<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 1998
REGISTRATION NO. 333-46493
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ZD INC.*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 2721 13-3987754
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ONE PARK AVENUE
NEW YORK, NEW YORK 10016
(212) 503-3500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TIMOTHY C. O'BRIEN
ZIFF-DAVIS INC.
ONE PARK AVENUE
NEW YORK, NEW YORK 10016
(212) 503-3500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<CAPTION>
STEPHEN A. GRANT, ESQ. JEFFREY SMALL, ESQ.
<S> <C>
SULLIVAN & CROMWELL DAVIS POLK & WARDWELL
125 BROAD STREET 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10017
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(o) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, please check the following box. [_]
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.
- --------
* Upon closing of the Offering, ZD Inc. will be renamed Ziff-Davis Inc. and
Ziff-Davis Inc. will be renamed ZD Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued April 6, 1998
25,800,000 Shares
Ziff-Davis Inc.
COMMON STOCK
----------
ALL OF THE 25,800,000 SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY
THE COMPANY. OF THE 25,800,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY,
20,640,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY
THE U.S. UNDERWRITERS AND 5,160,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE
THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE
"UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ANTICIPATED THAT THE INITIAL PUBLIC
OFFERING PRICE WILL BE BETWEEN $14.00 AND $17.00 PER SHARE. SEE "UNDERWRITERS"
FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.
----------
CONCURRENTLY WITH THE OFFERING BEING MADE HEREBY, THE COMPANY IS OFFERING, BY
MEANS OF A SEPARATE PROSPECTUS, $250 MILLION AGGREGATE PRINCIPAL AMOUNT OF ITS %
SENIOR SUBORDINATED NOTES DUE 2008 (THE "NOTES OFFERING" AND, TOGETHER WITH THE
OFFERING, THE "OFFERINGS"). THE CONSUMMATION OF EACH OF THE OFFERINGS IS
CONDITIONED UPON, AND WILL OCCUR SIMULTANEOUSLY WITH, THE CONSUMMATION OF THE
OTHER. SEE "USE OF PROCEEDS."
----------
UPON COMPLETION OF THE OFFERINGS, AFFILIATES OF THE COMPANY WILL RETAIN
APPROXIMATELY 74.2% OF THE OUTSTANDING VOTING POWER OF THE COMPANY. SEE
"PRINCIPAL STOCKHOLDERS."
----------
APPLICATION HAS BEEN MADE TO LIST THE COMMON STOCK ON THE NEW YORK STOCK
EXCHANGE UNDER THE SYMBOL "ZD."
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
PRICE $ A SHARE
----------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share................................... $ $ $
Total(3).................................... $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company, estimated at
$ . All the net proceeds will be paid to affiliates of the
Company. See "Use of Proceeds."
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
3,870,000 additional Shares of Common Stock at the Price to Public less
Underwriting Discounts and Commissions, for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriters."
----------
The Shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to approval of certain
legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is
expected that delivery of the Shares will be made on or about , 1998 at
the office of Morgan Stanley & Co. Incorporated, New York, NY against payment
therefor in immediately available funds.
----------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
, 1998
<PAGE>
[ART]
Artwork includes: (i) general comments relating to the Company and the
industry; (ii) descriptions of each of the Company's platforms; and (iii)
logos of the Company and each of the Company's 50 brands.
Text included within the artwork is as follows:
COVER PAGE:
The impact of computing and the Internet is a phenomenon that will define
this era.
The number of personal computers in use worldwide is now over 300 million
and use of the Internet has reached over 68 million U.S. adults.
Ziff-Davis is dedicated to bringing together the makers and users of
technology in a productive exchange.
We believe in technology.
SPREAD:
For companies targeting the technology marketplace, Ziff-Davis provides
integrated marketing programs across all of its platforms.
ZD PUBLISHING
Ziff-Davis' U.S. and international publications, including joint ventures
and over 50 licensed publications, total more than 80 publications worldwide.
PC Magazine, PC Week and Computer Shopper magazines are the top three computer
magazines in the U.S., as measured by total revenue.
ZD COMDEX & FORUMS
Ziff-Davis produces over 50 trade shows and conferences around the world.
COMDEX/Fall is the largest trade show in the U.S. as measured by total
revenue, total exhibit space and number of attendees.
ZD INTERNET
ZDNet.com, Ziff-Davis' computing Web site, was ranked as the leading Web
site in 1997 in the category of news, information and entertainment, as
measured by visitors per month. ZDNet has over one million registered users
and over 2.5 million e-mail recipients per month.
ZD EDUCATION
Ziff-Davis publishes computer training products and over 50 newsletters and
provides training through ZDUniversity, its Web based educational program.
ZD MARKET RESEARCH
Ziff-Davis develops, analyzes and compiles information on computer
technology issues and assists clients in identifying and targeting their
customers by tracking current activity and market share in the business, home
and reseller channels.
ZD TELEVISION
ZDTV, a 24 hour cable television channel and integrated Web site to be
launched by an affiliate, will target viewers interested in computers,
technology and the Internet.
BACK PAGE:
Ziff-Davis reaches makers and users of technology in over 100 countries.
believe in technology
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCE IMPLY THAT THE INFORMATION IS CORRECT AS OF ANY DATE SUBSEQUENT
TO THE DATE HEREOF.
---------------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMPANY OR BY AN UNDERWRITER THAT WOULD PERMIT A
PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED,
OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS
COMES ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES
ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE COMMON STOCK
AND THE DISTRIBUTION OF THIS PROSPECTUS.
---------------
The Company's logo and certain of the titles and logos of the Company's
publications, products and services referenced herein are trademarks of the
Company. Each trade name, trademark or service mark of any other company
appearing in this Prospectus is the property of its holder.
---------------
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 12
The Company............................................................... 18
The Reorganization........................................................ 20
Use of Proceeds........................................................... 21
Capitalization............................................................ 22
Dividend Policy........................................................... 22
Dilution.................................................................. 23
Selected Historical Combined Financial and Other Data..................... 24
Unaudited Pro Forma Combined Financial Information........................ 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 30
Industry.................................................................. 39
Business.................................................................. 41
Management................................................................ 57
Certain Transactions...................................................... 64
Principal Stockholders.................................................... 67
Description of Capital Stock.............................................. 68
Shares Eligible for Future Sale........................................... 72
Description of Certain Indebtedness....................................... 74
Certain United States Tax Consequences to Non-U.S. Holders of Common
Stock.................................................................... 76
Underwriters.............................................................. 78
Legal Matters............................................................. 81
Experts................................................................... 81
Additional Information.................................................... 82
Index to Financial Statements............................................. F-1
</TABLE>
3
<PAGE>
This Prospectus includes statistical data regarding the publishing, trade
show and Internet sectors which was obtained from industry publications,
including reports generated by ActivMedia, Advertising Age, AdScope, Audit
Bureau of Circulations, BPA International, Computer Intelligence, CMR,
Cowles/Simba Information, Electronic Advertising and Marketplace Report,
FIND/SVP, Inc., IMS, International Communications Research, Jupiter Ad Spend,
MediaMetrix, Trade Show Week and U.S. Industry and Trade Outlook 1998. These
industry publications generally indicate that the information contained
therein has been obtained from sources believed to be reliable, but that the
accuracy and completeness of such information is not guaranteed. The Company
has not independently verified such data. The Company has not sought the
consent of any of these organizations to refer to their reports herein.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by reference to, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information in this Prospectus (i)
assumes no exercise of the over-allotment option and (ii) gives effect to the
transactions described herein under the heading "The Reorganization." Unless
the context otherwise requires, references in this Prospectus to "Ziff-Davis"
or the "Company" are to the Company and its consolidated subsidiaries after
giving effect to the transactions described herein under the heading "The
Reorganization" and their respective predecessors. Unless the context otherwise
requires, references in this Prospectus to "Softbank" refer to SOFTBANK Corp.,
a Japanese corporation, and its affiliates. See "The Company--Relationship with
Softbank" and "The Reorganization."
Upon closing of the Offering, the Company will assume the name Ziff-Davis
Inc. and the operating subsidiary with the same name will be renamed ZD Inc.
Unless the context otherwise requires, references in this Prospectus to "ZDI"
refer to the operating corporation and its subsidiaries, including (i) Ziff-
Davis Publishing Company prior to its acquisition by Softbank in February 1996
and (ii) operations owned by MAC Inc. but managed by ZDI and to be acquired by
the Company in the Reorganization. Such operations owned by MAC Inc. consist of
certain international consumer and Internet publications, international trade
shows and the ZDNet business (the "MAC Assets"). See "The Reorganization" and
"Business."
THE COMPANY
The Company is the world's preeminent integrated media and marketing company
focused on computing and Internet-related technology, with principal platforms
in print publishing, trade shows and conferences, online content, market
research and education. The Company provides global technology companies with
marketing strategies for reaching key decision-makers.
The Company's PC Magazine, PC Week and Computer Shopper magazines are the top
three computer magazines in the U.S. and are among the top 25 U.S. magazines,
each as measured by total revenue in 1996 (the latest year for which data is
available). The Company also produces the world's most important trade shows
serving vendors, resellers, buyers and users of computer technology, including
COMDEX/Fall, the largest trade show in the U.S. The Company's ZDNet.com Web
site ("ZDNet") is the leading computing content site and ranked the number one
Web site in 1997 in the category of news, information and entertainment, as
measured by visitors per month.
The Company's 28 primary U.S. and international titles, including its joint
ventures, and over 50 licensed publications, total more than 80 publications
distributed worldwide, with a combined circulation of over eight million
primary readers. In 1997, Ziff-Davis was the largest technology publisher in
the U.S. in terms of total magazine revenue. In that same year, Ziff-Davis
accounted for 36.8% of all advertising and circulation dollars spent in
computer periodicals, with at least 50% more total magazine revenue than its
closest competitor. The preeminence of the Company's publications among readers
and advertisers is based on its comprehensive market and product coverage, the
quality of its editorial content and the influence of its readership.
In 1997, the Company produced over 50 trade shows and conferences worldwide
with over two million estimated attendees. The Company's COMDEX/Fall event is
the number one ranked trade show for all industries in the U.S. as measured by
total revenue, total exhibit space and number of attendees.
The Company's other media and marketing platforms include online content,
market research, education and the publication of computer-related newsletters
and training manuals and materials. In addition, the Company has an option to
acquire an interest in ZDTV: Your Computer Channel ("ZDTV"), the first 24-hour
cable television channel and integrated Web site focused exclusively on
computers, technology and the Internet, which is expected to be launched in the
first half of 1998.
5
<PAGE>
The Company had total revenue of $1.154 billion for 1997. The Company's
revenue is primarily derived from advertising sales, which represented 51.9% of
total revenue in 1997. The second largest component of the Company's revenue is
derived from trade shows and conferences, which accounted for 23.5% of total
revenue in 1997. Circulation revenue, comprised of subscription and newsstand
single copy sales, generated 13.1% of the Company's revenue in 1997 and other
revenue components, including online content, market research and revenue
derived from joint ventures and licenses, contributed 11.5% in 1997. The
Company had a net loss of $71.2 million for 1997 and expects the net loss for
the first quarter of 1998 to increase by 15-20% as compared with the first
quarter of 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
BUSINESS AND OPERATING STRATEGY
The Company's objective is to be the preferred marketing partner to
technology vendors and service providers seeking to reach primary decision-
makers involved in the specification and purchase of their products and
services. Major elements of the Company's strategy include:
.Maintain Focus on the Computer and Internet Technology Markets
.Develop the Most Comprehensive, Objective and Authoritative Content
.Build Upon Brand Strength of Existing Media Properties
.Continue to Leverage Multiple Media Marketing Platforms
.Expand Leadership on the Internet
.Launch New Products and Services
.Expand Global Reach
The Company expects to fund its business and operating strategy from
internally generated cash flow from operations, which are estimated to be
sufficient to fund investments and the repayment of indebtedness. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
6
<PAGE>
RELATIONSHIP WITH SOFTBANK
Upon the completion of the Reorganization described below, SOFTBANK Corp., a
Japanese Corporation publicly-traded on the Tokyo Stock Exchange First Section
(together with its affiliates, "Softbank"), will own approximately 74.2% of the
outstanding shares of Common Stock (71.4% if the U.S. Underwriters' over-
allotment is exercised in full). The Company and Softbank have entered into
certain agreements governing various interim and ongoing relationships between
Softbank and the Company. Softbank also has given the Company an undertaking
not to expand certain operations outside Japan in competition with the Company
without the prior approval of the Company's management directors after
consulting with the Company's independent directors. This undertaking would not
preclude investments by investment funds managed by Softbank. The Company has
undertaken not to compete with Softbank in Japan without the prior approval of
SOFTBANK Corp.'s Board of Directors and has agreed to afford Softbank the
continuing right to license all of the Company's products and services in
Japan. See "Risk Factors--Control by Principal Stockholders and Potential
Conflicts of Interest," "The Company--Relationship with Softbank" and "Certain
Transactions."
The following table presents Softbank's total historical investment in and
return on investment from the Company as well as the value of its investment at
the assumed initial offering price (calculated based on the midpoint of the
range set forth on the cover page). See also "Dilution."
<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS,
EXCEPT PER
SHARE
DATA)
----------
<S> <C>
Historical investment in the Company....................... $3,040,201(1)
Total return on investment................................. 471,966(2)
Pro forma total return on investment....................... 2,003,278(3)
Percentage of Company held after the Offerings............. 74.2%
Value of investment after the Offerings.................... 1,150,100(4)
</TABLE>
- --------
(1) Total investment includes $492,560 in equity and $2,547,641 in debt.
(2) Total return includes $8,000 in dividends, $355,096 in interest and
$108,870 in debt principal repayments.
(3) Pro forma total return includes total return as described above in (2) plus
the repayment of intercompany indebtedness totaling $1,531,312 in
connection with the Reorganization.
(4) Assumes an initial public offering price of $15.50 per share and a holding
of 74.2 million shares of Common Stock by Softbank.
7
<PAGE>
THE REORGANIZATION
The Company is an indirect subsidiary of SOFTBANK Corp., which, as of
December 31, 1997, was 50.2% owned by Mr. Masayoshi Son, its President,
including 43.4% directly held by his 99% owned holding company, MAC Inc., a
Japanese corporation ("MAC"), and SOFTBANK Corp.'s largest shareholder. Prior
to the Offerings, the Company's businesses were conducted through various
indirect subsidiaries of SOFTBANK Corp. The Company's publishing business was
principally conducted through Ziff-Davis Inc. ("ZDI") and its trade show
business was principally conducted through ZD COMDEX and Forums Inc. ("ZDCF").
The MAC Assets were managed by ZDI and ZDCF, but were owned by MAC.
Concurrently with the Offerings, the Company will consummate a Reorganization
(as described under "The Reorganization") pursuant to which: (i) all of the
stock of ZDI and ZDCF will be contributed to the Company by Softbank in
exchange for 74.2% of the Company's Common Stock; (ii) the Company will
complete the purchase of the MAC Assets; (iii) the Company will issue and sell
the Common Stock and the Notes pursuant to the Offerings; (iv) the Company will
enter into a credit facility with a group of financial institutions (the
"Credit Facility") and borrow $1.25 billion thereunder; and (v) approximately
$928 million of the Company's obligations to Softbank will be converted to
equity and the Company will repay approximately $1.531 billion of obligations
to Softbank. The Company has obtained a commitment letter from The Bank of New
York, Morgan Stanley Senior Funding, DLJ Capital Funding and The Chase
Manhattan Bank to provide such Credit Facility. All of the transactions
comprising the Reorganization will be deemed to occur simultaneously. See "Risk
Factors--Risks Relating to the Reorganization," and "--Absence of History as a
Stand-Alone Company; Limited Relevance of Historical Financial Information,"
"The Reorganization" and "Unaudited Pro Forma Combined Financial Information."
8
<PAGE>
THE OFFERING
Common Stock offered:
<TABLE>
<S> <C>
U.S. Offering................ shares
International Offering....... shares
-----------------
Total.................... 25,800,000 shares
=================
Common Stock to be
outstanding after the
Offering................... 100,000,000 shares(1)
Notes Offering.............. Concurrently with the Offering being made hereby,
the Company is offering, by means of a separate
prospectus, $250 million aggregate principal
amount of its % Senior Subordinated Notes due
2008 (the "Notes"). The consummation of the
Offering being made hereby and the Notes Offering
is conditioned upon, and will occur
simultaneously with, the consummation of the
other.
Use of Proceeds............. The net proceeds from the Offerings, together
with the amounts drawn under the Credit Facility,
will be used to complete the purchase of the MAC
Assets and repay intercompany indebtedness. See
"Use of Proceeds."
NYSE symbol................. "ZD"
- ----------------
</TABLE>
(1) Does not include 10,000,000 shares of Common Stock reserved for issuance
under the Company's Incentive Compensation and Employee Stock Purchase
Plans. See "Management--Stock Plans."
RISK FACTORS
Prospective investors should consider carefully the information contained
under "Risk Factors," as well as the other information and data included in
this Prospectus for certain considerations relevant to evaluating an investment
in the shares of Common Stock offered hereby.
9
<PAGE>
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA
The following table presents Summary Historical Combined Financial and Other
Data for ZDI and ZDCF as of December 31, 1997 and for the three years then
ended which were derived from the audited combined financial statements of ZDI
and ZDCF included elsewhere in this Prospectus. COMDEX was acquired by Softbank
on April 1, 1995 and ZDI was acquired by Softbank on February 29, 1996; the
Summary Historical Combined Financial and Other Data includes the results of
COMDEX and ZDI from such dates. See "The Reorganization." The following table
also presents pro forma combined financial data of ZDI and ZDCF giving effect
to the transactions described under the heading "The Reorganization" as if they
had occurred as of January 1, 1997, in the case of the statement of operations
data, and as of December 31, 1997, in the case of the balance sheet data. The
pro forma financial data does not purport to be indicative of the results that
actually would have been obtained had the Reorganization been completed as of
such dates and is not intended to be a projection of the future results of
operations or financial position of ZDI and ZDCF. The following information
should be read in conjunction with "Use of Proceeds," "Capitalization,"
"Selected Historical Combined Financial and Other Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Presentation of Financial Information," "Unaudited Pro Forma Combined Financial
Information" and the Combined Financial Statements of ZDI and ZDCF, including
the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
PRO FORMA
1995 1996 1997 1997(1)
-------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue, net.................... $202,729 $ 955,139 $1,153,761 $ 1,153,761
Depreciation and amortization... 24,305 139,736 154,940 156,940
Income from operations.......... 62,675 87,181 109,232 109,232
Interest expense, net........... 44,005 120,646 190,445 122,730
Income/(loss) before income
taxes.......................... 22,869 (27,124) (72,491) (4,776)
Net income/(loss)(2)............ 10,945 (52,081) (71,179) (7,915)
Pro forma basic loss per
share(2)....................... (.08)
Pro forma diluted loss per
share(2)....................... (.08)
Pro forma weighted average
shares outstanding(2).......... 100,000,000
OTHER DATA:
EBITDA(3)....................... $ 91,179 $ 233,258 $ 272,894 $ 274,894
Capital expenditures............ 3,367 22,365 30,196 --
Net cash provided (used) by
operating activities........... 26,168 61,543 (3,364) --
Net cash used by investing
activities..................... (817,887) (2,147,188) (44,196) --
Net cash provided by financing
activities..................... 815,408 2,087,652 47,946 --
Ratio of earnings to fixed
charges(4)..................... 1.5x -- -- --
<CAPTION>
AS OF DECEMBER 31,
1997
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ACTUAL PRO FORMA
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 30,301 $ 30,301
Total assets........................................ 3,546,646 3,532,834
Total long-term obligations......................... 2,408,240 1,586,539
Stockholders' equity................................ 126,130 1,441,165
</TABLE>
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(1) Due to the subjectivity inherent in the assumptions concerning the timing
and nature of the uses of cash generated by the pro forma adjustments, cash
flows from operating, investing and financing activities are not presented
in the pro forma data.
(2) No historical earnings per share or share data are presented as the Company
does not consider such data meaningful. Upon closing of the Offering, 100
million shares of common stock will be outstanding and pro forma earnings
per share data gives effect to these shares as if they were outstanding on
January 1, 1997.
(3) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA is not intended to represent
cash flows from operations and should not be considered as an alternative
to net income as an indicator of the Company's operating performance or to
cash flows as a measure of liquidity. The Company believes that EBITDA is a
standard measure commonly reported and widely used by analysts, investors
and other interested parties in the publishing and media industries.
(4) For purposes of the computations, earnings before fixed charges consist of
income/(loss) before income taxes adjusted for equity earnings (loss), as
appropriate, plus fixed charges. Fixed charges are defined as interest
expense plus that portion of rental expense which is deemed to be
representative of the interest factor. For the years ended December 31,
1996, 1997 and Pro Forma 1997 earnings were insufficient to cover fixed
charges by $26,598, $74,520 and $6,805, respectively.
----------------
For information relating to the three months ended March 31, 1998, see page
33 in "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
SEE THE TABLE ON PAGE 32 IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" FOR A PRESENTATION OF THE
COMBINED RESULTS AS IF ZDI HAD BEEN ACQUIRED ON JANUARY 1, 1995. THE COMPANY
BELIEVES THIS INFORMATION IS IMPORTANT IN EVALUATING ITS HISTORICAL RESULTS OF
OPERATIONS.
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RISK FACTORS
An investment in the shares of Common Stock offered hereby involves various
risks. Prior to investing in the Common Stock being offered hereby,
prospective investors should consider carefully the factors set forth below,
together with the other information set forth in this Prospectus. Certain
information contained in this section and elsewhere in this Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors set forth in
this section and elsewhere in this Prospectus.
RISKS RELATING TO THE REORGANIZATION
The Company is a newly organized Delaware corporation, incorporated on
February 4, 1998 in contemplation of the Reorganization. As part of the
Reorganization, the Company has acquired and will acquire the MAC Assets for
approximately $370 million. Although the Company believes, based on an
independent appraisal of the assets, that the purchase price does not exceed
fair market value, such arrangements are not the result of an arm's length
negotiation between unrelated parties, and there can be no assurance that the
Company would not have been able to obtain better terms from unrelated
parties. See "The Reorganization," "Unaudited Pro Forma Combined Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Certain Transactions."
ABSENCE OF HISTORY AS A STAND-ALONE COMPANY; LIMITED RELEVANCE OF HISTORICAL
FINANCIAL INFORMATION
The Company has never operated as a stand-alone company. Until October 1997,
the ZDI and the ZDCF businesses were managed as separate Softbank
subsidiaries. The Company's future operating results will depend in part on
its ability to integrate these businesses and manage the combined enterprise.
In addition, although the Company will be a subsidiary of Softbank following
the Offerings, Softbank will be under no obligation to provide assistance to
the Company or any of its subsidiaries.
The financial information of ZDI and ZDCF included herein does not reflect
what the actual results of operations, financial position and cash flows of
the Company would have been had the Company existed and the Reorganization
been completed prior to the periods presented, nor is it necessarily
indicative of the results of operations, financial position and cash flows of
the Company in the future. The financial statements also include the MAC
Assets which are being transferred to the Company pursuant to the
Reorganization. See "Unaudited Pro Forma Combined Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Presentation of Financial Information" and "Certain Transactions."
CONTROL BY PRINCIPAL STOCKHOLDERS AND POTENTIAL CONFLICTS OF INTEREST
Upon the completion of the Reorganization, Softbank will own approximately
74.2% of the outstanding shares of Common Stock of the Company (71.4% if the
U.S. Underwriters' over-allotment option is exercised in full). As a result,
Softbank will be in a position to direct the election of all members of the
Board of Directors of the Company and to control even those actions that
require the approval of two-thirds or more of the voting share capital of the
Company, including amendments to the Company's Certificate of Incorporation
and any business combinations. Such concentration of ownership would also have
the effect of preventing a change in control of the Company that might
otherwise be beneficial to stockholders. Section 141 of the Delaware General
Corporation Law, however, imposes upon directors a fiduciary duty to
shareholders.
The Company and Softbank have entered into certain agreements governing
various interim and ongoing relationships between Softbank and the Company,
including certain licensing and management agreements relating to
publications, trade shows, ZDTV and ZDNet. In addition, Softbank has given the
Company an undertaking that, as long as it owns 40% of the voting stock of the
Company and can elect a majority of the Board of Directors, it will not expand
operations involving (x) publishing information on computing and Internet-
related technology through the media of print, CD-ROM/DVD, Internet and
television, or (y) producing trade shows, conferences, exhibitions and similar
events primarily related to computing and Internet-related technology outside
Japan in competition with the Company without the prior approval of the
Company's management
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directors after consulting with the Company's independent directors. This
undertaking does not preclude investments by investment funds managed by
Softbank. Softbank manages certain venture capital funds which invest in,
among other things, computer and Internet-related companies. These funds may
be able to co-invest with the Company or compete with the Company with respect
to new investments. Softbank may develop new funds in the future, which funds
may compete with the Company for investment opportunities. The Company has
undertaken not to compete with Softbank in Japan without the prior approval of
SOFTBANK Corp.'s Board of Directors and has agreed to afford Softbank the
continuing right to license all of the Company's products and services in
Japan. Such arrangements and undertaking are not the result of an arm's length
negotiation between unrelated parties. See "--New Product Risks," "The
Company--Relationship with Softbank," "Certain Transactions," "Principal
Stockholders" and "Description of Capital Stock."
SIGNIFICANT DEBT OBLIGATIONS
At December 31, 1997, on a pro forma basis after giving effect to the
Reorganization described under "Unaudited Pro Forma Combined Financial
Information," the Company's total debt was approximately $1.594 billion, its
total stockholders' equity was approximately $1.441 billion, its earnings were
insufficient to cover fixed charges by $6.8 million and its total debt was
52.5% of total capitalization. The Company's indebtedness is substantial in
relation to its stockholders' equity. The degree to which the Company is
leveraged could have important consequences to holders of Common Stock
because: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired; (ii) the funds available to the Company
for its operations may be reduced if a substantial portion of the Company's
cash flow from operations is dedicated to the payment of principal and
interest on its indebtedness; and (iii) the Company's ability to incur
additional debt may be impaired because the Credit Facility and the Notes are
expected to contain financial and other restrictive covenants, including those
relating to the incurrence of additional indebtedness, the creation of liens,
the payment of dividends and sales of assets. See "Description of Certain
Indebtedness." The indebtedness of the Company requires a substantial portion
of the Company's cash flow to be dedicated to the payment of principal and
interest on indebtedness, thereby reducing funds available for capital
expenditures and future business opportunities. In addition, the Company's
indebtedness could increase the Company's vulnerability to adverse general
economic conditions (including increases in interest rates) and could impair
the Company's ability to take advantage of significant business opportunities
that may arise.
DEPENDENCE ON DEMAND FOR ADVERTISING
A significant portion of the Company's total revenue in 1997 (51.9%) was
derived from advertising sales. Should a general economic downturn or a
recession in the United States occur in the future, the Company's advertisers
may reduce their advertising budgets. In addition, technology product
advertisers may be affected by factors such as pricing pressures and new
product launches. Furthermore, there can be no assurance that technology
product advertisers will maintain current levels of advertising in special
interest magazines and events as opposed to general interest media such as
newspapers, television and Internet sites. Any material decline in the demand
for advertising by technology product advertisers could have an adverse effect
on the Company's financial condition and results of operations.
IMPORTANCE OF CERTAIN PUBLICATIONS AND TRADE SHOWS
Certain of the Company's publications have represented a significant portion
of the Company's historic revenue, and the Company expects that such
publications will continue to do so in the future. The Company's business
publications, which include such titles as PC Magazine, Computer Shopper and
PC Week, accounted for 49.0% of the Company's print publishing revenue in
1997. Although the Company believes it has a diversified portfolio of special-
interest publications and is not dependent on any single publication, a
significant decline in the performance of any of these publications could have
an adverse effect on the Company's financial condition and results of
operations. See "Business--Print Publishing--Sources of Print Publishing
Revenue."
Certain of the Company's trade shows and conferences have represented a
significant portion of the Company's historic revenue, and the Company expects
that such trade shows and conferences will continue to
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do so in the future. COMDEX/Fall accounted for 34.0% of the Company's trade
show and conference revenue in 1997. Although the Company believes it has a
diversified portfolio of trade shows worldwide, a significant decline in the
performance of COMDEX/Fall could have an adverse effect on the Company's
financial condition and results of operations. See "Business--Trade Shows and
Conferences--Sources of Trade Show and Conference Revenue."
SEASONALITY OF REVENUE; FLUCTUATIONS IN REVENUE FROM PERIOD TO PERIOD;
ANTICIPATED LOSS FOR FIRST QUARTER OF 1998
The Company's business is seasonal, with revenue typically reaching its
highest level during the fourth quarter of each calendar year, largely due to
the timing of its single largest trade show event, COMDEX/Fall, and the
increase in publishing revenue in the fourth quarter due to increased consumer
buying activity during the holiday season. In 1997, 35.0% of the Company's
revenue was generated during the fourth quarter, with the first, second and
third quarters accounting for 19.5%, 26.1% and 19.4% of revenue, respectively.
In addition, the Company may experience fluctuations in revenue from period to
period based on levels of marketing expenditure by the Company's advertising
customers and by competition among computer technology marketers. Many of the
Company's large customers concentrate their advertising expenditures around
major new product launches. Marketing expenditure by technology companies can
also be affected by factors affecting the computer industry generally,
including changes in end user demand, pricing pressures and inventory
surpluses. Furthermore, the Company's results are affected by the number and
timing of new product launches and the timing of events. The launch of new
publications, trade shows and services are funded with cash flow from
operations and are expensed as incurred. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview" and "--
Seasonality."
For the first quarter of 1998, the Company expects that its net loss will
increase by 15-20% as compared with the first quarter of 1997. There are
several factors influencing the lower operating results anticipated for the
first quarter of 1998, including lower advertising revenue in the Company's
business publications as a result of factors affecting the computer technology
industry generally (substantially offset by revenue from trade shows which
were not held in the comparable period of the prior year) and certain one-time
costs occurring in the first quarter of 1998. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Three Months Ended
March 31, 1998 Compared With Three Months Ended March 31, 1997 (unaudited)."
HISTORICAL NET LOSSES
The Company had net losses of $52.1 million and $71.2 million for the twelve
months ended December 31, 1996 and 1997, respectively. On a pro forma as
adjusted basis giving effect to the Reorganization, the Company had a net loss
of $7.9 million, or $(.08) per share, for the twelve months ended December 31,
1997. See "Unaudited Pro Forma Combined Financial Information." There can be
no assurance that the Company will report net income in the future.
NEW PRODUCT RISKS
The Company's future success will depend in part on its ability to monitor
rapidly changing technologies and market trends and offer new publications,
trade shows and services that address the needs of specific target audiences.
The process of internally researching and developing, launching, acquiring
acceptance and establishing profitability for a new publication, trade show or
service, or assimilating and marketing an acquired publication, trade show or
service, can be risky and costly. There can be no assurance that the Company's
efforts to introduce new or assimilate acquired publications, trade shows or
services will be successful or profitable. In addition to its publications,
trade shows and services, the Company is a leading provider of Internet
content about computing services, primarily through its ZDNet online service.
The Internet is still in the relatively early stages of development;
therefore, there can be no assurance that the Company's Internet services will
remain competitive. Costs related to the development of new products are
expensed as incurred and, accordingly, the Company's profitability from year
to year may be adversely affected by the number and timing of new product
launches. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company has entered into a license and services agreement with MAC to
develop ZDTV. ZDTV is owned by MAC, but as part of this license and services
agreement MAC has granted the Company an option
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exercisable through December 31, 1998 to purchase all of MAC's interest in
ZDTV for an amount equal to MAC's investment plus 10% per annum for the period
of its investment. The Company does not intend to exercise the option unless
ZDTV has secured sufficient cable carriage. This may include entering into a
joint venture or other co-ownership arrangement. The Company is currently
funding ZDTV's operations on behalf of MAC through unsecured advances which,
for approved levels of expenditure, are to be reimbursed by MAC. ZDTV's cash
requirements are expected to be approximately $54 million in 1998. There can
be no assurance that MAC will continue to approve and reimburse the Company
for expenditures or that the Company will exercise its option. If the Company
exercises its option, there can be no assurance that ZDTV will ultimately
obtain sufficient cable carriage and commercial acceptance to be profitable.
See "The Company--Relationship with Softbank" and "Certain Transactions."
RISKS ASSOCIATED WITH FLUCTUATIONS IN PAPER AND POSTAGE COSTS
The Company's principal raw material is paper. Paper costs constitute a
significant expense, accounting for 15.2% of the Company's total U.S. print
publishing operating expenses in 1997. Paper prices have been volatile over
the past several years, initially rising in 1994, rising more significantly in
1995 and 1996 and declining in 1997. Management anticipates paper prices will
increase in 1998. The Company does not use forward contracts and most of its
paper supply contracts, which are generally for a two to three year renewable
term, provide for price adjustments to reflect changing market prices.
Accordingly, significant increases in paper prices could adversely affect the
Company's future results of operations.
Postage for magazine distribution is also a significant expense for the
Company, accounting for 11.3% of the Company's total U.S. print publishing
operating expenses in 1997. Postage costs increase periodically and can be
expected to increase in the future. The United States Postal Service has
recently announced a 5.4% increase for commercial magazine rates, which is
expected to become effective in 1998. The Company may not be able to recover,
in whole or in part, paper or postage cost increases. Accordingly, significant
cost increases could have an adverse effect on the Company's financial
condition or results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business--Print
Publishing--Paper and Printing."
COMPETITION
The Company faces significant competition with respect to its print
publications, trade shows and conferences and other technology information
services. In its publishing business, the Company principally competes for
advertising and circulation revenue with publishers of other computer
technology publications and also faces broad competition from media companies
that produce general interest magazines, newspapers and online content.
Overall competitive factors include product positioning, editorial quality,
circulation, price and customer service. Competition for advertising dollars
is primarily based on advertising rates, the nature and scope of readership,
reader response to advertisers' products and services and the effectiveness of
sales teams. In its trade show and conference business, the Company competes
with other producers of trade shows and conferences for exhibition space,
exhibitors and attendees, primarily on the basis of the quality of the
conference, its content and organizational efficiency. If the Company is
unable to compete effectively for advertisers, readers, exhibitors and/or
attendees, its financial condition and results of operations could be
adversely affected. See "Business--Competition."
CONSOLIDATION OF PRINCIPAL VENDORS; SIGNIFICANT SUPPLIER
The Company's principal vendors include paper suppliers, printers,
fulfillment houses and national newsstand distributors. Each of these
industries is currently experiencing consolidation among their principal
participants. Such consolidation may result in: (i) decreased competition,
which may lead to increased prices; (ii) interruptions and delays in services
provided by such vendors; and (iii) greater dependence on certain vendors.
Such factors could adversely affect the Company's results of operations. One
printing company
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accounted for approximately 50% of the Company's total print publishing
manufacturing expenditures in 1997 for its U.S.-based publications. While the
Company believes there are adequate alternatives available, an interruption or
delay in service from, or the loss of, this printer could have an adverse
effect on the Company. See "Business--Print Publishing--Paper and Printing."
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
One component of the Company's growth strategy is to further expand into
international markets. There are certain risks inherent in doing business in
international markets, such as the uncertainty of product acceptance by
different cultures, the risks of divergent business expectations or
difficulties in establishing joint ventures with foreign partners,
difficulties in staffing and managing multinational operations, currency
fluctuations, state-imposed restrictions on the repatriation of funds and
potentially adverse tax consequences. There can be no assurance that one or
more of such factors will not have an adverse effect on the Company's future
international operations and, consequently, on the Company's financial
condition and results of operations. See "Business --Print Publishing--
International Publications" and "Business--Trade Shows and Conferences."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company expects to have 100 million
shares of Common Stock outstanding (approximately 103.9 million shares if the
U.S. Underwriters' over-allotment option is exercised in full), of which the
25.8 million shares offered hereby will be freely tradeable without
restriction by persons other than "affiliates" of the Company. The remaining
shares of Common Stock will be deemed "restricted" securities within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
as such may not be sold in the absence of registration under the Securities
Act or an exemption therefrom, including the exemption contained in Rule 144
under the Securities Act. The Company and Softbank have entered into a
registration rights agreement in connection with the Offering which provides
Softbank with the right to require the Company to register any or all of the
Common Stock held by Softbank in a public offering pursuant to the Securities
Act and the right to "piggyback" or include Softbank's Common Stock in any
registration of Common Stock made by the Company. No prediction can be made as
to the effect, if any, that future sales of shares of Common Stock, or the
availability of such shares for future sales, will have on the market price of
the shares of Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock, and such a
reduction in the market price of the Common Stock could impair the ability of
the Company to raise additional capital through future public offerings of its
equity securities. See "Shares Eligible for Future Sale."
DIVIDEND POLICY; HOLDING COMPANY STRUCTURE
The Company currently intends to retain earnings to finance its operations,
fund future growth and reduce indebtedness and does not anticipate paying
dividends in the foreseeable future. In addition, as a holding company, the
Company's major assets will initially be the shares it holds in its
subsidiaries. Therefore, the Company's ability to pay future dividends and
distributions, if any, to holders of the Common Stock is dependent upon the
receipt of dividends or other payments from its subsidiaries. See "Dividend
Policy."
SUBSTANTIAL AND IMMEDIATE DILUTION
The initial public offering price of the Common Stock will be higher than
the book value per share of Common Stock. Accordingly, purchasers in the
Offering will suffer a substantial and immediate dilution of $31.39 in the net
tangible book value per share of Common Stock from the initial public offering
price. See "Dilution."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for
the Company's Common Stock will develop or be sustained after
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the Offering. The initial public offering price will be determined by
negotiation between the Company and the representatives of the Underwriters
based upon several factors. See "Underwriters" for a discussion of the factors
to be considered in determining the initial public offering price. The trading
price of the Company's Common Stock could be subject to wide fluctuations in
response to quarterly variations in operating results, expectations of
securities analysts, announcements of new publications or technological
innovations by the Company or its competitors, changes in financial estimates
by securities analysts, the operating and stock price performance of other
companies that investors may deem comparable to the Company and other events
or factors. In addition, the stock market in general has experienced extreme
volatility that often has been unrelated to the operating performance of
particular companies which are traded on the market. These broad market and
industry fluctuations may adversely affect the trading price of the Company's
Common Stock, regardless of the Company's actual operating performance.
CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Certificate of Incorporation and By-Laws
may inhibit changes in control of the Company not approved by the Board of
Directors. The Company will also be afforded the protections of Section 203 of
the Delaware General Corporation Law, which could have similar effects. See
"Description of Capital Stock."
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THE COMPANY
The Company is the world's preeminent integrated media and marketing company
focused on computing and Internet-related technology, with principal platforms
in print publishing, trade shows and conferences, online content, market
research and education. The Company's 28 primary U.S. and international
titles, including its joint ventures, and over 50 licensed publications, total
more than 80 publications distributed worldwide, with a combined circulation
of more than eight million primary readers. The Company's predecessor was
founded in 1927 and pioneered the development of special-interest magazines,
including Car and Driver, Popular Photography, Stereo Review, Boating, Skiing
and Modern Bride. The Company also produces the world's most important trade
shows related to computer technology, with over two million estimated
attendees at over 50 trade shows and conferences worldwide in 1997. The
Company's COMDEX/Fall event is the number one ranked trade show for all
industries in the U.S. as measured by total revenue, total exhibit space and
number of attendees. The Company's ZDNet.com Web site is the leading computing
content site and ranked the number one Web site in 1997 in the category of
news, information and entertainment, as measured by visitors per month. The
Company's other media and marketing platforms include market research,
education and the publication of computer-related newsletters, training
manuals and materials.
The Company's principal executive offices are located at One Park Avenue,
New York, New York 10016 and its telephone number is (212) 503-3500.
RELATIONSHIP WITH SOFTBANK
The Company is an indirect subsidiary of SOFTBANK Corp., which, as of
December 31, 1997, was 50.2% owned by Mr. Masayoshi Son, its President,
including 43.4% directly held by his 99% owned holding company, MAC. Softbank
is a leading provider of information and distribution services as
infrastructure for the digital information industry. Softbank is Japan's
leading distributor of computer software as well as a leading publisher of
Japanese computer technology publications. It also is an 80% owner of Kingston
Technology Company ("Kingston"), one of the world's largest independent
providers of computer memory modules; a founder and co-owner of Japan Sky
Broadcasting Co., Ltd. ("JSkyB"), a digital satellite broadcasting venture in
Japan; a shareholder, directly or through its investment fund affiliates, in
over 50 network and computer-related venture businesses in the digital
information industry; and a 29.4% owner of Yahoo! Inc.
Upon the completion of the Reorganization, Softbank will own approximately
74.2% of the outstanding shares of Common Stock (71.4% if the U.S.
Underwriters' overallotment is exercised in full). The Company and Softbank
have entered into certain agreements governing various interim and ongoing
relationships between Softbank and the Company, including certain licensing
and management agreements relating to publications, trade shows, ZDTV and
ZDNet. See "Certain Transactions."
In addition, Softbank has given the Company an undertaking that, as long as
it owns 40% of the voting stock of the Company and can elect a majority of the
Board of Directors, it will not expand operations involving (x) publishing
information on computing and Internet-related technology through the media of
print, CD-ROM/DVD, Internet and television, or (y) producing trade shows,
conferences, exhibitions and similar events primarily related to computing and
Internet-related technology outside Japan in competition with the Company
without the prior approval of the Company's management directors after
consulting with the Company's independent directors.
This undertaking does not preclude investments by investment funds managed
by Softbank. Softbank manages certain venture capital funds which invest in,
among other things, computer and Internet-related companies. These funds may
be able to co-invest with the Company or compete with the Company with respect
to new investments. Softbank may develop new funds in the future, which funds
may compete with the Company for investment opportunities. The Company has
undertaken not to compete with Softbank in Japan without the prior approval of
SOFTBANK Corp.'s Board of Directors and has agreed to afford Softbank the
continuing right to license all of the Company's products and services in
Japan. See "Risk Factors--Control by Principal Stockholders and Potential
Conflicts of Interest" and "Certain Transactions."
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In order to expand its media platforms, the Company has entered into a
license and services agreement with MAC to develop ZDTV, a 24-hour cable
television channel and integrated Web site focused exclusively on computers,
technology and the Internet. ZDTV is owned by MAC, but as part of this license
and services agreement MAC has granted the Company an option exercisable
through December 31, 1998 to purchase all of MAC's interest in ZDTV for an
amount equal to MAC's investment plus 10% per annum for the period of its
investment. Pursuant to the license and services agreement, the Company has
agreed to fund ZDTV's operations on behalf of MAC through unsecured advances
which, for approved levels of expenditure, are to be reimbursed by MAC. Such
advances bear interest at the 30-day LIBOR rate plus .50%. ZDTV's cash
requirements are expected to be approximately $54 million in 1998. The
Company's cumulative advances in respect of ZDTV, which totaled $14.4 million
net of $10.1 million in repayments through December 31, 1997, will be repaid
concurrently with the Reorganization. The Company has not yet determined
whether it will exercise its option to purchase MAC's interest in ZDTV. Any
such purchase will depend upon securing sufficient cable carriage, which may
include entering into a joint venture or other co-ownership arrangement,
including an arrangement with a third party cable system operator which will
provide carriage and also assume a portion of the ongoing cash requirements on
terms that are acceptable to the Company. ZDTV is not included in the
Company's results of operations. See "Certain Transactions."
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THE REORGANIZATION
The businesses to be conducted by the Company were acquired in a series of
acquisitions and internal reorganizations undertaken by Softbank. See "The
Company--Relationship with Softbank." The Company's principal business
operations are as follows:
(i) the computer technology publishing operations of Ziff-Davis
Publishing Company ("ZD Pubco"), which Softbank acquired in February 1996
for $1.8 billion in cash and subsequently renamed Ziff-Davis Inc.;
(ii) the COMDEX computer-related trade show operations ("COMDEX"), which
Softbank acquired in April 1995 for $803 million in cash and renamed
SOFTBANK COMDEX Inc. ("SB COMDEX"); and
(iii) the computer and network-related trade show operations of Ziff-
Davis Exposition and Conference Company ("ZD Expos"), which Softbank
acquired in December 1994 for $127 million in cash and subsequently renamed
SOFTBANK Forums Inc. ("SB Forums").
Concurrently with the ZD Pubco and ZD Expos acquisitions described above,
MAC purchased certain operations and assets of these companies for $302
million and $75 million, respectively. The MAC Assets consist of certain
international consumer and Internet publications, international trade shows
and the ZDNet business, most of which were still under development. The MAC
Assets and related operations have been managed by ZDI and ZDCF since their
acquisition by MAC. As part of the Reorganization discussed below, the MAC
Assets, except for those that have been discontinued, have been or will be
acquired by the Company at a purchase price that does not exceed fair market
value, based on an independent appraisal. A portion of the MAC Assets was
acquired by the Company on October 31, 1997 for $100 million, and the balance
will be sold to the Company concurrently with the Offerings. See "Use of
Proceeds."
In October 1997, Softbank decided to combine the businesses of ZDI, SB
COMDEX and SB Forums. SB Forums and SB COMDEX were merged as of December 31,
1997, with the surviving corporation named ZDCF. In order to complete the
combination and establish the Company as a separate public company,
concurrently with the sale of the Company's Common Stock offered hereby, ZDI
and ZDCF will be contributed to the Company in exchange for 74.2% of the
Company's Common Stock, and approximately $928 million of the Company's
obligations to Softbank will be converted to equity at the initial public
offering price. The amount of intercompany indebtedness to be converted to
equity is comprised of the obligations due to Softbank as of December 31,
1997, except those repaid with borrowings under the Credit Facility and the
proceeds of the Notes Offering and a $94.2 million note which matures on
February 20, 2009. Assuming an initial public offering price of $15.50 per
share, the value of the capitalized intercompany indebtedness would have been
equivalent to 59.8 million shares of Common Stock. In addition, the Company
will receive approximately $10 million of fixed assets from Kingston in
exchange for $10 million of shares of the Company's Common Stock (valued at
the initial public offering price), which assets will be subsequently leased
back to Kingston.
As part of the Reorganization, the Company will: (i) issue 25.8 million
shares of its Common Stock in the Offering; (ii) sell $250 million aggregate
principal amount of its % Senior Subordinated Notes due 2008 in the Notes
Offering; and (iii) enter into the $1.35 billion Credit Facility and borrow
$1.25 billion thereunder. The Company will use the net proceeds from the
Offerings and the Credit Facility to (i) pay $270 million to MAC, representing
the purchase price for the remaining MAC Assets, and (ii) repay approximately
$1.589 billion of obligations to Softbank (including the Company's liability
to Softbank with respect to the $100 million purchase price for the initial
portion of the MAC Assets, net of the approximately $42 million of balances
due from MAC in connection with funding for the MAC Assets and ZDTV through
December 31, 1997), which payment will eliminate all except $94.2 million of
the remaining intercompany indebtedness as of December 31, 1997. The Company
has obtained a commitment letter from The Bank of New York, Morgan Stanley
Senior Funding, DLJ Capital Funding and The Chase Manhattan Bank to provide
such Credit Facility.
Unless the context otherwise indicates, references herein to the
"Reorganization" include all of the transactions described above. The
Offerings will be conditioned upon the completion of all such transactions
comprising the Reorganization, which shall be deemed to occur simultaneously.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock and the
Notes are estimated to be $377.5 million ($434.5 million if the U.S.
Underwriters' over-allotment option is exercised in full) and $241.3 million,
respectively, after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company intends to use
the proceeds from the Offerings and approximately $1.25 billion in borrowings
under the Credit Facility, to fund the approximately $270 million purchase
price of the balance of the MAC Assets (see "Risk Factors--Risks Relating to
the Reorganization") and repay approximately $1.589 billion of intercompany
obligations.
The following table summarizes the foregoing estimated sources and uses of
funds:
<TABLE>
<CAPTION>
AMOUNT
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Sources:
Common Stock Offering.................................. $ 400,000
Notes Offering......................................... 250,000
Borrowings under Credit Facility....................... 1,250,000
----------
Total sources........................................ $1,900,000
==========
Uses:
Net payments to affiliates(1).......................... $1,588,625
Offering expenses and debt issuance costs(2)........... 41,375
Purchase balance of MAC Assets......................... 270,000
----------
Total uses........................................... $1,900,000
==========
</TABLE>
- --------
(1) Net payments to affiliates include the following:
<TABLE>
<S> <C>
(i) Repayment of notes payable to affiliates:
7.8% notes maturing March 31, 2011........................ $1,080,000
8.0% notes maturing February 28, 2010..................... 375,027
8.0% notes maturing March 31, 2010........................ 74,772
8.0% notes maturing January 1, 2007....................... 1,513
(ii) Repayment of obligations to Softbank for the October 31,
1997 purchase of certain MAC Assets....................... 100,000
(iii) Receipt from MAC of amounts due with respect to
funding the development and operations of the MAC (42,687)
Assets and ZDTV through December 31, 1997 ................ ----------
$1,588,625
==========
</TABLE>
(2) Includes $22,500 in expenses related to the issuance of Common Stock and
$18,875 of debt issuance costs.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997: (i) on a combined basis for ZDI and ZDCF; (ii) on a pro
forma basis after giving effect to the contribution of ZDI and ZDCF to the
Company, conversion of approximately $928 million of intercompany obligations
to equity and the Kingston sale-leaseback; and (iii) on a pro forma basis as
adjusted to give effect to the Offerings and the remaining debt refinancing.
See "The Reorganization." This table should be read in conjunction with
"Selected Historical Combined Financial and Other Data," "Unaudited Pro Forma
Combined Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Presentation of Financial
Information" and the Combined Financial Statements of ZDI and ZDCF.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------------
ACTUAL PRO FORMA
COMBINED PRO FORMA AS ADJUSTED
---------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C> <C>
Debt:
Credit Facility.......................... $ -- $ -- $1,250,000
Notes.................................... -- -- 250,000
Notes payable to affiliates, including
current portion......................... 2,534,030 1,625,543 94,231
---------- ---------- ----------
Total debt........................... 2,534,030 1,625,543 1,594,231
Stockholders' equity:
Common Stock, $.01 par value, 1,000
shares authorized, 200 shares issued and
outstanding; Pro Forma: par value $.01
per share; 110,000,000 shares autho-
rized; 100,000,000
shares issued and outstanding........... $ -- $ -- $ 1,000
Additional paid-in-capital............... 248,330 1,185,865 1,562,365
Accumulated deficit...................... (119,429) (119,429) (119,429)
Deferred compensation.................... (996) (996) (996)
Cumulative translation adjustment........ (1,775) (1,775) (1,775)
---------- ---------- ----------
Total stockholders' equity............. 126,130 1,063,665 1,441,165
---------- ---------- ----------
Total capitalization................. $2,660,160 $2,689,208 $3,035,396
========== ========== ==========
</TABLE>
DIVIDEND POLICY
The Company currently intends to retain all of its earnings following the
Offering in order to finance its operations, repay indebtedness and fund
future growth and, accordingly, does not expect to pay any dividends for the
foreseeable future. The Board of Directors will review this dividend policy
from time to time in light of the conditions then existing, including the
Company's financial condition, results of operations, capital requirements,
restrictions, if any, contained in financing or other agreements binding upon
the Company, and such other factors as the Board of Directors deems relevant.
The Credit Facility and provisions of the Notes contain certain limitations on
the payment of dividends. See "Risk Factors--Dividend Policy; Holding Company
Structure" and "Description of Certain Indebtedness--Notes" and "--Credit
Facility."
22
<PAGE>
DILUTION
As of December 31, 1997 the pro forma net tangible book value of the Company
was a deficit of $1.97 billion or $26.50 per share of Common Stock. Pro forma
net tangible book value per share is determined by dividing the tangible net
worth of the Company (total assets less intangible assets and total
liabilities) by the aggregate number of shares of Common Stock outstanding,
assuming the Reorganization had taken place on January 1, 1997. After giving
effect to the sale of the 25.8 million shares of Common Stock offered hereby
(at an assumed initial offering price of $15.50 per share, the mid point of
the range set forth on the cover page of this Prospectus) and the application
of the net proceeds therefrom, pro forma net tangible book value of the
Company as of December 31, 1997 would have been a deficit of approximately
$1.59 billion, or $15.89 per share. This represents an immediate increase in
pro forma net tangible book value of $10.61 per share to Softbank, the current
stockholder of ZDI and ZDCF, and an immediate dilution in pro forma net
tangible book value of $31.39 per share to purchasers of Common Stock in the
Offering. The following table illustrates the per share dilution in pro forma
net tangible book value to new investors:
<TABLE>
<S> <C> <C>
Initial public offering price per share................... $15.50
Pro forma net tangible book value per share at December
31, 1997................................................. (26.50)
Increase in pro forma net tangible book value per share 10.61
attributable to purchasers in the Offering............... ------
Pro forma net tangible book value per share after the (15.89)
Offering................................................. ------
Dilution in pro forma net tangible book value per share to $31.39
purchasers of Common Stock in the Offering (1)........... ======
</TABLE>
- --------
(1) Dilution is determined by subtracting pro forma net tangible book value
per share after the Offering from the initial public offering price per
share.
The following table summarizes, on a pro forma basis, as of December 31,
1997, the number of shares of Common Stock purchased from the Company, the
total consideration paid (or to be paid) and the average price per share paid
(or to be paid) by the Company's existing stockholder and by new investors
purchasing shares of Common Stock in the Offering, based on an assumed initial
public offering price of $15.50 per share, before deducting estimated offering
expenses and underwriting discounts and commissions.
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
------------------- ------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ---------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Softbank.................. 74,200,000 74.2% $1,114,051 73.6% $15.01
Purchasers of Common Stock
in the Offering.......... 25,800,000 25.8 400,000 26.4 15.50
----------- ----- ---------- -----
Total................... 100,000,000 100.0% $1,514,051 100.0% $15.14
=========== ===== ========== =====
</TABLE>
The foregoing calculations exclude an aggregate of: (i) 5,254,700 shares of
Common Stock issuable upon the exercise of options granted under the Company's
Incentive Compensation; and (ii) 4,745,300 additional shares of Common Stock
reserved for grants of additional options under the Company's Incentive
Compensation and Employee Stock Purchase Plans. See "Management--Stock Plans."
23
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA
The Selected Historical Combined Financial and Other Data (i) of ZDI as of
and for the year ended December 31, 1995 and for the period January 1, 1996 to
February 28, 1996 and (ii) of ZDI and ZDCF as of and for the years ended
December 31, 1995 and 1996 and 1997 were derived from their respective
historical financial statements. Such financial statements, audited by
independent accountants, are included elsewhere herein. The historical
financial data of ZDI as of and for the years ended December 31, 1994 and 1993
is derived from ZDI's accounting records and has not been audited. The
following information should be read in conjunction with "Use of Proceeds,"
"Capitalization," "Unaudited Pro Forma Combined Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Presentation of Financial Information," the Combined Financial
Statements of ZDI and ZDCF and the Historical Consolidated Financial
Statements of ZDI, as of and for the year ended December 31, 1995 and for the
period January 1, 1996 to February 28, 1996.
<TABLE>
<CAPTION>
ZDI AND
ZDI(1) ZDCF COMBINED
-------------------------------------------- -------------------------------
YEAR ENDED TWO-MONTH YEAR ENDED
DECEMBER 31, PERIOD ENDED DECEMBER 31,
------------------------------ FEBRUARY 28, -------------------------------
1993 1994 1995 1996 1995(2) 1996(3) 1997
-------- ---------- --------- ------------ --------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue, net............ $649,452 $ 711,379 $ 768,995 $ 125,465 $ 202,729 $ 955,139 $1,153,761
Depreciation and amorti-
zation................. 38,228 34,208 91,546 15,137 24,305 139,736 154,940
Income from operations.. 29,481 80,723 55,750 7,270 62,675 87,181 109,232
Interest expense, net... 14,035 17,887 92,609 14,030 44,005 120,646 190,445
Income/(loss) before in-
come taxes............. 13,700 77,650 (40,250) (6,995) 22,869 (27,124) (72,491)
Net income/(loss)(4)(5). 13,700 77,650 (26,002) (4,547) 10,945 (52,081) (71,179)
OTHER DATA:
Capital expenditures.... $ 16,141 $ 15,119 $ 14,163 $ 552 $ 3,367 $ 22,365 $ 30,196
Ratio of earnings to
fixed charges(6)....... 1.7 4.1 -- -- 1.5 -- --
BALANCE SHEET DATA (AT
PERIOD END):
Cash and cash equiva-
lents.................. $ 36,300 $1,066,606 $ 10,083 $ 13,669 $ 27,908 $ 29,915 $ 30,301
Total assets............ 308,267 2,819,974 1,623,906 1,619,905 1,090,981 3,584,173 3,546,646
Total long-term obliga-
tions.................. 353,507 1,034,751 964,153 964,153 575,450 2,522,252 2,408,240
Stockholders' equity
(deficit).............. (214,355) 391,275 365,150 360,717 397,881 447,756 126,130
</TABLE>
- --------
(1) Historical Combined Financial and Other Data of ZDI has been presented for
all periods prior to its acquisition by Softbank on February 29, 1996 as
it represents the Company's principal operations.
(2) Reflects operations of SB Forums for the year and COMDEX from the date of
acquisition by Softbank on April 1, 1995.
(3) Reflects operations of SB Forums and COMDEX for the year and ZDI from the
date of acquisition by Softbank on February 29, 1996.
(4) For the years ended December 31, 1993 and 1994, the operations of ZDI were
conducted through various partnerships. Accordingly, no income taxes have
been provided.
(5) No historical earnings per share or share data are presented as the
Company does not consider such data meaningful.
(6) For purposes of the computations, earnings before fixed charges consist of
income/(loss) before income taxes adjusted for equity earnings/losses as
appropriate, plus fixed charges. Fixed charges are defined as interest
expense plus that portion of rental expense which is deemed to be
representative of the interest factor. For the year ended December 31,
1995 and the two-month period ended February 28, 1996, ZDI's earnings were
insufficient to cover fixed charges by $36,859 and $6,760, respectively.
For the years ended December 31, 1996 and 1997, ZDI and ZDCF's earnings
were insufficient to cover fixed charges by $26,598 and $74,520,
respectively.
For information relating to the three months ended March 31, 1998, see page
33 in "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
SEE THE TABLE ON PAGE 32 IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" FOR A PRESENTATION OF THE
COMBINED RESULTS AS IF ZDI HAD BEEN ACQUIRED ON JANUARY 1, 1995. THE COMPANY
BELIEVES THIS INFORMATION IS IMPORTANT IN EVALUATING ITS HISTORICAL RESULTS OF
OPERATIONS.
24
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Financial Information (the "Pro
Forma Financial Information") is based on the historical combined financial
statements of ZDI and ZDCF and has been prepared to illustrate the effects of
the Reorganization and the other transactions described below.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1997 gives effect to the Reorganization as if it had occurred as
of January 1, 1997. The Unaudited Pro Forma Combined Balance Sheet as of
December 31, 1997 has been prepared as if the Reorganization had occurred on
that date. See "The Reorganization."
The Pro Forma Financial Information is not necessarily indicative of the
actual results of operations or financial position of the Company at December
31, 1997 and does not purport to represent the Company's results of operations
for future periods or its future financial position.
The Pro Forma Financial Information should be read in conjunction with the
Historical Combined Financial Statements of ZDI and ZDCF and notes thereto
which are included elsewhere in this Prospectus. In management's opinion, the
Pro Forma Financial Information includes all adjustments necessary to reflect
the effects of the Reorganization and other transactions described below.
25
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
COMBINED FOR CAPITAL ADJUSTMENTS PRO FORMA
ACTUAL CONTRIBUTIONS PRO FORMA FOR REFINANCINGS AS ADJUSTED
---------- ------------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equiva-
lents................ $ 30,301 $ $ 30,301 $ $ 30,301
Accounts receivable,
net.................. 221,310 221,310 221,310
Inventories........... 17,853 17,853 17,853
Prepaid expenses and
other current assets. 37,900 37,900 37,900
Due from affiliates... 131,290 131,290 (42,687)(e) 88,603
Deferred taxes........ 8,794 8,794 8,794
---------- --------- ---------- ----------- ----------
Total current as-
sets............... 447,448 447,448 (42,687) 404,761
Property and equipment,
net.................... 53,536 10,000 (a) 63,536 63,536
Intangible assets, net.. 3,030,333 3,030,333 3,030,333
Other assets............ 15,329 15,329 18,875 (f) 34,204
---------- --------- ---------- ----------- ----------
Total assets........ $3,546,646 $ 10,000 $3,556,646 $ (23,812) $3,532,834
========== ========= ========== =========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable...... $ 55,468 $ $ 55,468 $ $ 55,468
Accrued expenses...... 80,094 80,094 80,094
Unearned income, net.. 154,682 154,682 154,682
Due to affiliates and
management........... 398,332 (19,048)(b) 379,284 (370,000)(g) 9,284
Current portion of
notes payable to
affiliates........... 125,790 125,790 (118,098)(h) 7,692
Other current
liabilities.......... 4,222 4,222 4,222
---------- --------- ---------- ----------- ----------
Total current lia-
bilities........... 818,588 (19,048) 799,540 (488,098) 311,442
Notes payable to affili-
ates................... 2,408,240 (908,487)(c) 1,499,753 (1,413,214)(h) 86,539
Long-term debt.......... -- -- 1,500,000 (i) 1,500,000
Deferred taxes.......... 180,117 180,117 180,117
Other liabilities....... 13,571 13,571 13,571
---------- --------- ---------- ----------- ----------
Total liabilities... 3,420,516 (927,535) 2,492,981 (401,312) 2,091,669
---------- --------- ---------- ----------- ----------
Stockholders' equity:
Preferred stock(1).... -- -- --
Common stock(2)....... -- -- 1,000 (j) 1,000
Additional paid-in
capital.............. 248,330 937,535 (d) 1,185,865 376,500 (j) 1,562,365
Retained earnings
(deficit)............ (119,429) (119,429) (119,429)
Deferred compensation. (996) (996) (996)
Cumulative translation
adjustment........... (1,775) (1,775) (1,775)
---------- --------- ---------- ----------- ----------
Total stockholders'
equity............. 126,130 937,535 1,063,665 377,500 1,441,165
---------- --------- ---------- ----------- ----------
Total liabilities
and stockholders'
equity............. $3,546,646 $ 10,000 $3,556,646 $ (23,812) $3,532,834
========== ========= ========== =========== ==========
</TABLE>
- --------
(1) Actual: par value $.01 per share, no shares issued and outstanding; Pro
Forma: 10,000,000 shares authorized, no shares issued and outstanding.
(2) Actual: par value $.01 per share, 1,000 shares authorized, 200 shares
issued and outstanding; Pro Forma: par value $.01 per share, 110,000,000
shares authorized, 100,000,000 shares issued and outstanding.
26
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET
a. Reflects the transfer of approximately $10,000 of fixed assets from
Kingston in exchange for 645,161 shares of the Company's Common Stock.
b. Reflects the capitalization of amounts due to Softbank in connection with
the conversion of $927,535 of intercompany obligations.
c. Reflects the capitalization of notes payable to affiliates in connection
with the conversion of $927,535 of intercompany obligations.
d. Reflects the impact on stockholders' equity of the following:
<TABLE>
<C> <S> <C>
(i) Capitalization of amounts due to Softbank................ $ 19,048
(ii) Exchange of Common Stock for Kingston's fixed assets..... 10,000
(iii) Capitalization of notes payable to affiliates............ 908,487
--------
$937,535
========
</TABLE>
e. Represents the settlement of balances due from MAC with respect to funding
the operations and development of the MAC Assets and ZDTV.
f. Represents debt issuance costs incurred in connection with the Notes
Offering and Credit Facility.
g. Represents the payment of $100 million due to Softbank and $270 million due
to MAC for the purchase of the MAC Assets.
h. Represents the repayment of the current portion and long-term portion of
notes payable to affiliates of $118,098 and $1,413,214, respectively.
i. Represents initial borrowings under the Credit Facility of $1,250,000 and
the proceeds from the Notes Offering of $250,000.
j. Represents the issuance of 25.8 million shares of the Company's Common
Stock at an assumed initial offering price of $15.50 per share, net of
offering costs of $22,500. Assumes no exercise of the Underwriters' over-
allotment option.
27
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
COMBINED FOR CAPITAL FOR PRO FORMA
ACTUAL CONTRIBUTION PRO FORMA REFINANCINGS AS ADJUSTED
---------- ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenue, net............ $1,153,761 $ $1,153,761 $ $ 1,153,761
---------- ---------- -----------
Cost of production...... 325,245 325,245 325,245
Selling, general and
administrative
expenses............... 564,344 (2,000)(a) 562,344 562,344
Depreciation of property
and equipment.......... 30,379 2,000 (b) 32,379 32,379
Amortization of intangi-
ble assets............. 124,561 124,561 124,561
---------- ---------- -----------
Income from operations.. 109,232 109,232 109,232
Interest expense, net... (190,445) 59,052 (c) (131,393) 8,663 (e) (122,730)
Other non-operating in-
come, net.............. 8,722 8,722 8,722
---------- ------- ---------- ------- -----------
Loss before income tax-
es..................... (72,491) 59,052 (13,439) 8,663 (4,776)
Provision (benefit) for
income taxes........... (1,312) 899 (d) (413) 3,552 (f) 3,139
---------- ------- ---------- ------- -----------
Net loss................ $ (71,179) $58,153 $ (13,026) $(5,111) $ (7,915)
========== ======= ========== ======= ===========
Pro forma basic loss per
share.................. (.08)(g)
===========
Pro forma diluted loss
per share.............. (.08)(g)
===========
Pro forma weighted
average shares
outstanding............ 100,000,000(g)
</TABLE>
----------------
For information relating to the three months ended March 31, 1998, see page
33 in "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
a. Represents the rental income generated by leasing back to Kingston the
fixed assets received from Kingston.
b. Represents an increase in depreciation expense associated with the fixed
assets received from Kingston.
c. Represents the reduction of interest expense resulting from the
capitalization of $908,487 of notes payable to affiliates; such notes bore
interest at an average rate of 6.5% per annum.
d. Represents the impact of the following adjustments:
<TABLE>
<C> <S> <C>
(i) Tax impact of reduced interest expense totalling
$59,052 from the capitalization of $908,487 of notes
payable to affiliates, at an effective tax rate of
41%................................................... $ 24,211
(ii) Tax benefit relating to losses generated by the MAC
Assets which would have been available to the Company
had the MAC Assets been purchased on January 1, 1997.
These benefits will not be available to the Company
following the Offering................................ (23,312)
---------
$ 899
=========
e. Represents the impact of the following adjustments:
(i) Reduction of interest expense from the repayment of
notes payable to affiliates from the proceeds of the
Offerings and the initial borrowings under the Credit
Facility.............................................. $(122,272)
(ii) Increase in interest expense related to the Notes at
an assumed interest rate of 8.00%..................... 20,000
(iii) Increase in interest expense related to the Credit
Facility at an assumed interest rate of 7.25%......... 90,625
(iv) Amortization of deferred financing costs using the
interest method....................................... 2,984
---------
$ (8,663)
=========
</TABLE>
f. Represents the income tax effect of the adjustments described in note (e)
above at an effective tax rate of 41%.
g. Pro forma basic loss per share and pro forma weighted average number of
common shares outstanding includes 100,000,000 shares of Common Stock
assumed to be outstanding upon consummation of the Reorganization. Pro
forma diluted loss per share excludes 5,254,700 Common Stock equivalents
assumed to be outstanding upon consummation of the Reorganization as
inclusion of such Common Stock equivalents would be antidilutive.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company operates in two business segments: (i) publishing and (ii) trade
shows and conferences. The Company is the world's preeminent integrated media
and marketing company focused on computing and Internet-related technology,
with principal platforms in print publishing, trade shows and conferences,
online content, market research and education. The Company's 28 primary U.S.
and international titles, including its joint ventures, and over 50 licensed
publications, total more than 80 publications distributed worldwide, with a
combined circulation of more than eight million primary readers. The Company
also produces the world's most important trade shows related to computer
technology, with over two million estimated attendees at over 50 trade shows
and conferences worldwide in 1997. The Company's COMDEX/Fall event is the
number one ranked trade show for all industries in the U.S. as measured by
total revenue, total exhibit space and number of attendees. The Company's
ZDNet.com Web site is the leading computing content site and ranked the number
one Web site in 1997 in the category of news, information and entertainment,
as measured by visitors per month. The Company's other media and marketing
platforms include market research, education and the publication of computer-
related newsletters, training manuals and materials.
The Company had net revenue of $1.154 billion for 1997. A substantial
portion of the Company's revenue is derived from the sale of advertising,
which in 1997 accounted for 51.9% of total revenue. No single advertiser has
comprised more than 3% of the Company's advertising revenue during any of the
last three years. However, the Company's top 20 advertisers accounted for
32.1% of total advertising revenue for 1997.
In the publishing segment, the Company's principal sources of revenue are
advertising (67.3% of 1997 total publishing revenue), circulation (17.4%) and
other (15.3%). Circulation comprises both paid subscriptions (10.8%) and
newsstand sales (6.6%) while other includes educational and training materials
(5.4%) and market research studies (6.2%) with the balance primarily
consisting of royalties, reprints and other miscellaneous sales. In the trade
shows and conferences segment, revenue is derived from two principal sources:
sale of exhibit space (64.8% of 1997 total segment revenue) and attendee
conference and seminar fees (14.9%). Unlike many trade show producers, the
Company derives a significant portion of its trade show revenue from other
sources (20.3%), including advertising in show-related publications,
billboards, banners, fees from managing customer-sponsored events and other
show-related activities. The Company believes these other sources will
continue to be an important growth area, particularly for its content-focused
events.
In the publishing business, the principal components of the Company's
production costs are raw materials, printing and distribution, which
represented 34.6%, 37.5% and 26.7%, respectively, of total 1997 publishing
production expenses. The Company's principal raw material is paper. Paper
supply and prices are subject to volatility and may be significantly affected
by many factors, including market and economic conditions. See "Risk Factors--
Risks Associated with Fluctuations in Paper and Postage Costs" and "--
Inflation and Change in Paper Prices." The principal components of production
costs within the trade shows and conferences business are the costs of renting
and preparing the facilities to hold the events (33.6%), direct mail and the
related costs for promotion of the events (33.2%) and program development and
presentation costs (11.3%).
The other principal operating costs for the Company are selling, general and
administrative expenses, including editorial costs. Included in these costs
are salaries, sales commissions and benefits (49.8%) along with marketing and
promotion expenses related to advertising and circulation (18.8%).
The Company's revenue and profitability are influenced by a number of
external factors, including the volume of new technology product
introductions, the amount and allocation of marketing expenditure by the
Company's clients, the extent to which sellers elect to advertise using print
and online media or participate in trade shows and conferences, changes in
paper prices, availability of appropriate venues for its largest trade shows
and conferences and competition among computer technology marketers (including
print publishers, producers of trade shows and providers of other technology
information services). Accordingly, the Company may experience fluctuations in
revenue from period to period. Many of the Company's large customers
30
<PAGE>
concentrate their advertising expenditures around major new product launches.
Marketing expenditures by technology companies can also be affected by factors
affecting the computer industry generally, including pricing pressures and
temporary surpluses of inventory. Revenue and profitability are also
influenced by product mix and the timing and frequency of the Company's new
product launches and launches in new markets, as well as by acquisitions. New
publications generally require several years to achieve profitability and upon
achieving initial profitability, often have lower margins than more
established publications. The launch of new publications, trade shows and
services are funded with cash flow from operations and are expensed as
incurred. Accordingly, the Company's revenue from year to year may be affected
by the number and timing of new product launches. If the Company concludes
that a new publication, trade show or service will not achieve certain
milestones with regard to revenues, profitability and cash flow within a
reasonable period of time, management may discontinue such publication, trade
show or service or merge it into another existing publication, trade show or
service. See "Risk Factors--New Product Risks."
Historically, the financing requirements of the Company have been funded
through intercompany loans and advances, totaling $2.5 billion at December 31,
1997, of which $126 million was current. As a result of the Reorganization,
the Company's intercompany debt owed to Softbank will be reduced to $94.2
million. Such indebtedness bears interest at 9.9% and matures in February
2009. Concurrently with the Offering, the Company intends to issue and sell
$250 million aggregate principal amount of Notes and will enter into the $1.35
billion Credit Facility and borrow $1.25 billion thereunder. See "--Liquidity
and Capital Resources."
PRESENTATION OF FINANCIAL INFORMATION
ZD Inc. was incorporated on February 4, 1998. Concurrent with the completion
of the Offerings, all of the common stock of ZDI and ZDCF, the Company's
principal operating subsidiaries, will be contributed to the Company.
These subsidiaries were acquired in a series of acquisitions and internal
reorganizations undertaken by the Company's principal stockholder, Softbank.
In December 1994, Softbank acquired SB Forums for $127 million in cash. The
acquisition was accounted for using the purchase method of accounting and
accordingly, the results of operations of SB Forums are included in the
Combined Financial Statements of ZDI and ZDCF for 1995, 1996 and 1997.
In April 1995, SOFTBANK acquired SB COMDEX for $803 million in cash, plus
transaction costs. The acquisition was accounted for using the purchase method
of accounting and accordingly, SB COMDEX's results are included in the
Combined Financial Statements since the date of acquisition. As of December
31, 1997, SB Forums and SB COMDEX were merged, with the surviving corporation
named ZD Comdex and Forums (ZDCF).
In February 1996, Softbank acquired Ziff-Davis Publishing Company
(subsequently renamed Ziff-Davis Inc.) for $1.8 billion in cash. The
acquisition of ZDI has been accounted for using the purchase method of
accounting and accordingly, the results of ZDI are included in the Combined
Financial Statements since the date of acquisition. ZDI's results of
operations for periods prior to the date of acquisition are set forth in the
ZDI Financial Statements included elsewhere in this Prospectus.
In connection with the acquisition of SB Forums and ZDI described above,
MAC, Softbank's largest shareholder, purchased certain operations and assets
of these companies for $75 million and $302 million, respectively. The MAC
Assets consist of certain international publications, consumer and Internet
publications, international trade shows and the ZDNet business, most of which
were still under development. As part of the Reorganization, the MAC Assets,
except for those which have been discontinued, have been or will be sold to
the Company. The acquisition of the MAC Assets has been accounted for in a
manner similar to a pooling of interests and is reflected in the Combined
Financial Statements of ZDI and ZDCF for all periods presented.
Due to the acquisition of ZDI on February 29, 1996 and the resulting
revaluation of assets and liabilities and the change in the Company's capital
structure, the historical financial statements of ZDI and ZDCF are not
directly comparable. The table below presents the Company's pro forma results
for 1996 and 1995 as if ZDI and ZDCF had been under common control since
January 1, 1995. The results of SB COMDEX are included since
31
<PAGE>
April 1, 1995. The combined results for 1995 and 1996 were derived by
combining the statement of operations for ZDI for the year ended December 31,
1995 and for the period January 1, 1996 to February 28, 1996 with the combined
statement of operations for ZDI and ZDCF for the years ended 1995 and 1996. In
addition, the purchase accounting adjustments related to the 1996 acquisition
of ZDI have been reflected as of January 1, 1995 resulting in pro forma
amortization, interest and income tax provision adjustments. Such adjustments
are further described in note (a) to the table set forth below under "--
Results of Operations." No pro forma adjustments have been made related to the
acquisition of SB COMDEX as such adjustments are not material. Although such
combination is not in accordance with generally accepted accounting
principles, management believes the combined statements present the most
meaningful basis of comparison. Intercompany transactions for those periods
were immaterial. The financial information presented herein may not
necessarily reflect the results of operations which would have occurred had
the Company been a stand-alone entity.
RESULTS OF OPERATIONS
The table below presents the combined results as if ZDI had been acquired on
January 1, 1995.
<TABLE>
<CAPTION>
ZDI AND ZDCF
YEAR ENDED DECEMBER 31,
----------------------------------
PRO FORMA
---------------------- ACTUAL
1995 1996 1997
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenue, net:
Publishing............................... $ 768,995 $ 815,720 $ 866,233
Trade shows and conferences.............. 202,729 264,884 287,528
---------- ---------- ----------
971,724 1,080,604 1,153,761
---------- ---------- ----------
Cost of production:
Publishing............................... 193,646 215,271 225,712
Trade shows and conferences.............. 68,810 87,373 99,533
---------- ---------- ----------
262,456 302,644 325,245
Selling, general and administrative ex-
penses.................................... 474,992 528,636 564,344
Depreciation and amortization(a)........... 154,163 161,259 154,940
---------- ---------- ----------
Income from operations..................... 80,113 88,065 109,232
Interest expense, net(a)................... (133,130) (135,500) (190,445)
Other non-operating income................. 808 6,106 8,722
---------- ---------- ----------
Loss before income taxes................... (52,209) (41,329) (72,491)
Provision (benefit) for income taxes....... 9,607 25,682 (1,312)
---------- ---------- ----------
Net loss(a)................................ $ (61,816) $ (67,011) $ (71,179)
========== ========== ==========
OTHER DATA:
EBITDA(b).................................. $ 235,084 $ 255,430 $ 272,894
Cash and cash equivalents, end of year..... 37,991 29,915 30,301
Net cash provided (used) by operating ac-
tivities.................................. 63,231 65,681 (3,364)
Net cash used by investing activities...... (2,889,426) (66,856) (44,196)
Net cash from financing activities......... 1,793,361 6,768 47,946
</TABLE>
- --------
(a) The acquisition of ZDI on February 29, 1996 gave rise to different bases
of accounting for the period after the acquisition versus the period prior
to the acquisition. This is primarily due to a purchase price which
exceeded the book value of the assets acquired, financed by a higher level
of both debt and equity as compared to the pre-acquisition capital
structure. The amounts indicated above assume that the acquisition of ZDI
took place on January 1, 1995; therefore, depreciation and amortization,
interest expense and net loss have been increased (decreased) by
approximately $6,386, $824 and $10,383, respectively, for 1996 and
$38,312, $(3,484) and $46,759, respectively, for 1995.
(b) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA is not intended to
represent cash flows from operations and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. The Company
believes that EBITDA is a standard measure commonly reported and widely
used by analysts, investors and other interested parties in the publishing
and media industries.
32
<PAGE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1997 (UNAUDITED)
For the first quarter of 1998, the Company expects to report approximately
the same level of revenue as compared with the first quarter of 1997. Revenue
from publishing operations will decline approximately 5% primarily due to the
absence of over $12 million of revenue from Macuser and MacWeek magazines,
which were transferred in October 1997 to a 50/50 joint venture with another
publishing company and are no longer consolidated in the Company's results.
The publishing segment will also record lower advertising revenue from its
business publications principally as a result of factors affecting the
computer technology industry generally, including slowing demand for computer
products, fewer new product launches, pricing pressures, vendor market share
shifts and excess PC inventories in distribution channels. This decline will
be largely offset by increased advertising sales in the Company's Internet
business and consumer publications. More than offsetting the decline in
publishing revenue will be an increase of approximately 75% in revenue from
the Company's tradeshows and conferences operations, primarily the result of
earlier production of two events in the first quarter of 1998 that had been
held in the second quarter of 1997.
The Company expects the net loss for the first quarter to increase by 15-20%
as compared with the first quarter of 1997 and expects EBITDA to decline 40-
45%. The unfavorable variances are primarily due to the lower level of
advertising in business publications, which have higher profit margins than
consumer publications or the Internet business, coupled with approximately
$3.4 million of one-time costs for office relocations and $1.8 million of
expenses incurred in launching two new publications.
As indicated below under "Seasonality," the first quarter accounted for
approximately 19.4% and 19.5% of the Company's revenue in 1996 on a pro forma
basis and 1997, respectively, and approximately 12.0% and 9.4% of the
Company's EBITDA for the respective years.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH PRO FORMA YEAR ENDED DECEMBER 31,
1996
Revenue
Revenue increased by $73.2 million or 6.8% from $1,080.6 million in 1996 to
$1,153.8 million in 1997.
Revenue from publishing grew by $50.5 million or 6.2% from $815.7 million to
$866.2 million. Approximately $22 million was due to inclusion of a full year
of results for the electronic gaming publications acquired in mid-1996 and two
publications launched in late 1996. Revenue from Internet services increased
$13.5 million or 71.9% due to higher advertising volume attributable to the
Company's growing presence on the Internet. Increases in advertising rates,
generally ranging between 3% and 10%, and a 5.1% increase in advertising pages
contributed $11.5 million. Revenue from international operations, which
generated 10.2% of the segment's revenue, decreased by $6.6 million due to the
strengthening of the U.S. dollar relative to the major European currencies.
Continued growth from new educational product launches and sales of market
research studies accounted for the balance of the revenue growth.
Revenue from trade shows and conferences increased $22.6 million or 8.5%
from $264.9 million to $287.5 million. Approximately $15 million of the
increase was due to 11 new trade show launches, including revenue from
ancillary show-related sources. The balance of revenue growth was due to
higher exhibitor rates charged at the major events, partly offset by a decline
in revenue from COMDEX/Spring and certain U.K. events.
Cost of production
Production costs increased $22.6 million or 7.5% from $302.6 million to
$325.2 million.
Publishing production costs increased $10.4 million or 4.8% from $215.3
million in 1996 to $225.7 million. Costs related to new launches and volume-
related growth increased approximately $20 million but were partly offset by
approximately $10 million of lower paper costs.
The costs of producing trade shows and conferences increased $12.2 million
or 14.0% from $87.3 million to $99.5 million primarily as a result of costs
related to new events launched in 1997.
33
<PAGE>
Selling, general and administrative expenses
Selling, general and administrative expenses increased $35.7 million or 6.8%
from $528.6 million to $564.3 million. The increase was due to the addition of
employees to support base business volume growth and launches of new products
and services. Results included a one-time $6.0 million charge for the
consolidation and restructuring of the trade shows and conferences business
which was announced in the fourth quarter of 1997. Costs for the publishing
segment rose 4.2% while those for the trade shows and conferences segment rose
22.1% due to the number of new launches and the one-time restructuring charge.
Depreciation and amortization
Total depreciation and amortization decreased $6.3 million to $154.9 million
in 1997. The reduction in depreciation and amortization expense was a result
of certain assets being fully depreciated in 1996.
Interest expense, net
Net interest expense increased $54.9 million or 40.5% to $190.4 million in
1997 due to interest on an additional $900 million of intercompany
indebtedness to Softbank incurred to finance a return of capital.
Other non-operating income, net
Other non-operating income/expense primarily reflects the Company's equity
share of earnings and losses from joint ventures and fees earned from
management of trade shows and conferences not produced by the Company. Income
increased $2.6 million from $6.1 million in 1996 to $8.7 million or 42.6%
reflecting growth in fees from managed events and reduced losses from joint
ventures.
Income Taxes
The 1997 combined income tax benefit of $1.3 million compares to a pro forma
income tax provision of $25.7 million in 1996. The improvement in the tax
provision is due to a higher pre-tax loss giving rise to a tax benefit. The
difference between the 1997 and 1996 effective tax rates and the federal
statutory tax rate of 35.0% is primarily due to non-recognition of tax losses
generated by the MAC Assets ($56.9 million and $77.2 million in 1997 and 1996,
respectively), non-deductible goodwill amortization ($10.2 million and $8.6
million, respectively) and state and local income taxes. In addition, the 1996
tax provision increased approximately $3.2 million as a result of pro forma
adjustments related to the ZDI acquisition.
Net loss
As a result of the changes described above, net loss for the period
increased $4.2 million or 6.2% from $67.0 million to $71.2 million.
EBITDA
EBITDA for 1997 was $272.9 million, an increase of $17.5 million or 6.8%
from the $255.4 million generated in 1996. The increase was due to higher
revenue and management fee income, net of higher production costs and selling,
general and administrative expenses. The ratio of EBITDA to revenue remained
relatively constant at 23.7% for 1997 compared to the 1996 margin of 23.6%.
Excluding the one-time charge related to the consolidation and restructuring
of the trade shows and conferences business, the 1997 ratio would have been
24.2%.
PRO FORMA YEAR ENDED DECEMBER 31, 1996 COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1995
Revenue
Revenue increased by $108.9 million or 11.2% from $971.7 million in 1995 to
$1,080.6 million in 1996.
Revenue from publishing grew by $46.7 million or 6.1% from $769.0 million to
$815.7 million. Higher overall advertising rates combined with a 12.4% growth
in advertising pages contributed 47.5% of the revenue increase while the mid-
1996 acquisition of several electronic gaming publications accounted for 33.5%
of the increase. New educational product launches and growth in sales of
market research studies accounted for the balance of revenue growth. Internet
revenue was slightly below the prior year due to the transition from a
business based on membership and subscription fees to one which is supported
primarily by advertising.
34
<PAGE>
Revenue from trade shows and conferences increased $62.2 million or 30.7%
from $202.7 million to $264.9 million. The launch of new international trade
shows accounted for 36.7% of the growth while the introduction of customized
events contributed 19.8%. The balance of the increase was due to growth in
exhibitor square footage and rates at the Company's major U.S. shows.
Cost of production
Production costs increased $40.2 million or 15.3% from $262.4 million to
$302.6 million.
Publishing production costs increased $21.6 million or 11.2% from $193.7
million to $215.3 million, primarily due to volume-related growth and higher
paper costs. Approximately 31.5% of the increase was attributed to costs for
the magazines acquired mid-year while increased frequencies on certain
publications and a full year of costs for publications launched in late 1995
accounted for 18.1% of the increase.
The costs of producing trade shows and conferences increased $18.6 million
or 27.0% from $68.8 million to $87.4 million. The increase was driven by the
cost of new product launches as well as higher direct marketing and facility-
related fees for the major U.S. events.
Selling, general and administrative expenses
Selling, general and administrative expenses rose $53.6 million or 11.3%
from $475.0 million to $528.6 million. This increase reflects the addition of
employees to support growth in the base business along with the launches of
new products and services. Costs for the publishing segment rose 6.1% while
those for the trade shows and conferences segment rose 58.7%, reflecting a
higher level of new launches and the absence of COMDEX related expenses for
the first three months of 1995 (COMDEX was acquired April 1, 1995).
Depreciation and amortization
Total depreciation and amortization of $161.3 million increased $7.1 million
from $154.2 million in 1995 primarily due to the inclusion of a full year's
depreciation and amortization relating to SB COMDEX, which was acquired April
1, 1995.
Interest expense, net
Net interest expense increased $2.4 million or 1.8% on a pro forma basis due
to higher average debt levels in 1996.
Other non-operating income, net
Income increased to $6.1 million compared to $.8 million in 1995 due to the
growth in fees from managed events along with reduced losses from joint
ventures.
Income Taxes
The combined income tax provision of $25.7 million compares to an income tax
provision of $9.6 million in 1995. The unfavorable variance in income taxes
and the difference in the 1996 and 1995 effective tax rates from the federal
statutory tax rate of 35% is primarily attributable to non-recognition of tax
losses generated by the MAC Assets ($77.2 million in 1996) and non-deductible
goodwill amortization ($8.6 million in 1996). In addition, the tax effects of
the 1996 and 1995 pro forma adjustments relating to the ZDI acquisition were a
$3.2 million and $11.9 million increase in tax provision, respectively.
Net Loss
As a result of the changes described above, net loss for the period
increased $5.2 million or 8.4% from $61.8 million to $67.0 million.
35
<PAGE>
EBITDA
EBITDA for 1996 was $255.4 million, an increase of $20.3 million or 8.7%
from the $235.1 million generated in 1995. The increase was due to higher
revenue and management fee income, net of higher production costs and selling,
general and administrative expenses. The cost of new product launches caused
the growth rate of expenses to exceed the revenue growth rate and, as a
result, the ratio of EBITDA to revenue of 23.6% decreased slightly from 24.2%
for 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the financing requirements of the Company have been funded
through intercompany loans and advances.
As a result of the Reorganization, the Company's intercompany debt owed to
Softbank will be reduced to $94.2 million. Such indebtedness bears interest at
9.9% and matures in February 2009. Concurrently with the Offering, the Company
intends to issue and sell $250 million aggregate principal amount of Notes. In
addition, the Company will enter into the $1.35 billion Credit Facility, and
borrow $1.25 billion thereunder, to provide additional funds for the repayment
of intercompany debt to Softbank and to provide for the Company's working
capital requirements. The Credit Facility will consist of a $700 million
reducing revolving credit facility (with $600 million drawn at closing) and a
$650 million term loan, both of which will mature in March 2005. There will be
no scheduled reductions in the revolving credit commitment or amortization
under the term loan until September 2000.
