ZIFF DAVIS INC, 10-K, 2000-04-13

ZIFF DAVIS INC
10-K, 2000-04-13
PERIODICALS: PUBLISHING OR PUBLISHING & PRINTING

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999.

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to .

Commission File Number

1-9676

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

DELAWARE 13-3987754
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)

28 East 28th Street,
New York, New York 10016
(Address of Principal Executive Offices and Zip Code)

Registrants telephone number, including area code: (212) 503-3500
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which
Registered
New York Stock Exchange
Ziff-Davis Inc.--ZD Common Stock, $.01 New York Stock Exchange
par value
Ziff-Davis Inc.--ZDNet Common Stock, $.01
par value

Shares registered pursuant to Section 12(g) of the Act:

Not Applicable

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of March 31, 2000 the aggregate market value of Ziff-Davis Inc.--ZD Common
Stock and Ziff-Davis Inc.--ZDNet Common Stock held by non-affiliates of the
registrant was approximately $504,939,969 and $319,463,618, respectively, based
upon the closing prices for such shares as reported on the New York Stock
Exchange Composite Tape on that date.
As of March 31, 2000 there were 104,092,731 shares of the registrant's Ziff-
Davis Inc.--ZD Common Stock and 15,065,844 shares of the registrant's Ziff-
Davis Inc.--ZDNet Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Ziff-Davis filed a definitive proxy statement on February 9, 2000 which is
incorporated by reference into the Cautionary Legend Regarding Forward-Looking
Statements and in Parts I, II and III hereof.

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TABLE OF CONTENTS

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PART I
Item 1. Business............................................................................... 3
Item 2. Properties............................................................................. 17
Item 3. Legal Proceedings...................................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders.................................... 18

PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.............. 18
Item 6. Selected Financial Data................................................................ 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................. 19
Item 8. Consolidated Financial Statements...................................................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 19

PART III
Item 10. Directors and Executive Officers of the Registrant..................................... 20
Item 11. Executive Compensation................................................................. 23
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 29
Item 13. Certain Relationships and Related Transactions......................................... 32

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................... 32

SIGNATURES...................................................................................... 35
Appendix (Selected Financial Data, Management's Discussion and Analysis of Financial Condition
and Results of Operations and Financial Statements for Ziff-Davis Inc. and ZDNet).............. F-1
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CAUTIONARY LEGEND REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this Form 10-K may constitute forward-looking
statements which are subject to various risks and uncertainties. These forward-
looking statements include, without limitation, statements regarding the timing
of the various remaining restructuring transactions described herein (or even
whether those transactions will in fact close), the amount of cash that may be
borrowed by the ZD events group, the timing and amount of the cash dividend to
be paid to holders of ZD stock as part of the restructuring, the ZD liabilities
that will need to be provided for as part of the restructuring, the timing of
the merger that will eliminate the tracking stock structure, the ZD/ZDNet
equivalency ratio and the exchange ratio for that merger, our future business
plans and strategies and our future financial condition or results of
operations, as well as other statements that are not historical. You can find
many of these statements by looking for words like "will," "may," "believes,"
"expects," "anticipates," "plans" and "estimates" and for similar expressions.

Because forward-looking statements involve risks and uncertainties, there are
factors that could cause the actual results to differ materially from those
expressed or implied. For example, the statements appearing under "Risk
Factors" in the proxy statement of Ziff-Davis dated February 7, 2000
incorporated by reference herein, and other cautionary statements appearing in
Management's Discussion and Analysis of Financial Condition and Results of
Operations for each of Ziff-Davis and ZDNet appearing elsewhere in this Form
10-K, describe circumstances that could materially affect the accuracy of
forward-looking statements.

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If there are any subsequent written or oral forward-looking statements made
by us or any person acting on our behalf, they are qualified in total by the
cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to the forward-
looking statements to reflect events or circumstances after the date of this
document or to reflect the occurrence of unanticipated events.

This Form 10-K also includes statistical data regarding the Internet, trade
show and publishing 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 in this Form 10-K.

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PART I

ITEM 1. BUSINESS

Ziff-Davis Inc. ("Ziff-Davis") is a leading media and marketing company
focused on computing and Internet-related technologies. Through its ZDNet
division ("ZDNet"), it provides online content and other Internet related
services. Through its ZD division ("ZD"), it is or has been engaged in the
print publishing, trade shows and conferences, education and television
businesses. Ziff-Davis currently has two series of common stock, ZDNet common
stock ("ZDNet stock") and ZD common stock ("ZD stock"). ZDNet common stock is
intended to track the performance of ZDNet, and ZD common stock is intended to
track the performance of ZD. In addition to the ZD businesses referred to
above, ZD is deemed to own a retained interest in ZDNet which is currently the
equivalent of 60 million shares of ZDNet stock.

Ziff-Davis has historically operated in four reportable business segments:
(1) Internet, (2) publishing, (3) events and (4) television. As a result of the
restructuring described below, Ziff-Davis is now reporting its events and
television segments as well as the education and market intelligence businesses
within the publishing segment as discontinued operations. For financial
information on the Ziff-Davis business segments, see the Combined Financial
Statements of ZDNet and the notes to the Consolidated Financial Statements of
Ziff-Davis included in the Appendix to this Form 10-K.

RECENT DEVELOPMENTS; RESTRUCTURING

Ziff-Davis is in the process of disposing of substantially all of its ZD
businesses as part of a comprehensive restructuring described in its proxy
statement dated February 7, 2000. Ziff-Davis has already completed the sale of
ZD Market Intelligence, ZD Education, ZD Publishing (excluding Computer
Shopper, Smart Planet and an investment in Red Herring Communications) and its
equity interest in ZDTV. In addition, Ziff-Davis announced on March 7, 2000
that it intends to recapitalize and spin-off its ZD Events group to the holders
of ZD common stock.

Ziff-Davis expects to form a new holding company for the ZD Events group.
That holding company will borrow approximately $400 million from bank lenders,
the capital markets, or a combination of both. The proceeds of that borrowing
will be used to retire Ziff-Davis' remaining indebtedness and to fund a cash
dividend to holders of ZD common stock. The cash dividend is expected to range
from $2.50 to $3.00 per share of ZD stock, but the exact amount will depend on
the amount set aside to cover ZD's actual and contingent liabilities. At the
time of the dividend or shortly thereafter, Ziff-Davis intends to distribute
all of the shares it owns in the ZD Events holding company to the holders of ZD
common stock. Ziff-Davis expects to complete these transactions at or around
the end of the second quarter.

After Ziff-Davis completes these transactions, Ziff-Davis expects to transfer
Computer Shopper magazine, Smart Planet, its investment in Red Herring
Communications and any other residual ZD assets to ZDNet in return for an
increase in ZD's retained interest in ZDNet. Thereafter, Ziff-Davis expects to
merge with a newly formed subsidiary to eliminate its tracking stock structure.
The surviving company will be renamed ZDNet Inc. As a result of the merger,
each outstanding share of ZD stock will remain outstanding as one share of the
newly named ZDNet Inc., and each outstanding share of ZDNet stock will convert
into a number of shares of ZDNet Inc. expected to fall between 1.7 and 1.9
shares. From the point of view of a holder of ZDNet stock, the transaction is
similar to a stock split--the price per share will decrease but the holder will
end up with more shares.

The restructuring transactions referred to above and the risks related
thereto are described in more detail in the proxy statement dated February 7,
2000, which is incorporated herein by reference.

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credit facility, which it plans to repay in full out of the proceeds of the
approximately $400 million ZD Events group borrowing described above. Ziff-
Davis used the proceeds from the borrowing under this interim credit facility,
together with approximately $130 million in cash on hand, to repurchase
substantially all of its outstanding 8 1/2% Senior Subordinated Notes Due 2008.
This left Ziff-Davis with about $100 million in cash at April 13, 2000.

Ziff-Davis plans to use approximately $70 million of this cash to repay in
full the outstanding note payable to SOFTBANK Corp. and to use the remaining
cash to fund capital expenditures and working capital requirements.

INTERNET SEGMENT (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 50
interconnected internet sites offers approximately 1,200 news stories per
month, 818,000 product listings and 44,000 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 1999 zdnet.com ranked first among all
Web sites in the category of news, information and entertainment among people
who access the Internet from the workplace, 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 371 million page views during December 1999, up from 202
million in December 1998. ZDNet delivered approximately 790 million ad-bearing
pages during the fourth quarter of 1999, up from 460 million during the same
period of 1998. In addition, ZDNet had localized foreign language editions in
more than 19 countries as of December 31, 1999.

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.

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. Jupiter
Communications Inc. forecasts that the number of online users in the U.S. will
grow to 157 million by the end of 2003, up from 83 million at the end of 1998.
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.

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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
$1.9 billion in 1998 and $693 million in the first three months of 1999, 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.

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 Internet Advertising Bureau,
accounted for approximately 20% of all U.S. online advertising dollars during
the first three months of 1999, down from 27% during the same period in 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
first quarter of 1999 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

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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.
Approximately 50 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
approximately 1,200 news stories per month, 818,000 product listings and 44,000
downloadable programs. In addition, through ZDNet's relationship with Ziff
Davis Media (the buyer of ZD Publishing), ZDNet will continue to have the use
of the content of all of ZD Publishing's computer and technology publications,
including PC Magazine, PC/Computing, PC Week and Yahoo! Internet Life. See "--
Relationship with Ziff-Davis Media" below.

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. ZDNet makes a variety of e-mail
newsletter and alerts available to its users, allowing subscribers to select
those of interest. As of December 1999, ZDNet had an e-mail newsletter
subscription base of over 4 million and distributed over 126 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 user group with
attractive demographics. According to the Winter 2000 @Plan study, among users
of ZDNet's Internet sites:

. 58% have college degrees,

. 84% have an annual household income of at least $35,000 (and 21% in
excess of $100,000),

. 55% use the Internet every day and

. 68% 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 was
also the first non-ad agency to win a prestigious "Creative Excellence in
Business Advertising" award, presented by the American Business Press.

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The ZDNet Strategy

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.

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 1,844,571 on December 31, 1998 to
3,331,570 on December 31, 1999, an increase of 81%.

Build ZDNet Brand Strength

ZDNet seeks to reinforce its brand recognition and extend its reputation as a
preferred destination for users looking to buy, use and learn about technology.
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.

In December 1999, ZDNet embarked on its first mass market consumer ad
campaign targeting the growing population of web users interested in
technology. The fifteen month, $25 million campaign includes marketing presence
in print media, broadcast and cable channels.

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!, Alta Vista, Go.com,
Lycos and iVillage 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 19 countries as of
December 31, 1999 and plans to continue to expand into selected overseas
markets through international launches as well as joint ventures and licensing
arrangements with local operating partners, as opportunities arise.

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ZDNet Sites and Services

ZDNet offers approximately 50 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 247 editors,
online producers, developers and operations staff and also uses 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 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 December 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
merchants. 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 107 merchants in over 122 product categories and enables shoppers to both
evaluate products and directly make purchases online.

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) among people who
access the Internet from the workplace in December 1999 according to Media
Metrix.

ComputerShopper.com (www.computershopper.com) 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 merchants (by clicking through to the merchants Web
sites, dialing the merchants' 1-800 numbers or faxing the orders to the
vendors).

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.

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ZDNet News (www.zdnn.com) provides 24 hours a day, 7 days a- week coverage
for computing and technology news and information. ZDNet News generates
original news content produced by its own staff. It also posts content from
other sources including publications such as PC Week, Inter@ctive Week and
Sm@rt Reseller, and strategic partners such as MSNBC and the Wall Street
Journal. ZDNet News also publishes an e-mail newsletter six days a week and
provides news to the Wall Street Journal, MSN and Yahoo!, among others.

GameSpot and Videogames.com (www.gamespot.com, www.videogames.com) offer
comprehensive news, reviews, previews and tips for all game categories.

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 Downloads (www.zdnet.com/downloads) offers over 44,000 files of
shareware, freeware and other downloadable software programs, nearly all of
which are tested for viruses and compatibility and approximately 33,000 of
these files are professionally reviewed and rated.

ZDNet Inter@ctive Investor (www.zdii.com) provides up-to-the-minute
proprietary financial news and commentary on the technology sector. It provides
access to multiple third-party information services such as Reuters, The Red
Herring magazine, Multex Systems Inc., ValueLine, Hoover's and Zack's
Investment Research. This site was ranked in the top 20 of Barron's annual
survey of the top Internet investment sites in 1998 and 1999.

Other ZDNet Channels

Ziff-Davis Print Publication Sites. Pursuant to an arrangement with Ziff
Davis Media Inc. ("Ziff-Davis Media", the buyer of ZD Publishing), each of the
Ziff-Davis print publications will continue to have 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 currently operated by ZDNet are the
companion sites of ZD Publishing's most successful print magazines, such as PC
Magazine, PC/Computing, PC Week and Yahoo! Internet Life. For a more detailed
description of the arrangement between the buyer of ZD Publishing and ZDNet for
the publication web sites, see "--Relationship with Ziff Davis Media" below.

Topical Channels. ZDNet also has over ten topical channels that bring
together one or more sites with a common theme, such as Tech News, Business &
Technology, Tech Life and Reviews. The Tech Life channel, for example, is aimed
at consumers and includes content, community and commerce geared for personal
use, families, gamers, and music aficionados. The Business & Technology channel
aggregates sites aimed at information technology managers in large and medium
sized business as well as small business users.

ZDNet seeks to identify and monitor technology trends in order to effectively
launch and introduce new sites and channels that address the needs of its
audience.

Relationship with Ziff Davis Media

ZDNet believes that its relationship with ZD Publishing has provided it with
substantial advantages over other online technology content providers.

In early April 2000, Ziff-Davis completed the sale of ZD Publishing to Ziff
Davis Media, a company controlled by Willis Stein & Partners. The sale excludes
Computer Shopper and an investment in Red Herring Communications. Ziff Davis
Media is not affiliated with Ziff-Davis. In order to assure that ZDNet will
continue to enjoy a beneficial relationship with the sold division, ZDNet has
entered into a five year license agreement with Ziff Davis Media. That license
agreement will allow ZDNet to use and license third parties to use online

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the content of the publications sold to Ziff Davis Media for a period of five
years. During the first three years, that right will be exclusive. During the
fourth year, Ziff Davis Media will be permitted to use and license third
parties to use the content online but only on its own web sites, and during the
fifth year, Ziff Davis Media will be permitted to use and license third parties
to use the content online. For the first four years, ZDNet will host the
official web sites for the publications that are the subject of the license
agreement, and during the fifth year Ziff Davis Media will host the official
web sites.

In exchange for these rights, ZDNet will continue to pay a royalty that will
initially be set at a level similar to the royalty that ZDNet paid ZD
Publishing before the sale: 5% of the first $100 million in annual revenue (net
of bad debt expense), 4% of the next $50 million in annual revenue (net of bad
debt expense) and 3% of any incremental annual revenue (net of bad debt
expense) 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.

