ZIFF DAVIS INC, PRER14A, 1999-03-02

ZIFF DAVIS INC
PRER14A, 1999-03-02
PERIODICALS: PUBLISHING OR PUBLISHING & PRINTING

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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934

Filed by the Registrant [X]

Filed by a Party Other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement

[_] Confidential, for Use of the
[_] Definitive Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

ZIFF-DAVIS INC.
(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:
$

(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount previously paid:

(2) Form, Schedule or Registration Statement No.:

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(4) Date Filed:
<PAGE>

ZIFF-DAVIS INC.
ONE PARK AVENUE
NEW YORK, NEW YORK 10016

., 1999

Dear Stockholder:

We invite you to attend a Special Meeting of stockholders of Ziff-Davis Inc.
to be held at 9:00 a.m., Eastern Standard Time, on March ., 1999 at .. At this
Special Meeting we will ask you to consider and approve the Tracking Stock
Proposal described in the accompanying Proxy Statement.

The Tracking Stock Proposal will allow us to issue a new series of common
stock ("ZDNet Stock"), intended to reflect the performance of ZDNet (i.e., our
online business division). Before we first issue ZDNet Stock, we would re-
classify Ziff-Davis Inc.'s existing common stock as "ZD Stock", intended to
reflect the performance of ZD (i.e., our other businesses and a retained
interest in ZDNet).

After the Special Meeting, we currently plan to offer to the public, for
cash, shares of ZDNet Stock intended to represent approximately 15% of the
equity value attributed to ZDNet and to use the net proceeds from that offering
to reduce our outstanding indebtedness.

We are proceeding with the Tracking Stock Proposal primarily for the
following reasons:

. The proposal will permit the market to review separate information about
ZDNet and separately value ZDNet Stock. This should encourage investors
and analysts to focus more attention on ZDNet and result in greater
market recognition of the value of ZDNet to Ziff-Davis Inc.

. The proposal will allow investors to invest in either or both series of
common stock, depending on their particular investment objectives.

. The proposal will allow us to issue stock options tied to ZDNet Stock,
thereby providing more focused incentives to ZDNet management and
employees.

. The proposal will provide us with greater flexibility to raise capital
and respond to strategic opportunities (including acquisitions), because
it will allow us to issue either ZD Stock or ZDNet Stock as appropriate
under the circumstances.

. The proposal will allow us to monetize some of the value of ZDNet while
preserving the financial, tax, operational, strategic and other benefits
of being a single consolidated entity.

. The proposal will allow us to issue ZDNet Stock to the public for cash on
a basis that we believe is tax-free and use the net proceeds to reduce
indebtedness. Assuming we do so (as we currently plan), the result should
strengthen Ziff-Davis Inc. from a credit perspective.

In addition to the Tracking Stock Proposal, we will ask you to consider and
approve related proposals to amend certain of our benefit plans. The board of
directors has carefully considered and unanimously approved the Tracking Stock
Proposal and these additional proposals and recommends that you vote for them.
We describe the proposals in more detail in the accompanying Proxy Statement,
which you should read in its entirety before voting.

SOFTBANK America Inc., the owner of approximately 72% of our outstanding
common stock, has agreed to vote for these proposals. Thus, we expect these
proposals to pass regardless of how other stockholders vote.

In addition to the Notice of Special Meeting and Proxy Statement, we have
attached for your convenience, in "Q and A" format, a summary of certain
questions you may have about the Tracking Stock Proposal and our answers to
these questions.

Thank you for your cooperation and continued support and interest in Ziff-
Davis Inc.

Sincerely yours,

Eric Hippeau
Chairman
<PAGE>

QUESTIONS AND ANSWERS
ABOUT OUR
TRACKING STOCK PROPOSAL

Q: WHY AM I RECEIVING THIS PROXY STATEMENT? WHAT IS THE TRACKING STOCK
PROPOSAL?

A: We are sending you this Proxy Statement in connection with a Special Meeting
to be held at 9:00 a.m., Eastern Standard Time, on March ., 1999 at .. At
this Special Meeting we will ask you to consider and approve the Tracking
Stock Proposal described in this Proxy Statement. The Tracking Stock
Proposal would allow us to amend and restate our charter to:

. Increase the number of authorized shares of common stock from 120 million
to 210 million.

. Authorize the board of directors to issue common stock in two series--ZD
Stock and ZDNet Stock.

. We intend ZDNet Stock to reflect the performance of ZDNet (i.e., our
online business division).

. We intend ZD Stock to reflect the performance of ZD (i.e., our other
businesses and a retained interest in ZDNet).

. We have allocated all of Ziff-Davis Inc.'s consolidated assets,
liabilities, revenue, expenses and cash flow between ZD and ZDNet. In
the future, we will publish combined financial statements of ZD and
combined financial statements of ZDNet together with consolidated
financial statements of Ziff-Davis Inc.

. Re-classify each outstanding share of existing common stock into a share
of ZD Stock.

SOFTBANK America Inc., the owner of approximately 72% of our outstanding
common stock, has agreed to vote for the Tracking Stock Proposal. Thus, we
expect the Tracking Stock Proposal to pass regardless of how other
stockholders vote.

Q: WHAT IS "TRACKING STOCK"?

A: "Tracking stock", which people sometimes call "alphabet stock", "letter
stock" or "targeted stock", is a type of common stock that the issuing
company intends to reflect (or "track") the performance of a particular
business. As mentioned above, we propose creating two new series of tracking
stock, to be designated as ZD Stock and ZDNet Stock.

We can't assure you that the market values of ZD Stock and ZDNet Stock will
in fact reflect the performance of ZD and ZDNet as we intend. Holders of ZD
Stock and ZDNet Stock will continue to be common stockholders of Ziff-Davis
Inc. and, as such, will be subject to all risks associated with an
investment in Ziff-Davis Inc. and all of our businesses, assets and
liabilities.

Q: HOW WILL YOU INITIALLY ISSUE ZDNET STOCK? HOW MANY SHARES WILL YOU INITIALLY
ISSUE AND WHEN?

A: We currently plan to offer to the public, for cash, shares of ZDNet Stock
intended to represent approximately 15% of the equity value attributed to
ZDNet and to use the net proceeds from that offering to reduce our
outstanding indebtedness. We expect the ZDNet Stock offering to occur
sometime in the first or second quarter of 1999. However, we could choose to
conduct the offering at a later time, or not to make the offering at all,
depending on the circumstances at the time.

ii
<PAGE>

Q: WHEN WILL YOU IMPLEMENT THE TRACKING STOCK PROPOSAL? WHEN WILL YOU RE-
CLASSIFY MY COMMON STOCK INTO ZD STOCK?

A: We will file the amended and restated certificate of incorporation
implementing the Tracking Stock Proposal and re-classify your common stock
before we first issue ZDNet Stock.

Q: WHAT HAPPENS TO MY COMMON STOCK WHEN YOU IMPLEMENT THE TRACKING STOCK
PROPOSAL? DO I NEED TO SEND IN MY STOCK CERTIFICATES?

A: When we file the amended and restated certificate of incorporation
implementing the Tracking Stock Proposal, that filing will automatically re-
classify each of your shares into one share of ZD Stock, and your existing
stock certificates will automatically represent that ZD Stock. Since the re-
classification is automatic, you do not need to send in your stock
certificates or make any notations reflecting the change.

Q: WHY ARE YOU DOING THIS?

Primarily for the following reasons:

. The proposal will allow investors to invest in either or both series of
common stock, depending on their particular investment objectives.

. The proposal will allow us to issue stock options tied to ZDNet Stock,
thereby providing more focused incentives to ZDNet management and
employees.

. The proposal will allow us to monetize some of the value of ZDNet while
preserving the financial, tax, operational, strategic and other benefits
of being a single consolidated entity.

Q: WILL THE ISSUANCE OF ZDNET STOCK HAVE ANY CREDIT IMPLICATIONS?

A: Yes--positive implications. Because ZDNet Stock is a series of common stock
of Ziff-Davis Inc., an issuance of ZDNet Stock will not diminish Ziff-Davis
Inc.'s consolidated asset base in any way. Thus, assuming we issue ZDNet
Stock to the public for cash on a basis that we believe is tax-free and use
the net proceeds to reduce our indebtedness (as currently planned), the
result should strengthen Ziff-Davis Inc. from a credit perspective.

Q: WILL ZD STOCK BE LISTED ON THE NYSE? HOW ABOUT ZDNET STOCK?

A: When we re-classify our common stock as ZD Stock, it will continue to trade
on the NYSE under the symbol "ZD". We currently intend to apply for listing
of ZDNet Stock on the NYSE under the symbol "ZDZ".

Q: WHAT VOTING RIGHTS WILL I HAVE?

A: Holders of ZD Stock and ZDNet Stock will vote together as a single class
(except in certain limited circumstances). Each share of ZD Stock will
entitle the holder to one vote. Each share of ZDNet Stock will entitle the
holder, for any particular vote, to a number of votes equal to the market
value of a share

of ZDNet Stock divided by the market value of a share of ZD Stock over a
specified 20-trading day period prior to the date of that vote.

iii
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Q: WHAT ARE THE TAX CONSEQUENCES OF THE TRACKING STOCK PROPOSAL?

A: We believe that neither you nor Ziff-Davis Inc. will recognize any income,
gain or loss for federal income tax purposes as a result of the re-
classification of existing common stock into ZD Stock or the issuance of
ZDNet Stock. There are, however, no court decisions bearing directly on
similar transactions and the Internal Revenue Service has announced that it
will not issue advance rulings on the federal income tax consequences of
such transactions. Thus, you should consult a tax advisor.

Q: DO YOU INTEND TO PAY DIVIDENDS?

A: We currently intend to retain all of our earnings to finance our operations,
repay indebtedness and fund future growth. We do not expect to pay any
dividends on ZD Stock or ZDNet Stock for the foreseeable future.

Q: WHEN AND WHERE WILL THE SPECIAL MEETING BE HELD?

A: We will hold the Special Meeting at 9:00 a.m., Eastern Standard Time, on
March ., 1999, at ..

Q: WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?

A: The board of directors has carefully considered and unanimously approved the
Tracking Stock Proposal and the additional proposals described in the Proxy
Statement and recommends that you vote for them.

Q: WHAT VOTE IS REQUIRED TO APPROVE THE TRACKING STOCK PROPOSAL? WHAT DOES
SOFTBANK AMERICA INC. INTEND TO DO?

A: The Tracking Stock Proposal requires the vote of the holders of a majority
of the outstanding shares. SOFTBANK America Inc., the owner of approximately
72% of our outstanding common stock, has agreed to vote for the Tracking
Stock Proposal. Thus, we expect the Tracking Stock Proposal to pass
regardless of how other stockholders vote.

Q: WHAT DO I DO IF I HAVE ADDITIONAL QUESTIONS?

A: If you have any questions prior to the Special Meeting, please call Morrow &
Co., Inc. at (212) 754-8000.

iv
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ZIFF-DAVIS INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD MARCH ., 1999

TO THE STOCKHOLDERS OF
ZIFF-DAVIS INC.:

A Special Meeting of stockholders of Ziff-Davis Inc. will be held at 9:00
a.m., Eastern Standard Time, on March ., 1999, at ., for the following
purposes:

1. To act upon our proposal to amend and restate our amended and restated
certificate of incorporation so that it reads in its entirety as set forth
in Annex II to the accompanying Proxy Statement.

2. To act upon proposals to amend the 1998 Incentive Compensation Plan,
the 1998 Employee Stock Purchase Plan and the 1998 Non-Employee Directors'
Stock Option Plan so that they read in their entirety as set forth in
Annexes III, IV and V, respectively, to the accompanying Proxy Statement.

3. To transact such other business as may properly come before the
meeting.

We describe the proposals in more detail in the accompanying Proxy Statement,
which you should read in its entirety before voting.

Only stockholders of record at the close of business on February 1, 1999 will
be entitled to vote at the meeting.

You may attend the meeting in person or complete, date, sign and return the
enclosed proxy. SOFTBANK America Inc., the owner of approximately 72% of our
outstanding common stock, has agreed to vote for these proposals. Thus, we
expect these proposals to pass regardless of how other stockholders vote.

By order of the board of directors,

J. Malcolm Morris
Secretary

New York, New York
., 1999
<PAGE>

PROXY STATEMENT

----------------

ZIFF-DAVIS INC.

----------------

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON, MARCH ., 1999

----------------

The board of directors of Ziff-Davis Inc. is furnishing this Proxy Statement
in connection with a Special Meeting to be held at 9:00 a.m., Eastern Standard
Time, on March ., 1999 at .. At this Special Meeting we will ask you to
consider and approve the Tracking Stock Proposal described in this Proxy
Statement.

The Tracking Stock Proposal will allow us to issue a new series of common
stock called Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"), intended to
reflect the performance of ZDNet (i.e., our online business division). Before
we first issue ZDNet Stock, we would re-classify Ziff-Davis Inc.'s existing
common stock as Ziff-Davis Inc.--ZD Common Stock ("ZD Stock") and that stock
would be intended to reflect the performance of ZD (i.e., our other businesses
and a retained interest in ZDNet). Our reasons for proceeding with the Tracking
Stock Proposal are outlined elsewhere in this Proxy Statement. See "Proposal
1--The Tracking Stock Proposal--Background and Reasons for the Tracking Stock
Proposal".

In addition to the Tracking Stock Proposal, we will ask you to consider and
approve related proposals to amend certain of our benefit plans. The board of
directors has carefully considered and unanimously approved the Tracking Stock
Proposal and these additional proposals and recommends that you vote for them.
We describe the proposals in more detail in this Proxy Statement, which you
should read in its entirety before voting.

See "Risk Factors" beginning on page 17 for certain information relating to
an evaluation of the Tracking Stock Proposal.

The date of this Proxy Statement is March . , 1999. We are first sending
this Proxy Statement to stockholders on or about that date.

<PAGE>

TABLE OF CONTENTS
<TABLE>
<S> <C>
PROXY STATEMENT SUMMARY................................................... 3
RISK FACTORS.............................................................. 17
Risk Factors Relating to the Tracking Stock Proposal..................... 17
Risk Factors Relating to ZDNet........................................... 23
Other Ziff-Davis Inc. Risks.............................................. 29
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................. 34
GENERAL................................................................... 35
PROPOSAL 1--THE TRACKING STOCK PROPOSAL................................... 36
General.................................................................. 36
Background and Reasons for the Tracking Stock Proposal................... 37
Dividend Policy.......................................................... 38
Certain Cash Management and Allocation Policies.......................... 38
Description of ZD Stock and ZDNet Stock.................................. 41
Limitations on Potential Unsolicited Acquisitions;
Anti-Takeover Considerations............................................ 53
Certain Other Provisions of the Restated Certificate of Incorporation and
By-laws................................................................. 54
Certain Provisions of Delaware Law....................................... 55
Limitations on Liability and Indemnification of Officers and Directors... 56
No Appraisal Rights...................................................... 57
Financial Advisors....................................................... 57
Stock Transfer Agent and Registrar....................................... 57
Certain Federal Income Tax Considerations................................ 57
PROPOSALS 2, 3 and 4--AMENDMENTS TO CERTAIN PLANS......................... 59
General.................................................................. 59
Description of Amendments to Incentive Plan (Proposal 2)................. 59
Description of Amendments to Stock Purchase Plan (Proposal 3)............ 62
Description of Amendments to Non-Employee Directors' Plan (Proposal 4)... 63
EXECUTIVE COMPENSATION.................................................... 65
Summary Compensation Table............................................... 65
Option Grants and Exercises in 1998...................................... 66
Committees of the Board of Directors; Compensation Committee Interlocks
and Insider Participation .............................................. 67
Compensation of Directors................................................ 67
Incentive Compensation Plan.............................................. 68
Employee Stock Purchase Plan............................................. 71
Softbank Executive Stock Option Plans.................................... 72
Employment Agreements.................................................... 73
</TABLE>

<TABLE>
<S> <C>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......... 75
Certain Beneficial Owners............................................. 75
Management............................................................ 76
STOCKHOLDER PROPOSALS.................................................. 77
INDEX OF CERTAIN TERMS................................................. 78
ANNEX I--ILLUSTRATIONS OF CERTAIN TERMS................................ I-1
ANNEX II--PROPOSAL 1--THE TRACKING STOCK PROPOSAL (AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION)......................................... II-1
ANNEX III--PROPOSAL 2--AMENDED 1998 INCENTIVE COMPENSATION PLAN........ III-1
ANNEX IV--PROPOSAL 3--AMENDED 1998 EMPLOYEE STOCK PURCHASE PLAN........ IV-1
ANNEX V--PROPOSAL 4--AMENDED 1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION
PLAN.................................................................. V-1
ANNEX VI--ZIFF-DAVIS INC............................................... VI-1
Selected Historical Consolidated Financial and
Other Data........................................................... VI-1
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ VI-2
Description of Business............................................... VI-14
Consolidated Financial Statements..................................... VI-15
ANNEX VII--ZD.......................................................... VII-1
Selected Historical Combined Financial and Other Data................. VII-1
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ VII-2
Description of Business............................................... VII-15
Combined Financial Statements......................................... VII-28
ANNEX VIII--ZDNET...................................................... VIII-1
Selected Historical Combined Financial and Other Data................. VIII-1
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ VIII-2
Description of Business............................................... VIII-12
Combined Financial Statements......................................... VIII-24
</TABLE>

2
<PAGE>

PROXY STATEMENT SUMMARY

This summary highlights key aspects of the Tracking Stock Proposal and the
proposals to amend certain of our benefit plans contained elsewhere in this
Proxy Statement. This summary is not a substitute for the more detailed
information contained in the rest of this Proxy Statement. For a more
comprehensive description of the Tracking Stock Proposal and the proposals to
amend certain of our benefit plans you should read the rest of this Proxy
Statement. Capitalized terms used in this summary have the meanings given them
elsewhere in this Proxy Statement. See "Index of Certain Terms" on page 78.

ZIFF-DAVIS INC., ZD AND ZDNET

Ziff-Davis Inc.

The Tracking Stock Proposal will allow us to issue ZDNet Stock, intended to
reflect the performance of ZDNet, and ZDStock, intended to reflect the
performance of ZD. We briefly describe ZD below and we briefly describe ZDNet
in the next section.

ZD includes:

. The following Ziff-Davis Inc. businesses: print publishing, trade shows
and conferences, market research, education (including our Internet-based
educational service) and television (including an online component).

. A retained interest in ZDNet. This retained interest is currently 100%,
but will decline to reflect the initial issuance of ZDNet Stock as well
as any future issuances.

Our principal executive offices are located at One Park Avenue, New York, New
York 10016. Our telephone number is (212) 503-3500.

ZDNet

ZDNet provides technology-related information to Internet users worldwide.
ZDNet focuses on content, community and commerce. ZDNet creates up-to-date,
reliable and comprehensive content divided broadly into "channels" that focus
on specific topics or audience groups. ZDNet's network of over 60
interconnected Internet sites offers over 1,200 news stories per month, 50,000
product listings, 30,000 product reviews and 34,000 downloadable programs. The
community of ZDNet users interacts through various online message systems,
including bulletin boards, chat rooms, moderated forums and e-mail. ZDNet
facilitates commerce by providing users of its sites with the ability to
evaluate, compare and purchase products and services and by providing
advertisers and merchants with access to a highly targeted user group with
attractive demographics.

According to Media Metrix, in December 1998 zdnet.com ranked first among all
Web sites in the category of news, information and entertainment, ahead of such
sites as cnet.com, cnn.com, msnbc.com, Disney Online and espn.com. ZDNet
estimates that its Web sites served more than 202 million page views during
December 1998, up from 124 million in December 1997. ZDNet delivered
approximately 460 million ad-bearing pages during the fourth quarter of 1998,
up from 240 million during the same period of 1997. In addition, ZDNet had
localized foreign language editions in more than 16 countries as of December
31, 1998.

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As the Internet gains acceptance as an advertising and commerce medium and as
Internet use continues to grow, technology will play an increasing role in
everyday life. According to Dataquest, worldwide end user spending for
information technology products and related services is expected to be
approximately $2 trillion in 1999 and grow 10% to 15% annually over the next
three years. The prevalence of technology and the growing number of
technological choices heighten the demand for up-to-date, comprehensive
information about technology-related products and services.

ZDNet's objective is to be the leading online content site focused on
technology products and services and the preferred online platform for
advertisers and merchants. ZDNet's strategy is to:

. continue to offer differentiated technology-related content,

. grow ZDNet's user community,

. build ZDNet's brand strength,

. increase advertising and commerce revenue,

. strengthen and expand strategic alliances and

. extend ZDNet's international presence.

ZDNet derives many benefits from its relationship with ZD, including consumer
and business recognition of the ZD brand name, use of magazine articles,
product reviews and other information created by ZD, and the ability to market
and promote ZDNet across all of ZD's businesses and publications. ZDNet's
revenue has grown from $13.6 million in 1995 to $56.1 million in 1998.

4
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SPECIAL MEETING

<TABLE>
<S> <C>
Time, Date and Place 9:00 a.m., Eastern Standard Time, on March ., 1999, at ..
Record Date February 1, 1999.
Proposals to be
Considered Vote Required for Approval
. Proposal 1--The
Tracking Stock Proposal 1 requires the affirmative vote of the holders of a
Proposal majority of the outstanding shares of existing common stock.
. Proposals 2, 3 and 4-- Each of Proposals 2, 3 and 4 requires the affirmative vote of
Amendments to Certain the holders of a majority of the shares of existing common
Plans stock present in person or represented by proxy at the Special
Meeting.
SOFTBANK's Intentions SOFTBANK America Inc., the owner of approximately 72% of our
outstanding common stock, has agreed to vote for these
proposals. Thus, we expect these proposals to pass regardless
of how other stockholders vote.
Questions If you have any questions prior to the Special Meeting, please
call Morrow & Co., Inc. at (212) 754-8000.
</TABLE>

The board of directors has carefully considered and unanimously approved
these proposals and recommends that you vote for them.

5
<PAGE>

PROPOSAL 1--THE TRACKING STOCK PROPOSAL

General

At the Special Meeting, we will ask you to consider and approve the Tracking
Stock Proposal described in this Proxy Statement. The Tracking Stock Proposal
would allow us to amend and restate our charter to:

. Increase the number of authorized shares of common stock from 120 million
to 210 million.

. Authorize the board of directors to issue common stock in two series--ZD
Stock and ZDNet Stock.

. We intend ZDNet Stock to reflect the performance of ZDNet (i.e., our
online business division).

. We intend ZD Stock to reflect the performance of ZD (i.e., our other
businesses and a Retained Interest in ZDNet).

. Re-classify each outstanding share of existing common stock into a share
of ZD Stock.

We currently plan to offer to the public, for cash, 10,000,000 shares of
ZDNet Stock intended to represent 14% of the equity value attributed to ZDNet.
We call this offer the "Offering". This would leave ZD with a retained interest
intended to represent 86% of the equity attributable to ZDNet. Assuming we do
so, we currently plan to attribute the net proceeds from 1,500,000 shares to
ZDNet, in a manner analogous to a primary offering of common stock, and
attribute the net proceeds from the remaining shares to ZD, in a manner
analogous to a secondary offering of common stock of a subsidiary owned by a
parent. ZDNet would then advance to ZD the net proceeds attributed to ZDNet,
and ZD would use those net proceeds, together with the net proceeds attributed
to ZD, to reduce our outstanding indebtedness. This should strengthen Ziff-
Davis Inc. from a credit perspective.

We expect that the Offering would occur sometime in the first or second
quarter of 1999. However, we could choose to conduct the Offering at a later
time, or not to make the Offering at all, depending on the circumstances at the
time.

We will file the amended and restated certificate of incorporation
implementing the Tracking Stock Proposal and re-classify your common stock
before we first issue ZDNet Stock.

Reasons for the Tracking Stock Proposal

We are proceeding with the Tracking Stock Proposal primarily for the
following reasons:

. The proposal will allow investors to invest in either or both series of
common stock, depending on their particular investment objectives.

. The proposal will allow us to issue stock options tied to ZDNet Stock,
thereby providing more focused incentives to ZDNet management and
employees.

6
<PAGE>

. The proposal will provide us with greater flexibility to raise capital
and respond to strategic opportunities, including acquisitions, because
it will allow us to issue either ZD Stock or ZDNet Stock as appropriate
under the circumstances.

. The proposal will enable us to monetize some of the value of ZDNet while
preserving the financial, tax, operational, strategic and other benefits
of being a single consolidated entity.

. The proposal will allow us to issue ZDNet Stock to the public for cash on
a basis that we believe is tax-free and use the net proceeds to reduce
our indebtedness. Assuming we do so (as we currently plan), the result
should strengthen Ziff-Davis Inc. from a credit perspective.

Summary Comparison of Terms of Existing Common Stock with Terms of ZD Stock and
ZDNet Stock

The following compares certain terms of our existing common stock to the
proposed terms of ZD Stock and ZDNet Stock. This comparison is not complete and
should be read together with the more detailed information contained in the
rest of this Proxy Statement. In particular, see "Proposal 1--The Tracking
Stock Proposal--Description of ZD Stock and ZDNet Stock".

<TABLE>
<CAPTION>
Tracking Stock Proposal
Existing -------------------------------------
Common Stock ZD Stock ZDNet Stock
------------------ ------------------ -----------------
<S> <C> <C> <C>
Basic Our existing We intend ZD We intend ZDNet
Investment Common Stock Stock to reflect Stock to reflect
Characteristics: reflects the the performance the performance
performance of of ZD. ZD of ZDNet, our
all of our currently online business
businesses, includes: division.
including: . Print
. Print Publishing
Publishing . Trade Shows and
. Trade Shows and Conferences
Conferences . Market Research
. Internet . Education
. Market Research (including our
. Education Internet-based
. Television educational
service)
. Television
(including an
online
component)
. A Retained
Interest in
ZDNet, which is
currently 100%
but will
decline to
reflect the
initial
issuance of
ZDNet Stock as
well as any
future
issuances

We cannot assure We cannot assure
you that the you that the
market value of market value of
ZD Stock will in ZDNet Stock will
fact reflect the in fact reflect
performance of ZD the performance
as we intend. of ZDNet as we
Holders of ZD intend. Holders
Stock will of ZDNet Stock
continue to be will continue to
common be common
stockholders of stockholders of
Ziff-Davis Inc. Ziff-Davis Inc.
and, as such, and, as such,
will be subject will be subject
to all risks to all risks
associated with associated with
an investment in an investment in
Ziff-Davis Inc. Ziff-Davis Inc.
and all of our and all of our
businesses, businesses,
assets and assets and
liabilities. liabilities.

Issuance: Our existing Before we first We currently plan
common stock is issue ZDNet to offer to the
already Stock, we will public, for cash,
outstanding. re-classify each 10,000,000 shares
outstanding share of ZDNet Stock
of existing intended to
common stock into represent 14% of
a share of ZD the equity value
Stock. attributed to
ZDNet.

</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
Tracking Stock Proposal
Existing -------------------------------------
Common Stock ZD Stock ZDNet Stock
------------------ ------------------ -----------------
<S> <C> <C> <C>
Use of Proceeds N/A We currently plan We currently plan
of Initial to attribute the to attribute the
Offering of net proceeds from net proceeds from
ZDNet Stock: 1,500,000 shares 1,500,000 shares
to ZDNet, in a to ZDNet, in a
manner analogous manner analogous
to a primary to a primary
offering of offering of
common stock, and common stock, and
the net proceeds the net proceeds
from the from the
remaining shares remaining shares
to ZD, in a to ZD, in a
manner analogous manner analogous
to a secondary to a secondary
offering of offering of
common stock of a common stock of a
subsidiary owned subsidiary owned
by a parent. by a parent.
ZDNet would then ZDNet would then
advance to ZD the advance to ZD the
net proceeds net proceeds
attributed to attributed to
ZDNet, and ZD ZDNet, and ZD
would use those would use those
net proceeds, net proceeds,
together with the together with the
net proceeds net proceeds
attributed to ZD, attributed to ZD,
to reduce to reduce
outstanding outstanding
indebtedness. indebtedness.
This should This should
strengthen Ziff- strengthen Ziff-
Davis Inc. from a Davis Inc. from a
credit credit
perspective. perspective.

Retained N/A Assuming we issue N/A
Interest After to the public,
Initial for cash, shares
Offering of of ZDNet Stock
ZDNet Stock: intended to
represent 14% of
the equity value
attributed to
ZDNet, as
currently
planned, this
would leave ZD
with a Retained
Interest intended
to represent 86%
of the equity
value attributed
to ZDNet.
Afterwards, we
would adjust the
Retained Interest
as appropriate to
reflect issuances
or repurchases of
ZDNet Stock,
capital
contributions to,
or returns of
capital from,
ZDNet and certain
other events.

Authorized and We are currently The Tracking The Tracking
Outstanding authorized to Stock Proposal Stock Proposal
Common Stock: issue only one will authorize us will authorize us
series of common to issue two to issue two
stock. series of common series of common
stock--ZD Stock stock--ZD Stock
and ZDNet Stock. and ZDNet Stock.

We are currently The Tracking The Tracking
authorized to Stock Proposal Stock Proposal
issue up to 120 will authorize us will authorize us
million shares of to increase the to increase the
common stock. number of number of
authorized shares authorized shares
to 210 million to 210 million
shares of common shares of common
stock. stock.

100,077,528 Once the Tracking Once the Tracking
shares of Stock Proposal is Stock Proposal is
existing common implemented, . implemented, a
stock were shares of ZD number of shares
outstanding on Stock will be of ZDNet Stock
February 22, outstanding, equal to the
1999. These based on the number we
shares count number of shares initially
against the total of existing determine to
number of shares common stock issue will be
we are authorized outstanding on ., outstanding.
to issue. 1999. These These shares, and
shares, and the the shares of ZD
shares of ZDNet Stock then
Stock then outstanding, will
outstanding, will count against the
count against the total number of
total number of shares of common
shares of common stock we are
stock we are authorized to
authorized to issue.
issue.
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
Tracking Stock Proposal
Existing -------------------------------------
Common Stock ZD Stock ZDNet Stock
------------------ ------------------ -----------------
<S> <C> <C> <C>
Dividends: We currently We currently We currently
intend to retain intend to retain intend to retain
all of our all of our all of our
earnings to earnings to earnings to
finance our finance our finance our
operations, repay operations, repay operations, repay
our indebtedness our indebtedness our indebtedness
and fund future and fund future and fund future
growth. We do not growth. We do not growth. We do not
expect to pay any expect to pay any expect to pay any
dividends on our dividends on ZD dividends on
existing common Stock for the ZDNet Stock for
stock for the foreseeable the foreseeable
foreseeable future. future.
future.

Although certain Although certain Although certain
of our debt of our debt of our debt
instruments instruments instruments
currently currently currently
prohibit the prohibit the prohibit the
payment of payment of payment of
dividends, we are dividends, we dividends, we
otherwise will otherwise be will otherwise be
permitted to pay permitted to pay permitted to pay
dividends out of dividends on ZD dividends on
the assets of Stock out of the ZDNet Stock out
Ziff-Davis Inc. assets of Ziff- of the assets of
legally available Davis Inc. Ziff-Davis Inc.
for the payment legally available legally available
of dividends for the payment for the payment
under Delaware of dividends of dividends
law. under Delaware under Delaware
law, but the law (and transfer
total of the corresponding
amounts paid as amounts to ZD in
dividends on ZD respect of its
Stock cannot Retained
exceed the Interest), but
Available the total of the
Dividend Amount amounts paid as
for ZD. The dividends on
Available ZDNet Stock (and
Dividend Amount the corresponding
for ZD is based amounts
on the amount transferred to ZD
that would be in respect of its
legally available Retained
for the payment Interest) cannot
of dividends exceed the
under Delaware Available
law if ZD were a Dividend Amount
separate Delaware for ZDNet. The
corporation. Available
Dividend Amount
for ZDNet is
based on the
amount that would
be legally
available for the
payment of
dividends under
Delaware law if
ZDNet were a
separate Delaware
corporation and
ZD's Retained
Interest in ZDNet
were represented
by outstanding
shares.

Mandatory None. If we dispose of If we dispose of
Dividend, All or All or
Redemption or Substantially All Substantially All
Exchange on of the Assets of of the Assets of
Disposition of ZD and the ZDNet and the
Assets: disposition is disposition is
not an Exempt not an Exempt
Disposition, we Disposition, we
would be required would be required
to choose one of to choose one of
the following the following
three three
alternatives: alternatives:

. pay a dividend . pay a dividend
to holders of to holders of
ZD Stock in an ZDNet Stock in
amount equal to an amount equal
their to their
Proportionate Proportionate
Interest in the Interest in the
Net Proceeds of Net Proceeds of
such such
disposition, disposition,

. redeem from . redeem from
holders of ZD holders of
Stock, for an ZDNet Stock,
amount equal to for an amount
their equal to their
Proportionate Proportionate
Interest in the Interest in the
Net Proceeds of Net Proceeds of
such such
disposition, disposition,
outstanding outstanding
shares of ZD shares of ZDNet
Stock or Stock or
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
Tracking Stock Proposal
Existing -------------------------------------
Common Stock ZD Stock ZDNet Stock
------------------ ------------------ -----------------
<S> <C> <C> <C>
. issue ZDNet . issue ZD Stock
Stock in in exchange for
exchange for outstanding
outstanding ZD ZDNet Stock at
Stock at a 10% a 10% premium
premium (based (based on the
on the average average Market
Market Value of Value of ZDNet
ZD Stock as Stock as
compared to the compared to the
average Market average Market
Value of ZDNet Value of ZD
Stock over a Stock over a
specified 20- specified 20-
Trading Day Trading Day
period prior to period prior to
the exchange). the exchange).

At any time At any time
within one year within one year
after completing after completing
a special a special
dividend or dividend or
partial partial
redemption redemption
referred to referred to
above, we will above, we will
have the right to have the right to
issue ZDNet Stock issue ZD Stock in
in exchange for exchange for
outstanding ZD outstanding ZDNet
Stock at a 10% Stock at a 10%
premium (based on premium (based on
the average the average
Market Value of Market Value of
ZD Stock as ZDNet Stock as
compared to the compared to the
average Market average Market
Value of ZDNet Value of ZD Stock
Stock over a over a specified
specified 20- 20- Trading Day
Trading Day period prior to
period prior to the exchange).
the exchange).

Exchange for ZD None. We will have the We will have the
Stock or ZDNet right, at any right, at any
Stock at Ziff- time after ZDNet time before ZDNet
Davis Inc.'s Stock exceeds the Stock exceeds the
Option: 65% of Total 65% of Total
Market Market
Capitalization Capitalization
Trigger but Trigger, to issue
before ZDNet ZD Stock in
Stock falls below exchange for
the 50% of Total outstanding ZDNet
Market Stock at a
Capitalization premium. The
Threshold, to premium will
issue ZDNet Stock initially be 25%
in exchange for (for exchanges
outstanding ZD occurring in the
Stock at a 15% first quarter
premium. after issuance)
and will decline
each quarter over
a period of 3
years to 15%.

The exchange The exchange
ratio that will ratio that will
result in the result in the
specified premium specified premium
will be will be
calculated based calculated based
on the average on the average
Market Value of Market Value of
ZD Stock as ZD Stock as
compared to the compared to the
average Market average Market
Value of ZDNet Value of ZDNet
Stock during the Stock during the
20 consecutive 20 consecutive
Trading Day Trading Day
period ending on, period ending on,
and including, and including,
the 5th Trading the 5th Trading
Day immediately Day immediately
preceding the preceding the
date on which we date on which we
mail the notice mail the notice
of exchange to of exchange to
holders of the holders of the
outstanding outstanding
shares being shares being
exchanged. exchanged.

In addition, we In addition, we
will have the will have the
right, if ZDNet right, if ZDNet
Stock exceeds the Stock exceeds the
65% of Total 65% of Total
Market Market
Capitalization Capitalization
Trigger and Trigger and
thereafter falls thereafter falls
below the 50% of below the 50% of
</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
Tracking Stock Proposal
Existing -------------------------------------
Common Stock ZD Stock ZDNet Stock
------------------ ------------------ -----------------
<S> <C> <C> <C>
Total Market Total Market
Capitalization Capitalization
Threshold, to Threshold, to
issue ZDNet Stock issue ZD Stock in
in exchange for exchange for
outstanding ZD outstanding ZDNet
Stock on a value Stock on a value
for value basis. for value basis.
Once this right Once this right
arises, we will arises, we will
not lose it even not lose it even
if ZDNet Stock if ZDNet Stock
thereafter thereafter
exceeds the 65% exceeds the 65%
of Total Market of Total Market
Capitalization Capitalization
Trigger or falls Trigger or falls
below the 50% of below the 50% of
Total Market Total Market
Capitalization Capitalization
Threshold. Threshold.

The exchange The exchange
ratio that will ratio that will
result in a value result in a value
for value for value
exchange will be exchange will be
based on the based on the
average Market average Market
Value of the Value of the
series of the series of the
common stock common stock
being exchanged being exchanged
as compared to as compared to
the average the average
Market Value of Market Value of
the other series the other series
of common stock of common stock
during the 20 during the 20
consecutive consecutive
Trading Day Trading Day
period ending on, period ending on,
and including, and including,
the 5th Trading the 5th Trading
Day immediately Day immediately
preceding the preceding the
date on which we date on which we
mail the notice mail the notice
of exchange to of exchange to
holders of the holders of the
outstanding outstanding
shares being shares being
exchanged. exchanged.

ZDNet Stock will ZDNet Stock will
exceed the "65% exceed the "65%
of Total Market of Total Market
Capitalization Capitalization
Trigger" if the Trigger" if the
Market Market
Capitalization of Capitalization of
the outstanding the outstanding
ZDNet Stock ZDNet Stock
exceeds 65% of exceeds 65% of
the total Market the total Market
Capitalization of Capitalization of
both series of both series of
common stock for common stock for
30 Trading Days 30 Trading Days
during any 60 during any 60
consecutive consecutive
Trading Day Trading Day
period. period.
Thereafter, ZDNet Thereafter, ZDNet
Stock will fall Stock will fall
below the "50% of below the "50% of
Total Market Total Market
Capitalization Capitalization
Threshold" if the Threshold" if the
Market Market
Capitalization of Capitalization of
the outstanding the outstanding
ZDNet Stock falls ZDNet Stock falls
below 50% of the below 50% of the
total Market total Market
Capitalization of Capitalization of
both series of both series of
common stock for common stock for
30 Trading Days 30 Trading Days
during any 60 during any 60
consecutive consecutive
Trading Day Trading Day
period. period.

Exchange for None. We will have the We will have the
Stock of a right at any time right at any time
Subsidiary at to transfer all to transfer all
Ziff-Davis of the assets and of the assets and
Inc.'s Option: liabilities of ZD liabilities of
to a subsidiary ZDNet to a
and deliver all subsidiary and
of the stock of deliver all of
that subsidiary the stock of that
in exchange for subsidiary in
all of the exchange for all
outstanding ZD of the
Stock. outstanding
ZDNet.

Voting Rights: One vote per One vote per Each share will
share. share. have a number of
votes equal to
the average
Market Value of a
share of ZDNet
Stock divided by
the average
Market Value of a
share
</TABLE>

11
<PAGE>

Holders of ZD Holders of ZD
Stock and ZDNet Stock and ZDNet
Stock will vote Stock will vote
together as a together as a
single class, single class,
except in certain except in certain
limited limited
circumstances. circumstances.

Liquidation: Upon liquidation Upon liquidation Upon liquidation
of Ziff-Davis of Ziff-Davis of Ziff-Davis
Inc., holders of Inc., holders of Inc., holders of
existing common ZD Stock and ZD Stock and
stock are ZDNet Stock will ZDNet Stock will
entitled to be entitled to be entitled to
receive the net receive the net receive the net
assets of Ziff- assets of Ziff- assets of Ziff-
Davis Inc., if Davis Inc., if Davis Inc., if
any, remaining any, remaining any, remaining
for distribution for distribution for distribution
to stockholders to stockholders to stockholders
(after payment or (after payment or (after payment or
provision for all provision for all provision for all
liabilities of liabilities of liabilities of
Ziff-Davis Inc. Ziff Davis Inc. Ziff Davis Inc.
and payment of and payment of and payment of
the liquidation the liquidation the liquidation
preference preference preference
payable to any payable to any payable to any
holders of holders of holders of
Preferred Stock). Preferred Stock). Preferred Stock).
Amounts due upon Amounts due upon
liquidation in liquidation in
respect of shares respect of shares
of ZD Stock and of ZD Stock and
shares of ZDNet shares of ZDNet
Stock will be Stock will be
distributed pro distributed pro
rata in rata in
accordance with accordance with
the average the average
Market Value of Market Value of
ZD Stock and the ZD Stock and the
average Market average Market
Value of ZDNet Value of ZDNet
Stock over a Stock over a
specified 20- specified 20-
Trading Day Trading Day
period prior to period prior to
the liquidation. the liquidation.

Stock Exchange NYSE under the NYSE under the We currently
Listings: symbol "ZD". symbol "ZD". intend to apply
for listing ZDNet
Stock on the NYSE
under the symbol
"ZDZ".
</TABLE>

Certain Cash Management and Allocation Policies

Because ZD and ZDNet are part of a single company, we have established
certain policies relating to cash management and allocations between ZD and
ZDNet. For a more complete description of how we will allocate cash between ZD
and ZDNet, see "Proposal 1--The Tracking Stock Proposal--Certain Cash
Management and Allocation Policies".

No Appraisal Rights

Under the Delaware General Corporation Law, you will not have appraisal
rights in connection with the Tracking Stock Proposal.

Certain Federal Income Tax Considerations

We believe that neither you nor Ziff-Davis Inc. will recognize any income,
gain or loss for federal income tax purposes as a result of the re-
classification of existing common stock into ZD Stock or the issuance of ZDNet
Stock. There are, however, no court decisions bearing directly on similar
transactions and the Internal Revenue Service has announced that it will not
issue advance rulings on the federal income tax consequences of such
transactions. Thus, you should consult a tax advisor. For a more detailed
description of possible federal income tax consequences, see "Proposal 1--The
Tracking Stock Proposal--Certain Federal Income Tax Considerations".

12
<PAGE>

PROPOSALS 2, 3 AND 4--AMENDMENTS TO CERTAIN PLANS

At the Special Meeting, we will also ask you to consider and approve
proposals to amend each of the 1998 Incentive Compensation Plan, the 1998
Employee Stock Purchase Plan and the 1998 Non-Employee Directors' Stock Option
Plan (1) to permit grants of awards under each such plan with respect to either
series of common stock of Ziff-Davis Inc., (2) to increase the number of shares
authorized for issuance, (3) solely with respect to the 1998 Incentive
Compensation Plan, to provide that shares issuable thereunder may be supplied
from outstanding shares of ZD Stock held by Ziff-Davis Inc.'s majority
stockholder and, solely for calendar year 1998, to increase the number of
shares in respect of which options to acquire shares of common stock of Ziff-
Davis Inc. may be granted to any single participant and (4) solely with respect
to the 1998 Non-Employee Directors' Stock Option Plan, to permit discretionary
grants of additional options from time to time. For a more detailed description
of the proposals to amend these plans, see "Proposals 2, 3 and 4--Amendments to
Certain Plans".

13
<PAGE>

ZIFF-DAVIS INC.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following table presents summary consolidated historical data for Ziff-
Davis Inc. as of and for the years ended December 31, 1996, 1997 and 1998. This
data was derived from the Consolidated Financial Statements of Ziff-Davis Inc.
An affiliate of Ziff-Davis Inc. acquired a print publishing business (ZDI) on
February 29, 1996; the data does not include results from the acquired business
for the period before the date of acquisition. On May 4, 1998, Ziff-Davis Inc.
completed a reorganization described in Note 2 to the Consolidated Financial
Statements of Ziff-Davis Inc. Results for periods before the reorganization are
not directly comparable to results for periods after the reorganization. No
historical earnings per share or share data are presented as Ziff-Davis Inc.
does not consider such data meaningful. See Note 2 to the Consolidated
Financial Statements of Ziff-Davis Inc. included in Annex VI hereto for certain
pro forma earnings per share information concerning Ziff-Davis Inc. After the
issuance of ZDNet Stock, Ziff-Davis Inc. will report earnings per share data
for ZD and ZDNet but not for Ziff-Davis Inc. This table should be read in
conjunction with the Selected Historical Financial and Other Data, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Financial Statements for each of Ziff-Davis Inc., ZD and ZDNet included in
Annexes VI, VII and VIII to this Proxy Statement.

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue, net...................... $ 955,139 $1,153,761 $1,108,892
Depreciation and amortization..... 139,736 154,940 152,544
Income from operations............ 87,181 109,232 31,080
Interest expense, net............. 120,646 190,445 143,547
Loss before income taxes.......... (27,124) (72,491) (104,236)
Net loss.......................... (52,081) (71,179) (77,809)
Balance Sheet Data (at period
end):
Cash and cash equivalents......... $ 29,915 $ 30,301 $ 32,566
Total assets...................... 3,584,173 3,546,646 3,433,803
Total long-term debt.............. 2,522,252 2,408,240 1,539,322
Stockholders' equity.............. 477,756 126,130 1,352,598
Other Data:
Net cash provided (used) by oper-
ating activities(1).............. $ 61,543 $ (3,364) $ 95,776
EBITDA(2)......................... 233,258 272,894 244,094
Capital expenditures.............. 22,365 30,196 36,599
Investments and acquisitions, net
of cash acquired................. 2,124,823 14,000 27,772
</TABLE>
- --------

(1) This information should be read in conjunction with the more detailed
information concerning cash flows from operating, investing and financing
activities in the Consolidated Statements of Cash Flows set forth in Ziff-
Davis Inc.'s Consolidated Financial Statements.

(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA for the year ending December
31, 1998 does not include a one-time restructuring charge of $52,239,000.
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 Ziff-
Davis Inc.'s operating performance or to cash flows as a measure of
liquidity. Although Ziff-Davis Inc. 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, the EBITDA
presented for Ziff-Davis Inc. may not be comparable to similarly titled
measures reported by other companies.

14
<PAGE>

SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents summary combined historical data for ZD as of
and for the years ended December 31, 1996, 1997 and 1998. This data was derived
from the Combined Financial Statements of ZD. An affiliate of Ziff-Davis Inc.
acquired a print publishing business (ZD Publishing) on February 29, 1996; the
data does not include results from the acquired business for the period before
the date of acquisition. On May 4, 1998, Ziff-Davis Inc. completed a
reorganization described in Note 2 to the Combined Financial Statements of ZD.
Results for periods before the reorganization are not directly comparable to
results for periods after the reorganization. No historical earnings per share
or share data are presented as Ziff-Davis Inc. does not consider such data
meaningful. After the issuance of ZDNet Stock, Ziff-Davis Inc. will report
earnings per share data for ZD and ZDNet but not for Ziff-Davis Inc. This table
should be read in conjunction with the Selected Historical Financial and Other
Data, Management's Discussion and Analysis of Financial Condition and Results
of Operations and Financial Statements for each of Ziff-Davis Inc., ZD and
ZDNet included in Annexes VI, VII and VIII to this Proxy Statement.

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue, net.............................. $ 938,924 $1,121,543 $1,052,749
Depreciation and amortization............. 134,251 147,259 146,096
Income from operations.................... 104,594 131,713 38,586
Interest expense, net..................... 120,646 190,445 143,547
Loss before income taxes.................. (26,636) (71,648) (104,748)
Net loss.................................. (52,081) (71,179) (77,809)
Balance Sheet Data (at period end):
Cash and cash equivalents................. $ 29,915 $ 30,273 $ 32,274
Total assets.............................. 3,584,963 3,548,108 3,429,938
Total long-term debt...................... 2,522,252 2,408,240 1,539,322
Division equity........................... 447,756 126,130 1,352,598
Other Data:
Net cash provided by operating
activities(1) $ 74,164 $ 11,900 $ 100,299
EBITDA(2)................................. 233,258 272,894 244,094
Capital expenditures...................... 21,355 27,822 32,117
Capital contributions to ZDNet............ 13,630 20,664 14,269
Investments and acquisitions, net of cash
acquired................................. 2,124,283 11,002 22,772
</TABLE>
- -------

(1) This information should be read in conjunction with the more detailed
information concerning cash flows from operating, investing and financing
activities in the Combined Statements of Cash Flows set forth in ZD's
Combined Financial Statements.

(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. ZD's EBITDA is calculated by adding
(a) ZD's EBITDA before losses related to its retained interest in ZDNet and
(b) ZD's proportionate interest in ZDNet's EBITDA, which is currently 100%.
EBITDA for the year ending December 31, 1998 does not include a one-time
restructuring charge of $52,239,000. 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 ZD's operating performance or to cash
flows as a measure of liquidity. Although Ziff-Davis Inc. 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, the EBITDA presented for ZD may not be comparable to similarly
titled measures reported by other companies.

15
<PAGE>

ZDNET

SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents summary historical data for ZDNet as of and for
the ten month period ended December 31, 1996 and as of and for the years ended
December 31, 1997 and 1998. This data was derived from the Combined Financial
Statements of ZDNet. An affiliate of Ziff-Davis Inc. acquired ZDNet on February
29, 1996; therefore, no results of ZDNet are shown for periods before that
date. No historical earnings per share of share data are presented as Ziff-
Davis Inc. does not consider such data to be meaningful. After the issuance of
ZDNet Stock, Ziff-Davis Inc. will report earnings per share data for ZD and
ZDNet but not for Ziff-Davis Inc. This table should be read in conjunction with
the Selected Historical Financial and Other Data, Management's Discussion and
Analysis of Financial Condition and Results of Operations and Financial
Statements for each of Ziff-Davis Inc., ZD and ZDNet included in Annexes VI,
VII and VIII to this Proxy Statement.

<TABLE>
<CAPTION>
Ten months
ended Year ended
December 31, December 31,
------------ -----------------
1996 1997 1998
------------ -------- -------
(in thousands)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue, net.................................. $ 16,215 $ 32,218 $56,143
Cost of operations:
Production and content........................ 14,863 23,543 26,208
Selling, general and administrative expenses.. 13,280 23,475 30,993
Depreciation and amortization................. 5,485 7,681 6,448
Loss from operations.......................... (17,413) (22,481) (7,506)
Minority interest............................. -- 400 134
Loss before income taxes...................... (17,413) (22,081) (7,372)
Net loss...................................... (16,925) (21,238) (7,884)
Balance Sheet Data (at period end):
Total current assets.......................... $ 7,852 $ 11,521 $20,068
Total assets.................................. 82,507 87,326 97,686
Total liabilities............................. 3,932 4,034 8,139
Division equity............................... 78,575 83,292 89,547
Other Data:
Net cash used in operating activities (1)..... $(12,620) $(15,264) $(4,522)
EBITDA (2).................................... (11,928) (14,400) (924)
Capital expenditures.......................... 1,010 2,374 4,483
Investments and acquisitions, net of cash
acquired..................................... -- 2,998 5,000
</TABLE>
- --------

(2) "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 ZDNet's operating performance or to
cash flows as a measure of liquidity. Although Ziff-Davis Inc. believes
that EBITDA is a standard measure commonly reported and widely used by
analysts, investors and other interested parties in the media industry, the
EBITDA presented for ZDNet may not be comparable to similarly titled
measures reported by other companies.

16
<PAGE>

RISK FACTORS

You should carefully consider the risk factors described below, as well as
the other information included in this Proxy Statement, before you decide
how to vote on the proposals.

Risk Factors Relating to the Tracking Stock Proposal

Holders Of ZDNet Stock Will Be Common Stockholders Of Ziff-Davis Inc. And Will
Be Subject To Risks Associated With An Investment In Ziff-Davis Inc. As A
Whole

We cannot assure you that the market values of ZD Stock and ZDNet Stock will
in fact reflect the performance of ZD and ZDNet as we intend.

Even though we have allocated all of our consolidated assets, liabilities,
revenue, expenses and cash flow between the two Groups in order to prepare
their respective financial statements, the Tracking Stock Proposal will not
change the legal title to any assets or responsibility for any liabilities and
will not affect the rights of any of our creditors. Further, holders of ZD
Stock and ZDNet Stock will not have any legal rights related to specific assets
of either Group, and, in any liquidation, will receive a share of the net
assets of Ziff-Davis Inc. based on the relative trading prices of ZD Stock and
ZDNet Stock rather than on any assessment of the actual value of the respective
Groups. Holders of ZD Stock and ZDNet Stock will continue to be common
stockholders of Ziff-Davis Inc. and, as such, will be subject to all risks
associated with an investment in Ziff-Davis Inc. and all of our businesses,
assets and liabilities. For example, if the cash flow of either Group is
insufficient to satisfy inter-Group loans or other debt owed by that Group,
both Groups would be adversely affected. For more information on the negative
effects our debt obligations could have on holders of Ziff-Davis Inc. common
stock, including holders of ZD Stock and ZDNet Stock, see "--Other Ziff-Davis
Inc. Risks--Ziff-Davis Inc. Has Significant Debt Obligations".

Financial Results Of Either Group Could Affect The Other Group

Financial results of either Group will affect our consolidated results of
operations, financial position and borrowing costs. This could affect the
results of operations, financial position or borrowing costs of the other Group
or the market price of shares issued with respect to the other Group. In
addition, net losses of either Group, and any dividends or distributions on, or
repurchases of, either series of common stock, will reduce the assets of Ziff-
Davis Inc. legally available for dividends on both series of common stock.
Accordingly, you should read financial information for each Group together with
financial information for the other Group and financial information for Ziff-
Davis Inc.

Having Two Series Of Common Stock Could Create Potential Conflicts Of Interest

Having two series of common stock could give rise to occasions when the
interests of holders of one series might diverge or appear to diverge from the
interests of holders of the other series. Examples include:

. our decisions as to whether to allocate the proceeds of issuances (or the
costs of repurchases) of ZDNet Stock to ZD in respect of its retained
interest in ZDNet or to the equity of ZDNet,

. our decisions as to how to allocate consideration to be received in
connection with a merger involving Ziff-Davis Inc. between holders of ZD
Stock and ZDNet Stock,

. our decisions as to whether and when to exchange one series of common
stock for the other series of common stock,

. our decisions as to whether and when to approve dispositions of assets of
either Group,

. our decisions as to whether to pay dividends on ZD Stock and ZDNet Stock
and

. our decisions as to whether and how to make transfers of funds from one
Group to another and, more generally, our decisions as to other
operational and financial matters that could be considered detrimental to
one Group or the other.

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If directors own disproportionate interests (in percentage or value terms) in
ZD Stock and ZDNet Stock, that disparity could create or appear to create
potential conflicts of interest when they are faced with decisions that could
have different implications for the different series.

Principles Of Delaware Law May Protect Decisions Of The Board Of Directors
That Have A Disparate Impact Upon Holders Of ZD Stock And ZDNet Stock

Principles of Delaware law established in cases involving differing treatment
of two classes of common stock provide that a board of directors owes an equal
duty to all common stockholders regardless of class or series and does not have
separate or additional duties to either group of stockholders. We are not aware
of any legislative or judicial precedent involving the fiduciary duties of
directors of a Delaware corporation with two classes of common stock with
separate rights related to specified operations of the corporation. However,
under the principles of Delaware law referred to above and the related
principle known as the "business judgment rule", you may not be able to
challenge decisions that have a disparate impact upon holders of ZD Stock and
ZDNet Stock if the board of directors:

. is disinterested and adequately informed with respect to such decisions
and

. acts in good faith and in the honest belief that it is acting in the best
interests of Ziff-Davis Inc.'s stockholders.

The Board Of Directors Has Sole Discretion to Allocate Proceeds Upon Issuances
(Or Costs Of Repurchases) Of ZDNet Stock To ZDNet Or ZD

Proceeds from the issuance of ZDNet Stock may not necessarily be allocated to
the equity of ZDNet. The board of directors will determine in its sole
discretion whether to allocate the proceeds of issuances or the costs of
repurchases of ZDNet Stock to ZD in respect of its retained interest in ZDNet
or to the equity of ZDNet. For a more complete description of how the board of
directors will allocate cash between ZD and ZDNet, see "Proposal 1--The
Tracking Stock Proposal--Certain Cash Management and Allocation Policies".

Stockholders Will Not Vote On How To Allocate Consideration Received In
Connection With A Merger Among Holders Of ZD Stock And Holders Of ZDNet Stock.

Our charter will not contain any provisions governing how consideration
received in connection with a merger or consolidation involving Ziff-Davis Inc.
is to be allocated between holders of ZD Stock and holders of ZDNet Stock.
Neither holders of ZD Stock nor holders of ZDNet Stock will have a separate
class vote in any merger or consolidation so long as we divide the type and
amount of consideration between holders of ZD Stock and holders of ZDNet Stock
in a manner we determine, in our sole discretion, to be fair. In any such
merger or consolidation, the different ways we may divide the consideration
might have materially different results. As a result, the consideration to be
received by holders of ZD Stock or ZDNet Stock in any such merger or
consolidation may be materially less valuable than the consideration they would
have received if they had a separate class vote on such merger or
consolidation.

We Have The Option To Exchange One Series of Common Stock For The Other Series
And This May Be Disadvantageous To Holders Of ZD Stock Or Holders Of ZDNet
Stock

As described in the summary under the caption "Summary Comparison of Terms of
Existing Common Stock with Terms of ZD Stock and ZDNet Stock", we will have the
right to issue shares of one series of common stock in exchange for outstanding
shares of the other series of common stock. Because certain exchanges would be
at a premium, and since we could determine to effect an exchange at a time when
either or both of ZD Stock and ZDNet Stock may be considered to be overvalued
or undervalued, any such exchange may be disadvantageous to holders of ZD Stock
or holders of ZDNet Stock. In addition, any such exchange would preclude
holders of the exchanged series of common stock from retaining their investment
in a security that is intended to reflect separately the performance of the
related Group.

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We May Dispose Of Assets Of Either ZD Or ZDNet Without Your Approval

Delaware law requires stockholder approval only for a sale or other
disposition of all or substantially all of the assets of Ziff-Davis Inc. As
long as the assets attributed to a Group represent less than substantially all
of Ziff-Davis Inc.'s assets, we may approve sales and other dispositions of any
amount of the assets of that Group without any stockholder approval. If we
dispose of all or substantially all of the assets of either Group, we would be
required, if the disposition is not an exempt disposition under the terms of
our charter, to choose one of the following three alternatives:

. declare and pay a dividend,

. redeem shares of the relevant series of stock or

. exchange shares of one series for outstanding shares of the other series
at a 10% premium.

Consequently, holders of either series of common stock may receive less value
for their shares than the value that a third-party buyer might pay for all or
substantially all of the assets of such Group. In addition, if we elect to
complete an exchange in connection with the disposition, we could do so as one
of the three alternatives required in connection with the disposition or as an
optional exchange that may in some cases be at no premium, and any such
exchange could be completed at a time when ZDNet Stock or ZD Stock may be
considered to be overvalued or undervalued.

The board of directors will decide, in its sole discretion, how to proceed
and is not required to select the option that would result in the highest value
to holders of ZD Stock or ZDNet Stock. This decision, however, will be subject
to the board of directors' general fiduciary duties as described above.

We Do Not Expect To Pay Dividends For The Foreseeable Future

Our various debt instruments currently prohibit the payment of dividends, and
in any event, we do not expect to pay any dividends for the foreseeable future
on either series of common stock.

We May Not Pay Dividends Equally On ZD Stock And ZDNet Stock

We have the right to pay dividends on ZD Stock or ZDNet Stock, or both, in
equal or unequal amounts, notwithstanding:

. the performance of either ZD or ZDNet,

. the amount of assets available for dividends on either series,

. the amount of prior dividends declared on either series or

. any other factor.

In addition, net losses of either Group, and any dividends or distributions on,
or repurchases of, either series, will reduce the assets of Ziff-Davis Inc.
legally available for dividends on either series.

The Board Of Directors May Make Operational And Financial Decisions Affecting
ZD and ZDNet Differently

The board of directors, in its sole discretion, will make operational and
financial decisions and implement policies that affect the businesses of ZD and
ZDNet differently. Examples include:

. transfers of funds between ZD and ZDNet,

. the manner of accounting for transfers between ZD and ZDNet,

. allocation of funds for capital expenditures,

. other transactions between ZD and ZDNet,

19
<PAGE>

. the allocation of financing opportunities in public markets and

. the allocation of business opportunities, resources and personnel.

Decisions of the board of directors may favor either Group at the expense of
the other. For example, the decision to provide funds for one Group may
adversely affect the ability of the other Group to obtain funds sufficient to
implement its growth strategies.

The Board Of Directors Has Sole Discretion To Change Certain Cash Management
And Allocation Policies

The board of directors has adopted certain policies relating to cash
management and allocations between ZD and ZDNet. Although it has no present
intention to do so, the board of directors may, in its sole discretion, modify,
rescind or add to any of these policies. The board of directors' discretion to
change these policies makes it riskier to be a holder of ZD Stock or ZDNet
Stock than a holder of ordinary common stock. For a more comprehensive
description of these policies, see "Proposal 1--The Tracking Stock Proposal--
Certain Cash Management and Allocation Policies".

Under Its Current Policies, The Board Of Directors Has Sole Discretion
Concerning Various Cash Management Matters

The discretion of the board of directors in the area of cash management makes
it riskier to be a holder of ZD Stock or ZDNet Stock than a holder of ordinary
common stock.

The board of directors will determine, in its sole discretion, whether to
transfer any cash to or from ZD and ZDNet. Moreover, the board of directors has
sole discretion to determine

. whether a transfer of cash from ZDNet to ZD will be treated as a
revolving credit advance, a long-term loan or a return of capital and

. whether a transfer of cash from ZD to ZDNet will be treated as a
revolving credit advance, a long-term loan or a contribution to capital.

The determination of the board of directors as to how to account for a cash
transfer will affect the amount of interest expense and interest income,
stockholders' equity and number of notional shares of ZDNet Stock outstanding
as reflected in the financial statements of ZD and ZDNet.

If either Group is unable to repay advances or loans owed to the other Group,
both Groups would be adversely affected. Also, if either Group extends an
advance or loan to the other group at an interest rate below the lending
Group's cost of funds or opportunity cost, the lending Group's results would be
adversely affected to the extent of the difference.

Any cash transfers we determine to account for as capital contributions or
returns of capital will increase or decrease ZD's retained interest in ZDNet.
Although we would calculate any change in the retained interest by reference to
the then current market value of ZDNet Stock, the change could come at a time
when ZDNet Stock is considered to be overvalued or undervalued. Also, any
increase in ZD's retained interest in ZDNet will reduce the percentage of ZDNet
intended to be represented by outstanding ZDNet Stock and any decrease in ZD's
retained interest in ZDNet will reduce the percentage of ZDNet intended to be
represented by outstanding ZD Stock.

The Board Of Directors Has Broad Discretion About A Variety Of Allocation
Matters

The board of directors will determine, in its sole discretion, how to
allocate issuances of Ziff-Davis Inc. debt or preferred stock between ZD and
ZDNet. Moreover, the board of directors will have broad discretion as

20
<PAGE>

to how to allocate Ziff-Davis Inc.'s consolidated assets, liabilities, revenue,
expenses and cash flow between ZD and ZDNet. The discretion of the board of
directors in these areas makes it riskier to be a holder of ZD Stock or ZDNet
Stock than a holder of ordinary common stock.

Holders Of ZDNet Stock Will Vote Together With Holders Of ZD Stock And Will
Have Limited Separate Voting Rights

Holders of ZD Stock and ZDNet Stock will vote together as a single class,
except in certain limited circumstances provided under the Delaware General
Corporation Law. When holders of ZD Stock and ZDNet Stock vote together as a
single class, holders of the series of common stock having a majority of the
votes will be in a position to control the outcome of the vote even if the
matter involves a conflict of interest between holders of ZD Stock and holders
of ZDNet Stock.

The Voting Power Of ZDNet Stock Will Fluctuate Based On Its Market Value

Each share of ZD Stock will have one vote and each share of ZDNet Stock will
have a variable number of votes based on the market value of a share of ZDNet
Stock as compared to the market value of a share of ZD Stock over a specified
20-trading day period prior to the date of the vote. Accordingly, the relative
voting power of ZD Stock and ZDNet Stock will fluctuate from time to time based
on the respective market values of ZD Stock and ZDNet Stock.

Dilution Of ZD Stock After Issuance of ZDNet Stock

The issuance of ZDNet Stock, like any issuance of common stock, would dilute
the voting rights and equity interest of holders of ZD Stock. We do not believe
that the issuance of ZDNet Stock as currently planned would cause a meaningful
dilution to holders of ZD Stock on an earnings or book value per share basis.

We Cannot Predict How The Issuance Of Tracking Stock Will Affect The Market
Price Of ZD Stock

We cannot predict the prices at which ZD Stock or ZDNet Stock will trade and
we cannot assure you that the market price of ZD Stock will equal or exceed the
market price of our existing common stock.

Certain terms of ZD Stock and ZDNet Stock may adversely affect the trading
price of ZD Stock or ZDNet Stock. These terms include:

. the right of the board of directors to exchange shares of one series of
common stock for shares of the other series,

. the discretion of the board of directors in making various determinations
relating to a variety of cash management and allocation matters and

.the variable voting power of ZDNet Stock as compared to ZD Stock.

The Volatility Of The Market Price Of ZDNet Stock May Subject Us To Litigation

The stock market has experienced extreme price and volume fluctuations. The
market prices of securities of Internet-related companies, in particular, have
been especially volatile. In the past, companies that have experienced such
volatility have sometimes been the object of securities class action
litigation. Securities class action litigation may result in substantial costs
and a diversion of management's attention and resources. For a description of
certain class action and derivative litigation to which Ziff-Davis Inc. is a
party, see Annex VIII--"ZDNet Description of Business--Legal Proceedings".

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<PAGE>

The Market Price of ZD Stock And ZDNet Stock May Not Reflect The Performance
of ZD And ZDNet As We Intend

We cannot assure you that the market price of ZD Stock and ZDNet Stock will
in fact reflect the performance of ZD and ZDNet as we intend. Holders of ZD
Stock and ZDNet Stock will continue to be common stockholders of Ziff-Davis
Inc. and, as such, will be subject to all risks associated with an investment
in Ziff-Davis Inc. and all of our businesses, assets and liabilities.

We Are Subject To Certain Takeover Constraints

SOFTBANK Corp. and its non-Ziff-Davis Inc. affiliates ("Softbank") currently
own approximately 72% of Ziff-Davis Inc.'s outstanding common stock. As long as
Softbank continues to own a majority of the voting power of our common stock,
no person interested in acquiring Ziff-Davis Inc., ZD or ZDNet will be able to
do so without obtaining the consent of Softbank.

If ZD and ZDNet were separate companies, any person interested in acquiring
either ZD or ZDNet without negotiating with management could seek control of
that entity by obtaining control of its outstanding voting stock by means of a
tender offer or proxy contest. Although we intend ZD Stock and ZDNet Stock to
reflect the separate performance of ZD and ZDNet, a person interested in
acquiring only one Group without negotiation with Ziff-Davis Inc.'s management
could obtain control of that Group only by obtaining control of the outstanding
voting stock of Ziff-Davis Inc.

The existence of two series of common stock could present complexities and
could in certain circumstances pose obstacles, financial and otherwise, to an
acquiring person. The existence of two series of common stock could, under
certain circumstances, prevent stockholders from profiting from an increase in
the market value of their shares as a result of a change in control of Ziff-
Davis Inc. by delaying or preventing such a change in control.

If the Tracking Stock Proposal is implemented, there would be an additional
80 million shares of common stock available for future issuance without further
stockholder approval. One of the effects of the existence of authorized and
unissued common stock and preferred stock could be to enable the board of
directors to issue shares to persons friendly to current management, which
could render more difficult or discourage an attempt to obtain control of Ziff-
Davis Inc. by means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management. Such additional shares also
could be used to dilute the stock ownership of persons seeking to obtain
control of Ziff-Davis Inc.

In addition, certain provisions of our charter and by-laws, and certain
provisions of Delaware law, may inhibit changes of control not approved by the
board of directors. For additional anti-takeover constraints, see "Proposal 1--
The Tracking Stock Proposal--Certain Other Provisions of the Restated
Certificate of Incorporation and By-laws" and "--Certain Provisions of Delaware
Law".

The Values Of ZD Stock And ZDNet Stock May Decline Due To Further Issuances Of
ZD Stock Or ZDNet Stock

Our charter will allow the board of directors, in its sole discretion, to
issue authorized but unissued shares of common stock. The board of directors
may issue ZD Stock or ZDNet Stock to, among other things:

. raise capital,

. provide compensation or benefits to employees,

. pay stock dividends or

. acquire companies or businesses.

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<PAGE>

Under the Delaware General Corporation Law, the board of directors would not
need your approval for these issuances. We do not intend to seek your approval
for any such issuances unless:

. stock exchange regulations or other applicable law require approval or

. the board of directors deems it advisable.

We May Not Offer ZDNet Stock At All

This Proxy Statement describes our current plans for an offering of ZDNet
Stock. Such an offering is subject to various conditions and uncertainties, so
we cannot assure you that it will be completed.

The Federal Income Tax Considerations Of The Tracking Stock Proposal Are
Uncertain

Moreover, the current Presidential administration's budget proposals,
released on February 1, 1999, would require the recognition of gain on the
issuance of certain tracking stock, such as ZDNet Stock, and would give the
Treasury Department the authority to treat tracking stock as nonstock or as
stock of another entity as appropriate to prevent tax avoidance. Because the
proposal would only affect tracking stock issued on or after the date of
enactment, the proposal will likely not affect the initial issuance of ZDNet
Stock. If, however, the proposals were to become law, it would affect future
issuances of ZDNet Stock. Under such circumstances, we might decide to exercise
our right to redeem all of the outstanding shares of ZDNet Stock for ZD Stock
at a premium, which would be disadvantageous to holders of ZD Stock.

Thus, you should consult your own tax advisor as to the particular tax
consequences of the Tracking Stock Proposal under federal, state, local or
foreign law. See "Proposal 1--The Tracking Stock Proposal--Certain Federal
Income Tax Considerations".

Risk Factors Relating to ZDNet

ZDNet Has An Extremely Limited Operating History And A History Of Net Losses

ZDNet has an extremely limited operating history and an investor must
consider the risks, expenses and difficulties frequently encountered by such
companies, particularly in the new and rapidly evolving market for Internet
products, content and services. We cannot assure you that ZDNet will be
successful in addressing such risks. Although ZDNet has experienced revenue
growth in recent periods, we cannot assure you that ZDNet's revenue will
continue to grow or continue at its current level.

ZDNet has incurred significant net losses in the past ($21.2 million in 1997
and $7.9 million in 1998). For more information regarding these net losses see,
"ZDNet Selected Historical Combined Financial and Other Data" and ZDNet's
Combined Financial Statements in Annex VIII hereto. We cannot assure you that
ZDNet will report net income in the future.

We Cannot Accurately Predict ZDNet's Future Revenue

As a result of the evolving nature of the Internet and ZDNet's limited
operating history, we cannot accurately forecast its revenue. Current and
future expense levels are based principally on estimated future revenue and are
to a large extent fixed. Accordingly, ZDNet may be unable to adjust spending to
compensate for any unexpected revenue shortfall. If ZDNet's actual revenue is
less than its estimated revenue, this could have an immediate material adverse
effect on ZDNet's profits and liquidity.

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ZDNet's Quarterly Operating Results May Fluctuate Significantly

ZDNet's quarterly operating results may fluctuate significantly because of a
variety of factors, many of which are outside our control, including:

. overall usage levels of the Internet and of ZDNet's sites in particular,

. demand for Internet advertising and the loss of advertisers,

. seasonal trends in Internet use and advertising,

. the amount and timing of ZDNet's capital expenditures,

. costs relating to the expansion of ZDNet's operations and the
introduction of new sites and services,

. price competition or pricing changes in Internet advertising and

. costs relating to technical difficulties or system downtime.

We believe Internet advertising typically slows in the first quarter of the
year. Historically, ZDNet has experienced lower advertising and lower revenue
in the first quarter of each year as compared to the fourth quarter of the
prior year. Seasonality and cyclicality in the level of Internet advertising
expenditures generally could become more pronounced in the future as the
Internet becomes more accepted as an advertising vehicle. Quarterly comparisons
of ZDNet's results of operations are not reliable as an indication of its
future performance. For additional information about the seasonality of ZDNet's
revenue, see "ZDNet Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Annex VIII hereto.

ZDNet's Future Revenue Is Dependent On The Growth Of Internet Use And The
Acceptance Of The Internet As An Advertising And Commerce Medium

ZDNet's future revenue will depend largely on the widespread acceptance and
use of the Internet as an information source and as an advertising and commerce
vehicle. Rapid growth in Internet use is a recent trend and market acceptance
of the Internet as an advertising and commercial medium is highly uncertain.

The Internet may not be accepted as a viable advertising and commerce medium
for distribution of information and engaging in commerce for a number of
reasons, including:

.inadequate development of the network infrastructure,

.inadequate development of enabling technologies,

.insufficient commercial support for Internet advertising,

.concerns about privacy and security among users and

.lack of widely accepted standards for measuring the effectiveness of
advertising on the Internet.

ZDNet Depends On Advertising As A Principal Source Of Its Revenue

ZDNet derived 86% of its revenue in 1998 from the sale of advertising on its
Internet sites and we expect that advertising revenue will continue to be the
principal source of its revenue in the foreseeable future. Most of ZDNet's
advertising contracts are either short-term contracts and/or can be terminated
by the advertiser at any time with little notice. We cannot assure you that
ZDNet will be able to retain current advertisers or obtain new advertising
contracts.

ZDNet's ability to generate advertising revenue will depend on several
factors, including:

.the continued development of the Internet as an advertising medium,

.the pricing of advertising on other Internet sites,

.the amount of traffic on ZDNet's network of sites,

.pricing pressures, delays and new product launches,

.ZDNet's ability to achieve, demonstrate and maintain attractive user
demographics and

.ZDNet's ability to develop and retain a skilled advertising sales force.

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ZDNet Is Increasingly Dependent On, And Receives A Significant Percentage Of
Its Revenue From, A Limited Number of Advertisers

A relatively small number of advertisers contribute a significant percentage
of ZDNet's consolidated revenue. In 1998, ZDNet's top 20 advertising customers
accounted for approximately 47.5% of its advertising revenue. These advertising
clients, and its other advertising clients, may not continue to use ZDNet's
services to the same extent, or at all, in the future. A significant reduction
in advertising by one or more of ZDNet's largest advertisers would have a
material adverse effect on ZDNet's profits and liquidity.

ZDNet Depends On Third Parties For Internet Traffic To Its Sites

ZDNet's ability to advertise on and maintain links from other Internet sites
is an important element to its success. Traffic originating from links existing
on other Internet sites (particularly search engines, directories and other
navigational tools managed by Internet service providers and Web browser
companies), is an important segment of the overall traffic on ZDNet's Internet
sites. ZDNet has special linking arrangements to generate additional traffic
with Yahoo!, Excite and MSNBC which are either short-term contracts and/or can
be terminated with little notice. There is intense competition for these types
of linking arrangements. We cannot assure you that these arrangements will be
maintained or that advertising or links will continue to be available on
reasonable commercial terms or at all.

ZDNet Depends On Licensed Technology From Third Parties

ZDNet relies on certain technology licensed from third parties such as
Vignette's Storyserver, Thunderstone's Texis Search Engine and Netscape's Web
Server Software for use in operating and managing its Internet sites and
providing related services to users and advertisers. ZDNet's ability to
generate revenue

from Internet commerce may also depend on data encryption and authentication
technologies that it may be required to license from third parties. We cannot
assure you that such technology licenses will be available at all, that they
will be available on reasonable commercial terms or that they will operate as
intended.

ZDNet's Competitive Position Depends On Its Ability To Attract And Retain Key
Personnel

ZDNet's failure to attract and retain qualified personnel could diminish its
competitive position. ZDNet's performance is substantially dependent on the
continued services and performance of its senior executive officers and other
key personnel. ZDNet does not have long-term employment agreements with any of
its key personnel and maintains no "key person" life insurance policies.
ZDNet's future success also depends on its ability to identify, attract, retain
and motivate highly skilled editorial, technical, managerial, sales, marketing
and customer service personnel. Competition for such persons is intense. We
cannot assure you that ZDNet will be able to attract or retain such personnel.

ZDNet May Not Be Able To Adequately Respond To Technological Change

The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. ZDNet will be required to continually improve the
performance, features and reliability of its network infrastructure and
Internet sites, particularly in response to competition and changing customer
demands. We cannot assure you that ZDNet will be successful in responding
rapidly, cost-effectively or adequately to such developments.

ZDNet's Competition Is Intense And Is Expected To Increase Significantly

We cannot assure you that ZDNet will be able to maintain its competitive
position. Competition among Internet content providers is intense and is
expected to increase significantly in the future. The market for Internet
content sites is rapidly evolving and barriers to entry are low, enabling
newcomers to launch competitive sites at relatively low cost. Moreover,
increased competition could result in price reductions, reduced margins or loss
of market share, any of which could have an effect on our future revenue and
profits.

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We believe ZDNet competes most directly with Web sites specializing in broad-
based technology information. These include c|net, CMP, Internet.com and IDG.
ZDNet also generally competes for users and advertisers with:

. Internet portals and search sites, that help users access information
rather than create original content and are not specifically focused on
technology related information, such as Excite, Infoseek, Lycos and
Yahoo!,

. general news sites, such as those provided by CNN and ABC,

. general purpose online service providers, such as America Online and MSN,

. browser/software companies offering information services, such as
Microsoft and Netscape and

. large general-interest sites, such as Time Warner's pathfinder.com.

In addition, ZDNet competes with traditional media content businesses such as
newspapers, magazines, radio and television. In order to compete successfully
and attract users, advertisers and strategic partners, ZDNet must continue to
provide high quality, engaging content in a timely and cost-effective manner.

To Remain Competitive, ZDNet Must Constantly Expand And Develop New Content
Areas And Services. This Is Inherently Risky And Expensive.

ZDNet's future success may depend in part on its ability to continue
expanding its Internet sites to include new subject matters and services. Costs
related to developing new content areas and services are expensed as they are
incurred while revenue related to these new content areas and services
typically builds over time. Accordingly, ZDNet's profitability from year to
year may be adversely affected by the number and timing of new launches. In
addition, we cannot assure you that any new areas or services will be developed
in a timely or cost-effective manner or that they will be successful.

We Cannot Assure You That ZDNet Will Continue To Develop The ZDNet Brand

We cannot assure you that ZDNet will be able to continue to develop its
brand. ZDNet believes brand identity is important to attracting and expanding
its user base, Internet traffic and advertising and commerce relationships.
ZDNet believes the significance of brand recognition will intensify as the
number of Internet sites increases.

Any Capacity Constraints Or System Disruptions Could Have A Material Adverse
Effect On ZDNet

The performance and reliability of ZDNet's Internet sites and network
infrastructure are critical to its reputation and ability to attract and retain
users, advertisers, merchants and strategic partners. Any system error or
failure, or a sudden and significant increase in traffic, may result in the
unavailability of sites and significantly delay response times. Individual,
sustained or repeated occurrences could result in a loss of potential or
existing users, advertisers or strategic partners. In addition, because ZDNet's
advertising revenue is directly related to the number of advertisements it
delivers to users, system interruptions or delays would reduce the number of
impressions delivered and thereby reduce its revenue.

ZDNet's systems and operations are vulnerable to interruption or malfunction
due to certain events beyond its control, including natural disasters,
telecommunications failures and computer hacking. ZDNet also relies on Web
browsers and online service providers to provide Internet access to its sites.
We cannot assure you that ZDNet will be able to expand its network
infrastructure, either itself or through use of third-party hosting systems or
service providers, on a timely basis sufficient to meet demand. ZDNet presently
has only a limited amount of redundant facilities or systems, no formal
disaster recovery plan and no sufficient business interruption insurance to
compensate for losses that may occur. Any interruption to its systems or
operations could have a material adverse effect on ZDNet's business and its
ability to retain users, advertisers and strategic partners.

26
<PAGE>

ZDNet's Networks May Be Vulnerable To Security Risks

ZDNet's networks may be vulnerable to unauthorized access, computer viruses
and other security problems. A user who circumvents security measures could
misappropriate proprietary information or cause interruptions or malfunctions
in ZDNet's operations. ZDNet may be required to expend significant resources to
protect against the threat of such security breaches or to alleviate problems
caused by such breaches. Although ZDNet intends to continue to implement
industry-standard security measures, such measures may be inadequate.

Increased Government Regulation Of The Internet Could Have A Material Adverse
Effect On ZDNet

Increased government regulation, or the application of existing laws to
online activities, could inhibit Internet growth, expose ZDNet and other online
content providers to additional liabilities and increase the cost of doing
business. This could have a material adverse effect on ZDNet's profits and
liquidity. The increasing popularity and use of the Internet and other online
services may lead to the adoption of new laws and regulations in the U.S. or
elsewhere covering issues such as online privacy, copyright and trademark,
sales taxes and fair business practices or which require qualification to do
business as a foreign corporation in certain jurisdictions. For instance, the
European Union's recently adopted privacy regulations may limit the collection
and use of certain user information.

ZDNet Relies On Intellectual Property Rights Which May Not Be Adequately
Protected Under Current Laws

To establish and protect its trademark, service mark and other proprietary
rights in its products and services, ZDNet relies on a combination of:

. copyright, unfair competition, trademark, service mark and trade secret
laws and

. confidentiality agreements with its licensees and other third parties and
confidentiality agreements and policies covering its employees.

We cannot assure you that these measures will be adequate, that ZDNet will be
able to secure registrations for all of its marks in the U.S. or
internationally or that third parties will not infringe upon or misappropriate
its proprietary rights. Any infringement or misappropriation, or litigation
relating to intellectual property rights, may divert management's attention and
ZDNet's funds to litigate such claims.

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related business are
uncertain and evolving. In particular, new domain name registration and
ownership priority procedures may be adopted which may make it more difficult
for ZDNet to retain or obtain desirable domain names.

