLE>
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AGREEMENT AND PLAN OF MERGER, dated as of July 19, 2000 (this
"Agreement"), among Ziff-Davis Inc., a Delaware corporation ("Z-D"), CNET
Networks, Inc., a Delaware corporation ("CNET"), and TD MERGER SUB, INC., a
Delaware corporation ("Merger Sub").
RECITALS
Merger Sub is a wholly owned direct subsidiary of CNET that
was organized by CNET solely as a vehicle to effect the Merger (as defined
below) and has engaged in no other business activities and has conducted its
business activities and operations only as contemplated hereby;
The Boards of Directors of Z-D, CNET and Merger Sub deem it
advisable and in the best interests of each corporation and its respective
stockholders that Merger Sub merge into Z-D, upon the terms and subject to the
conditions of this Agreement;
Approval of the Merger and this Agreement requires a vote for
adoption of this Agreement by the holders of shares of Ziff-Davis Inc. -- Z-D
Common Stock, par value $0.01 per share, of Z-D (the "Z-D Common Stock") and
Ziff-Davis Inc. -- Z-D Net Common Stock, par value $0.01 per share, of Z-D (the
"Z-D Net Common Stock"), entitled to cast a majority of the votes entitled to be
cast by the holders of all outstanding Z-D Common Stock and Z-D Net Common
Stock, voting together as a single class, at a meeting at which a quorum is
present, in the manner specified in the amended and restated certificate of
incorporation of Z-D and otherwise in accordance with the law of the State of
Delaware (the "Z-D Stockholder Approval"), and (y) the approval of the issuance
of Common Stock, par value $0.0001 per share, of CNET (the "CNET Common Stock")
pursuant to this Agreement, by the holders of a majority of the shares of CNET
Common Stock entitled to vote thereon represented, in person or by proxy, at a
meeting at which a quorum is present, in accordance with the rules of the NASDAQ
Stock Market and the law of the State of Delaware (the "CNET Stockholder
Approval");
In furtherance thereof, the Board of Directors of each of Z-D,
CNET and Merger Sub have approved the Merger, upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which each share of Z-D
Common Stock and Z-D Net Common Stock will be converted into the right to
receive the Merger Consideration (as defined below);
Key3Media Group, Inc., a subsidiary of Z-D ("Spin Co."), has
filed, as part of a registration statement on Form S-1 (as amended from time to
time, the "Spin-Off S-1"), a preliminary prospectus (such preliminary
prospectus, as amended through the date hereof, the "Preliminary Spin-Off
Prospectus") describing Z-D's current plans to recapitalize and spin off its
trade show and conference business (the "Spin-Off") and to pay a cash dividend
to the holders of Z-D Common Stock (the "Cash Dividend");
As a condition and inducement to CNET's willingness to enter
into this Agreement, SOFTBANK America Inc., a Delaware corporation ("Z-D
Majority Stockholder"), is entering into an agreement dated as of the date
hereof substantially in the form of Exhibit A (the "Z-D Stockholder Voting
Agreement") pursuant to which Z-D Majority Stockholder has agreed, among other
things, to vote all shares of Z-D Common Stock owned or acquired by it in favor
of the adoption of this Agreement and the transactions contemplated hereby;
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As a condition and inducement of Z-D's willingness to enter
into this Agreement, certain stockholders of CNET are entering into an agreement
dated as of the date hereof substantially in the form of Exhibit B (the "CNET
Stockholder Voting Agreement" and collectively with the Z-D Stockholder Voting
Agreement, the "Voting Agreements") pursuant to which such stockholders have
agreed, among other things, to vote all shares of CNET Common Stock owned or
acquired by them in favor of approval of the issuance of CNET Common Stock
pursuant to this Agreement;
As a further condition and inducement to CNET and Z-D's
willingness to enter into this Agreement, Z-D Majority Stockholder and CNET
desire to enter into a stockholder agreement substantially in the form of
Exhibit C (the "Stockholder Agreement"); and
For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, and intending to be legally bound hereby and thereby, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
1.1 The Merger.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time:
(a) The Surviving Corporation. Upon the terms and subject to
the conditions of this Agreement, Merger Sub shall merge with and into Z-D (the
"Merger"), the separate existence of Merger Sub shall cease and Z-D (sometimes
hereinafter referred to as the "Surviving Corporation") shall survive the
Merger. The name of the Surviving Corporation shall be "CNET Networks, Inc.".
The Surviving Corporation shall continue to be governed by the laws of the State
of Delaware, and the separate corporate existence of the Surviving Corporation
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger.
1.2 Closing.
Upon the terms and subject to the conditions set forth in
Article VI and the termination rights set forth in Article VII, the closing of
the Merger (the "Closing") will take place on the second Business Day after the
satisfaction or waiver (subject to applicable law) of the conditions (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date (as
defined below)) set forth in Article VI, unless this Agreement has been
theretofore terminated
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pursuant to its terms or unless another time or date is agreed to in writing by
the parties hereto (the actual time and date of the Closing being referred to
herein as the "Closing Date"). The Closing shall be held at the offices of
Simpson Thacher & Bartlett, 3373 Hillview Avenue, Palo Alto, California 94304,
unless another place is agreed to in writing by the parties hereto.
1.3 Effective Time.
As soon as practicable following the satisfaction or waiver
(subject to applicable law) of the conditions set forth in Article VI, at the
Closing the parties shall file a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware in such form as is
required by and executed and acknowledged in accordance with the relevant
provisions of the DGCL and make all other filings or recordings required under
the DGCL. The Merger shall become effective at (i) the date and time the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or (ii) such subsequent time as CNET, Merger Sub and Z-D shall agree
and as shall be specified in the Certificate of Merger (such time as the Merger
becomes effective being the "Effective Time").
1.4 Effects of the Merger.
At and after the Effective Time, the Merger will have the
effects set forth in the applicable provisions of the DGCL.
1.5 Charter and Bylaws.
(a) Certificate of Incorporation. At the Effective Time, and
without any further action on the part of CNET or Merger Sub, the certificate of
incorporation of Z-D as in effect at the Effective Time shall be amended and
restated to read in its entirety as set forth in Exhibit D, which shall be the
certificate of incorporation of the Surviving Corporation.
(b) Bylaws. At the Effective Time, and without any further
action on the part of CNET or Merger Sub, the bylaws of Merger Sub as in effect
at the Effective Time shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
1.6 Officers and Directors.
The officers of Z-D immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of their
death, resignation or removal or until their respective successors are duly
elected and qualified, as the case may be. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, until the earlier of their death, resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
1.7 Effect on Common Stock.
As of the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any shares of Z-D Common Stock, Z-D Net
Common Stock or of any shares of Merger Sub Common Stock (as defined below):
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(a) Common Stock of Merger Sub. Each issued and outstanding
share of common stock, par value $0.01 per share, of Merger Sub (the "Merger Sub
Common Stock") shall, by virtue of the Merger, be converted into one share of
common stock, par value $0.01 per share, of the Surviving Corporation.
(b) Cancellation of Merger Sub-Owned Z-D Common Stock and Z-D
Net Common Stock. Each share of Z-D Common Stock and Z-D Net Common Stock that
is owned by CNET or Merger Sub shall automatically be canceled and retired and
shall cease to exist, and no cash, CNET Common Stock or other consideration
shall be delivered or deliverable in exchange therefore.
(c) Conversion of Z-D Common Stock and Z-D Net Common Stock.
Subject to Section 2.5, (i) each issued and outstanding share of Z-D Common
Stock (other than shares canceled pursuant to Section 1.7(b)), shall be
converted into the right to receive a fraction equal to the Z-D Exchange Ratio
of a share of CNET Common Stock and (ii) each issued and outstanding share of
Z-D Net Common Stock (other than shares canceled pursuant to Section 1.7(b))
shall be converted into the right to receive a fraction equal to the Z-D Net
Exchange Ratio of a share of CNET Common Stock. The "Z-D Exchange Ratio" means
0.3397 and the "Z-D Net Exchange Ratio" means 0.5932. The amount of CNET Common
Stock into which each such share of Z-D Common Stock and Z-D Net Common Stock,
as the case may be, is converted is referred to herein as the "Merger
Consideration".
(d) Cancellation and Retirement of Z-D Common Stock and Z-D
Net Common Stock. As a result of the Merger and without any action on the part
of the holders thereof, at the Effective Time, all shares of Z-D Common Stock
and Z-D Net Common Stock shall cease to be outstanding and shall be canceled and
retired and shall cease to exist, and each holder of a certificate which
immediately prior to the Effective Time represented any such shares of Z-D
Common Stock or Z-D Net Common Stock (such certificate or other evidence of
ownership, a "Certificate") shall thereafter cease to have any rights with
respect to such shares of Z-D Common Stock or Z-D Net Common Stock, except the
right (subject to Section 1.9) to receive the applicable Merger Consideration
(and cash in lieu of fractional shares of CNET Common Stock) to be issued or
paid in consideration therefore upon surrender of such Certificate in accordance
with Article II.
(e) Cancellation of Treasury Stock. Subject to Section 2.5,
each share of Z-D Common Stock and Z-D Net Common Stock issued and owned or held
by Z-D or any Subsidiary of Z-D at the Effective Time shall, by virtue of the
Merger, cease to be outstanding and shall be canceled and retired, and no
consideration shall be delivered in exchange therefor.
1.8 Treatment of Stock Options and Other Equity-Based Awards.
Each outstanding option to purchase Z-D Common Stock (a "Z-D
Common Stock Option") or Z-D Net Common Stock (a "Z-D Net Stock Option") granted
prior to the Effective Time and which remains outstanding immediately prior to
the Effective Time shall cease to represent a right to acquire shares of Z-D
Common Stock or Z-D Net Common Stock, as the case may be, and shall be converted
(each, as so converted, a "Z-D Converted Option"), at the Effective Time, into
an option to acquire, on the same terms and conditions as were applicable under
the Z-D Common Stock Option or Z-D Net Stock Option, as the case may be (but
taking into account any change thereto, including the acceleration thereof
provided for in the Z-D Stock
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Option Plans (as defined in Section 3.2(b)) or in any award agreement by reason
of this Agreement or the transactions contemplated hereby) that number of shares
of CNET Common Stock determined by (i) in the case of each Z-D Common Stock
Option, multiplying the number of shares of Z-D Common Stock subject to such Z-D
Common Stock Option by the Z-D Exchange Ratio, rounded, if necessary, to the
nearest whole share of CNET Common Stock, at a price per share (rounded to the
nearest one-hundredth of a cent) equal to the per share exercise price specified
in such Z-D Common Stock Option divided by the Z-D Exchange Ratio and (ii) in
the case of each Z-D Net Stock Option, multiplying the number of shares of Z-D
Net Common Stock subject to such Z-D Net Stock Option by the Z-D Net Exchange
Ratio, rounded, if necessary, to the nearest whole share of CNET Common Stock,
at a price per share (rounded to the nearest one-hundredth of a cent) equal to
the per share exercise price specified in such Z-D Net Stock Option divided by
the Z-D Net Exchange Ratio; provided, however, that in the case of any Z-D
Common Stock Option or Z-D Net Stock Option to which Section 421 of the Code
applies by reason of its qualification under Section 422 of the Code, the option
price, the number of shares subject to such option and the terms and conditions
of exercise of such option shall be determined in a manner consistent with the
requirements of Section 424(a) of the Code.
1.9 Certain Adjustments.
If, between the date of this Agreement and the Effective Time
(and as permitted by Sections 4.1 and 4.2), the outstanding shares of CNET
Common Stock or the outstanding shares of Z- D Common Stock or Z-D Net Common
Stock shall have been increased, decreased, changed into or exchanged for a
different number of shares or different class, in each case, by reason of any
reclassification, recapitalization, stock split, reverse stock split, split-up,
combination or exchange of shares or a stock dividend or dividend payable in any
other securities (other than the Spin-Off) shall be declared with a record date
within such period, or any similar event shall have occurred, the Merger
Consideration (as defined in Section 1.7(c)) shall be appropriately adjusted to
provide to the holders of Z-D Common Stock, Z-D Net Common Stock, Z-D Common
Stock Options, Z-D Net Stock Options and CNET Common Stock the same economic
effect as contemplated by this Agreement prior to such event.
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ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund.
Prior to the Effective Time, CNET shall appoint a commercial
bank or trust company reasonably acceptable to Z-D, or a subsidiary thereof, to
act as exchange agent hereunder for the purpose of exchanging Certificates for
the applicable Merger Consideration (the "Exchange Agent"). At or prior to the
Effective Time, CNET shall deposit with the Exchange Agent, in trust for the
benefit of holders of shares of Z-D Common Stock and Z-D Net Common Stock,
certificates representing the shares of CNET Common Stock issuable pursuant to
Section 1.7 in exchange for outstanding shares of Z-D Common Stock and Z-D Net
Common Stock, as the case may be. CNET agrees to make available to the Exchange
Agent from time to time, as needed, cash sufficient to pay cash in lieu of
fractional shares pursuant to Section 2.5 and any dividends and other
distributions pursuant to Section 2.3. Any cash and certificates representing
CNET Common Stock deposited with the Exchange Agent shall hereinafter be
referred to as the "Exchange Fund".
2.2 Exchange Procedures.
Promptly after the Effective Time, CNET shall cause the
Exchange Agent to mail to each holder of a Certificate (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and which letter shall be in customary form
and have such other provisions as Z-D may reasonably specify (such letter to be
reasonably acceptable to Z-D prior to the Effective Time) and (ii) instructions
for effecting the surrender of such Certificates in exchange for the applicable
Merger Consideration, together with any dividends and other distributions with
respect thereto and any cash in lieu of fractional shares. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefore (A) one
or more shares of CNET Common Stock representing, in the aggregate, the whole
number of shares that such holder has the right to receive pursuant to Section
1.7 (after taking into account all shares of Z-D Common Stock and Z-D Net Common
Stock then held by such holder) and (B) a check in the amount equal to the cash
that such holder has the right to receive pursuant to the provisions of this
Article II, including cash in lieu of any fractional shares of CNET Common Stock
pursuant to Section 2.5 and dividends and other distributions pursuant to
Section 2.3. No interest will be paid or will accrue on any cash payable
pursuant to Section 2.3 or Section 2.5. In the event of a transfer of ownership
of Z-D Common Stock or Z-D Net Common Stock which is not registered in the
transfer records of Z-D a certificate evidencing, in the aggregate, the proper
number of shares of CNET Common Stock, a check in the proper amount of cash in
lieu of any fractional shares of CNET Common Stock pursuant to Section 2.5 and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.3, may be issued with respect to such Z-D Common Stock or Z-D Net
Common Stock, as applicable, to such a transferee if the Certificate
representing such shares of Z-D Common Stock or Z-D Net Common Stock, as
applicable, is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
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2.3 Distributions with Respect to Unexchanged Shares.
No dividends or other distributions with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of CNET Common Stock that such holder would be
entitled to receive upon surrender of such Certificate and no cash payment in
lieu of fractional shares of CNET Common Stock shall be paid to any such holder
pursuant to Section 2.5 until such holder shall surrender such Certificate in
accordance with Section 2.2. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the record holder
thereof without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional shares of CNET Common Stock to
which such holder is entitled pursuant to Section 2.5 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of CNET Common Stock, and (b)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time and a payment date subsequent to
such surrender payable with respect to such shares of CNET Common Stock.
2.4 No Further Ownership Rights in Z-D Common Stock.
All shares of CNET Common Stock issued and cash paid upon
conversion of shares of Z-D Common Stock and Z-D Net Common Stock in accordance
with the terms of Article I and this Article II (including any cash paid
pursuant to Sections 2.3 or 2.5) shall be deemed to have been issued or paid in
full satisfaction of all rights pertaining to the shares of Z-D Common Stock and
Z-D Net Common Stock, as the case may be.
2.5 No Fractional Shares of CNET Common Stock.
(a) No certificates or scrip or shares of CNET Common Stock
representing fractional shares of CNET Common Stock or book-entry credit of the
same shall be issued upon the surrender for exchange of Certificates and such
fractional share interests will not entitle the owner thereof to vote or to have
any rights of a stockholder of CNET or a holder of shares of CNET Common Stock.
(b) Notwithstanding any other provision of this Agreement,
each holder of shares of Z-D Common Stock or Z-D Net Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of CNET Common Stock (determined after taking into account
all Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to the product of (i) such fractional part
of a share of CNET Common Stock multiplied by (ii) the closing price for a share
of CNET Common Stock as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on the first trading day following
the date on which the Effective Time occurs. As promptly as practicable after
the determination of the amount of cash, if any, to be paid to holders of
fractional interests, the Exchange Agent shall so notify CNET, and CNET shall
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
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2.6 Termination of Exchange Fund.
Any portion of the Exchange Fund which remains undistributed
to the holders of Certificates for six months after the Effective Time shall, at
CNET's request, be delivered to CNET or otherwise on the instruction of CNET,
and any holders of the Certificates who have not theretofore complied with this
Article II shall after such delivery look only to CNET for the Merger
Consideration with respect to the shares of Z-D Common Stock and Z-D Net Common
Stock formerly represented thereby to which such holders are entitled pursuant
to Sections 1.7 and 2.2, any cash in lieu of fractional shares of CNET Common
Stock to which such holders are entitled pursuant to Section 2.5 and any
dividends or distributions with respect to shares of CNET Common Stock to which
such holders are entitled pursuant to Section 2.3. Any such portion of the
Exchange Fund remaining unclaimed by holders of shares of Z-D Common Stock or
Z-D Net Common Stock, as the case may be, immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental Entity
(as defined in Section 3.1(c)(iii)) shall, to the extent permitted by law,
become the property of CNET free and clear of any claims or interest of any
Person previously entitled thereto.
2.7 No Liability.
None of CNET, Merger Sub, Z-D, Z-D Majority Stockholder or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
2.8 Investment of the Exchange Fund.
The Exchange Agent shall invest any cash included in the
Exchange Fund as directed by CNET on a daily basis; provided that no such
investment or loss thereon shall affect the amounts payable to Z-D stockholders
pursuant to Article I and the other provisions of this Article II. Any interest
and other income resulting from such investments shall promptly be paid to CNET.
2.9 Lost Certificates.
If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by CNET, the
posting by such Person of a bond in such reasonable amount as CNET may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will deliver in exchange for such lost, stolen
or destroyed Certificate the applicable Merger Consideration with respect to the
shares of Z-D Common Stock and Z-D Net Common Stock formerly represented
thereby, any cash in lieu of fractional shares of CNET Common Stock, and unpaid
dividends and distributions on shares of CNET Common Stock deliverable in
respect thereof, pursuant to this Agreement.
2.10 Withholding Rights.
CNET shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Z-D Common Stock such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code and the rules and
regulations promulgated thereunder, or any provision of state, local or foreign
tax
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law. To the extent that amounts are so withheld by CNET, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Z-D Common Stock or Z-D Net Common Stock in respect of
which such deduction and withholding was made by CNET.
2.11 Further Assurances.
At and after the Effective Time, the officers and directors of
CNET will be authorized to execute and deliver, in the name and on behalf of
Merger Sub or Z-D, any deeds, bills of sale, assignments or assurances and to
take and do, in the name and on behalf of Merger Sub or Z-D, any other actions
and things to vest, perfect or confirm of record or otherwise in CNET any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by CNET as a result of, or in connection with,
the Merger.
2.12 Stock Transfer Books.
The stock transfer books of Z-D shall be closed immediately
upon the Effective Time and there shall be no further registration of transfers
of shares of Z-D Common Stock or Z-D Net Common Stock thereafter on the records
of Z-D. On or after the Effective Time, any Certificates presented to the
Exchange Agent or CNET for any reason shall be converted into the right to
receive the applicable Merger Consideration with respect to the shares of Z-D
Common Stock or Z-D Net Common Stock formerly represented thereby (including any
cash in lieu of fractional shares of CNET Common Stock to which the holders
thereof are entitled pursuant to Section 2.5 and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.3).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of CNET and Merger Sub.
Except as disclosed in the CNET Filed SEC Reports (as defined
in Section 3.1(d)(ii)) or as set forth in the CNET Disclosure Schedule delivered
by CNET to Z-D prior to the execution of this Agreement (the "CNET Disclosure
Schedule"), CNET and Merger Sub jointly and severally represent and warrant to
Z-D as follows:
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(a) Organization, Standing and Power; Subsidiaries.
(i) CNET is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each Subsidiary (as defined in Section 8.12) of
CNET, including Merger Sub, is a corporation or other organization duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power and authority, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
(as defined in Section 8.12) on CNET or Merger Sub. CNET and each Subsidiary of
CNET is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary other than in such jurisdictions
where the failure so to qualify or to be in good standing, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on CNET or Merger Sub. The copies of the certificate of incorporation and
bylaws of CNET and Merger Sub that were previously furnished or made available
to Z-D are true, complete and correct copies of such documents as in effect on
the date of this Agreement.
(ii) Exhibit 21 to CNET's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 includes all the Subsidiaries of CNET which
as of the date of this Agreement are Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X of the Securities and Exchange Commission (the
"SEC")). All the outstanding shares of capital stock of, or other equity
interests in, each such Significant Subsidiary have been duly authorized,
validly issued and are fully paid and nonassessable and are, except as set forth
in such Form 10-K, owned directly or indirectly by CNET, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively "Liens") and free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests), except for restrictions
imposed by applicable securities laws.
(b) Capital Structure.
(i) As of July 17, 2000, the authorized capital stock of CNET
consists of (A) 400,000,000 shares of CNET Common Stock, of which (v) 85,451,249
shares were issued and outstanding, (w) no shares were held in treasury, (x)
13,343,501 shares were reserved for future issuance pursuant to outstanding
stock options and shares reserved under stock option plans, (y) 1,400,000 shares
were reserved for issuance pursuant to an employee stock purchase plan, and (z)
4,622,623 shares were reserved for issuance upon conversion of CNET's 5%
convertible notes due 2006; and (B) 5,000,000 shares of preferred stock, par
value $0.01 per share, of which no shares are issued and outstanding. Except as
described in this Section 3.1(b), as of the date of this Agreement, no shares of
capital stock of CNET are reserved for any purpose. All issued and outstanding
shares of capital stock of CNET are duly authorized, validly issued, fully paid
and nonassessable, and have not been issued in violation of (nor are any of the
authorized shares of capital stock of CNET subject to) any preemptive or similar
rights created by statute, the certificate of incorporation or bylaws of CNET,
or any agreement to which CNET is a party or bound.
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(ii) No bonds, debentures, notes or other indebtedness of CNET
having the right to vote on any matters on which holders of capital stock of
CNET may vote are issued or outstanding.