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Minimum Maximum
Payment Payment
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<S> <C> <C>
First Year........................................ $ 7 million $14 million
Second Year....................................... $ 9 million $18 million
Third Year........................................ $11 million $22 million
</TABLE>

The license agreement also contains various cross promotional rights and
obligations, including ZDNet's right to one free page of advertising and one
additional page at "house rates" (i.e., substantially discounted) in each issue
of each publication subject to the licensing agreement.

See "Risk Factors--Risk Factors Relating to the Restructuring--The Sale of
ZD's Businesses May Adversely Affect ZDNet's Future Business" in the Ziff-Davis
proxy statement dated February 7, 2000 which is incorporated herein by
reference.

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!, AltaVista,
Go.com, Lycos and iVillage 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 for 1 or 2 year terms, subject to renewal upon the agreement of both
parties. In addition, ZDNet content is distributed by various Internet service
providers such as Earthlink, 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, China, Singapore 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, 1999 in more than 12
additional regions, 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 from ZDNet's U.S. Web
sites translated into the local language.

Advertising Sales and Marketing

ZDNet derives the principal portion of its revenue from the sale of
advertisements. The advertising revenue for 1999 represented 93% 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.

10
<PAGE>

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 Media Metrix and ZDNetTrak services, to inform
clients about overall industry trends. ZDNetTrak is a quarterly marketing
survey that tracks ZDNet Web users and their online activities, including their
purchasing behavior. ZDNet's direct sales and marketing organization consisted
of 139 professionals as of December 31, 1999. Sales and marketing are generally
organized by geographic region.

During the fourth quarter of 1999, 588 companies advertised with ZDNet (as
compared to 377 in the fourth quarter of 1998). The following is a list of
ZDNet's top fifteen advertising customers (based on advertising revenue in
1999):

<TABLE>
<S> <C> <C>
Active Home/X-10 Egghead Micron Computer
Beyond.com First USA Microsoft
Buy.com Gateway Symantec
Compaq/Digital Hewlett Packard Toshiba
Dell Intel 800.com
</TABLE>

No advertiser accounted for more than 5.0% of ZDNet's revenue during 1999.
ZDNet's 20 largest advertising customers accounted for approximately 35% of
ZDNet's net advertising revenue during 1999.

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 Frontier Global Center, 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

. Deja.com 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.

11
<PAGE>

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
cnet, 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. 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 snowball.com and cnet Gamecenter, and ZDNet
Downloads 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.

Employees

As of December 31,1999, ZDNet had 483 employees, including 247 in Web design
and content development, 139 in sales, marketing, customer support and audience
development, 84 in technical development and operations and 13 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.

NON-INTERNET SEGMENTS (EVENTS, PUBLISHING AND TELEVISION)

Ziff-Davis is in the process of disposing of substantially all of its ZD
businesses as part of a comprehensive restructuring described in its proxy
statement dated February 7, 2000. Ziff-Davis has already completed the sale of
ZD Market Intelligence, ZD Education, ZD Publishing (excluding Computer
Shopper, Smart Planet, and an investment in Red Herring Communications) and its
equity interest in ZDTV. In addition, Ziff-Davis announced on March 7, 2000
that it intends to recapitalize and spin off its ZD Events group to the holders
of ZD common stock. See "--Recent Developments; Restructuring" above. The
following discussion is limited to the ZD Businesses that have not already been
sold.

Trade Shows and Conferences (ZD Events)

ZD is a leading producer of trade shows, conferences and customized marketing
and educational programs for the computer industry in the U.S. ZD produces the
industry-wide COMDEX events, other segment-focused trade shows and conferences
and customized events for specific clients. ZD produced over 50 trade shows and
conferences in 1999.

The COMDEX/Fall event, held in the fourth quarter of each year, has been held
for 20 years and was ranked in 1999 as the number one trade show for all
industries in the U.S. as measured by total revenue and number of attendees. In
1999, ZD estimates that approximately 2 million people attended its trade shows
and conferences worldwide. In addition to COMDEX/Fall, held annually in Las
Vegas, ZD produced 18 other COMDEX events in 13 countries that year.

12
<PAGE>

In 1999, ZD produced 11 segment-focused "NetWorld+Interop" and "Seybold
Seminars" trade shows in 5 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 produced the following segment-focused trade shows in
1999:

. WINDOWS WORLD, in conjunction with Microsoft Corporation,

. Java SM Business Expo SM, sponsored by Sun Microsystems, Inc. and
focusing on the full range of Java SM technology for information
technology professionals,

. Support Services Conference & Expo, focusing on technology for help desk
and information technology support services,

. Customer Relationship Management Conference and Expo for sales,
marketing and customer service automation,

. IT for Wallstreet servicing the financial services industry,

. Technology in Government Week bringing technology together with
government agencies and

. Linux Business Expo focusing on business application on the Linux
operating system.

ZD also produces customized conferences that are designed to meet the
marketing needs of specific clients. For example, ZD produced the JavaOne
conferences for Sun Microsystems, Inc., which are 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 1999 over 8000
companies participated as exhibitors in its trade shows and conferences.

The following table sets forth information relating to ZD's principal trade
shows and conferences, including joint ventures, for 1999. Substantially all of
ZD's international COMDEX events are joint ventures and substantially all
NetWorld+Interop events are owned by ZD.

<TABLE>
<CAPTION>
1999
-------------------------------------
Total Net Estimated
Launch Square Total Total
Year Footage Exhibitors Attendees
------ --------- ---------- ---------
<S> <C> <C> <C> <C>
EVENT
North America
COMDEX/Fall...................... 1979 974,689 1,911 200,000
COMDEX/Spring, WINDOWS WORLD..... 1981 128,393 339 72,000
COMDEX/Canada incl. WINDOWS
WORLD........................... 1992 107,396 271 56,000
COMDEX/PacRim.................... 1995 35,584 144 32,424
COMDEX/Quebec.................... 1996 28,900 117 18,000
COMDEX/Miami .................... 1996 44,700 243 15,000
NetWorld+Interop Las Vegas....... 1986 479,188 622 57,000
NetWorld+Interop Atlanta......... 1992 340,000 478 46,000
Seybold San Francisco
Publishing...................... 1986 142,980 266 36,000
Seybold Seminars Boston.......... 1982 90,299 197 18,000
Support Services including CRM
East............................ 1991 65,200 177 5,250
Support Services including CRM
West............................ 1996 56,800 184 6,050
Technology in Government Week.... 1991 54,600 276 8,704
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
1999
-------------------------------------
Total Net Estimated
Launch Square Total Total
Year Footage Exhibitors Attendees
------ --------- ---------- ---------
<S> <C> <C> <C> <C>
International
COMDEX/SUCESU-SP Brazil.......... 1992 235,178 329 116,000
COMDEX & WINDOWS WORLD
Mexico(1)....................... 1993 43,305 125 30,000
COMDEX/INFOCOM & WINDOWS WORLD
Argentina....................... 1997 59,279 177 30,000
COMDEX IT France................. 1997 114,778 540 52,000
COMDEX/Japan & Object World
Tokyo(2)........................ 1996 90,000 130 75,000
COMDEX/China..................... 1996 46,825 115 60,000
COMDEX/Korea..................... 1997 47,858 98 50,000
COMDEX/IT INDIA.................. 1996 53,000 250 85,000
NetWorld+Interop Paris........... 1992 199,306 450 48,000
NetWorld+Interop Tokyo(2)........ 1993 173,200 300 122,000
</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 61% of ZD's total trade show and
conference revenue for 1999. 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 19% of all trade show and conference revenue in 1999.

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.

Conference fees accounted for 19% of ZD's trade show and conference revenue
for 1999, primarily from NetWorld+lnterop 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.

14
<PAGE>

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 20 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 1999, COMDEX/Fall had approximately 1,900 exhibiting companies occupying
over 974,000 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 1999, it was held in Chicago and had approximately 340 exhibiting
companies and over 72,000 attendees. For the last nine 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 1999, other
COMDEX events were held in Miami, Toronto, Vancouver, Montreal, Mexico City,
Monterrey (Mexico), Buenos Aires, Sao Paulo, Rio de Janeiro, Sydney, Tel Aviv,
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 1999, the NetWorld+Interop Las Vegas event had
approximately 620 exhibiting companies occupying over 479,000 net square feet
of exhibit space and 57,000 attendees. The NetWorld+Interop Atlanta event, held
in October each year, is only slightly smaller in all categories. In 1999,
NetWorld+Interop events were held in Las Vegas, Atlanta, Singapore, Tokyo,
Toronto, 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, design tools and
desktop applications. The largest of the Seybold Seminars series is held
annually each Fall in San Francisco. In 1999, this Seybold Seminars show had
approximately 265 exhibiting companies occupying over 142,000 net square feet
of exhibit space and 36,000 attendees. Other Seybold Seminars events were held
in Boston, Miami and Tokyo.

Computer Shopper

On April 5, 2000, Ziff-Davis completed the sale of ZD Publishing to Ziff
Davis Media, a company controlled by Willis Stein & Partners. Ziff Davis Media
is not affiliated with Ziff-Davis. See "Item I--Business --Recent Developments;
Restructuring" and "--Internet Segment (ZDNet) --Relationship with Ziff Davis
Media" above. This sale did not include, among other things, Computer Shopper.

Computer Shopper is a U.S. publication focused on sophisticated business
buyers. It provides authoritative, independent guidance which Ziff-Davis
believes is generally considered to be the primary product resource within its
market segment. Specifically, Computer Shopper provides buying advice, product
evaluations and technology coverage, including availability, pricing,
specifications and configurations of thousands of computer products. During the
last six months of 1999, Computer Shopper had average per issue newsstand sales
of 203,360 (the largest per issue newsstand sales of any computer publication).

15
<PAGE>

Sources of Computer Shopper Revenue

Computer Shopper is a paid-circulation magazine, meaning that it generates
revenue from newsstand sales, subscriptions and advertising.

Advertising Sales. Ziff-Davis seeks to assist its advertisers in maximizing
the return on their marketing investment. Advertising sales accounted for 84.7%
of Ziff-Davis revenues attributable to Computer Shopper for the year ended
December 31, 1999. In that same year, Computer Shopper's top 20 advertisers
accounted for approximately 58.1% of its advertising revenues. The Ziff-Davis'
sales force uses market research tools to inform clients about overall industry
trends. Ziff-Davis' sales staff provides customer service, research,
promotional support and value-added programs for its advertisers.

Circulation. Ziff-Davis strives to increase the readership of Computer
Shopper by building relationships with distributors, retailers and subscribers.
Revenue from circulation of Computer Shopper accounted for 13.9% of Ziff-Davis'
total Computer Shopper revenue in 1999. This was composed of subscription sales
(5.9% in 1999) and newsstand sales (8.0% in 1999). During the last six months
of 1999, Computer Shopper had an average paid circulation of 510,244.

Ziff-Davis' Computer Shopper newsstand strategy focuses on developing strong
relationships with key distributors and large retail accounts. For example,
Ziff-Davis 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 Computer Shopper's brand identity.

Ziff-Davis' subscription strategy is to maintain a highly focused readership
and increase subscriber loyalty and renewal rates. This strategy provides Ziff-
Davis advertisers with access to a precisely focused target audience.

Services Agreement

Under the terms of a Services Agreement entered into at the time of the sale
of ZD Publishing to Ziff Davis Media, Ziff Davis Media will, for a period of up
to three years, provide Ziff-Davis, at cost, with circulation, production,
distribution and other services for Computer Shopper.

Other Assets Held by ZD

ZD also owns:

. Smart Planet Inc., a relatively new online consumer education
business which it retained when it sold the rest of ZD Education in
the first quarter of 2000 and

. a minority interest in Red Herring Communications, a public company.

Competition

Computer Shopper competes with a wide range of companies. The magazine
publishing business is highly competitive. Computer Shopper 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 Computer Shopper in the U.S. include IDG,
CMP and Imagine Media. 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.

16
<PAGE>

ZD Events competes primarily with several significant trade show management
companies. These include Miller Freeman, Penton Media and IDG. Competitive
factors in this business include quality of conference content, organizational
efficiency and quality and number of exhibitors and attendees.

Employees

As of December 31, 1999, Ziff-Davis had a total of 3,397 employees. Of these
employees, 853 were engaged in U.S. magazine publishing activities, 356 in
international publishing activities, 535 in trade shows and conferences, 453 in
education activities, 483 in Internet activities, 330 in television and 387 in
central services. None of Ziff-Davis' U.S. employees is represented by a labor
union. ZD considers its relationships with its employees to be satisfactory.

Ziff-Davis estimates that, after giving effect to the completed and planned
dispositions, it will retain approximately 95 ZD employees to work with the
ZDNet employees at the newly named ZDNet Inc.

TRADEMARKS

Ziff-Davis has developed strong brand awareness for its products and
services. Accordingly, Ziff-Davis 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. Ziff-
Davis 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 Ziff-Davis publications and services are available.

Ziff-Davis 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. Ziff-Davis 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.

ITEM 2. PROPERTIES

Ziff-Davis relocated its headquarters from One Park Avenue, New York, NY to
28 East 28th Street, New York, NY during the first quarter of 1999. As of
December 31, 1999, it leased approximately 400,000 square feet at that
location, maintained other principal offices in the Boston, Chicago, Los
Angeles, Miami, San Francisco and Seattle metropolitan areas and had over 50
editorial, production and sales offices and computer labs in many other cities
in the U.S. and around the world.

After giving effect to the completed and planned dispositions, Ziff-Davis
expects that it will continue to lease approximately 49,140 square feet at the
New York City headquarters and to maintain other principal offices in the
Boston, Chicago, Los Angeles, Miami, San Francisco and Seattle metropolitan
areas.

Neither Ziff-Davis nor any of its subsidiaries own real property that is
material to its business. Ziff-Davis leases all but one of its offices from
third parties. Ziff-Davis 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.

ITEM 3. LEGAL PROCEEDINGS

For information required under Item 3, see Note 18 to the consolidated
financial statements of Ziff-Davis Inc. included in the Appendix to this Form
10-K.

17
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The ZD stock and ZDNet stock of Ziff-Davis are traded on the New York Stock
Exchange under the trading symbols "ZD" and "ZDZ", respectively. As of March
31, 2000, there were 104,092,731 shares of ZD stock outstanding held by 341
stockholders of record and 15,065,844 shares of ZDNet stock outstanding held by
141 stockholders of record.

The high and low sales prices of ZD stock, as reported on NYSE Composite
Tape, for 1998 and 1999 are shown below.

<TABLE>
<CAPTION>
1998 High Low
---- ------ ------
<S> <C> <C>
Second Quarter (from April 29)............................. $19.00 $12.81
Third Quarter.............................................. 16.38 5.38
Fourth Quarter............................................. 23.94 3.63

<CAPTION>
1999 High Low
---- ------ ------
<S> <C> <C>
First Quarter.............................................. $29.00 $15.81
Second Quarter............................................. 25.31 11.00
Third Quarter.............................................. 19.13 13.75
Fourth Quarter............................................. 19.50 14.31

The high and low sales price of ZDNet stock, as reported on NYSE Composite
Tape, for 1999 are shown below.
<CAPTION>
1999 High Low
---- ------ ------
<S> <C> <C>
First Quarter (March 31 only).............................. $40.00 $29.00
Second Quarter............................................. 55.50 16.63
Third Quarter.............................................. 26.63 13.38
Fourth Quarter............................................. 25.69 18.00
</TABLE>

Dividends

Ziff-Davis has never declared or paid dividends on either its ZD stock or its
ZDNet stock. However, Ziff-Davis currently plans to pay a special cash dividend
and spin off ZD Events, as further described under "Part I--Item 1. Business--
Recent Developments; Restructuring" above.