ZDNet May Incur Liability For Its Internet Content And User Data

As a content provider, ZDNet may face potential liability for intellectual
property infringement, defamation, indecency and other claims. In addition,
ZDNet may incur liability for unauthorized duplication or distribution of
third-party content or materials or for information collected from and about
its users. We cannot assure you that third parties or users will not bring
claims against ZDNet relating to proprietary rights or use of personal
information. Although ZDNet seeks to obtain indemnification from strategic
partners for any liability resulting from licensed content or linked sites, we
cannot assure you that such indemnities will always be obtainable or adequate.
ZDNet's general liability insurance may not cover or be adequate for potential
claims of this type.

ZDNet May Not Be Able To Adequately Manage Its Growth

ZDNet will need to effectively plan and manage its business to succeed in the
rapidly evolving Internet industry. ZDNet continues to increase the scope of
its operations and has grown its workforce substantially. As of December 31,
1997, ZDNet had a total of 252 employees and, as of December 31, 1998, ZDNet
had a total

27
<PAGE>

of 316 employees--a growth of 25.4%. This growth has placed, and future growth
may place, a significant strain on ZDNet's resources. For example, we expect
that the variety of advertising products available on ZDNet sites will expand,
increasing demands on ZDNet billing and collection systems and requiring
additional resources to properly determine pricing and discounting structures.
ZDNet expects that it will need to continue to improve its financial and
management controls and reporting systems and procedures, and will need to
continue to expand, train and manage its workforce.

ZDNet's Acquisition And Investment Strategy Exposes It To Risks

ZDNet may acquire or make investments in new or complementary businesses,
products, services or technologies. We cannot assure you that ZDNet will be
able to identify suitable acquisition or investment candidates. Even if ZDNet
does identify suitable candidates, we cannot assure you that ZDNet will be able
to make such acquisitions or investments on reasonable commercial terms or
successfully assimilate personnel, operations, products, services or
technologies into its operations. This could disrupt ZDNet's ongoing business,
distract ZDNet's management and employees, increase ZDNet's expenses, including
amortization of goodwill, and materially and adversely affect ZDNet's profits
and liquidity. Furthermore, the incurrence of debt or issuance of equity
securities may be attributed to ZDNet to fund any future ZDNet acquisitions.

ZDNet's Computer Systems, And Those Of Others On Whom It Relies, May Not
Achieve Year 2000 Readiness

Programming codes in existing computer systems and software may not reliably
recognize date-sensitive information when the calendar year changes to 2000.
Systems or software that do not properly recognize such information could
generate erroneous data or fail. We are in the process of identifying and
testing our computer systems and software for Year 2000 readiness. In addition,
we are in the process of working with third parties on whom we rely for system
and database management to ensure Year 2000 readiness. We have not verified
that such third parties are Year 2000 compliant. We cannot assure you that our
systems or software, or third-party systems or software on which we rely, will
be Year 2000 compliant. Significant uncertainty exists concerning the potential
costs and effects associated with Year 2000 compliance. If Ziff-Davis Inc. or
any subscribers, advertisers, licensors, vendors or other third parties on whom
it relies experiences a Year 2000 compliance problem, this could have a
material adverse effect on ZDNet's profits and liquidity.

ZDNet's International Expansion Strategy Exposes It To Risk

One component of ZDNet's growth strategy is to further expand into
international markets. ZDNet's international operations are at an early stage
of development and have an extremely limited operating history. In addition,
the markets in which ZDNet has undertaken international expansion have
technology and online industries that are less well developed than in the U.S.

There are certain risks inherent in doing business in international markets,
such as the following:

. uncertainty of product acceptance by different cultures,

. unforeseen changes in regulatory requirements,

. difficulties in staffing and managing multinational operations,

. state-imposed restrictions on the repatriation of funds,

. currency fluctuations,

. difficulties in finding appropriate foreign licensees or joint venture
partners and

. potentially adverse tax consequences.

There is a risk that such factors will have an adverse effect on ZDNet's
ability to successfully operate internationally and on its profits and
liquidity.

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<PAGE>

Other Ziff-Davis Inc. Risks

Ziff-Davis Inc. Has Only Operated As A Stand-Alone Company For Less Than A
Year

We have only operated as a stand-alone company since May 1998. Until October
1997, our publishing business and our trade show and conference businesses were
managed as separate SOFTBANK Corp. subsidiaries. Our success depends in part on
our continued ability to manage the combined enterprise.

Ziff-Davis Inc.'s Historical Financial Information Is Not Particularly
Relevant To Its Actual Results

Our financial information included in this Proxy Statement does not reflect
what the actual results of operations, financial position and cash flows would
have been had Ziff-Davis Inc. existed prior to the periods presented. In
addition, the financial information is not necessarily indicative of our future
results of operations, financial position and cash flows. For more information
regarding our operating results, see "Ziff-Davis Inc. Management's Discussion
and Analysis of Financial Condition and Results of Operations--Presentation of
Financial Information" set forth in Annex VI hereto.

Ziff-Davis Inc. Is Controlled By Its Principal Stockholders. This Creates
Potential Conflicts Of Interest

Softbank owns approximately 72% of Ziff-Davis Inc.'s outstanding shares. As a
result, Softbank could elect all the members of the board of directors.
Softbank could also control those actions requiring the approval of the holders
of a majority of the voting stock, including amendments to our charter and any
business combinations. This concentration of ownership could prevent a change
in control of Ziff-Davis Inc. that might otherwise be beneficial to
stockholders.

We have entered into certain agreements with Softbank governing ongoing
relationships. These agreements include certain licensing and management
agreements relating to publications, events, ZDNet and ZDTV, a 24-hour cable
television channel and integrated Web site focused exclusively on computers,
technology and the Internet. In addition, SOFTBANK Corp. has given us an
undertaking that, as long as it owns 40% of the voting power in our stock and
can elect a majority of the board of directors, it will not expand its
operations outside Japan involving:

. publishing information on computing and Internet-related technology
through print media, CD-ROM/DVD, Internet and television or

. producing trade shows, conferences, exhibitions and similar events
primarily related to computing and Internet-related technology

that compete with us without the prior approval of our employee directors after
consulting with our independent directors.

This undertaking does not preclude investments by venture capital funds
managed by Softbank which invest in, among other things, computer and Internet-
related companies. These funds may be able to co-invest with or compete with us
with respect to new investments. In addition, Softbank may also develop new
funds which may compete with us for investment opportunities. We have agreed
not to compete with SOFTBANK Corp. in Japan without the prior approval of
SOFTBANK Corp.'s board of directors and have given Softbank the continuing
right to license all of our products and services in Japan. These arrangements
and undertakings might be less favorable than arrangements negotiated at arm's
length between unrelated parties.

Ziff-Davis Inc. Has Significant Debt Obligations

At December 31, 1998:

. ZD's total debt (and Ziff-Davis Inc.'s total debt) was approximately $1.5
billion.

. ZD's total division equity (and Ziff-Davis Inc.'s stockholders' equity)
was approximately $1.4 billion.

. ZD's total debt (and Ziff-Davis Inc.'s total debt) was 53% of total
capitalization.

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<PAGE>

Our indebtedness is substantial in relation to stockholders' equity. The
degree to which we are leveraged is important because:

. It may impair our ability to obtain additional financing for working
capital, capital expenditures, acquisitions or general corporate
purposes.

. It may reduce the funds available to us for our operations if a
substantial portion of our cash flow from operations is dedicated to the
payment of principal and interest on our indebtedness.

. It may impair our ability to incur additional debt because of 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.

. It may increase our vulnerability to adverse general economic conditions,
including increases in interest rates.

Our indebtedness requires us to use a substantial portion of our cash flow to
pay down principal and interest on our outstanding debt. This reduces the funds
available for capital expenditures and future business opportunities.

Our credit facility is secured, in part, by a first priority security
interest in the capital stock of certain of our subsidiaries and is guaranteed
by certain of our wholly owned domestic subsidiaries, including ZD Inc. and ZD
Events Inc.

On December 11, 1998 Standard & Poors lowered its corporate credit and bank
loan ratings for Ziff-Davis Inc. to BB- from BB and Ziff-Davis Inc.'s
subordinated debt rating to B from B+. This downgrade had no impact on the
terms of our current borrowings. While the downgrade may make future borrowings
more expensive, we do not believe this will have a material impact on our
liquidity or our access to credit markets.

On December 16, 1998 the lenders on our $1.35 billion credit facility agreed
to amend certain provisions of that facility. The amended provisions include an
increase to our allowed leverage ratios. In return, we have agreed to pay a
one-time fee of $3.375 million, and increase our interest rates on amounts
borrowed under the facility to rates currently ranging from LIBOR plus 2.875%
to LIBOR plus 3.375%, depending on the type of loan.

Ziff-Davis Inc.'s Revenue Is Dependent On Demand For Advertising

Ziff-Davis Inc. derived 52% of its total revenue in 1998 from advertising
sales and we expect that advertising revenue will continue to be the principal
source of our revenue in the foreseeable future. Most of Ziff-Davis Inc.'s
advertising contracts are either short-term contracts and/or can be terminated
by the advertiser at any time with little notice. We cannot assure you that we
will be able to retain current advertisers or obtain new advertising contracts.

If a general economic downturn or a U.S. recession occurs in the future, our
advertisers may reduce their advertising budgets. In addition, factors such as
pricing pressures, delays and new product launches may affect technology
product advertisers. We cannot assure you that technology product advertisers
will maintain current levels of advertising in special interest magazines and
events instead of advertising in more general interest media. Any material
decline in the demand for advertising by technology product advertisers could
have an adverse effect on our profits and liquidity.

A Reduced Demand For Advertising Has Resulted In A Company-Wide Restructuring

Margin pressure on computer equipment manufacturers, industry and product
delays, lower demand in Asia and a focus on the Year 2000 transition are
contributing to a reduced demand for advertising in our magazines (principally
PC Magazine, PC/Computing, Computer Shopper and PC Week). We believe these
factors will continue. In part as a result of these factors, earnings before
interest, taxes, depreciation and amortization for the fourth quarter of 1998
were significantly lower than they were for the fourth quarter of 1997.

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<PAGE>

As a result of this reduced demand, we announced on October 8, 1998 a
company-wide restructuring in which we discontinued three publications
(Internet Business, Equip and Windows Pro), and reduced our workforce by
approximately 10%. In the fourth quarter of 1998 we took a pre-tax charge of
$52.2 million as part of this restructuring.

Ziff-Davis Inc. Is Increasingly Dependent On, And Receives A Significant
Percentage Of Its Revenue From, A Limited Number Of Advertisers

A relatively small number of advertisers contribute a significant percentage
of Ziff-Davis Inc.'s advertising revenue. In 1998, Ziff-Davis Inc.'s top 20
advertising customers accounted for approximately 37.1% of its advertising
revenue. These advertising clients, and our other advertising clients, may not
continue to use our services to the same extent, or at all, in the future. A
significant reduction in advertising by one or more of Ziff-Davis Inc.'s
largest clients would have a material adverse effect on our profits and
liquidity.

Ziff-Davis Inc.'s Revenue Is Dependent On Certain Publications And Trade Shows

Certain of our publications have represented a significant portion of our
historic revenue. We expect that such publications will continue to do so in
the future. Three of our business publications, PC Magazine, Computer Shopper
and PC Week, accounted for approximately 48% of our publishing revenue in 1998.
Although we believe we have a diversified portfolio of special interest
publications and are not dependent on any single publication, a significant
decline in the performance of any of these publications could have an adverse
effect on our profits and liquidity.

Certain of our trade shows and conferences have represented a significant
portion of our historic revenue. We expect that such trade shows and
conferences will continue to do so in the future. COMDEX/Fall accounted for 32%
of our trade show and conference revenue in 1998. Although we believe we have a
diversified portfolio of trade shows worldwide, a significant decline in the
performance of COMDEX/Fall could have an adverse effect on our profits and
liquidity.

Ziff-Davis Inc.'s Revenue Is Seasonal

Our business is seasonal. Revenue typically reaches its highest level during
the fourth quarter of each calendar year. This is largely due to the timing of
our single largest trade show event, COMDEX/Fall, and the general increase in
publishing revenue in the fourth quarter due to increased consumer buying
activity during the holiday season. We cannot assure you that COMDEX/Fall will
continue to be successful or that our fourth quarter revenue will continue to
be higher than revenue for our other quarters.

Ziff-Davis Inc. Has Historical Net Losses

We and our predecessor have incurred significant net losses in the past and
we cannot assure you that we will report net income in the future. For more
information on our net losses, see Ziff-Davis, Inc.'s Consolidated Financial
Statements and Selected Historical Consolidated Financial and Other Data in
Annex VI hereto.

To Remain Competitive Ziff-Davis Inc. Must Constantly Expand And Develop New
Products And Services. This Is Inherently Risky and Expensive.

Our success depends in part on our ability to monitor rapidly changing
technologies and market trends and offer new publications, trade shows and
services, including online services, that address the needs of specific target
audiences. The process of internally researching and developing new products
and services and whether they will achieve market acceptance and profitability
can be risky and costly. We cannot assure you that our efforts to introduce
new, or assimilate acquired, publications, trade shows or services will be
successful or profitable. Costs to develop new products are expensed as
incurred. Accordingly, our profitability from year to year may be adversely
affected by the number and timing of new product launches.

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<PAGE>

In February 1999, we purchased ZDTV from an affiliate at a purchase price of
$81.4 million plus the costs of funding its operations for January 1999. We
cannot assure you that ZDTV will ultimately obtain sufficient cable carriage
and commercial acceptance to be profitable.

Ziff-Davis Inc. May Be Adversely Affected By Fluctuations In Paper And Postage
Costs

ZD's principal raw material is paper. Paper costs constitute a significant
expense, accounting for 15.2% of our total U.S. print publishing operating
expenses in 1997 and 16.3% in 1998. Paper prices have been volatile over the
past several years, rising from 1994 through 1996, declining in 1997 and
remaining relatively flat in 1998. Management anticipates that paper prices
will remain relatively stable in 1999. We do not use forward contracts and most
of our 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 ZD's future results of operations.

Postage for magazine distribution is also one of ZD's significant expenses,
accounting for 11.3% of our total U.S. print publishing operating expenses in
1997 and 7.7% in 1998. Postage costs increase periodically and can be expected
to increase in the future. Management estimates postage costs will increase
approximately 3.5% in 1999. We may not be able to recover, in whole or in part,
paper or postage cost increases. Accordingly, significant cost increases could
have a material adverse effect on our profits and liquidity.

Ziff-Davis Inc. Competition Is Significant And Is Expected To Continue

We face significant competition with respect to our print publications, trade
shows and conferences and other technology information services. If we are
unable to compete effectively for advertisers, readers, exhibitors and/or
attendees, our profits and liquidity could be materially and adversely
affected.

In our publishing business, we principally compete for advertising and
circulation revenue with publishers of other computer technology publications.
We also face broad competition from media companies that produce general
interest magazines and newspapers. 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. Overall competitive factors in publishing include product
positioning, editorial quality, circulation, price and customer service. In our
trade show and conference business, we compete 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.

Ziff-Davis Inc. Principal Vendors Are Consolidating And This May Adversely
Affect Our Operations

Our principal vendors include paper suppliers, printers, subscription
fulfillment houses and national newsstand distributors. Each of these
industries is currently experiencing consolidation among their principal
participants. Such consolidation may result in:

. decreased competition, which may lead to increased prices,

. interruptions and delays in services provided by such vendors and

. greater dependence on certain vendors.

Such factors could adversely affect our results of operations. One printing
company accounted for approximately 50% of our U.S.-based publications'
manufacturing expenditures in both 1997 and 1998. While we believe there are
adequate alternatives available, an interruption or delay in service from, or
the loss of, this printer could have a material adverse effect.

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<PAGE>

Ziff-Davis Inc. Is Exposed To Risks From Expanding Into International Markets

One component of our growth strategy is to further expand into international
markets. There are certain risks inherent in doing business in international
markets. For example:

. the uncertainty of product acceptance by different cultures,

. the risks of divergent business expectations,

. difficulties in finding appropriate foreign licensees or 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 our future international operations and, consequently, on our
profits and liquidity.

Ziff-Davis Inc. Is A Defendant In Several Lawsuits, Which Could Have A
Material Adverse Effect On It

In connection with the initial public offering of our existing common stock,
the repricing of certain stock options and a former joint venture between
Softbank and certain third parties, we have been named as a defendant in
several lawsuits. While we believe there are substantial defenses to all of the
claims, we cannot assure you that we will prevail. Defense costs and/or
settlement costs relating to these actions could be substantial, and the
defense of these actions may divert management's attention and resources. If
the plaintiffs prevail in these actions, any judgments awarded by the courts
could have a material adverse effect on our liquidity. For more information
regarding these lawsuits, see "ZDNet Description of Business--Legal
Proceedings" set forth in Annex VIII hereto.

Ziff-Davis Inc.'s Computer Systems, And Those Of Others On Whom It Relies, May
Not Achieve Year 2000 Readiness

Programming codes in existing computer systems and software may not reliably
recognize date-sensitive information when the calendar year changes to 2000.
Systems or software that do not properly recognize such information could
generate erroneous data or fail. We are in the process of identifying and
testing our computer systems and software for Year 2000 readiness. In addition,
we are in the process of working with third parties on whom we rely for system
and database management to ensure Year 2000 readiness. We have not verified
that such third parties are Year 2000 compliant. We cannot assure you that our
systems or software, or third-party systems or software on which we rely, will
be Year 2000 compliant. Significant uncertainty exists concerning the potential
costs and effects associated with Year 2000 compliance. If Ziff-Davis Inc. or
any subscribers, advertisers, licensors, vendors or other third parties on whom
we rely experiences a Year 2000 compliance problem, this could have a material
adverse effect on our profits and liquidity.

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<PAGE>

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

Some of the information in this Proxy Statement may constitute forward-
looking statements which are subject to various risks and uncertainties. Such
statements can be identified by the use of forward-looking terminology such as
"may", "will", "expect", "anticipate", "estimate", "continue", "plan" or other
similar words. These statements discuss future expectations, contain
projections of results of operations or of financial condition or state other
"forward-looking" information. When considering such forward-looking
statements, you should keep in mind the factors described in "Risk Factors" and
other cautionary statements appearing in Management's Discussion and Analysis
of Financial Condition and Results of Operations for each of Ziff-Davis Inc.,
ZD and ZDNet (appearing in Annexes VI, VII and VIII to this Proxy Statement)
and elsewhere in this Proxy Statement. Such risk factors and statements
describe circumstances which could cause actual results to differ materially
from those contained in any forward-looking statement.

This Proxy Statement also includes statistical data regarding the publishing,
trade show and Internet industries. This data was obtained from industry
publications and reports which we believe to be reliable sources. We have not
independently verified such data nor sought the consent of any organizations to
refer to their reports herein.

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<PAGE>

GENERAL

The Board of Directors of Ziff-Davis Inc. (the "Board") is furnishing this
Proxy Statement to solicit proxies in connection with a Special Meeting to be
held at 9:00 a.m., Eastern Standard Time, on March ., 1999 at . and at any
adjournments or postponements thereof. We will vote shares represented by the
proxies received and not properly revoked in accordance with the instructions
contained therein. A stockholder who has given a proxy may revoke it at any
time before it is exercised by filing with the Secretary of Ziff-Davis Inc. a
written revocation or a duly executed proxy bearing a later date or by voting
in person at the Special Meeting. If no choice is specified on the form of
proxy, the shares will be voted "FOR" the approval of each of Proposals 1, 2, 3
and 4 described in this Proxy Statement. If you vote "FOR" the Tracking Stock
Proposal at the Special Meeting you may be forfeiting your right to challenge
the Tracking Stock Proposal in the future.

Stockholders of record at the close of business on February 1, 1999 (the
"Record Date") are entitled to vote at the Special Meeting. As of the close of
business on the Record Date, there were 321 stockholders of record and
100,076,628 shares of common stock were outstanding. A quorum will be met at
the Special Meeting if a majority of the outstanding shares of common stock are
present in person or by proxy. Each holder of common stock will be entitled to
one vote for each share held as of the Record Date, on all matters brought
before the Special Meeting.

Representatives of our independent accountants will be present at the Special
Meeting and will have the opportunity to make a statement if they so desire.
The independent accountants will be available to respond to appropriate
questions you might have.

Proposal 1 (the "Tracking Stock Proposal") requires the affirmative vote of
the holders of a majority of the outstanding shares of common stock. Each of
Proposals 2, 3 and 4 requires the affirmative vote of the holders of a majority
of the shares of common stock present in person or represented by proxy at the
Special Meeting. Abstentions with respect to any proposal will have the same
effect as negative votes on each of the proposals. If a broker, which is the
record holder of certain shares, indicates on a form of proxy that it does not
have discretionary authority to vote such shares on any proposal, or if shares
are voted in other circumstances in which proxy authority is defective or has
been withheld with respect to such proposal, these non-voted shares will be
counted for quorum purposes but will have the same effect as a negative vote on
Proposal 1 and will have no effect on Proposals 2, 3 and 4.

SOFTBANK America Inc. ("SBA"), the owner of approximately 72% of our
outstanding common stock, has agreed to vote for these proposals. Thus, we
expect these proposals to pass regardless of how other stockholders vote.

We will bear the expense of printing and mailing proxy materials. In addition
to soliciting proxies by mail, certain of our directors, officers and other
employees may solicit proxies by personal interview, telephone or facsimile. We
will not pay additional compensation to such persons for such solicitation. We
will reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation materials to beneficial owners of common stock. We have
also retained Morrow & Co., Inc. to perform various proxy advisory,
distribution and solicitation services at a cost of approximately $2,500 plus
disbursements.

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PROPOSAL 1--THE TRACKING STOCK PROPOSAL

General

. Increase the number of authorized shares of common stock from 120 million
to 210 million.

. Authorize the Board to issue common stock in two series--ZD Stock and
ZDNet Stock.

. We intend the ZDNet Stock to reflect the performance of ZDNet (i.e.,
our online business division).

. We intend the ZD Stock to reflect the performance of ZD (i.e., our
other businesses and a Retained Interest in ZDNet).

. We have allocated all of Ziff-Davis Inc.'s consolidated assets,
liabilities, revenue, expenses and cash flow between ZD and ZDNet. In
this Proxy Statement each of ZD and ZDNet is sometimes called a
"Group". In the future, we will publish combined financial statements
of ZD and combined financial statements of ZDNet together with
consolidated financial statements of Ziff-Davis Inc. See "--Certain
Cash Management and Allocation Policies".

. Re-classify each outstanding share of common stock into a share of ZD
Stock.

SBA, the owner of approximately 72% of our outstanding common stock, has
agreed to vote for the Tracking Stock Proposal. Thus, we expect the Tracking
Stock Proposal to pass regardless of how other stockholders vote.

We currently plan to offer to the public, for cash, 10,000,000 shares of
ZDNet Stock intended to represent 14% of the equity value attributed to ZDNet.
This would leave ZD with a Retained Interest intended to represent 86% of the
equity attributable to ZDNet. (We call Ziff-Davis Inc.'s interest in ZDNet,
excluding the interest intended to be represented by outstanding shares of
ZDNet Stock, ZD's "Retained Interest" in ZDNet.) Assuming we do so, we
currently plan to attribute the net proceeds from 1,500,000 shares to ZDNet (in
a manner analogous to a primary offering of common stock) and the net proceeds
from the remaining shares to ZD (in a manner analogous to a secondary offering
of common stock of a subsidiary owned by a parent). ZDNet would then advance to
ZD the net proceeds attributed to ZDNet, and ZD would use those net proceeds,
together with the net proceeds attributed to ZD, to reduce our outstanding
indebtedness. This should strengthen Ziff-Davis Inc. from a credit perspective.

We expect the Offering to occur sometime in the first or second quarter of
1999. However, we could choose to conduct the Offering at a later time, or not
to make the Offering at all, depending on the circumstances at the time.

The Board and the underwriters for the Offering will determine the terms of
the Offering based upon:

. prevailing market and other conditions, both generally and for Internet
businesses,

. the financial condition, results of operations and prospects of ZDNet and

. such other factors as they deem appropriate at the time of the Offering.

In addition to or instead of the Offering, we reserve the right to distribute
ZDNet Stock to stockholders.

We will file an amended and restated certificate of incorporation
implementing the Tracking Stock Proposal (the "Restated Certificate of
Incorporation") and re-classify your common stock before we first issue ZDNet
Stock.

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Background and Reasons for the Tracking Stock Proposal

We continually review each of our businesses and Ziff-Davis Inc. as a whole
to determine the best way to realize its inherent value. As a result of this
review process, we recently began to evaluate various restructuring
alternatives, including an offering of direct stock in a corporation that would
acquire ZDNet or of "tracking stock" of Ziff-Davis Inc. intended to reflect the
performance of ZDNet.

Upon management's recommendation and after extensive consultation with our
financial and legal advisors, the Board determined that the issuance of
tracking stock would be preferable because, among other things, issuances of
tracking stock, unlike the issuance of direct stock, would preserve certain
favorable financial, tax, operational, strategic and other benefits of being a
single consolidated entity. On March ., 1999, the Board carefully considered
the Tracking Stock Proposal and the other proposals described in this Proxy
Statement, determined that those proposals are in the best interests of Ziff-
Davis Inc. and its stockholders, unanimously approved them and resolved to
recommend that you vote for them.

In arriving at its determination and recommendation, the Board, with the
assistance of its financial and legal advisors, considered, among other things,
the following:

. The proposal will allow investors to invest in either or both series of
common stock, depending on their particular investment objectives.

. The proposal will allow us to issue stock options tied to ZDNet Stock,
thereby providing more focused incentives to ZDNet management and
employees.

. The proposal will enable us to monetize some of the value of ZDNet while
preserving the financial, tax, operational, strategic and other benefits
of being a single consolidated entity.

. The proposal will allow us to issue ZDNet Stock to the public for cash on
a basis that we believe to be tax-free and use the net proceeds to reduce
indebtedness. Assuming we do so (as we currently plan), the result should
strengthen Ziff-Davis Inc. from a credit perspective.

The Board also evaluated the potential negative aspects of the Tracking Stock
Proposal, including the following:

. The uncertainty as to the amount of net proceeds we may realize in the
Offering.

. The Tracking Stock Proposal will require a complex capital structure and
additional reporting requirements with respect to each Group.

. The Tracking Stock Proposal will expand the Board's responsibility to
oversee the interests of two series of common stockholders.

. The potential diverging or conflicting interests between the holders of
ZD Stock and the holders of ZDNet Stock and issues that the Board may
face in resolving any conflicts.

. The pooling-of-interests method of accounting might not be available for
future acquisitions using ZD Stock or ZDNet Stock.

. The costs associated with implementing the Tracking Stock Proposal and
the ongoing cost of operating separate Groups will exceed the costs
associated with operating Ziff-Davis Inc. as it currently exists.

The Board determined that the positive aspects of the Tracking Stock Proposal
outweighed the negative aspects and concluded that the Tracking Stock Proposal
and the other proposals are in the best interests of Ziff-Davis Inc. and its
stockholders.

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Dividend Policy

We currently intend to retain all of our earnings to finance our operations,
repay indebtedness and fund future growth. We do not expect to pay any
dividends on ZD Stock or ZDNet Stock for the foreseeable future.

Although certain of our debt instruments currently prohibit the payment of
dividends, and in any event, as stated above, we do not expect to pay any
dividends for the foreseeable future on either series of common stock, we will
otherwise be permitted to pay dividends on

. ZD Stock out of the assets of Ziff-Davis Inc. legally available for the
payment of dividends under Delaware law, but the total amounts paid as
dividends on ZD Stock cannot exceed the Available Dividend Amount for ZD
and

. ZDNet Stock out of the assets of Ziff-Davis Inc. legally available for
the payment of dividends under Delaware law (and transfer corresponding
amounts to ZD in respect of its Retained Interest in ZDNet), but the
total of the amounts paid as dividends on ZDNet Stock and the
corresponding amounts transferred to ZD in respect of its Retained
Interest cannot exceed the Available Dividend Amount for ZDNet.

The "Available Dividend Amount" for ZD or ZDNet, as the case may be, is based
on the amount that would be legally available for the payment of dividends
under Delaware law if ZD and ZDNet were each a separate Delaware corporation.
For a more detailed definition of Available Dividend Amount, see "--Description
of ZD Stock and ZDNet Stock--Dividends". We expect that determinations to pay
dividends on ZD Stock or ZDNet Stock would be based primarily upon the
financial condition, results of operations, capital requirements, any
restrictions contained in financing or other agreements binding upon Ziff-Davis
Inc. and such other factors as the Board deems relevant.

Certain Cash Management and Allocation Policies

In order to prepare separate financial statements for ZD and ZDNet, Ziff-
Davis Inc. has allocated all of its consolidated assets, liabilities, revenue,
expenses and cash flow between ZD and ZDNet. Thus, the financial statements of
ZD and ZDNet, taken together, comprise all of the accounts included in the
corresponding financial statements of Ziff-Davis Inc.

The financial statements of ZD and ZDNet reflect the application of certain
cash management and allocation policies adopted by the Board. These policies
are summarized below.

The Board may, in its sole discretion, modify, rescind or add to any of these
policies, although it has no present intention to do so. The decision of the
Board to modify, rescind or add to any of these policies would, however, be
subject to the Board's general fiduciary duties.

Even though Ziff-Davis Inc. has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between ZD and ZDNet, holders of
ZDNet Stock will continue to be common stockholders of Ziff-Davis Inc. and, as
such, will be subject to all risks associated with an investment in Ziff-Davis
Inc. and all of its businesses, assets and liabilities. See "Risk Factors--Risk
Factors Relating to the Tracking Stock Proposal--Holders Of ZDNet Stock Will Be
Common Stockholders Of Ziff-Davis Inc. And Will Be Subject To Risks Associated
With An Investment In Ziff-Davis Inc As A Whole".

Treasury Activities

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cash receipts (other than receipts of foreign operations or operations that are
not wholly owned) to Ziff-Davis Inc., and Ziff-Davis Inc. generally funds each
Group's cash disbursements (other than disbursements of foreign operations or
operations that are not wholly owned) on a daily basis.

In the historical financial statements of ZD and ZDNet, (1) all external debt
and equity transactions (and the proceeds thereof) were attributed to ZD, (2)
whenever ZDNet held cash (other than cash of ZDNet's foreign operations or of
ZDNet's operations that are not wholly owned), that cash was transferred to ZD
and accounted for as a return of capital (i.e., as a reduction in ZDNet's
division equity and ZD's Retained Interest in ZDNet) and (3) whenever ZDNet had
a cash need (other than cash needs of ZDNet's foreign operations or of ZDNet's
operations that are not wholly owned), that cash need was funded by ZD and
accounted for as a capital contribution (i.e., as an increase in ZDNet's
division equity and ZD's Retained Interest in ZDNet). Ziff-Davis Inc. intends
to continue these practices until ZDNet Stock is first issued. Accordingly, no
interest expense has been or will be reflected in the financial statements of
ZDNet, and no interest income from ZDNet has been or will be reflected in the
financial statements of ZD, for any period prior to the date on which ZDNet
Stock is first issued.

After the date on which ZDNet Stock is first issued:

(1) Ziff-Davis Inc. will attribute each future incurrence or issuance of
external debt or preferred stock (and the proceeds thereof) to ZD, unless
the Board determines otherwise. The Board may, but is not required to,
attribute an incurrence or issuance of debt or preferred stock (and the
proceeds thereof) to ZDNet to the extent that Ziff-Davis Inc. incurs or
issues the debt or preferred stock for the benefit of ZDNet.

(2) Ziff-Davis Inc. will attribute each future issuance of ZD Stock (and
the proceeds thereof) to ZD. Ziff-Davis Inc. may attribute any future
issuance of ZDNet Stock (and the proceeds thereof) to ZD in respect of its
Retained Interest in ZDNet (in a manner analogous to a secondary offering
of common stock of a subsidiary owned by a corporate parent) or to ZDNet
(in a manner analogous to a primary offering of common stock). Dividends on
and repurchases of ZD Stock will be charged against ZD, and dividends on
and repurchases of ZDNet Stock will be charged against ZDNet. In addition,
at the time of any dividend on ZDNet Stock, Ziff-Davis Inc. will credit to
ZD, and charge against ZDNet, a corresponding amount in respect of ZD's
Retained Interest in ZDNet. See "--Description of ZD Stock and ZDNet
Stock".

(3) Whenever ZDNet holds cash (other than cash of ZDNet's foreign
operations or cash of ZDNet's operations that are not wholly owned), ZDNet
will normally transfer that cash to ZD. Conversely, whenever ZDNet has a
cash need (other than cash needs of ZDNet's foreign operations or cash
needs of ZDNet's operations that are not wholly owned), ZD will normally
fund that cash need. However, the Board will determine, in its sole
discretion, whether to provide any particular funds to either Group and
will not be obligated to do so.

(4) Ziff-Davis Inc. will account for all cash transfers from one Group to
or for the account of the other Group (other than transfers in return for
assets or services rendered or transfers in respect of ZD's Retained
Interest that correspond to dividends paid on ZDNet Stock), as inter-Group
revolving credit advances unless:

. the Board determines that a given transfer (or type of transfer)
should be accounted for as a long-term loan,

. the Board determines that a given transfer (or type of transfer)
should be accounted for as a capital contribution increasing ZD's
Retained Interest in ZDNet or

. the Board determines that a given transfer (or type of transfer)
should be accounted for as a return of capital reducing ZD's Retained
Interest in ZDNet.

There are no specific criteria to determine when Ziff-Davis Inc. will
account for a cash transfer as a long-term loan, a capital contribution or
a return of capital rather than an inter-Group revolving credit advance.

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The Board would make such a determination in the exercise of its business
judgment at the time of such transfer, or the first of such type of
transfer, based upon all relevant circumstances. Factors the Board would
consider include:

. the current and projected capital structure of each Group,

. the relative levels of internally generated funds of each Group,

. the financing needs and objectives of the recipient Group,

. the investment objectives of the transferring Group,

. the availability, cost and time associated with alternative financing
sources and

. prevailing interest rates and general economic conditions.

(5) Any cash transfer accounted for as an inter-Group revolving credit
advance will bear interest at the rate at which the Board, in its sole
discretion, determines Ziff-Davis Inc. could borrow such funds on a
revolving credit basis. Any cash transfer accounted for as a long-term loan
will have interest rate, amortization, maturity, redemption and other terms
that generally reflect the then prevailing terms on which the Board, in its
sole discretion, determines Ziff-Davis Inc. could borrow such funds.

(6) Any cash transfer from ZD to ZDNet, or for ZDNet's account, accounted
for as a capital contribution will correspondingly increase ZDNet's
division equity and ZD's Retained Interest in ZDNet. As a result, the
number of shares of ZDNet Stock that Ziff-Davis Inc. may issue for the
account of ZD in respect of its Retained Interest (which we call the
"Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet") will increase by the amount of such capital contribution divided by
the Market Value of ZDNet Stock on the date of transfer.

(7) Any cash transfer from ZDNet to ZD, or for ZD's account, accounted
for as a return of capital will correspondingly reduce ZDNet's division
equity and ZD's Retained Interest in ZDNet. As a result, the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet will
decrease by the amount of such return of capital divided by the Market
Value of ZDNet Stock on the date of transfer.

Corporate General And Administrative Expenses

Ziff-Davis Inc. allocates the cost of certain corporate general and
administrative services and shared services to the Groups generally based on
utilization. These shared services include legal, accounting (tax and
financial), information services, telecommunications, purchasing, marketing,
intellectual property, public relations, corporate office and travel expenses.
Where determinations based on utilization alone are impracticable, Ziff-Davis
Inc. uses other methods and criteria that management believes to be equitable
and to provide a reasonable estimate of the cost attributable to each Group.

Taxes

Federal income taxes, which are determined on a consolidated basis, are
allocated to each Group, and reflected in their respective financial
statements, in accordance with Ziff-Davis Inc.'s tax allocation policy. In
general, this policy provides that the consolidated tax provision, and related
tax payments or refunds, are allocated between the Groups based principally
upon the financial income, taxable income, credits and other amounts directly
related to the respective Groups. Tax benefits that cannot be used by the Group
generating such attributes, but can be utilized on a consolidated basis, are
allocated to the Group that generated such benefits. As a result, the allocated
Group amounts of taxes payable or refundable are not necessarily comparable to
those that would have resulted if the Groups had filed separate tax returns.
State income taxes generally are computed on a separate company basis.

Royalty Charges

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financial statements as a reduction in selling, general and administrative
expenses, is equal to 5% of the first $100 million of ZDNet's revenue for the
year, 4% of the next $50 million of ZDNet's revenue for that year and 3% of any
incremental revenue over $150 million for that year. The Board may, in its sole
discretion, at some point in the future change this fee as it deems appropriate
in light of the circumstances from time to time.

Description of ZD Stock and ZDNet Stock

The following description is not complete and should be read with Annex II
to this Proxy Statement, which contains the full text of the Restated
Certificate of Incorporation that will be filed pursuant to the Tracking
Stock Proposal.

General

Our current amended and restated certificate of incorporation (which we call
the "Current Certificate of Incorporation") authorizes us to issue 130 million
shares, consisting of 120 million shares of common stock, par value $.01 per
share, and 10 million shares of preferred stock, par value $.01 per share
("Preferred Stock"). Only the Preferred Stock is currently issuable in series
by the Board. As of February 22, 1999, we had approximately 100 million shares
of common stock and no shares of Preferred Stock issued and outstanding.

In order to implement the Tracking Stock Proposal, we would file the Restated
Certificate of Incorporation which would amend and restate our Current
Certificate of Incorporation. The Restated Certificate of Incorporation would:

. Increase the number of authorized shares of common stock from 120 million
to 210 million.

. Authorize the Board to issue common stock in two series--ZD Stock and
ZDNet Stock. Initially, we expect to designate 130 million shares as ZD
Stock and 80 million shares as ZDNet Stock.

. We intend ZDNet Stock to reflect the performance of ZDNet.

. We intend ZD Stock to reflect the performance of ZD.

. Re-classify each outstanding share of common stock into a share of ZD
Stock. (The filing would not change the authorized Preferred Stock.)

The full definitions of the terms "ZD" and "ZDNet" are set forth under "--
Mandatory Dividend, Redemption Or Exchange On Disposition Of All Or
Substantially All Of The Assets Of A Group" below.

Before we first issue shares of ZDNet Stock, the Board would designate the
initial Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet. See "--ZD's Retained Interest in ZDNet", "--Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet" and Annex I for additional
information about ZD's Retained Interest in ZDNet and the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet.

The Board will have the authority to increase or decrease from time to time
the total number of authorized shares comprising either series of common stock.
However, the Board could not increase the number of authorized shares of a
series above a number which, when added to all of the authorized shares of the
other series of common stock, would exceed the total authorized number of
shares of common stock. Likewise, the Board could not decrease the number of
authorized shares of a series below the number of shares of such series then
outstanding.

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The Board will have the authority in its sole discretion to issue authorized
but unissued shares of common stock from time to time for any proper corporate
purpose. The Board will have the authority to do so without your approval
(except as provided by Delaware law or the rules and regulations of any
securities exchange on which any series of outstanding common stock may then be
listed).

Dividends

We currently intend to retain all of our earnings to finance operations,
repay our indebtedness and fund future growth. We do not expect to pay
dividends on ZD Stock or ZDNet Stock for the foreseeable future.

Although our various debt instruments currently prohibit the payment of
dividends, and in any event, as stated above, we do not expect to pay any
dividends for the foreseeable future on any series of common stock, we will
otherwise be permitted to pay dividends on

. ZD Stock out of assets of Ziff-Davis Inc. legally available for the
payment of dividends under Delaware law, but the total amounts paid as
dividends on ZD Stock cannot exceed the Available Dividend Amount for ZD
and

. ZDNet Stock out of the assets of Ziff-Davis Inc. legally available for
the payment of dividends under Delaware law (and transfer corresponding
amounts to ZD in respect of its Retained Interest in ZDNet). However, the
total amounts paid as dividends on ZDNet Stock and the corresponding
amounts transferred to ZD in respect of its Retained Interest in ZDNet
cannot exceed the Available Dividend Amount for ZDNet.

The "Available Dividend Amount" for ZD at any time is the amount that would
then be legally available for the payment of dividends on ZD's common stock
under Delaware law if (1) ZD and ZDNet were each a separate Delaware
corporation, (2) ZD had outstanding (a) a number of shares of common stock, par
value $0.01 per share, equal to the number of shares of ZD Stock that are then
outstanding and (b) a number of shares of preferred stock, par value $0.01 per
share, equal to the number of shares of Preferred Stock of Ziff-Davis Inc. that
have been attributed to ZD and are then outstanding, (3) the assumptions about
ZDNet set forth in the next sentence were true and (4) ZD owned a number of
shares of ZDNet common stock equal to the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet. Similarly, the "Available Dividend
Amount" for ZDNet at any time is the amount that would then be legally
available for the payment of dividends on ZDNet's common stock under Delaware
law if ZDNet were a separate Delaware corporation having outstanding (1) a
number of shares of common stock, par value $0.01 per share, equal to the
number of shares of ZDNet Stock that are then outstanding plus the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet and (2) a
number of shares of preferred stock, par value $0.01 per share, equal to the
number of shares of Preferred Stock of Ziff-Davis Inc. that have been
attributed to ZDNet and are then outstanding.

The amount legally available for the payment of dividends on common stock of
a corporation under Delaware law is generally limited to (1) the total assets
of the corporation less its total liabilities less (2) the aggregate par value
of the outstanding shares of its common and preferred stock. However, if that
amount is not greater than zero, the corporation may also pay dividends out of
the net profits for the corporation for the fiscal year in which the dividend
is declared and/or the preceding fiscal year. As mentioned above, these
restrictions will form the basis for calculating the Available Dividend Amounts
for ZD and ZDNet. These restrictions will also form the basis for calculating
the aggregate amount of dividends that Ziff-Davis Inc. as a whole can pay on
its common stock (regardless of series). Thus, net losses of either Group, and
any dividends and distributions on, or repurchases of, either series of common
stock, will reduce the assets legally available for dividends on both series of
common stock.

Subject to the foregoing limitations (and to any other limitations set forth
in any future series of Preferred Stock or in any agreements binding on Ziff-
Davis Inc. from time to time), we have the right to pay dividends on both, one
or neither series of common stock in equal or unequal amounts, notwithstanding
the performance

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of either Group, the amount of assets available for dividends on either series,
the amount of prior dividends paid on either series, the respective voting
rights of each series or any other factor.

At the time of any dividend on the outstanding shares of ZDNet Stock
(including any dividend required as a result of a disposition of All or
Substantially All of the Assets of ZDNet, but excluding any dividend payable in
shares of ZDNet Stock), we will credit to ZD, and charge against ZDNet, a
corresponding amount in respect of ZD's Retained Interest in ZDNet.
Specifically, the corresponding amount will equal (1) the aggregate amount of
such dividend times (2) a fraction, the numerator of which is the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet and the
denominator of which is the number of shares of ZDNet Stock then outstanding.

Mandatory Dividend, Redemption Or Exchange On Disposition Of All Or
Substantially All Of The Assets Of A Group

If we dispose of All or Substantially All of the Assets of a Group to one or
more persons or entities, in one transaction or a series of related
transactions (collectively, a "Disposition"), and the Disposition is not an
Exempt Disposition as defined below, we would be required, by the 85th Trading
Day after the consummation of such Disposition, to choose one of the following
three alternatives:

. declare and pay a dividend to holders of the series of common stock that
relates to that Group (in cash, securities (other than common stock of
Ziff-Davis Inc.) or other property, or a combination thereof), in an
amount having a Fair Value equal to their Proportionate Interest in the
Net Proceeds of such Disposition,

. redeem from holders of the series of common stock that relates to that
Group, for cash, securities (other than common stock of Ziff-Davis Inc.)
or other property (or a combination thereof) in an amount having a Fair
Value equal to their Proportionate Interest in the Net Proceeds of such
Disposition, all of the outstanding shares of the relevant series of
common stock (or, if such Group continues after such Disposition to own
any material assets other than the proceeds of such Disposition, a number
of shares of such series of common stock having an aggregate average
Market Value, during the 20 consecutive Trading Day period beginning on
the 16th Trading Day immediately following the date on which the
Disposition is consummated, equal to such Fair Value) or

. issue shares of the series of common stock that does not relate to that
Group in exchange for all of the outstanding shares of the series of
common stock that relates to that Group at a 10% premium (based on the
average Market Value of the relevant series of common stock as compared
to the average Market Value of the other series of common stock during
the 20 consecutive Trading Day period beginning on the 16th Trading Day
immediately following the date on which the Disposition is consummated).

In connection with any special dividend on, or redemption of, ZDNet Stock as
described above, we will credit to ZD, and charge against ZDNet, a
corresponding amount in respect of ZD's Retained Interest in ZDNet.
Specifically, the corresponding amount will equal (1) the aggregate Fair Value
of such dividend or redemption times (2) a fraction, the numerator of which is
the Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet
and the denominator of which is the number of shares of ZDNet Stock then
outstanding. In addition, in connection with any redemption of ZDNet Stock as
described above, we will decrease the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet by the same proportion as the proportionate
decrease in outstanding shares of ZDNet caused by such redemption.

At any time within one year after completing any dividend or partial
redemption of the sort referred to above, we will have the right to issue
shares of the series of common stock that does not relate to the Group in
question in exchange for outstanding shares of the series of common stock that
relates to that Group at a 10% premium (based on the average Market Value of
the relevant series of common stock as compared to the average Market Value of
the other series of common stock during the 20 consecutive Trading Day period
ending on the 5th Trading Day immediately preceding the date on which Ziff-
Davis Inc. mails the notice of

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<PAGE>

exchange to holders of the relevant series). In determining whether to effect
any such exchange following such a dividend or partial redemption, we would, in
addition to other matters, consider whether the remaining assets of such Group
continue to constitute a viable business, the number of shares of such common
stock remaining issued and outstanding, the per share market price of such
common stock and the ongoing cost of continuing to have a separate series of
such common stock outstanding.

The following terms used in this document have the meanings specified in our
Restated Certificate of Incorporation and are set forth below:

"All or Substantially All of the Assets" of either Group means a portion of
such assets that represents at least 80% of the then-current Fair Value of the
assets of such Group.

"Exempt Disposition" means any of the following:

. a Disposition in connection with the liquidation, dissolution or winding-
up of Ziff-Davis Inc. and the distribution of assets to stockholders,

. a Disposition to any person or entity controlled by Ziff-Davis Inc. (as
determined by the Board in its sole discretion),

. a Disposition by either Group for which Ziff-Davis Inc. receives
consideration primarily consisting of equity securities (including,
without limitation, capital stock of any kind, interests in a general or
limited partnership, interests in a limited liability company or debt
securities convertible into or exchangeable for, or options or warrants
to acquire, any of the foregoing, in each case without regard to the
voting power or other management or governance rights associated
therewith) of an entity which is primarily engaged or proposes to engage
primarily in one or more businesses similar or complementary to
businesses conducted by such Group prior to the Disposition, as
determined by the Board in its sole discretion,

. a dividend, out of ZDNet's assets, to holders of ZDNet Stock (and a
transfer of a corresponding amount to ZD in respect of its Retained
Interest in ZDNet),

. a dividend, out of ZD's assets, to holders of ZD Stock and

. any other Disposition, if (1) at the time of the Disposition there are no
shares of ZD Stock outstanding, (2) at the time of the Disposition there
are no shares of ZDNet Stock outstanding or (3) before the 30th Trading
Day following the Disposition we have mailed a notice stating that we are
exercising our right to exchange all of the outstanding shares of ZD
Stock or ZDNet Stock for newly issued shares of the other series of
common stock as contemplated under "--Optional Exchange Of One Series Of
Common Stock For The Other Series" below.

"Fair Value" means (1) in the case of cash, the amount thereof, (2) in the
case of capital stock that has been Publicly Traded for a period of at least 15
months, the Market Value thereof and (3) in the case of other assets or
securities, the fair market value thereof as the Board shall determine in good
faith. Any good faith Board determination of Fair Value shall be conclusive and
binding on all stockholders.

"Market Capitalization" of either series of common stock on any date means
the Market Value of a share of such series on such date times the number of
shares of such series outstanding on such date. Shares issuable with respect to
ZD's Retained Interest in ZDNet are not considered to be outstanding unless and
until they are in fact issued to third parties.

"Market Value" of a share of any class or series of capital stock on any
Trading Day generally means the average of the high and low reported sales
prices regular way of a share of such class or series on such Trading Day,
subject to certain exceptions as described in our Restated Certificate of
Incorporation.

The "Net Proceeds" of a Disposition of any of the assets of a Group means the
positive amount, if any, remaining from the gross proceeds of such Disposition
after any payment of, or reasonable provision (as

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<PAGE>

determined in good faith by the Board, which determination will be conclusive
and binding on all stockholders) for, (1) any taxes payable by Ziff-Davis Inc.
in respect of such Disposition, (2) any taxes payable by Ziff-Davis Inc. in
respect of any resulting dividend or redemption, (3) any transaction costs,
including, without limitation, any legal, investment banking and accounting
fees and expenses and (4) any liabilities (contingent or otherwise) of,
attributed to or related to, such Group, including, without limitation, any
liabilities for deferred taxes, any indemnity or guarantee obligations which
are outstanding or incurred in connection with the Disposition or otherwise,
any liabilities for future purchase price adjustments and any obligations with
respect to outstanding securities (other than common stock) attributed to such
Group.

"Proportionate Interest" of holders of ZDNet Stock in the Net Proceeds of a
ZDNet Disposition (or in the outstanding shares of common stock of any
subsidiaries holding ZDNet's assets and liabilities) means the amount of such
Net Proceeds (or the number of such shares) times the number of shares of ZDNet
Stock outstanding divided by the Total Number of Notional ZDNet Shares Deemed
Outstanding. "Proportionate Interest" of holders of ZD Stock in the Net
Proceeds of a ZD Disposition (or in the outstanding shares of common stock of
any subsidiaries holding ZD's assets and liabilities) means the amount of such
Net Proceeds (or the number of such shares).

"Publicly Traded" with respect to any security means (1) registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (or any successor provision of law), and (2) listed for trading on the
NYSE (or any other national securities exchange registered under Section 7 of
the Exchange Act (or any successor provision of law)) or listed on the Nasdaq
NMS (or any successor market system).

"Total Number of Notional ZDNet Shares Deemed Outstanding" means the number
of shares of ZDNet Stock outstanding plus the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet.

"Trading Day" means each weekday on which the relevant security (or, if there
are two relevant securities, each relevant security) is traded on the principal
national securities exchange on which it is listed or admitted to trading or on
the Nasdaq NMS or, if such security is not listed or admitted to trading on a
national securities exchange or quoted on the Nasdaq NMS, traded in the
principal over-the-counter market in which it trades.

"ZD" means (1) all of the businesses, assets and liabilities of Ziff-Davis
Inc. and its subsidiaries, other than the businesses, assets and liabilities
that are part of ZDNet, (2) the rights and obligations of ZD under any inter-
Group debt deemed to be owed to or by ZD (as such rights and obligations are
defined in accordance with policies established from time to time by the Board)
and (3) a proportionate interest in ZDNet (after giving effect to any options,
Preferred Stock, other securities or debt issued or incurred by Ziff-Davis Inc.
and attributed to ZDNet) equal to the Retained Interest Percentage; provided
that:

(a) Ziff-Davis Inc. may re-allocate assets from one Group to the other
Group in return for other assets or services rendered by that other Group
in the ordinary course of business or in accordance with policies
established by the Board from time to time and

(b) if Ziff-Davis Inc. transfers cash, other assets or securities to
holders of shares of ZDNet Stock as a dividend or other distribution on
shares of ZDNet Stock (other than a dividend or distribution payable in
shares of ZDNet Stock), or as payment in a redemption of shares of ZDNet
Stock effected as a result of a ZDNet Disposition, then the Board shall re-
allocate from ZDNet to ZD cash or other assets having a Fair Value equal to
the aggregate Fair Value of the cash, other assets or securities so
transferred times a fraction, the numerator of which shall equal the Number
of Shares Issuable with Respect to ZD's Retained Interest in ZDNet on the
record date for such dividend or distribution, or on the date of such
redemption, and the denominator of which shall equal the number of shares
of ZDNet Stock outstanding on such date.

"ZDNet" means (1) the online business division of Ziff-Davis Inc., including
all of the businesses, assets and liabilities of Ziff-Davis Inc. and its
subsidiaries that the Board has, as of the date on which the Restated

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Certificate of Incorporation becomes effective under Delaware law (the
"Effective Date"), allocated to ZDNet but excluding any ownership interest in
Ziff-Davis Inc.'s ZDU and ZDTV businesses, (2) any assets or liabilities
acquired or incurred by Ziff-Davis Inc. or any of its subsidiaries after the
Effective Date in the ordinary course of business and attributable to ZDNet,
(3) any businesses, assets or liabilities acquired or incurred by Ziff-Davis
Inc. or any of its subsidiaries after the Effective Date that the Board has
specifically allocated to ZDNet or that Ziff-Davis Inc. otherwise allocates to
ZDNet in accordance with policies established from time to time by the Board
and (4) the rights and obligations of ZDNet under any inter-Group debt deemed
to be owed to or by ZDNet (as such rights and obligations are defined in
accordance with policies established from time to time by the Board); provided
that:

Optional Exchange Of One Series Of Common Stock For The Other Series

We will have the right, at any time before ZDNet Stock exceeds the 65% of
Total Market Capitalization Trigger, to issue shares of ZD Stock in exchange
for outstanding shares of ZDNet Stock at a premium. The premium will initially
be 25% (for exchanges occurring in the first quarter after issuance) and will
decline each quarter over a period of 3 years to 15%.

We will have the right, at any time after ZDNet Stock exceeds the 65% of
Total Market Capitalization Trigger but before ZDNet Stock falls below the 50%
of Total Market Capitalization Threshold, to issue shares of ZDNet Stock in
exchange for outstanding shares of ZD Stock at a 15% premium.

The exchange ratio that will result in the specified premium will be
calculated based on the average Market Value of ZD Stock as compared to the
average Market Value of ZDNet Stock during the 20 consecutive Trading Day
period ending on, and including, the 5th Trading Day immediately preceding the
date on which we mail the notice of exchange to holders of the outstanding
shares being exchanged.

In addition, we will have the right, if ZDNet Stock exceeds the 65% of Total
Market Capitalization Trigger and thereafter falls below the 50% of Total
Market Capitalization Threshold (and regardless of whether ZDNet Stock
thereafter remains below the 50% of Total Market Capitalization Threshold or
the 65% of Total Market Capitalization Trigger), to issue shares of either
series of common stock in exchange for outstanding shares of the other series
of common stock on a value for value basis.

The exchange ratio that will result in a value for value exchange will be
based on the average Market Value of the series of the common stock being
exchanged as compared to the average Market Value of the other series of common
stock during the 20 consecutive Trading Day period ending on, and including,
the 5th Trading Day immediately preceding the date on which we mail the notice
of exchange to holders of the outstanding shares being exchanged.

ZDNet Stock will exceed the "65% of Total Market Capitalization Trigger" if
the Market Capitalization of the outstanding ZDNet Stock exceeds 65% of the
Total Market Capitalization of both series of common stock for 30 Trading Days
during any 60 consecutive Trading Day period. Thereafter, ZDNet Stock

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will fall below the "50% of Total Market Capitalization Threshold" if, after
exceeding the 65% of Total Market Capitalization Trigger, the Market
Capitalization of the outstanding ZDNet Stock falls below 50% of the total
Market Capitalization of both series of common stock for 30 Trading Days during
any 60 consecutive Trading Day period.

If we have the right, on the date on which we mail a notice of exchange as
contemplated above, to issue shares of ZD Stock or ZDNet Stock in exchange for
outstanding shares of the other series of common stock as described above, we
will not lose that right even if ZDNet Stock subsequently exceeds the 65% of
Total Market Capitalization Trigger or falls below the 50% of Total Market
Capitalization Threshold.

Optional Exchange For Stock Of A Subsidiary

At any time at which all of the assets and liabilities of a Group (and no
other assets or liabilities of Ziff-Davis Inc. or any subsidiary thereof) are
held directly or indirectly by one or more wholly owned subsidiaries of Ziff
Davis (the "Group Subsidiaries"), we will have the right to deliver to holders
of the relevant series of common stock their Proportionate Interest in all of
the outstanding shares of the common stock of the Group Subsidiaries in
exchange for all of the outstanding shares of such series of common stock.

. If the series of common stock being exchanged is ZD Stock and the Number
of Shares Issuable with Respect to ZD's Retained Interest in ZDNet is
greater than zero, we will also issue a number of shares of ZDNet Stock
equal to the then current Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet and deliver those shares to the holders of ZD
Stock or to one of the Group Subsidiaries, at our option.

. If the series of common stock being exchanged is ZDNet Stock and the
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet
is greater than zero (so that less than all of the shares of common stock
of the Group Subsidiaries are being delivered to the holders of ZDNet
Stock), we may retain the remaining shares of common stock of the Group
Subsidiaries or distribute those shares as a dividend on ZD Stock.

General Dividend, Exchange and Redemption Provisions

If we complete a Disposition of All or Substantially All of the Assets of a
Group (other than an Exempt Disposition), we would be required, not more than
the 10 Trading Days after the consummation of such Disposition, to issue a
press release specifying (1) the Net Proceeds of such Disposition, (2) the
number of shares of the series of common stock related to such Group then
outstanding, (3) the number of shares of such series of common stock issuable
upon conversion, exchange or exercise of any convertible or exchangeable
securities, options or warrants and the conversion, exchange or exercise prices
thereof and (4) if the Group is ZDNet, the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet. Not more than 30 Trading Days after
such consummation, we would be required to announce by press release which of
the actions specified in the first paragraph under "--Mandatory Dividend,
Redemption Or Exchange On Disposition Of All Or Substantially All Of The Assets
Of A Group" we have determined to take, and upon making that announcement, that
determination would become irrevocable. In addition, we would be required, not
more than 30 Trading Days after such consummation and not less than 10 Trading
Days before the applicable payment date, redemption date or exchange date, to
send a notice by first-class mail, postage prepaid, to holders of the relevant
series of common stock at their addresses as they appear on our transfer books.

. If we determine to pay a special dividend, we would be required to
specify in the notice (1) the record date for such dividend, (2) the
payment date of such dividend (which cannot be more than 85 Trading Days
after such consummation) and (3) the aggregate amount and type of
property to be paid in such dividend (and the approximate per share
amount thereof).

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. If we determine to undertake a redemption, we would be required to
specify in the notice (1) the date of redemption (which cannot be more
than 85 Trading Days after such consummation), (2) the aggregate amount
and type of property to be paid as a redemption price (and the
approximate per share amount thereof), (3) if less than all shares of the
relevant series of common stock are to be redeemed, the number of shares
to be redeemed and (4) the place or places where certificates for shares
of such series of common stock, properly endorsed or assigned for
transfer (unless we waive such requirement), should be surrendered in
return for delivery of the cash, securities or other property to be paid
by Ziff-Davis Inc. in such redemption.

. If we determine to undertake an exchange, we would be required to specify
in the notice (1) the date of exchange (which cannot be more than 85
Trading Days after such consummation), (2) the number of shares of the
other series of common stock to be issued in exchange for each
outstanding share of such series of common stock and (3) the place or
places where certificates for shares of such series of common stock,
properly endorsed or assigned for transfer (unless we waive such
requirement), should be surrendered in return for delivery of the other
series of common stock to be issued by Ziff-Davis Inc. in such exchange.

If we determine to complete any exchange described under "--Optional Exchange
Of One Series Of Common Stock For The Other Series" or "--Optional Exchange For
Stock Of A Subsidiary", we would be required, between 10 to 30 Trading Days
before the exchange date, to send a notice by first-class mail, postage
prepaid, to holders of the relevant series of common stock at their addresses
as they appear on our transfer books, specifying (1) the exchange date and the
other terms of the exchange and (2) the place or places where certificates for
shares of such series of common stock, properly endorsed or assigned for
transfer (unless we waive such requirement), should be surrendered for delivery
of the stock to be issued or delivered by Ziff-Davis Inc. in such exchange.

Neither the failure to mail any required notice to any particular holder nor
any defect therein would affect the sufficiency thereof with respect to any
other holder or the validity of any dividend, redemption or exchange.

If we are redeeming less than all of the outstanding shares of a series of
common stock as described above, we would redeem such shares pro rata or by lot
or by such other method as the Board determines to be equitable.

No holder of shares of a series of common stock being exchanged or redeemed
will be entitled to receive any cash, securities or other property to be
distributed in such exchange or redemption until such holder surrenders
certificates for such shares, properly endorsed or assigned for transfer, at
such place as we specify (unless we waive such requirement). As soon as
practicable after our receipt of certificates for such shares, we would deliver
to the person for whose account such shares were so surrendered, or to the
nominee or nominees of such person, the cash, securities or other property to
which such person is entitled, together with any fractional payment referred to
below, in each case without interest. If less than all of the shares of common
stock represented by any one certificate were to be exchanged or redeemed, we
would also issue and deliver a new certificate for the shares of such common
stock not exchanged or redeemed.

We would not be required to issue or deliver fractional shares of any capital
stock or any other fractional securities to any holder of common stock upon any
exchange, redemption, dividend or other distribution described above. If more
than one share of common stock were held at the same time by the same holder,
we may aggregate the number of shares of any capital stock that would be
issuable or any other securities that would be distributable to such holder
upon any such exchange, redemption, dividend or other distribution. If there
are fractional shares of any capital stock or any other fractional securities
remaining to be issued or distributed to any holder, we would, if such
fractional shares or securities were not issued or distributed to such holder,
pay cash in respect of such fractional shares or securities in an amount equal
to the Fair Value thereof (without interest).

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From and after the date set for any exchange or redemption, all rights of a
holder of shares of common stock that were exchanged or redeemed would cease
except for the right, upon surrender of the certificates representing such
shares, to receive the cash, securities or other property for which such shares
were exchanged or redeemed, together with any fractional payment as provided
above, in each case without interest (and, if such holder was a holder of
record as of the close of business on the record date for a dividend not yet
paid, the right to receive such dividend). A holder of shares of common stock
being exchanged would not be entitled to receive any dividend or other
distribution with respect to shares of the other series of common stock until
after the shares being exchanged are surrendered as contemplated above. Upon
such surrender, we would pay to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable with respect
to a record date occurring after the exchange, but which were not paid by
reason of the foregoing, with respect to the number of whole shares of the
other series of common stock represented by the certificate or certificates
issued upon such surrender. From and after the date set for any exchange, we
would, however, be entitled to treat the certificates for shares of common
stock being exchanged that were not yet surrendered for exchange as evidencing
the ownership of the number of whole shares of the other series of Common Stock
for which the shares of such common stock should have been exchanged,
notwithstanding the failure to surrender such certificates.

We would pay any and all documentary, stamp or similar issue or transfer
taxes that might be payable in respect of the issue or delivery of any shares
of capital stock and/or other securities on any exchange or redemption
described herein. We would not, however, be required to pay any tax that might
be payable in respect of any transfer involved in the issue or delivery of any
shares of capital stock and/or other securities in a name other than that in
which the shares so exchanged or redeemed were registered, and no such issue or
delivery will be made unless and until the person requesting such issue pays to
Ziff-Davis Inc. the amount of any such tax or establishes to our satisfaction
that such tax has been paid.

We may, subject to applicable law, establish such other rules, requirements
and procedures to facilitate any dividend, redemption or exchange contemplated
as described above as the Board may determine to be appropriate under the
circumstances.

Voting Rights

Currently, holders of existing common stock have one vote per share on all
matters submitted to a vote of stockholders. Once the Tracking Stock Proposal
is implemented, holders of ZD Stock and ZDNet Stock would vote together as one
class on all matters as to which common stockholders generally are entitled to
vote, unless a separate class vote is required by applicable law. On all such
matters for which no separate vote is required,

. each outstanding share of ZD Stock entitles the holder to one vote and

. each outstanding share of ZDNet Stock entitles the holder to a number of
votes (calculated to the nearest five decimal places) equal to the
average Market Value of a share of ZDNet Stock divided by the average
Market Value of a share of ZD Stock during the 20 consecutive Trading Day
period ending on (and including) the 5th Trading Day before the
applicable record date.

The voting formula is intended to equate the proportionate voting rights of
each series of common stock to its respective Market Values at the time of any
vote. On matters where holders of either series of common stock are entitled to
vote as a separate class, each share of that series would be entitled to one
vote in the separate vote on such matter.

The relative voting rights of ZD Stock and ZDNet Stock will fluctuate from
time to time based on the respective Market Values of the two series of common
stock. Fluctuations in the relative voting rights of ZD Stock and ZDNet Stock
could influence an investor interested in acquiring and maintaining a fixed
percentage of the voting power in Ziff-Davis Inc. to acquire such percentage of
all series of common stock, and would limit the ability of investors in one
series to acquire for the same consideration relatively more or less votes per
share than investors in the other series.

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When holders of ZD Stock and ZDNet Stock vote together as a single class, the
holders of the series of common stock having a majority of the votes will be in
a position to control the outcome of the vote even if the matter involves a
conflict of interest between the holders of ZD Stock and holders of ZDNet
Stock.

The DGCL requires a separate vote of holders of shares of common stock of any
series on any amendment if the amendment would increase or decrease the par
value of the shares of such series or alter or change the powers, preferences
or special rights of the shares of such series so as to affect them adversely.

After ZDNet Stock is issued, we would set forth the number of outstanding
shares of ZD Stock and ZDNet Stock in our annual and quarterly reports filed
pursuant to the Exchange Act, and disclose in any proxy statement for a
stockholder meeting the number of outstanding shares and per share voting
rights of ZD Stock and ZDNet Stock.

Liquidation

Currently, holders of common stock are entitled, upon voluntary or
involuntary liquidation, dissolution or winding-up of Ziff-Davis Inc., to
receive their proportionate interest in the net assets of Ziff-Davis Inc., if
any, remaining for distribution to stockholders (after payment of or provision
for all liabilities, including contingent liabilities, of Ziff-Davis Inc. and
payment of the liquidation preference payable to any holders of our Preferred
Stock).

Once the Tracking Stock Proposal is implemented, holders of ZD Stock and
holders of ZDNet Stock will be entitled, upon voluntary or involuntary
liquidation, dissolution or winding-up of Ziff-Davis Inc., to receive in
respect of shares of ZD Stock and shares of ZDNet Stock their proportionate
interest in the net assets of Ziff-Davis Inc., if any, remaining for
distribution to stockholders (after payment of or provision for all
liabilities, including contingent liabilities, of Ziff-Davis Inc. and payment
of the liquidation preference payable to any holders of our Preferred Stock),
pro rata in accordance with the average Market Value of a share of ZD Stock
divided by the average Market Value of a share of ZDNet Stock during the 20
consecutive Trading Day period ending on (and including) the 5th Trading Day
before the date of the first public announcement of (1) a voluntary
liquidation, dissolution or winding-up by Ziff-Davis Inc. or (2) the
institution of any proceeding for the involuntary liquidation, dissolution or
winding-up of Ziff-Davis Inc.

The liquidation formula is intended to provide liquidation rights for each
series of common stock proportionate to the respective Market Values at the
time of any liquidation.

Neither the merger nor consolidation of Ziff-Davis Inc. with any other
entity, nor a sale, transfer or lease of all or any part of the assets of Ziff-
Davis Inc., would alone be deemed a liquidation, dissolution or winding-up for
these purposes.

ZD's Retained Interest In ZDNet

At the time that we first issue shares of ZDNet, the Board would designate
the initial Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet.

In this document, we call the percentage interest in ZDNet intended to be
represented at any time by the outstanding shares of ZDNet Stock the
"Outstanding Interest Percentage", and we call the remaining percentage
interest in ZDNet intended to be represented at any time by ZD's Retained
Interest in ZDNet the "Retained Interest Percentage". At any time, the
Outstanding Interest Percentage equals the number of shares of ZDNet Stock
outstanding divided by the Total Number of Notional ZDNet Shares Deemed
Outstanding (expressed as a percentage) and the Retained Interest Percentage
equals the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet divided by the Total Number of Notional ZDNet Shares Deemed Outstanding
(expressed as a percentage). The sum of the Outstanding Interest Percentage and
the Retained Interest Percentage always equals 100%.

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At the time that we file the Restated Certificate of Incorporation, the
Retained Interest Percentage will be 100% and the Outstanding Interest
Percentage will be 0%.

Number Of Shares Issuable With Respect To ZD's Retained Interest In ZDNet. We
currently intend to designate 70,000,000 as the initial Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet and to offer to the
public, for cash, 10,000,000 shares of ZDNet Stock. Assuming we do so, we
intend to attribute the net proceeds of 1,500,000 shares (the "Primary Shares")
to the equity of ZDNet and attribute the net proceeds of the remaining shares
(the "Secondary Shares") to ZD in respect of its Retained Interest. The
issuance of the Primary Shares will have no effect on the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet, but the issuance of
the Secondary Shares will correspondingly reduce that number. Thus, after
giving effect to the Offering,

. there would be 10,000,000 shares of ZDNet Stock outstanding, or 11,500,000
shares if the underwriters to the Offering fully exercise their option to
purchase additional shares,

. the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would decline to 61,500,000, or 60,000,000 if the underwriters to
the Offering fully exercise their option to purchase additional shares,

. the Total Number of Notional ZDNet Shares Deemed Outstanding would be
71,500,000,

. the Outstanding Interest Fraction would be approximately 14.0%, or
approximately 16.1% if the underwriters to the Offering fully exercise
their option to purchase additional shares and

. the Retained Interest Fraction would be approximately 86.0%, or
approximately 83.9% if the underwriters to the Offering fully exercise
their option to purchase additional shares.

Attribution Of Issuances Of ZDNet Stock. Whenever we decide to issue shares
of ZDNet Stock, we would determine, in our sole discretion, whether to
attribute that issuance (and the proceeds thereof) to ZD in respect of its
Retained Interest in ZDNet (in a manner analogous to a secondary offering of
common stock of a subsidiary owned by a corporate parent) or to ZDNet (in a
manner analogous to a primary offering of common stock). If we issue any shares
of ZDNet Stock and attribute that issuance (and the proceeds thereof) to ZD in
respect of its Retained Interest in ZDNet, the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet would be reduced by the number of
shares so issued, the number of outstanding shares of ZDNet Stock would be
increased by the same amount, the Total Number of Notional ZDNet Shares Deemed
Outstanding would remain unchanged, the Retained Interest Percentage would be
reduced and the Outstanding Interest Percentage would be correspondingly
increased. If we instead attribute that issuance (and the proceeds thereof) to
ZDNet, the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would remain unchanged, the number of outstanding shares of ZDNet Stock
and the Total Number of Notional ZDNet Shares Deemed Outstanding would be
increased by the number of shares so issued, the Retained Interest Percentage
would be reduced and the Outstanding Interest Percentage would be
correspondingly increased.

Issuances Of ZDNet Stock As Distributions On ZD Stock. We reserve the right
to issue shares of ZDNet Stock as a distribution on ZD Stock, although we do
not currently intend to do so. If we did so, we would attribute that
distribution to ZD in respect of its Retained Interest in ZDNet. As a result,
the Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet
would be reduced by the number of shares so distributed, the number of
outstanding shares of ZDNet Stock would be increased by the same amount, the
Total Number of Notional ZDNet Shares Deemed Outstanding would remain
unchanged, the Retained Interest Percentage would be reduced and the
Outstanding Interest Percentage would be correspondingly increased. If instead
we issued shares of ZDNet Stock as a distribution on ZDNet Stock, we would
attribute that distribution to ZDNet, in which case we would proportionately
increase the Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet. As a result, the Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet and the Total Number of Notional ZDNet Shares Deemed
Outstanding would each be increased by the same percentage as the number of
outstanding shares of ZDNet Stock is increased and the Retained Interest
Percentage and Outstanding Interest Percentage would remain unchanged.

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Dividends On ZDNet Stock. At the time of any dividend on the outstanding
shares of ZDNet Stock (including any dividend required as a result of a
Disposition of All or Substantially All of the Assets of ZDNet, but excluding
any dividend payable in ZDNet Stock), we will credit to ZD, and charge against
ZDNet, a corresponding amount in respect of ZD's Retained Interest in ZDNet.
Specifically, the corresponding amount will equal (1) the aggregate amount of
such dividend times (2) a fraction, the numerator of which is the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet and the
denominator of which is the number of shares of ZDNet Stock then outstanding.

Repurchases Of ZDNet Stock. If we decide to repurchase shares of ZDNet Stock,
we would determine, in our sole discretion, whether to attribute that
repurchase (and the cost thereof) to ZD (in a manner analogous to a purchase of
common stock of a subsidiary by a corporate parent) or to ZDNet (in a manner
analogous to an issuer repurchase). If we repurchase shares of ZDNet Stock and
attribute that repurchase (and the cost thereof) to ZD, the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet would be increased by
the number of shares so purchased, the number of outstanding shares of ZDNet
Stock would be decreased by the same amount, the Total Number of Notional ZDNet
Shares Deemed Outstanding would remain unchanged, the Retained Interest
Percentage would be increased and the Outstanding Interest Percentage would be
correspondingly decreased. If we instead attribute that repurchase (and the
cost thereof) to ZDNet, the Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet would remain unchanged, the number of outstanding
shares of ZDNet Stock and the Total Number of Notional ZDNet Shares Deemed
Outstanding would be decreased by the number of shares so repurchased, the
Retained Interest Percentage would be increased and the Outstanding Interest
Percentage would be correspondingly reduced.

Transfers Of Cash Or Other Property Between ZD And ZDNet. We may, in our sole
discretion, determine to transfer cash or other property of ZDNet to ZD in
return for a decrease in ZD's Retained Interest in ZDNet (in a manner analogous
to a return of capital) or to transfer cash or other property of ZD to ZDNet in
return for an increase in ZD's Retained Interest in ZDNet (in a manner
analogous to a capital contribution). If we determine to transfer cash or other
property of ZDNet to ZD in return for a decrease in ZD's Retained Interest in
ZDNet, the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet and the Total Number of Notional ZDNet Shares Deemed Outstanding would
each be decreased by an amount equal to the Fair Value of such cash or other
property divided by the Market Value of a share of ZDNet Stock on the day of
transfer, the number of outstanding shares of ZDNet Stock would remain
unchanged, the Retained Interest Percentage would be decreased and the
Outstanding Interest Percentage would be correspondingly increased. If we
instead determine to transfer cash or other property of ZD to ZDNet in return
for an increase in ZD's Retained Interest in ZDNet, the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet and the Total Number
of Notional ZDNet Shares Deemed Outstanding would each be increased by an
amount equal to the Fair Value of such cash or other property divided by the
Market Value of a share of ZDNet Stock on the day of transfer, the number of
outstanding shares of ZDNet Stock would remain unchanged, the Retained Interest
Percentage would be increased and the Outstanding Interest Percentage would be
correspondingly decreased.

We may not attribute issuances of ZDNet Stock to ZD, transfer cash or other
property of ZDNet to ZD in return for a decrease in its Retained Interest in
ZDNet or take any other action to the extent that doing so would cause the
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet to
decrease below zero.

For illustrations showing how to calculate the Retained Interest Percentage,
the Outstanding Interest Percentage, the Number of Shares Issuable with Respect
to ZD's Retained Interest in ZDNet and the Total Number of Notional ZDNet
Shares Deemed Outstanding after giving effect to certain hypothetical
dividends, issuances, repurchases and transfers, see Annex I--"Illustrations of
Certain Terms".

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Effectiveness of Certain Terms

The terms described under "--Dividends", "--Mandatory Dividend, Redemption Or
Exchange On Disposition Of All Or Substantially All Of The Assets Of A Group",
"--Optional Exchange Of One Series Of Common Stock For The Other Series", "--
Optional Exchange For Stock Of A Subsidiary", "--Voting Rights" and "--
Liquidation" above apply only when there are shares of both series of common
stock outstanding.

Determinations By The Board

The Restated Certificate of Incorporation would provide that, subject to
applicable law, any determinations made by the Board in good faith under the
Restated Certificate of Incorporation or in any certificate of designation
filed pursuant thereto would be final and binding on all stockholders of Ziff-
Davis Inc.

Preemptive Rights

Holders of ZD Stock and ZDNet Stock will not have any preemptive rights to
subscribe for any additional shares of capital stock or securities that we may
issue in the future.

Limitations on Potential Unsolicited Acquisitions; Anti-Takeover Considerations

If ZD and ZDNet were separate independent companies, any person interested in
acquiring either Group without negotiating with management could seek control
of that entity by obtaining control of its outstanding voting stock by means of
a tender offer or proxy contest. Although we intend ZD Stock and ZDNet Stock to
reflect the separate performance of ZD and ZDNet, a person interested in
acquiring only one Group without negotiation with Ziff-Davis Inc.'s management
could obtain control of that Group only by obtaining control of the outstanding
voting stock of Ziff-Davis Inc.

If the Tracking Stock Proposal is implemented, there would be an additional
80 million shares of common stock available for future issuance without further
stockholder approval. One of the effects of the existence of authorized and
unissued common stock and Preferred Stock could be to enable the Board to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of Ziff-Davis Inc. by
means of a merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of our management. Such additional shares also could be
used to dilute the stock ownership of persons seeking to obtain control of
Ziff-Davis Inc.

For additional anti-takeover considerations, see "--Certain Other Provisions
of the Restated Certificate of Incorporation and By-laws" and "--Certain
Provisions of Delaware Law".

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Certain Other Provisions of the Restated Certificate of Incorporation and By-
laws

Preferred Stock

The Restated Certificate of Incorporation, like the Current Certificate of
Incorporation, provides that the Board may issue shares of Preferred Stock in
one or more series from time to time. The Board has the authority 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:

. the distinctive serial designation of such series which shall distinguish
it from other series,

. the number of shares included in such series,

. the dividend rate (or method of determining such rate) payable to holders
of the shares of such series,

. any condition upon which such dividends shall be paid and the date or
dates upon which such dividends shall be payable,

. 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,

. the amount or amounts which shall be payable out of the assets of Ziff-
Davis Inc. to holders of the shares of such series upon voluntary or
involuntary liquidation, dissolution or winding-up Ziff-Davis Inc. and
the relative rights of priority, if any, of payment of the shares of such
series,

. 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 Ziff-Davis Inc. or at the
option of the holder or holders thereof or upon the happening of a
specified event or events,

. the obligation, if any, of Ziff-Davis Inc. 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 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,

. 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 Ziff-Davis Inc. 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
Ziff-Davis Inc. and the price or prices or rate or rates of exchange or
conversion and any adjustments applicable thereto and

. whether or not 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.

Unless a corporation's certificate provides otherwise, Section 242(b)(2) of
the General Corporation Law of the State of Delaware automatically gives
holders of the outstanding shares of a class the option to vote as a class on
amendments to increase or decrease the number of authorized shares of such
class. Our Restated Certificate of Incorporation, provides, however, that,
subject to the rights of 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 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 the State of Delaware (the "DGCL") or any
corresponding provision hereafter enacted.

Staggered Board Of Directors

The Board is divided into three classes, each of whose members serve for a
staggered three-year term. Upon the expiration of the term of a class of
directors, directors in such class are elected for three-year terms at the
annual meeting of stockholders in the year in which such term expires. The
classification of the Board has 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.

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Number Of Directors; Removal; Filling Vacancies

The number of members of the Board will be fixed from time to time pursuant
to our by-laws. Our by-laws provide that the Board will consist of one or more
members, the number of which is determined from time to time by the Board. In
the event of any increase or decrease in the authorized number of directors,
(1) a director 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 (2) 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. Directors may be removed only
for cause. However, a director who is also an officer may be removed upon
ceasing to be an officer. 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, the sole
remaining director of that class if one such director remains, the majority
vote of the directors of the remaining classes if no such director remains or
stockholders at an annual meeting of stockholders of Ziff-Davis Inc.

A director elected to fill a vacancy shall serve for the remainder of his
term of office of the class to which he is elected. These provisions prevent
any stockholder from enlarging the Board and then filling the new directorships
with such stockholder's own nominees.

No Stockholder Action By Written Consent; Special Meetings

Any action required or permitted to be taken by the stockholders of Ziff-
Davis Inc. 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.
Special meetings of stockholders of Ziff-Davis Inc. may be called only by the
Chairman of the Board or the Board pursuant to a resolution stating the purpose
or purposes of the special meeting. 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 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

Our by-laws establish an advance notice procedure. This procedure requires
stockholders to deliver to Ziff-Davis Inc. notice of any proposal to be
presented or of a candidate to be nominated for election as a director of Ziff-
Davis Inc. not less than 60 nor more than 90 days prior to the date of the
meeting. However, if the date of the meeting is first publicly announced or
disclosed (in a public filing or otherwise) is less than 70 days prior to the
date of the meeting, such advance notice shall be given not more than 10 days
after such date is first so announced or disclosed. 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 affirmative vote of 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 our by-laws relating
to stockholder action without a meeting, the calling of special meetings, the
number (or manner of determining the number) of Ziff-Davis Inc.'s directors,
the election and term of Ziff-Davis Inc.'s directors, the filling of vacancies
and the removal of directors.

Certain Provisions of Delaware Law

Ziff-Davis Inc. is 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 in which

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the person became an interested stockholder unless: (1) the business
combination transaction, or the transaction in which the interested stockholder
became an interested stockholder, is approved by the Board prior to the date
the interested stockholder obtained such status, (2) 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 (3) on or subsequent to such date the business
combination is approved by the Board 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 Ziff-Davis Inc.
and, accordingly, may discourage attempts to acquire Ziff-Davis Inc. Since the
Board approved the acquisition of common stock by SBH before SBH acquired such
common stock, SBH is not an interested stockholder for these purposes.