(iii) Except as set forth in this Section 3.1(b), as of the
date of this Agreement, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which CNET or any of
its Significant Subsidiaries is a party relating to the issued or unissued
capital stock of CNET or any of its Significant Subsidiaries or obligating CNET
or any of its Significant Subsidiaries to grant, issue or sell any shares of the
capital stock of CNET or any of its Significant Subsidiaries, by sale, lease,
license or otherwise. As of the date of this Agreement, there are no
obligations, contingent or otherwise, of CNET or any of its Significant
Subsidiaries to repurchase, redeem or otherwise acquire any shares of CNET
Common Stock or other capital stock of CNET or any of its Significant
Subsidiaries. As of July 17, 2000, there were 10,614,999 CNET Stock Options
outstanding with an exercise price below $32.1875 per share and those options
have an average exercise price of $13.3148 per share.
(iv) Shareholders of CNET Common Stock have the right to vote
on all matters put forth to the shareholders of CNET.
(v) The authorized capital stock of Merger Sub consists of
1,000 shares of Merger Sub Common Stock. As of the date of this Agreement, 100
shares of Merger Sub Common Stock were issued and outstanding and held by CNET,
all of which are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, Merger Sub's
certificate of incorporation or bylaws or any agreement to which Merger Sub is a
party or is bound.
(vi) The shares of CNET Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, CNET's certificate of
incorporation or bylaws or any agreement to which CNET is a party or is bound.
(c) Authority; No Conflicts.
(i) CNET and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and thereby, subject, in the case of the consummation of the
Merger, to the approval by the CNET Stockholder Approval. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of CNET and Merger Sub and no other corporate proceedings on the part of CNET or
Merger Sub are necessary to authorize the execution and delivery of this
Agreement or to consummate the Merger and the other transactions contemplated
hereby, subject in the case of the consummation of the Merger, to the CNET
Stockholder Approval. This Agreement has been duly executed and delivered by
CNET and Merger Sub and constitutes a valid and binding agreement of CNET and
Merger Sub, enforceable against each of CNET and Merger Sub in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
relating to or affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
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(ii) The execution and delivery of this Agreement by CNET and
Merger Sub do not, and the consummation by CNET and Merger Sub of the Merger and
the other transactions contemplated hereby will not, conflict with, or result in
any violation of, or constitute a default (with or without notice or lapse of
time, or both) under, or give rise to a right of, or result by its terms in the
termination, amendment, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a Lien, charge, "put" or
"call" right or other encumbrance on, or the loss of, any assets, including
Intellectual Property (any such conflict, violation, default, right of
termination, amendment, cancellation or acceleration, loss or creation, a
"Violation") pursuant to: (A) any provision of the certificate of incorporation
or bylaws or similar organizational document of CNET, Merger Sub or any
Significant Subsidiary of CNET, or (B) except as (1) individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
CNET or Merger Sub or (2) would not prevent or materially delay the consummation
of the Merger, subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in paragraph
(iii) below, and except with respect to employee stock options and other awards,
any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to CNET, Merger Sub or any Subsidiary of CNET or their respective
properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal, local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any quasi-
governmental or private body exercising any regulatory, taxing, importing or
other governmental or quasi-governmental authority (a "Governmental Entity") or
any other Person, is required by or with respect to CNET, Merger Sub or any
Subsidiary of CNET in connection with the execution and delivery of this
Agreement by CNET or Merger Sub, as applicable, or the consummation by CNET and
Merger Sub of the Merger and the other transactions contemplated hereby, except
for those required under or in relation to (A) the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) state securities or
"blue sky" laws (the "Blue Sky Laws"), (C) the Securities Act of 1933, as
amended (the "Securities Act"), (D) the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (E) the DGCL with respect to the filing of the
Certificate of Merger, (F) the rules and regulations of the NASDAQ or of The New
York Stock Exchange, (G) antitrust or other competition laws of other
jurisdictions and (H) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or obtain,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on CNET. Consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to any of
the foregoing clauses (A) through (G) are hereinafter referred to as "Necessary
Consents".
(d) Reports and Financial Statements of CNET.
(i) CNET has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents required
to be filed by it with the SEC since December 31, 1997 (collectively, the "CNET
SEC Reports"). No Subsidiary of CNET is required to file any form, report,
registration statement, prospectus or other document with the SEC. None of the
CNET SEC Reports, as of their respective dates (and, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing),
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contained or will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the financial statements (including the related
notes) included or incorporated by reference in the CNET SEC Reports presents
fairly, in all material respects, the consolidated financial position and
consolidated results of operations and cash flows of CNET and its consolidated
Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods involved except as
otherwise noted therein, and subject, in the case of the unaudited interim
financial statements of CNET, to the absence of notes and normal year-end
adjustments that have not been and are not expected to be material in amount.
All of such CNET SEC Reports, as of their respective dates (and as of the date
of any amendment to the respective CNET SEC Report), complied as to form in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
(ii) Except as disclosed in the CNET SEC Reports filed and
publicly available prior to the date hereof (the "CNET Filed SEC Reports"), CNET
and its Subsidiaries have not incurred any liabilities that are of a nature that
would be required to be disclosed on a balance sheet of CNET and its
Subsidiaries or the footnotes thereto prepared in conformity with GAAP, other
than (A) liabilities incurred in the ordinary course of business, (B)
liabilities incurred in accordance with Section 4.1 or (C) liabilities that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on CNET.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by CNET
for inclusion or incorporation by reference in (A) the Form S-4 (as defined in
Section 5.1) will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (B) the Joint Proxy Statement/Prospectus (as defined in
Section 5.1) will, on the date it is first mailed to Z-D stockholders or CNET
stockholders or at the time of the Z-D Stockholders Meeting or the CNET
Stockholders Meeting (each as defined in Section 5.1), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Form S-4 and
the Joint Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by CNET with respect to statements
made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Z-D for inclusion or
incorporation by reference therein.
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(f) Board Approvals.
(i) CNET Board Approval. The Board of Directors of CNET, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way (the "CNET
Board Approval"), has duly (A) determined that this Agreement and the Merger are
fair to and in the best interests of CNET and its stockholders and declared the
Merger to be advisable, (B) approved this Agreement, the CNET Stockholders
Voting Agreement and the Merger and the consummation of the transactions
contemplated hereby, (C) approved the acquisition of CNET Common Stock by Z-D
Majority Stockholder pursuant to the Merger for purposes of Section 203 of the
DGCL and (D) recommended that the stockholders of CNET approve the issuance of
CNET Common Stock pursuant to this Agreement and directed that such matter be
submitted for consideration by CNET's stockholders at the CNET Stockholders
Meeting. The CNET Board Approval constitutes approval of this Agreement and the
Merger and the transactions contemplated hereby for purposes of Section 203 of
the DGCL. To the knowledge of CNET, except for Section 203 of the DGCL (which
has been rendered inapplicable by the approval described in clause (C) above),
no state takeover statute is applicable to this Agreement or the Merger or the
other transactions contemplated hereby.
(ii) Merger Sub Board Approval. The Board of Directors of
Merger Sub, by resolutions duly adopted by unanimous vote of those voting at a
meeting duly called and held and not subsequently rescinded or modified in any
way (the "Merger Sub Board Approval"), has duly (A) determined that this
Agreement and the Merger are fair to and in the best interests of Merger Sub and
its stockholders and declared the Merger to be advisable, and (B) approved this
Agreement, the Merger, the CNET Stockholders Voting Agreement and the
consummation of the transactions contemplated hereby. The Merger Sub Board
Approval constitutes approval of this Agreement and the Merger and the
transactions contemplated hereby for purposes of Section 203 of the DGCL. To the
knowledge of Merger Sub, except for Section 203 of the DGCL (which has been
rendered inapplicable by the approval described in clause (ii)(B) above), no
state takeover statute is applicable to this Agreement or the Merger or the
other transactions contemplated hereby.
(g) Vote Required. The CNET Stockholder Approval as required
by the rules of the NASDAQ is the only vote of the holders of any class or
series of CNET capital stock necessary to approve or adopt this Agreement and
the Merger and to consummate the Merger and the other transactions contemplated
hereby.
(h) Litigation; Compliance with Laws.
(i) There are no suits, actions, judgments or proceedings
(collectively, "Actions") pending or, to the knowledge of CNET, threatened,
against or affecting CNET or any Subsidiary of CNET or any property or asset of
CNET or any Subsidiary of CNET which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on CNET, nor are there
any judgments, decrees, injunctions, rules or orders of any Governmental Entity
or arbitrator outstanding against CNET or any Subsidiary of CNET which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on CNET.
(ii) Except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on CNET, CNET and its
Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
orders and approvals of all Governmental Entities
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which are necessary for the operation of the businesses as now being conducted
of CNET and its Subsidiaries, taken as a whole (the "CNET Permits"), and no
suspension or cancellation of any of the CNET Permits is pending or, to the
knowledge of CNET, threatened. CNET and its Subsidiaries are in compliance with
the terms of the CNET Permits, except where the failure to so comply,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on CNET. Neither CNET nor its Subsidiaries is in
violation of, and CNET and its Subsidiaries have not received any notices of
violations with respect to, any laws, statutes, ordinances, rules or regulations
of any Governmental Entity, except for violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
CNET.
(i) Absence of Certain Changes or Events.
Except for liabilities permitted to be incurred in accordance
with this Agreement or the transactions contemplated hereby, since December 31,
1999, CNET and its Subsidiaries (including Merger Sub) have conducted their
business only in the ordinary course and in a manner consistent with past
practice and, since December 31, 1999, there have not been any changes,
circumstances or events which, individually or in the aggregate, have had, or
would reasonably be expected to have, a Material Adverse Effect on CNET.
(j) Intellectual Property.
Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on CNET: (i) CNET and
each of its Subsidiaries owns, or is licensed to use (in each case, free and
clear of any Liens), all Intellectual Property (as defined below) used in or
necessary for the conduct of its business as currently conducted; (ii) to the
knowledge of CNET, the use of any Intellectual Property by CNET and its
Subsidiaries does not infringe on or otherwise violate the rights of any Person;
(iii) the use of the Intellectual Property by CNET or any Subsidiary of CNET is
in accordance with applicable licenses pursuant to which CNET or any Subsidiary
of CNET acquired the right to use any such Intellectual Property; and (iv) to
the knowledge of CNET, no Person is challenging, infringing on or otherwise
violating any right of CNET or any of its Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to CNET or its Subsidiaries or
has received notice of any alleged infringement. As of the date of this
Agreement except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on CNET, neither CNET nor any of
its Subsidiaries has knowledge of any pending claim, order or proceeding with
respect to any Intellectual Property used by CNET and its Subsidiaries and to
its knowledge no Intellectual Property owned and/or licensed by CNET or its
Subsidiaries is being used or enforced in a manner that would reasonably be
expected to result in the abandonment, cancellation or unenforceability of such
Intellectual Property. For purposes of this Agreement, "Intellectual Property"
shall mean trademarks, service marks, internet domain names, brand names,
certification marks, trade dress and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by
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any person; writings and other works, whether copyrightable or not, in any
jurisdiction; registrations or applications for registration of copyrights in
any jurisdiction, and any renewals or extensions thereof; any similar
intellectual property or proprietary rights.
(k) Opinion of CNET Financial Advisor.
CNET has received the opinion of Lazard Freres & Co., dated
the date of this Agreement, to the effect that, as of such date, the Z-D
Exchange Ratio and the Z-D Net Exchange Ratio are fair to CNET, from a financial
point of view, a copy of which opinion will be made available to Z-D promptly
after the date of this Agreement.
(l) Taxes.
(i) Each of CNET and its Subsidiaries has filed all Tax
Returns required to have been filed (or extensions have been duly obtained), has
paid all Taxes required to have been paid by it (whether or not shown as due on
any Tax Return), and has established an appropriate accrual for all Taxes not
yet paid through March 31, 2000; (ii) all Tax Returns filed by CNET and its
Subsidiaries are true, complete and correct in all material respects; (iii) no
material claim for unpaid Taxes has become a lien against the property of CNET
or any of its Subsidiaries or is being asserted against CNET or any of its
Subsidiaries; (iv) no material audit or other proceeding with respect to any
Taxes due from CNET or any of its Subsidiaries or any Tax Return of CNET or any
of its Subsidiaries is pending or threatened in writing, or being conducted by a
Tax authority; (v) none of CNET or any of its Subsidiaries (A) has, since
January 1, 1997, been a member of a Consolidated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
CNET) or had any liability arising from the application of Treasury Regulation
section 1.1502-6 or any analogous provision of state, local or foreign law, or
(B) has any other liability for the Taxes of any person as a transferee or
successor, by contract, or otherwise; (vi) no consent under Section 341(f) of
the Code has been filed with respect to CNET or any of its Subsidiaries; (vii)
all material Taxes required to be withheld, collected or deposited by or with
respect to CNET and each of its Subsidiaries have been timely withheld,
collected or deposited, as the case may be, and, to the extent required, have
been paid to the relevant taxing authority; (viii) none of CNET or any of its
Subsidiaries has been a party to any distribution occurring during the last two
years in which the parties to such distribution treated the distribution as one
to which section 355 of the Code is applicable; (ix) none of CNET or any of its
Subsidiaries has agreed to make or is required to make any adjustment under
section 481(a) of the Code by reason of a change in accounting method or
otherwise or is otherwise required to include any amounts in income for a period
following the Closing that was economically accrued in a period prior to the
Closing; (x) none of CNET or any of its Subsidiaries is a party to, is bound by
or has any obligation under, any Tax sharing agreement or similar contract or
arrangement; and (xi) no closing agreement pursuant to section 7121 of the Code
(or any similar provision of state, local or foreign law) has been entered into
by or with respect to CNET or any of its Subsidiaries.
(m) Brokers or Finders.
No agent, broker, investment banker, financial advisor or
other firm or Person is or will be entitled to any broker's or finder's fee or
any other similar commission or fee in connection with any of the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
CNET, except Lazard Freres & Co., whose fees and expenses will be
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paid by CNET. CNET has provided to Z-D a true, correct and complete copy of
CNET's agreement with Lazard Freres & Co. relating to this Agreement and the
Merger.
3.2 Representations and Warranties of Z-D.
Except as disclosed in the Z-D Filed SEC Reports (as defined
in Section 3.2(d)(ii)) or as set forth in the Z-D Disclosure Schedule delivered
by Z-D to CNET prior to the execution of this Agreement (the "Z-D Disclosure
Schedule"), Z-D represents and warrants to CNET as follows:
(a) Organization, Standing and Power; Subsidiaries.
(i) Z-D is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each Subsidiary of Z-D is a corporation or
other organization duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Z-D. Each of Z-D and its Subsidiaries is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification necessary
other than in such jurisdictions where the failure so to qualify or to be in
good standing, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Z-D. The copies of the certificate
of incorporation and bylaws of Z-D which were previously furnished or made
available to CNET are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
(ii) Section 3.2(a)(ii) of the Z-D Disclosure Schedule lists
all the Subsidiaries of Z-D as of the date of this Agreement. Except as set
forth in Schedule 3.2(a)(ii) of the Z-D Disclosure Schedule, all the outstanding
shares of capital stock of, or other equity interests in, each such Significant
Subsidiary have been duly authorized, validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Z-D, free and clear of all
Liens and free of any other restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests), except for restrictions imposed by applicable securities laws. Other
than as set forth on Schedule 3.2(a)(ii), as of the date of this Agreement,
neither Z-D nor any of its Subsidiaries directly or indirectly owns any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or other business
association or entity (other than Subsidiaries).
(b) Capital Structure.
(i) As of July 17, 2000, the authorized capital stock of Z-D
consists of (A) 210,000,000 shares of Z-D Common Stock of which (1) 106,620,886
shares of Z-D Common Stock were issued and outstanding and (2) 16,834,581 shares
of Z-D Net Common Stock were issued and outstanding and (B) 10,000,000 shares of
preferred stock, par value $0.01 per share, none of which are issued or
outstanding. From July 17, 2000 to the date of this Agreement, there
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have been no issuances of shares of the capital stock of Z-D or any other
securities of Z-D other than issuances of shares pursuant to options or rights
outstanding as of July 17, 2000. All issued and outstanding shares of the
capital stock of Z-D, including the Z-D Net Common Stock, are duly authorized,
validly issued, fully paid and nonassessable, and free of any preemptive rights.
None of the Subsidiaries of Z-D own any shares of Z-D capital stock. As of July
17, 2000 there were no options, warrants or other rights outstanding to acquire
capital stock from Z-D other than the Z-D Stock Options (as defined in the next
sentence). The options and other rights to acquire Z-D Common Stock or Z-D Net
Common Stock from Z-D representing the right to purchase shares of Z-D Common
Stock or Z-D Net Common Stock, as the case may be, together with other employee
stock options issued by Z-D after the date hereof in accordance with the Z-D
Stock Option Plans (as defined in the next sentence) and Section 4.2, are
referred to herein collectively as the "Z-D Stock Options"). The Z-D Stock
Options have been granted under the Z-D 1998 Incentive Compensation Plan (the
"Z-D Stock Option Plans"). As of July 17, 2000, (i) there were 9,101,828 options
to purchase Z-D Net Common Stock outstanding with an exercise price below
$19.0936 per share and those options have an average exercise price of $6.5806
per share and (ii) there were 3,007,914 options to purchase Z-D Common Stock
outstanding with an exercise price below $16.4350 per share and those options
have an average exercise price of $8.7994 per share.
(ii) No bonds, debentures, notes or other indebtedness of Z-D
having the right to vote on any matters on which holders of capital stock of Z-D
may vote ("Z-D Voting Debt") are issued or outstanding.
(iii) Except as set forth in this Section 3.2(b) and Section
3.2(b) of the Z-D Disclosure Schedule, and other than in connection with the
Spin-Off, as of the date of this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to which
Z-D or any of its Subsidiaries is a party relating to the issued or unissued
capital stock of Z-D or any of its Significant Subsidiaries or obligating Z-D or
any of its Subsidiaries to grant, issue or sell any shares of the capital stock
of Z-D or any of its Significant Subsidiaries, by sale, lease, license or
otherwise. As of the date of this Agreement, except as set forth in Section
3.2(b) of the Z-D Disclosure Schedule, there are no obligations, contingent or
otherwise, of Z-D or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Z-D Common Stock or Z-D Net Common Stock or other capital
stock of Z-D or any of its Significant Subsidiaries.
(iv) As of the date hereof, assuming the number of votes per
share of Z-D Net Common Stock at the Z-D Stockholders Meeting (as determined in
accordance with the Amended and Restated Certificate of Incorporation of Z-D)
equals the Z-D Net Exchange Ratio divided by the Z-D Exchange Ratio, Z-D
Majority Stockholder will for purposes of the Z-D Stockholders Meeting own of
record at least a majority of the voting power of the shares of Z-D Common Stock
and Z-D Net Common Stock entitled to vote at the Z-D Stockholders Meeting.
(c) Authority; No Conflicts.
(i) Z-D has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, subject, in the case of the consummation of the Merger, to the Z-D
Stockholder Approval. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Z-D and no other corporate
proceedings
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on the part of Z-D are necessary to authorize the execution and delivery of the
Agreement or to consummate the Merger and the other transactions contemplated
hereby, subject in the case of the consummation of the Merger, to the Z-D
Stockholder Approval. This Agreement has been duly executed and delivered by Z-D
and constitutes a valid and binding agreement of Z-D, enforceable against Z-D in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by Z-D does
not, and the consummation by Z-D of the Merger and the other transactions
contemplated hereby will not, conflict with, or result in a Violation pursuant
to: (A) any provision of the certificate of incorporation or bylaws or similar
organizational document of Z-D or any Significant Subsidiary of Z-D or (B)
except as (1) individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Z-D or (2) would not prevent or materially
delay the consummation of the Merger, subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below and except with respect to employee
stock options and other awards, any loan or credit agreement, note, mortgage,
bond, indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Z-D or any Subsidiary of Z-D or
their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any other
Person is required by or with respect to Z-D or any Subsidiary of Z-D in
connection with the execution and delivery of this Agreement by Z-D or the
consummation of the Merger and the other transactions contemplated hereby,
except the Necessary Consents and such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
make or obtain, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Z-D.
(iv) For so long as this Agreement may be in effect, Z-D will
not consummate the merger contemplated by the Agreement and Plan of Merger dated
as of February 7, 2000, between Z-D and Z-D Merger Subsidiary Inc.
(d) Reports and Financial Statements.
(i) Z-D has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents required
to be filed by it with the SEC since December 31, 1997 (collectively, the "Z-D
SEC Reports"). No Subsidiary of Z-D is required to file any form, report,
registration statement, prospectus or other document with the SEC other than in
connection with the Spin-Off. None of the Z-D SEC Reports, as of their
respective dates (and, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), contained or will contain any
untrue statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Each
of the financial statements (including the related notes) included or
incorporated by reference in the Z-D SEC Reports presents fairly, in all
material respects, the consolidated financial position and consolidated results
of operations and cash flows of Z-D and its consolidated Subsidiaries as of
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the respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved except as
otherwise noted therein, and subject, in the case of the unaudited interim
financial statements of Z-D, to the absence of notes and normal year-end
adjustments that have not been and are not expected to be material in amount.
All of such Z-D SEC Reports, as of their respective dates (and as of the date of
any amendment to the respective Z-D SEC Report), complied as to form in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
(ii) Except as disclosed in the Z-D SEC Reports filed and
publicly available prior to the date hereof (the "Z-D Filed SEC Reports"), Z-D
and its Subsidiaries have not incurred any liabilities that are of a nature that
would be required to be disclosed on a balance sheet of Z-D and its Subsidiaries
or the footnotes thereto prepared in conformity with GAAP, other than (A)
liabilities incurred in the ordinary course of business, (B) liabilities
incurred in accordance with Section 4.2, or (C) liabilities that, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Z-D.
(iii) A registration statement on Form S-1, as amended through
the date hereof and as may be subsequently amended (the "Spin Co. S-1"), with
respect to the common stock, par value $.01 per share (the "Spin Co. Common
Stock"), of Spin Co. to be offered in connection with the Spin-Off have (i)
been prepared by Spin Co. in conformity with the requirements of the Securities
Act and the rules and regulations (the "Rules and Regulations") of the SEC
thereunder, and (ii) been filed with the SEC under the Securities Act. Copies of
the Spin Co. S-1 have been delivered by Z-D to CNET. The Spin Co. S-1 conforms
(and any prospectus and any further amendments or supplements to the Spin Co.