Recent Sales of Unregistered Securities

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA

For information required under Item 6, see the Appendix to this Form 10-K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

For information required under Item 7, see the Appendix to this Form 10-K.

18
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For information required under Item 7A, see "Ziff-Davis Inc.--Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Interest Rate Swaps" in the Appendix to this Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

For information required under Item 8, see the Appendix to this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

Not applicable.

19
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Eric Hippeau............ 48 Chairman, Chief Executive Officer, Director
Jason E. Chudnofsky..... 56 President, Chief Executive Officer, ZD Events, Director
Daniel L. Rosensweig.... 39 President, Chief Executive Officer, ZDNet, Director
Barry D. Briggs......... 44 Executive Vice President, ZDNet
Massimo De Nadai........ 44 Vice President, Business Operations, ZDNet
Daniel B. Farber........ 49 Vice President, Editor in Chief, ZDNet
J. Malcolm Morris....... 57 Senior Vice President, General Counsel
Mark D. Moyer........... 40 Vice President and Controller
Alan Phillips........... 42 Vice President, Internet Operations and Technology, ZDNet
Robert C. Smahl......... 37 Vice President, Audience Development, ZDNet
Thomas L. Wright........ 41 Vice President, Treasurer
Masayoshi Son........... 41 Director
Ronald D. Fisher........ 52 Director
Jonathan D. Lazarus..... 49 Director
Jerry Yang.............. 31 Director
</TABLE>

Biographies Of Directors

Set forth below is the biography of each of the Class I, Class II and Class
III directors, all of whom have been a director of Ziff-Davis Inc. since our
initial public offering in April 1998 except for Daniel L. Rosensweig, who was
elected by the Class III directors on February 10, 1999 to fill the vacancy
created by the resignation of Claude P. Sheer as director on January 31, 1999.

Class I Directors--Term Expires in 2002

Jason E. Chudnofsky. Jason E. Chudnofsky has been President of ZD Events
since October 1997. He has been a director of Ziff-Davis Inc. since 1998 and
his current term will expire in 2002. From 1988 to 1997, Mr. Chudnofsky was
President of the Trade Show Division of The Interface Group which was renamed
SOFTBANK COMDEX when that division was acquired by Softbank in 1995. In
addition, Mr. Chudnofsky served as President and Chief Executive Officer of the
Sands Expo and Convention Center Division from 1990 to 1995. Mr. Chudnofsky has
over 15 years of experience in the exposition, trade show and conference
industry.

Ronald D. Fisher. Ronald D. Fisher has been the Vice Chairman of SOFTBANK
Holdings Inc. ("SOFTBANK Holdings") since 1995 and the Vice Chairman of
SOFTBANK America Inc. ("SOFTBANK America") since 1998. Mr. Fisher has been a
director of Ziff-Davis Inc. since 1998 and his current term will expire in
2002. From 1990 to 1995, Mr. Fisher was the Chief Executive Officer of Phoenix
Technologies Ltd., a leading developer and marketer of system software products
for personal computers. From 1984 through 1989, Mr. Fisher was the President of
Interactive Systems Corporation. His prior experience also includes senior
management positions at Visicorp, TRW and ICL (USA). In addition to being a
Board member of SOFTBANK Corp., Mr. Fisher serves on the board of directors of
INSWEB Corporation.

20
<PAGE>

Jonathan D. Lazarus. Jonathan D. Lazarus has been a director of Ziff-Davis
Inc. since 1998 and his current term will expire in 2002. Mr. Lazarus was with
Microsoft Corporation from 1985 through 1996, in a series of executive
positions serving most recently as Vice President, Strategic Relations. Mr.
Lazarus serves on the board of directors of HomeGrocer.com, Liquid Audio,
NetGravity and Vision Solutions. Mr. Lazarus has served as an advisor to
Microsoft Corporation, the Universal Studios New Media Group and ZDTV.

Class II Directors--Term Expires in 2000

Jerry Yang. Jerry Yang has been a director of Ziff-Davis Inc. since 1998 and
his current term expires in 2000. Mr. Yang co-founded Yahoo! Inc. in 1995 and
has served as an officer and a member of the board of directors of Yahoo! Inc.
since March 1995. Mr. Yang co-developed Yahoo! Inc. in 1994 while he was
working towards his Ph.D. in electrical engineering at Stanford University.

Class III Directors--Term Expires in 2001

Eric Hippeau. Eric Hippeau has been Chairman and Chief Executive Officer of
Ziff-Davis Inc. since 1998 and of ZD Inc. since 1993. On or before the merger,
which is part of our restructuring, Mr. Hippeau will resign as Chief Executive
Officer, but is expected to remain as a non-executive Chairman of Ziff-Davis
Inc. Mr. Hippeau has been a director of Ziff-Davis Inc. since 1998 and his
current term will expire in 2001. He joined ZD Inc. in 1989 as Publisher of PC
Magazine, was named Executive Vice President of ZD Inc. in 1990, and President
and Chief Operating Officer in February 1991. Prior to joining ZD Inc., Mr.
Hippeau held a number of positions with IDG, including Vice President of
computer publications in Latin America and Publisher of IDG's InfoWorld
magazine. Mr. Hippeau is currently a Director of Global Crossing Ltd., Asia
Global Crossing Ltd., Odimo.com, Electron Economy, Yahoo! Inc. and Starwood
Hotels and Resorts Worldwide, Inc. Mr. Hippeau is also President and Executive
Managing Director of Softbank International Ventures.

Daniel L. Rosensweig. Daniel L. Rosensweig has been President and Chief
Executive Officer of ZDNet since January 1999 and President of ZDNet since
1997. From 1996 to 1997, Mr. Rosensweig served as Executive Vice President of
ZD Inc.'s Internet Publishing Group. Mr. Rosensweig has been a director of
Ziff-Davis Inc. since February 1999 and his current term will expire in 2001.
From 1995 to 1996, Mr. Rosensweig was Vice President and Publisher of PC
Magazine, and, from 1994 to 1995, was Publisher of PC Magazine. Since joining
ZD Inc. in 1983, Mr. Rosensweig has also held a number of positions, including
Associate Publisher positions at PC Magazine, Computer Shopper and PC Sources.
In addition, Mr. Rosensweig currently is a director of Deja News, Inc.

Masayoshi Son. Masayoshi Son has been President and Chief Executive Officer
of SOFTBANK Corp. since 1981. Mr. Son has been a director of Ziff-Davis Inc.
since 1998 and his current term will expire in 2001. Mr. Son has been President
and Chief Executive Officer of Mediabank Corporation since 1994 and GeoCities
Japan Corporation since 1997 and was President and Chief Executive Officer of
Japan Sky Broadcasting Co. Ltd. from 1996 to 1998 and SOFTBANK Networks
Corporation from 1997 to 1998. In addition, Mr. Son currently serves as a
Director of PASONABANK Inc., Yahoo! Japan Corporation and E*Trade Group, Inc.
and is a Representative Director of Cisco Systems Inc.

Biographies of Executive Officers

Set forth below is the biography of each of our current executive officers
each of whom has been an executive officer of Ziff-Davis Inc. since our initial
public offering in April 1998 unless otherwise noted.

Barry D. Briggs. Barry D. Briggs has been Executive Vice President of ZDNet
since 1999. From 1997 to 1999 he was Vice President, Advertising Sales and
Marketing of ZDNet. During his six years with Ziff-Davis Inc. he has served as
Network Director of Corporate Sales, Associate Publisher of ComputerLife, and
Publisher of FamilyPC. Prior to joining Ziff-Davis Inc., Mr. Briggs held a
number of positions at Time Warner Inc., including Director of Marketing and
Sales Development at Sports Illustrated, National Sales Manager for Time
Magazine and Eastern Regional Director for all Time Inc.

Massimo De Nadai. Massimo De Nadai has been Vice President, Business
Operations of ZDNet since February 1999, having served as Director, Business
Operations since November 1998 and is responsible for managing finance,
administration, customer service and paid-content services. Mr. De Nadai has
been

21
<PAGE>

associated with ZDNet since December 1991, holding a variety of positions in
business management, business development and planning. Prior to joining ZDNet,
Mr. De Nadai held positions in technical development, product management and
general management at Cullinet Database Systems, which developed and marketed
database management systems, development tools and packaged applications,
Strategic Information, a former division of Ziff-Davis Inc., which developed
packaged database management solutions for selected vertical markets, and
Monchik-Weber Investment Systems, which developed, maintained and installed
systems for brokerage and investment management organizations.

Daniel B. Farber. Daniel B. Farber has been Vice President, Editor in Chief
of ZDNet since 1996. During his ten years with Ziff-Davis Inc., Mr. Farber has
also served as Vice President, Editor in Chief of PC Week and MacWeek. Prior to
joining Ziff-Davis Inc., Mr. Farber held a number of editorial positions at IDG
publications, including PC World and MacWorld.

J. Malcolm Morris. J. Malcolm Morris has been Senior Vice President, General
Counsel of Ziff-Davis Inc. since 1998, having previously served as Vice
President, General Counsel of ZD Inc. since 1990. Mr. Morris joined ZD Inc. in
1980 as Assistant General Counsel. Prior to joining ZD Inc., Mr. Morris was
engaged in the practice of law at the New York firm of Cleary, Gottlieb, Steen
& Hamilton.

Mark D. Moyer. Mark D. Moyer has been Vice President and Controller of Ziff-
Davis Inc. since 1998 and of ZD Inc. since 1995. From 1990 to 1995, Mr. Moyer
served in various financial management positions at both the divisional and
corporate levels of the ITT Corporation. From 1984 to 1990, Mr. Moyer served in
various finance management positions at both the divisional and corporate
levels of Amax Inc. From 1981 to 1984, Mr. Moyer was employed by Arthur Young &
Company, predecessor firm to Ernst & Young LLP.

Alan Phillips. Alan Phillips has been Vice President, Internet Operations and
Technology of ZDNet since January 1998, having previously served as ZDNet's
Director of Internet Operations and Technology since 1995. Prior to joining
Ziff-Davis Inc., Mr. Phillips was President and CEO of Instant Information,
Inc., a leading provider of enhanced fax services from 1990 to 1994. Prior to
1990, Mr. Phillips held several executive positions at Information Marketing
Businesses, Inc., now owned by Simplex, which develops and markets labor
management software, Tekscan, Inc., which develops, manufactures and markets
proprietary sensor technology, and Data Resources, Inc., a McGraw-Hill company,
which focuses on consulting and forecasting industry economic indices.

Robert C. Smahl. Robert C. Smahl has been Vice President, Audience
Development of ZDNet since September 1997. Prior to joining ZDNet, Mr. Smahl
served as General Manager of Windows NT Intranet Solutions at ZD Expos where he
worked in various roles from 1993 to 1997. From 1985 to 1993, Mr. Smahl held a
variety of positions within the circulation department of ZD Publishing.

Thomas L. Wright. Thomas L. Wright has been Treasurer of Ziff-Davis Inc.
since 1998 and of ZD Inc. since 1995. Mr. Wright has been Vice President and
Treasurer of SOFTBANK Holdings Inc. since 1996. Prior to joining ZD Inc.,
Mr. Wright held various positions from 1986 to 1995 at Reliance Group Holdings,
Inc., most recently as Vice President and Assistant Treasurer.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires Ziff-Davis
Inc.'s officers and directors, and persons who own more than ten percent of a
registered class of Ziff-Davis Inc.'s equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than ten
percent beneficial owners are required by SEC regulation to furnish Ziff-Davis
Inc. with copies of all Section 16(a) forms they file.

Based on its review of the copies of such reports received by it, or written
representations from certain reporting persons that no other reports were
required for those persons, Ziff-Davis Inc. believes that during fiscal 1999,
all of its officers, directors and greater than ten percent beneficial owners
complied with those filing requirements applicable to them.

22
<PAGE>

ITEM 11. 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, each of the four other most highly
compensated executive officers and two additional highly compensated officers
of Ziff-Davis for services rendered in all capacities to Ziff-Davis during the
last three fiscal years.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------- ------------
Securities
Underlying
Name and Principal Options All Other
Position Year Salary($) Bonus($) (#)(1) Compensation($)(2)
------------------ ---- --------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Eric Hippeau............ 1999 900,000 0 300,000(3a) 1,161,689(4)
Chairman and Chief
Executive Officer 1998 1,050,000 0 1,665,032(3b) 17,566
1997 1,350,000 14,063 31,000 17,566
Jason E. Chudnofsky..... 1999 800,000 91,200 45,000(5a) 28,720
President and Chief
Executive Officer, 1998 800,000 288,493 378,395(5b) 95,023
ZD Events 1997 800,000 300,000 10,000 28,269
Michael S. Perlis (13).. 1999 650,000 300,000 100,000(6a) 20,759
President and Chief
Executive Officer, 1998 93,750 0 328,750(6b) 130
ZD Publishing 1997(7) -- -- -- --
Timothy C. O'Brien
(13)................... 1999 490,000 191,798 70,000(8a) 221,961(9)
Chief Financial Officer 1998 485,833 136,163 312,988(8b) 42,892
1997 462,500 305,850 7,700 36,806
Terri S. Holbrooke
(13)................... 1999 457,450 163,099 70,000(10a) 18,425
President, ZD Corporate
Operations 1998 430,000 137,993 193,410(10b) 14,018
1997 380,000 143,993 5,000 6,868
James J. Spanfeller, Jr.
(13)................... 1999 355,000 1,217,984 45,000(11a) 17,227
Executive Vice
President, 1998 316,250 171,244 84,458(11b) 17,218
ZD Publishing 1997 272,500 99,484 1,650 13,335
Jack Dolce (13)......... 1999 350,000 515,377 64,701(12a) 24,563
Executive Vice
President, 1998 300,000 269,833 68,250(12b) 21,342
ZD Publishing 1997 300,000 289,224 2,000 11,066
</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 1999 reflects contributions to Ziff-Davis'
defined contribution plan, group term life insurance and reimbursement of
certain medical expenses and housing costs.
(3)(a) Includes options to purchase 160,000 shares of ZD stock and options to
purchase 140,000 shares of ZDNet stock.
(b) Includes options to purchase 860,000 shares of ZD stock, options to
purchase 560,000 shares of ZDNet stock and 245,032 Repriced Softbank
Options (including the 31,000 granted in 1997).
(4) Includes $1,135,160 paid to Mr. Hippeau in connection with grants made
under the ZDTV, L.L.C. Profits Interest Plan.
(5)(a) Includes options to purchase 27,000 shares of ZD stock and options to
purchase 18,000 shares of ZDNet stock.
(b) Includes options to purchase 300,000 shares of ZD stock, options to
purchase 52,500 shares of ZDNet stock and 25,895 Repriced Softbank
Options (including the 10,000 granted in 1997).
(6)(a) Includes options to purchase 60,000 shares of ZD stock and options to
purchase 40,000 shares of ZDNet stock.
(b) Includes options to purchase 250,000 shares of ZD stock and options to
purchase 78,750 shares of ZDNet stock.
(7) Mr. Perlis was not an employee of Ziff-Davis in 1997.
(8)(a) Includes options to purchase 42,000 shares of ZD stock and options to
purchase 28,000 shares of ZDNet stock.
(b) Includes options to purchase 150,000 shares of ZD stock, options to
purchase 140,000 shares of ZDNet stock and 22,988 Repriced Softbank
Options (including the 7,700 granted in 1997).
(9) Includes $174,640 paid to Mr. O'Brien in connection with grants made under
the ZDTV, L.L.C. Profits Interest Plan.
(10)(a) Includes options to purchase 42,000 shares of ZD stock and options to
purchase 28,000 shares of ZDNet stock.
(10)(b) Includes options to purchase 135,000 shares of ZD stock, options to
purchase 52,500 shares of ZDNet stock and 5,910 Repriced Softbank
Options (including the 5,000 granted in 1997).