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 or 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 or 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. Our Restated Certificate
of Incorporation and by-laws include provisions which limit or eliminate the
personal liability of Ziff-Davis Inc.'s directors to the fullest extent
permitted by Section 102 of the DGCL. Consequently, a director will not be
personally liable to Ziff-Davis Inc. or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for any breach of the
directors' duty of loyalty to Ziff-Davis Inc. or its stockholders, acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, unlawful payments of dividends or unlawful stock
repurchases, redemptions or other distributions and any transaction from which
the director derived an improper personal benefit.

Our by-laws provide that Ziff-Davis Inc. 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 Ziff-Davis Inc. or
serves or served at the request of Ziff-Davis Inc. any other enterprise as a
director, officer or employee. Our 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 Ziff-Davis Inc. 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 Ziff-Davis Inc. The inclusion of these indemnification
provisions in our by-laws is intended to enable Ziff-Davis Inc. to attract
qualified persons to serve as directors and officers who might otherwise be
reluctant to do so.

The directors and officers of Ziff-Davis Inc. are insured under policies of
insurance maintained by Ziff-Davis Inc., subject to the limits of such
policies, against certain losses arising from any claim made against them by
reason of being or having been such officers or directors. In addition to the
protection available under our Restated Certificate of Incorporation, by-laws
and insurance policies, we have entered into agreements with our outside
directors to indemnify them to the fullest extent permitted by law against
losses arising from any

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claim against them by reason of being or having been a director. In addition,
the limited liability provisions in our Restated Certificate of Incorporation
and the indemnification provisions in our 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 Ziff-Davis Inc. and our stockholders. Furthermore, a stockholder's
investment in Ziff-Davis Inc. may be adversely affected to the extent we pay
the costs of settlement and damage awards against directors and officers of
Ziff-Davis Inc. pursuant to the indemnification provisions in our by-laws. The
limited liability provisions in our Restated Certificate of Incorporation will
not limit the liability of directors under federal securities laws.

Section 203 of the DGCL, and the provisions of our Restated Certificate of
Incorporation and by-laws described above, may make it more difficult for a
third party to acquire or discourage bids for Ziff-Davis Inc. Section 203 and
these provisions could have the effect of inhibiting attempts to change the
membership of the Board.

No Appraisal Rights

Under the DGCL, you will not have appraisal rights in connection with the
Tracking Stock Proposal.

Financial Advisors

We have engaged Donaldson, Lufkin & Jenrette Securities Corporation and
Goldman, Sachs & Co. (together, the "Advisors") as our strategic financial
advisors in connection with the Tracking Stock Proposal. The Advisors assisted
our analysis and consideration of various financial alternatives related to
ZDNet and the formulation of the Tracking Stock Proposal. The Advisors are
further assisting us in implementing the Tracking Stock Proposal. We are paying
our advisors customary fees for their services. We have also agreed to
reimburse the Advisors for certain reasonable out-of-pocket expenses (including
fees and expenses of their legal counsel) and have agreed to indemnify the
Advisors against certain liabilities, including liabilities under the federal
securities laws.

None of the Advisors will participate in the solicitation of proxies.

Stock Transfer Agent and Registrar

The Bank of New York is the registrar and transfer agent for our existing
common stock. We expect The Bank of New York to serve as registrar and transfer
agent for ZD Stock and ZDNet Stock.

Certain Federal Income Tax Considerations

The following summary of the federal income tax consequences of the Tracking
Stock Proposal and the ownership of ZD Stock and ZDNet Stock is based on the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"),
Treasury Department regulations, published positions of the Internal Revenue
Service (the "IRS") and court decisions now in effect, all of which are subject
to change.

You should consult your own tax advisors with regard to the application
of the federal income tax laws to your particular situation, as well as to
the applicability and effect of any state, local, or foreign tax laws to
which you may be subject.

We believe that for federal income tax purposes ZD Stock and ZDNet Stock will
be considered common stock of Ziff-Davis Inc. Accordingly, we believe that for
federal income tax purposes, neither you nor Ziff-Davis Inc. will recognize any
income, gain or loss as a result of the re-classification of existing common
stock into ZD Stock or the issuance of ZDNet Stock.

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There are, however, no court decisions or other authorities bearing directly
on the classification of instruments with characteristics similar to those of
ZD Stock and ZDNet Stock. In addition, the IRS has announced that it will not
issue advance rulings on the classification of an instrument that has certain
voting and liquidation rights in an issuing corporation but whose dividend
rights are determined by reference to the earnings of a segregated portion of
the issuing corporation's assets, including assets held by a subsidiary.

The current Presidential administration's budget proposals, released on
February 1, 1999, would require the recognition of gain on the issuance of
certain tracking stock, such as ZDNet Stock, and give the Treasury Department
the authority to treat tracking stock as nonstock or as stock of another entity
as appropriate to prevent tax avoidance. The Treasury Department's explanation
expresses the view that the use of tracking stock "is clearly outside the
contemplation of" the Code and says that "no inference regarding the tax
treatment of [such stock] under current law is intended by [the] proposal".
Because the proposal would only be effective for tracking stock on or after the
date of enactment, the proposal will likely not affect the re-classification of
existing common stock into ZD Stock or the initial issuance of ZDNet Stock. If,
however, the proposals were to become law, it would affect future issuances of
ZDNet Stock. Under such circumstances, we might decide to exercise our right to
redeem all of the outstanding shares of ZDNet Stock for ZD Stock at a premium,
which would be disadvantageous to holders of ZD Stock.

Certain non-corporate holders of ZD Stock or ZDNet Stock could be subject to
backup withholding at a rate of 31% on the payment of dividends on or proceeds
from the sale of such stock. Backup withholding will apply only if the
stockholder (1) fails to furnish its taxpayer identification number ("TIN"),
which, for an individual, would be his or her social security number, (2)
furnishes an incorrect TIN, (3) is notified by the IRS that it has failed to
properly report payments of interest or dividends or (4) under certain
circumstances, fails to certify under penalties of perjury that it has
furnished a correct TIN and has been notified by the IRS that it is subject to
backup withholding for failure to report payments of interest or dividends.
Stockholders should consult their tax advisors regarding their qualification
for exemption from backup withholding and the procedures for obtaining such an
exemption if applicable. The amount of any backup withholding from a payment to
a holder of ZD Stock or ZDNet Stock will be allowed as a credit against such
stockholder's federal income tax liability and may entitle such holder to a
refund, provided that the required information is furnished to the IRS.

----------------

Approval of Proposal 1 will require the affirmative vote of the holders of a
majority of the outstanding shares of existing common stock. SBA, the owner of
approximately 72% of our outstanding common stock, has agreed to vote for this
proposal. Thus we expect this proposal to pass regardless of how other
stockholders vote.

The Board of Directors recommends a vote FOR the Tracking Stock Proposal.

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PROPOSALS 2, 3 and 4--AMENDMENTS TO CERTAIN PLANS

General

At the Special Meeting, we will also ask you to consider and approve
proposals to amend each of Ziff-Davis Inc.'s 1998 Incentive Compensation Plan
(the "Incentive Plan"), Ziff-Davis Inc.'s 1998 Employee Stock Purchase Plan
(the "Stock Purchase Plan") and Ziff-Davis Inc.'s 1998 Non-Employee Directors'
Stock Option Plan (the "Non-Employee Directors' Plan") (1) to permit grants of
awards under each such plan to be made with respect to either series of common
stock of Ziff-Davis Inc., (2) to increase the number of shares authorized for
issuance, (3) solely with respect to the Incentive Plan, to provide that shares
issuable under the Incentive Plan may be supplied from outstanding shares of ZD
Stock held by Ziff-Davis Inc.'s majority stockholder and, solely for calendar
year 1998, to increase the number of shares in respect of which options to
acquire shares of common stock of Ziff-Davis Inc. ("Options") may be granted to
any single participant and (4) solely with respect to the Non-Employee
Directors' Plan, to permit discretionary grants of additional Options from time
to time.

Description of Amendments to Incentive Plan (Proposal 2)

Amendments to the Incentive Plan will (1) clarify that grants of Options and
other stock-based awards under the Incentive Plan may be made with respect to
either ZD Stock or ZDNet Stock, or both, in the same manner as currently
permitted with respect to existing common stock, (2) increase the number of
shares of common stock (regardless of series) available for issuance, (3)
provide that shares issuable under the Incentive Plan may be supplied from
outstanding shares of ZD Stock held by Ziff-Davis Inc.'s majority stockholder
and (4) increase the maximum number of shares of common stock with respect to
which grants of Options may be granted during 1998 to any individual. For the
text of the Incentive Plan as it will be amended, see Annex III hereto.

Grants Of Awards

Under the current Incentive Plan, grants of Options and other stock-based
awards may be made with respect to shares of existing common stock. Under the
amended Incentive Plan, grants of Options and other stock-based awards may be
made with respect to either ZD Stock or ZDNet Stock, or both, in the same
manner as currently permitted with respect to existing common stock.

Limitation On Shares Of Common Stock Available Under Incentive Plan

Under the current Incentive Plan, up to 8,500,000 shares of existing common
stock may be available for grants of awards, and the shares of common stock
issued under the Incentive Plan may be authorized and unissued shares or
treasury shares, as Ziff-Davis Inc. may from time to time determine. Under the
amended Incentive Plan, up to 20,000,000 shares of common stock (regardless of
series) will be available for issuance out of authorized and unissued or
treasury shares, as Ziff-Davis Inc. may from time to time determine. In
addition, up to 327,500 shares will be available out of outstanding shares of
common stock to be supplied by Ziff-Davis Inc.'s majority stockholder in
respect of awards of stock options granted to certain participants in
connection with the cancellation of corresponding options to purchase stock of
SOFTBANK Corp. Shares subject to an award that expires unexercised, are
forfeited, or terminated, or settled in cash instead of common stock, and
shares tendered to pay for the exercise of an Option, will thereafter again be
available for grant under the Incentive Plan.

Limitation On Awards Of Options To Any Individual

Under the current Incentive Plan, no individual employee may receive in any
calendar year grants of Options with respect to more than 1,000,000 shares of
common stock. Under the amended Incentive Plan, this annual limitation will be
modified to provide that for the 1998 calendar year, no individual employee may
receive grants of Options with respect to more than 2,600,000 shares of common
stock. On September 23,

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1998, we repriced each optionee's outstanding Options under the Incentive Plan.
Even though no new Options were granted, the repriced Options may be deemed to
constitute new grants for certain purposes. For this reason, if the annual
limitation on grants of Options in effect for the 1998 calendar year is not
amended, we may not be permitted a full tax deduction for the compensation
expense attributable to the exercise of a portion of the repriced Options. The
amendment to the Incentive Plan affects the individual annual Option grant
limitation only for the 1998 calendar year, and does not increase such annual
limitation otherwise in effect for subsequent years.

Effect On Outstanding Awards

The approval of the amendments to the Incentive Plan will not result in any
adjustment to the outstanding awards under the Incentive Plan.

Recent and Future Awards under the Incentive Plan

On December 21, 1998 the Board approved an amendment to the Incentive Plan
that, subject to stockholder approval, would permit grants of options and other
stock-based awards with respect to either series of common stock of Ziff-Davis
Inc. Pursuant to the Incentive Plan, the number of shares reserved for issuance
was increased from 8,500,000 shares to 20,327,500 shares.

In addition, on December 21, 1998, the Board approved the grant of options to
acquire an aggregate of approximately 5,729,000 shares of ZDNet Stock, at a
price of $7.50 per share representing the fair value of the shares at that
date, to certain employees. These options are currently scheduled to vest and
become exercisable on the fifth anniversary of the date of grant except that,
upon the completion of an initial public offering of ZDNet Stock prior to the
fifth anniversary of the date of grant, such options will vest and become
exercisable with respect to 25% of the shares on December 31 of the year in
which the consummation of the offering occurs, and an additional 6.25% of the
shares at the end of each three-month period thereafter.

The terms of the options described in the preceding paragraph require an
adjustment in the number of shares of ZDNet Stock that holders may purchase and
the per share purchase price thereof if the Initial Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet is different from 40,000,000.
This adjustment is similar to the adjustment that would generally be made to
the terms of employee stock options in the event of a stock split. Ziff-Davis
Inc. currently expects that the initial Number of Shares Issuable with Respect
to ZD's Retained Interest in ZDNet will be 70,000,000. Assuming that this is
so, the total number of shares of ZDNet Stock that holders may purchase upon
exercise of these options will increase to approximately 10,200,000 and the per
share purchase price thereof will decrease to approximately $4.29.

Softbank has, in the past, granted options to purchase stock of SOFTBANK
Corp. to certain employees of Ziff-Davis Inc. On January 29, 1999, Ziff-Davis
Inc. granted options to a number of employees in connection with the
cancellation of corresponding options to purchase stock of SOFTBANK Corp. In
connection with these grants, an affiliate of SOFTBANK Corp. has agreed with
Ziff-Davis Inc. that, if and when any of these options are exercised, (1) that
affiliate will cause the shares of Ziff-Davis Inc. common stock issuable upon
such exercise to be supplied to Ziff-Davis Inc. and (2) Ziff-Davis Inc. will
deliver to that affiliate or its designee the exercise price paid upon such
exercise. Thus, the exercise of these options will not increase the number of
shares of Ziff-Davis Inc. common stock outstanding or Ziff-Davis Inc.'s
stockholders' equity. However, Ziff-Davis Inc. expects to recognize
compensation expense for accounting purposes of approximately $3,018,000 over
three years as a result of these grants. An affiliate of SOFTBANK Corp. has
agreed to reimburse Ziff-Davis Inc. for any compensation expense recognized by
it for accounting purposes as a result of such grants. Any such reimbursement
would likely not be treated as income for accounting purposes but would restore
Ziff-Davis Inc.'s stockholders' equity to the level it would have been in the
absence of such expense. For more information regarding the grant of options,
see the Financial Statements for each of Ziff-Davis Inc. and ZD included in
Annexes VI and VII to this Proxy Statement.

Under the amended Incentive Plan, the incentive compensation plan committee
will, in its discretion, be able to grant awards under the Incentive Plan with
respect to ZD Stock, ZDNet Stock or both, in such amounts

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and types as it determines in accordance with the terms of the Incentive Plan.
In determining whether awards in respect of ZD Stock, ZDNet Stock, or both,
will be made to specific employees, it is anticipated that the incentive
compensation plan committee will consider, among other things, the identity of
the division of Ziff-Davis Inc. to which such employee provides services;
provided, however, that nothing shall prohibit the incentive compensation plan
committee from granting awards with respect to ZD Stock, ZDNet Stock, or both,
to any participant in the Incentive Plan without regard to the division of
Ziff-Davis Inc. for which the participant provides services.

The foregoing summary of the amendments to the Incentive Plan is not complete
and should be read with the full proposed text of the Incentive Plan as set
forth in Annex III hereto.

Federal Income Tax Consequences

The following is a brief description of the federal income tax consequences
generally arising with respect to awards under the Incentive Plan.

The grant of an Option or a stock appreciation right ("SAR") will create no
tax consequences for the participant or Ziff-Davis Inc. A participant will not
recognize taxable income upon exercising an incentive stock option (within the
meaning of Section 422 of the Code) ("ISO") (except that the alternative
minimum tax may apply). Upon exercising an Option other than an ISO, the
participant generally must recognize ordinary income equal to the difference
between the exercise price and fair market value of the freely transferable and
nonforfeitable shares acquired on the date of exercise. Upon exercising an SAR,
the participant generally must recognize ordinary income equal to the cash or
the fair market value of the freely transferable and nonforfeitable shares
received.

If the participant does not hold the common stock acquired upon exercise of
an ISO for at least one year from the date of exercise and two years from the
date of grant (the "Holding Period"), the participant generally must recognize
ordinary income equal to the lesser of (1) the fair market value of the shares
at the date of exercise of the ISO minus the exercise price, or (2) the amount
realized upon the disposition of the ISO shares minus the exercise price.
Otherwise, a participant's disposition of shares acquired upon the exercise of
an Option (including an ISO for which the ISO Holding Periods are met) or SAR
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the participant's tax basis in
such shares (the tax basis generally being the exercise price plus any amount
recognized as ordinary income in connection with the exercise of the Option or
SAR).

We generally will be entitled to a tax deduction equal to the amount
recognized as ordinary income by the participant in connection with an Option
or SAR. We generally are not entitled to a tax deduction relating to amounts
that represent a capital gain to a participant. Accordingly, we will not be
entitled to any tax deduction with respect to an ISO if the participant holds
the shares for the ISO Holding Period prior to disposition of the shares.

With respect to awards granted under the Incentive Plan that result in the
payment or issuance of cash or shares or other property that is either not
restricted as to transferability or not subject to a substantial risk of
forfeiture, the participant generally must recognize ordinary income equal to
the cash or the fair market value of shares or other property received. We
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the participant.

With respect to awards involving the issuance of shares or other property
that is restricted as to transferability and subject to a substantial risk of
forfeiture (e.g., restricted stock), the participant generally must recognize
ordinary income equal to the fair market value of the shares or other property
at the first time the shares or other property becomes transferable or is not
subject to a substantial risk of forfeiture, whichever occurs earlier. We
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the participant.

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Description of Amendments to Stock Purchase Plan (Proposal 3)

Amendments to the Stock Purchase Plan will (1) clarify that grants of Options
under the Stock Purchase Plan may be made with respect to either ZD Stock or
ZDNet Stock, or both, in the same manner as currently permitted with respect to
existing common stock and (2) increase the number of shares of common stock
(regardless of series) available for issuance. In addition to the above
amendments for which Ziff-Davis Inc. is seeking stockholder approval, the Board
has adopted a resolution that amends the Stock Purchase Plan to provide that
the committee that administers the Stock Purchase Plan shall, solely to the
extent required to comply with Rule 16b-3 as promulgated under the Exchange Act
and Section 162(m) of the Code, be composed of "non-employee directors" within
the meaning of Rule 16b-3 under the Exchange Act and "outside directors" within
the meaning of Section 162(m) of the Code. For the text of the Stock Purchase
Plan as it will be amended, see Annex IV hereto.

Grants Of Options

Under the current Stock Purchase Plan, grants of Options may be made with
respect to shares of existing common stock. Under the amended Stock Purchase
Plan, grants of Options made following the approval of the amendment may be
made with respect to either ZD Stock or ZDNet Stock, or both, in the same
manner as currently permitted with respect to existing common stock.

Limitation On Shares Of Common Stock Available Under Stock Purchase Plan

Under the current Stock Purchase Plan, up to 1,500,000 shares of existing
common stock may be available for sale to participants. Under the amended Stock
Purchase Plan, up to 2,500,000 shares of common stock (regardless of series)
may be available for sale to participants.

Effect On Outstanding Options

The approval of the amendments to the Stock Purchase Plan will not result in
any adjustment to the outstanding options to purchase common stock under the
Stock Purchase Plan.

Future Awards Under The Stock Purchase Plan

Under the amended Stock Purchase Plan, the committee that administers the
Stock Purchase Plan will, in its discretion, be able to grant Options under the
Stock Purchase Plan with respect to ZD Stock, ZDNet Stock or both, as it
determines in accordance with the terms of the Stock Purchase Plan.

The foregoing summary of the amendments to the Stock Purchase Plan is not
complete and should be read with the full proposed text of the Stock Purchase
Plan as set forth in Annex IV hereto.

Federal Income Tax Consequences

The following is a brief description of the federal income tax consequences
generally arising with respect to Options granted under the Stock Purchase
Plan.

An employee will not recognize ordinary compensation income upon the exercise
of the Option granted under the Stock Purchase Plan, provided that the employee
holds the common stock acquired upon exercise until the expiration of the
Holding Period. Upon the subsequent disposition of the acquired common stock,
the employee will recognize ordinary compensation income in an amount equal to
the lesser of (1) the excess of the fair market value of the common stock upon
disposition over the option price thereof or (2) the excess of the fair market
value of the common stock at the time of grant over the option price thereof.
Any additional gain upon the sale of the acquired common stock will be long-
term capital gain. We will not be entitled to a deduction for any income
recognized by the employee pursuant to either the exercise of Options granted
under the Stock Purchase Plan or the sale of the acquired common stock.

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<PAGE>

If the employee disposes of the common stock acquired upon exercise of the
Option prior to the end of the Holding Period, the employee will recognize
ordinary compensation income in the year of the disposition in an amount equal
to the difference between the fair market value of the common stock on the date
of exercise over the option price thereof. We will be entitled to an income tax
deduction equal to the amount of the ordinary compensation income recognized by
the employee. Any additional gain (or loss) on the sale of the common stock by
the employee will be taxed as short-term or long-term capital gain (or loss),
as the case may be.

Description of Amendments to Non-Employee Directors' Plan (Proposal 4)

Amendments to the Non-Employee Directors' Plan will (1) clarify that grants
of Options under the Non-Employee Directors' Plan may be made with respect to
either ZD Stock or ZDNet Stock, or both, in the same manner as currently
permitted with respect to existing common stock, (2) permit discretionary
grants of additional Options from time to time and (3) increase the number of
shares of common stock (regardless of series) available for issuance under the
Non-Employee Directors' Plan. In addition to the above amendments for which
Ziff-Davis Inc. is seeking stockholder approval, the Board has adopted a
resolution that amends the Non-Employee Directors' Plan to provide that, after
ZDNet Stock is first issued, (1) the 15,000 options that each Non-Employee
Director (as defined under the Non-Employee Directors' Plan) receives upon
election as a director shall be composed of Options to purchase shares of ZD
Stock and shares of ZDNet Stock in such proportion as determined by the
committee administering the Non-Employee Directors' Plan, (2) the 7,500 Options
that each Non-Employee Director receives on the date of each annual
shareholders meeting shall be composed of Options to purchase shares of ZD
Stock and shares of ZDNet Stock in such proportion as determined by the
committee administering the Non-Employee Directors' Plan, (3) each Non-Employee
Director who is a director on the date of the initial offering of ZDNet Stock
shall receive a grant of Options to purchase 25,000 shares of ZDNet Stock on
the date of such offering at the initial public offering price and (4) the Non-
Employee Directors' Plan may be administered by the Board. For the text of the
Non-Employee Directors' Plan as it will be amended, see Annex V hereto.

Grants Of Options

Under the current Non-Employee Directors' Plan, grants of Options may be made
with respect to shares of existing common stock. Under the amended Non-Employee
Directors' Plan, grants of Options made following the approval of the amendment
may be made with respect to either ZD Stock or ZDNet Stock, or both, in the
same manner as currently permitted with respect to existing common stock.

Shares Reserved For Issuance Under Non-Employee Directors' Plan

Under the current Non-Employee Directors' Plan, up to 200,000 shares of
existing common stock may be available for grants of Options. Under the amended
Non-Employee Directors' Plan, up to 300,000 shares of common stock (regardless
of series) may be available for grants of awards. Shares subject to an award
that expires unexercised, is forfeited, or terminated, or settled in cash
instead of common stock, and shares tendered to pay for the exercise of an
Option, will thereafter again be available for grant under the Non-Employee
Directors' Plan.

Types Of Options

Under the current Non-Employee Directors' Plan, each Non-Employee Director
automatically receives (1) upon election as a member of the Board, an initial
grant of options to purchase 15,000 shares of common stock and (2) on the date
of each annual stockholders meeting thereafter a grant of Options to purchase
7,500 shares of common stock (the "Nondiscretionary Options"). Under the
amended Non-Employee Directors' Plan, each Non-Employee Director will
automatically receive the Nondiscretionary Options, provided that after ZDNet
Stock is first issued, such Options shall in each case be composed of Options
to purchase shares of ZD Stock and Options to purchase shares of ZDNet Stock in
such proportion as determined by the committee

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administering the Non-Employee Directors' Plan; provided, that, a Non-Employee
Director shall not receive the annual grant of options to purchase 7,500 shares
of common stock in any year in which such Non-Employee Director also receives
the initial grant of options to purchase 15,000 shares of common stock. In
addition, under the Non-Employee Directors' Plan, each Non-Employee Director
who is on the Board on the date of the initial public offering of ZDNet Stock
will receive a grant of stock options to purchase 25,000 shares of ZDNet Stock
on the date of such offering at the initial public offering price, which will
vest and become exercisable with respect to 25% of the shares on December 31 of
the year in which the consummation of the offering occurs, and an additional
6.25% of the shares at the end of each three-month period thereafter.

Under the current Non-Employee Directors' Plan, the terms of the
Nondiscretionary Options provide that the Option price will be equal to 100% of
the fair market value (as defined in the Non-Employee Directors' Plan), the
Option will not be exercisable for a period more than 10 years following the
date of grant, and the Option will vest and become exercisable in five equal
installments beginning on the first anniversary of the date of grant. If the
optionee ceases to be a Non-Employee Director, the Option will expire, except
that (1) if the termination results from any reason other than death,
disability or cause, the Option will remain exercisable for 90 days, and (2) if
the termination results from death or disability, the Option will remain
exercisable for one year. Under the amended Non-Employee Directors' Plan, the
terms of the Nondiscretionary Options described in the immediately preceding
sentence will apply, except as described above with respect to the initial
grant of options to purchase 25,000 shares of ZDNet Stock on the date of the
initial public offering of ZDNet Stock at the initial public offering price or
unless the committee administering the Non-Employee Directors' Plan determines
otherwise in its discretion. Each Non-Employee Director will be eligible to
receive grants of Options (in addition to the Nondiscretionary Options) from
time to time, and on such terms and conditions, as are determined by the Board.

Effect On Outstanding Options

The approval of the amendments to the Non-Employee Directors' Plan will not
result in any adjustment to the outstanding Options under the Non-Employee
Directors' Plan.

The foregoing summary of the amendments to the Non-Employee Directors' Plan
is not complete and should be read with the full proposed text of the Non-
Employee Directors' Plan as set forth in Annex V hereto.

Federal Income Tax Consequences

The following is a brief description of the federal income tax consequences
generally arising with respect to Options granted under the Non-Employee
Directors' Plan.

The grant of an Option will create no tax consequences for the Non-Employee
Director or Ziff-Davis Inc. Upon exercising an Option, the Non-Employee
Director generally must recognize ordinary income equal to the difference
between the exercise price and fair market value of the shares acquired on the
date of exercise, and we generally will be entitled to a tax deduction equal to
the amount recognized as ordinary income by the participant. The disposition of
shares acquired upon the exercise of an Option generally will result in capital
gain or loss measured by the difference between the sale price and the
participant's tax basis in such shares (the tax basis generally being the
exercise price plus any amount recognized as ordinary income in connection with
the exercise of the Option).

----------------

Each of Proposals 2, 3 and 4 requires the affirmative vote of the holders of
a majority of the shares of common stock present in person or represented by
proxy at the Special Meeting. SBA, the owner of approximately 72% of our
outstanding common stock, has agreed to vote for these proposals. Thus, we
expect these proposals to pass regardless of how other stockholders vote.

The Board of Directors recommends a vote FOR each of Proposals 2, 3 and 4.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The table below sets forth the compensation paid to, deferred or accrued for
the benefit of, our Chief Executive Officer and each of the four other most
highly compensated executive officers for services rendered in all capacities
to Ziff-Davis Inc. during the last two fiscal years.

<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------- ---------------------
Name and Principal Securities Underlying All Other
Position Year Salary($) Bonus($) Options (#)(1) Compensation($)(2)
------------------ ---- --------- -------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Eric Hippeau............ 1998 1,050,000 0 1,665,032(3) 17,566
Chairman and Chief
Executive Officer 1997 1,350,000 14,063 31,000 17,566
Jason E. Chudnofsky..... 1998 800,000 273,552 378,395(4) 95,023(5)
President and Chief
Executive Officer, 1997 800,000 300,000 10,000 28,269
ZD Events
Claude P. Sheer......... 1998 537,500 27,524 277,798(6) 17,866
Chief Internet 1997 457,500 342,656 9,500 17,566
Strategist
Timothy C. O'Brien...... 1998 485,833 136,163 312,988(7) 42,892
Chief Financial Officer 1997 462,500 305,850 7,700 36,806
Terri S. Holbrooke...... 1998 430,000 137,993 193,410(8) 14,018
President, ZD Brand & 1997 380,000 143,993 5,000 6,868
Market Services
</TABLE>
- --------

(1) The options granted in 1997 are options to purchase common stock of
SOFTBANK Corp. under the SOFTBANK Group Executive Stock Option Plans (the
"Softbank Options"). The options listed for 1998 include the Softbank
Options granted in 1996 and 1997 which were repriced in 1998 to (Yen)4,000
(the "Repriced Softbank Options"). No additional Softbank Options were
granted in 1998 to any of the persons named in the table above.

(2) All Other Compensation for 1998 reflects contributions to Ziff-Davis Inc.'s
defined contribution plan, group term life insurance and reimbursement of
certain medical expenses and housing costs.

(3) Includes options to purchase 860,000 shares of common stock of Ziff-Davis
Inc., options to purchase 560,000 shares of ZDNet Stock of Ziff-Davis Inc.
(assumes that the initial Total Number of Notional ZDNet Stock Deemed
Outstanding will be 70,000,000; to the extent that this is not the case,
these options will be appropriately adjusted) and 245,032 Repriced Softbank
Options (including the 31,000 granted in 1997).

(4) Includes options to purchase 300,000 shares of common stock of Ziff-Davis
Inc., options to purchase 52,500 shares of ZDNet Stock of Ziff-Davis Inc.
(assumes that the initial Total Number of Notional ZDNet Stock Deemed
Outstanding will be 70,000,000; to the extent that this is not the case,
these options will be appropriately adjusted) and 25,895 Repriced Softbank
Options (including the 10,000 granted in 1997).

(5) Includes a payment of $75,735 relating to the termination of a defined
benefit plan.

(6) Includes options to purchase 200,000 shares of common stock of Ziff-Davis
Inc., options to purchase 52,500 shares of ZDNet Stock of Ziff-Davis Inc.
(assumes that the initial Total Number of Notional ZDNet Stock Deemed
Outstanding will be 70,000,000; to the extent that this is not the case,
these options will be appropriately adjusted) and 25,298 Repriced Softbank
Options (including the 9,500 granted in 1997).

(7) Includes options to purchase 150,000 shares of common stock of Ziff-Davis
Inc., options to purchase 140,000 shares of ZDNet Stock of Ziff-Davis Inc.
(assumes that the initial Total Number of Notional ZDNet Stock Deemed
Outstanding will be 70,000,000; to the extent that this is not the case,
these options will be appropriately adjusted) and 22,988 Repriced Softbank
Options (including the 7,700 granted in 1997).

(8) Includes options to purchase 135,000 shares of common stock of Ziff-Davis
Inc., options to purchase 52,500 shares of ZDNet Stock of Ziff-Davis Inc.
(assumes that the initial Total Number of Notional ZDNet Stock Deemed
Outstanding will be 70,000,000; to the extent that this is not the case,
these options will be appropriately adjusted) and 5,910 Repriced Softbank
Options (including the 5,000 granted in 1997).

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<PAGE>

Option Grants and Exercises in 1998

The following two tables summarize stock option grants to, and exercises by,
each of the executive officers named in the Summary Compensation Table during
1998 and the value of the options held by them as of December 31, 1998.
Option Grants in 1998

<TABLE>
<CAPTION>
Percent of Potential Realized
Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for
Underlying Employees or Base Option Term
Name and Principal Option in Fiscal Price ----------------------
Position Granted(#) Year(%) ($/Sh) Expiration Date 5%($) 10%($)
------------------ ---------- ---------- -------- ----------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eric Hippeau............ 860,000(1) 12.7 6.00(2) June 24, 2008 3,245,096 8,223,711
Chairman and Chief 560,000(3) 5.6 4.29 December 21, 2008 1,509,347 3,824,982
Executive
Officer 245,032(4) 24.6 31.03(5) January 31, 2007 4,781,702 12,117,771
Jason E. Chudnofsky..... 300,000(1) 4.4 6.00(2) June 24, 2008 1,132,010 2,868,736
President and Chief 52,500(3) .5 4.29 December 21, 2008 141,501 358,592
Executive
Officer, ZD Events 25,895(4) 2.6 31.03(5) January 31, 2007 505,331 1,280,607
Claude P. Sheer......... 200,000(1) 3.0 6.00(2) June 24, 2008 754,674 1,912,491
Chief Internet 52,500(3) .5 4.29 December 21, 2008 141,501 358,592
Strategist
25,298(4) 2.5 31.03(5) January 31, 2007 493,680 1,251,083
Timothy C. O'Brien...... 150,000(1) 2.2 6.00(2) June 24, 2008 566,005 1,434,368
Chief Financial Officer 140,000(3) 1.4 4.29 December 21, 2008 377,337 956,245
22,988(4) 2.3 31.03(5) January 31, 2007 448,602 1,136,845
Terri S. Holbrooke...... 135,000(1) 2.0 6.00(2) June 24, 2008 509,405 1,290,931
President ZD Brand & 52,500(3) .5 4.29 December 21, 2008 141,501 358,592
Market
Services 5,910(4) .6 31.03(5) January 31, 2007 115,331 292,272
</TABLE>
- --------

(1) Represents options to purchase shares of common stock of Ziff-Davis Inc.

(2) Ziff-Davis Inc. stock options were repriced from $16.00 to $6.00 per share
in 1998.

(3) Represents options to purchase shares of ZDNet Stock. Assumes that the
initial Total Number of Notional ZDNet Shares Deemed Outstanding will be
70,000,000; to the extent this is not the case, these options will be
appropriately adjusted.

(4) Represents Repriced Softbank Options.

(5) Softbank Options were repriced from (Yen)9,170 and (Yen)7,500 to (Yen)4,000
per share in 1998; the exercise price per share is based on an assumed
exchange rate of 128.90 (Yen)/USD, the exchange rate as of January 19,
1998, the date the Softbank Options were repriced.

Aggregated Option Exercises in 1998 and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised In-The-Money Options at
Options at Fiscal Year-End (#) Fiscal Year-End($)
Shares ------------------------------------- -------------------------
Name and Principal Acquired On Value
Position Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ ------------ ------------ -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Hippeau............ -- -- -- 860,000(1) -- 8,438,750
Chairman and Chief
Executive Officer -- -- -- 560,000(2) -- --
-- -- 28,062(3) 216,970(3) 694,849 5,372,438
Jason E. Chudnofsky..... -- -- -- 300,000(1) -- 2,943,750
President and Chief -- -- -- 52,500(2) -- --
Executive Officer,
ZD Events -- -- 9,358(3) 16,537(3) 231,715 409,476
Claude P. Sheer......... -- -- -- 200,000(1) -- 1,962,500
Chief Internet
Strategist -- -- -- 52,500(2) -- --
7,548(4) 133,788 -- 17,750(3) -- 439,511
Timothy C. O'Brien...... -- -- -- 150,000(1) -- 1,471,875
Chief Financial Officer -- -- -- 140,000(2) -- --
-- -- 7,005(3) 15,983(3) 173,452 395,758
Terri S. Holbrooke...... -- -- -- 135,000(1) -- 1,324,688
President ZD Brand &
Market Services -- -- -- 52,500(2) -- --
1,325(4) 24,650 -- 4,585(3) -- 113,500
</TABLE>
- --------

(1) Represents options to purchase shares of common stock of Ziff-Davis Inc.

(2) Represents options to purchase shares of ZDNet Stock. Assumes that the
initial Total Number of Notional ZDNet Shares Deemed Outstanding will be
70,000,000; to the extent this is not the case, these options will be
appropriately adjusted.

(3) Represents Repriced Softbank Options.

(4) Represents shares of SOFTBANK Corp.

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<PAGE>

Committees of the Board of Directors; Compensation Committee Interlocks and
Insider Participation

The Board currently has two committees: an audit committee and a compensation
committee. The audit committee is currently comprised of Messrs. Lazarus and
Yang. The compensation committee is currently comprised of Messrs. Fisher,
Lazarus and Yang.

Our audit committee reviews and recommends to the Board, as it deems
necessary, our internal accounting and financial controls and the accounting
principles and auditing practices and procedures to be employed in preparation
and review of our financial statements. Our 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.
PricewaterhouseCoopers LLP presently serves as our independent accountants.

Our compensation committee (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
also advises and consults with the officers of Ziff-Davis Inc. 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.

Each of Messrs. Fisher, Lazarus and Yang is independent of management. Mr.
Fisher is the Vice Chairman of SBA, our majority stockholder, and Mr. Yang is a
co-founder and Chief Yahoo of Yahoo! Inc. Mr. Hippeau, our chairman and chief
executive officer, is a director and serves on the compensation committee of
Yahoo! Inc. During 1996, 1997 and 1998, Ziff-Davis Inc. incurred $2.0 million,
approximately $1.6 million and $0.3 million in advertising expenses with Yahoo!
Inc., respectively.

Compensation of Directors

Directors who are not executive officers or employees of Ziff-Davis Inc.,
SOFTBANK Corp., SOFTBANK Holdings Inc. ("SBH") or SBA will receive an annual
retainer of $25,000 for Board service and a fee of $2,000 for each meeting of
the Board or any committee thereof attended.

Directors of Ziff-Davis Inc. who are not employees of Ziff-Davis Inc.,
SOFTBANK Corp., SBH or SBA ("Non-Employee Directors") will automatically
participate in the Non-Employee Directors' Plan. The Non-Employee Directors'
Plan is administered by the Committee and is summarized below.

Shares Reserved For Issuance

The aggregate number of shares reserved for issuance under the Non-Employee
Directors' Plan is 200,000 shares of common stock, subject to adjustment by the
Committee in the event of any change in the outstanding shares of common stock
by reason of any stock dividend or split, recapitalization, merger,
consolidation, spinoff, combination, exchange of shares or other corporate
change or any distributions to common stockholders other than regular cash
dividends. Shares subject to or underlying an option that expires unexercised,
or is forfeited, terminated or canceled, or is paid in cash in lieu of common
stock and shares that are tendered to pay for the exercise of an option will
thereafter be available for grant under the Non-Employee Directors' Plan.

Pursuant to the Non-Employee Directors' Plan, each Non-Employee Director will
receive upon election as a member of the Board an initial grant of stock
options to purchase 15,000 shares of common stock; provided, that each Non-
Employee Director who is on the Board on the date of the initial public
offering of Ziff-Davis Inc.'s common stock receives such initial grant on the
date of such initial public offering.

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<PAGE>

On the date of each annual Stockholders meeting thereafter, each Non-Employee
Director will automatically receive 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 will
provide that (1) the option price will 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, (2) such option will be exercisable for a period of 10
years following the date of grant and (3) such option will 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 will
terminate except with respect to any portion of such option then exercisable,
which portion will remain exercisable for a period of (a) 90 days, if the
termination as Director resulted from any reason other than death, disability
or cause or (b) 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 will immediately terminate and no longer be exercisable to any
extent; provided, further, that in no event will any such option remain
exercisable past the remainder of its scheduled ten-year term.

Change In Control

Upon a "change in control" of Ziff-Davis Inc. (as defined in the Non-Employee
Directors' Plan), each outstanding option will 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 Ziff-Davis Inc., each Non-
Employee Director will 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 (1) 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 (2) 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.

Amendment And Termination

The Board may amend, suspend or terminate the Non-Employee Directors' Plan or
any portion thereof at any time, provided, that no amendment shall be made (1)
without stockholder approval if such approval is necessary in order for the
Non-Employee Directors' Plan to comply with any applicable law, regulations or
stock exchange rule and (2) except in the case of a change in control of Ziff-
Davis Inc., that would adversely affect the rights of any Non-Employee Director
under any outstanding option without such Non-Employee Director's written
consent.

Proposed Amendment Requiring Stockholder Approval

If the Tracking Stock Proposal is approved, the Non-Employee Directors' Plan
is proposed to be amended. See "Proposals 2, 3 and 4--Amendments to Certain
Plans--Description of Amendments to Non-Employee Directors' Plan (Proposal 4)".

Incentive Compensation Plan

General

Ziff-Davis Inc. has adopted the Incentive Plan to provide long-term
incentives for its key employees and enhance stockholder value, the principal
terms and conditions of which are set forth below.

The Incentive Plan will be administered by the Board or the incentive
compensation plan committee which (1) selects the participants and determines
the type of awards and the number of shares or share units subject to awards
and (2) interprets the Incentive Plan and makes all other determinations
necessary or advisable for its administration.

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<PAGE>

All employees and consultants of Ziff-Davis Inc. and our affiliates who have
demonstrated significant management potential or the capacity for contributing
substantially to the successful performance of Ziff-Davis Inc. and our
affiliates, are eligible to be participants in the Incentive Plan. Awards may
consist of stock awards, stock options (either incentive stock options within
the meaning of Section 422 of the 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).

Under the Incentive Plan up to 8,500,000 shares of common stock will be
available for issuance out of authorized and unissued shares or treasury
shares, as the incentive compensation plan committee may from time to time
determine.

In the event of any change in the outstanding shares by reason of any stock
dividend or split, recapitalization, merger, other corporate change or
distributions to common stockholders other than regular cash dividends, the
incentive compensation plan 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 Incentive Plan and to
outstanding awards. Shares subject to an award that expires unexercised or is
forfeited, terminated, canceled or paid in cash in lieu of common stock, and
shares tendered to pay for the exercise of a stock option, will thereafter
again be available for grant under the Incentive Plan.

Each award under the Incentive Plan will be evidenced by an agreement setting
forth the terms and conditions, as determined by the incentive compensation
plan committee, which apply to such award. In the sole discretion of the
incentive compensation plan committee, a participant may be permitted to defer
the receipt of cash or common stock otherwise deliverable under any award.

Stock Options

The incentive compensation plan committee will establish the option price at
the time each stock option is granted, which price will not be less than 100%
of the fair market value of the common stock on the date of grant. Stock
options will vest and become exercisable at a rate determined by the incentive
compensation plan committee, and will remain exercisable for such period as
specified by the incentive compensation plan 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 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 incentive compensation plan
committee deems appropriate.

Stock Appreciation Rights

SARs may be granted in tandem with a stock option or may be unrelated to a
stock option. SARs will vest and become exercisable at a rate determined by the
Incentive Plan Committee, and will remain exercisable for such period as
specified by the incentive compensation plan committee. SARs entitle holders to
receive from Ziff-Davis Inc. 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 of a share of common stock on the date of grant. The incentive

69
<PAGE>

compensation plan committee will 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 conditions and the length of the performance
period will be determined by the incentive compensation plan committee but in
no event may a performance period be less than one year. The incentive
compensation plan committee will 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 incentive compensation plan committee determines otherwise, awards
of performance shares to a Covered Employee will be subject to performance
conditions based on the achievement by Ziff-Davis Inc. of target levels of
items such as consolidated net income, return on stockholders' equity, return
on net assets or share price performance. For purposes of the Incentive Plan, a
"Covered Employee" generally includes any employee that would be a covered
employee within the meaning of Section 162(m) of the Code and any other
employee of Ziff-Davis Inc. or its subsidiaries designated by the incentive
compensation plan 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 incentive compensation plan
committee at time of grant, except that each restriction period will not be
less than 12 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 incentive compensation plan
committee determines. The incentive compensation plan committee will 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 Incentive 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, will immediately vest in such participant.

Change in Control

In the event of a Change in Control (as defined below): (1) all stock options
will be fully vested and exercisable in full, (2) all SARs which have not been
granted in tandem with stock options will become exercisable in full, (3) 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, (4) all performance shares will be deemed
to be earned at target level and (5) all performance shares granted in the form
of share units will be paid in cash.

For purposes of the Incentive Plan, "Change in Control" is generally defined
as (1) a change in the majority of the Board except upon consent of the
previous Board, (2) certain mergers, consolidations or similar corporate
transactions in which Ziff-Davis Inc. is not the surviving corporation or
entity or (3) a plan of

70
<PAGE>

complete liquidation or dissolution of Ziff-Davis Inc. or a sale of all or
substantially all of Ziff-Davis Inc.'s assets that is approved by the
stockholders of Ziff-Davis Inc.; provided, that a Change in Control will not be
deemed to occur under clause (2) if SOFTBANK Corp., directly or indirectly, is
the beneficial owner of more than 25% of Ziff-Davis Inc.'s voting securities or
of the voting securities of any surviving corporation, respectively.

Amendment And Termination

The Board may amend, suspend or terminate the Incentive Plan or any portion
thereof at any time, provided, that (1) no amendment will be made without
stockholder approval (including an increase in the number of shares reserved
for issuance under the Incentive Plan) if such approval is necessary in order
for the Incentive Plan to comply with any applicable law, regulations or stock
exchange rule and (2) 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.

Effective Date

The Incentive Plan has a term of 10 years from February 13, 1998, subject to
earlier termination.

Repricing

On September 23, 1998, the incentive plan committee authorized the amendment
of options granted under the Incentive Plan prior to that date including those
granted on June 24, 1998. Pursuant to such amendment, the exercise price of
such options will be reduced from $16.00 to $6.00 (the closing price of our
common stock on September 23, 1998), but the options will not vest until three
months after the dates on which the options were originally to become vested.

Proposed Amendment Requiring Stockholder Approval

If the Tracking Stock Proposal is approved, the Incentive Plan is proposed to
be amended. See "Proposals 2, 3 and 4--Amendments to Certain Plans--Description
of Amendments to Incentive Plan (Proposal 2)".

Employee Stock Purchase Plan

General

Ziff-Davis Inc. has adopted the Stock Purchase Plan, the principal terms and
conditions of which are set forth below.

The Stock Purchase Plan is intended to meet the applicable requirements of
Section 423 of the Code and will be administered by the Committee.

Shares Subject To Plan

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 change in the outstanding shares of common
stock by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, combination, exchange of shares, other corporate
change or any distribution to common stockholders other than cash dividends.
Upon the dissolution or liquidation of Ziff-Davis Inc., or upon a
reorganization, merger or consolidation of Ziff-Davis Inc. as a result of which
Ziff-Davis Inc. is not the surviving corporation, or upon a sale of
substantially all of Ziff-Davis Inc.'s assets or a sale or distribution of a
subsidiary of Ziff-Davis Inc., 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.

71
<PAGE>

Option To Purchase

Under the Stock Purchase Plan, all full-time and certain part-time employees
of Ziff-Davis Inc. who meet certain minimum service requirements will be
eligible to purchase shares of common stock by means of payroll deductions.
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 price at which shares of common stock will be purchased at the end of
each purchase period will be the lesser of (1) 85% of the fair market value of
a share of common stock on the first business day of such purchase period or
(2) 85% of the fair market value on the last business day of such 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 Stock Purchase Plan. No such
termination will 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 will be effective unless approved
by the stockholders of Ziff-Davis Inc. if such stockholder approval of such
amendment is required to comply with any law, regulation or stock exchange
rule.

Proposed Amendment Requiring Stockholder Approval

If the Tracking Stock Proposal is approved, the Stock Purchase Plan is
proposed to be amended. See "Proposals 2, 3 and 4--Amendments to Certain
Plans--Description of Amendments to Stock Purchase Plan (Proposal 3)".

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
SBH. 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 19, 1998, the exercise price of all options was reset at
(Yen)4,000 per share, the market price of SOFTBANK Corp.'s common stock on that
date.

On January 29, 1999, Ziff-Davis Inc. granted options to a number of employees
in connection with the cancellation of corresponding options to purchase stock
of SOFTBANK Corp. In connection with these grants, an affiliate of SOFTBANK
Corp. has agreed with Ziff-Davis Inc. that, if and when any of these options
are exercised, (1) that affiliate will cause the shares of Ziff-Davis Inc.
common stock issuable upon such exercise to be supplied to Ziff-Davis and (2)
Ziff-Davis Inc. will deliver to that affiliate or its designee the exercise
price paid upon such exercise. Thus, the exercise of these options will not
increase the number of shares of Ziff-Davis Inc. common stock outstanding or
Ziff-Davis Inc.'s stockholders' equity. However, Ziff-Davis Inc. expects to
recognize compensation expense for accounting purposes of approximately
$3,018,000 over three years as a result of these grants. An affiliate of
SOFTBANK Corp. has agreed to reimburse Ziff-Davis Inc. for any compensation
expense recognized by it for accounting purposes as a result of such grants.
Any such reimbursement would likely not be treated as income for accounting
purposes but would restore Ziff-Davis Inc.'s stockholders' equity to the level
it would have been in the absence of such expense. For more information
regarding the grant of options, see the Financial Statements for each of Ziff-
Davis Inc. and ZD included in Annexes VI and VII to this Proxy Statement.

72
<PAGE>

Employment Agreements

Eric Hippeau

Ziff-Davis Inc. has entered into an employment agreement with Mr. Hippeau,
dated as of April 1, 1998, pursuant to which Mr. Hippeau will serve as our
Chairman and Chief Executive Officer through March 31, 2004. Pursuant to this
agreement, Mr. Hippeau will receive an annual base salary of not less than
$900,000 and an annual incentive bonus of not less than $600,000, as determined
by a compensation committee assuming the achievement of performance targets.
Pursuant to the Incentive Plan, we have granted Mr. Hippeau options to acquire
up to 860,000 shares of common stock (of which 430,000 shares are based upon
the achievement of certain performance targets) and options to acquire up to
560,000 shares of ZDNet Stock.

Upon certain terminations of employment, we will pay Mr. Hippeau his base
salary plus his average incentive bonus for the preceding two years for a
period ending on the later of the date that is two years after the date of
termination or March 31, 2001. In the event that Mr. Hippeau's employment is
terminated in connection with a Change of Control, Ziff-Davis Inc. will pay Mr.
Hippeau an amount which, on an after-tax basis, will equal any excise tax
imposed by Section 4999 of the Code as a result of payments made under the
agreement.

Jason Chudnofsky

We have entered into an employment agreement with Mr. Chudnofsky, dated as of
April 1, 1998, pursuant to which Mr. Chudnofsky will serve as the President and
Chief Executive Officer of ZD Events, Inc. through March 31, 2001. Pursuant to
this agreement, Mr. Chudnofsky will receive an annual base salary of not less
than $800,000 and an annual incentive bonus of $300,000, subject to adjustment
and assuming the achievement of earnings and other performance targets, as
determined by the board of directors of ZD Events, Inc. Pursuant to the
Incentive Plan, we have granted Mr. Chudnofsky options to acquire up to 300,000
shares of common stock and options to acquire up to 52,500 shares of ZDNet
Stock.

Upon certain terminations of employment, we will pay Mr. Chudnofsky his base
salary plus his average incentive bonus for the year of termination and the
preceding two years for a period ending on the later of the date that is two
years after the date of termination or March 31, 2001.

Timothy C. O'Brien

We have entered into an employment agreement with Mr. O'Brien, dated as of
April 1, 1998, pursuant to which Mr. O'Brien will serve as Vice President,
Chief Financial Officer of Ziff-Davis Inc. through March 31, 2001. Pursuant to
this agreement, Mr. O'Brien will receive an annual base salary of not less than
$490,000 and an annual incentive bonus of $300,000, subject to adjustment and
assuming the achievement of earnings and other performance targets, as
determined by the board of directors of Ziff-Davis Inc. Pursuant to the
Incentive Plan, we have granted Mr. O'Brien options to acquire up to 150,000
shares of common stock and options to acquire up to 140,000 shares of ZDNet
Stock.

Upon certain terminations of employment, we will pay Mr. O'Brien severance
equal to the sum of his then current base salary and his annual incentive
compensation, using the average amount of incentive compensation earned in the
preceding two calendar years.

Terri S. Holbrooke

We have entered into an employment agreement with Ms. Holbrooke, dated as of
April 1, 1998, pursuant to which Ms. Holbrooke will serve as President of ZD
Brand & Market Services through March 31, 2001. Pursuant to this agreement, Ms.
Holbrooke will receive an annual base salary of not less than $420,000 and an
annual incentive bonus of $150,000, subject to adjustment and assuming the
achievement of earnings and other performance targets, as determined by the
board of directors of Ziff-Davis Inc. Pursuant to the Incentive Plan, we have
granted Ms. Holbrooke options to acquire up to 135,000 shares of common stock
and options to acquire up to 52,500 shares of ZDNet Stock.

73
<PAGE>

Upon certain terminations of employment, we will pay Ms. Holbrooke severance
equal to the sum of her then current base salary and her annual incentive
compensation, using the average amount of incentive compensation earned in the
preceding two calendar years.

Michael S. Perlis

We have entered into an employment agreement with Mr. Perlis, dated as of
November 6, 1998, pursuant to which Mr. Perlis will serve as President of ZD
Publishing through December 31, 2001. Pursuant to this agreement, Mr. Perlis
will receive an annual base salary of not less than $650,000 and an annual
incentive bonus equal to a percentage of the EBITDA for ZD Publishing above a
base amount. Pursuant to the Incentive Plan, we have granted Mr. Perlis options
to acquire up to 250,000 shares of common stock and options to acquire up to
78,750 shares of ZDNet Stock.

Upon certain terminations of employment, we will pay Mr. Perlis severance
equal to the sum of his then current base salary and his annual incentive
compensation, using the amount earned in the most recent completed year.

----------------

The number of shares of ZDNet Stock covered by the options described under
"--Employment Agreements" above assumes that the initial Total Number of
Notional ZDNet Shares Deemed Outstanding will be 70,000,000; to the extent this
is not the case, these options will be appropriately adjusted.

74
<PAGE>

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Certain Beneficial Owners

The following table sets forth, as of March 1, 1999, certain information with
respect to the beneficial ownership of common stock of Ziff-Davis Inc. by each
person or entity which beneficially owns more than five percent of the
outstanding shares of the common stock of Ziff-Davis Inc.

<TABLE>
<CAPTION>
Number of shares
of
common stock Percent of
Beneficial Owner of Ziff-Davis Inc. Class
- ---------------- ------------------ ----------
<S> <C> <C> <C> <C>
SBA(1)................................ 71,619,355 71.6%
SBH(2)................................ 72,120,000 72.1
SOFTBANK Corp.(3)..................... 72,120,000 72.1
Masayoshi Son(4)...................... 72,120,000 72.1
</TABLE>
- --------

(1) SBA's address is 10 Langley Road, Suite 403, Newton Center, MA 02459.

(2) Includes shares owned by SBA and 500,645 shares owned by SOFTBANK Kingston
Inc., all of which may be deemed to be beneficially owned by SBH. SBH's
address is 10 Langley Road, Suite 403, Newton Center, MA 02459.

(3) Includes shares owned by SBA and SOFTBANK Kingston Inc., all of which may
be deemed to be beneficially owned by SOFTBANK Corp. SOFTBANK Corp.'s
address is 24-1 Nihonbashi-Hakozakicho, Chuo-ku, Tokyo 103, Japan.

(4) Includes shares owned by SBA and SOFTBANK Kingston Inc., all of which may
be deemed to be beneficially owned by Mr. Son (who owns 42.2% of SOFTBANK
Corp. and is its President). Mr. Son's address is c/o SOFTBANK Corp., 24-1
Nihonbashi-Hakozakicho, Chuo-Ku, Tokyo 103, Japan.

As a result of its beneficial ownership of common stock, Softbank is able to
influence significantly matters affecting Ziff-Davis Inc. Softbank is able to
elect all members of the Board and to control those actions that require the
approval of holders of a majority of the voting stock of Ziff-Davis Inc.,
including amendments to our charter and approval of any business combinations.
See "Risk Factors--Other Ziff-Davis Inc. Risks-- Ziff-Davis Inc. Is Controlled
By Its Principal Stockholders. This Creates Potential Conflicts of Interest"
and "Proposal 1--The Tracking Stock Proposal--Certain Other Provisions of the
Restated Certificate of Incorporation and By-laws".

75
<PAGE>

Management

The following table sets forth, as of March 1, 1999, certain information with
respect to the beneficial ownership of common stock of Ziff-Davis Inc. and the
common stock of SOFTBANK Corp. by (1) each executive officer named in the
Summary Compensation Table, (2) each director of Ziff-Davis Inc. and (3) all
executive officers and directors of Ziff-Davis Inc. as a group.

<TABLE>
<CAPTION>
Number of
Number of shares of
shares of common stock of
common stock Percent of SOFTBANK Percent of
Beneficial Owner(1) of Ziff-Davis Inc. Class Corp.(2) Class
- ------------------- ------------------ ---------- --------------- ----------
<S> <C> <C> <C> <C>
Eric Hippeau(3)......... 97,608 *% 77,068 *%
Jason E. Chudnofsky(3).. 60,000 * 14,537 *
Timothy C. O'Brien(3)... 40,000 * 11,603 *
Claude P. Sheer(4)...... 42,000 * 5,059 *
Terri S. Holbrooke(4)... 28,000 * 1,182 *
Daniel L. Rosensweig.... 30,600 * 3,137 *
Masayoshi Son(5)........ 72,120,000 72.1 43,760,748 42.2
Yoshitaka Kitao......... 0 * 118,747 *
Ronald D. Fisher(6)..... 45,000 * 99,450 *
Jonathan D. Lazarus(7).. 39,000 * 0 *
Jerry Yang(8)........... 18,300 * 0 *
Officers and directors
as a group............. 72,639,459 72.6 44,100,495 42.5
</TABLE>
- --------
* Less than one percent.

(1) The percentage of ownership is based on (a) 100,077,528 shares of common
stock of Ziff-Davis Inc. outstanding on the date referenced above and (b)
103,694,929 shares of common stock of SOFTBANK Corp. outstanding as of
December 10, 1998. Shares of common stock subject to options which are
currently exercisable or exercisable within 60 days of the date referenced
above, are deemed outstanding for computing the percentages of the person
holding such options, but are not deemed outstanding for computing the
percentages of any other person. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
includes voting and investment power with respect to shares. Unless
otherwise indicated, the persons named in the table have sole voting and
sole investment control with respect to all shares beneficially owned.

(2) Includes options granted in 1996 and 1997 to purchase common stock of
SOFTBANK Corp. under the SOFTBANK Group Executive Stock Option Plans.

(3) Both a director and an executive officer named in the Summary Compensation
Table.

(4) An executive officer named in the Summary Compensation Table.

(5) Includes shares owned by SBA and SOFTBANK Kingston Inc., all of which may
be deemed to be beneficially owned by Mr. Son.

(6) Including shares owned by 1995 Fisher Family Trust.

(7) Including shares owned by Lazarus Family Investments LLC, all of which may
be deemed to be beneficially owned by Jonathan D. Lazarus, a member of such
LLC.

(8) Including shares owned by Red Husky Foundation.

76
<PAGE>

STOCKHOLDER PROPOSALS

If you intend to present any stockholder proposals at our 1999 Annual Meeting
of Stockholders currently expected to be held on or about May 27, 1999, the
proposals must have been received by Ziff-Davis Inc. at our principal executive
offices located at One Park Avenue, New York, NY 10016 by January 27, 1999 and
must be in compliance with applicable Securities and Exchange Commission
regulations to be included in Ziff-Davis Inc.'s proxy statement and related
proxy materials to be used in connection with our 1999 Annual Meeting.

Any stockholder proposals you submit outside the proxy process must comply
with Ziff-Davis Inc.'s advance notice procedure as set forth in our by-laws.
This procedure requires stockholders to deliver to Ziff-Davis Inc., at our
principal executive offices located at One Park Avenue, New York, NY 10016,
notice of any proposal to be presented or of a candidate to be nominated for
election as a director of Ziff-Davis Inc. not less than 60 nor more than 90
days prior to the date of the annual or special meeting, as the case may be.
However, if the date of the meeting is first publicly announced or disclosed
(in a public filing or otherwise) less than 70 days prior to the date of the
meeting, such advance notice shall be given not more than 10 days after such
date is first so announced or disclosed. Accordingly, if you or any stockholder
fails to act in compliance with the notice provisions you will not be able to
nominate directors or propose new business.

77
<PAGE>

INDEX OF CERTAIN TERMS

<TABLE>
<CAPTION>
Page on which
term is defined in the
Term Proxy Statement
- ---- ----------------------
<S> <C>
50% of Total Market Capitalization Threshold........... 47
65% of Total Market Capitalization Trigger............. 46
All or Substantially All of the Assets................. 44
Available Dividend Amount.............................. 42
Committee.............................................. 67
Disposition............................................ 43
Exempt Disposition..................................... 44
Fair Value............................................. 44
Group.................................................. 36
Incentive Plan......................................... 59
Market Capitalization.................................. 44
Market Value........................................... 44
Net Proceeds........................................... 44
Non-Employee Directors................................. 67
Non-Employee Directors' Plan........................... 59
Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet..................................... 40
Outstanding Interest Percentage........................ 50
Proportionate Interest................................. 45
Publicly Traded........................................ 45
Retained Interest...................................... 36
Retained Interest Percentage........................... 50
Softbank............................................... 22
Softbank Plans......................................... 72
Stock Purchase Plan.................................... 59
Total Number of Notional ZDNet Shares Deemed
Outstanding........................................... 45
Trading Day............................................ 45
</TABLE>

78
<PAGE>

ANNEX I

ILLUSTRATIONS OF CERTAIN TERMS

The following illustrations show how to calculate the Retained Interest
Percentage, the Outstanding Interest Percentage, the Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet and the Total Number of
Notional ZDNet Shares Deemed Outstanding after giving effect to certain
hypothetical dividends, issuances, repurchases and transfers, in each case
based on the assumptions set forth herein. In these illustrations, the Number
of Shares Issuable with Respect to ZD's Retained Interest in ZDNet is initially
assumed to be 100. Unless otherwise specified, each illustration below should
be read independently as if none of the other transactions referred to below
had occurred. Actual calculations may be slightly different due to rounding.

"Total Number of Notional ZDNet Shares Deemed Outstanding" means the number
of shares of ZDNet Stock outstanding plus the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet.

At any given time, the percentage interest in ZDNet intended to be
represented by the outstanding shares of ZDNet Stock (i.e., the Outstanding
Interest Percentage) is equal to:

Outstanding Shares of ZDNet Stock
----------------------------------------------
Total Number of Notional ZDNet Shares Deemed Outstanding

and the remaining percentage interest in ZDNet intended to be represented by
ZD's Retained Interest in ZDNet (i.e., the Retained Interest Percentage) is
equal to:

Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet
----------------------------------------------
Total Number of Notional ZDNet Shares Deemed Outstanding

The sum of the Outstanding Interest Percentage and the Retained Interest
Percentage would always equal 100%. In our example, before the first issuance
the Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet
and the Total Number of Notional ZDNet Shares Deemed Outstanding are each equal
to 100, the Retained Interest Percentage is 100% and the Outstanding Interest
Percentage is 0%.

The Offering

The following illustrations reflect an assumed issuance by Ziff-Davis Inc. of
15 shares of ZDNet Stock in the Offering.

Offering for Account of ZD

Assume the issuance is attributed to ZD in respect of its Retained Interest
(as currently planned), with the net proceeds credited solely to ZD.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................. 0
Newly issued shares for account of ZD................................ 15
---
Total issued and outstanding after the Offering.................. 15
===

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would decrease by the number of shares of ZDNet Stock sold for the
account of ZD.

Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to the Offering......................................... 100
Shares issued in the Offering........................................ 15
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after the Offering..................................... 85
===
</TABLE>

I-1
<PAGE>

. As a result, the issued and outstanding shares (15) would represent an
Outstanding Interest Percentage of 15%, calculated as follows:

15
--------
15 + 85

The Retained Interest Percentage would accordingly be 85%.

. In this case, in the event of any dividend or other distribution paid on
the outstanding shares of ZDNet Stock (other than a dividend or other
distribution payable in shares of ZDNet Stock), ZD would be credited, and
ZDNet would be charged, with an amount equal to 567% (representing the
ratio of the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet (85) to the total number of shares of ZDNet Stock
issued and outstanding following the Offering (15)) of the aggregate
amount of such dividend or distribution. If, for example, a dividend of
$1.00 per share were declared and paid on the 15 shares of ZDNet Stock
outstanding (an aggregate of $15), ZD would be credited with $85, and
ZDNet would be charged with that amount in addition to the $15 dividend
paid to the holders of ZDNet Stock (a total of $100).

Offering for Account of ZDNet

Assume the issuance is attributed to ZDNet as an increase in its equity, with
the net proceeds credited solely to ZDNet.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 0
Newly issued shares for account of ZDNet............................... 15
---
Total issued and outstanding after the Offering.................... 15
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet (100) would remain unchanged.

. As a result, the issued and outstanding shares (15) would represent an
Outstanding Interest Percentage of about 13%, calculated as follows:

15
--------
15 + 100

The Retained Interest Percentage would accordingly be about 87%.

Additional Offerings of ZDNet Stock

The following illustrations reflect an assumed issuance of an additional 15
shares of ZDNet Stock after the assumed initial issuance of 15 shares for the
account of ZD.

Additional Offering for Account of ZD

Assume the issuance is attributed to ZD in respect of its Retained Interest,
with the net proceeds credited solely to ZD.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares for account of ZD.................................. 15
---
Total issued and outstanding after additional offering............. 30
===
</TABLE>

I-2
<PAGE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would decrease by the number of shares of ZDNet Stock issued for
the account of ZD

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to the additional offering............................. 85
Newly issued shares for account of ZD............................... 15
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after the additional offering........................... 70
===
</TABLE>

. As a result, the total issued and outstanding shares (30) would in the
aggregate represent an Outstanding Interest Percentage of 30%, calculated
as follows:

30
--------
30 + 70

The Retained Interest Percentage would accordingly be reduced to 70%.

. In this case, in the event of any dividend or other distribution paid on
ZDNet Stock (other than a dividend or other distribution payable in
shares of ZDNet Stock), ZD would be credited, and ZDNet would be charged,
with an amount equal to 233% (representing the ratio of the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet (70) to
the total number of shares of ZDNet Stock issued and outstanding
following the additional offering (30)) of the aggregate amount of such
dividend or distribution.

Additional Offering for Account of ZDNet

Assume the issuance is attributed to ZDNet as an increase in its equity, with
the net proceeds credited solely to ZDNet.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares for account of ZDNet............................... 15
---
Total issued and outstanding after the additional offering......... 30
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet (85) would remain unchanged.

. As a result, the total issued and outstanding shares (30) would in the
aggregate represent an Outstanding Interest Percentage of about 26%,
calculated as follows:

30
--------
30 + 85

The Retained Interest Percentage would accordingly be reduced to about 74%.

. In this case, in the event of any dividend or other distribution paid on
ZDNet Stock (other than a dividend or other distribution payable in
shares of ZDNet Stock), ZD would be credited, and ZDNet would be charged,
with an amount equal to 283% (representing the ratio of the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet (85) to
the total number of shares of ZDNet Stock issued and outstanding
following the additional offering (30)) of the aggregate amount of such
dividend or distribution.

Offerings of Convertible Securities

If we were to issue any securities convertible into or exercisable for shares
of ZDNet Stock, the Outstanding Interest Percentage and the Retained Interest
Percentage would be unchanged at the time of such

I-3
<PAGE>

issuance. If any shares of ZDNet Stock were issued upon conversion or exercise
of such securities, however, then the Outstanding Interest Percentage and the
Retained Interest Percentage would be affected as shown above under "Additional
Offering for Account of ZD", if such securities were attributed to ZD, or under
"Additional Offering for Account of ZDNet", if such securities were attributed
to ZDNet.

Repurchases of ZDNet Stock

The following illustrations reflect an assumed repurchase by Ziff-Davis Inc.
of 5 shares of ZDNet Stock after the assumed initial issuance of 15 shares of
ZDNet Stock for the account of ZD.

Repurchase for the Account of ZD

Assume the repurchase is attributed to ZD as an increase in its Retained
Interest in ZDNet, with the cost charged solely against ZD.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Shares repurchased for account of ZD................................... 5
---
Total issued and outstanding after repurchase...................... 10
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be increased by the number of any shares of ZDNet Stock
repurchased for the account of ZD.

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet prior to repurchase.............................. 85
Number of shares repurchased for the account of ZD.................. 5
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after repurchase...................................... 90
===
</TABLE>

. As a result, the total issued and outstanding shares (10) would in the
aggregate represent an Outstanding Interest Percentage of 10%, calculated
as follows:

10
--------
10 + 90

The Retained Interest Percentage would accordingly be increased to 90%.

Repurchase for Account of ZDNet without Participation by ZD

Assume the repurchase is attributed to ZDNet, with the cost being charged
solely against ZDNet. Further assume that the Board does not determine to
transfer assets from ZDNet to ZD to hold constant the Outstanding Interest
Percentage and Retained Interest Percentage.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Shares repurchased for account of ZDNet................................ 5
---
Total issued and outstanding after repurchase...................... 10
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet (85) would remain unchanged.

. As a result, the total issued and outstanding shares (10) would in the
aggregate represent an Outstanding Interest Percentage of about 11%,
calculated as follows:

10
--------
10 + 85

The Retained Interest Percentage would accordingly be increased to about
89%.

I-4
<PAGE>

Repurchase for Account of ZDNet with Participation by ZD

Assume the repurchase is attributed to ZDNet, with the cost being charged
solely against ZDNet. Further assume that the repurchase is made in connection
with a tender offer for 5, or 33%, of the then outstanding shares at a price of
$20 per share, and that the Board determines to transfer cash or other assets
from ZDNet to ZD to hold constant the Outstanding Interest Percentage and
Retained Interest Percentage.

. In order to hold constant the Outstanding Interest Percentage and
Retained Interest Percentage, the Board could determine that the Market
Value of a share of ZDNet Stock in this context is $20 and transfer from
ZDNet to ZD an amount of cash or other assets equal to 567% (representing
the ratio of the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet (85) to the total number of shares of ZDNet Stock
issued and outstanding (15), in each case immediately prior to the
repurchase) of the aggregate amount of the cash paid in the tender offer
to holders of outstanding shares of ZDNet Stock ($100), or a total of
$567.

. In that case, the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet (85) would decrease by the amount of cash so
transferred ($567) divided by the Market Value per share of ZDNet Stock
($20).

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to transfer............................................. 85
Adjustment in respect of ZD's Retained Interest to reflect transfer
to ZD of funds theretofore allocated to ZDNet....................... 28
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after transfer......................................... 57
===
</TABLE>

. As a result, the total issued and outstanding shares (10) would in the
aggregate continue to represent an Outstanding Interest Percentage of
15%, calculated as follows:

10
--------
10 + 57

The Retained Interest Percentage would accordingly continue to be 85%.

. Assuming that the Board transferred only half of the $567 amount, or
$283.50, from ZDNet to ZD, the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet (85) would decrease by the amount of cash
so transferred ($283.50) divided by the Market Value per share of ZDNet
Stock ($20).

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to transfer............................................ 85
Adjustment in respect of ZD's Retained Interest to reflect transfer
to ZD of cash theretofore allocated to ZDNet....................... 14
---
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet after transfer............................................... 71
===
</TABLE>

. In that case, as a result, the total issued and outstanding shares (10)
would in the aggregate represent an Outstanding Interest Percentage of
about 12%, calculated as follows:

10
--------
10 + 71

The Retained Interest Percentage would accordingly be increased to about
88%.

I-5
<PAGE>

ZDNet Stock Dividends

The following illustrations reflect assumed dividends of ZDNet Stock on
outstanding shares of ZD Stock and outstanding shares of ZDNet Stock,
respectively, after the assumed initial issuance of 15 shares of ZDNet Stock
for the account of ZD.

ZDNet Stock Dividend on ZD Stock

Assume 1,000 shares of ZD Stock are outstanding and Ziff-Davis Inc. declares
a dividend of 1/20 of a share of ZDNet Stock on each outstanding share of ZD
Stock.

<TABLE>
<S> <C>
Shares previously issued and outstanding.............................. 15
Newly issued shares for account of ZD................................. 50
---
Total issued and outstanding after dividend......................... 65
===
</TABLE>

. Any dividend of shares of ZDNet Stock to the holders of shares of ZD
Stock would be treated as a reduction in the Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet.

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to dividend........................................... 85
Number of shares distributed on outstanding shares of ZD Stock for
account of ZD..................................................... 50
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after dividend......................................... 35
===
</TABLE>

. As a result, the total issued and outstanding shares (65) would in the
aggregate represent an Outstanding Interest Percentage of 65%, calculated
as follows:

65
---------
65 + 35

The Retained Interest Percentage would accordingly be reduced to 35%.
Note, however, that after the dividend, the holders of ZD Stock would also
hold 50 shares of ZDNet Stock, which would be intended to represent a 50%
interest in the value attributable to ZDNet.

ZDNet Stock Dividend on ZDNet Stock

Assume Ziff-Davis Inc. declares a dividend of 1/5 of a share of ZDNet Stock
on each outstanding share of ZDNet Stock.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares for account of ZDNet............................... 3
---
Total issued and outstanding after dividend........................ 18
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be increased proportionately to reflect the stock dividend
payable in shares of ZDNet Stock to holders of shares of ZDNet Stock.
That is, the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet would be increased by a number equal to 567%
(representing the ratio of the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet (85) to the number of shares of ZDNet
Stock issued and outstanding (15), in each case immediately prior to such
dividend) of the aggregate number of shares issued in connection with
such dividend (3), or 17.

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to dividend.............................................. 85
Adjustment in respect of ZD's Retained Interest to reflect shares
distributed on outstanding shares of ZDNet Stock..................... 17
---
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet after dividend............................................... 102
===
</TABLE>

I-6
<PAGE>

. As a result, the total issued and outstanding shares (18) would in the
aggregate continue to represent an Outstanding Interest Percentage of
15%, calculated as follows:

18
---------
18 + 102

The Retained Interest Percentage would accordingly continue to be 85%.

Capital Transfers of Cash or Other Assets between ZD and ZDNet

Capital Contribution of Cash or Other Assets from ZD to ZDNet

The following illustration reflects the assumed contribution by ZD to ZDNet,
after the assumed initial issuance of 15 shares of ZDNet Stock for the account
of ZD, of $40 of assets allocated to ZD at a time when the Market Value of the
ZDNet Stock is $20 per share.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................. 15
Newly issued shares.................................................. 0
---
Total issued and outstanding after contribution.................. 15
===

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be increased to reflect the contribution to ZDNet of assets
theretofore allocated to ZD by a number equal to the value of the assets
contributed ($40) divided by the Market Value of ZDNet Stock at that time
($20), or 2 shares.

Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to contribution......................................... 85
Increase to reflect contribution to ZDNet of assets allocated to ZD.. 2
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after contribution..................................... 87
===
</TABLE>

. As a result, the total issued and outstanding shares (15) would in the
aggregate represent an Outstanding Interest Percentage of a little less
than 15%, calculated as follows:

15
--------
15 + 87

The Retained Interest Percentage would accordingly be increased to a little
more than 85%.

Return of Capital Transfer of Cash or Other Assets from ZDNet to ZD

The following illustration reflects the assumed transfer by ZDNet to ZD,
after the assumed initial issuance of 15 shares of ZDNet Stock for the account
of ZD, of $40 of assets allocated to ZDNet on a date on which the Market Value
of ZDNet Stock is $20 per share.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares.................................................... 0
---
Total issued and outstanding after contribution.................... 15
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be decreased to reflect the transfer to ZD of assets
theretofore allocated to ZDNet by a number equal to the value of the
assets transferred ($40) divided by the Market Value of ZDNet Stock at
that time ($20), or 2 shares.

I-7
<PAGE>

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to contribution........................................ 85
Decrease to reflect transfer to ZD of assets allocated to ZDNet..... 2
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after contribution.................................... 83
===
</TABLE>

. As a result, the total issued and outstanding shares (15) would in the
aggregate represent an Outstanding Interest Percentage of a little more
than 15%, calculated as follows:

15
--------
15 + 83

The Retained Interest Percentage would accordingly be decreased to a little
less than 85%.

I-8
<PAGE>

ANNEX II

PROPOSAL 1--THE TRACKING STOCK PROPOSAL

(AMENDED AND RESTATED CERTIFICATE OF INCORPORATION)

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

ZIFF-DAVIS INC.

(Adopted in accordance with Sections 242 and 245 of the General Corporation Law

of the State of Delaware)

The undersigned, a duly authorized officer of Ziff-Davis Inc. (the
"Corporation"), hereby certifies as follows:

FIRST. The name under which the Corporation was originally incorporated was
ZD Inc., and the date of filing of its original certificate of incorporation
was February 4, 1998.

SECOND. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware.

THIRD. The text of the Corporation's amended and restated certificate of
incorporation is hereby further amended and restated to read in full as
follows:

ARTICLE I

NAME

The name of the Corporation is Ziff-Davis Inc.

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.

ARTICLE III

PURPOSES

The purposes of the Corporation are to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.

ARTICLE IV

CAPITAL STOCK

A. Authorized Shares.

The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 220 million shares of which 210 million shares
shall be designated as Common Stock, par value $.01 per share ("Common Stock"),
and 10 million shares shall be designated as Preferred Stock, par value $.01
per share ("Preferred Stock").

II-1
<PAGE>

B. Common Stock.

1. Issuance of Common Stock in Series; Designation; Re-Classification.

The Corporation shall have the authority to issue shares of Common Stock in
two series. One series of Common Stock shall be designated as Ziff-Davis Inc.--
ZD Common Stock ("ZD Stock"). The second series of Common Stock shall be
designated as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"). When the
filing of this Amended and Restated Certificate of Incorporation becomes
effective, each share of Common Stock outstanding immediately prior thereto
shall thereupon automatically be re-classified as one share of ZD Stock (and
outstanding certificates that had theretofore represented shares of Common
Stock shall thereupon represent an equivalent number of shares of ZD Stock
despite the absence of any indication thereon to that effect).

The total number of shares of ZD Stock which the Corporation shall have the
authority to issue shall initially be 130 million, and the total number of
shares of ZDNet Stock which the Corporation shall have the authority to issue
shall initially be 80 million. The Board of Directors shall have the authority
to increase or decrease from time to time the total number of shares of Common
Stock of either series which the Corporation shall have the authority to issue,
but not above the number which, when added to the total number of shares of the
other series of Common Stock that the Corporation would have the authority to
issue, would exceed the total number of shares of Common Stock that the
Corporation has the authority to issue, and not below the number of shares of
such series then outstanding.

2. Dividends.

(a) Dividends. Subject to the preferences and other terms of any outstanding
series of Preferred Stock, the holders of either series of Common Stock shall
be entitled to receive dividends on their shares of Common Stock if, as and
when declared by the Board of Directors out of legally available funds, but (i)
the aggregate amounts paid as dividends on ZD Stock on any day may not exceed
the Available Dividend Amount for ZD on that day and (ii) the aggregate amounts
paid as dividends on ZDNet Stock on any day, together with the aggregate
amounts that are re-allocated to ZD as a result of such dividends as required
pursuant to clause (ii) in the proviso to the definition of ZD below, may not
exceed the Available Dividend Amount for ZDNet on that day.

(b) Discrimination Between or Among Series of Common Stock. Subject to
paragraph (a) of this Section 2 and subject to the preferences and other terms
of any outstanding series of Preferred Stock, the Corporation shall have the
authority to declare and pay dividends on both, one or neither series of Common
Stock in equal or unequal amounts, notwithstanding the performance of either
Group, the amount of assets available for dividends on either series of Common
Stock, the amount of prior dividends paid on either series of Common Stock, the
respective voting rights of each series of Common Stock or any other factor.

3. Mandatory Dividend, Redemption or Exchange on Disposition of All or
Substantially All of the Assets of a Group; Exchange of One Series of Common
Stock for the Other Series or for Stock of a Subsidiary at the Corporation's
Option.

(a) Mandatory Dividend, Redemption or Exchange. (i) In the event of a
Disposition of All or Substantially All of the Assets of a Group (other than an
Exempt Disposition), the Corporation shall, on or prior to the 85th Trading Day
after the consummation of such Disposition, either:

(x) declare and pay a dividend to holders of the series of Common Stock
that relates to that Group (in cash, securities (other than Common Stock)
or other property, or a combination thereof), subject to the limitations on
dividends set forth under Section 2 of this Article IV(B), in an amount
having a Fair Value equal to their Proportionate Interest in the Net
Proceeds of such Disposition;

(y) redeem from holders of the series of Common Stock that relates to
that Group, for cash, securities (other than Common Stock) or other
property (or a combination thereof) in an amount having a Fair Value equal
to their Proportionate Interest in the Net Proceeds of such Disposition,
all of the

II-2
<PAGE>

outstanding shares of the relevant series of Common Stock (or, if such
Group continues after such Disposition to own any material assets other
than the proceeds of such Disposition, a number of shares of such series of
Common Stock (rounded, if necessary, to the nearest whole number) having an
aggregate average Market Value, during the 20 consecutive Trading Day
period beginning on (and including) the 16th Trading Day immediately
following the date on which the Disposition is consummated, equal to such
Fair Value); or

(z) issue, in exchange for all of the outstanding shares of the series of
Common Stock that relates to that Group, a number of shares of the series
of Common Stock that does not relate to that Group (rounded, if necessary,
to the nearest whole number) having an aggregate value equal to 110% of the
aggregate value of all of the outstanding shares of the series of Common
Stock that relates to that Group (where in each case value is based on the
average Market Value of a share of the relevant series of Common Stock
during the 20 consecutive Trading Day period beginning on (and including)
the 16th Trading Day immediately following the date on which the
Disposition is consummated).

(ii) At any time within one year after completing any dividend or partial
redemption pursuant to (x) or (y) of the preceding sentence, the Corporation
may issue, in exchange for all of the remaining outstanding shares of the
series of Common Stock that relates to the Group that consummated the
applicable Disposition, a number of shares of the series of Common Stock that
does not relate to that Group (rounded, if necessary, to the nearest whole
number) having an aggregate value equal to 110% of the aggregate value of all
of the outstanding shares of the series of Common Stock that relates to that
Group (where in each case value is based on the average Market Value of a share
of the relevant series of Common Stock during the 20 consecutive Trading Day
period ending on (and including) the 5th Trading Day immediately preceding the
date on which the Corporation mails the notice of exchange to holders of the
relevant series).

(iii) For purposes of this Section 3, if a Group consummates a Disposition in
a series of related transactions, such Disposition shall not be deemed to have
been completed until consummation of the last of such transactions.