S-1, when they become effective or are filed with the SEC, as the case may be,
will conform) in all material respects with the applicable requirements of the
Securities Act and the Rules and Regulations and do not and will not, as of the
applicable effective date (as to the Spin Co. S-1 and any amendment thereto) and
as of the applicable filing date (as to any prospectus and any amendment or
supplement thereto) contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
(iv) The financial statements (including the related notes
filed as part of the Spin Co. S-1 or included in any prospectus) present fairly,
in all material respects, the combined financial condition and combined results
of operations of Spin Co., at the dates and for the periods indicated, and have
been prepared in conformity with GAAP applied on a consistent basis throughout
the periods involved, except as otherwise noted therein.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by Z-D
for inclusion or incorporation by reference in (A) the Form S-4 will, at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(B) the Joint Proxy Statement/Prospectus will, on the date it is first mailed to
Z-D stockholders or CNET stockholders or at the time of the Z-D Stockholders
Meeting or the CNET Stockholders Meeting, contain any
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untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Joint
Proxy Statement/Prospectus will comply as to form in all material respects with
the requirements of the Exchange Act and the Securities Act and the Rules and
Regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(e), no representation or warranty is made by Z-D with respect to statements
made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by or on behalf of CNET for
inclusion or incorporation by reference therein.
(f) Board Approval.
The Board of Directors of Z-D, by resolutions duly adopted by
unanimous vote of those voting at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "Z-D Board Approval"), has
duly (i) determined that this Agreement and the Merger are fair to and in the
best interests of Z-D, the holders of Z-D Common Stock and the holders of Z-D
Net Common Stock and declared the Merger to be advisable, (ii) approved this
Agreement, the Merger and the consummation of the transactions contemplated
hereby and (iii) recommended that the stockholders of Z-D adopt this Agreement
and directed that such matter be submitted for consideration by Z-D's
stockholders at the Z-D Stockholders Meeting. The Z-D Board Approval constitutes
approval of this Agreement, the Merger and the consummation of the transactions
contemplated hereby (including, without limitation, the Z-D Stockholder Voting
Agreement) for purposes of Section 203 of the DGCL. To the knowledge of Z-D,
except for Section 203 of the DGCL (which has been rendered inapplicable by the
approval in clause (ii) above), no state takeover statute is applicable to this
Agreement or the Merger or the other transactions contemplated hereby (including
the Z-D Stockholder Voting Agreement).
(g) Vote Required.
The Z-D Stockholder Approval is the only vote of the holders
of any class or series of Z-D capital stock necessary to approve or adopt this
Agreement and the Merger and to consummate the Merger and the other transactions
contemplated hereby.
(h) Litigation; Compliance with Laws.
(i) Except as set forth in Section 3.2(h) of the Z-D
Disclosure Schedule, there are no Actions pending or, to the knowledge of Z-D,
threatened, against or affecting Z-D or any Subsidiary of Z-D or any property or
asset of Z-D or any Subsidiary of Z-D which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Z-D, nor are
there any judgments, decrees, injunctions, rules or orders of any Governmental
Entity or arbitrator outstanding against Z-D or any Subsidiary of Z-D which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Z-D.
(ii) Except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Z-D, Z-D and its
Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
orders and approvals of all Governmental Entities which are necessary for the
operation of the businesses as now being conducted of Z-D and its
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Subsidiaries, taken as a whole (the "Z-D Permits"), and no suspension or
cancellation of any of the Z-D Permits is pending or, to the knowledge of Z-D,
threatened. Z-D and its Subsidiaries are in compliance with the terms of the Z-D
Permits, except where the failure to so comply, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Z-D. Neither Z-D nor its Subsidiaries is in violation of, and Z-D and its
Subsidiaries have not received any notices of violations with respect to, any
laws, statutes, ordinances, rules or regulations of any Governmental Entity,
except for violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Z-D.
(i) Absence of Certain Changes or Events.
Except for liabilities permitted to be incurred in accordance
with this Agreement or the transactions contemplated hereby and except as
described in the Z-D SEC Reports, since December 31, 1999, Z-D and its
Subsidiaries have conducted their business only in the ordinary course and in a
manner consistent with past practice and, since December 31, 1999, there have
not been any changes, circumstances or events which, individually or in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on Z-D.
(j) Intellectual Property.
Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Z-D: (i) Z-D and
each of its Subsidiaries owns, or is licensed to use (in each case, free and
clear of any Liens), all Intellectual Property used in or necessary for the
conduct of its business as currently conducted; (ii) to the knowledge of Z-D,
the use of any Intellectual Property by Z-D and its Subsidiaries does not
infringe on or otherwise violate the rights of any Person; (iii) the use of the
Intellectual Property by Z-D or any Subsidiary of Z-D is in accordance with
applicable licenses pursuant to which Z-D or any Subsidiary of Z-D acquired the
right to use any such Intellectual Property; and (iv) to the knowledge of Z-D,
no Person is challenging, infringing on or otherwise violating any right of Z-D
or any of its Subsidiaries with respect to any Intellectual Property owned by
and/or licensed to Z-D or its Subsidiaries or has received notice of any alleged
or threatened infringement. As of the date of this Agreement, except as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Z-D, neither Z-D nor any of its Subsidiaries has knowledge of
any pending claim, order or proceeding with respect to any Intellectual Property
used by Z-D and its Subsidiaries and to its knowledge no Intellectual Property
owned and/or licensed by Z-D or its Subsidiaries is being used or enforced in a
manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property. Section 3.2(j)
of the Z-D Disclosure Schedule sets forth (i) a list of any written claim that
Intellectual Property used by Z-D and its Subsidiaries infringes on or otherwise
violates the rights of any Person; and (ii) a list of any written claim by Z-D
that another Person is infringing on or otherwise violating, any right of Z-D or
any of its Subsidiaries with respect to any Intellectual Property owned by
and/or licensed to Z-D or its Subsidiaries.
(k) Opinion of Z-D Financial Advisor.
Z-D has received the opinion of Morgan Stanley Dean Witter,
dated the date of this Agreement, to the effect that, as of such date, the Z-D
Exchange Ratio is fair, from a financial point of view, to the holders of Z-D
Common Stock, and the Z-D Net Exchange Ratio is fair, from a
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financial point of view, to the holders of the Z-D Net Common Stock. A copy of
such opinion will be made available to CNET promptly after the date of this
Agreement.
(l) Taxes.
(i) Except as set forth in Section 3.2(l) of the Z-D
Disclosure Schedule, each of Z-D and its Subsidiaries has filed all Tax Returns
required to have been filed (or extensions have been duly obtained), has paid
all Taxes required to have been paid by it (whether or not shown as due on any
Tax Return), and has established an appropriate accrual for all Taxes not yet
paid through March 31, 2000; (ii) all Tax Returns filed by Z-D and its
Subsidiaries are true, complete and correct in all material respects; (iii) no
material claim for unpaid Taxes has become a lien against the property of Z-D or
any of its Subsidiaries or is being asserted against Z-D or any of its
Subsidiaries; (iv) no material audit or other proceeding with respect to any
Taxes due from Z-D or any of its Subsidiaries or any Tax Return of Z-D or any of
its Subsidiaries is pending or threatened in writing, or being conducted by a
Tax authority; (v) none of Z-D or any of its Subsidiaries (A) has, since January
1, 1997, been a member of a Consolidated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was Z-D) or had
any liability arising from the application of Treasury Regulation section
1.1502-6 or any analogous provision of state, local or foreign law, or (B) has
any other liability for the Taxes of any person as a transferee or successor, by
contract, or otherwise; (vi) no consent under Section 341(f) of the Code has
been filed with respect to Z-D or any of its Subsidiaries; (vii) all material
Taxes required to be withheld, collected or deposited by or with respect to Z-D
and each of its Subsidiaries have been timely withheld, collected or deposited,
as the case may be, and, to the extent required, have been paid to the relevant
taxing authority; (viii) none of Z-D or any of its Subsidiaries has been a party
to any distribution occurring during the last two years in which the parties to
such distribution treated the distribution as one to which section 355 of the
Code is applicable; (ix) none of Z-D or any of its Subsidiaries has agreed to
make or is required to make any adjustment under section 481(a) of the Code by
reason of a change in accounting method or otherwise or is otherwise required to
include any amounts in income for a period following the Closing that was
economically accrued in a period prior to the Closing; (x) none of Z-D or any of
its Subsidiaries is a party to, is bound by or has any obligation under, any Tax
sharing agreement or similar contract or arrangement; (xi) no closing agreement
pursuant to section 7121 of the Code (or any similar provision of state, local
or foreign law) has been entered into by or with respect to Z-D or any of its
Subsidiaries.
(m) Certain Contracts.
As of the date hereof, except as disclosed in the Z-D Filed
SEC Reports or on Schedule 3.2(m) of the Z-D Disclosure Schedule, neither Z-D
nor any of its Subsidiaries (other than Z-D Events, Inc.) is a party to or
bound by (i) any "material contracts" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC); (ii) any joint ventures, partnerships,
or similar arrangements; (iii) other agreements or arrangements that give rise
to a right of the other parties thereto to terminate such material contract or
to a right of first refusal or similar right thereunder as a result of the
execution and delivery of this Agreement and the consummation by Z-D of the
Merger and the other transactions contemplated hereby; or (iv) any agreements,
licenses or other arrangements that contain exclusive grants of rights that
could, after the Effective Time, restrict CNET or any of its Affiliates or any
successor thereto, from engaging in or competing with any line of business or in
any geographic area (collectively, the "Z-D Material Contracts"). All
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Z-D Material Contracts are valid and in full force and effect except to the
extent they have previously expired in accordance with their terms or if the
failure to be in full force and effect, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on Z-D. Neither Z-D
nor any of its Subsidiaries has violated any provision of, or committed or
failed to perform any act which, with or without notice, lapse of time or both,
would constitute a default under the provisions of, any Z-D Material Contract,
except in each case for those violations and defaults which, individually or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect on Z-D.
(n) Employee Benefits.
(i) Section 3.2(n) of the Z-D Disclosure Schedule contains a
true and complete list of each "employee benefit plan" (within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the meaning
of ERISA section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefore now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether legally binding or not, under which any employee or former
employee of Z-D or any of its Subsidiaries has any present or future right to
benefits and under which Z-D or any of its Subsidiaries has any present or
future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Z-D Benefit Plans".
Section 3.2(n)(i) of the Z-D Disclosure Schedule lists each employment agreement
in effect on the date of this Agreement.
(ii) With respect to each Z-D Benefit Plan, Z-D has delivered
or made available to CNET a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (A) any related trust agreement or other funding instrument; (B) the
most recent determination letter, if applicable; (C) any current summary plan
description and other written communications (or a description of any oral
communications) by Z-D or any of its Subsidiaries within the last year or any
communication that modifies or amends benefits under a Z-D Benefit Plan to their
employees concerning the extent of the benefits provided under a Z-D Benefit
Plan; and (D) for the two most recent years the Form 5500 and attached
schedules, audited financial statements, actuarial valuation reports and
attorney's response to an auditor's request for information.
(iii) (A) Each Z-D Benefit Plan has been established and
administered in accordance with its terms, and in substantial compliance with
the applicable provisions of ERISA, the Code and other applicable laws, rules
and regulations; (B) each Z-D Benefit Plan which is intended to be qualified
within the meaning of Code section 401(a) is so qualified and has received a
favorable determination letter as to its qualification, and nothing has
occurred, whether by action or failure to act, that could reasonably be expected
to cause the loss of such qualification; (C) no event has occurred and no
condition exists that would subject Z-D or any of its Subsidiaries, either
directly or by reason of their affiliation with any member of their "Controlled
Group" (defined as any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o)), to
any material tax, fine, lien, penalty or other liability imposed by ERISA, the
Code or other applicable laws, rules
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and regulations; (D) for each Z-D Benefit Plan with respect to which a Form 5500
has been filed, no material change has occurred with respect to the matters
covered by the most recent Form since the date thereof; (E) no "reportable
event" (as such term is defined in ERISA section 4043), or "accumulated funding
deficiency" (as such term is defined in ERISA section 302 and Code section 412
(whether or not waived)) has occurred with respect to any Z-D Benefit Plan; (F)
neither Z-D nor any of its Subsidiaries has engaged in a transaction with
respect to any Z-D Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the Company or any
subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material; (G) no Z-D Benefit
Plan provides retiree welfare benefits and neither Z-D nor any of its
Subsidiaries have any obligation to provide any retiree welfare benefits other
than as required by Section 4980B of the Code; (H) neither Z-D nor any member of
its Controlled Group has engaged in, or is a successor or parent corporation to
an entity that has engaged in, a transaction described in Sections 4069 or
4212(c) of ERISA; and (I) the compensation of each employee of Z-D or any of its
Subsidiaries has been, or will be, fully deductible by Z-D or any of its
Subsidiaries notwithstanding the provisions of Section 162(m) of the provisions
of the Code and the regulations promulgated thereunder.
(iv) No Z-D Benefit Plan is subject to Title IV of ERISA
(including without limitation any multiemployer plan within the meaning of
section 4001(a)(3) of ERISA, and none of Z-D, its Subsidiaries or any member of
their Controlled Group has incurred any liability under Title IV of ERISA that
remains unsatisfied.
(v) With respect to any Z-D Benefit Plan, (A) no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
are pending or, to the knowledge of Z-D, threatened, (B) no facts or
circumstances exist to the knowledge of Z-D that could reasonably be expected to
give rise to any such actions, suits or claims, and (C) no written or oral
communication has been received from the PBGC in respect of any Z-D Benefit Plan
subject to Title IV of ERISA concerning the funded status of any such plan or
any transfer of assets and liabilities from any such plan in connection with the
transactions contemplated herein.
(vi) Except as set forth on Schedule 3.2(n), no Z-D Benefit
Plan exists that could result in the payment to any present or former employee
of Z-D or any of its Subsidiaries of any money or other property or accelerate
or provide any other rights or benefits to any present or former employee of Z-D
or any of its Subsidiaries as a result of the transaction contemplated by this
Agreement. Except as set forth on Schedule 3.2(n), there is no contract, plan or
arrangement (written or otherwise) covering any employee or former employee of
Z-D or any of its Subsidiaries that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to the
terms of Section 280G of the Code.
(o) Insurance.
All primary, excess and umbrella policies, bonds and other
forms of insurance currently owned or held by or on behalf of and/or providing
insurance coverage to Z-D and its Subsidiaries and their respective directors,
officers, agents and employees are in full force and effect, except for any such
forms of insurance the absence of which would not likely have a Material Adverse
Effect on Z-D. Z-D has not received a notice of default under any such policy
and has not received written notice of any pending or threatened termination or
cancellation, coverage limitation or reduction, or material premium increase
with respect to any such policy.
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Except as set forth in Section 3.2(o) of the Z-D Disclosure Schedule, no letters
of credit have been posted and no cash has been restricted to support any
reserves for insurance.
(p) Properties.
Except for properties and assets disposed of in the ordinary
course of business consistent with past practices, since December 31, 1999, Z-D
and its Significant Subsidiaries have good and marketable title, free and clear
of all liabilities and liens, to all their material properties and assets,
whether tangible or intangible, real, personal or mixed. All material buildings,
fixtures, equipment and other property and assets held under leases by Z-D or
any of its Significant Subsidiaries are held under valid instruments enforceable
by Z-D or such Significant Subsidiary in accordance with their respective terms.
Substantially all of Z-D's and its Significant Subsidiaries' equipment in
regular use has been well maintained and is in good and serviceable condition,
reasonable wear and tear excepted.
(q) Affiliate Transactions.
Except as set forth on Section 3.2(q) of the Z-D Disclosure
Schedule there is no agreement, arrangement or transaction between Z-D or any
Subsidiary of Z-D (other than Z-D Events, Inc.) and Z-D Majority Stockholder or
any Subsidiary of Z-D Majority Stockholder. Z-D has no loans in excess of
$25,000 of principal and interest outstanding to any of its employees, officers
or directors, except as disclosed in the Z-D Filed SEC Reports.
(r) Restructuring Transactions.
(i) In accordance with the plan of restructuring previously
approved by the Board of Directors and stockholders of Z-D, prior to the date
hereof Z-D has sold all of the businesses listed on Section 3.2(r) of the Z-D
Disclosure Schedule (the "Divested Businesses"). Set forth on Section 3.2(r) of
the Z-D Disclosure Schedule is a list of all agreements, arrangements and
understandings to which Z-D or any of its Subsidiaries is a party or pursuant to
which they may have any obligations or liabilities (whether absolute, contingent
or otherwise and whether or not required to be set forth or reflected in a
consolidated balance sheet of Z-D prepared in accordance with GAAP) relating to
the Divested Businesses or the sale thereof other than obligations or
liabilities against which Z-D is indemnified by the buyer thereof (the
"Divestiture Agreements"). Z-D has provided to CNET true and correct copies of
the Divestiture Agreements. All of the Divestiture Agreements are in full force
and effect and are unmodified. Except for obligations and liabilities arising
under or described in the Divestiture Agreements, neither Z-D nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether absolute,
contingent or otherwise and whether or not required to be set forth or reflected
in a consolidated balance sheet of Z-D prepared in accordance with GAAP) arising
out of or relating to the Divested Businesses or their respective businesses,
assets, liabilities or obligations or the sale thereof other than obligations or
liabilities against which Z-D is indemnified by the buyer thereof. Except as set
forth in Section 3.2(r) of the Z-D Disclosure Schedule, no claims have been
asserted or threatened against Z-D or any of its Subsidiaries under any of the
Divestiture Agreements (including, without limitation, any claims in respect of
a breach of any term of any such agreement or for any indemnification provided
by Z-D or any of its Subsidiaries in any Divestiture Agreement) nor to the
knowledge of Z-D is there any basis for any such claim, in each case other than
immaterial claims arising following the date hereof and prior to the Effective
Time.
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(ii) Except as disclosed in the Spin Co. S-1 as filed with the
SEC prior to the date hereof, (A) Spin Co. and its Subsidiaries do not own or
have any rights to use any properties, assets or other rights used in the
conduct of the business of Z-D or any of Z-D's Subsidiaries (other than Spin Co.
and Spin Co.'s Subsidiaries), (B) there are no agreements, arrangements,
understandings or other transactions between Spin Co. or any of its
Subsidiaries, on the one hand, and Z-D and any of its Subsidiaries (other than
Spin Co. and its Subsidiaries) on the other and (C) since December 31, 1999 no
officer or key employee of Z-D or any of its Subsidiaries (other than Spin Co.
and its Subsidiaries) has transferred to, or otherwise become an employee or
consultant of, Spin Co. or any of its Subsidiaries. The assets of Spin Co. and
its Subsidiaries consist entirely of (i) assets reflected as "Net assets of
discontinued operations" on the consolidated balance sheets of Z-D included in
the Z-D Filed SEC Reports (the "Z-D Financial Statements") and (ii) assets
acquired by Spin Co. and its Subsidiaries after the date of the Z-D Financial
Statements. Since the date of the Z-D Financial Statements, neither Z-D nor any
of its Subsidiaries (other than Spin Co. and its Subsidiaries) has transferred
any assets or other rights to Spin Co. and its Subsidiaries except cash
transfers prior to the date hereof that are fully reflected in the net
inter-company payable from Spin Co. and its Subsidiaries to Z-D. Z-D and its
Subsidiaries (other than Spin Co. and its Subsidiaries) do not have any
liabilities or other obligations (whether absolute, contingent or otherwise and
whether or not required to be set forth in or reflected on a balance sheet
prepared in accordance with GAAP) arising out of or relating to Spin Co. or its
Subsidiaries or their respective properties, assets and other activities other
than (i) those to be expressly provided for in the Distribution Agreement (as
defined below) and (ii) those for which Spin Co. will indemnify Z-D and its
Subsidiaries pursuant to the Distribution Agreement. For all purposes of this
Agreement, the Subsidiaries of Spin Co. will include those entities being
transferred to Spin Co. pursuant to the Distribution Agreement. All outstanding
indebtedness of Spin Co. and its Subsidiaries (including the $150,000,000
interim debt facility) is non-recourse to Z-D and its Subsidiaries (other than
Spin Co. and its Subsidiaries). The Preliminary Spin-Off Prospectus included as
part of the Spin Co. S-1 as filed with the SEC prior to the date hereof
accurately describes in all material respects Z-D's current plans with respect
to the Spin-Off and the Cash Dividend. Section 3.2(r)(ii) of the Z-D Disclosure
Schedule sets forth Z-D's good faith estimate of the amounts set forth therein
and Z-D knows of no other fees or expenses payable by Z-D relating to the
Spin-Off, the restructuring or the Merger which have not been included therein.
At the time of the Spin-Off and after giving effect to the contemplated
borrowings and the payment of the proceeds thereof to Z-D, Spin Co. will be
Solvent (as defined in Section 8.12) and will have a net worth (fair market
value of assets minus fair market value of liabilities) of at least $1.00.
(s) Valuation Methodology.
Section 3.2(s) of the Z-D Disclosure Schedule sets forth the
valuation methodology used to establish the relationship between the Z-D
Exchange Ratio and the Z-D Net Exchange Ratio.
(t) Brokers or Finders.
No agent, broker, investment banker, financial advisor or
other firm or Person is or will be entitled to any broker's or finder's fee or
any other similar commission or fee in connection with any of the transactions
contemplated by this Agreement, based upon arrangements made by or on behalf of
Z-D, except Morgan Stanley Dean Witter, whose fees and expenses will be paid by
Z-D. Z-D has provided to CNET a true, correct and complete copy of Z-D's
agreement
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with Morgan Stanley Dean Witter relating to this Agreement, the Merger, the
Spin-Off and the Divestitures.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of CNET.
During the period from the date of this Agreement and
continuing until the Effective Time, CNET agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or Section 4.1 (including its subsections) of the CNET Disclosure
Schedule or to the extent that Z-D shall otherwise consent in writing, such
consent not to be unreasonably withheld):
(a) Ordinary Course.
CNET and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all material respects,
in substantially the same manner as heretofore conducted, and shall use its
reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them to the end
that their ongoing businesses shall not be impaired in any material respect at
the Effective Time.
(b) Dividends; Repurchases of Share Capital.
CNET shall not, and shall not propose to, (i) declare or pay
any dividends on or make other distributions in respect of any of its
outstanding shares of capital stock; (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock; or (iii) repurchase, redeem or otherwise acquire any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock pursuant to any tender offer or exchange offer.
(c) Governing Documents.
Except to the extent required to comply with their respective
obligations under this Agreement or with applicable law, CNET and Merger Sub
shall not amend or propose to amend their respective certificates of
incorporation or bylaws in a manner that could reasonably be expected to
materially and adversely affect CNET's or Merger Sub's ability to effect the
consummation of the Merger.
(d) No Acquisitions.