23
<PAGE>

(11)(a) Includes options to purchase 27,000 shares of ZD stock and options to
purchase 18,000 shares of ZDNet stock.
(11)(b) Includes options to purchase 50,000 shares of ZD stock, options to
purchase 29,750 shares of ZDNet stock and 4,708 Repriced Softbank
Options (including the 1,650 granted in 1997).
(12)(a) Includes options to purchase 42,701 shares of ZD stock (including
1,200 Softbank Options that were converted into 4,701 ZD options in
1999) and options to purchase 22,000 shares of ZDNet stock.
(12)(b) Includes options to purchase 40,000 shares of ZD stock, options to
purchase 26,250 shares of ZDNet stock and 2,000 Repriced Softbank
Options.
(13) No longer employed by Ziff-Davis Inc.

Option Grants and Exercises in 1999

The following two tables summarize stock option grants to, and exercises by,
each of the persons named in the Summary Compensation Table during 1999 and the
value of the options held by them as of December 31, 1999.

Option Grants in 1999

<TABLE>
<CAPTION>
Potential Realized
Percent of Value at Assumed
Total Annual Rates of Stock
Number of Options Price Appreciation for
Securities Granted to Exercise Option Term
Underlying Employees or Base -----------------------
Name and Principal Option in Fiscal Price
Position Granted(#) Year(%) ($/Sh) Expiration Date 5%($) 10%($)
------------------ ---------- ---------- -------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eric C. Hippeau......... 160,000(1) 3.55 15.8750 April 20, 2009 1,597,392 4,048,106
Chairman and Chief 40,000(2) 0.61 31.0625 April 20, 2009 781,402 1,980,225
Executive 100,000(2) 1.53 20.00 December 17, 2009 1,257,789 3,187,485
Officer 200,000(3) 8.10 0.35(4)October 25, 2009 44,023 111,562
Jason Chudnofsky........ 27,000(1) 0.60 15.8750 April 20, 2009 269,560 683,118
President and Chief 18,000(2) 0.28 31.0625 April 20, 2009 351,631 891,101
Executive
Officer, ZD Events
Michael S. Perlis (6)... 60,000(1) 1.33 15.8750 April 20, 2009 599,022 1,518,040
President and Chief 40,000(2) 0.61 31.0625 April 20, 2009 781,402 1,980,225
Executive
Officer, ZD Publishing
Timothy C. O'Brien (6).. 42,000(1) 0.93 15.8750 April 20, 2009 419,315 1,062,628
Chief Financial Officer 28,000(2) 0.43 31.0625 April 20, 2009 546,981 1,386,158
Terri S. Holbrooke (6).. 42,000(1) 0.93 15.8750 April 20, 2009 419,315 1,062,628
President, ZD Corporate 28,000(2) 0.43 31.0625 April 20, 2009 546,981 1,386,158
Operations 25,000(3) 1.01 0.35(4)October 25, 2009 5,503 13,945
James J. Spanfeller Jr. 27,000(1) 0.60 15.8750 April 20, 2009 269,560 683,118
(6)....................
Executive Vice 18,000(2) 0.28 31.0625 April 20, 2009 351,631 891,101
President, ZD
Publishing
Jack Dolce (6).......... 33,000(1) 0.73 15.8750 April 20, 2009 329,462 834,922
Executive Vice 5,000(1) 0.11 15.7500 June 30, 2000 3,938 7,875
President, ZD
Publishing
22,000(2) 0.34 31.0625 April 20, 2009 429,771 1,089,124
4,701(5) 0.10 8.8939 February 28, 2006 17,021 39,666
</TABLE>
- --------
(1) Represents options to purchase shares of ZD stock.
(2) Represents options to purchase shares of ZDNet stock.
(3) Represents options to purchase shares of common stock of Smart Planet Inc.
(4) The exercise price represents the fair value of one share of common stock
of Smart Planet at the time of granting of the options, based on a third
party valuation of Smart Planet.
(5) Represents options to purchase shares of ZD stock, which were granted in
exchange for cancelled Softbank options.
(6) No longer employed by Ziff-Davis Inc.

24
<PAGE>

Aggregated Option Exercises in 1999 and Fiscal Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Value Options at Fiscal Year-End (#) Fiscal Year-End($)
Shares ------------ ------------------------------ -------------------------
Name and Principal Acquired On
Position Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ ------------ ------------ --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Hippeau............ -- -- 150,500(1) 869,500(1) 1,476,781 6,961,969
Chairman and Chief
Executive Officer -- -- 140,000(2) 560,000(2) 2,339,400 7,118,200
65,000(4) 5,574,275 12,068(3) 167,964(3) 11,081,562 154,234,623
-- -- -- 200,000(5) -- --
Jason E. Chudnofsky..... -- -- 90,000(1) 237,000(1) 883,125 2,060,625
President and Chief
Executive Officer, -- -- 13,125(2) 57,375(2) 219,319 657,956
ZD Events 14,000(4) 6,225,402 537(3) 11,358(3) 493,106 10,429,597
Michael S. Perlis (8)... 35,000(6) 321,562 15,000(1) 260,000(1) 139,668 1,932,500
President and Chief
Executive Officer, 11,000(7) 189,997 8,687(2) 99,063(2) 145,168 986,934
ZD Publishing -- -- -- -- -- --
Timothy C. O'Brien (8).. -- -- 52,500(1) 139,500(1) 515,156 956,718
Chief Financial Officer -- -- 35,000(2) 133,000(2) 584,850 1,754,550
5,000(4) 1,204,312 6,603(3) 11,386(3) 6,063,271 10,455,308
Terri S. Holbrooke (8).. -- -- 47,250(1) 129,750(1) 463,641 861,047
President ZD Corporate -- -- 13,125(2) 67,375(2) 219,319 657,956
Operations
1,000(4) 94,335 182(3) 3,403(3) 167,123 3,124,839
-- -- -- 25,000(5) -- --
James J. Spanfeller Jr. -- -- 17,500(1) 59,500(1) 171,719 318,906
(8)....................
Executive Vice -- -- 7,437(2) 40,313(2) 124,280 372,842
President,
ZD Publishing 2,366(4) 93,076 -- 2,342(3) -- 2,150,585
Jack Dolce (8).......... -- -- 14,000(1) 68,701(1) 137,375 287,961
Executive Vice -- -- 6,562(2) 41,688(2) 109,658 328,978
President,
ZD Publishing 800(4) 31,448 -- -- -- --
</TABLE>
- --------
(1) Represents options to purchase shares of ZD stock.
(2) Represents options to purchase shares of ZDNet stock.
(3) Represents Repriced Softbank Options.
(4) Represents shares of SOFTBANK Corp.
(5) Represents options to purchase shares of common stock of Smart Planet Inc.
(6) Represents shares of ZD stock.
(7) Represents shares of ZDNet stock.
(8) No longer employed by Ziff-Davis Inc.

Composition of the Board of Directors

The board of directors currently consists of seven members. Mr. Chudnofsky
will resign from the board of directors upon the closing of the spinoff of ZD
Events. The board of directors intends to nominate for election two additional
"independent directors" within the meaning of the regulations of the NYSE. The
board of directors is divided into three classes each of whose members serves
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.

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

The board of directors currently has two committees: an audit committee and a
compensation committee. The audit committee currently consists of Messrs.
Lazarus and Yang. The compensation committee currently consists of Messrs.
Fisher, Lazarus and Yang.

25
<PAGE>

employed in preparation and review of our financial statements. Our audit
committee makes recommendations to the board of directors 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 reviews and, as it deems appropriate, recommends
to the board of directors 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 compensation
committee also advises and consults with the officers of Ziff-Davis Inc. as may
be requested regarding managerial personnel policies. The compensation
committee will have such additional powers and be granted additional authority
as may be conferred upon it from time to time by the board of directors.

Each of Messrs. Fisher, Lazarus and Yang is independent of management. Mr.
Fisher is the Vice Chairman of SOFTBANK America Inc., 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! During 1998 and 1999, we incurred
approximately $0.3 million in advertising expenses with Yahoo! Inc.

Compensation of Directors

Directors who are not employees of Ziff-Davis, SOFTBANK Corp., SOFTBANK
Holdings Inc. or SOFTBANK America Inc. will receive an annual retainer of
$25,000 for board of directors service, will receive a fee of $2,000 for each
meeting of the board of directors or any committee thereof attended and will
automatically participate in the Non-Employee Directors' Plan. For more
information on the Non-Employee Directors' Plan, see "Proposals 2 and 3--
Amendments to Benefit Plans--Proposal 3--Amendments to Non-Employee Directors'
Plan" in the Ziff-Davis proxy statement dated February 7, 2000 which is
incorporated herein by reference.

Employment Agreements

Eric Hippeau

In April 1998, we entered into an employment agreement with Mr. Hippeau to
serve as our Chairman and Chief Executive Officer through March 31, 2004. In
March 2000, Mr. Hippeau's compensation was reduced to an annual rate of
$150,000 to reflect the reduction of his duties as a result of our
restructuring and his employment by SOFTBANK Corp. Mr. Hippeau will also
receive stock options as determined from time to time by our compensation
committee. Pursuant to the Incentive Plan, we have granted Mr. Hippeau options
to acquire up to 1,020,000 shares of ZD stock (of which 430,000 shares are
based upon the achievement of certain performance targets) and options to
acquire up to 700,000 shares of ZDNet stock.

On or before the merger, Mr. Hippeau will resign as Chief Executive Officer,
but it is expected he will continue to serve as non-executive Chairman. In that
position it is expected that he will continue to receive annual compensation in
the amount of $150,000. In connection with the restructuring, certain of Mr.
Hippeau's unvested ZD options will become vested. The remainder of his unvested
ZD options, ZDNet options and options to purchase shares of common stock of
SOFTBANK Corp. will continue to vest in accordance with the terms of the grants
for these options.

Jason Chudnofsky

26
<PAGE>

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 327,000
shares of ZD stock and options to acquire up to 70,500 shares of ZDNet stock.

It is anticipated that upon the spinoff of ZD Events, Mr. Chudnofsky would be
employed by ZD Events Inc. as opposed to Ziff-Davis. Upon termination of Mr.
Chudnofsky's employment, all of his ZD options and ZDNet options will become
vested.

Timothy C. O'Brien

In April 1998, we entered into an employment agreement with Mr. O'Brien to
serve as our Vice President, Chief Financial Officer through March 31, 2001.
Pursuant to this agreement, Mr. O'Brien received 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 granted Mr. O'Brien options to acquire up to 192,000
shares of ZD stock and options to acquire up to 168,000 shares of ZDNet stock.

In connection with the restructuring, Mr. O'Brien ended his employment with
us on March 31, 2000. As a result, we paid 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 1999 and 1998
(which was deemed to be $200,000). In addition, all of Mr. O'Brien's ZD
options, ZDNet options and options to purchase shares of common stock of
SOFTBANK Corp. vested immediately. Mr. O'Brien will continue to receive
coverage under our health plans for a period of one year.

Terri S. Holbrooke

In April 1998, we entered into an employment agreement with Ms. Holbrooke to
serve as President of ZD Brand & Market Services through March 31, 2001.
Pursuant to this agreement, Ms. Holbrooke received 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. Pursuant to the
Incentive Plan, we granted Ms. Holbrooke options to acquire up to 177,000
shares of ZD stock and options to acquire up to 80,500 shares of ZDNet stock.

In connection with the restructuring, Ms. Holbrooke ended her employment with
us on February 29, 2000. As a result, we paid Ms. Holbrooke severance equal to
her current base salary. In addition, all of Ms. Holbrooke's ZD options, ZDNet
options and options to purchase shares of common stock of SOFTBANK Corp. vested
immediately upon the termination of her employment. Ms. Holbrooke will continue
to receive coverage under our health plans for a period of one year.

Michael S. Perlis

In November 1998, we entered into an employment agreement with Mr. Perlis to
serve as President of ZD Publishing through December 31, 2001. Pursuant to this
agreement, Mr. Perlis received 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 granted Mr.
Perlis options to acquire up to 310,000 shares of ZD stock and options to
acquire up to 118,750 shares of ZDNet stock.

Mr. Perlis ended his employment with us on March 8, 2000, and we paid him
severance equal to $550,000. In addition, all of Mr. Perlis' ZD options and
ZDNet options vested immediately upon the termination of his employment.

27
<PAGE>

STOCK PERFORMANCE GRAPH

SEC rules require proxy statements to contain a performance graph comparing
the performance of Ziff-Davis Inc.'s common stock with a broad market index and
either a published industry or line-of-business index or a graph of peer
companies.

The graph below provides an indicator of the cumulative stockholder return
for ZD stock for the period April 29, 1998 to December 31, 1999 compared with
the cumulative total return of the S&P Composite 500 Stock Index and the
cumulative total return of a peer group (weighted in accordance with the stock
market capitalization of each component issuer) composed of CNET Inc., Meredith
Corp., Penton Media Inc., Primedia Inc. and Readers Digest Association. This
peer group is the same as the peer group used for the Stock Performance Graph
in the proxy statement for the 1999 annual meeting, except that CMP and
Petersen have been omitted because they were acquired by third parties. The
graph assumes a $100 investment in the ZD Stock at the initial public offering
price of $15.50 a share on April 29, 1998, and in the S&P index and in the peer
group on the same date. The graph further assumes that each dividend paid on
the hypothetical investment in any stock in the peer group during any month is
reinvested in that stock on the last trading day of that month.