Cash and cash equivalents were $30.3 million and $29.9 million at December
31, 1997 and 1996, respectively. The balance increased $.4 million due to the
factors discussed below:
Cash (used) provided by operating activities was $(3.4) million and $65.7
million for the years ended December 31, 1997 and 1996, respectively. The
decrease from 1996 to 1997 was the result of higher interest expense and final
payment of long-term incentives to management established in connection with
the sale of ZDI in 1994.
For the year ended December 31, 1997, the Company used $44.2 million in cash
for investing activities, principally $30.2 million in capital expenditures.
The majority of these expenditures were for computer equipment and leasehold
improvements. The Company believes that future capital expenditures associated
with new office space will be approximately $35 million in 1998 and $25
million in 1999 (net of tenant improvement credits). Cash used for investing
activities on a pro forma basis for 1996 was $66.8 million principally due to
capital expenditures of $22 million and the acquisition of Sendai Publishing
Group for $28 million.
For the year ended December 31, 1997, the Company generated $47.9 million in
cash from financing activities, principally $50.8 million of capital
contributed by MAC to fund the operating losses of the MAC Assets, net of a
$21.4 million repayment of intercompany indebtedness. Cash flow from financing
activity for the year 1996 was $6.8 million, primarily from capital
contributions of $14.8 million from Softbank offset by a dividend of $8.0
million.
The Company believes that, based on its current level of operations and
anticipated growth, the Company's ability to generate cash, together with
other available sources of funds including available cash on hand at December
31, 1997, of $30.3 million, will be adequate over the next 12 months to make
required payments of principal and interest on the Company's indebtedness, to
fund anticipated capital expenditures and future working capital requirements.
However, actual capital requirements may change, particularly as a result of
any acquisitions the Company may pursue. The ability of the Company to meet
its debt service obligations and reduce its total debt will depend upon the
future performance of the Company.
The Company has entered into a license and services agreement with MAC to
develop ZDTV. ZDTV is owned by MAC, but as part of this license and services
agreement MAC has granted the Company an option exercisable through December
31, 1998 to purchase all of MAC's interest in ZDTV for an amount equal to
36
<PAGE>
MAC's investment plus 10% per annum for the period of its investment. Pursuant
to the license and services agreement, the Company has agreed to fund ZDTV's
operations on behalf of MAC through unsecured advances which, for approved
levels of expenditure, are to be reimbursed by MAC. Such advances bear
interest at the 30-day LIBOR rate plus .50%. ZDTV's cash requirements are
expected to be approximately $54 million in 1998. The Company's cumulative
advances in respect of ZDTV, which totaled $14.4 million net of $10.1 million
in repayments through December 31, 1997, will be repaid concurrently with the
Reorganization. The Company has not yet determined whether it will exercise
its option to purchase MAC's interest in ZDTV. Any such purchase will depend
upon securing sufficient cable carriage, which may include entering into a
joint venture or other co-ownership arrangement, including an arrangement with
a third party cable system operator which will provide carriage and also
assume a portion of the ongoing cash requirements on terms that are acceptable
to the Company. ZDTV is not included in the Company's results of operations.
In the event that the Company acquires a controlling interest in ZDTV from
MAC, such acquisition would be accounted for as a pooling transaction; in the
event that the Company acquires a non-controlling interest, such acquisition
would be accounted for under the equity method. See "Certain Transactions."
SEASONALITY
Historically, the Company's business has been seasonal as a significant
portion of the trade shows and conferences segment revenue has occurred in the
second and fourth quarters. In addition, the Company's publishing segment has
generated higher revenue in the second and fourth quarters. The following
table sets forth certain unaudited quarterly combined statements of operations
data for each of the eight quarters in the period ended December 31, 1997. In
the opinion of the Company's management, this unaudited information has been
prepared on a basis consistent with the audited Combined Financial Statements
of ZDI and ZDCF appearing elsewhere in this Prospectus (with the exception of
the March 31, 1996 data which has been prepared on the basis described in
Presentation of Financial Information above) and includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein when read in conjunction with the Combined
Financial Statements and related notes thereto. The operating results for any
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTERS ENDED
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996 1997 1997 1997 1997
--------- -------- ------------- ------------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............. $189,984 $197,121 $195,731 $232,884 $209,564 $219,195 $199,745 $237,729
Tradeshows and confer-
ences................. 19,661 69,047 53,631 122,545 15,321 82,135 24,227 165,845
-------- -------- -------- -------- -------- -------- -------- --------
Total Revenue........... 209,645 266,168 249,362 355,429 224,885 301,330 223,972 403,574
Percentage of total
year.................. 19.4% 24.6% 23.1% 32.9% 19.5% 26.1% 19.4% 35.0%
Cost of production...... 55,818 76,456 73,568 96,802 61,526 92,986 62,716 108,017
Selling, general and
administrative
expenses............... 122,730 122,846 133,035 150,025 139,980 143,243 143,131 137,990
Depreciation and amorti-
zation................. 35,284 41,692 41,793 42,490 38,966 39,032 39,699 37,243
Income (loss) from oper-
ations................. (4,187) 25,174 966 66,112 (15,587) 26,069 (21,574) 120,324
Income (loss) before
taxes.................. (28,139) (14,260) (30,556) 31,626 (60,145) (17,715) (66,937) 72,306
Net income (loss)....... (34,559) (20,680) (36,977) 25,205 (59,817) (17,387) (66,609) 72,634
EBITDA.................. 30,752 67,823 45,828 111,027 25,534 68,216 20,486 158,658
Percentage of total
year.................. 12.0% 26.6% 17.9% 43.5% 9.4% 25.0% 7.5% 58.1%
</TABLE>
INFLATION AND CHANGES IN PAPER PRICES
The Company continually assesses the impact of inflation and changes in
paper prices. The Company generally enters into contracts for the purchase of
paper which adjust the price on a quarterly basis. Paper prices began to rise
in 1994, rose significantly in 1995 and 1996 then decreased in 1997.
Management expects paper prices to increase again in 1998. The Company will
continue to monitor the impact of inflation and paper prices and will consider
these matters in setting its pricing policies.
The Company frequently reviews its purchasing and manufacturing processes
for opportunities to reduce costs and mitigate the impact of paper price and
postage rate increases (such as purchasing lighter-grade paper stock or, when
paper prices are at cyclical lows, increasing paper inventory or entering into
longer term contracts
37
<PAGE>
with suppliers). However, the Company has not entered, and does not currently
plan to enter, into long-term forward price or option contracts for paper. See
"Risk Factors--Risks Associated with Fluctuations in Paper and Postage Costs"
and "Business--Print Publishing--Paper and Printing."
YEAR 2000 ISSUES
The Company uses a number of computer software programs and operating
systems, including applications for its internal electronic communications
network and for various administrative and billing functions. The Company has
assessed the scope of the Company's risks related to problems these computer
systems may have in processing date information related to the year 2000 and
believes such risks are not significant.
The Company has identified all of its significant internal software
applications which contain source codes that may be unable to appropriately
interpret the year 2000 and has already begun to modify or replace those
applications. The estimated costs to modify or replace these applications are
not material to the Company.
In addition, the Company has inquired of its vendors and business partners
about their progress in identifying and addressing problems related to the
year 2000. All major vendors with whom the Company exchanges electronic
information or on whose internal software applications the Company may be
dependent, have committed to the Company that plans are in place to be
compliant before processing of information related to calendar year 2000 would
be required. Although no assurance can be given that all of these third party
systems will be year 2000 compliant, the Company believes that risk is not
significant.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 130, "Reporting Comprehensive Income," issued in June 1997, will
require the Company to disclose, in financial statement format, all non-owner
changes in equity. Such changes include, for example, cumulative foreign
currency translation adjustments, certain minimum pension liabilities and
unrealized gains and losses on securities available for sale. This statement
is effective for fiscal years beginning after December 15, 1997 and requires
presentation of prior period financial statements for comparability purposes.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Generally, financial information is required to be reported on the basis that
is used internally for evaluating segment performance and deciding how to
allocate resources to segments.
SFAS No. 132, "Employer's Disclosure about Pensions and Other Postretirement
Benefits," is effective for the year ended December 31, 1998. This statement
revises the disclosure requirements for employers' pension and other retiree
benefits.
The Company expects to adopt the above statements beginning with its 1998
financial statements.
FORWARD-LOOKING STATEMENTS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other sections of this Prospectus contain forward-looking
statements which are subject to various risks and uncertainties. Actual
results could differ materially from those discussed herein. Important factors
that could cause or contribute to such differences include those discussed
under "Risk Factors" as well as those discussed elsewhere in this Prospectus.
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INDUSTRY
Technology is widely recognized as one of the largest and fastest growing
sectors of the United States economy. The market for technology goods and
services is undergoing rapid expansion, largely fueled by: (i) increased
integration of computers into the workplace and home; (ii) shortened product
life cycles; and (iii) increased use of the Internet. The demand for computer
technology to enhance productivity as well as the increasing number of
applications in the areas of education, entertainment and communications has
dramatically increased the number of computers in use. The number of personal
computers in use worldwide has doubled from 150 million in 1995 to over 300
million in 1997, significantly broadening the consumer and business markets
for computer technology. In addition, rapid technological advances have
shortened product life cycles; for example, the estimated marketable product
life of a PC has decreased from five years in 1981 to less than six months
today. The Internet has also become a widely accepted information tool as
demonstrated by the proliferation of users, with 68 million adults in the U.S.
having used the Internet by year-end 1997, up from just five million in 1994,
and the sharp increase in the number of commercial Web sites worldwide, from
30,000 in 1995 to approximately 400,000 in 1997.
For buyers and users of computer technology products, these factors have
increased the demand for objective, up-to-date information and analysis. For
sellers of such products, these factors have increased their need to
communicate a wide range of information regarding their products and services,
from advertising designed to increase sales to education designed to improve
end-user satisfaction and build brand loyalty. Computer technology-focused
media enable sellers to communicate their message effectively by targeting a
focused customer base. As a result of the broadening of the consumer base, as
well as the favorable demographics of this base, computer technology
publications and other media are becoming increasingly attractive as a
platform for consumer product advertising.
COMPUTER TECHNOLOGY PRINT PUBLICATIONS MARKET
In 1996, advertising revenue in computer-oriented print publications
totalled $1.3 billion. In 1997, advertising revenue in computer-oriented
publications grew by 11.2% while the advertising market as a whole grew by
8.3% in the first ten months (the latest period for which data is available)
as compared to the same period in the prior year. Growth in advertising and
circulation revenue for computer-oriented publications has outpaced the
publishing industry in general, growing 10.4% a year from 1994 to 1997, versus
6.3% a year for all periodicals.
COMPUTER TECHNOLOGY TRADE SHOWS
A trade show can be described as a face-to-face version of a print
publication. Trade show attendees, like readers of print publications, are
presented with product advertisements in the form of exhibits and "editorial"
content in the form of conferences and other ancillary forums. Producers of
trade shows and conferences generate revenue from exhibit space sales,
advertising and conference and general attendance fees. Trade shows and
conferences allow sellers to conduct a large volume of face-to-face sales
presentations to qualified buyers in a short period of time. Professional
attendees include hardware and software manufacturers and developers, sales
and distribution personnel and large volume end-users. Industry leaders such
as Microsoft Corporation, Intel Corporation and Cisco Systems, Inc. have
consistently used these events to promote the launch of important products in
order to reach top-ranking decision-makers in the computer technology
industry.
Trade shows are becoming an increasingly important part of the marketing
strategy for information technology vendors. A recent study noted that
companies consider trade shows one of the most effective mediums for
generating and closing sales, second only to direct selling. Exhibit space
revenues from North American computer-product trade shows were approximately
$573 million in 1997. In 1997, exhibit square footage rose 28% at such shows,
the number of exhibiting firms increased 20% and attendance rose 28%.
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ONLINE AND OTHER TECHNOLOGY INFORMATION SERVICES
The proliferation of Web sites and the growing number of users combine to
make the Internet an increasingly significant advertising and brand-building
vehicle. The Internet enables marketers to deliver targeted messages as a
result of the ability to track consumer behavior and immediately convert
advertising responses into commercial transactions. The advertising-based
business model for online services, which is similar to print and television
media, involves the payment to Internet content and service providers of
advertising fees based primarily on the demographics and purchasing habits of
the audience and on the number and positioning of advertisements delivered.
The market for advertising on the Internet was approximately $597 million in
1997, a 152.6% increase from 1996. The computer technology industry has been
one of the leading advertisers on the Internet, comprising 35% of all
advertising dollars for the twelve months ended September 30, 1997. Web sites
focused on computing content provide yet another forum for sellers of computer
technology to deliver targeted product information and advertising to a
premium customer base. The Company expects that the Internet market, like the
publications market, will continue to broaden and gain appeal as a platform
for consumer product advertising as well.
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BUSINESS
The Company is the world's preeminent integrated media and marketing company
focused on computing and Internet-related technology, with principal platforms
in print publishing, trade shows and conferences, online content, market
research and education. The Company provides global technology companies with
marketing strategies for reaching key decision-makers. The Company is the
successor to Ziff-Davis Publishing Company, which pioneered the development of
special-interest magazines; Ziff-Davis Exposition and Conference Company; and
the COMDEX computer and network-related trade show operations of Interface
Group-Nevada, Inc.
The Company's PC Magazine, PC Week and Computer Shopper magazines are the
top three computer magazines in the U.S. and are among the top 25 U.S.
magazines, each as measured by total revenue in 1996 (the latest year for
which data is available). The Company also produces the world's most important
trade shows serving vendors, resellers, buyers and users of computer
technology, including COMDEX/Fall, the largest trade show in the U.S. in 1997.
The Company's ZDNet.com Web site is the leading computing content site and
ranked the number one Web site in 1997 in the category of news, information
and entertainment, as measured by visitors per month.
The Company's 28 primary U.S. and international titles, including its joint
ventures, and over 50 licensed publications, total more than 80 publications
distributed worldwide, with a combined circulation of over eight million
primary readers. In 1997, Ziff-Davis was the largest technology publisher in
the U.S. in terms of total magazine revenue. In that same year, Ziff-Davis
accounted for 36.8% of all advertising and circulation dollars spent in
computer periodicals, with at least 50% more total magazine revenue than its
closest competitor. The Company's publications include PC Magazine, the
largest circulation computer magazine in the world, Computer Shopper, the
leading magazine targeted at direct buyers of computers (along with its Web-
based companion, Netbuyer), Computer Life, a monthly magazine for home
computing enthusiasts, and Family PC, a magazine specifically targeted to
households with children. ZD Labs, its computer testing facility, enables the
Company to provide reliable and authoritative product evaluations to a
sophisticated audience of brand-specifiers and decision-makers in both the
business and consumer markets. The preeminence of the Company's publications
among readers and advertisers is based on its comprehensive market and product
coverage, the quality of its editorial content and the influence of its
readership.
In 1997, the Company produced over 50 trade shows and conferences worldwide
with over two million estimated attendees. The Company's COMDEX/Fall event is
the number one ranked trade show for all industries in the U.S. as measured by
total revenue, total exhibit space and number of attendees.
The Company's other media and marketing platforms include online content,
market research, education and the publication of computer-related newsletters
and training manuals. In addition, the Company and MAC have developed ZDTV,
the first 24-hour cable television channel and integrated Web site focused
exclusively on computers, technology and the Internet, which is expected to be
launched in the first half of 1998. The Company has an option to purchase ZDTV
from MAC on or before December 31, 1998. See "--Television."
The Company developed certain international consumer and Internet
publications, international trade shows and the ZDNet business under the
ownership of MAC. As a result of the Reorganization, these businesses have
been or will be purchased from MAC. See "The Reorganization."
The Company's Ziff-Davis Media Network integrates the Company's marketing
activities into one cohesive resource for its largest customers. Originally
established to provide discounts for advertisers buying across two or more
magazine titles, the Media Network has been expanded to allow marketers to
reach their various target buyers through any combination of the Company's
media and marketing platforms.
The Company had total revenue of $1.154 billion for 1997. The Company's
revenue is primarily derived from advertising sales, which represented 51.9%
of total revenue in 1997. The second largest component of the Company's
revenue is derived from trade shows and conferences, which accounted for 23.5%
of total revenue in
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1997. Circulation revenue, comprised of subscription and newsstand single copy
sales, generated 13.1% of the Company's revenue in 1997 and other revenue
components, including online content, market research and revenue derived from
joint ventures and licenses, contributed 11.5% in 1997.
BUSINESS AND OPERATING STRATEGY
The Company's objective is to be the preferred marketing partner to
technology vendors and service providers seeking to reach primary decision-
makers involved in the specification and purchase of their products and
services. Major elements of the Company's strategy include:
Maintain Focus on the Computer and Internet Technology Markets. The Company
believes that its singular focus on the computer and Internet-related
technology markets provides it with substantial growth opportunities as well
as the ability to broaden its expertise in attracting both audiences and
advertisers.
Develop the Most Comprehensive, Objective and Authoritative Content. The
Company strives to produce the most comprehensive, objective and authoritative
editorial content in order to attract category brand-specifiers and decision-
makers to its media platforms. The ability to provide focused audiences with
their specific information needs attracts the leading advertisers and
exhibitors to the Company's products and services.
Build Upon Brand Strength of Existing Media Properties. The Company will
pursue continued growth from its core portfolio of leading brands, such as PC
Magazine, PC Week, COMDEX and ZDNet, by seeking to expand its market share of
audiences and advertisers and enhancing the quality and accessibility of the
content it produces and marketing services it provides. In addition, the
Company will continue to extend its existing brands into other platforms to
offer multiple media presentations of its content.
Continue to Leverage Multiple Media Marketing Platforms. The Company
believes that the scope and depth of its products and services across multiple
media platforms and geographic territories creates growth opportunities
exceeding those that such businesses could achieve independently. Such
opportunities include the leveraging of strong relationships with accounts in
one media platform into other platforms, cross-marketing Ziff-Davis products
and services to the audiences of its different platforms and packaging
integrated marketing products across all platforms for large advertisers. The
Company believes that its ability to offer clients multiple platform marketing
solutions gives it a competitive advantage over single platform providers.
Expand Leadership on the Internet. The Company intends to use its already
significant presence on the Internet and broad experience in publishing to
continue to reach new audiences and increase advertising revenue. In addition,
the Company believes that the large existing audience for ZDNet and its
affiliated sites, together with its publishing experience, gives it a
competitive advantage in identifying, acquiring and developing new products
and services.
Launch New Products and Services. The Company believes that rapid advances
in technology create additional growth opportunities for the launch of new
products and the expansion of its audiences and advertising base. The Company
seeks to be the first to identify new audiences and develop products and
services which respond to their informational needs. Management believes that
the scope of its operations and its experience in launching new products
across multiple media platforms and geographic regions reduce the risks
typically associated with these activities and enable it to more readily
achieve market acceptance for new products and services as compared to other
media companies.
Expand Global Reach. The Company intends to leverage its widely recognized
brands and its experience in multinational operations to expand further into
key overseas markets, focusing on those markets which have size and growth
characteristics that will support its strategy of cross-media operations.
Management intends to further expand internationally through the launch
overseas of proven U.S. properties, joint ventures and licensing arrangements
with local operating partners and through selective acquisitions.
The Company expects to fund its business and operating strategy from
internally generated cash flow from operations, which are estimated to be
sufficient to fund investments as well as the repayment of indebtedness. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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PRINT PUBLISHING
The Company is a leading computer-related magazine publisher, with 28
primary U.S. and international titles, including its joint ventures, and over
50 licensed publications, totaling more than 80 publications distributed
worldwide. In 1997, the Company's publications had combined circulation of
over eight million primary readers worldwide. Approximately 62% of the
Company's total revenue in 1997 was attributable to its print publishing
business. Each of the Company's magazines is designed to appeal to a target
audience of sophisticated customers in the business and consumer markets by
providing high-quality editorial content, often supported by independent
laboratory-based product testing. The Company seeks to maintain and increase
its revenue by introducing current advertisers to new titles, by attracting
new advertisers targeted at the Company's readership and by developing new
reader and advertising categories. Each of the Company's primary publications
has established its own Web site as a complementary delivery platform.
The Company believes its preeminent position in the computer publishing
market is based upon its leading brands in key categories, its ability to
successfully develop new brands for emerging product categories, its strength
in circulation and its ability to expand internationally. Ziff-Davis seeks to
produce the highest quality editorial content; it employs top editors and
columnists supported by laboratory-testing facilities that produce widely
acknowledged authoritative benchmarks for determining product quality. See "--
Editorial, Laboratory Testing and Benchmark Software." In addition to its
leading publications targeted at brand-specifiers and other industry
professionals, the Company has successfully introduced new publications
targeted at emerging sectors, including the consumer market (Family PC,
Computer Life and Computer Gaming World), technology lifestyle (Yahoo!
Internet Life) and Internet professionals (Internet Computing and Inter@ctive
Week). The Company's newsstand strategy focuses on developing strong
relationships with a key distributor and large retail accounts. In order to
offer clients coverage of broad international markets, the Company has adopted
a licensing strategy designed to maximize global reach and maintain content
quality in international publications while reducing cost of entry into new
markets. Depending on the characteristics of a particular market, the Company
may choose to own an international publication, enter into a master license
covering one or more titles, or enter into a joint venture if an attractive
local partner can be identified.
The Company's PC Magazine, PC Week and Computer Shopper magazines are the
top three computer magazines in the U.S. and are among the top 25 U.S.
magazines, each as measured by total revenue in 1996 (the latest year for
which data is available). In 1997, Ziff-Davis was the largest technology
publisher in the U.S. in terms of total magazine revenue. In that same year,
Ziff-Davis accounted for 36.8% of all advertising and circulation dollars
spent in computer periodicals, with at least 50% more total magazine revenue
than its closest competitor. In recent years, advertisements in the Company's
publications have expanded beyond those for computer technology products to
include consumer product advertising, reflecting the desirable demographics of
the Company's readership, as well as the expanding readership of computer
technology publications to a broader consumer market.
The Company's publications include paid-circulation magazines, which
generate revenue from newsstand sales, subscriptions and advertising, and
controlled-circulation publications, which are distributed free of charge to
qualified information technology professionals and generate revenue
principally from the sale of advertising. In addition, the readership of
controlled-circulation publications provides valuable demographic information
to the Company. Most of the current Ziff-Davis publications are either monthly
magazines providing comparative, laboratory-based product reviews or news
weeklies providing product and industry news and analysis; however, the
Company also serves the developing market for lifestyle and entertainment
publications focusing on technology.
The Company's U.S. publications have a total circulation of over six million
primary readers, and the Company had a worldwide circulation of over eight
million primary readers. Its six paid-circulation business magazines
(including one joint venture) accounted for 47.2% of the total paid-
circulation of all computer technology business magazines in the U.S. in 1997.
In 1997, PC Magazine's circulation was greater than that of Business Week,
Fortune or Forbes. With respect to newsstand sales, a critical measure of
magazine vitality, in the first six months of 1997 Ziff-Davis accounted for
47.5% of all computer magazine copies sold, and on average Computer Shopper
had greater newsstand sales than Business Week, Fortune and Forbes combined.
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The following table sets forth information relating to the Company's primary
publications for 1997.
<TABLE>
<CAPTION>
CIRCULATION
--------------------
PUBLICATION 1997
FIRST FREQUENCY ADVERTISING
PUBLICATION ISSUE TYPE AMOUNT(1) (PER YEAR) PAGES(2)
----------- ----- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
U.S. BUSINESS
PC Magazine............ 1981 Paid 1,176,351 22x 6,261
PC Computing........... 1988 Paid 1,008,615 12x 2,821
Computer Shopper....... 1979 Paid 561,308 12x 8,590
PC Week................ 1983 Controlled 300,105 51x 7,033
Windows Sources(3)..... 1993 Paid 400,738 12x 2,108
Internet
Computing(3)(4)....... 1996 Paid 340,579 12x 948
Inter@ctive Week(3).... 1994 Controlled 101,510 45x 1,840
Macworld(5)............ 1985 Paid 671,391 12x 1,734
MacWeek(5)............. 1987 Controlled 97,502 48x 2,593
Sm@rt Reseller(3)...... 1998 Controlled 60,000(6) 12x N/A
U.S. CONSUMER
Computer Life(3)....... 1994 Paid 453,078 12x 1,268
Electronic Gaming
Monthly............... 1988 Paid 358,198 12x 1,221
Yahoo! Internet
Life(3)............... 1995 Paid 325,771 12x 491
Computer Gaming
World(3).............. 1981 Paid 230,772 12x 2,320
EGM/2/................. 1988 Paid 126,310 12x 216
Official U.S.
PlayStation
Magazine(7)........... 1995 Paid 100,000(8) 12x 463
Family PC(3)(9)........ 1994 Paid 382,925 12x 1,343
INTERNATIONAL(3)
PC Professionell
(German).............. 1991 Paid 178,246 12x 1,461
PC Direkt (German)..... 1992 Paid 139,229 12x 814
Internet Professionell
(German).............. 1997 Paid 26,665 12x 134
PC Magazine (UK)....... 1992 Paid 130,264 12x 3,054
PC Direct (UK)......... 1992 Paid 124,165 12x 7,432
PC Gaming World (UK)... 1997 Paid 40,385 12x 304
PC Expert (French)..... 1992 Paid 98,816 12x 1,203
PC Direct (French)..... 1992 Paid 83,097 12x 1,335
PC Week
(China)(10)(11)....... 1996 Controlled 50,000 51x 2,638
PC Computing
(China)(10)........... 1994 Paid 45,580 12x 360
PC Magazine
(China)(10)........... 1994 Paid 45,899 12x 678
</TABLE>
- --------
(1) Based on circulation information provided by the Company to the Audit
Bureau of Circulation for paid publications and BPA International for
controlled publications for the six month period ended December 31, 1997
other than French publications, which are based on information provided
to the Office de la Justication de la Diffusion for the year ended
December 31, 1997, German publications, which are based on information
provided to Informationgemeinschaft zur Feststellungder Verbreiterung Von
Webetragern e.v. for the quarter ended December 31, 1997 and Chinese
publications, which are based on information provided to BPA
International for paid publications for the six month period ended
December 31, 1997.
(2) As reported by AdScope for the year ended December 31, 1997 for domestic
publications and based on Company data for international publications.
(3) Properties which have been or will be acquired from MAC.
(4) Formerly ZD Internet Magazine.
(5) Joint venture with International Data Group, Inc.
(6) 60,000 target rate base for 1998.
(7) Formerly P.S.X.
(8) 100,000 target rate base for 1998.
(9) Joint venture with an affiliate of The Walt Disney Company.
(10) Venture with Richina Media Holdings and other local agencies in China.
(11) Circulation numbers and advertising pages are based on Company data.
44
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ZIFF-DAVIS MEDIA NETWORK
The Company's Ziff-Davis Media Network integrates the Company's marketing
activities into one cohesive resource for its largest customers. Originally
established to provide discounts for advertisers buying across two or more
magazine titles, the Media Network has been expanded to allow marketers to
reach their various target buyers through any combination of the Company's
media and marketing platforms. Currently 21 professionals in the Ziff-Davis
Media Network link major advertisers from one platform into other platforms.
EDITORIAL, LABORATORY TESTING AND BENCHMARK SOFTWARE
The Company has invested heavily in its editorial staff and in training and
technology to develop the high level of technical expertise required to
provide quality content on computer technology. It employs over 450 editorial
personnel worldwide, including award-winning editors and experts in their
fields. The Company believes that it provides its consumers with the most
reliable, objective and focused product evaluations and industry news. Because
of the quality and reputation of Ziff-Davis laboratory tests, the Company's
publications are widely regarded as a reliable source of objective product
evaluations. The Company's influence over computer purchasing carries with it
the responsibility to maintain the highest standards of fairness and
objectivity in its product reviews. To ensure this impartiality, Ziff-Davis
has instituted policies governing separation of editorial functions from
advertising sales functions and restricting trading in securities of
technology-related companies by its journalists.
The Company is committed to laboratory-based product testing as an integral
part of its editorial mission. In 1997, the Company spent over $10 million in
laboratory testing. Testers from many of the Company's different publications
work with the ZD Labs staff to provide comprehensive, objective test results
that can assist readers and users of Ziff-Davis publications and other
content-based services in making buying decisions. In addition to the core ZD
Labs staff, Ziff-Davis publications such as PC Magazine, PC Week, Computer
Shopper and PC Computing maintain their own staff and/or testing space at ZD
Labs as well as at their own locations. The ZD Labs testing facility provides
space for testing hundreds of products and systems. One of its newest
facilities is an Internet/Intranet lab dedicated to testing Web servers and
other Internet products. In its domestic lab facilities, the Company employs
120 technicians, enabling it to test thousands of products each year and
conduct large-scale tests that effectively simulate corporate installations.
The Company believes ZD Labs gives it a competitive advantage in terms of
staffing, equipment and access to the technology necessary to evaluate
products.
ZD Labs produces the core, publicly available and widely distributed
benchmark software that Ziff-Davis publications use worldwide to measure the
performance of PCs, Macintosh systems and servers. The Company's benchmarks
have become industry standards among major buyers of computer and Internet-
related technology.
SOURCES OF PRINT PUBLISHING REVENUE
Advertising Sales. The Company's advertising strategy for its publishing
business is based on helping customers maximize the return on their
advertising investment. Advertising sales accounted for 78.4% of the Company's
total print publishing revenue for 1997. Ziff-Davis has historically invested
in comprehensive research to better understand the computer technology market
and the positions of its different publications. The Ziff-Davis sales
philosophy is to encourage its sales force to adopt the role of marketing
consultant, using Ziff-Davis market research tools, such as the Company's
InternetTrack and BrandTrack services, to provide clients with information on
overall industry trends as opposed to more limited sales presentations
focusing on individual publications. As of December 31, 1997, Ziff-Davis
employed over 250 salespeople, sales managers and sales executives and over
325 sales support staff in its publishing segment to provide customer service,
research, promotional support and value-added programs for advertisers.
Circulation. Ziff-Davis maintains centralized circulation operations which
enable the Company to capitalize on its successful strategies and practices
across all publications on a timely basis. The Company strives
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<PAGE>
to increase its readership by building relationships with distributors,
retailers and subscribers. Revenue from circulation of the Company's paid-
circulation magazines accounted for 18.4% of the Company's total print
publishing revenue in 1997. This was comprised of subscription sales (10.1% of
total revenue in 1997 and 10.5% in 1996) and newsstand sales (8.1% in each of
1997 and 1996). The Company's publications have a total circulation of over
eight million primary readers worldwide.
The Company's newsstand strategy focuses on developing strong relationships
with a key distributor and large retail accounts. Ziff-Davis recently entered
into a newsstand distribution arrangement in the U.S. with Warner Publishers
Services ("Warner"), a division of Time Warner Inc., which covers the
Company's entire line of paid-circulation magazines. As of January 1998, the
Company became Warner's principal supplier of computer technology
publications. In addition, the Company has preferred distribution arrangements
with large retailers including WalMart, Barnes & Noble, Staples and Office
Max. These arrangements include special magazine displays featuring Ziff-Davis
brand products which increase the prominence of the Company's publications and
strengthen its brand identity. With respect to newsstand sales, a critical
measure of magazine vitality, Ziff-Davis publications accounted for 47.5% of
all computer magazine copies sold in the first six months of 1997.
The Company's subscription strategy is to maintain a highly focused
readership in order to provide the most effective affinity between advertisers
and readers. The Company believes that this strategy increases subscriber
loyalty and renewal rates and allows the Company to provide advertisers with
access to a precisely focused target audience. The Company's six paid-
circulation business magazines (including one joint venture) accounted for
47.2% of the total paid circulation of all computer technology business
magazines in the U.S. in 1996.
Licensing and Joint Ventures. The Company has adopted a licensing strategy
designed to maximize global reach and maintain content quality in
international publications while reducing the cost of entry into new markets.
In markets where the Company believes that the opportunity is significant
relative to the cost of entry, the Company may operate through wholly-owned
publishing companies. Through subsidiaries, the Company currently has
publishing operations in France, the United Kingdom and Germany. In other
markets, the Company has opted to enter into licensing arrangements with local
publishing companies, and currently has over 50 licensed publications
worldwide. The Company's licenses are generally three to five year agreements
that provide for a minimum annual royalty against a percentage of revenue. The
Company also operates through a number of joint venture companies with
partners, including joint ventures with International Data Group, Inc. ("IDG")
and an affiliate of The Walt Disney Company ("Disney") in the U.S. and a
venture with Richina Media Holdings and other local agencies in China. The
Company is currently negotiating with an affiliate of Disney to buy its
interest in the Family PC joint venture.
U.S. PUBLICATIONS
Business Magazines. In the U.S. market, the Company publishes ten computer
publications directed to business buyers, including six paid-circulation
magazines and four controlled-circulation weeklies or bi-weeklies. Each
publication produces authoritative, independent guidance that the Company
believes is generally considered to be the primary product resource in its
market segment. Two of these titles, Macworld and MacWeek, are dedicated to
the Apple Macintosh market and are published by Mac Publishing L.L.C., a joint
venture between the Company and IDG.
PC Magazine provides corporate buyers of computer technology with
comprehensive laboratory-based comparative reviews of PC hardware, software
and networking products, with a focus on technical specifications. With a
paid circulation of more than 1.18 million, PC Magazine is the largest
circulation computer magazine in the world, accounting for 35.4% of all
computer advertising revenue in directly competitive U.S. publications in
1997. PC Magazine has expanded its editorial material into other media,
including a Web publication, PC Magazine Online, and a CD ROM-based
multimedia companion magazine, PC Magazine Extra, which has a paid
circulation of over 75,000. PC Magazine also produces two newsstand-only
specials: Your New PC, which supplies buying advice for less sophisticated
computer buyers, and InternetUser, which focuses on reviews of Internet
products.
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PC Computing provides business users with results-oriented reviews of
computer products, with a focus on productivity and usability. A monthly
publication, it is one of only three computer magazines to have reached a
circulation of over one million readers. PC Computing recently launched
Equip, a quarterly newsstand publication that provides frequent buyers of
consumer electronic products with recommendations on digital electronic
products such as digital phones, DVD players, digital satellite dishes and
camcorders.
Computer Shopper provides readers who buy computer products directly from
manufacturers with buying advice, product evaluations, and technology
coverage, including information on the availability, pricing,
specifications and configurations of thousands of computer products. With a
newsstand circulation of approximately 300,000 in 1997 (the largest
newsstand sales of any computer publication), this monthly publication
sells more pages of advertising than any other computer magazine. Its
interactive Web-based companion, Netbuyer, is one of the leading Web sites
devoted to computer retailing.
PC Week provides enterprise product buyers and information technology
professionals at large corporate computing sites with timely information on
products, companies and general industry news. With a controlled
circulation of over 340,000 distributed to over 180,000 sites, it is the
leading computer weekly. Its online companion, PC Week Online, contains
such innovative features as PC Week Radio.
Windows Sources provides computer professionals responsible for
implementing computing standards within their organizations with detailed
reviews of important Windows 95 and Windows NT products. With an increasing
focus on Windows NT as a critical computing platform, this monthly
publication reached a paid circulation of more than 400,000 in 1997.
Internet Computing provides key buyers of Internet and Intranet products
(primarily Web site designers and developers and IS/Intranet managers) with
product buying information, analysis of new technologies and techniques and
tips for creating Web sites. Internet Computing is published monthly and
reached a paid circulation of more than 340,000 in 1997.
Inter@ctive Week provides Internet and telecommunications professionals
with information on relevant business and technology issues, including
products, events, services, strategies, alliances and key players. With a
controlled circulation of over 100,000, Inter@ctive Week became one of the
leading publications for the digital communications technology industry in
less than three years.
Sm@rt Reseller, a bi-weekly launched in January 1998, provides value-
added resellers, system integrators, distributors, Web developers and
Internet service providers with in-depth news and analysis on business and
technology. Sm@rt Reseller currently targets a controlled circulation of
60,000.
Macworld provides Macintosh buyers with comparative, laboratory-based
product evaluations, reviews and information about Macintosh products,
supported by a product testing facility which the Company believes is the
most advanced in the Macintosh industry. Macworld has a qualified
circulation of over 650,000.
MacWeek is targeted at volume buyers of, and purchase influencers for,
Macintosh products at large sites in business, government and education, as
well as buyers at mid-level and smaller businesses, and delivers
information on Macintosh technology, industry trends, news, analysis and
new products. The only weekly Macintosh newspaper, MacWeek had a controlled
circulation of approximately 100,000 recipients in 1997 at nearly 56,000
work locations.
Consumer Magazines. The Company publishes seven magazines that serve the
rapidly growing consumer market and which are dedicated to meeting the varying
needs of computer enthusiasts and net surfers, family buyers and gamers. One
of these titles, Family PC, is published under a joint venture between the
Company and an affiliate of Disney.
Computer Life provides home computing enthusiasts with products, ideas
and techniques designed to help its readers further enrich their personal
computing experience and better integrate computing into all areas of their
lives. Computer Life is a monthly publication with a circulation of over
450,000.
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Electronic Gaming Monthly offers video game enthusiasts news, information
and product reviews about the latest games on ten different game systems.
Written by video gamers for video gamers, this monthly publication has a
primary circulation of more than 350,000. EGM/2/, a companion publication
to Electronic Gaming Monthly with a circulation of more than 125,000,
offers in-depth strategies, exclusive tips and tricks and comprehensive
maps and walk-throughs of the latest games.
Yahoo! Internet Life is the world's leading Internet consumer magazine.
Yahoo! Internet Life reaches a paid circulation of more than 325,000
readers. It is designed to be an entertaining and authoritative print and
online guide to the Internet, targeting an influential, affluent and early-
adopting group of readers. The Company has an exclusive license from Yahoo!
Inc. to use Yahoo! in the title of a print magazine.
Computer Gaming World provides computer game enthusiasts with results-
oriented gaming information. Computer Gaming World serves more than 230,000
game enthusiasts and is both the oldest and one of the largest computer
game publications.
Official U.S. PlayStation Magazine assists Sony PlayStation users in
getting the most out of their PlayStation game consoles by providing up-to-
date news, interviews and insights. This publication has a rate base of
100,000 PlayStation game fans.
Family PC is specifically targeted to households with children. Written
by parents for parents in plain English, its purpose is to help its paid
circulation of 380,000 select the right computers and software for their
families and ensure that they get the most rewarding, productive and
educational experiences from them. It is currently published under a joint
venture with an affiliate of Disney. The Company is currently negotiating
with an affiliate of Disney to buy its interest in Family PC.
INTERNATIONAL PUBLICATIONS
The Company publishes in the United Kingdom PC Magazine, PC Direct and PC
Gaming World and has announced plans to publish IT Week; in Germany PC
Professionell, PC Direkt and Internet Professionell; in France PC Expert and
PC Direct; and in the People's Republic of China PC Week, PC Computing and PC
Magazine through a venture with Richina Media Holdings and local agencies in
China.
PC Magazine (U.K.), PC Expert, PC Professionell, and PC Magazine (China) are
equivalents of PC Magazine (U.S.) adapted to their individual markets.
Similarly, PC Direct (U.K.), PC Direct (France), and PC Direkt are intended to
be equivalents of the Company's U.S. publication, Computer Shopper. Internet
Professionell is based on Internet Computing, while IT Week will be aimed at
information technology professionals and will include material from
Interactive Week, ZDNet News and other U.S. publications in addition to local
content.
PAPER AND PRINTING
Ziff-Davis maintains strong relationships with its paper suppliers and
printing companies. The Company uses five main paper suppliers for the
majority of its printing needs. In general, paper supply contracts are two to
three year agreements, with quarterly pricing adjustments, and are renewable
on a staggered basis. Most agreements contain pricing clauses that seek to
ensure the most competitive pricing on a quarter to quarter basis. The
Company's main paper suppliers are Bowater, Champion, Consolidated, Fraser and
UPM, each of which provides over 10% of the Company's paper supply. Printing
companies that the Company has relationships with include R.R. Donnelley,
Brown, Quadgraphics and Quebecor. Approximately 50% of the Company's total
printing expenditures for its U.S. publications are with R.R. Donnelley, which
has a number of alternative printing sites. Printing contracts are generally
two to three year agreements.
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TRADE SHOWS AND CONFERENCES
The Company is the leading producer of trade shows, conferences and
customized marketing and educational programs for the computer industry in the
U.S. Approximately 25% of the Company's total revenue in 1997 was attributable
to its trade show and conference business which includes the industry-wide
COMDEX events, other trade shows and conferences focused on specific segments
of the computer technology industry, and customized events designed to meet
the marketing needs of specific clients. In 1997, the Company produced over 50
trade shows and conferences, 18 of which were held in North America.
The COMDEX/Fall event has been held for 18 years and is the number one
ranked trade show for all industries in the U.S. as measured by total revenue,
total exhibit space and number of attendees. In 1997, the Company estimates
that over two million people attended Company trade shows and conferences
worldwide. In addition to COMDEX/Fall, held annually in Las Vegas, the Company
produces 18 other COMDEX events in 13 countries.
"NetWorld+Interop" ("N+I") and "Seybold Seminars" are segment-focused
Company trade shows. In 1997, nine such shows were held in six countries. The
N+I trade shows focus on the networking/interconnectivity segment of the
computer industry, while the Seybold Seminars focus on publishing and graphic
communications. In addition, the Company will produce the following segment-
focused trade shows in 1998: (i) WINDOWS WORLD in conjunction with Microsoft
Corporation; (ii) EXPO COMM, servicing the worldwide telecommunications
industry; (iii) CommUnity, for the emerging corporate integrated data, voice
and video segments; (iv) COMDEX/Enterprise, focusing on solutions for the
large corporate information technology infrastructures; (v) Java Internet
Business Expo, sponsored by Sun Microsystems, Inc. and focusing on the full
range of Java technology for information technology professionals; (vi)
Service and Support Expo, focusing on technology for help desk and information
technology support services; and (vii) Learning Technology, focusing on
applying technology to education and training. The Company's customized
conferences are designed to meet the marketing needs of a specific client. For
example, the Company produced the Java One series of conferences for Sun
Microsystems, Inc. which were designed to introduce Java software to the
developer community.
Attendees at the Company's trade shows and conferences cover a wide range of
participants from the computer industry, including manufacturers,
distributors, dealers, retailers, value-added and other resellers and large
corporate end-users. Each event includes an extensive conference program,
which provides a forum for the exchange and dissemination of information
germane to the particular event's focus. In addition, each event has one or
more "keynote" sessions with speakers drawn from computer industry leaders.
The Company estimates that in 1997 over 5,000 companies participated as
exhibitors in its trade shows and conferences and over 8,000 industry experts,
analysts and consultants spoke at its conference programs.
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The following table sets forth information relating to the Company's
principal trade shows and conferences, including joint ventures, for 1997.
Substantially all of the Company's international COMDEX events are joint
ventures and substantially all N+I events are owned by the Company.
<TABLE>
<CAPTION>
1997 ACTUAL
-------------------------------------
TOTAL NET ESTIMATED
LAUNCH SQUARE TOTAL TOTAL
YEAR FOOTAGE EXHIBITORS ATTENDEES
------ --------- ---------- ---------
<S> <C> <C> <C> <C>
EVENT
NORTH AMERICA
COMDEX/Fall.............................. 1979 1,362,400 1,750 200,000
COMDEX/Spring, WINDOWS WORLD & EXPO COMM
USA..................................... 1981 267,900 615 100,000
COMDEX/Canada incl. WINDOWS WORLD
and Connected Computing................. 1992 164,200 401 59,000
COMDEX/PacRim............................ 1995 79,000 239 33,000
COMDEX/Quebec............................ 1996 47,900 162 28,000
COMDEX/Miami & EXPO COMM Miami........... 1996 85,300 339 23,000
NetWorld+Interop & CommUnity Las Vegas... 1986 407,400 662 56,000
NetWorld+Interop & CommUnity Atlanta..... 1992 366,681 620 44,000
Seybold San Francisco Publishing......... 1986 141,900 315 38,000
Seybold Seminars East (New York)(1)...... 1982 107,000 271 23,000
Windows NT Intranet Solutions (WINTIS)
San Francisco........................... 1993 53,400 275 23,000
INTERNATIONAL
COMDEX/SUCESU-SP Brazil.................. 1992 358,900 455 128,000
COMDEX/Rio............................... 1994 105,400 214 90,000
COMDEX & WINDOWS WORLD Mexico(2)......... 1993 90,100 240 48,000
COMDEX/INFOCOM & WINDOWS WORLD Argentina. 1997 94,200 192 38,000
COMDEX IT France......................... 1997 180,800 466 50,000
COMDEX & Object World UK(2).............. 1996 52,020 209 21,000
COMDEX/Japan & Object World Tokyo(3)..... 1996 114,600 222 80,000
COMDEX/China............................. 1996 59,900 157 82,000
COMDEX/Korea............................. 1997 90,200 150 45,000
COMDEX/Asia at Singapore Informatics..... 1995 57,500 146 40,000
COMDEX/IT INDIA.......................... 1996 144,300 253 60,000
NetWorld+Interop Paris................... 1992 163,267 350 38,000
NetWorld+Interop Tokyo(3)................ 1993 187,600 287 91,000
Seybold Seminars Tokyo(3)................ 1996 24,600 53 28,000
Windows NT Intranet Solutions Japan(3)... 1994 77,500 176 46,000
</TABLE>
- --------
(1) Properties which have been or will be acquired from MAC.
(2) These international COMDEX events are wholly-owned by the Company.
(3) Trade shows in Japan are owned by Softbank and managed by the Company.
50
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SOURCES OF TRADE SHOW AND CONFERENCE REVENUE
In 1997, exhibitor space fees accounted for 64.8% of the Company's total
trade show and conference revenue. The Company believes most trade show
producers receive virtually all of their revenue from the sale of exhibitor
space fees. The Company has actively sought to increase its revenue from other
sources, including attendee fees, which accounted for 35.2% of all trade show
and conference revenue in 1997.
At each trade show, all exhibitors pay the same price per square foot of
booth space, regardless of the exhibit hall they select or the location or
size of their booth within a given hall. Typically, a majority of each trade
show's exhibitors commit to booth space during that year's show for the next
year's show. The Company encourages this commitment through a booth selection
procedure that grants priority based upon a seniority system. Annual renewal
is required for exhibitors to maintain their seniority. Exhibitors pay for
space in two or three installments, the last of which is usually due six
months prior to the upcoming event.
In 1997, attendee fees accounted for 14.9% of the Company's trade show and
conference revenue, primarily from N+I and Seybold events. Most COMDEX
attendees come as the invited guests of exhibiting companies. The Company
provides exhibiting companies with a supply of complimentary admission
tickets, which are generally given to customers and key prospects. This helps
exhibitors ensure that their best customers and prospects will attend.
The Company's trade show and conference advertising revenue is derived
principally from five products: (i) a daily newspaper distributed during the
show; (ii) the Program Exhibits Guide; (iii) the Preview, a newspaper
published and distributed to pre-registrants and certain prior year attendees
in advance of the show; (iv) advertising billboards and banners; and (v)
ancillary exhibitor logo products which are sold to exhibitors to increase
booth traffic and name recognition.
The Company also maintains a continuously updated database containing the
names and certain demographic information on its over two million attendees.
This database is rented to direct mail users on a fee-per-use basis.
COMDEX
COMDEX trade shows cover a broad range of new technologies at every stage in
their development and evolution--from introduction to commercial maturity.
Many of the most significant computer product launches over the past 18 years
occurred at COMDEX, including the launch of the IBM PC, Lotus 1-2-3, Windows
3.1 and DVD.
COMDEX/Fall is a five-day trade show held annually in November in Las Vegas.
In 1997 COMDEX/Fall had over 1,750 exhibiting companies occupying more than
1,350,000 net square feet of exhibit space and more than 200,000 attendees.
COMDEX/Spring, which was launched in 1981, is a smaller version of the fall
event. In 1997, it was held in Atlanta and had more than 600 exhibiting
companies and over 100,000 attendees. In April 1998, COMDEX/Spring will be
held in Chicago. For the last six years, the Company, in cooperation with
Microsoft Corporation, has produced a WINDOWS WORLD trade show concurrently
with COMDEX/Spring.
In 1993, the Company began launching additional COMDEX events in order to
capitalize on the international recognition of the COMDEX brand name. The 1998
schedule includes other COMDEX events in Miami, Toronto, Vancouver, Montreal,
Mexico City, Monterrey (Mexico), Buenos Aires, Sao Paulo, Rio de Janeiro,
London, Paris, Tokyo, Seoul, New Delhi, Beijing, Singapore and Cairo.
NETWORLD + INTEROP
N+I is the largest of the Company's segment-focused trade shows and is the
leading show for professionals in the rapidly growing field of computer
networking. N+I places strong emphasis on the quality of its conference
programs and, in recent years, has become a leading educational forum for the
Internet and enterprise computing
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communities. The largest N+I event is held annually in Las Vegas in May. Each
N+I trade show features InteropNet, a live, multi-platform network that
interconnects exhibitors to one another and to the Internet. In 1997, the N+I
Las Vegas event had over 600 exhibiting companies occupying more than 400,000
net square feet of exhibit space and more than 55,000 attendees. The N+I
Atlanta event, held in October each year, is only slightly smaller in all
categories. The 1998 schedule of N+I events includes seven shows in six
countries.
SEYBOLD SEMINARS
The Company's Seybold Seminars are segment-focused trade shows and are a
leading information and education provider for traditional and new media
publishing industries. These shows focus on the latest technologies and
products, design tools and desktop applications. The largest of the Seybold
series is held annually each September in San Francisco. In 1997, this Seybold
show had over 300 exhibiting companies occupying more than 140,000 net square
feet of exhibit space and more than 38,000 attendees. Other Seybold events are
held in New York and Tokyo.
OTHER EVENTS
The Company also produces EXPO COMM, a series of worldwide trade shows
focusing on the telecommunications, wireless and telephony segments of the
information technology marketplace. The Company purchased a 50% interest in
the series from EXPO COMM's founder, E.J. Krause & Associates, Inc., in 1996.
EXPO COMM events are held in Chicago, Moscow, Beijing, Buenos Aires, Sao
Paulo, Mexico City, Monterrey (Mexico) and Tokyo. WINDOWS WORLD trade shows
are held in cooperation with Microsoft Corporation concurrently with the
Company's COMDEX events in Chicago, Mexico City and Toronto. These events
showcase the latest Windows-based applications and solutions.
The Company also produces Learning Technology trade shows for professionals
focused on learning and helping others to learn to use technology, held in
Atlanta and Los Angeles, and Object World trade shows focused on the
commercial and practical aspects of applying object technology and distributed
computing in today's business environment, held in San Francisco, Boston,
London, Frankfurt and Tokyo.
INTERNET
The Company maintains a number of Web sites related to its publications,
trade shows and conferences and other media platforms. The Company's ZDNet.com
Web site is the leading computing content site and the number one Web site in
the category of news, information and entertainment, in each case as measured
by visitors per month in 1997, ranking it higher than Web sites produced by
Time Warner Inc. (Pathfinder.com), Disney (Disney.com) and ESPN
(Sportzone.com). The Company estimates that the ZDNet Web site serves more
than 100 million pages each month to more than five million visitors. It has
over one million registered users and over 2.5 million e-mail recipients per
month. ZDNet has successfully attracted new audiences in addition to
established computer enthusiasts, as is evidenced by the fact that 64% of
ZDNet users do not regularly read any computer technology publications. ZDNet
seeks to be the most comprehensive site for quality content about computing.
ZDNet has its own staff of over 100 editors, designers and technology
experts who create and develop a wide range of content, including current and
in-depth news, product reviews, investor information, shareware library,
online shopping, training, forums and chat areas. ZDNet coordinates and
collaborates on content development with the Company's other publications and
businesses and is fully integrated with the Company's individual Web sites.
ZDNet includes Netbuyer, a leading Web site devoted to computer retailing.
Softbank is a majority owner of Gamespot, a leading Web site for gaming
information, including reviews, demo downloads and other content. Softbank's
interest in Gamespot will be contributed to the Company concurrently with the
Reorganization. Over 80% of the content on ZDNet is original, with the
remainder supplied by the Company's print publications.
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The Company has a number of arrangements with leading Web sites and product
manufacturers to increase traffic and thereby advertising revenue to ZDNet.
ZDNet is the preferred computer and technology content-provider for leading
Internet sites and products, including Yahoo!, Excite, MSNBC and Pointcast, as
well as for leading Internet service providers such as Mindspring and AT&T's
World Net, each of which provides a direct link to ZDNet. ZDNet also has
arrangements with original equipment manufacturers, such as Compaq Computer
Corp. and Gateway 2000, Inc., whereby ZDNet is an automatic bookmark in the
Web browsers included on such computers.
The Company distributes localized versions of ZDNet in Germany as ZDNet
Deutschland, in France as ZDNet France and in the United Kingdom as ZDNet UK.
Localized versions of ZDNet are also distributed by licensees in Italy,
Russia, Japan, China, Taiwan, Australia and Latin America.
TELEVISION
In order to expand its media platforms, the Company has entered into a
license and services agreement with MAC to develop ZDTV, which is expected to
be launched in the first half of 1998. ZDTV will be the first 24-hour cable
television channel and integrated Web site focused exclusively on computers,
technology and the Internet. ZDTV will target a wide range of viewers,
including computer and technology enthusiasts, computer gaming enthusiasts,
business people, teens, families and other viewers with a sustained interest
in computers, technology and the Internet. Programs are expected to include
educational features, product evaluations, gaming tips and strategies, current
events and other entertainment. ZDTV will also feature live interactive
programming allowing viewers to participate through simultaneous Web
programming on ZDTV.com.
ZDTV is owned by MAC, but as part of the license and services agreement, MAC
has granted the Company an option exercisable through December 31, 1998 to
purchase all of MAC's interest in ZDTV for an amount equal to MAC's investment
plus 10.0% per annum for the period of its investment. The Company is
currently funding ZDTV's operations on behalf of MAC through unsecured
advances which, for approved levels of expenditure, are to be reimbursed by
MAC. Such advances bear interest at the 30-day LIBOR rate plus .50%. ZDTV's
cash requirements are expected to be approximately $54 million in 1998. The
Company's cumulative advances in respect of ZDTV, which totaled approximately
$14.4 million net of $10.1 million in repayments through December 31, 1997,
will be repaid concurrently with the Reorganization. The Company has not yet
determined whether it will exercise its option to purchase MAC's interest in
ZDTV. Any such purchase will depend upon access to sufficient cable carriage,
which may include entering into a joint venture or other co-ownership
arrangement, including an arrangement with a third party cable system operator
which will provide carriage and also assume a portion of the ongoing cash
requirements on terms that are acceptable to the Company. ZDTV is not included
in the Company's results of operations. See "Certain Transactions."
ZD Television Productions, which is also owned by MAC, creates customized
programming for ZDTV and third parties. The Company's option to purchase ZDTV
from MAC also includes the option to purchase ZD Television Productions. Its
productions have included the regional Emmy award-winning "The Site" with
MSNBC and "21st Century Home" with Home & Garden Television. See "Certain
Transactions."
EDUCATION
The Company is an independent publisher of computer training products and
services for end-users and advanced technology professionals. Its products and
services include Internet-based training, computer-based training, instructor-
led courseware and customization tools. The Company believes that its
education offerings extend the Company's reach and brand reputation while
permitting the Company to attract and retain customers.
The Company is a source of software-specific newsletters and technology
information, with more than 50 titles, a family of CD-ROM products and an
interactive Web site. Generally published monthly, the titles include time-
saving tips and techniques on products such as Windows 95, Novel NetWare,
Visual Basic, Word, Excel, Microsoft Office, PhotoShop and Windows NT, in
addition to several programming and operating systems journals. The Company's
informational Web site provides instant access to a library of back issues,
reviews, online links and chats with authors.
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Through ZD University, an Internet-based educational program, the Company
provided training to more than 37,000 paid subscribers in 1997, an increase of
100% from 1996. The ZD University Web site is closely integrated with ZDNet,
helping to ensure that customers of one service are exposed to other Company
services.
Through the Help Desk Institute and the Support Services Professionals
Association, the Company provides training programs and publications for
hardware and software support service professionals. The Company also
publishes Inside Technology Training, which reaches 40,000 information
technology and training managers, and other software support professionals. In
addition, the Company owns and operates a single-site training center that
specializes in applications, programming and certification training for
Microsoft, Novell and Lotus, and the Training Center Alliance, which provides
qualifying training center customers with enhanced marketing support and
referral capabilities worldwide.
MARKET RESEARCH
The Company's market research division develops, analyzes and compiles a
wide variety of information on computer technology issues ranging from
technical aspects of current usage to trends in decision making. The Computer
Intelligence ("CI") unit focuses on information concerning installed and
planned technology hardware and software purchases, and is a leading source in
North America and Europe of fact-based information concerning hardware and
software needs for the computer and communications industries. CI is an
important part of the Company's effort to be a single source marketing
solution, as it can provide the Company's marketing customers with important
information to identify their target customers. CI's databases are built from
more than 30,000 telephone interviews per month and contain data on installed
and planned computer and communications products and services at over 400,000
business sites in the U.S., Canada and eight European countries, according to
Company estimates. CI assists the Company's clients in identifying and
targeting their customers by tracking current activity and market share in the
business, home and reseller channels. Customers use CI's services to make
important marketing decisions.
The Company also identifies and analyzes trends in the decision making
process for consumers of computer technology. This type of information helps
to identify criteria other than technical product specifications that are used
in product selection. The Company's market research division also consolidates
information obtained in each of the databases maintained by the Company's
other operating divisions, so that each Ziff-Davis division can offer the
Company's clients a wide range of information to meet their marketing needs
across multiple platforms.
The Company publishes Microprocessor Report, a leading technical publication
for the microprocessor industry. It also produces Microprocessor Forum, the
industry's leading conference for the introduction of new high-performance
microprocessors, and PC Tech Forum, events which together attract more than
1,000 paid attendees and provide information on trends and markets.
COMPETITION
The Company competes with a wide range of companies for each of the products
and services it provides. Although such competition is significant and is
likely to increase in the future, the Company believes it has a greater
breadth of product and service offerings than any of its competitors.
The magazine publishing business is highly competitive. The Company faces
broad competition, not only from other technology publishers, but from other
media companies as well, including business, news and general interest
magazine publishers. Other principal computer and technology publishers in the
United States include IDG, CMP Media Inc., The McGraw-Hill Companies and
Imagine Publishing, each of which produces publications that directly compete
with one or more of the Company's publications. The Company also competes with
various computer and technology publishers in the international markets in
which it conducts business. A
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publishing company's success depends upon a number of factors, such as
editorial quality, product positioning and price. Competitive factors for
advertising sales include quality of readership, circulation, reader response
and advertising rates. The Company believes its publications effectively
compete in the marketplace on the basis of each of these factors.
The Company also faces competition in its trade show and conference
business, primarily from several significant trade show management companies.
These include Miller Freeman, Mecklermedia Corporation and IDG. The Company
believes its trade shows compete in the marketplace on the basis of quality of
conference content, organizational efficiency, and quality and number of
exhibitors and attendees.
The Internet media business is highly competitive. An increasing number of
companies are developing online content and services for delivery on the World
Wide Web in order to compete for audiences and the advertising dollars that
are currently being directed to the Internet. ZDNet competes with other
technology-related online content sites such as c|net, CMPnet, and IDGnet.
The Company's market research division faces competition from numerous
market research companies, including International Data Corporation, Gartner
Group's Dataquest and IntelliQuest. Database providers such as Information
Resource Group and Dun & Bradstreet provide additional competition.
The Company's education division competes with a variety of education
providers, including vendor-supplied training materials and traditional
classroom-based computer training.
ZDTV is expected to be the first 24-hour cable television channel and
integrated Web site focused on computer technology and the Internet, and as
such it is not expected to face direct competition in the near future. It
will, however, face competition from a variety of general and special interest
television programs. The market for television programming is highly
competitive, with many programming producers competing both for channel
carriage and for advertiser and audience market share.
TRADEMARKS
The Company has developed strong brand awareness for its principal
publications, trade shows and other products and services. Accordingly, the
Company considers its trademarks, copyrights, trade secrets and similar
intellectual property as critical to its success and relies on trademark,
copyright and trade secrets laws, as well as licensing and confidentiality
agreements, to protect its intellectual property rights. The Company generally
registers its material trademarks in the United States and in certain other
key countries in which these trademarks are used. Effective trademark,
copyright and trade secret protection may not be available in every country in
which the Company's publications and services are available.
The Company may be subject to claims of alleged infringement by it or its
licensees of trademarks and other intellectual property rights of third
parties from time to time in the ordinary course of business. The Company does
not believe there are any such legal proceedings or claims that are likely to
have, individually or in the aggregate, a material adverse effect on the
Company's business, financial condition or results of operations.
FACILITIES
The Company's world headquarters are located in New York and the Company has
over 50 editorial, production and sales offices and computer labs in many
other cities in the United States and around the world. The Company's other
principal offices are located in the Boston and San Francisco metropolitan
areas. The Company does not own real property that is material to its business
and leases all but one of its offices from third parties. The Company believes
that its properties, taken as a whole, are in good operating condition and are
suitable and adequate for the Company's current business operations, and that
suitable additional or alternative space, including space available under
lease options, will be available at commercially reasonable terms for future
expansion.
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EMPLOYEES
As of December 31, 1997, the Company had a total of 3,698 employees. Of
these employees, 1,160 were engaged in U.S. magazine publishing activities,
350 in international publishing activities, 728 in trade shows and
conferences, 197 in Internet-related activities, 414 in education activities,
486 in market research and 363 in central administrative services. None of the
Company's U.S. employees is represented by a labor union. The Company
considers its relationships with its employees to be satisfactory.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Company is a party, other than
ordinary routine litigation incidental to the business of the Company which is
not otherwise material to the business or financial condition of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are set forth in the
table below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Masayoshi Son.................... 40 Director
Yoshitaka Kitao.................. 47 Director
Ronald D. Fisher................. 50 Director
Eric Hippeau..................... 46 Chairman, Chief Executive Officer,
Director
Jason E. Chudnofsky.............. 54 President and Chief Executive
Officer, ZDCF, Director
Timothy C. O'Brien............... 49 Chief Financial Officer, Director
Claude P. Sheer.................. 47 President, ZD Publishing, Director
Robert G. Brown.................. 51 President, ZD Market Intelligence
Terri S. Holbrooke............... 41 President, ZD Brand and Marketing
J. Malcolm Morris................ 55 Senior Vice President, General
Counsel
Daryl R. Otte.................... 36 Senior Vice President, Development
and Planning
Daniel L. Rosensweig............. 36 President, ZD Internet Productions
William A. Rosenthal............. 37 President, ZD Education
Thomas L. Wright................. 38 Vice President, Treasurer
Jonathan D. Lazarus.............. 47 Director
Jerry Yang....................... 27 Director
</TABLE>
The Company will nominate for election one additional independent director
as soon as practicable after consummation of the Offerings. See "--Board
Composition."
BIOGRAPHIES OF DIRECTORS AND EXECUTIVE OFFICERS
Masayoshi Son. Masayoshi Son has been President and Chief Executive Officer
of SOFTBANK Corp. since 1981. Mr. Son has been President and Chief Executive
Officer of Mediabank Corporation since 1994 and GeoCities Japan Corporation
since 1997 and was President and Chief Executive Officer of Japan Sky
Broadcasting Co. Ltd. from 1996 to 1998 and SB Networks Corporation from 1997
to 1998. In addition, Mr. Son is currently a Director of each of PASONABANK
Inc. and Yahoo! Japan Corporation and a Representative Director of each of MIC
Inc., Son Kosan Ltd. and MAC.
Yoshitaka Kitao. Yoshitaka Kitao has been Executive Vice President and Chief
Financial Officer of SOFTBANK Corp. since 1995. Mr. Kitao has been President
and Chief Executive Officer of SoftVenture Capital Inc. since 1996, SOFTBANK
Ventures Inc. since 1996 and SOFTBANK Contents Partners Corporation since
1997. Since 1997 Mr. Kitao has been President of Cybercash K.K. and a Director
of Trendmicro Inc. Previously, Mr. Kitao served as Director of Nomura
Wasserstein Perella Co., Ltd. from 1992 to 1993, Managing Director of
Wasserstein Perella & Co., Inc. from 1989 to 1992 and was the General Manager
for The Nomura Securities Co., Ltd.'s Corporate Finance and Services Dept. 3
from 1992 to 1995.
Ronald D. Fisher. Ronald D. Fisher has been the Vice Chairman of SOFTBANK
Holdings Inc. since 1995. From 1990 to 1995, Mr. Fisher was the Chief
Executive Officer of Phoenix Technologies Ltd, a leading developer and
marketer of system software for personal computers. From 1984 through 1989,
Mr. Fisher was the President of Interactive Systems Corporation. His prior
experience includes senior management positions at VisiCorp, TRW and ICL
(USA). In addition to being a Board member of SOFTBANK Corp., Mr. Fisher
serves on the Boards of Phoenix Technologies Ltd, Microtouch Systems Inc. and
Segue Software Inc.
Eric Hippeau. Eric Hippeau has been Chairman and Chief Executive Officer of
ZDI since 1993. He joined ZDI in 1989 as Publisher of PC Magazine, was named
Executive Vice President of ZDI in 1990, and President and Chief Operating
Officer in February 1991. Prior to joining ZDI, Mr. Hippeau held a number of
positions with IDG, including Vice President of computer publications in Latin
America and Publisher of IDG's InfoWorld magazine. Mr. Hippeau is currently a
Director of Yahoo! Inc.
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Jason E. Chudnofsky. Jason E. Chudnofsky has been President and Chief
Executive Officer of ZDCF since October 1997. From 1988 to 1997, Mr.
Chudnofsky was President of the Trade Show Division of The Interface Group
which was renamed SOFTBANK COMDEX when that division was acquired by Softbank
in 1995. In addition, Mr. Chudnofsky served as President and Chief Executive
Officer of the Sands Expo and Convention Center Division from 1990 to 1995.
Mr. Chudnofsky has over 15 years of experience in the exposition, trade show
and conference industry.
Timothy C. O'Brien. Timothy C. O'Brien has been Vice President and Chief
Financial Officer of ZDI since 1995. From 1985 to 1994, Mr. O'Brien was Chief
Financial Officer of Reed Elsevier Inc. and Reed Publishing USA. From 1992 to
1994, he was also Executive Vice President of Cahners Publishing Company which
he joined in 1980. From 1970 to 1980, Mr. O'Brien was employed by Price
Waterhouse LLP.
Claude P. Sheer. Claude P. Sheer has been President of the ZD Publishing
Division of ZDI since December 1997, having served in 1997 as President of
U.S. Publications of ZDI and in 1996 as President of the Business Media Group.
Since joining ZDI in 1980, Mr. Sheer has served in a number of positions
including Publisher of PC Week and Group Vice President of Controlled
Circulation Publications.
Robert G. Brown. Robert G. Brown has been President of ZD Market
Intelligence since 1993. He joined Ziff-Davis in 1992 as Vice President of
Market Development. Prior to that time, from March 1988 to July 1992,
Mr. Brown was founder and President of R.G. Brown & Associates, a direct
marketing and management consulting company working with computer hardware and
software companies. Mr. Brown was previously President of Quadram, a unit of
Intelligent Systems, L.P., which manufactured and sold peripheral products to
PC users.
Terri S. Holbrooke. Terri S. Holbrooke has been President of ZD Brand &
Market Services since July 1997. From October 1996 to July 1997, Ms. Holbrooke
was Senior Vice President of Marketing for ZDI. From January 1996 to October
1996, Ms. Holbrooke was Vice President of SOFTBANK Exposition and Conference
Company. From 1986 to 1995, Ms. Holbrooke held several executive marketing
positions at Novell Inc., including head of Worldwide Marketing Communications
and Vice President of Strategic Planning.
J. Malcolm Morris. J. Malcolm Morris has been Senior Vice President, General
Counsel of ZDI since January 1998, having previously served as Vice President,
General Counsel since 1990. Mr. Morris joined ZDI in 1980 as Assistant General
Counsel. Prior to joining ZDI, Mr. Morris was engaged in the practice of law
at the New York firm of Cleary, Gottlieb, Steen & Hamilton.
Daryl R. Otte. Daryl R. Otte has been Senior Vice President of Development
and Planning for ZDI since 1997. From 1995 to 1997, Mr. Otte was Vice
President of Planning. From 1989 to 1995, Mr. Otte held various corporate
finance and planning positions at Reed Elsevier Inc., and its predecessors,
including Vice President of Planning, Cahners Publishing Company, and
Assistant to the Chief Financial Officer of Reed Publishing USA.
Daniel L. Rosensweig. Daniel L. Rosensweig has been President of ZD Internet
Productions since 1997, having served in 1996 and 1997 as Executive Vice
President of ZDI's Internet Publishing Group. From 1995 to 1996, Mr.
Rosensweig was Vice President and Publisher of PC Magazine, and, from 1994 to
1995, was Publisher of PC Magazine. Since joining ZDI in 1983, Mr. Rosensweig
held a number of positions, including Associate Publisher positions at
PC Magazine, Computer Shopper and PC Sources.
William A. Rosenthal. William A. Rosenthal has been President of ZD
Education since 1997 having served as President of ZDI's Logical Operations
division in 1996 and 1997. From 1993 to 1996, Mr. Rosenthal was the General
Manager for ZDI's Logical Operations division and from 1987 to 1993 was
Vice President of Sales and Marketing for that division.
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Thomas L. Wright. Thomas L. Wright has been Treasurer of ZDI since 1995 and
has been Vice President and Treasurer of SOFTBANK Holdings Inc. since 1996.
Prior to joining ZDI, Mr. Wright held various positions from 1986 to 1995 at
Reliance Group Holdings, Inc., most recently as Vice President and Assistant
Treasurer.
Jonathan D. Lazarus. Jonathan D. Lazarus was with Microsoft Corporation from
1985 through 1996, serving most recently as Vice President, Strategic
Relations. Mr. Lazarus serves on the Boards of ELEKOM Corp., Liquid Audio,
NetGravity, Vision Solutions and National Association of Television Program
Executives. Mr. Lazarus is also an advisor to Microsoft Corporation, the
Universal Studios New Media Group and ZDTV.
Jerry Yang. Jerry Yang co-founded Yahoo! Inc. in 1995 and has served as an
officer and a member of the Board of Directors of Yahoo! Inc. since March
1995. Mr. Yang co-developed Yahoo! Inc. in 1994 while he was working towards
his Ph.D. in electrical engineering at Stanford University.
BOARD COMPOSITION
Following the Offering, the Board of Directors will consist of ten members,
which will include the nine current members of the Board plus one additional
"independent director" (within the meaning of the regulations of the New York
Stock Exchange (the "NYSE")) nominated for election by the Board of Directors.
It is expected that the new director will be elected by the Board within three
months following the closing of the Offering. Directors of the Company are
currently elected annually by its stockholders to serve during the ensuing
year or until their respective successors are duly elected and qualified.
Following the Offering, the Board of Directors will be divided into three
classes each of whose members will serve for a staggered three-year term. Upon
the expiration of the term of a class of directors, directors in such class
will be elected for three-year terms at the annual meeting of stockholders in
the year in which such term expires. See "Description of Capital Stock--
Certain Provisions of the Certificate of Incorporation and By-laws."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors currently has two committees: an Audit Committee and
a Compensation Committee.
The Audit Committee will be comprised of the independent directors. The
Audit Committee reviews and recommends to the Board, as it deems necessary,
the internal accounting and financial controls for the Company and the
accounting principles and auditing practices and procedures to be employed in
preparation and review of financial statements of the Company. The Audit
Committee makes recommendations to the Board concerning the engagement of
independent public accountants and the scope of the audit to be undertaken by
such accountants. Price Waterhouse LLP presently serves as the independent
accountants of the Company.
The Compensation Committee is currently comprised of Mr. Fisher, who,
following the Offering, will be joined by the two independent directors. The
Committee reviews and, as it deems appropriate, recommends to the Board
policies, practices and procedures relating to the compensation of the
officers and other managerial employees and the establishment and
administration of employee benefit plans. The Committee exercises all
authority under any employee stock option plans of the Company as the
Committee therein specifies (unless the Board resolution appoints any other
committee to exercise such authority), and advises and consults with the
officers of the Company as may be requested regarding managerial personnel
policies. The Committee will have such additional powers and be granted
additional authority as may be conferred upon it from time to time by the
Board.
COMPENSATION OF DIRECTORS
Directors who are not executive officers or employees of the Company or
Softbank will receive an annual retainer of $25,000 for Board of Directors
service and a fee of $2,000 for each meeting of the Board of Directors or any
committee thereof attended.
The Company has adopted the 1998 ZD Inc. Incentive Compensation Plan (the
"1998 Incentive Compensation Plan"). Directors of the Company who are not
employees of the Company or any of its subsidiaries ("Non-employee Directors")
will automatically participate in the 1998 Incentive Compensation Plan. See
"--Stock Plans--Incentive Compensation Plan" for a detailed discussion of the
1998 Incentive Compensation Plan.
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Pursuant to the 1998 Incentive Compensation Plan, each Non-employee Director
shall receive upon election as a member of the Board an initial grant of stock
options to purchase 10,000 shares of Common Stock; provided, that each Non-
employee Director who is on the Board of Directors on the date of the Offering
shall receive such initial grant of stock options on the date of the Offering.
Each Non-employee Director shall automatically receive on each annual meeting
thereafter an annual grant of stock options to purchase 7,500 additional
shares of Common Stock. The terms of each stock option granted to a Non-
employee Director shall provide that (i) the option price shall be equal to
100% of the fair market value (as defined in the 1998 Incentive Compensation
Plan) of the Common Stock on the date of grant, (ii) such option shall be
exercisable for a period of ten years following the date of grant, and (iii)
such option shall vest and become exercisable in five equal installments
beginning on the first anniversary of the date of grant.
Upon ceasing to be a Non-employee Director, such option shall terminate
except with respect to any portion of such option then exercisable, which
portion shall remain exercisable for a period of (x) 90 days, if the
termination as Director resulted from any reason other than death, disability
or Cause (as defined in the 1998 Incentive Compensation Plan), or (y) one
year, if the termination resulted from death or disability; provided, that in
the event the termination resulted from a removal for Cause, such option shall
immediately terminate and no longer be exercisable to any extent; provided,
further, that in no event shall any such option remain exercisable past the
remainder of its scheduled ten-year term.
Upon a "change in control" of the Company (as defined in the 1998 Incentive
Compensation Plan), each outstanding option shall fully vest and become
immediately exercisable in full. In addition, the Committee may provide in its
sole discretion that upon a change in control of the Company, each Non-
employee Director shall be entitled to receive in cancellation of such Non-
employee Director's outstanding and unexercised stock options, a cash payment
in an amount equal to the difference between the option price of such stock
options and (i) in the event the change of control is the result of a tender
offer or exchange offer for the Common Stock, the final offer price per share
paid for the Common Stock, multiplied by the number of shares of Common Stock
covered by such stock options, or (ii) in the event the change of control is
the result of any other occurrence, the aggregate value of the Common Stock
covered by such stock options, as determined by the Committee at such time.
COMPENSATION OF EXECUTIVE OFFICERS
The table below sets forth the compensation paid to, deferred or accrued for
the benefit of, the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers for services rendered in all
capacities to the Company during the fiscal year ended December 31, 1997.
1997 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------- ------------------------
NAME AND PRINCIPAL RETIREMENT STOCK ALL OTHER
POSITION SALARY($) BONUS($) PLAN($) OPTIONS(#)(1) COMPENSATION($)(2)
------------------ ---------- --------- ---------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Eric Hippeau.......... 1,350,000 14,063 16,000 31,000 1,566
Chairman and Chief
Executive Officer
Jason E. Chudnofsky... 800,000 -- (3) 7,385 10,000 20,884
President and Chief
Executive Officer,
ZDCF
Claude P. Sheer....... 457,500 342,656 16,000 9,500 1,566
President, ZD
Publishing
Timothy C. O'Brien.... 462,500 305,850 16,000 7,700 20,806
Chief Financial
Officer
Robert G. Brown....... 382,500 253,151 16,000 3,250 5,949
President, ZD Market
Intelligence
</TABLE>
- --------
(1) Represents options to purchase stock of SOFTBANK Corp.
(2) All Other Compensation does not include certain payments in 1997 for
services rendered in 1994. See Note 9 to the ZDI and ZDCF Combined
Financial Statements and "Certain Transactions."
(3) Does not include bonus of $300,000 paid in 1997 for 1996.
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STOCK PLANS
Incentive Compensation Plan
General. The Company has adopted a 1998 Incentive Compensation Plan (the
"Plan") to provide long-term incentives for its key employees and enhance
shareholder value. The Plan will be administered by the Compensation Committee
(for purposes herein, the "Committee"), which will (i) select the
participants, determine the type of awards, and the number of shares or share
units subject to awards, and (ii) interpret the Plan and make all other
determinations necessary or advisable for its administration.
All employees and consultants of the Company and its affiliates who have
demonstrated significant management potential or the capacity for contributing
substantially to the successful performance of the Company and its affiliates,
are eligible to be participants in the Plan. Awards may consist of stock
awards, stock options (either incentive stock options within the meaning of
Section 422 of the Internal Revenue Code or nonstatutory stock options), stock
appreciation rights, performance shares (which may be granted as performance
share units) and restricted stock (which may be granted as restricted stock
units).
The Common Stock available for awards under the Plan shall not exceed
8,500,000 shares. In the event of any change in the outstanding shares by
reason of any stock dividend or split, recapitalization, merger or other
corporate change, or any distributions to common shareholders other than
regular cash dividends, the Committee may make such substitution or
adjustment, if any, as it deems to be equitable, as to the number or kind of
shares of Common Stock or other securities issued pursuant to the Plan and to
outstanding awards. Shares subject to an award that expires unexercised, is
forfeited, or terminated, or settled in cash in lieu of Common Stock, and
shares tendered to pay for the exercise of a stock option, shall thereafter
again be available for grant under the Plan.
Each award under the Plan shall be evidenced by an agreement setting forth
the terms and conditions, as determined by the Committee, which apply to such
award. In the sole discretion of the Committee, a participant may be permitted
to defer the receipt of cash or Common Stock otherwise deliverable under any
award.
Stock Options. The Committee shall establish the option price at the time
each stock option is granted, which price shall not be less than 100% of the
fair market value of the Common Stock on the date of grant. Stock options
shall vest and become exercisable at a rate determined by the Committee, and
shall remain exercisable for such period as specified by the Committee. The
award agreements in respect of options that are intended to qualify as
incentive stock options will contain any additional provisions necessary to
comply with the requirements of Section 422 of the Internal Revenue Code. In
no event may any employee receive in any calendar year grants of stock options
with respect to more than 1,000,000 shares of Common Stock.
The option price of each share as to which a stock option is exercised will
be paid in full at the time of such exercise in cash, by tender of shares of
Common Stock owned by the participant valued at fair market value, by a "sale
to cover" broker transaction or other cashless exercise method permitted under
Regulation T of the Federal Reserve Board, or by a combination of cash, shares
of Common Stock and other consideration as the Committee deems appropriate.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be granted
in tandem with a stock option or unrelated to a stock option. SARs shall vest
and become exercisable at a rate determined by the Committee, and shall remain
exercisable for such period as specified by the Committee. A SAR entitles its
holder to receive from the Company an amount equal to the excess of the fair
market value of a share of Common Stock on the exercise of the SAR over the
fair market value on the date of grant. The Committee may determine in its
sole discretion whether a SAR will be settled in cash, Common Stock or a
combination thereof. In no event may any employee receive in any calendar year
grants of SARs with respect to more than 500,000 shares of Common Stock.
Performance Shares. Performance shares may be granted in the form of actual
shares of Common Stock or share units having a value equal to an identical
number of shares of Common Stock. The performance
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conditions and the length of the performance period will be determined by the
Committee but in no event may a performance period be less than one year. The
Committee may determine in its sole discretion whether performance shares
granted in the form of share units shall be paid in cash, Common Stock, or a
combination thereof.
Unless the Committee determines otherwise, awards of performance shares to a
Covered Employee will be subject to performance conditions based on the
achievement by the Company of target levels of items such as consolidated net
income, return on shareholders' equity, return on net assets or share price
performance. For purposes of the 1998 Incentive Compensation Plan, a "Covered
Employee" generally includes any employee that would be a covered employee
within the meaning of Section 162(m) of the Internal Revenue Code, and any
other employee of the Company or its subsidiaries designated by the Committee
in its discretion. The maximum number of performance shares subject to any
award to a Covered Employee is 500,000 for the first 12 months during the
performance period and each 12-month period thereafter.
Restricted Stock. Restricted stock may be granted in the form of actual
shares of Common Stock or share units having a value equal to an identical
number of shares of Common Stock. The employment conditions and the length of
the period for vesting of restricted stock will be established by the
Committee at time of grant, except that each restriction period shall not be
less than twelve months. During the restricted period, shares of restricted
stock may not be sold, assigned, transferred or otherwise disposed of, or
pledged or hypothecated as collateral for a loan or as security for the
performance of any obligation or for any other purpose as the Committee shall
determine. The Committee may determine in its sole discretion whether
restricted stock granted in the form of share units will be paid in cash,
Common Stock or a combination thereof.
Stock awards. In addition to awards of performance shares and restricted
stock, awards of Common Stock may be granted under the Plan in the form of
actual shares of Common Stock. Full ownership of such shares, whether issued
in the form of a certificate or in book entry, including the right to vote and
receive dividends, shall immediately vest in such participant.
Change in Control. In the event of a Change in Control (as defined below):
(i) all stock options will be fully vested and exercisable in full (ii) all
SARs which have not been granted in tandem with stock options will become
exercisable in full (iii) the restrictions applicable to all shares of
restricted stock will lapse and such shares will be deemed fully vested and
all restricted stock granted in the form of share units will be paid in cash;
(iv) all performance shares will be deemed to be earned at target level; and
(v) all performance shares granted in the form of share units will be paid in
cash.
For purposes of the Plan, "Change in Control" is generally defined as (i) a
change in the majority of the Board except upon consent of the previous Board;
(ii) certain mergers, consolidations or similar corporate transactions in
which the Company is not the surviving corporation or entity; or (iii) the
shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company or a sale of all or substantially all of the
Company's assets; provided, that a Change in Control will not be deemed to
occur under clause (ii) if Softbank, directly or indirectly, is the beneficial
owner of more than 25% of the Company's voting securities or of the voting
securities of any surviving corporation, respectively.
Amendment and Termination. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that (a) no amendment will
be made without stockholder approval (including an increase in the number of
shares reserved for issuance under the Plan) if such approval is necessary to
comply with any applicable law, regulations or stock exchange rule, and (b)
except as otherwise provided under the cashout provisions in the event of a
Change in Control, no amendment will be made that would adversely affect the
rights of a participant under any award previously granted, without such
participant's written consent.
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Effective Date. The Plan will have a term of ten years from February 15,
1998, subject to earlier termination.
Softbank Executive Stock Option Plans
The SOFTBANK Group Executive Stock Option Plans (the "Softbank Plans")
authorize the grant of options to those officers, directors and key employees
of Softbank as selected by a committee appointed by the Board of Directors of
SOFTBANK Holdings Inc. The Softbank Plans authorize the granting of options to
purchase SOFTBANK Corp. common stock at not less than 100% of the closing
market price on the date the option is granted. As of December 31, 1997,
substantially all options granted become exercisable in various installments
over the first six anniversaries of the date of grant and expire ten years
after the date of grant.
As of December 31, 1997, 966,986 options had been granted under the Softbank
Plans. On January 23, 1998, the exercise price of all options was reset at
4,000 Japanese yen per share, the market price of SOFTBANK Corp.'s common
stock on that date.
Employee Stock Purchase Plan
General. The Company has adopted an employee stock purchase plan (the "Stock
Purchase Plan"). The Stock Purchase Plan is intended to meet the applicable
requirements of Section 423 of the Internal Revenue Code and will be
administered by the Committee.
Option to Purchase. Under the Stock Purchase Plan, all full-time and certain
part-time employees of the Company who meet certain minimum service
requirements will be eligible to purchase shares of Common Stock by means of
payroll deductions, except for certain employees who earn above a certain
level of total compensation and participate in the 1998 Incentive Compensation
Plan. Eligible employees may elect to participate in offering periods by
authorizing after-tax payroll deductions of between 1% and 10% (in whole
percentages) of their base pay for the purchase of shares of Common Stock. The
aggregate maximum number of shares of Common Stock purchasable under the Stock
Purchase Plan is 1,500,000, subject to adjustment by the Committee in its sole
discretion in the event of any increase, reduction or change or exchange of
shares of Common Stock for a different number or kind of shares or other
securities of the Company by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, combination or exchange of
shares or other corporate change, or any distribution to common shareholders
other than cash dividends. Upon the dissolution or liquidation of the Company,
or upon a reorganization, merger or consolidation of the Company as a result
of which the Company is not the surviving corporation, or upon a sale of
substantially all of the Company's assets, or a sale or distribution of a
subsidiary of the Company, any affected participant will thereafter be
entitled to receive, for each share of Common Stock subject to such
participant's option, the cash, securities and/or property which a holder of
one share of Common Stock was entitled to receive upon and at the time of such
transaction.
The price at which shares of Common Stock will be purchased at the end of
each purchase period will be the lesser of (i) 85% of the Fair Market Value of
a share of Common Stock on the first business day of such purchase period or
(ii) 85% of the fair market value on the last business day of each purchase
period. No participating employee will be entitled in any calendar year to
purchase Common Stock having an aggregate fair market value as of the first
business day in any Purchase Period in excess of $25,000.
Amendment and Termination. The Board may at any time terminate or amend the
Plan. No such termination shall adversely affect options previously granted
and no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. No amendment shall be
effective unless approved by the shareholders of the Company if such
shareholder approval of such amendment is required to comply with any law,
regulation or stock exchange rule.
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CERTAIN TRANSACTIONS
ARRANGEMENTS BETWEEN THE PRINCIPAL STOCKHOLDERS AND THE COMPANY
The Company and Softbank have entered into certain agreements governing
ongoing business relationships between them, including: (i) a master license
agreement for Softbank's producing and distributing Ziff-Davis publications in
Japan; (ii) a license agreement for Softbank's operating ZDNet in Japan; and
(iii) a series of agreements, including a service mark license agreement,
technical assistance agreement and accounting and administrative services
agreement, pursuant to which the Company will manage all ZDCF trade shows and
conferences conducted in Japan, but owned by Softbank. Total revenue earned by
the Company from such trade show and conference agreements will approximate
50% of the pre-tax income generated by such trade shows and conferences.
Softbank has given the Company an undertaking not to expand operations
involving (x) publishing information on computing and Internet-related
technology through the media of print, CD-Rom/DVD, Internet and television, or
(y) producing trade shows, conferences, exhibitions and similar events
primarily related to computing and Internet-related technology outside Japan
in competition with the Company without the prior approval of the Company's
management directors after consulting with the Company's independent
directors. This undertaking does not preclude investments by investment funds
managed by Softbank. Softbank manages certain venture capital funds which
invest in, among other things, computer and Internet-related companies. These
funds may be able to co-invest with the Company or compete with the Company
with respect to new investments. Softbank may develop new funds in the future,
which funds may compete with the Company for investment opportunities. The
Company has undertaken not to compete with Softbank in Japan without the prior
approval of SOFTBANK Corp.'s Board of Directors and to afford Softbank the
continuing right to license all of the Company's products and services in
Japan. See "Risk Factors--Control by Principal Stockholders and Potential
Conflicts of Interest."
The Company and Softbank entered into a Registration Rights Agreement, dated
as of April 1, 1998, in connection with the Offering. The Agreement entitles
Softbank to require the Company to register any or all of the Common Stock
held by it in a public offering pursuant to the Securities Act of 1933, as
amended, as well as to "piggyback" or include its shares of Common Stock in
any registration of Common Stock made by the Company.