CNET shall not acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association, joint venture or other business
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organization or division thereof or otherwise acquire or agree to acquire any
assets (excluding the acquisition of assets used in the operations of the
business of CNET and its Subsidiaries in the ordinary course, which assets do
not constitute a business unit, division or all or substantially all of the
assets of the transferor) to the extent such acquisition could reasonably be
expected to materially delay or interfere with the consummation of the Merger;
provided, however, that the foregoing shall not prohibit (x) internal
reorganizations or consolidations involving existing Subsidiaries of CNET or (y)
the creation of new Subsidiaries of CNET organized to conduct or continue
activities otherwise permitted by this Agreement; provided, further, however,
that CNET shall not be permitted to acquire that certain company set forth on
Section 4.1(d) of the CNET Disclosure Schedule. For the avoidance of doubt, the
parties agree that an acquisition would "materially delay" consummation of the
Merger if pro forma financial statements would be required to be included in the
relevant disclosure document relating to such acquisition and complying with
such a requirement would delay clearance of the Form S-4 (as defined below) by
the SEC.
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(e) Qualification.
CNET shall use its reasonable best efforts not to, and shall
use its reasonable best efforts not to permit any of its Subsidiaries to, take
any action (including any action otherwise permitted by this Section 4.1) that
would prevent or impede the Merger from qualifying as a reorganization under
Section 368(a) of the Code.
(f) Benefits Maintenance.
CNET shall maintain for a period of one year after the
Effective Time, without interruption, employee compensation and benefit plans,
programs and policies and fringe benefits (including post-employment welfare
benefits but excluding equity-based arrangements and compensation plans) that
will provide benefits to each employee of Z-D who continues employment with CNET
after the Effective Time that are in the aggregate no less favorable than those
provided to similarly situated CNET employees pursuant to employee compensation
and benefit plans, programs and policies, and fringe benefits of CNET as in
effect from time to time. Employees of Z-D who continue employment with CNET
shall be given credit for all service with Z-D (or service credited by Z-D for
similar plans, programs or policies) under all employee compensation and benefit
plans, programs and policies and fringe benefits of CNET in which they become
participants for purposes of eligibility, vesting and benefit accrual (other
than benefit accrual under tax qualified defined benefit plans which would
provide a duplication of benefits to employees of Z-D).
(g) Income Tax Elections.
CNET shall not (i) change its fiscal year, (ii) make or change
any Tax election, (iii) change any method of Tax accounting, (iv) enter into any
closing agreement relating to any Tax, or (v) surrender any right to claim a Tax
Refund, that, individually or in the aggregate, in the United States or
elsewhere, would be material to CNET.
(h) No Related Actions.
CNET will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
4.2 Covenants of Z-D.
During the period from the date of this Agreement and
continuing until the Effective Time, Z-D agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or Section 4.2 (including its subsections) of the Z-D Disclosure
Schedule or to the extent that CNET shall otherwise consent in writing, which
consent shall not be unreasonably withheld):
(a) Ordinary Course.
(i) Except in connection with the Spin-Off and the Cash
Dividend, Z-D and its Subsidiaries shall carry on their respective businesses in
the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use their
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reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them (including,
without limitation, by delaying payment of accounts payable) and retain the
services of their respective officers and key employees and consultants, to the
end that their ongoing businesses shall not be impaired in any material respect
at the Effective Time.
(ii) Other than in connection with acquisitions permitted by
Section 4.2(e) or investments permitted by Section 4.2(g), Z-D shall not, and
shall not permit any of its Subsidiaries to, (A) enter into any new material
line of business or (B) incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith other than capital
expenditures and obligations or liabilities in connection therewith as disclosed
in Section 4.2(a) of the Z-D Disclosure Schedule or obligations or liabilities
in non-material amounts incurred or committed to in the ordinary course of
business consistent with past practice.
(b) Dividends; Changes in Share Capital.
Z-D shall not, and shall not permit any of its Subsidiaries
to, and shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except the Spin-Off and
the Cash Dividend in the manner provided in Section 5.12; (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned Subsidiary of Z-D which remains a wholly owned Subsidiary after
consummation of such transaction; or (iii) except as set forth in Section 4.2(b)
of the Z-D Disclosure Schedule, repurchase, redeem or otherwise acquire any
shares of its capital stock or any securities convertible into or exercisable
for any shares of its capital stock, except for the purchase from time to time
by Z-D of Z-D Common Stock and Z-D Net Common Stock in connection with the Z-D
Benefit Plans in the ordinary course of business consistent with past practice.
(c) Issuance of Securities.
Z-D shall not, and shall not permit any of its Subsidiaries
to, issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock of any class, any Z-D Voting Debt or
any securities convertible into or exercisable for, or any rights, warrants,
calls or options to acquire, any such shares or Z-D Voting Debt, or enter into
any commitment, arrangement, undertaking or agreement with respect to any of the
foregoing, other than (i) the issuance of Z-D Common Stock and Z-D Net Common
Stock upon the exercise of Z-D Stock Options in accordance with their present
terms or pursuant to Z-D Stock Options or other stock based awards granted
pursuant to clause (ii) below, (ii) the granting of up to 100,000 Z-D Stock
Options or other stock based awards of or to acquire shares of Z-D Net Common
Stock granted under Z-D Stock Option Plans outstanding on the date hereof in the
ordinary course of business consistent with past practice, (iii) issuances by a
wholly owned Subsidiary of Z-D of capital stock to such Subsidiary's parent or
another wholly owned Subsidiary of Z-D, (iv) pursuant to acquisitions and
investments as disclosed in Section 4.2(e) or 4.2(g) of the Z-D Disclosure
Schedule or the financings therefore, (v) in connection with the Spin-Off, or
(vi) issuances disclosed in Section 4.2(c) of the Z-D Disclosure Schedule.
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(d) Governing Documents.
Except as set forth in Section 4.2(d) of the Z-D Disclosure
Schedule or to the extent required to comply with their respective obligations
hereunder or with applicable law, Z-D and its Subsidiaries shall not amend or
propose to amend their respective certificates of incorporation or bylaws.
(e) No Acquisitions.
Other than acquisitions disclosed in Section 4.2(e) of the Z-D
Disclosure Schedule and the restructurings required in connection with the
Spin-Off, Z-D shall not, and shall not permit any of its Subsidiaries to,
acquire or agree to acquire by merger or consolidation, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets (excluding the acquisition of assets used
in the operations of the business of Z-D and its Subsidiaries in the ordinary
course, which assets do not constitute a business unit, division or all or
substantially all of the assets of the transferor); provided, however, that
notwithstanding anything herein to the contrary, (i) between the date hereof and
120 days after the date hereof, Z-D shall be permitted to make acquisitions
provided that (x) no cash consideration is to be paid or debt incurred in
connection therewith unless Z-D reasonably believes that it will not have any
debt outstanding at the Effective Time, following payment of all expenses set
forth in Section 3.2(r) of the Z-D Disclosure Schedule, and (y) the
consideration to be paid by Z-D in any individual acquisition is less than $25
million; and provided further that the aggregate consideration to be paid by Z-D
in all such acquisitions is not more than $50 million and (ii) if the Closing
does not take place within 120 days of the date hereof, the $50 million referred
to in clause (i) above shall be increased to $70 million and (iii) in any event,
the acquired company shall not be an Affiliate of Z-D Majority Stockholder;
provided, further, that issuance of such shares would not cause Z-D Majority
Stockholder to own of record, for purposes of the Z-D Stockholders Meeting, less
than a majority of the voting power of the shares of Z-D Common Stock and Z-D
Net Common Stock entitled to vote at the Z-D Stockholders Meeting; and provided,
further, however, that Z-D shall not be permitted to acquire that certain
company set forth in Schedule 4.1(d) of the CNET Disclosure Schedule prior to
the Effective Time. Without limiting the foregoing, Z-D shall not, and shall not
permit any of its Subsidiaries to, engage in (x) internal reorganizations or
consolidations involving existing Subsidiaries of Z-D (other than required in
connection with the Spin-Off contemplated by the Distribution Agreement) or (y)
the creation of new Subsidiaries of Z-D organized to conduct or continue
activities otherwise permitted by this Agreement.
(f) No Dispositions.
Other than as disclosed in Section 4.2(f) of the Z-D
Disclosure Schedule, Z-D shall not, and shall not permit any of its Subsidiaries
to, sell, lease or otherwise dispose of, or agree to sell, lease or otherwise
dispose of, any of its assets (including capital stock of Subsidiaries of Z-D)
except for the Spin-Off or the Cash Dividend and for sales in the ordinary
course of business.
(g) Investments; Indebtedness.
Z-D shall not, and shall not permit any of its Subsidiaries
to, other than as disclosed in Section 4.2(g) of the Z-D Disclosure Schedule,
make any loans, advances or capital contributions to, or investments in, any
Person, incur any indebtedness for borrowed money or
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guarantee any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of Z-D or
any of its Subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another Person (other than any wholly owned Subsidiary) or enter
into any arrangement having the economic effect of any of the foregoing
(collectively, "Z-D Indebtedness"), except for the financings by Spin Co. that
are non-recourse to Z-D and its Subsidiaries (other than Spin Co. and its
Subsidiaries) in connection with the Spin-Off and except that Z-D may, with the
prior consent of CNET, which will not be unreasonably withheld, enter into and
borrow up to $10 million in indebtedness pursuant to a line of credit facility
that by its terms is not due until at least six months following the Closing.
(h) Tax-Free Qualification.
Z-D shall use its reasonable best efforts not to, and shall
use its reasonable best efforts not to permit any of its Subsidiaries to, take
any action (including any action otherwise permitted by this Section 4.2)(a)
that would prevent or impede the Merger from qualifying as a reorganization
under Section 368(a) of the Code.
(i) Compensation.
Except as required by law or by the terms of any collective
bargaining agreement or other agreement currently in effect between Z-D or any
Subsidiary of Z-D and any executive officer or employee thereof, Z-D shall not
increase the salary of any director, executive officer or key employee of Z-D or
any Significant Subsidiary of Z-D (except in the ordinary course of business
consistent with past practice), or make any increase in or commitment to
increase any employee benefits or bonuses, accelerate the exercisability of any
Z-D Stock Options, provide any current or former employee a cash payment in
cancellation of any Z-D Stock Option, make any severance payments, adopt or
amend or make any commitment to adopt or amend any Z-D Benefit Plan or any plan,
program or arrangement that would be a Z-D Benefit Plan if in effect as of the
date hereof or make any contribution, other than regularly scheduled
contributions, to any Z-D Benefit Plan. Any option granted or committed to be
granted after the date hereof shall not accelerate as a result of the approval
or consummation of any transaction contemplated by this Agreement.
(j) Accounting Methods; Income Tax Elections.
Except as disclosed in the Z-D SEC Reports filed prior to the
date of this Agreement, or as required by a Governmental Entity, Z-D shall not
change its methods of accounting in effect at December 31, 1999, except as
required by changes in GAAP as concurred in by Z-D's independent public
accountants. Z-D shall not (i) change its fiscal year, (ii) make or change any
Tax election, (iii) change any annual Tax accounting period, (iv) change any
method of Tax accounting, (v) file any amended Tax Return, (vi) enter into any
closing agreement relating to any Tax, (vii) settle any material Tax claim or
assessment, or (viii) surrender any right to claim a Tax Refund, that,
individually or in the aggregate, in the United States or elsewhere, would be
material to Z-D or the Surviving Corporation.
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(k) Certain Agreements and Arrangements.
Except as set forth in Section 4.2(k) of the Z-D Disclosure
Schedule, Z-D shall not, and shall not permit any of its Subsidiaries to, enter
into any agreements or arrangements that (i) provide exclusive rights to any
third party, including in any territory; (ii) could, after the Effective Time,
reasonably be expected to limit or restrict CNET or any of its Affiliates
(including CNET) or any successor thereto, from engaging or competing in any
line of business or in any geographic area; or (iii) would be a "material
contract" or would have been required to be included in Section 3.2(m) of the
Z-D Disclosure Schedule had such contract been in existence on the date of this
Agreement.
(l) Settlements.
Z-D shall not, and shall not permit any of its Subsidiaries
to, settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit, controversy or similar dispute or
proceeding.
(m) Spin Co.
Z-D will not, and will not permit any of its Subsidiaries to,
take any action that would result in the representations and warranties
contained in Section 3.2(r) being untrue in any respect immediately prior to the
Effective Time nor will Z-D or any Subsidiary of Z-D (other than Spin Co.)
transfer any property, assets, employees or other rights to Spin Co. or any of
its Subsidiaries (other than assets primarily related to Spin Co. and reflected
on the Z-D Financial Statements as "net assets of discontinued operations" and
cash transfers to Spin Co. that are reflected in Section 5.12).
(n) No Related Actions.
Z-D will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
4.3 Governmental Filings.
Each party shall (a) confer on a reasonable basis with the
other and (b) report to the other (to the extent permitted by law or regulation
or any applicable confidentiality agreement) on operational matters. Z-D and
CNET shall file all reports required to be filed by each of them with the SEC
(and all other Governmental Entities) between the date of this Agreement and the
Effective Time and shall, if requested by the other party and to the extent
permitted by law or regulation or any applicable confidentiality agreement,
deliver to the other party copies of all such reports, announcements and
publications promptly after such request.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; Stockholders Meetings.
(a) As promptly as reasonably practicable following the date
hereof, CNET and Z-D shall cooperate in preparing and each shall cause to be
filed with the SEC mutually acceptable proxy materials which shall constitute
the joint proxy statement/prospectus relating to the matters to be submitted to
the CNET stockholders at the CNET Stockholders Meeting (as defined in Section
5.1(c)) and the matters to be submitted to the Z-D stockholders at the Z-D
Stockholders Meeting (defined in Section 5.1(b)) (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Joint
Proxy Statement/Prospectus") and CNET shall prepare and file with the SEC a
registration statement on Form S-4 with respect to the issuance of CNET Common
Stock in the Merger (such Form S-4, and any amendments or supplements thereto,
the "Form S-4"). The Joint Proxy Statement/Prospectus will be included as a
prospectus in and will constitute a part of the Form S-4 as CNET's prospectus.
Each of CNET and Z-D shall use reasonable best efforts to have the Joint Proxy
Statement/Prospectus cleared by the SEC and the Form S-4 declared effective by
the SEC and to keep the Form S-4 effective as long as is necessary to consummate
the Merger and the transactions contemplated hereby and thereby. CNET and Z-D
shall, as promptly as practicable after receipt thereof, provide the other party
copies of any written comments and advise the other party of any oral comments,
with respect to the Joint Proxy Statement/Prospectus or Form S-4 received from
the SEC. The parties shall cooperate and provide the other with a reasonable
opportunity to review and comment on any amendment or supplement to the Joint
Proxy Statement/Prospectus and the Form S-4 prior to filing such with the SEC,
and will provide each other with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment or
supplement (including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Form S-4 shall be made without the approval of both
parties, which approval shall not be unreasonably withheld or delayed; provided
that with respect to documents filed by a party which are incorporated by
reference in the Form S-4 or Joint Proxy Statement/Prospectus, this right of
approval shall apply only with respect to information relating to the other
party or its business, financial condition or results of operations. CNET will
use reasonable best efforts to cause the Joint Proxy Statement/Prospectus to be
mailed to CNET stockholders, and Z-D will use reasonable best efforts to cause
the Joint Proxy Statement/Prospectus to be mailed to Z-D's stockholders, in each
case as promptly as practicable after the Form S-4 is declared effective under
the Securities Act. CNET shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken under any applicable
state securities laws in connection with the Merger and each of Z-D and CNET
shall furnish all information concerning it and the holders of its capital stock
as may be reasonably requested in connection with any such action. Each party
will advise the other party, promptly after it receives notice thereof, of the
time when the Form S-4 has become effective, the issuance of any stop order, the
suspension of the qualification of the CNET Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any request by the
SEC for amendment of the Joint Proxy Statement/Prospectus or the Form S-4. If at
any time prior to the Effective Time any information relating to CNET or Z-D, or
any of their respective affiliates, officers or directors, should be discovered
by CNET or Z-D, which information should be set forth in an amendment or
supplement to either the Form S-4 or the Joint Proxy Statement/Prospectus so
that any of such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other party hereto
and, to the extent required by law, rules or regulations, an appropriate
amendment or supplement describing such information shall be promptly filed with
the SEC and disseminated to the stockholders of CNET and Z-D.
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(b) Z-D shall duly take all lawful action to call, give notice
of, convene and hold a meeting of its stockholders on a date determined in
accordance with the mutual agreement of Z-D and CNET (the "Z-D Stockholders
Meeting") for the purpose of obtaining the Z-D Stockholder Approval and shall
its use reasonable best efforts to solicit the Z-D Stockholder Vote; and the
Board of Directors of Z-D shall recommend adoption of this Agreement by the
stockholders of Z-D (the "Z-D Recommendation"), and shall not, unless CNET makes
a change in the CNET Recommendation, (x) withdraw, modify or qualify (or propose
to withdraw, modify or qualify) in any manner adverse to CNET such
recommendation or (y) take any action or make any statement (other than any
action described in the foregoing clause (x)) in connection with the Z-D
Stockholders Meeting inconsistent with such recommendation (collectively, a
"Change in the Z-D Recommendation"); provided, however, any action or statement
under clause (y) will not be deemed a Change in the Z-D Recommendation provided
(I) such action or statement is taken or made pursuant to advice from Sullivan &
Cromwell, counsel to Z-D, to the effect that such action or statement is
required by applicable law, (II) if a Z-D Public Proposal has been made and not
rescinded, such action or statement shall not relate to such Z-D Public Proposal
other than any factual statement required by any regulatory authority (including
the SEC) and shall in any event include a rejection of such Z-D Public Proposal
and (III) such action or statement also includes a reaffirmation of the Z-D
Board of Directors' approval of the Merger and the other transactions
contemplated hereby and recommendation to the Z-D stockholders to adopt this
Agreement provided further, however, that, notwithstanding clause (I), (II) or
(III), the Board of Directors of Z-D may make a Change in the Z-D Recommendation
pursuant to Section 5.4 hereof. Notwithstanding any Change in the Z-D
Recommendation, this Agreement shall be submitted to the stockholders of Z-D at
the Z-D Stockholders Meeting for the purpose of adopting this Agreement and
nothing contained herein shall be deemed to relieve Z-D of such obligation.
(c) CNET shall duly take all lawful action to call, give
notice of, convene and hold a meeting of its stockholders on a date determined
in accordance with the mutual agreement of CNET and Z-D (the "CNET Stockholders
Meeting") for the purpose of obtaining the CNET Stockholder Approval with
respect to the transactions contemplated by this Agreement and shall use its
reasonable best efforts to solicit the CNET Stockholder Vote, and the Board of
Directors of CNET shall recommend approval of the issuance of CNET Common Stock
pursuant to this Agreement by the stockholders of CNET (the "CNET
Recommendation"), and shall not, unless Z-D makes a Change in the Z-D
Recommendation, (x) withdraw, modify or qualify (or propose to withdraw, modify
or qualify) in any manner adverse to Z-D such recommendation or (y) take any
action or make any statement (other than any action described in the foregoing
clause (x)) in connection with the CNET Stockholders Meeting inconsistent with
such recommendation (collectively, a "Change in the CNET Recommendation");
provided, however, any action or statement under clause (y) will not be deemed a
Change in the CNET Recommendation provided (I) such action or statement is taken
or made pursuant to advice from Simpson Thacher & Bartlett, counsel to CNET, to
the effect that such action or statement is required by applicable law, (II) if
a CNET Public Proposal has been made and not rescinded, such action or statement
shall not relate to such CNET Public Proposal other than any factual statement
required by any regulatory authority (including the SEC) and shall in any event
include a rejection of such CNET Public Proposal and (III) such action or
statement also includes a reaffirmation of the CNET Board of Directors' approval
of the Merger and the other transactions contemplated hereby and recommendation
to the CNET stockholders to approve the issuance of CNET Common Stock pursuant
to this Agreement; provided further, however, that, notwithstanding clause (I),
(II) or (III), the Board of Directors of CNET may make a Change in the CNET
Recommendation pursuant to Section 5.4 hereof.
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Notwithstanding any Change in the CNET Recommendation, this Agreement shall be
submitted to the stockholders of CNET at the CNET Stockholders Meeting for the
purpose of approving the issuance of CNET Common Stock pursuant to this
Agreement and nothing contained herein shall be deemed to relieve CNET of such
obligation.
5.2 Access to Information.
Upon reasonable notice, each party shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of the other party reasonable
access during normal business hours, during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, records, officers
and employees and, during such period, such party shall (and shall cause its
Subsidiaries to) furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed, published, announced
or received by it during such period pursuant to the requirements of Federal or
state securities laws and the HSR Act and (b) all other information concerning
it and its business, properties and personnel as such other party may reasonably
request; provided, however, that either party may restrict the foregoing access
to the extent that (i) any law, treaty, rule or regulation of any Governmental
Entity applicable to such party or any contract requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or
information or (ii) the information is subject to confidentiality obligations to
a third party. The parties will hold any such information obtained pursuant to
this Section 5.2 in confidence in accordance with, and shall otherwise be
subject to, the provisions of the confidentiality letter dated June 28, 2000,
between Z-D and CNET (the "Confidentiality Agreement"), which Confidentiality
Agreement shall continue in full force and effect. Any investigation by either
of CNET or Z-D shall not affect the representations and warranties of the other.
5.3 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement,
each party will use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under this Agreement and applicable laws and regulations to consummate
the Merger and the other transactions contemplated by this Agreement as soon as
practicable after the date hereof, including (i) preparing and filing as
promptly as practicable all documentation to effect all necessary applications,
notices, petitions, filings and other documents and to obtain as promptly as
practicable all Necessary Consents and all other consents, waivers, licenses,
orders, registrations, approvals, permits, rulings, authorizations and
clearances necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement (collectively, the "Required
Approvals") and (ii) taking all reasonable steps as may be necessary to obtain
all such Necessary Consents and the Required Approvals. In furtherance and not
in limitation of the foregoing, each party hereto agrees to make, as promptly as
practicable, (i) an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby
(which filing shall be made in any event within 10 Business Days of the date
hereof), and (ii) all other necessary filings with other Governmental Entities
relating to the Merger, and, in each case, to supply as promptly as practicable
any additional information and documentary material that may be requested
pursuant to such laws or by such authorities and to use reasonable best efforts
to cause the expiration or termination of the applicable waiting periods under
the HSR Act and the receipt of Required Approvals under such
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other laws or from such authorities as soon as practicable. Notwithstanding the
foregoing, nothing in this Section or the other provisions of this Agreement
shall require, or be deemed to require, (x) CNET or Z-D or any of their
respective Subsidiaries to agree to divest or hold separate any business or
assets or to effect any such divestiture or action, except in each case that the
parties agree after consultation is not material and does not affect any of the
contemplated benefits of the Merger, (y) CNET or Z-D or any of their
Subsidiaries to agree to any restriction or condition on the conduct of their or
their Subsidiaries' businesses, except in each case that the parties agree after
consultation is not material and does not affect any of the contemplated
benefits of the Merger or (z) CNET or Z-D to take any other action if doing so
would, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on CNET after the Merger. Neither Z-D nor CNET shall
take or agree to take any action identified in clause (x), (y) or (z) of the
immediately preceding sentence without the prior written consent of the other
party.