ZD Stock
[LINE GRAPH]

1998
----
4/29 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31
------ ------ ------ ------ ------ ------ ------- ------- -------

ZD Stock 100 109 90 80 52 47 44 76 102
S&P 500 100 100 104 103 88 94 101 107 113
Peer Group 100 102 112 103 79 81 85 94 96

1999
----
1/31 2/28 3/31 4/30 5/31 6/30
------ ------ ------ ------ ------ ------
ZD Stock 117 108 139 102 84 96
S&P 500 118 115 119 124 121 128
Peer Group 116 123 137 167 156 166

1999
----
7/31 8/31 9/30 10/31 11/30 12/31
------ ------ ------ ------- ------- -------
ZD Stock 113 100 104 96 119 102
S&P 500 124 123 120 127 130 137
Peer Group 141 127 144 135 137 155

28
<PAGE>

The graph below provides an indicator of the cumulative stockholder return
for ZDNet stock for the period March 31, 1999 to December 31, 1999 compared
with the cumulative total return of the S&P Composite 500 Stock Index and the
cumulative total return of a peer group (weighted in accordance with the stock
market capitalization of each component issuer) composed of CNET Inc., EarthWeb
Inc., internet.com Corporation, iVillage Inc., MarketWatch.com, Inc.,
SportsLine.com, Inc., theglobe.com, Inc. and TheStreet.com, Inc. The graph
assumes a $100 investment in the ZDNet Stock at the initial public offering
price of $19.00 a share on March 31, 1999, and in the S&P Index and in the peer
group on the same date.

ZDNet Stock

[LINE GRAPH]

1999
----

3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31
---- ---- ---- ---- ---- ---- ---- ----- ----- -----
ZDNet Stock 100 186 110 137 99 80 112 106 121 111
S&P 100 104 101 107 104 103 100 107 109 115
Peer Group 100 106 82 87 65 58 74 68 77 82

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Certain Beneficial Owners

The following table sets forth certain information with respect to the
beneficial ownership (1) of ZD stock as of March 31, 2000 and (2) of the common
stock of the company as of March 31, 2000 but after giving effect to the
restructuring based on an estimated exchange ratio of 1.77, by each person or
entity which beneficially owns more than five percent of the outstanding shares
of the common stock of Ziff-Davis. (Throughout this Item 12, we use an
estimated exchange ratio of 1.77 because that is the result of the illustrative
example set forth in our proxy statement dated February 7, 2000 which is
incorporated herein by reference; the actual exchange ratio will be calculated
as described in the proxy statement and may be higher or lower than 1.77.) As
of March 31, 2000 no person or entity beneficially owned more than five percent
of the outstanding shares of ZDNet stock.

29
<PAGE>

<TABLE>
<CAPTION>
Prior to the After the
Restructuring Restructuring
--------------------- -------------------
Number of
Number of Shares of Percent
shares of Percent of Common of
Beneficial Owner ZD Stock Class(1) Stock Class(1)
- ---------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
SOFTBANK America Inc.(2).............. 71,619,355 68.8% 71,619,355 54.77%
SOFTBANK Holdings Inc.(3)............. 71,620,000 68.8 71,620,000 54.77
SOFTBANK Corp.(4)..................... 71,620,000 68.8 71,620,000 54.77
Masayoshi Son(5)...................... 71,620,000 68.8 71,620,000 54.77
</TABLE>
- --------
(1) The percentage of ownership is based on (a) 104,092,731 shares of ZD stock
outstanding as of March 31, 2000 and (b) 15,065,844 shares of common stock
of the company outstanding as of March 31, 2000 after giving effect to the
restructuring based on an estimated exchange ratio of 1.77.
(2) SOFTBANK America Inc.'s address is 10 Langley Road, Suite 403, Newton
Center, MA 02459.
(3) Includes shares owned by SOFTBANK America Inc. and 645 shares owned by
SOFTBANK Kingston Inc., all of which may be deemed to be beneficially owned
by SOFTBANK Holdings Inc. SOFTBANK Holdings Inc.'s address is 10 Langley
Road, Suite 403, Newton Center, MA 02459.
(4) Includes shares owned by SOFTBANK America Inc. and SOFTBANK Kingston Inc.,
all of which may be deemed to be beneficially owned by SOFTBANK Corp.
SOFTBANK Corp.'s address is 24-1 Nihonbashi-Hakozakicho, Chuo-ku, Tokyo
103, Japan.
(5) Includes shares owned by SOFTBANK America Inc. and SOFTBANK Kingston Inc.,
all of which may be deemed to be beneficially owned by Mr. Son (who owns
37.86% of SOFTBANK Corp. and is its President). Mr. Son's address is c/o
SOFTBANK Corp., 24-1 Nihonbashi-Hakozakicho, Chuo-Ku, Tokyo 103, Japan.

As a result of its beneficial ownership of common stock, Softbank is able to
influence significantly matters affecting Ziff-Davis. Softbank is able to elect
all members of the board of directors and to control those actions that require
the approval of holders of a majority of the voting stock of Ziff-Davis,
including amendments to our charter and approval of any business combinations.
See "Risk Factors--Other Risk Factors--We Are Controlled By Our Principal
Stockholders. This Creates Potential Conflicts of Interest" as discussed in the
Ziff-Davis proxy statement dated February 7, 2000 incorporated by reference
herein.

30
<PAGE>

Management

The following table sets forth certain information with respect to the
beneficial ownership (1) of ZD stock and ZDNet stock as of March 31, 2000 (2)
of the common stock of the company as of March 31, 2000 but after giving effect
to the restructuring based on an estimated exchange ratio of 1.77 and (3) of
the common stock of SOFTBANK Corp. as of March 31, 2000, in each case by (x)
each person named in the Summary Compensation Table, (y) each director of Ziff-
Davis and (z) all executive officers and directors of Ziff-Davis as a group.
<TABLE>
<CAPTION>
Prior to the Restructuring After the Restructuring
-------------------------------------------- -----------------------
Number of
Number of Number of shares of
shares of Shares of Number of common stock of
common stock Percent of ZDNet Percent of Shares of Percent of SOFTBANK Percent of
Beneficial Owner of ZD Stock Class(1) Stock Class(1) Common Stock Class(1) Corp.(2) Class(1)
- ---------------- ------------ ---------- --------- ---------- ------------ ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric Hippeau(3)......... 225,101 * % 192,500 1.28% 565,826 * % 61,074 * %
Jason E. Chudnofsky(3).. 126,750 * 28,406 * 177,028 * 5,716 *
Timothy C.
O'Brien(3)(10)......... 80,500 * 50,750 * 170,327 * 4,701 *
Michael S.
Perlis(4)(10).......... 260,000 * 84,063 * 408,791 * 0 *
Terri S.
Holbrooke(4)(10)....... 178,000 * 70,500 * 302,785 * 3,585 *
Daniel L. Rosensweig(3).. 58,600 * 546,875 3.63 1,026,568 * 3,136 *
Masayoshi Son(5)........ 71,620,000 68.8 0 * 71,620,000 54.77 41,708,748 37.86
Ronald D. Fisher(6)..... 85,000 * 14,450 * 110,576 * 210,346 *
Jonathan D. Lazarus(7).. 42,938 * 16,251 * 71,702 * 0 *
Jerry Yang(8)........... 22,238 * 8,751 * 37,727 * 0 *
James J. Spanfeller, Jr.(9)(10).. 66,875 * 41,000 * 139,445 * 4,708 *
Jack Dolce(9)(10)....... 70,326 * 40,500 * 142,011 * 0 *
Officers and directors
as a group............. 73,007,051 70.14 1,624,672 10.78 75,882,713 58.03 42,003,416 38.13
</TABLE>
- --------
* Less than one percent.
(1) The percentage of ownership is based on (a) 104,092,731 shares of ZD stock
outstanding as of March 31, 2000; (b) 15,065,844 shares of ZDNet stock
outstanding as of March 31, 2000, (c) 130,759,275 shares of common stock
of the company outstanding as of March 31, 2000 after giving effect to the
restructuring based on an estimated exchange ratio of 1.77 and (d)
110,151,188 shares of common stock of SOFTBANK Corp. outstanding as of
March 31, 2000. Shares of common stock subject to options which are
currently exercisable or exercisable within 60 days of the date referenced
above, are deemed outstanding for computing the percentages of the person
holding such options, but are not deemed outstanding for computing the
percentages of any other person. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
includes voting and investment power with respect to shares. Unless
otherwise indicated, the persons named in the table have sole voting and
sole investment control with respect to all shares beneficially owned.
(2) Includes options granted in 1996 and 1997 to purchase common stock of
SOFTBANK Corp. under the SOFTBANK Group Executive Stock Option Plans.
(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 SOFTBANK America Inc. 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.
(9) An officer named in the Summary Compensation Table.
(10) No longer employed by Ziff-Davis Inc.

31
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For information required under Item 13, see "Committees of the Board of
Directors; Compensation Committee Interlocks and Insider Participation" in Item
11 of this Form 10-K and Note 12 to the consolidated financial statements of
Ziff-Davis Inc. included in the Appendix to this Form 10-K.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

(A) Documents filed as part of this report

(1) Financial Statements and Supplemental Schedules

(a) The Consolidated Financial Statements of Ziff-Davis and ZDNet are
set forth in Item 8 of this
Form 10-K.

(b) No financial statement schedules are required.

(2) Exhibits

<TABLE>
<C> <S>
2.1 Purchase Agreement, dated August 30, 1999, among ZD Inc., ZD Holdings
(Europe) Ltd. and Harte-Hanks, Inc.

2.2 Purchase Agreement, dated November 17, 1999, between ZD Inc. and WP
Education Holdings LLC.

2.3 Purchase Agreement, dated November 19, 1999, between ZD Inc. and Vulcan
Programming Inc.

2.4 Purchase Agreement, dated December 6, 1999, among ZD Inc., ZD Holdings
(Europe) Ltd. and WS-ZD Acquisition, Inc.

2.5 Agreement and Plan of Merger, dated February 7, 2000, between Ziff-Davis
Inc. and ZD Merger Subsidiary Inc. (incorporated by reference to Exhibit
99.1 in this Form 10-K)

3.1 Amended and Restated Certificate of Incorporation of Ziff-Davis Inc.
(incorporated by reference to the exhibit in Ziff-Davis Inc.'s
Registration Statement of Form S-1, File No. 333-69447)

3.2 Form of Amended and Restated Certificate of Incorporation of Ziff-Davis
Inc. to be in effect after completion of the agreement filed as Exhibit
2.5 (incorporated by reference to Exhibit 99.1 in this Form 10-K)

3.3 By-Laws of Ziff-Davis Inc. (incorporated by reference to the exhibit in
Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-46493)

4.1 Specimen of certificate representing Ziff-Davis Inc.--ZD Common Stock,
par value $.01 per share (incorporated by reference to the exhibit in
Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-69447)

4.2 Specimen certificate representing Ziff-Davis Inc.--ZDNet Common Stock,
par value $.01 per share (incorporated by reference to the exhibit in
Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-69447)

10.1 Amended 1998 Incentive Compensation Plan

10.2 Amended 1998 Employee Stock Purchase Plan

10.3 Amended 1998 Non-Employee Directors' Stock Option Plan

10.4 Undertaking, dated as of April 1, 1998, between SOFTBANK Corp. and ZD
Inc. (incorporated by reference to the exhibit in Ziff-Davis Inc.'s
Registration Statement on Form S-1, File No. 46493)
</TABLE>

32
<PAGE>

<TABLE>
<C> <S>
10.6 Master License Agreement, dated as of April 1, 1998, between Ziff-Davis
Inc. and SOFTBANK Corp. (incorporated by reference to the exhibit in
Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-
46493)

10.7 License Agreement, dated as of July 1, 1998, between MAC Inc. and Ziff-
Davis Inc. and SOFTBANK Corp. (incorporated by reference to the exhibit
in Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-
46493)

10.8 Agreement to Produce, dated as of April 1, 1998, between ZD COMDEX and
Forums Inc. and SOFTBANK Corp. (incorporated by reference to the exhibit
in Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-
46493)

10.10 License Agreement, dated April 5, 2000, between Ziff-Davis Inc. and Ziff
Davis Media Inc.

10.11 License Agreement, dated April 5, 2000, between ZD Inc. and Ziff Davis
Publishing Holdings Inc.

10.12 License Agreement, dated April 5, 2000, between ZD Inc. and Ziff Davis
Publishing Holdings Inc.

10.13 Services Agreement, dated April 5, 2000, between ZD Inc. and Ziff Davis
Media Inc.

10.14 Transition Services Agreement, dated April 5, 2000, between ZD Inc. and
Ziff Davis Media Inc.

10.15 Side Letter Agreement, dated as of April 5, 2000, by and among Ziff
Davis Media Inc., ZD Inc. and ZD Holdings (Europe) Ltd.

10.16 Technical Agreement, dated as of April 1, 1998, between ZD COMDEX and
Forums Inc. and SOFTBANK Forums KK (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement on Form S-1, File
No. 333-46493)

10.17 Registration Rights Agreement, dated as of April 1, 1998, between ZD
Inc. and SOFTBANK Holdings Inc. (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement on Form S-1, File
No. 333-46493)

10.18 Credit Agreement, dated as of March 27, 1996 between SOFTBANK Holdings
Inc., the Guarantors listed therein, The Bank of New York and Morgan
Stanley Senior Funding, Inc. as amended March 9, 1998 (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration Statement on
Form S-1, File No. 333-46493)

10.19 Secured Guaranteed Credit Agreement, dated as of May 4, 1998, among
Ziff-Davis Inc., the Banks listed therein, Morgan Stanley Senior
Funding, Inc., as Syndication Agent, the Chase Manhattan Bank and DLJ
Capital Funding, Inc., as Co-Documentation Agents, The Bank of New York,
as Administrative Agent, and the Guarantors (incorporated by reference
to the exhibit in Ziff-Davis Inc.'s Registration Statement of Form S-1,
File No. 333-46493)

10.20 Amendment No. 1 and Waiver to Secured Guaranteed Credit Agreement, dated
as of May 28, 1998, among Ziff-Davis Inc., the Banks listed therein and
The Bank of New York, as Administrative Agent (incorporated by reference
to the exhibit in Ziff-Davis Inc.'s Registration Statement on Form S-1,
File No. 333-69447)

10.21 Amendment No. 2 to Secured Guaranteed Credit Agreement, dated as of June
8, 1998, among Ziff-Davis Inc., the Banks listed therein and The Bank of
New York, as Administrative Agent (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement on Form S-1, File
No. 333-69447)

10.22 Amendment No. 3 to Secured Guaranteed Credit Agreement, dated as of
December 30, 1998, among Ziff-Davis Inc., the Banks listed therein and
The Bank of New York, as Administrative Agent (incorporated by reference
to the exhibit in Ziff-Davis Inc.'s Registration Statement on Form S-1,
File No. 333-69447)
</TABLE>

33
<PAGE>

<TABLE>
<C> <S>
10.23 Lease of Ziff-Davis Inc.'s headquarters at 28 East 28th Street, New
York, New York (incorporated by reference to the exhibit in Ziff-Davis
Inc.'s Registration Statement of Form S-1, File No. 333-46493)

10.24 Lease Agreement, dated as of May 4, 1998, between Ziff-Davis Inc., ZD
Inc., ZD COMDEX and Forums Inc. and Kingston Technology Company
(incorporated by reference to the exhibit in Ziff-Davis Inc.'s
Registration Statement on Form S-1, File No. 333-46493)

10.25 Agreement and Consent to Assignment, dated as of April 4, 2000, by and
among 63 Madison Associates, L.P., ZD Inc. and Ziff Davis Publishing
Inc.