CERTAIN RELATED PARTY TRANSACTIONS
The Company is a member of a group of companies affiliated through common
ownership under SOFTBANK Corp. and has various transactions and relationships
with members of the group, including SOFTBANK Corp.'s wholly-owned U.S.
subsidiary, SOFTBANK Holdings Inc. ("SBH"). Because of these relationships, it
is possible that the terms of the various transactions are not those that
would result from an arm's length dealing among unrelated parties.
In December 1994, as part of the acquisition of ZD Expos, MAC purchased a
portion of the trade show assets for $45 million and its parent company, Son
Kosan Ltd., purchased an additional portion for $10 million. Son Kosan's trade
show assets were sold to SB Forums for $30 million in January 1997 and certain
of MAC's trade show assets are being contributed to ZDCF as part of the
Reorganization. See "The Reorganization."
In February 1996, as part of the acquisition of ZD Pubco, MAC purchased
certain publishing assets for $302 million in cash. Concurrently with the sale
of assets, ZDI and MAC entered into a management agreement pursuant to which
ZDI agreed to provide management services with respect to the purchased
assets. The Company earned approximately $2 million for such services for each
of the years ended December 31, 1996 and 1997, respectively. Of these assets,
a portion was transferred to ZDI for $100 million as of October 31, 1997 and
the balance will be sold to ZDI for $270 million concurrently with the
Offering. See "The Reorganization." The purchase price for the assets sold to
ZDI was not more than fair market value as determined by an independent
appraiser.
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ZDI and Softbank entered into a series of license and syndication agreements
pursuant to which Softbank was granted the license to publish, or use certain
materials from, PC Week, Computer Shopper, PC Computing, MacWeek, Computer
Gaming World, PC Magazine and Internet Business Advantage. The Company earned
approximately $963,948 and $1,817,986 in connection therewith for the years
ended December 31, 1996 and 1997, respectively. Such agreements are being
combined into the master license agreement described above.
The Company has advanced funds for the account of MAC in managing the MAC
Assets and ZDTV, bearing interest at the 30-day LIBOR rate plus .50%; subject
to periodic reimbursement by MAC. Such advances totalled $8.1 million, $68.2
million and $70.9 million in 1995, 1996 and 1997, respectively. The remaining
outstanding amount as of December 31, 1997 of $42.6 million will be reimbursed
in connection with the Reorganization. See Note 9 to the Notes to the Combined
Financial Statements of ZDI and ZDCF.
During 1996 and 1997, the Company recorded revenues of approximately $.9
million and $2.7 million, respectively, from sales of advertising space and
trade show services to Kingston, an 80%-owned Softbank partnership. These
services were provided under terms consistent with those provided to
unaffiliated customers. See Note 9 of the Notes to the Combined Financial
Statements. Concurrently with the Offering the Company is entering into a
sale-leaseback transaction with Kingston. See "The Reorganization."
In 1997 the Company had an arrangement with SOFTBANK Interactive Marketing
("SIM"), a 65.3%-owned Softbank subsidiary, for providing interactive media
sales. The Company paid SIM approximately $.6 million and $1.8 million in
commissions for the years ended December 31, 1996 and 1997, respectively.
Effective December 31, 1997, SIM was acquired by an unrelated third party and
the Company terminated its representation agreement with SIM. See Note 9 of
the Notes to the Combined Financial Statements of ZDI and ZDCF.
During 1996 and 1997, the Company and Softbank were parties to a joint
venture agreement pursuant to which the Company managed all ZDCF trade shows
and conferences conducted in Japan. The Company earned approximately
$1,727,000 and $1,413,000 for such services for the years ended December 31,
1996 and 1997, respectively.
During 1996 and 1997, the Company incurred $2 million and approximately $1.6
million in advertising expenses with Yahoo! Inc., which is 29.4% owned by
Softbank. Mr. Yang is a co-founder and Chief Yahoo and Mr. Hippeau is a
director of Yahoo! Inc.
During 1995 to 1997, the Company issued notes payable to Softbank in an
aggregate principal amount of $2.5 billion as of December 31, 1997,
principally for indebtedness incurred in the acquisition of ZD Expos, COMDEX
and ZD Pubco. See Note 9 of the Notes to the Combined Financial Statements.
As part of the acquisition of the Company by its former owner in 1994, the
Company agreed to assume certain obligations to management arising out of
prior employment arrangements with Ziff Communications Company. In 1995 and
immediately after the end of the 1996 calendar year, the Company paid under
such arrangements $29,702,469 to Mr. Hippeau, the Company's Chairman and CEO
and a Director of the Company, and $1,114,565 to Mr. Sheer, the President of
ZD Publishing and a Director of the Company. See Note 8 to the Notes to the
Combined Financial Statements of ZDI and ZDCF.
The Company has participated in the U.S. Softbank cash management program,
periodically transferring excess cash to SBH and in turn receiving cash
advances from SBH to fund the Company's short-term working capital
requirements. Under the program, interest is accrued based on the net balance
outstanding at the end of each month. Interest income is earned at the 30-day
LIBOR rate. Interest expense is incurred at such rate plus .50%. As of
December 31, 1996 and 1997, such net cash transfers from the Company to SBH
amounted to $41.3 million and $76.5 million, respectively. See Note 9 of the
Notes to the Combined Financial Statements of ZDI and ZDCF.
During 1997, the Company was a guarantor under SBH's $150 million loan
agreement with The Bank of New York, under which $102.5 million was
outstanding as of December 31, 1997, bearing interest at a weighted average
rate of 6.51% per annum. In March, 1998 this agreement was amended and
restated to increase the loan
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amount to $450 million. Under the amended agreement, the Company is a
guarantor under SBH's $450 million credit facility with The Bank of New York,
as agent, The Bank of New York and Morgan Stanley Senior Funding, Inc., as
lenders, and certain affiliate guarantors. The agreement governing the credit
facility contains certain restrictive covenants and other provisions which
bind the Company, but it does not prevent the Company from consummating the
Offering. Concurrently with the Reorganization, the Company will repay
obligations due to SBH; and it is expected that SBH will use a portion of such
proceeds to prepay the loans under the credit facility and terminate the
commitments thereunder.
SBH and its subsidiary SBH Delaware have agreed to act as guarantors for
payments under the Company's lease for its new headquarters located at 28 East
28th Street, New York, New York. In addition, the various intercompany loans
from SBH Delaware to the Company were subordinated to the lease agreement. In
accordance with the terms of these agreements, these arrangements will
terminate when the Company and SBH meet minimum net worth levels of $850
million and $715 million, respectively, upon completion of the Offerings, at
which time the Company will become the sole guarantor under the lease.
During 1997, the Company entered into an operating lease with GE Capital
Corp. for certain television production equipment that the Company subleased
to ZDTV on similar terms. This arrangement is expected to continue upon
completion of the Offering. The total amount of leased equipment will not
exceed $10 million.
During 1997, the Company participated in a global insurance program
implemented by SBH. Upon completion of the Offering, it is expected that the
Company will remain a part of this program. The total amount of insurance
expenses allocated to the Company for the period from August 1, 1997 to July
30, 1998 does not exceed $1.35 million.
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PRINCIPAL STOCKHOLDERS
The Company is a newly organized Delaware corporation, incorporated on
February 4, 1998, with no stock issued prior to the Reorganization. SBH is a
wholly-owned subsidiary of SOFTBANK Corp. which, as of December 31, 1997, was
50.2% owned by Mr. Masayoshi Son, its President, including 43.4% directly held
by his 99% owned holding company, MAC. Upon completion of the Reorganization,
Softbank will own approximately 74.2% of the outstanding shares of Common
Stock and approximately 25.8% of the outstanding shares of Common Stock will
be owned by the public.
The following table sets forth, as of April 1, 1998, certain information,
after giving effect to the Reorganization, with respect to the beneficial
ownership of the Common Stock (i) by each person or entity which beneficially
owns in excess of five percent of the Common Stock and (ii) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT
BENEFICIAL OWNER COMMON STOCK(1) OF CLASS
- ---------------- ------------------- --------
<S> <C> <C>
SOFTBANK Holdings Inc.(2) ......................... 74,200,000 74.2%
SOFTBANK Corp.(3) ................................. 74,200,000 74.2
MAC Inc.(4)........................................ 74,200,000 74.2
Masayoshi Son(5)................................... 74,200,000 74.2
Officers and directors as a group.................. 74,200,000 74.2
</TABLE>
- --------
(1) Assumes no exercise of the U.S. Underwriters' over-allotment option and
does not include 10 million shares of Common Stock reserved for issuance
under the Company's Incentive Compensation and Employee Stock Purchase
Plans. See "Management--Stock Plans."
(2) Such entity's address is 10 Langley Road, Suite 403, Newton Center, MA
02159.
(3) Reflecting shares of Common Stock owned by SBH, a wholly-owned subsidiary
of SOFTBANK Corp. Such entity's address is c/o SOFTBANK Corp., 24-1
Nihonbashi-Hakozakicho, Chuo-ku, Tokyo 103, Japan.
(4) Reflecting shares of Common Stock owned by SBH and indirectly by SOFTBANK
Corp., which is 43.4% owned by MAC. Such entity's address is 1-4-2
Azabudai, Minato-ku, Tokyo (106-0041).
(5) Reflecting shares of Common Stock owned by SBH and indirectly by SOFTBANK
Corp. and MAC, which is 99% directly and indirectly owned by Mr. Son,
SOFTBANK Corp.'s President. Such person'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 will be
able to influence significantly matters affecting the Company and will be in a
position to direct the election of all members of the Board of Directors and
to control even those actions that require the approval of two-thirds or more
of the voting share capital of the Company, including amendments to the
Company's Certificate of Incorporation and any business combinations. See
"Risk Factors--Control by Principal Stockholders and Potential Conflicts of
Interest" and "Description of Capital Stock--Certain Provisions of the
Certificate of Incorporation and By-laws."
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DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the Company's capital stock
describes all material provisions of, but does not purport to be complete and
is subject to, and qualified in its entirety by, the Company's Certificate of
Incorporation and By-laws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law. See "Additional Information."
At the time of the Offering, the total amount of authorized capital stock of
the Company will be 120 million shares, consisting of 110 million shares of
Common Stock, par value $.01 per share, and 10 million shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). Upon completion of the
Offering, 100 million shares of Common Stock and no shares of Preferred Stock
will be issued and outstanding. As of April 1, 1998, there were no shares of
Common Stock outstanding. The discussion herein describes the Company's Amended
and Restated Certificate of Incorporation (the "Certificate of Incorporation")
and By-laws, as anticipated to be in effect upon consummation of the Offering,
and their effect on the Common Stock.
Prior to the Offering, there has been no public market for the Common Stock.
See "Risk Factors--No Prior Public Market; Possible Volatility of Stock Price."
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares of
Common Stock being offered by the Company will be upon payment therefor,
validly issued, fully paid and nonassessable. The holders of outstanding shares
of Common Stock are entitled to receive dividends out of assets legally
available therefor at such time and in such amounts as the Board of Directors
may from time to time determine. See "Dividend Policy." The shares of Common
Stock are not convertible and the holders thereof have no preemptive or
subscription rights to purchase any securities of the Company. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive pro rata the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities. Each outstanding share of Common Stock is entitled to one vote on
all matters submitted to a vote of the stockholders, including election of
directors. There is no cumulative voting. Except as otherwise required by law
or the Certificate of Incorporation, the Common Stock will vote on all matters
submitted to a vote of the stockholders, including election of directors.
PREFERRED STOCK
The Certificate of Incorporation provides that shares of Preferred Stock may
be issued in one or more series from time to time by the Board, and the Board
is expressly authorized to fix by resolution or resolutions the designations
and the powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of each series of Preferred Stock,
including without limitation the following: (a) the distinctive serial
designation of such series which shall distinguish it from other series; (b)
the number of shares included in such series; (c) the dividend rate (or method
of determining such rate) payable to the holders of the shares of such series,
any conditions upon which such dividends shall be paid and the date or dates
upon which such dividends shall be payable; (d) whether dividends on the shares
of such series shall be cumulative and, in the case of shares of any series
having cumulative dividend rights, the date or dates or method of determining
the date or dates from which dividends on the shares of such series shall be
cumulative; (e) the amount or amounts which shall be payable out of the assets
of the Company to the holders of the shares of such series upon voluntary or
involuntary liquidation, dissolution or winding up the Company, and the
relative rights of priority, if any, of payment of the shares of such series;
(f) the price or prices at which, the period or periods within which and the
terms and conditions upon which the shares of such series may be redeemed, in
whole or in part, at the option of the Company or at the option of the holder
or holders thereof or upon the happening of a specified event or events; (g)
the obligation, if any, of the Company to purchase or redeem shares of such
series pursuant to a sinking fund or otherwise and the price or prices at
which, the period or periods within which and
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the terms and conditions upon which the shares of such series shall be
redeemed or purchased, in whole or in part, pursuant to such obligation; (h)
whether or not the shares of such series shall be convertible or exchangeable,
at any time or times at the option of the holder or holders thereof or at the
option of the Company or upon the happening of a specified event or events,
into shares of any other class or classes or any other series of the same or
any other class or classes of stock of the Company, and the price or prices or
rate or rates of exchange or conversion and any adjustments applicable
thereto; and (i) whether or not the holders of the shares of such series shall
have voting rights, in addition to the voting rights provided by law, and if
so the terms of such voting rights. Subject to the rights of the holders of
any series of Preferred Stock, the number of authorized shares of any class or
series of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote, irrespective
of the provisions of Section 242(b)(2) of the General Corporation Law of
Delaware or any corresponding provision hereafter enacted.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Staggered Board of Directors
Following the Offering, the Board of Directors will consist of ten members.
The Certificate of Incorporation provides that the directors of the Company
will be divided into three classes, as nearly equal in number as reasonably
possible, as determined by the Board. The initial term of office of Class I
directors will expire at the first annual meeting of stockholders, the initial
term of office of Class II directors will expire at the second annual meeting
of stockholders and the initial term of office of Class III directors will
expire at the third annual meeting of stockholders, with each class of
directors to hold office until their successors have been duly elected and
qualified. At each annual meeting of stockholders, directors elected to
succeed the directors whose terms expire at such annual meeting shall be
elected to hold office for a term expiring at the annual meeting of
stockholders in the third year following the year of their election and until
their successors have been duly elected and qualified. The classification of
the Board will have the effect of making it more difficult for stockholders to
change the composition of the Board, because only a minority of the directors
are up for election at each annual meeting, and the Board may not be replaced
by vote of the stockholders at any one time.
Number of Directors; Removal; Filling Vacancies
The Certificate of Incorporation provides that the number of members of the
Board of Directors will be fixed from time to time pursuant to the By-laws.
The By-laws provide that the Board will consist of one or more members, the
number of which will be determined from time to time by the Board. The
Certificate of Incorporation and By-laws provide that in the event of any
increase or decrease in the authorized number of directors, (a) each director
then serving as such shall nevertheless continue as a director of the class of
which he is a member until the expiration of his current term, or his earlier
death, retirement, resignation, or removal, and (b) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board among the three classes of directors so as to
maintain such classes as nearly equal in number as reasonably possible. The
Certificate of Incorporation and By-laws provide that directors may be removed
only for cause except that a director who is also an officer may be removed
upon ceasing to be an officer. The By-laws provide that vacancies, whether
arising through death, retirement, resignation or removal of a director or
through an increase in the authorized number of directors of any class, may
only be filled by a majority vote of the remaining directors of the class in
which such vacancy occurs, or by the sole remaining director of that class if
one such director remains, or by the majority vote of the directors of the
remaining classes if no such director remains, or by stockholders at an annual
meeting of stockholders of the Company. A director elected to fill a vacancy
shall serve for the remainder of the then present term of office of the class
to which he is elected. These provisions would prevent any stockholder from
enlarging the Board and then filling the new directorships with such
stockholder's own nominees.
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No Stockholder Action by Written Consent; Special Meetings
The Certificate of Incorporation and By-laws provide that any action
required or permitted to be taken by the stockholders of the Company must be
duly effected at a duly called annual or special meeting of such holders and
may not be taken by any consent in writing by such holders. The Certificate of
Incorporation and By-laws provide that special meetings of stockholders of the
Company may be called only by the Chairman of the Board, the Vice Chairman of
the Board, the President or the Board pursuant to a resolution stating the
purpose or purposes thereof, and any power of stockholders to call a special
meeting is specifically denied. No business other than that stated in the
notice shall be transacted at any special meeting. These provisions will have
the effect of delaying consideration of a stockholder proposal until the next
annual meeting unless a special meeting is called by the Chairman, Vice
Chairman, President or the Board for consideration of such proposal.
Advance Notice for Stockholder Nominations and Proposals of New Business
The By-laws require notice of any proposal to be presented by any
stockholder or of the name of any person to be nominated by any stockholder
for election as a director of the Company at a meeting of stockholders to be
delivered to the Secretary of the Company not less than 60 nor more than 90
days prior to the date of the meeting. Accordingly, failure by a stockholder
to act in compliance with the notice provisions will mean that the stockholder
will not be able to nominate directors or propose new business.
Amendments
The Certificate of Incorporation provides that the affirmative vote of the
holders of at least 80% of the stock entitled to vote generally in the
election of directors, voting together as a single class, or a majority of the
Board is required to amend provisions of the By-laws relating to stockholder
action without a meeting; the calling of special meetings; the number (or
manner of determining the number), election and term of the Company's
directors; the filling of vacancies; and the removal of directors.
CERTAIN PROVISIONS OF DELAWARE LAW
Following the consummation of the Offering, the Company will be subject to
the "Business Combination" provisions of Section 203 of the DGCL. In general,
such provisions prohibit a publicly held Delaware corporation from engaging in
various "business combination" transactions with any "interested stockholder"
for a period of three years after the date of the transaction which the person
became an "interested stockholder," unless: (i) the transaction is approved by
the Board of Directors prior to the date the "interested stockholder" obtained
such status; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested stockholder"
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date the "business combination" is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the "interested stockholder." A "business
combination" is defined to include mergers, asset sales and other transactions
resulting in financial benefit to a stockholder. In general, an "interested
stockholder" is a Person who, together with affiliates and associates, owns
(or within three years, did own) 15% or more of a corporation's voting stock.
The statute could prohibit or delay mergers or other takeover or change in
control attempts with respect to the Company and, accordingly, may discourage
attempts to acquire the Company.
Section 203 and the provision of the Company's Certificate of Incorporation
and By-laws described above may make it more difficult for a third party to
acquire, or discharge bids for, the Company. Section 203 and these provisions
could have the effect of inhibiting attempts to change the membership of the
Company's Board of Directors.
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LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 102 of the DGCL authorizes a Delaware corporation to include a
provision in its certificate of incorporation limiting or eliminating the
personal liability of its directors to the corporation and its stockholders
for monetary damages for breach of the directors' fiduciary duty of care. The
duty of care requires that, when acting on behalf of the corporation,
directors exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
such provision, directors are accountable to corporations and their
stockholders for monetary damages for conduct constituting gross negligence in
the exercise of their duty of care. Although Section 102 of the DGCL does not
change a director's duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Company's
Certificate of Incorporation and By-laws include provisions which limit or
eliminate the personal liability of its directors to the fullest extent
permitted by Section 102 of the DGCL. Consequently, a director or officer will
not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for (i) any breach
of the director's duty of loyalty to the Company or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases, redemptions or other distributions and (iv) any transaction
from which the director derived an improper personal benefit.
The Certificate of Incorporation and By-laws provide that the Company will
indemnify to the full extent permitted by law any person made or threatened to
be made a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person or
such person's testator or intestate is or was a director, officer or employee
of the Company or serves or served at the request of the Company as a
director, officer or employee. The Certificate of Incorporation and By-laws
provide that expenses, including attorneys' fees, incurred by any such person
in defending any such action, suit or proceeding will be paid or reimbursed by
the Company promptly upon receipt by it of an undertaking of such person to
repay such expenses if it shall ultimately be determined that such person is
not entitled to be indemnified by the Company.
The inclusion of these indemnification provisions in the Company's Certificate
of Incorporation and By-laws is intended to enable the Company to attract
qualified persons to serve as directors and officers who might otherwise be
reluctant to do so.
The directors and officers of the Company are insured under policies of
insurance maintained by the Company, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such officers or directors. In addition, the limited
liability provisions in the Certificate of Incorporation and the
indemnification provisions in the Certificate of Incorporation and By-laws may
discourage stockholders from bringing a lawsuit against directors for breach
of their fiduciary duty (including breaches resulting from grossly negligent
conduct) and may have the effect of reducing the likelihood of derivative
litigation against directors and officers, even though such an action, if
successful, might otherwise have benefitted the Company and it stockholders.
Furthermore, a stockholder's investment in the Company may be adversely
affected to the extent the Company pays the costs of settlement and damage
awards against directors and officers of the Company pursuant to the
indemnification provisions in the Company's By-laws. The limited liability
provisions in the Certificate of Incorporation will not limit the liability of
directors under federal securities laws.
LISTING
Application has been made to list the Common Stock on the NYSE under the
symbol "ZD."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The Bank of New
York.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from the time. Nevertheless, sales of significant amounts of
Common Stock in the public market, or the perception that such sales may
occur, could adversely affect the prevailing market prices. See "Risk
Factors--Shares Eligible for Future Sale."
Upon completion of the Offering, the Company expects to have 100,000,000
shares of Common Stock outstanding. Of the shares outstanding after the
Offering, the 25,800,000 shares of Common Stock (29,670,000 shares if the U.S.
Underwriters' over-allotment is exercised in full) sold in the Offering will
be freely tradeable without restriction under the Securities Act, except for
any such shares which may be acquired by an "affiliate" of the Company (an
"Affiliate"), which shares will be subject to the volume limitations of Rule
144. As defined in Rule 144, an Affiliate of an issuer is a person that,
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such issuer.
An aggregate of 74,200,000 shares of Common Stock held by existing
stockholders upon completion of the Offering will be "restricted securities"
(as that phrase is defined in Rule 144) and may not be resold in the absence
of registration under the Securities Act or pursuant to exemptions from such
registration, including among others, the exemption provided by Rule 144 under
the Securities Act. One year after the date of this Prospectus, such shares of
Common Stock will be eligible for sale in the public market pursuant to Rule
144, subject to the volume limitations and other restrictions described below.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least one year has elapsed
since the later of the date the "restricted securities" were acquired from the
Company and the date they were acquired from an Affiliate, then the holder of
such restricted securities (including an Affiliate) is entitled to sell a
number of shares within any three-month period that does not exceed the
greater of 1% of the then outstanding shares of the Common Stock
(approximately 1,000,000 shares immediately after the Offering) or the average
weekly reported volume of trading of the Common Stock on the NYSE during the
four calendar weeks preceding such sale. The holder may only sell such shares
through unsolicited brokers' transactions. Sales under Rule 144 are also
subject to certain requirements pertaining to the manner of such sales,
notices of such sales and the availability of current public information
concerning the Company. Affiliates may sell shares not constituting restricted
shares in accordance with the foregoing volume limitations and other
requirements without regard to any holding period. Under Rule 144 (k), if a
period of at least two years has elapsed between the later of the date
restricted securities were acquired from the Company and the date they were
acquired from an Affiliate, as applicable, a holder of such restricted
securities who is not an Affiliate at the time of the sale and has not been an
Affiliate for at least three months prior to the sale would be entitled to
sell the shares immediately without regard to the volume limitations and other
restrictions described above.
Any employee of the Company who purchased his or her shares of Common Stock
or received an option to purchase Common Stock pursuant to a written
compensation plan or contract while the Company was not subject to the
reporting requirements of the U.S. Securities Exchange Act of 1934, as amended
(the "Exchange Act") may be entitled to rely on the resale provisions of Rule
701 under the Securities Act, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the current public information,
holding period, volume limitation or notice provisions of Rule 144 and permits
Affiliates to sell their Rule 701 shares without having to comply with the
holding period provision of Rule 144, in each case beginning 90 days after the
Company became subject to the reporting requirements of the Exchange Act.
The Company and Softbank entered into a Registration Rights Agreement, dated
as of April 1, 1998 (the "Registration Rights Agreement"), in connection with
the Offering. The Registration Rights Agreement provides Softbank with the
right to require the Company to register any or all of the Common Stock held
by it in a public offering pursuant to the Securities Act of 1933, as amended.
Pursuant to the Registration Rights
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Agreement, Softbank also has the right to "piggyback" or include its Common
Stock in any registration of Common Stock made by the Company.
Notwithstanding the foregoing, in connection with the Offering, each of the
Company and SBH, which owns in aggregate 74.2 million shares of Common Stock,
has agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, during the period ending 180 days
after the date of the Prospectus, they will not, directly or indirectly, (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are then owned by such person or are thereafter acquired directly
from the Company) or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The restrictions described in this paragraph
do not apply to (a) the sale to the Underwriters of the shares of Common Stock
under the Underwriting Agreement, (b) the issuance by the Company of shares of
Common Stock upon the exercise of an option or a warrant or the conversion of
a security outstanding on the date of this Prospectus of which the
Underwriters have been advised in writing, (c) transactions by any person
other than the Company relating to shares of Common Stock or other securities
acquired in open market transactions after the completion of the offering of
the shares, (d) the issuance of shares of Common Stock in connection with the
Reorganization, (e) the issuance of shares of Common Stock in connection with
the Company's Employee Stock Purchase Plan or (f) subject to certain
conditions, the sale of the shares of Common Stock issued in exchange for the
Kingston assets. In addition, SBH has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters,
neither it nor any of its affiliates will, during the period ending 180 days
after the date of the Prospectus, make any demand for, or exercise any right
with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summaries of certain material provisions of the Company's
Notes and Credit Facility do not purport to be complete and are subject to,
and qualified in their entirety by, the Company's Indenture (as defined below)
and Credit Facility, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law. See "Additional Information."
NOTES
General
The Notes are to be issued under an Indenture, to be dated as of , 1998
(the "Indenture"), between the Company and The Bank of New York, as trustee
(the "Trustee"). The Notes are general unsecured senior subordinated
obligations of the Company, and will rank on a parity with all other unsecured
and subordinated indebtedness of the Company. The Notes will be subordinated
in right of payment to all senior indebtedness of the Company (including
indebtedness under the Credit Agreement) as well as all other Senior
Indebtedness (as defined in the Indenture).
The Notes will be limited to $250,000,000 aggregate principal amount and
will mature on , 2008. Interest on the Notes will be payable on and
of each year, commencing , 1998 at the rate of % per annum. The
Notes will be redeemable, at the Company's option, in whole or in part, at any
time after , 2003, at redemption prices starting at % of their
principal amount and declining to 100% of their principal amount on or after
, 2006 plus accrued and unpaid interest. In addition, upon a change of
control of the Company, each holder of Notes will have the right to require
the Company to purchase such holder's Notes. The Company will be permitted to
redeem a portion of the Notes following one or more public equity offerings
consummated prior to , 2001.
Covenants
The Indenture contains certain restrictive covenants, including, among
others, the following: (i) a limitation on the ability of the Company and its
Restricted Subsidiaries (as defined in the Indenture) to incur any
indebtedness other than Permitted Indebtedness (as defined in the Indenture)
or to incur senior subordinated indebtedness or certain indebtedness secured
by liens; (ii) a limitation on the ability of the Company and its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment (as
defined in the Indenture), including payment of dividends, prepayment of
subordinated indebtedness and the repurchase of capital stock; (iii) a
limitation on the ability of the Company to suffer to exist certain dividend
and other payment restrictions affecting its Restricted Subsidiaries; (iv) a
limitation on the ability of the Company to sell or to permit any Restricted
Subsidiary to issue or sell capital stock of a Restricted Subsidiary; (v) a
limitation on the ability of the Company and its Restricted Subsidiaries to
consummate certain Asset Sales (as defined in the Indenture) unless certain
conditions are fulfilled; and (vi) limitations on any transaction with
affiliates. Certain of these covenants will terminate if and when the Notes
receive an investment grade rating.
In addition, the Indenture limits the ability of the Company to merge with
or to transfer all or substantially all of its assets to another person.
Except as set forth above, the Indenture does not contain any material
quantitative financial requirements. The Notes provide for acceleration upon
customary events of default.
CREDIT FACILITY
The Company has obtained a commitment letter from The Bank of New York,
Morgan Stanley Senior Funding, DLJ Capital Funding and The Chase Manhattan
Bank to provide a $1.35 billion term Credit Facility. In connection with the
Reorganization, the Company will enter into the Credit Facility and borrow
$1.25 billion thereunder. The Credit Facility will consist of a seven year
$700 million reducing revolving credit facility (with $600 million drawn at
assets, maintenance of adequate and customary insurance coverage, consummation
of the
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<PAGE>
Offerings) and a seven year $650 million term loan. The revolving credit
commitments will be reduced and the term loan will be amortized, beginning in
September 2000, by (x) 10% in 2000, in two equal quarterly installments, (y)
20% in each of 2001, 2002, 2003 and 2004 in four equal quarterly installments
and (z) 10% at final maturity in March, 2005.
The Credit Facility will contain certain customary affirmative and negative
covenants, including covenants (subject to certain exceptions) with respect
to, among other things, the delivery of financial statements and other
information, limitations on dispositions of assets, changes of business and
ownership, mergers or acquisitions, restricted payments, indebtedness, loans
and investments, and transactions with affiliates, negative pledge of
compliance with all applicable laws and regulations, and restriction on
modifications of certain agreements, charter documents or other material
documents without the consent of the lenders. The Credit Facility will also
contain certain financial covenants.
The failure to satisfy any of the covenants would constitute an Event of
Default under the Credit Facility. The Credit Facility will also include other
customary events of default, including, without limitation, nonpayment,
misrepresentation in a material respect, cross-default to other indebtedness,
bankruptcy, ERISA, judgments and change of control.
The Credit Facility is subject to certain terms and conditions, including
without limitation negotiation, execution and delivery of definitive financing
agreements, in each case containing terms and conditions, representations and
warranties, covenants, indemnifications, events of default and conditions to
lending. There can be no assurance as to when or whether the Credit Facility
will be entered into or as to whether the Credit Facility will contain the
terms and conditions described above, and such may contain terms and
conditions more favorable or less favorable to the Company than set forth
above.
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<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person that, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or
an estate or trust, in each case not subject to United States federal income
tax on a net income basis in respect of income or gain from Common Stock (a
"non-U.S. holder"). This discussion does not consider the specific facts and
circumstances that may be relevant to particular holders in light of their
personal circumstances and does not address the treatment of non-U.S. holders
of Common Stock under the laws of any state, local or foreign taxing
jurisdiction. Further, the discussion is based on provisions of the United
States Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder, and administrative and judicial interpretations
thereof, all as in effect on the date hereof and all of which are subject to
change on a possibly retroactive basis. Each prospective holder is urged to
consult a tax advisor with respect to the United States federal tax
consequences of acquiring, holding and disposing of Common Stock, as well as
any tax consequences that may arise under the laws of any state, local or
foreign taxing jurisdiction.
DIVIDENDS
Dividends paid to a non-U.S. holder of Common Stock will be subject to
withholding of United States federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business
within the United States (and are attributable to a United States permanent
establishment of such holder, if an applicable income tax treaty so requires
as a condition for the non-U.S. holder to be subject to United States income
tax on a net income basis in respect of such dividends). Such "effectively
connected" dividends are subject to tax at rates applicable to United States
citizens, resident aliens and domestic United States corporations, and are not
generally subject to withholding. Any such effectively connected dividends
received by a non-United States corporation may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty.
Under currently effective United States Treasury regulations, dividends paid
to an address in a foreign country are presumed to be paid to a resident of
that country (unless the payor has knowledge to the contrary) for purposes of
the withholding discussed above and, under the current interpretation of
United States Treasury regulations, for purposes of determining the
applicability of a tax treaty rate. Under recently finalized United States
Treasury regulations that will generally be effective for distributions after
December 31, 1999 (the "Final Withholding Regulations"), however, a non-U.S.
holder of Common Stock who wishes to claim the benefit of an applicable treaty
rate would be required to satisfy applicable certification requirements. In
addition, under the Final Withholding Regulations, in the case of Common Stock
held by a foreign partnership, (x) the certification requirement would
generally be applied to the partners of the partnership and (y) the
partnership would be required to provide certain information, including a
United States taxpayer identification number. The Final Withholding
Regulations also provide look-through rules for tiered partnerships.
A non-U.S. holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for
refund with the United States Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of Common Stock
except in the following circumstances: (i) the gain is effectively connected
with a trade or business conducted by the non-U.S. holder in the United States
(and is attributable to a permanent establishment maintained in the United
States by such non-U.S. holder if an applicable income tax treaty so requires
as a condition for such non-U.S. holder to be subject to United States
taxation on a net income
76
<PAGE>
basis in respect of gain from the sale or other disposition of the Common
Stock); (ii) in the case of a non-U.S. holder who is an individual and holds
the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale and certain other
conditions exist; (iii) the Company is or has been a "United States real
property holding corporation" for federal income tax purposes and, in the
event that the Common Stock is considered "regularly traded on an established
securities market", the non-U.S. holder held, directly or indirectly at any
time during the five-year period ending on the date of disposition, more than
5% of the Common Stock (and is not eligible for any treaty exemption); or (iv)
the non-U.S. holder is subject to tax pursuant to certain provisions of the
Code applicable to U.S. expatriates. Effectively connected gains realized by a
corporate non-U.S. Holder may also, under certain circumstances, be subject to
an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
The Company believes it is not currently, and does not anticipate becoming,
a "United States real property holding corporation" for federal income tax
purposes.
FEDERAL ESTATE TAXES
Common Stock held by a non-U.S. holder at the time of death will be included
in such holder's gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under current law, United States information reporting requirements (other
than reporting of dividend payments for purposes of the withholding tax noted
above) and backup withholding tax generally will not apply to dividends paid
to non-U.S. holders that are either subject to the 30% withholding discussed
above or that are not so subject because an applicable tax treaty reduces such
withholding. Otherwise, backup withholding of United States federal income tax
at a rate of 31% may apply to dividends paid with respect to Common Stock to
holders that are not "exempt recipients" and that fail to provide certain
information (including the holder's United States taxpayer identification
number). Generally, unless the payor of dividends has definite knowledge that
the payee is a United States person, the payor may treat dividend payments to
a payee with a foreign address as exempt from information reporting and backup
withholding. However, under the Final Withholding Regulations, dividend
payments generally will be subject to information reporting and backup
withholding unless applicable certification requirements are satisfied. See
the discussion above with respect to the rules applicable to foreign
partnerships under the Final Withholding Regulations.
In general, United States information reporting and backup withholding
requirements also will not apply to a payment made outside the United States
of the proceeds of a sale of Common Stock through an office outside the United
States of a non-United States broker. However, United States information
reporting (but not backup withholding) requirements will apply to a payment
made outside the United States of the proceeds of a sale of Common Stock
through an office outside the United States of a broker (i) that is a United
States person, (ii) that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, (iii)
that is a "controlled foreign corporation" as to the United States, or (iv)
(effective beginning January 1, 2000) a foreign partnership, if at any time
during its tax year, one or more of its partners are U.S. persons (as defined
in U.S. Treasury regulations) who in the aggregate hold more than 50% of the
income or capital interest in the partnership or if, at any time during its
tax year, such foreign partnership is engaged in a United States trade or
business, unless the broker has documentary evidence in its records that the
holder or beneficial owner is a non-United States person or the holder or
beneficial owner otherwise establishes an exemption. Payment of the proceeds
of the sale of Common Stock to or through a United States office of a broker
is currently subject to both United States backup withholding and information
reporting unless the holder certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption.
A non-United States holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the United States Internal Revenue Service.
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<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below, for whom Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Goldman, Sachs & Co. and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") are acting as U.S. Representatives, and the International
Underwriters named below for whom Morgan Stanley & Co. International Limited,
Merrill Lynch International, Goldman Sachs International and Donaldson, Lufkin
& Jenrette International are acting as International Representatives, have
severally agreed to purchase, and the Company has agreed to sell to them,
severally, the respective number of shares of Common Stock set forth opposite
the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Goldman, Sachs & Co. .............................................
Donaldson, Lufkin & Jenrette Securities Corporation...............
----------
Subtotal........................................................
----------
International Underwriters:
Morgan Stanley & Co. International Limited........................
Merrill Lynch International.......................................
Goldman Sachs International.......................................
Donaldson, Lufkin & Jenrette International........................
----------
Subtotal........................................................
----------
Total........................................................... 25,800,000
==========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively
referred to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the U.S. Underwriters' over-allotment option described below)
if any such shares are taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly,
any Shares or distribute any prospectus relating to the Shares outside the
United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement between U.S. and International Underwriters,
each International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States
or Canadian Person. With respect to any Underwriter that is a U.S. Underwriter
and an International Underwriter, the foregoing representations and agreements
(i) made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement
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<PAGE>
between U.S. and International Underwriters. As used herein, "United States or
Canadian Person" means any national or resident of the United States or
Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person), and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
Underwriters under the Underwriting Agreement are referred to herein as the
"Shares."
Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of
any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any Shares, directly or indirectly, in any
province or territory of Canada or to, or for the benefit of, any resident of
any province or territory of Canada in contravention of the securities laws
thereof and has represented that any offer or sale of Shares in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing
such Shares, such dealer represents and agrees that it has not offered or
sold, and will not offer or sell, directly or indirectly, any of such Shares
in any province or territory of Canada or to, or for the benefit of, any
resident of any province or territory of Canada in contravention of the
securities laws thereof and that any offer or sale of Shares in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is made,
and that such dealer will deliver to any other dealer to whom it sells any of
such Shares a notice containing substantially the same statement as contained
in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not
offered or sold and, prior to the date six months after the closing date for
the sale of the Shares to the International Underwriters, will not offer or
sell, any Shares to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it
in connection with the offering of the Shares to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document
may otherwise lawfully be issued or passed on.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or
sales to Japanese International Underwriters or dealers and except pursuant to
any exemption from the registration requirements of the Securities and
Exchange Law and otherwise in compliance with applicable provisions of
Japanese law. Each International Underwriter has further agreed to send to any
dealer who purchases from it any of the Shares a notice stating in substance
that, by purchasing such Shares, such dealer represents and agrees that it has
not offered or sold, and will not offer or sell, any of such Shares, directly
or indirectly, in Japan or to or for the account of any resident thereof
except for offers or sales to Japanese International Underwriters or dealers
and except pursuant to any exemption from the registration requirements of the
Securities and Exchange Law and otherwise in compliance with applicable
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<PAGE>
provisions of Japanese law, and that such dealer will send to any other dealer
to whom it sells any of such Shares a notice containing substantially the same
statement as contained in this sentence.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering
price. Any Underwriter may allow, and such dealers may reallow, a concession
not in excess of $ a share to other Underwriters or to certain
other dealers. After the initial offering of the shares of Common Stock, the
offering price and other selling terms may from time to time be varied by the
Representatives.
The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
3,870,000 additional shares of Common Stock at the public offering price set
forth on the cover page hereof, less underwriting discounts and commissions.
The U.S. Underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, made in connection with the offering of the
shares of Common Stock offered hereby. To the extent such option is exercised,
each U.S. Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as the number set forth next to such U.S. Underwriter's name in the
preceding table bears to the total number of shares of Common Stock set forth
next to the names of all U.S. Underwriters in the preceding table.
The Company has submitted an application to list the Common Stock on the New
York Stock Exchange under the symbol "ZD." In order to meet the requirements
for listing the Common Stock on the New York Stock Exchange, the Underwriters
have undertaken to meet the New York Stock Exchange's minimum distribution,
issuance and aggregate market value requirements.
At the request of the Company, the U.S. Underwriters have reserved shares of
Common Stock offered hereby for sale, at the initial public offering price, up
to 1,550,000 shares to be issued by the Company and offered hereby for
directors, officers, employees, business associates and related persons of the
Company. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent such individuals purchase such
reserved shares. Any reserved shares which are not so purchased will be
offered by the U.S. Underwriters to the general public on the same basis as
the other shares offered hereby.
Each of the Company and SBH has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters,
during the period ending 180 days after the date of the Prospectus, they will
not, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are then owned by such person or
are thereafter acquired directly from the Company) or (ii) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The
restrictions described in this paragraph do not apply to (a) the sale to the
Underwriters of the shares of Common Stock under the Underwriting Agreement,
(b) the issuance by the Company of shares of Common Stock upon the exercise of
an option or a warrant or the conversion of a security outstanding on the date
of this Prospectus of which the Underwriters have been advised in writing, (c)
transactions by any person other than the Company relating to shares of Common
Stock or other securities acquired in open market transactions after the
completion of the offering of the Shares, (d) the issuance of shares of Common
Stock in connection with the Reorganization, (e) the issuance of shares of
Common Stock in connection with the Company's Employee Stock Purchase Plan or
(f) subject to certain conditions, the sale of the shares of Common Stock
issued in exchange for the Kingston assets. In addition, SBH has agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the Underwriters, neither it nor any of its affiliates will, during
the period ending 180 days after the date of the Prospectus, make any demand
for, or exercise any right with respect to, the registration of any shares of
Common Stock or any security convertible into or exercisable or exchangeable
for Common Stock.
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The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Common Stock in the Offering if the syndicate repurchases
previously distributed shares of Common Stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities at any time.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
The Underwriters have agreed to reimburse the Company for a portion of the
Company's expenses in connection with the Offerings.
Certain of the Underwriters from time to time perform various investment
banking services for the Company and Softbank, for which such Underwriters
receive compensation. Morgan Stanley, Merrill Lynch and DLJ are also acting as
underwriters in connection with the Notes Offering and will receive customary
discounts and commissions in connection therewith. Morgan Stanley Senior
Funding, an affiliate of Morgan Stanley, and DLJ Capital Funding, an affiliate
of DLJ, will each act as an agent and a lender under the Credit Facility and
will receive fees pursuant to the Credit Facility customary to performing such
services. In addition, Morgan Stanley Senior Funding is currently a lender to
SBH under a $450 million revolving credit facility and will receive fees
pursuant to such financing arrangement customary to performing such services.
PRICING OF OFFERING
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price for the Common Stock will be
determined by negotiations between the Company and the Representatives. Among
the factors to be considered in determining the initial public offering price
will be the Company's record of operations, the Company's current financial
position and future prospects, the experience of its management, the economics
of the industry in general, the general condition of the equity securities
markets, sales, earnings and certain other financial operation information of
the Company in recent periods, the price-earnings ratios, price-sales ratios,
market prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company. The estimated
initial public offering price range set forth on the cover page of this
Preliminary Prospectus is subject to change as a result of market conditions
and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Sullivan & Cromwell, New York, New York, U.S. counsel to the
Company. Stephen A. Grant, a partner of Sullivan & Cromwell, owns 5,350 shares
of common stock of SOFTBANK Corp., which are held in a retirement account.
Certain legal matters will be passed upon for the Underwriters by Davis Polk &
Wardwell, New York, New York.
EXPERTS
The Combined Financial Statements of Ziff-Davis Inc. and ZD COMDEX and
Forums Inc. as of December 31, 1996 and 1997 and for the three years in the
period ended December 31, 1997 and the Consolidated Financial Statements of
Ziff-Davis Inc. at December 31, 1995 and February 28, 1996 and for the year
ended December 31, 1995 and for the period from January 1, 1996 to February
28, 1996, included in this Prospectus have been so included in reliance upon
the reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all
amendments and exhibits, the "Registration Statement") under the Securities
Act, and the rules and regulations promulgated thereunder, with respect to the
Common Stock offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Securities offered hereby, reference is hereby
made to the Registration Statement and to the schedules and exhibits thereto.
The Registration Statement, including the exhibits and schedules thereto, may
be inspected, without charge, and copies may be obtained, at prescribed rates,
at the public reference facilities of the Commission maintained at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of
the Registration Statement may also be inspected, without charge, at the
Commission's regional office at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. In addition, copies of the Registration Statement may be
obtained by mail at prescribed rates, from the Commission's Public Reference
Section at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
Upon completion of the Offering, the Company will become subject to the
information and periodic reporting requirements of the Exchange Act, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities, regional offices and Web site referred to above.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ZD INC.
Report of independent accountants........................................ F-2
Balance sheet as of March 27, 1998....................................... F-3
Notes to balance sheet................................................... F-4
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
Report of independent accountants........................................ F-5
Combined balance sheets as of December 31, 1996 and 1997................. F-6
Combined statements of operations for the years ended December 31, 1995,
1996 and 1997........................................................... F-7
Combined statements of cash flows for the years ended December 31, 1995,
1996 and 1997........................................................... F-8
Combined statements of changes in stockholder's equity for the years
ended December 31, 1995, 1996 and 1997.................................. F-9
Notes to combined financial statements................................... F-10
ZDI (ZIFF-DAVIS INC.)
Report of independent accountants........................................ F-28
Consolidated balance sheets as of December 31, 1995 and February 28,
1996.................................................................... F-29
Consolidated statements of operations for the year ended December 31,
1995 and for the period from January 1, 1996 to February 28, 1996....... F-30
Consolidated statements of cash flows for the year ended December 31,
1995 and for the period from January 1, 1996 to February 28, 1996....... F-31
Consolidated statements of changes in stockholder's equity for the year
ended December 31, 1995 and for the period from January 1, 1996 to
February 28, 1996....................................................... F-32
Notes to consolidated financial statements............................... F-33
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
ZD Inc.
The information and capitalization of the Company described in Note 1 to the
balance sheet has not been consummated at March 27, 1998. When it has been
consummated, we would be in a position to furnish the following report:
"In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of ZD Inc. at March 27, 1998
in conformity with generally accepted accounting principles. This
balance sheet is the responsibility of the Company's management; our
responsibility is to express an opinion on this balance sheet based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall balance sheet presentation.
We believe that our audit provides a reasonable basis for the opinion
expressed above."
PRICE WATERHOUSE LLP
New York, NY
March 27, 1998
F-2
<PAGE>
ZD INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
MARCH 27,
1998
---------
<S> <C>
Cash.................................................................. $ --
-----
Total assets.......................................................... $ --
=====
LIABILITIES AND STOCKHOLDERS' EQUITY
Commitments and contingencies (Notes 1 and 2).........................
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized; no
shares issued and outstanding...................................... $ --
Common stock, $.01 par value; 110,000,000 shares authorized; no
shares issued and
outstanding........................................................ --
-----
Total stockholders' equity............................................ --
-----
Total liabilities and stockholders' equity............................ $ --
=====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ZD INC.
NOTES TO BALANCE SHEET
1. ORGANIZATION
ZD Inc. (the "Company") is a newly formed corporation incorporated in the
State of Delaware on February 4, 1998. Upon completion of the reorganization
discussed below, the Company will be a majority-owned indirect subsidiary of
SOFTBANK Corp. and affiliates ("Softbank").
The Company was formed to effect the reorganization of ZDI (Ziff-Davis Inc.)
and ZDCF (ZD COMDEX and Forums Inc.), both indirect wholly-owned subsidiaries
of Softbank. The reorganization is expected to be completed in the second
quarter of 1998 and will be accounted for in a manner similar to a pooling of
interests as the Company, ZDI and ZDCF will be companies under common control.
There have been no operations of ZD Inc. as of March 27, 1998, and,
accordingly, statements of ZD Inc.'s operations and cash flows have not been
included herein.
2. FINANCING ARRANGEMENTS
The Company expects to raise approximately $400,000,000 from the initial
public offering of its Common Stock, approximately $250,000,000 in notes, and
approximately $1,250,000,000 of senior bank debt. There can be no assurances
that the expected levels of financing from the Common Stock and Notes
Offerings will be obtained.
The Company has obtained a commitment from a group of banks to enter into a
$1.35 billion Credit Facility. The Credit Facility will consist of a seven
year $700 million reducing revolving credit facility (with $600 million drawn
at closing) and a seven year $650 million term loan. The revolving credit will
be available for loans, letters of credit, and swing-line loans, subject to a
certain maximum level of borrowing. Reductions in revolving credit commitments
and term loan amortization will occur in equal quarterly amounts beginning
September, 2000 through final maturity in March, 2005. The Credit Agreement
will also provide the Company the ability to increase the revolving credit
portion by $300 million to $1 billion at any time prior to June, 2000 if the
banks agree to increase their commitments.
Loans under both the revolving credit and term loan portions of the Credit
Facility will bear interest at either LIBOR plus an applicable margin or the
Alternate Base Rate plus an applicable margin. The applicable margin will be
based on a pricing grid to be determined by the Company's ratio of total debt
to EBITDA. The Company will also pay a commitment fee on the unused portion of
the revolving credit.
The funds raised will be used to retire substantially all of the existing
notes payable to Softbank and its affiliates of ZDI and ZDCF, and for the
purchase of certain assets from affiliated companies.
3. EMPLOYEE BENEFIT PLANS
1998 Incentive Compensation Plan
The Company adopted the 1998 Incentive Compensation Plan (the "Plan") to
provide long-term incentives for its key employees and enhance shareholder
value. The Plan provides for the issuance of up to 8,500,000 options, stock
appreciation rights, stock awards and other interests in the Company's Common
Stock. On February 13, 1998, the Company granted 5,254,700 options with an
exercise price of $16.00 per share representing the fair value of such options
at that date. Such options vest ratably over five years.
1998 Employee Stock Purchase Plan
The Company adopted the Employee Stock Purchase Plan (the "Stock Purchase
Plan") whereby eligible employees may purchase the Company's Common Stock with
after tax payroll deductions of 1% to 10% of their base pay. The price at
which shares of Common Stock will be purchased is the lesser of 85% of the
fair market value of a share of Common Stock on (i) the first business day of
a purchase period or (ii) the last business day of a purchase period. The
Company has reserved 1,500,000 shares of Common Stock for issuance under the
Stock Purchase Plan.
F-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Ziff-Davis Inc. and ZD COMDEX and
Forums Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in stockholder's
equity, present fairly, in all material respects, the financial position of
Ziff-Davis Inc. and ZD COMDEX and Forums Inc. and their subsidiaries (the
"Companies") at December 31, 1997 and 1996, and the results of Ziff-Davis
Inc.'s operations and cash flows for the period from February 29, 1996 to
December 31, 1996 and for the year ended December 31, 1997 and the results of
ZD COMDEX and Forums Inc.'s operations and cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Companies' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 17, 1998
F-5
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 29,915 $ 30,301
Accounts receivable, net............................. 203,863 221,310
Inventories.......................................... 16,804 17,853
Prepaid expenses and other current assets............ 35,190 37,900
Due from affiliates.................................. 77,208 131,290
Deferred taxes....................................... 8,674 8,794
---------- ----------
Total current assets................................... 371,654 447,448
Property and equipment, net............................ 53,561 53,536
Intangible assets, net................................. 3,148,333 3,030,333
Other assets........................................... 10,625 15,329
---------- ----------
Total assets........................................... $3,584,173 $3,546,646
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable..................................... $ 57,105 $ 55,468
Accrued expenses..................................... 79,921 80,094
Unearned income, net................................. 174,876 154,682
Due to affiliates and management..................... 69,416 398,332
Current portion of notes payable to affiliates....... 33,198 125,790
Other current liabilities............................ 3,890 4,222
---------- ----------
Total current liabilities.............................. 418,406 818,588
Notes payable to affiliates............................ 2,522,252 2,408,240
Deferred taxes......................................... 181,309 180,117
Other liabilities...................................... 14,450 13,571
---------- ----------
Total liabilities...................................... 3,136,417 3,420,516
---------- ----------
Commitments and contingencies (Notes 15, 16 and 18)
Stockholder's equity:
Common stock, $.01 par value; 1,000 shares
authorized;
200 shares issued and outstanding................... -- --
Additional paid-in capital........................... 498,818 248,330
Accumulated deficit.................................. (48,250) (119,429)
Deferred compensation................................ (2,448) (996)
Cumulative translation adjustment.................... (364) (1,775)
---------- ----------
Total stockholder's equity............................. 447,756 126,130
---------- ----------
Total liabilities and stockholder's equity............. $3,584,173 $3,546,646
========== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-6
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Revenue, net:
Publishing................................... $ -- $690,255 $ 866,233
Trade shows and conferences.................. 202,729 264,884 287,528
-------- -------- ----------
202,729 955,139 1,153,761
-------- -------- ----------
Cost of production:
Publishing................................... -- 184,159 225,712
Trade shows and conferences.................. 68,810 87,373 99,533
-------- -------- ----------
68,810 271,532 325,245
Selling, general and administrative expenses... 46,939 456,690 564,344
Depreciation and amortization of property and
equipment..................................... 1,412 32,303 30,379
Amortization of intangible assets.............. 22,893 107,433 124,561
-------- -------- ----------
Income from operations......................... 62,675 87,181 109,232
Related party interest expense, net............ (44,005) (120,646) (190,445)
Other non-operating income, net................ 4,199 6,341 8,722
-------- -------- ----------
Income (loss) before income taxes.............. 22,869 (27,124) (72,491)
Provision (benefit) for income taxes........... 11,924 24,957 (1,312)
-------- -------- ----------
Net income (loss).............................. $ 10,945 $(52,081) $ (71,179)
======== ======== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-7
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------------------
1995 1996 1997
--------- ----------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $ 10,945 $ (52,081) $(71,179)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization............. 24,305 139,736 154,940
Income from equity investments............ -- (115) (2,030)
Deferred tax provision (benefit).......... 11,924 24,957 (1,312)
Provision for bad debts, returns and can-
cellations............................... 662 14,475 13,616
Compensation earned on restricted stock... -- 1,080 3,916
Changes in operating assets and liabili-
ties:
Accounts receivable..................... (26,041) (52,561) (32,515)
Inventories............................. -- 7,788 (853)
Accounts payable and accrued expenses... 9,516 12,850 (7,376)
Unearned income......................... (3,153) 1,392 (20,194)
Due to affiliates and management........ (7,460) (29,303) (38,543)
Other, net.............................. 5,470 (6,675) (1,834)
--------- ----------- --------
Net cash provided (used) by operating
activities................................. 26,168 61,543 (3,364)
--------- ----------- --------
Cash flows from investing activities:
Capital expenditures........................ (3,367) (22,365) (30,196)
Acquisitions, net of cash acquired.......... (814,520) (2,124,823) (14,000)
--------- ----------- --------
Net cash used by investing activities....... (817,887) (2,147,188) (44,196)
--------- ----------- --------
Cash flows from financing activities:
Proceeds from notes payable to affiliates... 575,450 1,080,000 10,000
Principal payments on notes payable to af-
filiates................................... (77,450) -- (31,420)
Contributed capital......................... 317,408 1,015,652 69,366
Payment of dividends........................ -- (8,000) --
--------- ----------- --------
Net cash provided by financing activities... 815,408 2,087,652 47,946
--------- ----------- --------
Net increase in cash and cash equivalents... 23,689 2,007 386
Cash and cash equivalents at beginning of
year....................................... 4,219 27,908 29,915
--------- ----------- --------
Cash and cash equivalents at end of year.... $ 27,908 $ 29,915 $ 30,301
========= =========== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-8
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ZDI ZDCF ADDITIONAL RETAINED CUMULATIVE TOTAL
------------- ------------- PAID-IN EARNINGS DEFERRED TRANSLATION STOCKHOLDER'S
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) COMPENSATION ADJUSTMENT EQUITY
------ ------ ------ ------ ---------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... -- $ -- 100 $ -- $ 62,178 $ 886 $ -- $ -- $ 63,064
Capital contribution
from Softbank.......... 317,408 317,408
Net income.............. 10,945 10,945
Foreign currency
translation adjustment. 111 111
--- ------ --- ------ ---------- --------- ------ ------- ----------
Balance at December 31,
1995................... -- -- 100 -- 379,586 11,831 -- 111 391,528
Acquisition of Ziff-
Davis Inc.............. 100 1,014,178 1,014,178
Return of capital ...... (899,948) (899,948)
Capital contribution.... 1,474 1,474
Dividend paid .......... (8,000) (8,000)
Shares contributed to
restricted stock plan.. 3,528 (3,528) --
Compensation earned on
restricted stock....... 1,080 1,080
Net loss................ (52,081) (52,081)
Foreign currency
translation adjustment. (475) (475)
--- ------ --- ------ ---------- --------- ------ ------- ----------
Balance at December 31,
1996................... 100 -- 100 -- 498,818 (48,250) (2,448) (364) 447,756
Return of capital ...... (381,434) (381,434)
Capital contribution ... 128,482 128,482
Shares contributed to
restricted stock plan.. 2,464 (2,464) --
Compensation earned on
restricted stock....... 3,916 3,916
Net loss................ (71,179) (71,179)
Foreign currency
translation adjustment. (1,411) (1,411)
--- ------ --- ------ ---------- --------- ------ ------- ----------
Balance at December 31,
1997................... 100 $ -- 100 $ -- $ 248,330 $(119,429) $ (996) $(1,775) $ 126,130
=== ====== === ====== ========== ========= ====== ======= ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-9
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
1. THE COMPANIES AND BASIS OF PRESENTATION
The combined financial statements include the accounts of ZDI (Ziff-Davis
Inc.) and ZDCF (ZD COMDEX and Forums, Inc.) and their subsidiaries and
predecessor companies (collectively the "Companies"). The Companies are
wholly-owned indirect subsidiaries of SOFTBANK Corp. ("Softbank"), a Japanese
corporation which, as of December 31, 1997, was 50.2% owned by Mr. Son, its
President, including 43.4% directly owned by his wholly-owned holding company,
MAC Inc. ( "MAC"), also a Japanese corporation.
As further described below, the combined financial statements include the
accounts of COMDEX (formerly Softbank COMDEX, Inc.) and ZDI as of their
respective acquisition dates and Forums (formerly Softbank Forums Inc.) for
all periods presented. Effective December 31, 1997, COMDEX and Forums merged
and the surviving company was renamed ZD COMDEX and Forums Inc.
The Companies operate in two business segments: (i) publishing and (ii)
trade shows and conferences.
Publishing
The publishing segment is engaged in publishing magazines, journals,
newsletters, electronic information products, training manuals and providing
market research about the computer industry. The publishing segment's
principal operations are in the United States and Europe, although it also
licenses or syndicates its editorial content to over 50 other publications
distributed worldwide.
Trade shows and conferences
The trade shows and conferences segment is engaged in the organization,
production and management of trade shows, conferences and seminars for the
computer industry. The trade shows and conferences segment's principal
operations are in the United States and to a lesser extent in Europe and Asia.
Acquisition of ZDI (formerly Ziff-Davis Publishing Company and Ziff-Davis
Holdings Corp.)
In February 1996, Softbank acquired the stock of Ziff-Davis Holdings Corp.
("Holdings") for an aggregate purchase price of approximately $1,800,000, plus
transaction costs. Concurrent with the acquisition, in a separate agreement,
MAC Inc., directly or through wholly-owned affiliates, acquired certain of the
assets and assumed certain of the liabilities of ZDI (the "MAC Assets") for an
aggregate purchase price of approximately $302,000.
The acquisitions of ZDI by the Companies and the MAC Assets by MAC Inc. have
been accounted for as of February 29, 1996 using the purchase method of
accounting. The excess of the purchase price over the fair value of the assets
acquired and liabilities assumed was $1,922,000 and $285,000, respectively.
Subsequent to the acquisition, Holdings and ZDI were merged with ZDI being
the surviving corporation.
F-10
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Unaudited summarized pro forma financial information
The following unaudited summarized pro forma financial information presents
the results of operations of the Companies as if the acquisition of ZDI had
taken place on January 1, 1995:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1995 1996
-------- ----------
<S> <C> <C>
Revenue, net........................................... $971,724 $1,080,604
======== ==========
Income from operations................................. $ 80,113 $ 88,065
======== ==========
Net loss............................................... $(61,816) $ (67,011)
======== ==========
</TABLE>
The pro forma results include amortization of intangible assets and interest
expense on debt assumed issued to finance the purchase. The pro forma results
are not necessarily indicative of what actually would have occurred if the
acquisition had been completed as of the beginning of the year, nor are they
necessarily indicative of future combined results.
Purchase of MAC Assets
In 1997, ZDI agreed to purchase certain of the MAC Assets for $370,000. The
acquisition will be effected in two tranches; the first of which closed on
October 31, 1997 and the second, which is subject to the successful completion
of an initial public offering of ZD Inc.'s Common Stock (refer to Note 18) or
upon a similar significant external financing. At December 31, 1997, ZDI has
accrued the $370,000 purchase price which has been recorded as a return of
capital.
The acquisitions from MAC described above have been accounted for in a
manner similar to a pooling of interests as all entities involved are under
common control. Accordingly, the accompanying combined financial statements
include the results of operations of the MAC Assets from February 29, 1996.
Throughout these financial statements any reference to ZDI and ZDCF or the
Companies includes ZDI, ZDCF and the MAC Assets from February 29, 1996.
Acquisition of Sendai
On May 8, 1996, ZDI acquired substantially all of the assets and liabilities
of Sendai Publishing Group, Inc., a publisher and distributor of magazines,
books, products and computer services related to the electronic gaming
industry, for approximately $27,500, plus transaction costs. The acquisition
was accounted for as a purchase and accordingly, Sendai's results are included
in the combined financial statements since the date of acquisition. The excess
of the purchase price over assets acquired approximated $33,378. The
operations of Sendai did not have a material effect on the combined results of
operations for the year ended December 31, 1996.
Acquisition of COMDEX
Effective April 1, 1995, Softbank acquired the assets of the COMDEX trade
show business, now part of ZDCF, for approximately $803,000, plus transaction
costs. The acquisition has been accounted for as of April 1, 1995 using the
purchase method of accounting and accordingly COMDEX's results are included in
the combined financial statements since the date of acquisition. The excess of
the purchase price over the fair value of the assets acquired and liabilities
assumed was $849,000.
F-11
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements include the accounts of ZDI and ZDCF
including, as discussed above, the MAC Assets. All significant transactions
between these entities have been eliminated in combination.
Investments in companies in which ownership interests range from 20 to 50
percent and the Companies have the ability to exercise significant influence
over the operating and financial policies of such companies are accounted for
under the equity method.
Parent Company Financing
As described in Note 18, Softbank announced a Reorganization and a financing
plan which includes a recapitalization of the Companies' debt and equity
structures. Prior to the consummation of the recapitalization transactions,
the Companies are dependent on funding from Softbank. At December 31, 1997,
the Companies had current liabilities which exceeded current assets by
$371,140. To the extent that the Companies are unable to fund their current
obligations as they become due from their operating cash flows, Softbank has
committed to provide additional financing or to restructure existing loan
arrangements at least through February 1999.
Cash and cash equivalents
The Companies consider all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Concentration of credit risk
The Companies place its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of
federally insured limits. The Companies have not experienced losses in such
accounts.
The Companies' advertisers and exhibitors include principally customers who
represent a variety of technology companies in the United States and other
countries. The Companies extend credit to their customers and distributors and
historically have not experienced significant losses relating to receivables
from individual customers or groups of customers.
Property and equipment
Property and equipment have been recorded at cost or their estimated fair
value at the date of acquisition. Depreciation is computed using the straight-
line method over the estimated useful lives of the assets which range from
three to thirty years. Leasehold improvements are amortized using the
straight-line method over the service life of the improvement or the life of
the related lease, whichever is shorter. Maintenance and repair costs are
charged to expense as incurred.
Inventories
Inventories, which consist principally of paper, are stated at the lower of
cost or market. Cost is determined on a first-in, first-out basis.
Intangible assets
Intangible assets consist principally of advertising lists, exhibitor
relationships, trademarks and trade names, and goodwill. Amortization of these
assets is computed on a straight-line basis over their estimated useful lives.
Identifiable
F-12
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
intangible assets are amortized over a period of 2 to 40 years and goodwill,
which represents the excess of the purchase price over the estimated fair
values of net assets acquired, is amortized over a period of 5 to 40 years
(refer to Note 5). The Companies assess the recoverability of their intangible
assets whenever adverse events or changes in circumstances indicate that
expected future cash flows (undiscounted and without interest charges) may not
be sufficient to support the carrying amount of intangible assets. If
undiscounted cash flows are not sufficient to support the recorded assets, an
impairment is recognized to reduce the carrying value of the intangibles to
estimated recoverable values. The Companies have not experienced any
impairment of its intangible assets.
Revenue recognition
Advertising revenue for the Companies' publications, less agency
commissions, is recognized as income in the month that the related
publications are sent to subscribers or become available for sale at
newsstands.
Circulation revenue consists of both subscription revenue and single copy
newsstand sales. Subscription revenue, less estimated cancellations, is
deferred and recognized as income in the month that the related publications
are sent to subscribers. Newsstand sales, less estimated returns, are
recognized in the month that the related publications become available for
sale at newsstands.
Payments received in advance of trade shows, conferences and seminars are
initially reported on the balance sheet as deferred revenue and are recognized
as income when the events take place.
Revenue generated by market research is recognized when the service is
provided.
On-line revenue, predominantly advertising, is recognized evenly over the
period of the related advertising contract which corresponds to the period of
time the advertising is displayed.
Operating costs and expenses
Cost of production includes the direct costs of producing magazines,
newsletters and training materials, primarily paper, printing and
distribution, and the direct costs associated with organizing, producing and
managing trade shows, seminars, conferences and expositions. Selling, general
and administrative costs include subscriber acquisition costs which are
expensed as incurred. Editorial and product development costs are expensed as
incurred. Product development costs include the cost of artwork, graphics,
prepress, plates and photography for new products.
Foreign currency
The effect of translating foreign currency financial statements into U.S.
dollars is included in the cumulative translation adjustments account in
stockholder's equity. Gains and losses on foreign currency transactions, which
are not significant to operations, have been included in selling, general and
administrative expenses. The Companies have not historically entered into
forward currency contracts.
Other non-operating income
Other non-operating income includes management fee income and the Companies'
equity share of income or loss from joint ventures.
Income taxes
The Companies use the asset and liability approach for financial accounting
and reporting of deferred taxes.
F-13
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
Actual results may differ from these estimates.
Fair value of financial instruments
All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments. The
recorded amounts of the Companies' long-term debt payable to affiliates also
approximate fair value based upon the current rates available to the Companies
for debt with similar remaining maturities.
Stock-based compensation
The Companies have elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," to account for stock options.
Effective January 1, 1996, the Companies adopted the disclosure-only
provisions of Statement of Financial Accounting Standard ("SFAS") No. 123,
"Accounting for Stock-Based Compensation."
Earnings per share
Historical earnings per share data have been omitted on the basis that they
are not meaningful due to the insignificant number of shares outstanding.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income," issued in June 1997, will
require the Companies to disclose, in financial statement format, all non-
owner changes in equity. Such changes include, for example, cumulative foreign
currency translation adjustments and unrealized gains and losses on securities
available for sale. This statement is effective for fiscal years beginning
after December 15, 1997 and requires presentation of prior period financial
statements for comparability purposes.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Generally, financial information will be required to be reported on the basis
that is used internally for evaluating segment performance and deciding how to
allocate resources to segments.
SFAS No. 132, "Employer's Disclosure about Pensions and Other Post-
Retirement Benefits," is effective for the year ended December 31, 1998. This
standard revises the disclosure requirements for employers' pension and other
retiree benefits.
The Companies expect to adopt the above statements beginning with their 1998
financial statements.
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Accounts receivable..................................... $284,829 $309,565
Allowance for doubtful accounts, returns and
cancellations.......................................... (80,966) (88,255)
-------- --------
$203,863 $221,310
======== ========
</TABLE>
F-14
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Computers and equipment.................................. $ 30,513 $ 50,170
Leasehold improvements................................... 38,439 40,033
Furniture and fixtures................................... 18,402 17,619
-------- --------
87,354 107,822
Accumulated depreciation and amortization................ (33,793) (54,286)
-------- --------
$ 53,561 $ 53,536
======== ========
</TABLE>
5. INTANGIBLE ASSETS, NET
Intangible assets, net, consist of the following:
<TABLE>
<CAPTION>
RANGE OF DECEMBER 31,
USEFUL LIVES ----------------------
(YEARS) 1996 1997
------------ ---------- ----------
<S> <C> <C> <C>
Advertising lists....................... 7-34 $ 888,100 $ 888,100
Exhibitor relationships ................ 4-27 154,070 154,070
Trademarks/trade names.................. 30-40 735,595 735,595
License agreements...................... 6-14 11,212 11,212
Subscriber lists........................ 3-10 51,475 51,475
Other................................... 2-20 57,599 57,599
Goodwill................................ 5-40 1,380,993 1,387,556
---------- ----------
3,279,044 3,285,607
Accumulated amortization................ (130,711) (255,274)
---------- ----------
$3,148,333 $3,030,333
========== ==========
</TABLE>
Intangible assets primarily relate to the acquisitions of ZDI, COMDEX and
the MAC Assets. As discussed in Note 1, the acquisitions were accounted for
under the purchase method of accounting. As such, purchase price was allocated
to tangible and identifiable intangible assets with the remaining amount being
allocated to goodwill.
Advertising lists, exhibitor relationships and subscriber lists were
recorded at their estimated fair value as determined by an income approach.
Trademarks/trade names were recorded at their estimated fair value using a
relief from royalty approach.
All intangible assets are being amortized using the straight-line method
over their estimated useful lives, up to 40 years. In determining the
estimated useful lives, the Companies considered their competitive position in
the markets in which they operate, the historical attrition rates of
advertisers, subscribers and exhibitors, legal and contractual obligations,
and other factors.
Recoverability of goodwill and intangible assets is assessed at a minimum on
an annual basis. Impairments would be recognized in operating results if a
permanent diminution in value were to occur based upon an undiscounted cash
flow analysis.
F-15
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Payroll and related employee benefits....................... $24,978 $29,112
Accrued interest-related party.............................. 4,449 6,226
Other taxes payable......................................... 6,310 2,822
Other....................................................... 44,184 41,934
------- -------
$79,921 $80,094
======= =======
</TABLE>
7. UNEARNED INCOME
Unearned income consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Unexpired subscriptions.................................. $100,387 $ 82,167
Prepaid conference fees.................................. 91,776 80,706
Reserve for cancellations................................ (17,287) (8,191)
-------- --------
$174,876 $154,682
======== ========
</TABLE>
8. INCOME TAXES
The Companies have been included in consolidated U.S. federal income tax
returns filed by Softbank, except for operations relating to the MAC Assets
(described in Note 1), which were assets of a separate taxpayer. The tax
expense reflected in the combined statements of operations and tax liabilities
reflected in the combined balance sheet have been prepared on a separate
return basis as though the Companies filed stand-alone income tax returns. No
tax benefit has been recorded for the losses related to the MAC Assets, as
such losses are not available to the Companies.
The Companies and Softbank do not have a tax sharing agreement. Therefore,
no intercompany tax payments have been made and no related intercompany
receivable or payable has been recorded.
Income (loss) before income taxes is attributable to the following
jurisdictions:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
United States.................................. $ 25,094 $(22,095) $(74,638)
Foreign........................................ (2,225) (5,029) 2,147
-------- -------- --------
Total........................................ $ 22,869 $(27,124) $(72,491)
======== ======== ========
</TABLE>
Components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
U.S. federal income taxes:
Current............................................ $ -- $ -- $ --
Deferred........................................... 9,240 19,338 (1,017)
State and local income taxes:
Current............................................ -- -- --
Deferred........................................... 2,684 5,619 (295)
Foreign income taxes................................. -- -- --
------- ------- -------
Total provision (benefit) for income taxes....... $11,924 $24,957 $(1,312)
======= ======= =======
</TABLE>
F-16
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
A reconciliation of the U.S. federal statutory tax rate to the Companies'
effective tax rate on income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996 1997
---- ------ -----
<S> <C> <C> <C>
Federal tax rate....................................... 35.0% 35.0% 35.0%
State and local taxes (net of federal tax benefit)..... 6.0 6.0 6.0
Non-recognition of combined losses of MAC Assets....... 9.9 (116.6) (32.2)
Amortization of non-deductible goodwill................ 1.0 (13.1) (5.8)
Other.................................................. 0.2 (3.3) (1.2)
---- ------ -----
Effective tax rate..................................... 52.1% (92.0)% 1.8%
==== ====== =====
</TABLE>
The effective tax rate differs from the federal statutory tax rate primarily
as a result of the Companies' inability to deduct losses of the MAC Assets
prior to the effective date of the purchase. The amortization of nondeductible
goodwill resulted primarily from the stock acquisition of 100% of the stock of
ZDI in 1996.
Following is a summary of the components of the deferred tax accounts at
December 31, 1996 and December 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Current deferred tax assets and (liabilities):
Allowance for bad debts............................. $ 8,825 $ 8,750
Other............................................... (151) 44
--------- ---------
Current deferred net tax assets................... 8,674 8,794
--------- ---------
Noncurrent deferred tax assets and (liabilities):
Basis difference in intangible assets............... (273,375) (288,286)
Net operating loss and other carryforwards.......... 129,798 133,314
Other............................................... 11,603 13,711
--------- ---------
Noncurrent deferred tax liabilities............... (131,974) (141,261)
Valuation allowance................................... (49,335) (38,856)
--------- ---------
Net noncurrent deferred tax liabilities........... (181,309) (180,117)
--------- ---------
Net deferred tax liabilities.......................... $(172,635) $(171,323)
========= =========
</TABLE>
As of December 31, 1996 and 1997 the Companies had total deferred tax assets
of $100,891 and $116,963, respectively, and total deferred tax liabilities of
$273,526 and $288,286, respectively. The December 31, 1996 and December 31,
1997 net deferred tax assets are reduced by a valuation allowance of $49,335
and $38,856, respectively, primarily relating to tax benefits of foreign net
operating loss carryforwards which are not expected to be realized. The
decrease in the valuation allowance in 1997 is primarily related to the
expiration of foreign net operating loss carryforwards. No deferred tax asset
has been established for the losses associated with the MAC Assets, which will
not be available to the Companies as a deduction.
The Companies have U.S. and foreign net operating loss carryforwards of
approximately $286,322, which will begin to expire in 1998. The Companies'
utilization of certain net operating loss carryforwards, of approximately
$122,549, is subject to limitations, due to the change of ownership resulting
from the Softbank
F-17
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
acquisition of the ZDI stock on February 29, 1996. Management believes that
such limitations will not significantly affect the Companies ability to
recognize the deferred tax assets relating to the carryforward. Accordingly,
no valuation allowance to reduce the deferred tax asset relating to the
carryforward has been established. In addition, the Companies have alternative
minimum tax credit carryforwards of $385 which may be carried forward
indefinitely until used.
The Companies' foreign subsidiaries have no undistributed earnings for
remittance to the U.S. and, therefore, no U.S. or foreign tax provision on
remittances has been recorded.
9. DUE TO AFFILIATES AND MANAGEMENT
The Companies are members of a group of companies affiliated through common
ownership with Softbank and has various transactions and relationships with
members of the group. Because of these relationships, it is possible that the
terms of those transactions are not the same as those that would result from
transactions among unrelated parties.
Receivables/payables
Receivables from affiliates consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- --------
<S> <C> <C>
Receivable from:
MAC and subsidiaries...................................... $ 7,140 $ 42,687
Softbank.................................................. 67,451 84,365
Other affiliates.......................................... 2,617 4,238
------- --------
$77,208 $131,290
======= ========
</TABLE>
Payables to management and affiliates consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- --------
<S> <C> <C>
Payable to:
Management................................................ $29,834 $ --
MAC and subsidiaries...................................... -- 270,000
Softbank.................................................. 39,582 126,371
Other affiliates.......................................... -- 1,961
------- --------
$69,416 $398,332
======= ========
</TABLE>
See Note 18 for a discussion of the Companies' plan to restructure their
debt and equity structures.
As part of the 1996 acquisition of ZDI, the Companies agreed to assume
certain obligations to management arising out of prior employment arrangements
with previous owners. In January 1997, the Companies paid all amounts due,
including accrued interest, through the payment date.
Periodically, the Companies transfer excess cash to Softbank for cash
management purposes and in turn receive cash advances from Softbank to fund
the Companies' short-term working capital requirements. Interest is accrued
based on the net balance outstanding at the end of each month. Interest income
is earned at the 30-day LIBOR rate for the applicable month. Interest expense
is incurred at the 30-day LIBOR rate plus 0.5%.
F-18
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Other affiliated arrangements
During the years ended December 31, 1996 and 1997, the Companies incurred
$2,000 and $1,631, advertising expense with Yahoo!, Inc. (Yahoo!), an
affiliated company. No advertising expense with Yahoo! was incurred in 1995.
The Companies sell advertising space and exhibition services to Kingston
Technology Company ("Kingston"), an affiliated company. During the years ended
December 31, 1995, 1996 and 1997, the Companies recorded revenues of $0, $882
and $2,667, respectively, from sales to Kingston. These services were provided
under terms consistent with those provided to unaffiliated customers.
ZDCF has entered into an agreement to manage certain trade shows and
expositions owned by Softbank and its affiliates, whereby ZDCF earns
management and licensing fees. The fees earned by ZDCF for the years ended
December 31, 1995, 1996 and 1997 were $1,979, $3,394 and $4,057, respectively.
In 1996 and 1997, the Companies had an arrangement with SOFTBANK Interactive
Marketing ("SIM"), an affiliated company, for the provision of interactive
media sales. The Companies paid commissions to SIM of $600 and $1,800 during
the years ended December 31, 1996 and 1997, respectively. Effective December
31, 1997, SIM was acquired by an unrelated third party. Management believes
that the sale of SIM by Softbank will have no material impact on the
Companies.
The Companies have an arrangement with SOFTBANK Services, an affiliated
company, whereby the Companies are charged for administrative services
provided plus a management fee. For the years ended December 31, 1995, 1996
and 1997, the Companies incurred services fees of $0, $359 and $1,259,
respectively, in relation to this agreement.
ZDI has entered into certain licensing agreements with Softbank for the
publishing and distribution of Japanese language editions of certain
publications. The fees earned by ZDI for the years ended December 31, 1996 and
1997 were approximately $964 and $1,818 respectively in each year.
The Companies have entered into a license and services agreement with MAC to
develop ZDTV: Your Computer Channel. ZDTV is owned by MAC, but as part of this
license and services agreement MAC has granted the Companies an option
exercisable through December 31, 1998 to purchase all of MAC's interest in
ZDTV for an amount equal to MAC's investment plus 10% per annum. The Companies
are currently funding ZDTV's operations on behalf of MAC through unsecured
advances which, for approved levels of expenditure, are to be reimbursed by
MAC. Such advances bear interest at the 30-day LIBOR rate plus .50%. The
Companies' cumulative advances, which totaled $14.4 million net of $10.1
million in repayments through December 31, 1997, will be repaid concurrently
with the Reorganization (See Note 18). The Companies have not yet determined
whether they will exercise the option to purchase MAC's interest in ZDTV. Any
such purchase will depend upon access to sufficient cable carriage, which may
include entering into a joint venture or other co-ownership arrangement,
including an arrangement with a third party cable system operator which will
provide carriage and also assume a portion of the ongoing cash requirements on
terms that are acceptable to the Companies. ZDTV is not included in the
Companies' financial statements.
If the Companies were to acquire a controlling interest in ZDTV from MAC,
such acquisition would be accounted for as a pooling transaction; if the
Companies were to acquire a non-controlling interest, such acquisition would
be accounted for under the equity method.
ZDI has entered into operating leases for television production equipment
and has sublet such equipment to ZDTV, an affiliated company. The terms of the
subleases are substantially identical to the terms of the leases which provide
for annual lease payments totaling approximately $610 through 2003.
F-19
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Notes payable to affiliates
The Company's long-term debt is payable to Softbank and consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Notes payable to affiliate(1)........................ $1,080,000 $1,080,000
Notes payable to affiliate(2)........................ 900,000 900,000
Notes payable to affiliate(3)........................ 398,000 375,027
Note payable to affiliate(4)......................... 100,000 94,231
Note payable to affiliate(5)......................... 77,450 74,772
Note payable to affiliate(6)......................... -- 10,000
---------- ----------
Total.............................................. 2,555,450 2,534,030
Less--Current portion................................ (33,198) (125,790)
---------- ----------
$2,522,252 $2,408,240
========== ==========
</TABLE>
- --------
(1) Principal and interest payments are due in 53 consecutive quarterly
installments on the last business day of each calendar quarter beginning
March 31, 1998 through March 31, 2011. The notes bear interest at a rate
of 7.8% per annum.
(2) These notes mature on December 31, 2001 and bear an interest rate of 6.5%
per annum, payable on the last business day of each quarter beginning
March 31, 1997.
(3) Notes mature on February 28, 2010. The notes bear interest at a rate of
8.0% per annum.
(4) Notes mature on February 28, 2009. The notes bear interest at 9.9% per
annum.
(5) Note is payable in 52 equal quarterly installments commencing March 31,
1997. The note bears interest at a rate of 8.0% per annum.
(6) Note is payable on January 1, 2007. The note bears interest at a rate of
8.0% per annum.
Scheduled principal payments due on long-term debt outstanding at December
31, 1997 are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 125,790
1999.............................................................. 125,790
2000.............................................................. 125,790
2001.............................................................. 1,025,790
2002.............................................................. 125,790
Thereafter........................................................ 1,005,080
----------
Total........................................................... $2,534,030
==========
</TABLE>
See Note 18 for a discussion of the Companies' plan to restructure its debt
and equity structures.
Guarantee of Softbank's U.S. debt
In April 1996, Softbank signed a line of credit agreement totaling $50,000
with an independent lender for which the Companies, along with certain other
Softbank affiliates, are guarantors. In January 1997 and October 1997, this
line of credit was increased to $75,000 and $150,000, respectively. At
December 31, 1997, $102,500 was outstanding under the line of credit.
Return of capital and dividends
On December 15, 1996, the Companies declared a return of capital of
approximately $900,000 paid through the issuance of a note payable to a
subsidiary of Softbank and a cash dividend of $8,000 to Softbank. In 1997, the
Companies recorded a return of capital of $381,434 in connection with the
purchase price of companies under common control.
F-20
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
10. EMPLOYEE STOCK COMPENSATION PLANS
Executive stock option plan
The SOFTBANK 1996 and 1997 Executive Stock Option Plans provide for the
granting of nonqualified stock options to purchase the common stock of
Softbank to officers, directors and key employees of the Companies. Under the
plans, options have been granted at exercise prices equal to the closing
market price in Japan's public equities market (market price denominated in
Japanese yen) on the date of grant. As of December 31, 1997, substantially all
options granted become exercisable in various installments over the first six
anniversaries of the date of grant and expire ten years after the date of
grant.
Information relating to stock options during 1995, 1996 and 1997 is as
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OPTION PRICE
OF SHARES PER SHARE(1)
--------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1995 -- --
Granted........................................ 739,493(2) $87.15
Exercised...................................... -- --
Forfeited...................................... 12,740(2) 87.15
-------
Shares outstanding under options at December
31, 1996...................................... 726,753 87.15
Granted........................................ 386,363 61.40
Exercised...................................... -- --
Forfeited...................................... 146,130 78.88
-------
Shares outstanding under options at December
31, 1997...................................... 966,986 $78.11
=======
Shares exercisable
At December 31, 1996......................... -- --
At December 31, 1997 (price range $44.26-
$87.15)..................................... 107,630 $82.06
</TABLE>
- --------
(1) The exercise price of the stock options is set in Japanese yen. The
exercise prices as shown above have been converted to U.S. dollars based
upon the exchange rate as of the date of grant for the respective options.
(2) Adjusted for a 1.4:1 stock split during 1996 and a 1.3:1 stock split
during 1997.
As permitted by SFAS 123, the Companies have chosen to continue to account
for stock options in accordance with the provisions of APB 25 and,
accordingly, no compensation expense related to stock option grants was
recorded in 1996 or 1997. Pro forma information regarding net income is
required by SFAS 123 and has been determined as if the Companies had accounted
for stock options under the fair value method. The fair value of the option
grants was estimated at the date of grant using the Black Scholes option-
pricing model with the following assumptions for 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Risk-free interest rate.................................... 5.89% 6.35%
Dividend yield............................................. 0.26% 0.22%
Volatility factor.......................................... 54.03% 51.35%
Expected life.............................................. 6 years 6 years
</TABLE>
The weighted average fair value of options granted in 1996 and 1997 was
$64.30 and $34.05, respectively. For purposes of the pro forma disclosures,
the estimated fair value of the options is amortized to expense over
F-21
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
the options' vesting period. Had compensation cost for the stock option plans
been determined based upon the fair value at the grant date for awards during
1996 and 1997, consistent with the provisions of SFAS 123, the Companies' net
loss would have been increased by approximately $3,100 and $4,200,
respectively. On January 23, 1998, the exercise price of all of the shares
outstanding under option agreements were reset to an exercise price equal to
the closing market price on Japan's Tokyo Stock Exchange First Section at that
date. In conjunction with the repricing, those options previously exercisable
on December 31, 1997 may now be exercised only after July 19, 1998. Repricing
of the stock options will not result in compensation expense to the Companies.
Other stock compensation plans
During 1996 and 1997, the Company granted 45,760 and 61,940 shares of common
stock of Softbank, respectively, (adjusted for two 1.4:1 stock splits during
1996 and a 1.3:1 stock split during 1997) to certain key employees, subject to
restrictions as to continuous employment which expire over a three to five-
year period from the date of grant. The granting of the shares to the
Companies' employees has been recorded as additional paid-in capital offset by
a reduction to stockholder's equity as deferred compensation. Such amounts
were recorded at the fair value, as established by market price of the shares
on the date of grant. The unearned compensation is being amortized ratably
over the restricted periods. During 1996, restrictions on 13,790 shares
expired, 2,160 shares were forfeited and $1,080 was charged to expense related
to the restricted stock awards. During 1997, restrictions on 75,210 shares
expired, 2,150 shares were forfeited and $3,916 was charged to expense related
to these restricted stock awards.
11. EMPLOYEE BENEFIT PLANS
Pension plan
Certain employees of ZDCF who have met eligibility requirements are covered
by a noncontributory defined benefit pension plan. The benefits are based on
years of service and average compensation at the time of retirement. The
Companies' funding policy is to contribute amounts sufficient to meet the
minimum funding requirements as set forth in the Employee Retirement Income
Security Act of 1974 ("ERISA"). Contributions to the plan are determined in
accordance with the projected unit credit cost method. Plan assets consist of
U.S. equity securities, high grade corporate bonds and commercial paper, and
U.S. treasury notes.
The weighted average assumed discount rate of 7% and rate of increase in
future compensation levels of 6% was used in the determination of the
actuarial present value of the projected benefit obligation at December 31,
1996 and 1997. The weighted average expected long-term rate of return on plan
assets at December 31, 1996 and 1997 was 7%.
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
1995 1996 1997
----- ------ -----
<S> <C> <C> <C>
Service cost........................................... $ 472 $ 700 $ 391
Interest cost.......................................... 363 472 456
Expected return on plan assets......................... (172) (300) (445)
Amortization of transition obligation.................. 149 199 75
----- ------ -----
Net periodic pension cost.............................. $ 812 $1,071 $ 477
===== ====== =====
</TABLE>
F-22
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
The following table sets forth the funded status and amounts recognized in
the balance sheet:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................... $ 4,132 $ 5,721
======= =======
Accumulated benefit obligations......................... 4,224 5,721
======= =======
Projected benefit obligations............................. 7,967 5,721
Plan assets at fair value................................. (4,467) (6,004)
------- -------
Projected benefit obligation in excess (less than) of plan
assets................................................... 3,500 (283)
Unrecognized net transition asset (liability)............. (2,297) 1,279
------- -------
Pension liability included in balance sheet............... $ 1,203 $ 996
======= =======
</TABLE>
During 1997, the Companies decided to terminate the defined benefit pension
plan and pursuant to this decision, all accrued benefits became fully vested
as of August 31, 1997. The above amounts reflect the effects of such
termination. All accrued plan obligations will be settled during 1998. There
was no significant gain or loss recognized in connection with the termination.
Any gain or loss associated with the plan settlement will be recognized in
1998.
Retirement plans
The Companies maintain various defined contribution retirement plans.
Substantially all of the Companies' employees are eligible to participate in
one of the plans under which annual contributions may be made by the Companies
for the benefit of all eligible employees. In certain cases, employees may
also make contributions to the plan in which they participate which, and
subject to certain limitations, may be matched by the Companies up to certain
specified percentages. Employees are generally eligible to participate in a
plan upon joining the Companies and receive matching contributions after one
year of employment. The Companies made contributions to the plans totaling
$2,115, $10,470 and $13,725 in 1995, 1996 and 1997, respectively.
12. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
The Companies have investments in the following companies/joint ventures:
<TABLE>
<CAPTION>
COMPANY/ CARRYING VALUE AT
JOINT VENTURE DECEMBER 31,
------------- OWNERSHIP -----------------
PERCENTAGE 1996 1997
---------- -------- --------
<S> <C> <C> <C>
Mac Publishing LLC............................. 50% $ -- $ 16,244
ExpoComm LLC................................... 50% $ 7,698 $ 7,758
Family PC G.P. ................................ 50% $ 10,138 $ 9,342
</TABLE>
The companies/joint ventures listed above are engaged primarily in the
publication or distribution of print media and the organization, production
and management of trade shows. Other investments and joint ventures are not
material to the Companies' financial statements.
The Companies equity income (loss) was $0, $(796) and $335 in 1995, 1996 and
1997, respectively.
F-23
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
13. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1996 1997
-------- ---------- --------
<S> <C> <C> <C>
Cash paid during the year for:
Interest to related parties.................. $ 8,390 $ 99,509 $185,447
Income taxes................................. -- 360 4
Noncash investing and financing activities:
Fair value of assets acquired................ $836,479 $2,508,603 $ 20,749
Liabilities assumed.......................... 21,959 370,518 6,749
-------- ---------- --------
Cash paid.................................... 814,520 2,138,085 14,000
Less--Cash acquired.......................... -- 13,262 --
-------- ---------- --------
Net cash paid for acquisitions............... $814,520 $2,124,823 $ 14,000
======== ========== ========
Return of capital dividends.................. $ -- $ 899,948 $381,434
======== ========== ========
Capital contributions........................ $ -- $ 5,002 $ 61,580
======== ========== ========
</TABLE>
14. STOCKHOLDER'S EQUITY
The Companies' issued and outstanding Common Stock consists of 100 shares of
ZDI and 100 shares of ZDCF. Such shares provide the holder with identical
rights in corporate matters.
15. OPERATING LEASE COMMITMENTS
The Companies are obligated under various operating leases which expire at
various dates through 2021. Future minimum rental commitments under
noncancelable operating leases are as follows:
<TABLE>
<S> <C>
1998................................................................ $ 34,912
1999................................................................ 32,702
2000................................................................ 28,875
2001................................................................ 25,891
2002................................................................ 24,932
Thereafter.......................................................... 248,407
--------
Total........................................................... $395,719
========
</TABLE>
Netted in the above totals is approximately $5,000 for which ZDI has
noncancelable subleases in place. Total sublease income approximates ZDI's
required payments under the related leases. Rent expense amounted to
approximately $2,492, $23,015 and $29,994 for the years ended December 31,
1995, 1996 and 1997, respectively.
16. CONTINGENCIES
The Companies are subject to various claims and legal proceedings arising in
the normal course of business. Management believes that the ultimate
liability, if any, in the aggregate will not be material to the consolidated
balance sheet, future operations or cash flows.
F-24
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
17. SEGMENT INFORMATION
Business segment information
The Companies' operations have been classified into two business segments:
(i) publishing and (ii) trade shows and conferences.
Publishing
The publishing segment is engaged in publishing magazines, journals,
newsletters, electronic information products, training manuals and providing
market research about the computer industry. The publishing segment's
principal operations are in the United States and Europe, although it also
licenses or syndicates its editorial content to over 50 other publications
distributed worldwide.
Trade shows and conferences
The trade shows and conferences segment is engaged in the organization,
production and management of trade shows, conferences and seminars for the
computer industry. The trade shows and conferences segment's principal
operations are in North America and to a lesser extent in Europe, Asia and
Latin America.
Summarized financial information by business segment as of December 31,
1995, 1996 and 1997 and for each of the years then ended is set forth below:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenue, net:
Publishing............................... $ -- $ 690,255 $ 866,233
Trade shows and conferences.............. 202,729 264,884 287,528
---------- ---------- ----------
$ 202,729 $ 955,139 $1,153,761
========== ========== ==========
Income from operations:
Publishing............................... $ -- $ 18,676 $ 49,997
Trade shows and conferences.............. 62,675 68,505 59,235
---------- ---------- ----------
$ 62,675 $ 87,181 $ 109,232
========== ========== ==========
Total assets at December 31:
Publishing............................... $ -- $2,440,651 $2,422,360
Trade shows and conferences.............. 1,090,981 1,143,522 1,124,286
---------- ---------- ----------
$1,090,981 $3,584,173 $3,546,646
========== ========== ==========
Depreciation and amortization:
Publishing............................... $ -- $ 106,587 $ 118,814
Trade shows and conferences.............. 24,305 33,149 36,126
---------- ---------- ----------
$ 24,305 $ 139,736 $ 154,940
========== ========== ==========
Capital expenditures:
Publishing............................... $ -- $ 14,657 $ 21,399
Trade shows and conferences.............. 3,367 7,708 8,797
---------- ---------- ----------
$ 3,367 $ 22,365 $ 30,196
========== ========== ==========
</TABLE>
Operating income by business segment excludes interest income and interest
expense.
F-25
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNITED STATES OTHER AREAS COMBINED
Geographic Segment Information ------------- ----------- ----------
Year ended December 31, 1995:
<S> <C> <C> <C>
Revenue, net............................. $ 192,789 $ 9,940 $ 202,729
========== ======== ==========
Income (loss) from operations............ $ 64,930 $ (2,255) $ 62,675
========== ========
Other non-operating income............... 4,199
Related party-interest expense........... 44,005
----------
Income before taxes...................... $ 22,869
==========
Total assets at December 31, 1995........ $1,081,829 $ 9,152 $1,090,981
========== ======== ==========
Year ended December 31, 1996:
Revenue, net............................. $ 854,666 $100,473 $ 955,139
========== ======== ==========
Income (loss) from operations............ $ 92,210 $ (5,029) $ 87,181
========== ========
Other non-operating income............... 6,341
Related party-interest expense........... 120,646
----------
Loss before taxes........................ $ (27,124)
==========
Total assets at December 31, 1996........ $3,549,102 $ 35,071 $3,584,173
========== ======== ==========
Year ended December 31, 1997:
Revenue, net............................. $1,040,297 $113,464 $1,153,761
========== ======== ==========
Income from operations................... $ 107,085 $ 2,147 $ 109,232
========== ========
Other non-operating income............... 8,722
Related party-interest expense........... 190,445
----------
Loss before taxes........................ $ (72,491)
==========
Total assets at December 31, 1997........ $3,500,945 $ 45,701 $3,546,646
========== ======== ==========
</TABLE>
Transactions between geographic areas are not significant.
F-26
<PAGE>
ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)
(WHOLLY-OWNED INDIRECT SUBSIDIARIES OF SOFTBANK CORP.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
18. SUBSEQUENT EVENTS (UNAUDITED)
Reorganization of the Companies
In February 1998, Softbank announced a reorganization of the Companies (the
"Reorganization"). In connection with the Reorganization, Softbank will
contribute the common stock of ZDI and ZDCF to a newly formed company in
exchange for a majority of the new company's common stock, the balance of
which will be offered to the public. In addition, approximately $928 million
of obligations owed to Softbank will be converted to equity, approximately
$1.5 billion of notes payable to affiliates will be refinanced, the $370
million obligation for the purchase of the MAC Assets will be paid and
balances totaling approximately $42 million due from MAC will be settled. The
Reorganization is contingent upon the successful completion of the public
stock offering and refinancing of the notes payable to affiliates.
Guarantee of Softbank's U.S. Debt
In March 1998, the Company increased its guarantee of Softbank's U.S. debt
from $150 million to $450 million.
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Ziff-Davis Inc., (formerly Ziff-Davis Publishing Company)
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, cash flows and changes in stockholder's
equity, present fairly, in all material respects, the financial position of
Ziff-Davis Inc. and its subsidiaries (formerly Ziff-Davis Publishing Company
or the "Company") at December 31, 1995 and February 28, 1996, and the results
of their operations and their cash flows for the year ended December 31, 1995
and for the period from January 1, 1996 to February 28, 1996, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 16 to the financial statements, the Company was acquired
by SOFTBANK Holdings Inc. on February 29, 1996.
PRICE WATERHOUSE LLP
New York, NY
February 17, 1998
F-28
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 10,083 $ 13,669
Accounts receivable, net........................... 113,078 116,075
Inventories........................................ 21,825 26,009
Deferred taxes..................................... 22,129 23,570
Prepaid postage and other current assets........... 16,621 16,852
---------- ----------
Total current assets................................. 183,736 196,175
Property and equipment, net.......................... 64,110 58,589
Intangible assets, net............................... 1,348,064 1,338,684
Deferred charges and other assets.................... 27,996 26,457
---------- ----------
Total assets......................................... $1,623,906 $1,619,905
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................... $ 56,488 $ 43,795
Accrued expenses................................... 68,814 78,333
Unexpired subscriptions, net....................... 81,737 86,435
Due to management and affiliates................... 58,480 58,762
Current portion of long-term debt.................. 6,847 6,847
Other current liabilities.......................... 2,048 2,733
---------- ----------
Total current liabilities............................ 274,414 276,905
Deferred taxes....................................... 11,822 10,815
Long-term debt....................................... 439,153 439,153
Subordinated debentures--related party............... 525,000 525,000
Other long-term liabilities.......................... 8,367 7,315
---------- ----------
Total liabilities.................................... 1,258,756 1,259,188
---------- ----------
Commitments and contingencies (Notes 14, 15 and 16)
Stockholder's equity:
Common stock, $.01 par value; 1,000 shares autho-
rized;
100 shares issued and outstanding................. -- --
Additional paid-in capital......................... 391,275 391,275
Accumulated deficit................................ (26,002) (30,549)
Cumulative translation adjustment.................. (123) (9)
---------- ----------
Total stockholder's equity........................... 365,150 360,717
---------- ----------
Total liabilities and stockholder's equity........... $1,623,906 $1,619,905
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-29
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1996
YEAR ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
Revenue, net...................................... $768,995 $125,465
Cost of production................................ 193,646 31,112
Selling, general and administrative expenses...... 428,053 71,946
Depreciation and amortization of property and
equipment........................................ 37,160 6,073
Amortization of intangible assets................. 54,386 9,064
-------- --------
Income from operations.......................... 55,750 7,270
Interest expense, net............................. (92,609) (14,030)
Equity in losses of joint ventures................ 3,391 235
-------- --------
Loss before income taxes........................ (40,250) (6,995)
Income tax benefit................................ (14,248) (2,448)
-------- --------
Net loss.......................................... $(26,002) $ (4,547)
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-30
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1996
YEAR ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................ $ (26,002) $ (4,547)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................. 91,546 15,137
Loss from equity investments.................. 3,391 235
Provisions for bad debts, allowances and
cancellations................................ 14,097 3,014
Deferred tax benefit.......................... (14,248) (2,448)
Changes in operating assets and liabilities:
Accounts receivable......................... (26,956) (6,011)
Inventories................................. (9,014) (4,184)
Accounts payable and accrued expenses....... 8,136 (3,174)
Unexpired subscriptions, net................ 2,499 4,698
Due to management and affiliates............ (3,020) 282
Other, net.................................. (3,366) 1,136
----------- --------
Net cash provided by operating activities....... 37,063 4,138
----------- --------
Cash flows from investing activities:
Capital expenditures.......................... (14,163) (552)
Proceeds from sale of businesses.............. 23,508 --
----------- --------
Net cash provided (used) by investing
activities..................................... 9,345 (552)
----------- --------
Cash flows from financing activities:
Borrowings under revolving credit facility.... 80,625 24,335
Repayment of revolving credit facility........ (60,625) (24,335)
Repayment of acquisition indebtedness......... (1,122,931) --
----------- --------
Net cash used by financing activities........... (1,102,931) --
----------- --------
Net (decrease)/increase in cash and cash
equivalents.................................... (1,056,523) 3,586
Cash and cash equivalents at beginning of
period......................................... 1,066,606 10,083
----------- --------
Cash and cash equivalents at end of period...... $ 10,083 $ 13,669
=========== ========
Supplemental cash flow disclosures:
Interest paid................................. $ 78,811 $ 29,255
Income taxes paid............................. $ 92,729 $ --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-31
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------- PAID-IN ACCUMULATED TRANSLATION STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
------ ------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... 100 $ -- $391,275 $ -- $ -- $391,275
Net loss................ -- -- -- (26,002) -- (26,002)
Foreign currency
translation adjustment. -- -- -- -- (123) (123)
--- ----- -------- -------- ----- --------
Balance at December 31,
1995................... 100 -- 391,275 (26,002) (123) 365,150
Net loss................ -- -- -- (4,547) -- (4,547)
Foreign currency
translation adjustment. -- -- -- -- 114 114
--- ----- -------- -------- ----- --------
Balance at February 28,
1996................... 100 $ -- $391,275 $(30,549) $ (9) $360,717
=== ===== ======== ======== ===== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-32
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
1. ORGANIZATION AND ACQUISITION
Ziff-Davis Inc. ("ZDI," formerly Ziff-Davis Publishing Company) is a wholly-
owned subsidiary of Ziff-Davis Holdings Corp. ("Holdings").
ZDI is engaged in publishing magazines, journals and training manuals and
providing market research about the computer industry, with operations in the
United States, Canada and Europe.
Acquisition
Effective January 1, 1995, Holdings, through ZDI, directly and indirectly
acquired certain assets and assumed certain liabilities of the Ziff-Davis
publishing business and related businesses (the "Acquisition" or the "Acquired
Businesses") from Ziff Communications Company, L.P., a limited partnership
("ZCC") and other persons and entities (collectively referred to as the
"Sellers"), for an aggregate purchase price of approximately $1,400,000 plus
transaction costs. ZDI funded the Acquisition through the issuance of Common
Stock, bank borrowings and a subordinated note payable to Holdings.
The acquisition has been accounted for using the purchase method of
accounting.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of ZDI and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Investments in companies in which ownership interests range from 20 to 50
percent, are accounted for under the equity method. ZDI has an equity
investment interest in Family PC G.P. of 50%. The equity investment in Family
PC G.P. is not material to ZDI's consolidated financial statements.
Cash and cash equivalents
ZDI considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
Concentration of credit risk
ZDI places its temporary cash investments with high credit quality financial
institutions. At times, such investments may be in excess of federally insured
limits. ZDI has not experienced losses in such accounts.
ZDI's advertisers include customers who represent a variety of technology
companies in the United States and other countries. ZDI extends credit to its
customers and historically has not experienced significant losses relating to
receivables from individual customers or groups of customers.
Property and equipment
Property and equipment have been recorded at their estimated fair value at
the date of acquisition. Depreciation is computed using the straight-line
method over the estimated useful lives of the acquired assets, ranging from 3
to 39 years. Leasehold improvements are amortized using the straight-line
method over the service life of the improvement or the life of the related
lease, whichever is shorter. Maintenance and repair costs are charged to
expense as incurred.
F-33
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Paper inventories
Paper inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis.
Intangible assets
Intangible assets consist principally of advertising lists, trademarks and
trade names and goodwill. Amortization of these assets is computed on a
straight-line basis over their estimated useful lives. Identifiable intangible
assets are amortized over a period of 2 to 39 years and goodwill, which
represents the excess of the purchase price over the estimated fair values of
net assets acquired, is amortized over 40 years. ZDI assesses the
recoverability of its intangible assets whenever adverse events or changes in
circumstances indicate that expected future cash flows (undiscounted and
without interest charges) may not be sufficient to support the carrying amount
of intangible assets. If undiscounted cash flows are not sufficient to support
the recorded assets, an impairment loss is recognized to reduce the carrying
value of the intangibles to its estimated recoverable value.
Revenue recognition
Advertising revenue for ZDI's publications, less agency commissions, is
recognized as income in the month that the related publications are sent to
subscribers or becomes available for sale at newsstands.
Circulation revenue consists of both subscription and single copy newsstand
sales. Subscription revenue, less estimated cancellations, is deferred and
recognized as income in the month that the related publications are sent to
subscribers. Newsstand sales, less estimated returns, are recognized in the
month that the related publications become available for sale at newsstands.
Revenue generated by market research is recognized when the service is
provided.
Operating costs and expenses
Cost of production includes paper, manufacturing, distribution and
fulfillment. Selling and promotion costs include subscriber acquisition costs
which are expensed as incurred. Editorial and product development costs are
generally expensed as incurred. Product development costs include the cost of
artwork, graphics, prepress, plates and photography for new products.
Foreign currency
Gains and losses on foreign currency transactions, which are not
significant, have been included in selling, general and administrative
expenses. The effect of translation of foreign currency financial statements
into U.S. dollars is included in the cumulative translation adjustments
account in stockholder's equity.
Income taxes
ZDI uses the asset and liability approach for financial accounting and
reporting of deferred taxes.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
Actual results may differ from these estimates.
F-34
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Fair value of financial instruments
All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments. The
recorded amounts of ZDI's long-term debt also approximate fair value which was
based upon the current rates available to ZDI for debt with similar remaining
maturities.
Impairment of long-lived assets
In 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," ("SFAS 121"). ZDI adopted SFAS 121 in fiscal 1996 with no
effect on operations.
Earnings per share
Historical earnings per share data has been omitted on the basis that it is
not meaningful due to the insignificant number of shares outstanding.
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Accounts receivable............................... $168,961 $166,036
Allowance for doubtful accounts, returns and
cancellations.................................... (55,883) (49,961)
-------- --------
$113,078 $116,075
======== ========
</TABLE>
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Computers and equipment............................ $ 55,838 $ 56,390
Leasehold improvements............................. 25,999 25,999
Furniture and fixtures............................. 12,404 12,404
Other.............................................. 7,029 7,029
-------- --------
101,270 101,822
Accumulated depreciation and amortization.......... (37,160) (43,233)
-------- --------
$ 64,110 $ 58,589
======== ========
</TABLE>
F-35
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
5. INTANGIBLE ASSETS, NET
Intangible assets, net, consist of the following:
<TABLE>
<CAPTION>
RANGE OF
LIVES DECEMBER 31, FEBRUARY 28,
(YEARS) 1995 1996
-------- ------------ ------------
<S> <C> <C> <C>
Advertiser lists.......................... 7-39 $ 645,800 $ 645,800
Trademarks and trade names................ 30 235,820 235,820
Subscriber lists.......................... 3-10 47,436 47,436
Other..................................... 2-5 28,800 28,800
License agreements........................ 6-14 11,211 11,211
Goodwill.................................. 40 433,383 433,067
---------- ----------
1,402,450 1,402,134
Accumulated amortization.................. (54,386) (63,450)
---------- ----------
$1,348,064 $1,338,684
========== ==========
</TABLE>
Intangible assets primarily relate to the acquisition of ZDI. As discussed
in Note 1, the acquisition was accounted for under the purchase method of
accounting. As such the purchase price was allocated to tangible and
identifiable intangible assets with the remaining amount allocated to
goodwill.
Advertising lists, exhibitor relationships and subscriber lists were
recorded at their estimated fair value as determined by an "income" approach.
Trademarks/trade names were recorded at their estimated fair value using a
"relief from royalty" approach.
All intangible assets are being amortized using the straight-line method
over their estimated useful lives, up to 40 years. In determining the
estimated useful lives, ZDI considered its competitive position in the markets
in which it operates, the historical attrition rates of advertisers,
exhibitors and subscribers, legal and contractual obligations, and other
factors.
Recoverability of goodwill and intangible assets is assessed at a minimum on
an annual basis. Impairments would be recognized in operating results if a
permanent diminution in value were to occur based upon an undiscounted cash
flow analysis.
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Payroll and related employee benefits.............. $35,044 $35,152
Accrued interest................................... 16,804 27,526
Other taxes payable................................ 1,588 2,576
Other accrued expenses............................. 15,378 13,079
------- -------
$68,814 $78,333
======= =======
</TABLE>
F-36
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
7. INCOME TAXES
Loss before income taxes is attributable to the following jurisdictions:
<TABLE>
<CAPTION>
YEAR JANUARY 1
ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
United States...................................... $(31,114) $(4,757)
Foreign............................................ (9,136) (2,238)
-------- -------
Total............................................ $(40,250) $(6,995)
======== =======
</TABLE>
Components of the income tax benefit are as follows:
<TABLE>
<CAPTION>
YEAR JANUARY 1
ENDED THROUGH
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
U.S. federal income taxes:
Current.......................................... $ -- $ --
Deferred......................................... (11,040) (1,897)
State and local income taxes:
Current.......................................... -- --
Deferred......................................... (3,208) (551)
Foreign income taxes............................... -- --
-------- -------
Total income tax benefit....................... $(14,248) $(2,448)
======== =======
</TABLE>
A reconciliation of the U.S. federal statutory tax rate to ZDI's effective
tax rate on loss before income taxes is as follows:
<TABLE>
<CAPTION>
YEAR JANUARY 1
ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Federal tax at 35%................................ 35.0% 35.0%
State and local taxes (net of federal tax bene-
fit)............................................. 6.0 6.0
Foreign losses.................................... (2.5) (2.5)
Amortization of nondeductible goodwill............ (1.3) (1.2)
Other nondeductible expenses...................... (1.8) (2.3)
---- ----
Effective tax rate.............................. 35.4% 35.0%
==== ====
</TABLE>
F-37
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Following is a summary of the components of the deferred tax accounts at
December 31, 1995 and February 28, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Current deferred tax assets:
Allowance for bad debts......................... $ 8,396 $ 8,535
Employee compensation, bonus, and vacation...... 12,248 12,687
Other........................................... 1,485 2,348
-------- --------
Current deferred tax assets................... 22,129 23,570
-------- --------
Noncurrent deferred tax assets and (liabilities):
Basis difference in intangible assets........... (69,271) (71,589)
Basis difference in property and equipment...... (3,378) (1,863)
Deferred rental expense......................... 3,285 3,139
Net operating loss carryforwards................ 102,165 103,954
Acquisition reserves............................ 2,773 2,756
Other........................................... (220) (36)
-------- --------
Gross noncurrent deferred tax assets.......... 35,354 36,361
Valuation allowance............................. (47,176) (47,176)
-------- --------
Net noncurrent deferred tax liabilities....... (11,822) (10,815)
-------- --------
Total net deferred tax assets..................... $ 10,307 $ 12,755
======== ========
</TABLE>
As of December 31, 1995 and February 28, 1996, ZDI had total deferred tax
assets of $83,176 and $86,243, respectively, and total deferred tax
liabilities of $72,869 and $73,488, respectively.
As of February 28, 1996, ZDI has U.S. and foreign net operating loss
carryforwards of approximately $244,172, which will begin to expire on
December 31, 1996. The December 31, 1995 and the February 28, 1996 net
deferred tax asset is reduced by a valuation allowance of $47,176 relating to
tax benefits of foreign net operating loss carryforwards which are not
expected to be recognized.
ZDI's foreign subsidiaries have no undistributed earnings for remittance to
the U.S. and therefore no U.S. or foreign tax provision on remittances has
been recorded.
8. DUE TO MANAGEMENT AND AFFILIATES
Payables to management and affiliates consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Payable to:
Management....................................... $28,161 $28,443
Sellers.......................................... 21,500 21,500
Holdings......................................... 8,819 8,819
------- -------
$58,480 $58,762
======= =======
</TABLE>
F-38
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
As part of the Acquisition, ZDI agreed to assume certain obligations to
management arising out of prior employment arrangements. Approximately $40,000
was due under these arrangements, of which approximately $12,000 was paid in
1995. The balance of the obligation, including accrued interest, was paid in
1997.
Amounts due to sellers represent final amounts payable related to the
Acquisition.
9. LONG-TERM DEBT
Long-term debt at December 31, 1995 and February 28, 1996 is comprised of
the following:
<TABLE>
<S> <C>
Bank debt:
Tranche A........................................................ $ 86,604
Tranche B........................................................ 179,479
Tranche C........................................................ 159,917
Revolving credit arrangement..................................... 20,000
--------
446,000
Less--Current portion.............................................. (6,847)
--------
$439,153
========
</TABLE>
On December 21, 1994, ZDI borrowed $515,000 under the terms of a Credit
Agreement. The proceeds of the loan were used to finance a portion of the
Acquisition and pay certain transaction costs.
Tranche A, as amended on August 31, 1995, is a six-year term loan due
quarterly in varying amounts from September 30, 1995 through December 31,
2000. Tranche B is a seven-year term loan due quarterly in varying amounts
commencing September 30, 1995 through September 30, 2001, with a final payment
of $126,000 on December 31, 2001. Tranche C is an eight-year term loan
providing for quarterly payments, aggregating $1,000 per calendar year
commencing September 30, 1995 through December 31, 2001, followed by four
quarterly payments of $39,500 through December 31, 2002.
The Credit Agreement also provides ZDI with an additional $85,000, increased
to $150,000 under terms of the August 31, 1995 amendment, under a revolving
credit arrangement through December 31, 2000. These funds are available for
loans, letters of credit, and swing-line loans, subject to certain maximum
levels of borrowing. At least once during each year, for a period of 30
consecutive days, the loans outstanding under the revolving credit facility
must be reduced so that the aggregate outstanding amount does not exceed
$130,000 during such 30-day period. The commitment fee for the revolving
credit facility is .50% during 1995 and 1996 on the unused portion of the
facility. ZDI has the option to permanently reduce the amount available for
borrowings under the revolving credit facility by a minimum of $5,000 at any
time. At December 31, 1995 and February 28, 1996, $130,000 under the revolving
credit facility is available for borrowing.
During 1995 and the period January 1, 1996 to February 28, 1996, the Tranche
A and revolving credit loans bore interest, payable at least quarterly, at
either the Average Bank Rate ("ABR"), as defined, plus 1.25%, or at the
Eurodollar rate, plus 2.5% at the election of ZDI. Tranche B and C loans bore
interest, payable at least quarterly, at either the ABR, plus 1.75% and 2.25%,
respectively, or at the Eurodollar rate, as defined, plus 3% and 3.5%,
respectively, at the election of ZDI. Swing-line loans bear interest at the
ABR, plus the applicable margins as discussed above. Borrowings outstanding at
December 31, 1995 and February 28, 1996 were $446,000 and the weighted average
interest rate was 8.8% and 10.1%, respectively.
F-39
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
ZDI is required to comply with various restrictive covenants, including
maintaining certain financial ratios, restrictions on additional indebtedness,
capital expenditures, acquisitions, certain asset sales, declaration of
dividends and acquisition of ZDI's or Holdings' Common Stock. All borrowings
under the Credit Agreement are secured by the common stock and other equity
interests of ZDI and its wholly owned subsidiaries.
ZDI is required to make mandatory prepayments of the loans with the net
proceeds of certain asset sales and debt issuances, if any. ZDI is also
required, commencing with the year ending December 31, 1995, to prepay the
loans with a portion of excess cash flow, as defined, once certain cash
balances are achieved. These cash balances were not achieved during 1995 or
for the period from January 1, 1996 to February 28, 1996 and therefore no
prepayments occurred.
Scheduled principal payments for each of the next five years are as follows:
<TABLE>
<S> <C>
1996................................................................ $ 6,847
1997................................................................ 13,518
1998................................................................ 21,524
1999................................................................ 23,658
2000................................................................ 52,795
Thereafter.......................................................... 327,658
--------
Total............................................................. $446,000
========
</TABLE>
10. RELATED PARTY TRANSACTIONS
Prior to the Acquisition, ZCC provided certain services to ZDI, including
legal, tax, human resources, payroll, facilities management and management
information services. The remaining unpaid balance (approximately $8,100) for
such services was paid in the normal course of business during 1995. Beginning
in 1995, ZDI sublet office space and provided administrative services to ZCC.
Such office space and services were provided to ZCC at ZDI's cost. The
majority partners of ZCC have a continuing investment in Holdings of
approximately 6%.
On the closing date of the Acquisition, ZDI paid approximately $280,000 in
cash to the Sellers and issued notes due January 13, 1995 and January 16, 1995
totaling $1,033,931, for the balance. These notes were subsequently fully paid
in January, 1995.
See Note 11 for a description of subordinated debentures.
In connection with the Acquisition, ZDI paid transaction costs of $14,000 to
an affiliate of Holdings.
The Company paid $44,555 and $3,791 in interest to Holdings for the year
ended December 31, 1995 and for the period from January 1, 1996 to February
28, 1996, respectively.
11. SUBORDINATED DEBENTURES--RELATED PARTY
On December 21, 1994, ZDI issued a $525,000 subordinated note payable to
Holdings to finance a portion of the Acquisition. The note bears interest at 8
1/2% per annum with interest payable semiannually on February 28 and August 31
of each year. The principal is repayable in three installments of $175,000
each on December 21, 2005, December 21, 2006 and December 21, 2007. This note
is fully subordinated in right of payment to the bank borrowings (see Note 9).
F-40
<PAGE>
ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY-OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
12. EMPLOYEE BENEFIT PLANS
Retirement plans
ZDI and its subsidiaries maintain various defined contribution retirement
plans. Substantially all of ZDI's employees are eligible to participate in one
of the plans under which annual contributions may be made by ZDI for the
benefit of all eligible employees. Employees may also make contributions to
the plan in which they participate which, subject to certain limitations, may
be matched by ZDI up to certain specified percentages. Employees are generally
eligible to participate in a plan upon joining ZDI and receive matching
contributions after one year of employment. ZDI made contributions of $8,432
and $1,407 for the year ended December 31, 1995 and for the period ended
February 28, 1996, respectively.
13. SALE OF BUSINESSES
During 1995, ZDI disposed of two subsidiaries and received cash
consideration of $23,508. No gain or loss was realized on the dispositions.
14. OPERATING LEASE COMMITMENTS
ZDI is obligated under various operating leases which expire at various
dates through 2006. Future minimum rental commitments under noncancelable
operating leases are as follows:
<TABLE>
<S> <C>
1996 (ten-month period).............................................. $15,771
1997................................................................. 19,606
1998................................................................. 18,219
1999................................................................. 12,532
2000................................................................. 9,611
Thereafter........................................................... 14,583
-------
Total.............................................................. $90,322
=======
</TABLE>
Netted in the above totals is approximately $2,300 for which ZDI has
noncancelable subleases in place. Total sublease income approximates ZDI's
required payments under the related leases. Rent expense amounted to
approximately $22,900 and $4,020 for the year ended December 31, 1995 and for
the period from January 1, 1996 to February 28, 1996, respectively.
15. CONTINGENCIES
ZDI is subject to various claims and legal proceedings arising in the normal
course of business. Management believes that the ultimate liability, if any,
in the aggregate will not be material to the consolidated balance sheet,
future operations or cash flows.
16. SUBSEQUENT EVENTS
Acquisition of the Company
In February 1996, SOFTBANK Corp. entered into an agreement to acquire the
stock of ZDI for an aggregate purchase price of approximately $1,800,000, plus
transaction costs. In a separate agreement, MAC Inc. Ltd., an affiliated
company of SOFTBANK Corp., acquired directly and through affiliates, certain
of the assets and assumed certain of the liabilities of ZDI for an aggregate
purchase price of approximately $302,000.
F-41
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued April 6, 1998
25,800,000 Shares
Ziff-Davis Inc.
COMMON STOCK
----------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. OF THE 25,800,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY,
5,160,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND
CANADA BY THE INTERNATIONAL UNDERWRITERS AND 20,640,000 SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS. SEE "UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS
BEEN NO PUBLIC MARKET FOR COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ANTICIPATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL
BE BETWEEN $14.00 AND $17.00 PER SHARE. SEE "UNDERWRITERS" FOR
A DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING
THE INITIAL PUBLIC OFFERING PRICE.
----------
CONCURRENTLY WITH THE OFFERING BEING MADE HEREBY, THE COMPANY IS OFFERING, BY
MEANS OF A SEPARATE PROSPECTUS, $250 MILLION AGGREGATE PRINCIPAL AMOUNT OF
ITS % SENIOR SUBORDINATED NOTES DUE 2008 (THE "NOTES OFFERING" AND,
TOGETHER WITH THE OFFERING, THE "OFFERINGS"). THE CONSUMMATION OF
EACH OF THE OFFERINGS IS CONDITIONED UPON, AND WILL OCCUR
SIMULTANEOUSLY WITH, THE CONSUMMATION OF THE OTHER. SEE "USE OF
PROCEEDS."
----------
UPON COMPLETION OF THE OFFERINGS, AFFILIATES OF THE COMPANY WILL RETAIN
APPROXIMATELY 74.2% OF THE OUTSTANDING VOTING POWER OF THE COMPANY. SEE
"PRINCIPAL STOCKHOLDERS."
----------
APPLICATION HAS BEEN MADE TO LIST THE COMMON STOCK ON THE
NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "ZD."
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
PRICE $ A SHARE
----------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share................................... $ $ $
Total(3).................................... $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company, estimated at
$ . All the net proceeds will be paid to affiliates of the
Company. See "Use of Proceeds."
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
3,870,000 additional shares of Common Stock at the Price to Public less
Underwriting Discounts and Commissions, for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriters."
----------
The Shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to approval of certain
legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is
expected that delivery of the Shares will be made on or about , 1998 at
the office of Morgan Stanley & Co. Incorporated, New York, New York, against
payment therefor in immediately available funds.
----------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
International
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the estimated expenses, other than
underwriting discounts and commissions, to be incurred in connection with the
distribution of the securities registered under this Registration Statement.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Securities and Exchange
Commission registration
fee...................... $135,700
NASD fees and expenses.... 30,500
Legal fees and expenses... *
Fees and expenses of qual-
ification under state se-
curities laws
(including legal fees)... *
NYSE listing fees and ex-
penses................... *
Accounting fees and ex-
penses................... *
Printing and engraving
fees..................... *
Registrar and transfer
agent's fees............. *
Miscellaneous............. *
Total................... $ *
</TABLE>
- --------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees
and individuals against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with any threatened, pending or completed actions, suits or
proceeding in which such person is made a party by reason of such person being
or having been a director, officer, employee or agent to the Registrant. The
statute provides that it is not exclusive of other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise. Section 6.4 of the
Registrant's By-laws provides for indemnification by the Registrant of its
directors, officers and employees to the fullest extent permitted by the
Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for payments of unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The Company's Certificate of Incorporation provides
for such limitation of liability.
Reference is also made to Section 7(c) of the Underwriting Agreement filed
as Exhibit 1.1 to the Registration Statement for information concerning the
Underwriters' obligation to indemnify the Registrant and its officers and
directors in certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.**
3.1 Form of Certificate of Incorporation of the Company.*
3.2 Form of By-laws of the Company.*
4.1 Specimen of certificate representing the Company's Common Stock, par
value $.01 per share.**
5.1 Opinion of Sullivan & Cromwell, counsel to the Company.**
10.1 1998 Incentive Compensation Plan.*
10.2 1998 Employee Stock Purchase Plan.
10.3 Undertaking, dated as of April 1, 1998, between SOFTBANK Corp. and ZD
Inc.
10.4 License and Services Agreement, dated as of July 28, 1997, between Ziff-
Davis Inc., ZDTV LLC, ZD Television Productions, Inc., MAC Holdings
(America) Inc. and MAC Inc.
10.5 Master License Agreement, dated as of April 1, 1998, between Ziff-Davis
Inc. and SOFTBANK Corp.
10.6 License Agreement, dated as of July 1, 1997, between Mac Inc. and Ziff-
Davis Inc. and SOFTBANK Corp.
10.7 Agreement to Produce, dated April 1, 1998, between ZD COMDEX and Forums,
Inc. and SOFTBANK Forums KK.
10.8 Trademark License Agreement, dated as of April 1, 1998, between ZD
COMDEX and Forums Inc. and SOFTBANK Forums KK.
10.9 Technical Assistance Agreement, dated as of April 1, 1998, between ZD
COMDEX and Forums Inc. and SOFTBANK Forums KK.
10.10 Accounting and Administrative Services Agreement, dated as of April 1,
1998, between ZD COMDEX and Forums Inc. and SOFTBANK Forums KK.
10.11 Registration Rights Agreement, dated as of April 1, 1998, between ZD
Inc. and SOFTBANK Holdings Inc.
10.12 Credit Agreement, dated as of March 27, 1996 between SOFTBANK Holdings
Inc., the Guarantors listed therein, The Bank of New York and Morgan
Stanley Senior Funding, Inc., as amended March 9, 1998.
10.13 Credit Agreement, dated as of , 1998, between Ziff-Davis Inc.,
BNY Capital Markets, Inc., Morgan Stanley Senior Funding, Inc. and the
Agents listed therein.**
10.14 Lease of Ziff-Davis Inc. headquarters at 28 East 28th Street, New York,
New York.*
10.15 Lease Agreement, dated as of , 1998, between ZD Inc., ZD COMDEX
and Forums Inc. and Kingston Technology Company.**
10.16 Form of Indenture, dated as of , 1998, between Ziff-Davis Inc. and
The Bank of New York, as Trustee.**
12. Computation of Ratio of Earnings to Fixed Charges.*
21.1 List of subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Sullivan & Cromwell (included in Exhibit 5 above).**
27. Financial Data Schedule.*
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing of the Offering, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-2
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14,
Indemnification of Directors and Officers" 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. In the event that a claim for
indemnification against such liabilities (other than the payment to the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement or amendment thereto to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, New York on the 6th day of April, 1998.
ZD Inc.
/s/ Ronald D. Fisher
By
-----------------------------------
RONALD D. FISHER
PRESIDENT
/s/ Ronald D. Fisher
-----------------------------------
RONALD D. FISHER,
SOLE DIRECTOR, PRESIDENT AND
TREASURER (PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)
II-4
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EXHIBIT 10.2
ZIFF-DAVIS
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The purpose of the Ziff-Davis 1998 Employee Stock Purchase Plan (the "Plan")
is to provide employees of ZD Inc. (the "Company") and its Subsidiaries with
an opportunity to acquire an interest in the Company through the purchase of
common stock of the Company, par value $0.01 per share (the "Common Stock")
with accumulated payroll deductions. The Company intends the Plan to qualify
as an "employee stock purchase plan" within the meaning of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the provisions of
the Plan shall be construed in a manner consistent with the requirements of
Section 423 of the Code. For purposes of the Plan, "Subsidiary" shall mean any
corporation, if any, having the relationship to the Company described in
Section 424(f) of the Code.
2. ADMINISTRATION.
The Plan shall be administered by a committee (the Committee) of at least
three members of the board of directors of the Company (the Board) appointed
by the Board to administer the Plan and who are "non-employee directors"
within the meaning of Rule 16b-3 as promulgated under Section 16 of the
Securities Exchange Act of 1934. A majority of the Committee shall constitute
a quorum, and the acts of the majority of such quorum shall be the acts of the
Committee. The Committee may select an administrator to whom its duties and
responsibilities hereunder may be delegated. The Committee shall have full
power and authority, subject to the provisions of the Plan, to promulgate such
rules and regulations as it deems necessary for the proper administration of
the Plan, to interpret the provisions and supervise the administration of the
Plan, and to take all action in connection therewith or in relation thereto as
it deems necessary or advisable. The Committee may correct any defect, supply
any omission or reconcile any inconsistency in the Plan in the manner and to
the extent it shall deem desirable to carry it into effect. The determinations
of the Committee in the administration of the Plan, as described herein, shall
be final, conclusive and binding on all persons, including the Company and its
Subsidiaries, its shareholders, Participants and their estates and
beneficiaries. Members of the Committee and any officer or employee of the
Company or any Subsidiary acting at the direction of, or on behalf of, the
Committee shall not be personally liable for any action or determination taken
or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified by the Company with respect to any such
action or determination.
3. ELIGIBILITY AND PARTICIPATION.
(a) Any person, including an officer, who is regularly employed by the
Company or one of its Subsidiaries (an Employee) who is an Eligible Employee
on an Offering Date (as defined in Section 5(a)) shall be eligible to become a
Participant in the Plan beginning on such Offering Date. For purposes of the
Plan, an "Eligible Employee" is any Employee of the Company or a Subsidiary
excluding:
(1) any Employee who customarily is employed for twenty (20) hours per
week or less;
(2) any Employee who customarily is employed for not more than five (5)
months in a calendar year;
(3) any Employee who is a highly compensated employee (within the meaning
of Section 414(q) of the Code) and who participates in the ZD Inc. 1998
Incentive Compensation Plan; or
(4) any Employee who (immediately after the grant of an option under the
Plan and applying the rules of Section 424(d) of the Code in determining
stock ownership) would own shares, and/or hold outstanding options to
purchase shares, possessing five percent (5%) or more of the total combined
voting power or value of all classes of shares of the Company (or its
"parent corporation" or "subsidiary corporation" as such terms are defined
in Section 424 of the Code).
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(b) Any Employee who first becomes an Eligible Employee during an Offering
Period (as defined in Section 5(a)) shall be eligible to become a Participant
in the Plan as of the first day of the Offering Period occurring after the
date on which such Employee becomes an Eligible Employee.
(c) An Eligible Employee shall become a Participant in the Plan by
completing a form (an Authorization Form) supplied by and delivered to the
Company by a Participant authorizing payroll deductions as set forth in
Section 6 hereof and such other terms and conditions as the Company from time
to time may determine, and filing such Authorization Form with the Company by
the date required by the Company, or by any other means prescribed by the
Committee. Such Authorization Form shall remain in effect for subsequent
Offering Periods, until modified or terminated by the Participant.
(d) A person shall cease to be a Participant upon the earliest to occur of:
(1) the date the Participant ceases to be an Eligible Employee, for any
reason;
(2) the first day of the Offering Period beginning after the date on
which the Participant ceases payroll deductions under the Plan; or
(3) the date of a withdrawal from the Plan by the Participant.
4. SHARES SUBJECT TO PLAN.
(a) The maximum number of shares of Common Stock reserved for sale under the
Plan shall be 1,500,000, subject to adjustment as provided in Section 13. If
the total number of shares which would otherwise be subject to options granted
pursuant to Section 5(a) on an Offering Date exceeds the number of shares then
available under the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Committee shall make a pro rata
allocation of the shares remaining available for option grant in as uniform a
manner as shall be practicable and as it shall determine in its sole
discretion to be equitable. In such event, the Committee shall give written
notice to each Participant of such reduction of the number of option shares
affected thereby and shall similarly reduce the rate of payroll deductions, if
necessary. The Plan shall terminate upon the issuance of the maximum number of
shares of Common Stock (unless sooner terminated under Section 14).
(b) Shares of Common Stock to be delivered to a Participant under the Plan
shall be registered in the name of the Participant or, at the election of the
Participant, in the name of the Participant and another person as joint
tenants with rights of survivorship.
5. GRANT OF OPTION.
(a) On each Offering Date the Company shall grant each Eligible Employee an
option to purchase shares of Common Stock, and each Eligible Employee shall
have the same rights and privileges under the Plan, subject only to the
limitations set forth in Sections 4, 5(b), and 5(c). For purposes of the Plan,
Offering Date means the first business day of any period of time (the Offering
Period) as determined from time to time by the Committee during the
effectiveness of the Plan during which options to purchase shares of Common
Stock are granted to Participants.
(b) The option price per share of Common Stock in respect of any Offering
Period shall be an amount equal to the lesser of: (i) eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock on the Offering Date
or (ii) eighty-five percent (85%) of the Fair Market Value of a share of
Common Stock on the last business day of such Offering Period (the Exercise
Date). For purposes of the Plan, "Fair Market Value" shall mean, per share of
Common Stock, the closing price of the Common Stock on the New York Stock
Exchange (the "NYSE") on the applicable date, or, if there are no sales of
Common Stock on the NYSE on such date, then the closing price of the Common
Stock on the last previous day on which a sale on the NYSE is reported.
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(c) No Participant shall be granted an option which permits such
Participants rights to purchase Common Stock under all employee stock purchase
plans of the Company to accrue at a rate which exceeds $25,000 of the Fair
Market Value of the Common Stock (determined at the time the option is
granted) for each calendar year in which such stock option is outstanding at
any time.
6. PAYROLL DEDUCTIONS.
A Participant may, in accordance with rules adopted by the Committee, submit
an Authorization Form that authorizes a payroll deduction of any whole
percentage (from one (1) percent to ten (10) percent) of such Participant's
Compensation (as defined below) on each pay period during the Offering Period.
A Participant may increase, decrease or cease such payroll deduction effective
as of the beginning of each calendar quarter, provided such Participant files
with the Company an Authorization Form requesting such change by the date
required by the Company. For purposes of the Plan, Compensation means base
salary or wage, including salary deferral contributions pursuant to Section
401(k) of the Code and any amount excludable pursuant to Section 125 of the
Code, but excluding any bonus, fee, overtime pay, severance pay, or other
special emolument or any credit or benefit under any employee plan maintained
by the Company or any Subsidiary. All payroll deductions made by a Participant
shall be credited to such Participant's account under the Plan.
7. EXERCISE OF OPTION.
(a) Unless a Participant withdraws from the Plan as provided in Section 9
hereof, such Participant's election to purchase shares shall be exercised
automatically on the Exercise Date, and the maximum number of full shares
subject to such option shall be purchased for such Participant at the
applicable option price with the accumulated payroll deductions and cash
dividends (credited pursuant to Section 10 hereof) in such Participant's
account. During a Participant's lifetime, such Participants option to purchase
shares hereunder is exercisable only by such Participant.
(b) The shares of Common Stock purchased upon exercise of an option
hereunder shall be credited to the Participant's account under the Plan and
shall be deemed to be transferred to the Participant on the Exercise Date and,
except as otherwise provided herein, the Participant shall have all rights of
a stockholder with respect to such shares. Notwithstanding the foregoing, in
accordance with the rules and procedures prescribed by the Committee, in lieu
of crediting shares of Common Stock to the Participants account, such shares
may be issued or transferred to the Participant.
(c) Shares of Common Stock held in nominee name for the account of a
Participant shall be voted as the Participant directs.
8. DELIVERY OF COMMON STOCK.
As promptly as practicable after receipt by the Committee of a written
request by a Participant for withdrawal of Common Stock, the Company shall
cause to be delivered to such Participant a stock certificate representing the
shares of Common Stock which the Participant requests to withdraw. Withdrawals
may be made no more frequently than once each Offering Period unless otherwise
approved by the Committee in its sole discretion.
9. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A Participant may withdraw all the payroll deductions and cash dividends
credited to such Participant's account (that have not been used to purchase
shares of Common Stock) under the Plan at any time by giving written notice to
the Company received at least 15 days prior to the next Exercise Date. All
such payroll deductions and cash dividends credited to such Participant's
account shall be paid to such Participant promptly after receipt of such
Participant's notice of withdrawal and such Participant's option for the
Offering Period in which the withdrawal occurs shall be automatically
terminated. No further payroll deductions for the purchase of shares of Common
Stock shall be made for such Participant during such Offering Period, and any
additional cash dividends during the Offering Period shall be distributed to
the Participant.
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(b) Upon termination of a Participant's status as an Eligible Employee
during the Offering Period for any reason, including voluntary or involuntary
termination, retirement or death, the payroll deductions and cash dividends
credited to such Participant's account that have not been used to purchase
shares of Common Stock shall be returned (and any future cash dividends shall
be distributed) to such Participant or, in the case of such Participant's
death, his designated beneficiary, or if no beneficiary has been designated,
his estate, and such Participant's option with respect to such Offering Period
shall be automatically terminated. A Participant's status as an Employee shall
not be considered terminated in the case of a leave of absence agreed to in
writing by the Company (including, but not limited to, military and sick
leave), provided that such leave is for a period of not more than ninety (90)
days or reemployment upon expiration of such leave is guaranteed by contract
or statute.
(c) A Participant's withdrawal from an offering shall not have any effect
upon such Participant's eligibility to participate in a succeeding offering or
in any similar plan which may hereafter be adopted by the Company.
10. DIVIDENDS.
(a) Cash dividends paid on Common Stock held in a Participant's account
shall be credited to such Participant's account and used in addition to
payroll deductions to purchase shares of Common Stock on the Exercise Date.
Dividends paid in Common Stock or stock splits of the Common Stock shall be
credited to the accounts of Participants. Dividends paid in property other
than cash or Common Stock shall be distributed to Participants as soon as
practicable.
(b) No interest shall accrue on or be payable with respect to the payroll
deductions or credited cash dividends of a Participant in the Plan.
11. NONTRANSFERABILITY.
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of by the
Participant in any way (other than by will and the laws of descent and
distribution) by the Participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
9 hereof.
12. USE OF FUNDS.
All payroll deductions received or held by the Company under the Plan may be
used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
13. ADJUSTMENT OF AND CHANGE IN STOCK.
(a) In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other corporate
change, or any distributions to common shareholders other than cash dividends,
the Committee shall in its sole discretion conclusively determine the
appropriate equitable adjustments, if any, to be made under the Plan,
including without limitation adjustments to the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option, as well as the price per share of Common Stock
covered by each option under the Plan which has not yet been exercised.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which
the Company is not the surviving corporation, or upon a sale of substantially
all of the Companys assets, or a sale or distribution of a Subsidiary, any
affected Participant will thereafter be
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including without limitation adjustments to the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option, as well as the price per share of Common Stock
covered by each option under the Plan which has not yet been exercised.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which
the Company is not the surviving corporation, or upon a sale of substantially
all of the Companys assets, or a sale or distribution of a Subsidiary, any
affected Participant will thereafter be entitled to receive on the next
Exercise Date for each share of Common Stock subject to such Participants
option, the cash, securities and/or property which a holder of one share of
Common Stock was entitled to receive upon and at the time of such transaction.
The Board and the Committee shall take such steps in connection with such
transaction as the Board and the Committee respectively shall deem necessary
to assure that the provisions of this Section 13(b) shall be complied with.
14. AMENDMENT OR TERMINATION.
The Board may at any time terminate or amend the Plan. Except as provided in
Section 4, no such termination shall adversely affect options previously
granted and no amendment may make any change in any option theretofore granted
which adversely affects the rights of any Participant. No amendment shall be
effective unless approved by the stockholders of the Company if stockholder
approval of such amendment is required to comply with any law, regulation or
stock exchange rule.
15. NOTICES.
All notices or other communications by a Participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.
16. GOVERNING LAW; REGULATORY APPROVALS.
(a) This Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of New York
applicable to contracts made and to be performed in such State.
(b) The obligation of the Company to sell or deliver shares of Common Stock
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable Federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
17. NOTICE OF SALE.
If the Participant makes a disposition, within the meaning of Section 424(c)
of the Code and regulations promulgated thereunder, of any share or shares
issued to such Participant pursuant to such Participant's exercise of an
option granted hereunder, and such disposition occurs within the two-year
period commencing on the day after the Offering Date or within the one-year
period commencing on the day after the Exercise Date, such Participant shall,
within five (5) days of such disposition, notify the Company thereof
(including the proceeds of such disposition).
18. REPORTS.
Each Participant having an account balance in the Plan shall receive a
quarterly statement of such Participants account.
19. EFFECTIVE DATE; APPROVAL OF STOCKHOLDERS.
The Plan shall be effective as of July 1, 1998, subject to the approval of
the stockholders of the Company within 12 months before or after the date the
Plan is adopted, and failure to receive such approval shall render the Plan
and all outstanding options issued thereunder void and of no effect.
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EXHIBIT 10.3
[LETTERHEAD OF SOFTBANK CORPORATION]
24-1, Nihonbashi-Hakozakicho * Chuo-ku, Tokyo 103, Japan
Tel: (03) 5642-8020
Fax: (03) 5641-3400
April 1, 1998
Ziff-Davis Inc.,
One Park Avenue,
New York, NY 10011.
Attention: Mr. Eric Hippeau, Chairman and CEO
Dear Sirs:
In connection with the public offering of shares of Ziff-Davis Inc.
(formerly ZD Inc., the "Company"), SOFTBANK Corp. ("SOFTBANK") undertakes that
SOFTBANK and its subsidiaries will not expand their operations involving
(i) publishing information on computing and Internet-related
technology through the media of print, CD ROM/DVD, Internet and
television, or
(ii) producing trade shows, conferences, exhibitions and
similar events primarily related to computing and Internet-related
technology,
outside Japan in competition with the Company and its subsidiaries, without the
prior approval of the Company's management directors in consultation with the
independent directors. It is agreed that the term "subsidiaries" as used herein
shall include only majority-owned subsidiaries of the Company or SOFTBANK, as
the case may be.
For its part, the Company undertakes that the Company and its
subsidiaries will
(i) not compete with SOFTBANK in Japan without the prior
approval of SOFTBANK's Board of Directors, and will afford SOFTBANK
full cooperation and a right of first license on all of the Company's
products and services in Japan, and
(ii) identify each as a member of the SOFTBANK Group by
displaying the words "A SOFTBANK Company" or the name "SOFTBANK"
prominently on (a) the cover page and masthead
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Ziff-Davis Inc. -2-
of all publications, (b) primary promotional materials for
all trade shows and conferences, and (c) the letterhead
and calling cards of all personnel.
The foregoing undertakings of SOFTBANK and the Company shall be in
effect only so long as SOFTBANK maintains ownership of at least 40% of the
outstanding voting stock of the Company and such ownership is sufficient to
elect a majority of the Company's Board of Directors.
Please confirm your agreement with the foregoing by signing and
returning a copy of this letter.
Very truly yours,
SOFTBANK CORP.
By:
--------------------------
Masayoshi Son,
President and CEO
Confirmed,
ZIFF-DAVIS INC.
By:
-------------------------------
Eric Hippeau,
Chairman and CEO
<PAGE>
EXHIBIT 10.4
LICENSE AND SERVICES
AGREEMENT
Dated as of July 28, 1997
The parties to this agreement are ZIFF-DAVIS INC., which has its principal
office at One Park Avenue, New York, New York 10016 ("Ziff-Davis"), ZDTV LLC, a
Delaware limited liability company, which has its principal offices at 650
Townsend Street, San Francisco, California 94103 ("ZDTV"), ZD TELEVISION
PRODUCTIONS, INC., a Delaware Corporation, which has its principal offices at
650 Townsend Street, San Francisco, California 94103 ("ZDTP", together with
ZDTV, the "TV Affiliates"), MAC HOLDINGS (AMERICA) INC., a Delaware corporation
("MAC America") and MAC Inc., a Japanese company which is the parent of MAC
America ("MAC").
Ziff-Davis is a leading integrated media and marketing company focused on
the computer technology industry, with platforms in magazine publishing, trade
shows, exhibitions and conferences, online content, market research and
education.
ZDTV, a wholly-owned subsidiary of MAC America, has announced plans to
produce ZDTV: Your Computer Channel, a 24-hour cable television channel and
integrated Web site focused exclusively on computers, technology and the
Internet (the "Channel").
ZDTP, a wholly-owned subsidiary of MAC America, creates customized
programming for ZDTV and for third parties.
The TV Affiliates desire to license, and Ziff-Davis desires to grant the TV
Affiliates, a license to the "ZD" trade name and mark, certain other trademarks
of Ziff-Davis and certain editorial content of Ziff-Davis for use in the TV
Affiliates' products and services.
MAC America, the owner of the TV Affiliates, desires that Ziff-Davis
provide management, centralized services and other services to the TV
Affiliates, and Ziff-Davis desires to perform such services, in accordance with
the terms and conditions of this Agreement.
In consideration of Ziff-Davis' licenses and services hereunder, MAC
America has agreed to provide Ziff-Davis an option to purchase the TV
Affiliates.
Therefore, the parties agree as follows:
1. Trademark License.
-----------------
(a) License Grant. Subject to the terms and conditions of this agreement,
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Ziff-Davis hereby grants the TV Affiliates a non-exclusive, non-transferable,
royalty-free license to use (i) the "ZD" trade name and mark solely in the
manner and form and for the purpose(s) specifically set forth on Exhibit A,
which includes the right to use "ZD" in the company name of each TV Affiliate
and in the name of the Channel; and (ii) those marks and the other Ziff-Davis
trademarks
<PAGE>
set forth in Exhibit B hereto (collectively with "ZD", the "Licensed Marks") in
such products and services of the TV Affiliates as may be approved by Ziff-
Davis, such approval not to be unreasonably withheld. Without limiting the
generality of the foregoing, Ziff-Davis shall have the right, at any time, upon
written notice to the TV Affiliates, to amend Exhibit B to withdraw from the
license granted herein any of the Licensed Marks which are no longer used by
Ziff-Davis (whether due to discontinuance, sale or otherwise), or for which
Ziff-Davis wishes to substitute another mark, and to add to the license granted
herein, at Ziff-Davis' sole discretion, any new mark. All rights not
specifically granted to the TV Affiliates herein are retained by Ziff-Davis.
(b) Ownership of the Licensed Marks.
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Each TV Affiliate acknowledges and agrees that the Licensed Marks
together with the goodwill of the business symbolized thereby, are the sole and
exclusive properties of Ziff-Davis. All use by the TV Affiliates of the
Licensed Marks shall inure solely to the benefit of Ziff-Davis. Each TV
Affiliate agrees that it will not use any of the Licensed Marks or any other
material which is owned by Ziff-Davis in any way other than as authorized
herein.
(ii) Upon Ziff-Davis' written instructions, the TV Affiliates will
assist and fully cooperate with Ziff-Davis' efforts during and after the term of
this agreement to secure, protect and preserve Ziff-Davis' rights and interests
in the Licensed Marks.
(c) Use of Licensed Marks; Quality Control by Ziff-Davis.
----------------------------------------------------
Each TV Affiliate warrants that it shall maintain the quality of
their respective products and services at a level consistent with the high
quality and standard of Ziff-Davis' products and services. Upon Ziff-Davis'
request, the TV Affiliates shall provide to Ziff-Davis access to representative
samples of all of the TV Affiliates' uses of the Licensed Marks in connection
with their products and services.
Each TV Affiliate acknowledges and agrees that the Licensed Marks have
an established prestige, reputation and goodwill and are of great value to Ziff-
Davis. The TV Affiliates each warrant that it shall use the Licensed Marks in
its services and products in a responsible manner to protect and enhance the
prestige of the Licensed Marks and Ziff-Davis. Each TV Affiliate further
warrants that it shall only use the Licensed Marks in its services and products
in a manner consistent with Ziff-Davis trademark usage policies and Exhibit A,
as it may be amended by Ziff-Davis from time to time upon notice to the TV
Affiliates.
Each TV Affiliate shall remedy any deficiencies in its use of the
Licensed Marks or the quality of its services and products as soon as
practicable following receipt of notice from Ziff-Davis and in any event, within
ten days.
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2. Content License
---------------
(a) License Grant. Ziff-Davis hereby grants the TV Affiliates a worldwide,
-------------
non-exclusive, non-transferable license to incorporate all or part of the
Content (as defined below) into ZDTV's products and services and to deliver
those products and services via the Channel or other distribution methods
including ZDTV's site on the World Wide Web.
(i) For purposes of this agreement, the term "Content" shall mean the
editorial text of articles published in Ziff-Davis' publications, as mutually
selected and agreed upon by the parties hereto, including, data or other text,
but excluding any articles, data or other text as to which Ziff-Davis has not
obtained the right to license the use contemplated by this agreement, and such
other Ziff-Davis content as may be mutually agreed upon by the parties hereto.
(ii) Notwithstanding any suggestion to the contrary above, Ziff-Davis
may itself distribute the Content in any media, including, without limitation,
cable, broadcasts or other forms of television, or license third parties to
distribute or incorporate the Content into databases, and other products and
services.
(iii) Ziff-Davis shall have the right to exercise editorial and other
quality control over the ZDTV products and services which use a Licensed Mark as
part of its name or are associated or may be reasonably perceived as associated
with Ziff-Davis or any Licensed Mark, all as Ziff-Davis deems appropriate to
ensure the quality of such products and services and protection of the goodwill
of its trademarks. The TV Affiliates shall provide Ziff-Davis with reasonable
access, at ZDTV's expense, to exercise such control and to review all such
products and services.
(iv) Ziff-Davis may also restrict the TV Affiliates' use or
distribution of the Content in any product or service that may have an adverse
effect on the operations or value of Ziff-Davis' products and services. For
example, if by distributing certain Content by cable television or online before
or shortly after distribution of the Ziff-Davis print publication containing
such content there is a risk of a material loss of readership or other adverse
effect the on circulation of that publication, Ziff-Davis may impose a
reasonable embargo or waiting period on the distribution of the content of that
publication or impose other reasonable restrictions on the distribution of the
product or service containing such content.
3. Management; Services.
--------------------
(a) Management. Ziff-Davis shall furnish management services to the TV
----------
Affiliates including overseeing the development and operation of the Channel and
other products and services and the development and implementation of strategic
plans and new projects. The
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President of each TV Affiliate will be responsible to MAC America for its
management but will keep the Chief Executive Officer of Ziff-Davis informed of
all material business issues and any material or strategic deviation from the TV
Affiliates' business plans.
(b) Provision of Services. Ziff-Davis shall provide the following
---------------------
centralized services to the TV Affiliates on the same allocated cost basis as it
charges its own operations: (i) accounting; (ii) tax preparation; (iii) Human
Resources; (iv) administration of payroll and benefits; (v) facilities; (vi)
insurance; (vii) legal; (viii) Information Systems; (ix) Internet services; and
(x) other similar centralized services.
(c) Standard of Services. The nature, quality and consistency of the
---------------------
services provided by Ziff-Davis pursuant to this Section shall be substantially
consistent with services provided by Ziff-Davis, as applicable, to its own
wholly-owned operations and Ziff-Davis shall not be liable for any error or
omission in the services provided except for willful misconduct.
4. Joint Promotion and Marketing. Ziff-Davis and the TV Affiliates shall
-----------------------------
promote each other's products and services. Ziff-Davis shall include the
products and services of the TV Affiliates in its media marketing and sales
activities, including within the ZD Media Network.
5. Funding; Reimbursement.
----------------------
(a) Through December 31, 1998, Ziff-Davis shall advance funds necessary for
the TV Affiliates to conduct their business in its ordinary course. Such
amounts advanced, including the allocated costs of central services provided by
Ziff-Davis, shall be repaid to Ziff-Davis by MAC America; provided, however, MAC
America has approved the level of funding, such approval not to be unreasonably
withheld. Such funding shall be reviewed each quarter in advance and Ziff-Davis
shall present a detailed annual plan and quarterly plan to MAC America at least
30 days prior to the start of each calendar quarter. MAC America shall promptly
respond to such plans. All amounts expended that are not contemplated in such
plans and approved by MAC America will be for Ziff-Davis' accounts.
Reimbursement shall be made at the end of each calendar year commencing with the
year ending December 31, 1997, or in the event Ziff-Davis exercises its option
in Section 6 below prior to the end of any year, be set off against the option
price or at such time as this agreement is terminated by either party if such
termination is prior to the end of a calendar year. Reimbursement shall also
include interest at the 30 day Libor rate (in effect for each month) plus 0.5
percent.
(b) Ziff-Davis may also enter into leases of real property and equipment
necessary for the TV Affiliates' business and such guarantees of such leases as
it deems appropriate. Upon the
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termination of this agreement (other than by Ziff-Davis' exercise of its option
below), MAC America shall secure the release of Ziff-Davis from all such
obligations.
6. Option; Sale of the TV Affiliates. During the period commencing as of
---------------------------------
the date of this Agreement and continuing to and including December 31, 1998,
Ziff-Davis or its designee shall have the option to purchase from MAC America
all of MAC America's stock or interests in the TV Affiliates and/or all of the
assets of the TV Affiliates for a purchase price equal to the total amount of
cash invested by MAC America (including any amounts owed to Ziff-Davis pursuant
to paragraph 5(a)) in the TV Affiliates plus a return of 10% per annum on its
investment. Ziff-Davis shall exercise its option by written notice to MAC
America. Such purchase shall be free and clear of any liens or claims by third
parties and shall be carried out through purchase agreements and other
documentation (including appropriate representations and warranties and other
terms and conditions) as is standard for a sale of this type. The closing shall
be held as soon after the option notice as is practicable. While the option
shall be in effect, MAC America may not transfer any of its interest in the TV
Affiliates or allow either of the TV Affiliates to sell any of their assets or
rights other than in the ordinary course of business.
7. Term, Termination.
-----------------
(a) The initial term of this agreement shall commence with the date of this
agreement and shall continue through December 31, 1998. The agreement shall
continue after the initial term unless terminated in writing by either party
with at least 90 days' notice, provided, however, Ziff-Davis shall have no
further obligations to fund the TV Affiliates after December 31, 1998.
(b) Notwithstanding anything to the contrary above, Ziff-Davis may
terminate this agreement if one or both of the TV Affiliates fail to cure any
material breach within 30 days after notice from Ziff-Davis of that breach.
8. Assignment. This agreement shall be binding on and shall inure to the
----------
benefit of the parties and their respective heirs, legal representatives,
successors and assigns. This agreement and the rights granted herein may not be
assigned by any party without the prior written consent of the other parties.
9. License Warranties; Indemnity.
-----------------------------
(a) Ziff-Davis represents and warrants it has all the rights necessary to
grant the TV Affiliates the licenses granted herein. Ziff-Davis will indemnify,
defend and hold the TV Affiliates harmless from any loss, liability, damage or
expense (including reasonable attorneys' fees and legal costs) arising from any
claim by a third party of infringement of trademark or copyright arising out of
the use by the TV Affiliates of the Licensed Marks or the Content, provided,
that
5
<PAGE>
such claims do not arise out of any errors, additions, deletions or other
changes (collectively, "alterations") to those materials made by either TV
Affiliate.
(b) MAC America and the TV Affiliates shall, jointly and severally,
indemnify and hold Ziff-Davis harmless from and against any claim by a third
party for loss, liability, damage or expense (including reasonable attorneys'
fees and legal costs) arising out of any material contained in any of the TV
Affiliates' service or products which is not provided by Ziff-Davis, or any
alteration of the Licensed Marks or Content.
(c) The foregoing indemnity obligations shall be conditioned upon prompt
notice by the party requesting indemnification of any claim for which
indemnification may be sought, complete control of the defense and settlement of
the matter by the indemnifying party, and reasonable cooperation by the party
claiming indemnification.
10. Guaranty by MAC. MAC hereby guarantees payment when due of all
---------------
obligations of MAC America, without set off, notice or demand.
11. Notice. Any notice or other communication under this agreement shall be in
------
writing and shall be considered given when delivered personally or mailed by
overnight courier or registered mail, return receipt requested, to the parties
at their respective addresses set forth above (or at such other address as a
party may specify by notice to the other). A copy of any notice to Ziff-Davis
shall also be sent to its Legal Department at the same address.
12. Miscellaneous.
-------------
(a) This agreement, and the performance under it, shall be deemed made in
and construed in accordance with the laws of the State of New York applicable to
agreements made in and to be performed in New York.
(b) No party shall be considered in default or liable under this agreement
in the event of delay or failure to perform as a result of war, civil riot,
epidemic, act of God, fire, strike, government restriction or other
circumstances beyond that party's reasonable control.
(c) This agreement constitutes the entire understanding of the parties with
respect to its subject matter, supersedes all previous agreements, arrangements
and understandings, written or oral, relating to its subject matter and cannot
be amended except by a writing signed by both parties.
(d) No waiver of any provisions of this agreement shall be effective or
binding unless in writing and signed by both parties. No waiver of any breach of
any provisions shall constitute a waiver or any other breach of that provision
or any other provision.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute this Agreement as of the date set forth above.
ZDTV LLC ZD TELEVISION PRODUCTIONS, INC.
By: _________________________ By: _________________________
Name: Name:
Title: Title:
ZIFF-DAVIS INC. MAC HOLDINGS (AMERICA)
INC.
BY: _________________________ BY: _________________________
Name: Name:
Title: Title:
MAC INC.
By: _________________________
Name:
Title:
7
<PAGE>
Groupjmm\mlagmt.doc
EXHIBIT 10.5
MASTER LICENSE AGREEMENT
As of April 1, 1998
The parties to this agreement are ZIFF-DAVIS Inc., a Delaware corporation,
with its principal office at One Park Avenue, New York, New York 10016
("Licensor"), and SOFTBANK CORP., a corporation organized and existing under the
laws of Japan, with its principal office at 24-1, Nihonbashi-Hakozakicho, Chuo-
ku, Tokyo 103, Japan, ("Licensee").
Licensor is a leading publisher in the United States of computer
publications and the owner of trademark registrations and logos for those
publications.
Licensee is a leading publisher in Japan of computer publications.
Licensor and Licensee have entered into a series of prior license
agreements and syndication agreements for the publication by Licensee of
Japanese editions of Licensor's publications and the use by Licensee of
materials from other Licensor publications.
Licensee and Licensor desire to continue their relationship under a master
license agreement which would continue to provide for Licensee to publish
foreign editions of Licensor's publications and to use editorial material from
other Licensor publications in its own publications.
Accordingly, it is agreed:
1. Grant of License.
----------------
(a) Foreign Edition Rights.
----------------------
(i)Subject to the terms and conditions set forth in this
agreement, Licensor hereby grants to Licensee, and Licensee hereby
accepts, the exclusive license during the terms provided in Section 2
below to publish and distribute throughout Japan (the "Territory") a
Japanese-language edition (each a "Foreign Edition" and collectively
the "Foreign Editions") of each of the Licensor's publications listed
on Exhibit A, as from time to time amended, (each a "Publication and
collectively, the Publications") in print and on CD-ROM, DVD and on
ZDNet (as long as Licensee holds a license to publish ZDNet in the
Territory) but not in any other platform without Licensor's consent
which shall not be unreasonably withheld. Licensee shall not, without
the prior written consent of Licensor, directly or indirectly export
or allow the export of any Foreign Edition outside of the
1
<PAGE>
Territory. Licensee shall use its best efforts in all respects in the
promotion, publication, distribution and sale of each Foreign Edition.
(ii)Subject to the terms and conditions set forth in this
agreement, Licensor also hereby grants to Licensee the right during
the term of each license to translate into and use in the Japanese
language, solely in connection with publication of a Foreign Edition,
Available Material (as defined in Section 6 below) from the
corresponding Publication and the right during the term of such
license to use, solely in connection with the publication, advertising
and promotion of such Foreign Edition in the Territory, the trademarks
in English, and the logos, as more fully described and illustrated in
Exhibit B, and as it may be amended from time to time by Licensor
upon notice to Licensee (collectively, the "Trademarks").
(b) Syndication Rights. Subject to the terms and conditions set forth
------------------
in this agreement, Licensor hereby grants to Licensee, and Licensee hereby
accepts, the exclusive right during the term of this agreement to select and
translate into the Japanese language Available Material as defined in Section 6,
from the Licensor's publications listed on Exhibit C (the "Additional
Publications") for publication and distribution in the Territory in print form
in a magazine format and to publish and distribute such translated material in
the Territory in print form in a magazine format, but only as part of the
designated Licensee publication also listed on Exhibit C (the "SB Publications")
and one time only; provided, however, that with respect to Available Material
for which Licensor's rights are non-exclusive, Licensee's rights hereunder shall
be non-exclusive.
(c) Rights to Other Publications. Licensor agrees to furnish Licensee
----------------------------
with copies of all its wholly owned publications worldwide and, upon written
request from Licensee, to include any such publication in Exhibit A or Exhibit C
to this agreement, thereby granting to Licensee the same rights as provided
above; provided, however, Licensor and Licensee agree on the amount of the fee
to be paid for Available Materials from publications added to Exhibit C and the
Licensee's publications in which such materials may be used. In addition,
Licensor agrees that Licensee shall have a right of first refusal on all
licenses with respect to publication in the Territory of any of Licensor's
existing or future publications, and that neither Licensor nor any of its
affiliates will initiate discussions with any third party in Japan with respect
to possible licensing of any of Licensor's publications to such party without
giving prior notice to Licensee. If Licensee shall terminate publication of any
Foreign Edition or the use of Available Material from
2
<PAGE>
any Additional Publication, a license for any Foreign Edition shall be
terminated for any other reason, or Licensee shall decline a right of first
refusal within sixty (60) days after Licensor's notice of such right, then
Licensor shall be free to license the right to publish that Foreign Edition or
to use that Available Material to any other entity in the Territory; but not on
terms more favorable than those offered to Licensee in the right of first
refusal.
2. Terms. Unless terminated earlier pursuant to this agreement including
-----
pursuant to Section 3(a), the term of each license for a Foreign Edition listed
on Exhibit A shall be for an initial period commencing on April 1, 1998 (and
with the date of first publication for any Foreign Edition hereafter added) and
ending March 31, 2008, provided, however, if Licensee shall cease directly or
indirectly to own at least 30% of the Common Stock of Licensor, Licensor may
terminate this agreement on not less than one year's notice. Each license for
Available Material shall be for an initial period of three years commencing on
April 1, 1998 and ending March 31, 2001. After the expiration of the initial
term in each case above, the term shall be automatically extended for additional
one-year periods unless either party shall give notice to the other at least one
hundred eighty (180) days prior to the expiration of the initial or any renewal
period of its intention to terminate the license on that expiration date. As
used in this agreement, the term "License Year" shall mean a 12-month period
commencing on the first day of April of each year, except that if the
termination of any license is effective other than on the anniversary of any
such license commencement date, the final License Year shall end on the
effective date of termination. Each License Year shall be referred to by the
calendar year of each such April 1.
3. Compensation.
------------
(a) Foreign Edition. In consideration of the rights granted by Licensor
---------------
under Section 1(a) of this agreement, Licensee shall pay royalties to Licensor
equal to a specified percentage of Licensee's Net Revenue (as defined in Section
3(b) below) from each Foreign Edition during each Reporting Period (as defined
below). Royalties shall be computed and expressed in Japanese Yen. That
percentage shall be the amount set forth on Exhibit A.
3
<PAGE>
(b) Net Revenue. As used in this agreement, the term "Net Revenue"
-----------
from a Foreign Edition shall mean the total amount (exclusive of value-added tax
or other sales, use or similar tax, but not income tax) of (i) Licensee's gross
advertising billings for such Foreign Edition, less related advertising agency
commissions, actual write-offs for bad debts, credits, discounts and other
similar standard allowances directly related to such billings; plus (ii) all
----
revenues derived from subscriptions to such Foreign Edition, less actual write-
offs for bad debts and credits; plus (iii) all revenues derived from the sale of
----
copies of such Foreign Edition other than by subscription, less returns; plus
----
(iv) all revenues derived from sponsorship of trade shows and conferences, and
list rentals of paid subscribers to such Foreign Edition and reprint sales; plus
----
(v) all revenues derived from any other activities contemplated by this
agreement, including, without limitation, distribution of such Foreign Edition
in any medium or form other than print form. All amounts included in Net
Revenue, as that term is defined in this Section 3(b), and the Reporting Period
in which such amounts shall be included, shall be determined in accordance with
generally accepted accounting principles for the magazine publishing industry in
the United States.
4
<PAGE>
Shall be reasonable and shall not exceed allocations to Licensee's own
publications of comparable size.
(c) Syndication Rights. In consideration of the syndication rights
------------------
granted by Licensor under Section 1(b) of this agreement, Licensee shall pay to
Licensor the amount per year set forth on Exhibit C for Available Material from
each Additional Publication.
4. Payments; Statements; Records.
-----------------------------
(a) Foreign Editions.
----------------
(i) With respect to each Foreign Edition licensed hereunder,
royalties for every six (6) month period during each License Year
(each such period shall herein be referred to as a "Reporting Period")
shall be paid by Licensee to Licensor within sixty (60) days after the
end of that Reporting Period. Royalties shall be paid, at Licensor's
option, in Japanese Yen or the equivalent in United States Dollars
converted at the TTS exchange rate in effect on the day of payment as
quoted by Licensee's transferring bank.
(ii) With each Reporting Period payment, Licensee shall deliver
to Licensor a statement certified by an authorized officer of its
publishing division in substantially the form of Exhibit D attached
hereto.
(iii) Within ninety (90) days after the end of each License
Year, Licensee shall provide Licensor with a statement certified by an
authorized officer setting forth the financial information required to
be contained in the statements for the Reporting Periods relating to
that License Year.
(b) Syndication Rights. Each annual payment for Available Material
------------------
from Additional Publications shall be payable in two installments in advance on
April 1 and October 1 of each License Year.
(c) If Licensee fails to pay any amount due under this agreement by
its due date and such failure continues for ten (10) business days, then
interest shall accrue on all unpaid amounts at the published prime rate of the
Bank of New York per annum, or, if lower, the highest rate then permitted by New
York law from the date on which payment was due through the date on which
Licensor receives payment. Licensee agrees to pay such interest and all
collection costs.
(d) The provisions of this Section 4 shall survive the expiration or
termination of any license under this agreement.
5
<PAGE>
5. Manner of Payment.
-----------------
(a) Each payment required to be made by Licensee pursuant to this
agreement shall be made by wire transfer to Licensor's account at a bank
designated by Licensor.
(b) Licensee shall be responsible for all bank transfer fees.
(c) The provisions of this Section 5 shall survive the expiration or
termination of any license under this agreement.
6. Available Material.
------------------
Foreign Editions.
----------------
(a) During the term of each license under this agreement, Licensor
shall at Licensor's expense, send via air mail or air courier, at Licensor's
option, to Licensee five (5) copies of each issue of each Publication or
Additional Publication immediately upon publication. For purposes of this
agreement, subject to any use restrictions identified by Licensor, all editorial
items (which term includes, without limitation, graphics and artwork) from each
Publication or Additional Publication in which Licensor owns the right to
license publication by Licensee in any Foreign Edition or SB Publication shall
be referred to as "Available Material", including editorial items available on
any CD version of the Publication or Additional Publication. Available Material
shall also include Benchmarks developed by any Publication or Additional
Publication and upon request, Licensor will provide Licensee with any software
required to conduct benchmark tests.
(b) Upon Licensee's request, Licensor shall make available to Licensee
electronic files, in a format and via a medium to be determined by Licensor, of
text, graphics and artwork that have been identified by Licensor as Available
Material. In the event that Licensee wishes to use at reasonable cost any
editorial item from any Publication or Additional Publication that is not
Available Material, Licensor shall use reasonable efforts to obtain permission,
on Licensee's behalf, for Licensee to use that item and Licensee shall promptly
reimburse Licensor for any fees, costs or expenses paid by Licensor to obtain
such permission, provided that Licensor shall have obtained Licensee's approval
of the amount of any such fees, costs or expenses prior to having incurred them.
Licensee shall also be responsible for the cost of all film or transparency
duplication and all costs of shipping or otherwise transmitting editorial
material, including Available Material (other than the copies of the
Publications and Additional Publications referred to above), for which Licensee
shall reimburse Licensor upon receipt of Licensor's invoice.
6
<PAGE>
(c) Notwithstanding any provision in this agreement to the contrary, if
Licensor is notified or believes that there is a likelihood of a suit or claim
relating to any item of Available Material, Licensor reserves the right not to
provide Licensee with such item and to revoke by notice to Licensee the right to
publish such item. Licensee shall not publish that item after receipt from
Licensor of such notice. Any action by Licensee in breach of this Section 6(c)
shall be at Licensee's own risk.
(d) In no event shall Licensee publish and distribute any Available
Material in any Foreign Edition or SB Publication prior to the publication and
distribution of such material by Licensor in the corresponding Publication or
Additional Publication.
(e) Licensee shall cause the translation of Available Material to be
made faithfully and accurately by a reasonably competent translator. Licensee,
if requested to do so, shall submit its translation to Licensor for review and
comment. Notwithstanding the foregoing, Licensee may edit Available Material so
long as the resulting changes do not affect the meaning of any item of Available
Material and are required (i) by any governmental authority, or (ii) in
Licensee's reasonable judgment, to fit space or similar editorial requirements
for publication or to render any item of Available Material more readily
comprehensible in style or language to the readers of the Foreign Edition or the
SB Publication. Any information relating to authorship credit, trademarks or
copyrights shall not be changed for any reason and must be included.
(f) In addition to Available Material from Publications, Licensee may
also include in any Foreign Edition other material prepared by Licensee or
purchased or licensed from other parties (the "Other Material"), provided that
the standard, content and quality of the Other Material is reasonably consistent
with the standard, content and quality of the corresponding Publication or
Publications; provided further that if Licensee wishes to include in any Foreign
Edition material which is not created specifically for such Foreign Edition,
Licensee shall first obtain Licensor's prior written consent.
(g) During the term of each license hereunder, upon request, Licensor
shall provide Licensee with a reasonable amount of editorial and sales training
support, and marketing and promotional assistance for each Foreign Edition.
Licensee shall bear all of Licensor's reasonable out-of-pocket expenses in
providing such support or assistance, including, without limitation, reasonable
travel and per diem expenses for support or assistance provided outside of the
United States.
7
<PAGE>
(h) In no event may the Available Material contained in any SB
Publication exceed 25% of the total edit material in that SB Publication.
7. Identification of Foreign Edition. The front cover of each issue of
---------------------------------
any Foreign Edition shall bear the title set forth in Exhibit A, and all the
trademarks and logos set forth in Exhibit B, all in accordance with the
standards for form, size, logo, color and position set forth in Exhibit B, and
language identifying the Foreign Edition as the Japanese edition or derivative
of the Publication. Licensee will take reasonable steps to insure that all
references to the Trademarks and any other trademarks of Licensor or its
affiliates in the editorial content of any Foreign Edition, including articles,
headlines and section headlines, and on the cover of any Foreign Edition and in
advertising, publicity and promotional materials, and any editorial references
to any other trademarks of Licensor or its affiliates, are consistent with
proper trademark usage, Exhibit B and such other guidelines of Licensor on such
usage as are communicated by Licensor to Licensee in writing from time to time.
8. Quality Standards and Quality Control; Conflict of Interest.
-----------------------------------------------------------
(a) All aspects of the publication and distribution of each Foreign
Edition, including, but not limited to, all aspects of advertising (including
advertisers, products advertised, advertising copy, sales practices and terms),
all aspects of editorial content, design and structure (including design, art
work, layout and design and copy lines of the front cover), all aspects of
manufacturing and production (including paper, printing and binding), and all
advertisements, publicity and promotional material regarding such Foreign
Edition, including, without limitation, premium disks and CD-ROMs, shall be of a
standard, content and quality that meets or exceeds the standard, content and
quality of the Publication, and that does not, in all material respects,
adversely reflect upon the reputation, integrity and high standing of the
Publication and Licensor or its affiliates or infringe or adversely affect the
value or reputation of or misuse any of the Trademarks or any other trademarks
of Licensor or its affiliates.
(b) Licensee shall, at its expense, send by air mail to Licensor five
(5) copies of each issue of each Foreign Edition published by Licensee promptly
after its publication so that Licensor may verify the continued overall quality
of the same.
(c) Licensee shall not engage in any actual or apparent conflict of
interest which would tend to create an impression in the minds of the public,
and especially readers of and advertisers in computer publications, that any
Foreign Edition is not an impartial, independent publication. The sale by
Licensee or its subsidiaries or affiliates of computer hardware or
8
<PAGE>
software shall not by itself be deemed a conflict of interest under this Section
8(c), provided such activity does not affect the impartiality or the
independence of any Foreign Edition.
9. Specific Advertising Matters.
----------------------------
(a) In the event that advertising in any Foreign Edition is sold in
combination with one or more of Licensee's other publications, the revenues from
such a combined sale shall be allocated among all publications involved in that
sale on the ratio of the then current one-time full page black and white rate
card rates for those publications.
(b) For the purpose of calculating Net Revenue, any barter
advertisement (i.e., any advertisement for which Licensee receives consideration
in a form other than cash) shall be deemed to have generated revenues at the
average page rate for the issue in which the advertisements appeared and any
house advertisements (i.e., advertisements promoting Licensee's own products
and/or services) in excess of two (2) pages per issue of the Foreign Edition,
shall be deemed to have generated revenues at the greater of (x) the amount
charged by Licensee to its divisions for those advertisements and (y) the paper,
printing and other production costs of such ads.
10. Copyright and Trademark Notice and Credit.
-----------------------------------------
(a) Each copy of each Foreign Edition shall carry the following notice
and credit on the contents or masthead page in the Japanese language: "The
Japanese edition of [the Publication] is published under license from Ziff-Davis
Inc., New York, New York. Editorial items appearing in [the Foreign Edition]
that were originally published in the U.S. Edition of [the Publication] are the
copyright property of Ziff-Davis Inc. Copyright _199_ [or other year of first
publication] Ziff-Davis Inc. All Rights Reserved. [Trademark] is a trademark of
Ziff-Davis Inc".
(b) Each copy of each SB Publication containing Available Material
shall carry the following notice and credit on the contents or masthead page in
the Japanese language: "Editorial items appearing in [the SB Publication] that
were originally published in the U.S. Edition of [the Additional Publication]
are the copyright property of Ziff-Davis Inc. Copyright _199_ [or other year of
first publication] Ziff-Davis Inc. All Rights Reserved. [Trademark] is a
trademark of Ziff-Davis Inc"
11. Non-Competition.
---------------
(a) During the term of this agreement, Licensee shall not, directly or
indirectly, engage in the business of publishing or distributing in the
Territory any publication, in print, electronic or other form, the principal
editorial content of which is directly competitive with any
9
<PAGE>
Foreign Edition, provided, that nothing herein shall prevent Licensor's
continued publication of its existing publications. Nothing herein shall prevent
Licensee from licensing materials or publications from other US publishers
provided such publishers are not competitors of Licensor. If such publishers are
competitors of Licensor, Licensee shall not licensee materials or publications
without Licensor's consent, not be unreasonably withheld.
(b) The provisions of this Section 11 shall also apply in the Territory
to the actions of and be directly binding on any company directly or indirectly
owned or controlled by or under common ownership or control with Licensee, or
which directly or indirectly owns or controls Licensee (each of the foregoing
companies shall be referred to in this agreement as a "Licensee Affiliate") to
the same extent Licensee is bound by such provisions, as if they were direct
obligations of the Licensee Affiliate and as if the Licensee Affiliate were a
party to this agreement.
(c) The provisions of this Section 11 shall survive the expiration or
termination of this agreement.
12. Trademarks.
----------
(a) Except for the permission specifically given to Licensee in this
agreement, as between Licensor and Licensee, all rights and interests in the
Trademarks remain Licensor's exclusive property. The scope of Licensee's
permission will not be considered as expanded in any respect, by implication,
operation of law or any other means except by a writing signed by both parties.
All use of the Trademarks and any other trademarks owned by Licensor or its
affiliates at any time during or after the term of each license under this
agreement anywhere in the world (collectively, the "Other Trademarks"), and all
translations of and any marks similar to any of the foregoing (all of the
foregoing Other Trademarks, and all translations of such Other Trademarks and
any marks similar to such Other Trademarks in English or in translation, and any
marks similar to the Trademarks, in English or in translation, are hereinafter
collectively referred to as the "Ziff-Davis Marks") will accrue solely to the
benefit of Licensor or its affiliates, as the case may be.
(b) Licensee (including all Licensee Affiliates) acknowledges that, as
between Licensee and Licensor, Licensor or its affiliate(s), as the case may be,
is the exclusive owner of the Trademarks and the Ziff-Davis Marks and of all
trademark rights related to or created by Licensee's use of the Trademarks in
any language or the Ziff-Davis Marks and agrees that it will
10
<PAGE>
not have or obtain, by exercising its rights under this agreement or otherwise,
any right or interest in the Trademarks or the Ziff-Davis Marks, beyond the
rights specifically given in this agreement.
(c) Licensee agrees to use the Trademarks only in accordance with, and
subject to the restrictions set forth in, this agreement and Exhibit B and such
other guidelines as Licensor may prescribe from time to time and in a manner
that does not derogate Licensor's rights therein, and not in combination with
any other word(s) or mark(s). Licensee shall not at any time directly or
indirectly, use or permit the use of the Trademarks or the Ziff-Davis Marks in
any way which might infringe the rights of Licensor or its affiliates therein.
(d) Ancillary to the licenses granted under this agreement, to the
extent that any trademarks owned by Licensor or its affiliates, in addition to
the Trademarks, are used by Licensor within the editorial content of any
Publication and are included in the Available Material, Licensee shall have the
limited right to use such trademarks in the corresponding Foreign Edition during
the term of its license under this agreement, but only in connection with the
publication of Available Material in such Foreign Edition in accordance with the
terms and conditions of this agreement and only as used by Licensor in the
Publication in connection with the Available Material and only in the exact
context and form used by Licensor in the Publication in connection with the
Available Material and not in combination with any other words or marks or in
any other manner.