(b) Each of Z-D and CNET shall, in connection with the efforts
referenced in Section 5.3(a) to obtain all Required Approvals, use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party; (ii) promptly inform the other party of any communication received by
such party from, or given by such party to, the Antitrust Division of the
Department of Justice (the "DOJ"), the Federal Trade Commission (the "FTC") or
any other Governmental Entity and of any material communication received or
given in connection with any proceeding by a private party, in each case
regarding any of the transactions contemplated hereby; and (iii) consult with
each other in advance to the extent practicable of any meeting or conference
with, the DOJ, the FTC or any such other Governmental Entity or, in connection
with any proceeding by a private party, with any other Person, and to the extent
permitted by the DOJ, the FTC or such other applicable Governmental Entity or
other Person, give the other party the opportunity to attend and participate in
such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of
the parties contained in Section 5.3(a) and (b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law (as defined
below), or if any statute, rule, regulation, executive order, decree, injunction
or administrative order is enacted, entered, promulgated or enforced by a
Governmental Entity which would make the Merger or the other transactions
contemplated hereby illegal or would otherwise prohibit or materially impair or
delay the consummation of the Merger or the other transactions contemplated
hereby, each of Z-D and CNET shall cooperate in all respects with each other
and, subject to Section 5.3(a), seek to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the Merger or the other transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable so
as to permit consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.3 shall limit a party's right to terminate this Agreement
pursuant to Section 7.1(b) or 7.1(c) so long as such party has up to then
complied with its obligations under this Section 5.3. For purposes of this
Agreement, "Regulatory Law" means the Sherman Act, as amended, the Clayton Act,
as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
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other federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to prohibit, restrict or regulate (i) mergers, acquisitions or other
business combinations, (ii) foreign investments or (iii) actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition.
(d) Each of Z-D and CNET and its respective Board of Directors
shall, if any state takeover statute or similar statute becomes applicable to
this Agreement, the Merger or any other transactions contemplated hereby or
thereby, take all action reasonably necessary to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on this Agreement, the Merger and the other
transactions contemplated hereby.
5.4 Acquisition Proposals.
(a) Without limitation on any of such party's other
obligations under this Agreement (including under Article IV hereof), each of
CNET and Z-D agrees that neither it nor any of its Subsidiaries nor any of the
officers and directors of it or its Subsidiaries shall, and that it shall direct
and use its reasonable best efforts to cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, (i) initiate, solicit, encourage or knowingly facilitate any
inquiries or the making of any proposal or offer with respect to, or a
transaction to effect, a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving it or any of its Significant Subsidiaries, or any purchase
or sale of 20% or more of the consolidated assets (including without limitation
stock of its Subsidiaries) of such party and its Subsidiaries, taken as a whole,
or any purchase or sale of, or tender or exchange offer for, the equity
securities of such party that, if consummated, would result in any Person (or
the stockholders of such Person) beneficially owning securities representing 20%
or more of the total voting power of such party (or of the surviving parent
entity in such transaction) or any of its Significant Subsidiaries (any such
proposal, offer or transaction (other than a proposal or offer made by the other
party or an Affiliate thereof) being hereinafter referred to as an "Acquisition
Proposal"), (ii) have any discussion with or provide any confidential
information or data to any Person relating to an Acquisition Proposal, or engage
in any negotiations concerning an Acquisition Proposal, or knowingly facilitate
any effort or attempt to make or implement an Acquisition Proposal, (iii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or (iv) approve or recommend, or propose to approve or
recommend, or execute or enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option agreement or other
similar agreement or propose publicly or agree to do any of the foregoing
related to any Acquisition Proposal.
(b) Notwithstanding anything in this Agreement to the
contrary, (i) each of CNET and Z-D and its respective Board of Directors shall
be permitted to, to the extent applicable, comply with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal, and
(ii) each of CNET and Z-D and their respective Board of Directors shall be
permitted to comply with federal securities laws, and (iii) each of CNET and Z-D
or their respective Board of Directors shall be permitted to engage in the
matters set forth in clauses (a) (ii) to (iv) above (other than executing or
entering into, any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement)
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and to make a Change in the CNET Recommendation or a Change in the Z-D
Recommendation, as the case may be, in connection with an Acquisition Proposal
by any such Person, to the extent that: (x) such Acquisition Proposal was not
solicited by such party and such party's Board of Directors, after consultation
with outside counsel, determines in good faith that the failure to take such
action would be inconsistent with its fiduciary duties under applicable law; (y)
prior to providing any information or data to any Person or entering into
discussions or negotiations with any Person, the subject party promptly notifies
the other party of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any inquiries, proposals or offers; and (z) the Board of Directors
of the subject party shall have received from such Person, prior to providing
any information or data to any Person in connection with an Acquisition Proposal
by any such Person, an executed confidentiality agreement having provisions that
are customary in such agreements, as advised by counsel, provided that if such
confidentiality agreement contains provisions that are less restrictive than the
comparable provision, or omits restrictive provisions, contained in the
Confidentiality Agreement, then the Confidentiality Agreement will be deemed to
be amended to contain only such less restrictive provisions or to omit such
restrictive provisions, as the case may be.
(c) Each of Z-D and CNET agrees that it will promptly keep the
other party informed of the status and terms of any such proposals or offers and
the status and terms of any such discussions or negotiations, and that prior to
the time that this Agreement is terminated in accordance with its terms, it will
not sign any agreement inconsistent with the consummation of the Merger. Each of
CNET and Z-D agrees that it will, and will cause its officers, directors and
representatives to, immediately cease and cause to be terminated any activities,
discussions or negotiations existing as of the date of this Agreement with any
parties conducted heretofore with respect to any Acquisition Proposal. Each of
CNET and Z-D agrees that it will use reasonable best efforts to promptly inform
its directors, officers, key employees, agents and representatives of the
obligations undertaken in this Section 5.4. Nothing in this Section 5.4 shall
permit CNET or Z-D to terminate this Agreement (except as specifically provided
in Article VII hereof) or affect any other obligation of CNET or Z-D under this
Agreement. Z-D shall not submit to the vote of its stockholders any Acquisition
Proposal other than the Merger and CNET shall not submit to the vote of its
stockholders any Acquisition Proposal (other than the Merger) that is not a
Qualifying Acquisition Proposal.
(d) Notwithstanding anything contained in this Agreement to
the contrary, CNET shall be permitted to undertake any of the actions set forth
in clauses (a) (i) to (iv) relating to any Qualifying Acquisition Proposal (as
defined in Section 8.12).
5.5 Fees and Expenses.
Subject to Section 7.2, whether or not the Merger is
consummated, all Expenses (as defined below) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses, except (a) if the Merger is consummated, the Surviving
Corporation shall pay, or cause to be paid, any and all property or transfer
taxes imposed in connection with the Merger and (b) Expenses incurred in
connection with the filing, printing and mailing of the Joint Proxy
Statement/Prospectus and Form S-4, which shall be shared equally by CNET and
Z-D. As used in this Agreement, "Expenses" includes all out-of-
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pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the Voting Agreements and the transactions
contemplated hereby and thereby, including the preparation, printing, filing and
mailing of the Joint Proxy Statement/Prospectus and Form S-4 and the
solicitation of stockholder approvals and all other matters related to the
transactions contemplated hereby and thereby.
5.6 Directors' and Officers' Indemnification and Insurance.
(a) The certificate of incorporation and bylaws of the
Surviving Corporation shall contain provisions no less favorable with respect to
exculpation and indemnification than are set forth in Article VIII of the
Amended and Restated Certificate of Incorporation of Z-D and Section 6.4 of the
bylaws of Z-D, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the Effective
Time were directors, officers or employees of Z-D.
(b) CNET shall cause to be maintained in effect for six years
from the Effective Time the current policies of the directors' and officers'
liability insurance maintained by Z-D (provided that CNET may substitute
therefore policies of at least the same coverage containing terms and conditions
which are not materially less advantageous) with respect to matters or events
occurring prior to the Effective Time to the extent available; provided,
however, that in no event shall CNET be required to expend more than an amount
per year equal to $750,000 to maintain or procure insurance coverage pursuant
hereto; and, provided, further that if the annual premiums of such insurance
coverage exceed such amount, CNET shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) After the Effective Time, CNET agrees that it will or will
cause the Surviving Corporation to indemnify and hold harmless each present and
former director and officer of Z-D, determined as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters relating to their duties
or actions in their capacity as officers and directors and existing or occurring
at or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent permitted under applicable law
(and CNET shall, or shall cause the Surviving Corporation to, also advance fees
and expenses (including reasonable attorneys' fees) as incurred to the fullest
extent permitted under applicable law provided the person to whom expenses are
advanced provides a customary undertaking complying with applicable law to repay
such advances if it is ultimately determined that such person is not entitled to
indemnification).
(d) Nothing in this Agreement is intended to, shall be
construed to or shall release, waive or impair any rights to directors' and
officers' insurance claims under any policy that is or has been in existence
with respect to Z-D or any of its officers, directors or employees, it being
understood and agreed that the indemnification provided for this Section 5.6 is
not prior to or in substitution for any such claims under such policies.
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5.7 Public Announcements.
The initial press release pertaining to the transactions
contemplated by this Agreement shall be a joint press release and thereafter
CNET and Z-D shall consult with each other before issuing communications to
employees regarding the transactions contemplated by this Agreement or any press
release or otherwise making any public statements with respect to this Agreement
or the Merger and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with its securities exchange. Z-D and CNET shall each provide
to the other a copy of each press release or other public statement relating to
its business reasonably in advance of making such release or statement.
5.8 Accountant's Letters.
Each of Z-D and CNET shall use its reasonable best efforts to
cause to be delivered to the other party a letter of its independent public
accountants, dated a date within two business days before the date on which the
S-4 shall become effective and addressed to the other, in form and substance
reasonably satisfactory to the other and customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.9 Board of Directors.
Effective at the Effective Time, CNET shall increase the size
of its Board of Directors by adding one directorship and creating one vacancy,
and CNET shall elect to its Board of Directors one designee of Z-D Majority
Stockholder and one designee of Z-D, in each case reasonably acceptable to the
Board of Directors of CNET. If, prior to the first anniversary of the Effective
Time, CNET further increases the size of its Board to nine directors, one
vacancy shall be filled by a designee appointed by the Board of Directors of
CNET who is reasonably acceptable to Z-D Majority Stockholder.
5.10 Listing of Shares of CNET Common Stock.
CNET shall use its reasonable best efforts to cause the shares
of CNET Common Stock to be issued in the Merger and the shares of CNET Common
Stock to be reserved for issuance upon exercise of the Z-D Stock Options to be
approved for listing on the NASDAQ, subject to official notice of issuance,
prior to the Closing Date.
5.11 Affiliates.
Not less than 45 days prior to the date of the Z-D
Stockholders Meeting, Z-D shall deliver to CNET a letter identifying all persons
who, in the judgment of Z-D, may be deemed at the time this Agreement is
submitted for adoption by the stockholders of Z-D, "affiliates" of Z-D for
purposes of Rule 145 under the Securities Act and applicable SEC rules and
regulations, and such list shall be updated as necessary to reflect changes from
the date thereof. Z-D shall use its reasonable best efforts to cause each person
identified on such list to deliver to CNET not less than 30 days prior to the
Effective Time a written agreement in form and substance reasonably satisfactory
to CNET and Z-D.
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5.12 The Spin-Off and Cash Dividend.
(a) Z-D shall use its reasonable best efforts to consummate
the Spin-Off as soon as practicable and in any event prior to the Z-D
Stockholders Meeting, in a manner that will not cause a breach of the
representation set forth in Section 3.2(r)(ii) hereof. Without limiting the
foregoing, to the extent necessary to consummate the Spin-Off prior to the Z-D
Stockholders Meeting, Z-D and Spin Co. will reduce or, to the extent necessary,
eliminate the borrowings by Spin Co. described in the Spin Co. S-1 as filed with
the SEC prior to the date hereof.
(b) Prior to the Effective Time, Z-D may declare and pay the
Cash Dividend in an aggregate amount of $2.50 per share of Z-D Common Stock,
provided that in the event that the Net Cash Transfers (as defined below) from
Spin Co. and its Subsidiaries to Z-D after the date hereof are less than $275
million, the amount of the Cash Dividend per share of Z-D Common Stock will be
reduced so that the aggregate Cash Dividend paid in respect of all shares of Z-D
Common Stock equals the amount of the Net Cash Transfers. As used herein, "Net
Cash Transfers" means the sum of (i) the aggregate cash amount transferred by
Spin Co. and its Subsidiaries to Z-D after the date hereof in repayment of the
net inter-company payable of Spin Co. and its Subsidiaries to Z-D, plus (ii) the
aggregate amount of any cash dividends paid by Spin Co. and its Subsidiaries to
Z-D after the date hereof, minus (iii) all cash transfers from Z-D or its
Subsidiaries to Spin Co. or its Subsidiaries from and after the date of this
Agreement and on or prior to the date that the Cash Dividend is declared. Prior
to the declaration of the Cash Dividend, Z-D will deliver a certificate of the
Chief Financial Officer of Z-D certifying as to the calculation of the amount of
the Cash Dividend that is permitted pursuant to this Section 5.12(b) and setting
forth such calculation in reasonable detail. If the Net Cash Transfers pursuant
to clause (i) are insufficient to repay all net inter-company payables of Spin
Co. and its Subsidiaries to Z-D, then Z-D will forgive all remaining net
inter-company payables owed by Spin-Co. and its Subsidiaries. Z-D agrees that
the Net Cash Transfers will be no less than zero.
(c) Z-D and its Subsidiaries will not make any cash transfers
to Spin Co. or its Subsidiaries after the date the Cash Dividend is declared.
(d) As promptly as practicable following the date hereof, Z-D
and Spin Co. shall enter into a distribution agreement with respect to the Spin
Off, substantially in the form of the draft dated July 11, 2000 which was
previously provided to CNET (except as set forth on Section 5.12(d) of the CNET
Disclosure Schedule) with such changes as are reasonably acceptable to CNET and
Z-D (the "Distribution Agreement").
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of Z-D and CNET to effect the
Merger and the transactions contemplated hereby are subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions:
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(a) Stockholder Approval.
(i) Z-D shall have obtained the Z-D Stockholder Approval and
(ii) CNET shall have obtained the CNET Stockholder Approval.
(b) No Injunctions or Restraints; Illegality.
No Laws shall have been adopted or promulgated, and no
temporary restraining order, preliminary or permanent injunction or other order
issued by a court or other Governmental Entity of competent jurisdiction shall
be in effect, having the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) HSR Act.
The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(d) NASDAQ.
The shares of CNET Common Stock to be issued in the Merger and
such other shares of CNET Common Stock to be reserved for issuance in connection
with the Merger shall have been approved for listing on the NASDAQ, subject to
official notice of issuance.
(e) Effectiveness of the Form S-4.
The Form S-4 shall have been declared effective by the SEC
under the Securities Act and no stop order suspending the effectiveness of the
Form S-4 shall have been issued by the SEC and no proceedings for that purpose
shall have been initiated or threatened by the SEC.
(f) Spin-Off and Cash Dividend.
The Spin-Off shall have been consummated and, to the extent
permitted by Section 5.12, the Cash Dividend shall have been paid.
6.2 Additional Conditions to Obligations of CNET.
The obligation of CNET to effect the Merger and the
transactions contemplated hereby is subject to the satisfaction, or waiver by
CNET, on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties.
(i) The representations and warranties of Z-D set forth in
this Agreement that are qualified as to Material Adverse Effect shall be true
and correct as of the date of this Agreement and as of immediately prior to the
Effective Time (except to the extent such representations and warranties shall
have been made as of an earlier date, in which case such representations and
warranties shall have been so true and correct as of such earlier date) with the
same force and effect as if then made and (ii) the representations and
warranties of Z-D set forth in
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this Agreement that are not qualified as to Material Adverse Effect shall be
true and correct in all respects as of the date of this Agreement and
immediately prior to the Effective Time (except to the extent such
representations and warranties shall have been made as of an earlier date, in
which case such representations and warranties shall have been true and correct
in all material respects as of such earlier date) with the same force and effect
as if then made, except where the failure of such representations and warranties
(other than the representation contained in Section 3.2(b), which shall be true
and correct in all material respects) to be true and correct would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Z-D; and CNET shall have received a certificate of a senior
executive officer and a senior financial officer of Z-D to such effect.
(b) Performance of Obligations of Z-D.
Z-D shall have performed or complied in all material respects
with all agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date, and CNET shall have received a
certificate of a senior executive officer and a senior financial officer of Z-D
to such effect.
(c) Tax Opinion.
CNET shall have received from Simpson Thacher & Bartlett,
counsel to CNET, on the Closing Date, a written opinion to the effect that for
federal income tax purposes the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code. In rendering such opinion, counsel to
CNET shall be entitled to rely upon information, representations and assumptions
provided by CNET and Z-D substantially in the form of Exhibits 6.2(c)(1) and
6.2(c)(2), respectively (allowing for such amendments to the representations as
counsel to CNET deems reasonably necessary).
(d) Solvency of Spin Co.; Cash Received from Spin Co.
Z-D shall have delivered to CNET reasonably satisfactory
evidence to the effect that Spin Co. was, at the time of the Spin-Off, Solvent.
6.3 Additional Conditions to Obligations of Z-D.
The obligations of Z-D to effect the Merger and the
transactions contemplated hereby is subject to the satisfaction, or waiver by
Z-D, on or prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties.
(i) The representations and warranties of CNET and Merger Sub,
as applicable, set forth in this Agreement that are qualified as to Material
Adverse Effect shall be true and correct as of the date of this Agreement and as
of immediately prior to the Effective Time (except to the extent such
representations and warranties shall have been made as of an earlier date, in
which case such representations and warranties shall have been so true and
correct as of such earlier date) with the same force and effect as if then made
and (ii) the representations and warranties of CNET and Merger Sub, as
applicable, set forth in this Agreement that are not
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qualified as to Material Adverse Effect shall be true and correct in all
respects the date of this Agreement and immediately prior to the Effective Time
(except to the extent such representations and warranties shall have been made
as of an earlier date, in which case such representations and warranties shall
have been true and correct in all material respects as of such earlier date)
with the same force and effect as if then made, except where the failure of such
representations and warranties (other than the representation contained in
Section 3.1(b), which shall be true and correct in all material respects) to be
true and correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on CNET; and Z-D shall have received
a certificate of a senior executive officer and a senior financial officer of
each of CNET and Merger Sub to such effect.
(b) Performance of Obligations of CNET and Merger Sub.
Each of CNET and Merger Sub shall have performed or complied
in all material respects with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date, and Z-D
shall have received a certificate of a senior executive officer and a senior
financial officer of each of CNET and Merger Sub to such effect.
(c) Tax Opinion.
Z-D shall have received from Sullivan & Cromwell, counsel to
Z-D, on the Closing Date, a written opinion to the effect that for federal
income tax purposes the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, counsel to Z-D
shall be entitled to rely upon information, representations and assumptions
provided by CNET and Z-D substantially in the form of Exhibits 6.2(c)(1) and
6.2(c)(2), respectively (allowing for such amendments to the representations as
counsel to Z-D deems reasonably necessary).
(d) CNET Conditions.
The conditions set forth in Section 6.2 shall have been
satisfied or waived by CNET.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination.
This Agreement may be terminated at any time prior to the
Effective Time by action taken or authorized by the Board of Directors of the
terminating party or parties and, except as provided below, whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of Z-D or CNET:
(a) By mutual written consent of CNET and Z-D;
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(b) By either Z-D or CNET, if the Effective Time shall not
have occurred on or before January 31, 2001 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement (including without limitation such party's obligations set
forth in Section 5.3) has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date;
(c) By either Z-D or CNET, if any Governmental Entity (i)
shall have issued an order, decree or ruling or taken any other action (which
the parties shall have used their reasonable best efforts to resist, resolve or
lift, as applicable, in accordance with and subject to Section 5.3) permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree or
ruling or to take any other action, and such denial of a request to issue such
order, decree, ruling or take such other action shall have become final and
nonappealable (which order, decree, ruling or other action the parties shall
have used their reasonable best efforts to obtain, in accordance with and
subject to Section 5.3), in the case of each of (i) and (ii) which is necessary
to fulfill the conditions set forth in Sections 6.1(c), (d) or (e), as
applicable; provided, however, that the right to terminate this Agreement under
this Section 7.1(c) shall not be available to any party whose failure to comply
with Section 5.3 has been the cause of such action or inaction;
(d) By either Z-D or CNET, if the approvals of the
stockholders of either CNET or Z-D contemplated by this Agreement shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or of any adjournment thereof at which the vote was
taken;
(e) By CNET, if Z-D shall have (i) failed to make the Z-D
Recommendation or (ii) materially breached its obligations under this Agreement
by reason of a failure to call the Z-D Stockholders Meeting in accordance with
Section 5.1(b) or if Z-D shall have failed to prepare and mail to its
stockholders the Joint Proxy Statement/Prospectus in accordance with Section
5.1(a);
(f) By Z-D, if CNET shall have (i) failed to make the CNET
Recommendation or (ii) materially breached its obligations under this Agreement
by reason of a failure to call the CNET Stockholders Meeting in accordance with
Section 5.1(c), or if CNET shall have failed to prepare and mail to its
stockholders the Joint Proxy Statement/Prospectus in accordance with Section
5.1(a);
(g) By Z-D, if CNET shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, such that the conditions set forth in Section 6.2(a) or (b)
are not capable of being satisfied on or before the Termination Date; or
(h) By CNET, if Z-D shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, such that the conditions set forth in Section 6.3(a) or (b)
are not capable of being satisfied on or before the Termination Date.
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7.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
Z-D or CNET as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of CNET or Z-D or
their respective officers or directors (i) except with respect to the second
sentence of Section 5.2, Section 5.5, this Section 7.2 and Article VIII, which
provisions shall survive such termination, (ii) except that, notwithstanding
anything to the contrary contained in this Agreement, neither CNET nor Z-D shall
be relieved or released from any liabilities or damages arising out of its
willful breach of this Agreement and (iii) except that the non-solicitation
agreement between Z- D and CNET dated as of July 14, 2000 (the "Non-Solicit
Agreement") shall remain in full force and effect in accordance with its terms.