(b) Optional Exchange of One Series of Common Stock for the Other Series. (i)
The Corporation may, at any time before ZDNet Stock exceeds the 65% of Total
Market Capitalization Trigger, issue, in exchange for all of the outstanding
shares of ZDNet Stock, a number of shares of ZD Stock (rounded, if necessary,
to the nearest whole number) having an aggregate value equal to the percentage
of the aggregate value of all of the outstanding shares of ZDNet Stock (the
"Applicable Percentage") specified for the applicable date of exchange below
(where in each case value is based on the average Market Value of a share of
the relevant series of Common Stock during the 20 consecutive Trading Day
period ending on (and including) the 5th Trading Day immediately preceding the
date on which the Corporation mails the notice of exchange to holders of ZDNet
Stock).

<TABLE>
<CAPTION>
The Applicable Percentage
If the Exchange Date Falls Will be the Percentage Specified
During the Period Indicated Below for Such Period Below
--------------------------------- --------------------------------
<S> <C>
First Quarter............................... 125%
Second Quarter.............................. 124.166667%
Third Quarter............................... 123.333333%
Fourth Quarter.............................. 122.5%
Fifth Quarter............................... 121.666667%
Sixth Quarter............................... 120.833333%
Seventh Quarter............................. 120%
Eighth Quarter.............................. 119.166667%
Ninth Quarter............................... 118.333333%
Tenth Quarter............................... 117.5%
Eleventh Quarter............................ 116.666667%
Twelfth Quarter............................. 115.833333%
After Twelfth Quarter....................... 115%
</TABLE>

II-3
<PAGE>

For purposes of the foregoing chart, (x) the first "Quarter" is the period from
and including the date of first issuance of shares of ZDNet Stock to but
excluding the third month anniversary of such date (provided that, if the date
of first issuance of shares of ZDNet Stock is the 29th, 30th or 31st day of any
month, the first "Quarter" will be the period from and including such date of
first issuance to but excluding the third month anniversary of the first day of
the month immediately following the month in which such date of first issuance
falls) and (y) each subsequent "Quarter" is the period from and including the
day after the end of the prior Quarter to but excluding the third month
anniversary of such day.

(ii) The Corporation may, at any time after ZDNet Stock exceeds the 65% of
Total Market Capitalization Trigger but before ZDNet Stock falls below the 50%
of Total Market Capitalization Threshold, issue, in exchange for all of the
outstanding shares of ZD Stock, a number of shares of ZDNet Stock (rounded, if
necessary, to the nearest whole number) having an aggregate value equal to 115%
of the aggregate value of all of the outstanding shares of ZD Stock (where in
each case value is based on the average Market Value of a share of the relevant
series of Common Stock during the 20 consecutive Trading Day period ending on
(and including) the 5th Trading Day immediately preceding the date on which the
Corporation mails the notice of exchange to holders of ZD Stock).

(iii) The Corporation may, if ZDNet Stock exceeds the 65% of Total Market
Capitalization Trigger and thereafter falls below the 50% of Total Market
Capitalization Threshold (and regardless of whether ZDNet Stock shall
thereafter remain below the 50% of Total Market Capitalization Threshold or the
65% of Total Market Capitalization Trigger), issue, in exchange for all of the
outstanding shares of either series of Common Stock (the "Series of Common
Stock Being Retired"), a number of shares of the other series of Common Stock
(rounded, if necessary, to the nearest whole number) having an aggregate value
equal to the aggregate value of all of the outstanding shares of the Series of
Common Stock Being Retired (where in each case value is based on the average
Market Value of a share of the relevant series of Common Stock during the 20
consecutive Trading Day period ending on (and including) the 5th Trading Day
immediately preceding the date on which the Corporation mails the notice of
exchange to holders of the Series of Common Stock Being Retired).

(iv) ZDNet Stock will exceed the "65% of Total Market Capitalization Trigger"
if the Market Capitalization of the outstanding ZDNet Stock exceeds 65% of the
Total Market Capitalization of both series of Common Stock for 30 Trading Days
during any 60 consecutive Trading Day period. Thereafter, ZDNet Stock will fall
below the "50% of Total Market Capitalization Threshold" if, after exceeding
the 65% of Total Market Capitalization Trigger, the Market Capitalization of
the outstanding ZDNet Stock falls below 50% of the total Market Capitalization
of both series of Common Stock for 30 Trading Days during any 60 consecutive
Trading Day period.

(v) If the Corporation has the right, on the date on which it mails a notice
of exchange as contemplated above, to issue shares of ZD Stock or ZDNet Stock
in exchange for outstanding shares of the other series of Common Stock as
described above, the Corporation will not lose that right if ZDNet Stock
subsequently exceeds the 65% of Total Market Capitalization Trigger or falls
below the 50% of Total Market Capitalization Threshold.

(c) Optional Exchange for Stock of a Subsidiary. (i) At any time at which all
of the assets and liabilities of a Group (and no other assets or liabilities of
the Corporation or any subsidiary thereof) are held directly or indirectly by
one or more wholly owned subsidiaries of the Corporation (the "Group
Subsidiaries"), the Corporation may deliver to holders of the relevant series
of Common Stock their Proportionate Interest in all of the outstanding shares
of the common stock of the Group Subsidiaries in exchange for all of the
outstanding shares of such series of Common Stock.

(ii) If the series of Common Stock being exchanged pursuant to Section
3(c)(i) above is ZD Stock and the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet is greater than zero, the Corporation shall
also issue a number of shares of ZDNet Stock equal to the then current Number
of Shares

II-4
<PAGE>

Issuable with Respect to ZD's Retained Interest in ZDNet and deliver those
shares to the holders of ZD Stock or to one of the Group Subsidiaries, at the
option of the Corporation.

(iii) If the series of Common Stock being exchanged pursuant to Section
3(c)(i) above is ZDNet Stock and the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet is greater than zero (so that less than all of
the shares of common stock of the Group Subsidiaries are being delivered to the
holders of ZDNet Stock), the Corporation may retain the remaining shares of
common stock of the Group Subsidiaries or distribute those shares as a dividend
on ZD Stock.

(d) General Dividend, Exchange and Redemption Provisions. (i) If the
Corporation completes a Disposition of All or Substantially All of the Assets
of a Group (other than an Exempt Disposition), the Corporation shall, not more
than the 10 Trading Days after the consummation of such Disposition, issue a
press release specifying (w) the Net Proceeds of such Disposition, (x) the
number of shares of the series of Common Stock related to such Group then
outstanding, (y) the number of shares of such series of Common Stock issuable
upon conversion, exchange or exercise of any convertible or exchangeable
securities, options or warrants and the conversion, exchange or exercise prices
thereof and (z) if the Group is ZDNet, the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet. The Corporation shall, not more
than 30 Trading Days after such consummation, announce by press release which
of the actions specified in Section 3(a)(i) of this Article IV(B) it has
determined to take, and upon making that announcement, that determination will
be irrevocable. In addition, the Corporation shall, not more than 30 Trading
Days after such consummation and not less than 10 Trading Days before the
applicable payment date, redemption date or exchange date, send a notice by
first-class mail, postage prepaid, to holders of the relevant series of Common
Stock at their addresses as they appear on the transfer books of the
Corporation, specifying:

(1) if the Corporation has determined to pay a special dividend, (A) the
record date for such dividend, (B) the payment date of such dividend (which
cannot be more than 85 Trading Days after such consummation) and (C) the
aggregate amount and type of property to be paid in such dividend (and the
approximate per share amount thereof);

(2) if the Corporation has determined to undertake a redemption, (A) the
date of redemption (which cannot be more than 85 Trading Days after such
consummation), (B) the aggregate amount and type of property to be paid as
a redemption price (and the approximate per share amount thereof), (C) if
less than all shares of the relevant series of Common Stock are to be
redeemed, the number of shares to be redeemed and (D) the place or places
where certificates for shares of such series of Common Stock, properly
endorsed or assigned for transfer (unless the Corporation waives such
requirement), should be surrendered in return for delivery of the cash,
securities or other property to be paid by the Corporation in such
redemption; and

(3) if the Corporation has determined to undertake an exchange, (A) the
date of exchange (which cannot be more than 85 Trading Days after such
consummation), (B) the number of shares of the other series of Common Stock
to be issued in exchange for each outstanding share of such series of
Common Stock and (C) the place or places where certificates for shares of
such series of Common Stock, properly endorsed or assigned for transfer
(unless the Corporation waives such requirement), should be surrendered in
return for delivery of the other series of Common Stock to be issued by the
Corporation in such exchange.

(ii) If the Corporation has determined to complete any exchange described in
Section 3(b) or (c) of this Article IV(B), the Corporation shall, not less than
10 Trading Days and not more than 30 Trading Days before the exchange date,
send a notice by first-class mail, postage prepaid, to holders of the relevant
series of Common Stock at their addresses as they appear on the transfer books
of the Corporation, specifying (x) the exchange date and the other terms of the
exchange and (y) the place or places where certificates for shares of such
series of Common Stock, properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), should be surrendered for delivery of the
stock to be issued or delivered by the Corporation in such exchange.

II-5
<PAGE>

(iii) Neither the failure to mail any notice required by this Section 3(d) to
any particular holder nor any defect therein would affect the sufficiency
thereof with respect to any other holder or the validity of any dividend,
redemption or exchange contemplated hereby.

(iv) If the Corporation is redeeming less than all of the outstanding shares
of a series of Common Stock pursuant to Section 3(a)(i) of this Article IV(B),
the Corporation shall redeem such shares pro rata or by lot or by such other
method as the Board of Directors determines to be equitable.

(v) No holder of shares of a series of Common Stock being exchanged or
redeemed shall be entitled to receive any cash, securities or other property to
be distributed in such exchange or redemption until such holder surrenders
certificates for such shares, properly endorsed or assigned for transfer, at
such place as the Corporation shall specify (unless the Corporation waives such
requirement). As soon as practicable after the Corporation's receipt of
certificates for such shares, the Corporation shall deliver to the person for
whose account such shares were so surrendered, or to the nominee or nominees of
such person, the cash, securities or other property to which such person shall
be entitled, together with any fractional payment referred to below, in each
case without interest. If less than all of the shares of Common Stock
represented by any one certificate is exchanged or redeemed, the Corporation
shall also issue and deliver a new certificate for the shares of such Common
Stock not exchanged or redeemed.

(vi) The Corporation shall not be required to issue or deliver fractional
shares of any capital stock or any other fractional securities to any holder of
Common Stock upon any exchange, redemption, dividend or other distribution
described above. If more than one share of Common Stock shall be held at the
same time by the same holder, the Corporation may aggregate the number of
shares of any capital stock that would be issuable or any other securities that
would be distributable to such holder upon any such exchange, redemption,
dividend or other distribution. If there are fractional shares of any capital
stock or any other fractional securities remaining to be issued or distributed
to any holder, the Corporation shall, if such fractional shares or securities
are not issued or distributed to such holder, pay cash in respect of such
fractional shares or securities in an amount equal to the Fair Value thereof
(without interest).

(vii) From and after the date set for any exchange or redemption contemplated
by this Section 3, all rights of a holder of shares of Common Stock being
exchanged or redeemed shall cease except for the right, upon surrender of the
certificates theretofore representing such shares, to receive the cash,
securities or other property for which such shares were exchanged or redeemed,
together with any fractional payment as provided above, in each case without
interest (and, if such holder was a holder of record as of the close of
business on the record date for a dividend not yet paid, the right to receive
such dividend). A holder of shares of Common Stock being exchanged shall not be
entitled to receive any dividend or other distribution with respect to shares
of the other series of Common Stock until after certificates theretofore
representing the shares being exchanged are surrendered as contemplated above.
Upon such surrender, the Corporation shall pay to the holder the amount of any
dividends or other distributions (without interest) which theretofore became
payable with respect to a record date occurring after the exchange, but which
were not paid by reason of the foregoing, with respect to the number of whole
shares of the other series of Common Stock represented by the certificate or
certificates issued upon such surrender. From and after the date set for any
exchange, the Corporation shall, however, be entitled to treat the certificates
for shares of a series of Common Stock being exchanged that were not yet
surrendered for exchange as evidencing the ownership of the number of whole
shares of the other series of Common Stock for which the shares of such Common
Stock should have been exchanged, notwithstanding the failure to surrender such
certificates.

(viii) The Corporation shall pay any and all documentary, stamp or similar
issue or transfer taxes that might be payable in respect of the issue or
delivery of any shares of capital stock and/or other securities on any exchange
or redemption contemplated by this Section 3; provided, however, that the
Corporation shall not be required to pay any tax that might be payable in
respect of any transfer involved in the issue or delivery of any shares of
capital stock and/or other securities in a name other than that in which the
shares so exchanged or

II-6
<PAGE>

redeemed were registered, and no such issue or delivery will be made unless and
until the person requesting such issue pays to the Corporation the amount of
any such tax, or establishes to the satisfaction of the Corporation that such
tax has been paid.

(ix) The Corporation may, subject to applicable law, establish such other
rules, requirements and procedures to facilitate any dividend, redemption or
exchange contemplated by this Section 3 as the Board of Directors may determine
to be appropriate under the circumstances.

4. Voting Rights.

At every meeting of stockholders, the holders of ZD Stock and the holders of
ZDNet Stock shall vote together as a single class on all matters as to which
common stockholders generally are entitled to vote, unless a separate vote is
required by applicable law. On all such matters for which no separate vote is
required, (a) holders of ZD Stock shall be entitled to one vote per share of ZD
Stock held and (b) holders of ZDNet Stock shall be entitled to a number of
votes per share of ZDNet Stock held (calculated to the nearest five decimal
places) equal to the average Market Value of a share of ZDNet Stock divided by
the average Market Value of a share of ZD Stock during the 20 consecutive
Trading Day period ending on (and including) the 5th Trading Day before the
applicable record date.

5. Liquidation Rights.

In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, holders of ZD Stock and holders of ZDNet Stock
shall be entitled to receive in respect of shares of ZD Stock and shares of
ZDNet Stock their proportionate interests in the net assets of the Corporation,
if any, remaining for distribution to stockholders (after payment of or
provision for all liabilities, including contingent liabilities, of the
Corporation and payment of the liquidation preference payable to any holders of
Preferred Stock), pro rata in accordance with the average Market Value of a
share of ZDNet Stock during the 20 consecutive Trading Day period ending on
(and including) the 5th Trading Day before the date of the first public
announcement of (a) a voluntary liquidation, dissolution or winding-up by the
Corporation or (b) the institution of any proceeding for the involuntary
liquidation, dissolution or winding-up of the Corporation. Neither the merger
nor consolidation of the Corporation with any other entity, nor a sale,
transfer or lease of all or any part of the assets of the Corporation, would,
alone, be deemed a liquidation, dissolution or winding-up for purposes of this
Section 5.

6. Adjustments to Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet.

The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet, as in effect from time to time, shall, automatically without action by
the Board of Directors or any other person, be:

(a) adjusted in proportion to any changes in the number of outstanding
shares of ZDNet Stock caused by subdivisions (by stock split,
reclassification or otherwise) or combinations (by reverse stock split,
reclassification or otherwise) of shares of ZDNet Stock or by dividends or
other distributions of shares of ZDNet Stock on shares of ZDNet Stock (and,
in each such case, rounded, if necessary, to the nearest whole number);

(b) decreased by (i) if the Corporation issues any shares of ZDNet Stock
and the Board of Directors attributes that issuance (and the proceeds
thereof) to ZD, the number of shares of ZDNet Stock so issued, and (ii) if
the Board of Directors re-allocates to ZD any cash or other assets
theretofore allocated to ZDNet in connection with a redemption of shares of
ZDNet Stock (as required pursuant to clause (ii) of the proviso to the
definition of ZD below) or in return for a decrease in the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet, the number
(rounded, if necessary, to the nearest whole number) equal to (x) the
aggregate Fair Value of such cash or other assets divided by (y) the Market
Value of one share of ZDNet Stock as of the date of such re-allocation; and

II-7
<PAGE>

(c) increased by (i) if the Corporation repurchases any shares of ZDNet
Stock and the Board of Directors attributes that repurchase (and the
consideration therefor) to ZD, the number of shares of ZDNet Stock so
repurchased and (ii) if the Board of Directors re-allocates to ZDNet any
cash or other assets theretofore allocated to ZD in return for an increase
in the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet, the number (rounded, if necessary, to the nearest whole number)
equal to (x) the Fair Value of such cash or other assets divided by (y) the
Market Value of one share of ZDNet Stock as of the date of such re-
allocation.

Neither the Corporation nor the Board of Directors shall take any action that
would, as a result of any of the foregoing adjustments, reduce the Number of
Shares Issuable with Respect to ZD's Retained Interest in

ZDNet to below zero. Subject to the preceding sentence, the Board of Directors
may attribute the issuance of any shares of ZDNet Stock (and the proceeds
therefrom) or the repurchase of ZDNet Stock (and the consideration therefor) to
ZD or to ZDNet, as the Board of Directors determines in its sole discretion;
provided, however, that the Board of Directors must attribute to ZD the
issuance of any shares of ZDNet Stock that are issued (1) as a dividend or
other distribution on, or as consideration for the repurchase of, shares of ZD
Stock or (2) as consideration to acquire any assets or satisfy any liabilities
attributed to ZD.

7. Additional Definitions.

As used in this Article IV, the following terms shall have the following
meanings (with terms defined in singular having comparable meaning when used in
the plural and vice versa), unless the context otherwise requires:

"All or Substantially All of the Assets" of either Group means a portion of
such assets that represents at least 80% of the then-current Fair Value of the
assets of such Group.

"Available Dividend Amount" for ZD, on any day on which dividends are paid on
shares of ZD Stock, is the amount that would, immediately prior to the payment
of such dividends, be legally available for the payment of dividends on shares
of ZD's common stock under Delaware law if (a) ZD and ZDNet were each a
separate Delaware corporation, (b) ZD had outstanding (i) a number of shares of
common stock, par value $0.01 per share, equal to the number of shares of ZD
Stock that are then outstanding and (ii) a number of shares of preferred stock,
par value $0.01 per share, equal to the number of shares of Preferred Stock
that have been attributed to ZD and are then outstanding, (c) the assumptions
about ZDNet set forth in the next sentence were true and (d) ZD owned a number
of shares of ZDNet common stock equal to the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet. "Available Dividend Amount" for
ZDNet, on any day on which dividends are paid on shares of ZDNet Stock, is the
amount that would, immediately prior to the payment of such dividends, be
legally available for the payment of dividends on shares of ZDNet's common
stock under Delaware law if ZDNet were a separate Delaware corporation having
outstanding (a) a number of shares of common stock, par value $0.01 per share,
equal to the number of shares of ZDNet Stock that are then outstanding plus the
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet and
(b) a number of shares of preferred stock, par value $0.01 per share, equal to
the number of shares of Preferred Stock that have been attributed to ZDNet and
are then outstanding.

"Disposition" means a sale, transfer, assignment or other disposition
(whether by merger, consolidation, sale or otherwise) of All or Substantially
All of the Assets of a Group to one or more persons or entities, in one
transaction or a series of related transactions.

"Effective Date" means the date on which this Amended and Restated
Certificate of Incorporation becomes effective under Delaware law.

"Exempt Disposition" means any of the following:

(a) a Disposition in connection with the liquidation, dissolution or
winding-up of the Corporation and the distribution of assets to
stockholders,

II-8
<PAGE>

(b) a Disposition to any person or entity controlled by the Corporation
(as determined by the Board of Directors in its sole discretion),

(c) a Disposition by either Group for which the Corporation receives
consideration primarily consisting of equity securities (including, without
limitation, capital stock of any kind, interests in a general or limited
partnership, interests in a limited liability company or debt securities
convertible into or exchangeable for, or options or warrants to acquire,
any of the foregoing, in each case without regard to the voting power or
other management or governance rights associated therewith) of an entity
which is primarily engaged or proposes to engage primarily in one or more
businesses similar or complementary to businesses conducted by such Group
prior to the Disposition, as determined by the Board of Directors in its
sole discretion,

(d) a dividend, out of ZDNet's assets, to holders of ZDNet Stock (and a
re-allocation of a corresponding amount of ZDNet's assets to ZD as required
pursuant to clause (ii) of the proviso to the definition of ZD below),

(e) a dividend, out of ZD's assets, to holders of ZD Stock and

(f) any other Disposition, if (i) at the time of the Disposition there
are no shares of ZD Stock outstanding, (ii) at the time of the Disposition
there are no shares of ZDNet Stock outstanding or (iii) before the 30th
Trading Day following the Disposition the Corporation has mailed a notice
stating that it is exercising its right to exchange all of the outstanding
shares of ZD Stock or ZDNet Stock for newly issued shares of the other
series of Common Stock as contemplated under Section 3(b) of this Article
IV.

"Fair Value" means (a) in the case of cash, the amount thereof, (b) in the
case of capital stock that has been Publicly Traded for a period of at least 15
months, the Market Value thereof and (c) in the case of other assets or
securities, the fair market value thereof as the Board of Directors shall
determine in good faith (which determination shall be conclusive and binding on
all stockholders).

"Group" means ZD or ZDNet.

"Market Capitalization" of either series of Common Stock on any date means
the Market Value of a share of such series on such date times the number of
shares of such series outstanding on such date.

"Market Value" of a share of any class or series of capital stock on any
Trading Day means the average of the high and low reported sales prices regular
way of a share of such class or series on such Trading Day or, in case no such
reported sale takes place on such Trading Day, the average of the reported
closing bid and asked prices regular way of a share of such class or series on
such Trading Day, in either case as reported on the New York Stock Exchange
("NYSE") Composite Tape or, if the shares of such class or series are not
listed or admitted to trading on the NYSE on such Trading Day, on the principal
national securities exchange on which the shares of such class or series are
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange on such Trading Day, on The Nasdaq National Market
System of the Nasdaq Stock Market ("Nasdaq NMS") or, if the shares of such
class or series are not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq NMS on such Trading Day, the
average of the closing bid and asked prices of a share of such class or series
in the over-the-counter market on such Trading Day as furnished by any NYSE
member firm selected from time to time by the Corporation or, if such closing
bid and asked prices are not made available by any such NYSE member firm on
such Trading Day, the fair market value of a share of such class or series as
the Board of Directors shall determine in good faith (which determination shall
be conclusive and binding on all stockholders); provided, that, for purposes of
determining the average Market Value of a share of any class or series of
capital stock for any period, (a) the "Market Value" of a share of any class or
series of capital stock on any day prior to any "ex-dividend" date or any
similar date occurring during such period for any dividend or distribution
(other than any dividend or distribution contemplated by clause (b)(ii) of this
sentence) paid or to be paid with respect to such capital stock shall be
reduced by the Fair Value of the per share amount of such dividend or
distribution and (b) the "Market Value" of a share of any class or series of
capital stock on any day prior to (i) the effective date of

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<PAGE>

any subdivision (by stock split or otherwise) or combination (by reverse stock
split or otherwise) of outstanding shares of such class or series of capital
stock occurring during such period or (ii) any "ex-dividend" date or any
similar date occurring during such period for any dividend or distribution with
respect to such capital stock to be made in shares of such class or series of
capital stock shall be appropriately adjusted, as determined by the Board of
Directors, to reflect such subdivision, combination, dividend or distribution;
and provided further, if (a) the Corporation repurchases outstanding shares of
ZDNet Stock and the Board of Directors attributes that repurchase (and the
consideration therefor) to ZDNet and (b) the Board of Directors determines to
re-allocate to ZD cash or other assets theretofore allocated to ZDNet in order
to avoid a change in the Retained Interest Percentage, the "Market Value" of a
share ZDNet Stock used to compute the corresponding reduction in the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet will equal the
Fair Value of the consideration paid per share of ZDNet Stock so repurchased;
and provided further, if the Corporation redeems

a portion of the outstanding shares of ZDNet Stock (and the Board of Directors
re-allocates to ZD cash or other assets theretofore allocated to ZDNet in the
manner required by clause (ii) of the proviso to the definition of ZD below),
the "Market Value" of a share ZDNet Stock used to compute the corresponding
reduction in the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet will equal the Fair Value of the consideration paid per share
of ZDNet Stock so redeemed.

"Net Proceeds" of a Disposition of any of the assets of a Group means the
positive amount, if any, remaining from the gross proceeds of such Disposition
after any payment of, or reasonable provision (as determined in good faith by
the Board of Directors, which determination will be conclusive and binding on
all stockholders) for, (a) any taxes payable by the Corporation in respect of
such Disposition, (b) any taxes payable by the Corporation in respect of any
resulting dividend or redemption, (c) any transaction costs, including, without
limitation, any legal, investment banking and accounting fees and expenses and
(d) any liabilities (contingent or otherwise) of, attributed to or related to,
such Group, including, without limitation, any liabilities for deferred taxes
or any indemnity or guarantee obligations which are outstanding or incurred in
connection with the Disposition or otherwise, any liabilities for future
purchase price adjustments and any obligations with respect to outstanding
securities (other than ZDNet Stock) attributed to such Group.

"Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet"
shall initially be a number the Board of Directors designates prior to the time
the Corporation first issues shares of ZDNet Stock as the number of shares of
ZDNet Stock that could be issued by the Corporation for the account of ZD in
respect of its Retained Interest in ZDNet; provided, however, that such number
as in effect from time to time shall automatically be adjusted as required by
Section 6 of this Article IV(B).

"Publicly Traded" with respect to any security means (a) registered under
Section 12 of the Securities Exchange Act of 1934, as amended (or any successor
provision of law), and (b) listed for trading on the NYSE (or any other
national securities exchange registered under Section 7 of the Securities
Exchange Act of 1934, as amended (or any successor provision of law)) or listed
on the Nasdaq NMS (or any successor market system).

"Retained Interest Percentage" means the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet divided by the Total Number of
Notional ZDNet Shares Deemed Outstanding.

"Total Number of Notional ZDNet Shares Deemed Outstanding" means the number
of shares of ZDNet Stock outstanding plus the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet.

II-10
<PAGE>

"ZD" means (a) all of the businesses, assets and liabilities of the
Corporation and its subsidiaries, other than the businesses, assets and
liabilities that are part of ZDNet, (b) the rights and obligations of ZD under
any inter-Group debt deemed to be owed to or by ZD (as such rights and
obligations are defined in accordance with policies established from time to
time by the Board of Directors) and (c) a proportionate interest in ZDNet

(after giving effect to any options, Preferred Stock, other securities or debt
issued or incurred by the Corporation and attributed to ZDNet) equal to the
Retained Interest Percentage; provided, however, that:

(i) the Corporation may re-allocate assets from one Group to the other
Group in return for other assets or services rendered by that other Group
in the ordinary course of business or in accordance with policies
established by the Board of Directors from time to time, and

(ii) if the Corporation transfers cash, other assets or securities to
holders of shares of ZDNet Stock as a dividend or other distribution on
shares of ZDNet Stock (other than a dividend or distribution payable in
shares of ZDNet Stock), or as payment in a redemption required by Section
3(a) of this Article IV(B), then the Board of Directors shall re-allocate
from ZDNet to ZD cash or other assets having a Fair Value equal to the
aggregate Fair Value of the cash, other assets or securities so transferred
times a fraction, the numerator of which shall equal the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet on the record date
for such dividend or distribution, or on the date of such redemption, and
the denominator of which shall equal the number of shares of ZDNet Stock
outstanding on such date.

"ZDNet" means (a) the online business division of the Corporation, including
all of the businesses, assets and liabilities of the Corporation and its
subsidiaries that the Board of Directors has, as of the Effective Date,
allocated to ZDNet but excluding any ownership interest in the Corporation's
ZDU and ZDTV businesses, (b) any assets or liabilities acquired or incurred by
the Corporation or any of its subsidiaries after the Effective Date in the
ordinary course of business and attributable to ZDNet, (c) any businesses,
assets or liabilities acquired or incurred by the Corporation or any of its
subsidiaries after the Effective Date that the Board of Directors has
specifically allocated to ZDNet or that the Corporation otherwise allocates to
ZDNet in accordance with policies established from time to time by the Board of
Directors and (d) the rights and obligations of ZDNet under any inter-Group
debt deemed to be owed to or by ZDNet (as such rights and obligations are
defined in accordance with policies established from time to time by the Board
of Directors); provided, however, that:

8. Effectiveness of Sections 2 Through 7 of This Article IV(B).

The terms of Sections 2 through 7, inclusive, of this Article IV(B) shall
apply only when there are shares of both series of Common Stock outstanding.

II-11
<PAGE>

9. Preferred Stock.

Shares of Preferred Stock may be issued in one or more series from time to
time by the Board of Directors, and the Board of Directors 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
Corporation to the holders of the shares of such series upon voluntary or
involuntary liquidation, dissolution or winding up the Corporation, 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 Corporation 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 Corporation 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 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 Corporation 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
Corporation, 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.

10. Determinations by the Board of Directors.

Subject to applicable law, any determinations made by the Board of Directors
in good faith under this Amended and Restated Certificate of Incorporation or
in any certificate of designation filed pursuant hereto, including without
limitation any such determinations with respect to the businesses, assets and
liabilities of either Group, transactions between the Groups or the rights of
holders of any series of Common Stock or Preferred Stock made pursuant to or in
the furtherance hereof or thereof, shall be final and binding on all
stockholders of the Corporation. A record of all formal determinations of the
Board of Directors made as contemplated hereby shall be filed with the records
of the actions of the Board of Directors.

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<PAGE>

ARTICLE V

BY-LAWS

The Board of Directors of the Corporation is expressly authorized to adopt,
amend or repeal by-laws of the Corporation. The by-laws of the Corporation may
also be altered or repealed and new by-laws may be adopted (i) at any annual or
special meeting of stockholders, by the affirmative vote of the holders of not
less than a majority of the voting power of all outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors, considered for purposes hereof as a single class, provided, however,
that any proposed alteration or repeal of, or the adoption of any by-law
inconsistent with, Sections 1.2, 1.11 and 1.12 of Article I of the by-laws,
Sections 2.1 and 2.2 of Article II of the by-laws, or this sentence, by the
stockholders shall require the affirmative vote of the holders of not less than
80% of the voting power of all outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, considered
for purposes hereof as a single class, or (ii) by the affirmative vote of a
majority of the Board of Directors.

ARTICLE VI

BOARD OF DIRECTORS

The number of directors of the Corporation shall be fixed from time to time
pursuant to the by-laws of the Corporation. Commencing with the first annual
meeting of stockholders, the directors of the Corporation shall be divided into
three classes, as nearly equal in number as reasonably possible, as determined
by the Board of Directors, with the initial term of office of the first class
of such directors ("Class I") to expire at the first annual meeting of
stockholders, the initial term of office of the second class of such directors
("Class II") to expire at the second annual meeting of stockholders and the
initial term of office of the third class of such directors ("Class III") to
expire at the third annual meeting of stockholders thereafter, 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. Elections of directors need not be by written
ballot except and to the extent provided in the by-laws of the Corporation. In
the event of any increase or decrease in the authorized number of directors,
(a) each director then serving as such shall nonetheless 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 of Directors among the three classes of
directors so as to maintain such classes as nearly equal in number as
reasonably possible. No director may be removed except for cause, provided a
director who is also an officer of the Corporation shall resign or be removed
upon termination of his or her employment as such officer. This Article VI may
not be amended, modified or repealed except by the affirmative vote of the
holders of not less than 80% of the voting power of all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, considered for purposes hereof as a single class.

ARTICLE VII

STOCKHOLDER ACTION

Any action required or permitted to be taken by the stockholders of the
Corporation must be taken at a duly called annual or special meeting of such
holders and may not be taken by any consent in writing by such holders. Except
as otherwise provided for herein or required by law, special meetings of
stockholders of the Corporation for any purpose or purposes may be called only
by the Chairman or the Board of Directors pursuant to a resolution stating the
purpose or purposes thereof, and any power of stockholders to call a special
meeting is specifically denied.

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ARTICLE VIII

DIRECTOR LIABILITY

A director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that such exemption from liability or limitation thereof
is not permitted under the Delaware General Corporation Law as currently in
effect or as the same may hereafter be amended. No amendment, modification or
repeal of this Article VIII shall adversely affect any right or protection of a
director that exists at the time of such amendment, modification or repeal.

IN WITNESS WHEREOF, I have signed this certificate on this . day of . 1999.

------------------------------------------

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ANNEX III

PROPOSAL 2--AMENDED 1998 INCENTIVE COMPENSATION PLAN

1. Purpose.

The purpose of the Ziff-Davis 1998 Incentive Compensation Plan (the "Plan")
is to promote the growth and performance of Ziff-Davis Inc., a Delaware
corporation (the "Company") and its affiliates, by encouraging employees and
consultants of the Company and its affiliates to acquire an ownership position
in the Company through the holding of common stock of the Company, par value
$0.01 per share (regardless of series), (the "Common Stock"), enhancing the
ability of the Company and its affiliates to attract and retain employees and
consultants of outstanding ability, and providing such employees and
consultants with an interest in the Company parallel to that of the Company's
stockholders.

2. Plan Administration.

The Plan shall be administered by the Board of Directors of the Company (the
"Board"), or by a Compensation Committee (the "Committee") appointed by the
Board which shall, following the initial public offering of the Company's
Common Stock, solely to the extent required to comply with Rule 16b-3 as
promulgated under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act") and Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), be composed of "non-employee directors" within the
meaning of Rule 16b-3 as promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code. To the extent the
Plan is administered by the Board, the term "Committee" shall refer to the
Board. 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. Subject to the
provisions of the Plan, the Committee (a) shall select the participants in the
Plan ("Participants"), determine the type of awards ("Awards") to be made to
Participants, determine the number of shares or share units subject to Awards,
and (b) shall have the authority to interpret the Plan, to establish, amend,
and rescind any rules and regulations relating to the Plan, to determine the
terms and provisions of any Award agreements entered into hereunder, and to
make all other determinations necessary or advisable for the administration of
the Plan. The Committee may accelerate the exercisability of any Award granted
hereunder, and may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Award 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. It is the intention of the Company that the Plan and
the administration thereof comply in all respects with Section 16(b) of the
Exchange Act and the rules and regulations thereunder, and in all events the
Plan shall be construed in favor of its meeting the requirements of Rule 16b-3
promulgated under the Exchange Act.

3. Eligibility.

All employees and consultants of the Company and its affiliates who have
demonstrated significant management potential or who have the capacity for
contributing in a substantial measure to the successful performance of the
Company and its affiliates, as determined by the Committee, are eligible to be
Participants in the Plan and to receive Awards under Section 5.

4. Shares Subject to the Plan.

Subject to adjustment as provided in Section 9, under the Plan, up to
20,000,000 shares of Common Stock will be available for issuance out of
authorized and unissued shares or treasury shares, as the Company may from time
to time determine. In addition, up to 327,500 shares supplied from outstanding
shares of Common

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<PAGE>

Stock held by the majority stockholder of the Company will be available for
issuance in respect of Awards of stock options granted to certain Participants
in connection with the cancellation of such Participants' corresponding options
to purchase stock of SOFTBANK Corp. Shares subject to or underlying an Award
that expires unexercised, or is forfeited, terminated or canceled, or is paid
in cash in lieu of Common Stock and shares that are tendered to pay for the
exercise of a stock option shall thereafter again be available for grant under
the Plan.

5. Types of Awards.

Awards under the Plan may consist of one or more of the following: stock
awards, stock options (either incentive stock options within the meaning of
Code Section 422 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). Awards of
performance shares and restricted stock may provide the Participant with
dividends or dividend equivalents and voting rights prior to vesting (whether
based on a period of time or based on attainment of specified performance
conditions). For purposes of the Plan, with respect to any Award granted under
the Plan, references to the term "Common Stock" shall be deemed to refer to the
applicable series of Common Stock with respect to which such Award is granted.

(a) Stock Awards. Awards of Common Stock (other than pursuant to Sections
5(d) and 5(e)) may be granted in the form of actual shares of Common Stock.
At the discretion of the Committee, a stock certificate may be issued in
respect of Stock Awards or a book entry of the Stock Award may be made. If
a certificate is issued, such certificate shall be registered in the name
of and be delivered to the Participant. 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.

(b) Stock Options. The Committee shall establish the option price at the
time each stock option is granted, which price shall generally not be less
than 100% of the Fair Market Value (as defined below) of the Common Stock
on the date of grant, unless otherwise specifically determined by the
Committee. 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 option price of each share as to which a stock option is exercised
shall 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
as of the date of exercise (subject to such guidelines for the tender of
Common Stock as the Committee may establish), 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. In no
event may any Participant receive grants of stock options with respect to
more than 1,000,000 shares of Common Stock in any calendar year; provided
that solely for the 1998 calendar year, no individual employee may receive
grants of options with respect to more than 2,600,000 shares of Common
Stock. For purposes of the Plan, "Fair Market Value" means, 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;
provided, that prior to the initial public offering of the Common Stock,
Fair Market Value means such value as determined in good faith by the
Committee.

(c) Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted in tandem with a stock option, in addition to a stock option, or
may be freestanding and unrelated to a stock option. SARs granted in tandem
or in addition to a stock option may be granted either at the same time as
the stock option or at a later time. 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 shall entitle the
Participant 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 of a share of Common Stock on the date of grant.
The Committee shall determine in its sole discretion whether the SAR shall
be

III-2
<PAGE>

settled in cash, Common Stock or a combination of cash and Common Stock. In
no event may any Participant receive grants of stock appreciation rights
with respect to more than 500,000 shares of Common Stock in any calendar
year.

(d) 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. In the event that a stock
certificate is issued in respect of performance shares, such certificate
shall be registered in the name of the Participant but shall be held by the
Company until the time the performance shares are earned. The performance
conditions and the length of the performance period shall be determined by
the Committee but in no event may a performance period be less than one
year. The Committee shall 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 of cash and Common Stock.

Awards of performance shares to a Covered Employee (as defined below)
shall (unless the Committee determines otherwise) be subject to performance
conditions based on the achievement by the Company relating to one or more
of the following: consolidated operating profit, consolidated net income,
funds from operations, return on or growth in shareholders' equity, return
on net assets, attainment of specified levels of earnings per share or
improvements in the Company's revenue, share price performance, enterprise
value, enterprise value per share, equity value, EBITDA (earnings before
interest, taxes, depreciation and amortization), free cash flow or any
combination of the foregoing. The Committee shall establish the relevant
performance conditions within 90 days after the commencement of the
performance period (or such later date as may be required or permitted by
Section 162(m) of the Code). The Committee may, in its discretion, reduce
or eliminate the amount of payment with respect to an Award of performance
shares to a Covered Employee, notwithstanding the achievement of a
specified performance condition. The maximum number of performance shares
subject to any Award to a Covered Employee shall be 500,000 for the first
12 months during the performance period and each 12-month period thereafter
(or, to the extent the Award is paid in cash, the maximum dollar amount of
any such Award shall be the equivalent cash value of such number of shares
of Common Stock at the closing price on the last day of the performance
period on which shares of Common Stock are traded on the NYSE). An Award of
performance shares to a Participant who is a Covered Employee shall (unless
the Committee determines otherwise) provide that in the event of the
employee's termination of employment prior to the end of the performance
period for any reason, such Award will be payable only (x) if the
applicable performance conditions are achieved and (y) to the extent, if
any, as the Committee shall determine.

For purposes of the Plan, "Covered Employee" means, at the time of an
Award (or such other time as required or permitted by Section 162(m) of the
Code) (1) the Company's Chief Executive Officer (or an individual acting in
such capacity), (2) any employee of the Company or its subsidiaries who, in
the discretion of the Committee for purposes of determining those employees
who are "covered employees" under Section 162(m) of the Code, is likely to
be among the four other highest compensated officers of the Company for the
year in which an Award is made or payable, and (3) any other employee of
the Company or its subsidiaries designated by the Committee in its
discretion.

(e) 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 shall be
established by the Committee at time of grant, except that each restriction
period shall not be less than 12 months. In the event that a stock
certificate is issued in respect of restricted stock, such certificate
shall be registered in the name of the Participant but shall be held by the
Company until the end of the restricted period. 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 shall determine in
its sole discretion whether restricted stock granted in the form of share
units shall be paid in cash, Common Stock, or a combination of cash and
Common Stock.

III-3
<PAGE>

6. Award Agreements.

Each Award under the Plan shall be evidenced by an agreement setting forth
the terms and conditions, as determined by the Committee, which shall apply to
such Award (including the effect upon such Award of a Participant's termination
of employment), in addition to the terms and conditions specified in the Plan.
In the sole discretion of the Committee, a Participant may be permitted to
defer, on such terms and conditions as the Committee shall specify, the receipt
of cash or Common Stock otherwise deliverable under any Award.

7. Withholding.

The Company shall have the right to deduct from any payment to be made
pursuant to the Plan the amount of any taxes required by law to be withheld
therefrom, or to require a Participant to pay to the Company such amount
required to be withheld prior to the issuance or delivery of any shares of
Common Stock or the payment of cash under the Plan. The Committee may, in its
discretion, permit a Participant to elect to satisfy such withholding
obligation by having the Company retain the number of shares of Common Stock
whose Fair Market Value equals the amount required to be withheld. Any fraction
of a share of Common Stock required to satisfy such obligation shall be
disregarded and the amount due shall instead be paid in cash to the
Participant.

8. Nontransferability; Forfeiture.

No Award shall be assignable or transferable, and no right or interest of any
Participant shall be subject to any lien, obligation or liability of the
Participant, except by will or the laws of descent and distribution.
Notwithstanding the immediately preceding sentence, the Committee may, subject
to the terms and conditions it may specify, permit a Participant to transfer
any stock options (other than incentive stock options) granted to him pursuant
to the Plan to one or more of his immediate family members or to trusts
established in whole or in part for the benefit of the Participant and/or one
or more of such immediately family members. During the lifetime of the
Participant, stock options shall be exercisable only by the Participant or by
the immediate family member or trust to whom such stock options have been
transferred in accordance with this Section 8. For purposes of this Plan, (a)
"immediate family" shall mean the Participant's spouse and issue (including
adopted and stepchildren) and (b) "immediate family members and trusts
established in whole or in part for the benefit of the Participant and/or one
or more of such immediate family members" shall be further limited, if
necessary, so that neither the transfer of a stock option to such immediate
family member or trust, nor the ability of a Participant to make such a
transfer shall have adverse consequences to the Company or the Participant by
reason of Section 162(m) of the Code. In addition, notwithstanding anything in
the Plan to the contrary, the Committee may provide in any Award agreement that
such Award may be forfeited for Cause. Furthermore, no share of Common Stock
acquired pursuant to an exercise of a stock option hereunder shall be
transferable or assignable except as provided under Section 14; provided,
however, that upon the consummation of an initial public offering of the Common
Stock, such restriction on the transferability or assignability of the Common
Stock acquired upon exercise of a stock option hereunder shall lapse and be
without further effect.

9. Adjustment of and Changes in Stock.

In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spinoff, combination or exchange of shares 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 or reserved for issuance pursuant to the Plan and to
outstanding Awards.

10. Change of Control.

(a) In the event of a Change of Control, (1) all SARs which have not been
granted in tandem with stock options shall become exercisable in full, (2) the
restrictions applicable to all shares of restricted stock shall lapse and such
shares shall be deemed fully vested and all restricted stock granted in the
form of share units

III-4
<PAGE>

shall be paid in cash, (3) all performance shares shall be deemed to be earned
at target level, (4) all performance shares granted in the form of share units
shall be paid in cash and (5) all stock options shall be fully vested and
exercisable in full. For purposes of the Plan, "Change in Control" means the
occurrence of any one of the following events:

(A) individuals who, on June 1, 1998, are members of the Board (the
"Incumbent Directors") cease for any reason following June 1, 1998, to
constitute at least a majority of the Board; provided, that any new
director who is approved by a vote of at least a majority of the Incumbent
Directors shall be treated as an Incumbent Director;

(B) the stockholders of the Company approve a merger, consolidation,
statutory share exchange or similar form of corporate transaction in which
the Company is not the surviving corporation or entity; provided, however,
that such approval shall not be a Change in Control if immediately
following such transaction, SOFTBANK Corporation, directly or indirectly,
would be the beneficial owner of more than 25% of the securities entitled
to vote for the election of the board of directors of the surviving
corporation or entity; or

(C) the stockholders 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.

(b) The Committee, in its sole discretion, may further provide that in the
event of a Change of Control, each Participant shall receive in cancellation of
such Participant's outstanding and unexercised stock options and SARs, a cash
payment in an amount equal to the difference between the option price of such
stock options or, in the case of SARs, the Fair Market Value of a share of
Common Stock on the date of grant and (1) 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, or such lower price as the
Committee may determine with respect to any incentive stock option to preserve
its incentive stock option status, multiplied by the number of shares of Common
Stock covered by such stock options, or (2) 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;
provided, that such cash payment election shall not be available in the event
such cancellation and payment would prevent the Company from using the pooling-
of-interests method of accounting with respect to the transaction giving rise
to the Change of Control.

(c) In the event that the Committee shall determine, in its sole discretion,
that any payment, acceleration of vesting or lapse of restrictions with respect
to an Award would subject a Participant to an excise tax under Section 4999 of
the Code, such payment shall be reduced (but not below zero) or such
acceleration of vesting or lapse of restrictions shall not occur (a "Cutback")
to the extent necessary to avoid imposition of such excise tax, but only if by
reason of such Cutback the resulting Net After-Tax Benefit (as defined below)
exceeds the Net After-Tax Benefit (determined without giving effect to this
sentence); provided, however, that no Cutback shall occur in respect of any
Participant if (1) any contract or agreement between such Participant and the
Company or any of its affiliates provides otherwise, or (2) such Cutback would
prevent the use of the pooling-of-interests method of accounting in respect of
the transaction giving rise to the Change of Control. For purposes of the Plan,
"Net After-Tax Benefit" means the sum of (x) the total amount payable to the
Participant hereunder, plus (y) all other benefits and payments which are
payable to or for the benefit of such Participant that constitute "parachute
payments" within the meaning of Code Section 280G, less (z) the amount of
federal, state and local income taxes and other taxes (including any excise tax
imposed under Code Section 4999) payable with respect to the foregoing amounts,
calculated assuming the Participant was subject to the maximum income tax rates
for each year in which such foregoing amounts are paid. The Committee may, in
its discretion, include such further provisions and limitations in any
agreement documenting such Awards as it may deem equitable and in the best
interests of the Company.

11. No Right to Employment.

No person shall have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company or its subsidiaries.

III-5
<PAGE>

Further, the Company and its subsidiaries expressly reserve the right at any
time to dismiss a Participant free from any liability, or any claim under the
Plan, except as provided herein or in any Award agreement entered into
hereunder.

12. Governmental Compliance.

Each Award under the Plan shall be subject to the requirement that if at any
time the Committee shall determine that the listing, registration or
qualification of any shares issuable or deliverable thereunder upon any
securities exchange or under any Federal or state law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition thereof, or in connection therewith, no such grant or award may be
exercised or shares issued or delivered unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.

13. Amendment and Termination.

The Board may amend, suspend or terminate the Plan or any portion thereof at
any time, provided that (a) no amendment shall be made without stockholder
approval (including an amendment to increase the number of shares reserved for
issuance under the Plan) if such approval is necessary in order for the Plan to
comply with any applicable law, regulations or stock exchange rule, and (b)
except as provided in Section 10, no amendment shall be made that would
adversely affect the rights of a Participant under any Award previously
granted, without such Participant's written consent.

14. Sale to Company.

(a) Except as provided in Section 14(c), and subject to the provisions of the
Plan, an optionee that acquires shares of Common Stock pursuant to the exercise
of a stock option hereunder shall be permitted to put to the Company such
shares of Common Stock at Fair Market Value as of the date of sale, in
accordance with regulations and procedures established by the Committee for
such purpose; provided, however, that no such shares of Common Stock shall be
permitted to be put to the Company unless such shares of Common Stock have been
held by the optionee for at least six months as of the date of sale.

(b) Except as provided in Section 14(c), in the event of an optionee's
termination of employment for any reason whatsoever, the Company shall have the
right to call shares of Common Stock acquired by such optionee pursuant to the
exercise of a stock option hereunder at Fair Market Value as of the date of
sale. The Company may exercise its right to call with respect to all or any
portion of the shares of Common Stock subject to such call, and if the Company
calls only a portion of such shares, the remaining shares shall continue to be
subject to the Company's right to call.

(c) Notwithstanding the provisions of Sections 14(a) and 14(b), in the event
of an initial public offering of the Common Stock, the put rights of an
optionee under Section 14(a), and the call rights of the Company under Section
14(b), shall terminate immediately and be without further force or effect.

15. Effective Date; Approval of Stockholders.

The Plan shall be effective as of February 13, 1998 (the "Effective Date").
Subject to earlier termination pursuant to Section 13, the Plan shall have a
term of 10 years from its Effective Date. The Plan is conditioned upon the
approval of the stockholders of the Company prior to the initial public
offering of shares of Common Stock of the Company, and failure to receive such
approval shall render the Plan and all outstanding Awards issued thereunder
void and of no effect.

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<PAGE>

ANNEX IV

PROPOSAL 3--AMENDED 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 Ziff-Davis 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 (regardless of
series, 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") appointed by
the board of directors of the Company (the "Board") to administer the Plan and
which shall, solely to the extent required to comply with Rule 16b-3 as
promulgated under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act") and Section 162(m) of the Code, be composed of "non-employee
directors" within the meaning of Rule 16b-3 as promulgated under the Exchange
Act and "outside directors" within the meaning of Section 162(m) of the Code. 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 20 hours per week or
less;

(2) any Employee who customarily is employed for not more than five (5)
months in a calendar year; or

(3) 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).

(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.

IV-1
<PAGE>

(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 2,500,000, 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, on such terms and conditions as it
shall determine, including whether the shares underlying an option during any
Offering Period shall be shares of one or more series 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: (1) eighty-five percent (85%)
of the Fair Market Value of a share of Common Stock on the Offering Date or (2)
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. For purposes of the
Plan, in the context of an option to purchase Common Stock that is granted
during any Offering Period, references to Common Stock during any Offering
Period shall be deemed to refer to the applicable series of Common Stock with
respect to which such option is granted.

(c) No Participant shall be granted an option which permits such
Participant's 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.

IV-2
<PAGE>

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, incentive
commission 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. A Participant may not make any additional payments into
such account.

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 Participant's 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 Participant's 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, but not less than 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.

IV-3
<PAGE>

(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 Company's 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 Participant's
option, the cash, securities and/or property which a holder of one share of
Common Stock was

IV-4
<PAGE>

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 Participant's 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.

IV-5
<PAGE>

ANNEX V

PROPOSAL 4--AMENDED 1998 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN

1. Purpose.

The purpose of the Ziff-Davis 1998 Non-Employee Directors Stock Option Plan
(the "Plan") is to promote the interests of Ziff-Davis Inc., a Delaware
corporation (the "Company") and its affiliates and stockholders, by allowing
the Company to attract and retain highly qualified directors who are not
employees of the Company, SOFTBANK Corp., SOFTBANK Holdings Inc. or SOFTBANK
America Inc. ("Non-Employee Directors") by permitting such Non-Employee
Directors to obtain or increase their ownership position in the Company through
the holding of common stock of the Company, par value $0.01 per share
(regardless of series, the "Common Stock"), and providing such Non-Employee
Directors with an interest in the Company parallel to that of the Company's
stockholders.

2. Plan Administration.

The Plan shall be administered by the Board of Directors of the Company (the
"Board") or by a Compensation Committee (the "Committee") appointed by the
Board. To the extent the Plan is administered by the Board, the term
"Committee" shall refer to the Board. 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. Subject to the provisions of the Plan, the Committee
shall have the authority to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the Plan, to determine the terms
and provisions of any option agreements entered into hereunder, and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee may accelerate the exercisability of any option granted
hereunder, and may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem desirable to 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, Non-Employee Directors 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. It is the intention of the Company that the Plan and
the administration thereof comply in all respects with Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations thereunder, and in all events the Plan shall be construed in
favor of its meeting the requirements of Rule 16b-3 promulgated under the
Exchange Act.

3. Eligibility.

Each Non-Employee Director is eligible to receive awards of stock options
("Awards") under Section 5.

4. Shares Subject to the Plan.

Subject to adjustment as provided in Section 8, the number of shares of
Common Stock available for the grant of Awards under the Plan shall not exceed
300,000 shares. The shares issued under the Plan may be authorized and unissued
shares or treasury shares, as the Company may from time to time determine.
Shares subject to or underlying an Award that expires unexercised, or is
forfeited, terminated or canceled, or is paid in cash in lieu of Common Stock
and shares that are tendered to pay for the exercise of a stock option shall
thereafter again be available for grant under the Plan.

V-1
<PAGE>

5. Awards.

(a) Non-Discretionary Grants. Each Non-Employee Director shall receive upon
election as a member of the Board an initial grant of stock options ("Initial
Grant") to purchase 15,000 shares of Common Stock which, in the event of a
reclassification of the Common Stock into (x) a series of Common Stock that is
intended to reflect the performance of the ZDNet division of the Company
("ZDNet Common Stock"), and (y) a series of Common Stock that is intended to
reflect the performance of the business of the Company other than the ZDNet
division, plus a retained interest in the ZDNet division ("ZD Common Stock")
(the "Reclassification"), shall be composed of 15,000 shares of ZD Common
Stock; provided, that following an initial public offering of the ZDNet Common
Stock, the Initial Grant shall be composed of shares of ZD Common Stock and
shares of ZDNet Common Stock in such proportion as determined by the Committee;
provided, that each Non-Employee Director who is on the Board on the date of
the initial public offering of Common Stock (prior to the Reclassification)
shall receive such Initial Grant on the date of such initial public offering;
provided, further, that each Non-Employee Director who is on the Board on the
date of the initial public offering of ZDNet Common Stock shall receive a grant
of stock options to purchase 25,000 shares of ZDNet Common Stock on the date of
such offering at the initial public offering price, which will vest and become
exercisable with respect to 25% of the shares on December 31 of the year in
which the consummation of the offering occurs, and an additional 6.25% of the
shares at the end of each three-month period thereafter. On the date of each
annual shareholders meeting thereafter, each Non-Employee Director shall
automatically receive an annual grant of stock options to purchase 7,500
additional shares of Common Stock which, following the Reclassification, shall
be composed of 7,500 shares of ZD Common Stock; provided, that following an
initial public offering of the ZDNet Common Stock, such annual grant shall be
composed of shares of ZD Common Stock and shares of ZDNet Common Stock in such
proportion as determined by the Committee; provided, that a Non-Employee
Director shall not receive such annual grant of options to purchase 7,500
shares of common stock in any year in which such Non-Employee Director also
receives the Initial Grant. Except as otherwise provided above in this Section
5(a), and unless otherwise determined by the Committee in its discretion, the
terms of each stock option granted under this Section 5(a) shall provide that
(1) the option price shall be equal to 100% of the Fair Market Value of the
Common Stock on the date of grant, (2) such option shall not be exercisable for
a period more than 10 years following the date of grant, and (3) such option
shall vest and become exercisable with respect to 20% of the shares on the
first anniversary of the date of grant, and an additional 5% of the shares at
the end of each three-month period thereafter. For purposes of the Plan, "Fair
Market Value" means, 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; provided, that prior to the initial public offering of
the Common Stock, Fair Market Value means such value as determined in good
faith by the Committee. Unless otherwise determined by the Committee in its
discretion, if an optionee ceases to be a Non-Employee Director, options
granted under this Section 5(a) 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 Non-Employee Director
resulted from any reason other than death, disability or cause, 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. For purposes of the Plan, with
respect to any stock option granted under the Plan, references to the term
"Common Stock" shall be deemed to refer to the applicable series of Common
Stock with respect to which such option is granted.

(b) Method of Exercise. The option price of each share as to which a stock
option is exercised shall be paid in full at the time of such exercise in cash,
by tender of shares of Common Stock owned by the Non-Employee Director valued
at Fair Market Value as of the date of exercise (subject to such guidelines for
the tender of Common Stock as the Committee may establish), 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.

V-2
<PAGE>

(c) Discretionary Grants. In addition, each Non-Employee Director shall be
eligible to receive additional grants of stock options to purchase Common Stock
from time to time on such terms and conditions as the Committee shall
determine.

6. Award Agreements.

Each Award under the Plan shall be evidenced by an agreement setting forth
the terms and conditions, as determined by the Committee, which shall apply to
such Award, in addition to the terms and conditions specified in the Plan. In
the sole discretion of the Committee, a Non-Employee Director may be permitted
to defer, on such terms and conditions as the Committee shall specify, the
receipt of Common Stock otherwise deliverable under any Award.

7. Nontransferability; Forfeiture.

No Award shall be assignable or transferable, and no right or interest of any
Non-Employee Director shall be subject to any lien, obligation or liability of
the Non-Employee Director, except by will or the laws of descent and
distribution. Notwithstanding the immediately preceding sentence, the Committee
may, subject to the terms and conditions it may specify, permit a Non-Employee
Director to transfer any stock options granted to him pursuant to the Plan to
one or more of his immediate family members or to trusts established in whole
or in part for the benefit of the Non-Employee Director and/or one or more of
such immediately family members. During the lifetime of the Non-Employee
Director, stock options shall be exercisable only by the Non-Employee Director
or by the immediate family member or trust to whom such stock options have been
transferred in accordance with this Section 7. For purposes of this Plan,
"immediate family" shall mean the Non-Employee Director's spouse and issue
(including adopted and step children). In addition, notwithstanding anything in
the Plan to the contrary, the Committee may provide in any Award agreement that
such Award may be forfeited for Cause (as determined by the Committee).

8. Adjustment of and Changes in Stock.

9. Change of Control.

(a) In the event of a Change of Control, all stock options shall be fully
vested and exercisable in full. For purposes of the Plan, "Change in Control"
means the occurrence of any one of the following events:

(1) individuals who, on June 1, 1998, are members of the Board (the
"Incumbent Directors") cease for any reason following June 1, 1998 to
constitute at least a majority of the Board; provided, that any new
director who is approved by a vote of at least a majority of the Incumbent
Directors shall be treated as an Incumbent Director;

(2) the stockholders of the Company approve a merger, consolidation,
statutory share exchange or similar form of corporate transaction in which
the Company is not the surviving corporation or entity; provided, however,
that such approval shall not be a Change in Control if immediately
following such transaction, SOFTBANK Corporation, directly or indirectly,
would be the beneficial owner of more than 25% of the securities entitled
to vote for the election of the board of directors of the surviving
corporation or entity; or

(3) the stockholders 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.

V-3
<PAGE>

(b) The Committee, in its sole discretion, may further provide that in the
event of a Change of Control, each Non-Employee Director shall 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 (A) 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, or such lower price as the
Committee may determine with respect to any incentive stock option to preserve
its incentive stock option status, multiplied by the number of shares of Common
Stock covered by such stock options, or (B) 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;
provided, that such cash payment election shall not be available in the event
such cancellation and payment would prevent the Company from using the pooling-
of-interests method of accounting with respect to the transaction giving rise
to the Change of Control.

10. Governmental Compliance.

11. Amendment and Termination.

The Board may amend, suspend or terminate the Plan or any portion thereof at
any time, provided that (a) no amendment shall be made without stockholder
approval (including an amendment to increase the number of shares reserved for
issuance under the Plan) if such approval is necessary in order for the Plan to
comply with any applicable law, regulations or stock exchange rule, and (b)
except as provided in Section 9, no amendment shall be made that would
adversely affect the rights of a Non-Employee Director under any Award
previously granted, without such Non-Employee Director's written consent.

12. Effective Date; Approval of Stockholders.

The Plan shall be effective as of February 13, 1998. Subject to earlier
termination pursuant to Section 11, the Plan shall have a term of ten years
from its Effective Date. The Plan is conditioned upon the approval of the
stockholders of the Company prior to the initial public offering of shares of
Common Stock of the Company, and failure to receive such approval shall render
the Plan and all outstanding Awards issued thereunder void and of no effect.

V-4
<PAGE>

ANNEX VI

ZIFF-DAVIS INC.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following table presents Selected Historical Consolidated Financial and
Other Data for Ziff-Davis Inc. as of and for the years ended December 31, 1996,
1997 and 1998. This data was derived from the Consolidated Financial Statements
of Ziff-Davis Inc. An affiliate of Ziff-Davis Inc. acquired a print publishing
business ("ZDI") on February 29, 1996; the data does not include results from
the acquired business for periods before the date of acquisition. However,
because ZDI represents Ziff-Davis Inc.'s principal operations, the following
table also presents Selected Historical Combined Financial and Other Data for
ZDI as of and for the years ended December 31, 1994 and 1995 and as of and for
the two month period ended February 28, 1996. ZDI data as of for the year ended
December 31, 1994 was derived from Ziff-Davis Inc.'s unaudited financial
statements. On May 4, 1998, Ziff-Davis Inc. completed a reorganization
described in Note 2 to the Consolidated Financial Statements of Ziff-Davis
Inc.; results for periods before the reorganization are not directly comparable
to results for periods after the reorganization. This table should be read in
conjunction with the Selected Historical Financial and Other Data, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Financial Statements for Ziff-Davis Inc., ZD and ZDNet, included in this Annex
and Annexes VII and VIII to this Proxy Statement.

<TABLE>
<CAPTION>
ZDI(1) Ziff-Davis Inc.
----------------------------------- ---------------------------------------------
Year ended Two-month
December 31, period ended Year ended December 31,
--------------------- February 28, ---------------------------------------------
1994 1995 1996 1995(2) 1996(2) 1997 1998
---------- ---------- ------------ ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $ 711,379 $ 768,995 $ 125,465 $ 202,729 $ 955,139 $1,153,761 $1,108,892
Depreciation and
amortization........... 34,208 91,546 15,137 24,305 139,736 154,940 152,544
Income from operations.. 80,723 55,750 7,270 62,675 87,181 109,232 31,080
Interest expense, net... 17,887 92,609 14,030 44,005 120,646 190,445 143,547
Income (loss) before
income taxes........... 77,650 (40,250) (6,995) 22,869 (27,124) (72,491) (104,236)
Net income
(loss)(3)(4)........... 77,650 (26,002) (4,547) 10,945 (52,081) (71,179) (77,809)
Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $1,066,606 $ 10,083 $ 13,669 $ 27,908 $ 29,915 $ 30,301 $ 32,566
Total assets............ 2,751,525 1,623,906 1,619,905 1,090,981 3,584,173 3,546,646 3,433,803
Total long-term debt.... 1,034,000 964,153 964,153 575,450 2,522,252 2,408,240 1,539,322
Stockholders' equity ... 391,275 365,150 360,717 397,881 447,756 126,130 1,352,598
Other Data:
Capital expenditures $ 15,119 $ 14,163 $ 552 $ 3,367 $ 22,365 $ 30,196 $ 36,599
Investments and
acquisitions, net of
cash acquired.......... -- -- -- 814,520 2,124,823 14,000 27,772
</TABLE>
- --------

(1) A third party acquired ZDI as of January 1, 1995. An affiliate of Ziff-
Davis Inc. acquired ZDI on February 29, 1996. Because ZDI represents Ziff-
Davis Inc.'s principal operations, ZDI data has been presented for periods
before these dates.

(2) An affiliate of Ziff-Davis Inc. acquired ZDI on February 29, 1996; Ziff-
Davis Inc. data does not include results from the acquired business for
periods before the date of acquisition.

(3) During 1994, ZDI conducted its operations through various partnerships.
Accordingly, there was no income tax provision for 1994.

(4) No historical earnings per share or share data are presented as Ziff-Davis
Inc. does not consider such data meaningful. See Note 1 to the Consolidated
Financial Statements of Ziff-Davis Inc. included in this Annex for certain
pro forma earnings per share information concerning Ziff-Davis Inc. After
issuance of ZDNet Stock, Ziff-Davis Inc. will report earnings per share
data for ZD and ZDNet but not for Ziff-Davis Inc.

VI-1
<PAGE>

ZIFF-DAVIS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Revenue

Ziff-Davis Inc. had net revenue of $1.109 billion for 1998. A substantial
portion of Ziff-Davis Inc.'s revenue is derived from the sale of advertising,
which in 1998 accounted for 51.6% of total revenue. No single advertiser has
comprised more than 3.0% of Ziff-Davis Inc.'s advertising revenue during any of
the last three years. However, Ziff-Davis Inc.'s top 20 advertisers accounted
for 37.1% of total advertising revenue for 1998.

In the publishing segment, Ziff-Davis Inc.'s principal sources of revenue are
advertising (64.4% of 1998 total publishing revenue), circulation (18.7%) and
other (16.9%) for the year ended December 31, 1998. Circulation comprises both
paid subscriptions (10.9%) and newsstand sales (7.8%) while other includes
educational and training materials (7.4%) and market research studies (7.1%)
with the balance primarily consisting of royalties, reprints and other
miscellaneous sales. In the events segment, revenue is derived from two
principal sources: sale of exhibit space (66.8% of 1998 total segment revenue)
and attendee conference and seminar fees (14.1%). Unlike many trade show
producers, Ziff-Davis Inc. derives a significant portion of its trade show
revenue from other sources (19.1%), including advertising in show-related
publications, billboards, banners, fees from managing customer-sponsored events
and other show-related activities. Ziff-Davis Inc. believes these other sources
will continue to be an important growth area, particularly for its content-
focused events. In the Internet segment, Ziff-Davis Inc.'s principal source of
revenue is from advertising (86.0% of total Internet revenue for 1998). The
Internet segment also derives revenue from subscription-based fees and services
(14.0%) of total Internet revenue in 1998).

Cost of operations

In the publishing business, the principal components of Ziff-Davis Inc.'s
production costs are raw materials, printing and distribution, which
represented 34.5%, 38.0% and 27.2%, respectively, of total 1998 publishing
production expenses. Ziff-Davis Inc.'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 also "Risk
Factors--Other Ziff-Davis Inc. Risks--Ziff-Davis Inc. May Be Adversely Affected
By Fluctuations In Paper And Postage Costs" and "--Inflation and Fluctuations
in Paper Prices and Postage Costs". The principal components of production
costs within the events business are the costs of renting and preparing the
facilities to hold the events (46.8%), direct mail and the related costs for
promotion of the events (37.0%) and program development and presentation costs
(13.4%). Production costs in the Internet segment consist primarily of third
party web hosting costs.

The other principal operating costs for Ziff-Davis Inc. are selling, general
and administrative expenses, including editorial costs. Included in these costs
are salaries, sales commissions and benefits (55.4%) along with marketing and
promotion expenses related to advertising and circulation (19.7%).

Factors affecting future periods

Ziff-Davis Inc.'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 Ziff-Davis Inc.'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 conferences and providers of other
technology information services). Accordingly, Ziff-Davis Inc. may experience
fluctuations in revenue from period to period. Many of Ziff-Davis Inc.'s large
customers concentrate their advertising expenditures around major new product
launches. Marketing expenditures by technology companies can also be affected
by factors affecting the computer

VI-2
<PAGE>

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 Ziff-Davis Inc.'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, Ziff-Davis Inc.'s
revenue from year to year may be affected by the number and timing of new
product launches. If Ziff-Davis Inc. concludes that a new publication, trade
show or service will not achieve certain milestones with regard to revenue,
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--Other
Ziff-Davis Inc. Risks--To Remain Competitive Ziff-Davis Inc. Must Constantly
Expand And Develop New Products And Services. This Is Inherently Risky And
Expensive".

Presentation of Financial Information

Ziff-Davis Inc. is comprised of certain operations which were acquired at
various times and completed a reorganization in May 1998. See Notes 1 and 2 to
the Consolidated Financial Statements in this Annex.

VI-3
<PAGE>

Results of Operations

The table below presents the results of Ziff-Davis Inc. as if the assets and
operations acquired by affiliates of Ziff-Davis Inc. on February 29, 1996 (as
described in Note 1 to the Consolidated Financial Statement in this Annex) had
been acquired on January 1, 1995. Purchase accounting adjustments relating to
that acquisition have been reflected through pro forma amortization, interest
and income tax adjustments, as described in note (1) to the table. Although the
1996 presentation is not in accordance with generally accepted accounting
principles, management believes it presents the most meaningful basis of
comparison. The financial information presented below may not necessarily
reflect the results of operations which would have occurred had the February
29, 1996 acquisition been completed on January 1, 1995.

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
Pro
Forma(1) Actual
---------- ----------------------
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenue, net:
Publishing...................... $ 796,602 $ 834,015 $ 782,882
Events.......................... 264,884 287,528 269,867
Internet........................ 19,118 32,218 56,143
---------- ---------- ----------
1,080,604 1,153,761 1,108,892
---------- ---------- ----------
Cost of production................ 302,644 325,245 305,346
Selling, general and
administrative expenses.......... 528,636 564,344 567,683
Depreciation and amortization..... 161,259 154,940 152,544
Restructuring charge ............. -- -- 52,239
---------- ---------- ----------
Income from operations............ 88,065 109,232 31,080
Interest expense, net............. (135,500) (190,445) (143,547)
Other non-operating income, net... 6,106 8,722 8,231
---------- ---------- ----------
Loss before income taxes.......... (41,329) (72,491) (104,236)
Provision (benefit) for income
taxes............................ 25,682 (1,312) (26,427)
---------- ---------- ----------
Net loss.......................... $ (67,011) $ (71,179) $ (77,809)
========== ========== ==========
Other Data:
EBITDA(2)......................... $ 255,430 $ 272,894 $ 244,094
Cash and cash equivalents, end of
period........................... 29,915 30,301 32,566
Net cash provided (used) by
operating activities............. 65,681 (3,364) 95,776
Net cash used by investing
activities....................... (66,856) (44,196) (64,371)
Net cash provided (used) by
financing activities............. 6,768 47,946 (29,140)
</TABLE>
- --------

(1) The February 29, 1996 acquisition gave rise to different bases of
accounting for the period after the acquisition as compared to 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 above numbers assume that the acquisition took place on
January 1, 1995; therefore, depreciation and amortization, interest expense
and net loss have been increased by approximately $6,386,000, $824,000 and
$10,383,000, respectively for 1996.

(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA for the year ended December
31, 1998 does not include a one-time restructuring charge of $52,239,000.
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 Ziff-
Davis Inc.'s operating performance or to cash flows as a measure of
liquidity. Although Ziff-Davis Inc. 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, the EBITDA
presented for Ziff-Davis Inc. may not be comparable to similarly titled
measures reported by other companies.

VI-4
<PAGE>

Year ended December 31, 1998 compared with Year ended December 31, 1997

Revenue, net

Revenue decreased by $44.9 million or 3.9% from $1,153.8 million in 1997 to
$1,108.9 million in 1998.

Publishing--Revenue from publishing decreased by $51.1 million or 6.1% from
$834.0 million in 1997 to $782.9 million in 1998. This decline was primarily
due to the transfer of certain publications to a joint venture and the closure
of three publications due to the restructuring (as discussed below). Excluding
such transfers and the restructuring action, revenue in the publishing segment
decreased by $5.6 million. The decrease was due to lower advertising in
business publications partly offset by growth in advertising in consumer
publications. Advertising revenue was lower in business publications
principally due to factors affecting the computer technology industry during
the year. Margin pressure on computer equipment manufacturers, industry and
product delays, lower demand in Asia and a focus on the Year 2000 transition
are contributing to a reduced demand for advertising in Ziff-Davis Inc.'s
magazines. Revenue from international operations, which generated 10.2% of the
segment's revenue, increased by $2.1 million primarily due to the launch of IT
Week in the UK, partially offset by lower advertising in business publications.

Net revenue from MacUser and MacWeek magazines contributed to Mac Publishing
LLC were $32.5 million for 1997 but are no longer consolidated into Ziff-Davis
Inc.'s results for 1998. On May 1, 1998, Ziff-Davis Inc. acquired its joint
venture partner's 50% interest in FamilyPC magazine. Ziff-Davis Inc. now owns
100% of the magazine and its results are included in the consolidated results
from the acquisition date. Revenue from FamilyPC included in the 1998 results
was $11.1 million. Revenue related to the three publications closed as part of
the restructuring was $12.5 million lower in the fourth quarter of 1998 as
compared to the fourth quarter of 1997.

Events--Revenue from events decreased by $17.6 million or 6.1% from $287.5
million in 1997 to $269.9 million in 1998. The decrease was primarily due to a
decline in revenue due to the discontinuation of certain "one-time" shows that
were held in 1997, lower ancillary revenue at COMDEX/Fall and lower square
footage sold at COMDEX/Spring. This decrease was partially offset by increased
revenue from increased square footage sold at N+I Las Vegas and Java One due to
an increased number of attendees.

Internet-- Net revenue increased 74.2% to $56.1 million for the year ended
December 31, 1998 from $32.2 million for the year ended December 31, 1997.
Revenue from advertising was 86% of net revenue for the year ended December 31,
1998 compared to 73% for the same period in 1997. Revenue from advertising
increased 104.2% to $48.2 million for the year ended December 31, 1998 from
$23.6 million for the prior. The increase in advertising revenue was attributed
to an increase in volume as both the number of advertisers and the average
monthly revenue per advertiser increased. Subscription-based fees and services
decreased by 6.9% to $8.0 million for the year ended December 31, 1998 from
$8.6 million for the year ended December 31, 1997.

Cost of Production

Production costs decreased by 6.1% or $19.9 million from $325.2 million in
1997 to $305.3 million in 1998.

Publishing production costs decreased by $6.0 million or 2.7% from $221.4
million to $215.3 million in 1998. The decrease was related to a decline in the
number of advertising pages produced.

The cost of producing events decreased by $17.4 million or 17.4% from $99.5
million in 1997 to $82.1 million in 1998. The decrease is a result of lower
operational costs and re-negotiated contracts as well as the discontinuation of
certain "one-time" shows that were held in 1997.

Internet production costs increased by $3.6 million or 83.7% from $4.3
million in 1997 to $7.9 million in 1998. The increase in production costs was
due to higher user traffic levels and increased editorial costs associated with
the launch of new content areas.

VI-5
<PAGE>

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $3.3 million or
0.6% from $564.3 million in 1997 to $567.7 million in 1998. The increase was
due to expenditures to launch new products and increased advertising expenses.
The increase was partially offset by headcount reductions and efficiencies
attained through the integration of operations resulting from the
reorganization completed in May 1998, as well as cost savings resulting from
the closure of three magazines in the fourth quarter of 1998 (see "--
Restructuring").

Depreciation and amortization

Total depreciation and amortization decreased $2.4 million from $154.9
million to $152.5 million. The decrease was a result of certain assets being
fully depreciated in 1997 and early 1998.

Restructuring

Margin pressure on computer equipment manufacturers, industry and product
delays, lower demand in Asia and a focus on the Year 2000 transition are
contributing to a reduced demand for advertising in Ziff-Davis Inc.'s magazines
(principally PC Magazine, PC/Computing, Computer Shopper and PC Week). Ziff-
Davis Inc. believes these factors are continuing. In part as a result of these
factors, EBITDA for the fourth quarter of 1998 was significantly lower than
EBITDA for the fourth quarter of 1997.

As a result of this reduced demand, in October 1998, Ziff-Davis Inc.
announced a restructuring program with the intent of significantly reducing its
cost base. Ziff-Davis Inc. incurred a pre-tax charge of $52.2 million for this
restructuring program. The charge was reported as a component of income from
operations for the fourth quarter of 1998. The charge included asset impairment
costs ($37.9 million), employee termination costs ($8.6 million) and costs to
exit activities ($5.7 million) principally resulting from the closing of three
publications (Windows Pro, Internet Business and Equip) and the reduction of
Ziff-Davis Inc.'s work force by 310 employees. The charge also included costs
resulting from the discontinuation of certain educational journals and trade
shows. The following sets forth additional detail concerning the principal
components of the charge:

. Asset impairment costs totalled $37.9 million. These costs, which are
non-cash, included the write-off of intangible assets associated with
the discontinued publications ($34.3 million) and trade shows ($2.9
million) as well as deferred expenses associated with the discontinued
educational journals ($0.7 million).

. Employee termination costs related to severed personnel at the closed
publications as well as a rationalization and resulting workforce
reduction of the remainder of Ziff-Davis Inc.'s operations. Employee
termination costs included payments for severance and earned vacation as
well as the costs of outplacement services and the provision of
continued benefits to personnel. As of December 31, 1998, $5.2 million
of the $8.6 million related to these employee terminations had been
paid.

. Costs to exit activities reflected the costs associated with the final
closure of the discontinued publications ($1.8 million) and the costs to
reduce office space under lease as a result of the reduced level of
employees ($3.8 million).

Interest expense, net

Interest expense decreased by $46.9 million or 24.6% from $190.4 in 1997 to
$143.6 million in 1998. The reduction was due primarily to lower levels of debt
outstanding throughout the year, as well as the capitalization of $908.7
million of intercompany debt as part of the reorganization.

Other non-operating income, net

Other non-operating income, net primarily reflects Ziff-Davis Inc.'s equity
share in earnings and losses from joint ventures and fees earned from
management of events not produced by Ziff-Davis Inc. Income decreased $0.5
million or 5.6% from $8.7 million in 1997 to $8.2 million in 1998 reflecting
reduced fees from managed events. The decline was partially offset by Ziff-
Davis Inc.'s equity share in earnings of MAC Publishing, LLC that was formed in
August 1997.

VI-6
<PAGE>

Income taxes

The 1998 income tax benefit of $26.4 million increased from $1.3 million
1997. The increase was due primarily to the losses with respect to the MAC
Assets, which were not deductible until Ziff-Davis Inc. purchased the MAC
Assets from an affiliate on May 4, 1998. The income tax benefit was also
increased by a higher net loss for the year ended December 31, 1998 compared to
the net loss for the year ended December 31, 1997.

Net loss

As a result of the changes described above, the net loss for the period
increased $6.6 million or 9.3% from $71.2 million in 1997 to $77.8 million in
1998.

EBITDA

EBITDA for the year ended December 31, 1998 was $244.1 million compared to
$272.9 million for the year ended December 31, 1997. EBITDA for the year ended
December 31, 1998 does not include the $52.2 million restructuring charge.
Results were unfavorable as compared to last year due to a lower level of
earnings from advertising in the higher margin business publications partly
offset by improved results at the events segment and reduced losses at the
Internet Segment. The improvement at the events segment was attributed to the
absence of losses from the discontinuance of certain "one-time" shows held in
1997 as well as continued costs savings. Reduced losses from the Internet
segment were the result of revenue growth exceeding increases in expenses. The
ratio of EBITDA to revenue was 22.0% for 1998 compared to 23.7% in 1997.

Year ended December 31, 1997 compared with Pro Forma Year ended December 31,
1996

Revenue, net

Net revenue increased by $73.2 million or 6.8% from $1,080.6 million in 1996
to $1,153.8 million in 1997.

Publishing--Net revenue from publishing grew by $37.4 million or 4.7% from
$796.6 million to $834.0 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. 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.

Events--Net revenue from events 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.

Internet--Net revenue increased 68.6% to $32.2 million for the year ended
December 31, 1997 from $19.1 million for the pro forma year ended December 31,
1996. An increasing percentage of ZDNet's net revenue was derived from
advertising for the year ended December 31, 1997, accounting for 73.3% of net
revenue, compared to 37.7% for the same period in 1996. The increased
percentage of net revenue derived from advertising in the later period reflect
a continuation of ZDNet's strategic shift from a business model based on
subscription-based fees and services to one based on advertising.

VI-7
<PAGE>

Revenue from advertising increased 227.8% to $23.6 million for year ended
December 31, 1997 from $7.2 million for the pro forma year ended December 31,
1996. The increase in advertising revenue was attributable to increases in the
number of advertisers, the average expenditures per advertiser and increasing
advertising rates. The increase was evenly attributable to rate and volume
increases. Subscription-based fees and services decreased by 27.7% to $8.6
million from $11.9 million from the same period in 1996.

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 events 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.

Internet production costs increased by $1.3 million or 43.3% from $3.0
million to $4.3 million. The increase in production costs was due to higher
user traffic levels and increased editorial costs associated with the launch of
new content areas.

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 events business which was announced in
the fourth quarter of 1997. Costs for the publishing segment rose 1.2% while
those for the events 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, net primarily reflects Ziff-Davis Inc.'s equity
share of earnings and losses from joint ventures and fees earned from
management of events not produced by Ziff-Davis Inc. 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.

VI-8
<PAGE>

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%.

Liquidity and Capital Resources

As a result of the May 4, 1998 reorganization, Ziff-Davis Inc.'s intercompany
debt owned to Softbank was reduced to $83.1 million. Such indebtedness bears
interest at 9.9% and matures in February 2010. Concurrently with Ziff-Davis
Inc.'s initial public offering, Ziff-Davis Inc. issued and sold $250 million
aggregate principal amount of notes. In addition, Ziff-Davis Inc. entered into
a $1.35 billion credit facility, and borrowed $1.25 billion under such
facility, to provide additional funds for the repayment of intercompany debt to
Softbank and to provide for Ziff-Davis Inc.'s working capital requirements. The
balance of intercompany obligations owed to Softbank was converted to equity.
(See Note 2 to the Consolidated Financial Statements included in this Annex.)

At December 31, 1998, Ziff-Davis Inc.'s outstanding total debt was $1,547.9
million (excluding unamortized discount) which consisted of $77.9 million due
to Softbank, $250 million in notes and $1,220.0 million under the credit
facility.

Cash and equivalents were $32.6 million at December 31, 1998, an increase of
$2.3 million from $30.3 million at December 31, 1997. The increase was due to
factors described below:

Cash provided by operations was $95.8 million for the year ended December 31,
1998 compared to a use of $3.4 million for the same period of 1997. The
increase from 1997 to 1998 was attributed to Ziff-Davis Inc.'s lower losses
(before the non-cash portion of the restructuring charge) and a decrease in
funding to affiliates for the 1998 period.

Cash used for investing activities for the year ended December 31, 1998
totaled $64.4 million compared to $44.2 million for the 1997 comparable period.
For both periods, the majority of these expenditures were for computer
equipment and leasehold improvements. Acquisitions and investments in the 1998
period relate to Ziff-Davis Inc.'s acquisition of Sky TV, a tradeshow in
Canada, an additional 50% interest in Family PC magazine, a European marketing
database company as well as investments in Red Herring and Deja News.
Acquisitions for the 1997 period reflect the purchase of a 70% interest in
GameSpot, Inc.