(e) Licensee agrees that it shall not, directly or indirectly (i)
challenge, contest or attack the ownership by Licensor or its affiliate, of the
Trademarks or any Ziff-Davis Marks or the validity of the Trademarks or any
Ziff-Davis Marks or the license granted under this agreement, or (ii) seek to
register or claim ownership of any of the Trademarks, or any other designation
similar to the Trademarks or any copyright, trademark, including, without
limitation, the Ziff-Davis Marks, or other right of Licensor or its affiliates.
(f) Upon Licensor's written instructions, Licensee will assist and
reasonably cooperate with Licensor's efforts to secure, protect and preserve
Licensor's rights and interests in the Trademarks, including Licensor's
procuring of copyright and trademark registrations, and Licensee will, at its
expense, execute and deliver any and all documents and perform any and all acts
related thereto, including, without limitation, the supplying of such samples
and similar materials (e.g., copies of issues of the Foreign Edition and
promotional or similar materials) as may be required in this agreement or
requested by Licensor, including, without limitation, documents and acts to
reflect or confirm Licensor's or its affiliate's exclusive ownership rights.
11
<PAGE>
Licensee further agrees, at its expense, to execute and deliver to Licensor such
documents as Licensor may request to register or record Licensee as a Registered
User or Permitted User of such trademark rights in any jurisdiction and to
follow Licensor's instructions for proper use thereof in order that protection
and/or registrations for the trademark rights may be obtained or maintained.
(g) During the term of this agreement, Licensee will immediately notify
Licensor in writing of any infringement or imitation of, or any other event or
claim adverse to or in violation of Licensor's or its affiliates' rights or
interests in, the Trademarks or the Ziff-Davis Marks, or any other rights,
occurring within the Territory, which comes to Licensee's attention. Licensor
will have sole discretion to decide whether any communication or legal action is
undertaken with respect to such events or claims, and will have sole right to
control all aspects of such communication and action (including choice of
attorney and settlement). Licensee will assist and fully cooperate with Licensor
in connection with any such communications and actions, and, in connection
therewith, Licensee will execute and deliver any and all documents and perform
any and all acts related thereto.
(h) The obligations, acknowledgments, representations, covenants and
agreements of a Licensee Affiliate under this Section 12 shall be directly
binding on such Licensee Affiliate to the same extent Licensee is bound by such
provisions, as if they were direct obligations, acknowledgments,
representations, covenants and agreements of the Licensee Affiliate and as if
the Licensee Affiliate were a party to this agreement.
13. Indemnities.
-----------
(a) Subject to Section 13(b) below, Licensor shall indemnify and hold
Licensee harmless from any and all loss, cost, liability, damage and expense
(including reasonable attorneys' fees and other legal costs) incurred by
Licensee on account of any suit or claim by a third party against Licensee
alleging (i) that Licensee's use of the Trademarks in accordance with the terms
and conditions hereof is an infringement of the rights of that third party in
their trademark, or (ii) that Licensee's publication in any Foreign Edition in
accordance with the terms and conditions of this agreement of any item
designated as Available Material and supplied pursuant to Section 6(a) above
(but only if the claim did not arise out of the translation or alteration by
Licensee of the Available Material) is libelous, an infringement of copyright,
or an invasion of privacy (but only to the extent that the claim would have been
actionable in the United States, it being understood that Licensor shall not be
responsible for claims of libel, infringement of copyright, or invasion of
12
<PAGE>
privacy that may arise solely under the law of any country other than the United
States). Licensee shall promptly advise Licensor of any such claim, shall give
Licensor the opportunity to defend, compromise or settle the same, as Licensor
in its sole discretion may determine, shall cooperate fully with Licensor in the
defense of same, and shall not settle any such claim without first obtaining
Licensor's written consent thereto.
(b) In the event of a third party claim alleging that Licensee's use of
the Trademarks is an infringement of the rights of that third party, Licensee
shall, upon Licensor's request and at Licensee's expense, use for the title of
any Foreign Edition a modified non-infringing form of the Trademarks, or a
different title and/or logo, as designated by Licensor, which shall be the sole
and exclusive property of Licensor and licensed to Licensee by Licensor under
the terms and conditions of this agreement. If the title and/or logo of such
Foreign Edition is changed pursuant to this Section 13(b), unless restricted by
law, Licensee shall place the title and logo of the corresponding Publication in
small size print on the cover page accompanied by words indicating that such
Foreign Edition is the Japanese edition or derivative of the Publication.
Licensor shall have the right to settle any claim or action arising out of any
such third party claim in its sole discretion. Subject to Section 13(a) above,
if Licensee brings any claim or counterclaim against such third party with
respect to any of the Trademarks, or continues to use any of the Trademarks
following any judgment or settlement enjoining such use, Licensee shall
indemnify and hold Licensor and its affiliates harmless from and against any and
all loss, cost, liability, damage and expense (including reasonable attorneys'
fees and other legal costs) incurred by Licensor and its affiliates on account
of such claim, counterclaim or use. In no event may Licensee make any settlement
or compromise which may authorize or permit any third party to use any of the
Trademarks, or any element thereof, or any similar trademark in any language
without Licensor's written consent.
(c) Licensee shall indemnify and hold Licensor and its affiliates
harmless from any and all loss, cost, liability, damage and expense (including
reasonable attorneys' fees and other legal costs) incurred by Licensor and its
affiliates on account of any third party claims or lawsuits arising out of or
relating to any of Licensee's activities hereunder (other than claims as to
which Licensor indemnifies Licensee under Section 13(a)), including, without
limitation, the claims or lawsuits arising out of or relating to the Other
Material; the mistranslation of Available Material or the marketing, promotion,
publication, sale or distribution of the Foreign Edition.
13
<PAGE>
(d) Notwithstanding anything to the contrary in this agreement, in no
event shall either party be liable to the other for consequential or indirect
damages, including, but not limited to damages resulting from lost profits or
goodwill, whether or not that party has been advised or is aware of the
possibility of such damages.
(e) The provisions of this Section 13 shall survive the expiration or
termination of any license under this agreement.
14. Retention of Rights. All rights not specifically granted to Licensee
-------------------
herein are retained by Licensor. Without limiting the generality of the
foregoing, except for the rights specifically granted to Licensee in Section
1(a) above, Licensor retains all rights in and to the Trademarks, and any
additional trademarks used by Licensee pursuant to Section 12(d) above, and all
Available Material, including, but not limited to, the right to use and exploit
the Trademarks and such additional trademarks and all Available Material
throughout the world other than the Territory, in all languages in any medium or
form. Notwith-standing the foregoing, Licensee is authorized to use any of the
material licensed under this agreement in advertising or promotion of any
Foreign Edition or in promotional or similar products ancillary to the
publication of such Foreign Edition (for example, calendars, tee shirts, etc.).
15. Assignment.
----------
(a) This agreement and all rights and obligations under this agreement
shall not, other than to a subsidiary or majority-owned affiliate or with the
prior written consent of Licensor, be assigned, sublicensed, delegated or
otherwise transferred by Licensee or by operation of law.
(b) This agreement shall not, without the prior written consent of
Licensee, be assigned by Licensor except to an affiliate or division or in
connection with the sale or transfer of all or substantially all of the assets
of any Publication, or the sale or transfer, merger, consolidation or similar
reorganization by Licensor of trademarks and/or other intangible property or all
or substantially all of its assets.
(c) Subject to the foregoing, this agreement shall inure to the benefit
of the parties' successors and assigns.
16. Breach. If Licensee fails to timely pay to Licensor any amounts due
------
under this agreement (after giving effect to applicable cure period) or any
other agreement, or Licensor fails to provide the support under Section 6(g), or
either party breaches in a material way any other provision of this agreement
(including for any deficiency in use of the Trademarks or in the quality
14
<PAGE>
of such Foreign Edition or related materials) or of any other agreement between
Licensor or any of its affiliates or divisions and Licensee or its affiliates or
divisions, the non-breaching party may give notice to the breaching party of
such breach, and unless the non-breaching party receives, within ten (10) days
after the delivery of that notice in the case of non-payment of amounts due
under this agreement or such other agreement, and within thirty (30) days after
the delivery of that notice in the case of any other breach, evidence of the
cure of that breach satisfactory to the non-breaching party, the non-breaching
party shall have the right (in addition to any other rights or remedies
available at law or in equity, except as otherwise provided herein) to terminate
this agreement and any other agreement with respect to such Foreign Edition or
Additional Publication between Licensor, or its affiliates or divisions and
Licensee or its affiliates or divisions, immediately upon notice to the
breaching party.
17. Bankruptcy. If either Licensee or Licensor suffers any insolvency
----------
proceeding, either voluntary or involuntary, or is adjudicated bankrupt or makes
any assignment for the benefit of creditors or has a receiver appointed, the
other party shall have the right to terminate this agreement by written notice
to the party in proceedings, but that termination shall not relieve the party in
proceedings from liability for the performance of its obligations under this
agreement. The other party shall also have all other rights and remedies which
may be available to it at law or in equity by reason of the breach by the party
in proceedings of its obligations under this agreement, except as otherwise
provided herein.
18. Discontinuance of a Publication. Notwithstanding anything contained
-------------------------------
herein to the contrary, Licensor and its affiliates shall have the absolute
right in their sole discretion, at any time, to discontinue, suspend, abandon or
otherwise terminate the publication of any Publication or Additional Publication
or incorporate any Publication or Additional Publication into or with another
publication. Licensor shall give Licensee as much notice as practical of such
event. In that event, Licensor's obligation to provide Available Material shall
automatically terminate, and Licensee shall have the right to terminate this
agreement with respect to such Publication and the corresponding Foreign Edition
or Additional Publication by notice to Licensor.
19. Discontinuance of a Foreign Edition. Notwithstanding anything
-----------------------------------
contained herein to the contrary, Licensee shall have the absolute right, in its
sole discretion, at any time during the term of this agreement, to discontinue,
suspend, abandon or otherwise terminate the publication of any Foreign Edition
or SB Publication upon not less than ninety (90) days prior notice to
15
<PAGE>
Licensor and the license for that Foreign Edition or Available Material from an
Additional Publication shall then cease.
20. Licensor's Right to Terminate. Notwithstanding anything contained
-----------------------------
herein to the contrary, Licensor shall have the right to terminate this
agreement upon not less than one hundred twenty (120) days' notice to Licensee
in the event that after execution of this agreement, any new Japanese income or
other tax shall be imposed against Licensor or any existing income or other tax
shall be increased against Licensor which either separately or in the aggregate
causes taxes to be paid by Licensor to increase by more than twenty (20%)
percent. Licensor may exercise its right to terminate this agreement pursuant
to this Section 20 at any time following the occurrence of such event without
limitation or restriction as to how soon after the occurrence such right must be
exercised.
21. Effects of Termination. In the event notice of termination of a
----------------------
license under this agreement with respect to any Publication or Foreign Edition
is given by either party for any reason, from and after such termination or
expiration of a license under this agreement, Licensee shall immediately cease
publication of such Foreign Edition, shall immediately discontinue all use of
the Trademarks and Available Material and shall immediately cease the exercise
of any other rights with respect to such Foreign Edition granted under this
agreement. Upon such termination, unless termination is due to a breach by
Licensee, copies of the most recent issue of such Foreign Edition that were
previously printed, but only those copies, may be distributed by Licensee,
subject to the terms and conditions of this agreement, including, without
limitation, the provisions of Sections 3, 4 and 5 of this agreement.
22. Confidential Information. If pursuant to this agreement Licensee
------------------------
receives or becomes aware of any information from Licensor concerning Licensor
or any Publication or Additional Publication that is confidential or proprietary
in nature, Licensee shall keep such information confidential and shall not,
without Licensor's prior written consent, disclose such information in any
manner whatsoever, in whole or in part, and shall not use such information for
any purpose except that with respect to confidential information belonging to a
third party and intended for publication in any Publication or Additional
Publication at such time as it is no longer confidential, Licensee may publish
such information following its publication in the U.S. edition of such
Publication or Additional Publication, subject to Section 6(c) above and
provided it is identified by Licensor as Available Material.
16
<PAGE>
The provisions of this Section 22 shall survive the expiration or
termination of any license under this agreement.
23. Compliance with Law. Licensee shall conduct its efforts under this
-------------------
agreement in strict accordance with all applicable laws and regulations.
24. Miscellaneous.
-------------
(a) Notices. All notices, requests, statements and other communications
-------
under this agreement shall be in writing, and shall be deemed given when
delivered personally, sent by air courier, or mailed Air Mail Registered Mail,
Return Receipt Requested, to each party at the following addresses (or such
other address as a party may give notice of hereafter);
(i) with respect to requests by Licensee to Licensor for editorial
material, and for all other requests, notices, statements and other
communications to:
Ziff-Davis Inc.
One Park Avenue
New York, New York 10016
Attention: Executive Director, Licensing
(ii) with respect to notices to Licensor regarding the breach,
extension or termination of this agreement, copies shall be sent to:
Ziff-Davis Inc.
One Park Avenue
New York, New York 10016
Attention: Executive Director of Licensing
with a copy to Licensor's Legal Department at the same address;
(iii) with respect to notices to Licensee regarding any matters, to:
SOFTBANK Corp.
24-1, Nihonbashi Hakozakicho
Chuo-ku, Tokyo 103-8501
Attention: Executive Vice President,
Publishing
with a copy to Licensee's Legal Department at the same address.
(b) Entire Agreement. This agreement contains a complete statement of
----------------
all of the arrangements between Licensor and Licensee with respect to the listed
Publications, Additional Publications, SB Publications and Foreign Editions,
supersedes all previous agreements, arrangements and understandings, written or
oral, relating thereto, and may not be modified except by a writing signed by
both parties. This agreement shall be binding on the parties
17
<PAGE>
permitted successors and permitted assigns, including subsequent owners. Nothing
herein shall affect Licensee's obligations to Licensor arising prior to April 1,
1998 under the prior license agreements and syndication agreements including,
without limitation, payments for periods prior to April 1, 1998.
(c) Governing Law. This agreement shall be governed by and construed
-------------
during and after the term of this agreement in accordance with the laws of the
State of New York applicable to agreements made and to be performed in New York.
Licensee irrevocably consents to the non-exclusive jurisdiction of the Courts
of New York in connection with any action or proceeding brought during or after
the term of this agreement and arising out of or related to this agreement. In
any such action or proceeding, each party waives personal service of any
summons, complaint or other process and agrees that service thereof shall be
deemed made when mailed registered air mail, return receipt requested, addressed
to that party at its address set forth in Section 26(a) or at such other address
as that party may specify by written notice to the other party. Within thirty
(30) days after such service (subject to such extensions as may be agreed to
between the parties or their attorneys), the party upon whom service was made
shall appear or answer to the summons, complaint or other process; if that party
shall fail to appear or answer within that thirty (30) day period (as it may be
extended as provided above), that party shall be deemed in default and judgment
may be entered by the other party for the relief demanded in the summons,
complaint or other process.
(d) No Joint Venture. This agreement is not intended to be and shall
----------------
not be one of partnership or joint venture and neither Licensee nor Licensor is
an agent for the other, except where Licensor is named Licensee's attorney-in-
fact.
(e) No Waiver. The failure of a party to insist upon strict adherence
---------
to any term of this agreement on any occasion shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this agreement. Any waiver must be in writing.
(f) Separability. If any provision of this agreement is invalid or
------------
unenforceable, the balance of this agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
18
<PAGE>
(g) Counterparts. This agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
(h) Headings. The headings in this agreement are solely for convenience
--------
of reference and shall not affect its interpretation.
(i) Further Instruments. Each party agrees to execute such further
-------------------
documents and take such further steps as may be reasonably requested by the
other party to further the purposes of this agreement.
(j) Survival. All provisions of this agreement which expressly state
--------
that they survive the expiration or termination of any license under this
agreement, or which state that they apply during and after the term of any
license under this agreement, or which by their sense are intended to survive
the expiration or termination of any license under this agreement, shall survive
the expiration or termination of any license under this agreement.
(k) Interpretation. This agreement has been negotiated by the parties
--------------
and their respective counsel. This agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
ZIFF-DAVIS INC. SOFTBANK CORP.
By: _____________________ By:_____________________
Name: Gertrud Borchardt Name:
Title: Executive Director, Title: Executive Vice
Licensing President, Publishing
19
<PAGE>
Exhibit A
Publication: Royalty Percentage:
- ----------- ------------------
PC Computing 7%
PC Week 7%
Computer Shopper 5%
20
<PAGE>
Exhibit B
Guidelines for the Use of the "PC Week" Trademark and Logo by Licensee
The "PC Week" trademark and the "PC Week" logo licensed under the agreement to
which this Exhibit is attached (the "Agreement") may be used by Licensee only as
a composite mark as specified below and or the attached which is incorporated
herein (except for textual references)and only in connection with the Foreign
Edition and only in the exact form and context specified by Licensor, all as
more fully set forth below and in the Agreement.
The "PC Week" trademark and the "PC Week" logo composite mark licensed under the
Agreement consists of two individual marks:
1. the words "PC Week"
2. the "PC Week" stylized type
All rights of Licensor and all obligations of Licensee, and its Licensee
Affiliates, under the Agreement shall apply with equal force and effect to the
composite mark and the two individual marks comprising the composite mark.
The "PC Week" trademark and the "PC Week" logo composite mark
licensed under the Agreement shall be used only in accordance with the
specifications as to placement, size and design set forth herein, may not be
combined with any other word(s) or mark(s) and must appear as the title of the
Foreign Edition and always be used in one of the three following color choices:
1. 100% PMS 540 (for "PC"), 100% PMS 542 (for "WEEK")
2. 100% Cyan, 50% Magenta, 50% Black (for "PC"); 50%
Cyan, 20% Magenta, 20% Black (for "WEEK")
3. 100% Black
The "PC Week" trademark and the "PC Week" logo composite mark must not be
enclosed in any way by any border.
The "PC Week" trademark shall always be written in a distinctive fashion, e.g.,
.PC WEEK (all caps)
.PC Week (all italics)
.PC WEEK (bold)
Licensee will use commercially diligent efforts to use the "PC Week" trademark
only as an adjective followed by the common generic term for the mark, e.g., the
"PC Week" publication, and shall not use the "PC Week" trademark in the
possessive.
Any additional trademarks to be used by Licensee in the Foreign Edition pursuant
to Section 12(l) of the Agreement, if any, may be used only in connection with
Available Material and only in the exact context and form used by Licensor, as
more fully set forth in the Agreement.
Whenever reasonable in the context of a particular use of the trademarks
licensed under the Agreement, Licensee shall identify such trademarks as being
used under license from Licensor.
All terms used in this Exhibit which are defined in the Agreement shall
have the meaning ascribed to them in the Agreement.
These guidelines may be amended from time to time by the Licensor on written
notice to Licensee.
21
<PAGE>
Exhibit B-2
Guidelines for the Use of the "PC/Computing" Trademark and Logo by Licensee
The "PC/Computing" trademark and the "PC/Computing" logo licensed under the
agreement to which this Exhibit is attached (the "Agreement") may be used by
Licensee only as a composite mark as specified below and or the attached which
is incorporated herein (except for textual references) and only in connection
with the Foreign Edition and only in the exact form and context specified by
Licensor, all as more fully set forth below and in the Agreement.
The "PC/Computing" trademark and the "PC/Computing" logo composite mark licensed
under the Agreement consists of two individual marks:
1. the words "PC/Computing"
2. the "PC/Computing" stylized type
All rights of Licensor and all obligations of Licensee, and its Licensee
Affiliates, under the Agreement shall apply with equal force and effect to the
composite mark and the two individual marks comprising the composite mark.
The "PC/Computing" trademark and the "PC/Computing" logo composite mark
licensed under the Agreement shall be used only in accordance with the
specifications as to placement, size and design set forth herein, may not be
combined with any other word(s) or mark(s) and must appear as the title of the
Foreign Edition and always be used in one of the two following color choices:
1. 100% Black
2. 100% Magenta, 100% Yellow for "PC", 100% Cyan, 70%
Magenta for "Computing" (process color)
The "PC/Computing" trademark and the "PC/Computing" logo composite mark must not
be enclosed in any way by any border.
The "PC/Computing" trademark shall always be written in a distinctive fashion,
e.g.,
.PC/COMPUTING (all caps)
.PC/Computing (all italics)
.PC/COMPUTING (bold)
Licensee will use commercially diligent efforts to use the "PC/Computing"
trademark only as an adjective followed by the common generic term for the mark,
e.g., the "PC/Computing" publication, and shall not use the "PC/Computing"
trademark in the possessive.
Any additional trademarks to be used by Licensee in the Foreign Edition pursuant
to Section 12(l) of the Agreement, if any, may be used only in connection with
Available Material and only in the exact context and form used by Licensor, as
more fully set forth in the Agreement.
Whenever reasonable in the context of a particular use of the trademarks
licensed under the Agreement, Licensee shall identify such trademarks as being
used under license from Licensor.
All terms used in this Exhibit which are defined in the Agreement shall
have the meaning ascribed to them in the Agreement.
These guidelines may be amended from time to time by the Licensor on written
notice to Licensee.
22
<PAGE>
Exhibit B-3
Guidelines for the Use of the "Computer Shopper" Trademark and Logo by Licensee
The "Computer Shopper" trademark and the "Computer Shopper" logo licensed under
the agreement to which this Exhibit is attached (the "Agreement") may be used by
Licensee only as a composite mark as specified below and or the attached which
is incorporated herein (except for textual references) and only in connection
with the Foreign Edition and only in the exact form and context specified by
Licensor, all as more fully set forth below and in the Agreement.
The "Computer Shopper" trademark and the "Computer Shopper" logo composite mark
licensed under the Agreement consists of two individual marks:
1. the words "Computer Shopper"
2. the "Computer Shopper" stylized type
All rights of Licensor and all obligations of Licensee, and its Licensee
Affiliates, under the Agreement shall apply with equal force and effect to the
composite mark and the two individual marks comprising the composite mark.
The "Computer Shopper" trademark and the "Computer Shopper" logo composite mark
licensed under the Agreement shall be used only in accordance with the
specifications as to placement, size and design set forth herein, may not be
combined with any other word(s) or mark(s) and must appear as the title of the
Foreign Edition and always be used in one of the two following color choices:
1. 100% Black
2. 100% Yellow
The "Computer Shopper" trademark and the "Computer Shopper" logo composite mark
must not be enclosed in any way by any border.
The "Computer Shopper" trademark shall always be written in a distinctive
fashion, e.g,
COMPUTER SHOPPER (all caps)
Computer Shopper (all italics)
COMPUTER SHOPPER (bold)
Licensee will use commercially diligent efforts to use the Computer Shopper
trademark only as an adjective followed by the common generic term for the mark,
e.g., the Computer Shopper publication, and shall not use the Computer Shopper
trademark in the possessive.
Any additional trademarks to be used by Licensee in the Foreign Edition pursuant
to Section 12(1) of the Agreement, if any, may be used only in connection with
Available Material and only in the exact context and form used by Licensor, as
more fully set forth in the Agreement.
23
<PAGE>
Whenever reasonable in the context of a particular use of the trademarks
licensed under the Agreement, Licensee shall identify such trademarks as being
used under license from Licensor.
All terms used in this Exhibit which are defined in the Agreement shall have the
meaning ascribed to them in the Agreement.
These guidelines may be amended from time to time by the Licensor on written
notice to Licensee.
24
<PAGE>
Exhibit C
Additional Publications: SB Publications: Annual Fee:
- -------------------------- ---------------- -----------
Computer Gaming World DOS/V Magazine $12,000
PC Magazine Gekkan/Intranet $15,000
Internet Business
Advantage (COBB) Gekkan/Intranet $15,000
25
<PAGE>
EXHIBIT D
----------
REVENUE STATEMENT
FOR THE REPORTING PERIOD
Ended___________
CURRENCY:
ADVERTISING
Gross Rev _____
Commission _____
Bad Debts _____
Credits _____
Discount & Other
Standard Allowances _____
NET AD REVENUE _____
CIRCULATION
Subscription Billing _____
Bad Debt _____
Credits _____
Single Copy Sales _____
Less Returns _____
NET CIRCULATION REV _____
MISCELLANEOUS
List Rentals __________
Reprint Sales __________
Trade Shows, Conferences __________
Supplements __________
Microfilm __________
Electronic __________
Barter
[Other Sources - __________
Separate line item for each source]
NET REVENUE
REPORTING PERIOD
__________
================================================================================
26
<PAGE>
EXHIBIT 10.6
LICENSE AGREEMENT
As of July 1, 1997
The parties to this agreement are (i) Mac Inc., a corporation organized and
existing under the laws of Japan acting through one of its divisions, with its
offices at 1 Athenaeum Street, Riverview Building, Cambridge, Massachusetts
02142 USA ("ZDNet"), (ii) Ziff-Davis Inc., a corporation organized and existing
under the laws of the State of Delaware, with its principal office at One Park
Avenue, New York, NY 10016 USA ("Ziff-Davis"), and (iii) SOFTBANK Corp., a
corporation organized and existing under the laws of Japan, with its principal
office at 24-1 Nihonbashi Hakozaki-cho, Chuo-ku, Tokyo 103-8501, Japan
("Licensee"). ZDNet and Ziff-Davis are collectively referred to herein as
"Licensor."
ZDNet is an affiliate and licensee of, and managed by, Ziff-Davis. ZDNet is
the publisher in the United States of the online service entitled "ZDNet" (the
"Service"). Ziff-Davis licenses ZDNet the right to use and sublicense the ZDNet
mark and logo and other materials from its publications.
Licensee desires to publish a localized edition of the Service using
editorial material from the Service.
Accordingly, it is agreed:
1. Grant of License
----------------
(a) Subject to the terms and conditions set forth in this agreement,
Licensor hereby grants to Licensee, and Licensee hereby accepts, the exclusive
license during the term of this agreement to reproduce, publicly perform,
publicly display, transmit and distribute online throughout the world via the
worldwide web from server(s) located in Japan (the "Territory") a Japanese
language edition of the
<PAGE>
Service directed to residents of the Territory to be entitled "ZDNET Japan" (the
"Localized Edition"). The Licensee will not, without the prior written consent
of Licensor, promote or distribute the Localized Edition from servers outside of
the Territory or to residents outside of the Territory. Licensee shall use its
best efforts in all respects in the promotion and distribution of the Localized
Edition; provided that, subject to Sections 4(f) and 12 below, Licensee may also
promote and distribute Japanese editions of other online services from
publishers other than Licensor.
(b) Subject to the terms and conditions set forth in this agreement,
Licensor also hereby grants to Licensee the right during the term of this
agreement to translate into and use in the Japanese language, solely in
connection with the Localized Edition, Available Material (as defined in Section
4 below) from the Service and the right during the term of this agreement to
use, solely in connection with the Localized Edition and the advertising and
promotion of the Localized Edition in the Territory, the trademark "ZDNET" in
English and the "ZDNET" logo, as more fully described in Exhibit A hereto and as
---------
it may be amended from time to time by Licensor upon notice to Licensee
(collectively, the "Trademarks"). Licensee may also use a reasonable amount of
Available Material from Web sites of Licensor's print publications which are
part of the Service in corresponding licensed foreign editions of those
publications.
(c) Subject to the terms and conditions set forth in this agreement,
Licensor also hereby grants to Licensee the exclusive right in the Territory
during the term of this agreement to use as part of the Localized Edition
elements of the graphic user interface ("GUI") used by Licensor for the Service
(the "ZDNET GUI"), as it may be modified from time to time by Licensor.
2
<PAGE>
(d) Licensor agrees to furnish Licensee with materials from any other
online service, currently or hereafter published by Licensor and, upon written
request from Licensee, to grant Licensee an exclusive license, on terms and
conditions to be agreed, to publish a Japanese language edition of such service,
subject only to rights of third parties; provided, in the event there shall be
--------
any such rights, Licensor shall use its best efforts to obtain any consent or
permission required to allow Licensee to publish or include material in such
Japanese language edition. In addition, Licensor agrees that Licensee shall
have a right of first refusal on all licenses with respect to publication of
Japanese language editions of any of Licensor's existing or future online
services, and that neither Licensor nor any of its wholly owned subsidiaries
will initiate discussions with any third party in Japan with respect to possible
licensing of any such online service to such party without giving prior notice
to Licensee. If Licensee shall terminate publication of the Localized Edition,
the license for the Localized Edition shall be terminated for any other reason,
or Licensee shall decline a right of first refusal within sixty (60) days after
Licensor's notice of such right, then Licensor shall be free to license the
right to publish the Localized Edition (or any other Licensor service) or the
right to use Available Material to any other entity in the Territory, but not on
terms more favorable than those offered to Licensee in the right of first
refusal.
2. Term
----
Unless terminated earlier pursuant to this agreement, the term of this
agreement shall be for an initial period commencing on the date set forth above
(the "Effective Date") and ending on December 31, 2004. After the expiration of
the initial term, the term of this agreement
3
<PAGE>
shall be automatically extended for additional one-year periods unless either
party shall give notice to the other at least one hundred eighty (180) days
prior to the expiration of the initial or any renewal period of its intention to
terminate this agreement on that expiration date.
3. Compensation
------------
(a) In consideration of the rights granted by Licensor under this
agreement, Licensee shall pay to Licensor royalties equal to 30% of Licensee's
Operating Income (as defined in Section 3(b) below).
(b) As used in this agreement, the term "Operating Income" shall mean the
total amount of net income or net loss of the Localized Edition before any
applicable income taxes (whether national, local or otherwise), determined on
the basis of financial statements prepared by Licensee in accordance with
generally accepted accounting principles in the Territory, but with the
following adjustments: (i) the Localized Edition shall be accounted for as a
separate business; (ii) gains and losses not considered recurring in the
ordinary course of business shall be excluded; (iii) the provisions of Section
7(b) shall be applied; (iv) employee claims and similar extraordinary
liabilities not directly related to the Localized Edition shall be excluded; (v)
any payment under Licensee's indemnity obligation shall be excluded; and (vi)
general and administrative expenses charged by Licensee to the Localized Edition
shall be reasonable and shall not exceed allocations generally made by Licensee
to its other operations of comparable size.
(c) Licensor shall pay to Licensee (Yen)20,000,000 in marketing support in
connection with the 1997 launch of the Localized Edition. Licensor shall pay
Licensee the marketing support payment no later than April 30, 1998 or such
later date as the parties may agree.
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(d) In further consideration of the rights granted by and obligations
assumed by Licensor under this agreement, Licensor shall be entitled to sell
available advertising opportunities in the Localized Edition in an amount up to
15% of available advertising opportunities in the Localized Edition during
calendar year 1998, 12.5% during calendar year 1999, and 10% thereafter during
each calendar year of the remaining term; provided, however, that Licensor shall
have such opportunities only to the extent that Licensee shall have sufficient
advertising opportunities available. Licensor shall be entitled to retain all
of the revenues received from the sale of such advertising; provided that
Licensor shall pay Licensee a commission on all such advertisements equal to the
following percentages of the "Net Amount" (as defined below) received by
Licensor for such advertising: 25% for advertising appearing in the Localized
Edition in calendar year 1998, 22.5% for advertising appearing in calendar year
1999, 20% for calendar year 2000 and 15% for advertising appearing thereafter in
each calendar year of the remaining term. "Net Amount" means gross advertising
revenues actually received by Licensor, less advertising agency commissions,
cash discounts, credits, make-goods and other billing adjustments and
allowances, but not Licensor's commission. The advertising opportunities made
available to Licensor shall include banners, sponsorships, micro sites, and
other opportunities and shall be available on all of the pages and sites within
the Localized Edition (other than the home page) on which Licensee sells
advertising. Licensee shall provide Licensor with appropriate information on
the Localized Edition including the total number of impressions for each month
and quarter (or more frequently as requested by Licensor in order to satisfy any
advertiser information requirements) by advertising site and category.
Licensee
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acknowledges that Licensor will sell its ads based on the level of estimated
impressions and Licensee shall promptly provide "make good" impressions for ads
sold by Licensor within its area of availabilities that do not receive the
number of impressions estimated by Licensee. Licensor shall be free to discount
from Licensee's regular rates the advertising space sold under this Section 3(d)
as part of a sale or a network or other combination of sites or for other
similar reasons which Licensor deems appropriate in the circumstances.
4. Design and Contents of the Localized Edition
--------------------------------------------
(a) Licensee shall be responsible for the design and development of the
Localized Edition; provided, however, that (i) the name of the Localized Edition
shall include the ZDNet name and logo in accordance with Exhibit A; (ii) the
---------
graphic user interface used by Licensee for the Localized Edition shall be the
ZDNET GUI, as it may be modified by Licensor from time to time; and (iii)
Licensor shall have the right to specify the ad banner format used in the
Localized Edition and all changes in that format shall be subject to Licensor's
written approval (which shall not unreasonably be withheld).
(b) During the term of this agreement, Licensor shall on a weekly basis
send or make available electronically to Licensee, at Licensor's expense,
electronic files, in a format and in a media to be determined by Licensor, of
all material from the Service immediately upon publication. For purposes of
this agreement, subject to any use restrictions identified by Licensor, all
editorial items (which term includes, without limitation, graphics, images and
music) from the Service in which Licensor owns the right to license publication
by Licensee in the Localized Edition shall be referred to as "Available
Material," as described in Exhibit B excluding (i) Netbuyer; (ii) GameSpot,
---------
Video GameSpot or
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any other games-related materials; (iii) ZD University; (iv) Computer Database
Plus; (v) any other content on the Service which is surcharged; or (vi) software
used to develop Available Material or used for the display or performance of
Available Material unless Licensor specifically agrees in a separate writing to
provide such material or software. In the event that Licensee wishes to use at
reasonable cost any editorial item from the Service that is not Available
Material, Licensor shall use its reasonable efforts to obtain permission, on
Licensee's behalf, for Licensee to use that item and Licensee shall promptly
reimburse Licensor for any fees, costs or expenses paid by Licensor to obtain
such permission, provided that Licensor shall have obtained Licensee's approval
of the amount of any such fees, costs or expenses prior to having incurred them.
Licensee acknowledges that Licensor is not authorizing the distribution of
shareware, demonstration software, patches or other software contained in the
Software Library part of the Service, but only Licensor's descriptions of such
software. Licensee shall be responsible for securing any necessary permission to
distribute such software and for complying with all terms and conditions on
distribution imposed by the software owners. Prior to publishing any
downloadable software in the Localized Edition, Licensee agrees to test such
software to ensure that it operates on the local versions of the relevant
platform and operating system.
(c) Notwithstanding any provision in this agreement to the contrary, if
Licensor is notified or believes that there is a likelihood of a suit or claim
relating to any item of Available Material, Licensor reserves the right not to
provide Licensee with such item and to revoke by notice to Licensee the right to
publish any such item. Licensee shall not publish that item after receipt from
Licensor of such
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notice. Any action by Licensee in breach of this Section 4(c) shall be at
Licensee's own risk. Upon notice by Licensor of a correction to any item of
Available Material, Licensee shall use reasonable commercial efforts to make the
correction to such item as instructed by Licensor's notice, but in any event
within thirty-six (36) hours after receipt of notice from Licensor.
(d) In no event shall Licensee publish any Available Material in the
Localized Edition prior to the publication of such material by Licensor on the
Service.
(e) Licensee shall cause the translation of Available Material to be made
faithfully and accurately by a reasonably competent translator. Notwithstanding
the foregoing, Licensee may edit Available Material so long as the resulting
changes do not affect the meaning of any item of Available Material and are
required (i) in Licensee's reasonable judgment, to fit space or similar
editorial requirements for publication or to render any item of Available
Material more readily comprehensible in style or language to the Localized
Edition's readers, or (ii) by any governmental authority. Any information
relating to authorship credit, trademarks, copyrights and licenses of any
Available Material shall not be changed for any reason and must be included on
the Localized Edition. In addition, Licensee must host all of the files from
the Software Library included within Available Material on its servers within
the Territory and may not point back to the Software Library on the Service
without Licensor's prior written consent.
(f) In addition to Available Material from the Service, Licensee may also
include in the Localized Edition other localized material prepared by Licensee
or purchased or licensed from other parties ("Other Material"), provided that
the standard, content and quality of Other Material is
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reasonably consistent with the standard, content and quality of the Service.
Licensee agrees that, within sixty (60) days after the signing of this
agreement, it will enter into a license with MAC Publications LLC for the
license of MacWeek publication content which shall be included within the
Localized Edition. Without limiting the foregoing, Licensee may not include any
materials from publications or services published by competitors of Licensor or
their affiliates, which shall include without limitation, CMP, IDG, C/Net and
McGraw Hill, except that materials from MAC Publications, LLC may be included so
long as it remains a joint venture between Ziff-Davis and IDG. Immediately upon
notice from Licensor, Licensee shall remove from the Localized Edition any Other
Material Licensor reasonably deems inappropriate.
(g) During the term of this agreement, upon request, Licensor shall
provide Licensee with reasonable editorial and sales training support, and
marketing and promotional assistance for the Localized Edition. Licensee shall
bear all of Licensor's reasonable out-of-pocket expenses in providing such
support or assistance, including, without limitation, reasonable travel and per
diem expenses for support or assistance provided outside of the United States.
5. Publication of the Localized Edition
------------------------------------
(a) Immediately following the execution of this agreement, Licensee shall
obtain from the appropriate authority in the Territory a local URL for the
Localized Edition, which to the extent obtainable, shall include the word
"ZDNet". Upon termination of this agreement, Licensee shall, at Licensor's
option, transfer such URL to Licensor's designee, cancel such URL, or hold, but
not use, such URL on Licensor's behalf.
(b) The first screen of the Localized Edition shall bear as the title of
the Localized Edition the trademark
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"ZDNET" in English, and the "ZDNET" logo, all in accordance with the standards
for form, size, logo, color and position set forth in Exhibit A, and shall bear
---------
language identifying the Localized Edition as the Japanese edition of ZDNET.
(c) Licensee shall update the Localized Edition at least weekly. Licensee
will be responsible for support of the Localized Edition at appropriate
technical levels, including twenty-four (24) hours, seven (7) days a week
support for the local servers serving the Localized Edition site. Licensee will
also at all times maintain sufficient available network bandwidth, disk and file
system throughput, computer capacity, memory capacity and application capacity
to meet the needs of users of the Localized Edition, including needs during peak
usage time and as a result of growth in usage.
(d) Each party shall appoint a Relationship Manager to administer this
agreement. The Relationship Managers shall be responsible for coordination and
general review of the ongoing development and marketing of the Localized Edition
and any other issues of concern to the parties. The Relationship Managers shall
also be responsible for coordination of delivery to Licensee and upload by
Licensee to the Localized Edition of weekly updates of the Available Material.
Each Relationship Manager shall be reasonably available to the other by
telephone or electronic mail.
(e) Licensee shall use its best efforts to promote the Localized Edition
and to establish the Localized Edition as the leading online source of
information about computers in the Territory.
(f) Licensor will promote the Localized Edition by listing it on
Licensor's international page for the Service for a period of fifteen (15) days
after launch of the Localized Edition, with an active link, and by listing the
URL for the Localized Edition.
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(g) Licensor may require that each filter and navigation page from the
Localized Edition and any Available Material used by Licensee link directly to a
site in the Service specified by Licensor.
6. Quality Standards and Quality Control; Conflict of Interest
-----------------------------------------------------------
(a) All aspects of the publication of the Localized Edition, including,
but not limited to, all aspects of advertising (including advertisers, products
advertised, advertising copy, sales practices and terms), all aspects of
editorial content, design and structure (including GUI design, art work, layout
and design and copy lines of the home page), all aspects of production, and all
advertisements, publicity and promotional material regarding the Localized
Edition and Licensee's Service, shall be of a standard, content and quality that
meets or exceeds the standard, content and quality of the Service and that does
not, in any material respect, adversely reflect upon the reputation, integrity
and high standing of the Service and Licensor or its affiliates or infringe or
adversely affect the value or reputation of or misuse any of the Trademarks or
any other trademarks of Licensor or its affiliates.
(b) Licensee shall advise Licensor of Licensee's URLs for the Localized
Edition and Licensee's Service as soon as available so that Licensor may verify
the continued overall quality of the same.
(c) Licensee shall not engage in any actual or apparent conflict of
interest which would tend to create an impression in the minds of the public,
and especially users of online services and advertisers advertising in online
services, that the Localized Edition is not an impartial, independent service.
The sale by Licensee or its subsidiaries or affiliates of computer hardware or
software shall not by itself be deemed a conflict of interest under
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this Section 6(c), provided such activity does not affect the impartiality or
the independence of the Localized Edition.
7. Specific Advertising Matters
----------------------------
(a) In the event that advertising in the Localized Edition is sold in
combination with one or more of Licensee's other services or its publications,
the revenues from such a combined sale shall be allocated among all services and
publications involved in that sale in the respective proportions of the then
current average ad rates paid by third parties in such services and
publications.
(b) For the purpose of calculating Operating Income, (i) any house
advertisements (i.e., advertisements promoting Licensee's own products and/or
----
services) in excess of 5% of advertising inventory per reporting period, shall
be deemed to have generated revenues at the amount charged by Licensee to its
other divisions for those advertisements; and (ii) any barter advertisement
(i.e., any advertisement for which Licensee receives consideration in a form
- -----
other than cash) shall be deemed to have been sold at the average cost of such
advertisement not sold for barter.
(c) Licensor may require that promptly after launch the Localized Edition
will have the capability to rotate advertising as on the Service; provided
Licensor provides or arranges for Licensee to obtain software for such
capability.
(d) Licensee shall measure and maintain records of the number of monthly
impressions, page requests, unique IP (Internet provider) addresses,
registrants, ad requests (click through), file downloads, numbers and names of
advertisers, local marketing activities, content development and similar
information on the Localized Edition, and deliver a report on such information
within thirty (30) days following the end of each calendar quarter.
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8. Copyright and Trademark Notice and Credit
-----------------------------------------
The home page of the Localized Edition and each hard copy printout of the
Localized Edition shall carry the following notice and credit in the Japanese
language: "The Japanese edition of `ZDNET' is published under license from
ZDNET, Cambridge, Massachusetts. Editorial items appearing in `ZDNET Japan'
that were originally published in the U.S. Edition of `ZDNET' are the copyright
property of ZDNET or its suppliers. Copyright (C) 199_ ZDNET. All Rights
Reserved. `ZDNET' is a trademark of Ziff-Davis Inc., a SOFTBANK Company."
Licensee shall make any additions, changes and deletions to such notices and
credits as are required by Licensor upon notice to Licensee.
9. Trademarks
----------
(a) Except as specifically provided in this agreement, as between Licensor
and Licensee, all rights and interests in the Trademarks remain Licensor's or
its affiliates' exclusive property. All use of the Trademarks and any other
trademarks owned or used by Licensor or its affiliates (including the trademarks
and logos of publications or other Ziff-Davis or ZDNet materials that are
included in the Available Material) at any time during or after the term of this
agreement anywhere in the world, and all translations of and any marks similar
to any of the foregoing (all of the foregoing including the Trademarks,
collectively, the "Ziff-Davis Marks") will accrue solely to the benefit of
Licensor or its affiliates, as the case may be.
(b) Licensee acknowledges that, as between Licensee and Licensor or an
affiliate, Licensor is the exclusive owner of the Ziff-Davis Marks and of all
trademark rights related to or created by Licensee's use of the Ziff-Davis Marks
in any language and agrees that it will not have or obtain, by exercising its
rights under this agreement or
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<PAGE>
otherwise, any right or interest in the Ziff-Davis Marks, beyond the rights
specifically given in this agreement.
(c) Licensee agrees to use the Trademarks only in accordance with, and
subject to the restrictions set forth in, this agreement and Exhibit A and such
---------
other guidelines as Licensor may prescribe from time to time and in a manner
that does not derogate Licensor's or its affiliate's rights therein, and not in
combination with any other word(s) or mark(s). Licensee shall not at any time
directly or indirectly use or permit the use of the Trademarks or the Ziff-Davis
Marks in any way which might infringe on the rights of Licensor or its
affiliates thereon.
(d) Ancillary to the licenses granted under this agreement, to the extent
that any trademarks owned by Licensor or its affiliates, in addition to the
Trademarks, are used by Licensor within the editorial content of any Service and
are included in the Available Material, Licensee shall have the limited right to
use such trademarks in the corresponding Localized Edition during the term of
its license under this agreement, but only in connection with the publication of
Available Material in such Localized Edition in accordance with the terms and
conditions of this agreement and only as used by Licensor in the Service in
connection with the Available Material and only in the exact context and form
used by Licensor in the Service in connection with the Available Material and
not in combination with any other words or marks or in any other manner.
(e) Licensee agrees that it shall not, directly or indirectly (i) challenge,
contest or attack the ownership by Licensor or its affiliate, of the Trademarks
or any Ziff-Davis Marks or the validity of the Trademarks or any Ziff-Davis
Marks or the license granted under this agreement, or (ii) seek to register or
claim ownership of
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any of the Trademarks, or any other designation similar to the Trademarks or any
copyright, trademark, including, without limitation, the Ziff-Davis Marks, or
other right of Licensor or its affiliates.
(f) Upon Licensor's written instructions, Licensee will assist and reasonably
cooperate with Licensor's efforts to secure, protect and preserve Licensor's
rights and interests in the Trademarks, including Licensor's procuring of
copyright and trademark registrations, and Licensee will, at its expense,
execute and deliver any and all documents and perform any and all acts related
thereto, including, without limitation, the supplying of such samples and
similar materials (e.g., copies of issues of the Localized Edition and
promotional or similar materials) as may be required in this agreement or
requested by Licensor, including, without limitation, documents and acts to
reflect or confirm Licensor's or its affiliate's exclusive ownership rights.
Licensee further agrees, at its expense, to execute and deliver to Licensor such
documents as Licensor may request to register or record Licensee as a Registered
User or Permitted User of such trademark rights in any jurisdiction and to
follow Licensor's instructions for proper use thereof in order that protection
and/or registrations for the trademark rights may be obtained or maintained.
(g) During the term of this agreement, Licensee will immediately notify
Licensor in writing of any infringement or imitation of, or any other event or
claim adverse to or in violation of Licensor's or its affiliates' rights or
interests in, the Trademarks or the Ziff-Davis Marks, or any other rights,
occurring within the Territory, which comes to Licensee's attention. Licensee,
Licensor will have sole discretion to decide whether any communication or legal
action is undertaken with respect to such events or
15
<PAGE>
claims, and will have sole right to control all aspects of such communication
and action (including choice of attorney and settlement). Licensee will assist
and fully cooperate with Licensor in connection with any such communications and
actions, and, in connection therewith, Licensee will execute and deliver any and
all documents and perform any and all acts related thereto.
10. Indemnities
-----------
(a) Subject to Section 10(b) below, Licensor shall indemnify and hold
Licensee harmless from any and all loss, cost, liability, damage and expense
(including reasonable attorneys' fees and other legal costs) incurred by
Licensee on account of any suit or claim by a third party against Licensee
alleging (i) that Licensee's use of the Trademarks in accordance with the terms
and conditions hereof is an infringement of the rights of that third party in
their trademark, or (ii) that Licensee's publication in the Localized Edition in
accordance with the terms and conditions of this agreement of any item
designated as Available Material and supplied pursuant to Section 4(b) above
(but only if the claim did not arise out of the translation or alteration by
Licensee of the Available Material) is libelous, an infringement of copyright,
or an invasion of privacy (but only to the extent that the claim would have been
actionable in the United States, it being understood that Licensor shall not be
responsible for claims of libel, infringement of copyright, or invasion of
privacy that may arise solely under the law of any country other than the United
States). Licensee shall promptly advise Licensor of any such claim, shall give
Licensor the opportunity to defend, compromise or settle the same, as Licensor
in its sole discretion may determine, shall cooperate fully with Licensor in the
defense of same, and
16
<PAGE>
shall not settle any such claim without first obtaining Licensor's written
consent thereto.
(b) In the event of a third party claim alleging that Licensee's use of the
Trademarks is an infringement of the rights of that third party, Licensee shall,
upon Licensor's request and at Licensee's expense, use for the title of the
Localized Edition a modified non-infringing form of the Trademarks, or a
different title and/or logo, as designated by Licensor, which shall be the sole
and exclusive property of Licensor or its affiliate and licensed to Licensee by
Licensor under the terms and conditions of this agreement. If the title and/or
logo of the Localized Edition is changed pursuant to this Section 10(b), unless
restricted by law, Licensee shall place the "ZDNET" title and logo in small size
print on the top page of the home page accompanied by words indicating that the
Localized Edition is the Japanese edition of the Service. Licensor shall have
the right to settle any claim or action arising out of any such third party
claim in its sole discretion. Subject to Section 10(a) above, if Licensee
brings any claim or counterclaim against such third party with respect to any of
the Trademarks, or continues to use any of the Trademarks following any judgment
or settlement enjoining such use, Licensee shall indemnify and hold Licensor and
its affiliates harmless from and against any and all loss, cost, liability,
damage and expense (including reasonable attorneys' fees and other legal costs)
incurred by Licensor and its affiliates on account of such claim, counterclaim
or use. In no event may Licensee make any settlement or compromise which may
authorize or permit any third party to use any of the Trademarks, or any element
thereof, or any similar trademark in any language, or any of the Ziff-Davis
Marks, without Licensor's written consent.
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(c) Licensee shall indemnify and hold Licensor and its affiliates harmless
from any and all loss, cost, liability, damage and expense (including reasonable
attorneys' fees and other legal costs) incurred by Licensor and its affiliates
on account of any third party claims or lawsuits arising out of or relating to
any of Licensee's activities hereunder, (other than claims as to which Licensor
indemnifies Licensee under Section 10(a) above), including, without limitation,
claims or lawsuits arising out of or relating to the Other Material, the
mistranslation of Available Material or the marketing, promotion, publication,
sale or distribution of the Localization Edition.
(d) Notwithstanding anything to the contrary in this agreement, in no event
shall either party be liable to the other for consequential or indirect damages,
including, but not limited to damages resulting from lost profits or goodwill,
whether or not that party has been advised or is aware of the possibility of
such damages.
11. Retention of Rights
-------------------
All rights not specifically granted to Licensee herein are retained by
Licensor. Without limiting the generality of the foregoing, except for the
rights specifically granted to Licensee in Section 1(a) above, Licensor retains
all rights in and to the Trademarks and all Available Material, including, but
not limited to, the right to use and exploit the Trademarks and all Available
Material throughout the world (except as provided in Section 1), in all
languages in any medium or form. Notwithstanding the foregoing, Licensee is
authorized to use any of the material licensed under this agreement in
advertising or promotion of any Localized Edition or in promotional or similar
products ancillary to the publication of such Local Edition.
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12. Non-Competition.
---------------
During the term of this agreement, Licensee shall not, directly or
indirectly, engage in the business of publishing or distributing in the
Territory, any electronic service, the principal editorial content of which is
about computers and computer-related technology and which is directly
competitive with the Localized Edition.
13. Assignment
----------
(a) This agreement and all rights and obligations under this agreement
shall not, other than to a subsidiary or affiliate or with the prior written
consent of Licensor, be assigned, sublicensed (except to permit subscribers to
the Localized Edition to download all or part of the Available Material for
their non-commercial personal use), delegated or otherwise transferred by
Licensee.
(b) This agreement shall not, without the prior written consent of
Licensee, be assigned by Licensor except to an affiliate or in connection with
the sale or transfer of all or substantially all of the assets of the Service,
or the sale or transfer, merger, consolidation or similar reorganization by
Licensor of trademarks and/or other intangible property or all or substantially
all of its assets.
(c) Subject to the foregoing, this agreement shall inure to the benefit
of parties' successors and assigns.
14. Termination
-----------
(a) This agreement may be terminated prior to the expiration of any term
in the following circumstances:
(i) By Licensor if Licensee fails to timely pay to Licensor any
amounts due under this agreement, unless Licensor receives, within thirty
(30) days after the delivery of written notice to Licensee of such
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<PAGE>
failure, all amounts due and owing to Licensor as specified in such notice;
(ii) By either party if the other party breaches in a material way
any other provision of this agreement (including for any deficiency in use
of the Trademarks or in the quality of the Localized Edition or related
materials) or of any other agreement between Licensor or any of its
affiliates and Licensee or its affiliates, unless within thirty (30) days
after delivery of written notice of such breach to the breaching party, an
evidence of the cure of that breach satisfactory to the non-breaching
party; and
(iii) By either party upon written notice to the other party if the
other party suffers any insolvency proceeding, either voluntary or
involuntary, or is adjudicated bankrupt or makes any assignment for the
benefit of creditors or has a receiver appointed, provided that such
termination shall not relieve the party in proceedings from liability for
the performance of its obligations under this agreement.
(b) The terminating party shall also have all other rights and remedies
which may be available to it under this agreement or at law or in equity, except
as otherwise provided herein.
15. Effects of Termination
----------------------
In the event notice of termination of this agreement is given by either
party for any reason, from and after termination or expiration of this
agreement, Licensee shall immediately cease publication of the Localized
Edition, shall immediately discontinue all use of the Trademarks and Available
Material and shall immediately cease the exercise of any other rights granted
under this agreement and shall cooperate with Licensor to apply to the
appropriate
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authorities to cancel any recording or registration of this agreement from all
government records.
16. Payments; Statements; Records
-----------------------------
(a) Within ninety (90) days after the end of each calendar year (a
"Reporting Period") during each year of this agreement, Licensee shall pay the
royalties provided by Section 3(b) above and deliver to Licensor an income
statement for the Localized Edition as well as reports of total impressions per
month, page requests per month, total pages served per month, unique IP
(Internet provider) addresses per month, ad requests (click through) per month,
local marketing activities, technical support and local content development for
the Localized Edition, in each case, certified by Licensee's authorized officer.
(b) If Licensee fails to pay any amount due under this agreement by its due
date and such failure continues for ten (10) business days, then interest shall
accrue on all unpaid amounts at the published prime rate of the Bank of New York
per annum, or, if lower, the highest rate then permitted by law from the date on
which payment was due through the date on which Licensor receives payment.
Licensee agrees to pay such interest and all collection costs.
17. Manner of Payment
-----------------
Each payment required to be made by Licensor to Licensee pursuant to this
agreement shall be made by wire transfer to Licensee's account at a bank
designated by Licensee. Each payment required to be made by Licensee to
Licensor pursuant to this agreement shall be made by wire transfer to Licensor's
account at a bank designated by Licensor. Licensee shall be responsible for all
bank transfer fees.
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18. Discontinuance of the Service
-----------------------------
(a) Notwithstanding anything contained herein to the contrary, Licensor
and its affiliates shall have the absolute right in their sole discretion, at
any time, to discontinue, suspend, abandon or otherwise terminate the
publication of the Service or any of the publications included in the Service or
incorporate the Service or any of the publications included in the Service into
or with another service or publication. Licensor shall give Licensee as much
notice as practical of such event. In that event, Licensor's obligation to
provide Available Material with respect to the discontinued or incorporated
service or publication shall automatically terminate, and, if the Service has
been discontinued or incorporated, Licensee shall have the right to terminate
this agreement upon notice to Licensor.
(b) Notwithstanding anything contained herein to the contrary, Licensee
shall have the absolute right, in its sole discretion, at any time during the
term of this agreement, to discontinue, suspend, abandon or otherwise terminate
the publication of the Localized Edition upon not less than ninety (90) days'
prior notice to Licensor. Any amount that may otherwise accrue and become
payable under Section 3 shall cease to accrue upon the expiration of such
ninety-day period. In that event, Licensor shall have the right, exercisable at
any time after the end of Licensee's notice period, to terminate this agreement
with respect to the Localized Edition immediately upon notice to Licensee.
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19. Confidential Information.
------------------------
If pursuant to this agreement Licensee receives or becomes aware of any
information from Licensor concerning Licensor or the Service that is
confidential or proprietary in nature, Licensee shall keep such information
confidential and shall not, without Licensor's prior written consent, disclose
such information in any manner whatsoever, in whole or in part, and shall not
use such information for any purpose except that with respect to confidential
information belonging to a third party and intended for publication in the
Service at such time as it is no longer confidential, Licensee may publish such
information following its publication in the U.S. edition of the Service,
subject to Section 4 above and provided it is identified by Licensor as
Available Material.
20. Compliance with Law.
-------------------
Licensee shall conduct its efforts under this agreement in strict
accordance with all applicable laws and regulations.
21. United States and Other Editions.
--------------------------------
Licensee acknowledges the rights of Licensor and Licensor's affiliates,
divisions and other present and future licensees to publish, reproduce, publicly
perform, publicly display, transmit and distribute into the Territory the U.S.
edition of the Service and other localized editions of the Service in languages
other than Japanese.
22. Miscellaneous.
-------------
(a) Notices. All notices, requests, statements and other communications
-------
under this agreement shall be in writing, and shall be deemed given when
delivered personally, sent by facsimile or e-mail, air courier, or mailed Air
Mail Registered Mail, Return Receipt Requested,
23
<PAGE>
to each party at the following addresses (or such other address as a party may
give notice of hereafter);
(i) with respect to requests by Licensee to Licensor for editorial
material, and for all other requests, notices, statements and other
communications to:
ZDNET
1 Athenaeum Street, Riverview Building
Cambridge, MA 02142, U.S.A.
Attention: President
(ii) with respect to notices to Licensor regarding the breach, extension
or termination of this agreement, copies shall be sent to:
ZDNET
1 Athenaeum Street, Riverview Building
Cambridge, MA 02142, U.S.A.
Attention: President
with a copy to Licensor's Legal Department at Ziff-Davis Inc., One Park
Avenue, New York, New York 10016, U.S.A.;
(iii) with respect to notices to Licensee regarding any matters, to:
SOFTBANK Corp.
24-1, Nihonbashi Hakozaki-cho
Chuo-ku, Tokyo 103-8501, Japan
Attention: Executive Vice President -
Publishing
with a copy to Licensee's Legal Department at the same address.
(b) Entire Agreement. This agreement contains a complete statement of all
----------------
of the arrangements between Licensor and Licensee with respect to the Service
and the Localized Edition, supersedes all previous agreements,
24
<PAGE>
arrangements and understandings, written or oral, relating thereto, and may not
be modified except by a writing signed by both parties. This agreement shall be
binding on the parties' permitted successors and assigns, including subsequent
owners.
(c) Governing Law.
-------------
This agreement shall be governed by and construed during and after the term
of this agreement in accordance with the laws of the State of New York.
Licensee irrevocably consents to the non-exclusive jurisdiction of the courts of
New York in connection with any action or proceeding brought during or after the
term of this agreement and arising out of or related to this agreement. In any
such action or proceeding, each party waives personal service of any summons,
complaint or other process and agrees that service thereof shall be deemed made
when mailed registered air mail, return receipt requested, addressed to that
party at its address set forth in Section 22(a) or at such other address as that
party may specify by written notice to the other party. Within thirty (30) days
after such service (subject to such extensions as may be agreed to between the
parties or their attorneys), the party upon whom service was made shall appear
or answer to the summons, complaint or other process; if that party shall fail
to appear or answer within that thirty (30) day period (as it may be extended as
provided above), that party shall be deemed in default and judgment may be
entered by the other party for the relief demanded in the summons, complaint or
other process.
(d) No Joint Venture. This agreement is not intended to be and shall
----------------
not be one of partnership or joint venture and neither Licensee nor Licensor is
an agent for the other, except where Licensor is named Licensee's attorney-in-
fact.
25
<PAGE>
(e) No Waiver. The failure of a party to insist upon strict
---------
adherence to any term of this agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this agreement. Any waiver must be
in writing.
(f) Separability. If any provision of this agreement is invalid or
------------
unenforceable, the balance of this agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
(g) Counterparts. This agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
(h) Headings. The headings in this agreement are solely for
--------
convenience of reference and shall not affect its interpretation.
(i) Further Instruments. Each party agrees to execute and deliver
-------------------
such further documents and take such further steps as may be reasonably
requested by the other party to further the purposes of this agreement.
(j) Survival. Sections 3, 8, 9, 10, 11, 12, 15, 19, and 22, and all
--------
other provisions of this agreement which expressly state that they survive the
expiration or termination of this agreement, or which state that they apply
during and after the term of this agreement, or which by their sense are
intended to survive the expiration or termination of this agreement, shall
survive the expiration or termination of this agreement.
(k) Interpretation. This agreement has been negotiated by the
--------------
parties and their respective counsel. This agreement will be fairly interpreted
in accordance with
26
<PAGE>
its terms and without any strict construction in favor of or against either
party.
(l) Affiliates.
----------
(a) The provisions of Sections 9 and 12 shall also apply to the actions
of and be directly binding on any company directly or indirectly owned or
controlled by or under common ownership or control with Licensee, or which
directly or indirectly owns or controls Licensee (each, other than Ziff-Davis, a
"Licensee Affiliate") to the same extent Licensee is bound by such provisions,
as if they were direct obligations of such Licensee Affiliate and as if such
Licensee Affiliate were a party to this agreement.
(b) For purposes of this agreement, any reference to an affiliate of
Licensor shall mean its majority owned subsidiaries and any other affiliates
which are under its management control. Without limiting the generality of the
foregoing, Licensee shall not be considered an affiliate of Licensor for these
purposes.
(m) Force Majeure. Neither party shall be responsible for any failure
-------------
or delay in performance of its obligations under this agreement because of
circumstances beyond its reasonable control, including, without limitation, acts
of God, fires, floods, wars, civil disturbances, sabotage, accidents, labor
disputes (whether or not the employees' demands are reasonable and within the
party's power to satisfy), governmental actions or inability to obtain labor,
material, equipment or transportation, nor, except as
27
<PAGE>
provided below, shall any such failure or delay give the other party the right
to terminate this agreement.
MAC INC. SOFTBANK CORP.
By: ___________________ By: _________________________
Name: Name:
Title: Title:
ZIFF-DAVIS INC.
By:_________________________
Name:
Title:
28
<PAGE>
Exhibit A
- ---------
Guidelines for the Use of the "ZDNET" Trademark and Logo by Licensee
The "ZDNET" logo licensed under the agreement to which this Exhibit is attached
(the "Agreement") may be used by Licensee only as a composite mark with the
ZDNET trademark as specified below and on the attached, which is incorporated
herein, and only in connection with the Localized Edition and only in the exact
form and context specified by Licensor, all as more fully set forth herein and
in the Agreement. Until Licensor directs or consents to another location, the
ZDNet logo shall be used in the manner and location as used by ZDNet on the
Service.
The "ZDNET" trademark and the "ZDNET" logo composite mark licensed under the
Agreement consists of four individual marks:
1. the words "ZDNET"
2. the "ZDNET' logo design, including the tilted box
design, without
the words "ZDNET"
3. the "ZD" stylized type
4. the "NET" stylized type
All rights of Licensor and all obligations of Licensee, and its Licensee
Affiliates, under the Agreement shall apply with equal force and effect to the
composite mark and the four individual marks comprising the composite mark.
The "ZDNET" logo composite mark licensed under the Agreement shall be used only
in accordance with the specifications as to placement, size and design set forth
herein and must appear as the title of the Localized Edition and always be used
in one of the three following color choices:
1. 100% Black
2. 91% Magenta, 87% Yellow (process color)
3. 100% PMS 485 (match color)
The "ZDNET" trademark and the "ZDNET" logo composite mark must not be enclosed
in any way by any border may not be combined with any other word(s) or mark(s).
The ZDNET trademark shall always be written in a distinctive fashion, e.g.,
29
<PAGE>
.ZDNET (all caps)
.ZDNET (all italics)
.ZDNET (bold)
Licensee will use commercially diligent efforts to use the ZDNET trademark only
as an adjective followed by the common generic term for the mark, e.g., the
ZDNET online service, and shall not use the ZDNET trademark in the possessive.
Any additional trademarks to be used by Licensee in the Localized Edition
pursuant to Section 9(a) of the Agreement may be used only in connection with
Available Material and only in the exact context and form used by Licensor, as
more fully set forth in the Agreement.
Whenever reasonable in the context of a particular use of the trademarks
licensed under the Agreement, Licensee shall identify such trademarks as being
used under license from Licensor.
All terms used in this Exhibit which are defined in the Agreement shall have the
meaning ascribed to them in the Agreement. These guidelines may be amended from
time to time by the Licensor on written notice to Licensee.
30
<PAGE>
Exhibit B
- ---------
Available Material
Available Material on ZDNet is identified as the text, graphic, and image files
on the server(s) at URL http://www.zdnet.com described by the site map at URL
http://www.zdnet.com/findit/sitemap.html under the following categories (except
as excluded herein):
ZDNet News
Top Stories
Web News
Product News
Business News
Rumors & Comment
ZDNet Products
Product News
Best of the Best
Special Reports
Review Grids
Review Directory
ZDNet Whole Web Catalog
Megasource
Web Guides
Web News
ZDNet Community Center (does not include discussion software)
Messages
ZD Net Events
People
Resources
Contact Us
ZDNet Software Library
What's New
Games
Internet
Homes & Education
Programs & Utilities
Windows 95/NT
Commercial Demos
Editor's Picks
Macintosh
Licensor is not authorizing the distribution of any shareware contained in the
ZDNet Software Library, only
31
<PAGE>
Licensor's descriptions of such shareware. Licensee shall be responsible for
securing any permission necessary to distribute the shareware and for complying
with all terms and conditions on distribution imposed by the shareware owners.
ZDNet Resources
AnchorDesk (exclusive of any subscription offers or services or related
software)
Company Finder (not available until mid 1997)
Top Five List (exclusive of any subscription offers or services or related
software)
Quick Poll (does not include Quick poll software)
Site Map
What's New Map
Ziff-Davis Magazines (exclusive of the magazine titles (except in block letters
for source identification) and logos)
Computer Life
Computer Shopper
Family PC
Interactive Week
Internet Computing
InternetUser
PC Computing
PC Magazine
PC Week
Windows Sources
Yahoo Internet Life
Notwithstanding any suggestion to the contrary above, available material shall
not include (i) Netbuyer; (ii) GameSpot, Nuke or any other games related
materials; (iii) ZD University; (iv) Computer Database Plus; (v) any other
content on the Service which is surcharged; or (vi) software used to develop
Available Material or used for the display or performance of Available Material
unless Licensor specifically agrees in a separate writing to provide such
material or software.
Notwithstanding any suggestion to the contrary above, Licensor may delete from
this Exhibit any of the Ziff-Davis magazines listed above upon not less than
thirty (30) days notice to Licensee.
32
<PAGE>
EXHIBIT 10.7
April 1, 1998
AGREEMENT TO PRODUCE "COMDEX/ JAPAN," "NETWORLD+INTEROP JAPAN," "WINDOWS
NT INTRANET SOLUTIONS TOKYO," "SEYBOLD SEMINARS TOKYO," "OBJECT WORLD JAPAN" AND
"NEW BUSINESS" EVENTS IN JAPAN.
This agreement dated 1st day of April 1998 is between ZD COMDEX and
Forums, Inc., a subsidiary of ZD Inc. (herein referred as `ZDCF'), owners and
producers of COMDEX, NetWorld + Interop, Windows NT Intranet Solutions, Seybold
Seminars and Object World events, worldwide and SOFTBANK FORUMS KK, A SUBSIDIARY
OF SOFTBANK CORP, A JAPANESE CORPORATION, (herein referred to as ("Forums"),
owners and producers of trade shows in Japan. This agreement is intended to
govern the ownership and production of a series of annual trade exhibitions and
seminars in Japan known as: "COMDEX/ Japan," "NetWorld + Interop Japan,"
-------------------------------------------
"Windows NT Intranet Solutions Tokyo," "Seybold Seminars Tokyo," "Object World
- ------------------------------------------------------------------------------
Japan" and other "New Business" events still to be determined (hereinafter the
- ------------------------------------------------------------------------------
"Events"). Pursuant to this agreement, Forums will own the Events in Japan and
- ---------
will be responsible for the overall production and management of the Events.
ZDCF agrees to give a limited license to Forums to use the trademarks:
"COMDEX," "NetWorld + Interop", "Windows NT Intranet Solutions," "Seybold
Seminars" and "Object World" solely for the purpose of organizing the above
events in Japan, in accordance with the "Trademark License Agreement" attached
hereto and incorporated herein. Additionally, ZDCF will provide technical
assistance and know-how to the events all as more fully set forth on the
attached Technical Assistance Agreement and incorporated herein. ZDCF will also
provide invoicing, collection and administrative services to FORUMS, related to
servicing exhibitors based outside Japan, interested in exhibiting at
COMDEX/Japan, NetWorld + Interop Japan, Windows NT Intranet Solutions Tokyo,
Seybold Seminars Tokyo ,Object World Japan and still to be determined "New
Business" events, all as more fully set forth on the attached Accounting and
Administrative Services Agreement and incorporated herein.
Whereas, heretofore, ZDCF was a wholly-owned subsidiary of SOFTBANK Corp,
and ZDCF owned and managed the Events in Japan; and
Whereas, Softbank Corp has elected to reorganize certain of its subsidiary
entities the end result of which will be that ZDCF will no longer be a wholly-
owned subsidiary of SOFTBANK Corp; and
Whereas, such reorganization requires that a new business arrangement be
established between ZDCF and Softbank Corp to control the ownership and
production of the Events in Japan to assure a fair and reasonable division of
the historic profits of the Events; and
Whereas, this agreement is intended to supercede all prior agreements
between the parties (or any predecessor entity of either party) and most
specifically, the agreement dated March 31, 1997 entitled "Agreement to Produce
COMDEX /Japan";
Now, therefore, it is agreed as follows:
<PAGE>
1. OWNERSHIP OF THE EVENTS
It is agreed between ZDCF and SOFTBANK CORP that the Events in Japan will be
owned by Forums. Accordingly, Forums undertakes to exert its best effort to
organize, plan, promote, and manage all aspects of the Events, except those
specifically reserved to ZDCF pursuant to the attached agreements.
Specifically, Forums will be responsible for all promotion, marketing,
sales, conference activities, operations, publications, administration,
accounting, public relations and all other Event related activities. All
profits and losses from the Events shall be for Forums account, and all
payments due ZDCF by Forums shall be paid in accordance with the specific
provisions of paragraph 3 hereof and the relevant paragraphs of the attached
agreements.
2. RESPONSIBILITIES OF ZDCF
a. ZDCF shall provide technical assistance (all as more fully set forth in
the attached Technical Assistance Agreement) to Forums to facilitate
their production and operation of the Events. Such assistance other than
during a specific event shall be performed at the ZDCF offices in the
United States, as ZDCF will have no permanent presence in Japan.
b. ZDCF will act as a sales agent for Forums outside of Japan selling
exhibit space and related products (all as more fully set forth in the
attached Accounting and Administrative Services Agreement) for all the
Events. ZDCF will utilize its existing worldwide network of general
sales agents to sell outside of the United States and Canada (except
Japan which will be the sales territory of Forums).
c. ZDCF will license to Forums the trademarks/service marks used in
connection with the Events, to wit, "COMDEX," "Networld + Interop,"
"Seybold Seminars," "Object World" and such other marks as may be owned
or controlled by ZDCF and required for the effective promotion of the
Events (all as more fully set forth on the attached Trademark License
Agreement).
3. FINANCIAL TERMS
a. All working capital necessary for the efficient operation of the Events
shall be provided by Forums.
b. As the owner of the events, Forums shall retain all profits and be
responsible for all losses from the Events.
c. ZDCF shall be compensated for its services to the Events as provided in
the several agreements attached, provided, however, that,
notwithstanding anything to the contrary set forth in the technical
Assistance Agreement, the Accounting and Administrative Services
Agreement and Trademark License Agreement, each between ZDCF and Forums
and dated of even date herewith, in no event, shall the fees paid ZDCF
pursuant to such agreements exceed, in gross, a sum greater than 50% of
the net (pre-tax) profits earned by Forums from the Events on an annual
basis. The fiscal year for the combination of Events shall end on
December 31.
d. ZDCF and Forums shall be responsible for their respective taxes on their
profits or fees, as the case may be.
2
<PAGE>
e. If the Events show a loss for the fiscal year, then such loss shall be
borne solely by Forums.
4. BUDGETS
Within the sixty(60) day period next following the execution of this
Agreement, ZDCF and Forums shall jointly develop budgets of income and
expenses for the Events to be held in 1998. In addition to the Events
budgets, Forums shall submit a proposed overhead budget for calendar year
1998 and submit same to ZDCF for its reasonable approval. With respect to
all subsequent events, Forums shall, within the sixty (60) day period next
following the conclusion of each event, prepare a proposed budget of income
and expenses for the next year's event and submit same to ZDCF for its
reasonable approval. Once approved, the 1998 or subsequent year's budgets
will become the operating budget and business plan for each of the Events,
subject to revisions and amendments from time to time, as proposed by Forums
and reasonably approved by ZDCF. Forums will maintain one or more separate
bank accounts in the name of Forums or each of the Events into which all
event revenues will be deposited and from which all event expenses will be
paid. Forums will maintain complete and accurate books of account for all
Event-related activities. Such books of account will be open for the
reasonable inspection of ZDCF or its agent from time to time and at
reasonable times.
5. DURATION
This Agreement shall have an indefinite term provided, however, that either
ZDCF or Forums shall be able to terminate this Agreement by notice in
writing to the other for the following reasons and on the following
conditions;
a. at any time if the other party has committed a material breach of the
terms of this Agreement which remains unremedied 30 days after service
of notice from the first party drawing attention to the breach and
requiring it to be remedied:
b. with respect to any single Event, such Event may be canceled or
postponed upon the mutual agreement of ZDCF and Forums;
c. in the event that either party goes into receivership or liquidation (or
analogous corporate procedure).
d. at any time with the mutual agreement of both ZDCF and Forums.
6. CONSEQUENCES OF TERMINATION
Where the Agreement has been lawfully terminated pursuant to paragraph 5 (a)
(b) (c) hereof, then the party in breach or the party in financial distress
shall:
(i) be precluded from producing or marketing a trade show or
conference in Japan using ZDCF trademarks or service marks or from
licensing such marks to enable third parties.
Where the Agreement has been terminated by mutual agreement of the parties,
then Forums shall be able to own, produce or manage trade shows or
conferences in Japan thereafter, but Forums shall not be permitted to
utilize the ZDCF trademarks or service marks to promote such events.
3
<PAGE>
7. RELATIONSHIP OF THE PARTIES
This agreement is solely a production and management contract and nothing
contained herein is intended to constitute or create a general partnership,
joint-venture, or general agency between the parties. Neither party has any
power or authority to act in the name of or on behalf of the other party,
nor to incur any liability or obligation binding upon the other party,
except as expressly provided in this Agreement. The employees of each party
remain the employees solely of such party, subject to the sole and
exclusive direction and control of their respective employer.
8. INDEMNIFICAITON
Each of the parties hereto (the "indemnifying party") hereby covenants to
indemnify and hold harmless the other (the "indemnified party ") against all
losses, liabilities, costs and expenses, including, without limitation,
legal fees and disbursements, incurred by the indemnified party that may
result from the negligence or misconduct of, or breach of this Agreement by
the indemnifying party.
9. NOTICES
Any notices sent hereunder shall be in writing to the parties hereto at
the following addresses:
If to ZD COMDEX & FORUMS INC:
ZD COMDEX & FORUMS Inc.
300 First Avenue
Needham, MA 02194
Attention: Charles D Forman, Chief Legal Officer
IF TO SOFTBANK FORUMS KK:
SOFTBANK Forums KK
24-1 Nihonbashi-Hakozakicho Chuo-ku
Tokyo, 103 Japan
Attention: Hiroyuki Sugano, Vice President
10. GOVERNING LAWS
This agreement shall be governed by, interpreted and enforced in accordance
with the laws of the State of New York, without giving effect to principles
of conflict of laws.
11. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of ZD COMDEX & FORUMS Inc. and
SOFTBANK Forums KK, but may not be assigned by either party without the
written consent of the other except to SOFTBANK Corp. and its affiliates.
4
<PAGE>
IN WITNESS WHEREOF, ZDCF and Forums have caused this Agreement to be
executed by their respective duly authorized representatives in the manner
legally binding upon them as of the date first above written.
WITNESS: ZD COMDEX & FORUMS INC.
- --------------------------- ---------------------------
Christopher Nazar, By: Charles D. Forman,
International Controller Chief Legal Officer
SOFTBANK Forums KK
- --------------------------- ----------------------------
Masakuni Takada, Controller By: Hiroyuki Sugano, Vice President
ATTACHMENTS:
(1) Technical Assistance Agreement;
(2) Accounting and Administrative Services Agreement;
(3) Trademark License Agreement
5
<PAGE>
EXHIBIT 10.8
TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT is made and entered this 1st day of April 1998 (hereinafter
the "Effective Date"), by and between ZD COMDEX & FORUMS INC., a subsidiary of
ZD Inc., a corporation organized and existing under the laws of the State of
Delaware, located at 300 First Avenue, Needham, Massachusetts (hereinafter
referred to as "Licensor"), and SOFTBANK FORUMS KK, a corporation organized and
existing under the laws of Japan, located at 24-1 Nihonbashi-Hakozakicho Chuo-
ku, Tokyo, 103 Japan (hereinafter referred to as "Licensee").
WHEREAS, Licensor is the owner of the tradenames, trademarks, servicemarks
and registrations thereof listed on Schedule A, which may be amended from time
to time by mutual consent of the parties (the "Marks");
WHEREAS, Licensee desires to obtain a license from Licensor to use the
Marks in connection with Licensee's trade shows and seminars to be known as
"COMDEX/Japan", "NetWorld + Interop Japan", "Windows NT Intranet Solutions
- --------------------------------------------------------------------------
Tokyo", "Seybold Seminars Tokyo , "Object World Japan and still to be determined
- --------------------------------------------------------------------------------
"New Business" events" and held annually in greater Tokyo area, Japan.
- ---------------------
NOW THEREFORE, in consideration of the foregoing and of the mutual promises
hereinafter set forth, the parties agree as follows:
1. Term.
----
1.1 Subject to the provision of Article 10 herein, this Agreement shall be
for an indefinite term, but, in any event, shall be co-terminous with
that certain agreement between the parties entitled "Agreement to
Produce COMDEX/Japan, NetWorld + Interop Japan, Windows NT Intranet
Solutions Tokyo, Seybold Seminars Tokyo and Object World Japan" of even
date herewith (the "Agreement to Produce") and shall terminate
immediately upon any termination of such agreement.
2. Territory.
---------
2.1 Territory shall mean Japan (location of the Events).
3. Grant of License.
----------------
3.1 Subject to the provisions of this Agreement, Licensor grants to
Licensee, and Licensee accepts, an exclusive, nontransferable,
personal license to use the Marks in the Territory solely in
connection with the organization, production, management and promotion
of the above listed Events. Licensee shall have the right to enter
into sublicenses (a) only with the prior written approval of Licensor;
(b) only with any of the subsidiaries or affiliates of SOFTBANK Corp.
and (c) only for the purposes for which Licensee has been granted a
license hereunder. No permitted sublicense agreement may extend beyond
the term of this Agreement.
4. Payment.
-------
<PAGE>
4.1 Licensee shall pay to Licensor as a licensee fee royalties in the
amount of ten percent ( 10% ) of the Gross Revenues from each of the
above Events. "Gross Revenues" shall mean all revenues generated by
each of Events, from worldwide sources - to include booth space sales
revenues, event marketing revenues, conference and seminars revenues,
attendee revenues and other. The payment of such fees to ZDCF in
respect of any Event held during any fiscal year of the Licensee shall
be due within sixty (60) following the end of such fiscal year.
5. Accounting and Auditing.
-----------------------
5.1 Within sixty (60) days following the end of each quarterly period after
the Effective Date, during the Term, Licensee shall provide Licensor
(at his request) with a written statement setting forth Licensee's
forecast for each of the Events and its Event-related revenues and
expenses during such quarterly period and a calculation of the royalty
based thereon. Within sixty (60) days after any expiration of this
Agreement, Licensee shall provide Licensor such a statement for the
last whole or partial quarterly period during the Term. Each such
statement shall be accompanied by the remittance to Licensor of the
royalties shown to be due thereby.
5.2 Upon five (5) days' notice to Licensee, Licensor, at its own expense,
shall have the right at any time during regular business hours, not
more frequently than twice annually, to have a qualified accountant
selected by Licensor audit the records of Licensee to the extend
necessary to verify Licensee's statements and payments of royalties.
Licensee shall cooperate with an assist Licensor's accountant for the
purpose of facilitating such audit. If, as a result of such audit,
Licensor's accountant determines that the amount of royalties due was
greater than the amount reported by Licensee in a quarterly statement
furnished pursuant to Section 5.1, Licensor shall promptly furnish to
Licensee a copy of the report of its accountant setting forth the
amount of the deficiency showing, in reasonable detail, the basis upon
which such deficiency was determined.
6. Quality Standards.
-----------------
6.1 Licensee agrees that the nature of quality of: (1) all services
rendered and goods produced, sold or distributed by Licensee in
connection with the Marks; and (2) all related advertising,
promotional, and other related uses of the Marks by Licensee shall
confirm to standards set by, and be under the control of, Licensor. All
such uses shall require prior written consent by Licensor. Any
different usage also shall require written consent by Licensor.
6.2 Licensee agrees to cooperate with Licensor in facilitating Licensor's
control of the nature and quality of goods and services rendered by
Licensee in connection with the license granted hereunder, to permit
reasonable, periodic inspection of Licensee's operations, at reasonable
times and with reasonable notice, and to supply Licensor with details
of all uses of the Marks upon request. Licensee shall comply with
applicable laws and regulations and obtain all appropriate governmental
approvals pertaining to the production, distribution, and sale and
promotion of goods and services rendered by Licensee in connection with
the Marks.
7. The Marks.
---------
2
<PAGE>
7.1 Licensee shall include the Marks on or with all Events-related products
and materials sold or distributed under the Marks and shall include all
notices and legends with respect to the Marks as are or may be required
by applicable law or which may be reasonably requested by Licensor.
7.2 Licensee acknowledges the ownership of the Marks by Licensor, agrees
that it will do nothing inconsistent with such ownership, and that all
use of the Marks by Licensee and all goodwill developed therefrom shall
inure to the benefit of and be on behalf of Licensor. Licensee agrees
that nothing in this Agreement shall Licensee any right, title, or
interest in the Marks other than the right to use the Marks other than
the right to use the Marks in accordance with this Agreement and
Licensee agrees that it will not challenge the title of Licensor to the
Marks or challenge the validity of this Agreement.
8. Infringement.
------------
8.1 Licensee shall notify Licensor promptly of any actual or threatened
infringements, imitations, or unauthorized use of the Marks by third
parties of which Licensee becomes aware. Licensor shall have the sole
right, at its expense, to bring any action on account of any such
infringements, imitations, or unauthorized use, and Licensee shall
cooperate with Licensor, as Licensor may reasonably request, in
connection with any such action brought by Licensor. Licensor shall
retain any and all damages, settlement and/or compensation paid in
connection with any such action brought by Licensor.
9 Indemnification.
- - ---------------
9.1 Licensee, at its expense, shall defend and indemnify, and save and hold
Licensor harmless from and against any and all liabilities, claims,
causes of actions, suits, damages, including without limitation, suits
for personal injury or death of third parties, and expenses, including
reasonable attorney's fees and expenses, for which Licensor becomes
liable, or may incur or be compelled to pay be reason of Licensee's
activities in Japan or breach of the terms of this Agreement, including
but not limited to: (a) claims of infringement of any intellectual
property right; or (b) product liability suits by direct or indirect
10 Relationship of the Parties.
- -- ---------------------------
10.1 The relationship of Licensee to Licensor is that of an independent
contractor and neither Licensee nor its agents or employees shall be
considered employees or agents of Licensor. This Agreement does not
constitute and shall not be construed as constituting a partnership or
joint-venture or grant of a franchise between Licensor and Licensee.
Licensee shall not have the right to bind Licensor to any obligations
to third parties.
11 Assignment.
- -- ----------
11.1 This Agreement may be assigned by Licensor but shall not be assigned
or transferable by Licensee except in accordance with the provisions
of Section hereof, and any attempted assignment by Licensee not so in
accordance with Section 3.1 shall be void and shall constitute a
breach of the obligations of Licensee hereunder.
3
<PAGE>
12 Notices.
-------
12.1 Any notice, demand, waiver, consent, approval, or disapproval
(collectively referred to as "notice") required or permitted herein
shall be in writing and shall be given by prepaid registered or
certified mail, with return receipt requested, by facsimile
transmission with confirmation receipt, or by recognized overnight
delivery courier service, such as Federal Express, addressed to the
parties at their respective addresses set forth above or at such other
address as a party may thereafter designate in writing to the other
party. A notice shall be deemed received on the date of receipt.
13 Applicable Law.
--------------
13.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, U.S.A., without regard to principles
of conflicts of laws.
14 Modification, Amendment, Supplement, or Waiver.
----------------------------------------------
14.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all previous
agreements, promises, representations, understandings, and
negotiations, whether written or oral.
14.2 No modification, amendment, supplement to or waiver of this Agreement
or any of its provisions shall be binding upon the parties hereto
unless made in writing and duly signed by both of the parties of this
Agreement. A waiver by either party of any of the terms or conditions
of this Agreement in any one instance shall not be deemed a waiver of
such terms or conditions in the future.
IN WITNESS THEREOF, the parties hereby have caused this Agreement to be
duly executed on the Effective Date.
LICENSOR: LICENSEE:
-------- --------
ZD COMDEX & FORUMS Inc SOFTBANK Forums KK
_________________________ ______________________
By: Charles D. Forman By: Hiroyuki Sugano
Chief Legal Officer Vice President
4
<PAGE>
SCHEDULE A:
LISTING OF MARKS REGISTERED IN JAPAN:
(1) "COMDEX" trademark - registered with proper authorities in Japan.
(2) "OBJECT WORLD" trademark - registered with proper authorities in Japan.
(3) "NetWorld + Interop" trademark - registered with proper authorities in
Japan.
(4) "Windows NT Intranet Solutions" trademark - registered with proper
authorities in Japan.
(5) "Seybold Seminars" trademark - registered with proper authorities in
Japan.
5
<PAGE>
EXHIBIT 10.9
TECHNICAL ASSISTANCE AGREEMENT
THIS AGREEMENT, made and entered this 1st day of April 1998, by and between
ZD COMDEX & FORUMS INC., a Delaware corporation having a principal place of
business at 300 First Avenue, Needham, Massachusetts ("ZDCF") and SOFTBANK
FORUMS KK, a Japanese corporation having a principal place of business at 24-1
Nihonbashi-Hakozakicho Chuo-ku, Tokyo, 103 Japan ("the Company").
WHEREAS, the Company is engaged in the business of managing and organizing trade
shows and conferences in Japan; and WHEREAS, the Company desires the assistance
of ZDCF in the planning, promotion and administration of its trade shows and
seminars known as: "COMDEX/Japan", "NetWorld + Interop", "Windows NT Intranet
----------------------------------------------------------
Solutions", "Seybold Seminars", "Object World" and still to be determined "New
- ------------------------------------------------------------------------------
Business" events to be held by the Company annually in Tokyo, Japan, and ZDCF
- ----------------
desires to provide such services to the Company.
NOW THEREFORE, in consideration of the mutual agreement set forth herein, the
parties hereto agree as follows:
1. Services. The following are the services to be performed by ZDCF in
--------
connection with the shows:
. 1.1. Financial Services. ZDCF shall make available to the Company the
------------------
services of its accounting department to assist the Company with respect to
accounting, control and other financial matters, as the Company requests.
Such services shall include assistance and advice with respect to budgets,
projections, financing issues, bank relationships, cash management,
reporting, accounting, credit and collection.
. 1.2 Public Relations and Marketing. ZDCF shall make available to the
------------------------------
Company the services of its corporate communications and marketing
departments, including its in-house publishing group - Marcom, for
developing marketing programs, and handling internal and external business
communications. Such services shall include collection and analysis of
information relating to the market for the Events, assistance in the
preparation of internal and external news releases (including graphic
design and printing services), relations with local, national and
international trade and general press organizations, the organization of
news conferences, the preparation of literature related to the Shows for
distribution to the trade, the organization and implementation of
advertising and promotion campaigns, and such other similar matters as ZDCF
and the Company may mutually agree.