10.26 Assignment and Assumption of Lease, dated as of April 5, 2000, between
ZD Inc. and Ziff Davis Publishing Inc.

10.27 Agreement of Sublease, dated March 10, 2000, between ZD Inc. and Ziff-
Davis Inc.

10.28 Assignment, dated as of May 4, 1998, between Kingston Technology Company
and Ziff-Davis Inc. (incorporated by reference to the exhibit in Ziff-
Davis Inc.'s Registration Statement on Form S-1, File No. 333-46493)

10.29 Employment Agreement, dated as of April 1, 1998, between ZD Inc. and
Eric Hippeau (incorporated by reference to the exhibit in Ziff-Davis
Inc.'s Registration Statement on Form S-1, File No. 333-46493), amended
as of March 1, 1999

10.30 Employment Agreement, dated as of April 1, 1998, between ZD COMDEX and
Forums Inc. and Jason E. Chudnofsky (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement on Form S-1, File
No. 333-46493)

10.31 Employment Agreement, dated as of April 1, 1998, between Ziff-Davis Inc.
and Terri S. Holbrooke (incorporated by reference to the exhibit in
Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-
69447)

10.33 Employment Agreement, dated as of November 6, 1998, between Ziff-Davis
Inc. and Michael S. Perlis (incorporated by reference to the exhibit in
Ziff-Davis Inc.'s Registration Statement on Form S-1, File No. 333-
69447)

10.34 Employment Agreement, dated as of March 1, 2000, between Ziff-Davis Inc.
and Frederic D. Rosen

10.35 Stock Purchase Agreement, dated as of February 5, 1999, by and between
Ziff-Davis Inc. and Vulcan Ventures Inc. (incorporated by reference to
the exhibit in Ziff-Davis Inc.'s Registration Statement on Form S-1,
File No. 333-69447)

10.36 Bill of Sale and Assignment, dated as of February 4, 1999, between MAC
Holdings (America) Inc. and ZD Inc. (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Current Report on Form 8-K, File No. 001-
14055)

21.1 List of subsidiaries of Ziff-Davis Inc.

23.1 Consent of PricewaterhouseCoopers LLP

27.1 Financial Data Schedule

99.1 Proxy Statement dated February 7, 2000
</TABLE>

(B) Reports on Form 8-K.

Ziff-Davis filed a Report on Form 8-K, dated December 8, 1999, announcing
that it had entered into a definitive agreement to sell its ZD Publishing
division to a company controlled by Willis Stein & Partners for $780,000,000.

34
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Date:

Ziff-Davis Inc.

/s/ Eric Hippeau
By:
----------------------------------
Name:Eric Hippeau
Title:Chairman, Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on April 13, 2000.

<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Eric Hippeau Chairman, Chief
___________________________________________ Executive Officer,
Eric Hippeau Director (Principal
Executive Officer)

/s/ Mark D. Moyer Controller (Principal
___________________________________________ Financial and
Mark D. Moyer Accounting Officer)

Director
___________________________________________
Masayoshi Son

/s/ Ronald D. Fisher Director
___________________________________________
Ronald D. Fisher

/s/ Jason E. Chudnofsky Director
___________________________________________
Jason E. Chudnofsky

/s/ Jonathan D. Lazarus Director
___________________________________________
Jonathan D. Lazarus

/s/ Jerry Yang Director
___________________________________________
Jerry Yang
/s/ Daniel L. Rosensweig Director
___________________________________________
Daniel L. Rosensweig

</TABLE>

35
<PAGE>

ZIFF-DAVIS INC.

APPENDIX

<TABLE>
<CAPTION>
Page
----
<S> <C>
ZIFF-DAVIS INC.
Selected historical consolidated financial and other data................ F-2
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... F-3
Report of Independent Accountants........................................ F-14
Consolidated balance sheets as of December 31, 1998 and 1999............. F-15
Consolidated statements of operations for the years ended December 31,
1997, 1998 and 1999..................................................... F-16
Consolidated statements of comprehensive income for the years ended
December 31, 1997, 1998 and 1999........................................ F-17
Consolidated statements of cash flows for the years ended December 31,
1997, 1998 and 1999..................................................... F-18
Consolidated statements of changes in stockholders' equity for the years
ended
December 31, 1997, 1998 and 1999....................................... F-19
Notes to consolidated financial statements............................... F-20
ZDNET
Selected historical combined financial and other data.................... F-53
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... F-54
Report of Independent Accountants........................................ F-62
Combined balance sheets as of December 31, 1998 and 1999................. F-63
Combined statements of operations for the years ended December 31, 1997,
1998 and 1999........................................................... F-64
Combined statements of comprehensive income for the years ended December
31, 1997, 1998 and 1999................................................. F-65
Combined statements of cash flows for the years ended December 31, 1997,
1998 and 1999........................................................... F-66
Combined statements of changes in division equity........................ F-67
Notes to consolidated financial statements............................... F-68
</TABLE>

F-1
<PAGE>

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, 1995,
1996, 1997, 1998 and 1999. 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 year ended December 31, 1995
and as of and for the two month period ended February 28, 1996. The data as of
and for the year ended December 31, 1995 and as of and for the two months ended
February 28, 1996 was derived from the audited Consolidated Financial
Statements of ZDI. 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. The Selected Financial Data
has been restated to reflect Ziff-Davis Inc's market intelligence, education,
television and events businesses as discontinued operations. 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.

<TABLE>
<CAPTION>
Ziff-Davis Inc.
ZDI (1) Year ended December 31,
-------------------------- --------------------------------------------------------
Two Month
Year ended Period ending
December 31, February 28,
1995 1996 1995(2) 1996(2) 1997 1998 1999
------------ ------------- -------- ---------- ---------- ---------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $ 667,316 $ 108,174 $ -- $ 595,280 $ 743,848 $ 704,058 $ 702,458
Depreciation and
Amortization........... 88,450 14,617 -- 104,285 107,291 98,852 110,830
Interest Expense, net... 94,334 21,285 -- 74,125 126,573 103,651 86,948
Loss from Continuing
Operations before tax.. (40,250) (8,132) -- (70,934) (81,963) (129,268) (1,145,958)
Loss from Continuing
Operations............. (26,002) (6,082) -- (94,498) (72,469) (93,648) (1,014,847)
Net income (loss) from
Discontinued
Operations............. (12,944) 1,535 10,945 42,417 1,290 15,839 18,151
Net income (loss)....... (38,946) (4,547) 10,945 (52,081) (71,179) (77,809) (996,696)
Balance Sheet Data
(at period end):
Cash and cash
equivalents............ $ 10,083 $ 13,669 $ -- $ 29,915 $ 30,301 $ 32,566 $ 12,695
Total assets............ 1,623,906 1,619,905 397,881 3,584,173 3,546,646 3,433,803 1,923,575
Total long-term debt.... 964,153 964,153 -- 2,522,252 2,408,240 1,539,322 1,164,775
Stockholders' equity.... 365,150 360,717 397,881 447,756 126,130 1,352,598 708,265
Other Data:
Capital expenditures.... $ 14,163 $ 552 $ 3,367 $ 22,365 $ 30,196 $ 36,599 $75,570
Investments and
acquisitions, net of
cash acquired.......... -- -- 814,520 2,124,823 14,000 27,772 65,132
ZD loss per pro forma
basic share(3)......... $ (0.78) $ (9.71)
ZDNet earnings per pro
forma basic share(3)... 0.03
ZDNet earnings per pro
forma diluted
share(3)............... 0.02
</TABLE>
- --------
(1) 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 this date.
(2) An affiliate of Ziff-Davis Inc. acquired ZDI on February 29, 1996; Ziff-
Davis Inc. data does not include results from the acquired business for
periods before the date of acquisition.
(3) No historical earnings per share or share data are presented prior to 1998
as Ziff-Davis Inc. does not consider such data meaningful. ZD loss per
share for 1998 is presented on a pro forma basis as if the ZD shares issued
in connection with the Reorganization and initial public offering described
in Note 2 to the consolidated financial statements of Ziff-Davis Inc. were
outstanding as of January 1, 1998. ZDNet earnings per share for 1999 is
presented on a pro forma basis as if the ZDNet shares issued in connection
with the ZDNet stock initial public offering described in Note 2 to such
consolidated financial statements were outstanding as of January 1, 1999.

F-2
<PAGE>

ZIFF-DAVIS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Presentation of Financial Information

The results of operations for Ziff-Davis Inc. for the years ending December
31, 1997 and 1998 have been restated to conform with the 1999 presentation. As
a result of the Company's decision to sell its education, television and market
intelligence businesses and to spin off its events businesses, the results of
these operations have been accounted for as discontinued operations. Therefore,
the results presented for the continuing operations of Ziff-Davis Inc. are
comprised of its print publications and internet businesses. See "--Recent
Developments; Restructuring" under Item 1 of this Form 10-K.

Revenue

Ziff-Davis Inc. ("Ziff-Davis") had net revenue of $702.5 million for 1999. A
substantial portion of Ziff-Davis' revenue is derived from the sale of
advertising, which in 1999 accounted for 77.5% of total revenue. No single
advertiser has comprised more than 3.0% of Ziff-Davis' advertising revenue
during any of the last three years. However, Ziff-Davis' top 20 advertisers
accounted for 37.1% of total advertising revenue for 1999.

In the publishing segment, Ziff-Davis' principal sources of revenue are
advertising (74.8% of 1999 total publishing revenue), circulation (21.7%) and
other (3.5%). Circulation comprises both paid subscriptions (10.7%) and
newsstand sales (11.0%) while other primarily consists of royalties, reprints
and other miscellaneous sales. In the Internet segment, Ziff-Davis' principal
source of revenue is from advertising (93.3% of total Internet revenue for
1999). The Internet segment also derives revenue from subscription-based fees
and services (6.7% of total Internet revenue in 1999).

Cost of operations

In the publishing business, the principal components of Ziff-Davis'
production costs are raw materials, printing and distribution, which
represented 35.6%, 40.5% and 23.9%, respectively of total 1999 publishing
production expenses. Ziff-Davis' 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. Production costs in the
Internet segment consist primarily of third party web hosting costs.

The other principal operating costs for Ziff-Davis are selling, general and
administrative expenses, including editorial costs. Included in these costs are
salaries, sales commissions and benefits (44.9% in 1999) along with marketing
and promotion expenses related to advertising and circulation (26.6% in 1999).

Factors affecting future periods

Ziff-Davis' 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 expenditures by Ziff-Davis' clients, the
extent to which sellers elect to advertise using online and print media,
changes in paper prices, and competition among computer technology marketers,
including websites, print publishers and providers of other technology
information services. Accordingly, Ziff-Davis may experience fluctuations in
revenue from period to period. Many of Ziff-Davis' 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 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' new product launches
and launches in new markets, as well as by acquisitions. Accordingly, Ziff-
Davis' revenue from year to year may be affected by the number and timing of
new product launches.

F-3
<PAGE>

Our future financial condition, results of operations and cash flow will be
materially impacted by the already completed sales of ZD Market Intelligence,
ZD Education, ZD Publishing (excluding Computer Shopper, Smart Planet, and an
interest in Red Herring) and our equity in ZDTV, as well as by the planned
recapitalization and spin off of ZD Events and the other elements of our
restructuring. See "Recent Developments; Restructuring" included in Item 1 of
this Form 10-K.

Presentation of Earnings per Share

Earnings per share data for 1997 has been omitted on the basis that it is not
meaningful due to the insignificant number of shares outstanding.

ZD loss per share data for 1998 is calculated on a pro forma basis as if the
ZD shares issued in connection with the Reorganization and initial public
offering described in Note 2 to the Ziff-Davis consolidated financial
statements were outstanding as of January 1, 1998. The loss per share for ZD
has been presented based on the separate income (loss) of the ZD group on a
continuing and discontinued operations basis. In order to reflect the initial
issuance of ZDNet stock on March 31, 1999 (as described in Note 2 to such
consolidated financial statements), the separate income (loss) of the ZD group
on a continuing operations basis included 100% of the income (loss) of the
ZDNet group for 1998 and the first quarter of 1999 and approximately 84% of the
income (loss) of the ZDNet group for the last three quarters of 1999. As a
result, in 1999 ZD had a loss from continuing operations of $1,015,226,000 and
income from discontinued operations of $18,151,000 for a combined net loss of
$997,075,000.

Year ended December 31, 1999 compared with year ended December 31, 1998

Revenue, net

Revenue decreased by $1.6 million or 0.2% to $702.5 million in 1999 from
$704.1 million in 1998.

Publishing--Revenue from publishing decreased by $49.6 million or 7.7% from
$647.9 million in 1998 to $598.3 million in 1999. The decrease was primarily
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 contributed to a reduced demand for advertising in Ziff-Davis'
magazines. Revenue from international operations, which generated 13.2% of the
segment's revenue, increased by $0.2 million primarily due to the launch of IT
Week in the UK, partially offset by lower advertising in business publications.

On May 1, 1998, Ziff-Davis acquired its joint venture partner's 50% interest
in FamilyPC magazine. Ziff-Davis owned 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 and was $16.7 in 1999.

Internet--Net revenue increased $48.1 million or 85.6% to $104.2 million for
the year ended December 31, 1999 from $56.1 million for the year ended December
31, 1998. Revenue from advertising was 93% of net revenue for the year ended
December 31, 1999 compared to 86% for the year ended December 31, 1998. Revenue
from advertising increased 101.7% to $97.2 million for the year ended December
31, 1999 from $48.2 million for the prior year. 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 12.5% to $7.0 million for the
year ended December 31, 1999 from $8.0 million for the year ended December 31,
1998.

F-4
<PAGE>

Cost of production

Production costs decreased by 11.1% or $23.3 million from $210.0 million in
1998 to $186.7 million in 1999.

Publishing production costs decreased by $21.4 million or 10.6% from $202.2
million in 1998 to $180.8 million in 1999. The decrease was related to a
decline in the number of advertising pages produced.

Internet production costs decreased by $1.9 million or 24.4% from $7.9
million in 1998 to $5.9 million in 1999. The decrease in production costs was
due to a shift towards increased marketing costs and less infrastructure
spending.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $32.3 million or
8.6% from $376.8 million in 1998 to $409.1 million in 1999. 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.

Stock-based compensation

During 1999, the Company incurred compensation expense related to stock
options on the Internet business granted during 1998 in anticipation of an
initial public offering where the exercise price was deemed to be below the
market price on the date of grant. The Company recognizes this cost on a
straight-line basis over the vesting period of the underlying options. The
Company also incurred compensation expense relating to the acceleration of the
vesting of stock options in connection with the termination of certain
employees.

Depreciation and amortization

Total depreciation and amortization increased $12.0 million from $98.8
million in 1998 to $110.8 million in 1999. The increase was primarily a result
of certain acquisitions made during the year at ZDNet.

Write-down of intangible assets

As a result of the decision reached in the fourth quarter of 1999 to sell
certain of the Company's publishing assets, Ziff-Davis recorded, based upon the
price contained in the agreement to sell these assets to a third party, a
write-down of these intangible assets totaling $778.8 million.