(b) If (A) (I) either party shall terminate this Agreement
pursuant to Section 7.1(d) (provided that the basis for such termination is the
failure of Z-D to obtain the Z-D Stockholder Approval) or pursuant to Section
7.1(b) without the Z-D Stockholders Meeting having occurred, (II) at any time
after the date of this Agreement and before such termination an Acquisition
Proposal with respect to Z-D shall have been publicly announced or otherwise
communicated to the senior management, Board of Directors or stockholders of Z-D
(a "Z-D Public Proposal") and (III) within twelve months of such termination Z-D
or any of its Subsidiaries enters into any definitive agreement with respect to,
or consummates, any Acquisition Proposal (for purposes of this clause (III), the
term "Acquisition Proposal" shall have the meaning assigned to such term in
Section 5.4(a) except that references to "20%" therein shall be deemed to be
references to "40%") or (B) CNET shall terminate this Agreement pursuant to
Section 7.1(e); then Z-D shall promptly, but in no event later than the date of
such termination (or in the case of clause (A), if later, the date Z-D or its
Subsidiary enters into such agreement with respect to or consummates such
Acquisition Proposal), pay CNET an amount equal to $58 million by wire transfer
of immediately available funds (less any amounts previously paid or payable by
Z-D pursuant to Section 7.2(d)), by wire transfer of immediately available
funds).
(c) If (A) (I) either party shall terminate this Agreement
pursuant to Section 7.1(d) (provided that the basis for such termination is the
failure of CNET to obtain the CNET Stockholder Approval) or pursuant to Section
7.1(b) without the CNET Stockholders Meeting having occurred, (II) at any time
after the date of this Agreement and before such termination an Acquisition
Proposal (other than a Qualifying Acquisition Proposal) with respect to CNET
shall have been publicly announced or otherwise communicated to the senior
management, Board of Directors or stockholders of CNET (an "CNET Public
Proposal") and (III) within twelve months of such termination CNET or any of its
Subsidiaries enters into any definitive agreement with respect to, or
consummates, any Acquisition Proposal (for purposes of this clause (III), the
term "Acquisition Proposal" shall have the meaning assigned to such term in
Section 5.4(a) except that references to "20%" therein shall be deemed to be
references to "40%") or (B) Z-D shall terminate this Agreement pursuant to
Section 7.1(f); then CNET shall promptly, but in no event later than the date of
such termination (or in the case of clause (A), if later, the date CNET or its
Subsidiary enters into such agreement with respect to or consummates such
Acquisition Proposal), pay Z-D an amount equal to $105 million (less any amounts
previously paid or payable by CNET pursuant to Section 7.2(d)), by wire transfer
of immediately available funds.
(d) If either party shall terminate this Agreement pursuant to
Section 7.1(d) and the basis for such termination is the failure of CNET to
obtain CNET Stockholder Approval, then,
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if the Z- D Stockholder Approval has been obtained and CNET is not then entitled
to terminate this Agreement pursuant to Section 7.1(h), CNET shall (i) pay Z-D
an amount equal to $60 million, by wire transfer of immediately available funds
and (ii) make an unsecured loan to Z-D in the principal amount of $15 million,
such loan to be due and payable in full at Z-D's option in cash or Z-D Common
Stock (based on the average closing price during the 30 trading days preceding
such repayment) on the earlier of the second anniversary thereof or consummation
by any person of an Acquisition Proposal with respect to Z-D, together with
interest thereon at the applicable federal rate; provided that no payment or
loan shall be made pursuant to this sentence if a termination fee has been paid
to Z-D pursuant to Section 7.2(c). If either party shall terminate this
Agreement pursuant to Section 7.1(d) and the basis for such termination is the
failure of Z-D to obtain the ZD Stockholder Approval, then, if the CNET
Stockholder Approval has been obtained and Z-D is not then entitled to terminate
this Agreement pursuant to Section 7.1(g), Z-D shall pay CNET an amount equal to
$33 million, by wire transfer of immediately available funds; provided that no
payment shall be made pursuant to this sentence if a termination fee has been
paid to CNET pursuant to Section 7.2(b). CNET and Z-D's rights hereunder are in
addition to any rights CNET or Z-D may have under the Voting Agreements.
(e) The parties acknowledge that the agreements contained in
this Section 7.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither party would enter into
this Agreement; accordingly, if either party fails promptly to pay any amount
due pursuant to this Section 7.2, and, in order to obtain such payment, the
other party commences a suit which results in a judgment against such party for
the fee set forth in this Section 7.2, such party shall pay to the other party
its costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee at the prime
rate of Citibank, N.A. in effect on the date such payment was required to be
made notwithstanding the provisions of Section 5.5. The parties agree that any
remedy or amount payable pursuant to this Section 7.2 shall not preclude any
other remedy or amount payable hereunder and shall not be an exclusive remedy
for any willful breach of any representation, warranty, covenant or agreement
contained in this Agreement.
7.3 Amendment.
This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of Z-D and CNET, but, after any such approval, no amendment shall
be made which by law or in accordance with the rules of any relevant stock
exchange requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
7.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto,
by action taken or authorized by their respective Boards of Directors, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver
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shall be valid only if set forth in a written instrument signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants, agreements and other provisions, shall
survive the Effective Time, except for those covenants, agreements and other
provisions contained herein (including Section 5.6 and Section 5.9) that by
their terms apply or are to be performed in whole or in part after the Effective
Time and this Article VIII.
8.2 Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the tenth Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) if to CNET to:
CNET Networks, Inc.
150 Chestnut Street
San Francisco, California 94111
Fax: (415) 395-9205
Attention: Chief Executive Officer
with a copy to:
Simpson Thacher & Bartlett
3373 Hillview Avenue
Palo Alto, California 94304
Fax: (650) 251-5002
Attention: Richard Capelouto, Esq.
Daniel Clivner, Esq.
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(b) if to Z-D to:
Ziff-Davis Inc.
28 East 28th Street
New York, New York 10016
Fax: (212) 503-4599
Attention: Chief Executive Officer
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Fax: (212) 558-3588
Attention: Alan J. Sinsheimer, Esq.
8.3 Interpretation.
When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article or
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". In addition, each Section of this Agreement is qualified by the
matters set forth with respect to such Section on the CNET Disclosure Schedule,
the Z-D Disclosure Schedule and the Schedules to this Agreement, as applicable,
to the extent specified therein and such other Sections of this Agreement to the
extent a matter in such Section is disclosed in such a way as to make its
relevance called for by such other Section readily apparent.
8.4 Counterparts.
This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that both parties need not
sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement, the Non-Solicit Agreement, the
Confidentiality Agreement and the exhibits and schedules hereto and the other
agreements and instruments of the parties delivered in connection herewith
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Section 5.6 (which is intended to be for the benefit of the Persons covered
thereby).
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8.6 Governing Law.
This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware applicable to contracts executed and to
be performed entirely within that state.
8.7 Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8 Assignment.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.9 Submission to Jurisdiction; Waivers.
Each of CNET and Z-D irrevocably agrees that any legal action
or proceeding with respect to this Agreement or for recognition and enforcement
of any judgment in respect hereof brought by the other party hereto or its
successors or assigns may be brought and determined in the Chancery or other
Courts of the State of Delaware, and each of CNET and Z-D hereby irrevocably
submits with regard to any such action or proceeding for itself and in respect
to its property, generally and unconditionally, to the nonexclusive jurisdiction
of the aforesaid courts. Each of CNET and Z-D hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement, (a) any claim that
it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to lawfully serve process, (b) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), (c) to the fullest extent permitted by
applicable law, that (i) the suit, action or proceeding in any such court is
brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper and (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts and (d) any right to a trial by jury.
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8.10 Enforcement.
The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.11 Further Assurances.
Notwithstanding anything to the contrary herein, any breach by
Z-D of a representation, warranty, agreement or covenant other than Sections
3.2(r)(ii), 4.2(m) and 5.12, which breach relates solely to the trade show and
conference business that will be the subject of the Spin-Off and which could not
reasonably be expected to have any adverse impact on CNET and its Subsidiaries
(including Z-D) after the Effective Time, shall not be deemed a breach of such
representation, warranty, agreement or covenant.
8.12 Definitions.
As used in this Agreement:
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2
of the rules and regulations promulgated under the Exchange Act.
(b) "beneficial ownership" or "beneficially own" shall have
the meaning under Section 13(d) of the Exchange Act and the rules and
regulations thereunder.
(c) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(d) "Business Day" means any day on which banks are not
required or authorized to close in the City of New York.
(e) "known" or "knowledge" means, with respect to any party,
the knowledge of such party's executive officers after reasonable inquiry.
(f) "Material Adverse Effect" means, with respect to any
entity any event, change, circumstance or effect that is or is reasonably likely
to be materially adverse to (i) the business, assets, liabilities, financial
condition or results of operations of such entity and its Subsidiaries taken as
a whole or (ii) the ability of such entity to consummate the transactions
contemplated by this Agreement.
(g) "the other party" means, with respect to Z-D, CNET and,
with respect to CNET, Z-D.
(h) "Person" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(i) "Qualifying Acquisition Proposal" means any Acquisition
Proposal involving CNET or its Subsidiaries (x) which the Board of Directors of
CNET concludes in good
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faith is in the best interests of CNET and could not reasonably be expected to
materially delay (including an event referred to in Section 4.1(d)) or interfere
with the consummation of the Merger in accordance with the terms of this
Agreement and (y) in which all parties to such Acquisition Proposal expressly
and unconditionally provide (and to the extent such Acquisition Proposal is
publicly disclosed, publicly disclose) that (1) the consummation of the
transaction contemplated by such Acquisition Proposal is not conditioned on the
cancellation, termination, amendment or other modification of this Agreement,
the Merger or the other agreements and transactions contemplated hereby and (2)
they will support and seek the consummation of the Merger and the other
transactions contemplated hereby.
(j) "Solvent" means, when used with respect to any Person, as
of any date of determination, that (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the amount of
all "liabilities of such Person, contingent or otherwise", as of such date, as
such quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
(k) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, at
least a majority of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(l) "Tax" (and, with correlative meaning, "Taxes") means any
federal, state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or add
on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any taxing authority or any
obligation to pay Taxes imposed on any entity for which a party to this
Agreement is liable as a result of any indemnification provision or other
contractual obligation.
(m) "Tax Return" means any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
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IN WITNESS WHEREOF, CNET, Z-D and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CNET NETWORKS, INC.
By: /s/ Shelby Bonnie
------------------
Name: Shelby Bonnie
Title: Chief Executive Officer
ZIFF-DAVIS INC.
By: /s/ Eric Hippeau
------------------
Name: Eric Hippeau
Title: Chairman and CEO
TD MERGER SUB, INC.
By: /s/ Shelby Bonnie
------------------
Name: Shelby Bonnie
Title: Chief Executive Officer
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EXHIBIT 6.2(c)(1)
[CNET LETTERHEAD]
ADDRESS
______, 2000
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Sullivan & Cromwell
125 Broad Street
New York, New York
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger, dated as of
____, 2000 (the "Agreement") among CNET Networks, Inc., a Delaware corporation
("CNET"), Merger Subsidiary, a Delaware corporation and a direct wholly-owned
subsidiary of CNET ("Merger Sub"), and Ziff-Davis Inc., a Delaware corporation
("Z-D"), which provides for the merger (the "Merger") of Merger Sub with and
into Z-D on the terms and conditions set forth, the time at which the Merger
becomes effective being hereafter referred to as the "Effective Time." It is a
condition to the consummation of the Merger that Simpson Thacher & Bartlett,
counsel to CNET, and Sullivan & Cromwell, counsel to Z-D, render opinions
regarding certain United States federal income tax consequences of the Merger.
Capitalized terms not defined herein have the meanings specified in the
Agreement.
In connection with such opinions to be rendered by each of
you, and acknowledging that each of you will rely, with CNET's consent, upon the
statements and representations made in this letter in rendering such opinions,
the undersigned certifies and represents to each of you on behalf of CNET, after
due investigation and inquiry that the statements and representations stated
herein are true, correct and complete in all respects at the date hereof and
except to the extent written notification to the contrary is received by you
before the Effective Time will be true, correct and complete in all respects as
of the Effective Time (as if made as of the Effective Time):
1. CNET and Merger Sub have entered into the Merger and will
effect the Merger for good and valid business reasons.
2. The Z-D Common Stock and the Z-D Net Common Stock will be
surrendered pursuant to the Merger in an arm's-length exchange, and the fair
market value of CNET Common Stock and cash in lieu of a fractional share of CNET
Common Stock received by each Z-D stockholder will be approximately equal to the
fair market value of Z-D Common Stock or Z-D Net Common Stock surrendered by
such stockholder in the Merger. In connection with the Merger, no holder of Z-D
Common Stock or Z-D Net Common Stock will receive in exchange for
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Z-D Common Stock or Z-D Net Common Stock, directly or indirectly, any
consideration other than CNET Common Stock and cash in lieu of a fractional
share thereof.
3. As of the Effective Time, neither CNET nor any corporation
related to CNET will, in connection with the Merger, (i) be under any
obligation, or will have entered into any agreement or understanding, directly
or indirectly, to redeem or repurchase any of the CNET Common Stock issued to
stockholders of Z-D in the Merger or to make any extraordinary distribution in
respect of such CNET Common Stock or (ii) have any plan or intention, directly
or indirectly, to reacquire any of the CNET Common Stock issued in the Merger;
provided, however, that CNET may adopt an open market stock repurchase program
that satisfies the requirements of Revenue Ruling 99-58. After the Merger, no
dividends or distributions will be made to the former Z-D stockholders by CNET
other than regular, normal dividends or distributions made to all holders of
CNET Common Stock. For purposes of this representation letter, two corporations
shall be treated as related to one another if immediately prior to or
immediately after the Merger, (a) the corporations are members of the same
affiliated group (within the meaning of section 1504 of the Code, but determined
without regard to section 1504(b) of the Code) or (b) one corporation owns 50%
or more of the total combined voting power of all classes of stock of the other
corporation that are entitled to vote or 50% or more of the total value of all
classes of stock of the other corporation (applying the attribution rules of
Section 318 of the Code as modified pursuant to section 304(c)(3)(B) of the
Code). For purposes of this representation, a corporation that is a partner in a
partnership will be treated as owning or acquiring any stock owned or acquired,
as the case may be, by the partnership and as having furnished its share of any
consideration furnished by the partnership to acquire the stock, in each case,
in accordance with its interest in the partnership.
4. Neither CNET nor any corporation related to CNET has any
plan or intention, following the Merger: (i) to liquidate Z-D; (ii) to merge Z-D
with or into another corporation (except pursuant to the Merger); (iii) to sell
or otherwise dispose of shares of the stock of Z-D, except for transfers
(including successive transfers) of such stock to corporations controlled by the
transferor corporation at the time of such transfer or (iv) to cause Z-D to
sell, distribute, transfer or otherwise dispose of any of its assets, or any of
the assets it acquired from Merger Sub, except for dispositions made in the
ordinary course of business or transfers (including successive transfers) of
assets to one or more corporations controlled, in the case of each transfer, by
the transferor corporation. CNET has no plan or intention to (i) cause Z-D,
after the Effective Time, to issue additional shares of stock that would result
in CNET losing control of Z-D or (ii) otherwise take any action that could
result in CNET losing control of Z-D following the Merger. For purposes of this
representation letter, "control" with respect to a corporation shall mean
ownership of at least (i) 80% of the total combined voting power of all classes
of stock entitled to vote and (ii) 80% of the total number of shares of each
other class of stock of the corporation.
5. To the best knowledge of the management of CNET, there is
no plan or intention on the part of stockholders of Z-D to sell, exchange or
otherwise transfer ownership of (including by derivative transactions such as an
equity swap which would have the economic effect of a transfer of ownership) any
share of CNET Common Stock (other than fractional shares of CNET Common Stock
for which holders of CNET Common Stock receive cash in the Merger) to CNET, Z- D
or any person related to CNET or Z-D, directly or indirectly (including through
partnerships or through third parties in connection with a plan to so transfer
ownership).
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6. Following the Merger, CNET will cause Z-D or another member
of Z-D's "qualified group" to continue the "historic business" of Z-D or use a
"significant portion" of Z-D's "historic business assets" in a business, as such
terms are used in Treasury Regulation section 1.368-1(d). For purposes of this
representation, Z-D's "qualified group" means, pursuant to Treasury Regulation
section 1.368-1(d)(4)(ii), one or more chains of corporations connected through
stock ownership with Z-D, but only if Z-D owns directly stock representing
control in at least one other corporation, and stock representing control in
each of the corporations (except Z-D) is owned directly by one of the other
corporations. In addition, Z-D will be treated as owning its proportionate share
of Z-D's business assets used in a business of any partnership in which members
of Z-D's qualified group either own a significant interest or have active and
substantial management functions as a partner with respect to that partnership
business.
7. Each of CNET and Merger Sub has paid and will pay their
respective expenses, if any, incurred in connection with the Merger, except that
Expenses incurred in connection with the filing, printing and mailing of the
Joint Proxy Statement/Prospectus and Form S-4, will be borne equally by Z-D and
CNET. Neither CNET nor Merger Sub has agreed to assume, or will assume, directly
or indirectly, any expense or other liability, whether fixed or contingent, of
Z-D or any holder of Z-D Common Stock or Z-D Net Common Stock as consideration
for the Z-D Common Stock or Z-D Net Common Stock surrendered pursuant to the
Merger or any related transaction.
8. There is, and at the Effective Time will be, no
intercorporate indebtedness existing between CNET and Z-D or between Merger Sub
and Z-D that was issued, acquired or will be settled at a discount.
9. Neither CNET nor Merger Sub, as the case may be, will (i)
elect, or have in effect an election, to be treated as a "regulated investment
company" or as a "real estate investment trust" or file any tax return
consistent with such treatment or (ii) be a corporation 50% or more of the fair
market value of whose total assets are stock or securities and 80% or more of
the fair market value of whose total assets are assets held for investment. In
making the determinations described in (ii) above, (x) the stock and securities
of any subsidiary of CNET shall be disregarded and CNET shall be deemed to own
its ratable share of such subsidiary's assets and (y) a corporation shall be
considered to be a subsidiary of CNET if CNET owns 50% or more of the combined
voting power of all classes of the stock of such subsidiary that are entitled to
vote, or 50% or more of the total value of all classes of the outstanding stock
of such subsidiary. In addition, in determining the fair market value of CNET's
total assets for the purposes of making this representation, CNET shall exclude
any cash and cash items (such as receivables), government securities and, to the
extent provided in the applicable Treasury regulations, any assets acquired
(through incurring indebtedness or otherwise) for the purposes of causing CNET
to not be characterized as an entity described in (i) or (ii) of the first
sentence of this paragraph or causing CNET to meet the requirements of section
368(a)(2)(F)(ii) of the Code.
10. None of the compensation to be received by any
stockholder-employees of Z-D for services rendered after the Effective Time,
and none of the compensation to be received by any stockholder-employees of Z-D
from CNET for services rendered either before or after the Effective Time, will
be separate consideration for, or allocable to, any of such
stockholder-employee's shares of Z-D stock; none of the shares of CNET Common
Stock to be received by any stockholder-employees of Z-D in connection with the
Merger will be separate consideration for,
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or allocable to, any employment, consulting or similar agreement or arrangement
with respect to services rendered after the Effective Time; and the compensation
paid to any stockholder-employees of Z-D for services rendered will be for
services actually rendered (or to be rendered) and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar services.
11. Merger Sub is being formed solely to effect the Merger and
it will not conduct any business or other activities other than the issuance of
its stock to CNET prior to the Merger. Merger Sub will not have any liabilities
that will be assumed by Z-D, and will not transfer to Z-D in the Merger any
assets subject to liabilities.
12. Pursuant to the Merger, all shares of Z-D Common Stock and
Z-D Net Common Stock will be exchanged solely for CNET Common Stock or for cash
in lieu of fractional shares of CNET Common Stock that would otherwise be issued
to stockholders of Z-D. For purposes of this representation, shares of Z-D
Common Stock or Z-D Net Common Stock exchanged for cash or other property
originating with CNET or a party related to CNET will be treated as outstanding
Z-D Common Stock or Z-D Net Common Stock at the Effective Time.
13. Prior to the Merger and through the Effective Time, CNET
will be in control of Merger Sub.
14. As of the Effective Time neither CNET nor any corporation
related to CNET will own beneficially or of record, or will have owned
beneficially or of record during the five years preceding the Effective Time,
any shares of Z-D Common Stock, Z-D Net Common Stock or other securities,
options, warrants or instruments giving the holder thereof the right to acquire
Z-D Common Stock, Z-D Net Common Stock or other securities issued by Z-D.
15. The CNET Common Stock into which Z-D Common Stock and Z-D
Net Common Stock will be converted in the Merger is stock entitled to vote for
the directors of CNET and on all other matters put forth to the shareholders of
CNET.
16. The payment of cash in lieu of fractional shares of CNET
Common Stock that would otherwise be issued to stockholders of Z-D in the Merger
is solely for the purpose of avoiding the expense and inconvenience to CNET of
issuing and transferring fractional shares of CNET Common Stock and does not
represent separately bargained-for consideration. The total cash consideration
that will be paid in the Merger to stockholders of Z-D instead of issuing
fractional shares of CNET Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to stockholders of Z-D in
exchange for their shares of Z-D Common Stock and Z-D Net Common Stock.
17. The undersigned is authorized to make all of the
statements and representations set forth herein on behalf of CNET and Merger
Sub.
Very truly yours,
CNET Networks, Inc.
By:
----------------------
Name:
Title:
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EXHIBIT 6.2(c)(2)
[ZIFF-DAVIS LETTERHEAD]
ADDRESS
_____, 2000
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Sullivan & Cromwell
125 Broad Street
New York, New York
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger, dated as of
____, 2000 (the "Agreement") among CNET Networks Inc., a Delaware corporation
("CNET"), TD Merger, Sub, a Delaware corporation and a direct wholly-owned
subsidiary of CNET ("Merger Sub"), and Ziff-Davis Inc., a Delaware corporation
("Z-D"), which provides for the merger (the "Merger") of Merger Sub with and
into Z-D on the terms and conditions set forth, the time at which the Merger
becomes effective being hereafter referred to as the "Effective Time." It is a
condition to the consummation of the Merger that Simpson Thacher & Bartlett,
counsel to CNET, and Sullivan & Cromwell, counsel to Z-D, render opinions
regarding certain United States federal income tax consequences of the Merger.
Capitalized terms not defined herein have the meanings specified in the
Agreement.
In connection with such opinions to be rendered by each of
you, and acknowledging that each of you will rely, with Z-D's consent, upon the
statements and representations made in this letter in rendering such opinions,
the undersigned hereby certifies and represents to each of you on behalf of Z-D,
after due investigation and inquiry that the statements and representations
stated herein are true, correct and complete in all respects at the date hereof
and except to the extent written notification to the contrary is received by you
before the Effective Time will be true, correct and complete in all respects as
of the Effective Time (as if made as of the Effective Time):
1. Z-D has entered into the Merger and will effect the Merger
for good and valid business reasons.