. 1.3 Government Affairs. ZDCF's government affairs group shall provide to
------------------
the Company information concerning existing and pending applicable
governmental legislation or policies which may impact the Company's
production of the Shows in the Territory. ZDCF will also maintain a liaison
with governmental officials in the Territory; will assist the Company in
obtaining necessary licenses, permits and authorizations; and will advise
and assist the Company in complying with the laws, regulations, business
and financing practices within the Territory. For the purposes hereof,
"Territory" shall mean Japan.
<PAGE>
. 1.4 Logistical Services. ZDCF shall provide logistical and support services
-------------------
in the Territory, including assistance to the Shows' exhibitors in
arranging and providing lodging, office space, translation,
transportation and communications facilities and other support services.
. 1.5 Show Floor Design. ZDCF shall make available to the Company the services
-----------------
of its operations department to assist the Company with overall Shows
design and design of the show floor space (location of exhibitor booths,
conference areas, keynote halls etc.).
. 1.6 Exhibitor Services. ZDCF shall assist the Company with customer service
------------------
to the Shows' exhibitors, shall provide freight forwarding services to
the exhibitors and shall assist with pre-registration of exhibitors for
subsequent trade-shows to be held by the Company. ZDCF personnel shall
be made available to advise with exhibitor booth set-up and take-down.
. 1.7 Personnel. ZDCF shall assign expert personnel to the Company to perform
---------
work for and on behalf of the Company in the Territory with respect to
the Shows, but only for the period of the actual Show dates, and at such
occasions other times as may be mutually agreed upon.
. 1.8 Other. ZDCF shall provide such other Show-related assistance as the
-----
Company may reasonably request from time to time. All services to be
provided hereunder shall be performed at ZDCF's offices, or elsewhere
within the United States, as ZDCF may determine in its sole discretion,
except for the services described in Section 1.7 above.
2. Relationship of the Parties. It is agreed that each of the parties is and
---------------------------
shall remain an independent contractor and nothing contained in this
Agreement shall be construed to constitute either party as an agent or
employee of the other. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint-venture. The authority of
ZDCF is limited to the performance of the functions as set forth in this
Agreement. Neither party shall have any authority to make any agreement or
incur any liability on behalf of the other party.
3. Charges for Services. In consideration for the furnishing by ZDCF of the
--------------------
services to be provided hereunder, the Company shall pay to ZDCF an amount
to be determined by ZDCF and the Company upon review of the level of
services and the time and resource commitment required to be expended by
ZDCF to deliver the services called for hereunder. Payments due hereunder
shall be made on or about December 31st of each year during the term.
4. This Agreement shall be effective on the date hereof, and shall be for an
----------
indefinite term, but shall be co-terminous with the Agreement to Produce and
shall terminate immediately upon termination of such agreement.
5. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties with respect to services described herein to be provided by ZDCF
to the Company with respect to the Events, and may not be modified or
amended except by a writing duly signed by the authorized representatives of
the parties hereto.
<PAGE>
6. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, USA.
IN WITNESS WHEREOFF, ZDCF and the Company have caused this Agreement to be
executed by their respective duly authorized representatives in the manner
legally binding upon them as of the date first above written.
WITNESS: ZD COMDEX & FORUMS Inc.
__________________________ By: _______________________
Christopher Nazar/ Charles D. Forman
International Controller Chief Legal Officer
SOFTBANK Forums KK
___________________________ By: ________________________
Masakuni Takada/ Controller Hiroyuki Sugano/Vice President
<PAGE>
EXHIBIT 10.10
ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT made and entered this 1st day of April 1998, by and BETWEEN
ZD COMDEX & FORUMS INC., a subsidiary of ZD Inc., Delaware corporation having a
principal place of business at 300 First Avenue, Needham, Massachusetts ("ZDCF")
and SOFTBANK FORUMS KK, a Japanese corporation having a principal place of
business at 24-1 Nihonbashi-Hakozakicho Chuo-ku, Tokyo, 103 Japan (the
"Company").
WHEREAS, the Company is in the business of managing and organizing trade
shows and seminars within Japan; and WHEREAS, the parties hereto wish to enter
into this Accounting and Administrative Services Agreement (the "Agreement"),
pursuant to which ZDCF will provide certain accounting, administrative and
support services to the Company in connection with sales of exhibit space,
conference programs and related products and services made by the Company,
relating to the Company's trade shows known as "COMDEX/ Japan", "NetWorld +
----------------------------
Interop Tokyo", "Windows NT Intranet Solutions Tokyo", "Seybold Seminars Tokyo",
- --------------------------------------------------------------------------------
"Object World Japan" and still-to-be-determined "New Business" events, to be
- ----------------------------------------------------------------------
held by the Company in greater Tokyo area, Japan (the "Events"). The term
----------------------------
"Territory" used in this agreement relates to Japan.
NOW THEREFORE, in consideration of the mutual agreements hereinafter set
forth, the parties hereto agree as follows:
Scope of Services. The Company hereby employs ZDCF to provide, through
-----------------
employees of ZDCF or its affiliates, the following described services. The
commencement date for such services shall be as of January 1, 1998.
a) Accounting and Record-Keeping Services. ZDCF will provide to the Company
--------------------------------------
all of the following accounting and record-keeping services with respect to
sales of exhibit space, seminar programs and related products and services
made by ZDCF outside the Territory relating to the Events.
b) Accounts Payable: processing all invoices related to U.S.-source expenses,
----------------
charging the proper accounts, preparing checks, paying outstanding
invoices;
. Invoicing: pricing support, preparing and mailing invoices;
---------
. Accounts Receivable: maintaining records of billings and collections;
-------------------
. Books and Records: review and assistance to the Company in the
-----------------
maintenance of financial and other books and records;
. General Ledger Consolidation: assistance in general ledger consolidations
----------------------------
of show accounts (to produce consolidated Event statements);
. Audit: periodic internal audits, performed by ZDCF's internal audit staff.
-----
(b) Data Processing and Management Information Services. ZDCF will provide all
---------------------------------------------------
data processing systems required to support sales made by the Company in
the United States related to the Show, including computer operations, data
input, systems and programming - and technical support.
(c) Personnel. On an as-needed basis, ZDCF shall temporarily assign to the
---------
Company certain of its employees to perform administrative work directly
related to sales made by ZDCF on behalf of the Company in the United States
relating to the Events. Such persons shall remain employees of ZDCF during
the term of such services to the Company.
<PAGE>
2. Relationship of the Parties. It is agreed that each of the parties is and
---------------------------
shall remain an independent contractor and nothing contained in this
Agreement shall be construed to constitute either party as an agent or
employee of the other. This Agreement does not constitute and shall not
construed as constituting a partnership or a joint-venture. The authority
of ZDCF is limited to the performance of the functions as set forth in this
Agreement. Neither party shall have any authority to make any agreement or
incur any liability on behalf of the other party.
3. Charges for Services. In consideration for the furnishing by ZDCF of the
--------------------
services to be provided hereunder, the Company shall pay to ZDCF a sum
equal to twenty five percent (25%) of all monies collected in the United
States on account of sales made by ZDCF for exhibit space and related
products in the Company's Events.
4. Term. This Agreement shall have an indefinite term, but, in any event,
----
shall be co-terminous with the "Agreement to Produce COMDEX/Japan, NetWorld
+ Interop Japan, Windows NT Intranet Solutions Tokyo, Seybold Seminars
Tokyo, and Object World Japan" of even date herewith and shall terminate
immediately upon termination of such agreement.
5. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties with respect to services described herein to be provided by
ZDCF to the Company with respect to the Events, and may not be modified or
amended except by a writing duly signed by the authorized representatives
of the parties hereto.
6. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, USA.
IN WITNESS WHEREOF, ZDCF and the Company have caused this Agreement to be
executed by their duly authorized representatives in the manner legally
binding upon them as of the date first above written.
WITNESS: ZD COMDEX & FORUMS Inc.
___________________ By: _______________________
Christopher Nazar Charles D. Forman
International Controller Chief Legal Officer
SOFTBANK Forums KK
_________________ By: ___________________
Masakuni Takada Hiroyuki Sugano
Controller Vice President
<PAGE>
EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of April 1, 1998,
between ZD Inc., a Delaware corporation (the "Company"), and SOFTBANK Holdings
Inc., a Delaware corporation ( "Softbank").
WHEREAS, in connection with the reorganization of the Company,
Softbank has agreed to contribute to the Company all of the stock of Ziff-Davis
Inc. and ZD COMDEX and Forums Inc. in exchange for shares of common stock, par
value $.01 per share, of the Company (the "Common Stock").
WHEREAS, the parties hereto desire to provide for certain
rights to register such shares of Common Stock under the Securities Act of 1933,
as amended, in the manner and upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the
terms and conditions herein contained, the parties hereto mutually agree as
follows:
1. Definitions
-----------
1.1 Defined Terms. In addition to the capitalized terms defined
-------------
elsewhere in this Agreement as used in this Agreement the following terms shall
have the following meanings (with the singular to include the plural, except
where the context otherwise requires):
(a) "Affiliate" of a Person shall mean any Person directly or
indirectly controlling, controlled by, or under common control with such Person.
(b) "Board of Directors" shall mean the Board of Directors of
the Company.
(c) "Commission" shall mean the Securities and Exchange
Commission.
(d) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) "Softbank Shares" shall mean the shares of Common Stock
issued to Softbank pursuant to the reorganization of the Company.
(f) "Softbank Securities" shall mean the Softbank Shares and
any and all issued shares of Registrable Securities (as defined in Section
2.1(a)).
(g) "Person" shall mean any individual, corporation,
partnership, association, trust or other entity or organization, including a
government or political subdivision or agency or instrumentality thereof.
<PAGE>
(h) "Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
(i) "Registration" shall mean a Demand Registration or a
Piggyback Registration.
(j) "Registration Statement" shall mean any registration
statement of the Company which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(l) "Subsidiary" shall mean any corporation, partnership,
joint venture or other entity of which the Company owns, directly or indirectly,
a majority of the capital stock or a majority of the partnership or other equity
interests, or is a general partner.
(m) "underwritten registration" or "underwritten offering"
shall mean a sale of securities of the Company to an underwriter for reoffering
to the public.
2. Registration Rights
-------------------
2.1 Demand Registrations.
--------------------
(a) Softbank may make three written requests to the Company to
effect a registration under and in accordance with the provisions of the
Securities Act of all or part of the Registrable Securities.
"Registrable Securities" shall mean the Softbank Shares and
all shares of Common Stock issued or issuable upon conversion or exercise of any
securities of the Company, which may be issued or distributed with respect to,
or in exchange for, the Softbank Shares pursuant to a stock dividend, stock
split or other distribution, merger, consolidation, recapitalization or
reclassification or otherwise, and any securities of the Company which may be
issued or distributed with respect to, or in exchange for, any such Common Stock
or such other securities pursuant to a stock dividend, stock split or other
distribution, merger, consolidation, recapitalization or reclassification or
otherwise; provided, however, that any such Registrable Securities shall cease
to be Registrable Securities when (i) a Registration Statement with respect to
the sale of such Registrable Securities has been declared effective under the
Securities Act and such Registrable Securities have been disposed of in
accordance with the plan of distribution set forth in such Registration
Statement, (ii) such Registrable Securities are distributed pursuant to Rule 144
or Rule 144A (or any similar provision then in force) under the Securities Act
or (iii) such Registrable Securities shall have been otherwise transferred, new
-2-
<PAGE>
certificates for them not bearing a legend restricting further transfer under
the Securities Act shall have been delivered by the Company and they may be
resold without subsequent registration under the Securities Act; provided,
further, however, that any securities that have ceased to be Registrable
Securities cannot thereafter become Registrable Securities, and any security
that is issued or distributed in respect to securities that have ceased to be
Registrable Securities are not Registrable Securities.
Any registration requested pursuant to Section 2.1(a) shall
hereinafter be referred to as a "Demand Registration." Each request for a Demand
Registration shall specify the kind and aggregate amount of Registrable
Securities to be registered and the intended methods of disposition thereof,
which may be stated in the alternative if a shelf Registration Statement is
requested pursuant to Rule 415 under the Securities Act. The Company shall be
deemed to have effected a Demand Registration if (i) the Registration Statement
relating to such Demand Registration is declared effective by the Commission and
remains effective for at least 30 days; provided, however, that no Demand
Registration shall be deemed to have been effected if (x) such registration,
after it has become effective, is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency or
court or (y) the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are not
satisfied or (ii) at any time after Softbank's request a Demand Registration and
prior to the effectiveness of the Registration Statement, the preparation of
such Registration Statement is discontinued or such Registration Statement is
withdrawn or abandoned at Softbank's request unless either (x) Softbank has
elected to pay and has paid to the Company in full the Registration Expenses (as
hereinafter defined) in connection with such Registration Statement or (y) such
discontinuation, withdrawal or abandonment is requested by Softbank because of
the occurrence of a significant negative change in market conditions or the
Company's business condition or prospects since the date of the initial request
for a Demand Registration.
(b) Priority of Demand Registrations. If the managing
--------------------------------
underwriter or agent of a Demand Registration (or, in the case of a Demand
Registration not being underwritten, Softbank), advises the Company in writing
that in its opinion the number of securities requested to be included in such
Demand Registration exceeds the number which can be sold in such offering
without a significant adverse effect on the price, timing or distribution of the
securities offered, the Company will include in such Registration only the
number of securities that, in the opinion of such underwriter or agent (or
Softbank, as the case may be), can be sold without a significant adverse affect
on the price, timing or distribution of the securities offered.
The Company and other holders of securities of the Company may
include other securities in such Registration if, but only if, such underwriter
or agent (or Softbank, as the case may be) concludes that such inclusion will
not have a significant adverse effect on the price, timing or distribution of
all the securities requested to be included in such Registration.
(c) The Company's Right to Defer Registration. If the Company
-----------------------------------------
is requested to effect a Demand Registration and the Company furnishes to
Softbank a copy of a resolution of the Board of Directors certified by the
Secretary of the Company stating that in the good faith judgment of the Board of
Directors it would be adverse to the Company and its
-3-
<PAGE>
securityholders for such Registration Statement to be filed on or before the
date such filing would otherwise be required hereunder because such registration
would interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company or any of its Subsidiaries or
would require premature disclosure thereof, or would require disclosure of
material information which the Company would be justified in not disclosing in
the absence of such Registration, the Company shall have the right to defer such
filing for a reasonable period not to exceed 90 days after receipt of the
request for such Registration from Softbank. If the Company shall so postpone
the filing of a Registration Statement and if Softbank within 30 days after
receipt of the notice of postponement advises the Company in writing that it has
determined to withdraw its request for Registration, then such Demand
Registration shall be deemed to be withdrawn by it and such request shall be
deemed not to have been exercised for purposes of determining whether Softbank
retains the right to Demand Registrations pursuant to this Section 2.1. In
addition, if Softbank so notifies the Company of its determination to withdraw
its request for Registration and, within the 60 days immediately following the
deferral period, Softbank makes a written request to the Company for
Registration of the same class of Registrable Securities that were subject to
the Registration withdrawn pursuant to the preceding sentence, the Company shall
have no right to defer such Registration pursuant to this paragraph (c).
(d) Registration Statement Form. Registrations under this
---------------------------
Section 2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be reasonably acceptable to
Softbank and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
Softbank's request for such Registration. If, in connection with any
Registration under this Section 2.1 which is proposed by the Company to be on
Form S-3 or any successor form to such Form, the managing underwriter, if any,
shall advise the Company in writing that in its opinion the use of another
permitted form is of material importance to the success of the offering, then
such Registration shall be on such other permitted form.
(e) Selection of Underwriters. If any offering pursuant to a
-------------------------
Demand Registration involves an underwritten offering, Softbank shall have the
right to select the managing underwriter or underwriters to administer the
offering, subject to the consent of the Company, which consent shall not be
unreasonably withheld.
2.2 Piggyback Registrations.
-----------------------
(a) Participation. Subject to Section 2.2(b) hereof, if at any
-------------
time and from time to time after the date hereof, the Company files a
Registration Statement under the Securities Act with respect to any offering of
any equity securities by the Company for its own account or for the account of
any of its equity holders (other than (i) a registration on Form S-4 or S-8 or
any successor form to such Forms or (ii) any registration of securities as it
relates to an offering and sale to management of the Company pursuant to any
employee stock plan or other employee benefit plan arrangement) then, as soon as
practicable (but in no event less than ten days prior to the proposed date of
filing such Registration Statement), the Company shall give written notice of
such proposed filing to Softbank, and such notice shall offer Softbank the
opportunity to register such number of Registrable Securities as Softbank may
request (a
-4-
<PAGE>
"Piggyback Registration") and shall specify whether the offering is to be
underwritten or is to on another basis. Subject to Section 2.2(b), the Company
shall include in such Registration Statement all Registrable Securities
requested within 30 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by Softbank)
to be included in the Registration for such offering pursuant to a Piggyback
Registration; provided, however, that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the Registration Statement filed in connection with such Registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to Softbank and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such Registration (but not from
its obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of Softbank to request that such
Registration be effected as a Registration under Section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. If the offering pursuant to such Registration
Statement is to be underwritten, then Softbank must participate in such
underwritten offering and shall not be permitted to make any other offering in
connection with such Registration. If the offering pursuant to such Registration
Statement is to be on any other basis, then, if Softbank makes a request for a
Piggyback Registration pursuant to this Section 2.2(a), it must participate in
such offering on such basis and it shall not be permitted to make an
underwritten offering in connection with such Registration. Softbank shall be
permitted to withdraw all or part of its Registrable Securities from a Piggyback
Registration at any time prior to the effective date thereof.
(b) Underwriter's Cutback. The Company shall use its best
---------------------
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be
included in the Registration for such offering under Section 2.2(a) or pursuant
to other piggyback registration rights granted by the Company, if any
("Piggyback Securities"), to be included on the same terms and conditions as any
similar securities included therein. Notwithstanding the foregoing, if the
managing underwriter or underwriters of any such proposed underwritten offerings
informs the Company and Softbank in writing that the total amount or kind of
securities, including Piggyback Securities, which Softbank and any other persons
or entities intend to include in such offering would be reasonably likely to
adversely affect the price or distribution of the securities offered in such
offering or the timing thereof, then the securities to be included in such
Registration shall be (i) first, 100% of the securities that the Company or
Softbank making a request for a Demand Registration pursuant to Section 2.1 or
pursuant to other demand registration rights, as the case may be, proposes to
sell, subject to the provisions of Section 2.1(b) and (ii) second, the number of
securities that, in the opinion of such underwriter or underwriters, can be sold
without an adverse effect on the price, timing or distribution of the securities
to be included.
(c) No Effect on Demand Registrations. No Registration of
---------------------------------
Registrable Securities effected pursuant to a request under this Section 2.2
shall be deemed to have been effected pursuant to Section 2.1 hereof or shall
relieve the Company of its obligation to effect any Registration upon request
under Section 2.1 hereof.
-5-
<PAGE>
2.3 Hold-Back Agreements.
--------------------
(a) Restrictions on Public Sale by Softbank. Softbank agrees,
---------------------------------------
if requested by (i) the Company, or (ii) the managing underwriters in an
underwritten offering, not to effect any public sale or distribution of
securities of the Company the same as or similar to those being registered, or
any securities convertible into or exchangeable or exercisable for such
securities, in any Registration Statement, including a sale pursuant to Rule 144
under the Securities Act (except as part of such underwritten registration),
during the 14-day period prior to, and during the 90-day period (or, with
respect to a Piggyback Registration, such longer period of up to 180 days as may
be required by such underwriter) beginning on, the effective date of any
Registration Statement (except as part of such registration) or the commencement
of the public distribution of securities, to the extent timely notified in
writing by the Company or the managing underwriters (or the holders, as the case
may be).
(b) Restrictions on Public Sale by the Company and Others. The
-----------------------------------------------------
Company agrees, if requested by the managing underwriter in an underwritten
offering, not to effect any public sale or distribution of any securities the
same as or similar to those being registered by the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
14-day period prior to, and during the 90-day period (or, with respect to a
Piggyback Registration, such longer period of up to 180 days as may be required
by the underwriter) beginning on, the effective date of a Registration Statement
filed under Section 2.1 or Section 2.2 hereof or the commencement of the public
distribution of securities to the extent timely notified in writing by Softbank
or the managing underwriters (except as part of such registration, if permitted,
or pursuant to registrations on Forms S-4 or S-8 or any successor form to such
Forms or any registration of securities for offering and sale to management of
the Company pursuant to any employee stock plan or other employee benefit plan
arrangement). The Company agrees to use reasonable efforts to obtain from each
holder of restricted securities of the Company the same as or similar to those
being registered by the Company, or any restricted securities convertible into
or exchangeable or exercisable for any of its securities, an agreement not to
affect any public sale or distribution of such securities (other than securities
purchased in a public offering) during such period, except as part of any such
registration if permitted.
(c) Other Registration Rights Agreements. The Company may
------------------------------------
enter into any other registration rights agreement; provided, however, that the
rights and benefits of a securityholder with respect to registration of the
Company's securities as contained in any such other agreement shall be no more
favorable than the rights and benefits of holders of Registrable Securities as
contained in this Agreement.
2.4 Registration Procedures. In connection with the Company's
-----------------------
Registration obligations pursuant to Sections 2.1 and 2.2 hereof, the Company
will use its best efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) prepare and, not later than 45 days after receipt of any
request for a Demand Registration, file with the Commission a Registration
Statement or Registration
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<PAGE>
Statements relating to the applicable Demand Registration or Piggyback
Registration including all exhibits and financial statements required by the
Commission to be filed therewith, and use its best efforts to cause such
Registration Statement to become effective under the Securities Act; provided,
however, that the Company may discontinue any Registration of its securities
which are not Registrable Securities (and, under the circumstances specified in
Section 2.1(d), may delay and, under the circumstances specified in Section
2.2(a), may delay or discontinue Registration of its securities which are
Registrable Securities) at any time prior to the effective date of the
Registration Statement relating thereto;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be requested by
Softbank or as may be necessary to keep the Registration Statement effective for
a period of not less than 270 days (or such shorter period which shall terminate
when all Registrable Securities covered by such Registration Statement have been
sold or withdrawn), or, if such Registration Statement relates to an
underwritten offering, such longer period as in the opinion of counsel for the
underwriters a Prospectus is required by law to be delivered in connection with
sales of Registrable Securities by an underwriter or dealer; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act, and the
rules and regulations promulgated thereunder with respect to the disposition of
all securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by
Softbank set forth in such Registration Statement or supplement to the
Prospectus;
(c) notify Softbank and the managing underwriters, if any, and
(if requested) confirm such advice in writing, as soon as practicable after
notice thereof is received by the Company (i) when the Registration Statement or
any amendment thereto has been filed or becomes effective, the Prospectus or any
amendment or supplement to the Prospectus has been filed, and, to furnish
Softbank and managing underwriters, if any, with copies thereof, (ii) of any
request by the Commission or any other federal or state governmental authority
for amendments or supplements to the Registration Statement or the Prospectus or
for additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary Prospectus or Prospectus or
the initiation or threatening of any proceedings for such purposes, (iv) if at
any time the representations and warranties of the Company contemplated by
paragraph (m) below cease to be true and correct and (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Registrable Securities for offering or sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(d) promptly notify Softbank and the managing underwriters, if
any, when the Company becomes aware of the happening of any event as a result of
which the Registration Statement or the Prospectus included in such Registration
Statement (as then in effect) contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements therein (in
the case of the Prospectus and any preliminary prospectus, in the light of the
circumstances under which they were made) not misleading or, if for any other
reason it shall be necessary during such time period to amend or supplement the
Registration Statement or the
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<PAGE>
Prospectus in order to comply with the Securities Act and, in either case as
promptly as practicable thereafter, prepare and file with the Commission, and
furnish without charge to the selling holders and the managing underwriters, if
any, a supplement or amendment to such Registration Statement or Prospectus
which will correct such statement or omission or effect such compliance;
(e) make every reasonable effort to prevent the issuance of or
to obtain the withdrawal of any stop order or other order suspending the use of
any preliminary Prospectus or Prospectus or suspending any qualification of the
Registrable Securities;
(f) if requested by the managing underwriter or underwriters
or Softbank, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters and Softbank agree
should be included therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
practicable after being notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment;
(g) furnish to Softbank and each managing underwriter, without
charge, one executed copy and as many conformed copies as they may reasonably
request, of the Registration Statement and any amendment or post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(h) deliver to Softbank and the underwriters, if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons may reasonably request
(it being understood that the Company consents to the use of the Prospectus or
any amendment or supplement thereto by Softbank and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
the Prospectus or any amendment or supplement thereto) and such other documents
as Softbank may reasonably request in order to facilitate the disposition of the
Registrable Securities by Softbank;
(i) on or prior to the date on which the Registration
Statement is declared effective, use its best efforts to register or qualify,
and cooperate with Softbank, the managing underwriter or agent, if any, and
their respective counsel in connection with the registration or qualification of
such Registrable Securities for offer and sale under the securities or blue sky
laws of each state and other jurisdiction of the United States as Softbank, any
such underwriter or agent reasonably requests in writing and do any and all
other acts or things reasonably necessary or advisable to keep such registration
or qualification in effect for so long as such Registration Statement remains in
effect and so as to permit the continuance of sales and dealings therein for as
long as may be necessary to complete the distribution of the Registrable
Securities covered by the Registration Statement; provided that the Company will
not be
-8-
<PAGE>
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to taxation or
general service of process in any such jurisdiction where it is not then so
subject;
(j) cooperate with Softbank and the managing underwriter or
agent, if any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the underwriters;
(k) use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(l) not later than the effective date of the applicable
Registration Statement, provide a CUSIP number for all Registrable Securities
and provide the applicable transfer agent with printed certificates for the
Registrable Securities which are in a form eligible for deposit with The
Depository Trust Company;
(m) make such representations and warranties to Softbank, and
the underwriters or agents, if any, in form, substance and scope as are
customarily made by issuers in primary underwritten public offerings;
(n) enter into such customary agreements (including a purchase
agreement or underwriting agreement) and take all such other actions as Softbank
or the managing underwriter or agent, if any, reasonably request in order to
expedite or facilitate the registration and disposition of such Registrable
Securities;
(o) obtain for delivery to Softbank and to the underwriter or
agent an opinion or opinions from counsel for the Company, upon consummation of
the sale of such Registrable Securities to the underwriters (the "Closing Date")
in customary form and in form, substance and scope reasonably satisfactory to
Softbank, such underwriters or agents and their counsel;
(p) obtain for delivery to the Company and the underwriter or
agent, with copies to Softbank, a cold comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the managing underwriter
or Softbank reasonably requests, dated the effective date of the Registration
Statement and brought down to the Closing Date;
(q) cooperate with Softbank and each underwriter or agent
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD");
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<PAGE>
(r) use its best efforts to comply with all applicable rules
and regulations of the Commission and make generally available to its security
holders, as soon as reasonably practicable (but not more than fifteen months)
after the effective date of the Registration Statement, an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and the rules
and regulations promulgated thereunder;
(s) as promptly as practicable after filing with the
Commission of any
document which is incorporated by reference into the Registration Statement or
the Prospectus, provide copies of such document to counsel for Softbank and to
the managing underwriters, if any;
(t) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such Registration Statement
from and after a date not later than the effective date of such Registration
Statement; and
(u) use its best efforts to cause all Registrable Securities
covered by the Registration Statement to be listed on each securities exchange
on which any of the Company's securities are then listed or quoted on each
inter-dealer quotation system on which any of the Company's securities are then
quoted.
The Company may require Softbank to furnish to the Company
such information regarding distribution of such securities and such other
information relating to Softbank and its ownership of Registrable Securities as
the Company may from time to time reasonably request in writing. Softbank agrees
to furnish such information to the Company and to cooperate with the Company as
necessary to enable the Company to comply with the provisions of this Agreement.
Softbank agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 2.4(d) hereof, Softbank will forthwith
discontinue disposition of Registrable Securities pursuant to such Registration
Statement until Softbank's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 2.4(d) hereof, or until it is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the Prospectus, and, if so directed by the Company, such holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time periods
during which such Registration Statement shall be maintained effective
(including the period referred to in Section 2.4(b) hereof) shall be extended by
the number of days during the period from and including the date of the giving
of such notice to and including the date when Softbank either receives the
copies of the supplemented or amended Prospectus contemplated by Section 2.4(d)
hereof or is advised in writing by the Company that the use of the Prospectus
may be resumed.
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<PAGE>
2.5 Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten offering by Softbank pursuant to a
Registration requested under Section 2.1, the Company will use reasonable
efforts to enter into an underwriting agreement with such underwriters for such
offering, such agreement to be reasonably satisfactory in substance and form to
the Company, Softbank and the underwriters and to contain such representations
and warranties by the Company and such other terms as are generally prevailing
in agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.8. Softbank will cooperate with
the Company in the negotiation of the underwriting agreement and will give
consideration to the reasonable suggestion of the Company regarding the form
thereof. Softbank shall be a party to such underwriting agreement and may, at
its option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of Softbank and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
Softbank. Softbank shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities, such holder's intended method of distribution and any
other representations required by law.
(b) Incidental Underwritten Offerings. If the Company proposes
---------------------------------
to register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by Softbank pursuant to Section 2.2
and subject to the provisions of Section 2.2(b), use its best efforts to arrange
for such underwriters to include all the Registrable Securities to be offered
and sold by Softbank among the securities of the Company to be distributed by
such underwriters. Softbank shall be a party to the underwriting agreement
between the Company and such underwriters and may, at its option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of Softbank and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of Softbank. Softbank shall
not be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding Softbank, Softbank's Registrable Securities and Softbank's
intended method of distribution or any other representations required by law.
(c) Participation in Underwritten Registration. No person may
------------------------------------------
participate in any underwritten registration hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
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<PAGE>
2.6 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each Registration Statement, the Company will give
Softbank, its underwriters, if any, and its respective counsel and accountants
the opportunity to participate in the preparation of such Registration
Statement, each Prospectus included therein or filed with Commission, and, to
the extent practicable, each amendment thereof or supplement thereto, and give
each of them such access to its books and records (to the extent customarily
given to underwriters of the Company's securities) and such opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of Softbank's and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act;
provided, however, that any books, records, information or documents that are
designated by the Company in writing as confidential shall be kept confidential
by such Persons unless disclosure thereof is required by law.
2.7 Registration Expenses. All expenses incident to the Company's
---------------------
performance of or compliance with this Agreement, including without limitation
(i) all registration and filing fees, any other fees and expenses associated
with filings required to be made with the Commission or the NASD (including, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel as may be required by the rules and regulations of the NASD), (ii)
all fees and expenses of compliance with state securities or blue sky laws
(including fees and disbursements of counsel for the underwriters or selling
holders in connection with blue sky qualifications of the Registrable Securities
and determination of their eligibility for investment under the laws of such
jurisdictions as the managing underwriters or holders of a majority of the
Registrable Securities being sold may designate), (iii) all printing and related
messenger and delivery expenses (including expenses of printing certificates for
the Registrable Securities in a form eligible for deposit with The Depository
Trust Company and of printing prospectuses), (iv) all fees and disbursements of
counsel for the Company and of all independent certified public accountants of
the Company (including the expenses of any special audit and cold comfort
letters required by or incident to such performance), (v) reasonable premiums
for Securities Act liability insurance if the Company so desires or the
underwriters to reasonably require in accordance with then customary
underwriting practice, (vi) all fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange or
quotation of the Registrable Securities on any inter-dealer quotation system,
(vii) all reasonable fees and disbursements of one counsel selected by Softbank
to represent Softbank in connection with such registration, (viii) all fees and
disbursements of underwriters customarily paid by the issuers or sellers of
securities, excluding underwriting discounts and commissions and transfer taxes,
if any, and excluding fees and disbursements of counsel to such underwriters
(other than such fees and disbursements incurred in connection with any
registration or qualification of Registrable Securities under the securities or
blue sky laws of any state), (ix) all fees and expenses of accountants to
Softbank and (x) fees and expenses of other Persons retained by the Company (all
such expenses being herein called "Registration Expenses"), will be borne by the
Company, regardless of whether the Registration Statement becomes effective
(except as provided in Section 2.1 hereof). The Company will, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any audit and the fees and expenses of any Person, including special
experts, retained by the Company.
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<PAGE>
2.8 Indemnification.
---------------
(a) Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless, to the full extent permitted by law, Softbank, its
officers, directors, employees, partners, shareholders and agents and each
Person who controls Softbank (within the meaning of the Securities Act or the
Exchange Act) from and against all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation and legal expenses)
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company, by Softbank expressly for use
therein; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any such preliminary Prospectus if (i)
it is determined that it was the responsibility of Softbank to provide the
Person asserting such loss, claim, damage, liability or expense with a current
copy of the Prospectus and Softbank failed to deliver or cause to be delivered a
copy of the Prospectus to such Person after the Company had furnished such
holder with a sufficient number of copies of the same and (ii) the Prospectus
completely corrected in a timely manner such untrue statement or omission. This
indemnity shall be in addition to any liability the Company may otherwise have,
shall remain in full force and effect regardless of any investigation made by or
on behalf of such holder or any such officer, director, employee, agent,
partner, shareholder or controlling Person and shall survive termination of this
Agreement and the transfer of Registrable Securities by Softbank. The Company
will also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers, directors, partners, shareholders and each Person who controls such
Persons (within the meaning of the Securities Act and the Exchange Act) to the
same extent as provided above (with appropriate modification) with respect to
the indemnification of the holders of Registrable Securities, if requested.
(b) Indemnification by Softbank. Softbank agrees to indemnify
---------------------------
and hold harmless, to the full extent permitted by law, the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act or the Exchange Act) from and against any losses,
claims, damages, liabilities and expenses resulting from any untrue statement of
a material fact or any omission of a material fact required to be stated in the
Registration Statement, Prospectus or preliminary Prospectus or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission is caused by or contained in any
information furnished in writing by Softbank to the Company specifically for
inclusion in such Registration Statement or Prospectus and has not been
corrected in a subsequent writing prior to or concurrently with the sale of the
Registrable Securities to the Person asserting such loss, claim, damage,
liability or expense. This indemnity shall be in addition to any liability such
selling holder may otherwise have, shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
officer, director or controlling Person and shall survive termination of this
Agreement and the transfer of Registrable Securities by Softbank. The Company
shall be entitled to receive
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<PAGE>
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above (with appropriate modification) with respect to
information so furnished in writing by such Persons specifically for inclusion
in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Any Person
--------------------------------------
entitled to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided, however,
that any delay or failure to so notify the indemnifying party shall relieve the
indemnifying party of its obligations hereunder only to the extent, if at all,
that it is prejudiced by reason of such delay or failure; provided further,
however, that any Person entitled to indemnification hereunder shall have the
right to select and employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at the expense of
such Person unless (i) the indemnifying party has agreed in writing to pay such
fees or expenses, or (ii) the indemnifying party shall have failed to assume the
defense of such claim within a reasonable time after receipt of notice of such
claim from the Person entitled to indemnification hereunder and employ counsel
reasonably satisfactory to such Person, or (iii) in the reasonable judgment of
any such Person, based upon advice of its counsel, a conflict of interest may
exist between such Person and the indemnifying party with respect to such claims
(in which case, if the Person notifies the indemnifying party in writing that
such Person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such Person). If such defense is not assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld), provided that an indemnifying party shall not be
required to consent to any settlement involving the imposition of equitable
remedies or involving the imposition of any material obligations on such
indemnifying party other than financial obligations for which such indemnified
party will be indemnified hereunder. No indemnifying party shall consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. Whenever the indemnified party or the indemnifying party receives a
firm offer to settle a claim for which indemnification is sought hereunder, it
shall promptly notify the other of such offer. If the indemnifying party refuses
to accept such offer within 20 business days after receipt of such offer (or of
notice thereof), such claim shall continue to be contested and, if such claim is
within the scope of the indemnifying party's indemnity contained herein, the
indemnified party shall be indemnified pursuant to the terms hereof. If the
indemnifying party notifies the indemnified party in writing that the
indemnifying party desires to accept such offer, but the indemnified party
refuses to accept such offer within 20 business days after receipt of such
notice, the indemnified party may continue to contest such claim and, in such
event, the total maximum liability of the indemnifying party to indemnify or
otherwise reimburse the indemnified party hereunder with respect to such claim
shall be limited to and shall not exceed the amount of such offer, plus
reasonable out-of-pocket costs and expenses (including reasonable attorneys'
fees and disbursement) to the date of notice that the indemnifying party desires
to accept such offer, provided that this sentence shall not apply to any
settlement of any claim involving the imposition of equitable remedies or to any
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<PAGE>
settlement imposing any material obligations on such indemnified party other
than financial obligations for which such indemnified party will be indemnified
hereunder. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
who is not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the written opinion of counsel to the indemnified party reasonably
satisfactory to the indemnifying party, use of one counsel by the underwriters
on the one hand, and by the securityholders on the other, would be expected to
give rise to a conflict of interest between such underwriters, on the one hand
and such securityholders on the other with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and expenses of one
such additional counsel.
(d) Contribution. If for any reason the indemnification
------------
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless as contemplated by the
preceding paragraphs (a) and (b), then the indemnifying party shall contribute
to the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that Softbank shall not be required to contribute in an amount greater
than the dollar amount of the proceeds received by Softbank with respect to the
sale of any such Registrable Securities. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
2.9 Rules 144 and 144A. The Company covenants that it will file the
------------------
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, it will, upon the request of
Softbank after the date that is the second anniversary of the date thereof, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 or 144A under the Securities Act), and it will take such
further action as Softbank may reasonably request, all to the extent required
from time to time to enable Softbank to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rules 144 or 144A under the Securities Act, as such Rules may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
3. Transfer of Securities.
----------------------
3.1 Notice of Proposed Transfer. At the time of any transfer or sale or
---------------------------
proposed transfer or sale of any Softbank Securities, the Company may require
written notice describing briefly the manner of such transfer or sale and a
written opinion of counsel for the holder thereof (who may be inside counsel) to
the effect that such transfer or sale may be effected without the registration
of Softbank Securities under the Securities Act and will be made in compliance
with
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<PAGE>
applicable state securities and blue sky laws. The Company shall thereupon
permit or cause its transfer agent (if any) to permit such transfer or sale to
be effected unless the Company, within five days after receipt of such notice
and opinion, shall furnish to such holder and such holder's counsel (if any) an
opinion of the Company's outside counsel which (i) states that such sale or
transfer may not be effected without the registration of such Softbank
Securities under the Securities Act (or will not be made in compliance with
applicable securities and blue sky laws) and (ii) specifies the reasons,
factual, legal or both, why such counsel's opinion differs from that of holder's
counsel. However, if in such written notice to the Company the transferring
holder informs the Company that the transfer or sale is to a purchaser or
transferee whom the transferring holder knows or reasonably believes to be a
"qualified institutional buyer," as that term is defined in Rule 144A
promulgated under the Securities Act, no opinion of counsel shall be required.
3.2 Termination of Restrictions. Notwithstanding the foregoing
provisions of this Section 3, the restrictions imposed by this Section 3 upon
the transferability of the Softbank Securities shall terminate as to any
particular Softbank Securities when (i) such Softbank Securities shall have been
effectively registered under the Securities Act and sold by the holder thereof
in accordance with such registration, (ii) such Softbank Securities have been
sold in accordance with Rule 144 or 144A promulgated under the Securities Act,
or (iii) written opinions to the effect that such restrictions are no longer
required or necessary under any federal or state law or regulation have been
received from counsel for the holder of thereof (who may be inside counsel) and,
if the Company shall so require, from counsel for the Company.
3.3 Exchange, Transfer and Replacement of Certificates. Subject to the
foregoing provisions of this Section 3, upon surrender of any certificate
representing Softbank Securities duly endorsed for exchange or transfer, the
Company will, at its expense, or will cause its transfer agent, at the Company's
expense, to issue in exchange therefor new certificates in such denominations as
may be requested by the certificate so surrendered and registered as such
stockholder may request. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any certificate
representing Softbank Securities and, in the case of any such loss, theft or
destruction, upon delivery of an agreement of indemnity satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such certificate, the Company will issue, at its expense, or will cause its
transfer agent, at the Company's expense, to issue a new certificate
representing the same aggregate number of Softbank Securities represented by
such lost, stolen, destroyed or mutilated certificate; provided, however, that
in the event of any loss, theft or destruction of any certificate representing
Softbank Securities registered in the name of Softbank or any of its Affiliates,
or in the name of any other holder which is an institutional investor or its
nominee, the Company shall not require such person or Affiliate or any other
holder which is an institutional investor or its nominee to furnish any
indemnity or surety bond in connection with the issuance of a new certificate
therefor if the Company is furnished with an affidavit of the holder (if the
holder is an individual) or, otherwise, the Chairman of the Board, President,
any Vice President, Treasurer or any Assistant Treasurer of the holder (or, in
the case of a nominee, the beneficial owner for which such holder is serving as
nominee) setting forth the fact of such loss, theft or destruction and, together
with such affidavit, such holder furnishes (or, in case of a nominee, the
beneficial owner for which such holder is serving as nominee furnishes) to the
Company its written
-16-
<PAGE>
agreement to indemnify the Company with respect to such loss, theft or
destruction; the Company shall, however, have the right to require any holder of
Softbank Securities other than Softbank or any of its Affiliates or any other
holder which is an institutional investor or its nominee to furnish such an
indemnity or surety bond. The party delivering any certificate representing
Softbank Securities pursuant to this Section 3.3 will pay the cost of such
delivery (including the cost of insurance against loss or theft in an amount
satisfactory to the sender).
4. Miscellaneous.
-------------
4.1 Injunctive Relief. Remedies for breach by the Company of its
-----------------
obligations to register the Registrable Securities shall be as otherwise set
forth herein. It is hereby agreed and acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved Person will be irreparably damaged and will
not have an adequate remedy at law. Any such Person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations, and if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
4.2 Notices. All notices, other communications or documents provided
-------
for or permitted to be given hereunder, shall be made in writing and shall be
given either personally by hand-delivery, by facsimile transmission, by mailing
the same in a sealed envelope, registered first-class mail, postage prepaid,
return receipt requested, or by air courier guaranteeing overnight delivery:
(a) If to the Company: Ziff-Davis Inc.
One Park Avenue
New York, New York 10016
Attention: General Counsel
Telecopy number:
(b) If to Softbank: SOFTBANK Holdings Inc.
10 Langley Road, Suite 403
Newton Center, MA 02159
Attention: Vice Chairman
Telecopy number: 617-928-9301
With copies to: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Stephen A. Grant, Esq.
Telecopy number: (212) 558-3588
Each party hereto, by written notice given to the other
parties hereto in accordance with this Section 4.2 may change the address to
which notices, other communications
-17-
<PAGE>
or documents are to be sent to such party. All notices, other communications or
documents shall be deemed to have been duly given: (i) at the time delivered by
hand, if personally delivered; (ii) when receipt is acknowledged by electronic
confirmation, if by facsimile transmission; (iii) four business days after being
deposited in the mail, postage prepaid, if mailed; and (iv) on the next business
day, if timely delivered to an air courier guaranteeing overnight delivery;
provided, however, that notices of a change of address shall be effective only
upon receipt.
4.3 Successors and Assigns.
----------------------
(a) This Agreement shall inure to the benefit of and be
binding upon the parties, and successors and assigns of each of the parties.
(b) All of the terms, covenants and agreements contained in
this Agreement are solely for the benefit of the parties hereto and their
respective successors and assigns as provided in Section 4.3(a), and no other
parties (including, without limitation, any other stockholder or creditor of the
Company, or any director, officer or employee of the Company) are intended to be
benefitted by, or entitled to enforce, this Agreement.
4.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
4.5 Headings. The headings in this Agreement are inserted herein for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
4.6 Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
4.7 Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
agreement among the parties hereto with respect to the subject matter contained
herein, supersedes all prior agreements, negotiations and understandings,
whether written or oral, with respect to the subject matter hereof, and may not
be amended, modified or supplemented, and waivers and consents to departures
from the provisions hereof may not be given, except by an instrument in writing
signed by Softbank and by the Company. There are no restrictions, promises,
warranties or undertakings, other than those set forth in this Agreement.
4.8 Waiver. No action taken pursuant to this Agreement shall be deemed
------
to constitute a waiver by the party taking such action of compliance with any
covenants or agreements contained herein. No failure to exercise and no delay in
exercising any right, power or privilege of a party hereunder shall operate as a
waiver nor a consent to the modification of the terms hereof unless given by
that party in writing. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach.
-18-
<PAGE>
4.9 Inspection. So long as this Agreement shall be in effect, this
----------
Agreement shall be made available for inspection by an stockholder of the
Company at the principal offices of the Company.
4.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts each of which
when so executed shall be deemed to be an original and of all which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date first written above.
ZD INC.
By: __________________________________
Name: ________________________
Title: _______________________
SOFTBANK HOLDINGS INC.
By: __________________________________
Name: ________________________
Title: _______________________
<PAGE>
EXHIBIT 10.12
================================================================================
$250,000,000
GUARANTEED CREDIT AGREEMENT
Dated as of March 27, 1996
As Amended and Restated as of February 26, 1998
Among
SOFTBANK HOLDINGS INC.,
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF,
THE BANK OF NEW YORK, as Agent
and
THE GUARANTORS
Arranged by
BNY Capital Markets, Inc.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
CREDIT FACILITY
Section 1.01 Commitment to Lend............................................1
(a) RC Loans................................................1
(b) Swing Loans.............................................1
Section 1.02 Manner of Borrowing...........................................2
(a) RC Loans................................................2
(b) Swing Loans.............................................3
Section 1.03 Interest......................................................3
(a) Rates...................................................3
(b) Payment.................................................4
(c) Conversion and Continuation.............................4
Section 1.04 Repayment.....................................................5
(a) RC Loans................................................5
(b) Swing Loans.............................................5
Section 1.05 Prepayments...................................................6
(a) Optional Prepayments....................................6
(b) Asset Disposition Mandatory Prepayments.................6
(c) Default Mandatory Prepayments and Fundings..............7
(d) Capital Securities Transfer Mandatory Prepayment........8
(e) Application to Types of Loans...........................8
Section 1.06 Limitation on Types of Loans.................................8
Section 1.07 Reduction of Commitments......................................8
Section 1.08 Commitment Fees...............................................9
Section 1.09 Computation of Interest and Fees..............................9
Section 1.10 Evidence of Indebtedness......................................9
Section 1.11 Payments by the Borrower......................................9
(a) Time, Place and Manner.................................9
(b) No Reductions..........................................10
(c) Extension of Payment Dates.............................10
Section 1.12 Distribution of Payments by the Agent........................10
Section 1.13 Taxes........................................................11
(a) Taxes Payable by the Borrower.........................11
(b) Taxes Payable by the Agent or any Bank.................11
(c) Limitations............................................11
Section 1.14 Pro Rata Treatment...........................................12
i
<PAGE>
ARTICLE 2
CONDITIONS TO RESTATED AGREEMENT DATE AND LOANS
Section 2.01 Conditions to Effectiveness of Agreement.....................12
Section 2.02 Conditions to Each Loan......................................15
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES
Section 3.01 Organization; Power; Qualification...........................16
Section 3.02 Subsidiaries.................................................16
Section 3.03 Authorization; Enforceability; Required Consents;
Absence of Conflicts.........................................16
Section 3.04 Existing Indebtedness and Investments........................17
Section 3.05 Taxes........................................................17
Section 3.06 Litigation...................................................18
Section 3.07 Burdensome Provisions........................................18
Section 3.08 No Adverse Change or Event...................................18
Section 3.09 Additional Adverse Facts.....................................18
Section 3.10 Guarantors and Subordinators.................................18
ARTICLE 4
CERTAIN COVENANTS
Section 4.01 Preservation of Existence and Properties, Scope of
Business, Compliance with Law, Payment of
Taxes and Claims, Preservation of Enforceability.............19
Section 4.02 Insurance....................................................19
Section 4.03 Use of Proceeds..............................................20
Section 4.04 Additional Wholly Owned Subsidiaries.........................20
Section 4.05 Indebtedness.................................................20
Section 4.06 Guaranties...................................................20
Section 4.07 Liens........................................................21
Section 4.08 Restricted Payments..........................................21
Section 4.09 Merger or Consolidation......................................21
Section 4.10 Disposition of Assets........................................21
Section 4.11 Investments..................................................22
Section 4.12 Benefit Plans................................................22
Section 4.13 Transactions with Affiliates.................................22
Section 4.14 Issuance or Disposition of Capital Securities................23
Section 4.15 Subordinated Indebtedness; InterCompany Indebtedness.........23
Section 4.16 Hedges and Swaps.............................................24
Section 4.17 Limitation on Restrictive Covenants..........................24
Section 4.18 Ratio of Indebtedness to Borrower Group EBITDA..............24
Section 4.19 Dissolution of Forums L.P....................................24
ii
<PAGE>
ARTICLE 5
INFORMATION
Section 5.01 Information to Be Furnished..................................25
(a) Quarterly Financial Statements.........................25
(b) Year-End Financial Statements; Accountants'
Certificate............................................25
(c) Officer's Certificate as to Financial Statements and
Defaults...............................................25
(d) Requested Information..................................26
(e) Notice of Defaults, Material Adverse
Changes and Other Matters..............................26
Section 5.02 Accuracy of Financial Statements and Information.............27
(a) Financial Statements...................................27
(b) Other Information......................................27
Section 5.03 Additional Covenants Relating to Disclosure..................27
(a) Accounting Methods and Financial Records...............27
(b) Visits, Inspections and Discussions....................28
Section 5.04 Authorization of Third Parties to Deliver
Information and Discuss Affairs..............................28
ARTICLE 6
DEFAULT
Section 6.01 Events of Default............................................28
Section 6.02 Remedies upon Event of Default...............................32
ARTICLE 7
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 7.01 Mandatory Suspension and Conversion of
Eurodollar Rate Loans........................................32
Section 7.02 Regulatory Changes...........................................33
Section 7.03 Capital Requirements.........................................34
Section 7.04 Funding Losses...............................................34
Section 7.05 Certain Determinations.......................................34
Section 7.06 Change of Lending Office.....................................34
ARTICLE 8
THE AGENT
Section 8.01 Appointment and Powers.......................................35
Section 8.02 Limitation on Agent's Liability..............................35
Section 8.03 Defaults.....................................................36
Section 8.04 Rights as a Bank.............................................36
Section 8.05 Indemnification..............................................36
Section 8.06 Non-Reliance on Agent and Other Banks........................37
Section 8.07 Execution and Amendment of Loan Documents on
Behalf of the Banks..........................................37
iii
<PAGE>
Section 8.08 Resignation of the Agent.....................................37
ARTICLE 9
GUARANTEES
Section 9.01 Guaranty of Payment..........................................37
Section 9.02 Limitation on Guaranty.......................................38
Section 9.03 Continuance and Acceleration of Guaranteed
Obligations upon Certain Events..............................38
Section 9.04 Recovered Payments...........................................39
Section 9.05 Evidence of Guaranteed Obligations...........................39
Section 9.06 Binding Nature of Certain Adjudications......................39
Section 9.07 Nature of Guarantor's Obligations............................39
Section 9.08 No Release of Guarantor......................................39
Section 9.09 Certain Waivers..............................................40
Section 9.10 Additional Guarantors........................................40
ARTICLE 10
MISCELLANEOUS
Section 10.01 Notices and Deliveries.......................................40
(a) Manner of Delivery....................................40
(b) Addresses..............................................40
(c) Effectiveness..........................................42
(d) Reasonable Notice......................................43
Section 10.02 Expenses; Indemnification....................................43
Section 10.03 Amounts Payable Due upon Request for Payment.................44
Section 10.04 Remedies of the Essence......................................44
Section 10.05 Rights Cumulative............................................44
Section 10.06 Disclosures..................................................44
Section 10.07 Amendments; Waivers..........................................45
Section 10.08 Set-Off; Suspension of Payment and Performance...............45
Section 10.09 Sharing of Recoveries........................................45
Section 10.10 Assignments and Participations...............................46
(a) Assignments...........................................46
(b) Participation..........................................47
Section 10.11 Governing Law................................................48
Section 10.12 Judicial Proceedings; Waiver of Jury Trial...................48
Section 10.13 LIMITATION OF LIABILITY......................................48
Section 10.14 Reference Banks..............................................48
Section 10.15 Severability of Provisions...................................49
Section 10.16 Counterparts.................................................49
Section 10.17 Survival of Obligations......................................49
Section 10.18 Entire Agreement.............................................49
Section 10.19 Successors and Assigns.......................................49
iv
<PAGE>
ARTICLE 11
INTERPRETATION
Section 11.01 Defined Terms................................................49
Section 11.02 Other Interpretive Provisions................................67
Section 11.03 Accounting Matters...........................................69
Section 11.04 Representations and Warranties...............................69
Section 11.05 Captions.....................................................69
Section 11.06 Interpretation of Related Documents..........................69
ANNEX A BANKS, LENDING OFFICES AND NOTICE ADDRESSES
Schedule 1.02(a) NOTICE OF BORROWING
Schedule 1.03(c) NOTICE OF CONVERSION OR CONTINUATION
Schedule 1.05 NOTICE OF PREPAYMENT
Schedule 2.01(a)(i) CERTIFICATE AS TO RESOLUTIONS, ETC.
Annex A RESOLUTIONS OF BOARD OF DIRECTORS
Annex A-1 RESOLUTIONS OF SHAREHOLDERS
Schedule 3.02 SCHEDULE OF SUBSIDIARIES
Schedule 3.03 SCHEDULE OF REQUIRED CONSENTS AND GOVERNMENTAL APPROVALS
Schedule 3.04 SCHEDULE OF PUBLIC DEBT OF SOFTBANK CORP.
Schedule 3.06 SCHEDULE OF MATERIAL LITIGATION
Schedule 3.09 SCHEDULE OF ADDITIONAL MATERIAL ADVERSE FACTS
Schedule 4.05 SCHEDULE OF EXISTING BORROWER/GUARANTOR/
WHOLLY OWNED SUBSIDIARY INDEBTEDNESS
Schedule 4.06 SCHEDULE OF EXISTING GUARANTIES
Schedule 4.07 SCHEDULE OF EXISTING LIENS
Schedule 4.11 SCHEDULE OF EXISTING INVESTMENT
Schedule 4.12 SCHEDULE OF EXISTING BENEFIT PLANS
Schedule 5.01(b) CERTIFICATE AS TO FINANCIAL STATEMENTS AND DEFAULTS
Schedule 5.02(a) SCHEDULE OF HISTORICAL FINANCIAL STATEMENTS
Schedule 9.01 SCHEDULE OF GUARANTORS
Schedule 9.10 FORM OF GUARANTOR SUPPLEMENT
Schedule 10.10(a) NOTICE OF ASSIGNMENT
EXHIBIT A-I RC NOTE
EXHIBIT A-II SWING LOAN NOTE
EXHIBIT B SUBORDINATION AGREEMENT FORM
v
<PAGE>
GUARANTEED CREDIT AGREEMENT
Dated as of March 27, 1996
As Amended and Restated as of February 26, 1998
SOFTBANK HOLDINGS INC., a Delaware corporation, each of the Guarantors and
THE BANK OF NEW YORK, agree that the Guaranteed Credit Agreement among SOFTBANK
Holdings Inc., The Bank of New York and the Guarantors dated as of March 27,
1996, as amended and restated as of October 30, 1997, shall be further amended
and restated effective, subject to the conditions to effectiveness set forth in
Section 2.01, as of the Restated Agreement Date, to read in its entirety as
follows (with certain terms used herein being defined in Article 11):
ARTICLE 1
---------
CREDIT FACILITY
---------------
Section 1.01 Commitment to Lend.
------------------
(a) RC Loans.
--------
Upon the terms and subject to the conditions of this Agreement, each
Bank agrees to make, from time to time during the period from the Restated
Agreement Date through the Termination Date, one or more RC Loans to the
Borrower in an aggregate unpaid principal amount not exceeding at any time such
Bank's Commitment at such time; provided that no RC Loan shall be made if, after
--------
giving effect to the making of such Loan and the simultaneous application of the
proceeds thereof, (i) the Exposure of such Bank would exceed the Commitment of
such Bank or (ii) the aggregate amount of the Exposures of all of the Banks
would exceed the aggregate amount of the Commitments. The aggregate amount of
the Commitments on the Restated Agreement Date is $250,000,000. Subject to
Section 1.06 and the other terms and conditions of this Agreement, the RC Loans
may, at the option of the Borrower, be made as, and from time to time continued
as or converted into, Base Rate or Eurodollar Rate Loans of any permitted Type,
or any combination thereof.
(b) Swing Loans.
-----------
Upon the terms and subject to the conditions of this Agreement, the
Swing Line Bank shall, for its own account, make one or more Swing Loans to the
Borrower; provided that no Swing Loan shall be made if, after giving effect to
--------
the making of such Loan and the simultaneous application of the proceeds thereof
(i) the aggregate principal amount of outstanding Swing Loans would exceed the
Swing Line Sublimit or (ii) the aggregate amount of the Exposures of all of the
Banks would exceed the aggregate amount of the Commitments. Swing Loans may
only be made and continued as Base Rate Loans or Agreed Rate Loans. The Swing
Line Sublimit is $25,000,000.
Section 1.02 Manner of Borrowing.
-------------------
(a) RC Loans.
--------
With respect to RC Loans:
(i) The Borrower shall give the Agent notice (which shall be irrevocable)
no later than, in the case of a Base Rate Loan, 10:00 a.m. on the requested date
for the making of such Loan and, in the case of a Eurodollar Rate Loan, 11:00
a.m. on the third Eurodollar
<PAGE>
Business Day before the requested date for the making of such Loan. Each such
notice shall be in the form of Schedule 1.02(a) and shall specify (A) the
----------------
requested date for the making of the requested Loan, which shall be, in the case
of a Base Rate Loan, a Business Day and, in the case of a Eurodollar Rate Loan,
a Eurodollar Business Day, (B) the Type or Types of Loans requested and (C) the
amount of each such Type of Loan, the aggregate of which amounts for all Types
of Loans requested shall be not less than (1) in the case of Eurodollar Rate
Loans $5,000,000 or any integral multiple of $5,000,000 in excess thereof and
(2) in the case of Base Rate Loans the lesser of $1,000,000 or any integral
multiple of $1,000,000 in excess thereof, and the aggregate amount of the unused
Commitments. Upon receipt of any such notice, the Agent shall promptly notify
each Bank of the contents thereof and the amount and Type of Loan to be made by
such Bank. Each Loan so requested shall be disbursed by the Agent not later than
2:00 p.m. on the requested date therefor in Dollars in funds immediately
available to the Borrower by credit to an account of the Borrower at the Agent's
Office or in such other manner as may have been specified in the applicable
notice and as shall be acceptable to the Agent.
(ii) On each requested date for the making of RC Loans, each Bank shall, if
it has received the notice contemplated by Section 1.02(a)(i) on or prior to (A)
in the case of Eurodollar Rate Loans, its close of business on the third
Eurodollar Business Day before such requested date and (B) in the case of Base
Rate Loans, 11:00 a.m. on such requested date, make available to the Agent, not
later than (x) in the case of Eurodollar Rate Loans, 11:00 a.m. and (y) in the
case of Base Rate Loans, 1:00 p.m., in Dollars in funds immediately available to
the Agent at the Agent's Office, the RC Loans to be made by such Bank on such
requested date. Any Bank's failure to make any RC Loan to be made by it on the
requested date therefor shall not relieve any other Bank of its obligation to
make any Loan to be made by such other Bank on such date, but such other Bank
shall not be liable for such failure.
(iii) Unless the Agent shall have received notice from a Bank prior to (A)
in the case of Eurodollar Rate Loans, 10:00 a.m., and (B) in the case of Base
Rate Loans, 12:00 noon, on the requested date for the making of any RC Loans
that such Bank will not make available to the Agent the RC Loans requested to be
made by such Bank on such date, the Agent may assume that such Bank has made
such RC Loans available to the Agent on such date in accordance with Section
1.02(a)(ii) and the Agent in its sole discretion may, in reliance upon such
assumption, make available to the Borrower (or, in the case of RC Loans
requested pursuant to Section 1.04(b) or Section 1.05(c)(i), to the Swing Line
Bank) on such date a corresponding amount on behalf of such Bank. If and to the
extent such Bank shall not have so made available to the Agent the RC Loans
requested to be made by such Bank on such date and the Agent shall have so made
available to the Borrower a corresponding amount on behalf of such Bank, such
Bank shall, on demand, pay to the Agent such corresponding amount together with
interest thereon, for each day from the date such amount shall have been so made
available by the Agent to the Borrower until the date such amount shall have
been repaid to the Agent, at the Federal Funds Rate until (and including) the
third Business Day after demand is made and thereafter at the Base Rate. If such
Bank does not pay such corresponding amount promptly upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower and the Borrower shall
immediately repay such corresponding amount to the Agent together with accrued
interest thereon at the applicable rate or rates provided in Section 1.03(a).
2
<PAGE>
(b) Swing Loans.
-----------
With respect to Swing Loans:
(i) The Borrower shall give the Agent and, if the Swing Line Bank is a Bank
that is not the Agent, the Swing Line Bank notice (which shall be irrevocable)
no later than 1:00 p.m. on the requested date for the making of a Swing Loan.
Each such notice shall specify (A) the amount of the requested Swing Loan, which
amount shall be not less than the lesser of (1) $100,000 or any integral
multiple of $100,000 in excess thereof and (2) the Swing Line Availability on
the requested date for the making of such Swing Loan, (B) whether such Swing
Loan shall be an Agreed Rate Loan or a Base Rate Loan and (C) if such Swing Loan
shall be an Agreed Rate Loan, the number of days (which shall not be more than
five Business Days) that the Agreed Rate for such Swing Loan is to obtain (the
"Agreed Rate Interest Period"). Such notice may be by telephone, confirmed by
telecopy on the date of the making of the requested Swing Loan. If the Borrower
and the Swing Line Bank do not agree upon a requested Agreed Rate, the requested
Swing Loan shall be made as a Base Rate Loan, unless the Borrower withdraws the
request for such Swing Loan. Upon the expiration of an Agreed Rate Interest
Period, the Swing Loan in question shall be continued, subject to Section
1.04(b), as a Base Rate Loan.
(ii) Swing Loans shall be disbursed by the Swing Line Bank not later than
4:30 p.m. on the requested date therefor in Dollars in funds immediately
available to the Borrower by credit to an account of the Borrower at the Swing
Line Bank's Office, or in such other manner as may have been specified in the
applicable notice and as shall be acceptable to the Swing Line Bank.
Section 1.03 Interest.
--------
(a) Rates.
-----
(i) RC Loans.
--------
Each RC Loan shall bear interest on the outstanding principal amount
thereof until due at a rate per annum equal to (A) so long as it is a Base Rate
Loan, the Base Rate as in effect from time to time plus the applicable Base Rate
Margin and (B) so long as it is a Eurodollar Rate Loan, the applicable Adjusted
Eurodollar Rate plus the applicable Eurodollar Rate Margin.
(ii) Swing Loans.
-----------
Each Swing Loan shall bear interest on the outstanding principal amount
thereof at a rate per annum equal to the Base Rate as in effect from time to
time plus the applicable Base Rate Margin or, if the Borrower and the Swing Line
Bank shall have agreed upon an Agreed Rate with respect to such Swing Loan, such
Agreed Rate; provided that upon the earliest of (A) the fifth Business Day after
--------
the date such Swing Loan was made, (B) the expiration of an Agreed Rate Interest
Period and (C) a Bankruptcy Default, any such Swing Loan shall cease to bear
interest at the Agreed Rate and shall bear interest at the Base Rate as in
effect from time to time plus the applicable Base Rate Margin.
(iii) Post-Default Rate.
-----------------
During an Event of Default (which is such by virtue of clause (a) of
Section 6.01 and whether before or after judgment), each Loan (whether or not
due) and, to the maximum extent permitted by Applicable Law, all other amounts
of interest and fees due and payable under the Borrower Loan Documents, shall
bear interest at a rate per annum equal to the applicable Post-Default Rate.
(b) Payment.
-------
Interest shall be payable, (i) in the case of Base Rate Loans that are
RC Loans, on each Interest Payment Date, (ii) in the case of Eurodollar Rate
Loans, on the
3
<PAGE>
last day of each applicable Interest Period (and, if an Interest Period is
longer than three months, at intervals of three months after the first day of
such Interest Period) and (iii) in the case of any Loan, when such Loan shall be
due (whether at maturity, by reason of notice of prepayment or acceleration or
otherwise) or converted, but only to the extent then accrued on the amount then
so due or converted. Interest at the Post-Default Rate shall be payable on
demand.
(c) Conversion and Continuation.
---------------------------
(i) All or any part of the principal amount of RC Loans of any Type may,
on any Business Day, be converted into any other Type or Types of RC Loans,
except that (A) Eurodollar Rate Loans may be converted only on the last day of
an applicable Interest Period and (B) Base Rate Loans may be converted into
Eurodollar Rate Loans only on a Eurodollar Business Day.
(ii) Each RC Loan that is a Base Rate Loan shall continue as a Base Rate
Loan unless and until such Loan is converted into an RC Loan of another Type.
Each RC Loan that is a Eurodollar Rate Loan of any Type shall continue as a Loan
of such Type until the end of the then current Interest Period therefor, at
which time it shall be automatically converted into a Base Rate Loan unless the
Borrower shall have given the Agent notice in accordance with Section 1.03(c)
requesting either that such Loan continue as a Loan of such Type for another
Interest Period or that such Loan be converted into a Loan of another Type at
the end of such Interest Period.
(iii) Notwithstanding anything to the contrary contained in Section
1.03(c)(i) or (ii), during a Default, the Agent may notify the Borrower that RC
Loans may only be converted into or continued as RC Loans of certain specified
Types and, thereafter, until no Default shall continue to exist, RC Loans may
not be converted into or continued as RC Loans of any Type other than one or
more of such specified Types.
(iv) The Borrower shall give the Agent notice (which shall be irrevocable)
of each conversion of an RC Loan or continuation of an RC Loan that is a
Eurodollar Rate Loan no later than, in the case of a conversion into a Base Rate
Loan, 12:00 noon on the Business Day, and, in the case of a conversion into or
continuation of an RC Loan that is a Eurodollar Rate Loan, 11:00 a.m. on the
third Eurodollar Business Day before the requested date of such conversion or
continuation. Each notice of conversion or continuation shall be in the form of
Schedule 1.03(c)(i) and shall specify (A) the requested date of such conversion
- -------------------
or continuation, (B) the amount and Type and, in the case of Eurodollar Rate
Loans, the last day of the applicable Interest Period of each Loan to be
converted or continued and (C) the amount and Type or Types of Loans into which
such Loans are to be converted. Upon receipt of any such notice, the Agent
shall promptly notify each Bank of (x) the contents thereof, (y) the amount and
Type and, in the case of Eurodollar Rate Loans, the last day of the applicable
Interest Period of each Loan to be converted or continued by such Bank and (z)
the amount and Type or Types of Loans into which such Loans are to be converted
or as which such Loans are to be continued.
Section 1.04 Repayment.
---------
(a) RC Loans.__
--------
The RC Loans shall mature and become due and payable, and shall be
repaid by the Borrower, in full on the Termination Date.
4
<PAGE>
(b) Swing Loans.
-----------
Each Swing Loan shall become due and payable, and shall be repaid by
the Borrower, in full on the earlier of (i) the date that is five Business Days
after the date that such Swing Loan was made and (ii) the Termination Date.
Except in the case of a Swing Loan maturing on the Termination Date, if, on or
prior to the maturity of a Swing Loan, the Borrower shall not have requested
either an RC Loan pursuant to Section 1.02(a) hereof or a Swing Loan pursuant to
Section 1.02(b) hereof, the maturity of such Swing Loan pursuant to this Section
1.04(b) shall (i) be deemed to constitute a notice under Section 1.02(a)
requesting RC Loans in an amount equal to such Swing Loan be made by the Banks
(including the Swing Line Bank) and that such Loans be Base Rate Loans, (ii)
have the same force and effect as a notice from the Borrower under such Section
and (iii) be subject to all the terms and conditions of Section 1.02(a), except
that (A) the requirement (1) to deliver a notice in the form of Schedule 1.02(a)
----------------
and (2) that the aggregate amount of Loans be not less than $500,000 shall not
apply and (B) the conditions to borrowing specified in Section 2.02 (other than
that a Bankruptcy Default shall not exist) shall not apply.
Section 1.05 Prepayments.
-----------
(a) Optional Prepayments.
--------------------
The Borrower may, at any time and from time to time, prepay the Loans
in whole or in part, without premium or penalty, except that any partial
prepayment shall be in an aggregate principal amount of at least (i) in the case
of Eurodollar Rate Loans and Base Rate Loans that are not Swing Loans,
$1,000,000 or any integral multiple of $1,000,000 in excess thereof and (ii) in
the case of Swing Loans $100,000 or any integral multiple of $100,000 in excess
thereof, and any prepayment of a Eurodollar Rate Loan or a Swing Loan that is an
Agreed Rate Loan shall be subject to Section 7.04. The Borrower shall give the
Agent and, in the case of prepayments of Swing Loans, if the Swing Line Bank is
not the Agent, the Swing Line Bank, notice of each prepayment of a Loan no later
than 10:00 a.m. on, in the case of a prepayment of Base Rate Loans and Swing
Loans, the Business Day, and, in the case of a prepayment of Eurodollar Rate
Loans, the third Eurodollar Business Day, before the date of such prepayment.
Each notice of prepayment of a Loan shall be in the form of Schedule 1.05 and
-------------
shall specify (i) whether the Loans to be prepaid are RC Loans or Swing Loans,
(ii) the date such prepayment is to be made, (iii) in the case of RC Loans, the
amount and Type and, in the case of Eurodollar Rate Loans, the last day of the
applicable Interest Period of each Loan to be prepaid and (iv) in the case of
Swing Loans, the amount and, in the case of Agreed Rate Loans, the last day of
its applicable Agreed Rate Interest Period of such Swing Loan to be prepaid.
Upon receipt of any such notice, other than a notice of prepayment of Swing
Loans, the Agent shall promptly notify each Bank of the contents thereof and the
amount and Type and, in the case of a Eurodollar Rate Loan, the last day of the
applicable Interest Period of each Loan of such Bank to be prepaid. Amounts to
be prepaid shall irrevocably be due and payable on the date specified in the
applicable notice of prepayment, together with interest thereon as provided in
Section 1.03(b).
(b) Asset Disposition Mandatory Prepayments.
---------------------------------------
In the event of any disposition (whether voluntary or involuntary) of
any asset of the Borrower or any Guarantor (other than dispositions to which
Section 4.10 is not applicable) the Commitments shall be reduced in an amount
equal to the Net Cash Proceeds of such disposition and the Borrower shall prepay
the principal amount of the Loans that is in excess of the aggregate amount of
the Commitments as so reduced. The Commitments shall be reduced and any Loans to
be prepaid shall be prepaid at the time or times that Net Cash Proceeds from
such disposition are paid.
5
<PAGE>
(c) Default Mandatory Prepayments and Fundings.
------------------------------------------
(i) Default Mandatory Prepayments of Swing Loans.
--------------------------------------------
If any Default other than a Bankruptcy Default exists, the Swing Line
Bank may request that outstanding Swing Loans be refunded by delivering to the
Agent and the Borrower on a Business Day a request to that effect, specifying
the principal amount of outstanding Swing Loans. Such a request shall (A) be
deemed to constitute a notice under Section 1.02(a) requesting RC Loans in an
amount equal to the outstanding Swing Loans be made by the Banks (including the
Swing Line Bank) and that such Loans be Base Rate Loans, (B) have the same force
and effect as a notice from the Borrower under such Section and (C) be subject
to all the terms and conditions of Section 1.02(a), except that (1) the
requirement (aa) to deliver a notice in the form of Schedule 1.02(a) and (bb)
----------------
that the aggregate amount of Loans be not less than the amount specified in
Section 1.02(a) for the applicable Type of Loan shall not apply and (2) the
conditions to borrowing specified in Section 2.02 (other than that a Bankruptcy
Default shall not exist) shall not apply.
(ii) Default Mandatory Fundings of Participations in Swing Loans.
-----------------------------------------------------------
(A) During a Bankruptcy Default, upon request (which shall relate to all Swing
Loans then outstanding) by the Swing Line Bank on a Business Day, each Bank
shall purchase from the Swing Line Bank, without recourse or warranty (except
that such outstanding Swing Loans in fact were made in accordance with Section
1.01(b)(i), and are not subject to any Liens arising out of any act of the Swing
Line Bank), a participation in the Swing Loans then outstanding by paying to the
Swing Line Bank, in Dollars immediately available to the Swing Line Bank at the
Swing Line Bank's Office, an amount equal to such Bank's Pro Rata Share of the
principal amount of such Swing Loans, with such payment being due on the day
such request is made, if such request is made prior to 2:00 p.m. on such day, or
if such request is made after 2:00 p.m. on the next Business Day (the
"Participation Payment Date"). Such participation shall constitute an undivided
interest and participation in the principal amount of Swing Loans then
outstanding and in interest that accrues thereon after the Participation Payment
Date. The Swing Line Bank shall, upon the request of a Bank, furnish to such
Bank a participation certificate evidencing any participation purchased by such
Bank pursuant to this Section 1.05. If any Bank does not pay any amount which
it is required to pay to the Swing Line Bank pursuant to this Section
1.05(c)(ii)(A) when due, the Swing Line Bank shall be entitled to recover such
amount from such Bank, together with interest thereon for each day from the
Participation Payment Date until the date such amount shall be paid to the Swing
Line Bank, at the Federal Funds Rate until (and including) the third Business
Day after the Participation Payment Date and thereafter at the Base Rate.
(B) Whenever, at any time after the Swing Line Bank has received from
any Bank payment in accordance with Section 1.05(c)(ii)(A) for its participation
in a Swing Loan, the Swing Line Bank receives any payment attributable to the
principal of, or interest accrued after the Participation Payment Date on, such
Swing Loan, the Swing Line Bank will promptly distribute to such Bank its share
thereof; provided, that in the event that any such payment received by the Swing
--------
Line Bank shall be required to be returned by the Swing Line Bank, for any
reason, such Bank shall return to the Swing Line Bank the portion thereof
previously distributed by the Swing Line Bank to it, but without interest
(unless the Swing Line Bank is required to pay interest on the amount so
returned, in which case such Bank shall be required to pay interest at a like
rate). Payments received after the Participation Payment Date
6
<PAGE>
by the Swing Line Bank on account of Swing Line Loans shall be applied first to
the payment of interest accrued thereon prior to the Participation Payment Date.
(iii) Obligations of Banks Absolute and Unconditional.
-----------------------------------------------
The obligation of each Bank to make an RC Loan to repay Swing Loans as
contemplated by Section 1.05(c)(i) and to purchase and fund its participation in
Swing Loans as contemplated by Section 1.05(c)(ii) shall be absolute and
unconditional.
(d) Capital Securities Transfer Mandatory Prepayment.
------------------------------------------------
In the event that the Borrower transfers any Capital Securities to ZD
Inc. in a transaction to which Section 4.14 is not applicable by virtue of
clause (d) of such Section, the Commitments shall be reduced in an amount equal
to the Net Cash Proceeds of the public offering referred to in such clause (d)
and the Borrower shall prepay the principal amount of the Loans that is in
excess of the aggregate amount of the Commitments as so reduced. Such amounts
shall be prepaid and the Commitments shall be reduced at the time or times that
Net Cash Proceeds from such public offering are paid to the Person entitled
thereto.
(e) Application to Types of Loans.
-----------------------------
Amounts prepaid pursuant to Section 1.05(b) shall be applied to
prepay, first, Swing Loans, second, RC Loans that are Base Rate Loans and,
----- ------
third, RC Loans that are Eurodollar Rate Loans in the order that the Agreed Rate
- -----
Interest Period or Interest Periods, as applicable, for such Loans ends.
Amounts to be prepaid pursuant to Section 1.05(b) shall be paid on the day or
within the time period specified therefor, whether or not such payment would
require a prepayment of Eurodollar Rate Loans prior to the last day of an
applicable Interest Period or would result in losses, costs or expenses
compensable under Section 7.04.
Section 1.06 Limitation on Types of Loans.
-----------------------------
Notwithstanding anything to the contrary contained in this Agreement, the
Borrower shall borrow, prepay, convert and continue RC Loans in a manner such
that (a) the aggregate principal amount of Eurodollar Rate Loans of the same
Type and having the same Interest Period shall at all times be not less than
$5,000,000, (b) there shall not be, at any one time, more than six Interest
Periods in effect with respect to Eurodollar Rate Loans of all Types and (c) no
payment of a Eurodollar Rate Loan will have to be made prior to the last day of
an applicable Interest Period in order to repay the Loans on (subject to Section
1.11(c)) the Termination Date.
Section 1.07 Reduction of Commitments.
------------------------
The Borrower may reduce the Commitments by giving the Agent notice (which
shall be irrevocable) thereof no later than 10:00 a.m. on the third Business Day
before the requested date of such reduction, except that no partial reduction of
the Commitments shall be in an aggregate amount less than $10,000,000 or any
integral multiple of $500,000 in excess thereof. Upon receipt of any such
notice, the Agent shall promptly notify each Bank of the contents thereof and
the amount to which such Bank's Commitment is to be reduced.
Section 1.08 Commitment Fees.
---------------
The Borrower shall pay to the Agent for the account of each Bank a
commitment fee on the daily amount by which such Bank's Commitment exceeds the
aggregate principal amount of its RC Loans for each day from the Restated
Agreement Date through the Termination Date at a rate per annum of (a) on or
prior to May 15,
7
<PAGE>
1998, 0.200%, (b) on or after May 16, 1998, and on or before June 15, 1998,
0.250% and (c) thereafter, 0.375%, payable on successive Interest Payment Dates,
on the Termination Date and on the date of any reduction of such Commitments (to
the extent accrued and unpaid on the amount of such reduction).
Section 1.09 Computation of Interest and Fees.
--------------------------------
Interest on Eurodollar Rate Loans shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed. Interest on Base
Rate Loans and, unless otherwise agreed by the Borrower and the Agent, Agreed
Rate Loans and the commitment fee shall be computed on the basis of a year of
365 or 366 days, as applicable, and paid for the actual number of days elapsed.
Interest for any period shall be calculated from and including the first day
thereof to but excluding the last day thereof.
Section 1.10 Evidence of Indebtedness.
------------------------
Each Bank's Loans (including the Swing Line Bank) and the Borrower's
obligation to repay such Loans with interest in accordance with the terms of
this Agreement shall be evidenced by this Agreement, the records of such Bank
and, in the case of RC Loans, a single RC Note payable to the order of such Bank
and, in the case of Swing Loans, a Swing Loan Note payable to the order of the
Swing Line Bank. The records of each Bank shall be prima facie evidence of such
Bank's Loans and accrued interest thereon and of all payments made in respect
thereof.
Section 1.11 Payments by the Borrower.
------------------------
(a) Time, Place and Manner.
----------------------
All payments due to the Agent under the Borrower Loan Documents shall
be made to the Agent at the Agent's Office or at such other address as the
Agent may designate by notice to the Borrower. All payments due to any Bank
under the Borrower Loan Documents shall, in the case of payments by the Borrower
on account of principal of or interest on the Loans (including Swing Loans, so
long as the Bank that is the Swing Line Bank is also the Agent) or fees be made
to the Agent at the Agent's Office and in the case of all other payments
(including payments of principal of, and interest on, Swing Loans, if the Bank
that is the Swing Line Bank is not the Agent), be made directly to such Bank at
its Domestic Lending Office or such other address as the Bank may designate. All
payments due to any Bank under the Borrower Loan Documents, whether made to the
Agent or directly to such Bank, shall be made for the account of, in the case of
payments in respect of Eurodollar Rate Loans, such Bank's Eurodollar Lending
Office and, in the case of all other payments, such Bank's Domestic Lending
Office. A payment shall not be deemed to have been made on any day unless such
payment has been received by the required Person, at the required place of
payment, in Dollars in funds immediately available to the Agent at such place,
no later than 12:00 noon on such day.
(b) No Reductions.
-------------
All payments due to the Agent or any Bank under the Borrower Loan
Documents, and all other terms, conditions, covenants and agreements to be
observed and performed by the Borrower thereunder, and all payments due to the
Swing Line Bank by a Bank, shall be made, observed or performed by the Borrower
or such Bank, as the case may be, without any reduction or deduction whatsoever,
including any reduction or deduction for any set-off, recoupment, counterclaim
(whether sounding in tort, contract or otherwise) or Tax, except in the case of
payments by the Borrower, subject to Section 1.13, for any withholding or
deduction for Taxes required to be withheld or deducted under Applicable Law;
provided that no payment by any Person to another Person shall constitute a
waiver or
8
<PAGE>
release by the Person making such payment of any right it may have against the
Person receiving such payment.
(c) Extension of Payment Dates.
--------------------------
Whenever any payment to the Agent or any Bank under the Borrower Loan
Documents would otherwise be due (except by reason of acceleration) on a day
that is not a Business Day, or, in the case of payments of the principal of
Eurodollar Rate Loans, a Eurodollar Business Day, such payment shall instead be
due on the next succeeding Business or Eurodollar Business Day, as the case may
be, unless, in the case of a payment of the principal of a Eurodollar Rate Loan,
such extension would cause payment to be due in the next succeeding calendar
month, in which case such due date shall be advanced to the next preceding
Eurodollar Business Day. If the date any payment under the Borrower Loan
Documents is due is extended (whether by operation of any Borrower Loan
Document, Applicable Law or otherwise), such payment shall bear interest for
such extended time at the rate of interest applicable hereunder.
Section 1.12 Distribution of Payments by the Agent.
-------------------------------------
(a) The Agent shall promptly distribute to each Bank its ratable share of
each payment received by the Agent under the Loan Documents for the account of
the Banks by credit to an account of such Bank at the Agent's Office or by wire
transfer to an account of such Bank at an office of any other commercial bank
located in the United States.
(b) Unless the Agent shall have received notice from the applicable Loan
Party prior to the date on which any payment is due to the Banks under the Loan
Documents that such Loan Party will not make such payment in full, the Agent may
assume that such Loan Party has made such payment in full to the Agent on such
date and the Agent in its sole discretion may, in reliance upon such assumption,
cause to be distributed to each Bank on such due date a corresponding amount
with respect to the amount then due such Bank. If and to the extent such Loan
Party shall not have so made such payment in full to the Agent and the Agent
shall have so distributed to any Bank a corresponding amount, such Bank shall,
on demand, repay to the Agent the amount so distributed together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the Federal Funds
Rate until (and including) the third Business Day after demand is made and
thereafter at the Base Rate.
Section 1.13 Taxes.
-----
(a) Taxes Payable by the Borrower.
-----------------------------
If under Applicable Law any Tax is required to be withheld or deducted
from, or is otherwise payable by the Borrower in connection with, any payment to
the Agent or any Bank under the Loan Documents, the Borrower (A) shall (1), if
so required, withhold or deduct the amount of such Tax from such payment and, in
any case, pay such Tax to the appropriate taxing authority in accordance with
Applicable Law and (2) indemnify the Agent or such Bank in accordance with the
provisions of Section 10.02(a) against its failure so to do and (B) shall pay to
the Agent or such Bank such additional amounts as may be necessary so that the
net amount received by the Agent or such Bank with respect to such payment,
after withholding or deducting all Taxes required to be withheld or deducted, is
equal to the full amount payable under the Loan Documents less any Bank Taxes
required to be withheld or deducted, or otherwise payable by the Borrower. If
any Tax is withheld or deducted from, or is otherwise payable by the Borrower in
connection with, any payment payable to any Bank under the Loan Documents, the
Borrower shall, as soon as
9
<PAGE>
possible after the date of such payment, furnish to the Agent or such Bank the
original or a certified copy of a receipt for such Tax from the applicable
taxing authority. If any payment due to the Agent or any Bank under the Loan
Documents is or is expected to be made without withholding or deducting
therefrom, or otherwise paying in connection therewith, any Tax payable to any
taxing authority, the Borrower shall, within 30 days after any request from the
Agent, furnish to the Agent a certificate from such taxing authority, or an
opinion of counsel acceptable to the Agent, in either case stating that no Tax
payable to such taxing authority was or is, as the case may be, required to be
withheld or deducted from, or otherwise paid by the Borrower in connection with,
such payment.
(b) Taxes Payable by the Agent or any Bank.
--------------------------------------
The Borrower shall, promptly upon request by the Agent or any Bank for
the payment thereof, pay to the Agent or such Bank (A) all Taxes (other than
Bank Taxes) payable by the Agent or such Bank with respect to any payment due to
the Agent or such Bank under the Loan Documents and (B) all Taxes payable by the
Agent or such Bank as a result of payments made by the Borrower (whether made to
a taxing authority or to the Agent or such Bank) pursuant to this Section
1.13(b).
(c) Limitations.
-----------
Notwithstanding anything to the contrary contained herein, the Borrower
shall not be required to pay any additional amount in respect of withholding
taxes pursuant to this Section 1.13 to any Bank (A) in respect of any Bank Tax,
(B) except to the extent such Taxes are required to be withheld as a result of
(1) in the case of a Person that is a Bank on the Effective Date, a Regulatory
Change Enacted after the Effective Date and (2) in the case of a Person that
becomes a Bank after the Effective Date, a Regulatory Change Enacted after such
Person becomes a Bank, or (C) to the extent such withholding is required because
such Bank has failed to submit any form or certificate that it is entitled to so
submit under Applicable Law.
Section 1.14 Pro Rata Treatment.
------------------
Except to the extent otherwise provided herein, (a) RC Loans of each Type
to be made on any day shall be made by the Banks pro rata in accordance with
their respective Commitments, (b) RC Loans of the Banks shall be converted and
continued pro rata in accordance with their respective amounts of RC Loans of
the Type and, in the case of Eurodollar Rate Loans, having the Interest Period
being so converted or continued, (c) each reduction in the Commitments shall be
made pro rata in accordance with the respective amounts thereof and (d) each
payment of the principal of or interest on the Loans or of fees shall be made
for the account of the Banks pro rata in accordance with the respective amounts
thereof then due and payable.
ARTICLE 2
---------
CONDITIONS TO RESTATED AGREEMENT DATE AND LOANS
-----------------------------------------------
Section 2.01 Conditions to Effectiveness of Agreement.
----------------------------------------
This Agreement, as amended and restated as of the Restated Agreement Date,
and the rights and obligations of the parties hereunder shall become effective
upon the determination by (x) in the case of clauses (e), (f) and (h), the
Agent, (y) in the case of clauses (h) and (i), the Banks (as defined hereunder
prior to the amendment and restatement hereof on the Restated Agreement Date)
and (z) in all other cases,
10
<PAGE>
each Bank, in each case, in its sole and absolute discretion that each of the
following conditions has been fulfilled:
(a) the Agent shall have received each of the following, in form and
substance and, in the case of the materials referred to in clauses (i), (ii),
(iv), (v), (vi), (vii), (viii) and (ix), certified in a manner satisfactory to
it:
(i) a certificate of the Secretary, an Assistant Secretary or other
officer acceptable to the Agent of the Borrower and each Guarantor, dated the
Restated Agreement Date, substantially in the form of Schedule 2.01(a)(i), to
-------------
which shall be attached copies of the resolutions and by-laws referred to in
such certificate;
(ii) (A) a copy of the certificate of incorporation of the Borrower and
each Guarantor that is a corporation and (B) a copy of the limited partnership
agreement of each Guarantor that is a partnership;
(iii) an opinion of counsel for the Borrower and each Guarantor dated the
Restated Agreement Date;
(iv) a copy of each Governmental Approval and other consent or approval
listed on Schedule 3.03;
-------------
(v) completed Schedules 3.02, 3.03, 3.04, 3.06, 3.09, 4.05, 4.06, 4.07,
4.12 and 9.01;
(vi) a certificate of the Director, the Secretary or an Assistant Secretary
of each Subordinator, dated the Effective Date, substantially in the form of
Schedule 2.01(a)(i), to which shall be attached copies of the resolutions, or in
- -------------------
the case of MAC Inc. and SOFTBANK Corp. the minutes, and by-laws, or in the case
of MAC Inc. and SOFTBANK Corp. the Articles of Incorporation, referred to in
such certificate;
(vii) a copy of the certificate of incorporation of each Subordinator that
is a corporation, or in the case of MAC Inc. and SOFTBANK Corp. the Commercial
Register, certified, as of a recent date, by the Secretary of State, the Legal
Affairs Bureau or other appropriate official of such Subordinator's jurisdiction
of incorporation;
(viii) a good standing certificate with respect to the Borrower and each
Loan Party that is a corporation, issued as of a recent date by the Secretary of
State or other appropriate official of such Person's jurisdiction of
incorporation, together with a telegram from such Secretary of State or other
official, updating the information in such certificate;
(ix) a copy of the partnership agreement of each Subordinator that is a
partnership;
(x) an opinion of counsel for each Subordinator dated the Effective Date;
(xi) a duly executed RC Note to the order of each Bank;
11
<PAGE>
(xii) a duly executed Swing Loan Note to the order of the Swing Line Bank;
(xiii) a duly executed copy of each Subordination Agreement; and
(xiv) such additional materials as any Bank may have requested pursuant to
Section 5.01(d);
(b) all amounts payable pursuant to Section 10.02 for which invoices have
been delivered by the Agent to the Borrower on or prior to such date, shall have
been paid in full or arrangements satisfactory to the Agent shall have been made
to cause them to be paid in full on the Restated Agreement Date.