As a result of a decline in revenues and cash flows from the Computer Shopper
magazine and the anticipated loss of operational synergies resulting from the
planned sale of the rest of the publishing business, Ziff-Davis performed an
analysis to determine the recoverability of associated intangible assets. Based
upon this analysis and an independent third party appraisal, Ziff-Davis
recorded a write-down of these intangible assets totaling $269.4 million.

Interest expense, net

Interest expense decreased by $16.8 million or 16.2% from $103.7 million in
1998 to $86.9 million in 1999. The reduction was due primarily to lower levels
of debt outstanding throughout the year.

Other non-operating income, net

Other non-operating income, net primarily reflects Ziff-Davis' equity share
in earnings and losses from joint ventures. This income increased $1.0 million
or 45.5% from $2.2 million in 1998 to $3.2 million in 1999. The increase
relates to income from the joint ventures, as well as a gain on the sale of
marketable securities by ZDNet.

Income taxes

The 1999 income tax benefit of $131.1 million increased from $35.6 million in
1998. This increased was due primarily to a higher net loss in 1999 as a result
of the write-down of intangible assets associated with assets held for sale and
discontinued operations.

F-5
<PAGE>

Net loss from continuing operations

As a result of the changes described above, the net loss from the period
increased $921.2 million from $93.6 million in 1998 to $1,014.8 million in
1999.

EBITDA

EBITDA for the year ended December 31, 1999 was $109.9 million compared to
$119.2 million for the year ended December 31, 1998. EBITDA for the year ended
December 31, 1998 does not include the $46.0 million restructuring charge and
for the year ended December 31, 1999 does not include a write down of
intangible assets of $1,048.2 million. Results were unfavorable as compared to
1998 due to a lower level of earnings from advertising in the higher margin
business publications partly offset by improved results in the consumer
publications and income in the Internet segment. Income from the Internet
segment increased primarily as a result of revenue growth exceeding increases
in expenses. The ratio of EBITDA to revenue was 15.6% for 1999 compared to
16.9% in 1998.

Year ended December 31, 1998 compared with year ended December 31, 1997

Revenue, net

Revenue decreased by $39.7 million or 5.3% from $743.8 million in 1997 to
$704.1 million in 1998.

Publishing--Revenue from publishing decreased by $63.7 million or 9.0% from
$711.6 million in 1997 to $647.9 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 discussed below. The remainder
of the decrease was primarily 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
contributed to a reduced demand for advertising in Ziff-Davis' 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'
results for 1998. On May 1, 1998, Ziff-Davis acquired its joint venture
partner's 50% interest in FamilyPC magazine. Ziff-Davis 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 reported in the fourth quarter of 1997 from the three
publications closed as part of the fourth quarter 1998 restructuring was $12.5
million.

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 year ended December 31, 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 year. 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 2.0% or $4.2 million from $214.2 million in
1997 to $210.0 million in 1998.

F-6
<PAGE>

Publishing production costs decreased by $7.7 million or 3.7% from $209.9
million in 1997 to $202.2 million in 1998. The decrease was related to a
decline in the number of advertising pages produced.

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.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased by $0.9 million or
0.2% from $377.7 million in 1997 to $376.8 million in 1998. The decrease was
primarily due to headcount reductions and efficiencies attained through the
integration of operations resulting from the reorganization completed in May
1998, as well as costs eliminated by the closure of three magazines in the
fourth quarter of 1998. The decrease was partially offset due to expenditures
to launch new products and increased advertising expenses.

Depreciation and amortization

Total depreciation and amortization decreased $8.5 million from $107.3
million in 1997 to $98.8 million in 1998. 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
contributed to a reduced demand for advertising in Ziff-Davis' magazines,
principally PC Magazine, PC/Computing, Computer Shopper and PC Week.

As a result of this reduced demand, in October 1998, Ziff-Davis announced a
restructuring program with the intent of significantly reducing its cost base.
Ziff-Davis' continuing operations incurred a pre-tax charge of $46.0 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 ($34.3 million), employee termination costs ($5.6
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' work force by 310 employees. The following
sets forth additional detail concerning the principal components of the charge:

. Asset impairment costs totaled $34.3 million primarily due to the write-
off of intangible assets associated with the discontinued publications.

. Employee termination costs related to severed personnel at the closed
publications as well as rationalization and resulting workforce
reduction of the remainder of Ziff-Davis' 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.

. 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 $22.9 million or 18.1% from $126.6 million in
1997 to $103.7 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' equity share
in earnings and losses from joint ventures. This income increased $2.6 million
from a loss of $0.4 million in 1997 to income of

F-7
<PAGE>

$2.2 million in 1998. The increase was primarily due to Ziff-Davis' equity
share in earnings of MAC Publishing, LLC, an entity that was formed in August
1997.

Income taxes

The 1998 income tax benefit of $35.6 million increased from $9.5 million in
1997. The increase was due primarily to income tax benefits generated from the
losses with respect to the MAC Assets, which were not deductible, until Ziff-
Davis 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 from continuing operations

As a result of the changes described above, the net loss for the period
increased $21.1 million or 29.1% from $72.5 million in 1997 to $93.6 million in
1998.

EBITDA

EBITDA for the year ended December 31, 1998 was $119.2 million compared to
$151.9 million for the year ended December 31, 1997. EBITDA for the year ended
December 31, 1998 does not include the $46.0 million restructuring charge.
Results were unfavorable as compared to 1997 due to a lower level of earnings
from advertising in the higher margin business publications partly offset by
improved results in the consumer publications and reduced losses in the
internet segment. Reduced losses from the internet segment were the result of
revenue growth exceeding increases in expenses. The ratio of EBITDA to revenue
was 16.9% for 1998 compared to 20.4% in 1997.

Discontinued Operations

As a result of Ziff-Davis Inc.'s decision to sell its market intelligence,
education and television businesses and to spin-off its events business, the
results of operations from these businesses have been reported as discontinued
operations. The accounting for discontinued operations requires that the
results of the businesses being discontinued are reported separately, net of
taxes. Management's key performance indicators for each of these businesses are
revenue and Earnings Before Interest, Taxes, Depreciation and Amortization and
other non-cash charges ("EBITDA").

The market intelligence business was sold in October to Harte-Hanks for
approximately $107.2 million. Ziff-Davis Inc. recognized a pre-tax gain of
approximately $60.2 million related to the sale of this business.

Ziff-Davis entered into an agreement to sell the ZD Education business in
November 1999 for $172.0 million. This transaction closed in February 2000. Had
ZD Education not been reported as a discontinued operation, Ziff-Davis Inc.'s
revenue would have been higher by approximately $64.5 million and EBITDA would
have been higher by approximately $0.3 million. In 1998, the ZD Education
business had revenue and EBITDA of $76.9 million and $(2.7) million,
respectively.

Ziff-Davis acquired ZDTV in February 1999 and sold a one-third interest to
Vulcan Programming ("Vulcan"). During November 1999, Ziff-Davis entered into an
agreement for Vulcan to purchase the remaining two-thirds interest for $204.5
million. This transaction closed in January 2000. Had ZDTV not been accounted
for as a discontinued operation, revenue would have been higher by
approximately $14.9 million and EBITDA would have been lower by approximately
$28.2 million.

The ZD Events business was the most significant business to be accounted for
as a discontinued operation. The results of its revenue and EBITDA are
discussed below.

F-8
<PAGE>

Events Segment

This discussion of the results from the Events segment is to provide an
understanding of the major effects on revenue and EBITDA. Ziff-Davis Inc.
announced on March 7, 2000 its intent to spin off the Events business into its
own separate company and that ZD shareholders would become shareholders in the
new Events company. This transaction is expected to be completed at or around
the end of the second quarter of 2000.

Year ended December 31, 1999 compared with year ended December 31, 1998

Revenue, net

Revenue from events decreased by $18.1 million or 7% from $269.9 million in
1998 to $251.8 million in 1999. The decrease was primarily due to a decline in
revenue resulting from lower square footage sold at COMDEX/Fall, lower square
footage sold at COMDEX/Spring and the discontinuance of certain one-time shows
that were held in 1998. This decrease was partially offset by increased revenue
from increased square footage sold at Networld+Interop Las Vegas and Java One
due to an increased number of attendees.

EBITDA

EBITDA from events decreased $12.3 million or 10.3% from $119.7 million in
1998 to $107.4 million in 1999. The decrease was primarily due to lower revenue
and the absence of income from the ExpoComm joint venture, partially offset by
the gain on the sale of the events business' interest in the ExpoComm joint
venture. In addition, overall expenses were higher due to higher sales and
marketing expenses and spending on Year 2000 transition issues.

Year ended December 31, 1998 compared with year ended December 31, 1997

Revenue, net

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 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 square footage
sold at Networld+Interop Las Vegas and Java One due to an increased number of
attendees.

EBITDA

EBITDA from events increased $16.0 million or 15.4% to $119.7 million in 1998
from $103.7 million in 1997. This improvement was primarily due to the absence
of losses from discontinued "one-time" shows as well as continued cost savings.

Liquidity and Capital Resources

At December 31, 1999, Ziff-Davis' outstanding total debt was $1,171.7
million, excluding unamortized discount, which consisted of $71.0 million due
to Softbank, $250.0 million in notes and $851.5 million under a credit
facility. Under its most restrictive covenant, Ziff-Davis could have borrowed
an additional $98.5 under the credit facility at December 31, 1999.

Cash and equivalents were $10.2 million at December 31, 1999, a decrease of
$22.4 million from $32.6 at December 31, 1997. The decrease was due to factors
described below:

Cash provided by operations was $53.3 million for the year ended December 31,
1999 compared to $95.8 million at December 31, 1998. The decrease was due
primarily to lower cash generated from the events businesses and lower income
at magazines as a result of decreased advertising revenues.

F-9
<PAGE>

Cash used for investing for the year ending December 31, 1999 was $6.6
million compared to $64.4 million in 1998. The Company received $101.0 million
from the sale of ZD Market Intelligence and approximately $20 million from the
sale of the Company's interest in ExpoComm LLC. In January 2000, the Company
received an additional $6.2 million of proceeds related to purchase price
adjustments from the sale of ZD Market Intelligence. These cash inflows were
offset by the acquisition of ZDTV ($32.8 million), acquisitions by ZDNet of
Softseek Inc. ($7 million) and Updates.com ($5 million) and a variety of
investments in Internet and Internet-related companies.

Cash used in financing for the year ended December 31, 1999 was $69.0 million
compared to $29.1 million in 1998. Ziff-Davis Inc. received approximately
$198.5 million from the initial public offering of the ZDNet tracking stock,
net of offering costs. Ziff-Davis also completed the sale of a one-third
interest in ZDTV to Vulcan Programming for $54.0 million and sold 3,333,333
shares of ZD stock to Vulcan Ventures Inc. for $50.0 million. The proceeds from
these transactions and the sale of interests in ZD Market Intelligence and
ExpoComm LLC were used to repay outstanding levels of indebtedness.

As of December 31, 1999, Ziff-Davis believes, based on its current level of
operations and anticipated growth, that Ziff-Davis' 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' indebtedness
and to fund anticipated capital expenditures and working capital requirements.
However, actual capital expenditures may change, particularly as a result of
any acquisitions Ziff-Davis may pursue. The ability of Ziff-Davis to meet its
debt service obligations and reduce its total debt will depend upon the future
performance of Ziff-Davis.

On April 5, 2000, Ziff-Davis repaid the remaining balance on its bank credit
facility in full out of proceeds from the sale of Ziff-Davis businesses. On
April 13, 2000, Ziff-Davis borrowed $150 million under an interim credit
facility, which it plans to repay in full out of the proceeds of the
approximately $400 million ZD Events group borrowing described under "Recent
Developments; Restructuring" included in Item 1 of this Form 10-K. Ziff-Davis
used the proceeds from the borrowing under this interim credit facility,
together with approximately $130 million in cash on hand, to repurchase
substantially all of its outstanding 8 1/2% Senior Subordinated Notes Due 2008.
This left Ziff-Davis with approximately $100 million in cash at April 13, 2000.

Credit Facility

At December 31, 1999 Ziff-Davis' credit facility, as amended, consisted of a
seven-year $400 million reducing revolving credit facility, a seven-year $260
million term loan and an eight-year $290 million term loan. There were at that
time no scheduled reductions in the revolving credit commitment or amortization
under the term loan until September 2000.

Ziff-Davis' credit facility exposed it to market risk with respect to changes
in interest rates. Ziff-Davis managed this risk through the use of interest
rate swap agreements, as described below. Through the use of these swap
agreements, Ziff-Davis effectively established a fixed interest rate for $400
million of the

F-10
<PAGE>

outstanding credit facility. Based on the $851.5 million outstanding under the
credit facility at December 31, 1999, if the LIBOR rate were to increase by 1%,
Ziff-Davis would have incurred, after giving effect to the swap agreements, an
additional $4.5 million of annual interest expense.

Ziff-Davis Inc. repaid this credit facility in full on April 5, 2000.

Interest Rate Swaps

Ziff-Davis' credit facility exposed it to market risk with respect to changes
in interest rates. Ziff-Davis managed this risk through the use of interest
rate swap agreements.

Through the use of swap agreements, as of December 31, 1999 Ziff-Davis had
effectively established a fixed interest rate for $400 million of the
outstanding credit facility. Based on the $851.5 million outstanding under the
credit facility as of December 31, 1999, if the LIBOR rate were to increase by
1%, Ziff-Davis would have incurred, after giving effect to the swap agreements,
an additional $4.5 million of annual interest expense. The weighted average
fixed rate Ziff-Davis paid under these agreements was approximately 5.0%. On
June 15, 1999, Ziff-Davis amended a swap agreement (with a notional amount of
$100 million) by reducing the fixed rate paid to the counterparty and providing
the counterparty with a one-time option to cancel the swap agreement on
February 5, 2000 (or reduce the term of the agreement by 3 1/2 years). Ziff-
Davis entered into another swap agreement (with a notional amount of $50
million) on June 15, 1999. Under this swap agreement, Ziff-Davis received a
fixed rate of interest and paid a floating rate of interest based on 3-month
LIBOR, which reset quarterly, for the term of the agreement.

On December 21, 1999, Ziff-Davis unwound $100 million of a $150 million swap
agreement. The Company received a payment of $2.86 million for the cancellation
of this swap. On April 5, 2000, Ziff-Davis repaid its credit facility in full
out of the proceeds from the sales of ZD Publishing, ZD Education and ZDTV. As
a result, Ziff-Davis unwound the remaining swap agreements on or prior to April
12, 2000 and received a payment of approximately $10.8 in connection therewith.

These swap agreements were viewed by Ziff-Davis as risk management tools and
were not used for trading or speculative purposes. The notional amount of $400
million did not represent a real amount exchanged by the parties, and
therefore, was not a measure of Ziff-Davis' exposure through its use of swap
agreements.