2. The Z-D Common Stock and Z-D Net Common Stock will be
surrendered pursuant to the Merger in an arm's-length exchange, and the fair
market value of CNET Common Stock and cash in lieu of a fractional share of CNET
Common Stock received by each Z-D stockholder will be approximately equal to the
fair market value of Z-D Common Stock or Z-D Net Common Stock surrendered by
such stockholder in the Merger. In connection with the Merger, no holder of Z-D
Common Stock or Z-D Net Common Stock will receive in exchange for their Z-D
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Common Stock or Z-D Net Common Stock, directly or indirectly, any consideration
other than CNET Common Stock and cash in lieu of a fractional share thereof.
3. Z-D, prior to and in connection with the Merger, has
neither (i) redeemed, directly or indirectly, any of its stock, nor (ii) made
any distributions with respect to its stock, other than the Spinoff and the Cash
Dividend. The fair market value of the stock distributed in the Spinoff and the
Cash Dividend does not exceed 50% of the total of (i) the fair market value of
the stock distributed in the Spinoff, (ii) the Cash Dividend, and, (iii) the
fair market value of the CNET Common Stock issued in the Merger. Additionally,
prior to and in connection with the Merger, no corporation related to Z-D has
acquired Z-D's stock with consideration other than stock of either Z-D or CNET.
For purposes of this representation letter, two corporations shall be treated as
related to one another if immediately prior to or immediately after the Merger,
(a) the corporations are members of the same affiliated group (within the
meaning of section 1504 of the Code, but determined without regard to section
1504(b) of the Code) or (b) one corporation owns 50% or more of the total
combined voting power of all classes of stock of the other corporation that are
entitled to vote or 50% or more of the total value of shares of all classes of
stock of the other corporation (applying the attribution rules of section 318 of
the Code as modified pursuant to section 304(c)(3)(B) of the Code). For purposes
of this representation, a corporation that is a partner in a partnership will be
treated as owning or acquiring any stock owned or acquired, as the case may be,
by the partnership and as having furnished its share of any consideration
furnished by the partnership to acquire the stock, in each case, in accordance
with its interest in the partnership.
4. To the best knowledge of the management of Z-D, there is
no plan or intention on the part of stockholders of Z-D to sell, exchange or
otherwise transfer ownership of (including by derivative transactions such as an
equity swap which would have the economic effect of a transfer of ownership) any
share of CNET Common Stock (other than fractional shares of CNET Common Stock
for which holders of CNET Common Stock receive cash in the Merger) to CNET, Z-D
or any person related to CNET or Z-D, directly or indirectly (including through
partnerships or through third parties in connection with a plan to so transfer
ownership).
5. No assets of Z-D have been sold, transferred or otherwise
disposed of so as to prevent Z-D from continuing the "historic business" of Z-D
or from using a "significant portion" of Z-D's "historic business assets" in a
business following the Merger, as such terms are used in Treasury Regulation
section 1.368-1(d). For purposes of this representation, Z-D's "qualified group"
means, pursuant to Treasury Regulation section 1.368-1(d)(4)(ii), one or more
chains of corporations connected through stock ownership with Z-D, but only if
Z-D owns directly stock representing control in at least one other corporation,
and stock representing control in each of the corporations (except Z-D) is
owned directly by one of the other corporations. In addition, Z-D will be
treated as owning its proportionate share of Z-D's business assets used in a
business of any partnership in which members of Z-D's qualified group either own
a significant interest or have active and substantial management functions as a
partner with respect to that partnership business. For purposes of this
representation letter, "control" with respect to a corporation shall mean
ownership of at least (i) 80% of the total combined voting power of all classes
of stock entitled to vote and (ii) 80% of the total number of shares of each
other class of stock of the corporation
6. Each of Z-D and its stockholders has paid and will pay
their respective expenses, if any, incurred in connection with the Merger, and
CNET has not agreed to assume, nor will it assume, directly or indirectly, any
expense or other liability, whether fixed or contingent, of
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any holder of Z-D Common Stock or Z-D Net Common Stock in connection with or as
part of the Merger or any related transaction. Notwithstanding the foregoing,
(i) any liability for transfer taxes incurred by a holder of Z-D Common Stock or
Z-D Net Common Stock will be paid by Z-D, and in no event by CNET, and (ii)
Expenses incurred in connection with the filing, printing and mailing of the
Joint Proxy Statement/Prospectus and Form S-4 will be borne equally by Z-D and
CNET.
7. There is, and at the Effective Time will be, no
intercorporate indebtedness existing between CNET and Z-D or between Merger Sub
and Z-D that was issued, acquired or will be settled at a discount.
8. Z-D will not (i) elect, or have in effect an election, to
be treated as a "regulated investment company" or as a "real estate investment
trust" or file any tax return consistent with such treatment or (ii) be a
corporation 50% or more of the fair market value of whose total assets are stock
or securities and 80% or more of the fair market value of whose total assets are
assets held for investment. In making the determinations described in (ii)
above, (x) the stock and securities of any subsidiary of Z-D shall be
disregarded and Z-D shall be deemed to own its ratable share of such
subsidiary's assets and (y) a corporation shall be considered to be a subsidiary
of Z-D if Z-D owns 50% or more of the combined voting power of all classes of
the stock of such subsidiary that are entitled to vote, or 50% or more of the
total value of all classes of the outstanding stock of such subsidiary. In
addition, in determining the fair market value of Z-D's total assets for the
purposes of making this representation, Z-D shall exclude any cash and cash
items (such as receivables), government securities and, to the extent provided
in the applicable Treasury regulations, any assets acquired (through incurring
indebtedness or otherwise) for the purposes of causing Z-D to not be
characterized as an entity described in (i) or (ii) of the first sentence of
this paragraph or causing Z-D to meet the requirements of section
368(a)(2)(F)(ii) of the Code.
9. Z-D is not, and at the Effective Time will not be, a debtor
under the jurisdiction of a court in a Title 11 or similar case. For purposes of
the foregoing, a "Title 11 or similar case" means a case under Title 11 of the
United States Code or a receivership, foreclosure or similar proceeding in a
federal or state court.
10. At the Effective Time, the fair market value of the assets
of Z-D will equal or exceed the sum of the Z-D's liabilities plus (without
duplication) the amount of liabilities, if any, to which its assets are or will
be subject.
11. None of the compensation to be received by any
stockholder-employees of Z-D for services rendered prior to the Effective Time
was, or will be, separate consideration for, or allocable to, any of such
stockholder-employee's shares of Z-D Common Stock or Z-D Net Common Stock; none
of the shares of CNET Common Stock to be received by any stockholder-employees
of Z-D in connection with the Merger will be separate consideration for, or
allocable to, any employment, consulting or similar agreement or arrangement
with respect to services rendered prior to the Effective Time; and the
compensation paid to any stockholder-employees of Z-D for services rendered
prior to the Effective Time will be for services actually rendered (or to be
rendered) and was, or will be, commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
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12. Z-D is not currently, and during the five years preceding
the Effective Time will not have been, a "United States real property holding
corporation." For purposes of the foregoing, a United States real property
holding corporation means a corporation in which the fair market value of its
United States real property interests equals or exceeds fifty percent of the
fair market value of (i) its United States real property interests, (ii) its
interests in real property located outside the United States and (iii) any other
of its assets which are used or held for use in a trade or business.
13. Pursuant to the Merger, all shares of Z-D Common Stock and
Z-D Net Common Stock will be exchanged solely for CNET Common Stock or for cash
in lieu of fractional shares of CNET Common Stock that would otherwise be issued
to stockholders of Z-D. For purposes of this representation, shares of Z-D
Common Stock or Z-D Net Common Stock exchanged for cash or other property
originating with CNET or a party related to CNET will be treated as outstanding
Z-D Common Stock or Z-D Net Common Stock at the Effective Time.
14. Z-D has no plan or intention to issue any additional
shares of its stock that would cause CNET to own less than (i) 80% of the total
combined voting power of all classes of Z-D stock entitled to vote and (ii) 80%
of the total number of shares of each other class of stock of Z-D.
15. At the Effective Time, Z-D will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in Z-D that, if exercised or converted,
would affect CNET's acquisition or retention of control of Z-D.
16. To the knowledge of Z-D, as of the Effective Time neither
CNET nor any corporation related to CNET will own beneficially or of record, or
will have owned beneficially or of record during the five years preceding the
Effective Time, any shares of Z-D Common Stock, Z-D Net Common Stock or other
securities, options, warrants or instruments giving the holder thereof the right
to acquire Z-D Common Stock, Z-D Net Common Stock or other securities issued by
Z-D.
17. There will be no dissenters to the Merger.
18. The payment of cash in lieu of fractional shares of CNET
Common Stock that would otherwise be issued to stockholders of Z-D in the Merger
is solely for the purpose of avoiding the expense and inconvenience to CNET of
issuing and transferring fractional shares of CNET Common Stock and does not
represent separately bargained-for consideration. The total cash consideration
that will be paid in the Merger to stockholders of Z-D instead of issuing
fractional shares of CNET Common Stock will not exceed one percent of the total
consideration that will be issued in the Merger to stockholders of Z-D in
exchange for their shares of Z-D Common Stock or Z-D Net Common Stock.
19. The undersigned is authorized to make all of the
statements and representations set forth herein on behalf of Z-D.
Very truly yours,
Ziff-Davis Inc.
By:
----------------------
Name:
Title:
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<PAGE> 218
ANNEX B
2000 CNET NETWORKS, INC.
STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company and its
Affiliates in recruiting and retaining key employees, directors or consultants
of outstanding ability and to motivate such employees, directors or consultants
to exert their best efforts on behalf of the Company and its Affiliates by
providing incentives through the granting of Awards. The Company expects that it
will benefit from the added interest which such key employees, directors or
consultants will have in the welfare of the Company as a result of their
proprietary interest in the Company's success.
2. DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as amended,
or any successor thereto.
(b) Affiliate: With respect to the Company, any entity
directly or indirectly controlling, controlled by ,
or under common control with, the Company or any
other entity designated by the Board in which the
Company or an Affiliate has an interest.
(c) Award: An Option or Other Stock-Based Award granted
pursuant to the Plan.
(d) Beneficial Owner: A "beneficial owner", as such term
is defined in Rule 13d-3 under the Act (or any
successor rule thereto).
(e) Board: The Board of Directors of the Company.
(f) Change in Control: The occurrence of any of the
following events:
(i) any Person (other than the Company, any trustee
or other fiduciary holding securities under an
employee benefit plan of the Company, or any company
owned, directly or indirectly, by the shareholders
of the Company in substantially the same proportions
as their ownership of stock of the Company), becomes
the Beneficial Owner, directly or indirectly, of
securities of the Company, representing 50% or more
of the combined voting power of the Company's
then-outstanding securities;
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(ii) during any period of twenty-four consecutive
months (not including any period prior to the
Effective Date), individuals who at the beginning of
such period constitute the Board, and any new
director (other than (A) a director nominated by a
Person who has entered into an agreement with the
Company to effect a transaction described in Sections
2(e)(i), (iii) or (iv) of the Plan or (B) a director
nominated by any Person (including the Company) who
publicly announces an intention to take or to
consider taking actions (including, but not limited
to, an actual or threatened proxy contest) which if
consummated would constitute a Change in Control)
whose election by the Board or nomination for
election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the
directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute at least
a majority thereof;
(iii) the consummation of any transaction or series
of transactions resulting in a merger or
consolidation, in which the Company is involved,
other than a merger or consolidation which would
result in the shareholders of the Company immediately
prior thereto continuing to own (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than 50% of
the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the complete liquidation of the Company or the
sale or disposition by the Company of all or
substantially all of the Company's assets, other than
a liquidation of the Company into a wholly-owned
subsidiary.
(g) Code: The Internal Revenue Code of 1986, as amended,
or any successor thereto.
(h) Committee: The Compensation Committee of the Board.
(i) Company: CNET Networks, Inc., a Delaware corporation.
(j) Effective Date: June 1, 2000.
(k) Fair Market Value: On a given date, (i) if there
should be a public market for the Shares on such
date, the arithmetic mean of the high and low prices
of the Shares as reported on such date on the
Composite Tape of the principal national securities
exchange on which such Shares are listed or admitted
to trading, or, if the Shares are not listed or
admitted on any national securities exchange, the
arithmetic mean of the per Share closing bid price
and per Share closing asked price on such date as
quoted on the National Association of Securities
Dealers Automated Quotation System (or such market in
which such prices are regularly quoted)(the
"NASDAQ"), or, if no sale of Shares shall have been
reported on the Composite Tape of any national
securities exchange or quoted on the
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NASDAQ on such date, then the immediately preceding
date on which sales of the Shares have been so
reported or quoted shall be used, and (ii) if there
should not be a public market for the Shares on such
date, the Fair Market Value shall be the value
established by the Committee in good faith.
(l) ISO: An Option that is also an incentive stock option
granted pursuant to Section 6(d) of the Plan.
(m) Other Stock-Based Awards: Awards granted pursuant to
Section 7 of the Plan.
(n) Option: A stock option granted pursuant to Section 6
of the Plan.
(o) Option Price: The purchase price per Share of an
Option, as determined pursuant to Section 6(a) of the
Plan.
(p) Participant: An employee, director or consultant who
is selected by the Committee to participate in the
Plan.
(q) Performance-Based Awards: Certain Other Stock-Based
Awards granted pursuant to Section 7(b) of the Plan.
(r) Person: A "person", as such term is used for purposes
of Section 13(d) or 14(d) of the Act (or any
successor section thereto).
(s) Plan: The 2000 CNET Networks, Inc. Stock Incentive
Plan.
(t) Shares: Shares of common stock of the Company.
(u) Subsidiary: A subsidiary corporation, as defined in
Section 424(f) of the Code (or any successor section
thereto).
3. SHARES SUBJECT TO THE PLAN
The total number of Shares which may be issued under the Plan
is 5,000,000. The maximum number of Shares for which Options (or Award other
Section 7(b)) may be granted during a calendar year to any Participant shall
800,000. The Shares may consist, in whole or in part, of unissued Shares or
treasury Shares. The issuance of Shares or the payment of cash upon the exercise
of an Award shall reduce the total number of Shares available under the Plan, as
applicable. Shares which are subject to Awards which terminate or lapse may be
granted again under the Plan.
4. ADMINISTRATION
The Plan shall be administered by the Committee, which may
delegate its duties and powers in whole or in part to any subcommittee thereof
consisting solely of at least two individuals who are intended to qualify as
"non-employee directors" within the meaning of Rule 16b-3 under the Act (or any
successor rule thereto) and "outside directors" within the meaning of Section
162(m) of the Code (or any successor section thereto). Awards may, in the
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discretion of the Committee, be made under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by the Company or its
affiliates or a company acquired by the Company or with which the Company
combines. The number of Shares underlying such substitute awards shall be
counted against the aggregate number of Shares available for Awards under the
Plan. The Committee is authorized to interpret the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, and to make any other
determinations that it deems necessary or desirable for the administration of
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
interpretation and administration of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned (including, but not limited to, Participants
and their beneficiaries or successors). The Committee shall have the full power
and authority to establish the terms and conditions of any Award consistent with
the provisions of the Plan and to waive any such terms and conditions at any
time (including, without limitation, accelerating or waiving any vesting
conditions). The Committee shall require payment of any amount it may determine
to be necessary to withhold for federal, state, local or other taxes as a result
of the exercise of an Award. Unless the Committee specifies otherwise, the
Participant may elect to pay a portion or all of such withholding taxes by (a)
delivery in Shares or (b) having Shares withheld by the Company from any Shares
that would have otherwise been received by the Participant.
5. LIMITATIONS
No Award may be granted under the Plan after the tenth
anniversary of the Effective Date, but Awards theretofore granted may extend
beyond that date.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be, as determined by the
Committee, non-qualified or incentive stock options for federal income tax
purposes, as evidenced by the related Award agreements, and shall be subject to
the foregoing and the following terms and conditions and to such other terms and
conditions, not inconsistent therewith, as the Committee shall determine:
(a) Option Price. The Option Price per Share shall be
determined by the Committee, but shall not be less than 100% of the Fair Market
Value of the Shares on the date an Option is granted.
(b) Exercisability. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may be determined
by the Committee, but in no event shall an Option be exercisable more than ten
years after the date it is granted, provided that, in the case of CNET Europe,
S.A., a Subsidiary, Options shall be exercisable for a period of at least twelve
(12) years but not more than fifteen (15) years from the date of grant.
(c) Exercise of Options. Except as otherwise provided in the
Plan or in an Award agreement, an Option may be exercised for all, or from time
to time any part, of the Shares for which it is then exercisable. For purposes
of Section 6 of the Plan, the exercise date of an Option shall be the later of
the date a notice of exercise is received by the Company and, if applicable, the
date payment is received by the Company pursuant to clauses (i), (ii) or (iii)
in the following sentence. The purchase price for the Shares as to which an
Option is exercised shall be paid to the Company in full at the time of exercise
at the election of the Participant (i) in cash or its
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equivalent (e.g., by check), (ii) to the extent permitted by the Committee, in
Shares having a Fair Market Value equal to the aggregate Option Price for the
Shares being purchased and satisfying such other requirements as may be imposed
by the Committee; provided, that such Shares have been held by the Participant
for no less than six months (or such other period as established from time to
time by the Committee or generally accepted accounting principles), (iii) partly
in cash and, to the extent permitted by the Committee, partly in such Shares or
(iv) through the delivery of irrevocable instruments to a broker to deliver
promptly to the Company an amount equal to the aggregate option price for the
shares being purchased. No Participant shall have any rights to dividends or
other rights of a stockholder with respect to Shares subject to an Option until
the Participant has given written notice of exercise of the Option, paid in full
for such Shares and, if applicable, has satisfied any other conditions imposed
by the Committee pursuant to the Plan.
(d) ISOs. The Committee may grant Options under the Plan that
are intended to be ISOs. Such ISOs shall comply with the requirements of Section
422 of the Code (or any successor section thereto). No ISO may be granted to any
Participant who at the time of such grant, owns more than ten percent of the
total combined voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least 110% of the
Fair Market Value of a Share on the date the ISO is granted and (ii) the date on
which such ISO terminates is a date not later than the day preceding the fifth
anniversary of the date on which the ISO is granted. Any Participant who
disposes of Shares acquired upon the exercise of an ISO either (i) within two
years after the date of grant of such ISO or (ii) within one year after the
transfer of such Shares to the Participant, shall notify the Company of such
disposition and of the amount realized upon such disposition.
(e) Attestation. Wherever in this Plan or any agreement
evidencing an Award a Participant is permitted to pay the exercise price of an
Option or taxes relating to the exercise of an Option by delivering Shares, the
Participant may, subject to procedures satisfactory to the Committee, satisfy
such delivery requirement by presenting proof of beneficial ownership of such
Shares, in which case the Company shall treat the Option as exercised without
further payment and shall withhold such number of Shares from the Shares
acquired by the exercise of the Option.
7. OTHER STOCK-BASED AWARDS
(a) Generally. The Committee, in its sole discretion, may
grant Awards of Shares, Awards of restricted Shares and Awards that are valued
in whole or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares ("Other Stock-Based Awards"). Such Other Stock-Based Awards
shall be in such form, and dependent on such conditions, as the Committee shall
determine, including, without limitation, the right to receive one or more
Shares (or the equivalent cash value of such Shares) upon the completion of a
specified period of service, the occurrence of an event and/or the attainment of
performance objectives. Other Stock-Based Awards may be granted alone or in
addition to any other Awards granted under the Plan. Subject to the provisions
of the Plan, the Committee shall determine to whom and when Other Stock-Based
Awards will be made, the number of Shares to be awarded under (or otherwise
related to) such Other Stock-Based Awards; whether such Other Stock-Based Awards
shall be settled in cash, Shares or a combination of cash and Shares; and all
other terms and conditions of such Awards (including, without limitation, the
vesting provisions thereof and provisions ensuring that all Shares so awarded
and issued shall be fully paid and non- assessable).
(b) Performance-Based Awards. Notwithstanding anything to the
contrary herein, certain Other Stock-Based Awards granted under this Section 8
may be granted in a manner which
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is deductible by the Company under Section 162(m) of the Code (or any successor
section thereto) ("Performance-Based Awards"). A Participant's Performance-Based
Award shall be determined based on the attainment of written performance goals
approved by the Committee for a performance period established by the Committee
(i) while the outcome for that performance period is substantially uncertain and
(ii) no more than 90 days after the commencement of the performance period to
which the performance goal relates or, if less, the number of days which is
equal to 25 percent of the relevant performance period. The performance goals,
which must be objective, shall be based upon one or more of the following
criteria: (i) consolidated earnings before or after taxes (including earnings
before interest, taxes, depreciation and amortization); (ii) net income; (iii)
operating income; (iv) earnings per Share; (v) book value per Share; (vi) return
on shareholders' equity; (vii) expense management; (viii) return on investment;
(ix) improvements in capital structure; (x) profitability of an identifiable
business unit or product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) market share; (xiv) revenues or sales; (xv) costs;
(xvi) cash flow; (xvii) working capital and (xviii) return on assets. The
foregoing criteria may relate to the Company, one or more of its Subsidiaries or
one or more of its divisions or units, or any combination of the foregoing, and
may be applied on an absolute basis and/or be relative to one or more peer group
companies or indices, or any combination thereof, all as the Committee shall
determine. In addition, to the degree consistent with Section 162(m) of the Code
(or any successor section thereto), the performance goals may be calculated
without regard to extraordinary items. The maximum amount of a Performance-Based
Award during a calendar year to any Participant shall be: (x) with respect to
Performance-Based Awards that are Options, 800,000 Shares and (y) with respect
to Performance-Based Awards that are not Options, $10,000,000. The Committee
shall determine whether, with respect to a performance period, the applicable
performance goals have been met with respect to a given Participant and, if they
have, to so certify and ascertain the amount of the applicable Performance-Based
Award. No Performance-Based Awards will be paid for such performance period
until such certification is made by the Committee. The amount of the
Performance-Based Award actually paid to a given Participant may be less than
the amount determined by the applicable performance goal formula, at the
discretion of the Committee. The amount of the Performance-Based Award
determined by the Committee for a performance period shall be paid to the
Participant at such time as determined by the Committee in its sole discretion
after the end of such performance period; provided, however, that a Participant
may, if and to the extent permitted by the Committee and consistent with the
provisions of Section 162(m) of the Code, elect to defer payment of a
Performance-Based Award.
8. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the
contrary, the following provisions shall apply to all Awards granted under the
Plan:
(a) Generally. In the event of any change in the outstanding
Shares after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off, combination,
combination or transaction or exchange of Shares or other corporate exchange, or
any distribution to shareholders of Shares other than regular cash dividends or
any transaction similar to the foregoing, the Committee in its sole discretion
and without liability to any person may make such substitution or adjustment, if
any, as it deems to be equitable, as to (i) the number or kind of Shares or
other securities issued or reserved for issuance pursuant to the Plan or
pursuant to outstanding Awards, (ii) the maximum number of Shares for which
Options may be granted during a calendar year to any Participant (iii) the
maximum amount of a
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Performance-Based Award that may be granted during a calendar year to any
Participant, (iv) the Option Price and/or (v) any other affected terms of such
Awards.