(c) all Affiliate Indebtedness shall constitute Subordinated
Indebtedness;
(d) the acceptance by CT Corporation System of its appointment as
"Process Agent" under each Subordination Agreement that requires such
appointment;
(e) the corporate or partnership structures, as the case may be, of the
Borrower and the Guarantors shall be satisfactory to the Agent;
(f) the terms and conditions of all Indebtedness set forth on Schedule
--------
4.05 of the Borrower and each Guarantor shall be satisfactory to the Agent;
- ----
(g) the Agent shall have received copies, certified in a manner
satisfactory to it, of all notes, bonds, debentures and other instruments and
securities that evidence Indebtedness of the Borrower and each Guarantor listed
on Schedule 4.05, and all Contracts under which such Indebtedness is issued or
-------------
which otherwise relate to such Indebtedness; and
(h) each Bank (as defined hereunder prior to the amendment and
restatement hereof on the Restated Agreement Date) shall have received
irrevocable payment in full of all fees payable pursuant to this Agreement
(prior to its amendment and restatement on the Restated Agreement Date).
Except to the extent that the Borrower shall have disclosed information to
the contrary in a notice given to the Agent prior to 5:00 p.m. on the Business
Day before the Restated Agreement Date, the Borrower shall be deemed to have
made a Representation and Warranty as of the Restated Agreement Date that no
Default exists under this Agreement (as in effect prior to its amendment and
restatement on the Restated Agreement Date) and no Default shall exist under
this Agreement (as amended and restated on the Restated Agreement Date) after
giving effect to this Agreement on the Restated Agreement Date. No such
disclosure by the Borrower shall affect the right of each Bank to not enter into
this Agreement.
Section 2.02 Conditions to Each Loan.
-----------------------
The obligation of each Bank to make each Loan, including its initial Loan
(other than, except for a Bankruptcy Default RC Loans to be made pursuant to a
request under Section 1.04(b) or Section 1.05(c)(i)), is subject to each of the
following conditions:
12
<PAGE>
(a) such Bank shall have received a notice of or request for a borrowing
with respect to such Loan complying with the requirements of Section 1.02;
(b) each Loan Document Representation and Warranty shall be true and
correct at and as of the time such Loan is to be made, both with and without
giving effect to such Loan and all other Loans to be made at such time and to
the application of the proceeds thereof; and
(c) no Default shall have occurred and be continuing at the time such Loan
is to be made or would result from the making of such Loan and all other Loans
to be made at such time or from the application of the proceeds thereof.
Except to the extent that the Borrower shall have disclosed in the notice
of borrowing, or in a subsequent notice given to the Agent prior to 5:00 p.m. on
the Business Day before the requested date for the making of the requested
Loans, that a condition specified in clause (b) or (c) above will not be
fulfilled as of the requested time for the making of such Loans, the Borrower
shall be deemed to have made a Representation and Warranty as of the time of the
making of such Loans that the conditions specified in such clauses have been
fulfilled as of such time. No such disclosure by the Borrower that a condition
specified in clause (b) or (c) above will not be fulfilled as of the requested
time for the making of the requested Loans shall affect the right of each Bank
to not make the Loans requested to be made by it if, in such Bank's
determination, such condition has not been fulfilled at such time.
ARTICLE 3
---------
CERTAIN REPRESENTATIONS AND WARRANTIES
--------------------------------------
In order to induce each Bank to enter into this Agreement and to make each
Loan requested to be made by it, the Borrower represents and warrants as
follows:
Section 3.01 Organization; Power; Qualification.
----------------------------------
The Borrower and each Guarantor are corporations or partnerships, duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or formation, have the power and
authority to own their respective properties and to carry on their respective
businesses as now being and hereafter proposed to be conducted and are duly
qualified and in good standing as foreign corporations or organizations, and are
authorized to do business, in all jurisdictions in which the character of their
respective properties or the nature of their respective businesses requires such
qualification or authorization, except for qualifications and authorizations the
lack of which, singly or in the aggregate, has not had and could not reasonably
be expected to have a Materially Adverse Effect on the Borrower and the
Guarantors taken as a whole.
Section 3.02 Subsidiaries.
------------
Schedule 3.02 sets forth, as of the Restated Agreement Date, all of the
-------------
Wholly Owned Subsidiaries, and each direct Subsidiary formed within the United
States of America, of the Borrower and each Guarantor, and all of the direct
Subsidiaries formed within the United States of America of each such Wholly
Owned Subsidiary, their jurisdictions of incorporation or formation and the
percentages of the various classes of their Capital Securities owned by the
Borrower, a Guarantor or another Subsidiary of the Borrower or a Guarantor. The
Borrower, a Guarantor or another Subsidiary of the Borrower or a Guarantor, as
13
<PAGE>
the case may be, has the unrestricted right to vote, and (subject to limitations
imposed by Applicable Law) to receive dividends and distributions on, all
Capital Securities indicated on Schedule 3.02 as owned by the Borrower or such
-------------
Subsidiary. All such Capital Securities have been duly authorized and issued
and are fully paid and nonassessable.
Section 3.03 Authorization; Enforceability; Required Consents; Absence of
------------------------------------------------------------
Conflicts.
- ---------
The Borrower and each Guarantor has the power, and has taken all necessary
action (including, if a corporation, any necessary stockholder action) to
authorize it, to execute, deliver and perform in accordance with their
respective terms the Loan Documents to which it is a party and, in the case of
the Borrower, to borrow hereunder in the unused amount of the Commitments. This
Agreement has been, and each of the other Loan Documents to which the Borrower
or any Guarantor is a party when delivered to the Agent will have been, duly
executed and delivered by the Borrower and each Guarantor that is a party
thereto and is, or when so delivered will be, a legal, valid and binding
obligation of such Loan Party, enforceable against such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally. The execution, delivery and
performance in accordance with their respective terms by the Borrower and the
Guarantors of the Loan Documents to which they are parties, and each borrowing
hereunder, whether or not in the amount of the unused Commitments, do not and
(absent any change in any Applicable Law or applicable Contract) will not (a)
require any Governmental Approval or any other consent or approval, including
any consent or approval of the stockholders or partners, as the case may be, of
the Borrower or any Guarantor, other than Governmental Approvals and other
consents and approvals that have been obtained, are final and not subject to
review on appeal or to collateral attack, are in full force and effect and, in
the case of any such required under any Applicable Law or Contract as in effect
on the Restated Agreement Date, are listed on Schedule 3.03, or (b) violate,
-------------
conflict with, result in a breach of, constitute a default under or result in or
require the creation of any Lien upon any assets of the Borrower or any
Guarantor under, (i) any Contract to which the Borrower or any Guarantor is a
party or by which the Borrower or any Guarantor or any of their respective
properties may be bound or (ii) any Applicable Law.
Section 3.04 Existing Indebtedness and Investments.
-------------------------------------
(a) Schedule 4.05 (i) sets forth all Indebtedness of the Borrower and each
-----------------
Guarantor that is outstanding on the Restated Agreement Date in an original
principal amount equal to $1,000,000 or more and that is payable to a single
Person or group of Persons that are Affiliates, or that constitutes
Indebtedness, issued under an indenture or similar instrument and (ii)
identifies each such Person that such Indebtedness is payable to or the
indenture or similar instrument under which such Indebtedness was issued.
(b) Schedule 3.04 sets forth (i) all public debt of SOFTBANK Corp. that is
-------------
outstanding on the Restated Agreement Date and (ii) all Indebtedness outstanding
on the Restated Agreement Date that, on the Restated Agreement Date, is secured
by a Lien on Affiliate Indebtedness.
(c) Schedule 4.11 sets forth all Investments of the Borrower and the
-------------
Guarantors outstanding on the Restated Agreement Date.
14
<PAGE>
Section 3.05 Taxes.
-----
(a) The Borrower and each Guarantor have timely filed all Tax returns
required to have been filed by them under Applicable Law (taking into account
any extension of time in which to file) except for returns (other than U.S.
federal income tax returns) which show or when completed would show a liability
for Taxes less than $50,000, (b) all such filed returns correctly reflect the
facts concerning the income, business, assets, properties, operations,
activities and status of the Borrower and each Guarantor, (c) the Borrower and
each Guarantor have timely paid all Taxes (except for Taxes the failure to have
paid which does not contravene Section 4.01) that are shown as due on such filed
returns or that have been assessed against them and (d) to the extent required
by Generally Accepted Accounting Principles, reserved against all Taxes that are
payable by it but are not yet due or that are due and payable by it or have been
assessed against it but have not yet been paid.
Section 3.06 Litigation.
----------
Except as set forth on Schedule 3.06, there are not, in any court or before
-------------
any arbitrator of any kind or before or by any governmental or non-governmental
body, any actions, suits or proceedings pending or threatened (nor, to the
knowledge of the Borrower or any Guarantor is there any basis therefor) against
or in any other way relating to or affecting (a) the validity or enforceability
of any Loan Document or (b) the Borrower or any Guarantor or any of their
respective businesses or properties, except actions, suits or proceedings that
could not reasonably be expected to be adversely determined and that, in the
case of those pending against the Borrower or any Guarantor, if adversely
determined, could not reasonably be expected to have, singly or in the
aggregate, a Materially Adverse Effect on the Borrower and the Guarantors taken
as a whole.
Section 3.07 Burdensome Provisions.
---------------------
Neither the Borrower nor any Guarantor is a party to or bound by any
Contract or Applicable Law, compliance with which could reasonably be expected
to have a Materially Adverse Effect on (a) the Borrower and the Guarantors taken
as a whole or (b) any Loan Document.
Section 3.08 No Adverse Change or Event.
--------------------------
Since December 31, 1996, no change in the business, assets, Liabilities,
financial condition or results of operations of the Borrower or any Guarantor
has occurred, and no event has occurred or failed to occur, that has had or
could reasonably be expected to have, either alone or in conjunction with all
other such changes, events and failures, a Materially Adverse Effect on (a) the
Borrower and the Guarantors taken as a whole or (b) any Loan Document. Such an
adverse change may have occurred, and such an event may have occurred or failed
to occur, at any particular time notwithstanding the fact that at such time no
Default shall have occurred and be continuing.
Section 3.09 Additional Adverse Facts.
------------------------
Except for facts and circumstances disclosed on Schedule 3.06 or Schedule
------------- --------
3.09, no fact or circumstance is known to the Borrower or any Guarantor, as of
- ----
the Restated Agreement Date, that either alone or in conjunction with all other
such facts and circumstances, has had or could reasonably be expected to have
(so far as the Borrower or any Guarantor can foresee) a Materially Adverse
Effect on (a) the Borrower and the Guarantors taken as a whole or (b) any Loan
Document. If a fact or circumstance disclosed on such Schedules or in such
notes should in the future have a Materially Adverse Effect on (x) the Borrower
and the Guarantors taken as a whole or (y) any Loan Document, such Materially
Adverse Effect shall be a change or event subject to Section 3.08
notwithstanding such disclosure.
15
<PAGE>
Section 3.10 Guarantors and Subordinators.
----------------------------
As of the Restated Agreement Date (a) the Guarantors listed on Schedule
--------
9.01 are, except as otherwise indicated on such Schedule, Wholly Owned
- ----
Subsidiaries of the Borrower and include all Wholly Owned Subsidiaries of each
Guarantor and (b) the resolutions or minutes, as the case may be, and the by-
laws or Articles of Incorporation, as the case may be, referred to in Section
2.01(a)(vi), the certificate of incorporation or Commercial Register, as the
case may be, referred to in Section 2.01(a)(v), the partnership agreements
referred to in Section 2.01(a)(ix) and the acceptance by CT Corporation referred
to in Section 2.01(c), all are in full force and effect as of the Restated
Agreement Date, in the forms delivered on the Effective Date, except for such
changes thereto as have been certified and delivered to the Agent on or before
the Restated Agreement Date.
ARTICLE 4
---------
CERTAIN COVENANTS
-----------------
From the Restated Agreement Date and until the Repayment Date,
A. The Borrower shall and shall cause each Guarantor and, prior to its
-------------------------------------------------------------------
dissolution as set forth in Section 4.19, Forums L.P., to:
- ---------------------------------------------------------
Section 4.01 Preservation of Existence and Properties, Scope of Business,
------------------------------------------------------------
Compliance with Law, Payment of Taxes and Claims, Preservation of
- -----------------------------------------------------------------
Enforceability.
(a) Preserve and maintain its corporate or partnership existence, as the
case may be, and all of its other franchises, licenses, rights and privileges,
(b) preserve, protect and obtain all Intellectual Property, and preserve and
maintain in good repair, working order and condition all other properties,
required for the conduct of its business, (c) comply with Applicable Law, (d)
pay or discharge when due all Taxes (other than Taxes that are the subject of a
good faith contest as to the fact or the amount of liability and, to the extent
required by Generally Accepted Accounting Principles, have been reserved against
on the books of the Person that has failed to discharge such Tax) and all
Liabilities that are or might become Liens on any of its properties and (e) take
all action and obtain all consents and Governmental Approvals required so that
its obligations under the Loan Documents will at all times be legal, valid and
binding and enforceable in accordance with their respective terms, except that
this Section 4.01 (other than clauses (a), in so far as it requires any Loan
Party to preserve its corporate or partnership existence and (e)) shall not
apply in any circumstance where noncompliance, together with all other
noncompliances with this Section 4.01, could not reasonably be expected to have
a Materially Adverse Effect on (x) the Borrower and the Guarantors taken as a
whole or (y) any Loan Document.
Section 4.02 Insurance.
---------
Maintain insurance with responsible insurance companies against at least
such risks and in at least such amounts as is customarily maintained by similar
businesses, or as may be required by Applicable Law.
Section 4.03 Use of Proceeds.
---------------
Use the proceeds of the Loans only for the repayment of Swing Loans and the
general corporate purposes of the Borrower, including, subject to the provisions
of Section 4.11, the making or acquisition of any Investments or Business Units.
None of the proceeds of any of the Loans shall be used to purchase or carry, or
to reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of
16
<PAGE>
Regulations U and X of the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any margin
stock. If requested by any Bank, the Borrower shall complete and sign Part I of
a copy of Federal Reserve Form U-1 referred to in Regulation U and deliver such
copy to such Bank.
Section 4.04 Additional Wholly Owned Subsidiaries.
------------------------------------
On or prior to the date that a Guarantor forms or acquires any new Wholly
Owned Subsidiary, or any existing Subsidiary of a Guarantor becomes a Wholly
Owned Subsidiary of such Guarantor, deliver to the Agent a Guarantor Supplement
executed by such Wholly Owned Subsidiary.
B. The Borrower shall not, and shall not permit any Guarantor, any ZD Holdings
---------------------------------------------------------------------------
Subsidiary (with respect only to Sections 4.05, 4.06 and 4.07) or, prior to its
- -------------------------------------------------------------------------------
dissolution as set forth in Section 4.19, Forums L.P., to, directly or
- ----------------------------------------------------------------------
indirectly:
- ----------
Section 4.05 Indebtedness.
------------
Have any Indebtedness, at any time, except that this Section 4.05 shall not
apply to (a) the Loans, (b) Guaranties to which Section 4.06 is not applicable,
(c) Existing Indebtedness, provided that, if such Indebtedness is Affiliate
--------
Indebtedness, such Indebtedness is Subordinated Indebtedness, (d) Purchase Money
Indebtedness in an aggregate principal amount not exceeding $5,000,000
outstanding at any time in the aggregate for the Borrower and the Guarantors,
(e) Indebtedness of the Borrower that is not InterCompany Indebtedness,
Subordinated Indebtedness or Indebtedness referred to in clause (f) of this
Section 4.05 in an aggregate principal amount not exceeding $25,000,000
outstanding at any time, (f) Indebtedness of the ZD Holdings Subsidiaries and
the Guarantors that is not InterCompany Indebtedness, Subordinated Indebtedness
or Indebtedness referred to in clause (e) of this Section 4.05 in an aggregate
principal amount not exceeding $10,000,000 outstanding at any time in the
aggregate for the Guarantors and the ZD Holdings Subsidiaries, (g) New
Subordinated Indebtedness, provided, that such New Subordinated Indebtedness
--------
shall (1) not require any scheduled payment or purchase of principal prior to
the Termination Date, (2) bear interest at a commercially reasonable rate and
(3) be subject to other terms and conditions no more burdensome in any material
manner to the obligor than the terms of any other Subordinated Indebtedness in
existence at the time of its incurrence and (h) InterCompany Indebtedness.
Section 4.06 Guaranties.
----------
Be obligated, at any time, in respect of any Guaranty, except that this
Section 4.06 shall not apply to (a) Existing Guaranties and (b) Permitted
Guaranties.
Section 4.07 Liens.
-----
Permit to exist, at any time, any Lien upon any of its properties or assets
of any character, whether now owned or hereafter acquired, or upon any income or
profits therefrom, except that this Section 4.07 shall not apply to Permitted
Liens.
Section 4.08 Restricted Payments.
-------------------
Make or declare or otherwise become obligated to make any Restricted
Payment, except that this Section 4.08 shall not apply to:
(a) Restricted Payments to SOFTBANK Corp.; provided, that (i) no Default
--------
shall exist either before or as a result of the making of such Restricted
Payment and (ii) the amount of such Restricted Payment (A) together with the
aggregate amount of all other SOFTBANK Corp. Payments, shall not exceed
$200,000,000 and (B) together with the
17
<PAGE>
aggregate amount of all other SOFTBANK Corp. Payments and all MAC Inc. Payments,
shall not exceed $300,000,000;
(b) in the case of a Guarantor, any Restricted Payment by such Guarantor
made to the Borrower or a Guarantor.
This Section 4.08 shall not prohibit the payment of a dividend that
constitutes a Restricted Payment if such Restricted Payment is made within 45
days of the declaration thereof and if this Section 4.08 did not prohibit such
Restricted Payment at the time of its declaration.
Section 4.09 Merger or Consolidation.
-----------------------
Merge or consolidate with any Person, except that, if after giving effect
thereto no Default would exist, this Section 4.09 shall not apply to (a) any
merger or consolidation of the Borrower with any one or more Guarantors,
provided that the Borrower shall be the continuing Person, (b) any merger or
- --------
consolidation of any Guarantor with any one or more other Guarantors and (c)
Investments to which Section 4.11 is not applicable by virtue of clause (j)
thereof; provided, that if the Borrower is a party to such merger or
--------
consolidation the Borrower is the surviving Person and if a Guarantor is a party
to such merger or consolidation such Guarantor is the surviving Person.
Section 4.10 Disposition of Assets.
---------------------
Sell, lease, license, transfer or otherwise dispose of any asset or any
interest therein, except that this Section 4.10 shall not apply to (a) any
disposition of any asset or any interest therein in the ordinary course of
business, (b) any disposition of any obsolete or retired property not used or
useful in its business, (c) any disposition of any Investment made after January
1, 1996 or of any interest therein to any Affiliate, provided that the Person
--------
disposing of such Investment or interest therein, receives in consideration of
such disposition an amount of Dollars not less than the original amount of such
Investment or interest, (d) any disposition of any asset or any interest therein
by the Borrower or any Guarantor to the Borrower or any Guarantor, (e) any
disposition of any asset if the fair market value of such asset, together with
the fair market value of all other assets disposed of by the Borrower and the
Guarantors after the Restated Agreement Date, does not exceed $50,000,000 and
(f) any transaction to which any of the other provisions of this Agreement
(other than Section 4.13) is by its express terms inapplicable. For this
purpose, "fair market value" of an asset means the fair market value of such
asset as reasonably determined by, if the Person disposing of such asset is a
corporation, its board of directors, and, if such Person is a partnership, its
general partner or partners.
Section 4.11 Investments.
-----------
Make or acquire any Investment or Business Unit, except that this Section
4.11 shall not apply to (a) Money Market Investments, (b) extensions of trade
credit in the ordinary course of business, but only if and so long as the same
are payable on customary trade terms, (c)(i) loans and advances to employees of
the Borrower or any Guarantor in the ordinary course of business in an amount
not exceeding $5,000,000 outstanding at any time in the aggregate for the
Borrower and the Guarantors, and (ii) Investments constituting Guaranties of
loans and advances referred to in clause (c)(i), (d) Investments in the Borrower
or a Guarantor by the Borrower or a Guarantor, (e) in addition to the Guaranties
contemplated by clause (c)(ii), Guaranties to which Section 4.06 is not
applicable, (f) Investments in MAC Inc. for purposes of effecting the
transactions contemplated in the Management Agreement in an aggregate amount not
in excess of $50,000,000 outstanding at any time, (g) Existing
18
<PAGE>
Investments, (h) Investments in and Business Units acquired from SOFTBANK Corp.
the cost of which (A) together with the aggregate amount of all other SOFTBANK
Corp. Payments, does not exceed $200,000,000 and (B) together with the aggregate
amount of all other SOFTBANK Corp. Payments and all MAC Inc. Payments, does not
exceed $300,000,000, (i) Investments in and Business Units acquired from MAC
Inc. the cost of which (A) together with the aggregate amount of all other MAC
Inc. Payments, does not exceed $175,000,000 and (B) together with the aggregate
amount of all other MAC Inc. Payments and all SOFTBANK Corp. Payments, does not
exceed $300,000,000 and (j) Investments (other than loans, advances and
extensions of credit to Affiliates) and Business Units the cost of which,
together with the costs of all other Borrower Group Payments (other than
Investments in the form of loans, advances and extensions of credit to
Affiliates), does not exceed $50,000,000.
Section 4.12 Benefit Plans.
-------------
(a) Have, or permit any of its ERISA Affiliates to have, any Benefit Plan
other than an Existing Benefit Plan, (b) permit any Existing Benefit Plan to be
amended in any manner that would cause the aggregate Unfunded Benefit
Liabilities under all Existing Benefit Plans to exceed $100,000,000 or (c)
permit any Existing Benefit Plan to have a Funded Current Liability Percentage
of less than 60%.
Section 4.13 Transactions with Affiliates.
----------------------------
Effect any transaction with any Affiliate that is (a) outside the ordinary
course of business or (b) on a basis less favorable than would at the time be
obtainable for a comparable transaction in arms-length dealing with an unrelated
third party, except that this Section 4.13 shall not apply to (i) the Guaranties
of the Borrower and the Guarantors pursuant to Article 9, (ii) any transaction
between the Borrower and a Guarantor and (iii) any transaction to which Section
4.11 is not applicable by virtue of clause (f) of such Section.
Section 4.14 Issuance or Disposition of Capital Securities.
---------------------------------------------
Issue any of its Capital Securities or sell, transfer or otherwise dispose
of any Capital Securities of any Guarantor, except that this Section 4.14 shall
not apply to (a) any issuance by a Guarantor of any of its Capital Securities to
the Borrower or a Guarantor, (b) any disposition by the Borrower or any
Guarantor of any Capital Securities of a Guarantor to the Borrower or a
Guarantor, (c) the issuance by the Borrower or any Guarantor of any of its
Capital Securities pursuant to, or upon exercise of any Capital Security issued
pursuant to, a Permitted Stock Option Plan and (d) a transfer by the Borrower of
Capital Securities of ZD COMDEX and Forums, Inc., Ziff-Davis Inc. and ZD
Holdings (UK) to ZD Inc. in connection with, and substantially simultaneously
with, a contemplated public offering of shares of the common stock of ZD Inc.
Section 4.15 Subordinated Indebtedness; InterCompany Indebtedness.
----------------------------------------------------
(a) Amend, modify or waive any provision of any Subordinated Indebtedness
or InterCompany Indebtedness, or Prepay all or any portion of any Subordinated
Indebtedness or make any other payments on or in respect thereof, except that
this Section 4.15 shall not apply to (i) amendments, modifications and waivers
that do not have an adverse effect on the rights of the Agent, the Swing Line
Lender or any Bank under the Loan Documents, so long as such amendment,
modification or waiver is in writing and a copy thereof is provided to the Agent
within 30 days of its execution, (ii) payments of interest and principal when
due on the Subordinated Indebtedness in accordance with their scheduled
maturities (without giving effect to any acceleration or required or optional
Prepayment), but not earlier, and then only if (A) no Default exists and (B)
such payment is
19
<PAGE>
permitted by the applicable Subordinated Agreement and (iii) Prepayments of
Subordinated Indebtedness made to (A) SOFTBANK Corp., provided that, the
--------
amount thereof, together with (1) the aggregate amount of all other SOFTBANK
Corp. Payments, shall not exceed $200,000,000 and (2) the aggregate amount of
all other SOFTBANK Corp. Payments and all MAC Inc. Payments, shall not exceed
$300,000,000, and (B) MAC Inc., provided that, the amount thereof, together
--------
with (1) the aggregate amount of all other MAC Inc. Payments, shall not
exceed $175,000,000 and (2) the aggregate amount of all other MAC Inc. Payments
and all SOFTBANK Corp. Payments, shall not exceed $300,000,000; provided in each
--------
case that no Default shall exist or result from the making of such payment. For
purposes of clause (i) of the preceding sentence, an increase in the principal
amount of, an increase in the interest rate beyond a commercially reasonable
rate on, or date scheduled earlier than the Termination Date for the payment,
purchase or defeasement of principal of or interest on, any InterCompany
Indebtedness or Subordinated Indebtedness shall be deemed to have such an
adverse effect.
(b) Amend, modify or waive any provision of the Kingston Contingent
Obligation or the Kingston Guarantee, except that this Section 4.15(b) shall not
apply to amendments, modifications and waivers that are not adverse to the
interests of the Agent or any Bank, provided that such amendments, modifications
and waivers are in writing and a copy thereof is provided to the Agent not less
than 5 Business Days prior to their effectiveness.
Section 4.16 Hedges and Swaps.
----------------
Enter into any interest rate or currency swap or similar transaction,
except that this Section 4.16 shall not apply to any such transaction entered
into in the ordinary course of such Person's business for the purpose of hedging
an interest rate or currency risk and on terms customary for such a transaction
at the time it was entered into.
C. The Borrower shall not permit any Guarantor or, prior to its dissolution as
---------------------------------------------------------------------------
set forth in Section 4.19, Forums L.P., to:
- ------------------------------------------
Section 4.17 Limitation on Restrictive Covenants.
-----------------------------------
Permit to exist, at any time, any consensual restriction limiting the
ability (whether by covenant, event of default, subordination or otherwise) of
any Guarantor to (a) pay dividends or make any other distributions on shares of
its capital stock or other ownership interests held by the Borrower or any other
Guarantor, (b) pay any obligation owed to the Borrower or any Guarantor, (c)
make any loans or advances to or investments in the Borrower or any Guarantor,
(d) transfer any of its property or assets to the Borrower or any Guarantor or
(e) create any Lien upon its property or assets whether now owned or hereafter
acquired or upon any income or profits therefrom, except that this Section 4.17
shall not apply to Permitted Restrictive Covenants.
D. The Borrower shall not at any time:
----------------------------------
Section 4.18 Ratio of Indebtedness to Borrower Group EBITDA.
-----------------------------------------------
Permit, as of the last day of any fiscal quarter, commencing with the first
fiscal quarter ending after the Restated Agreement Date, the ratio of the
aggregate Indebtedness of the Borrower and the Guarantors, other than
InterCompany Indebtedness and Subordinated Indebtedness outstanding on such day,
to Borrower Group EBITDA, for the 4 consecutive fiscal quarters of the Borrower
most recently ended to be greater than 2.50:1.00.
20
<PAGE>
E. The Borrower shall:
------------------
Section 4.19 Dissolution of Forums L.P.
--------------------------
(a) Cause the dissolution of Forums L.P. on or before March 31, 1998, (b)
not permit Forums L.P. to engage in any activity or conduct any business
whatsoever, other than such activities as may be necessary to effect the
dissolution of Forums L.P. and (c) not permit the amendment of, or the waiver of
any provision of, the limited partnership agreement of Forums L.P. as in effect
on the Restated Agreement Date, other than such amendments and waivers as may be
necessary to effect the dissolution of Forums L.P.
ARTICLE 5
---------
INFORMATION
-----------
Section 5.01 Information to Be Furnished.
---------------------------
From the Restated Agreement Date and until the Repayment Date, the Borrower
shall furnish to each Bank:
(a) Quarterly Financial Statements.
------------------------------
As soon as available and in any event within 45 days after the close
of each of the first three quarterly accounting periods in each fiscal year of
the Borrower, commencing with the quarterly period ending March 31, 1998,
consolidated balance sheets of the Borrower and the Consolidated Subsidiaries as
at the end of such quarterly period and the related consolidated statements of
income, retained earnings and cash flows of the Borrower and the Consolidated
Subsidiaries for such quarterly period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period, setting forth in each
case in comparative form the figures for the corresponding periods of the
previous fiscal. The consolidated financial statements of the Borrower will be
supported by schedules showing revenues and EBITDA by major business units.
(b) Year-End Financial Statements; Accountants' Certificate.
-------------------------------------------------------
As soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, commencing with the fiscal year ending
December 31, 1997:
(i) consolidated balance sheets of the Borrower and the Consolidated
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income, retained earnings and cash flows of the Borrower and the
Consolidated Subsidiaries for such fiscal year, setting forth in comparative
form the figures as at the end of and for the previous fiscal year, supported by
schedules showing revenues, operating expenses, EBITDA, net assets, capital
spending and depreciation, by major business units; and
(ii) an audit report of Price Waterhouse, or other independent certified
public accountants of recognized national standing, on such of the financial
statements referred to in clause (i) as are consolidated financial statements,
which report shall be without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit.
(c) Officer's Certificate as to Financial Statements and Defaults.
-------------------------------------------------------------
At the time that financial statements are furnished pursuant to
Section 5.01(a) or 5.01(b), a certificate of the president, chief financial
officer or other officer of the Borrower acceptable to the Agent in the form of
Schedule 5.01(b).
- -----------------
21
<PAGE>
(d) Requested Information.
---------------------
From time to time and promptly upon request of the Agent, such
Information regarding the Loan Documents, the Loans or the business, assets,
Liabilities, financial condition, results of operations or business prospects of
the Borrower and the Guarantors as the Agent may reasonably request.
(e) Notice of Defaults, Material Adverse Changes and Other Matters.
--------------------------------------------------------------
Prompt notice of:
(i) any Default of which the Borrower is or in the exercise of normal
business prudence should have been aware,
(ii) the acquisition or formation of a new Subsidiary and, in the case of
each such new Subsidiary, its name, jurisdiction of incorporation, the
percentages of the various classes of its Capital Securities owned by the
Borrower or another Subsidiary and whether or not such new Subsidiary is a
Consolidated Subsidiary,
(iii) any change in the name of any Guarantor, its jurisdiction of
incorporation or formation, the percentages of the various classes of its
Capital Securities or partnership interests owned by the Borrower or another
Subsidiary or its status as a Consolidated or non-Consolidated Subsidiary,
(iv) the threatening or commencement of, or the occurrence or nonoccurrence
of any change or event relating to, any action, suit or proceeding that would
cause the Representation and Warranty contained in Section 3.06 to be incorrect
if made at such time,
(v) the occurrence or nonoccurrence of any change or event that would
cause the Representation and Warranty contained in Section 3.08 to be incorrect
if made at such time,
(vi) any event or condition referred to in clauses (i) through (vii) of
Section 6.01(h), whether or not such event or condition shall constitute an
Event of Default, and
(vii) any material amendment of the certificate of incorporation or
partnership agreement or by-laws of the Borrower or any Subsidiary that is a
Loan Party.
Section 5.02 Accuracy of Financial Statements and Information.
------------------------------------------------
(a) Financial Statements.
--------------------
The Borrower hereby represents and warrants that (i) the financial
statements attached hereto as Schedule 5.02(a), while not prepared in accordance
----------------
with Generally Accepted Accounting Principles, would be substantially the same
had such financial statements been so prepared, and fairly present the
respective financial positions of the Persons whose financial statements such
financial statements purport to be as at their respective dates and the results
of operations, retained earnings and, as applicable, changes in financial
position or cash flows of such Persons for the respective periods to which such
statements relate, (ii) except as disclosed or reflected in such financial
statements, as at their respective dates, neither the Borrower nor any Guarantor
had any Liability, contingent or otherwise, or any unrealized or anticipated
loss, that, singly or in the aggregate, has had or could reasonably be expected
to have a Materially Adverse Effect on the Borrower and the Guarantors taken as
a whole, and (iii) the financial statements furnished pursuant to Section
5.01(a) or 5.01(b) will fairly present, in accordance with
22
<PAGE>
Generally Accepted Accounting Principles (except for changes therein or
departures therefrom that are described in the certificate or report
accompanying such statements and that have been approved in writing by the
Borrower's then current independent certified public accountants), the
consolidated financial position of the Borrower and the Consolidated
Subsidiaries, as at their respective dates and the consolidated results of
operations, retained earnings and cash flows of such Persons for the respective
periods to which such statements relate.
(b) Other Information.
-----------------
The Borrower hereby represents and warrants that the Information
furnished to the Agent or any Bank by or on behalf of the Borrower or any
Subsidiary on or prior to the Restated Agreement Date (other than the financial
statements referred to in Section 5.02(a)) does not, and the Information
furnished to such Person by or on behalf of the Borrower or any Subsidiary after
the Restated Agreement Date (other than the financial statements referred to in
Section 5.02(a)) will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading in the light of the circumstances under which
they were made.
Section 5.03 Additional Covenants Relating to Disclosure.
-------------------------------------------
From the Restated Agreement Date and until the Repayment Date, the Borrower
shall and shall cause each Guarantor to:
(a) Accounting Methods and Financial Records.
----------------------------------------
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete), as may be required or necessary to
permit (i) the preparation of financial statements required to be delivered
pursuant to Section 5.01(a) and 5.01(b) and (ii) the determination of the
compliance of the Borrower and the Guarantors with the terms of the Loan
Documents.
(b) Visits, Inspections and Discussions.
-----------------------------------
Permit representatives of any Bank, from time to time, as often as may
be reasonably requested, to visit and inspect its properties and its books and
records.
Section 5.04 Authorization of Third Parties to Deliver Information and
---------------------------------------------------------
Discuss Affairs.
- ---------------
The Borrower hereby authorizes and directs each Person whose preparation or
delivery to the Agent or any Bank of any opinion, report or other Information is
a condition or covenant under the Loan Documents (including under Article 2 or
this Article 5) to so prepare or deliver such Information for the benefit of the
Agent or such Bank.
ARTICLE 6
---------
DEFAULT
-------
Section 6.01 Events of Default.
-----------------
Each of the following shall constitute an Event of Default, whatever the
reason for such event and whether it shall be voluntary or involuntary, or
within or without the control of the Borrower or any Guarantor, or be effected
by operation of law or pursuant to any judgment or order of any court or any
order, rule or regulation of any governmental or nongovernmental body:
23
<PAGE>
(a) Any payment of principal of or interest on any of the Loans or the
Notes, of the commitment fee payable pursuant to Section 1.08 or of any fee
payable to the Agent or any of its Affiliates shall not be made when and as due
(whether at maturity, by reason of notice of prepayment or acceleration or
otherwise) and in accordance with the terms of this Agreement and the Note and,
except in the case of payments of principal, such failure shall continue for
four Business Days from the earlier of (1) the date that the Borrower knew or in
the exercise of normal business prudence should have known of and (2) the date
that the Borrower was given notice of, such non-payment;
(b) Any Loan Document Representation and Warranty shall at any time prove
to have been incorrect or misleading in any material respect when made;
(c)(i) The Borrower shall default in the performance or observance of:
(A) any term, covenant, condition or agreement contained in Section
4.01(a) (insofar as such Section requires the preservation of the corporate
existence of the Borrower), 4.01(e), 4.03 through 4.05, 4.08 through 4.10,
4.12 through 4.16, 4.18, 5.01(e)(i) or 5.03(b);
(B) any term, covenant, condition or agreement contained in Section
4.06, 4.07, 4.11 or 4.17 and, if capable of being remedied, such default
shall continue unremedied for a period of 10 days; or
(C) any term, covenant, condition or agreement contained in this
Agreement (other than a term, covenant, condition or agreement a default in
the performance or observance of which is elsewhere in this Section
specifically dealt with) and, if capable of being remedied, such default
shall continue unremedied for a period of 30 days from the earlier of (1)
the date that the Borrower knew or in the exercise of normal business
prudence should have known of and (2) the date that the Borrower was given
notice of, such default; or
(ii) Any Loan Party that is a party to a Subordination Agreement shall
default in the performance or observance of any term, covenant, condition or
agreement contained therein;
(d)(i) The Borrower, any Guarantor or, subject to the proviso to this
Section 6.01(d), any Affiliate, shall fail to pay, in accordance with its terms
- --------------
and when due and payable, any of the principal of or interest on any of its
Indebtedness (other than the Loans) having a then outstanding principal amount
in excess of $15,000,000, (ii) the maturity of any such Indebtedness shall, in
whole or in part, have been accelerated, or any such Indebtedness shall, in
whole or in part, have been required to be prepaid prior to the stated maturity
thereof, in accordance with the provisions of any Contract evidencing, providing
for the creation of or concerning such Indebtedness, or (iii) (A) any event
shall have occurred and be continuing that permits (or, with the passage of time
or the giving of notice or both, would permit) any holder or holders of such
Indebtedness, any trustee or agent acting on behalf of such holder or holders or
any other Person so to accelerate such maturity or require any such prepayment
and (B) if the Contract evidencing, providing for the creation of or concerning
such Indebtedness provides for
24
<PAGE>
a cure period for such event, such event shall not be cured prior to the end of
such cure period; provided that this Section 6.01(d) shall not apply to any
--------
Indebtedness of an Affiliate (other than the Kingston Contingent Obligation),
unless such Affiliate has granted to the Person to whom such Indebtedness is
owed a Lien on Affiliate Indebtedness;
(e) The Borrower or any Guarantor shall fail, subject to the proviso to
this Section 6.01(e), to pay in accordance with its terms and when due and
payable, any of the principal of, interest on or other amount payable in respect
of any Guaranteed Obligations (other than a payment of principal of, interest
on, or other amount payable in respect of a Guaranteed Obligation which is
elsewhere in this Section specifically dealt with), and such Guaranteed
Obligation shall remain unpaid for a period of 30 days from the earlier of (i)
the date that the Borrower or such Guarantor knew or in the exercise of normal
business prudence should have known of and (ii) the date that the Borrower or
such Guarantor was given notice of, such non-payment; provided that this Section
6.01(e) shall not apply to any payment that is the subject of a good faith
contest as to the fact or the amount of liability and as to which adequate
reserves determined in accordance with Generally Accepted Accounting Principles
have been established on the books of the Person that has failed to make such
payment;
(f) (i) The Borrower or any Guarantor shall (A) commence a voluntary case
under the Federal bankruptcy laws (as now or hereafter in effect), (B) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts, (C) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case under
such bankruptcy laws or other laws, (D) apply for, or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or the like of itself
or of a substantial part of its assets, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its debts (other than
those that are the subject of bona fide disputes) as they become due, (F) make a
general assignment for the benefit of creditors or (G) take any corporate action
for the purpose of effecting any of the foregoing;
(ii) (A) A case or other proceeding shall be commenced against the Borrower
or any Guarantor seeking (1) relief under the federal bankruptcy laws of the
United States of America (as now or hereafter in effect) or under any other
laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts or (2) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower or any
Guarantor, or of all or any substantial part of the assets, domestic or foreign,
of the Borrower or any Guarantor, and such case or proceeding shall continue
undismissed and unstayed for a period of 60 days or (B) an order granting the
relief requested in such case or proceeding against the Borrower or any
Guarantor (including an order for relief under such federal bankruptcy laws of
the United States of America) shall be entered;
(g) A judgment or order shall be entered against the Borrower or any
Guarantor by any court, and (i) in the case of a judgment or order for the
payment of money, either (A) such judgment or order shall continue undischarged
and unstayed for a period of 30 days in which the aggregate amount (determined
in accordance with the proviso to this Section 6.01(g)) of all such judgments
and orders exceeds $15,000,000 or (B) enforcement proceedings shall have been
25
<PAGE>
commenced upon such judgment or order and (ii) in the case of any judgment or
order for other than the payment of money, such judgment or order could,
together with all other such judgments or orders, reasonably be expected to have
a Materially Adverse Effect on the Borrower and the Guarantors taken as a whole;
provided that clause (i) of this Section 6.01(g) shall not apply to the amount
of any judgment or order for the payment of money equal to the amount that a
financially responsible insurer has acknowledged is payable under a policy of
insurance issued by it to the Borrower or such Guarantor, as the case may be,
insuring against the claim that was the basis for such judgment or order;
(h) (i) any Termination Event shall occur with respect to any Benefit Plan
of the Borrower, any Guarantor or any of their respective ERISA Affiliates, (ii)
any Accumulated Funding Deficiency, whether or not waived, shall exist with
respect to any such Benefit Plan, (iii) any Person shall engage in any
Prohibited Transaction involving any such Benefit Plan, (iv) the Borrower, any
Guarantor or any of their respective ERISA Affiliates shall be in "default" (as
defined in ERISA Section 4219(c)(5)) with respect to payments owing to any such
Benefit Plan that is a Multiemployer Benefit Plan as a result of such Person's
complete or partial withdrawal (as described in ERISA Section 4203 or 4205)
therefrom, (v) the Borrower, any Guarantor or any of their respective ERISA
Affiliates shall fail to pay when due an amount that is payable by it to the
PBGC or to any such Benefit Plan under Title IV of ERISA, (vi) a proceeding
shall be instituted by a fiduciary of any such Benefit Plan against the
Borrower, any Guarantor or any of their respective ERISA Affiliates to enforce
ERISA Section 515 and such proceeding shall not have been dismissed within 30
days thereafter, or (vii) any other event or condition shall occur or exist with
respect to any such Benefit Plan, except that no event or condition referred to
in clauses (i) through (vii) shall constitute an Event of Default if it,
together with all other such events or conditions at the time existing, has not
subjected, and in the reasonable determination of the Agent will not subject,
the Borrower or any Guarantor to any Liability that, alone or in the aggregate
with all such Liabilities for all such Persons, exceeds $5,000,000;
(i) (a) Any Loan Party, any payee of any Subordinated Indebtedness or any
Affiliate of any Loan Party or any such payee asserts, or any Loan Party, any
payee of any Subordinated Indebtedness or any Affiliate of any Loan Party or any
such payee or any other Person institutes any proceeding that could reasonably
be expected to establish that (x) any provision of the Loan Documents is
invalid, not binding or unenforceable or (y) the Guaranty of the Borrower or any
Guarantor is limited in amount pursuant to Section 9.02 hereof;
(b) any Subordination Agreement or any guaranty under Article 9 shall,
without the prior written consent of the Banks, cease to be in full force and
effect;
(j) SOFTBANK Corp. shall at any time beneficially own, directly or
indirectly, less than 100% of the issued and outstanding shares of the
Borrower's Capital Securities minus Capital Securities of the Borrower issued by
the Borrower pursuant to, or upon exercise of any Capital Securities issued
pursuant to, a Permitted Stock Option Plan; or
(k) Masayoshi Son or the executor or administrator of the estate of
Masayoshi Son shall at any time cease to control, directly or indirectly,
SOFTBANK Corp., and for this purpose "control" shall mean the power, through the
ownership of Capital Securities, to cause the direction of the management
policies of SOFTBANK Corp.
26
<PAGE>
Section 6.02 Remedies upon Event of Default.
------------------------------
During the continuance of any Event of Default (other than one specified in
Section 6.01(f)) and in every such event, the Agent, upon notice to the
Borrower, may do either or both of the following: (a) declare, in whole or,
from time to time, in part, the principal of and interest on the Loans and the
Notes and all other amounts owing under the Borrower Loan Documents to be, and
the Loans and the Notes and all such other amounts shall thereupon and to that
extent become, due and payable and (b) terminate, in whole or, from time to
time, in part, the Commitments. Upon the occurrence of an Event of Default
specified in Section 6.01(f), automatically and without any notice to the
Borrower, (a) the principal of and interest on the Loans and the Notes and all
other amounts owing under the Borrower Loan Documents shall be due and payable
and (b) the Commitments shall terminate. Presentment, demand, protest or notice
of any kind (other than the notice provided for in the first sentence of this
Section 6.02) are hereby expressly waived.
ARTICLE 7
---------
ADDITIONAL CREDIT FACILITY PROVISIONS
-------------------------------------
Section 7.01 Mandatory Suspension and Conversion of Eurodollar Rate Loans.
------------------------------------------------------------
Each Banks' obligations to make, continue or convert into Eurodollar Rate
Loans of any Type shall be suspended, all outstanding Loans of that Type shall
be converted on the last day of their applicable Interest Periods (or, if
earlier, in the case of clause (b) below, on the last day the Bank may lawfully
continue to maintain Loans of that Type or, in the case of clause (c) below, on
the day determined by such Bank to be the last Business Day before the effective
date of the applicable restriction) into, and all pending requests for the
making or continuation of or conversion into Loans of such Type shall be deemed
requests for, Base Rate Loans, if:
(a) on or prior to the determination of an interest rate for a Eurodollar
Rate Loan of that Type for any Interest Period, such Bank determines that for
any reason appropriate quotations are not available to it (including, in the
case of the Eurodollar Rate, quotations in the London interbank market for
deposits with it) for purposes of determining the Eurodollar Rate for such
Interest Period or that such rate would not accurately reflect the cost to such
Bank of making, continuing or converting into a Eurodollar Rate Loan of such
Type for such Interest Period;
(b) at any time such Bank determines that any Regulatory Change Enacted
after the Effective Date makes it unlawful or impracticable for the Bank or the
applicable Lending Office to make, continue or convert into any Eurodollar Rate
Loan of that Type, or to comply with its obligations hereunder in respect
thereof; or
(c) such Bank determines that, by reason of any Regulatory Change Enacted
after the Effective Date, the Bank or the applicable Lending Office is
restricted, directly or indirectly, in the amount that it may hold of (i) a
category of liabilities that includes deposits by reference to which, or on the
basis of which, the interest rate applicable to Eurodollar Rate Loans of that
Type is directly or indirectly determined or (ii) the category of assets that
includes Eurodollar Rate Loans of that Type.
27
<PAGE>
Such Bank shall promptly notify the Borrower of any circumstance that would
make the provisions of this Section 7.01 applicable, but the failure to give any
such notice shall not affect such Bank's rights hereunder.
Section 7.02 Regulatory Changes.
------------------
If in the determination of any Bank (a) any Regulatory Change Enacted after
the Effective Date shall directly or indirectly (i) reduce the amount of any sum
received or receivable by such Bank with respect to any Loan or the return to be
earned by such Bank on such Loan, (ii) impose a cost on such Bank or any
Affiliate of such Bank that is attributable to the making, funding or
maintaining of, or such Bank's commitment to make, any Loan or to purchase a
participation in any Swing Loan, (iii) require such Bank or any Affiliate of
such Bank to make any payment on or calculated by reference to the gross amount
of any amount received by such Bank under any Loan Document or (iv) reduce, or
have the effect of reducing, the rate of return on any capital of such Bank or
any Affiliate of such Bank that such Bank or such Affiliate is required to
maintain on account of any Loan or such Bank's commitment to make any Loan or to
purchase a participation in any Swing Loan and (b) such reduction, increased
cost or payment shall not be fully compensated for by an adjustment in the
applicable rates of interest payable under the Loan Documents, then the Borrower
shall pay to such Bank such additional amounts as such Bank determines will,
together with any adjustment in the applicable rates of interest payable
hereunder, fully compensate for such reduction, increased cost or payment. Such
additional amounts shall be payable, in the case of those applicable to prior
periods, within 15 days after request by such Bank for such payment and, in the
case of those applicable to future periods, on the dates specified, or
determined in accordance with a method specified, by such Bank. Each Bank will
promptly notify the Borrower of any determination made by it referred to in
clauses (a) and (b) above, but the failure to give such notice shall not affect
such Bank's right to compensation.
Section 7.03 Capital Requirements.
--------------------
If, in the determination of any Bank, such Bank or any Affiliate of such
Bank is required, as a result of any Regulatory Change Enacted after the
Effective Date, to maintain capital on account of any Loan or such Bank's
commitment to make any Loan or to purchase a participation in any Swing Loan,
then, upon request by such Bank, the Borrower shall from time to time thereafter
pay to such Bank such additional amounts as such Bank determines will fully
compensate for any reduction in the rate of return on the capital that such Bank
or such Affiliate is so required to maintain on account of such Loan or
commitment suffered as a result of such capital requirement. Such additional
amounts shall be payable, in the case of those applicable to prior periods,
within 15 days after request by such Bank for such payment and, in the case of
those relating to future periods, on the dates specified, or determined in
accordance with a method specified, by such Bank.
Section 7.04 Funding Losses.
--------------
The Borrower shall pay to each Bank, upon request, such amount or amounts
as such Bank determines are necessary to compensate it for any loss, cost or
expense incurred by it as a result of (a) in the case of Eurodollar Rate Loans,
(i) any payment, prepayment or conversion of a Eurodollar Rate Loan on a date
other than the last day of an Interest Period for such Eurodollar Rate Loan or
(ii) a Eurodollar Rate Loan for any reason not being made or converted, or any
payment of principal thereof or interest thereon not being made, on the date
therefor determined in accordance with the applicable provisions of this
Agreement, and (b) in the case of Agreed Rate Loans, (i) any payment or
prepayment of an Agreed Rate Loan on a date other than the last day of an Agreed
Rate Interest Period or (ii) an Agreed Rate
28
<PAGE>
Loan for any reason not being made, or any payment of principal thereof or
interest thereon not being made, on the date required therefor determined in
accordance with the applicable provisions of this Agreement, including any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or conversion or
failure to borrow, convert, continue or prepay.
Section 7.05 Certain Determinations.
----------------------
In making the determinations contemplated by Sections 7.01, 7.02, 7.03 and
7.04, each Bank may make such estimates, assumptions, allocations and the like
that such Bank in good faith determines to be appropriate, and each Bank's
selection thereof in accordance with this Section 7.05, and the determinations
made by such Bank on the basis thereof, shall be final, binding and conclusive
upon the Borrower, except, in the case of such determinations, for manifest
errors in computation or transmission. Each Bank shall furnish to the Borrower
upon request a certificate outlining in reasonable detail the computation of any
amounts claimed by it under Sections 7.02, 7.03 and 7.04 and the assumptions
underlying such computations.
Section 7.06 Change of Lending Office.
------------------------
If an event occurs with respect to a Lending Office that obligates the
Borrower to pay any amount under Section 1.13, makes operable the provisions of
clause (b) or (c) of Section 7.01 or entitles any Bank to make a claim under
Section 1.13(a), 7.02 or 7.03, such Bank shall, if requested by the Borrower,
use reasonable efforts to designate another Lending Office or Offices the
designation of which will reduce the amount the Borrower is so obligated to pay,
eliminate such operability or reduce the amount such Bank is so entitled to
claim, provided that such designation would not, in the sole and absolute
discretion of such Bank, be disadvantageous to such Bank in any manner or
contrary to Bank policy. Each Bank may at any time and from time to time change
any Lending Office and shall give notice of any such change to the Borrower.
Except in the case of a change in Lending Offices made at the request of the
Borrower, the designation of a new Lending Office by any Bank shall not obligate
the Borrower to pay any amount to such Bank under Section 1.13, make operable
the provisions of clause (b) or (c) of Section 7.01 or entitle the Bank to make
a claim under Section 1.13(a), 7.02 or 7.03 if such obligation, the operability
of such clause or such claim results solely from such designation and not from a
Regulatory Change Enacted thereafter.
ARTICLE 8
---------
THE AGENT
---------
Section 8.01 Appointment and Powers.
----------------------
Each Bank hereby irrevocably appoints and authorizes the Agent, and the
Agent hereby agrees, to act as the agent for such Bank under the Loan Documents
with such powers as are delegated to the Agent by the terms thereof, together
with such other powers as are reasonably incidental thereto. The Agent's duties
shall be purely ministerial and it shall have no duties or responsibilities
except those expressly set forth in the Loan Documents. The Agent shall not be
required under any circumstances to take any action that, in its judgment, (a)
is contrary to any provision of the Loan Documents or Applicable Law or (b)
would expose it to any Liability or expense against which it has not been
indemnified to its satisfaction. The Agent shall not, by reason of its serving
as the Agent, be a trustee or other fiduciary for any Bank.
29
<PAGE>
Section 8.02 Limitation on Agent's Liability.
-------------------------------
Neither the Agent nor any of its directors, officers, employees or agents
shall be liable or responsible for any action taken or omitted to be taken by it
or them under or in connection with the Loan Documents, except for its or their
own gross negligence, willful misconduct or knowing violations of law. The
Agent shall not be responsible to any Bank for (a) any recitals, statements,
representations or warranties contained in the Loan Documents or in any
certificate or other document referred to or provided for in, or received by any
of the Banks under, the Loan Documents, (b) the validity, effectiveness or
enforceability of the Loan Documents or any such certificate or other document
or (c) any failure by the Loan Parties to perform any of their obligations under
the Loan Documents. The Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact so long as the Agent was not grossly negligent in selecting or
directing such agents or attorneys-in-fact. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or given by or on behalf of the proper
Person or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. As to any matters not
expressly provided for by the Loan Documents, the Agent shall in all cases be
fully protected in acting, or in refraining from acting, under the Loan
Documents in accordance with instructions signed by the Required Banks, and such
instructions of the Required Banks and any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.
Section 8.03 Defaults.
--------
The Agent shall not be deemed to have knowledge of the occurrence of a
Default (other than the non-payment to it of principal of or interest on Loans
or fees) unless the Agent has received notice from a Bank or the Borrower
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Agent has knowledge of such a non-payment or receives such
a notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Banks. In the event of any Default, the Agent shall (a) in the
case of a Default that constitutes an Event of Default, take either or both of
the actions referred to in clauses (a) and (b) of the first sentence of Section
6.02 if so directed by the Required Banks and (b) in the case of any Default,
take such other action with respect to such Default as shall be reasonably
directed by the Required Banks. Unless and until the Agent shall have received
such directions, in the event of any Default, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Banks.
Section 8.04 Rights as a Bank.
----------------
Each Person acting as the Agent that is also a Bank shall, in its capacity
as a Bank, have the same rights and powers under the Loan Documents as any other
Bank and may exercise the same as though it were not acting as the Agent, and
the term "Bank" or "Banks" shall include such Person in its individual capacity.
Each Person acting as the Agent (whether or not such Person is a Bank) and its
Affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to and generally engage in any kind of banking, trust or other
business with the Loan Parties and their Affiliates as if it were not acting as
the Agent, and such Person and its Affiliates may accept fees and other
consideration from the Loan Parties and their Affiliates for services in
connection with the Loan Documents or otherwise without having to account for
the same to the Banks.
30
<PAGE>
Section 8.05 Indemnification.
---------------
The Banks agree to indemnify the Agent (to the extent not reimbursed by the
Loan Parties under the Loan Documents), ratably on the basis of the respective
aggregate principal amounts of the Exposures of the Banks (or, if no Exposures
are at the time outstanding, ratably on the basis of their respective
Commitments), for any and all Liabilities, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the Agent
(including the costs and expenses that the Loan Parties are obligated to pay
under the Loan Documents) in any way relating to or arising out of the Loan
Documents or any other documents contemplated thereby or referred to therein or
the transactions contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Bank shall be liable
for any of the foregoing to the extent (a) they are subject to the indemnity
contemplated by the last sentence of Section 10.10(b) or (b) they arise from
gross negligence, willful misconduct or knowing violations of law by the Agent.
Section 8.06 Non-Reliance on Agent and Other Banks.
-------------------------------------
Each Bank agrees that it has made and will continue to make, independently
and without reliance on the Agent or any other Bank, and based on such documents
and information as it deems appropriate, its own credit analysis of the Loan
Parties and its own decision to enter into the Loan Documents and to take or
refrain from taking any action in connection therewith. The Agent shall not be
required to keep itself informed as to the performance or observance by the Loan
Parties of the Loan Documents or any other document referred to or provided for
therein or to inspect the properties or books of any Loan Party or any
Subsidiary thereof. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent under
the Loan Documents, the Agent shall have no obligation to provide any Bank with
any information concerning the business, status or condition of any Loan Party
or any Subsidiary thereof or the Loan Documents that may come into the
possession of the Agent or any of its Affiliates.
Section 8.07 Execution and Amendment of Loan Documents on Behalf of the
----------------------------------------------------------
Banks.
- -----
Each Bank hereby authorizes the Agent to execute and deliver, in the name
of and on behalf of such Bank, any Loan Document requiring execution by or on
behalf of such Bank.
Section 8.08 Resignation of the Agent.
------------------------
The Agent may at any time give notice of its resignation to the Banks and
the Borrower. Upon receipt of any such notice of resignation, the Required
Banks may, after consultation with the Borrower, appoint a successor Agent. If
no successor Agent shall have been so appointed by the Required Banks and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation, then the retiring Agent may, on behalf of the Banks
and after consultation with the Borrower, appoint a successor Agent. Upon the
acceptance by any Person of its appointment as a successor Agent, such Person
shall thereupon succeed to and become vested with all the rights, powers,
privileges, duties and obligations of the retiring Agent and the retiring Agent
shall be discharged from its duties and obligations as Agent under the Loan
Documents. After any retiring Agent's resignation as Agent, the provisions of
this Article 8 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
31
<PAGE>
ARTICLE 9
---------
GUARANTEES
----------
Section 9.01 Guaranty of Payment.
-------------------
The Borrower and each of the Guarantors hereby (a) guarantees to each Bank
and each holder of a Note the due and punctual payment of all of the Guaranteed
Obligations (other than those that constitute Liabilities of such Guarantor) in
accordance with their respective terms and when and as due (whether at maturity,
by reason of acceleration or otherwise), or deemed to be due pursuant to Section
9.03, and (b) agrees so to pay the same when so due, or deemed to be due, upon
demand.
Section 9.02 Limitation on Guaranty.
----------------------
It is the intention of the Borrower, each of the Guarantors and the Banks
that the obligations of the Borrower and each such Guarantor hereunder shall be
in, but not in excess of, the maximum amount permitted by Applicable Law. To
that end, but only to the extent such obligations would otherwise be void,
voidable or otherwise unenforceable, the obligations of the Borrower and each
such Guarantor hereunder shall be limited to the maximum amount that would not
make such obligations void, voidable or otherwise unenforceable. This Section
9.02 is intended solely to preserve the rights of each Bank and each holder of a
Note hereunder to the maximum extent permitted by Applicable Law, and neither
the Borrower, any Guarantor nor any other Person shall have any right under this
Section 9.02 that it would not otherwise have under Applicable Law.
Section 9.03 Continuance and Acceleration of Guaranteed Obligations upon
-----------------------------------------------------------
Certain Events.
- --------------
If:
(a) any Event of Default that this Agreement states is to result in the
automatic acceleration of any Guaranteed Obligations shall occur;
(b) any injunction, stay or the like that enjoins any acceleration, or
demand for the payment of any Guaranteed Obligations that would otherwise be
required or permitted hereunder shall become effective; or
(c) any Guaranteed Obligations shall be or be determined to be or become
discharged, disallowed, invalid, illegal, void or otherwise unenforceable
(whether by operation of any present or future law or by order of any court or
governmental agency) against the Borrower; then (i) such Guaranteed Obligations
shall, for all purposes hereof, be deemed (A) in the case of clause (c), to
continue to be outstanding and in full force and effect notwithstanding the
unenforceability thereof against the Borrower and (B) if such is not already the
case, to have thereupon become immediately due and payable and, if subject
thereto, to have commenced bearing interest at the Post-Default Rate and (ii)
such Bank or other holder of a Note to which such Guaranteed Obligations are
owing may, with respect to such Guaranteed Obligations, exercise all of the
rights and remedies under the Borrower Loan Documents that would be available to
them during an Event of Default.
Section 9.04 Recovered Payments.
------------------
The Guaranteed Obligations shall be deemed not to have been paid, and the
Borrower's and each Guarantor's obligations hereunder in respect thereof shall
continue and not be discharged, to the extent that any payment thereof by the
32
<PAGE>
Borrower or any other guarantor, or out of the proceeds of any collateral, is
recovered from or paid over by or for the account of any Bank or other holder of
a Note for any reason, including as a preference or fraudulent transfer or by
virtue of any subordination (whether present or future or contractual or
otherwise) of the Guaranteed Obligations, whether such recovery or payment over
is effected by any judgment, decree or order of any court or governmental
agency, by any plan of reorganization or by settlement or compromise by such
Bank or other holder of a Note (whether or not consented to by the Borrower, any
Guarantor or any other guarantor) of any claim for any such recovery or payment
over. The Borrower and each Guarantor hereby expressly waives the benefit of
any applicable statute of limitations and agrees that it shall be liable
hereunder with respect to any Guaranteed Obligation whenever such a recovery or
payment over thereof occurs.
Section 9.05 Evidence of Guaranteed Obligations.
----------------------------------
The records of the Agent and each Bank or other holder of a Note shall be
conclusive evidence of the Guaranteed Obligations owing to it and of all
payments in respect thereof.
Section 9.06 Binding Nature of Certain Adjudications.
---------------------------------------
The Borrower and each Guarantor shall be conclusively bound by the
adjudication in any action or proceeding, legal or otherwise, involving any
controversy arising under, in connection with, or in any way related to, any of
the Guaranteed Obligations, and by a judgment, award or decree entered therein.
Section 9.07 Nature of Guarantor's Obligations.
---------------------------------
The Borrower's and each Guarantor's obligations hereunder (a) are absolute
and unconditional, (b) are unlimited in amount except as provided in Section
9.02, (c) constitute a guaranty of payment and not a guaranty of collection, (d)
are as primary obligor and not as a surety only, (e) shall be a continuing
guaranty of all present and future Guaranteed Obligations and all promissory
notes and other documentation given in extension or renewal or substitution for
any of the Guaranteed Obligations and (f) shall be irrevocable.
Section 9.08 No Release of Guarantor.
-----------------------
THE OBLIGATIONS OF THE BORROWER AND EACH GUARANTOR UNDER THIS ARTICLE 9
SHALL NOT BE REDUCED, LIMITED OR TERMINATED, NOR SHALL THE BORROWER OR SUCH
GUARANTOR BE DISCHARGED FROM ANY THEREOF, FOR ANY REASON WHATSOEVER (other than,
subject to Section 9.04, the payment of the Guaranteed Obligations), including
(and whether or not the same shall have occurred or failed to occur once or more
than once and whether or not the Borrower or such Guarantor shall have received
notice thereof) ANY ACT OR FAILURE TO ACT OR ANY OTHER EVENT OR CIRCUMSTANCE
THAT (i) VARIES THE RISK OF THE BORROWER OR SUCH GUARANTOR HEREUNDER OR (ii) BUT
FOR THE PROVISIONS HEREOF, WOULD, AS A MATTER OF STATUTE OR RULE OF LAW OR
EQUITY, OPERATE TO REDUCE, LIMIT OR TERMINATE THE OBLIGATIONS OF THE BORROWER OR
SUCH GUARANTOR HEREUNDER OR DISCHARGE THE BORROWER OR SUCH GUARANTOR FROM ANY
THEREOF.
Section 9.09 Certain Waivers.
---------------
The Borrower and each Guarantor waives ALL DEFENSES UNDER APPLICABLE LAW
THAT WOULD, BUT FOR THIS SECTION 9.09, BE AVAILABLE TO THE BORROWER OR SUCH
GUARANTOR AS A DEFENSE AGAINST OR A REDUCTION OR LIMITATION OF ITS OBLIGATIONS
HEREUNDER.
33
<PAGE>
Section 9.10 Additional Guarantors.
---------------------
Any Wholly Owned Subsidiary may become a party hereto as a Guarantor by
executing and delivering to the Agent a Guarantor Supplement in the form of
Schedule 9.10. Such Wholly Owned Subsidiary shall thereafter be a Guarantor for
- -------------
all purposes hereof.
ARTICLE 10
----------
MISCELLANEOUS
-------------
Section 10.01 Notices and Deliveries.
----------------------
(a) Manner of Delivery.
------------------
All notices, communications and materials (including all Information)
to be given or delivered pursuant to the Borrower Loan Documents shall, except
in those cases where giving notice by telephone is expressly permitted, be given
or delivered in writing (which shall include telecopy transmissions). Notices
under Sections 1.02, 1.03(c), 1.05, 1.07 and 6.02 may be by telephone, promptly,
in the case of each notice other than one under Section 6.02, confirmed in
writing. In the event of a discrepancy between any telephonic notice and any
written confirmation thereof, such written confirmation shall be deemed the
effective notice except to the extent that the Agent or the Swing Line Bank has
acted in reliance on such telephonic notice.
(b) Addresses.
---------
All notices, communications and materials to be given or delivered
pursuant to the Borrower Loan Documents shall be given or delivered at the
following respective addresses and telecopier and telephone numbers and to the
attention of the following individuals or departments:
(i) if to the Borrower, to it at:
SOFTBANK Holdings Inc.
10 Langley Road
Suite 403
Newton Center, MA 02159
Telecopier No.: (617) 928-9301
Telephone No.: (617) 928-9300
Attention: Ronald D. Fisher
and
Ziff-Davis Inc.
One Park Avenue
New York, NY 10016
Telecopier No.: (212) 503-3585
Telephone No.: (212) 503-3762
Attention: Thomas L. Wright
34
<PAGE>
with a copy to:
ZD COMDEX and Forums, Inc.
300 First Avenue
Needham, MA 02194
Telecopier No.: (781) 449-0196
Telephone No.: (781) 449-6600
Attention: Charles D. Forman
(ii) if to the Agent, to it at:
The Bank of New York
One Wall Street
New York, NY 10286
Telecopier No.: (212) 635-8593/8595
Telephone No.: (212) 635-8628
Attention: Mr. Brendan T. Nedzi
with a copy of each Notice of Borrowing under Section 1.02(a) or
under Section 1.02(b) to:
Carolyn Surles
BNY Capital Markets, Inc.
One Wall Street, 18th Floor
New York, New York 10286
Telecopier No.: (212) 635-6365
Telephone No.: (212) 635-4695
(iii) if to any Guarantor, to it at the address for notices listed on
Schedule 10.01 or such Guarantor's Guarantor Supplement;
--------------
(iv) if to any Bank, to it at the address or telex, telecopier or
telephone number and to the attention of the individual or
department, set forth below such Bank's name under the heading
"Notice Address" on Annex A or, in the case of a Bank that
becomes a Bank pursuant to an assignment, set forth under the
heading "Notice Address" in the Notice of Assignment given to
the Borrower and the Agent with respect to such assignment;
(v) if to the Swing Line Bank, if the Swing Line Bank is at such
time (A) the Bank that is the Agent, to it at the address of the
Agent or (b) any other Bank, to it at the address of such Bank;
or at such other address or telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify
35
<PAGE>
for the purpose in a notice specifically captioned "Notice of Change of
Address," given to (w) if the party to which such information pertains is the
Borrower, the Agent, the Swing Line Bank and each Bank, (x) if the party to
which such information pertains is the Agent, the Borrower, the Swing Line Bank
and each Bank, (y) if the party to which such information pertains is a Bank,
the Borrower, the Swing Line Bank and the Agent and (z) if the party to which
such information pertains is the Swing Line Lender, the Borrower, the Agent and
each Bank.
(c) Effectiveness.
-------------
Each notice and communication and any material to be given or
delivered pursuant to the Borrower Loan Documents shall be deemed so given or
delivered (i) if sent by registered or certified mail, postage prepaid, return
receipt requested, on the third Business Day after such notice, communication or
material, addressed as above provided, is delivered to a United States post
office and a receipt therefor is issued thereby, (ii) if sent by any other means
of physical delivery, when such notice, communication or material is delivered
to the appropriate address as above provided, (iii) if sent by telecopier, when
such notice, communication or material is transmitted to the appropriate
telecopier number as above provided and is received at such number and (iv) if
given by telephone, when communicated to the individual or any member of the
department specified as the individual or department to whose attention notices,
communications and materials are to be given or delivered, or, in the case of
notice by the Agent to the Borrower under Section 6.02 given by telephone as
above provided, if any individual or any member of the department to whose
attention notices, communications and materials are to be given or delivered is
unavailable at the time, to any other officer or employee of the Borrower,
except that (x) notices of a change of address, telecopier or telephone number
or individual or department to whose attention notices, communications and
materials are to be given or delivered shall not be deemed given until received
and (y) notices, communications and materials to be given or delivered to the
Agent or any Bank pursuant to Sections 1.02, 1.03(c), 1.05, 1.07 and 1.12(b) and
Article 5 shall not be deemed given or delivered until received by the officer
of the Agent or such Bank responsible, at the time, for the administration of
the Loan Documents.
(d) Reasonable Notice.
-----------------
Any requirement under Applicable Law of reasonable notice by the Agent
or the Banks to the Borrower or a Guarantor of any event in connection with, or
in any way related to, the Loan Documents or the exercise by the Agent or the
Banks of any of their rights thereunder shall be met if notice of such event is
given to the Borrower or such Guarantor in the manner prescribed above at least
10 days before (i) the date of such event or (ii) the date after which such
event will occur.
Section 10.02 Expenses; Indemnification.
-------------------------
Whether or not any Loans are made hereunder, the Borrower shall:
(a) pay or reimburse the Agent and each Bank for all transfer,
documentary, stamp and similar taxes, and all recording and filing fees and
taxes, payable in connection with, arising out of, or in any way related to, the
execution, delivery and performance of the Loan Documents or the making of the
Loans;
(b) pay or reimburse the Agent for all costs and expenses (including
reasonable fees and disbursements of legal counsel), incurred by the Agent in
connection with, arising out of, or in any way related to (i) the negotiation,
preparation, execution and delivery of (A) the
36
<PAGE>
Loan Documents and (B) whether or not executed, any waiver, amendment or consent
thereunder or thereto, (ii) (A) the protection, preservation, exercise or
enforcement of any of rights of the Agent or the Banks under or related to the
Loan Documents or (B) the performance of any of their obligations under or
related to the Loan Documents; and
(c) pay or reimburse each Bank for all costs and expenses (including fees
and disbursements of legal counsel and other experts employed or retained by
such Bank) incurred by such Bank, in connection with, arising out of, or in any
way related to (i) the negotiation, preparation, execution and delivery of (A)
the Loan Documents and (B) whether or not executed, any waiver, amendment or
consent thereunder or thereto; and
(d) indemnify and hold each Indemnified Person harmless from and against
all losses (including judgments, penalties and fines) suffered, and pay or
reimburse each Indemnified Person for all costs and expenses (including fees and
disbursements of legal counsel and other experts employed or retained by such
Indemnified Person) incurred, by such Indemnified Person in connection with,
arising out of, or in any way related to (i) any Loan Document Related Claim
(whether asserted by such Indemnified Person or the Borrower or any other
Person), including the prosecution or defense thereof and any litigation or
proceeding with respect thereto (whether or not, in the case of any such
litigation or proceeding, such Indemnified Person is a party thereto), or (ii)
any investigation, governmental or otherwise, arising out of, related to, or in
any way connected with, the Loan Documents or the relationships established
thereunder, except that the foregoing indemnity shall not be applicable to any
loss suffered by any Indemnified Person to the extent such loss is determined by
a judgment of a court that is binding on the Borrower and such Indemnified
Person, final and not subject to review on appeal, to be the result of acts or
omissions on the part of such Indemnified Person constituting (x) willful
misconduct or (y) knowing violations of law.
Section 10.03 Amounts Payable Due upon Request for Payment.
--------------------------------------------
All amounts payable by the Borrower under Section 10.02 and under the other
provisions of the Borrower Loan Documents shall, except as otherwise expressly
provided, be immediately due upon request for the payment thereof.
Section 10.04 Remedies of the Essence.
-----------------------
The various rights and remedies of the Agent and each of the Banks under
the Borrower Loan Documents are of the essence of those agreements, and the
Agent and each of the Banks shall be entitled to obtain a decree requiring
specific performance of each such right and remedy.
Section 10.05 Rights Cumulative.
-----------------
Each of the rights and remedies of the Agent and the Banks under the Loan
Documents shall be in addition to all of its other rights and remedies under the
Loan Documents and Applicable Law, and nothing in the Loan Documents shall be
construed as limiting any such rights or remedies.
Section 10.06 Disclosures.
-----------
The Agent and the Banks shall maintain the confidentiality of non-public
information regarding the Borrower, the Guarantors and their Affiliates received
pursuant to this Agreement and shall use such information only for the purposes
of analyzing the financial condition of the Borrower and the Guarantors and
their compliance with the terms and conditions of the Loan Documents; provided,
--------
however, that nothing herein shall prevent the
- -------
37
<PAGE>
Agent or the Banks from disclosing such information (i) to its officers,
directors, employees, attorneys, and accountants who have a need to know such
information in accordance with customary banking practices and who receive such
information having been made aware of the restrictions set forth in this Section
10.06, (ii) upon the order or other process of any court or administrative
agency or regulatory authority of competent jurisdiction, (iii) pursuant to any
requirement of Applicable Law, (iv) protecting, exercising or enforcing any of
its rights under the Loan Documents or (v) in the case of an assignment
permitted under Section 10.10, to any potential assignee so long as such Person
shall have been made aware of and agreed to abide by the restrictions set forth
in this Section 10.06.
Section 10.07 Amendments; Waivers.
-------------------
Any term, covenant, agreement or condition of the Borrower Loan Documents
may be amended, and any right under the Borrower Loan Documents may be waived,
if, but only if, such amendment or waiver is in writing and is signed by the
Required Banks and, if the rights and duties of the Agent or the Swing Line Bank
are affected thereby, by the Agent or the Swing Line Bank, as the case may be,
and, in the case of an amendment, by the Borrower; provided, however, that no
amendment or waiver shall be effective, unless in writing and signed by each
Bank affected thereby, to the extent it (A) changes the amount of such Bank's
Commitment, (B) reduces the principal of or the rate of interest on such Bank's
Loans or Note or the fees payable to such Bank hereunder, (C) postpones any date
fixed for any payment of principal of or interest on such Bank's Loans or Note
or the fees payable to such Bank hereunder or (D) amends Section 1.14, this
Section 10.07 or any other provision of this Agreement requiring the consent or
other action of all of the Banks. Unless otherwise specified in such waiver, a
waiver of any right under the Borrower Loan Documents shall be effective only in
the specific instance and for the specific purpose for which given. No election
not to exercise, failure to exercise or delay in exercising any right, nor any
course of dealing or performance, shall operate as a waiver of any right of any
Bank under the Borrower Loan Documents or Applicable Law, nor shall any single
or partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right of the Agent or any Bank under the
Borrower Loan Documents or Applicable Law.
Section 10.08 Set-Off; Suspension of Payment and Performance.
----------------------------------------------
The Agent and each Bank is hereby authorized by the Borrower and each
Guarantor, at any time and from time to time, without notice, during any Event
of Default, to set off against, and to appropriate and apply to the payment of,
the Liabilities of such Person under the Loan Documents (whether owing to the
Agent or such Bank or to any other Person that is the Agent or a Bank and
whether matured or unmatured, fixed or contingent or liquidated or unliquidated)
any and all Liabilities owing by the Agent or such Bank or any of its Affiliates
to such Person (whether payable in Dollars or any other currency, whether
matured or unmatured and, in the case of Liabilities that are deposits, whether
general or special, time or demand and however evidenced and whether maintained
at a branch or office located within or without the United States).
Section 10.09 Sharing of Recoveries.
---------------------
(a) Each Bank agrees that, if, for any reason, including as a result of
(i) the exercise of any right of counterclaim, set-off, banker's lien or
similar right, (ii) its claim in any applicable bankruptcy, insolvency or
other similar law being deemed secured by a Debt owed by it to any Loan Party,
including a claim deemed secured under Section 506 of the Bankruptcy Code, or
(iii) the allocation of payments by the Agent or any Loan Party in a manner
contrary to the provisions of Section 1.14, such Bank shall receive
38
<PAGE>
payment of a proportion of the aggregate amount due and payable to it hereunder
(A) as principal of or interest on the RC Loans or (B) fees that is greater than
the proportion received by any other Bank in respect of the respective
aggregates of such amounts due and payable to such other Bank hereunder, then
the Bank receiving such proportionately greater payment shall purchase
participations (which it shall be deemed to have done simultaneously upon the
receipt of such payment) in the rights of the other Banks hereunder in such RC
Loans or fees, as the case may be, so that all such recoveries with respect to
such respective amounts due and payable hereunder (net of costs of collection)
shall be pro rata; provided, that if all or part of such proportionately greater
payment received by the purchasing Bank is thereafter recovered by or on behalf
of any Loan Party from such Bank, such purchases shall be rescinded and the
purchase prices paid for such participations shall be returned to such Bank to
the extent of such recovery, but without interest (unless the purchasing Bank is
required to pay interest on the amount recovered to the Person recovering such
amount, in which case the selling Bank shall be required to pay interest at a
like rate). The Borrower expressly consents to the foregoing arrangements and
agrees that any holder of a participation in any rights hereunder so purchased
or acquired pursuant to this Section 10.09(a) shall, with respect to such
participation be entitled to all of the rights of a Bank under Sections 7.02,
10.02 and 10.08 (subject to any condition imposed on a Bank hereunder with
respect thereto) and may exercise any and all rights of set-off with respect to
such participation as fully as though the Borrower were directly indebted to the
holder of such participation for Loans in the amount of such participation.
(b) Each Bank agrees to exercise any right of counterclaim, set-off,
banker's lien or similar right that it may have in respect of any Loan Party in
a manner so as to apportion the amount subject to such exercise, on a pro rata
basis, first, between (i) obligations of such Loan Party for amounts subject
to the sharing provisions of Section 10.09(a) and (ii) other Liabilities of such
Loan Party and, second, with respect to amounts allocated to obligations of such
Loan Party referred to in clause (i), between, first, to RC Loans and second,
participations in Swing Loans.
Section 10.10 Assignments and Participations.
------------------------------
(a) Assignments.
-----------
(i) Neither the Borrower nor any Guarantor may assign any of its rights or
obligations under the Borrower Loan Documents without the prior written consent
of each Bank, and no assignment of any such obligation shall release the
Borrower or such Guarantor therefrom unless each Bank, as applicable, shall have
consented to such release in a writing specifically referring to the obligation
from which the Borrower or such Guarantor is to be released.
(ii) Each Bank may from time to time assign any or all of its rights and
obligations under the Borrower Loan Documents to one or more Persons; provided
--------
that, except in the case of the grant of a security interest to a Federal
Reserve Bank (which may be made without condition or restriction), no such
assignment shall be effective unless (A) the assignment is consented to by the
Agent and, unless a Bankruptcy Default with respect to the Borrower or a
Guarantor exists, the Borrower and the Guarantors, (B) the assignment shall
involve the assignment of not less than $5,000,000 of the assignor Bank's
Commitment, (C) a Notice of Assignment with respect to the assignment, duly
executed by the assignor and the assignee, shall have been given to the Borrower
and the Agent and (D) except in the case of an assignment by the Bank that is
the Agent, the Agent shall have been paid an assignment fee of $3,500. Upon any
effective assignment, the assignee shall have all of the rights and shall be
obligated to
39
<PAGE>
perform all of the obligations of a Bank; provided, however, that no assignee
-------- -------
shall be entitled to any amounts that would otherwise be payable to it with
respect to its assignment under Section 7.02 unless (x) such amounts are payable
in respect of a Regulatory Change Enacted after the date the applicable
assignment agreement was executed or (y) such amounts would have been payable to
the Bank that made such assignment if such assignment had not been made. In the
event of any effective assignment by a Bank, the Borrower shall, against (except
in the case of a partial assignment) receipt of the existing Note of the
assignor Bank, issue a new Note to the assignee Bank.
(b) Participation.
-------------
Each Bank may from time to time sell or otherwise grant participations
in any or all of its rights and obligations under the Borrower Loan Documents
without the consent of the Borrower, any Guarantor, the Agent or any other Bank.
In the event of any such grant by a Bank of a participation, such Bank's
obligations under the Loan Documents to the other parties thereto shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, and the Borrower, the Guarantors, the Agent and the other Banks may
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations thereunder. A Bank may not grant to any holder of
a participation the right to require such Bank to take or omit to take any
action under the Loan Documents, except that a Bank may grant to any such holder
the right to require such holder's consent to (i) reduce the principal of or
the rate of interest on such Bank's Loans or the fees payable to such Bank
hereunder, (ii) postpone any date fixed for any payment of principal or of
interest on such Bank's Loans or the fees payable to such Bank hereunder, (iii)
permit any Loan Party to assign any of its obligations under the Loan Documents
to any other Person or (iv) release any Guarantor from its obligations under
Article 9. Each holder of a participation in any rights under the Borrower Loan
Documents, if and to the extent the applicable participation agreement so
provides, shall, with respect to such participation, be entitled to all of the
rights of a Bank as fully as though it were a Bank under Sections 1.13, 7.02,
7.03, 10.02(d) and 10.07 (subject to any conditions imposed on a Bank hereunder
with respect thereto) and may exercise any and all rights of set-off with
respect to such participation as fully as though the Borrower were directly
indebted to the holder of such participation for Loans in the amount of such
participation; provided, however, that no holder of a participation shall be
entitled to any amounts that would otherwise be payable to it with respect to
its participation under Section 1.13 or 7.02 unless (x) such amounts are
payable in respect of a Regulatory Change Enacted after the date the applicable
participation agreement was executed or (y) such amounts would have been
payable to the Bank that granted such participation if such participation had
not been granted. Each Bank selling or granting a participation shall indemnify
the Borrower and the Agent for any Taxes and Liabilities that they may sustain
as a result of such Bank's failure to withhold and pay any Taxes applicable to
payments by such Bank to its participant in respect of such participation.
Section 10.11 Governing Law.
-------------
The rights and duties of the Borrower, the Guarantors, the Agent and the
Banks under this Agreement and the Notes (including matters relating to the
Maximum Permissible Rate) shall, pursuant to New York General Obligations Law
Section 5-1401, be governed by the law of the State of New York.
Section 10.12 Judicial Proceedings; Waiver of Jury Trial.
------------------------------------------
Any judicial proceeding brought against the Borrower or any Guarantor with
respect to any Loan Document Related Claim may be brought in any court of
competent jurisdiction in the City of New York, and, by
40
<PAGE>
execution and delivery of this Agreement, the Borrower and each Guarantor (a)
accepts, generally and unconditionally, the nonexclusive jurisdiction of such
courts and any related appellate court and irrevocably agrees to be bound by any
judgment rendered thereby in connection with any Loan Document Related Claim and
(b) irrevocably waives any objection it may now or hereafter have as to the
venue of any such proceeding brought in such a court or that such a court is an
inconvenient forum. The Borrower and each Guarantor hereby waives personal
service of process and consents that service of process upon it may be made by
certified or registered mail, return receipt requested, at its address specified
or determined in accordance with the provisions of Section 10.01(b), and service
so made shall be deemed completed on the third Business Day after such service
is deposited in the mail. Nothing herein shall affect the right of the Agent,
any Bank or any other Indemnified Person to serve process in any other manner
permitted by law or shall limit the right of the Agent, any Bank or any other
Indemnified Person to bring proceedings against the Borrower or any Guarantor in
the courts of any other jurisdiction. Any judicial proceeding by the Borrower or
any Guarantor against the Agent involving any Loan Document Related Claim shall
be brought only in a court located in the City and State of New York and in the
case of a Bank, the jurisdiction in which the Bank's principal United States
office is located. THE BORROWER, THE AGENT, THE SWING LINE BANK, EACH BANK AND
EACH GUARANTOR HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
ANY OF THEM ARE PARTY INVOLVING ANY LOAN DOCUMENT RELATED CLAIM.
Section 10.13 LIMITATION OF LIABILITY.
-----------------------
NEITHER THE AGENT NOR THE SWING LINE BANK NOR ANY OTHER INDEMNIFIED PERSON
SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER AND EACH GUARANTOR
HEREBY WAIVE, RELEASE AND AGREE NOT TO SUE FOR, ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL, AND, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, PUNITIVE,
DAMAGES SUFFERED BY THE BORROWER OR SUCH GUARANTOR IN CONNECTION WITH ANY LOAN
DOCUMENT RELATED CLAIM.
Section 10.14 Reference Banks.
---------------
The Reference Bank shall furnish to the Agent timely information for the
purpose of determining the Eurodollar Rate. If the Reference Bank shall notify
the Agent that thenceforth it shall not be able to furnish such information in a
timely manner or shall assign all of its Loans or Commitment to a Person that is
not an Affiliate of the Reference Bank, the Agent shall, with the consent of the
Required Banks and after consultation with the Borrower, appoint another Bank as
a Reference Bank in place of the Reference Bank.
Section 10.15 Severability of Provisions.
--------------------------
Any provision of the Borrower Loan Documents that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions thereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent permitted by Applicable Law,
the Borrower and each Guarantor hereby waive any provision of Applicable Law
that renders any provision of the Borrower Loan Documents prohibited or
unenforceable in any respect.
Section 10.16 Counterparts.
------------
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto were
upon the same instrument.
41
<PAGE>
Section 10.17 Survival of Obligations.
-----------------------
Except as otherwise expressly provided therein, the rights and obligations
of the Borrower, the Guarantors, the Agent and the other Indemnified Persons
under the Borrower Loan Documents shall survive the Repayment Date; provided
--------
that, the obligations of the Guarantors under Article 9 shall be subject to the
proviso to the definition of Guaranteed Obligations.
Section 10.18 Entire Agreement.
----------------
This Agreement and the Notes embody the entire agreement between the
Borrower, the Guarantors, the Agent and the Banks relating to the subject matter
hereof and supersede all prior agreements, representations and understandings,
if any, relating to the subject matter hereof.
Section 10.19 Successors and Assigns.
----------------------
All of the provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
ARTICLE 11
----------
INTERPRETATION
--------------
Section 11.01 Defined Terms.
-------------
For the purposes of this Agreement:
"Accumulated Funding Deficiency" has the meaning ascribed to that term in
------------------------------
Section 302 of ERISA.
"Adjusted Eurodollar Rate" means, for any Interest Period, a rate per annum
------------------------
(rounded upward, if necessary, to the next higher 1/16 of 1%) equal to the rate
obtained by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to 1 minus the Reserve Requirement in effect from time to time
during such Interest Period.
"Affiliate" means, with respect to a Person, any other Person that,
---------
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person; unless
otherwise specified, "Affiliate" means an Affiliate of the Borrower. For
purposes of this definition, the term "control" (including the correlative
meanings of the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of such
Person, whether through the ownership of securities or partnership or other
ownership interests or by contract or otherwise.
"Affiliate Indebtedness" means Indebtedness payable by the Borrower or any
----------------------
Guarantor to any Affiliate (other than the Borrower or a Guarantor).
"Agent" means The Bank of New York, as agent for the Banks under the Loan
-----
Documents, and any successor Agent appointed pursuant to Section 8.08.
"Agent's Office" means the address of the Agent specified in or determined
--------------
in accordance with the provisions of Section 10.01(b).
42
<PAGE>
"Agreed Rate" means, for any day and with respect to a Swing Loan, a rate
-----------
per annum equal to the rate agreed to by the Borrower and the Swing Line Bank as
the rate of interest applicable to such Swing Loan.