Cash used in financing activities totaled $29.1 million for the year ended
December 31, 1998, representing proceeds from the reorganization and initial
public offering of $1,863.3 million, net of transaction costs, and funding from
Softbank of $20.4 million offset by the repayment of debt and amounts due to
affiliates of $1,916.1 million. Cash provided by financing activities in the
same period in 1997 amounted to $47.9 million representing capital
contributions partly offset by repayments of intercompany debt.

Ziff-Davis Inc. had a working capital surplus of approximately $35.5 million
at December 31, 1998, compared to a working capital deficit of approximately
$371.1 million at December 31, 1997. Ziff-Davis Inc.'s balance sheet has
historically had a working capital deficit due to significant amounts due to
affiliates. Ziff-Davis also maintains a significant level of deferred revenue
generated from publication subscriptions paid in advance and prepayments from
trade show exhibitors. At December 31, 1998, Ziff-Davis Inc. had deferred

VI-9
<PAGE>

revenue of $152.1 million compared to $154.7 million at December 31, 1997.
Deferred revenue does not represent a cash liability owed by Ziff-Davis Inc.,
unless Ziff-Davis Inc. fails to deliver a magazine or cancels a trade show, and
generally does not affect Ziff-Davis Inc.'s ability to fund day-to-day
operations. Working capital increased as a result of the reorganization and the
initial public offering of Ziff-Davis Inc.'s common stock which resulted in the
repayment and conversion to equity of related party obligations in connection
therewith.

On December 11, 1998, Standard & Poors lowered its corporate credit and bank
loan ratings for Ziff-Davis Inc. to BB- from BB and its subordinated debt
rating for Ziff-Davis Inc. to B from B+. This downgrade had no impact on our
current borrowings. Although this downgrade may make future borrowings more
expensive, we do not believe this will have a material impact on our liquidity
or our access to credit markets.

Ziff-Davis Inc. believes, based on its current level of operations and
anticipated growth, that Ziff-Davis Inc.'s ability to generate cash, together
with cash on hand and available lines of credit, will be sufficient to make
required payments of principal and interest on Ziff-Davis Inc.'s indebtedness
and fund anticipated capital expenditures and future working capital
requirements over the next 12 months. However, actual capital expenditures may
change, particularly as a result of any acquisitions Ziff-Davis Inc. may
pursue. The ability of Ziff-Davis Inc. to meet its debt service obligations and
reduce its total debt will depend upon the future performance of Ziff-Davis
Inc.

Credit Facility

Ziff-Davis Inc.'s credit facility, as amended, consists of a seven-year $400
million reducing revolving credit facility, a seven-year $450 million term loan
and an eight-year $500 million term loan. There are no scheduled reductions in
the revolving credit commitment or amortization under the term loan until
September 2000.

For the reasons described under "--Restructuring" above, Ziff-Davis Inc.
expects its debt to EBITDA ratios at December 31, 1998 would have been above
the levels that had originally been required by its credit facility. On
December 16, 1998, the lenders of the $1.35 billion credit facility agreed to
amend certain provisions of that facility. The amended provisions include an
increase in the allowed leverage ratios. In return, Ziff-Davis Inc. agreed to
pay a one-time fee of $3.375 million and increase the interest rates on amounts
borrowed under the facility to rates currently ranging from LIBOR plus 2.875%
to LIBOR plus 3.375% depending on the type of loan. Had the increased interest
rates been in effect for the period from Ziff-Davis Inc.'s initial public
offering on April 28, 1998 to December 31, 1998, interest expense would have
increased by approximately $11.9 million. Based on the $1,220.0 million
outstanding on December 31, 1998, the annualized incremental interest is $18.0
million. This increase in interest expense would reduce the amount otherwise
available to fund ZD or ZDNet operations.

Ziff-Davis Inc.'s credit facility exposes it to market risk with respect to
changes in interest rates. Ziff-Davis Inc. manages this risk through the use of
interest rate swap agreements, as described below. Through the use of these
swap agreements, Ziff-Davis Inc. has effectively established a fixed interest
rate for $550 million of the outstanding credit facility. Based on the $1.220
billion outstanding under the credit facility at December 31, 1998, if the
LIBOR rate were to increase by 1%, Ziff-Davis Inc. would incur, after giving
effect to the swap agreements, an additional $6.7 million of annual interest
expense.

Interest Rate Swaps

On June 10, 1998, Ziff-Davis Inc. entered into interest rate swap agreements,
with an aggregate notional amount of $550 million. Under these swap agreements,
which commenced on August 10, 1998, Ziff-Davis Inc. will receive a floating
rate of interest based on three-month LIBOR, which resets quarterly, and Ziff-
Davis Inc.

VI-10
<PAGE>

will pay a fixed rate of interest each quarter for the terms of the respective
agreements. The weighted average fixed rate Ziff-Davis Inc. will pay under
these agreements is 5.85%. Ziff-Davis Inc. has entered into these agreements
solely to hedge its interest rate risk. At December 31, 1998, the three-month
LIBOR rate was 5.06%.

These swap agreements are viewed by Ziff-Davis Inc. as risk management tools
and are not used for trading or speculative purposes. The notional amount of
$550 million does not represent a real amount exchanged by the parties, and
therefore, is not a measure of Ziff-Davis Inc.'s exposure through its use of
swap agreements. The fair values of these swap agreements were estimated by
obtaining quotes from brokers which represented the amounts that Ziff-Davis
Inc. would pay if the agreements were terminated at the balance sheet date.
While it is not Ziff-Davis Inc.'s intention to terminate these swap agreements,
these fair values indicated that the termination of the swap agreements would
have resulted in a loss of $15,627,000.

By nature, swap agreements involve credit risk, due to the possible
nonperformance by counterparties. To mitigate this risk, Ziff-Davis Inc. enters
into swap agreements with major financial institutions and diversifies the
counterparties used as a means to limit counterparty exposure and concentration
of risk.

ZDTV

In July 1997, Ziff-Davis Inc. entered into a license and services agreement
to develop ZDTV for MAC Holdings America ("MHA"), a company that is wholly
owned by Mr. Masayoshi Son who is a director of Ziff-Davis Inc. and principal
stockholder of SOFTBANK Corp. Under this agreement, Ziff-Davis Inc. agreed to
fund ZDTV's operations through unsecured advances and was granted an option to
purchase ZDTV for a price equal to MHA's investment plus 10% per annum for the
period of investment. On January 15, 1999, Ziff-Davis Inc. exercised this
option and on February 4, 1999, purchased ZDTV at a purchase price of $81.4
million. Ziff-Davis Inc. paid approximately $32.8 million of the purchase price
in cash (funded on February 5, 1999) and paid the remainder by applying
approximately $48.6 million in advances owed to it by MHA through December 31,
1998. Ziff-Davis Inc. also agreed to be responsible for the funding of ZDTV
during the period in 1999 prior to the purchase which will be accounted for as
additional purchase price. The cash portion of the purchase price was funded by
an advance from ZDTV to Ziff-Davis Inc., pursuant to the ZDTV cash management
system, of the funds invested in ZDTV by Vulcan Programming described below. In
connection with its acquisition of ZDTV, Ziff Davis Inc. assumed MHA's
obligations under an option granted to DirectTV to purchase 5% of ZDTV for $15
million, subject to adjustment.

Vulcan Transactions

On February 4, 1999, Vulcan Ventures, the investment vehicle of Paul G.
Allen, agreed to purchase approximately three million shares of Ziff-Davis Inc.
common stock for $50 million. We expect the purchase of common stock to close
in the first quarter of 1999. On February 5, 1999, Vulcan Programming, an
entity owned by Paul G. Allen, purchased a one-third interest in ZDTV for $54
million.

Seasonality

Historically, Ziff-Davis Inc.'s business has been seasonal as a significant
portion of annual revenue has occurred 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,
1998. In the opinion of Ziff-Davis Inc.'s management, this unaudited
information has been prepared on a basis consistent with the audited
Consolidated Financial Statements appearing elsewhere in this Annex 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 Consolidated Financial Statements and related notes
thereto. The operating results for any quarter are not necessarily indicative
of results for any future period.

VI-11
<PAGE>

<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------------------------------------------------------------
March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- ------------- ------------ --------- -------- ------------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............. $204,281 $211,333 $191,613 $226,788 $191,245 $198,419 $181,726 $211,492
Events................. 15,321 82,135 24,227 165,845 27,121 65,782 29,787 147,177
Internet............... 5,283 7,862 8,132 10,941 9,688 12,274 14,505 19,676
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue........... 224,885 301,330 223,972 403,574 228,054 276,475 226,018 378,345
Percentage of total
year.................. 19.5% 26.1% 19.4% 35.0% 20.6% 24.9% 20.4% 34.1%
Cost of production...... 61,526 92,986 62,716 108,017 70,310 75,749 63,471 95,546
Selling, general and
administrative
expenses............... 139,980 143,243 143,131 137,990 144,239 140,063 139,516 143,865
Depreciation and
amortization........... 38,966 39,032 39,699 37,243 37,475 39,276 37,843 37,950
Restructuring charge.... -- -- -- -- -- -- -- 52,239
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations............. (15,587) 26,069 (21,574) 120,324 (23,970) 21,387 (14,812) 48,745
Income (loss) before
taxes.................. (60,145) (17,715) (66,937) 72,306 (68,287) (12,032) (39,449) 15,532
Net income (loss)....... $(59,817) $(17,387) $(66,609) $ 72,634 $ (5,121) $(76,560) $ (4,498) $ 8,370
EBITDA(1)............... $ 25,534 $ 68,216 $ 20,486 $158,658 $ 15,127 $ 63,397 $ 27,487 $138,083
Percentage of total
year.................. 9.4% 25.0% 7.5% 58.1% 6.2% 26.0% 11.3% 56.6%
</TABLE>
- --------

(1) EBITDA is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA for the quarter ended
December 31, 1998 does not include a one-time restructuring charge of
$52,239,000. 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 Ziff-Davis Inc.'s operating performance or to cash flows as a
measure of liquidity. Although Ziff-Davis Inc. 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, the
EBITDA presented for Ziff-Davis Inc. may not be comparable to similarly
titled measures reported by other companies.

Inflation and Fluctuations in Paper Prices and Postage Costs

Ziff-Davis Inc. continually assesses the impact of inflation and changes in
paper prices. Ziff-Davis Inc. 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 and then decreased in 1997.
During 1998, paper prices were relatively flat. Management anticipates that
paper prices will remain relatively stable in 1999. Ziff-Davis Inc. will
continue to monitor the impact of inflation and paper prices and will consider
these matters in setting its pricing policies. Ziff-Davis Inc. 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 with
suppliers). However, Ziff-Davis Inc. had not entered, and does not currently
plan to enter, into long-term forward price or option contracts for paper.
Management estimates postage costs will increase approximately 3.5% in 1999.
See "Risk Factors--Other Ziff-Davis Inc. Risks--Ziff-Davis Inc. May Be
Adversely Affected By Fluctuations In Paper And Postage Costs" and Annex VII--
"ZD Description of Business--Print Publishing--Paper and Printing".

Year 2000 Readiness Disclosure

During 1997, Ziff-Davis Inc., began a review of its computer systems and
software to identify systems and software which might malfunction due to
misidentification of the Year 2000. Ziff-Davis Inc. is using both internal and
external resources to identify, test, correct and reprogram systems and
software for Year 2000 readiness.

VI-12
<PAGE>

At December 31, 1998, Ziff-Davis Inc. was in the research and validation
phase of its Year 2000 project for information ("IT") systems and non-IT
systems. This phase consists of research and validation of all infrastructure,
hardware and software, including platform, wide-area network and local-area
network components. Research for non-IT systems includes identifying systems
that include embedded technology, such as micro-controllers, which are not Year
2000 compliant.

Ziff-Davis Inc. has identified critical systems and applications that will
either be validated for compliance though formal documentation, through vendors
or through testing. Ziff-Davis Inc. will enter the testing phase of its
infrastructure, hardware, software and databases in the first quarter of 1999
and plans to complete such phase by September 1, 1999. Contingency plans will
be developed for any systems or platforms that are known to be non-compliant as
of September 1, 1999.

Some of Ziff-Davis Inc.'s computer systems and databases, including its
subscription fulfillment and payroll systems, are managed by third parties
under contractual arrangements. Ziff-Davis Inc. currently has no known Year
2000 compliance problems relating to third parties. Ziff-Davis Inc. has
requested those third parties with which Ziff-Davis Inc. has material
relationships in the first quarter of 1999 to advise it as to whether such
third parties anticipate difficulties in addressing Year 2000 compliance
problems, and if so, the nature of such difficulties. Ziff-Davis Inc.
anticipates that such inquiries will be completed by April 30, 1999.

In addition, Ziff-Davis Inc. will develop contingency plans during the second
half of 1999 in order to compensate for any disruption or downtime that could
result from a Year 2000 compliance problem. Ziff-Davis Inc. plans to replace IT
and non-IT systems that it determines are not Year 2000 compliant prior to
October 1, 1999 in order to minimize any risk of a Year 2000 compliance
problem.

Ziff-Davis Inc. has incurred remediation costs associated with its Year 2000
readiness efforts. These remediation costs have been incurred in connection
with replacement of systems and hardware, modification of software and
consulting costs related to Year 2000 solution providers. The costs to address
Year 2000 issues which have been included in the general and administrative
expenses of Ziff-Davis Inc. have not been tracked separately and are therefore
not determinable. However, management believes these expenses have been
substitutive rather than incremental to the recurring level of general and
administrative expenses. Total capitalized costs incurred in the replacement of
systems in connection with Ziff-Davis Inc.'s Year 2000 readiness efforts as of
December 31, 1997 and 1998 were $1,692,000 and $3,657,000, respectively. Ziff-
Davis Inc. estimates that it will capitalize an additional $3,815,000 during
1999 related to its Year 2000 readiness efforts.

Ziff-Davis Inc. expects to complete testing and replacement of critical
systems by the beginning of the fourth quarter of 1999. Ziff-Davis Inc.'s
estimate of its most reasonably likely "worst case scenario" would be the
failure of its internal applications and systems that process and store certain
information and data. Ziff-Davis Inc. would resolve the failure of such
applications and systems on an individual basis and management of Ziff-Davis
Inc. does not believe that the impact on its critical systems would be
material. However, if Ziff-Davis Inc. or any subscribers, advertisers,
licensors, vendors or other third parties on whom it relies experiences a Year
2000 compliance problem, this could have a material adverse effect on Ziff-
Davis Inc.'s profit and liquidity.

Recently Issued Accounting Pronouncements

SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities
issued in June 1998, establishes accounting and reporting standards for
derivative instruments and for hedging activities and is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Ziff-Davis Inc.
does not expect the adoption of SFAS No. 133 to have a material impact on
Ziff-Davis Inc.'s results of operations.

Ziff-Davis Inc. expects to adopt this statement beginning with its 2000
financial statements.

VI-13
<PAGE>

ZIFF-DAVIS INC.
DESCRIPTION OF BUSINESS

General

Ziff-Davis Inc. is a leading media and marketing company that provides
information on computing and technology, including the Internet. We provide
technology companies worldwide with marketing strategies for reaching key
decision-makers. From an accounting standpoint, we have separated our online
business division from the rest of our businesses, and we have allocated all of
our consolidated assets, liabilities, revenue, expenses and cash flow between
ZD and ZDNet. For additional information regarding the amounts allocated see
the Selected Financial and Other Data, Management's Discussion and Analysis of
Financial Condition and Results of Operations, Description of Business and
Financial Statements for ZD and ZDNet, set forth in Annex VII and VII
respectively.

Relationship with Softbank

For information concerning the formation of Ziff-Davis Inc. and its
relationship with Softbank see Note 1 to the Financial Statements of Ziff-Davis
Inc. included in this Annex VI and "Risk Factors--Other Ziff-Davis Inc. Risks--
Ziff-Davis Inc. Is Controlled By Its Principal Stockholders. This Creates
Potential Conflicts Of Interest".

VI-14
<PAGE>

Ziff-Davis Inc.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Ziff-Davis Inc.
Report of Independent Accountants...................................... VI-16
Consolidated Balance Sheets as of December 31, 1997 and 1998 .......... VI-17
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998 .................................................. VI-18
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998................................................... VI-19
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998.......................... VI-20
Notes to Consolidated Financial Statements............................. VI-21
</TABLE>

VI-15
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

Ziff-Davis Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, cash flows and changes in stockholders'
equity, present fairly, in all material respects, the financial position of
Ziff-Davis Inc. and its subsidiaries (the "Company") at December 31, 1997 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, 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.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, NY

February 22, 1999

VI-16
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 30,301 $ 32,566
Accounts receivable, net.............................. 221,310 227,325
Inventories........................................... 17,853 15,551
Prepaid expenses and other current assets............. 37,900 34,543
Due from affiliates................................... 131,290 53,984
Deferred taxes........................................ 8,794 22,262
---------- ----------
Total current assets.................................... 447,448 386,231
Property and equipment, net............................. 53,536 91,189
Intangible assets, net.................................. 3,030,333 2,907,043
Other assets............................................ 15,329 49,340
---------- ----------
Total assets............................................ $3,546,646 $3,433,803
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 55,468 $ 74,397
Accrued expenses...................................... 80,094 97,319
Unearned income, net.................................. 154,682 152,081
Due to affiliates and management...................... 398,332 4,618
Current portion of notes payable to affiliates........ 125,790 7,692
Other current liabilities............................. 4,222 14,591
---------- ----------
Total current liabilities............................... 818,588 350,698
Notes payable to affiliates............................. 2,408,240 70,192
Notes payable, net of unamortized discount.............. -- 1,469,130
Deferred taxes.......................................... 180,117 165,082
Due to management....................................... -- 5,400
Other liabilities....................................... 13,571 20,703
---------- ----------
Total liabilities....................................... 3,420,516 2,081,205
---------- ----------
Commitments and contingencies (Notes 17 and 18)
Stockholders' equity:
Preferred stock(1).................................... -- --
Common stock(2)....................................... -- 1,000
Additional paid-in capital............................ 248,330 1,553,419
Accumulated deficit................................... (119,429) (197,238)
Deferred compensation................................. (996) (3,762)
Cumulative translation adjustment..................... (1,775) (821)
---------- ----------
Total stockholders' equity.............................. 126,130 1,352,598
---------- ----------
Total liabilities and stockholders' equity.............. $3,546,646 $3,433,803
========== ==========
</TABLE>
- --------

(1) December 31, 1998: par value $.01 per share, 10,000,000 shares authorized,
no shares issued and outstanding; December 31, 1997: no shares authorized,
issued and outstanding.

(2) December 31, 1998: par value $.01 per share, 120,000,000 shares authorized,
100,000,000 shares issued and outstanding; December 31, 1997: par value
$.01 per share, 2,000 shares authorized, 200 shares issued and outstanding.

The accompanying notes are an integral part of these financial statements.

VI-17
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------
1996 1997 1998
--------- --------- -----------
<S> <C> <C> <C>
Revenue, net:
Publishing............................... $ 674,040 $ 834,015 $ 782,882
Events................................... 264,884 287,528 269,867
Internet................................. 16,215 32,218 56,143
--------- --------- -----------
955,139 1,153,761 1,108,892
--------- --------- -----------
Cost of production......................... 271,532 325,245 305,346
Selling, general and administrative
expenses.................................. 456,690 564,344 567,683
Depreciation and amortization of property
and equipment............................. 32,303 30,379 29,885
Amortization of intangible assets.......... 107,433 124,561 122,659
Restructuring charge....................... -- -- 52,239
--------- --------- -----------
Income from operations..................... 87,181 109,232 31,080
Interest expense, net...................... (120,646) (190,445) (143,547)
Other non-operating income, net............ 6,341 8,722 8,231
--------- --------- -----------
Loss before income taxes................... (27,124) (72,491) (104,236)
Provision (benefit) for income taxes....... 24,957 (1,312) (26,427)
--------- --------- -----------
Net loss................................... $ (52,081) $ (71,179) $ (77,809)
========= ========= ===========
Pro forma basic loss per common share...... $ (0.78)
===========
Pro forma weighted average common shares
outstanding............................... 100,000,000
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

VI-18
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------
1996 1997 1998
----------- -------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................... $ (52,081) $(71,179) $ (77,809)
Adjustments to reconcile net loss to net
cash provided
(used) by operating activities:
Depreciation and amortization............. 139,736 154,940 152,544
Amortization of debt issuance costs and
discount................................. -- -- 2,430
Non-cash portion of restructuring charge.. -- -- 38,020
Income from equity investments............ (115) (2,030) (7,483)
Deferred tax provision (benefit).......... 24,957 (1,312) (28,974)
Changes in operating assets and liabili-
ties:
Accounts receivable...................... (38,086) (18,899) (4,899)
Inventories.............................. 7,788 (853) 2,923
Accounts payable and accrued expenses.... 12,850 (7,376) 13,098
Unearned income.......................... 1,392 (20,194) (5,326)
Due to affiliates and management......... (29,303) (38,543) (3,348)
Other, net............................... (5,595) 2,082 14,600
----------- -------- ----------
Net cash provided (used) by operating
activities................................ 61,543 (3,364) 95,776
----------- -------- ----------
Cash flows from investing activities:
Capital expenditures..................... (22,365) (30,196) (36,599)
Investments and acquisitions, net of cash
acquired................................ (2,124,823) (14,000) (27,772)
----------- -------- ----------
Net cash used by investing activities...... (2,147,188) (44,196) (64,371)
----------- -------- ----------
Cash flows from financing activities:
Proceeds from equity offering............ -- -- 380,337
Proceeds from issuance of notes payable.. -- -- 242,723
Proceeds from issuance of bank debt...... -- -- 1,240,200
Proceeds from notes payable to affili-
ates.................................... 1,080,000 10,000 --
Payments of amounts due to affiliates.... -- -- (314,798)
Repayments of credit facility ........... -- -- (95,504)
Borrowings under credit facility......... -- -- 65,504
Principal payments on notes payable to
affiliates.............................. -- (31,420) (1,571,264)
Payment of deferred financing fee........ -- -- (3,375)
Purchase of treasury shares.............. -- -- (29,500)
Sale of treasury shares.................. -- -- 29,500
Advance from majority shareholder........ -- -- 20,377
Contributed capital...................... 1,015,652 69,366 6,660
Payment of dividends..................... (8,000) -- --
----------- -------- ----------
Net cash provided (used) by financing
activities................................ 2,087,652 47,946 (29,140)
Net increase in cash and cash equivalents.. 2,007 386 2,265
Cash and cash equivalents at beginning of
period.................................... 27,908 29,915 30,301
----------- -------- ----------
Cash and cash equivalents at end of peri-
od........................................ $ 29,915 $ 30,301 $ 32,566
=========== ======== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

VI-19
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(dollars in thousands)

<TABLE>
<CAPTION>
Ziff-Davis Inc. ZDI ZDCF Additional Retained Cumulative
------------------- Treasury ------------- ------------- paid-in earnings Deferred translation
Shares Amount Stock Shares Amount Shares Amount capital (deficit) compensation adjustment
----------- ------ -------- ------ ------ ------ ------ ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1995........... -- $ -- $ -- -- $ -- 100 $ -- $ 379,586 $ 11,831 $ -- $ 111
Acquisition of
Ziff-Davis
Inc............ 100 -- 1,014,178
Return of
capital........ (899,948)
Capital
contribution... 1,474
Dividend paid... (8,000)
Shares
contributed to
restricted
stock plan..... 3,528 (3,528)
Compensation
earned on
restricted
stock.......... 1,080
Net loss........ (52,081)
Foreign currency
translation
adjustment..... (475)
----------- ------ ------- ---- ----- ---- ----- ---------- --------- ------- ------
Balance at
December 31,
1996........... -- -- -- 100 -- 100 -- 498,818 (48,250) (2,448) (364)
Return of
capital........ (381,434)
Capital
contribution... 128,482
Shares
contributed to
restricted
stock plan..... 2,464 (2,464)
Compensation
earned on
restricted
stock.......... 3,916
Net loss........ (71,179)
Foreign currency
translation
adjustment..... (1,411)
----------- ------ ------- ---- ----- ---- ----- ---------- --------- ------- ------
Balance at
December 31,
1997........... -- -- -- 100 -- 100 -- 248,330 (119,429) (996) (1,775)
Capital
contribution... 9,007
Capitalization
of amounts due
to affiliates.. 908,673
Contribution of
subsidiaries
from SBH to
Ziff-Davis
Inc............ 73,619,355 736 (100) -- (100) --
Initial public
offering....... 25,800,000 258 375,235
Acquisition of
fixed assets
from an
affiliate...... 580,645 6 8,994
Purchase of
treasury shares
from SBH....... (2,000,000) (20) (29,480)
Sale of treasury
shares to the
public......... 2,000,000 20 29,480
Stock options
vested as
severance...... 162
Conversion of
Softbank stock
options........ 3,018 (3,018)
Net loss........ (77,809)
Compensation
earned on
restricted
stock.......... 252
Foreign currency
translation
adjustment..... 954
----------- ------ ------- ---- ----- ---- ----- ---------- --------- ------- ------
Balance at
December 31,
1998........... 100,000,000 $1,000 $ -- -- $ -- -- $ -- $1,553,419 $(197,238) $(3,762) $ (821)
=========== ====== ======= ==== ===== ==== ===== ========== ========= ======= ======
<CAPTION>
Total
stockholders'
equity
--------------
<S> <C>
Balance at
December 31,
1995........... $ 391,528
Acquisition of
Ziff-Davis
Inc............ 1,014,178
Return of
capital........ (899,948)
Capital
contribution... 1,474
Dividend paid... (8,000)
Shares
contributed to
restricted
stock plan..... --
Compensation
earned on
restricted
stock.......... 1,080
Net loss........ (52,081)
Foreign currency
translation
adjustment..... (475)
--------------
Balance at
December 31,
1996........... 447,756
Return of
capital........ (381,434)
Capital
contribution... 128,482
Shares
contributed to
restricted
stock plan..... --
Compensation
earned on
restricted
stock.......... 3,916
Net loss........ (71,179)
Foreign currency
translation
adjustment..... (1,411)
--------------
Balance at
December 31,
1997........... 126,130
Capital
contribution... 9,007
Capitalization
of amounts due
to affiliates.. 908,673
Contribution of
subsidiaries
from SBH to
Ziff-Davis
Inc............ 736
Initial public
offering....... 375,493
Acquisition of
fixed assets
from an
affiliate...... 9,000
Purchase of
treasury shares
from SBH....... (29,500)
Sale of treasury
shares to the
public......... 29,500
Stock options
vested as
severance...... 162
Conversion of
Softbank stock
options........ --
Net loss........ (77,809)
Compensation
earned on
restricted
stock.......... 252
Foreign currency
translation
adjustment..... 954
--------------
Balance at
December 31,
1998........... $1,352,598
==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

VI-20
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(numbers rounded to the nearest thousand, except share and per share amounts)

1. The Company and Basis of Presentation

Formation of Ziff-Davis Inc.

Ziff-Davis Inc. was formed through an initial public offering and a
reorganization that were completed on May 4, 1998. (See Note 2.) Prior to that
date, the predecessors of Ziff-Davis Inc. (currently named ZD Inc. ("ZDI") and
ZD Events Inc.) were wholly owned indirect subsidiaries of SOFTBANK Corp ("SBC"
or together with its non-Ziff-Davis Inc. affiliates "Softbank"). As such,
financial statements for periods prior to May 4, 1998 have been prepared on a
combined basis while financial statements for periods after May 4, 1998 have
been prepared on a consolidated basis.

As further described below, the financial statements include the accounts of
ZDI from its date of acquisition (February 29, 1996), and ZD Events for all
periods presented. In addition, the results of the MAC Assets (defined below)
which were acquired in two tranches on October 31, 1997 and May 4, 1998 have
been included in Ziff-Davis Inc's financial statements from the time of their
acquisition by MAC Inc. ("MAC") (February 29, 1996). These results have been
included in a manner similar to a pooling of interests, as the MAC Assets, ZDI
and ZD Events Inc. were under common control at the time the MAC Assets were
acquired by Ziff-Davis Inc. (See relationship with Softbank and MAC below).

Relationship with Softbank and MAC

SBC is the indirect majority shareholder of Ziff-Davis Inc. SBC is a Japanese
corporation which at the time of the acquisition of the MAC Assets was majority
owned directly and indirectly by its president, Mr. Son. As of December 31,
1998, Mr. Son owned approximately 45% of SBC (50.2% as of December 31, 1997).
MAC, also a Japanese corporation, was wholly owned by Mr. Son.

Operations and acquisitions

Ziff-Davis Inc. operates in three business segments: publishing, events and
Internet.

Publishing

The publishing segment is engaged in publishing magazines, journals,
newsletters, electronic information products, training manuals and market
research about the computer industry. The publishing segment's principal
operations are in the U.S. and Europe, although it also licenses or syndicates
its editorial content to over 50 other publications distributed worldwide.

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for the computer industry. The events
segment's principal operations are in the U.S. and to a lesser extent in Europe
and Asia.

Internet

The Internet segment is engaged in providing technology related information
to Internet users worldwide. The Internet segment's principal operations are in
the U.S. and to a lesser extent in Europe.

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 $1,800,000,000
plus transaction costs. Concurrent with the

VI-21
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

acquisition, in a separate agreement, MAC, 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 $302,000,000.

These acquisitions 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 $1,922,000,000 and
$285,000,000 respectively.

Subsequent to the acquisition, Holdings and ZDI were merged with ZDI being
the surviving corporation.

Purchase of MAC Assets

In 1997, ZDI agreed to purchase certain of the MAC Assets for $370,000,000.
The acquisition was effected in two tranches, the first of which closed on
October 31, 1997 and the second of which closed upon completion of an initial
public offering of Ziff-Davis Inc.'s common stock (further described below). At
December 31, 1997, ZDI accrued the $370,000,000 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 were under common
control at the time of acquisition. Accordingly, the accompanying consolidated
financial statements include the results of operations of 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 $27,500,000, plus transaction costs. The
acquisition was accounted for as a purchase and accordingly, Sendai's results
are included in the consolidated financial statements since the date of
acquisition. The excess of the purchase price over assets acquired approximated
$33,378,000. The operations of Sendai did not have a material effect on the
consolidated results of operations for the year ended December 31, 1996.

Acquisition of Sky TV

On October 28, 1998, Ziff-Davis Inc. acquired the assets of Sky TV Inc. and
certain affiliates for approximately $12,150,000 in cash plus contingent
payments related to earnings performance payable in 2002. Sky TV is a media
company that produces video content for distribution principally through
airline in-flight, cable and broadcast television. The acquisition was
accounted for as a purchase and accordingly Sky TV's results are included in
the consolidated financial statements since the date of acquisition. The excess
of the purchase price over assets acquired approximated $11,318,000. The
operations of Sky TV did not have a material effect on consolidated results of
operations for the year ended December 31, 1998.

2. Reorganization, initial public offering and ZDNet Stock Proposal

On February 4, 1998, a nonstock corporation, ZD Inc., was formed in
contemplation of a reorganization and initial public offering of Ziff-Davis
Inc. Upon completion of the initial public offering (described below),
Ziff-Davis Inc. was renamed ZD Inc. and ZDCF was renamed ZD Events Inc. and ZD
Inc. was renamed Ziff-Davis Inc.

On May 4, 1998 Softbank, through its wholly owned subsidiary SOFTBANK
Holdings Inc. ("SBH"), completed a reorganization whereby the common stock of
ZD Inc. and ZD Events Inc. were contributed to Ziff-Davis Inc. in exchange for
73,619,335 shares of Ziff-Davis Inc.'s common stock. Concurrent with the

VI-22
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

reorganization, Ziff-Davis Inc. (1) completed an initial public offering of
25,800,000 common shares at an initial public offering price of $15.50 per
share, (2) issued $250,000,000 of 8 1/2% Subordinated Notes due 2008,
(3) entered into a $1,350,000,000 credit facility with a group of banks under
which $1,250,000,000 was borrowed and (4) converted $908,673,000 of
intercompany indebtedness to equity. In addition, Ziff-Davis Inc. received
approximately $9,107,000 of fixed assets from Kingston Technology Company
("Kingston"), a related party, in exchange for 580,645 shares of Ziff-Davis
Inc.'s common stock and $107,000 in cash. These assets have been subsequently
leased back to Kingston. Total shares of common stock issued to Softbank and
its non-Ziff-Davis Inc. affiliates were 74,200,000. The transactions described
above are hereafter referred to as the "Reorganization".

Proceeds, net of transaction costs, from the initial public offering and
funding transactions in the Reorganization of $1,863,260,000 were used to
complete the purchase of certain assets from MAC for $370,000,000 and repay
intercompany indebtedness.

On May 28, 1998, Ziff-Davis Inc.'s U.S. underwriters exercised their option
to purchase 2.0 million additional shares of common stock to cover over-
allotments. Ziff-Davis Inc. purchased the additional shares from SBH resulting
in no change to the total number of shares outstanding. On December 31, 1998,
SBH contributed 71,619,355 shares of Ziff-Davis Inc.'s common stock to SOFTBANK
America Inc., an affiliate of Softbank.

Unaudited Pro Forma Financial Information

The following summary pro forma information has been prepared as if the
Reorganization and initial public offering described above, had been
consummated on January 1, 1998. The pro forma adjustments include a $5,219,000
reduction of interest expense, a $900,000 increase in depreciation expense and
a $900,000 reduction of selling, general and administrative expenses, as well
as the tax effect of these items recorded at an effective rate of 40%.

<TABLE>
<CAPTION>
Year ended
December 31, 1998
--------------------------
(dollars in thousands)
(except per share amounts)
<S> <C>
Revenue, net:..................................... $ 1,108,892
Depreciation and amortization .................... 153,444
Income from operations............................ 31,080
Interest expense, net............................. 138,328
Loss before income taxes.......................... (99,017)
Income tax benefit................................ 24,339
Net loss.......................................... (74,678)
Net loss per basic common share................... (0.75)
Weighted average common shares outstanding........ 100,000,000
</TABLE>

ZDNet Stock Proposal (Unaudited)

The stockholders of Ziff-Davis Inc. are scheduled to vote on a proposal (the
"Tracking Stock Proposal") to authorize the issuance of a new series of common
stock, to be designated as Ziff-Davis Inc--ZDNet Common Stock ("ZDNet Stock"),
intended to reflect the performance of Ziff-Davis Inc.'s online business
division ("ZDNet"). The majority owner of the common stock of Ziff-Davis Inc.
has committed to vote for the Tracking Stock Proposal. Before the ZDNet Stock
is first issued, Ziff-Davis Inc.'s existing common stock will be re-classified
as Ziff-Davis Inc.--ZD Common Stock ("ZD Stock"), and that stock will be
intended to

VI-23
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

reflect the performance of Ziff-Davis Inc.'s other businesses and a "Retained
Interest" in ZDNet (i.e., Ziff-Davis Inc.'s interest in ZDNet excluding the
interest intended to be represented by outstanding shares of ZDNet Stock)
(collectively, "ZD").

ZD currently has a 100% Retained Interest in ZDNet. Following approval of the
Tracking Stock Proposal, Ziff-Davis Inc. currently plans to offer to the
public, for cash, 10,000,000 shares of ZDNet Stock intended to represent
approximately 14% of the equity value attributed to ZDNet. Ziff-Davis Inc.
expects to offer ZDNet Stock to the public sometime in the first or second
quarter of 1999. However, Ziff-Davis Inc. could choose to conduct the offering
at a later time, or not to make the offering at all, depending on the
circumstances at the time. In addition to or instead of the offering, Ziff-
Davis Inc. reserves the right to distribute ZDNet Stock to stockholders of
Ziff-Davis Inc.

3. Summary of Significant Accounting Policies

Principles of Combination and Consolidation

Prior to the Reorganization, the financial statements were prepared on a
combined basis to include the accounts of ZDI and ZD Events including, as
discussed above, the MAC Assets. The financial statements of Ziff-Davis Inc.
prepared subsequent to the Reorganization described above have been prepared on
a consolidated basis. All significant transactions between these entities have
been eliminated in combination and consolidation.

Investments in companies in which ownership interests range from 20% to 50%
and in which Ziff-Davis Inc. has the ability to exercise significant influence
over the operating and financial policies of such companies are accounted for
under the equity method.

Cash and cash equivalents

Ziff-Davis Inc. considers all highly liquid investments with an original
maturity of 3 months or less to be cash equivalents.

Concentration of credit risk

Ziff-Davis Inc. places its temporary cash investments with high credit
quality financial institutions. At times, such investments may be in excess of
federally insured limits. Ziff-Davis Inc. has not experienced losses in such
accounts.

Ziff-Davis Inc. advertisers and exhibitors include principally customers who
represent a variety of technology companies in the U.S. and other countries.
Ziff-Davis Inc. extends credit to its customers and distributors 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 cost or estimated fair value at
the date of acquisition. Depreciation is computed using the straight-line
method, half year convention, over the estimated useful lives of the assets
which range from 3 to 30 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.

VI-24
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

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.

Debt issuance costs and discount on senior subordinated notes

The cost to issue debt is recorded in the balance sheet in other assets and
amortized to interest expense over the life of the debt. The discount on the
senior subordinated notes is recorded in the balance sheet as a reduction of
long term-debt and is amortized to interest expense over the life of the notes.
All amounts are amortized utilizing the effective-interest method.

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 estimated useful lives.
Identifiable 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. (See Note 7.) Ziff-Davis Inc. assesses the recoverability of 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 value of
assets, an impairment loss is recognized to reduce the carrying value of the
intangibles to estimated recoverable value.

Revenue recognition

Advertising revenue for Ziff-Davis Inc.'s 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.

Online revenue is derived principally from the sale of advertisements on
short-term contracts. Online revenue is recognized ratably in the period in
which the advertisement is displayed, provided that no significant obligations
remain and collection of the resulting receivable is probable. Ziff-Davis
Inc.'s obligations typically include guarantees of minimum number of
"impressions", or times that an advertisement appears in pages viewed by users
of Ziff-Davis Inc.'s online properties. To the extent minimum guaranteed
impressions are not met, Ziff-Davis Inc. defers recognition of the
corresponding revenues until the remaining guaranteed impression levels are
achieved.

Operating costs and expenses

Cost of production includes the direct costs of producing magazines, online
content, 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

VI-25
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

development costs are expensed as incurred. Product development costs include
the cost of artwork, graphics, prepress, plates and photography for new
products.

Reportable segments

In 1998, Ziff-Davis Inc. adopted Statement of Financial Accounting Standards
("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise, replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of Ziff-Davis Inc.'s reportable segments.
SFAS 131 also requires disclosures about products and services, geographic
areas and major customers. The adoption of SFAS 131 did not affect results of
operations or financial position but did affect the disclosure of segment
information. (See Note 19.)

Foreign currency

The effect of translating foreign currency financial statements into U.S.
dollars is included in the cumulative translation adjustments account in
stockholders' equity. Gains and losses on foreign currency transactions, which
are not significant to operations, have been included in selling, general and
administrative expenses. Ziff-Davis Inc. has not historically entered into
forward currency contracts.

Other non-operating income

Other non-operating income includes management fee income and Ziff-Davis
Inc.'s equity share of income or loss from joint ventures.

Income taxes

Ziff-Davis Inc. 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.

Fair value of financial instruments

Ziff-Davis Inc's financial instruments recorded on the balance sheet include
cash and cash equivalents, accounts receivable, accounts payable and debt.
Because of their short maturity, the carrying amount of cash and cash
equivalents, accounts receivable and accounts payable approximate fair value.
Fair value of long-term bank debt is based on rates available to Ziff-Davis
Inc. for debt with similar terms and maturities. Fair value of public debt is
based on market prices.

Ziff-Davis Inc. uses interest rate swap agreements to manage risk on its
floating rate debt portfolio. Fair value of these instruments is based on
estimated current settlement cost.

Interest rate swaps

Ziff-Davis Inc. periodically uses interest rate swaps to manage its exposure
to interest rate fluctuations on its floating rate debt. These interest rate
swaps are entered into for hedging purposes and as such, must be designated and
effective as a hedge against the risk of increased interest rates. Under the
terms of the agreements Ziff-Davis Inc. pays a fixed interest rate on a
notional amount and receives a variable interest rate

VI-26
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

on the same notional amount. The differential between the amounts paid and
received is recorded in interest expense. Interest rate swaps designated but no
longer effective as a hedge would be reported at market value and the related
gains and losses would be recognized in earnings. Gains or losses on
termination of interest rate swaps would be recognized in earnings in the
period of termination.

Stock-based compensation

Ziff-Davis Inc. has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25"), to account for stock
options. Effective January 1, 1996, Ziff-Davis Inc. adopted the disclosure-only
provisions of Statement of Financial Accounting Standard ("SFAS") No. 123,
Accounting for Stock-Based Compensation.

Earnings per share

Earnings per share data for 1996 and 1997 have been omitted on the basis that
they are not meaningful due to the insignificant number of shares outstanding.
Earnings per share data for 1998 is calculated on a pro forma basis as if the
shares issued in connection with the Reorganization and initial public offering
described in Note 2 were outstanding as of January 1, 1998. Common share
equivalents that could potentially dilute basic earnings per share in the
future were not included in the computation of diluted loss per share because
they were anti-dilutive. Common share equivalents were 6,691,305 at December
31, 1998.

Comprehensive Income

Ziff-Davis Inc. implemented SFAS No. 130 Reporting Comprehensive Income,
effective January 1, 1998. This standard requires Ziff-Davis Inc. to report the
total changes in stockholders' equity that do not result directly from
transactions with stockholders, including those which do not affect retained
earnings. These changes are not material to Ziff-Davis Inc.'s consolidated
financial statements.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Ziff-Davis Inc. does not expect the adoption of
SFAS No. 133 to have a material impact on Ziff-Davis Inc.'s results of
operations. Ziff-Davis Inc. will adopt SFAS No. 133 beginning with its 2000
financial statements.

Reclassifications

Certain amounts have been reclassified, where appropriate, to conform to the
current financial statement presentation.

4. Restructuring

Margin pressure on computer equipment manufacturers, industry and product
delays, lower demand in Asia and a focus on the Year 2000 transition are
contributing to a reduced demand for advertising in Ziff-Davis Inc.'s
magazines, principally PC Magazine, PC/Computing, Computer Shopper and PC Week.
Ziff-Davis Inc. believes these factors are continuing. In part as a result of
these factors, income from operations for the fourth quarter of 1998 was
significantly lower than income from operations for the fourth quarter of 1997.

VI-27
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

As a result of this reduced demand, in October 1998 Ziff-Davis Inc. announced
a restructuring program with the intent of significantly reducing its cost
base. Ziff-Davis Inc. incurred a pre-tax charge of $52,239,000 for this
restructuring program. The charge included asset impairment costs
($37,890,000), employee termination costs ($8,668,000) and costs to exit
activities ($5,681,000) principally resulting from the closing of three
publications (Windows Pro, Internet Business and Equip) and the reduction of
Ziff-Davis Inc.'s work force by 310 employees. The charge also included costs
resulting from the discontinuation of certain educational journals and trade
shows. The following sets forth additional detail concerning the principal
components of the charge:

. Asset impairment costs totaled $37,890,000. These costs, which are non-
cash, included the write-off of intangible assets, primarily subscriber
lists, advertising lists, tradenames and goodwill, associated with the
discontinued publications ($34,245,000) and trade shows ($2,930,000) as
well as deferred marketing expenses associated with the discontinued
educational journals ($715,000).

. Employee termination costs related to severed personnel at the closed
publications as well as a rationalization and resulting workforce
reduction of the remainder of Ziff-Davis Inc.'s operations. Employee
termination costs included payments for severance and earned vacation as
well as the costs of outplacement services and the provision of
continued benefits to personnel. As of December 31, 1998, $5,200,000 of
the $8,668,000 million related to these employee terminations had been
paid.

. Costs to exit activities reflect the costs associated with the final
closure of the discontinued publications ($1,837,000) and the costs to
reduce office space under lease as a result of the reduced level of
employees ($3,844,000).

Included in accrued expenses is $7,260,000 related to this restructuring
which Ziff-Davis Inc. believes will be paid during the first half of 1999.

5. Accounts Receivable, Net

Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1998
-------- --------
(dollars in
thousands)
<S> <C> <C>
Accounts receivable................................. $309,565 $312,706
Allowance for doubtful accounts, returns and
cancellations...................................... (88,255) (85,381)
-------- --------
$221,310 $227,325
======== ========
</TABLE>

6. Property and Equipment, Net

Property and equipment, net, consist of the following:

<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
-------- -------
(dollars in
thousands)
<S> <C> <C>
Computers and equipment................................ $ 50,170 $78,587
Leasehold improvements................................. 40,033 62,672
Furniture and fixtures................................. 17,619 29,646
-------- -------
107,822 170,905
Accumulated depreciation and amortization.............. (54,286) (79,716)
-------- -------
$ 53,536 $91,189
======== =======
</TABLE>

VI-28
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

7. Intangible Assets, Net

Intangible assets, net, consists of the following:

<TABLE>
<CAPTION>
Range of December 31,
Useful Lives ----------------------
(years) 1997 1998
------------ ---------- ----------
(dollars in
thousands)
<S> <C> <C> <C>
Advertising lists.................... 7-34 $ 888,100 $ 872,400
Exhibitor relationships.............. 4-27 154,070 154,070
Trademarks/trade names............... 30-40 735,595 709,306
License agreements................... 6-14 11,212 11,212
Subscriber lists..................... 3-10 51,475 51,375
Other................................ 2-20 57,599 58,837
Goodwill............................. 5-40 1,387,556 1,419,892
---------- ----------
3,285,607 3,277,092
Accumulated amortization............. (255,274) (370,049)
---------- ----------
$3,030,333 $2,907,043
========== ==========
</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, the purchase price of these
acquisitions 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 estimated fair value as determined by an income approach. Trademarks/trade
names were recorded at estimated fair value using a relief from royalty
approach.

All intangible assets are being amortized using the straight-line method over
estimated useful lives, up to 40 years. In determining the estimated useful
lives, Ziff-Davis, Inc. considered its competitive position in the markets in
which it operates, 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. In connection with the restructuring described in Note 4, Ziff-
Davis Inc. recorded a $37,175,000 write-down of intangible assets associated
with discontinued publications and events.

8. Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------- -------
(dollars in
thousands)
<S> <C> <C>
Payroll and related employee benefits..................... $29,112 $26,351
Accrued interest.......................................... 6,226 13,678
Restructuring reserve .................................... -- 7,260
Other taxes payable....................................... 2,822 2,674
Other..................................................... 41,934 47,356
------- -------
$80,094 $97,319
======= =======
</TABLE>

VI-29
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

9. Unearned Income

Unearned income consists of the following:

<TABLE>
<CAPTION>
December 31,
------------------
1997 1997
-------- --------
(dollars in
thousands)
<S> <C> <C>
Unexpired subscriptions................................ $ 82,167 $ 66,018
Prepaid conference fees................................ 80,706 95,706
Reserve for cancellations.............................. (8,191) (9,643)
-------- --------
$154,682 $152,081
======== ========
</TABLE>

10. Income Taxes

Prior to the Reorganization and initial public offering described in Note 2,
the subsidiaries of Ziff-Davis Inc. had 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 consolidated statements of operations and tax
liabilities reflected in the consolidated balance sheet have been prepared on a
separate return basis as though Ziff-Davis Inc. 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 Ziff-Davis Inc. Following the
Reorganization, Ziff-Davis Inc. will no longer be included in the consolidated
U.S. federal income tax returns filed by Softbank.

Income (loss) before income taxes is attributable to the following
jurisdictions:

<TABLE>
<CAPTION>
December 31,
-----------------------------
(dollars in thousands)
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
United States............................... $(22,095) $(74,638) $(101,132)
Foreign..................................... (5,029) 2,147 (3,104)
-------- -------- ---------
Total..................................... $(27,124) $(72,491) $(104,236)
======== ======== =========
</TABLE>

Components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
December 31,
-------------------------
(dollars in thousands)
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
U.S. federal income taxes:
Current...................................... $ -- $ -- $ --
Deferred..................................... 19,338 (1,017) (21,595)
State and local income taxes:
Current...................................... -- -- --
Deferred..................................... 5,619 (295) (7,377)
Foreign income taxes:
Current...................................... -- -- 2,545
Deferred..................................... -- -- --
------- ------- --------
Total provision (benefit) for income taxes... $24,957 $(1,312) $(26,427)
======= ======= ========
</TABLE>

VI-30
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

A reconciliation of the U.S. federal statutory tax rate to Ziff-Davis Inc.'s
effective tax rate on income (loss) before income taxes is as follows:

<TABLE>
<CAPTION>
December 31,
--------------------
1996 1997 1998
------ ----- ----
<S> <C> <C> <C>
Federal statutory tax
rate................... 35.0% 35.0% 35.0%
State and local taxes
(net of federal tax
benefit)............... 6.0 6.0 4.6
Non-recognition of
combined losses of MAC
Assets................. (116.6) (32.2) (4.4)
Amortization of non-
deductible goodwill.... (13.1) (5.8) (3.4)
Other................... (3.3) (1.2) (6.4)
------ ----- ----
Effective tax rate...... (92.0)% 1.8% 25.4%
====== ===== ====
</TABLE>

The effective tax rate differs from the federal statutory tax rate primarily
as a result of Ziff-Davis Inc.'s inability to deduct losses of the MAC Assets
prior to May 4, 1998. The amortization of non-deductible goodwill resulted
primarily from the acquisition of 100% of the stock of Holding's in 1996.

Following is a summary of the components of the deferred tax accounts at
December 31, 1997 and 1998:

<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998
--------- ---------
(dollars in
thousands)
<S> <C> <C>
Current deferred tax assets and (liabilities):
Allowance for doubtful accounts................... $ 8,750 $ 15,769
Unearned income................................... 965 6,309
Other............................................. (921) 184
--------- ---------
Current deferred net tax assets................. 8,794 22,262
--------- ---------
Noncurrent deferred tax assets and (liabilities):
Basis difference in intangible assets............. (288,286) (247,832)
Basis difference in property and equipment........ 7,394 12,274
Net operating loss and other carryforwards........ 133,314 91,637
Other............................................. 6,317 15,149
--------- ---------
Noncurrent deferred tax liabilities............. (141,261) (128,772)
Valuation allowance................................. (38,856) (36,310)
--------- ---------
Net noncurrent deferred tax liabilities......... (180,117) (165,082)
--------- ---------
Net deferred tax liabilities........................ $(171,323) $(142,820)
========= =========
</TABLE>

As of December 31, 1997 and 1998 Ziff-Davis Inc. had total deferred tax
assets of $116,963,000 and $105,012,000, respectively, and total deferred tax
liabilities of $288,286,000 and $247,832,000, respectively. The December 31,
1997 and 1998 net deferred tax assets are reduced by a valuation allowance of
$38,856,000 and $36,310,000, 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 1998 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,
inasmuch as such losses will not be available to Ziff-Davis Inc.

VI-31
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

At December 31, 1998, Ziff-Davis Inc. has U.S. and foreign net operating loss
carryforwards of approximately $195,943,000, which will begin to expire in
1999. Ziff-Davis Inc.'s utilization of certain net operating loss
carryforwards, of approximately $122,549,000, is subject to limitations, due to
the change of ownership resulting from the Softbank acquisition of the Holdings
stock on February 29, 1996. Management believes that such limitations will not
significantly affect Ziff-Davis Inc.'s 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, Ziff-Davis Inc. has alternative minimum tax credit
carryforwards of $385,000 which may be carried forward indefinitely until used.

Undistributed earnings of foreign subsidiaries for which no deferred taxes
have been provided approximate $2,789,000 at December 31, 1998. Any additional
U.S. taxes payable on these foreign earnings, if remitted, would be
substantially offset by credits for foreign taxes already paid.

11. Notes Payable

8 1/2% Senior Subordinated Notes

On May 4, 1998 Ziff-Davis Inc. issued 8 1/2% Senior Subordinated Notes due
2008 (the "Notes") in the aggregate principal amount of $250,000,000. The Notes
were issued at a discount of $915,000 which is being amortized to interest
expense over the term of the notes. Included in the balance sheet at December
31, 1998 as a reduction of long-term debt is $870,000 representing the
unamortized discount on the Notes. Interest on the Notes is payable semi-
annually on May 1 and November 1 of each year. Redemption of the Notes by Ziff-
Davis Inc. is subject to certain limitations. The Notes are subordinated to all
existing and future senior indebtedness.

Credit Facility

Ziff-Davis Inc. is party to a secured guaranteed credit agreement with The
Bank of New York, Morgan Stanley Senior Funding, DLJ Capital Funding and The
Chase Manhattan Bank, as agents, to provide a $1,350,000,000 term credit
facility. The amount outstanding under this facility at December 31, 1998 was
$1,220,000,000. The credit facility consists of (1) a seven-year $400,000,000
reducing revolving credit facility, with $270,000,000 drawn as of December 31,
1998, (2) a seven-year $450,000,000 term loan and (3) an eight-year
$500,000,000 term loan. Under the credit facility, Ziff-Davis Inc. paid
interest at rates ranging from LIBOR plus 1.5% to LIBOR plus 1.75%. See "--
Amendment to Credit Facility" below.

There are various customary conditions to draw-downs under the revolving
commitments. The revolving credit commitments will be reduced and the $450
million term loan will be amortized, beginning in September 2000, by:

. 10% in 2000, in two equal quarterly installments,

. 20% in each of 2001, 2002, 2003 and 2004 in four equal quarterly
installments and

. 10% at final maturity in March 2005.

The $500 million term loan will be amortized, beginning in September 2000, by:

. $2 million in 2000, in two equal quarterly installments,

. $4 million in each of 2001, 2002, 2003, 2004 and 2005 in four equal
quarterly installments and

. $478 million at final maturity in March 2006.

The credit facility is secured, in part, by a first priority security
interest in capital stock of certain subsidiaries of Ziff-Davis Inc. and is
guaranteed by certain wholly owned domestic subsidiaries of Ziff-Davis Inc., in
each case, including ZD Inc. and ZD Events.

VI-32
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Under its most restrictive covenant, Ziff-Davis Inc. had $28,800,000
available under its line of credit at December 31, 1998.

Covenants

The Notes and the credit facility contains certain customary affirmative and
negative covenants, including covenants with respect to limitations on
dispositions of assets, changes of business and ownership, mergers or
acquisitions, restricted payments, indebtedness, loans and investments, and
transactions with affiliates. The Notes and the credit facility also contains
certain financial covenants including levels of debt to EBITDA and EBITDA to
interest ratios.

The failure to satisfy any of the covenants would constitute an event of
default under the credit facility. The credit facility also includes 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. At December 31, 1998,
Management believes that Ziff-Davis Inc. was in compliance with all covenants
under its debt agreements.

Amendment to Credit Facility

On December 16, 1998, the lenders on Ziff-Davis Inc.'s $1,350,000,000 credit
facility agreed to amend certain provisions of that facility. The amended
provisions include an increase in allowed leverage ratios. In return, Ziff-
Davis Inc. agreed to pay a one-time fee of $3,375,000 and increase rates on
amounts borrowed under the facility to rates currently ranging from LIBOR plus
2.875% to LIBOR plus 3.375%, depending on the type of loan. The fee has been
capitalized and will be amortized to interest expense over the remaining term
of the facility.

Related-party debt

In March 1995, Ziff-Davis Inc. entered into a $100,000,000 note payable to
Softbank due in quarterly installments, maturing on February 28, 2010 and
bearing interest at 9.9% per annum. (See Note 12).

Scheduled principal payments

Scheduled principal payments due on long-term debt at December 31, 1998 are
as follows:

<TABLE>
<CAPTION>
(dollars
in
thousands)
----------
<S> <C>
1999........................................ $ 7,692
2000........................................ 53,923
2001........................................ 100,923
2002........................................ 100,923
2003........................................ 100,923
Thereafter.................................. 1,183,501
----------
Total....................................... $1,547,885
==========
</TABLE>

Interest Rate Swaps

On June 10, 1998 Ziff-Davis Inc entered into interest rate swap agreements,
with an aggregate notional amount of $550,000,000. Under these swap agreements,
which took effect on August 10, 1998, Ziff-Davis Inc. will receive a floating
rate of interest based on three-month LIBOR, which resets quarterly, and Ziff-
Davis Inc. will pay a fixed rate of interest, each quarter, for the terms of
the respective agreements. The terms of these agreements range from 3 to 7
years and the weighted average fixed rate Ziff-Davis Inc. will pay is 5.85%
Ziff-Davis Inc. has entered into these agreements solely to hedge its interest
rate risk under its floating rate bank debt.

VI-33
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

For the year ended December 31, 1998, these interest rate swaps did not have
a material impact on the financial statements.

12. Related Party Transactions

Ziff-Davis Inc is a member of a group of companies affiliated through common
ownership with Softbank and has various transactions and relationships with
members of the group. Due to 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

Due from affiliates consist of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
----------- -----------
(dollars in thousands)
<S> <C> <C>
Due from:
MAC .............................................. $ 42,687 $ 50,704
Softbank.......................................... 84,365 1,557
Other affiliates.................................. 4,238 1,723
----------- ----------
$ 131,290 $ 53,984
=========== ==========
</TABLE>

Due to affiliates and management consist of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
----------- -----------
(dollars in thousands)
<S> <C> <C>
Due to:
Management (including long term portion)......... $ -- $ 9,900
MAC ............................................. 270,000 --
Softbank......................................... 126,371 --
Other affiliates................................. 1,961 118
----------- ----------
$ 398,332 $ 10,018
=========== ==========
</TABLE>

As part of the 1996 acquisition of ZDI, Ziff-Davis Inc. agreed to assume
certain obligations to management arising out of prior employment arrangements
with previous owners. In January 1997, Ziff-Davis Inc. paid all amounts due,
including accrued interest, through the payment date.

Prior to the Reorganization and initial public offering, Ziff-Davis Inc. was
a member of Softbank's central cash management system. Under this system, Ziff-
Davis Inc. would periodically transfer excess cash to Softbank for cash
management purposes and in turn receive cash advances from Softbank to fund
Ziff-Davis Inc.'s short-term working capital requirements. Interest was accrued
based on the net balance outstanding at the end of each month. Interest income
was earned at the 30-day LIBOR rate for the applicable month. Interest expense
was incurred at the 30-day LIBOR rate plus 0.5%.

As a result of contingent purchase price adjustments related to its
acquisition of Inter@ctive Enterprises, Ziff-Davis Inc. is obligated to pay the
prior owners of Inter@ctive Week $10,850,000 which was recorded as an increase
to intangible assets. The purchase price payments of $950,000, $4,500,000 and
$5,400,000 are due in 1998, 1999 and 2000, respectively. The 1999 and 2000
payments have been classified as current and long-term due to management.

VI-34
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Other affiliated arrangements

During the years ended December 31, 1996, 1997 and 1998, Ziff-Davis Inc.
incurred $2,000,000 $1,631,000, and $270,000, respectively, in advertising
expense with Yahoo!, Inc. ("Yahoo!"), an affiliated company.

Ziff-Davis Inc. sells advertising space and exhibition services to Kingston
Technology Company ("Kingston"), an affiliated company. During the years ended
December 31, 1996, 1997 and 1998, Ziff-Davis Inc. recorded revenue of $882,000,
$2,667,000 and $3,070,000 respectively, from sales to Kingston. These services
were provided under terms consistent with those provided to unaffiliated
customers.

In addition, on May 4, 1998 Ziff-Davis Inc. purchased $9,107,000 of fixed
assets from Kingston in exchange for cash and common stock of Ziff-Davis Inc.
Such fixed assets were subsequently leased back to Kingston. Rental income
included as a reduction of selling, general and administrative expenses related
to this transaction was $2,400,000 in 1998.

Ziff-Davis Inc. has entered into an agreement to manage certain trade shows
and expositions owned by Softbank and its non-Ziff-Davis Inc. affiliates,
whereby Ziff-Davis Inc. earns management, royalty and licensing fees. The fees
earned by for the years ended December 31, 1996, 1997 and 1998 were $3,394,000,
$4,057,000 and $1,117,000 respectively.

In 1996 and 1997, Ziff-Davis Inc. had an arrangement with SOFTBANK
Interactive Marketing ("SIM"), an affiliated company, for the provision of
interactive media sales. Ziff-Davis Inc. paid commissions to SIM of $600,000
and $1,800,000 during the years ended December 31, 1996 and 1997, respectively.
The relationship for provision of interactive media sales was terminated in
1997 and on December 31, 1997, SIM was acquired by an unrelated third party.

Ziff-Davis Inc. has an arrangement with SOFTBANK Services, an affiliated
company, whereby Ziff-Davis Inc. is charged for administrative services
provided plus a management fee. For the years ended December 31, 1996, 1997 and
1998, the Ziff-Davis Inc. incurred services fees of $359,000, $1,259,000 and
$810,000 respectively, in relation to this agreement. During 1998, SOFTBANK
Services was sold to an unrelated third party and the arrangement was
terminated.

Ziff-Davis Inc. has entered into certain licensing agreements with Softbank
for the publishing and distribution of Japanese language editions of certain
publications. The fees earned by Ziff-Davis Inc. for the years ended December
31, 1996, 1997 and 1998 were approximately $964,000 $1,818,000 and $709,000
respectively.

Certain Ziff-Davis Inc. employees have been granted options to purchase
Softbank Common Stock (the "Softbank Options"). Further, on January 29, 1999
options to purchase Ziff-Davis, Inc. Common Stock were granted in connection
with the cancellation of certain Softbank options. (See Note 13.)

In July 1997, Ziff-Davis Inc. entered into a license and services agreement
to develop ZDTV for MAC Holdings (America) Inc. ("MHA"), a company that is
wholly owned by Mr. Masayoshi Son, who is a director of Ziff-Davis Inc. and
principal stockholder of SOFTBANK Corp. Under this agreement, Ziff-Davis Inc.
agreed to fund ZDTV's operations through unsecured advances and was granted an
option to purchase ZDTV for a price equal to MHA's investment plus 10% per
annum for the period of investment. The cumulative advances, through December
31, 1997, which totaled $14.4 million net of $10.1 million in repayments were
repaid concurrently with the Reorganization. Advances in 1998 totaled $48.6
million and were repaid upon completion of Ziff-Davis Inc.'s acquisition of
ZDTV. (See Notes 2 and 21.)

VI-35
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Ziff-Davis Inc. 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 $1,161,000
through 2003.

Notes payable to affiliates

See Note 2 for a discussion of Ziff-Davis Inc.'s restructuring of its debt
and equity structures through the Reorganization and initial public offering.

Ziff-Davis Inc.'s long-term debt payable to Softbank consists of the
following:

<TABLE>
<CAPTION>
December 31,
-------------------
1997 1998
---------- -------
(dollars in
thousands)
<S> <C> <C>
Notes payable to affiliate(1)......................... $1,080,000 $ --
Notes payable to affiliate(2)......................... 900,000 --
Notes payable to affiliate(3)......................... 375,027 --
Note payable to affiliate(4).......................... 94,231 77,884
Note payable to affiliate(5).......................... 74,772 --
Note payable to affiliate(6).......................... 10,000 --
---------- -------
Total............................................... 2,534,030 77,884
Less--Current portion................................. (125,790) (7,692)
---------- -------
$2,408,240 $70,192
========== =======
</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) Note matures on February 28, 2010. The note bears 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.

During 1996, 1997 and 1998, Ziff-Davis Inc. incurred $120,646,000,
$190,445,000 and $65,935,000 respectively, of interest expense due to Softbank
related to the above notes payable.

Guarantee of Softbank's U.S. debt

In April 1996, Softbank signed a line of credit agreement totaling
$50,000,000 with an independent lender for which Ziff-Davis Inc., along with
certain other Softbank affiliates, is a guarantor. In January 1997, October
1997 and March 1998, this line of credit was increased to $75,000,000,
$150,000,000 and $450,000,000, respectively. On May 4, 1998, Ziff-Davis Inc.
was released from this guarantee.

Return of capital and dividends

On December 15, 1996, Ziff-Davis Inc. declared a return of capital of
approximately $900,000,000 paid through the issuance of a note payable to a
subsidiary of Softbank and a cash dividend of $8,000,000 to Softbank. In 1997,
Ziff-Davis Inc. recorded a return of capital of $381,434,000 in connection with
the purchase price of companies under common control.

VI-36
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

13. Stock Compensation Plans

SOFTBANK Executive Stock Option Plans

The SOFTBANK Executive Stock Option Plans provide for the granting of
nonqualified stock options (the "Softbank Options") to purchase the common
stock of Softbank to officers, directors and key employees of Ziff-Davis Inc.
Softbank is Ziff-Davis Inc.'s majority stockholder and SOFTBANK Corp. is a
publicly traded company in Japan. 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, 1998, 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. On January 19, 1998, the exercise
price of all of the shares outstanding under option agreements was reset to
(Yen)4,000, 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 could only be exercised after July
19, 1998. The repricing did not result in compensation expense to Ziff-Davis
Inc.

1998 Incentive Compensation Plan and the 1998 Non-Employee Directors' Stock
Option Plan

In 1998, Ziff-Davis Inc. adopted the 1998 Incentive Compensation Plan (the
"Incentive Plan") and the 1998 Non-Employee Directors' Stock Option Plan (the
"Non-Employee Directors' Plan"). The Incentive Plan provides for the grant of
options, stock appreciation rights, stock awards and other interests in Ziff-
Davis Inc.'s common stock to key employees of Ziff-Davis Inc. and its
affiliates and consultants. The Non-Employee Directors' Plan provides for the
grant of stock options to non-employee directors. Ziff-Davis Inc. has reserved
8,500,000 shares of common stock for issuance under the Incentive Plan and
200,000 shares of common stock for issuance under the Non-Employee Directors'
Plan. During 1998, Ziff-Davis Inc. granted options to purchase 6,757,495 shares
with exercise prices ranging from $6.00 to $16.00 per share representing the
fair value of such options at that date. Such options vest ratably over five
years.

On September 23, 1998, the Board approved the reduction of the exercise price
of all options outstanding under the plans from $16.00 to $6.00, the closing
market price of Ziff-Davis Inc.'s common stock on that date. In addition, the
vesting period of the options was extended by three months. The repricing did
not result in compensation expense to Ziff-Davis Inc.

On December 21, 1998 the Board approved an amendment to the Incentive Plan,
subject to stockholder approval, to permit grants of options and other stock-
based awards with respect to any series of common stock of Ziff-Davis Inc. and
increase the number of shares reserved for issuance from 8,500,000 shares to
20,327,500 shares.

The terms of the options described in the preceding paragraph require an
adjustment in the number of shares of ZDNet Stock that holders may purchase and
the per share purchase price thereof if the Initial Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet is different from 40,000,000.
This adjustment is similar to the adjustment that would generally be made to
the terms of employee stock options in the event of a stock split. Ziff-Davis
Inc. currently expects that the Initial Number of Shares Issuable with Respect
to ZD's Retained Interest in ZDNet will be 70,000,000. Assuming that this is
so, the total number of

VI-37
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

shares of ZDNet Stock that holders may purchase upon exercise of these options
will increase to approximately 10,200,000 and the per share purchase price
thereof will decrease to approximately $4.29.

The December 21, 1998 Board actions described above are subject to
stockholder approval. The majority stockholder of Ziff-Davis Inc. has committed
to vote for these actions.

On January 29, 1999, Ziff-Davis Inc. granted options to a number of employees
in connection with the cancellation of corresponding options to purchase stock
of SOFTBANK Corp. In connection with these grants, an affiliate of SOFTBANK
Corp. has agreed with Ziff-Davis Inc. that, if and when any of these options
are exercised, (1) that affiliate will cause the shares of Ziff-Davis Inc.
common stock issuable upon such exercise to be supplied to Ziff-Davis Inc. and
(2) Ziff-Davis Inc. will deliver to that affiliate or its designee the exercise
price paid upon such exercise. Thus, the exercise of these options will not
increase the number of shares of Ziff-Davis Inc. common stock outstanding or
Ziff-Davis Inc.'s stockholders' equity. However, Ziff-Davis Inc. expects to
recognize compensation expense for accounting purposes of approximately
$3,018,000 over three years as a result of these grants. As such, this amount
has been recorded in the Financial Statements as additional paid in capital
offset by a reduction to stockholders' equity as deferred compensation.

GameSpot Inc. 1997 Stock Option Plan

Ziff-Davis Inc. adopted the GameSpot Inc. 1997 Stock Option Plan (the
"GameSpot Plan") to provide long term incentives for key employees of GameSpot
and to enhance shareholder value. The GameSpot Plan provides for the grant of
stock options in GameSpot Inc.'s common stock. GameSpot had reserved 800,000
shares of GameSpot Inc.'s common stock for issuance under the GameSpot Plan. In
1997, 780,000 options were granted to certain employees under the GameSpot
Plan. Such options vest ratably over 3 years.

Option grants

Information relating to the Softbank options during 1996, 1997 and 1998 is as
follows:

<TABLE>
<CAPTION>
Number Weighted Average
of Option Price
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
Granted................................... 258,215 31.03
Exercised................................. (75,982) 31.03
Converted to Ziff-Davis Inc. options...... (83,578) 31.03
Forfeited/cancelled....................... (309,936) 31.03
--------
Shares outstanding under options at
December 31, 1998........................ 755,705 $31.03
========
Shares exercisable as of:
At December 31, 1996.................... -- --
At December 31, 1997 (price range
$44.26-$87.15)......................... 107,630 $82.06
At December 31, 1998 (price $31.03)..... 177,965 $31.03
</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.
The 1998 activity reflects the repricing of all options outstanding as of
January 19, 1998 to (Yen)4,000.
(2) Adjusted for a 1.4:1 stock split during 1996 and a 1.3:1 stock split during
1997.

VI-38
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Information relating to Ziff-Davis Inc. stock options issued during 1998 is
as follows:

<TABLE>
<CAPTION>
Weighted Average
Number of Option Price
Shares Per Share
--------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1997................................... -- --
Granted..................................... 6,757,495 $ 6.09
Exercised................................... -- --
Converted from Softbank options............. 327,400 8.89
Forfeited................................... (393,590) 6.00
---------
Shares outstanding under options at December
31, 1998................................... 6,691,305 $ 6.22
=========

Information relating to ZDNet stock options issued during 1998 is as follows:

<CAPTION>
Weighted Average
Number of Option Price
Shares Per Share
--------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1997................................... -- --
Granted..................................... 5,729,300 $ 7.50
Exercised................................... -- --
Forfeited................................... -- --
---------
Shares outstanding under options at December
31, 1998................................... 5,729,300 $ 7.50
=========
</TABLE>

At December 31, 1998, no shares of either the Ziff-Davis Inc. or ZDNet
options were exercisable.

Information relating to GameSpot, Inc. stock options is as follows:

<TABLE>
<CAPTION>
Number Weighted Average
of Option Price
Shares Per Share
-------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1996.................................... -- --
Granted...................................... 780,000 $0.44
Exercised.................................... -- --
Forfeited.................................... (61,000) 0.44
--------
Shares outstanding under options at December
31, 1997.................................... 719,000 $0.44
Granted...................................... -- --
Exercised.................................... -- --
Forfeited.................................... (167,000) 0.44
--------
Shares outstanding under options at December
31, 1998.................................... 552,000 $0.44
========
Shares exercisable as of:
December 31, 1997 (price of $0.44)........... 400,610 $0.44
December 31, 1998 (price of $0.44)........... 497,639 $0.44
</TABLE>

As permitted by SFAS No. 123, Ziff-Davis Inc. 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, 1997 or 1998. Pro forma information regarding net income is
required by SFAS No. 123 and has been determined as if Ziff-Davis Inc. had
accounted for stock options under the fair value

VI-39
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

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, 1997 and 1998:

Softbank Options
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate......................... 5.89% 6.35% 5.46%
Dividend yield.................................. 0.26% 0.22% 1.50%
Volatility factor............................... 54.03% 51.35% 77.72%
Expected life................................... 6 years 6 years 6 years

Ziff-Davis Inc. Options
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate......................... n/a n/a 5.03%
Dividend yield.................................. n/a n/a 0.00%
Volatility factor............................... n/a n/a 54.70%
Expected life................................... n/a n/a 6 years

ZDNet Options
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate......................... n/a n/a 4.67%
Dividend yield.................................. n/a n/a 0.00%
Volatility factor............................... n/a n/a 54.70%
Expected life................................... n/a n/a 6 years

GameSpot Inc. Options
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate......................... n/a 6.35% 6.44%
Dividend yield.................................. n/a 0.00% 0.00%
Volatility factor............................... n/a 100.27% 100.27%
Expected life................................... n/a 4 years 4 years

The weighted average fair value of options granted in 1996, 1997 and 1998, is
as follows:

<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Softbank options................................ $ 64.30 $ 34.05 $ 19.81
Ziff-Davis Inc. options......................... n/a n/a 5.21
ZDNet options................................... n/a n/a 4.25
GameSpot Options................................ n/a 0.32 0.32
</TABLE>

For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over 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, 1997 and 1998, consistent
with the provisions of SFAS No. 123, the Ziff-Davis Inc.'s net loss would have
been increased by approximately $3,100,000, $4,200,000, and $15,130,000
respectively.

Other stock compensation plans

During 1996, 1997 and 1998, employees of Ziff-Davis Inc. were granted 45,760,
61,940 and 27,223 shares, respectively, of Softbank common stock (adjusted for
a 1.4:1 stock split 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 3 to 5-year period from the date of grant. The granting of the shares to
Ziff-Davis Inc.'s employees has

VI-40
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

been recorded as additional paid-in capital offset by a reduction to
stockholders' 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 $1,080,000 was charged to expense related to the restricted stock
awards. During 1997, restrictions on 75,210 shares expired, 2,150 shares were
forfeited and $3,916,000 was charged to expense related to these restricted
stock awards. During 1998, restrictions on 22,361 shares expired, 5,736 shares
were forfeited and $252,000 was charged to expense related to these restricted
stock awards.

Employee Stock Purchase Plan

In 1998, Ziff-Davis Inc. adopted the Employee Stock Purchase Plan (the "Stock
Purchase Plan") whereby eligible employees may purchase Ziff-Davis Inc.'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 (1) the first
business day of a purchase period or (2) the last business day of a purchase
period. Ziff-Davis Inc. has reserved 2,500,000 shares of common stock
(regardless of series) for issuance under the Stock Purchase Plan.

14. Employee Benefit Plans

Pension plan

Certain employees of Ziff-Davis Inc. who have met eligibility requirements
were covered by a noncontributory defined benefit pension plan. The benefits
are based on years of service and average compensation at the time of
retirement. Ziff-Davis Inc.'s 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.

During 1997, Ziff-Davis Inc. 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 amounts below reflect the effects of such termination.
A gain of $156,000 was recorded in 1998 as a result of the plan settlement.

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>
1996 1997
------------ -----------
(dollars in thousands)
<S> <C> <C>
Service cost..................................... $ 700 $ 391
Interest cost.................................... 472 456
Expected return on plan assets................... (300) (445)
Amortization of transition obligation............ 199 75
------------ ----------
Net periodic pension cost........................ $ 1,071 $ 477
============ ==========
</TABLE>

VI-41
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

The following table sets forth the funded status and amounts recognized in
the balance sheet:

<TABLE>
<CAPTION>
1997
----------------------
(dollars in thousands)
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation....................... $5,721
------
Accumulated benefit obligations................. 5,721
======
Projected benefit obligations..................... 5,721
Plan assets at fair value......................... (6,004)
------
Projected benefit obligation less than plan
assets........................................... (283)
Unrecognized net transition asset ................ 1,279
------
Pension liability included in balance sheet....... $ 996
======
</TABLE>

Retirement plans

Ziff-Davis Inc. maintains various defined contribution retirement plans.
Substantially all of Ziff-Davis Inc.'s employees are eligible to participate in
one of the plans under which annual contributions may be made by Ziff-Davis
Inc. 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 Ziff-Davis Inc. up to certain
specified percentages. Employees are generally eligible to participate in a
plan upon joining Ziff-Davis Inc. and receive matching contributions after one
year of employment. Ziff-Davis Inc. made contributions to the plans totaling
$10,470,000, $13,725,000 and $13,004,000 in 1996, 1997 and 1998, respectively.

15. Investments

Ziff-Davis Inc. has investments in the following companies/joint ventures:

<TABLE>
<CAPTION>
Carrying value
at December 31,
Ownership ---------------
Equity investments Percentage 1997 1998
------------------ ---------- ------- -------
(dollars in
thousands)
<S> <C> <C> <C>
Mac Publishing LLC............................. 50% $16,244 $19,268
ExpoComm LLC................................... 50 7,758 8,571
Family PC G.P.................................. 50 9,342 --
Cost Investments
----------------
Red Herring Communications, Inc................ -- $ 5,000
Deja News, Inc. ............................... -- 5,000
</TABLE>

The entities 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 Ziff-
Davis Inc.'s financial statements.

Ziff-Davis Inc.'s equity income (loss) was $(796,000), $335,000 and
$7,483,000 in 1996, 1997 and 1998, respectively.

VI-42
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

16. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
1996 1997 1998
---------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest ................................. $ 99,509 $185,447 $129,976
Income taxes.............................. 360 4 1,000
Noncash investing and financing activities:
Fair value of assets acquired............. $2,508,603 $ 20,749 $ 60,473
Liabilities assumed....................... 370,518 6,749 32,701
---------- -------- --------
Cash paid................................. 2,138,085 14,000 27,772
Less--cash acquired....................... 13,262 -- --
---------- -------- --------
Net cash paid for investments and
acquisitions............................. $2,124,823 $ 14,000 $ 27,772
========== ======== ========
Return of capital dividends............... $ 899,948 $381,434 $ --
========== ======== ========
Capital contributions..................... $ 5,002 $ 61,580 $926,096
========== ======== ========
</TABLE>

17. Operating Lease Commitments

Ziff-Davis Inc. is obligated under various operating leases which expire at
various dates through 2021. Future minimum rental commitments under
noncancelable operating leases are as follows:

<TABLE>
<CAPTION>
(dollars
in
thousands)
<S> <C>
1999................................................................. $ 32,740
2000................................................................. 34,094
2001................................................................. 31,882
2002................................................................. 29,957
2003................................................................. 28,655
Thereafter........................................................... 232,974
--------
Total.............................................................. $390,302
========
</TABLE>

Netted in the above totals is approximately $5,000,000 for which Ziff-Davis
Inc. has noncancelable subleases in place. Total sublease income approximates
Ziff-Davis Inc.'s required payments under the related leases. Rent expense
amounted to approximately $23,015,000, $29,994,000 and $24,695,000 for the
years ended December 31, 1996, 1997 and 1998, respectively.

18. Contingencies

Ziff-Davis Inc. is subject to various claims and legal proceedings arising in
the normal course of business.

Class Action and Derivative Litigations

Following a decline in the price per share of Ziff-Davis Inc.'s common stock
in October, 1998, eight securities class action suits were filed against Ziff-
Davis Inc. and certain of its directors and officers in the United States
District Court for the Southern District of New York.

The complaints allege that defendants violated Sections 11, 12(a) (2) and 15
of the Securities Act of 1933 in connection with the registration statement
filed by Ziff-Davis Inc. with the Securities and Exchange Commission relating
to the initial public offering of Ziff-Davis Inc.'s stock on April 29, 1998
(the "IPO"). More particularly, the complaints allege that the registration
statement contained false and misleading statements and failed to disclose
facts that could have indicated an impending decline in Ziff-Davis Inc.'s
revenue. The complaints seek on behalf of a class of purchasers of Ziff-Davis
Inc.'s common stock from the

VI-43
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

date of the IPO through October 8, 1998 unspecified damages, interest, fees and
costs, rescission, and injunctive relief such as the imposition of a
constructive trust upon the proceeds of the IPO.

On January 28, 1999, the court entered an order consolidating the actions,
appointing lead plaintiff's counsel and requiring the filing of a consolidated
amended complaint within 45 days. Thereafter, Ziff-Davis Inc. will have 45 days
to respond to the consolidated amended complaint.

In addition, to derivative suits have been filed by stockholders against
Ziff-Davis Inc. and all of its directors in the Court of Chancery of the State
of Delaware for New Castle County. The complaints allege that the directors
breached their fiduciary duties to Ziff-Davis Inc. by repricing the stock
options awarded to certain directors and demand the nullification of the
repricing and an injunction against exercise by the directors of any repriced
option. Plaintiffs filed an amended complaint on February 17, 1999 (which is
substantially similar to the original complaints, except that the amended
complaint also addresses the granting of "new options" at an allegedly "reduced
exercise price") and have indicated their intent to seek consolidation of the
actions. A response to the amended complaint has not yet been filed.

Other Legal Proceedings

Ziff-Davis Inc. was named as a defendant in an action, filed on April 17,
1998 in the Supreme Court of the State of New York, by minority shareholders of
SOFTBANK Interactive Marketing Inc. ("SIM"), formerly an indirect subsidiary of
Softbank. The complaint alleges, among other things, that SBH, SIM's majority
shareholder, acting with Ziff-Davis Inc. and two of its senior officers and
directors who were directors of SIM (and who were also named as defendants),
had conflicts of interest between SIM and other Softbank investments (including
investments in Ziff-Davis Inc.) and failed to act in the best interests of SIM
and the minority shareholders by taking actions which benefited Ziff-Davis Inc.
The complaint states claims based on common law fraud, breach of fiduciary duty
and aiding and abetting theories and seeks in excess of $200,000,000 in
damages. Ziff-Davis Inc. and the other defendants have moved to dismiss all of
the claims against them other than a breach of contract claim which is solely
against SBH.

Although the outcome of these cases cannot be predicted, Ziff-Davis Inc.
believes that there are substantial defenses to the claims. Ziff-Davis Inc.
currently cannot estimate its ultimate liability, if any, with respect to such
pending litigations. Accordingly, no provision for such matters have been
included in the financial statements.

19. Segment Information

Ziff-Davis Inc. has adopted the provisions of SFAS No. 131 Disclosures about
Segments of an Enterprise and Related Information. As such, prior years data
has been restated in accordance with SFAS No. 131.