(b) Change in Control. Except as otherwise provided in an
Award agreement, in the event of a Change in Control, the Committee in its sole
discretion and without liability to any person may take such actions, if any, as
it deems necessary or desirable with respect to any Award (including, without
limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount
in exchange for the cancellation of an Award and/or (iii) the requiring of the
issuance of substitute Awards that will substantially preserve the value, rights
and benefits of any affected Awards previously granted hereunder) as of the date
of the consummation of the Change in Control.
9. NO RIGHT TO EMPLOYMENT OR AWARDS
The granting of an Award under the Plan shall impose no
obligation on the Company or any Subsidiary to continue the employment or
service or consulting relationship of a Participant and shall not lessen or
affect the Company's or Subsidiary's right to terminate the employment or
service or consulting relationship of such Participant. No Participant or other
Person shall have any claim to be granted any Award, and there is no obligation
for uniformity of treatment of Participants, or holders or beneficiaries of
Awards. The terms and conditions of Awards and the Committee's determinations
and interpretations with respect thereto need not be the same with respect to
each Participant (whether or not such Participants are similarly situated).
10. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of the
Company and a Participant, including without limitation, the estate of such
Participant and the executor, administrator or trustee of such estate, or any
receiver or trustee in bankruptcy or representative of the Participant's
creditors.
11. NONTRANSFERABILITY OF AWARDS
Unless otherwise determined by the Committee, an Award shall
not be transferable or assignable by the Participant otherwise than by will or
by the laws of descent and distribution. An Award exercisable after the death of
a Participant may be exercised by the legatees, personal representatives or
distributees of the Participant.
12. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuation shall be made which, (a) without the
approval of the shareholders of the Company, would (except as is provided in
Section 8 of the Plan), increase the total number of Shares reserved for the
purposes of the Plan or change the maximum number of Shares for which Awards may
be granted to any Participant or (b) without the consent of a Participant, would
diminish any of the rights of the Participant under any Award theretofore
granted to such Participant under the Plan; provided, however, that the
Committee may amend the Plan in such manner as it deems necessary to permit the
granting of Awards meeting the requirements of the Code or other applicable
laws.
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13. INTERNATIONAL PARTICIPANTS
With respect to Participants who reside or work outside the
United States of America and who are not (and who are not expected to be)
"covered employees" within the meaning of Section 162(m) of the Code, the
Committee may, in its sole discretion, amend the terms of the Plan or Awards
with respect to such Participants in order to conform such terms with the
requirements of local law.
14. CHOICE OF LAW
The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to conflicts of laws.
15. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of the Effective Date.
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ANNEX C
[Letterhead of Lazard Freres & Co.]
July 18, 2000
The Board of Directors
CNET Networks, Inc.
150 Chestnut St.
San Francisco, CA 94111
Dear Members of the Board:
We understand that CNET Networks, Inc (the "Company") and
Ziff-Davis, Inc. (the "Subject Company") expect to enter into an Agreement to be
dated as of July 19, 2000 (the "Agreement"), pursuant to which the Company will
acquire the Subject Company (the "Acquisition"). Pursuant to the Agreement, the
Acquisition will be effected by the merger of a wholly owned subsidiary of the
Company with and into the Subject Company, with the Subject Company surviving
the merger and becoming a wholly owned subsidiary of the Company. In connection
with the Acquisition, each issued and outstanding share of Ziff Davis, Inc. -
Z-D Common Stock, par value $0.01 per share, of the Subject Company ("Subject
Company Common Stock") will be converted into the right to receive 0.3397 shares
(the "Subject Company Exchange Ratio") of common stock, par value $0.0001 per
share, of the Company ("Company Common Stock"), and each issued and outstanding
share of Ziff-Davis, Inc. - Z-D Net Common Stock, par value $0.01 per share, of
the Subject Company ("Subject Company Net Common Stock") will be converted into
the right to receive 0.5932 shares (the "Subject Company Net Exchange Ratio"
and, together with the Subject Company Exchange Ratio, the "Exchange Ratios") of
Company Common Stock. The Agreement permits the recapitalization and spin-off of
the trade show and conference business subsidiary of the Subject Company and the
payment of a cash dividend of $2.50 per share of Subject Company Common Stock in
connection therewith (subject to downward adjustment under certain
circumstances) prior to the consummation of the Acquisition.
You have requested our opinion as to the fairness, from a
financial point of view, to the Company of the Consideration to be paid in the
Merger pursuant to the Agreement. As used herein, the term "Consideration" means
the aggregate number of shares of Company Common Stock to be issued to the
holders of Subject Company Common Stock and Subject Company Net Common Stock in
the Merger. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of a draft of the
Agreement dated July 18, 2000 (the "Draft Agreement");
(ii) Analyzed certain historical business and financial information
relating to the Company and the Subject Company;
(iii) Reviewed various financial forecasts and other data (including
projected cost savings and operating synergies) provided to us
by the Company and the Subject Company relating to their
respective businesses;
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(iv) Subject Company with respect to the businesses and prospects
of the Company and the Subject Company, respectively, the
strategic objectives of each, and possible benefits which
might be realized following the Acquisition;
(v) Reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the businesses of the Company and the Subject
Company;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be
generally comparable to those of the Company and the Subject
Company, and in other industries generally;
(vii) Reviewed the historical stock prices and trading volumes of
the Company's common stock; and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the
foregoing information, and have not assumed any responsibility for any
independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or the Subject
Company, or concerning the solvency or fair value of either of the foregoing
entities. With respect to financial forecasts, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of management of the Company and the Subject Company as
to the future financial performance of the Company and the Subject Company,
respectively. We assume no responsibility for and express no view as to such
forecasts or the assumptions on which they are based. We have also assumed that
the Acquisition will qualify as a tax-free reorganization for United States
federal income tax purposes.
Further, our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof. We are not expressing any opinion herein
as to the prices at which any securities of the Company or the Subject Company
may actually trade at any time, and nor are we expressing any opinion herein as
to the relative merits of the Acquisition and the other business strategies that
may have been considered by the Company's Board of Directors.
In rendering our opinion, we reviewed the Draft Agreement and
have assumed that the final form of the Agreement that the parties will execute
will not differ in any material respect from that draft. We have further assumed
that the Acquisition will be consummated on the terms described in the
Agreement, without any waiver of any material terms or conditions by the Company
and that obtaining the necessary regulatory approvals for the Acquisition will
not have an adverse effect on the Company.
Our opinion only addresses the fairness, from a financial
point of view, to the Company of the Consideration, and we do not express any
views on any other terms of the Agreement or any other agreement or arrangement
between the parties and/or their stockholders.
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Lazard Freres & Co. LLC is acting as investment banker to the
Company in connection with the Acquisition and will receive a fee for our
services a substantial portion of which is contingent upon the completion of the
Acquisition. Lazard Freres & Co. LLC provides a full range of financial advisory
and securities services and, in the ordinary course of our business, we and our
affiliates may trade the securities of the Company and the Subject Company for
our own account and for the accounts of our customers, and, accordingly, may at
any time hold a long or short position in such securities.
Our engagement and the opinion expressed herein are for the
benefit of the Company's Board of Directors and does not constitute a
recommendation to any person as to how to vote with respect to the Acquisition,
and should not be relied upon by any person as such. It is understood that,
except for the reproduction of this letter in its entirety in the registration
statement and related proxy statement-prospectus required to be provided to the
holders of Company Common Stock, this letter may not be disclosed or otherwise
referred to without our prior consent, except as may otherwise be required by
law or by a court of competent jurisdiction.
This opinion is given pursuant to the engagement letter
between us and the Company dated June 1, 2000, and is governed by the laws of
the State of New York. It may only be relied upon subject to the assumptions and
qualifications described herein, including the express condition that it is
governed by the laws of the State of New York.
Based on and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Consideration to be paid is fair to the Company
from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ Paul J.S. Haigney
----------------------
Paul J.S. Haigney
Managing Director
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ANNEX D
[Letterhead of Morgan Stanley & Co. Incorporated]
July 18, 2000
Board of Directors
Ziff-Davis Inc.
28 East 28th Street
New York, NY 10016
Members of the Board:
We understand that Ziff-Davis Inc. ("Ziff-Davis"), CNET
Networks, Inc. ("CNET") and TD Merger Sub, a wholly owned subsidiary of CNET
("Merger Sub"), propose to enter into an Agreement and Plan of Merger,
substantially in the form of the draft dated July 17, 2000 (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Merger Sub with and into Ziff-Davis. Pursuant to the Merger, (i) Ziff-Davis
will become a wholly owned subsidiary of CNET, (ii) each outstanding share of ZD
Common Stock, par value $0.01 per share (the "ZD Common Stock"), other than
shares held by CNET or Merger Sub, will be converted into the right to receive
0.3397 shares of common stock, par value $0.0001 per share (the "CNET Common
Stock"), of CNET (the "ZD Consideration") and (iii) each outstanding share of
ZDNet Common Stock, par value $0.01 per share (the "ZDNet Common Stock", and
together with the ZD Common Stock, the "Common Stock"), other than shares held
by CNET or Merger Sub, will be converted into the right to receive 0.5932 shares
of CNET Common Stock (the "ZDNet Consideration" and, together with ZD
Consideration, the "Consideration"). The ZDNet Common Stock is intended to track
the performance of Ziff-Davis' ZDNet division ("ZDNet"). The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration
to be received by the holders of shares of ZD Common Stock and ZDNet Common
Stock pursuant to the Merger Agreement is fair from a financial point of view to
such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of Ziff-Davis, ZDNet and CNET;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning Ziff-Davis and ZDNet
prepared by the management of Ziff-Davis;
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(iii) reviewed certain publicly available financial projections for
ZDNet and CNET contained in certain securities analysts'
research reports that were recommended for review by the
managements of Ziff-Davis and CNET, respectively;
(iv) discussed the past and current operations and financial
condition and the prospects of Ziff-Davis and ZDNet, including
information relating to the strategic, financial and
operational benefits anticipated from the Merger, with senior
executives of Ziff-Davis and ZDNet;
(v) discussed the past and current operations and financial
condition and the prospects of CNET, including information
relating to the strategic, financial and operational benefits
anticipated from the Merger, with senior executives of CNET;
(vi) reviewed the reported prices and trading activity for the ZD
Common Stock, the ZDNet Common Stock and the CNET Common
Stock;
(vii) compared the financial performance of ZDNet and CNET and the
prices and trading activity of the ZDNet Common Stock and the
CNET Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(viii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
(ix) participated in discussions and negotiations among
representatives of Ziff-Davis and CNET and their financial and
legal advisors;
(x) reviewed the Merger Agreement and certain related documents;
(xi) considered such other factors and performed such other
analyses as we have deemed appropriate.
We have assumed and relied upon without independent
verification the accuracy and completeness of the information reviewed by us for
the purposes of this opinion. As you are aware, we were not provided with
projections or forecasts of future financial performance of ZDNet or CNET.
Instead, for purposes of our analysis, we have relied with your consent on the
estimates of certain securities analysts' research reports that were recommended
for review by the managements of Ziff-Davis and CNET, respectively. We have
relied upon the assessment by the managements of Ziff-Davis and CNET of their
ability to retain key employees of Ziff-Davis and CNET. We have also relied
upon, without independent verification, the assessment by the managements of
Ziff-Davis and CNET of: (i) the strategic, financial and other benefits expected
to result from the Merger; (ii) the timing and risks associated with the
integration of ZDNet and CNET; and (iii) the validity of, and risks associated
with, ZDNet's and CNET's existing and future technologies, services or business
models. We have not made any independent valuation or appraisal of the assets or
liabilities or technology of Ziff-Davis, nor have we been furnished with any
such appraisals. Morgan Stanley has assumed that in connection with the receipt
of all the necessary regulatory approvals for the proposed Merger, no
restrictions will be imposed that would have a material adverse effect on the
contemplated benefits expected to be derived from the Merger. In addition, we
have assumed that the Merger will be consummated in accordance with the terms
set forth in the Merger Agreement, including that (i) the Spin-Off and the Cash
Dividend
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(each as defined in the Merger Agreement) will be consummated prior to the
Merger and (ii) the Merger will be treated as a tax-free reorganization pursuant
to Section 368(a) of the Internal Revenue Code of 1986. With your consent,
Morgan Stanley assumed for purposes of considering the relationship between the
exchange ratio for the ZD Common Stock and the exchange ratio for the ZDNet
Common Stock that the net value of all of the assets and liabilities of the ZD
division of Ziff-Davis (excluding ZD's retained interest in ZDNet and the impact
of stock options) was equal to $55 million (i.e., the amount determined by the
Ziff-Davis Board of Directors and the special committee of that Board of
Directors). With your consent, Morgan Stanley also assumed that there would be
no tax consequences to holders of shares of ZD Common Stock and ZDNet Common
Stock in connection with the Merger. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors
of Ziff-Davis in connection with this transaction and will receive a fee for our
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory and financing services for Ziff-Davis and CNET and
have received fees for the rendering of these services.
It is understood that this letter is for the information of
the Board of Directors of Ziff-Davis only and may not be used for any other
purpose without our prior written consent. This opinion does not in any manner
address the prices at which the CNET Common Stock will trade following
consummation of the Merger, and Morgan Stanley expresses no opinion or
recommendation as to how the holders of ZD Common Stock, ZDNet Common Stock or
CNET Common Stock should vote at the shareholders' meetings held in connection
with the Merger.
Based on the foregoing, we are of the opinion on the date
hereof that the Consideration to be received by the holders of shares of ZD
Common Stock and ZDNet Common Stock pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Stuart J. Epstein
----------------------
Stuart J. Epstein
Managing Director
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145(a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because the person is or was a director
or officer of the corporation. Such indemnity may be against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or
proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
person did not have reasonable cause to believe the person's conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general,
that a corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor because the person is or was a director or officer of the
corporation, against any expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation.
Section 145(g) of the Delaware Corporation Law provides, in general,
that a corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director or officer of the corporation
against any liability asserted against the person in any such capacity, or
arising out of the person's status as such, whether or not the corporation would
have the power to indemnify the person against such liability under the
provisions of the law.
The Registrant's bylaws and certificate of incorporation provide for
the mandatory indemnification of its directors, officers, and to the extent
authorized by the board of directors, employees and other agents, to the maximum
extent permitted by the Delaware General Corporation Law, and CNET has entered
into agreements with its officers, directors and certain key employees
implementing such indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or incorporated herein by
reference:
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of July 19, 2000, among
the Registrant, CNET Networks, Inc., Ziff-Davis Inc. and TD
Merger Sub, Inc. (included as Annex A to the proxy
statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended 1999 and
incorporated herein by reference).
3.2 Restated By-Laws of the Registrant (filed as Exhibit 3.4 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 and incorporated herein by
reference).
*5.1 Opinion of Simpson Thacher & Bartlett regarding legality of
securities being registered.
*8.1 Opinion of Simpson Thacher & Bartlett regarding certain U.S.
income tax aspects of the Merger.
*8.2 Opinion of Sullivan & Cromwell regarding certain U.S. income
tax aspects of the Merger.
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EXHIBIT
NUMBER DESCRIPTION
10.1 Stock Option Plan adopted by the board of directors of CNET
dated August____, 2000 (included as Annex B to the proxy
statement/prospectus forming a part of this Registration
Statement and incorporated by reference).
*23.1 Consent of Simpson Thacher & Bartlett (to be included as part
of its opinions filed as Exhibit 5.1 and Exhibit 8.1,
respectively, and incorporated herein by reference).
*23.2 Consent of Sullivan & Cromwell (included as part of its
opinion filed as Exhibit 8.2 and incorporated herein by
reference).
23.3 Consent of Lazard Freres & Co. (included as part of its
opinion attached as Annex C to the proxy statement/prospectus
forming a part of this Registration Statement and incorporated
herein by reference).
*23.4 Consent of Morgan Stanley & Co. Incorporated.
23.5 Consent of PricewaterhouseCoopers.
23.6 Consent of KPMG LLP.
24.1 Power of Attorney (included on the signature page of this Form
S-4 and incorporated herein by reference).
99.1 Opinion of Lazard Freres & Co. (included as Annex C to the
proxy statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference).
99.2 Opinion of Morgan Stanley & Co. Incorporated (included as
Annex D to the proxy statement/prospectus forming a part of
this Registration Statement and incorporated herein by
reference).
99.3 Stockholder Agreement, dated as of July 19, 2000, among CNET
Networks, Inc., Softbank America Inc. and Softbank Corp.
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated July 21, 2000 and incorporated herein by
reference).
99.4 Voting Agreement, dated as of July 19, 2000, among CNET
Networks, Inc., Softbank America Inc. and TD Merger Sub, Inc.
(filed as Exhibit 99.3 to the Registrant's Current Report on
Form 8-K dated July 21, 2000 and incorporated herein by
reference).
99.5 Voting Agreement, dated as of July 19, 2000, between
Ziff-Davis, Inc. and Shelby Bonnie (filed as Exhibit 99.4 to
the Registrant's Current Report on Form 8-K dated July 21,
2000 and incorporated herein by reference).
99.6 Voting Agreement, dated as of July 19, 2000, between
Ziff-Davis, Inc. and Halsey Minor (filed as Exhibit 99.5 to
the Registrant's Current Report on Form 8-K dated July 21,
2000 and incorporated herein by reference).
*99.7 Form of Proxy of CNET Networks, Inc.
*99.8 Form of Proxy of Ziff Davis Inc.
*99.9 Form of Affiliate Agreement to be executed by affiliates of
Ziff-Davis, Inc.
----------
* To be filed by amendment.
(b)-(c) All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and therefore have
been omitted.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this registration statement 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;
(2) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons
II-2
<PAGE> 234
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form;
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment 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) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of any such request, and to send the
incorporated documents by first class mail or other equally prompt means,
including information contained in documents filed after the effective date of
this registration statement through the date of responding to such request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this registration statement when it
became effective.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. If a claim of
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 a 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.
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<PAGE> 235
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN FRANCISCO, STATE OF
CALIFORNIA, ON AUGUST 15, 2000.
CNET Networks, Inc.
By: /s/ SHELBY BONNIE
----------------------------
Name: Shelby Bonnie
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Shelby W. Bonnie and Douglas N. Woodrum
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement and to file the same
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney may be executed in counterparts.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ HALSEY M. MINOR Chairman of the Board August 15, 2000
----------------------------------
Halsey M. Minor
/s/ SHELBY W. BONNIE Chief Executive Officer August 15, 2000
----------------------------------
Shelby W. Bonnie
/s/ RICHARD M. MARINO President August 15, 2000
----------------------------------
Richard M. Marino
/s/ DOUGLAS N. WOODRUM Director, Executive Vice President and August 15, 2000
---------------------------------- Chief Financial Officer
Douglas N. Woodrum
/s/ JOHN C. "BUD" COLLIGAN Director August 15, 2000
----------------------------------
John C. "Bud" Colligan
/s/ MITCHELL KERTZMAN Director August 15, 2000
----------------------------------
Mitchell Kertzman
/s/ ERIC ROBINSON Director August 15, 2000
----------------------------------
Eric Robinson
/s/ DAVID P. OVERMYER Vice President, Finance and Administration August 15, 2000
---------------------------------- (Principal Accounting Officer)
David P. Overmyer
</TABLE>
II-4
<PAGE> 236
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of July 19, 2000, among
the Registrant, Ziff-Davis Inc, and TD Merger Sub, Inc.
(included as Annex A to the proxy statement/prospectus forming
a part of this Registration Statement and incorporated herein
by reference).
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended 1999 and
incorporated herein by reference).
3.2 Restated By-Laws of the Registrant (filed as Exhibit 3.4 the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 and incorporated herein by reference).
*5.1 Opinion of Simpson Thacher & Bartlett regarding legality of
securities being registered.
*8.1 Opinion of Simpson Thacher & Bartlett regarding certain U.S.
income tax aspects of the Merger.
*8.2 Opinion of Sullivan & Cromwell regarding certain U.S. income
tax aspects of the Merger.
10.1 Stock Option Plan adopted by the board of directors of CNET
dated August____, 2000 (included as Annex B to the proxy
statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference).
*23.1 Consent of Simpson Thacher & Bartlett (to be included as part
of its opinions filed as Exhibit 5.1 and Exhibit 8.1,
respectively, and incorporated herein by reference).
*23.2 Consent of Sullivan & Cromwell (to be included as part of its
opinion filed as Exhibit 8.2 and incorporated herein by
reference).
23.3 Consent of Lazard Freres & Co. (included as part of its
opinion attached as Annex C to the proxy statement/prospectus
forming a part of this Registration Statement and incorporated
herein by reference).
*23.4 Consent of Morgan Stanley & Co. Incorporated.
23.5 Consent of PricewaterhouseCoopers.
23.6 Consent of KPMG LLP.
24.1 Power of Attorney (included on the signature page of this Form
S-4 and incorporated herein by reference).
99.1 Opinion of Lazard Freres & Co. (included as Annex C to the
proxy statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference).
99.2 Opinion of Morgan Stanley & Co. Incorporated (included as
Annex D to the proxy statement/prospectus forming a part of
this Registration Statement and incorporated herein by
reference).
99.3 Stockholder Agreement, dated as of July 19, 2000, among CNET
Networks, Inc., Softbank America Inc. and Softbank Corp.
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated July 21, 2000 and incorporated herein by
reference).
99.4 Voting Agreement, dated as of July 19, 2000, among CNET
Networks, Inc., Softbank America Inc. and TD Merger Sub, Inc.
(filed as Exhibit 99.3 to the Registrant's Current Report on
Form 8-K dated July 21, 2000 and incorporated herein by
reference).
99.5 Voting Agreement, dated as of July 19, 2000, between
Ziff-Davis, Inc. and Shelby Bonnie (filed as Exhibit 99.4 to
the Registrant's Current Report on Form 8-K dated July 21,
2000 and incorporated herein by reference).
99.6 Voting Agreement, dated as of July 19, 2000, between
Ziff-Davis, Inc. and Halsey Minor (filed as Exhibit 99.5 to
the Registrant's Current Report on Form 8-K dated July 21,
2000 and incorporated herein by reference).
*99.7 Form of Proxy of CNET Networks, Inc.
*99.8 Form of Proxy of Ziff-Davis Inc.
*99.9 Form of Affiliate Agreement to be executed by affiliates of
Ziff-Davis, Inc.
</TABLE>
----------
* To be filed by amendment.