"Agreed Rate Interest Period" has the meaning ascribed to that term in
---------------------------
Section 1.02(b)(i).
"Agreed Rate Loan" means a Swing Loan the interest on which is, or is to
----------------
be, as the context may require, computed on the basis of the applicable Agreed
Rate.
"Agreement" means this Agreement, including all schedules, annexes and
---------
exhibits hereto.
"Applicable Law" means, anything in Section 10.11 to the contrary
--------------
notwithstanding, (a) all applicable common law and principles of equity and (b)
all applicable provisions of all (i) constitutions, statutes, rules, regulations
and orders of governmental bodies, (ii) Governmental Approvals and (iii) orders,
decisions, judgments and decrees of all courts (whether at law or in equity or
admiralty) and arbitrators.
"Bank" means (a) any Person listed on the signature pages hereof following
----
the Agent and (b) any Person that has been assigned any or all of the rights or
obligations of a Bank pursuant to Section 10.10(a).
"Bank Tax" means any net income, franchise or similar Tax imposed upon any
--------
Bank by any jurisdiction (or political subdivision thereof) in which such Bank
or any of its Lending Offices is located or where such Bank is otherwise subject
to tax other than as a result of the transactions contemplated by this
Agreement, but in no event shall it mean any withholding tax.
"Bankruptcy Default" means a Default which is such by virtue of Section
------------------
6.01(f).
"Base Rate" means, for any day, a rate per annum equal to the higher of (a)
---------
the Prime Rate in effect on such day and (b) the sum of the Federal Funds Rate
in effect on such day plus 1/2%.
"Base Rate Loan" means a Loan the interest on which is, or is to be, as the
--------------
context may require, computed on the basis of the Base Rate.
"Base Rate Margin" means with respect to Base Rate Loans (a) outstanding on
----------------
or before June 15, 1998, 0.000% and (b) outstanding thereafter, 0.250%.
"Benefit Plan" of any Person, means, at any time, any employee benefit plan
------------
(including a Multiemployer Benefit Plan), the funding requirements of which
(under Section 302 of ERISA or Section 412 of the Code) are, or at any time
within six years immediately preceding the time in question were, in whole or in
part, the responsibility of such Person.
"Borrower" means SOFTBANK Holdings Inc., a Delaware corporation.
--------
"Borrower Group EBITDA" means, for any period, the combined EBITDA of the
---------------------
Borrower and the Guarantors for such period (taken as a cumulative whole);
provided that there
- --------
43
<PAGE>
shall be excluded: (a) the earnings of any Subsidiary of the Borrower that is
not a Guarantor and of any Subsidiary of any Guarantor that is not a Guarantor
that would, in accordance with Generally Accepted Accounting Principles, be
consolidated in the earnings of the Borrower or any Guarantor and (b) any such
earnings of a Guarantor for any period during which it was not a Guarantor.
"Borrower Group Payments" means, as of any date of determination, all
-----------------------
payments to any Person other than SOFTBANK Corp., or MAC Inc. by the Borrower or
the Guarantors during the period from the Restated Agreement Date to such date,
or that the Borrower or any Guarantor becomes, during such period, obligated
(including by way of Guaranty) to make, in respect of (a) Restricted Payments to
any such Person, (b) Investments in any such Person, (c) Business Units acquired
from any such Person and (d) Prepayments of Subordinated Debt of the Borrower or
any Guarantor owed to any such Person.
"Borrower Loan Documents" means the Loan Documents to which the Borrower is
-----------------------
a party.
"Business Day" means any day other than a Saturday, Sunday or other day on
------------
which banks in New York City are authorized to close.
"Business Unit" means the assets constituting the business or a division or
-------------
operating unit thereof of any Person.
"Capital Security" means, with respect to any Person, (a) any share of
----------------
capital stock or other ownership interest of such Person or (b) any security
convertible into, or any option, warrant or other right to acquire, any share of
capital stock or other ownership interest of such Person.
"Code" means the Internal Revenue Code of 1986.
----
"Commitment" of any Bank means (a) the amount set forth opposite such
-----------
Bank's name under the heading "Commitment" on Annex A or, in the case of a Bank
that becomes a Bank pursuant to an assignment, the amount of the assignor's
Commitment assigned to such Bank, in either case, as the same may be reduced
from time to time pursuant to Section 1.07 or increased or reduced from time to
time pursuant to assignments in accordance with Section 10.10 (a), or (b) as the
context may require, the obligation of such Bank to make Loans in an aggregate
unpaid principal amount not exceeding such amount.
"Consolidated Subsidiary" means, with respect to any Person at any time,
-----------------------
any Subsidiary or other Person the accounts of which would be consolidated with
those of such first Person in its consolidated financial statements as of such
time; unless otherwise specified, "Consolidated Subsidiary" means a Consolidated
Subsidiary of the Borrower.
"Contract" means (a) any agreement (whether bi-lateral or uni-lateral or
--------
executory or non-executory and whether a Person entitled to rights thereunder is
so entitled directly or as a third-party beneficiary), including an indenture,
lease or license, (b) any deed or other instrument of conveyance, (c) any
certificate of incorporation or charter and (d) any by-law.
44
<PAGE>
"Debt" means any Liability that constitutes "debt" or "Debt" under section
----
101(11) of the Bankruptcy Code or under the Uniform Fraudulent Conveyance Act,
the Uniform Fraudulent Transfer Act or any analogous Applicable Law.
"Default" means any condition or event that constitutes an Event of Default
-------
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United States of
------- -
America.
"Domestic Lending Office" of any Bank means (a) the branch or office of
-----------------------
such Bank set forth below such Bank's name under the heading "Domestic Lending
Office" on Annex A or, in the case of a Bank that becomes a Bank pursuant to an
assignment, the branch or office of such Bank set forth under the heading
"Domestic Lending Office" in the Notice of Assignment given to the Borrower and
the Agent with respect to such assignment or (b) such other branch or office of
such Bank designated by such Bank from time to time as the branch or office at
which its Base Rate Loans are to be made or maintained.
"EBITDA" means, for any Borrower or a Guarantor and for any period, the sum
------
of:
(a) Net Income of such Person for such period; plus
----
(b) the sum of the following items (to the extent deducted in the
computation of such Net Income):
(i) depreciation expense;
(ii) amortization expense;
(iii) interest expense and commitment fees paid or payable for such
period with respect to Indebtedness of such Person (other than
InterCompany Indebtedness), including imputed interest on capital
leases and fees and other amounts paid or payable for such period to
any Person under interest rate or currency swap or similar
transactions;
(iv) income tax expense; and
(v) other non-cash items.
EBITDA will be adjusted to (A) exclude the EBITDA attributable to any asset or
business that was disposed of (either directly or as part of an exchange) by the
Borrower or any Guarantor and (B) include the EBITDA attributable to any asset
or business that was acquired (either directly or as part of an exchange) by the
Borrower or any Guarantor, in each case during the period of calculation (as if
such asset or business had not been owned, or had been owned (as applicable), by
the Borrower or any Guarantor during such period).
"Effective Date" means March 27, 1996, being the date that this Agreement
--------------
(prior to any amendment and restatement hereof) originally became effective.
45
<PAGE>
"Enacted", as applied to a Regulatory Change, means the date such
-------
Regulatory Change first becomes effective or is implemented or first required or
expected to be complied with, whether the same is (a) the result of an enactment
by a government or any agency or political subdivision thereof, a determination
of a court or regulatory authority, or otherwise or (b) enacted, adopted, issued
or proposed before or after the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of 1974.
-----
"ERISA Affiliate" means, with respect to any Person, any other Person,
---------------
including a Subsidiary or other Affiliate of such first Person, that is a member
of any group of organizations within the meaning of Code Sections 414(b), (c),
(m) or (o) of which such first Person is a member.
"Eurodollar Business Day" means any Business Day on which dealings in
-----------------------
Dollar deposits are carried on in the London interbank market and on which
commercial banks are open for domestic and international business (including
dealings in Dollar deposits) in London, England.
"Eurodollar Lending Office" of any Bank means (a) the branch or office of
-------------------------
such Bank set forth below such Bank's name under the heading "Eurodollar Lending
Office" on Annex A or, in the case of a Bank that becomes a Bank pursuant to an
assignment, the branch or office of such Bank set forth under the heading
"Eurodollar Lending Office" in the Notice of Assignment given to the Borrower
and the Agent with respect to such assignment or (b) such other branch or office
of such Bank designated by such Bank from time to time as the branch or office
at which its Eurodollar Rate Loans are to be made or maintained.
"Eurodollar Rate" means, for any Interest Period, the rate per annum
---------------
determined by the Agent to be the rate at which the Reference Bank offered or
would have offered to place with first-class banks in the London interbank
market deposits in Dollars in amounts comparable to the Eurodollar Rate Loan of
the Reference Bank to which such Interest Period applies, for a period equal to
such Interest Period, at 11:00 a.m. (London time) on the second Eurodollar
Business Day before the first day of such Interest Period.
"Eurodollar Rate Loan" means a RC Loan the interest on which is, or is to
--------------------
be, as the context may require, computed on the basis of the Adjusted Eurodollar
Rate.
"Eurodollar Rate Margin" means, with respect to Eurodollar Rate Loans (a)
----------------------
outstanding on or before May 14, 1998, 0.625%, (b) outstanding on or after May
15, 1998 and on or before June 15, 1998, 0.750% and (c) outstanding thereafter,
1.500%.
"Event of Default" means any of the events specified in Section 6.01.
----------------
"Existing Benefit Plan" means any Benefit Plan listed on Schedule 4.12.
--------------------- -------------
"Existing Guaranty" means (a) any Guaranty outstanding on the Restated
-----------------
Agreement Date, to the extent set forth on Schedule 4.06, and (b) any Guaranty
-------------
that constitutes a renewal, extension or replacement of an Existing Guaranty,
but only if (i) at the time such Guaranty is entered into and immediately after
giving effect thereto, no Default would exist, (ii) such Guaranty is binding
only on the obligor or obligors under the Guaranty so renewed, extended or
46
<PAGE>
replaced, (iii) the principal amount of the obligations Guaranteed by such
Guaranty does not exceed the principal amount of the obligations Guaranteed by
the Guaranty so renewed, extended or replaced at the time of such renewal,
extension or replacement and (iv) the obligations Guaranteed by such Guaranty
bear interest at a rate per annum not exceeding the rate borne by the
obligations Guaranteed by the Guaranty so renewed, extended or replaced except
for any increase that is commercially reasonable at the time of such increase.
"Existing Indebtedness" means, (a) any Indebtedness listed on Schedule
--------------------- --------
4.05, (b) in the case of any Guarantor that became a Guarantor after the
Restated Agreement Date, any Indebtedness of such Guarantor outstanding at the
time such Guarantor became a Guarantor, but only if such Indebtedness was not
incurred in contemplation thereof, and (c) any Indebtedness constituting a
renewal, extension or refunding of any Existing Indebtedness, but only if (i) at
the time such Indebtedness is incurred and immediately after giving effect
thereto, no Default would exist, (ii) the principal amount of such Indebtedness
does not exceed the principal amount of the Indebtedness so renewed, extended or
refunded at the time of such renewal, extension or refunding, (iii) if the
Indebtedness so renewed, extended or refunded was Subordinated Indebtedness,
such Indebtedness constitutes Subordinated Indebtedness and (iv) such
Indebtedness bears interest at a rate per annum not exceeding the rate borne by
the Indebtedness so renewed, extended or refunded except for any increase that
is commercially reasonable at the time such Indebtedness is incurred.
"Existing Investments" means any Investment listed on Schedule 4.11.
-------------------- -------------
"Exposure" means, with respect to any Bank at any time, an amount equal to
--------
the sum of (a) the aggregate unpaid principal amount at such time of the RC
Loans of such Bank, plus (b) such Bank's Pro Rata Share of the aggregate unpaid
principal amount at such time of the Swing Loans.
"Federal Funds Rate" means, for any day, the weighted average of the rates
------------------
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York or, if such rate is not so published for any day that
is a Business Day, the average of quotations for such day on such transactions
received by The Bank of New York from three Federal funds brokers of recognized
standing selected by such bank.
"Forums L.P." means SOFTBANK Forums L.P., a Delaware limited partnership.
-----------
"Funded Current Liability Percentage" has the meaning ascribed to that term
-----------------------------------
in Code Section 401(a)(29).
"Generally Accepted Accounting Principles" means generally accepted
----------------------------------------
accounting principles as in effect in the United States of America on the
Effective Date.
"Governmental Approval" means any authorization, consent, approval, license
---------------------
or exemption of, registration or filing with, or report or notice to, any
governmental unit.
47
<PAGE>
"Guaranteed Obligations" means all Liabilities of the Borrower and each
----------------------
Guarantor for the payment of money owing to, or in favor or for the benefit of,
or purporting to be owing to, or in favor or for the benefit of, the Agent, the
Swing Line Bank or any other Bank, including those under the Loan Documents, any
letter of credit issued for the account of the Borrower or a Guarantor, any
foreign exchange contract (whether the same is for future or spot delivery or a
hedge transaction), hedge transactions (including interest rate swaps and
collars and the like), derivative obligations (including commodities swaps,
commodities options, equity or equity index swaps and the like), and overdrafts
and other extensions of credit under cash management arrangements, checking
accounts and the like, in each case (i) WHETHER NOW EXISTING OR HEREAFTER
ARISING AND (ii) WHETHER OR NOT AN ALLOWABLE CLAIM AGAINST THE BORROWER OR SUCH
GUARANTOR UNDER THE BANKRUPTCY CODE OR OTHERWISE ENFORCEABLE AGAINST THE
BORROWER OR SUCH GUARANTOR, AND INCLUDING, IN ANY EVENT, INTEREST AND OTHER
LIABILITIES ACCRUING OR ARISING AFTER THE FILING BY OR AGAINST THE BORROWER OR
SUCH GUARANTOR OF A PETITION UNDER THE BANKRUPTCY CODE OR THAT WOULD HAVE SO
ACCRUED OR ARISEN BUT FOR THE FILING OF SUCH A PETITION; provided that, in the
--------
case of any such Liability arising after the Repayment Date, such Liability is a
Liability of the Borrower under this Agreement or such Liability arose under, in
connection with or is related to another Contract or other arrangement
(including the letters of credit, foreign exchange contracts, hedging
transactions, derivative obligations, cash management arrangements and checking
accounts referred to above) in effect on or before the Repayment Date and, in
the case of any such Liability arising under, in connection with or related to a
Contract or other arrangement in effect on the Repayment Date, such Liability
arose, or relates to facts existing, on or before the date such Contract or
other arrangement is terminated.
"Guarantor" shall mean each Person listed on Schedule 9.01 and each Person
--------- -------------
executing and delivering a Guarantor Supplement.
"Guarantor Supplement" shall mean a supplement hereto in the form of
--------------------
Schedule 9.10.
- -------------
"Guaranty" of any Person means any obligation, contingent or otherwise, of
--------
such Person (a) to pay any Liability of any other Person or to otherwise
protect, or having the practical effect of protecting, the holder of any such
Liability against loss (whether such obligation arises by virtue of such Person
being a partner of a partnership or participant in a joint venture or by
agreement to pay, to keep well, to purchase assets, goods, securities or
services or to take or pay, or otherwise) or (b) incurred in connection with the
issuance by a third Person of a Guaranty of any Liability of any other Person
(whether such obligation arises by agreement to reimburse or indemnify such
third Person or otherwise). The word "Guarantee" when used as a verb has the
---------
correlative meaning.
"Indebtedness" of any Person means (in each case, whether such obligation
------------
is with full or limited recourse), without duplication, (a) any obligation of
such Person for borrowed money, (b) any obligation of such Person evidenced by a
bond, debenture, note or other similar instrument, (c) any obligation of such
Person to pay the deferred purchase price of property or services, except a
trade account payable that arises in the ordinary course of business but only if
and so long as the same is payable on customary trade terms, (d) any obligation
of such Person as lessee
48
<PAGE>
under a capital lease, (e) any Mandatorily Redeemable Stock of such Person owned
by any Person other than such Person or an Indebtedness-Free Subsidiary of such
Person (the amount of such Mandatorily Redeemable Stock to be determined for
this purpose as the higher of the liquidation preference of and the amount
payable upon redemption of such Mandatorily Redeemable Stock), (f) any
obligation of such Person to purchase securities or other property that arises
out of or in connection with the sale of the same or substantially similar
securities or property, (g) any non-contingent obligation of such Person to
reimburse any other Person in respect of amounts paid under a letter of credit
or other Guaranty issued by such other Person to the extent that such
reimbursement obligation remains outstanding after it becomes non-contingent,
(h) any amount that is due and payable under an interest rate or currency swap
or similar obligation, including any amount required to be paid upon the early
termination or other unwinding of any such obligation but excluding any
regularly scheduled interim payments thereunder except to the extent that any
such interim payment is overdue beyond any applicable grace period, except that
if any agreement relating to such obligation provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount thereof, (i) any
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) a Lien on any
asset of such Person and (j) any Indebtedness of others Guaranteed by such
Person.
"Indebtedness-Free Subsidiary" means a Subsidiary (a) all of the Capital
----------------------------
Securities, other ownership interests and rights to acquire ownership interests
of which are owned or controlled by the Borrower, by one or more other
Indebtedness-Free Subsidiaries or by the Borrower and one or more other
Indebtedness-Free Subsidiaries and (b) that has no Indebtedness other than the
Loans and Indebtedness owing to the Borrower or another Indebtedness-Free
Subsidiary.
"Indemnified Person" means (a) any Person that is, or at any time was, the
------------------
Agent, a Bank, the Swing Line Bank, an Affiliate of any such Person or a
director, officer, employee or agent of any such Person and (b) BNY Capital
Markets, Inc. or a director, officer, employee or agent thereof.
"Information" means data, certificates, reports, statements (including
-----------
financial statements), opinions of counsel, documents and other information.
"Intellectual Property" means (a) (i) patents and patent rights, (ii)
---------------------
trademarks, trademark rights, trade names, trade name rights, corporate names,
business names, trade styles, service marks, logos and general intangibles of
like nature and (iii) copyrights, in each case whether registered, unregistered
or under pending registration and, in the case of any such that are registered
or under pending registration, whether registered or under pending registration
under the laws of the United States or any other country, (b) reissues,
continuations, continuations-in-part and extensions of any Intellectual Property
referred to in clause (a), and (c) rights relating to any Intellectual Property
referred to in clause (a) or (b), including rights under applications (whether
pending under the laws of the United States or any other country) or licenses
relating thereto.
49
<PAGE>
"InterCompany Indebtedness" means Indebtedness payable by the Borrower or
-------------------------
any Guarantor that is payable to the Borrower or any Guarantor.
"Interest Payment Date" means the last day of each calendar quarter and the
---------------------
Termination Date.
"Interest Period" means a period commencing, in the case of the first
---------------
Interest Period applicable to a Eurodollar Rate Loan, on the date of the making
of, or conversion into, such Loan, and, in the case of each subsequent,
successive Interest Period applicable thereto, on the last day of the
immediately preceding Interest Period, and ending in the case of Eurodollar Rate
Loans, depending on the Type of Loan, on the same day in the first, second,
third or sixth calendar month thereafter, except that (a) any Interest Period
that would otherwise end on a day that is not a Eurodollar Business Day shall be
extended to the next succeeding Eurodollar Business Day unless such Eurodollar
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Eurodollar Business Day and (b) any Interest
Period that begins on the last Eurodollar Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar
month in which such Interest Period ends) shall end on the last Eurodollar
Business Day of a calendar month.
"Investment" of any Person means (a) any Capital Security, evidence of
----------
Indebtedness or other security or instrument issued by any other Person, (b) any
loan, advance or extension of credit to (including Guaranties of Liabilities
of), or any contribution to the capital of, any other Person and (c) any other
investment in any other Person. An Investment shall be deemed to be
"outstanding", except to the extent that it has been paid or otherwise satisfied
in cash or the Person making such Investment has received cash in consideration
for the sale thereof, notwithstanding the fact that such Investment may
otherwise have been forgiven, released, canceled or otherwise nullified.
"Kingston Contingent Obligation" means the Contingent Promissory Note made
------------------------------
by SOFTBANK Kingston, Inc. to the order of Kingston Technology Corporation,
--------
dated as of October 1, 1997 in the amount of $450,000,000.
"Kingston Guarantee" means the guarantee of the Borrower pursuant to the
------------------
Guarantee dated as of October 1, 1997, of the Kingston Contingent Obligation as
in effect on the Restated Agreement Date, after giving effect to all amendments
and waivers (a) that become effective after the Restated Agreement Date and (b)
to which Section 4.15(b) is not applicable.
"Lending Office" of any Bank means the Domestic Lending Office or the
--------------
Eurodollar Lending Office of such Bank.
"Liability" of any Person means (in each case, whether with full or limited
---------
recourse) any indebtedness, liability, obligation, covenant or duty of or
binding upon, or any term or condition to be observed by or binding upon, such
Person or any of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, whether arising under Contract, Applicable Law, or
otherwise, whether now existing or hereafter arising, and whether for the
payment of money or the performance or non-performance of any act.
50
<PAGE>
"Lien" means, with respect to any property or asset (or any income or
----
profits therefrom) of any Person (in each case whether the same is consensual or
nonconsensual or arises by Contract, operation of law, legal process or
otherwise) (a) any mortgage, lien, pledge, attachment, levy or other security
interest of any kind thereupon or in respect thereof or (b) any other
arrangement, express or implied, under which the same is subordinated,
transferred, sequestered or otherwise identified so as to subject the same to,
or make the same available for, the payment or performance of any Liability in
priority to the payment of the ordinary, unsecured Liabilities of such Person.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset that it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means any RC Loan or Swing Loan.
----
"Loan Document Related Claim" means any claim or dispute (whether arising
---------------------------
under Applicable Law, including any "environmental" or similar law, under
Contract or otherwise and, in the case of any proceeding relating to any such
claim or dispute, whether civil, criminal, administrative or otherwise) in any
way arising out of, related to, or connected with, the Loan Documents, the
relationships established thereunder or any actions or conduct thereunder or
with respect thereto, whether such claim or dispute arises or is asserted before
or after the Effective Date or before or after the Repayment Date.
"Loan Document Representation and Warranty" means any "Representation and
-----------------------------------------
Warranty" as defined in any Loan Document and any other representation or
warranty made or deemed made under any Loan Document.
"Loan Documents" means this Agreement, the Notes and each Subordination
--------------
Agreement.
"Loan Party" means any Person (other than the Agent or a Bank) that is a
----------
party to a Loan Document.
"MAC Inc." means MAC Inc., a Japanese corporation.
--------
"MAC Inc. Payments" means, as of any date of determination, all payments to
-----------------
MAC Inc. either made by the Borrower or the Guarantors during the period from
the Restated Agreement Date to such date, or that the Borrower or any Guarantor
becomes, during such period, obligated to make, in respect of (a) Restricted
Payments to MAC Inc., (b) Investments in MAC Inc. (other than pursuant to the
terms of the Management Agreement), (c) Business Units acquired from MAC Inc.
and (d) Prepayments of Subordinated Debt of the Borrower or any Guarantor owed
to MAC Inc.
"Management Agreement" means that certain Management Agreement (a) among
--------------------
MAC Inc., MAC Holdings (Europe) Ltd. ("MAC Europe") and Ziff-Davis Inc.
(formerly known as Ziff-Davis Publishing Company) providing for, among other
things, the funding of certain operational expenses relating to the assets
transferred to MAC Inc. and MAC Europe pursuant to the Asset Purchase Agreement
dated as of November 8, 1995 and referred to therein, (b) a true and correct
copy of which, in the form executed and delivered, has been delivered to the
Agent, (c) which is in form and substance satisfactory to the Agent and (d) no
amendment to or waiver
51
<PAGE>
under which has become effective except for amendments and waivers that have
either (i) been approved by the Agent or (ii) are not materially adverse to the
interests of the Banks, provided that, in the case of clause (ii) such
--------
amendments and waivers are in writing and copies thereof have been provided to
the Agent within 30 days of their execution and delivery.
"Mandatorily Redeemable Stock" means, with respect to any Person, any share
----------------------------
of such Person's capital stock to the extent that it is (a) redeemable, payable
or required to be purchased or otherwise retired or extinguished, or convertible
into any Indebtedness or other Liability of such Person, (i) at a fixed or
determinable date, whether by operation of a sinking fund or otherwise, (ii) at
the option of any Person other than such Person or (iii) upon the occurrence of
a condition not solely within the control of such Person, such as a redemption
required to be made out of future earnings or (b) convertible into Mandatorily
Redeemable Stock.
"Masayoshi Son" shall mean that Person whose business address is, as of the
-------------
Restated Agreement Date, 24-1 Nihonbashi-Hakozakicho, Chuo-ku, Tokyo 103, Japan.
"Materially Adverse Effect" means, (a) with respect to any Person, any
-------------------------
materially adverse effect on such Person's business, assets, Liabilities,
financial condition, results of operations or business prospects, (b) with
respect to a group of Persons "taken as a whole", any materially adverse effect
on such Persons' business, assets, Liabilities, financial conditions, results of
operations or business prospects taken as a whole on, where appropriate, a
consolidated basis in accordance with Generally Accepted Accounting Principles
and (c) with respect to any Loan Document, any materially adverse effect on the
binding nature, validity or enforceability thereof as an obligation of any Loan
Party that is a party thereto.
"Money Market Investment" means (a) any security issued or directly and
-----------------------
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof having a remaining maturity of not more than one year,
(b) any certificate of deposit, eurodollar time deposit and bankers' acceptance
with remaining maturity of not more than one year, any overnight bank deposit,
and any demand deposit account, in each case with any Bank or with any United
States commercial bank having capital and surplus in excess of $500,000,000 and
rated B or better by Thomson Bankwatch Inc., (c) any repurchase obligation with
a term of not more than seven days entered into with (i) any financial
institution meeting the qualifications specified in clause (b) above or (ii) any
primary dealer of national reputation reporting daily to the Federal Reserve
Bank of New York, and (d) any commercial paper issued by any Bank or the parent
corporation of any Bank and any other commercial paper of issuers rated A-2 by
Standard & Poor's Rating Group or Prime-2 by Moody's Investors Service, Inc. and
in any case having a remaining maturity of not more than six months.
"Multiemployer Benefit Plan" means any Benefit Plan that is a multiemployer
--------------------------
plan as defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means, with respect to (a) the disposition of any
-----------------
asset, including Capital Securities of Persons other than the Person effecting
the disposition, (i) the gross cash proceeds of such disposition (including (A)
insurance payments and condemnation awards and (B) principal payments in respect
of any notes or other instruments received as consideration for such
disposition) less (ii) (A) all documented taxes, fees, including underwriting
and placement
52
<PAGE>
fees, and reasonable expenses payable by the Borrower and its Subsidiaries in
connection with such disposition, including income taxes payable as a
consequence of such disposition, (B) the principal amount of, and the premium,
if any, and interest on, any Indebtedness (other than the Loans) secured by such
asset and required to be prepaid upon such disposition and (C) amounts required
to be maintained as a reserve against liabilities associated with such
disposition under Generally Accepted Accounting Principles as then in effect
(provided that such amounts shall cease to be deducted from Net Cash Proceeds
and may become payable whenever they cease to be so required to be maintained)
and (b) the disposition of any Capital Security that is a Capital Security of
the Person effecting such disposition, (i) the gross cash proceeds of such
disposition (including principal payments in respect of any notes or other
instruments received as consideration for such disposition) less (ii) all
underwriting, placement and other fees and discounts and any other expenses
reasonably incurred in connection with such disposition.
"Net Income" means, for any Person and for any period, the net income (or
----------
net loss) of such Person for such period; provided that such amount shall be
--------
adjusted to exclude (to the extent otherwise included therein):
(a) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of income accrued
during such period and except for normal accruals and reversals in the
ordinary course of business;
(b) any write-up or write-down of any asset;
(c) any net gain or loss from the collection of the proceeds of any
insurance policies;
(d) any gain or loss arising from the acquisition of any securities or
Indebtedness of such Person and any net loss arising from the exercise of
any warrant of such Person;
(e) any deferred credit representing the excess of equity in any
Person at the date of acquisition over the cost of the investment in such
Person;
(f) any aggregate net gain (or loss) during such period arising from
the sale, exchange or other disposition of capital assets (such term to
include all fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets, and all
securities) other than any sale, exchange or other disposition in the
ordinary course of business, provided that there shall also be excluded any
--------
related charges for taxes on such capital assets;
(g) any net gains or losses resulting from the extinguishment or
defeasance of any Indebtedness;
(h) any earnings or losses from discontinued businesses; and
(i) all other extraordinary items.
53
<PAGE>
"New Subordinated Indebtedness" means Subordinated Indebtedness incurred
-----------------------------
after the Restated Agreement Date.
"Note" means any RC Note or Swing Loan Note.
----
"Notice of Assignment" means any notice to the Borrower and the Agent with
--------------------
respect to an assignment pursuant to Section 10.10(a) in the form of Schedule
--------
10.10(a).
- --------
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Permitted Guaranty" means any Guaranty that is (a) an endorsement of a
------------------
check for collection in the ordinary course of business, (b) a Guaranty of and
only of the Guaranteed Obligations, (c) a Guaranty constituting an Investment to
which Section 4.11 is not applicable by virtue of clause (c)(ii) or (g) of such
Section, (d) a Guaranty of Indebtedness to which Section 4.05 is not applicable
by virtue of clause (e) or (f) of such Section, (e) the Kingston Guarantee, (f)
a Guaranty of a Liability of the Borrower or a Guarantor not constituting
Indebtedness to which Section 4.05 is not applicable by virtue of clause (e) or
(f) of such Section; provided that, such Guaranty and such Liability shall each
--------
be incurred in the ordinary course of business of the party obligated thereunder
and shall be upon terms and conditions reasonable and customary in the industry
in which such party conducts its business or (g) a Guaranty by a ZD Holdings
Subsidiary of Indebtedness in principal amount, together with the aggregate
principal amount of all other Indebtedness so Guaranteed, not exceeding
$2,000,000 at any time.
"Permitted Lien" means (a) any Lien securing and only securing the
--------------
obligations of the Loan Parties under the Loan Documents; (b) any Lien securing
a tax, assessment or other governmental charge or levy or the claim of a
materialman, mechanic, carrier, warehouseman or landlord for labor, materials,
supplies or rentals incurred in the ordinary course of business, but only if
payment thereof shall not at the time be required to be made in accordance with
Section 4.01(d) and foreclosure, distraint, sale or other similar proceedings
shall not have been commenced; (c) any Lien on the properties and assets of a
Guarantor securing an obligation owing to the Borrower or a Guarantor; (d) any
Lien consisting of a deposit or pledge made in the ordinary course of business
in connection with, or to secure payment of, obligations under worker's
compensation, unemployment insurance or similar legislation; (e) any Lien
arising pursuant to an order of attachment, distraint or similar legal process
arising in connection with legal proceedings, but only if and so long as the
execution or other enforcement thereof is not unstayed for more than 20 days;
(f) any Lien existing on (i) any property or asset of any Person at the time
such Person becomes a Guarantor or (ii) any property or asset at the time such
property or asset is acquired by the Borrower or a Guarantor, but only, in the
case of either (i) or (ii), if and so long as (A) such Lien was not created in
contemplation of such Person becoming a Guarantor or such property or asset
being acquired, (B) such Lien is and will remain confined to the property or
asset subject to it at the time such Person becomes a Guarantor or such property
or asset is acquired and to fixed improvements thereafter erected on such
property or asset, (C) such Lien secures only the obligation secured thereby at
the time such Person becomes a Guarantor or such property or asset is acquired
and (D) the obligation secured by such Lien is not in default; (g) any Lien in
existence on the Restated Agreement Date to the extent set forth on Schedule
--------
4.07, but only, in the case of each such Lien, to the extent it secures an
- ----
obligation outstanding on the Restated Agreement Date to the extent set forth on
such Schedule; (h) any
54
<PAGE>
Lien securing Purchase Money Indebtedness but only if, in the case of each such
Lien, (i) such Lien shall at all times be confined solely to the property or
asset the purchase price of which was financed through the incurrence of the
Purchase Money Indebtedness secured by such Lien and to fixed improvements
thereafter erected on such property or asset and (ii) such Lien attached to such
property or asset within 30 days of the acquisition of such property or asset;
(i) any Lien on the properties and assets of a ZD Holdings Subsidiary securing
Indebtedness in principal amount, together with the aggregate principal amount
of all other Indebtedness so secured, not exceeding $2,000,000 at any time; or
(j) any Lien constituting a renewal, extension or replacement of a Lien
constituting a Permitted Lien by virtue of clause (f), (g), (h) or (j) of this
definition, but only if (i) at the time such Lien is granted and immediately
after giving effect thereto, no Default would exist, (ii) such Lien is limited
to all or a part of the property or asset that was subject to the Lien so
renewed, extended or replaced and to fixed improvements thereafter erected on
such property or asset, (iii) the principal amount of the obligations secured by
such Lien does not exceed the principal amount of the obligations secured by the
Lien so renewed, extended or replaced, (iv) if the principal amount of such
obligations constitutes Subordinated Indebtedness, such obligations continue to
constitute Subordinated Indebtedness and (v) the obligations secured by such
Lien bear interest at a rate per annum not exceeding the rate borne by the
obligations secured by the Lien so renewed, extended or replaced except for any
increase that is commercially reasonable at the time of such increase.
"Permitted Restrictive Covenant" means (a) any covenant or restriction
------------------------------
contained in any Loan Document, (b) any covenant or restriction binding upon any
Person at the time such Person becomes a Guarantor if the same is not created in
contemplation thereof, (c) any covenant or restriction of the type contained in
Section 4.07 that is contained in any Contract evidencing or providing for the
creation of or concerning Purchase Money Indebtedness so long as such covenant
or restriction is limited to the property purchased therewith and (d) any
covenant or restriction that (i) is not more burdensome than an existing
Permitted Restrictive Covenant that is such by virtue of clause (b), (c) or (d),
(ii) is contained in a Contract constituting a renewal, extension or replacement
of the Contract in which such existing Permitted Restrictive Covenant is
contained and (iii) is binding only on the Person or Persons bound by such
existing Permitted Restrictive Covenant.
"Permitted Stock Option Plan" means, as applied to any Person, any plan or
---------------------------
program in the nature of an incentive plan or program that has been duly
adopted, if such Person is a corporation, by its board of directors, or, if such
Person is a partnership, by its general partner or partners, providing for the
issuance of Capital Securities of such Person; provided that the amount of
--------
Capital Securities that are subject to, and the terms and conditions of, such
plan or program are conventional and not more favorable than those of similar
plans or programs maintained by Persons of a size similar to such Person and
engaged in businesses similar to that of such Person.
"Person" means any individual, sole proprietorship, corporation,
------
partnership, trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, government or any agency or
political subdivision thereof or, for the purpose of the definition of "ERISA
Affiliate," any trade or business.
"Post-Default Rate" means the rate otherwise applicable under Section
-----------------
1.03(a) plus 2.0%.
55
<PAGE>
"Prepayment", as applied to Subordinated Indebtedness, means any payment on
----------
account of the principal of such Subordinated Indebtedness, other than a payment
of principal at a regularly scheduled maturity (without giving affect to any
acceleration), whether such payment is by way of purchase, repayment,
defeasance, redemption or other entitlement.
"Prime Rate" means the prime commercial lending rate of The Bank of New
----------
York, as publicly announced to be in effect from time to time. The Prime Rate
shall be adjusted automatically, without notice, on the effective date of any
change in such prime commercial lending rate. The Prime Rate is not necessarily
The Bank of New York's lowest rate of interest.
"Pro Rata Share," as applied to a Bank means, at any time, the percentage
--------------
obtained by dividing the amount of such Bank's Commitment at such time by the
sum of the Commitments at such time of all the Banks.
"Prohibited Transaction" means any transaction that is prohibited under
----------------------
Code Section 4975 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.
"Purchase Money Indebtedness" means (a) Indebtedness of a Person that is
---------------------------
incurred to finance part or all of (but not more than) the purchase price of a
tangible asset, provided that (i) neither the Borrower nor any Guarantor had at
--------
any time prior to such purchase any interest in such asset other than a security
interest or an interest as lessee under an operating lease and (ii) such
Indebtedness is incurred within 30 days after such purchase, or (b) Indebtedness
that (i) constitutes a renewal, extension or refunding of, but not an increase
in the principal amount of, Purchase Money Indebtedness that is such by virtue
of clause (a) or (b), (ii) bears interest at a rate per annum that is
commercially reasonable at the time such Indebtedness is incurred and (iii) if
the Indebtedness that is being renewed, extended or refunded constitutes
Subordinated Indebtedness, such Indebtedness constitutes Subordinated
Indebtedness.
"Qualified Swing Loan" means at any time, with respect to any Swing Loan,
--------------------
the principal amount of such Swing Loan that Banks would be required to
refinance with RC Loans or purchase participations in pursuant to Section
1.05(c)(i) or (ii), as the case may be, after giving effect to the provisions of
Section 1.05(c)(iii).
"RC Loan" means any amount advanced by a Bank pursuant to Section 1.01(a).
-------
"RC Note" means any Note in the form of Exhibit A-1.
------- -----------
"Reference Bank" means The Bank of New York and any replacement Reference
--------------
Bank appointed pursuant to Section 10.14.
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the Federal
------------
Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the Federal
------------
Reserve System.
56
<PAGE>
"Regulatory Change" means any Applicable Law, interpretation, directive,
-----------------
request or guideline (whether or not having the force of law), or any change
therein or in the administration or enforcement thereof, that becomes effective
or is implemented or first required or expected to be complied with after the
Effective Date, whether the same is (a) the result of an enactment by a
government or any agency or political subdivision thereof, a determination of a
court or regulatory authority, or otherwise or (b) enacted, adopted, issued or
proposed before or after the Effective Date, including any such that imposes,
increases or modifies any Tax, reserve requirement, insurance charge, special
deposit requirement, assessment or capital adequacy requirement, but excluding
any such that imposes, increases or modifies any Bank Tax.
"Repayment Date" means the later of (a) the termination of the Commitments
--------------
(whether as a result of the occurrence of the Termination Date, reduction to
zero pursuant to Section 1.07 or termination pursuant to Section 6.02) and (b)
the payment in full of the Loans and all other amounts payable or accrued
hereunder.
"Reportable Event" means, with respect to any Benefit Plan of any Person,
----------------
(a) the occurrence of any of the events set forth in ERISA Sections 4043(c),
other than an event as to which the requirement of 30 days' notice, or the
penalty for failure to provide such notice, has been waived by the PBGC, (b) the
existence of conditions sufficient to require advance notice to the PBGC
pursuant to ERISA Section 4043(b), (c) the occurrence of any of the events set
forth in ERISA Sections 4062(e) or 4063(a) or the regulations thereunder, (d)
any event requiring such Person or any of its ERISA Affiliates to provide
security to such Benefit Plan under Code Section 401(a)(29) or (e) any failure
to make a payment required by Code Section 412(m) with respect to such Benefit
Plan.
"Representation and Warranty" means any representation or warranty made
---------------------------
pursuant to or under (a) Article 2, Article 3, Section 5.02 or any other
provision of this Agreement or (b) any amendment to, or waiver of rights under,
this Agreement, WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (a) OR (b) OF THIS DEFINITION (EXCEPT, IN EACH CASE, TO
THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE INFORMATION THAT IS THE SUBJECT
MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE BORROWER.
"Required Banks" means, at any time, Banks having more than, if there are
--------------
at such time four or more Banks, 51% or, if at such time there are less than
four Banks, 66-2/3% of the aggregate amount of the Commitments or, if the
Commitments shall have expired or been terminated, Banks having more than, if
there are at such time four or more Banks, 51% or, if at such time there are
less than four Banks, 66-2/3% of the aggregated amount of the Exposures
outstanding.
"Reserve Requirement" means, at any time, the then current maximum rate for
-------------------
which reserves (including any marginal, supplemental or emergency reserve) are
required to be maintained under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding five billion Dollars
against "Eurocurrency liabilities", as that term is used in Regulation D. The
Adjusted Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.
57
<PAGE>
"Restated Agreement Date" means the date set forth as such on the last
-----------------------
signature page hereof, which date is the date the executed copies of this
Agreement, as amended and restated as of such date, were delivered by all
parties hereto and, accordingly, the date this Agreement, as amended and
restated of such date, became effective and, for the first time binding upon
such parties.
"Restricted Payment" means, with respect to any Person, any payment with
------------------
respect to or on account of any of such Person's Capital Securities, including
any dividend or other distribution on, any payment of interest on or principal
of, and any payment on account of any purchase, redemption, retirement,
exchange, defeasance or conversion of, or on account of any claim relating to or
arising out of the offer, sale or purchase of, any such Capital Securities. For
the purposes of this definition, a "payment" shall include the transfer of any
asset or the incurrence of any Indebtedness or other Liability (the amount of
any such payment to be the fair market value of such asset or the amount of such
obligation, respectively) but shall not include the issuance of any capital
stock of the Borrower other than Mandatorily Redeemable Stock.
"SOFTBANK Corp." means SOFTBANK Corp., a Japanese corporation.
--------------
"SOFTBANK Corp. Payments" means, as of any date of determination, all
-----------------------
payments to SOFTBANK Corp. either made by the Borrower or the Guarantors during
the period from the Restated Agreement Date to such date, or that the Borrower
or any Guarantor becomes, during such period, obligated to make, in respect of
(a) Restricted Payments to SOFTBANK Corp., (b) Investments in SOFTBANK Corp.,
(c) Business Units acquired from SOFTBANK Corp. and (d) Prepayments of
Subordinated Debt of the Borrower or any Guarantor owed to SOFTBANK Corp.
"SOFTBANK Kingston" means SOFTBANK Kingston Inc., a Delaware corporation.
-----------------
"Subordinated Indebtedness" means Affiliate Indebtedness that is subject to
-------------------------
a Subordination Agreement.
"Subordination Agreement" means (a) a Subordination Agreement substantially
-----------------------
in the form of Exhibit B and (b) with respect to which, the Agent, if it shall
---------
have requested the same, shall have received an opinion, in form and substance
satisfactory to the Agent, of counsel, acceptable to the Agent, to the effect
that such Subordination Agreement has been duly authorized, executed and
delivered by the obligee subject thereto and constitutes a legally binding
agreement of such Person, enforceable against such Person in accordance with its
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization and other similar laws affecting the enforcement of creditors'
rights generally.
"Subordinator" means any Person that has agreed, pursuant to a
------------
Subordination Agreement to which such Person is party, to subordinate Affiliate
Indebtedness payable to it as provided in such Subordination Agreement.
"Subsidiary" means, with respect to any Person, any other Person (i)
----------
securities of which having ordinary voting power to elect a majority of the
board of directors (or other persons having similar functions) or (ii) other
ownership interests of which ordinarily constituting a majority voting interest,
are at the time, directly or indirectly, owned or controlled by such first
58
<PAGE>
Person, or by one or more of its Subsidiaries, or by such first Person and one
or more of its Subsidiaries; unless otherwise specified, "Subsidiary" means a
Subsidiary of the Borrower, and "Subsidiaries" means the Subsidiaries of the
Borrower.
"Swing Line Availability" means, at any time, the lesser of (a) the Swing
-----------------------
Line Sublimit at such time less the aggregate principal amount of outstanding
Swing Loans at such time and (b) the Commitments at such time less the aggregate
amount of the Exposures of all of the Banks at such time.
"Swing Line Bank" means the Bank that, with its consent and the consent of
---------------
each existing Swing Line Bank, if any, is designated as such by the Borrower.
On the Restated Agreement Date such Bank is The Bank of New York.
"Swing Line Bank's Office" means, at any time that the Bank that is the
------------------------
Swing Line Bank is the Agent, the Agent's Office and, at any other time, the
address of such Bank determined in accordance with the provisions of Section
10.01(b)(iv).
"Swing Line Sublimit" means $25,000,000.
-------------------
"Swing Loan" means an amount advanced by the Swing Line Bank pursuant to
----------
Section 1.01(b).
"Swing Loan Note" means a note in the form attached hereto as Exhibit A-II.
---------------
"Tax" means any Federal, State or foreign tax, assessment or other
---
governmental charge (including any withholding tax) upon a Person or upon its
assets, revenues, income or profits.
"Termination Date" means the date that is 363 days after the Restated
----------------
Agreement Date.
"Termination Event" means, with respect to any Benefit Plan, (a) any
-----------------
Reportable Event with respect to such Benefit Plan, (b) the termination of such
Benefit Plan, or the filing of a notice of intent to terminate such Benefit
Plan, or the treatment of any amendment to such Benefit Plan as a termination
under ERISA Section 4041(c), (c) the institution of proceedings to terminate
such Benefit Plan under ERISA Section 4042 or (d) the appointment of a trustee
to administer such Benefit Plan under ERISA Section 4042.
"Type" means, with respect to RC Loans, any of the following, each of which
----
shall be deemed to be a different "Type" of Loan: Base Rate Loans, Eurodollar
Rate Loans having a one-month Interest Period, Eurodollar Rate Loans having a
two-month Interest Period, Eurodollar Rate Loans having a three-month Interest
Period and Eurodollar Rate Loans having a six-month Interest Period. Any
Eurodollar Rate Loan having an Interest Period that differs from the duration
specified for a Type of Eurodollar Rate Loan listed above solely as a result of
the operation of clauses (a) and (b) of the definition of "Interest Period"
shall be deemed to be a Loan of such above-listed Type notwithstanding such
difference in duration of Interest Periods.
"Unfunded Benefit Liabilities" means, with respect to any Benefit Plan at
----------------------------
any time, the amount of unfunded benefit liabilities of such Benefit Plan at
such time as determined under ERISA Section 4001(a)(18).
59
<PAGE>
"Wholly Owned Subsidiary" means, with respect to any Person, any Subsidiary
-----------------------
of such Person all of the Capital Securities and all other ownership interests
and rights to acquire ownership interests of which (except directors' qualifying
shares) are, directly or indirectly, owned or controlled by such Person or one
or more Wholly Owned Subsidiaries of such Person or by such Person and one or
more of such Subsidiaries; unless otherwise specified, "Wholly Owned Subsidiary"
-----------------------
means a wholly owned subsidiary of the Borrower or of a Guarantor.
"ZD COMDEX and Forums, Inc." means ZD COMDEX and Forums, Inc., a Delaware
--------------------------
corporation.
"ZD Holdings (UK)" means ZD Holdings (UK), a company organized under the
----------------
laws of England.
"ZD Holdings Subsidiary" means each of ZD Holdings (UK) and its Wholly
----------------------
Owned Subsidiaries.
"ZD Inc." means ZD Inc., a Delaware corporation.
-------
"Ziff-Davis Inc." means Ziff-Davis Inc., a Delaware corporation.
---------------
Section 11.02 Other Interpretive Provisions.
-----------------------------
(a) Except as otherwise specified herein, all references herein (i) to any
Person shall be deemed to include such Person's successors and assigns, (ii) to
any Applicable Law defined or referred to herein shall be deemed references to
such Applicable Law or any successor Applicable Law as the same may have been or
may be amended or supplemented from time to time and (iii) to any Loan Document
or Contract defined or referred to herein shall be deemed references to such
Loan Document or Contract (and, in the case of any Note or any other instrument,
any instrument issued in substitution therefor) as the terms thereof may have
been or may be amended, supplemented, waived or otherwise modified from time to
time.
(b) When used in this Agreement, the words "herein", "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article", "Section",
"Annex", "Schedule" and "Exhibit" shall refer to Articles and Sections of, and
Annexes, Schedules and Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the word "including,"
"include" or "includes" is set forth only for the purpose of indicating that,
regardless of whatever other items are in the category in which such item or
items are "included," such item or items are in such category, and shall not be
construed as indicating that the items in the category in which such item or
items are "included" are limited to such items or to items similar to such
items.
60
<PAGE>
(e) Each authorization in favor of the Agent, the Banks or any other
Person granted by or pursuant to this Agreement shall be deemed to be
irrevocable and coupled with an interest.
(f) Except as otherwise specified herein, all references herein to the
Agent, any Bank or any Loan Party shall be deemed to refer to such Person
however designated in Loan Documents, so that (i) a reference to rights of a
Bank under the Loan Documents shall be deemed to include the rights of such
Person as the guaranteed party under Article 9 and, if such Person is the Swing
Line Bank, the rights of such Person as the Swing Line Bank and (ii) a reference
to costs incurred by a Bank in connection with Loan Documents shall be deemed to
include costs incurred by such Person as the guaranteed party under Article 9 or
as the Swing Line Bank .
(g) except as otherwise specified herein, all references to the time of
day shall be deemed to be to New York City time as then in effect.
Section 11.03 Accounting Matters.
------------------
Unless otherwise specified herein, all accounting determinations hereunder
and all computations utilized by the Borrower in complying with the covenants
contained herein shall be made, all accounting terms used herein shall be
interpreted, and all financial statements required to be delivered hereunder
shall be prepared, in accordance with Generally Accepted Accounting Principles,
except, in the case of such financial statements, for departures from Generally
Accepted Accounting Principles that may from time to time be approved in writing
by the independent certified public accountants who are at the time, in
accordance with Section 5.01(b), reporting on the Borrower's financial
statements.
Section 11.04 Representations and Warranties.
------------------------------
All Representations and Warranties shall be deemed made (a) in the case of
any Representation and Warranty contained in this Agreement at and as of the
Restated Agreement Date, (b) in the case of any Representation and Warranty
contained in this Agreement or any other document delivered in connection with
or pursuant to this Agreement or at the time any Loan is made, at and as of such
time and (c) in the case of any particular Representation and Warranty, wherever
contained, at such other time or times as such Representation and Warranty is
made or deemed made in accordance with the provisions of this Agreement or the
document pursuant to, under or in connection with which such Representation and
Warranty is made or deemed made.
Section 11.05 Captions.
--------
Captions to Articles, Sections and subsections of, and Annexes, Schedules
and Exhibits to, this Agreement are included for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose or in
any way affect the meaning or construction of any provision of this Agreement.
Section 11.06 Interpretation of Related Documents.
-----------------------------------
Except as otherwise specified therein, terms that are defined herein that
are used in Notes, certificates, opinions and other documents delivered in
connection herewith shall have the meanings ascribed to them herein and such
documents shall be otherwise interpreted in accordance with the provisions of
this Article 11.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the Restated Agreement
Date.
SOFTBANK HOLDINGS INC.
By: /s/ Thomas L. Wright
---------------------------------------
Name: Thomas L. Wright
Title: Vice President and Treasurer
ZD COMDEX AND FORUMS, INC.,
as a Guarantor
By: /s/ Mo Virani
-----------------------------------------
Name: Mo Virani
Title: Chief Financial Officer
ZIFF-DAVIS INC.,
as a Guarantor
By: /s/ Thomas L. Wright
------------------------------------------
Name: Thomas L. Wright
Title: Vice President and Treasurer
SBH DELAWARE, INC.,
as a Guarantor
By: /s/ Thomas L. Wright
-----------------------------------------
Name: Thomas L. Wright
Title: Vice President and Treasurer
<PAGE>
THE BANK OF NEW YORK,
as Agent, a Bank and Swing Line Bank
By: /s/ Brendan T. Nedzi
-----------------------------------------
Name: Brendan T. Nedzi
Title: Vice President
Restated Agreement Date: February 26, 1998
<PAGE>
ANNEX A
Banks, Lending Offices
and Notice Addresses Commitments
- -------------------- -----------
THE BANK OF NEW YORK $250,000,000
Domestic Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
Eurodollar Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
Notice address:
The Bank of New York
One Wall Street
New York, NY 10286
Telecopy No.: (212) 635-8593/8595
Telephone No.: (212) 635-8628
Attention: Mr. Brendan T. Nedzi
<PAGE>
Schedule 1.02(a)
NOTICE OF BORROWING
[Name and address
of the Agent in accordance with
Section 10.01(b)]
Date:
Ladies and Gentlemen:
Reference is made to the Guaranteed Credit Agreement, dated as of March 27,
1996 as amended and restated as of October 30, 1997 and as further amended and
restated as of February 26, 1998, among SOFTBANK Holdings Inc., the Banks listed
on the signature pages thereof and The Bank of New York, as Agent, and the
Guarantors party thereto (the "Credit Agreement"). The undersigned hereby gives
notice pursuant to Section 1.02(a) of the Credit Agreement of its request to
have the following RC Loans made to it on [insert requested date of borrowing]:
Type of RC Loan Amount
The undersigned on behalf of the Borrower, represents and warrants that (a)
the borrowing requested hereby complies with the requirements of the Credit
Agreement and (b) [except to the extent set forth on Annex A hereto,]2 (i) each
Loan Document Representation and Warranty is true and correct at and as of the
date hereof and (except to the extent the undersigned gives notice to the Bank
to the contrary prior to 5:00 p.m. on the Business Day before the requested date
for the making of the RC Loans) will be true and correct at and as of the time
the RC Loans are made, in each case both with and without giving effect to the
RC Loans and the application of the proceeds thereof, and (ii) no Default has
occurred and is continuing as of the date hereof or would result from the making
of the Loans or from the application of the proceeds thereof if the Loans were
made on the date hereof, and (except to the extent the undersigned gives notice
to the Bank to the contrary prior to 5:00 p.m. on the Business Day before the
requested date for the making of the RC Loans) no Default will have occurred and
be continuing at the time the RC Loans are to be made or would result from the
making of the RC Loans or from the application of the proceeds thereof.
<PAGE>
SOFTBANK HOLDINGS INC.
By:
------------------------------
Name:
Title:
------------
1. Be sure to specify the duration of the Interest Period in the case of
Eurodollar Rate Loans (e.g., one-month Eurodollar Rate).
----
2. If the representation and warranty in either clause (b)(i) or (b)(ii)
would be incorrect, include the material in brackets and set forth the
reasons such representation and warranty would be incorrect on an
attachment labeled Annex A.
2
<PAGE>
Schedule 1.03(c)
NOTICE OF CONVERSION OR CONTINUATION
[Name and address
of the Agent in accordance with
Section 10.01(b)]
Date:
Ladies and Gentlemen:
Reference is made to the Guaranteed Credit Agreement, dated as of March 27,
1996 as amended and restated as of October 30, 1997 and as further amended and
restated as of February 26, 1998, among SOFTBANK Holdings Inc., the Banks listed
on the signature pages thereof, The Bank of New York, as Agent, and the
Guarantors party thereto (the "Credit Agreement"). The undersigned hereby gives
notice pursuant to Section 1.03(c) of the Credit Agreement of its desire to
convert or continue the Loans specified below into or as Loans of the Types and
in the amounts specified below on [insert date of conversion or continuation]:
Loans to be Converted or Continued Converted or Continued Loans
Last Day of Current Type of
Type of Loan Interest Period Amount Loan Amount
The undersigned represents and warrants that conversions and continuations
requested hereby comply with the requirements of the Credit Agreement.
SOFTBANK HOLDINGS INC.
By:
-------------------
Name:
Title:
- -----------
1. Be sure to specify the duration of the Interest Period in the case of
Eurodollar Rate Loans (e.g., one-month Eurodollar Rate).
----
<PAGE>
Schedule 1.05
NOTICE OF PREPAYMENT
[Name and address
of the Agent in accordance with
Section 10.01(b)]
Date:
Ladies and Gentlemen:
Reference is made to the Guaranteed Credit Agreement, dated as of March 27,
1996, as amended and restated as of October 30, 1997 and as further amended and
restated as of February 26, 1998 among SOFTBANK Holdings Inc., the Banks listed
on the signature pages thereof, The Bank of New York, as Agent, and the
Guarantors party thereto (the "Credit Agreement"). The undersigned hereby gives
notice pursuant to Section 1.05 of the Credit Agreement that it will prepay the
[RC] [Swing] Loans specified below on [insert date of prepayment]:
Last Day of
Type of [RC] [Swing] Loan [Current] [Agreed Rate] Amount
Interest Period+
_____________________
* Please specify whether RC or Swing Lonas.
+ Insert as applicable.
<PAGE>
- -----------
The undersigned represents and warrants that the prepayment requested
hereby complies with the requirements of the Credit Agreement.
SOFTBANK HOLDINGS INC.
By:
----------------------
Name:
Title:
- -----------
1. Be sure to specify the duration of the Interest Period or the Agreed Rate
Interest Period, as applicable, in the case of Eurodollar Rate Loans and
Agreed Rate Loans (e.g., one-month Eurodollar Rate, two-day Agreed Rate, as
----
applicable).
2
<PAGE>
Schedule 2.01(a)(i)
-------------------
[NAME OF LOAN PARTY]
CERTIFICATE AS TO RESOLUTIONS, ETC.
I, __________, [Assistant] Secretary of [name of Loan Party], a
__________ [corporation/partnership] (the "Company"), hereby certify, pursuant
to Section 2.01(a)(i) of the Guaranteed Credit Agreement dated as of March 27,
1996 as amended and restated as of October 30, 1997 and as further amended and
restated as of February 26, 1998 among SOFTBANK Holdings Inc., the Guarantors
and The Bank of New York, that:
1. The below named persons have been duly elected (or appointed) and
have duly qualified as, and on this day are, officers of the Company
holding their respective offices below set opposite their names, and the
signatures below set opposite their names are their genuine signatures:
Name Office Signature
---- ------ ---------
[Insert names and offices of persons authorized to sign the Loan Documents
to which the Company is a party and any related documents]
2. (a) Attached as Annex A is a true and correct copy of
[resolutions/consents] duly adopted by [written consents of] the [Board of
Directors/partners] of the Company. Such [resolutions/consents] have not
been amended, modified or revoked and are in full force and effect on the
date hereof.
[(b) Attached as Annex A-1 is a true and correct copy of
resolutions duly adopted by [unanimous written consent of] the stockholders
of the Company. Such resolutions have not been amended, modified or
revoked and are in full force and effect on the date hereof.]/1/
3. [List Loan Documents to which the Company is a party], in each
case as executed and delivered on behalf of the Company, are in the forms
thereof approved by [unanimous written consent of] the [Board of
Directors/partners] of the Company.
<PAGE>
[4. There has been no amendment to [the Certificate of Incorporation]
[partnership agreement] of the Company since __________, 19__./2/]/1/
[5. Attached as Annex B is a true and correct copy of the By-laws of
the Company as in effect on __________, 19__/3/ and at all subsequent times
to and including the date hereof.]/1/
IN WITNESS WHEREOF, I have signed this certificate this __ day of
__________, 19__.
___________________________
[Assistant] Secretary
I, __________, [title] of the Company, hereby certify that [name of
the above [Assistant] Secretary] has been duly elected or appointed and has been
duly qualified as, and on this day is, [Assistant] Secretary of the Company, and
the signature in paragraph 1 above is his genuine signature.
IN WITNESS WHEREOF, I have signed this certificate this __ day of
__________, 19__.
___________________________
[Title]
____________________
1. Omit if not applicable.
2. Insert date of the Secretary of State's Certificate of Incorporation
required by Section 2.01(a)(ii).
3. Insert date of the Board of Directors' meeting adopting the resolutions
referred to in paragraph 2(a).
2
<PAGE>
Annex A
-------
[NAME OF LOAN PARTY]
RESOLUTIONS OF BOARD OF DIRECTORS
<PAGE>
Annex A-1
---------
[NAME OF LOAN PARTY]
RESOLUTIONS OF SHAREHOLDERS
[Insert applicable resolutions]
<PAGE>
Schedule 3.02
-------------
SCHEDULE OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION OF OWNERSHIP OF ITS
INCORPORATION/FORMATION CAPITAL SECURITIES
<S> <C> <C>
ZD COMDEX and Forums, Inc. Delaware 100% owned by
SOFTBANK Holdings Inc.
SOFTBANK Forums L.P. Delaware General partners:
ZD COMDEX and Forums, Inc. and
MAC Forums L.P.
SOFTBANK Kingston Inc. Delaware 100% owned by
SOFTBANK Holdings Inc.
Kingston Technology Company Delaware 80% owned by
SOFTBANK Kingston Inc.
Ziff-Davis Inc. Delaware 100% owned by
SOFTBANK Holdings Inc.
SOFTBANK Content Services, Delaware 100% owned by
Inc. SOFTBANK Holdings Inc.
SOFTBANK Services Group Delaware 70% owned by
SOFTBANK Holdings Inc.
SpotMedia Communications California 70% owned by
SOFTBANK Holdings Inc.
SOFTBANK Interactive Delaware 83% owned by
Marketing Inc. SOFTBANK Holdings Inc.
SBH Delaware, Inc. Delaware 100% owned by
SOFTBANK Holdings Inc.
STV IV LLC Delaware LLC 91% owned by
SOFTBANK Holdings Inc.
SOFTBANK Technology Ventures Delaware L.P. General partner:
IV L.P. STV IV LLC
SB Holdings Pte., Ltd. Singapore 100% owned by
SOFTBANK Holdings Inc.
ZD COMDEX and Forums Pte., Singapore 100% owned by
Ltd. SOFTBANK Holdings Inc.
ZD COMDEX and Forums Pty., Australia 100% owned by
Ltd. SOFTBANK Holdings Inc.
ZD Holdings (UK), Ltd. United Kingdom 100% owned by
SOFTBANK Holdings Inc.
</TABLE>
<PAGE>
Schedule 3.03
-------------
SCHEDULE OF REQUIRED CONSENTS AND
GOVERNMENTAL APPROVALS
(NONE)
<PAGE>
Schedule 3.04
-------------
SCHEDULE OF PUBLIC DEBT OF SOFTBANK CORP.
(in Yen, Billions)
<TABLE>
<CAPTION>
ISSUE PRINCIPAL AMOUNT Interest Rate
- --------------------------------- -------------------------- -----------------------------
<S> <C> <C>
Unsecured Debt No. 1 45 3.90%
Unsecured Debt No. 2 20 1.65%
Unsecured Debt No. 3 25 2.60%
Unsecured Debt No. 4 25 3.15%
Unsecured Debt No. 5 20 2.30%
Unsecured Debt No. 6 10 2.65%
Unsecured Debt No. 7 25 3.00%
Unsecured Debt No. 8 10 3.45%
Unsecured Debt No. 9 10 3.55%
Unsecured Debt No. 10 10 3.80%
Unsecured Debt No. 11 5 3.70%
Unsecured Convertible Debt No. 1 46 0.50%
Unsecured Convertible Debt No. 2 8 0.00%
</TABLE>
<PAGE>
Schedule 3.06
-------------
SCHEDULE OF MATERIAL LITIGATION
(NONE)
<PAGE>
Schedule 3.09
-------------
SCHEDULE OF ADDITIONAL MATERIAL ADVERSE FACTS
(NONE)
<PAGE>
Schedule 4.05
-------------
SCHEDULE OF EXISTING BORROWER
AND GUARANTOR INDEBTEDNESS
SCHEDULE OF EXISTING BORROWER INDEBTEDNESS
- ------------------------------------------
BORROWER LENDER AMOUNT RATE
- ---------- ----------- ---------------------------- --------------
SBH MAC INC. $1,080,000,000 7.80%
SBH MAC INC. $ 309,076,000 8.00%
SBH MAC INC. $ 65,950,000 7.80%
SBH MAC INC. $ 72,980,000 8.00%
SBH MAC INC. $ 795,000,000 8.80%
SBH MAC INC. $ 304,000,000 8.80%
SBH MAC INC. $ 100,000,000 8.00%
TOTAL-MAC $2,727,006,000
SBH SBC (Yen)2,312,002,500 5.00%
SBH SBC $ 25,000,000 5.80%
SCHEDULE OF EXISTING GUARANTOR INDEBTEDNESS
- -------------------------------------------
<TABLE>
<CAPTION>
BORROWER LENDER AMOUNT RATE
- --------------------------- ------------------------ ------------------------- -------------------
<S> <C> <C> <C>
ZIFF-DAVIS SBH DELAWARE $1,080,000,000 7.80%
ZIFF-DAVIS SBH DELAWARE $ 600,000,000 6.50%
ZD COMEX & FORUMS SBC $ 100,000,000 9.90%
ZD COMEX & FORUMS SBH DELAWARE $ 309,076,924 8.00%
ZD COMEX & FORUMS SBH DELAWARE $ 65,950,000 7.80%
ZD COMEX & FORUMS SBH DELAWARE $ 300,000,000 6.50%
ZD COMEX & FORUMS SBH DELAWARE $ 72,981,731 8.00%
ZD COMEX & FORUMS SBH DELAWARE $ 10,000,000 8.00%
SB KINGSTON SBH DELAWARE $ 875,000,000 8.80%
</TABLE>
<PAGE>
Schedule 4.06
-------------
SCHEDULE OF EXISTING GUARANTIES
(NONE)
<PAGE>
Schedule 4.07
-------------
SCHEDULE OF EXISTING LIENS
Obligation Secured Collateral
------------------ ----------
(NONE)
<PAGE>
Schedule 4.11
-------------
SCHEDULE OF EXISTING INVESTMENTS
<TABLE>
<CAPTION>
INVESTMENT AMOUNT (COST)
<S> <C>
Yahoo, Inc. $108,250,000
Kinesoft Development Corporation 12,000,000
SEGA Entertainment, Inc. 42,875,000
UT Starcom, Inc. 134,985,283
GeoCities, Inc. 51,658,634
Cybercash, Inc. 15,439,097
Electric Classifieds, Inc. 2,500,000
GT Interactive Software Corp. 38,250,000
Herring Communications Inc. 2,000,000
Wacos, Inc. 5,129,331
WebCel Communications 250,000
</TABLE>
<PAGE>
Schedule 4.12
-------------
SCHEDULE OF EXISTING BENEFIT PLANS
Kingston Technology Corporation
Kingston Technology Corporation Retirement Savings Plan
<PAGE>
Schedule 5.01(b)
----------------
[To be agreed upon; form supplied as starting point]
SOFTBANK HOLDINGS INC.
CERTIFICATE AS TO FINANCIAL STATEMENTS AND DEFAULTS
I, __________, [President, Chief Financial Officer] of SOFTBANK
Holdings Inc., a [jurisdiction of incorporation] corporation (the "Borrower"),
hereby certify, pursuant to Section 5.01 of the Guaranteed Credit Agreement
dated as of March 27, 1996, as amended and restated as of October 30, 1997 and
as further amended and restated as of February 26, 1998 among the Borrower, the
Banks listed on the signature pages thereof, The Bank of New York, as Agent, and
Guarantors party thereto, that:
1. (a) The accompanying [unaudited]1 consolidated and consolidating
financial statements of the Borrower and the Consolidated Subsidiaries as at
__________ and for the [fiscal year][quarterly accounting period]2 ending
__________, 19__, are complete and correct and present fairly, in accordance
with Generally Accepted Accounting Principles (except for changes therein or
departures therefrom described below that have been approved in writing by
Messrs. __________, the Borrower's current independent certified public
accountants), the consolidated and consolidating financial position of the
Borrower and the Consolidated Subsidiaries as at the end of such [fiscal
year][quarterly period]/2/, and the consolidated and consolidating results of
operations and cash flows for such quarterly period, and for the elapsed portion
of the fiscal year ended with the last day of [fiscal year][such quarterly
period]2, in each case on the basis presented [and subject only to normal year-
end auditing adjustments]/1/.
(b) Except as disclosed or reflected in such financial statements, as
at __________, neither the Borrower nor any Subsidiary had any Liability,
contingent or otherwise, or any unrealized or anticipated loss, that, singly or
in the aggregate, have had or might have a Materially Adverse Effect on the
Borrower and the Consolidated Subsidiaries taken as a whole.
2. (a) The changes in and departures from Generally Accepted
Accounting Principles are as follows:
All such changes have been approved in writing by Messrs. __________.
3. There follow the calculations required to establish whether or not
the Borrower was in compliance with the following Sections of the Agreement:/4/
<PAGE>
(a)
(b)
(c)
(d)
(e)
4. Based on an examination sufficient to enable me to make an
informed statement, no Default exists, including, in particular, any such
arising under the provisions of Article 4, except the following:
[If none such exist, insert "None"; if any do exist, specify the
same by Section, give the date the same occurred, and the steps being taken
by the Borrower or a Subsidiary with respect thereto.]
Dated:
------------------------------------
[President, Chief Financial Officer]
_______________
1. Include only in the case of a certificate to be delivered with respect to
quarterly financial statements.
2. Include first alternative in the case of a certificate to be delivered with
respect to year-end financial statements; include second alternative in the
case of a certificate to be delivered with respect to quarterly financial
statements.
3. Paragraph (b) should be included in, and Annex A attached to, the
Certificate only if changes from Generally Accepted Accounting Principles
are specified in Paragraph 2(a) of this or any previous Certificate.
4. The calculations should be made in the same manner and with the same degree
of detail as the calculations set forth in the certificate delivered by the
Borrower pursuant to Section 2.01(a()vi).
2
<PAGE>
Schedule 5.02(a)
----------------
SCHEDULE OF HISTORICAL FINANCIAL STATEMENTS
ZIFF-DAVIS PUBLISHING COMPANY
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
TOTAL WORLDWIDE
<S> <C>
TOTAL REVENUES $ 768,930
TOTAL OPERATING EXPENSE 619,944
---------
TOTAL EBITDA 148,986
Less: Depreciation and Amortization 37,161
---------
TOTAL OPERATING INCOME 111,825
Interest Expense (Income), net 92,609
Amortization of Intangibles 332,597
Income Taxes
Loss on Investments in Joint Ventures 3,391
Other Non-Operating Expense (Income), net 4,695
---------
TOTAL NET INCOME $(321,467)
=========
</TABLE>
3
<PAGE>
4
<PAGE>
ZIFF-DAVIS PUBLISHING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOW
YEAR ENDED DECEMBER 31, 1995
(Amounts in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net (Loss) $ (321,467)
Adjustments to reconcile net income to net cash
Depreciation and amortization 37,161
Amortization of intangibles 332,597
Corporate interest expense 94,203
Allowance for doubtful accounts 14,113
Amortization of deferred finance fee 3,432
Amortization of deferred rent credit (2,529)
Loss on investments in joint ventures 3,391
----------
160,901
Effects of changes in assets and liabilities
Accounts receivable (33,189)
Inventories (8,379)
Prepaid expenses and other current assets (3,830)
Other assets (5,674)
Accounts payable and accrued expenses 30,787
Unexpired subscriptions, net 2,784
Other, net (1,568)
----------
Net cash provided by operating activities 141,832
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Capital expenditures (14,186)
Proceeds from sale of divisions 23,524
----------
5
<PAGE>
Net cash provided by investing activities 9,338
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Repayment of notes payable to banks (69,000)
Corporate interest payments (81,125)
Capital contributions 8,826
Repayment of notes to payable to sellers (1,033,931)
Payment of acquisition liabilities (32,521)
------------
Net cash used in financing activities (1,207,751)
Increase (decrease) in Cash and cash equivalents (1,056,581)
Effect of foreign currency exchange rates on cash 63
Cash and cash equivalents, beginning of period 1,066,606
-----------
Cash and cash equivalents, end of period $ 10,088
===========
6
<PAGE>
ZIFF-DAVIS PUBLISHING COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
WORLDWIDE CONSOLIDATED
-------------------------------------------
January 1 December 31
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $1,066,606 $ 10,088
Accounts receivable, less allowances for doubtful accounts, 102,257 121,099
returns and cancellations
Inventories 12,811 21,194
Prepaid expenses and other current assets 17,939 21,556
---------- ----------
Total current assets 1,199,613 173,937
PROPERTY AND EQUIPMENT, less accumulated depreciation and 87,107 64,110
amortization
INTANGIBLES, net 1,402,300 1,059,373
DEFERRED FINANCE FEE, net 21,410 17,978
OTHER ASSETS 20,095 10,596
---------- ----------
TOTAL ASSETS $2,730,525 $1,325,994
========== ==========
LIABILITIES AND EQUITY
-----------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 120,918 $ 139,173
Unexpired subscriptions, net 74,361 81,737
Current portion of long-term debt 6,000 +
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Other current liabilities 14,025 2,195
Notes payable to Sellers 1,033,931 +
---------- ----------
Total current liabilities 1,249,235 223,105
NOTES PAYABLE 509,000 446,000
SUBORDINATED DEBENTURES 525,000 525,000
OTHER LONG TERM OBLIGATIONS 56,015 53,380
EQUITY
Capital stock 391,275 400,099
Net income (loss) from January 1-December 31, 1995 + (321,467)
Accumulated currency translation adjustment + (123)
---------- ----------
Total equity, December 31, 1995 391,275 78,509
---------- ----------
TOTAL LIABILITIES AND EQUITY $2,730,525 $1,325,994
========== ==========
</TABLE>
2
<PAGE>
Schedule 9.01
-------------
SCHEDULE OF GUARANTORS
Guarantor: Address for Notices:
- --------- -------------------
ZD COMDEX and Forums, Inc. 300 First Avenue
Needham, MA 02194-2722
Telecopier No.: (781) 449-0196
Telephone No.: (781) 433-1910
Attention: Charles D. Forman
Ziff-Davis Inc. One Park Avenue
New York, NY 10016
Telecopier No.: (212) 503-3585
Telephone No.: (212) 503-3762
Attention: Thomas L. Wright
SBH Delaware, Inc. c/o Ziff-Davis, Inc.
One Park Avenue
New York, NY 10016
Telecopier No.: (212) 503-3585
Telephone No.: (212) 503-3762
Attention: Thomas L. Wright
<PAGE>
Schedule 9.10
-------------
FORM OF GUARANTOR SUPPLEMENT
Reference is made to the Guaranteed Credit Agreement dated as of March
27, 1996, as amended and restated as of October 30, 1997 and as further amended
and restated as of February 26, 1998 among SOFTBANK Holdings Inc., the Banks
listed on the signature pages thereof, The Bank of New York, as Agent, and the
Guarantors party thereto (the "Credit Agreement"); capitalized terms used herein
and not otherwise defined herein shall have the meanings given to such terms in,
or by reference in, the Credit Agreement. The undersigned hereby agrees that
upon delivery hereof to the Bank the undersigned shall be and become a Guarantor
for all purposes of the Credit Agreement as fully and to the same extent as if
it were an original signatory thereto.
[Name of Guarantor]
By:
---------------------------
Name:
Title:
Dated:
Notice Address:
Attention:
Telephone:
Telecopy:
<PAGE>
Schedule 10.10(a)
-----------------
NOTICE OF ASSIGNMENT
[Name and address
of Borrower in accordance with
Section 10.01(a)(i)]
[Name and address
of Agent in accordance with
Section 10.01(a)(ii)]
Date:
Gentlemen:
Reference is made to the Guaranteed Credit Agreement, dated as of
March 27, 1996, as amended and restated as of October 30, 1997 and as further
amended and restated as of February 26, 1998, among SOFTBANK Holdings Inc., the
Banks listed on the signature pages thereof, The Bank of New York, as Agent, and
the Guarantors party thereto (the "Credit Agreement"). The undersigned hereby
gives notice that [name of Assignor] [(the "Assignor")]/1/ has made the
following assignment to [name of Assignee] [(the "Assignee")]/2/:
Rights and Obligations
Assigned
Effective Date of
Assignment:
[The Assignee's Lending Offices and address for notices are as
follows:
Domestic Lending Office:
Eurodollar Lending Office:
- -----------
1 Include definition if Footnote 4 material is to be included.
2 Include definition if Footnote 3 or Footnote 4 material is to be included.
2
<PAGE>
Notice Address:]/3/
[The Assignor hereby requests that [the Borrower and] [the Agent]
consent to the assignment described above by signing a copy of this letter in
the space provided below and returning it to the Assignor. Such consent shall
release the Assignor from all of the obligations described above as having been
assigned to the Assignee.]4
[NAME OF ASSIGNOR]
By:
----------------------
Name:
Title:
[NAME OF ASSIGNEE]
By:
-----------------------
Name:
Title:
- -------------
3 Omit if the Assignee is a Bank
4 Include the appropriate portion of the bracketed provision if (i) the
Assignor desires to be released from the assigned obligations, (ii) the
consent of the Borrower and/or the Agent is required for such release and
(iii) the Assignor has not otherwise obtained such consents.
3
<PAGE>
[Assignment and release consented to:]/4/
SOFTBANK HOLDINGS INC.
By:
------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Agent
By:
--------------------------
Name:
Title:
- -------------
4 Include the appropriate portion of the bracketed provision if (i) the
Assignor desires to be released from the assigned obligations, (ii) the
consent of the Borrower and/or the Agent is required for such release and
(iii) the Assignor has not otherwise obtained such consents.
4
<PAGE>
EXHIBIT A-I
SOFTBANK HOLDINGS INC.
RC NOTE
February __, 1998
FOR VALUE RECEIVED, SOFTBANK HOLDINGS INC. (the "Borrower") hereby
promises to pay to the order of _______________________ (the "Bank") the
principal amount of the RC Loans outstanding, on the dates and in the amounts
specified in Section 1.04 of the Credit Agreement referred to below, and to pay
interest on the principal amount of each RC Loan on the dates and at the rates
specified in Section 1.03 of such Credit Agreement. All payments due the Bank
hereunder shall be made to the Bank at the place, in the type of money and funds
and in the manner specified in Section 1.11 of such Credit Agreement.
Each holder hereof is authorized to endorse on the grid attached
hereto, or on a continuation thereof, each RC Loan and each payment, with
respect thereto.
Presentment, demand, protest, notice of dishonor and notice of intent
to accelerate are hereby waived by the undersigned.
This Note evidences RC Loans made under, and is entitled to the
benefits of, the Guaranteed Credit Agreement, dated as of March 27, 1996 as
amended and restated as of October 30, 1997, and as further amended and restated
as of February 26, 1998, among the Borrower, the Guarantors party thereto, the
Banks party thereto and The Bank of New York, as Agent, as the same may be
amended from time to time. Reference is made to such Credit Agreement, as so
amended, for provisions relating to the prepayment and the acceleration of the
maturity hereof.
This Note shall, pursuant to New York General Obligations Law Section
5-1401, be governed by the law of the State of New York.
SOFTBANK HOLDINGS INC.
By:
--------------------
Name:
Title:
1
<PAGE>
GRID
PROMISSORY NOTE
_______________________________________________________________________
Amount of Amount of Notation
Date Loan Principal Repaid Made By
- ----------- ----------------------- ----------------------- -----------
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
<PAGE>
EXHIBIT A-II
SOFTBANK HOLDINGS INC.
SWING LOAN NOTE
February __, 1998
FOR VALUE RECEIVED, SOFTBANK HOLDINGS INC. (the "Borrower") hereby
promises to pay to the order of _______________________ (the "Swing Line Bank")
the principal amount of the Swing Loans outstanding, on the dates and in the
amounts specified in Section 1.04 of the Credit Agreement referred to below, and
to pay interest on the principal amount of each Swing Loan on the dates and at
the rates specified in Section 1.03 of such Credit Agreement. All payments due
the Swing Line Bank hereunder shall be made to the Swing Line Bank at the place,
in the type of money and funds and in the manner specified in Section 1.11 of
such Credit Agreement.
Each holder hereof is authorized to endorse on the grid attached
hereto, or on a continuation thereof, each Swing Loan and each payment, with
respect thereto.
Presentment, demand, protest, notice of dishonor and notice of intent
to accelerate are hereby waived by the undersigned.
This Note evidences Swing Loans made under, and is entitled to the
benefits of, the Guaranteed Credit Agreement, dated as of March 27, 1996 as
amended and restated as of October 30, 1997, and as further amended and restated
as of February 26, 1998, among the Borrower, the Guarantors party thereto, the
Banks party thereto and The Bank of New York, as Agent, as the same may be
amended from time to time. Reference is made to such Credit Agreement, as so
amended, for provisions relating to the prepayment and the acceleration of the
maturity hereof.
This Note shall, pursuant to New York General Obligations Law Section
5-1401, be governed by the law of the State of New York.
SOFTBANK HOLDINGS INC.
By:
--------------------
Name:
Title:
<PAGE>
GRID
PROMISSORY NOTE
_______________________________________________________________________
Amount of Amount of Notation
Date Loan Principal Repaid Made By
- ----------- ----------------------- ----------------------- -----------
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
<PAGE>
EXHIBIT B
SUBORDINATION AGREEMENT FORM
[ATTACH FORM]
<PAGE>
AMENDMENT NO. 1
to
CREDIT AGREEMENT
THIS AMENDMENT NO. 1 (the "Amendment"), dated as of March 9, 1998 among
SOFTBANK Holdings Inc. (the "Borrower"), the guarantors listed on the signature
pages hereof (the "Guarantors"), The Bank of New York (the "Existing Bank"), The
Bank of New York, as Agent (the "Agent") and Morgan Stanley Senior Funding, Inc.
(the "Incoming Bank"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Existing Bank and the Agent are
parties to the Guaranteed Credit Agreement dated as of March 27, 1996, as
amended and restated as of February 26, 1998 (as so amended and restated, the
"Agreement") (capitalized terms used and not otherwise defined herein shall have
the meanings ascribed thereto in the Agreement); and
WHEREAS, the Borrower has requested, and the Existing Bank and the Agent
have agreed to, the amendments to the Agreement more fully set forth in this
Amendment; and
WHEREAS, such amendments shall be of benefit, either directly or
indirectly, to the Borrower; and
WHEREAS, the Incoming Bank desires to become party to the Agreement, as
amended hereby, as a Bank;
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Amendments. Upon and after the Amendment Effective Date (as
----------
defined in Section 3 below):
(a) The aggregate amount of the Commitments shall be increased to
$450,000,000, the Commitments of each of the Banks (which shall include both the
Existing Bank and the Incoming Bank) shall be as set forth on Annex A hereto and
Annex A to the Agreement shall be restated in its entirety as set forth on Annex
A hereto.
(b) The Incoming Bank shall be a Bank for all purposes under the
Agreement, with all of the rights and obligations of a Bank thereunder, as fully
and to the same extent as if it were an original signatory thereto.
<PAGE>
(c) The Borrower hereby designates the Incoming Bank as Co-Arranger
and Syndication Agent, and BNY Capital Markets, Inc. as Lead Arranger.
2. Representations and Warranties. In order to induce the Existing
------------------------------
Bank to agree to amend the Agreement and the Incoming Bank to become party to
the Agreement as amended hereby, the Borrower and each Guarantor make the
following representations and warranties, which shall survive the execution and
delivery of this Amendment:
(a) No Default has occurred and is continuing or would exist
immediately after giving effect to the amendments contained herein; and
(b) Each of the representations and warranties set forth in
Article 3 of the Agreement are true and correct as though such
representations and warranties were made at and as of the Amendment
Effective Date (as defined in Section 3 below), except to the extent that
any such representations or warranties are made as of a specified date or
with respect to a specified period of time, in which case such
representations and warranties shall be made as of such specified date or
with respect to such specified period. Each of the representations and
warranties made under the Agreement (including those made herein) shall
survive to the extent provided therein and not be waived by the execution
and delivery of this Amendment.
3. Amendment Effective Date. This Amendment shall become effective
------------------------
as of the date first referenced above on the date (the "Amendment Effective
Date") on which:
(a) the Agent shall have received this Amendment, executed and
delivered by the Borrower, each Guarantor, the Agent, the Existing Bank and
the Incoming Bank and
(b) the Incoming Bank shall have made the payment to the Existing Bank
referred to in Section 4 hereof.
4. Assignment and Assumption. Upon the Amendment Effective Date (as
-------------------------
defined in Section 3 above) the Existing Bank shall be deemed to sell and assign
to the Incoming Bank, and the Incoming Bank shall be deemed to purchase and
assume from the Existing Bank, without recourse, all right, title and interest
of the Existing Bank in RC Loans then outstanding to the extent in excess of the
Existing Bank's Pro Rata Share of such RC Loans, based on the Commitments as in
effect after giving effect to the amendments set forth in Section 1 hereof (such
RC Loans, the "Assigned Loans"). In consideration of such sale and assignment
the Incoming Bank shall pay to the Existing Bank an amount equal to the
principal amount of the Assigned Loans. Amounts payable by the Borrower with
respect to the Assigned Loans for periods prior to the Amendment Effective Date
shall be payable for the account of the Existing Bank, and such amounts payable
with respect to periods after the Amendment Effective Date shall be payable for
the account of the Incoming Bank.
5. Consent and Undertaking. The Borrower and each Guarantor hereby
-----------------------
consent to the assignment effected by Section 4 hereof, and the Borrower
undertakes promptly
2
<PAGE>
following the Amendment Effective Date (as defined in Section 3 hereof) to
provide a new Note to the Incoming Bank.
6. Payment of Expenses. The Borrower hereby agrees to pay all
-------------------
reasonable costs and expenses incurred by the Agent in connection with the
preparation, execution and delivery of this Amendment and any other documents or
instruments which may be delivered in connection herewith.
7. Counterparts. This Amendment may be executed in counterparts
------------
and by different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which, when
taken together, shall constitute one and the same instrument.
8. Ratification. The Agreement, as amended by this Amendment, is
------------
and shall continue to be in full force and effect and is hereby in all respects
confirmed, approved and ratified.
9. Governing Law. The rights and duties of the Borrower, the
-------------
Guarantors, the Existing Bank, the Incoming Bank and the Agent under this
Amendment shall, in accordance with New York General Obligations Law Section 5-
1401, be governed by the law of the State of New York.
10. Reference to Agreement. From and after the Amendment Effective
----------------------
Date, each reference in the Agreement to "this Agreement," "hereof," "hereunder"
or words of like import, and all references to the Agreement in any and all
agreements, instruments, documents, notes, certificates and other writings of
every kind and nature, shall be deemed to mean the Agreement as modified and
amended by this Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first written above.
SOFTBANK HOLDINGS INC.
By: /s/ Thomas L. Wright
-------------------------------
Name: Thomas L. Wright
Title: Vice President and Treasurer
ZD COMDEX AND FORUMS, INC.,
as a Guarantor
By: /s/ Mo Verani
--------------------------------
Name: Mo Verani
Title: Chief Financial Officer
ZIFF-DAVIS INC.,
as a Guarantor
By: /s/ Thomas L. Wright
---------------------------------
Name: Thomas L. Wright
Title: Vice President and Treasurer
SBH DELAWARE, INC.,
as a Guarantor
By: /s/ Thomas L. Wright
------------------------------------
Name: Thomas L. Wright
Title: Vice President and Treasurer
<PAGE>
THE BANK OF NEW YORK,
as Agent and a Bank
By: /s/ Brendan T. Nedzi
------------------------------------
Name: Brendan T. Nedzi
Title: Senior Vice President
MORGAN STANLEY SENIOR FUNDING, INC.
By: /s/ Michael T. McLaughlin
-------------------------------------------
Name: Michael T. McLaughlin
Title: Principal
<PAGE>
ANNEX A
Banks, Lending Offices
and Notice Addresses Commitments
- -------------------- -----------
THE BANK OF NEW YORK $225,000,000
Domestic Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
Eurodollar Lending Office:
Morgan Stanley Senior Funding, Inc.
One Wall Street
New York, NY 10286
Notice Address:
Bank of New York
One Wall Street
New york, NY 10286
Telecopy No.: (212) 635-8593/8595
Telephone No.: (212) 635-8628
Attention: Mr. Brendan T. Nedzi
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitments
- -------------------- -----------
MORGAN STANLEY
SENIOR FUNDING, INC. $225,000,000
Domestic Lending Office:
Morgan Stanley Senior Funding, Inc.
1585 Broadway
New York, NY 10036
Eurodollar Lending Office:
Morgan Stanley Senior Funding, Inc.
1585 Broadway
New York, NY 10036
Notice Address:
Morgan Stanley Senior Funding, Inc.
1585 Broadway
New York, NY 10036
Attention: Henry F. D'Alessandro
Telecopy No.: (212) 761-3932
Telephone No.: (212) 761-1051
And: James Morgan
Telecopy No.: (212) 761-0592
Telephone No.: (212) 761-4866
<PAGE>
EXHIBIT 21.1
Upon consummation of the Reorganization, the Registrant's subsidiaries will
be:
ZD COMDEX AND FORUMS INC.; DELAWARE
ZIFF-DAVIS INC.; DELAWARE
1
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports dated February 17, 1998,
relating to the combined financial statements of Ziff-Davis Inc. and ZD COMDEX
and Forums Inc., and the consolidated financial statements of Ziff-Davis Inc.
(formerly Ziff-Davis Publishing Company), which appear in such Prospectus. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
New York, NY
April 2, 1998