Business segment information

Ziff-Davis Inc.'s reportable segments are based on its method of internal
reporting, which segregates its business by product lines. Management measures
operating performance of the business segments based on "EBITDA". 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 a alternative to net income as
an indicator of Ziff-Davis Inc.'s operating performance or to cash flows as a
measure of liquidity. Although Ziff-Davis Inc. believes that EBITDA is a
standard measure

VI-44
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

commonly reported and widely used by analysts, investors and other interested
parties, in the publishing business and media industries, the EBITDA presented
for Ziff-Davis Inc. may not be comparable to similarly titled measures reported
by other companies.

Ziff-Davis Inc.'s reportable segments are:

Publishing

The publishing segment is engaged in publishing magazines, journals,
newsletters, online content, 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.

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for the computer industry. The events
segment's principal operations are in North America and to a lesser extent in
Europe, Asia and Latin America.

Internet

The Internet segment is engaged in providing technology-related information
to Internet users worldwide. The Internet segment's principal operations are in
the U.S. and to a lesser extent Europe.

The accounting policies of the segments are the same as those described in
Note 3 "Summary of Significant Accounting Policies". Ziff-Davis Inc. evaluates
the performance of its segments and allocates resources to them based on
EBITDA. Any inter-segment revenues included in segment data are not material.
The following presents information about the reported segments for the years
ending December 31:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenue:
Publishing............................. $ 674,040 $ 834,015 $ 782,882
Events................................. 264,884 287,528 269,867
Internet............................... 16,215 32,218 56,143
---------- ---------- ----------
Total................................ $ 955,139 $1,153,761 $1,108,892
========== ========== ==========

<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
EBITDA:
Publishing............................. $ 136,395 $ 183,545 $ 125,320
Events................................. 108,791 103,749 119,698
Internet............................... (11,928) (14,400) (924)
---------- ---------- ----------
Total................................ $ 233,258 $ 272,894 $ 244,094
========== ========== ==========

<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Total Assets:
Publishing............................. $2,358,144 $2,335,034 $2,192,099
Events................................. 1,143,522 1,124,286 1,144,018
Internet............................... 82,507 87,326 97,686
---------- ---------- ----------
Total................................ $3,584,173 $3,546,646 $3,433,803
========== ========== ==========
</TABLE>

VI-45
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

A reconciliation of total segment EBITDA to total consolidated loss before
income taxes, for the years ended December 31, 1996, 1997 and 1998 is as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
EBITDA:
Total segment EBITDA.................... $ 233,258 $ 272,894 $ 244,094
Restructuring charge.................... -- -- (52,239)
Depreciation & amortization............. (32,303) (30,379) (29,885)
Amortization of intangible assets....... (107,433) (124,561) (122,659)
Interest expense, net................... (120,646) (190,445) (143,547)
--------- --------- ---------
Consolidated loss before income
taxes................................ $ (27,124) $ (72,491) $(104,236)
========= ========= =========
</TABLE>

Equity in income of investees included in the publishing segment EBITDA for
the years ended December 31, 1996, 1997 and 1998 was $(796,000), $335,000 and
$2,044,000, respectively. Equity in income of investees included in the events
segment EBITDA for the years ended December 31, 1996, 1997 and 1998 was $--,
$1,695,000 and $5,439,000, respectively.

Publishing's investment in equity method investees for the years ended
December 31, 1996, 1997 and 1998 was $10,138,000, $25,586,000 and $19,268,000,
respectively. Events' investment in equity method investees for the years ended
December 31, 1996, 1997 and 1998 was $7,698,000, $7,758,000 and $8,571,000
respectively.

During the years ended December 31, 1996, 1997 and 1998, publishing spent
$2,123,651,000, $19,026,000 and $42,324,000, respectively, for additions to
long-lived assets. Events spent $22,527,000 $19,798,000 and $12,565,000 for
additions to long-lived assets during the years ended December 31, 1996, 1997
and 1998, respectively. Internet spent $1,010,000, $5,372,000 and $9,483,000
for additions to long-lived assets during the years ended December 31, 1996,
1997 and 1998, respectively.

The following is sales information by geographic area as of and for the
respective years ended December 31.

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenue:
United States............................. $ 854,666 $1,040,297 $ 990,096
Foreign................................... 100,473 113,464 118,796
---------- ---------- ----------
Total................................... $ 955,139 $1,153,761 $1,108,892
========== ========== ==========

Foreign revenue is based on the country in which the sales originate. Revenue
from no single foreign country was material to the consolidated revenues of ZD.

The following is long-lived asset information by geographic area as of and
for the respective years ended December 31:

<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Long-lived assets:
United States............................. $3,202,981 $3,090,643 $3,034,002
Foreign................................... 9,538 8,555 13,570
---------- ---------- ----------
Total................................... $3,212,519 $3,099,198 $3,047,572
========== ========== ==========
</TABLE>

No single customer has accounted for more than 10% of total revenue for each
of the years ended December 31, 1996, 1997 and 1998.

VI-46
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

20. Fair Value of Financial Instruments

Ziff-Davis Inc.'s accounting policies with respect to financial instruments
are discussed in Note 3.

The carrying amounts and fair values of Ziff-Davis Inc.'s significant on
balance sheet financial instruments at December 31, 1997 and 1998 are as
follows:

<TABLE>
<CAPTION>
At December 31,
-------------------------------------------
1997 1998
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Values Amount Values
---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents......... $ 30,301 $ 30,301 $ 32,566 $ 32,566
Accounts receivable............... 221,310 221,310 227,325 227,325
Accounts payable.................. 55,468 55,468 74,397 74,397
Long-term debt (including current
portion)......................... 2,534,030 2,534,030 1,547,014 1,543,839
</TABLE>

Interest rate swaps

Ziff-Davis Inc. utilizes interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt. Under Ziff-
Davis Inc.'s interest rate swap agreements, Ziff-Davis Inc. agreed with the
counterparties to exchange, at quarterly intervals, the difference between
Ziff-Davis Inc.'s fixed pay rate and the counterparties' variable pay rate on
three-month LIBOR. At December 31, 1998, Ziff-Davis Inc. was a fixed payor of
5.85% on an aggregate notional amount of $550,000,000.

The fair values of these interest rate swaps were estimated by obtaining
quotes from brokers which represented the amounts that Ziff-Davis Inc. would
pay if the agreements were terminated at the balance sheet date. While it is
not Ziff-Davis Inc.'s intention to terminate these interest rate swaps, these
fair values indicated that the termination of the interest rate swap agreements
would have resulted in a loss of $15,627,000.

21. Subsequent Events

ZDTV

On February 4, 1999, Ziff-Davis Inc. purchased ZDTV at a purchase price of
approximately $81,400,000. (See Note 12.) Ziff-Davis Inc. paid approximately
$32,800,000 of the purchase price in cash (settled on February 5, 1999) and
paid the remainder by applying approximately $48,600,000 in advances owed to it
by MAC Holdings America. Other than advances to ZDTV which are reported on
Ziff-Davis Inc.'s balance sheet, the results of operations of ZDTV are not
included in Ziff-Davis Inc.'s results for any of the periods presented. This
acquisition will be accounted for in 1999 under the purchase method of
accounting.

Vulcan Transactions

On February 4, 1999, Vulcan Ventures, the investment vehicle of Paul G.
Allen, agreed to purchase approximately three million shares of Ziff-Davis Inc.
common stock for $50,000,000 in cash. This purchase is expected to close in the
first quarter of 1999. On February 5, 1999, Vulcan Programming, an entity owned
by Paul G. Allen, purchased a one-third interest in ZDTV for $54,000,000 in
cash.

VI-47
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Unaudited summary pro forma information

The following unaudited summary pro forma information has been prepared as if
the acquisition of ZDTV and the sale of a one-third interest in ZDTV to Vulcan
Programming had been consummated on January 1, 1998. (amounts in thousands)

<TABLE>
<S> <C>
Revenue.......................... $1,114,500
Loss from operations............. (24,000)
Net loss......................... $ (100,300)
Pro forma basic loss per share... $ (1.00)
</TABLE>

VI-48
<PAGE>

ANNEX VII

SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Selected Historical Combined Financial and Other
Data for ZD as of and for the years ended December 31, 1995, 1996, 1997 and
1998. This data was derived from the Combined Financial Statements of ZD. An
affiliate of Ziff-Davis Inc. acquired a print publishing business, ZD
Publishing, on February 29, 1996; the data does not include results from the
acquired business for periods before the date of acquisition. However, because
ZD Publishing represents ZD's principal operations, the following table also
presents Selected Historical Combined Financial and Other Data for ZD
Publishing as of and for the years ended December 31, 1994 and 1995 and as of
and for the two month period ended February 28, 1996. The data as of and for
the year ended December 31, 1995 and as of and for the two months ended
February 28, 1996 was derived from the unaudited Combined Financial Statements
of ZD Publishing. ZD Publishing data as of and for the year ended December 31,
1994 was derived from ZD Publishing's unaudited financial statements. On May 4,
1998, Ziff-Davis Inc. completed a reorganization described in Note 2 to the
Combined Financial Statements of ZD; results for period before the
reorganization are not directly comparable to results for period after the
reorganization. This table should be read in conjunction with the Selected
Historical Financial and Other Data, Management's Discussion and Analysis of
Financial Condition and Results of Operations and Financial Statements for
Ziff-Davis Inc., ZD and ZDNet, included in this Annex and Annexes VI and VIII
to this Proxy Statement.

<TABLE>
<CAPTION>
ZD Publishing(1) ZD
------------------------------------- ---------------------------------------------
Two month
Year ended December 31, period ended Year ended December 31,
----------------------- February 28, ---------------------------------------------
1994 1995 1996 1995(2) 1996 1997 1998
----------- ----------- ------------ ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $ 698,030 $ 755,419 $ 122,562 $ 202,729 $ 938,924 $1,121,543 $1,052,749
Depreciation and
amortization........... 33,045 87,506 14,540 24,305 134,251 147,259 146,096
Income from operations.. 85,134 65,283 8,540 62,675 104,594 131,713 38,586
Interest expense, net... 17,887 92,609 14,030 44,005 120,646 190,445 143,547
Income (loss) before
income taxes........... 82,176 (36,472) (6,539) 22,869 (26,636) (71,648) (104,748)
Net income
(loss)(3)(4)........... 82,176 (26,002) (4,547) 10,945 (52,081) (71,179) (77,809)
Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 1,064,174 $ 10,083 $ 13,669 $ 27,908 $ 29,915 $ 30,273 $ 32,274
Total assets............ 2,747,968 1,625,426 1,622,438 1,090,981 3,584,963 3,548,108 3,429,938
Total long-term debt.... 1,034,000 964,153 964,153 575,450 2,522,252 2,408,240 1,539,332
Division equity......... 387,718 365,150 360,717 397,881 447,756 126,130 1,352,598
Other Data:
Capital expenditures.... $ 14,606 $ 12,573 $ 384 $ 3,367 $ 21,355 $ 27,822 $ 32,117
Capital contributions to
ZDNet.................. -- 7,106 2,350 -- 13,630 20,664 14,269
Investments and
acquisitions, net of
cash acquired.......... -- -- -- 814,520 2,124,823 11,002 22,772
</TABLE>
- --------

(1) A third party acquired ZD Publishing as of January 1, 1995. An affiliate of
Ziff-Davis Inc. acquired ZD Publishing on February 29, 1996. Because ZD
Publishing represents the ZD's principal operations, ZD Publishing data has
been presented for periods before these dates.

(2) An affiliate of Ziff-Davis Inc. acquired ZD Publishing on February 29,
1996; ZD data does not include results from the acquired business for
periods before the date of acquisition.

(3) During 1994, ZD Publishing conducted its operations through various
partnerships. Accordingly, there was no income tax provision for 1994.

(4) No historical earnings per share or share data are presented as Ziff-Davis
Inc. does not consider such data meaningful. After issuance of ZDNet Stock,
Ziff-Davis Inc. will report earnings per share data for ZD and ZDNet but
not for Ziff-Davis Inc.

VII-1
<PAGE>

ZD
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Revenue

ZD had net revenue of $1.053 billion for 1998. A substantial portion of ZD's
revenue is derived from the sale of advertising, which in 1998 accounted for
49.8% of total revenue. No single advertiser has comprised more than 4.0% of
ZD's advertising revenue during any of the last three years. However, ZD's top
20 advertisers accounted for 37.5% of total advertising revenue for 1998.

In the publishing segment, ZD's principal sources of revenue are advertising
(64.4% of 1998 total publishing revenue), circulation (18.7%) and other (16.9%)
for the year ended December 31, 1998. Circulation comprises both paid
subscriptions (10.9%) and newsstand sales (7.8%) while other includes
educational and training materials (7.4%) and market research studies (7.1%)
with the balance primarily consisting of royalties, reprints and other
miscellaneous sales. In the events segment, revenue is derived from two
principal sources: sale of exhibit space (66.8% of 1998 total segment revenue)
and attendee conference and seminar fees (14.1%). Unlike many trade show
producers, ZD derives a significant portion of its trade show revenue from
other sources (19.1%), including advertising in show-related publications,
billboards, banners, fees from managing customer-sponsored events and other
show-related activities. ZD believes these other sources will continue to be an
important growth area, particularly for its content-focused events.

ZD provides certain editorial content and brands for ZDNet for which ZDNet
pays a royalty to ZD based on ZDNet's revenue. See Note 5 to ZD's Combined
Financial Statements in this Annex.

Cost of operations

In the publishing business, the principal components of ZD's production costs
are raw materials, printing and distribution, which represented 34.5%, 38.0%
and 27.2%, respectively, of total 1998 publishing production expenses. ZD'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--Other Ziff-Davis Inc. Risks--Ziff-
Davis Inc. May Be Adversely Affected By Fluctuations In Paper And Postage
Costs" and "--Inflation and Fluctuations in Paper and Postage Costs". The
principal components of production costs within the events business are the
costs of renting and preparing the facilities to hold the events (46.8%),
direct mail and the related costs for promotion of the events (37.0%) and
program development and presentation costs (13.4%).

The other principal operating costs for ZD are selling, general and
administrative expenses, including editorial costs. Included in these costs are
salaries, sales commissions and benefits (56.6%) along with marketing and
promotion expenses related to advertising and circulation (20.2%).

The costs of certain Central Services are allocated between ZD and ZDNet. See
Note 5 to ZD's Combined Financial Statements in this Annex.

Factors affecting future periods

ZD'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 ZD'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, ZD may experience fluctuations in revenue from period to period.
Many of ZD's large customers concentrate their advertising

VII-2
<PAGE>

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 ZD'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, ZD's revenue from year to
year may be affected by the number and timing of new product launches. If ZD
concludes that a new publication, trade show or service will not achieve
certain milestones with regard to revenue, 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--Other Ziff-Davis Inc. Risks--To Remain Competitive
Ziff-Davis Inc. Must Constantly Expand And Develop New Products And Series.
This is Inherently Risky and Expensive".

Presentation of Financial Information

ZD is comprised of certain operations which were acquired at various times
and completed a reorganization in May 1998. See Notes 1 and 2 to ZD's Combined
Financial Statements in this Annex.

In order to create financial statements that separately present ZD's assets,
liabilities, revenue, expenses and cash flow while still reflecting ZD's 100%
Retained Interest in ZDNet's division equity and net losses, ZD has accounted
for its interest in ZDNet in a manner similar to the manner prescribed by APB
No. 18, The Equity Method of Accounting for Investments in Common Stock. Thus,
ZD's historical balance sheets reflect ZD's 100% Retained Interest in ZDNet's
division equity as "Retained interest in ZDNet". Similarly, ZD's historical
statements of operations reflect ZD's 100% Retained Interest in ZDNet's
division losses as "Loss related to Retained Interest in ZDNet".

Since ZD and ZDNet together constitute all of Ziff-Davis Inc. and since ZD's
financial statements have historically reflected 100% of ZDNet's division
equity and losses, ZD's division equity and net income or loss has historically
been equal to Ziff-Davis Inc.'s total stockholders' equity and net income or
loss.

However, ZD's 100% Retained Interest will decline in the future to reflect,
among other things, the ZDNet Stock sold in the offering. When ZD's Retained
Interest declines to a percentage below 100%, ZD's net income or loss will,
going forward, reflect only that reduced percentage of ZDNet's division income
or loss.

The book value associated with ZD's Retained Interest will decline in the
future to reflect sales of ZDNet Stock attributed to ZD's Retained Interest.

In addition, the book value associated with ZD's Retained Interest will
increase or decrease to reflect ZD's proportionate Retained Interest in ZDNet's
division income or loss and will be adjusted from time to time as set forth
under Note 3 to ZD's Combined Financial Statements in this Annex.

VII-3
<PAGE>

Results of Operations

The table below presents the results of ZD as if the assets and operations
acquired by affiliates of Ziff-Davis Inc. on February 29, 1996 (as described in
Note 1 to the Combined Financial Statements in this Annex) had been acquired on
January 1, 1995. Purchase accounting adjustments relating to that acquisition
have been reflected through pro forma amortization, interest and income tax
adjustments, as described in note (1) to the table. Although the 1996
presentation is not in accordance with generally accepted accounting
principles, management believes it presents the most meaningful basis of
comparison. The financial information presented below may not necessarily
reflect the results of operations which would have occurred had the February
29, 1996 acquisition been completed on January 1, 1995.

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
Pro Forma Actual
---------- ----------------------
1996(1) 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenue, net:
Publishing.............................. $ 796,602 $ 834,015 $ 782,882
Events.................................. 264,884 287,528 269,867
---------- ---------- ----------
1,061,486 1,121,543 1,052,749
---------- ---------- ----------
Cost of production:
Publishing.............................. 212,287 221,367 215,336
Events.................................. 87,373 99,533 82,143
---------- ---------- ----------
299,660 320,900 297,479
Selling, general and administrative
expenses................................. 499,901 521,671 518,349
Depreciation and amortization............. 154,855 147,259 146,096
Restructuring charge...................... -- -- 52,239
---------- ---------- ----------
Income from operations.................... 107,070 131,713 38,586
Interest expense, net..................... (135,500) (190,445) (143,547)
Loss related to Retained Interest in
ZDNet.................................... (17,933) (21,238) (7,884)
Other non-operating income, net........... 6,107 8,322 8,097
---------- ---------- ----------
Loss before income taxes.................. (40,256) (71,648) (104,748)
Provision (benefit) for income taxes...... 26,755 (469) (26,939)
---------- ---------- ----------
Net loss.................................. $ (67,011) $ (71,179) $ (77,809)
========== ========== ==========
Other Data:
EBITDA(2)................................. $ 255,430 $ 272,894 $ 244,094
Cash and cash equivalents, end of period.. 29,915 30,273 32,274
Net cash provided (used) by operating
activities............................... 80,483 11,900 100,299
Net cash used by investing activities..... (65,678) (59,488) (69,158)
Net cash provided (used) by financing
activities............................... (9,212) 47,946 (29,140)
</TABLE>
- --------

(1) The February 29, 1996 acquisition 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
above numbers assume that the acquisition took place on January 1, 1995;
therefore, depreciation and amortization, interest expense and net loss
have been increased by approximately $6,064,000, $824,000, and $10,383,000
for 1996.

(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. ZD's EBITDA is calculated by adding
(a) ZD's EBITDA before losses related to its retained interest in ZDNet and
(b) ZD's proportionate interest (currently 100%) in ZDNet's EBITDA. EBITDA
for the year ended December 31, 1998 does not include a one-time
restructuring charge of $52,239,000. 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 ZD's operating performance or to cash
flows as a measure of liquidity. Although ZD 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, the
EBITDA presented for ZD may not be comparable to similarly titled measures
reported by other companies.

VII-4
<PAGE>

Year ended December 31, 1998 compared with year ended December 31, 1997

Revenue, net

Revenue decreased by $68.8 million or 6.1% from $1,121.5 million in 1997 to
$1,052.7 million in 1998.

Publishing--Revenue from publishing decreased by $51.1 million or 6.1% from
$834.0 million in 1997 to $782.9 million in 1998. This decline was primarily
due to the transfer of certain publications to a joint venture and the closure
of three publications due to the restructuring (as discussed below). Excluding
such transfers and the restructuring action, revenue in the publishing segment
decreased by $5.6 million. The decrease was due to lower advertising in
business publications partly offset by growth in advertising in consumer
publications. Advertising revenue was lower in business publications
principally due to factors affecting the computer technology industry during
the year. Margin pressure on computer equipment manufacturers, industry and
product delays, lower demand in Asia and a focus on the Year 2000 transition
are contributing to a reduced demand for advertising in Ziff-Davis Inc.'s
magazines. Revenue from international operations, which generated 10.2% of the
segment's revenue increased by $2.1 million due to the launch of IT Week in the
UK, partially offset by lower advertising in business publications.

Events--Revenue from events decreased by $17.7 million or 6.1% from $287.5
million in 1997 to $269.9 million in 1998. The decrease was primarily due to a
decline in revenue due to the discontinuation of certain "one-time" shows that
were held in 1997, lower ancillary revenue at COMDEX/Fall and lower square
footage sold at COMDEX/Spring. This decrease was partially offset by increased
revenue from increased square footage sold at N+I Las Vegas and Java One due to
an increased number of attendees.

Cost of production

Production costs decreased by 7.3% or $23.4 million from $320.9 million in
1997 to $297.5 million in 1998.

Publishing production costs decreased by $6.1 million or 2.7% from $221.4
million to $215.3 million in 1998. The decrease was related to a decline in the
number of advertising pages produced.

The cost of producing events decreased by $17.4 million or 17.4% from $99.5
million in 1997 to $82.1 million in 1998. The decrease is a result of lower
operational costs and re-negotiated contracts as well as the discontinuance of
certain "one-time" shows that were held in 1997.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by $3.4 million or
0.7% from $521.7 million in 1997 to $518.3 million in 1998. The increase was
due to expenditures to launch new products and increased advertising expenses.
The increase was partially offset by headcount reductions and efficiencies
attained through the integration of operations resulting from the
reorganization completed in May 1998, as well as cost savings resulting from
the closure of three magazines in the fourth quarter of 1998 (see "--
Restructuring").

Depreciation and amortization

Total depreciation and amortization decreased $1.2 million from $147.3
million to $146.1 million. The decrease was a result of certain assets being
fully depreciated in 1997 and early 1998.

VII-5
<PAGE>

Restructuring

Margin pressure on computer equipment manufacturers, industry and product
delays, lower demand in Asia and a focus on the Year 2000 transition are
contributing to a reduced demand for advertising in ZD's magazines (principally
PC Magazine, PC/Computing, Computer Shopper and PC Week). ZD believes these
factors are continuing. In part as a result of these factors, EBITDA for the
fourth quarter of 1998 will be significantly lower than EBITDA for the fourth
quarter of 1997.

. Asset impairment costs totaled $37.9 million. These costs, which are
non-cash, included the write-off of intangible assets associated with
the discontinued publications ($34.3 million) and trade shows ($2.9
million) as well as deferred expenses associated with the discontinued
educational journals ($0.7 million).

. Costs to exit activities reflect the costs associated with the final
closure of the discontinued publications ($1.8 million) and the costs to
reduce office space under lease as a result of the reduced level of
employees ($3.8 million).

Interest expense, net

Interest expense decreased by $46.9 million or 24.6% from $190.4 in 1997 to
$143.5 million in 1998. The reduction was due primarily to lower levels of debt
outstanding throughout the year, as well as the capitalization of $908.7
million of intercompany debt as part of the reorganization.

Loss related to retained interest in ZDNet

The loss related to the retained interest in ZDNet decreased by $13.4 million
from $21.2 million in 1997 to $7.9 million in 1998. This decrease is due to
improved performance of that business. See Annex VIII--"ZDNet Management's
Discussion and Analysis of Financial Condition and Results of Operations".

Other non-operating income, net

Other non-operating income, net primarily reflects ZD's equity share in
earnings and losses from joint ventures and fees earned from management of
events not produced by ZD. Income decreased $0.2 million or 2.4% from $8.3
million in 1997 to $8.1 million in 1998 reflecting reduced fees from managed
events. The decline was partially offset by ZD's equity share in earnings of
MAC Publishing, LLC that was formed in August 1997.

Income taxes

The 1998 income tax benefit of $26.9 million increased from $0.5 million
reported in 1997. The increase was due primarily to income tax benefits
generated from the losses with respect to the MAC Assets, which

VII-6
<PAGE>

were not deductible until ZD purchased the MAC Assets from an affiliate on May
4, 1998. The income tax benefit was also increased by a higher net loss for the
year ended December 31, 1998 compared to the net loss for the year ended
December 31, 1997.

Net loss

As a result of the changes described above, the net loss for the period
increased $6.6 million or 9.3% from $71.2 million in 1997 to $77.8 million in
1998.

EBITDA

EBITDA for the year ended December 31, 1998 was $244.1 million compared to
$272.9 million for the year ended December 31, 1997. EBITDA for the year ended
December 31, 1998 does not include the $52.2 million restructuring charge.
Results were unfavorable as compared to last year due to a lower level of
earnings from advertising in the higher margin business publications partly
offset by improved results at the events segment and reduced losses from ZD's
retained interest in ZDNet. The improvement at the events segment was
attributed to the absence of losses from the discontinuance of certain "one-
time" shows held in 1997 as well as continued costs savings. Reduced losses
from ZDNet were the result of revenue growth exceeding increases in expenses.
The ratio of EBITDA to revenue was 23.2% for 1998 compared to 24.3% in 1997.

Year ended December 31, 1997 compared with Pro Forma Year ended December 31,
1996

Revenue, net

Net revenue increased by $60.0 million or 5.7% from $1,061.5 million in 1996
to $1,121.5 million in 1997.

Publishing--Net revenue from publishing grew by $37.4 million or 4.7% from
$796.6 million to $834.0 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. 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 9.5% of the segment's revenue, decreased by $1.5
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.

Cost of production

Production costs increased $21.2 million or 7.1% from $299.7 million to
$320.9 million.

Publishing production costs increased $9.1 million or 4.3% from $212.3
million in 1996 to $221.4 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 events 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.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $21.8 million or 4.4%
from $499.9 million to $521.7 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

VII-7
<PAGE>

and restructuring of the events business which was announced in the fourth
quarter of 1997. Costs for the publishing segment rose 1.2% while those for the
events 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 $7.6 million to $147.3 million
in 1997. The reduction in depreciation and amortization expense was a result of
certain assets being fully depreciated in 1996.

Interest expense, net

Loss related to retained interest in ZDNet

The loss from ZD's Retained Interest in ZDNet increased to $21.2 million in
1997 from $17.9 in 1996 due to the operating performance of that business. See
Annex VIII--"ZDNet Management's Discussion and Analysis of Financial Condition
and Results of Operations".

Other non-operating income, net

Other non-operating income, net increased $2.2 million from $6.1 million in
1996 to $8.3 million or 36.1% primarily due to a $2.2 million or 36.3% increase
in ZD's share of Mac Publishing, LLC's earnings.

Income Taxes

The 1997 combined income tax benefit of $0.5 million compares to a pro forma
income tax provision of $26.8 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 ($42.0 million and $63.0 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 $2.1 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 6.9% 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 24.3% for 1997 compared to the 1996 margin of 24.1%.

Liquidity and Capital Resources

As a result of the May 4, 1998 reorganization, ZD's intercompany debt owed to
Softbank was reduced to $83.1 million. Such indebtedness bears interest at 9.9%
and matures in February 2010. Concurrently with Ziff-Davis Inc.'s initial
public offering, Ziff-Davis Inc. (on behalf of ZD) issued and sold $250 million
aggregate principal amount of notes. In addition, Ziff-Davis Inc. (on behalf of
ZD) entered into a $1.35 billion credit facility, and borrowed $1.25 billion
under such facility, to provide additional funds for the repayment of
intercompany debt to Softbank and to provide for ZD's working capital
requirements. The balance of intercompany obligations owed to Softbank was
converted to equity. (See Note 2 to the Combined Financial Statements included
in this Annex.)

VII-8
<PAGE>

At December 31, 1998, ZD's outstanding total debt was $1,547.9 million
(excluding unamortized discount) which consisted of $77.9 million due to
Softbank, $250 million in notes and $1,220.0 million under the credit facility.

Cash and cash equivalents were $32.3 million at December 31, 1998 and $30.3
million at December 31, 1997. The balance increased $2.0 million due to the
factors discussed below:

Cash provided by operations was $100.3 million for the year ended December
31, 1998 compared to $11.9 million for the year ended December 31, 1997. The
increase from 1997 to 1998 was attributed to ZD's lower losses (before the non-
cash portion of the restructuring charge), lower working capital and a decrease
in funding to affiliates and to ZDNet for the 1998 period.

Cash used for investing activities for the year ended December 31, 1998 and
1997 was $69.2 million and $59.5 million, respectively. The majority of these
expenditures were for computer equipment and leasehold improvements as well as
for funding the operation of ZDNet. Acquisitions and investments in the 1998
period relate to ZD's acquisition of Sky TV, a tradeshow in Canada, an
additional 50% interest in Family PC magazine, a European marketing database
company as well as an investment in Red Herring. Acquisitions for the 1997
period reflected the purchase of a 70% interest in GameSpot, Inc.

ZD had a working capital surplus of approximately $22.6 million at December
31, 1998, compared to a working capital deficit of approximately $379.8 million
at December 31, 1997. Ziff-Davis Inc.'s balance sheet has historically had a
working capital deficit due to significant amounts due to affiliates. ZD also
maintains a significant level of deferred revenue generated from publication
subscriptions paid in advance and prepayments from trade show exhibitors. At
December 31, 1998, Ziff-Davis Inc. had deferred revenue of $151.0 million
compared to $154.7 million at December 31, 1997. Deferred revenue does not
represent a cash liability owed by Ziff-Davis Inc., unless Ziff-Davis Inc.
fails to deliver the magazine or cancels a trade show, and generally does not
affect Ziff-Davis Inc.'s ability to fund day-to-day operations. Working capital
increased as a result of the reorganization and the initial public offering of
Ziff-Davis Inc's common stock which resulted in the repayment and conversion to
equity of related party obligations in connection therewith.

On December 11, 1998, Standard & Poors lowered its corporate credit and bank
loan ratings for Ziff-Davis Inc. to BB- from BB and its subordinated debt
rating for Ziff-Davis Inc., to B from B+. This downgrade had no impact on our
current borrowings. Although this downgrade may make future borrowings more
expensive, we do not believe this will have a material impact on our liquidity
or our access to credit markets.

ZD believes, based on its current level of operations and anticipated growth,
that ZD's ability to generate cash, together with cash on hand and available
lines of credit, will be sufficient to make required payments of principal and
interest on ZD's indebtedness and fund anticipated capital expenditures and
future working capital requirements over the next 12 months. However, actual
capital requirements may change, particularly as a result of any acquisitions
ZD may pursue. The ability of ZD to meet its debt service obligations and
reduce its total debt will depend upon the future performance of ZD.

Funding for ZDNet

In the financial statements of ZD and ZDNet, whenever ZDNet had a cash need
(other than cash needs of ZDNet's foreign operations or cash needs of ZDNet's
operations that are not wholly owned), that cash need

VII-9
<PAGE>

was funded by ZD and accounted for as a capital contribution (i.e., as an
increase in ZDNet's division equity and ZD's Retained Interest in ZDNet).
Accordingly, no interest income from ZDNet has been reflected in the financial
statements of ZD. Each of ZD and ZDNet is sometimes referred to herein as a
"Group". After the date on which ZDNet Stock is first issued, Ziff-Davis Inc.
will account for all cash transfers from one Group to or for the account of the
other Group (other than transfers in return for assets or services rendered or
transfers in respect of ZD's Retained Interest that correspond to dividends
paid on ZDNet Stock) as inter-Group revolving credit advances (bearing interest
at the rate at which Ziff-Davis Inc. could borrow such funds on a revolving
credit basis) (as the Board determines in its sole discretion) unless the Board
determines that a given transfer (or type of transfer) should be accounted for
as a long-term loan, a capital contribution increasing ZD's Retained Interest
in ZDNet or a return of capital reducing ZD's Retained Interest in ZDNet.

Credit Facility

ZD's credit facility, as amended, consists of a seven-year $400 million
reducing revolving credit facility, a seven-year $450 million term loan and an
eight-year $500 million term loan. There are no scheduled reductions in the
revolving credit commitment or amortization under the term loan until September
2000.

For the reasons described under "--Restructuring" above, ZD expects its debt
to EBITDA ratios at December 31, 1998 would have been above the levels that
originally had been required by its credit facility. On December 16, 1998, the
lenders of the $1.35 billion credit facility agreed to amend certain provisions
of that facility. The amended provisions include an increase in the allowed
leverage ratios. In return, ZD agreed to pay a one-time fee of $3.375 million
and increase rates on amounts borrowed under the credit facility to rates
currently ranging from LIBOR plus 2.875% to LIBOR plus 3.375% depending on the
type of loan. Had the increased interest rates been in effect for the period
from ZD's initial public offering on April 28, 1998 to December 31, 1998,
interest expense would have increased by approximately $11.9 million. Based on
the $1,220.0 million outstanding on December 31, 1998, the annualized
incremental interest is $18.0 million. This increase in interest expense would
reduce the amount otherwise available for funding ZDNet operations.

ZD's credit facility exposes it to market risk with respect to changes in
interest rates. ZD manages this risk through the use of interest rate swap
agreements, as described below. Through the use of these swap agreements, ZD
has effectively established a fixed interest rate for $550 million of the
outstanding credit facility. Based on the $1,220.0 million outstanding under
the credit facility at December 31, 1998, if the LIBOR rate were to increase by
1%, ZD would incur, after giving effect to the swap agreements, an additional
$6.7 million of annual interest expense.

Interest Rate Swaps

On June 10, 1998, ZD entered into interest rate swap agreements, with an
aggregate notional amount of $550 million. Under these swap agreements, which
commenced on August 10, 1998, ZD will receive a floating rate of interest based
on three-month LIBOR, which resets quarterly, and ZD will pay a fixed rate of
interest each quarter for the terms of the respective agreements. The weighted
average fixed rate ZD will pay under these agreements is 5.85%. ZD has entered
into these agreements solely to hedge its interest rate risk. At December 31,
1998, the three-month LIBOR rate was 5.06%.

These swap agreements are viewed by Ziff-Davis Inc. as risk management tools
and are not used for trading or speculative purposes. The notional amount of
$550 million does not represent a real amount exchanged by the parties, and
therefore, is not a measure of Ziff-Davis Inc.'s exposure through its use of
swap agreements. The fair values of these swap agreements were estimated by
obtaining quotes from brokers which represented the amounts that ZD would pay
if the agreements were terminated at the balance sheet date. While it is not
ZD's intention to terminate these swap agreements, these fair values indicated
that the termination of these swap agreements would have resulted in a loss of
$15,627,000.

VII-10
<PAGE>

ZDTV

In July 1997, Ziff-Davis Inc. entered into a license and services agreement
to develop ZDTV for MHA, a company that is wholly owned by Mr. Masayoshi Son
who is a director of Ziff-Davis Inc. and principal stockholder of SOFTBANK
Corp. Under this agreement, Ziff-Davis Inc. agreed to fund ZDTV's operations

through unsecured advances and was granted an option to purchase ZDTV for a
price equal to MHA's investment plus 10% per annum for the period of
investment. On January 15, 1999, Ziff-Davis Inc. exercised this option and on
February 4, 1999, purchased ZDTV at a purchase price of $81.4 million. Ziff-
Davis Inc. paid approximately $32.8 million of the purchase price in cash
(funded on February 5, 1999), and paid the remainder by applying approximately
$48.6 million in advances owed to it by MHA through December 31, 1998. Ziff-
Davis Inc. also agreed to be responsible for the funding of ZDTV during the
period in 1999 prior to the purchase, which will be accounted for as additional
purchase price. The cash portion of the purchase price was funded by an advance
from ZDTV to Ziff-Davis Inc., pursuant to the ZDTV cash management system, of
the funds invested in ZDTV by Vulcan Programming described below. In connection
with its acquisition of ZDTV, Ziff Davis Inc. assumed MHA's obligations under
an option granted to DirectTV to purchase 5% of ZDTV for $15 million, subject
to adjustment.

Vulcan Transactions

VII-11
<PAGE>

Seasonality

Historically, ZD's business has been seasonal as a significant portion of
annual revenue has occurred 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, 1998. In
the opinion of Ziff-Davis Inc.'s management, this unaudited information has
been prepared on a basis consistent with the audited Combined Financial
Statements of ZD appearing elsewhere in this Annex 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
-----------------------------------------------------------------------------------------------
March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- ------------- ------------ --------- -------- ------------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............. $204,281 $211,333 $191,613 $226,788 $191,246 $198,419 $181,726 $211,491
Events................. 15,321 82,135 24,227 165,845 27,121 65,782 29,787 147,177
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue........... 219,602 293,468 215,840 392,633 218,367 264,201 211,513 358,668
Percentage of total
year.................. 19.6% 26.2% 19.2% 35.0% 20.7% 25.1% 20.1% 34.1%
Cost of production...... 60,842 91,152 61,710 107,196 69,048 74,710 62,898 90,823
Selling, general and
administrative expenses 130,837 132,015 131,633 127,186 131,177 127,114 127,382 132,676
Depreciation and
amortization........... 37,196 37,173 37,804 35,086 35,748 37,859 36,207 36,282
Restructuring charge.... -- -- -- -- -- -- -- 52,239
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations............. (9,273) 33,128 (15,307) 123,165 (17,606) 24,518 (14,974) 46,648
Income (loss) before
taxes.................. (59,901) (17,448) (66,703) 72,404 (68,058) (11,940) (39,458) 14,708
Net income (loss)....... $(59,817) $(17,387) $(66,606) $ 72,631 $ (5,121) $(76,560) $ (4,498) $ 8,370
EBITDA (1).............. $ 24,008 $ 66,624 $ 18,822 $156,602 $ 15,127 $ 63,397 $ 27,487 $138,083
Percentage of total
year.................. 9.0% 25.0% 7.1% 58.9% 6.2% 26.0% 11.3% 56.6%
</TABLE>
- --------

(1) EBITDA is defined as income before provision for income taxes, interest
expense, depreciation and amortization. ZD's EBITDA is calculated by adding
(a) ZD's EBITDA before losses related to its retained interest in ZDNet and
(b) ZD's proportionate interest (currently 100%) in ZDNet's EBITDA. EBITDA
for the quarter ended December 31, 1998 does not include a one-time
restructuring charge of $52,239,000. 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 ZD's operating performance or to cash
flows as a measure of liquidity. Although ZD 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, the
EBITDA presented for ZD may not be comparable to similarly titled measures
reported by other companies.

Inflation and Fluctuations in Paper and Postage Costs

ZD continually assesses the impact of inflation and changes in paper prices.
ZD 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 and then decreased in 1997. During 1998, paper
prices were

VII-12
<PAGE>

relatively flat. Management anticipates that paper prices will remain
relatively stable in 1999. ZD will continue to monitor the impact of inflation
and paper prices and will consider these matters in setting its pricing
policies. ZD 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 with suppliers). However, ZD has not entered, and does
not currently plan to enter, into long-term forward price or option contracts
for paper. Management estimates postage costs will increase approximately 3.5%
in 1999. See "Risk Factors--Other Ziff-Davis Inc. Risks--Ziff-Davis Inc. May Be
Adversely Affected By Fluctuations In Paper And Postage Costs" and "--ZD
Description of Business--Print Publishing--Paper and Printing".

Year 2000 Readiness Disclosure

During 1997, Ziff-Davis Inc., including the businesses comprising ZD, began a
review of its computer systems and software to identify systems and software
which might malfunction due to misidentification of the Year 2000. Ziff-Davis
Inc. is using both internal and external resources to identify, test, correct
and reprogram systems and software for Year 2000 readiness.

Ziff-Davis Inc. expects to complete testing and replacement of critical
systems by the beginning of the fourth quarter of 1999. Ziff-Davis Inc.'s
estimate of ZD's most reasonably likely "worst case scenario" would be the
failure of its internal applications and systems that process and store certain
information and data. Ziff-Davis Inc. would resolve the failure of such
applications and systems on an individual basis and management of Ziff-Davis
Inc. does not believe that the impact on its critical systems would be
material.

VII-13
<PAGE>

However, if Ziff-Davis Inc. or any subscribers, advertisers, licensors, vendors
or other third parties on whom it relies experiences a Year 2000 compliance
problem, this could have a material adverse effect on ZD's profit and
liquidity.

Recently Issued Accounting Pronouncements

ZD expects to adopt this statement beginning with its 2000 financial
statements.

VII-14
<PAGE>

DESCRIPTION OF BUSINESS

Ziff-Davis Inc. is a leading media and marketing company that provides
information on computing and technology, including the Internet. ZD is the
division of Ziff-Davis Inc. focused on the businesses of print publishing,
trade shows and conferences, market research, education (including ZDU, our
Internet-based educational service) and television (including an online
component). ZD provides technology companies worldwide with marketing
strategies for reaching key decision-makers.

ZD'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 1997. In 1998, ZD was the largest technology
publisher in terms of magazine revenue (with at least 50% more magazine revenue
than its closest competitor). In 1997, ZD accounted for 36.8% of all
advertising and circulation dollars spent in computer periodicals. ZD believes
its publications provide readers and advertisers with comprehensive market and
product coverage and quality editorial content.

Through ZD Events, ZD also produces some of the world's most important trade
shows serving vendors, resellers, buyers and users of computer technology and
the Internet. In 1998, ZD produced over 50 trade shows and conferences
worldwide with over two million estimated attendees. ZD'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.

ZD's other media and marketing platforms include market research, education
and publication of computer-related newsletters and training manuals and
television. ZD also currently has a 100% Retained Interest in ZDNet (Ziff-Davis
Inc.'s online business division), although that interest will decline if Ziff-
Davis Inc. completes its offering of ZDNet Stock as currently planned.

Industry Background

Technology continues to be one of the largest and fastest growing sectors of
the U.S. economy. The market for technology goods and services is rapidly
expanding due to increased integration of computers into the workplace and
home, shortened product life cycles and increased use of the Internet. The
demand for computer technology to enhance productivity and the increasing
number of applications in the areas of education, entertainment and
communications has dramatically increased the number of computers in use
worldwide (from 150 million in 1993 to over 300 million in 1997). This increase
in computer usage has significantly broadened the consumer and business markets
for computer technology. In addition, rapid technological advances have
shortened product life cycles. Today, the estimated marketable product life of
a PC is less than six months as compared to five years in 1981. The Internet
has also become a widely accepted information tool. Forrester Research Inc.
estimates that the number of adult Web users will reach 51 million in the U.S.
by the end of 1998 and will grow to 99 million by the end of 2001.

These factors have led to increased demand among buyers and users of computer
technology product for objective, up-to-date information and analysis. To meet
this demand, sellers of computer technology products need to effectively
advertise to increase sales, educate consumers, improve end-user satisfaction
and build brand loyalty. Computer technology-focused media enables sellers to
communicate their message effectively by targeting a focused customer base. As
a result of a broadening consumer base containing favorable demographics,
computer technology publications and other media are becoming increasingly
attractive as a platform for consumer product advertising.

VII-15
<PAGE>

Computer Technology Print Publications Market

Advertising and circulation revenue for computer-oriented print publications
grew on average 10% a year from 1994 to 1997, totaling $1.7 billion in 1997.
However, in 1998 computer advertising pages decreased 8% as compared to 1997,
according to Adscope and CMR. Ziff-Davis Inc. believes the decline in the
technology advertising market is due mainly to continuing margin pressure on
computer equipment manufacturers, industry and product delays, lower demand in
Asia and a focus on the Year 2000 transition.

Computer Technology Trade Shows

Trade show attendees 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 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 and Cisco Systems, Inc. use 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 an increasingly important marketing strategy for information
technology vendors and can be an effective medium for generating and closing
sales. In 1998 estimated exhibit space revenue from North American computer-
product trade shows was approximately $686 million, exhibit square footage rose
17% from 1997, the number of exhibiting firms increased 26% from 1997 and
attendance at such shows rose 20% from 1997.

ZD Strategy

ZD'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. The key elements of
ZD's strategy are:

Focus on the Technology Market

ZD believes that its focus on the technology market provides it with
substantial opportunities to attract both audiences and advertisers.

Develop the Most Comprehensive, Objective and Authoritative Content

ZD strives to produce the most differentiated, high quality content to
attract category brand-specifiers and decision-makers. ZD Labs, its computer
testing facility, enables ZD to provide reliable and authoritative product
evaluations to the business and consumer markets. The ability to provide
focused audiences with targeted information attracts leading advertisers and
exhibitors to ZD's products and services.

Build Brand Strength

ZD seeks growth in its core portfolio of leading brands, such as PC Magazine,
PC Week and COMDEX. ZD seeks to expand its market share of audiences and
advertisers while enhancing the quality and accessibility of its content and
marketing services. Ziff-Davis Inc.'s variety of business platforms enables ZD
to offer multiple media presentations of its branded content.

Leverage Multiple Media Marketing Platforms

ZD believes that the scope and depth of Ziff-Davis Inc.'s products and
services across multiple media platforms creates growth opportunities exceeding
those that ZD's businesses could achieve independently. Such

VII-16
<PAGE>

opportunities include the leveraging of strong relationships with advertisers
in one media platform into other platforms, cross-marketing products and
services to the audiences of its different platforms and packaging integrated
marketing products across all platforms for large advertisers. We believe that
ZD has a competitive advantage over single platform providers because of its
ability to offer clients multiple platform marketing solutions.

Launch New Products and Services

ZD believes that rapid advances in technology will create additional growth
opportunities to launch new products and expand its audience and advertiser
base. ZD seeks to identify new audiences and develop products and services that
respond to their informational needs. ZD believes that the scope of its
operations and its experience in launching new products across multiple media
platforms and geographic regions enable it to more readily achieve market
acceptance for new products and services.

Expand Global Reach

ZD intends to leverage its brand recognition and multinational experience to
expand further into overseas markets, focusing on key markets that have size
and growth characteristics to support ZD's strategy of cross-media operations.
ZD seeks to further expand internationally through the launch overseas of
proven U.S. properties, joint ventures and licensing arrangements with local
operating partners and selective acquisitions.

ZD 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 repay indebtedness. See "--ZD Management's
Discussion and Analysis of Financial Condition and Results of Operations".

Print Publishing

ZD is a leading computer-related magazine publisher, with 26 primary U.S. and
international titles, including its joint ventures, and over 50 licensed
publications, totaling more than 75 publications distributed worldwide. ZD's
publications have a combined circulation of approximately seven million primary
readers worldwide. Approximately 61.5% of ZD's total revenue for the year ended
December 31, 1998 was attributable to its print publishing business. ZD's
magazines are designed to appeal to a target audience of sophisticated
customers in the business and consumer markets by providing high-quality
editorial content. ZD produces monthly magazines that provide comparative,
laboratory-based product reviews and news weeklies that provide product and
industry news and analysis. ZD also serves the developing market for lifestyle
and entertainment publications that focus on technology. ZD's publications also
include magazines related to the electronic gaming industry that ZD acquired
from Sendai Publishing Group, Inc. in May 1996.

ZD believes its leading position in the computer publishing market is based
upon:

. Leading Brands in Key Categories. In 1997, ZD's PC Magazine, PC Week and
Computer Shopper magazines were the top three computer magazines in the
U.S. and among the top 25 U.S. magazines, each as measured by total
revenue.

. Strength in Advertising, Circulation and Newsstand Sales. In 1997, ZD
accounted for 36.8% of all advertising and circulation dollars spent in
computer periodicals. ZD's U.S. publications have a total circulation of
approximately six million primary readers, and ZD has a worldwide
circulation of approximately seven million primary readers. In 1998, PC
Magazine's circulation was greater than that of Business Week, Fortune or
Forbes. With respect to newsstand sales, ZD's publications accounted for
50.1% of all computer magazines sold in the first six months of 1998.

. High Quality Editorial Content. ZD's top editors and columnists are
supported by laboratory-testing facilities, producing widely acknowledged
authoritative benchmarks for determining product quality. ZD's
comprehensive content attracts focused audiences, thereby attracting
leading advertisers and exhibitors to its products and services.

VII-17
<PAGE>

. Successful Development of New Publications for Emerging Sectors. ZD has
successfully introduced or acquired publications targeted at the consumer
market (FamilyPC and Computer Gaming World), technology lifestyle (Yahoo!
Internet Life), Internet professionals (Inter@ctive Week) and resellers
(Sm@rt Reseller).

The following table sets forth information relating to ZD's primary
publications for 1998.

<TABLE>
<CAPTION>
1998
Circulation Publication 1998
First ----------------- Frequency Advertising
Publication Issue Type(1) Amount(2) (Per Year) Pages(3)
----------- ----- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
U.S. Business
PC Magazine................... 1981 P 1,182,181 22x 5,381
PC/Computing.................. 1988 P 1,044,252 12x 2,557
Computer Shopper.............. 1979 P 560,267 12x 6,525
PC Week....................... 1983 C 400,144 51x 5,447
Inter@ctive Week.............. 1994 C 150,150 45x 2,173
Macworld(4)................... 1985 P 532,702 12x 1,296
Sm@rt Reseller................ 1998 C 65,520 22x 890
U.S. Consumer
Electronic Gaming Monthly..... 1988 P 398,219 12x 1,428
Yahoo! Internet Life.......... 1995 P 453,433 12x 722
Computer Gaming World......... 1981 P 286,978 12x 2,416
Expert Gamer(5)............... 1988 P 191,083 12x 688
Official U.S. PlayStation
Magazine..................... 1995 P 179,472 12x 864
FamilyPC(6)................... 1994 P 401,163 12x 1,161
International
PC Professionell (Germany).... 1991 P 209,257 12x 1,570
PC Direkt (Germany)........... 1992 P 170,067 12x 2,285
Internet Professionell
(Germany).................... 1997 P 35,171 12x 176
PC Magazine (UK).............. 1992 P 135,002 12x 3,472
PC Direct (UK)................ 1992 P 121,032 12x 6,606
PC Gaming World (UK).......... 1997 P 40,385 12x 405
IT Week (UK).................. 1998 C 55,000 45x 635
PC Expert (France)............ 1992 P 102,000 12x 1,587
PC Direct (France)............ 1992 P 82,640 12x 2,922
PC Week (China)(7)............ 1996 C 70,000 51x 3,264
PC/Computing (China)(7)....... 1994 P 70,000 12x 215
PC Magazine (China)(7)........ 1994 P 103,000 12x 988
Sm@rt Reseller (China)(7)..... 1998 C 50,000 26x 178
</TABLE>
- --------
(1) P = Paid, C = Controlled.

(2) Based on circulation information provided by ZD to the Audit Bureau of
Circulation for paid publications and BPA International for controlled
publications for the six months ended December 31, 1998 for domestic
publications and based on ZD data for international publications.

(3) As reported by AdScope, Inc., Eugene, OR for the year ended December 31,
1998 for domestic publications and based on ZD data for international
publications.
(4) Joint venture with International Data Group, Inc.

(5) Formerly EGM/2/.

(6) Operated as a joint venture with an affiliate of The Walt Disney Company
through April 30, 1998; 100% owned by ZD thereafter.

(7) Joint venture with Richina Media Holdings and other local agencies in
China.

VII-18
<PAGE>

Corporate Sales

ZD's corporate sales team integrates its marketing activities into one
cohesive resource for its largest customers. The corporate sales group,
originally established to provide discounts for advertisers buying across two
or more magazine titles, has been expanded to allow marketers to reach their
target buyers through any combination of Ziff-Davis Inc.'s business platforms.
Currently 27 professionals in U.S. corporate sales coordinate major
advertisers' campaigns across Ziff-Davis Inc.'s multiple platforms.

Editorial, Laboratory Testing and Benchmark Software

ZD seeks to develop and maintain a high level of technical expertise to
provide quality technology content. ZD's editorial personnel includes award-
winning editors and experts. ZD believes its publications are widely regarded
as a reliable source of objective product evaluations and industry news because
of the quality and reputation of its laboratory tests. To maintain impartiality
and objectivity in its product reviews, ZD has policies governing separation of
editorial functions from advertising sales functions and restricts trading in
securities of technology-related companies by its journalists.

ZD is committed to laboratory-based product testing as an integral part of
its editorial mission. For the year ended December 31, 1998, ZD spent over $11
million in laboratory testing. The ZD Labs staff works with testers from many
of ZD's different publications to provide comprehensive, objective test results
to assist buying decisions. In addition to the core ZD Labs staff, the PC
Magazine, PC Week, Computer Shopper and PC/Computing publications maintain
their own staff and/or testing space. The ZD Labs testing facility tests
thousands of products and systems each year and conducts large-scale tests to
simulate corporate installations. ZD believes ZD Labs gives it a competitive
advantage in terms of staffing, equipment and access to the technology
necessary to effectively evaluate products.

ZD Labs produces the core, publicly available and widely distributed
benchmark software that its publications use to measure the performance of PCs,
Macintosh systems and servers. ZD's benchmarks have become industry standards
among major buyers of computer and Internet-related technology.

Sources of Print Publishing Revenue

ZD's publications are generally either paid-circulation magazines--which
generate revenue from newsstand sales, subscriptions and advertising--or
controlled-circulation publications--which are distributed free of charge to
qualified information technology professionals, generate revenue principally
from advertising sales and provide valuable demographic information to ZD.

Advertising Sales. ZD seeks to assist its advertisers in maximizing the
return on their marketing investment. Advertising sales accounted for 77.6% of
ZD's total print publishing revenue for the year ended December 31, 1998. The
ZD sales force uses market research tools, such as ZD's BrandTrak and ZDNet's
InternetTrak services, to inform clients about overall industry trends.
BrandTrak is a survey that is conducted every six months of subscribers to five
ZD publications and three European publications in order to track purchasing
behavior by brand. InternetTrak is a quarterly survey of Web users in the U.S.
that tracks Web users and their online activities. ZD's sales staff provides
customer service, research, promotional support and value-added programs for
advertisers.

Circulation. ZD maintains centralized circulation operations, enabling it to
capitalize on its successful practices on a timely basis across all
publications. ZD strives to increase its readership by building relationships
with distributors, retailers and subscribers. Revenue from circulation of ZD's
paid-circulation magazines accounted for 19.6% of ZD's total print publishing
revenue in 1998. This was comprised of subscription sales (10.2% in 1998) and
newsstand sales (9.4% in 1998). ZD's publications have a total circulation of
approximately seven million primary readers worldwide.

VII-19
<PAGE>

ZD's newsstand strategy focuses on developing strong relationships with key
distributors and large retail accounts. For example, ZD is the principal
supplier of computer technology publications to Warner Publisher Services, a
division of Time Warner Inc. In addition, ZD has preferred distribution
arrangements with large retailers including WalMart, Staples and Barnes &
Noble. These arrangements, which are terminable at will without notice, include
prominent magazine displays to strengthen ZD's brand identity.

ZD's subscription strategy is to maintain a highly focused readership and
increase subscriber loyalty and renewal rates. This strategy provides ZD's
advertisers with access to a precisely focused target audience.

Licensing and Joint Ventures. In its international publications, ZD seeks to
maximize global reach, maintain content quality and reduce the cost of entering
new markets. Through subsidiaries, ZD currently has publishing operations in
France, the United Kingdom and Germany. ZD also has over 50 licensed
publications worldwide. ZD's licenses are generally three to five year
agreements that provide for a minimum annual royalty against a percentage of
revenue. ZD also operates with a number of joint venture partners, including
IDG in the U.S., Richina Media Holdings and other local agencies in China and
APN Computing Group in Australia.

U.S. Publications

Business Magazines. In the U.S. market, ZD publishes seven computer
publications directed to business buyers, including four paid-circulation
magazines and three controlled-circulation weeklies or bi-weeklies. Each
publication produces authoritative, independent guidance that ZD believes is
generally considered to be the primary product resource in its market segment.
Macworld is published by Mac Publishing L.L.C., a ZD joint venture with 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 37.8% of all computer
advertising revenue in directly competitive U.S. publications in 1998. PC
Magazine also produces two newsstand-only specials: Your New PC (buying advice
for less sophisticated computer buyers) and InternetUser (reviews of Internet
products).

PC/Computing offers reviews of computer products, focusing 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.

Computer Shopper provides buying advice, product evaluations and technology
coverage, including availability, pricing, specifications and configurations of
thousands of computer products. Computer Shopper has a newsstand circulation of
approximately 260,000 (the largest newsstand sales of any computer
publication).

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. PC Week has a controlled
circulation of over 400,000.

Inter@ctive Week provides Internet and telecommunications professionals with
information on products, events, services, strategies, alliances and key
players. With a controlled circulation of over 150,000, 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 publication, 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 has a controlled circulation of over 65,000.

VII-20
<PAGE>

Macworld provides Macintosh buyers with comparative, laboratory-based product
evaluations, reviews and information about Macintosh products, supported by a
product testing facility which ZD believes is the most advanced in the
Macintosh industry. Macworld has a qualified circulation of over 500,000.

Consumer Magazines. ZD publishes six magazines that serve the rapidly growing
consumer market in order to meet the varying needs of computer enthusiasts, net
surfers, family buyers and gamers.

Electronic Gaming Monthly targets video game enthusiasts and offers news,
information and product reviews about the latest games on ten different game
systems. This monthly publication has a paid circulation of more than 390,000.
Expert Gamer (formerly known as EGM/2/), a companion publication to Electronic
Gaming Monthly with a paid circulation of more than 190,000, offers in-depth
strategies, exclusive tips and tricks and comprehensive maps and walk-throughs
of the latest games.

Yahoo! Internet Life is a leading Internet consumer magazine. Yahoo! Internet
Life has a paid circulation of more than 450,000 readers. It is designed to be
an entertaining and authoritative guide to the Internet, targeting an
influential, affluent and early-adopting group of readers. ZD 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 280,000
game enthusiasts and is 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 game consoles by providing up-to-date news, interviews
and insights. This publication has a paid circulation of over 175,000
PlayStation game fans.

FamilyPC is specifically targeted to households with children and has a paid
circulation of over 400,000. Written by parents for parents in easy to
understand language, its purpose is to assist families in selecting computers
and software and thereafter ensure that they get a rewarding, productive and
educational experience from them.

International Publications

ZD publishes in the United Kingdom PC Magazine, PC Direct, PC Gaming World
and 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, PC Magazine and Sm@rt Reseller 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 ZD's U.S. publication, Computer Shopper. IT Week includes
material from Inter@ctive Week and ZDNet News in addition to local content.

Paper and Printing

ZD maintains strong relationships with its paper suppliers and printing
companies. ZD's main paper suppliers for its U.S. publications are Bowater,
Blandin, Champion, Consolidated, and Fraser, which provided 8%, 13%, 38%, 15%
and 12%, respectively, of ZD's paper supply in 1998 as measured by tonnage. Its
paper supply contracts are generally 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. ZD has relationships with a number of
printing companies, including R.R. Donnelley, Brown, Quadgraphics and Quebecor.
Approximately 46% of ZD'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.

VII-21
<PAGE>

Trade Shows and Conferences

ZD is a leading producer of trade shows, conferences and customized marketing
and educational programs for the computer industry in the U.S. Approximately
25.6% of ZD's total revenue in 1998 was attributable to its trade show and
conference business. ZD produces the industry-wide COMDEX events, which ZD's
predecessor acquired in April 1995, other segment-focused trade shows and
conferences and customized events for specific clients. ZD produced over 50
trade shows and conferences in 1998.

The COMDEX/Fall event, held in the fourth quarter of each year, has been held
for 19 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 1998, ZD estimates that over two million people attended its trade shows and
conferences worldwide. In addition to COMDEX/Fall, held annually in Las Vegas,
ZD produces 18 other COMDEX events in 13 countries.

In 1998, ZD produced 11 segment-focused "NetWorld+Interop" and "Seybold
Seminars" trade shows in 9 countries. The NetWorld+Interop trade shows focus on
the networking/interconnectivity segment of the computer industry and the
Seybold Seminars focus on technologies for publishing and graphic
communications. ZD also produces the following segment-focused trade shows:

. WINDOWS WORLD, in conjunction with Microsoft Corporation,

. EXPO COMM, servicing the worldwide telecommunications industry,

. CommUnity, for the emerging corporate integrated data, voice and video
segments,

. COMDEX/Enterprise, focusing on solutions for the large corporate
information technology infrastructures,

. Java SM Business Expo SM, sponsored by Sun Microsystems, Inc. and
focusing on the full range of Java(TM) technology for information
technology professionals and

. Support Services Conference & Expo, focusing on technology for help desk
and information technology support services.

ZD also produces customized conferences that are designed to meet the marketing
needs of specific clients. For example, ZD produced the JavaOne series of
conferences for Sun Microsystems, Inc., which were designed to introduce Java
technology software to the developer community.

Attendees at ZD's trade shows and conferences cover a wide range of
participants from the computer industry, including manufacturers, distributors,
dealers, retailers, as well as value-added and other resellers and large
corporate end-users. Each event includes an extensive conference program,
providing a forum to exchange 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. ZD estimates that in 1998 over 8,000
companies participated as exhibitors in its trade shows and conferences.

VII-22
<PAGE>

The following table sets forth information relating to ZD's principal trade
shows and conferences, including joint ventures, for 1998. Substantially all of
ZD's international COMDEX events are joint ventures and substantially all
NetWorld+Interop events are owned by ZD.

<TABLE>
<CAPTION>
1998 Actual
-------------------------------------
Total Net Estimated
Launch Square Total Total
Year Footage Exhibitors Attendees
------ --------- ---------- ---------
<S> <C> <C> <C> <C>
EVENT
North America
COMDEX/Fall............................. 1979 1,229,062 1,556 202,000
COMDEX/Spring, WINDOWS WORLD & EXPO COMM
USA.................................... 1981 180,259 563 85,750
COMDEX/Canada incl. WINDOWS WORLD and
Connected Computing.................... 1992 140,648 334 57,110
COMDEX/PacRim........................... 1995 65,762 211 30,500
COMDEX/Quebec........................... 1996 34,770 129 17,825
COMDEX/Miami & EXPO COMM Miami.......... 1996 65,600 261 20,000
NetWorld+Interop & CommUnity Las Vegas.. 1986 475,484 705 55,000
NetWorld+Interop & CommUnity Atlanta.... 1992 383,048 576 44,000
Seybold San Francisco Publishing........ 1986 153,324 356 38,570
Seybold Seminars New York............... 1982 122,920 293 23,970
International
COMDEX/SUCESU-SP Brazil................. 1992 306,134 393 130,000
COMDEX & WINDOWS WORLD Mexico(1)........ 1993 68,874 199 39,000
COMDEX/INFOCOM & WINDOWS WORLD
Argentina.............................. 1997 89,252 250 32,000
COMDEX IT France........................ 1997 118,116 560 60,000
COMDEX/Japan & Object World Tokyo(2).... 1996 95,706 139 80,970
COMDEX/China............................ 1996 164,689 175 91,265
COMDEX/Korea............................ 1997 40,689 127 81,685
COMDEX/Asia at Singapore Informatics.... 1995 32,830 205 19,075
COMDEX/IT INDIA......................... 1996 43,057 125 70,000
NetWorld+Interop Paris.................. 1992 194,015 400 48,770
NetWorld+Interop Tokyo(2)............... 1993 169,800 258 99,320
Seybold Seminars Tokyo(2)............... 1996 3,400 23 24,135
Windows NT Intranet Solutions Japan(2).. 1994 36,500 59 38,020
</TABLE>
- --------
(1) These international COMDEX events are wholly owned by ZD.
(2)Trade shows in Japan are owned by Softbank and managed by ZD.

Sources of Trade Show and Conference Revenue

Exhibitor space fees accounted for 66.8% of ZD's total trade show and
conference revenue for 1998. ZD believes most trade show producers receive
virtually all of their revenue from the sale of exhibitor space fees. ZD has
actively sought to increase its revenue from other sources, including attendee
fees, which accounted for 33.2% of all trade show and conference revenue in
1998,

All exhibitors pay the same price per square foot of booth space, regardless
of the exhibit hall selected or the location or size of the booth. Typically, a
majority of exhibitors at each trade show commit to booth space for the next
year's show. ZD encourages this commitment through a prioritized booth
selection procedure based upon seniority. 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.

VII-23
<PAGE>

Attendee fees accounted for 14.1% of ZD's trade show and conference revenue
for 1998, primarily from NetWorld+Interop and Seybold Seminars events. Most
COMDEX attendees are invited guests of exhibitors who receive complimentary
admission tickets from ZD for their customers and key prospects. This helps
exhibitors ensure that their best customers and prospects will attend.

Advertising revenue from ZD's trade shows and conferences is derived
principally from five products:

. a daily newspaper distributed during the show,

. the Program Exhibits Guide,

. the Preview, a newspaper distributed to pre-registrants and certain prior
year attendees before the show,

. advertising billboards and banners and

. exhibitor logo products that are sold to exhibitors to increase booth
traffic and name recognition.

ZD also maintains a continuously updated database containing the names and
certain demographic information on its 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
from their development and introduction to commercial maturity. Many of the
most significant computer product launches over the past 19 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 1998, COMDEX/Fall had approximately 1,500 exhibiting companies occupying 1.2
million net square feet of exhibit space and 200,000 attendees. COMDEX/Spring,
which was launched in 1981, is a smaller version of the fall event. In 1998, it
was held in Chicago and had approximately 560 exhibiting companies and over
85,000 attendees. For the last eight years, ZD, in cooperation with Microsoft
Corporation, has produced a WINDOWS WORLD trade show concurrently with
COMDEX/Spring.

In 1993, ZD began launching additional COMDEX events in order to capitalize
on the international recognition of the COMDEX brand name. In 1998, other
COMDEX events were held 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

NetWorld+Interop is the largest of ZD's segment-focused trade shows and is
the leading show for professionals in the rapidly growing field of computer
networking. NetWorld+Interop places strong emphasis on the quality of its
conference programs and has become a leading educational forum for the Internet
and enterprise computing communities. The largest NetWorld+Interop event is
held annually in May in Las Vegas. Each NetWorld+Interop trade show features
InteropNet, a live, multi-platform network that interconnects exhibitors to one
another and to the Internet. In 1998, the NetWorld+Interop Las Vegas event had
approximately 700 exhibiting companies occupying 475,000 net square feet of
exhibit space and 55,000 attendees. The NetWorld + Interop Atlanta event, held
in October each year, is only slightly smaller in all categories. In 1998,
NetWorld + Interop events were held in Las Vegas, Atlanta, Singapore, Tokyo,
London, Sao Paulo, Paris and Sydney.

Seybold Seminars

ZD's Seybold Seminars are also segment-focused trade shows, providing
information and education for traditional and new media publishing industries.
These shows focus on the latest technologies and products,

VII-24
<PAGE>

design tools and desktop applications. The largest of the Seybold Seminars
series is held annually each Fall in San Francisco. In 1998, this Seybold
Seminars show had approximately 350 exhibiting companies occupying 150,000 net
square feet of exhibit space and 38,000 attendees. Other Seybold Seminars
events are held in New York and Tokyo.

Television

In order to expand its media platforms, Ziff-Davis Inc. entered into a
license and services agreement to manage ZDTV for MAC Holdings America Inc.
("MHA"), a company that is wholly owned by Mr. Masayoshi Son, who is a director
of Ziff-Davis Inc. and principal stockholder of SOFTBANK Corp. In February
1999, Ziff-Davis Inc. acquired ZDTV and sold a one-third interest in ZDTV to
Vulcan Programming, Inc., an entity owned by Paul G. Allen.

ZDTV which was launched in May 1998, is the first 24-hour cable television
channel and integrated Web site focused exclusively on computers, technology
and the Internet. ZDTV targets 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. ZDTV's programming includes educational features, product
evaluations, gaming tips and strategies, current events and other
entertainment. ZDTV also features live interactive programming, allowing
viewers to participate through simultaneous Web programming on ZDTV.com. ZDTV
reached approximately 9.6 million homes at December 31, 1998 according to ZDTV
estimates. In addition, ZDTV creates customized programming for third parties,
including the regional Emmy award-winning "The Site" with MSNBC and "21st
Century Home" with Home & Garden Television.

For more information about Ziff-Davis Inc.'s acquisition of ZDTV see "ZD
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and ZD's Combined Financial Statements.

Education

ZD publishes 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. ZD believes its education offerings extend ZD's reach and
brand reputation while permitting it to attract and retain customers.

ZD produces software-specific newsletters and technology information, with
approximately 40 titles. 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.

ZDU is an Internet-based technology educational service through which ZD
provides interactive instructor-led training to subscribers. The ZDU service is
part of ZD but is closely integrated with ZDNet.

Market Research

ZD's market research division develops, analyzes and compiles a wide variety
of information on computer technology issues ranging from current technical
aspects to decision making trends. The ZD Market Intelligence ("ZDMI") unit
focuses on installed and planned technology hardware and software purchases. It
is a leading source in North America and Europe of fact-based information for
the computer and communications industries. ZDMI is an important part of ZD's
effort to be a single source marketing solution, as it provides marketing
customers with important targeting information. ZDMI's databases are built from
more than 45,000 telephone interviews per month and contain data on installed
and planned computer and communications products and services at over 350,000
business sites in the U.S., Canada and eight European countries, according to
ZD estimates. ZDMI identifies and targets customers by tracking current
activity and market share in the business, home and reseller channels.
Customers use ZDMI's services to make important marketing decisions.

VII-25
<PAGE>

ZD also identifies and analyzes trends in the decision making process for
computer technology consumers. This information indicates the criteria people
focus on to select products beyond technical product specifications. ZD's
market research division also consolidates information obtained in each of the
databases maintained by other operating divisions within ZD and ZDNet, so that
each division can offer Ziff-Davis Inc.'s clients a wide range of information
to meet their marketing needs across multiple platforms.

Competition

ZD competes with a wide range of companies for each of its products and
services. The magazine publishing business is highly competitive. ZD faces
broad competition from other technology publishers and from other media
companies such as business, news and general interest magazines. Computer and
technology publishers that directly compete with ZD in the U.S. include IDG,
CMP and Imagine Media. ZD also competes with various computer and technology
publishers in the international markets where it conducts business. A
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.

ZD also faces competition in its trade show and conference business,
primarily from several significant trade show management companies. These
include Miller Freeman, Mecklermedia and IDG. Competitive factors in this
business include quality of conference content, organizational efficiency and
quality and number of exhibitors and attendees.

ZD'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.

ZD's education division competes with a variety of education providers,
including vendor-supplied training materials and traditional classroom-based
computer training.

ZDTV is the first 24-hour cable television channel and integrated Web site
focused exclusively on computers, technology and the Internet, and as such, it
is not expected to face direct competition in the near future. However, ZDTV
does compete with a variety of general and special interest television
programs. In addition, the market for television programming in general is
highly competitive, with many programming producers competing for channel
carriage, advertisers and audiences.

Trademarks

ZD has developed strong brand awareness for its principal publications, trade
shows and other products and services. Accordingly, ZD 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. ZD generally registers its material trademarks in
the U.S. 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 where ZD's publications and services are available.

ZD 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. ZD 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 its business, financial condition or
results of operations.

Employees

As of December 31, 1998, ZD had a total of 2,889 employees. Of these
employees, 621 were engaged in U.S. magazine publishing activities, 397 in
international publishing activities, 505 in trade shows and conferences, 407 in
education activities, 436 in market research and 523 in central services. None
of ZD's U.S. employees is represented by a labor union. ZD considers its
relationships with its employees to be satisfactory.

VII-26
<PAGE>

Facilities

ZD's world headquarters are located in New York and ZD has over 50 editorial,
production and sales offices and computer labs in many other cities in the U.S.
and around the world. ZD's other principal offices are located in the Boston
and San Francisco metropolitan areas. ZD and Ziff-Davis Inc. do not own real
property that is material to its business and Ziff-Davis Inc. leases all but
one of its offices from third parties. ZD believes that its properties, taken
as a whole, are in good operating condition and are suitable and adequate for
its current operations, and that suitable additional or alternative space,
including space available under lease options, will be available at
commercially reasonable terms for future expansion.

Legal Proceedings

For information concerning certain legal proceedings to which Ziff-Davis Inc.
is a party, see "ZDNet Description of Business" set forth in Annex VIII hereto.

VII-27
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
------
<S> <C>
ZD
Report of Independent Accountants..................................... VII-29
Combined Balance Sheets as of December 31, 1997 and 1998.............. VII-30
Combined Statements of Operations for the years ended December 31,
1996, 1997 and 1998.................................................. VII-31
Combined Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998.................................................. VII-32
Combined Statements of Changes in Division Equity for the years ended
December 31, 1995, 1996, 1997 and 1998............................... VII-33
Notes to Combined Financial Statements................................ VII-34
</TABLE>

VII-28
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Ziff-Davis Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in division equity,
present fairly, in all material respects, the financial position of ZD (a
division of Ziff-Davis Inc., the "Company") at December 31, 1997 and 1998, and
the results of its operations and cash flows for each of the three years in the
period ended December 31, 1998, 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 described in Note 1 to the financial statements, ZD is a division of Ziff-
Davis Inc.; accordingly the financial statements of ZD should be read in
conjunction with the audited financial statements of Ziff-Davis Inc.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, NY

February 22, 1999

VII-29
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED BALANCE SHEETS

(dollars in thousands)

<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 30,273 $ 32,274
Accounts receivable, net............................... 209,914 208,593
Inventories............................................ 17,853 15,551
Prepaid expenses and other current assets.............. 37,872 34,278
Due from affiliates.................................... 131,290 53,984
Deferred taxes......................................... 8,725 21,483
---------- ----------
Total current assets..................................... 435,927 366,163
Property and equipment, net.............................. 50,391 85,571
Retained interest in ZDNet............................... 83,292 89,547
Intangible assets, net................................... 2,963,169 2,844,317
Other assets............................................. 15,329 44,340
---------- ----------
Total assets............................................. $3,548,108 $3,429,938
========== ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable....................................... $ 54,823 $ 71,844
Accrued expenses....................................... 77,886 93,824
Unearned income, net................................... 154,682 151,003
Due to affiliates and management....................... 398,332 4,618
Current portion of notes payable to affiliates......... 125,790 7,692
Other current liabilities.............................. 4,222 14,591
---------- ----------
Total current liabilities................................ 815,735 343,572
Notes payable to affiliates.............................. 2,408,240 70,192
Notes payable, net of unamortized discount............... -- 1,469,130
Deferred taxes........................................... 185,613 169,356
Due to management........................................ -- 5,400
Other liabilities........................................ 12,390 19,690
---------- ----------
Total liabilities........................................ 3,421,978 2,077,340
---------- ----------
Commitments and contingencies (Notes 20 and 22)
Division equity.......................................... 126,130 1,352,598
---------- ----------
Total liabilities and division equity................ $3,548,108 $3,429,938
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

VII-30
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF OPERATIONS

(dollars in thousands)

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Revenue, net:
Publishing............................... $ 674,040 $ 834,015 $ 782,882
Events................................... 264,884 287,528 269,867
--------- ---------- ----------
938,924 1,121,543 1,052,749
--------- ---------- ----------
Cost of production:
Publishing............................... 181,313 221,367 215,336
Events................................... 87,373 99,533 82,143
--------- ---------- ----------
268,686 320,900 297,479
Selling, general and administrative
expenses.................................. 431,393 521,671 518,349
Depreciation and amortization of property
and equipment............................. 31,647 28,884 27,875
Amortization of intangible assets.......... 102,604 118,375 118,221
Restructuring charge....................... -- -- 52,239
--------- ---------- ----------
Income from operations..................... 104,594 131,713 38,586
Interest expense, net...................... (120,646) (190,445) (143,547)
Loss related to retained interest in
ZDNet..................................... (16,925) (21,238) (7,884)
Other non-operating income, net............ 6,341 8,322 8,097
--------- ---------- ----------
Loss before income taxes................... (26,636) (71,648) (104,748)
Provision (benefit) for income taxes....... 25,445 (469) (26,939)
--------- ---------- ----------
Net loss................................... $ (52,081) $ (71,179) $ (77,809)
========= ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

VII-31
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CASH FLOWS

(dollars in thousands except share and per share amounts)

<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1996 1997 1998
---------- -------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................... $ (52,081) $(71,179) $ (77,809)
Adjustments to reconcile net loss to net
cash provided
by operating activities:
Depreciation and amortization............. 134,251 147,259 146,096
Amortization of debt discount............. -- -- 2,430
Loss from retained interest in ZDNet...... 16,925 21,238 7,884
Income from equity investments............ (115) (2,030) (7,483)
Deferred tax provision (benefit).......... 25,445 (469) (29,484)
Non-cash portion of restructuring charge.. -- -- 38,020
Changes in operating assets and liabili-
ties:
Accounts receivable..................... (36,194) (14,375) 2,437
Inventories............................. 7,788 (853) 2,923
Accounts payable and accrued expenses... 10,503 (6,065) 9,903
Unearned income......................... 1,299 (20,101) (6,404)
Due to affiliates and management........ (29,303) (38,543) (3,348)
Other, net.............................. (4,354) (2,982) 15,134
---------- -------- ----------
Net cash provided by operating activities... 74,164 11,900 100,299
---------- -------- ----------
Cash flows from investing activities:
Capital expenditures...................... (21,355) (27,822) (32,117)
Capital contributions to ZDNet............ (13,630) (20,664) (14,269)
Investments and acquisitions, net of cash
acquired................................. (2,124,823) (11,002) (22,772)
---------- -------- ----------
Net cash used by investing activities....... (2,159,808) (59,488) (69,158)
---------- -------- ----------
Cash flows from financing activities:
Proceeds from equity offering............. -- -- 380,337
Proceeds from issuance of notes payable... -- -- 242,723
Proceeds from issuance of bank debt....... -- -- 1,240,200
Proceeds from notes payable to affili-
ates..................................... 1,080,000 10,000 --
Payments of amounts due to affiliates..... -- -- (314,798)
Repayments of credit facility............. -- -- (95,504)
Borrowings under credit facility.......... -- -- 65,504
Payment of deferred financing fees........ -- -- (3,375)
Payments of notes payable to affiliates... -- (31,420) (1,571,264)
Purchase of treasury shares............... -- -- (29,500)
Sale of treasury shares................... -- -- 29,500
Advance from majority shareholder......... -- -- 20,377
Contributed capital....................... 1,015,651 69,366 6,660
Payment of dividends...................... (8,000) -- --
---------- -------- ----------
Net cash provided (used) by financing activ-
ities...................................... 2,087,651 47,946 (29,140)
---------- -------- ----------
Net increase in cash and cash equivalents... 2,007 358 2,001
Cash and cash equivalents at beginning of
period..................................... 27,908 29,915 30,273
---------- -------- ----------
Cash and cash equivalents at end of period.. $ 29,915 $ 30,273 $ 32,274
========== ======== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

VII-32
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY

(dollars in thousands)

<TABLE>
<CAPTION>
Retained Cumulative Total
Paid-in earnings Deferred translation division
capital (deficit) compensation adjustment equity
---------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... $ 379,586 $ 11,831 $ -- $ 111 $ 391,528
Acquisition of Ziff-
Davis Inc.............. 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................... 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................... 248,330 (119,429) (996) (1,775) 126,130
Capital contribution.... 9,007 9,007
Capitalization of
amounts due to
affiliates............. 908,673 908,673
Contribution of
subsidiaries from SBH
to Ziff-Davis Inc...... 736 736
Initial public
offering............... 375,493 375,493
Acquisition of fixed
assets from an
affiliate.............. 9,000 9,000
Purchase of treasury
shares from SBH........ (29,500) (29,500)
Sale of treasury shares
to the public.......... 29,500 29,500
Stock options vested as
severance.............. 162 162
Conversion of Softbank
stock options.......... 2,942 -- (2,942) --
Net loss................ (77,809) (77,809)
Compensation earned on
restricted stock....... 252 252
Foreign currency
translation
adjustment............. 954 954
---------- --------- ------- ------ ----------
Balance at December 31,
1998 .................. $1,554,343 $(197,238) $(3,686) $ (821) $1,352,598
========== ========= ======= ====== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

VII-33
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS

(numbers rounded to the nearest thousand, except per share amounts)

1. Organization and Basis of Presentation

Ziff-Davis Inc. was formed through an initial public offering and
reorganization which were completed on May 4, 1998. (See Note 2.) Prior to that
date, the predecessors of Ziff-Davis Inc. (currently named ZD Inc. and ZD
Events Inc.) were wholly owned indirect subsidiaries of SOFTBANK Corp. ("SBC"
or together with its non-Ziff-Davis Inc. affiliates "Softbank").

As further described below, the combined financial statements include the
accounts of ZDI from its date of acquisition (February 29, 1996) and ZD Events.
Effective December 31, 1997, COMDEX and Forums merged and the surviving company
was renamed ZD COMDEX and Forums Inc. ("ZDCF"). In 1998, ZDCF was renamed ZD
Events Inc.

ZD is the division of Ziff-Davis Inc. (formerly ZD Inc.) focused on the
business of print publishing, trade shows and conferences, market research and
education.

In order to prepare separate financial statements for ZD and ZDNet (as
defined below), Ziff-Davis Inc. has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between ZD and ZDNet. Thus, the
financial statements of ZD and ZDNet, taken together, comprise all of the
accounts included in the corresponding consolidated financial statements of
Ziff-Davis Inc.

ZD's financial statements reflect the application of certain cash management
and allocation policies adopted by the Board of Directors of Ziff-Davis Inc.
(the "Board"). These policies are summarized in Note 5 "Certain Cash Management
and Allocation Policies" below.

Even though Ziff-Davis Inc. has allocated all of its consolidated assets,
liabilities, revenues, expenses and cash flow between ZD and ZDNet, that
allocation and the division of Ziff-Davis Inc. common stock will not change the
legal title to any assets or responsibility for any liabilities and will not
affect the rights of any creditors. Holders of ZD Stock (as defined below) will
continue to be common stockholders of Ziff-Davis Inc. and, as such, will be
subject to all risks associated with an investment in Ziff-Davis Inc. and all
of its businesses, assets and liabilities.

