SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
December 6, 1999
ZIFF-DAVIS INC.
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-19676 13-3987754
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
Ziff-Davis Inc.
28 East 28th Street, New York, New York 10016
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 503-3500
N/A
(Former name or former address, if changed since last report)
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Items 1 - 4. Not Applicable.
Item 5. Other Events.
Ziff-Davis Inc., a Delaware corporation (the "Company"), has entered
into an agreement to sell its Ziff-Davis Publishing division (the "Publishing
Division") to a company controlled by Willis Stein & Partners. The purchase
price for the Division is $780,000,000, subject to adjustments based on the
Publishing Division's actual 1999 earnings before interest, taxes, depreciation
and amortization and tangible net worth of the Publishing Division on the date
the sale is completed. The sale does not include the Publishing Division's
Computer Shopper publication or its investment in Red Herring Communications,
Inc. (the publisher of Red Herring Magazine).
In order to assure that the Company's ZDNet division ("ZDNet") will
continue to have access to content from the Publishing Division on terms similar
to those it currently enjoys, the buyer will formalize the content relationship
by entering into a written license agreement at closing. That license agreement
will grant ZDNet the right to use and license third parties to use online the
content of the publications that are being sold (the "ZD Publications") for a
period of five years. During the first three years, that right will be
exclusive. During the fourth year, the buyer will be permitted to use the
content online but only on its own websites, and during the fifth year, the
buyer will be permitted to use and license third parties to use the content
online. For the first four years, ZDNet will host the websites for the ZD
Publications, and during the fifth year buyer will host those websites.
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In exchange for these rights, ZDNet will continue to pay a royalty that
will initially be set at the same level as the royalty that ZDNet currently pays
the Publishing Division: 5% of the first $100 million in annual revenue, 4% of
the next $50 million in annual revenue and 3% of any incremental annual revenue
over $150 million. In the fourth year of the license agreement, the royalty will
be reduced to 50% of these levels, and in the fifth year, the royalty will be
reduced to 25% of these levels. In addition, for the first three years, the
royalty is subject to the following minimum and maximum payments:
Minimum Payment Maximum Payment
--------------- ---------------
First Year $7 million $14 million
Second Year $9 million $18 million
Third Year $11 million $22 million
The license agreement will also contain various cross promotional
rights and obligations, including a ZDNet right to one free page of advertising
and one additional page at "house rates" (i.e., substantially discounted) in
each issue of each ZD Publication.
The transaction is subject to financing, accuracy of representations
and warranties, absence of material adverse changes and certain other customary
conditions and is expected to close in the first quarter of 2000. None of the
representations and warranties will survive closing.
Some of the information in this Current Report on Form 8-K,
particularly the information regarding the timing of the transaction,
constitutes forward-looking statements which are subject to various risks and
uncertainties, including the possibility that the transaction is delayed or
abandoned as a result of a material adverse change in the business of the
Publishing Division or an unexpected difficulty in obtaining financing.
Item 6. Not Applicable.
Item 7. Not Applicable.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ZIFF-DAVIS INC.
By: /s/ J. Malcolm Morris
---------------------------------
Title: Senior Vice President,
General Counsel
Date: December 8, 1999
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