Financial impacts which occur that affect Ziff-Davis Inc.'s consolidated
results of operations or financial position could affect the results of
operations or financial condition of ZD or the market price of ZD Stock. In
addition, net losses of ZDNet, and any dividends or distributions on, or
repurchases of, ZDNet Stock will reduce the assets of Ziff-Davis Inc. legally
available for dividends on ZD Stock. Accordingly, financial information for ZD
should be read in conjunction with financial information for ZDNet and
financial information for Ziff-Davis Inc.

Relationship with Softbank and MAC

SBC is the indirect majority shareholder of Ziff-Davis Inc. SBC is a Japanese
corporation which at the time of the acquisition of the MAC Assets was majority
owned directly and indirectly by its president, Mr. Son. As of December 31,
1998 Mr. Son owned approximately 45% of SBC (50.2% as of December 31, 1997).
MAC, also a Japanese corporation, was wholly owned by Mr. Son.

ZD operates in two business segments: (1) publishing and (2) events.

VII-34
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Operations and acquisitions

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 U.S. and Europe, although it also licenses or syndicates
its editorial content to over 50 other publications distributed worldwide. The
publishing segment includes a 100% retained interest in ZDNet. ZDNet is the
online business division of Ziff-Davis Inc. Each of ZD and ZDNet is sometimes
referred to herein as a "Group".

Events

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 $1,800,000,000
plus transaction costs. Concurrent with the acquisition, in a separate
agreement, MAC, 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 $302,000,000.

Subsequent to the acquisition, Holdings and ZDI were merged with ZDI being
the surviving corporation.

Purchase of MAC Assets

In 1997, ZD agreed to purchase certain of the MAC Assets for $370,000,000.
The acquisition was effected in two tranches, the first of which closed on
October 31, 1997 and the second, closed upon completion of the initial public
offering of Ziff-Davis Inc.'s common stock (further described below). At
December 31, 1997, ZD accrued the $370,000,000 purchase price which was
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 were under common
control at the time of the acquisitions. 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 ZD
includes ZDI, ZD Events and the MAC Assets, (including ZD's 100% retained
interest in ZDNet) from February 29, 1996.

Acquisition of Sendai

On May 8, 1996, ZD 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 $27,500,000 plus transaction costs. The acquisition
was accounted for as a

VII-35
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

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 $33,378,000. 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 Sky TV

On October 28, 1998, ZD acquired the assets of Sky TV Inc. and certain
affiliates for approximately $12,150,000 in cash, plus contingent payments
related to earnings performance payable in 2002. Sky TV is a media company that
provides video content for distribution principally through airline in-flight,
cable and broadcast television. The acquisition was accounted for as a purchase
and accordingly Sky TV's results are included in the combined financial
statements since the date of acquisition. The excess of the purchase price over
assets acquired approximated $11,318,000. The operations of Sky TV did not have
a material effect on the combined results of operations for the year ended
December 31, 1998.

2. Reorganization and Initial Public Offering

On February 4, 1998, a nonstock corporation, ZD Inc., was formed in
contemplation of a reorganization and initial public offering of Ziff-Davis
Inc. Upon completion of the initial public offering (described below), Ziff-
Davis Inc. was renamed ZD Inc., ZDCF was renamed ZD Events Inc. and ZD Inc. was
renamed Ziff-Davis Inc.

On May 4, 1998, Softbank, through its wholly owned subsidiary SOFTBANK
Holdings Inc. ("SBH"), completed a reorganization whereby the common stock of
ZD Inc. and ZD Events Inc. were contributed to Ziff-Davis Inc. in exchange for
73,619,355 shares of Ziff-Davis Inc.'s common stock. Concurrent with the
reorganization, Ziff-Davis Inc. (1) completed an initial public offering of
25,800,000 common shares at an initial public offering price of $15.50 per
share, (2) issued $250,000,000 of 8 1/2% subordinated notes due 2008, (3)
entered into a $1,350,000,000 credit facility with a group of banks under which
$1,250,000,000 was borrowed and (4) converted $908,673,000 of intercompany
indebtedness to equity. In addition, Ziff-Davis Inc. received approximately
$9,107,000 of fixed assets from Kingston Technology Company ("Kingston") in
exchange for 580,645 shares of Ziff-Davis Inc.'s common stock and $107,000 in
cash. These assets have been subsequently leased back to Kingston. Total shares
of common stock issued to Softbank and its non-Ziff-Davis Inc. affiliates were
74,200,000. The transactions described above are herein referred to as the
"Reorganization".

On May 28, 1998, Ziff-Davis Inc.'s U.S. underwriters exercised their option
to purchase 2.0 million additional shares of common stock to cover over-
allotments. ZD purchased the additional shares from SBH resulting in no change
to the total number of shares outstanding. On December 31, 1998, SBH
contributed 71,619,355 shares of Ziff-Davis Inc.'s common stock to SOFTBANK
America Inc., a non-Ziff-Davis Inc. affiliate of Softbank.

Unaudited Pro Forma Financial Information

The following summary pro forma information has been prepared as if the
Reorganization and initial public offering, described above, had been
consummated on January 1, 1998. The pro forma adjustments for

VII-36
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

the year include a $5,219,000 reduction of interest expense, a $900,000
increase in depreciation expense and a $900,000 reduction of selling, general
and administrative expenses, as well as the tax effect of these items recorded
at an effective tax rate of 40%.

<TABLE>
<CAPTION>
Year ended
December 31, 1998
-----------------
(dollars in
thousands)
<S> <C>
Revenue, net............................................. $1,052,749
Depreciation and amortization............................ 146,996
Income from operations................................... 38,586
Interest expense, net.................................... 138,328
Loss before income taxes................................. (99,529)
Income tax benefit....................................... (24,851)
Net loss................................................. $ (74,678)
</TABLE>

3. ZDNet Stock Proposal (unaudited)

The stockholders of Ziff-Davis Inc. are scheduled to vote on a proposal (the
"Tracking Stock Proposal") to authorize the issuance of a new series of common
stock, to be designated as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"),
intended to reflect the performance of Ziff-Davis Inc.'s online business
division ("ZDNet"). The majority owner of the common stock of Ziff-Davis Inc.
has committed to vote for the Tracking Stock Proposal. Before the ZDNet Stock
is first issued, Ziff-Davis Inc.'s existing common stock will be re-classified
as Ziff-Davis Inc.--ZD Common Stock ("ZD Stock") and that stock will be
intended to reflect the performance of Ziff-Davis Inc.'s other businesses and a
"Retained Interest" in ZDNet (i.e., Ziff-Davis Inc.'s interest in ZDNet
excluding the interest intended to be represented by outstanding shares of
ZDNet Stock) (collectively, "ZD").

The book value associated with ZD's Retained Interest in ZDNet will be
increased proportionately for net income (or decreased proportionately for net
loss) of ZDNet. In addition, that book value will be adjusted from time to time
as set forth below.

Currently, Ziff-Davis Inc. provides all funding for ZD and ZDNet as described
in Note 5 (Certain Cash Management and Allocation Policies). Ziff-Davis Inc.
intends to continue these practices until ZDNet Stock is first issued.
Accordingly, no interest income or expense from or to ZDNet has been reflected
in the financial statements of ZD for any period prior to the date on which
ZDNet Stock is first issued.

VII-37
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

After the date on which ZDNet Stock is first issued, for financial statement
purposes, the following policies will apply except to the extent the Board
rescinds, modifies or adds to them:

(a) Ziff-Davis Inc. will attribute each future incurrence or issuance of
external debt or preferred stock (and the proceeds thereof) to ZD, except
in cases where the Board determines otherwise. The Board may determine from
time to time to attribute an incurrence or issuance of debt or preferred
stock (and the proceeds thereof) to ZDNet to the extent that Ziff-Davis
Inc. incurs or issues the debt or preferred stock for the benefit of ZDNet,
but the Board will not be required to do so.

(b) Ziff-Davis Inc. will attribute each future issuance of ZD Stock (and
the proceeds thereof) to ZD. Ziff-Davis Inc. may attribute any future
issuance of ZDNet Stock (and the proceeds thereof) to ZD in respect of its
Retained Interest in ZDNet (in a manner analogous to a secondary offering
of common stock of a subsidiary owned by a corporate parent) or to ZDNet
(in a manner analogous to a primary offering of common stock). Dividends on
and repurchases of ZD Stock will be charged against ZD, and dividends on
and repurchases of ZDNet Stock will be charged against ZDNet. In addition,
at the time of any dividend on ZDNet Stock, Ziff-Davis Inc. will credit to
ZD, and charge against ZDNet, a corresponding amount in respect of ZD's
Retained Interest in ZDNet.

(c) Whenever ZDNet holds cash (other than cash of ZDNet's foreign
operations or cash of ZDNet's operations that are not wholly owned), ZDNet
will normally transfer that cash to ZD. Conversely, whenever ZDNet has a
cash need (other than cash needs of ZDNet's foreign operations or cash
needs of ZDNet's operations that are not wholly owned), ZD will normally
fund that cash need. However, the Board will determine, in its sole
discretion, whether to provide any particular funds to either Group. The
Board is not obligated to cause either Group to provide funds to the other
Group if the Board determines it is not in the best interest of Ziff-Davis
Inc. to do so.

(d) Ziff-Davis Inc. will account for all cash transfers from one Group to
or for the account of the other Group (other than transfers in return for
assets or services rendered or transfers in respect of ZD's Retained
Interest that correspond to dividends paid on ZDNet Stock) as inter-Group
revolving credit advances unless (1) the Board determines that a given
transfer (or type of transfer) should be accounted for as a long-term loan,
(2) the Board determines that a given transfer (or type of transfer) should
be accounted for as a capital contribution increasing ZD's Retained
Interest in ZDNet or (3) the Board determines that a given transfer (or
type of transfer) should be accounted for as a return of capital reducing
ZD's Retained Interest in ZDNet. There are no specific criteria to
determine when Ziff-Davis Inc. will account for a cash transfer as a long-
term loan, a capital contribution or a return of capital rather than an
inter-Group revolving credit advance. The Board would make such a
determination in the exercise of its business judgment at the time of such
transfer (or the first of such type of transfer) based upon all relevant
circumstances. Factors the Board would consider include (1) the current and
projected capital structure of each Group, (2) the relative levels of
internally generated funds of each Group, (3) the financing needs and
objectives of the recipient Group, (4) the investment objectives of the
transferring Group, (5) the availability, cost and time associated with
alternative financing sources and (6) prevailing interest rates and general
economic conditions.

(e) Any cash transfer accounted for as an inter-Group revolving credit
advance will bear interest at the rate at which Ziff-Davis Inc. could
borrow such funds on a revolving credit basis (as the Board determines in
its sole discretion). Any cash transfer accounted for as a long-term loan
will have interest rate, amortization, maturity, redemption and other terms
that generally reflect the then prevailing terms on which Ziff-Davis Inc.
could borrow such funds (as the Board determines in its sole discretion).

VII-38
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

the number of shares of ZDNet Stock that could be issued by Ziff-Davis Inc.
for the account of ZD in respect of its Retained Interest in ZDNet (the
"Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet") will increase by (1) the amount of such capital contribution
divided by (2) the Market Value of ZDNet Stock on the date of transfer.

(g) Any cash transfer from ZDNet to ZD (or for its account) accounted for
as a return of capital will correspondingly reduce ZDNet's division equity
and ZD's Retained Interest in ZDNet. As a result, the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet will decrease by
(1) the amount of such return of capital divided by (2) the Market Value of
ZDNet Stock on the date of transfer.

4. Summary of Significant Accounting Policies

Principles of combination

The combined financial statements include the accounts of ZD. All significant
transactions within the ZD division have been eliminated in combination.

Investments in companies in which ZD's ownership interests range from 20% to
50% and in which ZD has the ability to exercise significant influence over the
operating and financial policies of such companies are accounted for under the
equity method.

Cash and cash equivalents

ZD considers all highly liquid investments with an original maturity of 3
months or less to be cash equivalents.

Concentration of credit risk

ZD places its temporary cash investments with high credit quality financial
institutions. At times, such investments may be in excess of federally insured
limits. ZD has not experienced losses in such accounts.

ZD's advertisers and exhibitors include principally customers who represent a
variety of technology companies in the U.S. and other countries. ZD extends
credit to its customers and distributors 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 cost or estimated fair value at
the date of acquisition. Depreciation is computed using the straight-line
method, half-year convention, over the estimated useful lives of the assets
which range from 3 to 30 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.

VII-39
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Investment in ZDNet

ZD's Retained Interest in 100% of the division equity of ZDNet is reflected
as "Retained Interest in ZDNet" in ZD's balance sheets. Similarly, ZD's
Retained Interest in 100% of the division net losses of ZDNet is reflected as
"Net loss related to retained interest in ZDNet" in ZD's combined statements of
operations.

Ziff-Davis Inc. accounts for ZD's retained interest in ZDNet, in a manner
similar to the method prescribed under APB No. 18, The Equity Method of
Accounting for Investments in Common Stock.

Debt issuance costs and discount on senior subordinated notes

The cost to issue debt is recorded in the balance sheet in other assets and
amortized to interest expense over the life of the debt. The discount on the
senior subordinated notes is recorded in the balance sheet as a reduction of
long-term debt and is amortized to interest expense over the life of the notes.
All amounts are amortized using the effective-interest method.

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 estimated useful lives.
Identifiable 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. (See Note 9.) ZD assesses the recoverability of 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 value of assets, an
impairment loss is recognized to reduce the carrying value of the intangibles
to estimated recoverable value.

Revenue recognition

Advertising revenue for ZD's 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.

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.

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

VII-40
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

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.

Reportable segments

In 1998, ZD adopted Statement of Financial Accounting Standards ("SFAS") No.
131, Disclosures about Segments of an Enterprise and Related Information. SFAS
No. 131 supersedes SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise, replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of ZD's reportable segments. SFAS No. 131 also requires disclosures
about products and services, geographic areas and major customers. The adoption
of SFAS No. 131 did not affect results of operations or financial position but
did affect the disclosure of segment information. (See Note 21.)

Foreign currency

The effect of translating foreign currency financial statements into U.S.
dollars is included in the cumulative translation adjustments account in
division equity. Gains and losses on foreign currency transactions, which are
not significant to operations, have been included in selling, general and
administrative expenses. Ziff-Davis Inc. has not historically entered into
forward currency contracts.

Other non-operating income

Other non-operating income includes management fee income and ZD's equity
share of income or loss from joint ventures.

Income taxes

ZD uses the asset and liability approach for financial accounting and
reporting of deferred taxes.

Use of estimates

Fair value of financial instruments

ZD's financial instruments recorded on the balance sheet include cash and
cash equivalents, accounts receivable, accounts payable and debt. Because of
their short maturity, the carrying amount of cash and cash equivalents,
accounts receivable and accounts payable approximate fair value. Fair value of
long-term bank debt is based on rates available to ZD for debt with similar
terms and maturities. Fair value of public debt is based on market prices.

ZD uses interest rate swap agreements to manage risk on its floating rate
debt portfolio. Fair value of these instruments is based on estimated current
settlement cost.

Interest rate swaps

ZD periodically uses interest rate swaps to manage its exposure to interest
rate fluctuations on its floating rate debt. These interest rate swaps are
entered into for hedging purposes and, as such, must be designated and
effective as a hedge against the risk of increased interest rates. Under the
terms of the agreements ZD pays a

VII-41
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

fixed interest rate on a notional amount and receives a variable interest rate
on the same notional amount. The differential between the amounts paid and
received is recorded as additional interest expense. Interest rate swaps
designated but no longer effective as a hedge would be reported at market value
and the related gains and losses would be recognized in earnings. Gains or
losses on termination of interest rate swaps would be recognized in earnings in
the period of termination.

Stock-based compensation

ZD has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), to account for stock
options. Effective January 1, 1996, ZD Group adopted the disclosure-only
provisions of Statement of Financial Accounting Standard ("SFAS") No. 123,
Accounting for Stock-Based Compensation.

Comprehensive Income

ZD implemented SFAS No. 130 Reporting Comprehensive Income, effective January
1, 1998. This standard requires ZD to report the total changes in division
equity that do not result directly from transactions with stockholders,
including those which do not affect retained earnings. These changes are not
material to ZD's combined financial statements.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. ZD does not expect the adoption of SFAS No. 133
will have a material impact on ZD's results of operations. ZD will adopt SFAS
No. 133 beginning with its 2000 financial statements.

Reclassifications

Certain amounts have been reclassified, where appropriate, to conform to the
current financial statement presentation.

5. Certain Cash Management and Allocation Policies

ZD's financial statements reflect the application of certain cash management
and allocation policies summarized below. The Board may rescind, modify or add
to any of these policies.

Treasury Activities

Ziff-Davis Inc. manages most treasury activities on a centralized,
consolidated basis. These activities include the investment of surplus cash,
the issuance, repayment and repurchase of short-term and long-term debt, and
the issuance and repurchase of common stock and preferred stock. Each of ZD and
ZDNet generally remits its cash receipts (other than receipts of foreign
operations or operations that are not wholly owned) to Ziff-Davis Inc., and
Ziff-Davis Inc. generally funds ZD's and ZDNet's cash disbursements (other than
disbursements of foreign operations or operations that are not wholly owned),
on a daily basis.

VII-42
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

In the financial statements of ZD and ZDNet, (1) all external debt and equity
transactions (and the proceeds thereof) were attributed to ZD, (2) whenever
ZDNet held cash (other than cash of ZDNet's foreign operations or cash of
ZDNet's operations that are not wholly owned), that cash was transferred to ZD
and accounted for as a return of capital (i.e., as a reduction in ZDNet's
division equity and ZD's Retained Interest in ZDNet) and (3) whenever ZDNet had
a cash need (other than cash needs of ZDNet's foreign operations or cash needs
of ZDNet's operations that are not wholly owned), that cash need was funded by
ZD and accounted for as a capital contribution (i.e., as an increase in ZDNet's
division equity and ZD's Retained Interest in ZDNet).

Corporate General and Administrative Expenses

Ziff-Davis Inc. allocates the cost of certain corporate general and
administrative services and shared services (including certain legal,
accounting (tax and financial), information systems, telecommunications,
purchasing, marketing, intellectual property, public relations, corporate
office and travel expenses) (collectively, "Central Services") to ZD based on
utilization. Where determinations based on utilization alone are impracticable,
Ziff-Davis Inc. uses other methods and criteria that management believes to be
equitable and to provide a reasonable estimate of the cost attributable to ZD.

Taxes

Federal income taxes, which are determined on a consolidated basis, are
allocated to ZD (and reflected in its financial statements) in accordance with
Ziff-Davis Inc.'s tax allocation policy. In general, this policy provides that
the consolidated tax provision (and related tax payments or refunds) are
allocated between the Groups based principally upon the financial income,
taxable income, credits and other amounts directly related to the respective
Groups. Tax benefits that cannot be used by the Group generating such
attributes, but can be utilized on a consolidated basis, are allocated to the
Group that generated such benefits. As a result, the allocated Group amounts of
taxes payable or refundable are not necessarily comparable to those that would
have resulted if the Groups had filed separate tax returns. State income taxes
generally are computed on a separate company basis.

Royalty Charges

ZD charges ZDNet an annual fee for the use of various brands and editorial
content. The current annual fee, which is reflected in ZD's financial
statements as a reduction of its selling, general and administrative costs, is
equal to 5% of the first $100,000,000 of ZDNet's revenue for the year, 4% of
the next $50,000,000 of ZDNet's revenue for that year and 3% of any incremental
revenue over $150,000,000 for that year. The Board may at some point in the
future change this fee as it, in its sole discretion, deems appropriate in
light of the circumstances from time to time.

6. Restructuring

Margin pressure on computer equipment manufacturers, industry and product
delays, lower demand in Asia and a focus on the Year 2000 transition are
contributing to a reduced demand for advertising in ZD's magazines, principally
PC Magazine, PC/Computing, Computer Shopper and PC Week. ZD believes these
factors are continuing. In part as a result of these factors, income from
operations for the fourth quarter of 1998 was significantly lower than income
from operations for the fourth quarter of 1997.

VII-43
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

. Employee termination costs related to severed personnel at the closed
publications as well as a rationalization and resulting workforce
reduction of the remainder of Ziff-Davis Inc.'s operations. Employee
termination costs included payments for severance and earned vacation as
well as the costs of outplacement services and the provision of continued
benefits to personnel. As of December 31, 1998, $5,200,000 million of the
$8,668,000 million related to these employee terminations had been paid.

Included in accrued expenses is $7,260,000 related to this restructuring
which Ziff-Davis Inc. believes will be paid during the first half of 1999.

7. Accounts Receivable, Net

Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1998
-------- --------
(dollars in
thousands)
<S> <C> <C>
Accounts receivable.................................. $297,647 $292,108
Allowance for doubtful accounts, returns and
cancellations....................................... (87,733) (83,515)
-------- --------
$209,914 $208,593
======== ========
</TABLE>

8. Property and Equipment, Net

Property and equipment, net, consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
(dollars in
thousands)
<S> <C> <C>
Computers and equipment.................................. $45,896 $70,584
Leasehold improvements................................... 39,719 61,972
Furniture and fixtures................................... 16,911 28,570
------- -------
102,526 161,126
Accumulated depreciation and amortization................ (52,135) (75,555)
------- -------
$50,391 $85,571
======= =======
</TABLE>

VII-44
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

9. Intangible Assets, Net

Intangible assets, net, consist of the following:

<TABLE>
<CAPTION>
Range of December 31,
Useful Lives ---------------------------
(years) 1997 1998
------------ ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Advertising lists................ 7-34 $ 885,700 $ 870,000
Exhibitor relationships.......... 4-27 154,070 154,070
Trademarks/trade names........... 30-40 735,595 709,306
License agreements............... 6-14 11,212 11,212
Subscriber lists................. 3-10 47,175 47,075
Other............................ 2-20 57,599 58,837
Goodwill......................... 5-40 1,316,077 1,348,413
---------- ----------
3,207,428 3,198,913
Accumulated amortization......... (244,259) (354,596)
---------- ----------
$2,963,169 $2,844,317
========== ==========
</TABLE>

All intangible assets are being amortized using the straight-line method over
estimated useful lives, up to 40 years. In determining the estimated useful
lives, ZD considered its competitive position in the markets in which it
operates, 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. In connection with the restructuring described in Note 6, ZD
recorded a $37,175,000 write-down of intangible assets associated with
discontinued publications and events.

10. Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------- -------
(dollars in
thousands)
<S> <C> <C>
Payroll and related employee benefits..................... $27,672 $24,408
Accrued interest.......................................... 6,226 13,678
Restructuring reserve..................................... -- 7,260
Other taxes payable....................................... 2,633 2,386
Other..................................................... 41,355 46,092
------- -------
$77,886 $93,824
======= =======
</TABLE>

VII-45
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

11. Unearned Income

Unearned income consists of the following:

<TABLE>
<CAPTION>
December 31,
------------------
1997 1998
-------- --------
(dollars in
thousands)
<S> <C> <C>
Unexpired subscriptions................................ $ 82,167 $ 64,940
Prepaid conference fees................................ 80,706 95,706
Reserve for cancellations.............................. (8,191) (9,643)
-------- --------
$154,682 $151,003
======== ========
</TABLE>

12. Income Taxes

Provision (benefit) for income taxes and related assets and liabilities
attributed to ZD are determined in accordance with Ziff-Davis Inc.'s tax
allocation policy. (See Note 5.)

Prior to the Reorganization and initial public offering described in Note 2,
ZD had 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 ZD 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 Ziff-Davis Inc.
Following the Reorganization, Ziff-Davis Inc. will no longer be included in the
consolidated U.S. federal income tax returns filed by Softbank.

Income (loss) before income taxes is attributable to the following
jurisdictions:

<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1997 1998
-------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C>
United States.............................. $(21,607) $(73,795) $(101,644)
Foreign.................................... (5,029) 2,147 (3,104)
-------- -------- ---------
Total...................................... $(26,636) $(71,648) $(104,748)
======== ======== =========

Components of the provision (benefit) for income taxes are as follows:

<CAPTION>
December 31,
-----------------------------
1996 1997 1998
-------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C>
U.S. federal income taxes:
Current.................................. $ -- $ -- $ --
Deferred................................. 19,716 (364) (22,008)
State and local income taxes:
Current.................................. -- -- --
Deferred................................. 5,729 (105) (7,476)
Foreign income taxes:
Current.................................. -- -- 2,545
Deferred................................. -- -- --
-------- -------- ---------
Total provision (benefit) for income
taxes................................. $ 25,445 $ (469) $ (26,939)
======== ======== =========
</TABLE>

VII-46
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

A reconciliation of the U.S. federal statutory tax rate to ZD's effective tax
rate on income (loss) before income taxes is as follows:

<TABLE>
<CAPTION>
December 31,
-------------------
1996 1997 1998
----- ----- ----
<S> <C> <C> <C>
Federal statutory tax rate........................... 35.0% 35.0% 35.0%
State and local taxes (net of federal tax benefit)... 6.0 6.0 4.6
Loss related to retained interest in ZDNet........... (26.1) (12.2) (2.5)
Non-recognition of combined losses of MAC Assets..... (96.9) (22.2) (2.6)
Amortization of non-deductible goodwill.............. (13.3) (5.8) (3.2)
Other................................................ (0.2) (0.1) (5.6)
----- ----- ----
Effective tax rate................................... (95.5)% 0.7% 25.7%
===== ===== ====
</TABLE>

The effective tax rate differs from the federal statutory tax rate primarily
as a result of ZD's inability to deduct losses of the MAC Assets prior to May
4, 1998, and ZD's policy of recording the losses related to its 100% retained
interest in ZDNet on a net of tax basis. The amortization of non-deductible
goodwill resulted primarily from the stock acquisition of 100% of the stock of
Holdings in 1996.

Following is a summary of the components of the deferred tax accounts at
December 31, 1997 and 1998:

<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998
--------- ---------
(dollars in
thousands)
<S> <C> <C>
Current deferred tax assets and (liabilities):
Allowance for doubtful accounts................... $ 8,713 $ 15,068
Unearned income................................... 965 6,309
Other............................................. (953) 106
--------- ---------
Current deferred net tax assets................. 8,725 21,483
--------- ---------
Noncurrent deferred tax assets and (liabilities):
Basis difference in intangible assets............. (288,286) (247,832)
Basis difference in property and equipment........ 7,394 12,274
Net operating loss and other carryforwards........ 124,233 81,909
Other............................................. 6,307 15,034
--------- ---------
Noncurrent deferred tax liabilities............. (150,352) (138,615)
Valuation allowance................................. (35,261) (30,741)
--------- ---------
Net noncurrent deferred tax liabilities......... (185,613) (169,356)
--------- ---------
Net deferred tax liabilities........................ $(176,888) $(147,873)
========= =========
</TABLE>

As of December 31, 1997 and 1998 ZD had total deferred tax assets of
$112,351,000 and $99,959,000 respectively, and total deferred tax liabilities
of $289,239,000 and $247,832,000, respectively. The December 31, 1997 and 1998
net deferred tax assets are reduced by a valuation allowance of $35,261,000 and
$30,741,000, 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 1998 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, inasmuch as
such losses will not be available to ZD.

VII-47
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

At December 31, 1998, ZD has U.S. and foreign net operating loss
carryforwards of approximately $172,943,000, which will begin to expire in
1999. ZD's utilization of certain net operating loss carryforwards, of
approximately $112,549,000, is subject to limitations, due to the change of
ownership resulting from the Softbank acquisition of the Holdings stock on
February 29, 1996. Management believes that such limitations will not
significantly affect ZD's 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, ZD
has alternative minimum tax credit carryforwards of $385,000 which may be
carried forward indefinitely until used.

13. Notes Payable

8 1/2% Senior Subordinated Notes

On May 4, 1998 ZD issued 8 1/2% Senior Subordinated Notes due 2008 (the
"Notes") in the aggregate principal amount of $250,000,000. The Notes were
issued at a discount of $915,000 which is being amortized to interest expense
over the term of the Notes. Included in the balance sheet as a reduction of
long-term debt at December 31, 1998 is $870,000 representing the unamortized
discount on the notes. Interest on the Notes is payable semi-annually on May 1
and November 1 of each year. Redemption of the Notes by ZD is subject to
certain limitations. The Notes are subordinated to all existing and future
senior indebtedness.

Credit Facility

Ziff-Davis Inc. is party to a secured guaranteed credit agreement with The
Bank of New York, Morgan Stanley Senior Funding, DLJ Capital Funding and The
Chase Manhattan Bank, as agents, to provide a $1,350,000,000 term credit
facility. The amount outstanding under this facility at December 31, 1998 was
$1,220,000,000. The credit facility consists of: (1) a seven-year $400,000,000
reducing revolving credit facility, with $270,000,000 drawn as of December 31,
1998; (2) a seven-year $450,000,000 term loan; and (3) an eight-year
$500,000,000 term loan. Under the credit facility, Ziff-Davis Inc. paid
interest at rates ranging from LIBOR plus 1.5% to LIBOR plus 1.75%. See "--
Amendment to Credit Facility" below.

. 10% in 2000, in two equal quarterly installments,

. 20% in each of 2001, 2002, 2003 and 2004 in four equal quarterly
installments and

. 10% at final maturity in March 2005.

The $500 million term loan will be amortized, beginning in September 2000, by:

. $2 million in 2000, in two equal quarterly installments,

. $4 million in each of 2001, 2002, 2003, 2004 and 2005 in four equal
quarterly installments and

. $478 million at final maturity in March 2006.

Under its most restrictive covenant, ZD had $28,800,000 available under its
line of credit at December 31, 1998.

VII-48
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

Covenants

The Notes and the credit facility is secured, in part, by a first priority
security interest in capital stock of certain subsidiaries of Ziff-Davis Inc.
and is guaranteed by certain wholly owned domestic subsidiaries of Ziff-Davis
Inc., in each case, including ZD Inc. and ZD Events.

The credit facility contains certain customary affirmative and negative
covenants, including covenants with respect to limitations on dispositions of
assets, changes of business and ownership, mergers or acquisitions, restricted
payments, indebtedness, loans and investments and transactions with affiliates.
The Notes and the credit facility also contains certain financial covenants
including levels of debt to EBITDA and EBITDA to interest ratios.

The failure to satisfy any of the covenants would constitute an event of
default under the credit facility. The credit facility also includes 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. At December 31, 1998,
Management believes that ZD was in compliance with all covenants under its debt
agreements.

Amendment to Credit Facility

On December 16, 1998, the lenders on Ziff-Davis Inc.'s $1,350,000,000 credit
facility agreed to amend of certain provisions of that facility. The amended
provisions include an increase in allowed leverage ratios. In return, Ziff-
Davis Inc. agreed to pay a one-time fee of $3,375,000 and increase rates on
amounts borrowed under the facility to rates currently ranging from LIBOR plus
2.875% to LIBOR plus 3.375%, depending on the type of loan. The fee has been
capitalized and will be amortized to interest expense over the remaining term
of the facility.

Related-party Debt

In March 1995, Ziff-Davis Inc. entered into a $100,000,000 note payable to
Softbank due in quarterly installments, maturing on February 28, 2010 and
bearing interest at 9.9% per annum. (See Note 14.)

Scheduled Principal Repayments

Scheduled principal payments due on long-term debt at December 31, 1998 are
as follows:

<TABLE>
<CAPTION>
(dollars in
thousands)
-----------
<S> <C>
1999........ $ 7,692
2000........ 53,923
2001........ 100,923
2002........ 100,923
2003........ 100,923
1,183,501
Thereafter.. -----------
$ 1,547,885
Total....... ===========
</TABLE>

Interest Rate Swaps

On June 10, 1998 ZD entered into interest rate swap agreements, with an
aggregate notional amount of $550,000,000. Under these swap agreements, which
took effect on August 10, 1998, ZD will receive a floating rate of interest
based on three-month LIBOR, which resets quarterly, and ZD will pay a fixed
rate of interest, each quarter, for the terms of the respective agreements. The
terms of these agreements range from 3 to 7 years and the weighted average
fixed rate ZD will pay is 5.85%. ZD has entered into these agreements solely to
hedge its interest rate risk under its floating rate bank debt.

VII-49
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

For the year ended December 31, 1998, these interest rate swaps did not have
a material impact on the financial statements.

14. Related Party Transactions

ZD transacts business with a group of companies affiliated through common
ownership with Softbank, and has various transactions and relationships with
members of the group. Due to 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

Due from affiliates consist of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
----------- -----------
(dollars in thousands)
<S> <C> <C> <C>
Due from:
MAC .......................................... $ 42,687 $ 50,704
Softbank...................................... 84,365 1,557
Other affiliates.............................. 4,238 1,723
----------- ----------
$ 131,290 $ 53,984
=========== ==========

Due to affiliates and management consist of the following:

<CAPTION>
December 31,
-----------------------
1997 1998
----------- -----------
(dollars in thousands)
<S> <C> <C> <C>
Due to:
Management (including long-term portion)...... $ -- $ 9,900
MAC .......................................... 270,000 --
Softbank...................................... 126,371 --
Other affiliates.............................. 1,961 118
----------- ----------
$ 398,332 $ 10,018
=========== ==========
</TABLE>

As part of the 1996 acquisition of ZDI, ZD agreed to assume certain
obligations to management arising out of prior employment arrangements with
previous owners. In January 1997, ZD paid all amounts due, including accrued
interest, through the payment date.

Prior to the Reorganization and initial public offering, ZD was a member of
Softbank's central cash management system. Under this system, ZD would
periodically transfer excess cash to Softbank for cash management purposes and
in turn receive cash advances from Softbank to fund ZD's short-term working
capital requirements. Interest was 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%.

As a result of contingent purchase price adjustments related to its
acquisition of Inter@ctive Enterprises, ZD is obligated to pay the prior owners
of Inter@ctive Week $10,850,000 which was recorded as an increase to intangible
assets. The purchase price payments of $950,000, $4,500,000 and $5,400,000 are
due in 1998, 1999 and 2000, respectively. The 1999 and 2000 payments have been
classified as current and long-term due to management.

VII-50
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Other affiliated arrangements

During the years ended December 31, 1996, 1997 and 1998, ZD incurred
$2,000,000, $1,631,000 and $169,000, respectively, in advertising expense with
Yahoo!, Inc. (Yahoo!), an affiliated company.

ZD sells advertising space and exhibition services to Kingston Technology
Company ("Kingston"), an affiliated company. During the years ended December
31, 1996, 1997 and 1998, ZD recorded revenue of $882,000, $2,667,000 and
$2,472,000, respectively, from sales to Kingston. These services were provided
under terms consistent with those provided to unaffiliated customers.

In addition, on May 4, 1998 Ziff-Davis Inc. purchased $9,107,000 of fixed
assets from Kingston in exchange for cash and common stock of Ziff-Davis Inc.
Such fixed assets were subsequently leased back to Kingston. Rental income
included as a reduction of selling, general and administrative expenses
relating to this transaction was $2,400,000 in 1998.

ZD has entered into an agreement to manage certain trade shows and
expositions owned by Softbank and its non-Ziff-Davis Inc. affiliates, whereby
ZD earns management, royalty and licensing fees. The fees earned by ZD for the
years ended December 31, 1996, 1997 and 1998 were $3,394,000, $4,057,000, and
$1,117,000 respectively.

ZD has an arrangement with SOFTBANK Services, an affiliated company, whereby
ZD is charged for administrative services provided plus a management fee. For
the years ended December 31, 1996, 1997 and 1998 Ziff-Davis Inc. incurred
services fees of $359,000, $1,259,000 and $810,000 respectively, in relation to
this agreement. During 1998, SOFTBANK Services was sold to an unrelated third
party and the arrangement was terminated.

ZD has entered into certain licensing agreements with Softbank for the
publishing and distribution of Japanese language editions of certain
publications. The fees earned by ZD for the years ended December 31, 1996, 1997
and 1998 were approximately $964,000, $1,818,000 and $709,000 respectively.

Certain ZD employees have been granted options to purchase Softbank common
stock (the "Softbank Options"). Further, on January 29, 1999, options to
purchase Ziff-Davis Inc. common stock were granted in connection with the
cancellation of certain Softbank options. (See Note 15.)

Included in selling, general and administrative expenses is an allocation for
Ziff-Davis Inc.'s Central Services amounting to $61,359,000, $85,739,000 and
$92,032,000 for the years ended December 31, 1996, 1997 and 1998, respectively.
Also included as a reduction in selling, general and administrative expenses is
a royalty charge from ZDNet amounting to $811,000, $1,611,000 and $2,807,000
for the years ended December 31, 1996, 1997 and 1998, respectively. (See Note
5.)

ZD's publications sell advertising to ZDNet at discounts to market rates. Had
ZD charged market rates for such advertising, ZD's revenue would have increased
by $2,235,000, $2,671,000 and $1,429,000 for the years ended December 31, 1996,
1997 and 1998 respectively.

VII-51
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

which through December 31, 1997, totaled $14.4 million net of $10.1 million in
repayments were repaid concurrently with the Reorganization. Advances in 1998
totaled $48.6 million and were repaid upon completion of Ziff-Davis Inc.'s
acquisition of ZDTV. (See Notes 2 and 23.)

Notes payable to affiliates

See Note 2 for a discussion of ZD's restructuring of its debt and equity
structures through the Reorganization and initial public offering.

ZD's long-term debt payable to Softbank consists of the following:

(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) Note matures on February 28, 2010. The note bears 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.

During 1996, 1997 and 1998 ZD incurred $120,640,000, $190,445,000 and
$65,935,000 respectively, of interest expense due to Softbank related to the
above notes payable.

Guarantee of Softbank's U.S. debt

In April 1996, Softbank signed a line of credit agreement totaling
$50,000,000 with an independent lender for which ZD, along with certain other
Softbank affiliates, is a guarantor. In January 1997, October 1997 and March
1998, this line of credit was increased to $75,000,000, $150,000,000 and
$450,000,000 respectively. On May 4, 1998, ZD was released from this guarantee.

VII-52
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Return of capital and dividends

On December 15, 1996, ZD declared a return of capital of approximately
$900,000,000 paid through the issuance of a note payable to a subsidiary of
Softbank and a cash dividend of $8,000,000 to Softbank. In 1997, ZD recorded a
return of capital of $381,434,000 in connection with the purchase of companies
under common control.

15. Stock Compensation Plans

SOFTBANK Executive Stock Option Plans

The Softbank Executive Stock Option Plans provide for the granting of
nonqualified stock options (the "Softbank options") to purchase the common
stock of Softbank to officers, directors and key employees of ZD. Softbank is
Ziff-Davis Inc.'s majority stockholder and SOFTBANK Corp. is a publicly traded
company in Japan. 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,
1998, 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. On January 19, 1998, the exercise price of
all of the shares outstanding under option agreements was reset to (Yen)4,000,
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 could only be exercised after July 19, 1998. The repricing
of the stock options did not result in compensation expense to ZD.

1998 Incentive Compensation Plan and the 1998 Non-Employee Directors' Stock
Option Plan

In 1998, Ziff-Davis Inc. adopted the 1998 Incentive Compensation Plan (the
"Incentive Plan") and the 1998 Non-Employee Directors' Stock Option Plan (the
"Non-Employee Directors' Plan"). The Incentive Plan provides for the grant of
options, stock appreciation rights, stock awards and other interests in Ziff-
Davis Inc.'s common stock to key employees of Ziff-Davis Inc. and its
affiliates and consultants. The Non-Employee Directors' Plan provides for the
grant of stock options to non-employee directors. Ziff-Davis Inc. has reserved
8,500,000 shares of common stock for issuance under the Incentive Plan and
200,000 shares of common stock for issuance under the Non-Employee Directors'
Plan. During 1998, Ziff-Davis Inc. granted options to purchase 6,418,495 shares
with exercise prices between $6.00 and $16.00 per share representing the fair
value of such options on the date of grant. Such options vest ratably over five
years.

On December 21, 1998, the Board approved an amendment to the Incentive Plan,
subject to stockholder approval, to permit grants of options and other stock-
based awards with respect to any series of common stock of Ziff-Davis Inc. and
to increase the number of shares reserved for issuance from 8,500,000 shares to
20,327,500 shares.

In addition, on December 21, 1998, the Board approved the grant of options to
acquire an aggregate of approximately 1,566,000 shares of ZDNet Stock, to
certain employees at a price of $7.50 per share representing the fair value of
the shares on that date. These options are currently scheduled to vest and
become exercisable on the fifth anniversary of the date of grant.

VII-53
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

The terms of the options described in the preceding paragraph require an
adjustment in the number of shares of ZDNet Stock that holders may purchase and
the per share purchase price thereof if the Initial Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet is different from 40,000,000.
This adjustment is similar to the adjustment that would generally be made to
the terms of employee stock options in the event of a stock split. Ziff-Davis
Inc. currently expects that the Initial Number of Shares Issuable with Respect
to ZD's Retained Interest in ZDNet will be 70,000,000. Assuming that this is
so, the total number of shares of ZDNet Stock that holders may purchase upon
exercise of these options will increase to approximately 10,200,000 and the per
share purchase price thereof will decrease to approximately $4.29.

The December 21, 1998 Board actions described above are subject to
stockholder approval. The majority stockholder of Ziff-Davis Inc. has committed
to vote for these actions.

On January 29, 1999, Ziff-Davis Inc. granted options to a number of employees
in connection with the cancellation of corresponding options to purchase stock
of SOFTBANK Corp. In connection with these grants, an affiliate of SOFTBANK
Corp. has agreed with Ziff-Davis Inc. that, if and when any of these options
are exercised, (1) that affiliate will cause the shares of Ziff-Davis Inc.
common stock issuable upon such exercise to be supplied to Ziff-Davis Inc. and
(2) Ziff-Davis Inc. will deliver to that affiliate or its designee the exercise
price paid upon such exercise. Thus, the exercise of these options will not
increase the number of shares of Ziff-Davis Inc. common stock outstanding or
Ziff-Davis Inc.'s stockholders' equity. However, Ziff-Davis Inc. expects to
recognize compensation expense for accounting purposes of approximately
$2,942,000 over three years as a result of these grants. As such, this amount
has been recorded in the Financial Statements as additional paid-in capital
offset by a reduction to division equity as deferred compensation.

VII-54
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Information relating to the Softbank options during 1996, 1997 and 1998 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.................................. 714,777 (2) $87.15
Exercised................................ -- --
Forfeited................................ (12,740)(2) 87.15
--------
Shares outstanding under options at
December 31, 1996....................... 702,037 87.15
Granted.................................. 368,563 61.25
Exercised................................ -- --
Forfeited................................ (138,034) 78.89
--------
Shares outstanding under options at
December 31, 1997....................... 932,566 $78.14
Granted.................................. 258,215 $31.03
Exercised................................ (75,982) 31.03
Forfeited/cancelled...................... (309,936) 31.03
Converted to Ziff-Davis Inc. options..... (81,478) 31.03
--------
Shares outstanding under options at
December 31, 1998....................... 723,385 $31.03
========
Shares exercisable as of:
At December 31, 1996................... -- --
At December 31, 1997 (price range
$44.26-$87.15)........................ 102,510 $82.21
At December 31, 1998 (price $31.03).... 167,991 $31.03
</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. The 1998 activity reflects the repricing of all
options outstanding as of January 19, 1998 to (Yen) 4,000.

(2) Adjusted for a 1.4:1 stock split during 1996 and a 1.3:1 stock
split during 1997.

Information relating to the Ziff-Davis Inc. stock options during 1998 is as
follows:

<TABLE>
<CAPTION>
Weighted Average
Number Option Price
of Shares Per Share
--------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1997................................... -- --
Granted..................................... 6,418,495 $6.09
Exercised................................... -- --
Converted from Softbank options............. 319,174 8.89
Forfeited................................... (385,590) 6.00
---------
Shares outstanding under options at December
31, 1998................................... 6,352,079 $6.22
=========
</TABLE>

VII-55
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Option grants

Information relating to the ZDNet stock options during 1998 is as follows:

<TABLE>
<CAPTION>
Weighted Average
Number Option Price
of Shares Per Share
--------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1997.................................... -- --
Granted...................................... 1,566,357 $7.50
Exercised.................................... -- --
Forfeited.................................... -- --
---------
Shares outstanding under options at December
31, 1998.................................... 1,566,357 $7.50
=========
</TABLE>

At December 31, 1998, no shares of either Ziff-Davis Inc. or ZDNet options
were exercisable.

As permitted by SFAS No. 123, ZD has 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, 1997
or 1998. Pro forma information regarding net income is required by SFAS No. 123
and has been determined as if ZD 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, 1997 and 1998:

Softbank Options
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... 5.89% 6.35% 5.46%
Dividend yield.................................... 0.26% 0.22% 1.50%
Volatility factor................................. 54.03% 51.35% 77.72%
Expected life..................................... 6 years 6 years 6 years

Ziff-Davis Inc. Options
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... n/a n/a 5.03%
Dividend yield.................................... n/a n/a 0.00%
Volatility factor................................. n/a n/a 54.70%
Expected life..................................... n/a n/a 6 years

ZDNet Options
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... n/a n/a 4.67%
Dividend yield.................................... n/a n/a 0.00%
Volatility factor................................. n/a n/a 54.70%
Expected life..................................... n/a n/a 6 years

The weighted average fair value of options granted in 1996, 1997 and 1998 is
as follows:

<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Softbank Options.................................. $64.30 $34.05 $19.81
Ziff-Davis Inc. Options........................... n/a n/a 5.21
ZDNet Options..................................... n/a n/a 4.25
</TABLE>

VII-56
<PAGE>

(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over 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, 1997 and 1998, consistent
with the provisions of SFAS No. 123, ZD's net loss would have been increased by
approximately $3,000,000, $4,000,000 and $14,084,000, respectively.

Other stock compensation plans

During 1996, 1997 and 1998 employees of ZD were granted 45,760, 61,940 and
27,223 shares of common stock of Softbank, respectively, (adjusted for a 1.4:1
stock split 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 3 to 5-year period from the date of grant. The granting of the shares to
ZD's employees has been recorded as additional paid-in capital offset by a
reduction to division 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 $1,080,000 was charged to expense related to the
restricted stock awards. During 1997, restrictions on 75,210 shares expired,
2,150 shares were forfeited and $3,916,000 was charged to expense related to
these restricted stock awards. During 1998, restrictions on 22,361 shares
expired, 5,736 shares were forfeited and $252,000 was charged to expense
related to these restricted stock awards.

Employee Stock Purchase Plan

16. Employee Benefit Plans

Pension plan

Certain employees of ZD who have met eligibility requirements were covered by
a noncontributory defined benefit pension plan. The benefits are based on years
of service and average compensation at the time of retirement. ZD's 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.

During 1997, ZD 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 amounts below reflect the effects of such termination. All
accrued plan obligations were settled during 1998 and a gain of $156,000 was
recognized in 1998 as a result of the plan settlement.

VII-57
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

Net periodic pension cost includes the following components:

<TABLE>
<CAPTION>
1996 1997
----------- -----------
(dollars in thousands)
<S> <C> <C>
Service cost...................................... $ 700 $ 391
Interest cost..................................... 472 456
Expected return on plan assets.................... (300) (445)
Amortization of transition obligation............. 199 75
----------- ----------
Net periodic pension cost......................... $ 1,071 $ 477
=========== ==========
</TABLE>

The following table sets forth the funded status and amounts recognized in the
balance sheet:

<TABLE>
<CAPTION>
1997
-------
(dollars in
thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................. $ 5,721
=======
Accumulated benefit obligations........................... 5,721
=======
Projected benefit obligations............................... 5,721
Plan assets at fair value................................... (6,004)
=======
Projected benefit obligation less than plan assets.......... (283)
Unrecognized net transition asset........................... 1,279
-------
Pension liability included in balance sheet................. $ 996
=======
</TABLE>

Retirement plans

Ziff-Davis Inc. maintains various defined contribution retirement plans.
Substantially all of ZD's employees are eligible to participate in one of the
plans under which annual contributions may be made by Ziff-Davis Inc. 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 Ziff-Davis Inc. up to certain specified
percentages. Employees are generally eligible to participate in a plan upon
joining Ziff-Davis Inc. and receive matching contributions after one year of
employment. ZD made contributions to the plans totaling $10,023,000,
$12,974,000 and $11,893,000 in 1996, 1997 and 1998, respectively.

17. Investments

ZD has investments in the following companies/joint ventures/divisions:

<TABLE>
<CAPTION>
Carrying value at
December 31,
Ownership -----------------
Equity Investments Percentage 1997 1998
------------------ ---------- -------- --------
(dollars in
thousands)
<S> <C> <C> <C>
Mac Publishing LLC........................... 50% $ 16,244 $19,268
ExpoComm LLC................................. 50% 7,758 8,571
Family PC G.P................................ 50% 9,342 --
Cost Investments
----------------
Red Herring Communications, Inc. ............ -- $ 5,000
</TABLE>

VII-58
<PAGE>

(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

The entities listed above are engaged primarily in the publication or
distribution of print media, the organization, production and management of
trade shows and providing interactive information and programming to
technology-oriented Internet users. Other investments and joint ventures are
not material to ZD's financial statements.

ZD has equity income (loss) from joint ventures of $(796,000), $335,000 and
$7,483,000 in 1996, 1997 and 1998, respectively. In addition, ZD had equity
losses of $16,925,000 and $21,238,000 and $7,884,000 in 1996, 1997 and 1998,
respectively, from its 100% Retained Interest in ZDNet.

18. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
Year ended December 31,
----------------------------
1996 1997 1998
---------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................... $ 99,509 $185,447 $129,976
Income taxes............................... 360 4 1,000
Noncash investing and financing activities:
Fair value of assets acquired.............. $2,508,603 $ 14,000 $ 55,473
Liabilities assumed........................ 370,518 -- 32,701
---------- -------- --------
Cash paid.................................. 2,138,085 14,000 22,772
Less--cash acquired........................ 13,262 -- --
Net cash paid for acquisitions............. $2,124,823 $ 14,000 $ 22,772
========== ======== ========
Return of capital dividends................ $ 899,948 $381,434 $ --
========== ======== ========
Capital contributions...................... $ 5,002 $ 61,580 $926,096
========== ======== ========
</TABLE>

19. Fair Value of Financial Instruments

ZD's accounting policies with respect to financial instruments are discussed
in Note 4.

The carrying amounts and fair values of ZD's significant on balance sheet
financial instruments at December 31, 1997 and 1998 are as follows:

<TABLE>
<CAPTION>
At December 31,
-------------------------------------------
1997 1998
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Values Amount Values
---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents......... $ 30,273 $ 30,273 $ 32,274 $ 32,274
Accounts receivable............... 209,914 209,914 208,593 208,593
Accounts payable.................. 54,823 54,823 71,844 71,844
Long-term debt (including current
portion)......................... 2,534,030 2,534,030 1,547,014 1,543,839
</TABLE>

Interest rate swaps

ZD utilizes interest rate swaps to reduce the impact on interest expense of
fluctuating interest rates on its variable rate debt. Under ZD's interest rate
swap agreements, ZD agreed with the counterparties to exchange, at quarterly
intervals, the difference between ZD's fixed pay rate and the counterparties'
variable pay rate on three-month LIBOR. At December 31, 1998, ZD was a fixed
payor of 5.85% on an aggregate notional amount of $550,000,000.

VII-59
<PAGE>

(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

The fair values of these interest rate swaps were estimated by obtaining
quotes from brokers which represented the amounts that ZD would pay if the
agreements were terminated at the balance sheet date. While it is not ZD's
intention to terminate these interest rate swaps, these fair values indicated
that the termination of the interest rate swap agreements would have resulted
in a loss of $15,627,000.

20. Operating Lease Commitments

ZD utilizes equipment and space under lease to Ziff-Davis Inc. ZD's portion
of the minimum lease payments based on square feet utilized are as follows:

<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
1999..................................................... $ 31,408
2000..................................................... 32,601
2001..................................................... 30,371
2002..................................................... 28,893
2003..................................................... 27,579
Thereafter............................................... 225,952
--------
Total.................................................. $376,804
========
</TABLE>

Netted in the above totals is approximately $5,000,000 for which ZD has
noncancelable subleases in place. Total sublease income approximates ZD's
required payments under the related leases. Rent expense amounted to
approximately $22,347,000, $28,646,000 and $23,087,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.

21. Segment Information

ZD has adopted the provisions of SFAS No. 131 Disclosure about Segments of an
Enterprise and Related Information. As such prior years data has been restated
in accordance with SFAS No. 131.

Business segment information

Reportable segments are based on ZD's method of internal reporting which
segregates its business by product lines. Management measures operating
performance of the business segments based on "EBITDA". EBITDA is defined as
income before provision for income taxes, interest expense, depreciation and
amortization. ZD's EBITDA is calculated by adding (a) ZD's EBITDA before losses
related to its retained interest in ZDNet and (b) ZD's proportionate interest
in ZDNet's EBITDA. 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 ZD's operating performance or to cash flows as a measure of
liquidity. Although ZD believes that EBITDA is a standard measure commonly
reported and widely used by analysts, investors and other interested parties,
in the publishing business and media industries, the EBITDA presented for ZD
may not be comparable to similarly titled measures reported by other companies.

ZD's reportable segments are:

Publishing

VII-60
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for the computer industry. The events
segment's principal operations are in North America and to a lesser extent in
Europe, Asia and Latin America.

The accounting policies of the segments are the same as those described in
Note 3 "Summary of Significant Accounting Policies". ZD evaluates the
performance of its segments and allocates resources to them based on earnings
before interest, taxes, depreciation and amortization (EBITDA). Any inter-
segment revenues included in segment data are not material. The following
presents information about the reported segments for the years ending December
31:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenue:
Publishing................................ $ 674,040 $ 834,015 $ 782,882
Events.................................... 264,884 287,528 269,867
---------- ---------- ----------
Total................................... $ 938,924 $1,121,543 $1,052,749
========== ========== ==========

<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
EBITDA:
Publishing................................ $ 124,467 $ 169,145 $ 124,396
Events.................................... 108,791 103,749 119,698
---------- ---------- ----------
Total................................... $ 233,258 $ 272,894 $ 244,094
========== ========== ==========
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Total Assets:
Publishing................................ $2,441,441 $2,423,822 $2,285,920
Events.................................... 1,143,522 1,124,286 1,144,018
---------- ---------- ----------
Total................................... $3,584,963 $3,548,108 $3,429,938
========== ========== ==========
</TABLE>

A reconciliation of total segment EBITDA to total combined loss before income
taxes, for the years ended December 31, 1996, 1997 and 1998 is as follows:

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ---------
(in thousands)
<S> <C> <C> <C>
EBITDA:
Total segment EBITDA...................... $233,258 $272,894 $ 244,094
Restructuring charge...................... -- -- (52,239)
Depreciation & amortization............... (31,647) (28,884) (27,875)
Amortization of intangible assets......... (102,604) (118,375) (118,221)
Interest expense, net..................... (120,646) (190,445) (143,547)
Non EBITDA loss related to retained
interest in ZDNet........................ (4,997) (6,838) (6,960)
-------- -------- ---------
Combined loss before income taxes....... $(26,636) $(71,648) $(104,748)
======== ======== =========
</TABLE>

VII-61
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share amounts)

Equity in income of investees included in the Publishing segment EBITDA for
the years ended December 31, 1996, 1997 and 1998 was $(796,000), $335,000 and
$2,044,000, respectively. Equity in income of investees included in the Events
segment EBITDA for the years ended December 31, 1996, 1997 and 1998 was $--,
$1,695,000 and $5,439,000 respectively.

Publishing's investment in equity method investees for the years ended
December 31, 1996, 1997 and 1998 was $10,138,000, $25,586,000 and $19,268,000,
respectively. Events' investment in equity method investees for the year ended
December 31, 1996, 1997 and 1998 was $7,698,000, $7,758,000 and $8,571,000,
respectively.

The following is sales information by geographic area as of and for the
respective years ended December 31.

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenue:
United States............................. $ 838,749 $1,008,681 $ 936,075
Foreign................................... 100,175 112,862 116,674
---------- ---------- ----------
Total................................... $ 938,924 $1,121,543 $1,052,749
========== ========== ==========

Foreign revenue is based on the country in which the sales originate. Revenue
from no single foreign country was material to the combined revenues of ZD.

The following is long-lived asset information by geographic area as of and
for the respective years ended December 31:

<CAPTION>
1996 1997 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Long-lived assets:
United States............................. $3,211,881 $3,103,611 $3,049,645
Foreign................................... 9,580 8,570 14,130
---------- ---------- ----------
Total................................... $3,221,461 $3,112,181 $3,063,775
========== ========== ==========
</TABLE>

No single customer accounted for more than 10% of total revenue for each of
the years ended December 31, 1996, 1997 and 1998.

22. Contingencies

ZD is subject to various claims and legal proceedings arising in the normal
course of business.

Class Action and Derivative Litigations

Following a decline in the price per share of Ziff-Davis Inc.'s common stock
in October 1998, eight securities class action suits were filed against Ziff-
Davis Inc. and certain of its directors and officers in the United States
District Court for the Southern District of New York.

VII-62
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

In addition, two derivative suits have been filed by stockholders against
Ziff-Davis Inc. and all of its directors in the Court of Chancery of the State
of Delaware for New Castle County. The complaints allege that the directors
breached their fiduciary duties to Ziff-Davis Inc. by repricing the stock
options awarded to certain directors and demand the nullification of the
repricing and an injunction against exercise by the directors of any repriced
option. The Plaintiffs filed an amended complaint on February 17, 1999 (which
is substantially similar to the original complaints, except that the amended
complaint also addresses the granting of "new options" at an allegedly "reduced
exercise price") and have indicated their intent to seek consolidation of the
actions. A response to the amended complaint has not yet been filed.

Other Legal Proceedings

Ziff-Davis Inc. was named as a defendant in an action, filed on April 17,
1998 in the Supreme Court of the State of New York, by minority stockholders of
SOFTBANK Interactive Marketing Inc. ("SIM"), formerly an indirect subsidiary of
Softbank. The complaint alleges, among other things, that SBH, SIM's majority
stockholder, acting with Ziff-Davis Inc. and two of its senior officers and
directors who were directors of SIM (and who were also named as defendants),
had conflicts of interest between SIM and other Softbank investments (including
investments in Ziff-Davis Inc.) and failed to act in the best interests of SIM
and the minority stockholders by taking actions which benefited Ziff-Davis Inc.
The complaint states claims based on common law fraud, breach of fiduciary duty
and aiding and abetting theories and seeks in excess of $200,000,000 in
damages. Ziff-Davis Inc. and the other defendants have moved to dismiss all of
the claims against them other than a breach of contract claim which is solely
against SBH.

VII-63
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except share and per share amounts)

23. Subsequent Events

ZDTV

On February 4, 1999, ZD purchased ZDTV at a purchase price of approximately
$81,400,000. ZD paid approximately $32,800,000 of the purchase price in cash
(settled on February 5, 1999) and paid the remainder by applying approximately
$48,600,000 in advances owed to it by MAC Holdings America. Other than advances
to ZDTV which are reported on ZD's balance sheet, the results of operations of
ZDTV are not included in ZD's results for any of the periods presented. This
acquisition will be accounted for in 1999 under the purchase method of
accounting.

Vulcan Transactions

Unaudited summary pro forma information

<TABLE>
<CAPTION>
(amounts
in
thousands)
----------
<S> <C>
Revenue...................................................... $1,058,300
Income from operations....................................... $ (16,500)
Net loss..................................................... $ (100,300)
</TABLE>

VII-64
<PAGE>

ANNEX VIII

ZDNET

SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Selected Historical Combined Financial and Other
Data for ZDNet and its predecessor as of and for the years ended December 31,
1994 and 1995, as of and for the two month period ended February 28, 1996, as
of and for the ten month period ended December 31, 1996, as of and for the
years ended December 31, 1997 and 1998. This data was derived from the Combined
Financial Statements of ZDNet. Data as of and for the year ended December 31,
1994 was derived from ZDNet's unaudited financial statements. This table should
be read in conjunction with the Selected Historical Financial and Other Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Financial Statements for Ziff-Davis Inc., ZD and ZDNet included
in this Annex and Annexes VI and VII to the Proxy Statement.

<TABLE>
<CAPTION>
Predecessor(1) ZDNet
------------------------------ ------------------------------
Two month Ten month
Year ended period ended period ended Year ended
December 31, February 28, December 31, December 31,
1994 1995 1996 1996 1997 1998
------- ------- ------------ ------------ -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $13,349 $13,576 $ 2,903 $ 16,215 $ 32,218 $56,143
Cost of operations:
Production and
content............... 9,321 10,709 1,802 14,863 23,543 26,208
Selling, general and
administrative
expenses.............. 7,276 8,360 1,774 13,280 23,475 30,933
Depreciation and
amortization.......... 1,163 4,040 597 5,485 7,681 6,448
Loss from operations.... (4,411) (9,533) (1,270) (17,413) (22,481) (7,506)
Minority interest....... -- -- -- -- 400 134
Loss before income
taxes.................. (4,411) (9,533) (1,270) (17,413) (22,081) (7,372)
Net loss (2)............ (4,526) (5,755) (814) (16,925) (21,238) (7,884)
Balance Sheet Data (at period
end):
Total current assets.... $ 2,432 $ 3,992 $ 4,951 $ 7,852 $ 11,521 $20,068
Total assets............ 3,557 91,772 92,717 82,507 87,326 97,686
Total liabilities....... 8,083 2,090 1,492 3,932 4,034 8,139
Division equity
(deficit).............. (4,526) 89,682 91,225 78,575 83,292 89,547
Other Data:
Capital expenditures.... $ 513 $ 1,590 $ 168 $ 1,010 $ 2,374 $ 4,483
Investments and
acquisitions, net of
cash acquired.......... -- -- -- -- 2,998 5,000
</TABLE>
- --------

(1) A third party acquired ZDNet's predecessor as of January 1, 1995. An
affiliate of Ziff-Davis Inc. acquired ZDNet's predecessor on February 29,
1996. Data for ZDNet's predecessor has been presented for periods before
these dates.

(2) No historical earnings per share or share data are presented as ZDNet does
not consider such data meaningful. After issuance of ZDNet Stock, Ziff-
Davis Inc. will report earnings per share data for ZD and ZDNet but not for
Ziff-Davis Inc.

VIII-1
<PAGE>

ZDNET
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Revenue

ZDNet's revenue consists of advertising revenue and revenue from
subscription-based fees and services. Advertising revenue consists primarily of
revenue derived from the sale of advertisements on pages delivered to users of
ZDNet's Internet sites. ZDNet recognizes the delivery of a single view of an
advertisement as an "impression". Advertising revenue is derived principally
from arrangements with ZDNet's advertising customers that provide for a
guaranteed number of impressions. Advertising rates vary depending primarily on
the total number of guaranteed impressions purchased, the length of the
advertiser's commitment, the location in which the advertisements are displayed
and the type of advertising. Advertising revenue is recognized in the period in
which the advertisements are delivered. For contracts/campaigns that are longer
than one accounting period, the revenue from the contract/campaign is
recognized ratably over the term of the contract/campaign.

Revenue from barter transactions is recognized during the period in which
advertisements are displayed. Barter transactions are recorded at the lower of
estimated fair value of goods or services received or the estimated fair value
of advertising given. To date, barter transactions have been immaterial to
revenue.

During 1995 and part of 1996, ZDNet was focused on generating revenue from
subscription-based fees and services. This revenue is generated primarily by
charging monthly membership fees to provide access to product reviews, software
reviews and shareware. During 1996, ZDNet shifted the focus of the business
model from the generation of subscription-based fees and services to the
generation of advertising revenue.

As a result of this shift, ZDNet's advertising revenue increased from 6.0% of
total revenue for the year ended December 31, 1995 to 86.0% of total revenue
for the year ended December 31, 1998. Over this period subscription-based fees
and services decreased correspondingly as a percentage of revenue.

No single customer accounted for more than 5.0% of ZDNet's total revenue for
the year ended December 31, 1997 or 1998. ZDNet's top 20 customers accounted
for 29.3% and 40.8% of total revenue for the years ended December 31, 1997 and
1998, respectively.

Cost of operations

Costs of production and content include costs to produce and edit content on
ZDNet's Internet sites as well as technical costs incurred to maintain ZDNet's
Internet sites. ZD provides certain editorial content and brand-marketing
services to ZDNet for which ZDNet pays a royalty to ZD based on revenue. This
charge is also included in production and content. See Note 4 to ZDNet's
Combined Financial Statements in this Annex.

The principal selling, general and administrative expenses of ZDNet are
payroll, sales commissions and related expenses, marketing and promotion. Ziff-
Davis Inc. provides certain selling, general and administrative services and
shared services on a centralized basis (the "Central Services"), and the costs
of these services are allocated between ZD and ZDNet. See Note 4 to ZDNet's
Combined Financial Statements in this Annex.

ZDNet also incurs a substantial amount of amortization expense related to
intangible assets created as a result of the December 21, 1994 and February 29,
1996 acquisitions of Ziff-Davis Inc.'s predecessors by Forstmann Little and Co.
and SOFTBANK Corp., respectively. The February 1996 acquisition created
$72.7 million of intangible assets for ZDNet. In addition, $5.5 million of
intangible assets were created by ZDNet's January 1997 acquisition of a 70%
equity interest in GameSpot, Inc., formerly SpotMedia Communications, Inc.
("GameSpot").

VIII-2
<PAGE>

Factors affecting future periods

ZDNet'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 ZDNet's advertisers, the
extent to which merchants elect to advertise using online media and competition
among other technology marketers.

Accordingly, ZDNet may experience fluctuations in revenue from period to
period. Marketing expenditures by technology companies can also be affected by
factors affecting the technology industry generally, including pricing
pressures and temporary surpluses of inventory. Revenue and profitability are
also influenced by product mix, the timing and frequency of ZDNet's new product
launches in new markets and acquisitions.

ZDNet has an extremely limited operating history upon which to base an
evaluation of ZDNet's prospects. ZDNet's prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by start-up
companies in the new and rapidly evolving market for Internet products, content
and services. ZDNet's revenue and cost of operations have grown substantially
and ZDNet has incurred cumulative net losses since inception. These losses
reflect substantial expenditures to develop, launch and acquire ZDNet's
Internet sites and services. ZDNet believes that newly launched sites and
services require a certain period of growth before they begin to achieve
adequate revenue to support their operation.

ZDNet must, among other things, effectively develop new relationships and
maintain existing relationships with its advertisers, their advertising
agencies and other third parties, provide original and compelling content to
Internet users, develop and upgrade its technology, respond to competitive
developments and attract, retain and motivate qualified personnel. There can be
no assurance that ZDNet will succeed in addressing such risks and the failure
to do so could have a material adverse effect on ZDNet's business, financial
condition or results of operations. Additionally, ZDNet's limited operating
history makes the prediction of future operating results difficult or
impossible, and there can be no assurance that ZDNet's revenue will increase or
even continue at its current level, or that ZDNet will achieve or maintain
profitability or generate cash from operations in future periods. Since
inception, ZDNet has incurred significant losses and, for the period from
February 29, 1996 to December 31, 1998, had accumulated a deficit of $46.0
million. ZDNet may continue to incur losses in the future.

For a discussion of other factors that may affect results. See "Risk
Factors--Risk Factors Relating to ZDNet".

Presentation of Financial Information

ZDNet is comprised of certain operations which were acquired at various times
and completed a reorganization in May 1998. See Note 1 to ZDNet's Combined
Financial Statements in this Annex.

VIII-3
<PAGE>

Results of Operations

The table below presents the results of ZDNet as if the assets and operations
acquired by affiliates of Ziff-Davis Inc. on February 29, 1996 (as described in
Note 1 to the Combined Financial Statements in this Annex) had been acquired on
January 1, 1995. Purchase accounting adjustments relating to that acquisition
have been reflected through pro forma amortization and interest and income tax
adjustments, as described in note (1) to the table. Although the 1996
presentation is not in accordance with generally accepted accounting
principles, management believes it presents the most meaningful basis of
comparison. The financial information presented below may not necessarily
reflect the results of operations which would have occurred had the February
29, 1996 acquisition been completed on January 1, 1995.

<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
Pro
forma Actual
-------- -----------------
1996(1) 1997 1998
-------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenue, net.............................. $ 19,118 $ 32,218 $56,143
Cost of operations:
Production and content.................. 16,665 23,543 26,208
Selling, general and administrative
expenses............................... 15,054 23,475 30,993
Depreciation and amortization........... 693 1,495 2,010
Amortization of intangible assets....... 5,712 6,186 4,438
-------- -------- -------
Total operating expenses.............. 38,124 54,699 63,649
-------- -------- -------
Loss from operations...................... (19,006) (22,481) (7,506)
Minority interest......................... -- 400 134
-------- -------- -------
Loss before income taxes.................. (19,006) (22,081) (7,372)
Provision (benefit) for income taxes...... (1,073) (843) 512
-------- -------- -------
Net loss.................................. $(17,933) $(21,238) $(7,884)
======== ======== =======
Other data:
EBITDA(2)............................... $(12,601) $(14,400) $ (924)
Capital expenditures.................... $ 1,178 $ 2,374 $ 4,483
Investments and acquisitions, net of
cash acquired.......................... $ -- $ 2,998 $ 5,000
</TABLE>
- --------

(1) The February 29, 1996 acquisition gave rise to different bases of
accounting for the period after versus the period prior to the acquisition.
The above numbers assume that the acquisition took place on January 1,
1995. This resulted in an increase to amortization of intangible assets and
net loss by $323,000 and $194,000, respectively, for the year ended
December 31, 1996.

(2) "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 ZDNet's operating performance or to cash
flows as a measure of liquidity. Although ZDNet believes that EBITDA is a
standard measure commonly reported and widely used by analysts, investors
and other interested parties in the media industry, the EBITDA presented
for ZDNet may not be comparable to similarly titled measures reported by
other companies.

VIII-4
<PAGE>

The following table presents the foregoing amounts as a percentage of
revenue:

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
Pro Forma Actual
----------- -----------------
1996 1997 1998
----------- ------- -------
<S> <C> <C> <C>
Revenue, net................ 100.0% 100.0% 100.0%
Cost of operations:
Production and content.... 87.2 73.1 46.7
Selling, general and
administrative expenses.. 78.7 72.9 55.2
Depreciation and
amortization............. 3.6 4.6 3.6
Amortization of intangible
assets................... 29.9 19.2 7.9
------- ------- -------
Total operating
expenses............... 199.4 169.8 113.4
------- ------- -------
Loss from operations........ (99.4) (69.8) (13.4)
Minority interest........... -- 1.2 0.3
------- ------- -------
Loss before income taxes.... (99.4) (68.6) (13.1)
Provision (benefit) for
income taxes............... (5.6) (2.7) 0.9
------- ------- -------
Net loss.................... (93.8)% (65.9)% (14.0)%
======= ======= =======
</TABLE>

Year ended December 31, 1998 compared with the year ended December 31, 1997

Revenue, net

Net revenue increased 74% to $56.1 million for the year ended December 31,
1998 from $32.2 million for the year ended December 31, 1997. Revenue from
advertising was 86% of net revenue for the year ended December 31, 1998
compared to 73% for the same period in 1997.

Revenue from advertising increased 104% to $48.2 million for the year ended
December 31, 1998 from $23.6 million for the prior. The increase in advertising
revenue was attributed to an increase in volume as both the number of
advertisers and the average monthly revenue per advertiser increased.
Subscription-based fees and services decreased by 7% to $8.0 million for the
year ended December 31, 1998 from $8.6 million for the year ended December 31,
1997.

Cost of operations

Production and content

Production and content expenses were $26.2 million or 46% of net revenue for
the year ended December 31, 1998, compared to $23.5 million or 73% of net
revenue for the prior year. The absolute dollar increase in production and
content charges was due to an increase in ZD's revenue-based royalty charge to
ZDNet, as well as an increase in production costs to support higher user
traffic levels and increased editorial costs associated with the launch of new
content areas. The cost of production and content decreased as a percentage of
revenue primarily due to economies of scale. ZDNet expects this trend to
continue. Royalty payments to ZD were $2.8 million and $1.6 million for the
years ending December 31, 1998 and 1997, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $31.0 million or 55% of net
revenue for the year ended December 31, 1998, compared to $23.5 million or 73%
of net revenue for the year ended December 31, 1997. The absolute dollar
increase in the selling, general and administrative expenses was primarily due
to increased personnel and services required to support the growth of ZDNet,
offset to some extent by the cessation of commission payments to SOFTBANK
Interactive Marketing Inc. ("SIM"), as ZDNet sales and marketing teams replaced
SIM in these functions. Sales and marketing costs were $21.2 million or 38% of
net revenue for

VIII-5
<PAGE>

the year ended December 31, 1998 compared to $15.9 million or 49% of net
revenue for the year ended December 31, 1997. ZDNet intends to continue to
increase the number of dollars spent on sales and marketing and intends to
launch a print ad campaign in the future. Sales and marketing expenses are
incurred both to drive traffic to ZDNet's Web site and to increase the number
of advertisers and advertising sales. Included in the sales and marketing costs
was an allocation from the Ziff-Davis Inc.'s Central Services amounting to
$0.9 million and $0.5 million for the years ended December 31, 1998 and 1997,
respectively.

Administrative and overhead costs were $9.7 million or 17% of net revenue for
the year ended December 31, 1998 compared to $7.6 million or 23% of net revenue
for the year ended December 31, 1997. Included in administrative and overhead
costs was an allocation from the Ziff-Davis Inc.'s Central Services amounting
to $5.1 million and $3.4 million for the years ended December 31, 1998 and 1997
respectively. The selling, general and administrative costs decreased as a
percentage of revenue primarily due to economies of scale. ZDNet expects this
trend to continue.

Depreciation

Depreciation expense was $2.0 million for the year ended December 31, 1998
compared to $1.5 million for the year ended December 31, 1997. The increase in
depreciation expense related primarily to the increased capital expenditures
made by ZDNet for equipment necessary to expand its network and infrastructure
in order to support its continued growth.

Amortization of intangible assets

Amortization of intangible assets was $4.4 million for the year ended
December 31, 1998 compared to $6.2 million for the year ended December 31,
1997. The decrease in amortization related to the intangible assets of
advertising and subscription lists becoming fully amortized as of March 1,
1998. This resulted in only two months of the related amortization being
included in the year ended December 31, 1998 versus twelve months amortization
included in the year ended December 31, 1997. Annual amortization expense
related to the remaining goodwill balance will be approximately $4.1 million
before giving effect to any future increase in goodwill.

Minority interest

The minority interest of $0.1 million in 1998 and $0.4 million in 1997
represented losses attributed to the holders of the minority interest in
GameSpot.

Income taxes

Losses which were incurred prior to the completion of Ziff-Davis Inc.'s
reorganization on May 4, 1998, are non-deductible for Ziff-Davis Inc. as ZDNet
was under the ownership of MAC Inc. As such, ZDNet recorded income tax expense
of $0.5 million for the year ended December 31, 1998, primarily resulting from
taxable income being generated during the third and fourth quarters of 1998,
representing an effective tax rate of (6.9%). The effective rate in 1997 was
significantly lower than the statutory rate of 35.0% due to the substantial
level of non-deductible expenses which were incurred while ZDNet was owned by
MAC Inc.

Net loss

As a result of the items described above, ZDNet's net loss decreased to $7.9
million from $21.2 million for the years ended December 31, 1998 and 1997,
respectively.

EBITDA

EBITDA for the year ended December 31, 1998 was a loss of $0.9 million
compared to a loss of $14.4 million for the same period in 1997. The
improvement was due to substantially increased revenue, offset to some extent
by higher production and content costs and selling, general and administrative
expenses.

VIII-6
<PAGE>

Year ended December 31, 1997 compared with Pro Forma Year ended December 31,
1996

Revenue, net

Net revenue increased 69% to $32.2 million for the year ended December 31,
1997 from $19.1 million for the pro forma year ended December 31, 1996. An
increasing percentage of ZDNet's net revenue was derived from advertising for
the year ended December 31, 1997, accounting for 73% of net revenue, compared
to 37% for the same period in 1996. The increased percentage of net revenue
derived from advertising in the later period reflect a continuation of ZDNet's
strategic shift from a business model based on subscription-based fees and
services to one based on advertising.

Revenue from advertising increased 228% to $23.6 million for year ended
December 31, 1997 from $7.2 million for the pro forma year ended December 31,
1996. The increase in advertising revenue was attributable to increases in the
number of advertisers, the average expenditures per advertiser and increasing
advertising rates. The increase was evenly attributable to rate and volume
increases. Subscription-based fees and services decreased by 28% to $8.6
million from $11.9 million from the same period in 1996.

Cost of operations

Production and content

Production and content expenses were $23.5 million or 73% of net revenue for
year ended December 31, 1997, compared to $16.7 million or 87% of net revenue
for the pro forma year ended December 31, 1996. The absolute dollar increase in
production and content charges was due to an increase in Ziff-Davis Inc.'s
revenue based royalty charge to ZDNet, as well as an increase in production
costs to support higher user traffic levels, and increased editorial costs
associated with the launch of new content areas. The cost of production and
content decreased as a percentage of revenue primarily due to economies of
scale. Royalty charges from ZD were $1.6 million and $1.0 million for the year
ended December 31, 1997 and the pro forma year ended December 31, 1996,
respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $23.5 million or 73% of net
revenue for the year ended December 31, 1997, compared to $15.1 million or 79%
of net revenue for the pro forma year ended December 31, 1996. The absolute
dollar increase in selling, general and administrative expenses was due to
higher sales commission costs paid to SIM and to the initial hiring of the
existing ZDNet sales and marketing teams. SIM was the exclusive sales team for
ZDNet prior to 1997. Sales and marketing costs were $15.9 million or 49% of net
revenue for the year ended December 31, 1997 compared to $11.0 million or 57%
of net revenue for the pro forma year ended December 31, 1996. Included in
sales and marketing costs was an allocation from Ziff-Davis Inc.'s Central
Services amounting to $0.5 million for the year ended December 31, 1997. There
was no such charge for the pro forma year ended December 31, 1996.

Administrative and overhead costs were $7.6 million or 23% of net revenue for
the year ended December 31, 1997 from $4.1 million or 21% of net revenue for
the pro forma year ended December 31, 1996. Included in administrative and
overhead costs was an allocation from Ziff-Davis Inc.'s Central Services
amounting to $3.4 million and $2.7 million for the year ended December 31, 1997
and the pro forma year ended December 31, 1996, respectively. Selling, general
and administrative expenses decreased as a percentage of revenue primarily due
to economies of scale.

Depreciation and amortization

Depreciation and amortization expense was $1.5 million for the year ended
December 31, 1997, compared to $0.7 million for the pro forma year ended
December 31, 1996. The increase in depreciation primarily related to the
increased capital expenditures made by ZDNet for equipment necessary to expand
its network and infrastructure in order to support its continued growth.

VIII-7
<PAGE>

Amortization of intangible assets

Amortization of intangible assets was $6.2 million for the year ended
December 31, 1997 compared to $5.7 million for the pro forma year ended
December 31, 1996. In February 1997, ZDNet purchased a 70% interest in
GameSpot, which created intangible assets of approximately $5.5 million. The
1997 period included approximately $0.5 million of amortization related to this
acquisition.

Minority interest

The minority interest of $0.4 million for the year ended December 31, 1997,
represents losses attributed to the holders of the minority interest in
GameSpot which was acquired in January 1997.

Income taxes

The income tax benefit decreased to $0.8 million for the year ended December
31, 1997 from $1.1 million for the pro forma year ended December 31, 1996. The
benefit represents an effective tax rate of approximately 3.8% and 5.6%,
respectively, which is significantly less than the federal statutory rate of
35.0% because ZDNet has a substantial level of non-deductible expenses, as
losses which were incurred while ZDNet was under MAC ownership are non-
deductible to Ziff-Davis Inc. As such, ZDNet does not reflect any tax benefits
associated with those losses.

Net loss

As a result of the items described above, ZDNet's net loss increased to $21.2
million for the year ended December 31, 1997 from $17.9 million for the pro
forma year ended December 31, 1996.

EBITDA

EBITDA for the year ended December 31, 1997 was a loss of $14,400,000
compared to a loss of $12,601,000 for the pro forma year ended December 31,
1996. The decrease was primarily due to higher production and content costs and
selling, general and administrative expenses partially offset by increased
revenue.

Liquidity and Capital Resources

Funding from ZD

In the financial statements of ZD and ZDNet, whenever ZDNet had a cash need,
other than cash needs of ZDNet's foreign operations or cash needs of ZDNet's
operations that are not wholly owned, that cash need was funded by ZD and
accounted for as a capital contribution (i.e., as an increase in ZDNet's
division equity and ZD's Retained Interest in ZDNet). Accordingly, no interest
expense has been reflected in the financial statements of ZDNet. Each of ZD and
ZDNet is sometimes referred to herein as a "Group". After the date on which
ZDNet Stock is first issued, Ziff-Davis Inc. will account for all cash
transfers from one Group to or for the account of the other Group (other than
transfers in return for assets or services rendered or transfers in respect of
ZD's Retained Interest that correspond to dividends paid on ZDNet Stock) as
inter-Group revolving credit advances (bearing interest at the rate at which
Ziff-Davis Inc. could borrow such funds on a revolving credit basis (as the
Board determines in its sole discretion)) unless the Board determines that a
given transfer (or type of transfer) should be accounted for as a long-term
loan, a capital contribution increasing ZD's Retained Interest in ZDNet or a
return of capital reducing ZD's Retained Interest in ZDNet. For a discussion
about the terms on which Ziff-Davis Inc. can now borrow on a short-term basis,
see Annex VI--"Ziff-Davis Inc. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Credit Facility". There is no assurance, however that ZDNet will
continue to be able to obtain sufficient funding from ZD. For a discussion of
the discretion of the Board regarding transfers of cash between ZD and ZDNet,
see "Risk Factors--Risk Factors Relating to the Tracking Stock Proposal--Under
Its Current Policies, The Board of Directors Has Sole Discretion Concerning
Various Cash Management Matters".

VIII-8
<PAGE>

Sources and uses of cash

Cash and cash equivalents were $0.3 million at December 31, 1998 and $0.0
million at December 31, 1997. The balance increased due to the factors
discussed below:

Cash used by operations was $4.5 million for the year ended December 31, 1998
and $15.3 million for the year ended December 31, 1997, respectively. The
improvement in the 1998 period was due primarily to a reduction in net loss.
The loss for the year ended December 31, 1998 was $7.9 million compared to
$21.2 million for the same period in 1997.

Cash used by investing activities was $9.5 million for the year ended
December 31, 1998 and $5.4 million for the year ended December 31, 1997. Cash
used for capital expenditures for the year ended December 31, 1998 increased by
$2.1 million to $4.5 million from $2.4 million for the year ended December 31,
1997. ZDNet intends to continue to invest in equipment as necessary to support
the increasing user traffic. Capital expenditures on equipment is expected to
be approximately $4.0 million in 1999. In addition, in July 1998, ZDNet
invested $5.0 million in preferred stock of Deja News, Inc., an Internet
discussion group. During the year ended December 31, 1997, ZDNet spent
approximately $3.0 million to acquire a 70% interest in GameSpot.

Cash provided by financing activities decreased to $14.3 million for the year
ended December 31, 1998 from $20.7 million for the year ended December 31,
1997, reflecting the improved operating performance of ZDNet. As discussed
under "--Funding from ZD" above, all funding from ZD was accounted for as a
capital contribution.

VIII-9
<PAGE>

Seasonality

The following table sets forth certain unaudited quarterly combined statement
of operations data for each of the eight quarters in the period ended December
31, 1998. In the opinion of Ziff-Davis Inc.'s management, this unaudited
information has been prepared on a basis consistent with the audited Combined
Financial Statements of ZDNet appearing elsewhere in this Annex 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>
Quarter Ended
(in thousands)
---------------------------------------------------------------------------------------
1997 1998
------------------------------------------- -------------------------------------------
March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31
-------- ------- ------------ ----------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 5,283 $ 7,862 $ 8,132 $10,941 $ 9,688 $12,274 $14,504 $19,677
Cost of operations...... 11,597 14,921 14,401 13,780 16,050 15,405 14,344 17,850
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (6,314) (7,059) (6,269) (2,839) (6,362) (3,131) 160 1,827
Minority interest....... (46) (201) (189) 36 (125) (145) (60) 196
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. (6,268) (6,858) (6,080) (2,875) (6,237) (2,986) 220 1,631
Provision (benefit) for
taxes.................. (244) (267) (232) (100) (228) (92) 8 824
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(6,024) $(6,591) $(5,848) $(2,775) $(6,009) $(2,894) $ 212 $ 807
======= ======= ======= ======= ======= ======= ======= =======
EBITDA(1)............... $(4,498) $(4,999) $(4,185) $ (718) $(4,511) $(1,569) $ 1,857 $ 3,299
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------------
1997 1998
------------------------------------------- -------------------------------------------
March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31
-------- ------- ------------ ----------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of operations...... 219.5 189.8 177.1 125.9 165.7 125.5 98.9 90.7
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (119.5) (89.8) (77.1) (25.9) (65.7) (25.5) 1.1 9.3
Minority interest....... (0.9) (2.6) (2.3) 0.3 (1.3) (1.2) (0.4) 1.0
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. (118.6) (87.2) (74.8) (26.2) (64.4) (24.3) 1.5 8.3
Provision (benefit) for
taxes.................. (4.6) (3.4) (2.9) (0.9) (2.4) (0.7) 0.1 4.2
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... (114.0)% (83.8)% (71.9)% (25.3)% (62.0)% (23.6)% 1.4% 4.1%
======= ======= ======= ======= ======= ======= ======= =======
EBITDA(1)............... (85.1)% (63.6)% (51.5)% (6.6)% (46.6)% (12.8)% 12.8% 16.8%
</TABLE>
- --------

(1)"EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA is not intended to represent
cash flow from operations and should not be considered as an alternative to
net income as an indicator of ZDNet's operating performance or to cash flows
as a measure of liquidity. Although Ziff-Davis Inc. believes that EBITDA is
a standard measure commonly reported and widely used by analysts, investors
and other interested parties in the media industry, the EBITDA presented for
ZDNet may not be comparable to similarly titled measures reported by other
companies.

On a historical basis, ZDNet has experienced lower revenue in the first
quarter when compared to the revenue in the preceding fourth quarter. This
fluctuation is a result of seasonal changes common to the media industry.

VIII-10
<PAGE>

Year 2000 Readiness Disclosure

During 1997, Ziff-Davis Inc., including the businesses comprising ZDNet,
began a review of its computer systems and software to identify systems and
software which might malfunction due to misidentification of the Year 2000.
Ziff-Davis Inc. is using both internal and external resources to identify,
test, correct and reprogram systems and software for Year 2000 readiness.

Ziff-Davis Inc. expects to complete testing and replacement of critical
systems by the beginning of the fourth quarter of 1999. Ziff-Davis Inc.'s
estimate of ZDNet's most reasonably likely "worst case scenario" would be the
failure of its internal applications and systems that process and store certain
information and data. Ziff-Davis Inc. would resolve the failure of such
applications and systems on an individual basis and management of Ziff-Davis
Inc. does not believe that the impact on its critical systems would be
material. However, if Ziff-Davis Inc. or any subscribers, advertisers,
licensors, vendors or other third parties on whom it relies experiences a Year
2000 compliance problem, this could have a material adverse effect on ZDNet's
profit and liquidity.

Recently Issued Accounting Pronouncements

SFAS 133 Accounting for Derivative Instruments and Hedging Activities issued
in June 1998 establishes accounting and reporting standards for derivative
instruments and for hedging activities and is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Ziff-Davis Inc. does not expect
the adoption of SFAS 133 to have a material impact on the ZDNet's results of
operations.

ZDNet expects to adopt the above statement beginning with its 2000 financial
statements.

VIII-11
<PAGE>

ZDNET

DESCRIPTION OF BUSINESS

Industry Background

Growth of the Internet and Demand for Technology-Related Content

The Internet has emerged as a global mass medium, enabling millions of people
to access and share information and conduct business electronically. Forrester
Research, Inc. estimates that the number of adult Web users will reach 51
million in the U.S. by the end of 1998 and will grow to 99 million by the end
of 2001. Major factors driving this growth include the increasing familiarity
and acceptance of the Internet by businesses and consumers, the increasing
number of personal computers in homes and offices, the ease, speed and lower
cost of Internet access and improvements in network infrastructure.

As the Internet gains acceptance as an advertising and commerce medium and
Internet use continues to grow, technology will play an increasing role in
everyday life. According to Dataquest, worldwide end user spending for
information technology products and related services is expected to be
approximately $2 trillion in 1999 and grow 10% to 15% annually over the next
three years. With the growth of the Internet and the widespread use of personal
computers, cellular phones, pagers and personal digital assistants, technology
has become an area of broad general interest. Users of technology products and
services confront an increasingly complex marketplace due to the rapid pace of
technological change and the frequent introduction of new products and
services. The prevalence of technology and the growing number of technological
choices heighten the demand for up-to-date, comprehensive information about
technology-related products and services.

Advertising and Commerce on the Internet

As the Internet and the technology industry continue to grow, the value of
the Internet to advertisers and merchants can be expected to increase as a
result of:

. the growth in the number of Web users,

. the Internet's global reach,

. the attractive demographic profile of Web users,

. the interactive nature of the medium,

. the increased willingness of users to conduct transactions online and

. the ability to effectively target user groups, customize promotions and
measure Web usage and viewer demographics.

ZDNet believes these characteristics allow Internet advertisers to build
valuable customer relationships through targeted advertising and sales
campaigns. The overall market for advertising on the Internet was approximately
$900 million in 1997 and $1.3 billion in the first nine months of 1998, as
measured by the Internet Advertising Bureau. According to Forrester Research,
Inc., advertising spending on the Internet will exceed $4 billion in the year
2000 and double to more than $8 billion by 2002.

The Internet also provides an efficient means for merchants to sell their
products and services directly to consumers. Forrester Research, Inc. forecasts
that worldwide commerce revenue on the Internet will increase from
approximately $35 billion in 1998 to $1.4 trillion in 2003. Internet
transactions are expected to increase as merchants improve Web-based
transaction-processing technology and as consumers become more accustomed to
purchasing online.

VIII-12
<PAGE>

ZDNet believes Internet sites focused on technology are particularly well-
suited to promote advertising and commerce because they offer a large user base
with attractive demographics for technology and general consumer product
companies. Historically, technology-focused sites have attracted primarily
technology advertisers, which, according to the Internet Advertising Bureau,
accounted for 47% of all U.S. online advertising dollars during the first nine
months of 1998. Recently, many of the largest advertisers on traditional media,
including consumer product companies, automobile manufacturers and travel-
related companies, have expanded their use of Internet advertising. Such
consumer-related advertising accounted for 27% of all U.S. online advertising
in the third quarter of 1998 according to the Internet Advertising Bureau, and
ZDNet believes Internet advertising will become an increasing percentage of
consumer product companies' overall advertising budgets in the future. Internet
sites with well-recognized brand names that focus on technology should be well-
positioned to capitalize on emerging Internet advertising and commerce
opportunities.

The ZDNet Solution

ZDNet's Web sites are designed to capitalize on the market opportunities
created by the increasing importance of technology, the emergence of the
Internet as a mass medium and the appealing demographics of technology-oriented
Web users. ZDNet focuses on content, community and commerce, enabling users to
research topics of interest, interact with other users, download software and
evaluate and purchase a wide range of products and services at a single
destination. Ziff-Davis Inc. was among the first content providers to focus its
efforts on the Internet, launching its zdnet.com service in the fall of 1994.
The ZDNet solution is based on the following distinguishing attributes:

Broad-Based Comprehensive Technology and Internet-Related Content

ZDNet's interconnected and easily navigable sites offer depth and breadth of
coverage on the technology industry as well as topics of general interest,
including financial information and general news. ZDNet divides its content
broadly into "channels" that focus on specific topics or audience groups. Over
60 sites can be reached through the zdnet.com home page or through their own
distinct domains, and sites are generally organized with similar navigation and
layout to ensure consistency throughout the network. ZDNet's online editorial
and technical staff of industry experts develops high-quality original content
specifically for online interactive use. ZDNet offers over 1,200 news stories
per month, 50,000 product listings, 30,000 product reviews and 34,000
downloadable programs. In addition, through ZDNet's relationship with ZD, ZDNet
has use of the content of all of ZD's computer and technology publications,
including PC Magazine, PC/Computing, PC Week and Yahoo! Internet Life.

Strong Community Affinity

ZDNet has developed an extensive user community and encourages active
participation by enabling users to personalize their content and join user
groups based on common interests. ZDNet provides forums, chat groups and other
interactive online environments that allow users to express views and share
information. In addition, its industry personalities host interactive forums
that encourage user comments and feedback. To promote its community, ZDNet has
instituted a common registration system for chat, discussion and e-mail
capabilities. Registered users are able to access member-only software
downloads and are eligible for special offers such as discounted trial
enrollment in ZDU's online courses (which is part of ZD's education business).
ZDNet makes a variety of e-mail newsletter and alerts available to its users,
allowing subscribers to select those of interest. As of December 1998, ZDNet
had an e-mail newsletter subscription base of over 2.3 million and distributed
over 52 million e-mail newsletters and alerts to its users in that month.

Attractive Environment for Advertising and Commerce

ZDNet facilitates commerce on its sites by providing users with the ability
to evaluate, compare and purchase products and services and by providing
advertisers and merchants with access to a highly targeted

VIII-13
<PAGE>

user group with attractive demographics. According to the Winter 1999 @Plan
study, among users of ZDNet's Internet sites:

. 59% have college degrees,

. 85% have an annual household income of at least $35,000 (and 21% in
excess of $100,000),

. 49% use the Internet every day and

. 56% purchased a product in the prior six months after gathering
information on the Internet.

In addition, ZDNet has developed an array of sales and marketing options
(banners, sponsorship wraps, buttons, text and graphical links, e-mail
sponsorships and custom microsites) designed to assist advertisers in crafting
unique and distinctive programs to target and reach their audiences. ZDNet is
also the first non-ad agency to win a prestigious "Creative Excellence in
Business Advertising" (CEBA) award, presented by the American Business Press.

Relationship with ZD

ZDNet derives many benefits from its relationship with ZD, including the
ability to leverage the ZD brand, use content from ZD publications and cross-
market across all of ZD's platforms. ZD publishes leading technology print
publications (such as PC Magazine, PC/Computing, PC Week and Yahoo! Internet
Life), produces leading trade shows and conferences (such as COMDEX,
NetWorld+Interop and Seybold Seminars), operates ZDTV, a 24-hour cable
television network, and maintains well-recognized market research and education
platforms (such as ZDU). For over a decade, the "Ziff-Davis" name has been a
leading brand associated with technology content.

The ZDNet Strategy

ZDNet's objective is to be the leading online content site focused on
technology products and services for users and the preferred online platform
for advertisers and merchants. The key elements of ZDNet's strategy are:

Continue to Offer Differentiated Technology and Internet-Related Content

ZDNet will continue to provide comprehensive and authoritative coverage of
the technology field in order to attract users and increase the value of its
sites to advertisers and merchants. Based on market research and user traffic
and feedback, ZDNet will continue to identify technology trends and develop
innovative sites that appeal to specific market segments and user interests. In
the past 12 months, ZDNet has introduced 16 new sites, or new areas within
existing sites, including special areas addressing Year 2000 issues, small
businesses, electronic commerce and technology-related careers.

Grow the ZDNet Community

ZDNet seeks to further grow its membership base by continuing to provide
interesting forums, chat groups and user groups, developing additional
interactive capabilities, promoting new online personalities and offering
insights from a broad range of experts. In response to these efforts, ZDNet's
registered user community has increased from 956,490 on December 31, 1997 to
1,844,571 on December 31, 1998, an increase of 93%. ZDNet also recently
launched ZDRewards, an online membership service, which entitles subscribers to
receive a bundle of ZD products and services, such as a subscription to a ZD
magazine or a semester of online ZDU classes, all for one discounted price.

VIII-14
<PAGE>

Build ZDNet Brand Strength

ZDNet seeks to reinforce its brand recognition and extend its reputation as a
leading site among users of technology information by continuing to leverage
the Ziff-Davis and ZDNet names. ZDNet's brand-building initiatives include
displaying the ZDNet brand on all ZDNet site pages (including those accessed
through the portals of its strategic partners), providing consistent formats
for easy navigation on all its sites and promoting a common registration
program for users. ZDNet plans to continue to promote the ZDNet brand in ZD
publications and events and to otherwise coordinate marketing efforts with ZD.

Increase Advertising and Commerce Revenue

ZDNet seeks to increase revenue generated from advertising and commerce by
continuing to develop innovative content, growing its user community, expanding
its base of technology advertisers, attracting consumer and other advertisers
and facilitating commerce opportunities. ZDNet continually refines its online
tracking reports to better enable advertisers and merchants to demonstrate
their advertising effectiveness, evaluate their marketing initiatives and
increase the rate of return on their advertising investments. ZDNet plans to
increase the number of its revenue-sharing commerce relationships with leading
technology and consumer product providers. ZDNet also plans to increase the
number of product listings on its ComputerShopper.com channel and expand its
ability to facilitate electronic commerce.

Strengthen and Expand Strategic Alliances

ZDNet seeks to increase brand awareness, traffic and revenue by entering into
strategic alliances with key Internet companies. ZDNet currently has alliances
with many of the Web's leading sites, including Yahoo!, Excite, MSNBC and Deja
News, and plans to establish new alliances as opportunities arise. As part of
these alliances, ZDNet typically provides selected branded content for its
partners' sites in return for a variety of benefits including revenue and links
back to ZDNet sites from the partner's site, providing ZDNet with access to a
broader base of consumers.

Extend International Presence

ZDNet had localized foreign language editions in more than 16 countries as of
December 31, 1998 and will continue to expand into selected overseas markets
through international launches as well as joint ventures and licensing
arrangements with local operating partners.

ZDNet Sites and Services

ZDNet offers more than 60 interconnected and easily navigable sites focused
on providing comprehensive, authoritative and timely online technology content,
creating an active community environment for its users and providing
opportunities for commerce.

ZDNet considers its content to be the most thorough and interesting content
on technology that is available online. ZDNet estimates that it currently
offers more than 300,000 pages of content on its interconnected sites where
users can research, evaluate, learn, interact, download and shop. ZDNet creates
original content using its own skilled and dedicated team of 149 editors,
online producers, developers and operations staff and also has access to
content from ZD publications and various strategic alliance partners. ZDNet's
content is divided broadly into "channels" that aggregate information from a
variety of sources around a specific topic area or audience focus, thereby
facilitating accessibility. All channels can be reached through the main
zdnet.com home page or through their own distinct domains, making browsing and
searching easy.

ZDNet seeks to foster a sense of community and engage its users in an
interactive online experience where they can express opinions and share
information about technology-related products and issues. ZDNet offers a
variety of features and activities designed to facilitate its community growth
and build user loyalty and affinity. Users can personalize the content they
seek and join user groups with others who have similar interests. In

VIII-15
<PAGE>

addition, users can activate the "talk-back" feature, which allows them to
state their views, and the "e-mail to a friend" feature, which allows them to
easily send articles of interest to others. During January 1999, ZDNet
estimates that 275,000 e-mails were sent using the e-mail to a friend feature.
Many of ZDNet's channels provide moderated forums and chat events on a variety
of current news and segment topics and certain hosts of these forums have
become popular Internet personalities.

ZDNet seeks to facilitate commerce on the Internet by combining information
about hardware and software products and services with direct access to
vendors. ZDNet's primary computer commerce site, ComputerShopper.com, was one
of the first Web shopping services to integrate comparative pricing, how-to
guides, buying tips, specifications, product reviews and multiple direct
purchasing sources. ComputerShopper.com currently displays products from more
than 113 vendors in over 88 product categories and enables shoppers to both
evaluate products and directly make purchases online.

The following table highlights a number of ZDNet sites:

<TABLE>
<CAPTION>
Selected Sites Description
- -------------- -----------
<S> <C>
Anchor Desk..... Inside analysis of technology news and products
[LOGO]
At Home......... Resources for home computing
[LOGO]
Careers......... Employment center for computer industry professionals
[LOGO]
Classifieds..... Ads and person-to-person auctions for computing products
Community
[LOGO]
Central......... Worldwide computing community
[LOGO]
ComputerShopper.com.. Marketplace to shop, compare and buy
[LOGO]
DevHead......... Tools, tips, and advice for Web developers
[LOGO]
E-Business...... Business advice on e-commerce opportunities
[LOGO]
</TABLE>

VIII-16
<PAGE>

<TABLE>
<CAPTION>
Selected Sites Description
- -------------- -----------
<S> <C>
Enterprise...... News, reviews and analytical editorial for IT professionals
[LOGO]
Equip........... Guide to electronic gadgets for home and office
[LOGO]
GameSpot........ Popular destination for PC and video gamer users
[LOGO]
Help Channel.... Advice on optimizing the use of a PC or Mac
Inter@ctive
[LOGO]
Investor........ Latest financial data and news for technology investors
Inter@ctive
[LOGO]
Week............ News and resources for IT professionals in interactive communications
[LOGO]
PC/Computing.... Getting the most out of technology
[LOGO]
PC Magazine..... Comparative reviews, buying advice and commentary
[LOGO]
PC Week......... Breaking news and analysis on the technology industry
Products
[LOGO]
Channel......... Reviews to help evaluate and select products
[LOGO]
Sm@rt Reseller.. News and resources for computer resellers, integrators and consultants
[LOGO]
</TABLE>

VIII-17
<PAGE>

<TABLE>
<CAPTION>
Selected Sites Description
- -------------- -----------
<S> <C>
Small Business
Advisor......... Technology solutions for small business professionals
[LOGO]
Software
Library......... Source for tested and reviewed software
[LOGO]
Yahoo! Internet
Life Online..... Reviews and links to interesting Internet sites
[LOGO]
ZDNetwork News.. Timely and comprehensive news on the technology industry
[LOGO]
ZDRewards....... Offering members discounted Ziff-Davis products and services
[LOGO]
ZDY2K........... News and resources about Year 2000 issues
[LOGO]
</TABLE>

Select ZDNet Sites

ZDNet.com (www.zdnet.com) is the home page and gateway for all of ZDNet's
sites and was ranked first among all Web sites in the category of news,
information and entertainment (as measured by net reach) in December 1998
according to Media Metrix.

ComputerShopper.com (www.computershopper.com) (formerly called NetBuyer)
supplies users with a comprehensive display of computer and technology products
in one central location with direct links to merchants to facilitate commerce
transactions. ZDNet shoppers can easily browse and search pricing and product
information, access expert recommendations and buying tips and complete their
purchases online for a unified shopping experience. Users of
ComputerShopper.com can purchase products directly on the site using a secured
server or can place orders through individual vendors (by clicking through to
the merchants' Web sites, dialing the vendors' 1-800 numbers or faxing the
orders to the vendors). Over $37 million in commerce orders were initiated
through ComputerShopper.com and forwarded to vendors in December 1998.

ZDNet Products (www.zdproducts.com) is a comprehensive and authoritative
source for information on purchasing computer products and technology. This
site is organized with user-friendly search and compare capabilities and offers
readily available expert advice and reviews for a full range of users and
systems.

ZDNet Anchordesk (www.anchordesk.com) was one of the first Web sites to
provide a combination of opinionated analysis and news in an interactive e-mail
environment featuring a talk-back capability for its subscribers. This site
offers a companion e-mail newsletter which is distributed every business day to
a subscription base of over 2 million.

VIII-18
<PAGE>

ZDNetwork News (www.zdnn.com) provides 24 hours a day/7 days a week coverage
for computing and technology news and information. ZDNetwork News aggregates
news through its investigative and reporting staff, its relationship with ZDTV
and ZD publications such as PC Week, Inter@ctive Week and Sm@rt Reseller and
strategic partnerships with MSNBC, Excite and others. This site also provides
audio and video clip capabilities, e-mail and customized news with MSNBC's
NewsAlert, Backweb and Pointcast.

GameSpot and Videogames.com (www.gamespot.com, www.videogames.com) offer
comprehensive news, reviews, previews and tips for all game categories.
GameSpot had the largest share of game advertising revenue among all game Web
sites for the first six months of 1998. GameSpot is 70% owned by ZDNet with the
remaining interest owned by the founders of the site and certain other
employees.

ZDNet Help (www.zdhelp.com) offers comprehensive tips, advice and trouble-
shooting aids for a full range of hardware and software. Users can search,
browse or access experts in chat rooms and on bulletin boards.

ZDNet Software Library (www.hotfiles.com) offers over 34,000 files of
shareware, freeware and other downloadable software programs, nearly all of
which are tested for viruses and compatibility and approximately 25,000 of
these files are professionally reviewed and rated.

ZDNet Inter@ctive Investor (www.zdii.com) provides investors with extensive,
up-to-date financial company profiles and news on technology and Internet
stocks. It provides access to multiple third-party information services such as
The Red Herring magazine, institutional equity research commentary and research
reports through Multex Systems Inc. This site ranked eighth in Barron's 1998
annual survey of the top ten Internet investment sites.

Other ZDNet Channels

Ziff-Davis Print Publication Sites. Each of the Ziff-Davis print publications
has a branded Web site within ZDNet's interconnected sites. Each of the sites
contains content adapted from Ziff-Davis print media and original content
developed specifically for these sites. Among the print publication sites
operated by ZDNet are the companion sites of ZD's most successful print
magazines, such as PC Magazine, PC/Computing, PC Week and Yahoo! Internet Life.

Topical Sites. ZDNet also has eight sites, of which four were launched in
1998, that are targeted at particular audiences or topics, providing an
efficient means for advertisers and marketers to reach highly focused consumer
groups. Examples of ZDNet's targeted sites are At Home (www.zdnet.com/athome),
Enterprise (www.zdnet.com/enterprise), Small Business Advisor
(www.zdnet.com/smallbusiness), Windows (www.zdwindows.com) and Year 2000
Challenge (www.zdy2k.com). ZDNet identifies and monitors technology trends to
effectively launch and introduce new sites that address the needs of its users.

Relationship with ZD

ZDNet believes that its relationship with ZD provides it with substantial
advantages over other online technology content providers. ZDNet has rights to
use ZD's technology content online on a preferred basis. In addition, ZDNet has
access to ZD's experience in delivering technology content through print
publishing and trade shows and can leverage ZD's experience to the online
medium.

With more than 75 publications distributed worldwide, the Ziff-Davis name is
seen by a combined circulation of approximately seven million primary readers
worldwide. ZD also produced over 50 trade shows and conferences worldwide on
technology and the Internet in 1998 with over two million estimated attendees.
Through ZDU, ZD provides online instructor-led interactive training to paid
subscribers. Through ZDTV, ZD offers the first 24-hour cable television channel
and integrated Web site focused exclusively on computers, technology and the
Internet. ZDNet believes that its relationship with ZD offers users the
advantages of an integrated media and marketing company with multiple
platforms.

VIII-19
<PAGE>

ZDNet's relationship with ZD allows it to integrate Ziff-Davis Inc.'s
marketing activities into one cohesive resource for print, trade show and
conference, television and online advertising. In addition, ZDNet and ZD are
able to realize benefits from cross-promotion.

Strategic Alliances

ZDNet's strategic alliances are important sources of content exchange,
revenue, brand visibility and increased user traffic. ZDNet has strategic
alliances with many of the Web's leading sites, including Yahoo!, Excite, MSNBC
and Deja News, pursuant to which selected ZDNet-branded content is displayed on
their sites in exchange for traffic, brand recognition, content or a percentage
of the revenue generated from those sites. These alliances are generally under
short-term contracts that expire in 1999, subject to renewal upon the agreement
of both parties.

ZDNet is the exclusive high-technology content partner of MSNBC, one of the
Web's largest sites for general news and sports content. Under this arrangement
ZDNet licenses content and brands to MSNBC in exchange for the exclusive right
among online computer and technology content providers to use MSNBC's general
news content. ZDNet also recently started using Deja News' technology which
allows ZDNet's users to search Usenet and participate in discussion groups,
including Usenet newsgroups. In addition, ZDNet content is distributed by
various Internet service providers such as AT&T WorldNet, MindSpring and
BellSouth to individual and corporate customers.

International

Through wholly owned sites and joint ventures, ZDNet currently operates
localized versions of certain of its Web sites in the United Kingdom, Germany,
France and Australia. In addition, through licensing arrangements with non-U.S.
operators, localized foreign language versions of ZDNet's Web sites were
available as of December 31, 1998 in more than 16 additional countries,
including Japan, Italy, Latin America, Russia, South Africa, Spain and
Switzerland. In order to deliver high-quality content worldwide, each of
ZDNet's international Web sites offers content tailored specifically to its
local market in addition to content translated from ZDNet's U.S. Web sites. See
"Risk Factors--Risk Factors Relating to ZDNet--ZDNet's International Expansion
Strategy Exposes it to Risk".

Advertising Sales and Marketing

ZDNet derives the principal portion of its revenue from the sale of
advertisements. For 1998 advertising revenue represented 86% of ZDNet's net
revenue. Advertising revenue is generally derived from short-term contracts on
a per impression basis and by the number of product listings in the
ComputerShopper.com site.

ZDNet believes that its user demographics are attractive to technology and
general consumer product advertisers and merchants. ZDNet has developed
extensive sales and marketing programs designed to assist advertisers in
reaching their audiences through distinctive and customizable programs. ZDNet
sells display advertising in multiple formats (such as banners, sponsorship
wraps, buttons, text and graphical links and e-mail sponsorships) that allow
users to link directly to the advertisers' own Web sites or to special
promotional microsites created by ZDNet on behalf of its advertisers. In
addition, advertising can be purchased in selected areas or across ZDNet's
entire network of sites.

ZDNet believes that its focused and well-trained sales and marketing
organization is important to attaining and maintaining premium advertising
pricing and maximizing revenue. ZDNet's sales and marketing organization uses
market research tools, such as ZDNet's InternetTrak services, to inform clients
about overall industry trends. InternetTrak is a marketing survey of Web users
in the U.S. that tracks Web users and their online activities. ZDNet's direct
sales and marketing organization consisted of 86 professionals as of December
31, 1998. Sales and marketing are generally organized by geographic region.

VIII-20
<PAGE>

During the fourth quarter of 1998, 377 companies advertised with ZDNet (as
compared to 280 in the fourth quarter of 1997). The following is a list of
ZDNet's top fifteen advertising customers (based on advertising revenue
recorded during the fourth quarter of 1998):

<TABLE>
<S> <C> <C>
Active Home/X-10 First USA Microsoft
BuyDirect Gateway NECX
Compaq Hewlett Packard Onsale
Egghead IBM Symantec
E-Trade Micron Computer 3Com/US Robotics
</TABLE>

No advertiser accounted for more than 5% of ZDNet's revenue during 1998.
ZDNet's 20 largest advertising customers accounted for approximately 47.5% of
net advertising revenue during 1998.

Technology Infrastructure and Operations

ZDNet has developed an expandable operations infrastructure using open
standard hardware and software systems. ZDNet's network of sites is primarily
hosted on ZDNet servers maintained at multiple locations to facilitate load
balancing and reduce potential downtimes. Additionally, ZDNet outsources
certain hosting and related functions to NewsCorp/News Internet Services, Real
Networks and InterStep, Inc. The primary data center is designed to minimize
failures by utilizing redundant equipment and connectivity paths.

ZDNet has developed systems allowing it to efficiently create new content
channels and build in personalization capabilities. With respect to
advertising, publishing and systems management tools, ZDNet has licensed
technology from:

. Vignette for its StoryServer publishing system,

. Thunderstone for its Texis search software and

. Proxicom for software relating to "threaded messages", which are user
originated messages that are organized under specific topics and subtopics
and then are presented to users for further discussion.

ZDNet also has developed complementary proprietary systems and solutions to
enhance traffic and advertising measurement functions.

Competition

Competition among Internet content sites is intense and is expected to
increase significantly in the future. The market for Internet content providers
is rapidly evolving and barriers to entry are low, enabling newcomers to launch
competitive sites at relatively low cost.

ZDNet competes for advertisers, merchants, users and strategic partners with
(1) Web sites specializing in technology information, such as sites provided by
c|net, CMP, IDG and Internet.com, (2) Internet portals, search sites and
content aggregators, such as Excite, Infoseek, Lycos and Yahoo!, (3) general
purpose online service providers, such as America Online and MSN, (4) general
news sites, such as those provided by CNN and ABC, (5) browser/software
companies offering information services, such as Microsoft and Netscape and (6)
large general-interest sites, such as Time Warner's pathfinder.com. In
addition, ZDNet competes with traditional media content businesses such as
newspapers, magazines, radio and television. Additionally, certain ZDNet
channels compete with Web sites focused on a particular corresponding content
niche. For example, GameSpot competes with Web sites such as those provided by
Imagine Media and HappyPuppy, and the ZDNet Software Library competes with
several software download sites.

Primary competitive factors in attracting users are quality, reliability,
brand recognition and depth, breadth and presentation of content. Primary
competitive factors in attracting advertisers are user demographics and volume,
ability to deliver interactive and focused advertising and cost-effectiveness.
ZDNet's success will depend on its ability to continue to provide
comprehensive, engaging content to attract and maintain both users and
advertisers.

VIII-21
<PAGE>

Employees

As of December 31, 1998, ZDNet had 316 employees, including 149 in Web design
and content development, 86 in sales, marketing, customer support and audience
development, 69 in technical development and operations and 12 in
administration, planning and finance. ZDNet also uses independent contractors
and temporary employees. None of ZDNet's employees is represented by a labor
union. ZDNet considers its relationship with its employees to be satisfactory.

Facilities

ZDNet's headquarters are located in San Francisco and its other principal
offices are located in the Boston metropolitan area, New York, Chicago, Los
Angeles and Seattle. Ziff-Davis Inc. leases all of the property and offices
occupied by ZDNet and as a result ZDNet pays an allocated portion of Ziff-Davis
Inc.'s lease payments. ZDNet believes that the properties it occupies are
adequate for its current operations, and that suitable additional or
alternative space, including space available under lease options, will be
available on reasonable commercial terms for future expansion.

Legal Proceedings

Ziff-Davis Inc. was named a defendant in an action, filed on April 17, 1998
in the Supreme Court of the State of New York, by minority stockholders of
SOFTBANK Interactive Marketing Inc. ("SIM"), formerly an indirect subsidiary of
SOFTBANK Corp. The complaint alleges, among other things, that SBH, SIM's
majority stockholder, acting with Ziff-Davis Inc. and two of its senior
officers and directors who were directors of SIM (and who were also named as
defendants), had conflicts of interest between SIM and other Softbank
investments (including investments in Ziff-Davis Inc.) and failed to act in the
best interests of SIM and the minority stockholders by taking actions which
benefited Ziff-Davis Inc. The complaint states claims based on common law
fraud, breach of fiduciary duty and aiding and abetting theories and seeks in
excess of $200 million in damages. Ziff-Davis Inc. and the other defendants
have moved to dismiss all of the claims against them other than a breach of
contract claim which is solely against SBH. Although the outcome of this case
cannot be predicted, Ziff-Davis Inc. believes that there are substantial
defenses to the claims and intends to defend vigorously.

In addition, eight securities class action suits have been filed against
Ziff-Davis Inc. and certain of its directors and officers in the United States
District Court for the Southern District of New York. The complaints allege
that defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act in
connection with the registration statement filed by Ziff-Davis Inc. with the
Securities and Exchange Commission relating to the initial public offering of
Ziff-Davis Inc.'s common stock (the "IPO"). More particularly, the complaints
allege that the registration statement contained false and misleading
statements and failed to disclose facts that could have indicated an impending
decline in Ziff-Davis Inc.'s revenue. The complaints seek, on behalf of a class
of purchasers of Ziff-Davis Inc.'s common stock from the date of the IPO
through October 8, 1998, unspecified damages, interest, fees and costs,
rescission, and injunctive relief such as the imposition of a constructive
trust upon the proceeds of the IPO.

The complaints are as follows: Napoli v. Ziff-Davis Inc., et al., No. 98 Civ.
7158 (filed Oct. 9, 1998); Steinberg, et al. v. Ziff-Davis Inc., et al., No. 98
Civ. 7205 (filed Oct. 13, 1998); Flinker v. Ziff-Davis Inc., et al., No. 98
Civ. 7231 (filed Oct. 14, 1998); Koenig v. Ziff-Davis Inc., et al., No. 98 Civ.
7260 (filed Oct. 15, 1998); Schindler v. Ziff-Davis Inc., et al., No. 98 Civ.
7418 (filed Oct. 19, 1998); Miller v. Ziff-Davis Inc., et al., No. 98 Civ. 7541
(filed Oct. 23, 1998); Felgoise v. Ziff-Davis Inc., et al., No. 98 Civ. 8045
(filed Nov. 9, 1998) and Javier v. Ziff-Davis Inc., et al., No. 98 Civ. 8201
(filed Nov. 17, 1998). On January 28, 1999, the court entered an order
consolidating the actions, appointing lead plaintiff's counsel and requiring
the filing of a consolidated amended complaint within 45 days. Thereafter,
Ziff-Davis Inc. will have 45 days to respond to the consolidated amended
complaint.

VIII-22
<PAGE>

In addition, two derivative suits have been filed by stockholders against
Ziff-Davis Inc. and all of its directors in the Court of Chancery of the State
of Delaware for New Castle County. The complaints allege that the directors
breached their fiduciary duties to Ziff-Davis Inc. by repricing the stock
options awarded to certain directors and demand the nullification of the
repricing and an injunction against exercise by the directors of any repriced
option. The complaints are as follows: Jacobs v. Ziff-Davis Inc., et al., No.
16813NC (filed Nov. 30, 1998) and Bernd Bildstein v. Ziff-Davis Inc., et al.,
No. 16835NC (filed Dec. 10, 1998). Plaintiffs filed an amended complaint on
February 17, 1999 (which is substantially similar to the original complaints,
except that the amended complaint also addresses the granting of "new options"
at an allegedly "reduced exercise price") and have indicated their intent to
seek consolidation of the actions. A response to the amended complaint has not
yet been filed.

Although the outcome of the foregoing cases cannot be predicted, Ziff-Davis
Inc. believes that there are substantial defenses to all of the claims.

There are no other legal proceedings to which Ziff-Davis Inc. is a party,
other than ordinary routine litigation incidental to its business that is not
otherwise material to the business or financial condition of Ziff-Davis Inc.

VIII-23
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
-------
<S> <C>
ZDNet
Report of Independent Accountants.................................... VIII-25
Combined Balance Sheets as of December 31, 1997 and 1998............. VIII-26
Combined Statements of Operations for the period from February 29,
1996 to December 31, 1996 and for the years ended December 31, 1997
and 1998............................................................ VIII-27
Combined Statements of Cash Flows for the period from February 29,
1996 to December 31, 1996 and for the years ended December 31, 1997
and 1998............................................................ VIII-28
Combined Statements of Changes in Division Equity for the period from
February 29, 1996 to December 31, 1996 and for the years ended
December 31, 1997 and 1998.......................................... VIII-29
Notes to Combined Financial Statements............................... VIII-30
</TABLE>

VIII-24
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Ziff-Davis Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in division equity,
present fairly, in all material respects, the financial position of ZDNet (a
division of Ziff-Davis Inc., the "Company") at December 31, 1997 and 1998, and
the results of its operations and its cash flows for the period from February
29, 1996 to December 31, 1996 and for the years ended December 31, 1997 and
1998, 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 described in Note 1 to the financial statements, ZDNet is a division of
Ziff-Davis Inc.; accordingly, the financial statements of ZDNet should be read
in conjunction with the audited financial statements of Ziff-Davis Inc.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, NY

February 22, 1999

VIII-25
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

COMBINED BALANCE SHEETS

(dollars in thousands)

<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 28 $ 292
Accounts receivable, net of allowance for doubtful accounts
of $522 and $1,866, for 1997 and 1998, respectively.......... 11,396 18,732
Deferred taxes................................................ 69 779
Other current assets.......................................... 28 265
------- -------
Total current assets........................................ 11,521 20,068
Property and equipment, net..................................... 3,145 5,618
Investment, at cost............................................. -- 5,000
Deferred taxes.................................................. 5,496 4,274
Intangible assets, net.......................................... 67,164 62,726
------- -------
Total assets................................................ $87,326 $97,686
======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.............................................. $ 645 $ 2,553
Accrued expenses.............................................. 2,208 3,495
Unearned income............................................... -- 1,078
------- -------
Total current liabilities................................... 2,853 7,126
Non-current liabilities......................................... 1,181 1,013
------- -------
Total liabilities........................................... 4,034 8,139
------- -------
Commitments and contingencies (Notes 12 and 13)
Division equity................................................. 83,292 89,547
------- -------
Total liabilities and division equity....................... $87,326 $97,686
======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

VIII-26
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF OPERATIONS

(dollars in thousands)

<TABLE>
<CAPTION>
Period from Year ended
February 29, 1996 December 31,
to December 31, -----------------
1996 1997 1998
----------------- -------- -------
<S> <C> <C> <C>
Revenue, net.............................. $ 16,215 $ 32,218 $56,143
Cost of operations:
Production and content.................. 14,863 23,543 26,208
Selling, general and administrative
expenses............................... 13,280 23,475 30,993
Depreciation and amortization of
property and equipment................. 656 1,495 2,010
Amortization of intangible assets....... 4,829 6,186 4,438
-------- -------- -------
Total operating expenses.............. 33,628 54,699 63,649
-------- -------- -------
Loss from operations...................... (17,413) (22,481) (7,506)
Minority interest......................... -- 400 134
-------- -------- -------
Loss before income taxes.................. (17,413) (22,081) (7,372)
Provision (benefit) for income taxes...... (488) (843) 512
-------- -------- -------
Net loss.................................. $(16,925) $(21,238) $(7,884)
======== ======== =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

VIII-27
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CASH FLOWS

(dollars in thousands)

<TABLE>
<CAPTION>
Period from Year ended
February 29, 1996 December 31,
to December 31, -----------------
1996 1997 1998
----------------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................. $(16,925) $(21,238) $(7,884)
Adjustments to reconcile net loss to net
cash
used in operating activities:
Depreciation and amortization........... 656 1,495 2,010
Amortization of intangible assets....... 4,829 6,186 4,438
Deferred tax benefit.................... (488) (843) 512
Changes in operating assets and
liabilities:
Accounts receivable................... (1,892) (4,524) (7,336)
Other current assets.................. (1,217) 4,093 (237)
Accounts payable and accrued
expenses............................. 2,347 (1,311) 3,195
Unearned income....................... 93 (93) 1,078
Other, net............................ (23) 971 (298)
-------- -------- -------
Net cash used in operating activities..... (12,620) (15,264) (4,522)
-------- -------- -------
Cash flows from investing activities:
Capital expenditures.................... (1,010) (2,374) (4,483)
Investments and acquisitions, net of
cash acquired.......................... -- (2,998) (5,000)
-------- -------- -------
Net cash used in investing activities..... (1,010) (5,372) (9,483)
-------- -------- -------
Cash flows from financing activities:
Capital contributions from ZD........... 13,630 20,664 14,269
-------- -------- -------
Net cash provided by financing
activities............................... 13,630 20,664 14,269
-------- -------- -------
Net increase in cash and cash
equivalents.............................. -- 28 264
Cash and cash equivalents at beginning of
period................................... -- -- 28
-------- -------- -------
Cash and cash equivalents at end of
period................................... $ -- $ 28 $ 292
======== ======== =======
Supplemental Cash Flow Information:
Non-cash capital contribution........... $ -- $ 5,167 $ --
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

VIII-28
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY

(dollars in thousands)

<TABLE>
<CAPTION>
Cumulative Total
Paid-in Deferred Accumulated translation division
capital compensation deficit adjustment equity
-------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at February 29,
1996................... $ 81,900 $-- $ -- $ -- $ 81,900
Capital contribution
from ZD................ 13,630 -- -- -- 13,630
Net loss................ -- -- (16,925) -- (16,925)
Foreign currency
translation
adjustment............. -- -- -- (30) (30)
-------- ---- -------- ----- --------
Balance at December 31,
1996................... 95,530 -- (16,925) (30) 78,575
Capital contribution
from ZD................ 25,831 -- -- -- 25,831
Net loss................ -- -- (21,238) -- (21,238)
Foreign currency
translation
adjustment............. -- -- -- 124 124
-------- ---- -------- ----- --------
Balance at December 31,
1997................... 121,361 -- (38,163) 94 83,292
Capital contribution
from ZD................ 14,269 -- -- -- 14,269
Conversion of Softbank
stock options.......... 76 (76) -- -- --
Net loss................ -- -- (7,884) -- (7,884)
Foreign currency
translation
adjustment............. -- -- -- (130) (130)
-------- ---- -------- ----- --------
Balance at December 31,
1998................... $135,706 $(76) $(46,047) $ (36) $ 89,547
======== ==== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

VIII-29
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS

(numbers rounded to the nearest thousand, except per share and share amounts)

1. Organization and Basis of Presentation

Ziff-Davis Inc. was formed through an initial public offering and
reorganization which were completed on May 4, 1998 (described below). Prior to
that date, the predecessors of Ziff-Davis Inc. (currently named ZD Inc. and ZD
Events Inc.) were wholly owned indirect subsidiaries of SOFTBANK Corp. ("SBC"
or together with its non-Ziff-Davis Inc. affiliates "Softbank").

ZDNet is the online business division of Ziff-Davis Inc. ZD is the division
of Ziff-Davis Inc. (formerly ZD Inc.) focused on the business of print
publishing, trade shows and conferences, market research and education.

ZDNet's financial statements reflect the application of certain cash
management and allocation policies adopted by the Board of Directors of Ziff-
Davis Inc. (the "Board"). These policies are summarized in Note 4 "Certain Cash
Management and Allocation Policies".

Even though Ziff-Davis Inc. has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between ZD and ZDNet, that
allocation and the division of Ziff-Davis Inc.'s common stock will not change
the legal title to any assets or responsibility for any liabilities and will
not affect the rights of any creditors. Holders of ZDNet Stock (as defined
below) will continue to be common stockholders of Ziff-Davis Inc. and, as such,
will be subject to all risks associated with an investment in Ziff-Davis Inc.
and all of its businesses, assets and liabilities.

Financial events which occur at ZD that affect Ziff-Davis Inc.'s consolidated
results of operations or financial position could affect the results of
operations or financial condition of ZDNet. Accordingly, financial information
for ZDNet should be read in conjunction with financial information for ZD and
financial information for Ziff-Davis Inc.

Relationship with Softbank and MAC

SBC is the indirect majority shareholder of Ziff-Davis Inc. SBC is a Japanese
corporation which at the time of the acquisition of the MAC Assets was majority
owned directly and indirectly by its president, Mr. Son. As of December 31,
1998 Mr. Son owned approximately 45% of SBC (50.2% as of December 31, 1997).
MAC, also a Japanese corporation, was wholly owned by Mr. Son.

Acquisition of ZDNet

In February 1996, Softbank acquired the stock of Ziff-Davis Holdings Corp.
("Holdings") for an aggregate purchase price of approximately $1,800,000,000,
plus transaction costs. Concurrent with the acquisition, in a separate
agreement, MAC, directly or through wholly owned affiliates, acquired certain
assets and assumed certain liabilities of ZD Inc. (the "MAC Assets"), a wholly
owned subsidiary of Holdings (formerly Ziff-Davis Inc.), for an aggregate
purchase price of approximately $302,000,000. ZDNet comprised a portion of the
MAC Assets.

VIII-30
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Acquisition of GameSpot, Inc.

In January 1997, SOFTBANK Holdings Inc. an affiliate of Ziff-Davis Inc.,
("SBH") acquired 70% of GameSpot, Inc. ("GameSpot", formerly SpotMedia
Communications, Inc.) for approximately $3,000,000. Funds for this acquisition
were provided by Ziff-Davis Inc. to SBH. As part of the initial public offering
and reorganization that was completed on May 4, 1998 (described below),
GameSpot was contributed to ZDNet. Because GameSpot and Ziff-Davis Inc. were
under common control at the time of the transaction, the GameSpot acquisition
has been accounted for in a manner similar to a pooling of interests and
GameSpot's results have been included in ZDNet's results since the time of
common ownership (January 1997). The "pooling" of GameSpot results in a non-
cash capital contribution of $5,167,000, for the year ended December 31, 1997.

Reorganization and Initial Public Offering

On February 4, 1998, a nonstock corporation, ZD Inc., was formed in
contemplation of a reorganization and initial public offering of Ziff-Davis
Inc. Upon completion of the initial public offering (described below), Ziff-
Davis Inc. was renamed ZD Inc., ZDCF was renamed ZD Events Inc. and ZD Inc. was
renamed Ziff-Davis Inc.

On May 4, 1998, Softbank, through its wholly owned subsidiary, SBH, completed
a reorganization whereby the common stock of ZD Inc. and ZD Events Inc. were
contributed to Ziff-Davis Inc. in exchange for 73,619,355 shares of Ziff-Davis
Inc.'s common stock. Concurrently with the reorganization, Ziff-Davis Inc. (1)
completed an initial public offering of 25,800,000 common shares at an initial
public offering purchase price of $15.50 per share, (2) issued $250,000,000 of
8 1/2% subordinated notes due 2008, (3) entered into a $1,350,000,000 credit
facility with a group of banks under which $1,250,000,000 was borrowed and (4)
converted $908,673,000 of intercompany indebtedness to equity. In addition,
Ziff-Davis Inc. received approximately $9,107,000 of fixed assets from Kingston
Technology Company ("Kingston") in exchange for 580,645 shares of ZDI common
stock and $107,000 in cash. These assets have been subsequently leased back to
Kingston. Total shares of common stock issued to Softbank and its affiliates
were 74,200,000. The transactions described above are herein referred to as the
"Reorganization".

On May 28, 1998, Ziff-Davis Inc.'s U.S. underwriters exercised their option
to purchase 2.0 million additional shares of common stock to cover over-
allotments. Ziff-Davis Inc. purchased the additional shares from SBH resulting
in no change to the total number of shares outstanding. On December 31, 1998
SBH contributed 71,619,355 shares of Ziff-Davis Inc.'s common stock to SOFTBANK
America Inc., a non-Ziff-Davis Inc. affiliate of Softbank.

Investment in Deja News Inc.

On July 22, 1998, ZDNet purchased $5,000,000 in Series C, convertible, non-
voting preferred shares of Deja News Inc., an Internet discussion network. This
investment is being accounted for at cost.

2. ZDNet Stock Proposal (unaudited)

VIII-31
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Common Stock ("ZDNet Stock"), intended to reflect the performance of Ziff-Davis
Inc.'s online business division ("ZDNet"). The majority owner of the common
stock of Ziff-Davis Inc. has committed to vote for the Tracking Stock Proposal.
Before the ZDNet Stock is first issued, Ziff-Davis Inc.'s existing common stock
will be re-classified as Ziff-Davis Inc.--ZD Common Stock ("ZD Stock"), and
that stock will be intended to reflect the performance of Ziff-Davis Inc.'s
other businesses and a "Retained Interest" in ZDNet (i.e., Ziff-Davis Inc.'s
retained interest in ZDNet excluding the interest intended to be represented by
outstanding shares of ZDNet Stock) (collectively, "ZD") (Each of ZDNet and ZD
is sometimes referred to herein as a "Group".)

Currently, Ziff-Davis Inc. provides all funding for ZD and ZDNet as described
in Note 4 (Certain Cash Management and Allocation Policies). Ziff-Davis Inc.
intends to continue these practices until ZDNet Stock is first issued.
Accordingly, no interest expense or income to or from ZD has been reflected in
the financial statements of ZDNet for any period prior to the date on which
ZDNet Stock is first issued.

After the date on which ZDNet Stock is first issued, for financial statement
purposes, the following policies will apply, except to the extent the Board
rescinds, modifies or adds to them:

VIII-32
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Retained Interest that correspond to dividends paid on ZDNet Stock) as
inter-Group revolving credit advances unless (1) the Board determines that
a given transfer (or type of transfer) should be accounted for as a long-
term loan, (2) the Board determines that a given transfer (or type of
transfer) should be accounted for as a capital contribution increasing ZD's
Retained Interest in ZDNet or (3) the Board determines that a given
transfer (or type of transfer) should be accounted for as a return of
capital reducing ZD's Retained Interest in ZDNet. There are no specific
criteria to determine when Ziff-Davis Inc. will account for a cash transfer
as a long-term loan, a capital contribution or a return of capital rather
than an inter-Group revolving credit advance. The Board would make such a
determination in the exercise of its business judgment at the time of such
transfer (or the first of such type of transfer) based upon all relevant
circumstances. Factors the Board would consider include (1) the current and
projected capital structure of each Group, (2) the relative levels of
internally generated funds of each Group, (3) the financing needs and
objectives of the recipient Group, (4) the investment objectives of the
transferring Group, (5) the availability, cost and time associated with
alternative financing sources and (6) prevailing interest rates and general
economic conditions.

(f) Any cash transfer from ZD to ZDNet (or for its account) accounted for
as a capital contribution will correspondingly increase ZDNet's division
equity and ZD's Retained Interest in ZDNet. As a result, the number of
shares of ZDNet Stock that could be issued by Ziff-Davis Inc. for the
account of ZD in respect of its Retained Interest in ZDNet (the "Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet") will
increase by (1) the amount of such capital contribution divided by (2) the
Market Value of ZDNet Stock on the date of transfer.

3. Summary of Significant Accounting Policies

Principles of combination

The combined financial statements include the accounts of ZDNet. All
significant transactions within the ZDNet division have been eliminated on
combination.

Cash and cash equivalents

ZDNet considers all highly liquid investments with an original maturity of 3
months or less to be cash equivalents.

Concentration of credit risk

ZDNet places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of
federally insured limits. ZDNet has not experienced losses in such accounts.

VIII-33
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

ZDNet's customers represent a variety of technology companies in the U.S. and
other countries. ZDNet 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 cost or estimated fair value at
the date of acquisition. Depreciation is computed using the straight-line
method half-year convention over the estimated useful lives of the assets which
range from 3 to 8 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.

Intangible assets

Intangible assets consist principally of advertising lists, subscriber lists
and goodwill. Amortization of these assets is computed on a straight-line basis
over estimated useful lives. Identifiable intangible assets are amortized over
a period of 2 to 9 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 10 to 20 years. (See Note 6.) ZDNet assesses the
recoverability of 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 value of assets, an impairment loss is recognized to reduce the
carrying value of the intangibles to estimated recoverable value. ZDNet has not
experienced any impairment of its intangible assets.

Revenue recognition

ZDNet's revenue is derived principally from the sale of advertisements on
short-term contracts. Advertising revenue is recognized ratably in the period
in which the advertisement is displayed, provided that no significant
obligations remain and collection of the resulting receivable is probable.
ZDNet's obligations typically include guarantees of a minimum number of
"impressions," or times that an advertisement appears in pages viewed by users
of ZDNet's online properties. To the extent minimum guaranteed impressions are
not met, ZDNet defers recognition of the corresponding revenue until the
remaining guaranteed impression levels are achieved.

Revenue from subscription based fees and services is recognized evenly over
the term of the contract.

Revenue from barter transactions is recognized during the period in which the
advertisements are displayed. Barter transactions are recorded at the lower of
estimated fair value of the goods or services received or the estimated fair
value of the advertisements given. To date, barter transactions have been
insignificant.

Foreign currency

The effect of translating foreign currency financial statements into U.S.
dollars is included in the cumulative translation adjustment account in
division equity. Gains and losses on foreign currency transactions, which are
not significant to operations, have been included in selling, general and
administrative expenses. ZDNet has not historically entered into forward
currency contracts.

Income taxes

ZDNet uses the asset and liability approach for financial accounting and
reporting of deferred taxes.

VIII-34
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Use of 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.

Stock-based compensation

ZDNet has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), to account for stock
options. Effective January 1, 1996, ZDNet adopted the disclosure-only
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation.

Comprehensive Income

ZDNet implemented SFAS No. 130 Reporting Comprehensive Income, effective
January 1, 1998. This standard requires ZDNet to report the total changes in
division equity that do not result directly from transactions with
stockholders, including those which do not affect retained earnings. These
changes are not material to ZDNet's combined financial statements.

New Accounting Pronouncement

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. ZDNet does not expect the adoption of SFAS No.
133 to have a material impact on ZDNet's results of operations. ZDNet will
adopt SFAS No. 133 beginning with its 2000 financial statements.

4. Certain Cash Management and Allocation Policies

ZDNet's financial statements reflect the application of certain cash
management and allocation policies summarized below. The Board may rescind,
modify or add to any of these policies.

Treasury Activities

Ziff-Davis Inc. manages most treasury activities on a centralized,
consolidated basis. These activities include the investment of surplus cash,
the issuance, repayment and repurchase of short-term and long-term debt, and
the issuance and repurchase of common stock and preferred stock. Each of ZDNet
and ZD generally remits its cash receipts (other than receipts of foreign
operations or operations that are not wholly owned) to Ziff-Davis Inc., and
Ziff-Davis Inc. generally funds ZDNet's cash disbursements (other than
disbursements of foreign operations or operations that are not wholly owned),
on a daily basis.

VIII-35
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

operations or cash of ZDNet's operations that are not wholly owned), that cash
was transferred to ZD and accounted for as a return of capital (i.e., as a
reduction in ZDNet's division equity and ZD's Retained Interest in ZDNet) and
(3) whenever ZDNet had a cash need (other than cash needs of ZDNet's foreign
operations or cash needs of ZDNet's operations that are not wholly owned), that
cash need was funded by ZD and accounted for as a capital contribution (i.e.,
as an increase in ZDNet's division equity and ZD's Retained Interest in ZDNet).
Accordingly, no interest expense or income to or from ZD has been reflected in
the financial statements of ZDNet.

Corporate General and Administrative Expenses

Ziff-Davis Inc. allocates the cost of certain corporate general and
administrative services and shared services (including certain legal,
accounting (tax and financial), information systems, telecommunications,
purchasing, marketing, intellectual property, public relations, corporate
office and travel expenses) (collectively, "Central Services") to ZDNet based
on utilization. Where determinations based on utilization alone are
impracticable, Ziff-Davis Inc. uses other methods and criteria that management
believes to be equitable and to provide a reasonable estimate of the cost
attributable to ZDNet.

Taxes

Federal income taxes, which are determined on a consolidated basis, except
for GameSpot, are allocated to ZDNet (and reflected in its financial
statements) in accordance with Ziff-Davis Inc.'s tax allocation policy. In
general, this policy provides that the consolidated tax provision (and related
tax payments or refunds) are allocated between the Groups based principally
upon the financial income, taxable income, credits and other amounts directly
related to the respective Groups. Tax benefits that cannot be used by the Group
generating such attributes, but can be utilized on a consolidated basis, are
allocated to the Group that generated such benefits. As a result, the allocated
Group amounts of taxes payable or refundable are not necessarily comparable to
those that would have resulted if the Groups had filed separate tax returns.

Royalty Charges

ZD charges ZDNet an annual fee for the use of various brands and editorial
content. The current annual fee, which is reflected in ZDNet's financial
statements as part of its production and content costs, is equal to 5% of the
first $100,000,000 of ZDNet's revenue for the year, 4% of the next $50,000,000
of ZDNet's revenue for that year and 3% of any incremental revenue over
$150,000,000 for that year. The Board may at some point in the future change
this fee as it, in its sole discretion, deems appropriate in light of the
circumstances from time to time.

5. Property and equipment, net

Property and equipment, net consists of following:

<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
----------- -----------
(dollars in thousands)
<S> <C> <C>
Computers and equipment.......................... $ 4,274 $ 8,003
Furniture and fixtures........................... 708 1,076
Leasehold improvements........................... 314 700
----------- -----------
5,296 9,779
Accumulated depreciation and amortization........ (2,151) (4,161)
----------- -----------
$ 3,145 $ 5,618
=========== ===========
</TABLE>

VIII-36
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

6. Intangible assets, net

Intangible assets, net consists of the following:

<TABLE>
<CAPTION>
December 31,
------------------------
Range of Useful
Lives
(years) 1997 1998
--------------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C>
Subscription lists............... 2 $ 4,300 $ 4,300
Advertising lists................ 9 2,400 2,400
Goodwill......................... 10-20 71,479 71,479
----- ----------- -----------
78,179 78,179
Accumulated amortization......... (11,015) (15,453)
----------- -----------
$ 67,164 $ 62,726
=========== ===========
</TABLE>

Intangible assets primarily relate to the acquisition of the MAC Assets. As
discussed in Note 1, the acquisition was accounted for under the purchase
method of accounting. As such, the purchase price of this acquisition was
allocated to tangible and identifiable intangible assets with the remaining
amount being allocated to goodwill.

Advertising lists and subscriber lists were recorded at estimated fair value
as determined by an income approach.

All intangible assets are being amortized using the straight-line method over
their estimated useful lives, up to 20 years. In determining the estimated
useful lives, ZDNet considered its competitive position in the markets in which
it operates, the historical attrition rates of advertisers, subscribes and
exhibitors, legal and contractual obligations and other factors.

7. Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
(dollars in
thousands)
<S> <C> <C>
Payroll and related employee benefits....................... $1,440 $2,221
Licenses.................................................... 108 24
Other taxes................................................. 189 302
Other....................................................... 471 948
------ ------
$2,208 $3,495
====== ======
</TABLE>

VIII-37
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

8. Income Taxes

Provision (benefit) for income taxes and related assets and liabilities
attributed to ZDNet are determined in accordance with Ziff-Davis Inc.'s tax
allocation policy. (See Note 4.)

ZDNet (excluding GameSpot) has been included in a consolidated federal income
tax return, except for the periods in which it was owned by MAC Inc. (described
in Note 1). GameSpot is a 70% owned subsidiary and files separate federal and
state income tax returns on a stand-alone basis.

Loss before income taxes is attributable to the following jurisdictions:

<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1997 1998
-------- -------- -------
(dollars in thousands)
<S> <C> <C> <C>
United States................................. $(15,263) $(18,853) $(5,009)
Foreign....................................... (2,150) (3,228) (2,363)
-------- -------- -------
Total......................................... $(17,413) $(22,081) $(7,372)
======== ======== =======
</TABLE>

Components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
December 31,
------------------
1996 1997 1998
----- ----- ----
(dollars in
thousands)
<S> <C> <C> <C>
U.S. federal income taxes:
Current............................................... $ -- $ -- $--
Deferred.............................................. (378) (653) 413
State and local income taxes:
Current............................................... -- -- --
Deferred.............................................. (110) (190) 99
Foreign income taxes.................................... -- -- --
----- ----- ----
Total provision (benefit) for income taxes ......... $(488) $(843) $512
===== ===== ====
</TABLE>

A reconciliation of the U.S. federal statutory tax rate to ZDNet's effective
tax rate on loss before income taxes is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Federal statutory tax
rate................... 35.0% 35.0% 35.0%
State and local taxes
(net of federal tax
benefit)............... 6.0 6.0 5.0
Non-recognition of
combined losses of MAC
Assets................. (33.3) (26.8) (29.3)
Change in valuation
allowance.............. (4.9) (9.5) (14.2)
Amortization of non-
deductible goodwill.... -- (0.9) (2.8)
Other................... -- -- (0.6)
----- ----- -----
Effective tax rate...... 2.8% 3.8% (6.9)%
===== ===== =====
</TABLE>

The effective tax rate differs from the federal statutory tax rate primarily
as a result of ZDNet's inability to deduct losses incurred by ZDNet while owned
by MAC. In addition, tax benefits attributable to losses in foreign
jurisdictions and certain U.S. losses are subject to the establishment of a
valuation allowance inasmuch as such loss carryforwards are not expected to be
utilized in the future.

VIII-38
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Following is a summary of the components of the deferred tax accounts at
December 31, 1997 and 1998:

<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
(dollars in
thousands)
<S> <C> <C>
Current deferred tax assets:
Allowance for doubtful accounts............................. $ 37 $ 701
Other....................................................... 32 78
------ ------
Current deferred tax assets................................. 69 779
------ ------
Noncurrent deferred tax assets
Net operating loss and other carryforwards.................. 9,081 9,728
Other....................................................... 10 115
------ ------
Noncurrent deferred tax assets.............................. 9,091 9,843
Valuation allowance.......................................... (3,595) (5,569)
------ ------
Net noncurrent deferred tax assets.......................... 5,496 4,274
------ ------
Net deferred tax assets................................... $5,565 $5,053
====== ======
</TABLE>

The valuation allowance primarily relates to tax benefits of foreign net
operating loss carryforwards acquired in the MAC Asset purchase which are not
expected to be realized. No deferred tax asset has been established for the
U.S. losses generated by ZDNet while owned by MAC since these losses will not
be available for use by Ziff-Davis Inc.

ZDNet has U.S. and foreign net operating loss carryforwards at December 31,
1998 of approximately $23,000,000, which will begin to expire in 2000. The
utilization of certain net operating loss carryforwards of approximately
$10,000,000 is subject to limitations primarily due to the change of ownership
resulting from Softbank's acquisition of Holding's stock. Management believes
that such limitations will not significantly affect Ziff-Davis Inc.'s ability
to recognize the deferred tax asset relating to the carryforwards. Accordingly,
no valuation allowance to reduce the deferred tax asset relating to the
carryforwards has been established.

9. Related Party Transactions

ZDNet transacts business with a group of companies affiliated through common
majority ownership with Softbank and has various transactions and relationships
with members of the group. Due to these relationships, it is possible that the
terms of these transactions are not the same as those that would result from
transactions among unrelated parties.

ZD provides all necessary funding for the operations and investments of
ZDNet; this funding is accounted for as capital contributions. (See Notes 2 and
4.) For the period from February 29, 1996 to December 31, 1996 and for the
years ended December 31, 1997 and 1998, such capital contributions were
$13,630,000, $25,831,000 and $14,269,000, respectively.

VIII-39
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

The amounts receivable or payable to affiliated companies are included in
accounts receivable, net or accounts payable in the accompanying balance
sheets. Details of these amounts are:

<TABLE>
<CAPTION>
December 31,
----------------------
1997 1998
----------------------
(dollars in thousands)
<S> <C> <C>
Accounts receivable:
Softbank Kingston..................................... $ 60 $ 72
E-Trade............................................... -- 367
US Web................................................ 7 --
Asia Communications Global Limited.................... 61 --
Inquiry.com, Inc. .................................... 50 --
Trend Micro, Inc. .................................... 10 --
Sega Entertainment.................................... 32 36
---------- -----------
Total............................................... $ 220 $ 475
========== ===========
Accounts payable:
SIM................................................... $ 2 $ --
Yahoo!................................................ -- 60
GeoCities............................................. -- 12
PointCast............................................. 42 16
---------- -----------
Total............................................... $ 44 $ 88
========== ===========
</TABLE>

ZDNet purchases advertising in ZD's publications at discounts to market
rates. Had ZD charged market rates for such advertising, ZDNet's operating
expenses would have increased by $2,235,000, $2,671,000 and $1,429,000 for the
period from February 29, 1996 to December 31, 1996 and for the years ended
December 31, 1997 and 1998, respectively.

VIII-40
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Related party transactions included in the accompanying combined statements
of operations include the following:

<TABLE>
<CAPTION>
Period from Year ending
February 29, 1996 December 31,
to December 31, --------------
1996 1997 1998
----------------- ------ ------
(dollars in thousands)
<S> <C> <C> <C>
Revenue, net
ZD ......................................... $ -- $ 76 $ 160
ZDTV........................................ -- 11 36
GeoCities................................... -- 30 --
E-Trade..................................... -- -- 1,168
Kingston Technology Company................. 88 353 615
US Web...................................... 93 75 --
Asia Communications Global Limited.......... -- 61 --
Electric Minds, Inc. ....................... -- 15 --
Inquiry.com, Inc. .......................... 29 149 --
Trend Micro, Inc. .......................... 28 77 --
Sega Entertainment.......................... 4 248 94
------ ------ ------
Total..................................... $ 242 $1,095 $2,073
====== ====== ======
Expenses
ZD ......................................... $4,496 $8,330 $9,374
ZDTV........................................ -- (120) (532)
SIM......................................... 585 1,613 --
Yahoo!...................................... 27 -- 101
Geo Cities.................................. -- -- 108
PointCast................................... -- 42 144
------ ------ ------
Total....................................... $5,108 $9,865 $9,195
====== ====== ======
</TABLE>

Included in selling, general and administrative expenses is an allocation for
the Ziff-Davis Inc. Central Services amounting to $2,391,000, $3,877,000 and
$5,949,000 for the ten month period ended December 31, 1996 and the years ended
December 31, 1997 and 1998, respectively. Also included in selling, general and
administrative expenses is a royalty charge to ZD amounting to $811,000,
$1,611,000 and $2,807,000 for the ten month period ended December 31, 1996 and
the years ended December 31, 1997 and 1998, respectively. (See Note 4.)

ZDNet is reimbursed by certain affiliates for pre-determined costs incurred
by ZDNet on the affiliates' behalf. These reimbursements are reflected as a
reduction of expenses in the accompanying statements of operations.

10. Employee Benefit Plans

Ziff-Davis Inc. maintains various defined contribution retirement plans.
Substantially, all of ZDNet's employees are eligible to participate in one of
the plans under which annual contributions may be made by Ziff-Davis Inc. 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 ZDNet up to certain specified
percentages. Employees are generally eligible to participate in a plan upon
joining Ziff-Davis Inc. and receive matching contributions after one year of
employment. ZDNet made contributions to the plan totaling $447,000, $751,000
and $1,111,000 for the period from February 29, 1996 to December 31, 1996 and
the years ended December 31, 1997 and 1998, respectively.

VIII-41
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

11. Stock Compensation Plans

SOFTBANK Executive Stock Option Plans

The SOFTBANK Executive Stock Option Plans provide for the granting of
nonqualified stock options (the "Softbank Options") to purchase the common
stock of Softbank to officers, directors and key employees of Ziff-Davis Inc.
Softbank is Ziff-Davis Inc.'s majority stockholder and SOFTBANK Corp. is a
publicly traded company in Japan. 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, 1998, 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. On January 19, 1998, the exercise
price of all of the shares outstanding under option agreements was reset to
(Yen)4,000, the closing market price on Japan's Tokyo Stock Exchange First
Section at that date. In conjunction with the repricing, those options
previously exercisable at December 31, 1997 could only be exercised after July
19, 1998. The repricing of the stock options did not result in compensation
expense to ZDNet.

1998 Incentive Compensation Plan and the 1998 Non-Employee Directors Stock
Option Plan

In 1998, Ziff-Davis Inc. adopted the 1998 Incentive Compensation Plan (the
"Incentive Plan") and the 1998 Non-Employee Directors' Stock Option Plan (the
"Non-Employee Directors' Plan"). The Incentive Plan provides for the grant of
options, stock appreciation rights, stock awards and other interests in Ziff-
Davis Inc.'s common stock to key employees of Ziff-Davis Inc. and its
affiliates and consultants. The Non-Employee Directors' Plan provides for the
grant of stock options to non-employee directors. Ziff-Davis Inc. has reserved
8,500,000 shares of common stock for issuance under the Incentive Plan and
200,000 shares of common stock for issuance under the Non-Employee Directors'
Plan. During 1998, Ziff-Davis Inc. granted options to purchase 339,000 shares
to ZDNet employees 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.

On December 21, 1998 the Board approved an amendment to the Incentive Plan to
permit grants of options and other stock-based awards with respect to any
series of common stock of Ziff-Davis Inc. and to increase the number of shares
reserved for issuance from 8,500,000 shares to 20,327,500 shares.

In addition, on December 21, 1998, the Board approved the grant of options to
acquire an aggregate of approximately 4,163,000 shares of ZDNet Stock, at a
price of $7.50 per share representing the fair value of the shares at that
date, to certain employees. These options are scheduled to vest and become
exercisable on the fifth anniversary of the date of grant.

VIII-42
<PAGE>

ZDNET

(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

adjustment is similar to the adjustment that would generally be made to the
terms of employee stock options in the event of a stock split. Ziff-Davis Inc.
currently expects that the Initial Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet will be 70,000,000. Assuming that this is so,
the total number of shares of ZDNet Stock that holders may purchase upon
exercise of these options will increase to approximately 10,200,000 and the per
share purchase price thereof will decrease to approximately $4.29.

The December 21, 1998 Board actions described above are subject to
stockholder approval. The majority stockholder of Ziff-Davis Inc. has committed
to vote for these actions.

On January 29, 1999, Ziff-Davis Inc. granted options to a number of employees
in connection with the cancellation of corresponding options to purchase stock
of SOFTBANK Corp. In connection with these grants, an affiliate of SOFTBANK
Corp. has agreed with Ziff-Davis Inc. that, if and when any of these options
are exercised, (1) that affiliate will cause the shares of Ziff-Davis Inc.
common stock issuable upon such exercise to be supplied to Ziff-Davis Inc. and
(2) Ziff-Davis Inc. will deliver to that affiliate or its designee the exercise
price paid upon such exercise. Thus, the exercise of these options will not
increase the number of shares of Ziff-Davis Inc. common stock outstanding or
Ziff-Davis Inc.'s stockholders' equity. However, ZDNet expects to recognize
compensation expense for accounting purposes of approximately $76,000 over
three years as a result of these grants. As such, this amount has been recorded
in the Financial Statements as additional paid in capital offset by a reduction
to division equity as deferred compensation.

GameSpot Inc. 1997 Stock Option Plan

Ziff-Davis Inc. adopted the GameSpot Inc. 1997 Stock Option Plan (the
"GameSpot Plan") to provide long-term incentives for key employees of GameSpot
and to enhance shareholder value. The GameSpot Plan provides for the grant of
stock options in GameSpot Inc.'s common stock. GameSpot has reserved 800,000
shares of GameSpot Inc.'s common stock for issuance under the GameSpot Plan. In
1997, 780,000 options were granted to certain employees under the GameSpot
Plan. Such options vest ratably over 3 years.

VIII-43
<PAGE>

ZDNET

(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Information relating to the Softbank options during 1996, 1997 and 1998 is as
follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price
Shares Per Share(1)
--------- ------------
<S> <C> <C>
Shares outstanding under options at December
31, 1995...................................... -- --
Granted...................................... 24,716(2) $87.15
Exercised.................................... -- --
Forfeited.................................... -- --
------
Shares outstanding under options at December
31, 1996...................................... 24,716 87.15
Granted...................................... 17,800 64.50
Exercised.................................... -- --
Forfeited.................................... (8,096) 78.76
------
Shares outstanding under options at December
31, 1997...................................... 34,420 77.41
Granted...................................... -- --
Exercised.................................... -- --
Forfeited.................................... -- --
Converted to Ziff-Davis Inc. options......... (2,100) 31.03
------
Shares outstanding under options at December
31, 1998...................................... 32,320 $31.03
======
Shares exercisable as of:......................
December 31, 1996............................ -- --
December 31, 1997 (price range $64.50 to
$87.15)..................................... 5,120 $78.97
December 31, 1998 (price $31.03)............. 9,974 $31.03
</TABLE>
- --------

(2) Adjusted for a 1.4:1 stock split during 1996 and a 1.3:1 stock split during
1997.

Information relating to Ziff-Davis Inc. stock options issued during 1998 is
as follows:

<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price
Shares Per Share
--------- ------------
<S> <C> <C>
Shares outstanding under options at December 31,
1997............................................ -- --
Granted........................................ 339,000 $6.00
Exercised...................................... -- --
Converted from Softbank options................ 8,226 8.89
Forfeited...................................... (8,000) 6.00
-------
Shares outstanding under options at December 31,
1998............................................ 339,226 $6.08
=======
</TABLE>

VIII-44
<PAGE>

ZDNET

(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Information relating to ZDNet stock options issued during 1998 is as follows:

<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price
Shares Per Share
--------- ------------
<S> <C> <C>
Shares outstanding under options at December 31,
1997............................................ -- --
Granted........................................ 4,162,943 $7.50
Exercised...................................... -- --
Forfeited...................................... -- --
---------
Shares outstanding under options at December 31,
1998............................................ 4,162,943 $7.50
=========
</TABLE>

At December 31, 1998, no shares of either Ziff-Davis Inc. or ZDNet options
were exercisable.

Information relating to GameSpot, Inc. stock options is as follows:

<TABLE>
<CAPTION>
Weighted
Average
Number of Option Price
Shares Per Share
--------- ------------
<S> <C> <C>
Share outstanding under options at December 31,
1996............................................ -- --
Granted........................................ 780,000 $0.44
Exercised...................................... -- --
Forfeited...................................... (61,000) 0.44
--------
Shares outstanding under options at December 31,
1997............................................ 719,000 0.44
Granted........................................ -- --
Exercised...................................... -- --
Forfeited...................................... (167,000) 0.44
--------
Shares outstanding under options at december 31,
1998............................................ 552,000 $0.44
========
Shares exercisable as of:
December 31, 1997................................ 400,610 $0.44
========
December 31, 1998................................ 497,639 $0.44
========
</TABLE>

VIII-45
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except per share and share amounts)

As permitted by SFAS No. 123, ZDNet has 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 No. 123
and has been determined as if ZDNet 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, 1997 and 1998:

Softbank Options

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate............................ 5.89% 6.35% 5.46%
Dividend yield..................................... 0.26% 0.22% 1.50%
Volatility factor.................................. 54.03% 51.35% 77.72%
Expected life...................................... 6 years 6 years 6 years

Ziff-Davis Inc. Options

<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate............................ n/a n/a 5.03%
Dividend yield..................................... n/a n/a 0.00%
Volatility factor.................................. n/a n/a 54.70%
Expected life...................................... n/a n/a 6 years

ZDNet Options

<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate............................ n/a n/a 4.67%
Dividend yield..................................... n/a n/a 0.00%
Volatility factor.................................. n/a n/a 54.70%
Expected life...................................... n/a n/a 6 years

GameSpot Inc. Options

<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate............................ n/a 6.35% 6.44%
Dividend yield..................................... n/a 0.00% 0.00%
Volatility factor.................................. n/a 100.27% 100.27%
Expected life...................................... n/a 4 years 4 years

The weighted average fair value of options granted in 1996, 1997 and 1998 is
as follows:

<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Softbank Options................................... $ 64.30 $ 34.05 $19.81
Ziff-Davis Inc. Options............................ n/a n/a 5.21
ZDNet Options...................................... n/a n/a 4.25
GameSpot Options................................... n/a 0.32 0.32
</TABLE>

For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over 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, 1997 and 1998, consistent
with the provisions of SFAS No. 123, ZDNet's net loss would have increased by
approximately $156,000, $167,000 and $1,046,000, respectively.

VIII-46
<PAGE>

ZDNET

(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

Employee Stock Purchase plan

Ziff-Davis Inc. adopted the Employee Stock Purchase Plan (the "Stock Purchase
Plan") whereby eligible employees may purchase Ziff-Davis Inc.'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 (1) the first business day of a
purchase period or (2) the last business day of a purchase period. Ziff-Davis
Inc. has reserved 2,500,000 shares of common stock (regardless of series) for
issuance under the Stock Purchase Plan.

12. Operating Lease Commitments

ZDNet utilizes equipment and space under lease to Ziff-Davis Inc. ZDNet's
allocation of the minimum lease payments are as follows:

<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
1999.................. $ 1,332
2000.................. 1,493
2001.................. 1,511
2002.................. 1,064
2003.................. 1,076
Thereafter............ 7,022
-------
Total minimum
payments........... $13,498
=======
</TABLE>

Rental expense from operating leases amounted to $668,000, $1,348,000 and
$1,608,000 for the period from February 29, 1996 to December 31, 1996, and the
years ended December 31, 1997 and 1998, respectively.

13. Contingencies

ZDNet and Ziff-Davis Inc. are subject to various legal proceedings arising in
the normal course of business.

Class Action and Derivative Litigations

The complaints allege that defendants violated Sections 11, 12(a) (2) and 15
of the Securities Act of 1933 in connection with the registration statement
filed by Ziff-Davis Inc. with the Securities and Exchange Commission relating
to the initial public offering of Ziff-Davis Inc.'s common stock on April 29,
1998 (the "IPO"). More particularly, the complaints allege that the
registration statement contained false and misleading statements and failed to
disclose facts that could have indicated an impending decline in Ziff-Davis
Inc.'s revenue. The complaints seek on behalf of a class of purchasers of Ziff-
Davis Inc.'s common stock from the date of the IPO through October 8, 1998
unspecified damages, interest, fees and costs, recission and injunctive relief
such as the imposition of a constructive trust upon the proceeds of the IPO.

VIII-47
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(numbers rounded to the nearest thousand, except per share and share amounts)

In addition, two derivative suits have been filed by stockholders against
Ziff-Davis Inc. and all of its directors in the Court of Chancery of the State
of Delaware for New Castle County. The complaints allege that the directors
breached their fiduciary duties to Ziff-Davis Inc. by repricing the stock
options awarded to certain directors and demand the nullification of the
repricing and an injunction against exercise by the directors of any repriced
option. Plaintiffs filed an amended complaint on February 17, 1999 (which is
substantially similar to the original complaints, except that the amended
complaint also addresses the granting of "new options" at an allegedly "reduced
exercise price") and have indicated their intent to seek consolidation of the
actions. A response to the amended complaint has not yet been filed.

Other Legal Proceedings

VIII-48
<PAGE>

ZIFF-DAVIS INCRRRRZIFF-DAVIS INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD MARCH ., 1999

The undersigned, having received the Notice of Special Meeting of Stockholders
and Proxy Statement dated March ., 1999 (the "Proxy Statement") of Ziff-Davis
Inc. (the "Company"), hereby appoints Eric Hippeau and Timothy C. O'Brien, and
each of them, proxies of the undersigned, with full power of substitution, to
represent the undersigned at the Special Meeting of stockholders of the Company
to be held on March __, 1999 and at any adjournments or postponements thereof
(the "Special Meeting") and to vote all shares of Common Stock which the
undersigned would be entitled to vote if personally present at the Special
Meeting in the manner the undersigned specifies in this Proxy Card (or, if the
undersigned does not specify how to vote, to vote all such shares FOR all
Proposals referred to in this Proxy Card and to vote in the discretion of the
proxies as to any other matters coming before the Special Meeting).

Please promptly mark this Proxy Card to specify how you would like your shares
voted and date, sign and mail it in the enclosed envelope. No postage is
required. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE
PROPOSALS REFERRED TO IN THIS PROXY CARD.

IF YOU EXECUTE AND RETURN THIS PROXY CARD BUT DO NOT SPECIFY THE MANNER IN WHICH
THE PROXIES SHOULD VOTE YOUR SHARES, THE PROXIES WILL VOTE YOUR SHARES FOR ALL
OF THE FOREGOING PROPOSALS AND IN THEIR DISCRETION AS TO ANY OTHER MATTERS
COMING BEFORE THE MEETING.
<TABLE>
<S> <C> <C>
Proposal 1. Proposal to amend and restate the Company's Amended and Restated Certificate of Incorporation in the
manner described in the Proxy Statement.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Proposal 2. Proposal to amend the Company's 1998 Incentive Compensation Plan in the manner described in the Proxy
Statement.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Proposal 3. Proposal to amend the Company's 1998 Employee Stock Purchase Plan in the manner described in the Proxy
Statement.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

Proposal 4. Proposal to amend the Company's 1998 Non-Employee Directors' Stock Option Plan in the manner described
in the Proxy Statement.

[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>

In addition, the undersigned authorizes such proxies to vote such shares in
their discretion as to any other matters coming before the Special Meeting.
CHANGE OF ADDRESS AND OR
COMMENTS
MARK HERE

Please date this Proxy Card and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or trustee, please add your title as
such. If executed by a corporation, this Proxy Card should be signed by a duly
authorized officer. If executed by a partnership, please sign in partnership
name by authorized persons.

________________________________________
(Signature)

________________________________________
(Signature if held jointly)

Dated:__________, 1999