ZDNet Offering

The stockholders of Ziff-Davis Inc. approved the issuance of a separate class
of common stock, designed to track the performance of Ziff-Davis' Internet
business, ZDNet. Immediately prior to the offering of the ZDNet stock, the
existing common stock of Ziff-Davis Inc. was reclassified as ZD Common Stock
(the "ZD Stock"). The ZD Stock is intended to track the results of Ziff-Davis
Inc.'s other businesses and a Retained Interest in ZDNet. A total of 10 million
shares, before underwriters over-allotment, was offered to the public, intended
to represent approximately 14% of the equity value attributed to ZDNet. The
ZDnet common stock ("ZDNet Stock") was issued to the public, for cash, on March
31, 1999 and generated proceeds, net of offering costs, of approximately $198.6
million. The proceeds from the offering were used, primarily, to reduce Ziff-
Davis Inc.'s outstanding debt levels. See "--Recent Developments;
Restructuring" under Item 1 in this Form 10-K.

Vulcan Transactions

On February 5, 1999, Vulcan Programming purchased a one-third interest in
ZDTV for $54 million. On March 4, 1999, Vulcan Ventures purchased three million
shares of ZD Common Stock for $50 million. Proceeds from these were used to
reduce outstanding indebtedness under Ziff-Davis' revolving credit facility.

F-11
<PAGE>

Seasonality

Historically, Ziff-Davis' 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 eight quarters in the period ended December 31, 1999. In the
opinion of Ziff-Davis' management, this unaudited information has been prepared
on a basis consistent with the audited Consolidated Financial Statements
appearing elsewhere in this Form 10-K 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.

<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------------
Sept.
March 31, June 30, 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- -------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............. $159,240 $164,837 $148,224 $175,615 $144,609 $147,869 $ 137,199 $ 168,603
Internet............... 9,688 12,274 14,504 19,677 18,561 22,939 26,291 36,387
-------- -------- -------- -------- -------- -------- --------- -----------
Total revenue........... $168,928 $177,111 $162,728 $195,292 $163,170 $170,808 $ 163,490 $ 204,990
Percentage of total
year.................. 24.0% 25.2% 23.1% 27.7% 23.2% 24.3% 23.3% 29.2%
Cost of production...... (50,077) (52,739) (49,376) (57,843) (48,091) (47,364) (40,540) (50,753)
Selling, general and
administrative
expenses............... (96,021) (94,830) (92,816) (93,176) (90,426) (92,815) (102,103) (123,802)
Stock-based compensation
expense................ (63) (63) (63) (59) (1,295) (1,741) (1,297) (5,583)
Depreciation and
amortization of fixed
assets................. (4,572) (5,190) (5,069) (4,035) (4,763) (5,243) (5,468) (8,394)
Amortization of
intangible assets...... (18,800) (20,340) (20,605) (20,210) (21,559) (22,982) (24,136) (18,285)
Restructuring........... -- -- -- (46,021) -- -- -- --
Impairment of Assets.... -- -- -- -- -- -- -- (1,048,185)
-------- -------- -------- -------- -------- -------- --------- -----------
Income/(loss) from
operations............. (605) 3,949 (5,201) (26,052) (2,964) 663 (10,054) (1,050,012)
Loss from Continuing
Operations before tax.. (30,587) (20,848) (28,493) (49,339) (27,520) (21,858) (30,932) (1,065,650)
Benefit for Income
Taxes.................. (8,442) (5,754) (7,864) (13,560) (3,345) (1,643) (2,838) (123,285)
-------- -------- -------- -------- -------- -------- --------- -----------
Loss from Continuing
Operations............. (22,145) (15,094) (20,629) (35,779) (24,175) (20,215) (28,094) (942,365)
Net Income (loss) from
Discontinued
Operations,
net of taxes........... 17,024 (61,466) 16,131 44,149 (13,600) 17,073 13,063 1,616
-------- -------- -------- -------- -------- -------- --------- -----------
Net income/(loss)...... $ (5,121) $(76,560) $ (4,498) $ 8,370 $(37,775) $ (3,142) $ (15,031) $ (940,749)
======== ======== ======== ======== ======== ======== ========= ===========
</TABLE>

Inflation and Fluctuations in Paper Prices and Postage Costs

Ziff-Davis continually assesses the impact of inflation and changes in paper
prices. Ziff-Davis 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, and 1999 paper prices were relatively flat. Management anticipates that
paper prices will increase slightly and considers these matters in setting its
pricing policies. Ziff-Davis 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 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 2% in 2000. As a result of the April 5, 2000 sale
of most of ZD Publishing, Ziff-Davis expects that fluctuations in paper costs
will not impact consolidated results in the future as much as they have in the
past.

F-12
<PAGE>

Year 2000 Readiness Disclosure

Ziff-Davis completed its identification, remediation and testing of Year 2000
issues prior to the end of 1999 and has not, to date, experienced any
significant problems as a result of the Year 2000 transition. Ziff-Davis
incurred costs of approximately $14.3 million in 1999, of which approximately
$7.3 million was capital in nature, to remediate Year 2000 issues.

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 at the
beginning of the first quarter of 2001. Ziff-Davis does not expect the adoption
of SFAS No. 133 to have a material impact on Ziff-Davis' results of operations.

Ziff-Davis expects to adopt this statement beginning with its 2001 financial
statements.

Staff Accounting Bulletin No. 101

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. This
bulletin summarizes the SEC's views in applying generally accepted accounting
principles to revenue recognition in financial statements and is required to be
adopted in the second quarter of 2000. Ziff-Davis Inc. has determined that
adoption of this bulletin will not have a material impact on its financial
statements.

F-13
<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, comprehensive income, 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, 1998 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
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
auditing standards generally accepted in the United States 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.

PricewaterhouseCoopers LLP
New York, NY
March 28, 2000,
except for Notes 1, 21 and
22 which are as of April 13, 2000.

F-14
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
December 31,
---------------------
1998 1999
---------- ----------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents.............................. $ 32,566 $ 10,207
Accounts receivable, net............................... 227,325 33,733
Inventories............................................ 15,551 468
Prepaid expenses and other current assets.............. 34,543 2,835
Due from affiliates.................................... 53,984 4,485
Deferred taxes......................................... 22,262 6,423
---------- ----------
Total current assets..................................... 386,231 58,151
Securities held for sale................................. -- 513
Property and equipment, net.............................. 91,189 23,181
Intangible assets, net................................... 2,907,043 141,636
Assets held for sale..................................... -- 780,000
Net assets of discontinued operations.................... -- 934,669
Other assets............................................. 49,340 49,695
---------- ----------
Total assets............................................. $3,433,803 $1,987,845
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<TABLE>
<CAPTION>
Accounts payable...................................... $ 74,397 $ 1,734
<S> <C> <C>
Accrued expenses...................................... 97,319 79,240
Unearned income, net.................................. 152,081 12,808
Due to affiliates and management...................... 4,618 --
Current portion of notes payable to affiliates........ 7,692 6,923
Other current liabilities............................. 14,591 10,224
---------- ----------
Total current liabilities............................... 350,698 110,929
Notes payable to affiliates............................. 70,192 64,039
Notes payable, net of unamortized discount.............. 1,469,130 1,100,736
Deferred taxes.......................................... 165,082 --
Due to management....................................... 5,400 --
Other liabilities....................................... 20,703 3,876
---------- ----------
Total liabilities....................................... 2,081,205 1,279,580
---------- ----------
Commitments and contingencies (Notes 17 and 18)
Stockholders' equity:
Preferred stock (1)................................... -- --
ZD common stock (2)................................... 1,000 1,034
ZDNet common stock (2)................................ -- 138
Additional paid-in capital............................ 1,571,681 1,915,173
Accumulated deficit................................... (197,238) (1,193,934)
Deferred compensation................................. (22,024) (15,388)
Unrealized loss on securities available for sale...... -- (249)
Cumulative translation adjustment..................... (821) 1,491
---------- ----------
Total stockholders' equity.............................. 1,352,598 708,265
---------- ----------
Total liabilities and stockholders' equity.............. $3,433,803 $1,987,845
========== ==========
</TABLE>
- --------
(1) December 31, 1999: par value $0.1 per share, 10,000,000 shares authorized,
no shares issued and outstanding; December 31, 1998: par value $.01 per
share, 10,000,000 shares authorized, no shares issued and outstanding.
(2) December 31, 1999: par value $0.01 per share; 210,000,000 shares
authorized; 103,467,728 shares of ZD common stock and 13,707,063 shares of
ZDNet common stock issued and outstanding.
December 31, 1998: par value $0.01 per share; 120,000,000 shares
authorized; 100,000,000 shares of ZD common stock and no shares of ZDNet
common stock issued and outstanding.

The accompanying notes are an integral part of these financial statements.

F-15
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1997 1998 1999
-------- ----------- -----------
<S> <C> <C> <C>
Revenue, net:
Publishing............................... $711,630 $ 647,915 $ 598,280
Internet................................. 32,218 56,143 104,178
-------- ----------- -----------
743,848 704,058 702,458
-------- ----------- -----------
Cost of production......................... 214,242 210,034 186,748
Selling, general and administrative
expenses.................................. 377,672 376,843 409,147
Stock-based compensation................... -- 248 9,916
Depreciation and amortization of property
and equipment............................. 22,227 18,867 23,867
Amortization of intangible assets.......... 85,064 79,955 86,963
Restructuring charge....................... -- 46,021 --
Write-down of intangible assets............ -- -- 1,048,185
-------- ----------- -----------
Income (loss) from operations.............. 44,643 (27,910) (1,062,368)
Interest expense, net--related party....... (126,573) (25,847) (7,497)
Interest expense, net...................... -- (77,804) (79,451)
Other non-operating income (loss), net..... (433) 2,159 3,241
Minority interest.......................... 400 134 117
-------- ----------- -----------
Loss before taxes and discontinued
operations................................ (81,963) (129,268) (1,145,958)
Income tax benefit......................... (9,494) (35,620) (131,111)
-------- ----------- -----------
Loss from continuing operations............ (72,469) (93,648) (1,014,847)
-------- ----------- -----------
Results of operations from discontinued
operations (net of tax of $8,182, $9,180
and $10,991 in 1997, 1998 and 1999,
respectively)............................. 1,290 15,839 (9,024)
Gain on disposal of discontinued operations
(net of taxes of $33,079)................. -- -- 27,175
-------- ----------- -----------
Income from discontinued operations........ 1,290 15,839 18,151
-------- ----------- -----------
Net loss................................... $(71,179) $ (77,809) $ (996,696)
======== =========== ===========
ZD loss per pro forma basic share from
continuing operations..................... $ (0.94) $ (9.88)
ZD earnings per pro forma basic share from
discontinued operations................... $ 0.16 0.18
----------- -----------
ZD loss per pro forma basic share.......... $ (0.78) $ (9.71)
=========== ===========
ZD pro forma weighted average number of
shares outstanding........................ 100,000,000 102,715,875
ZDNet earnings per pro forma basic share... $ 0.03
ZDNet earnings per pro forma diluted
share..................................... $ 0.02
ZDNet pro forma weighted average basic
shares outstanding........................ 72,664,270
ZDNet pro forma weighted average diluted
shares outstanding........................ 80,821,191
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-16
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Net loss......................................... $(71,179) $(77,809) $(996,696)
Other comprehensive income (loss):
Foreign currency translation adjustment........ (1,411) 954 2.312
Unrealized loss on securities available for
sale.......................................... -- -- (249)
-------- -------- ---------
Comprehensive loss............................... $(72,590) $(76,855) $(994,633)
======== ======== =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-17
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------
1997 1998 1999
-------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................... $(71,179) $ (77,809) $ (996,696)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation and amortization............ 154,940 152,544 175,898
Amortization of debt issuance costs and
discounts............................... -- 2,430 6,839
Write-down of intangible assets.......... -- -- 1,048,185
Gain on sale of business units........... -- -- (80,674)
Restructuring charge..................... -- 52,239 --
Income from equity investments........... (2,030) (7,483) (4,596)
Deferred tax benefit..................... (1,312) (28,974) (87,041)
Stock-based compensation................. -- 248 9,916
Minority interest........................ (400) (134) (20,766)
Changes in operating assets and
liabilities:
Accounts receivable.................... (18,899) (4,899) 5,894
Inventories............................ (853) 2,923 3,121
Accounts payable and accrued expenses.. (7,376) (1,121) 11,724
Unearned income........................ (20,194) (5,326) (5,099)
Due to affiliates and management....... (38,543) (3,348) --
Other, net............................. 2,482 14,486 (13,430)
-------- ----------- ----------
Net cash provided (used) by operating
activities: (3,364) 95,776 53,275
-------- ----------- ----------
Cash flows from investing activities:
Capital expenditures..................... (30,196) (36,599) (75,570)
Investments and other.................... (14,000) (27,772) (19,146)
Proceeds from sale of business........... -- -- 130,105
Returns from joint ventures.............. -- -- 4,000
Acquisitions, net of cash acquired....... -- -- (45,986)
-------- ----------- ----------
Net cash used by investing activities...... (44,196) (64,371) (6,597)
-------- ----------- ----------
Cash flows from financing activities:
Proceeds from equity offering............ -- 380,337 --
Proceeds from issuance of notes payable.. -- 242,723 --
Proceeds from issuance of common stock... -- -- 252,279
Proceeds from sale of interest in ZDTV... -- -- 54,000
Proceeds from issuance of bank debt...... -- 1,240,200 --
Proceeds from notes payable to
affiliates.............................. 10,000 -- --
Payments of amounts due to affiliates.... -- (314,798) --
Repayments of credit facility............ -- (95,504) (368,394)
Borrowings under credit facility......... -- 65,504 --
Principal payments on notes payable to
affiliates.............................. (31,420) (1,571,264) (6,922)
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...................... 69,366 6,660 --
Payment of dividends..................... -- -- --
-------- ----------- ----------
Net cash provided (used) by financing
activities................................ 47,946 (29,140) (69,037)
Net increase in cash and cash equivalents.. 386 2,265 (22,359)
Cash and cash equivalents at beginning of
period.................................... 29,915 30,301 32,566
-------- ----------- ----------
Cash and cash equivalents at end of
period.................................... $ 30,301 $ 32,566 $ 10,207
======== =========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-18
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)

<TABLE>
<CAPTION>
ZD Common Stock ZDNet Common Stock
------------------- ----------------------
Additional Retained Unrealized Cumulative
Treasury Paid-In Earnings Deferred Loss on Translation
Shares Amount Shares Amount Shares Capital (deficit) Compensation Securities Adjustment
----------- ------ ------------ ---------------- ---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1996........... 200 $ -- -- $ -- $ -- $ 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
adjustment..... (1,411)
----------- ------ ------------ ------ ------- ---------- ----------- -------- ----- -------
Balance at
December 31,
1997........... 200 -- -- -- -- 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............ 73,619,155 736
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 option
vested as
severance...... 162
Conversion of
Softbank stock
options........ 3,018 (3,018)
Issuance of
ZDNet Options.. 18,262 (18,262)
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 -- -- -- 1,571,681 (197,238) (22,024) (821)
Issuance of
common stock... 3,030,303 30 49,970
Sale of minority
interest of
subsidiary..... 7,176
Compensation
earned on stock
options........ 6,081
Issuance of
ZDNet shares,
net of offering
costs.......... 11,500,000 115 198,340
Shares issued to
acquire
minority
interest in
Gamespot....... 600,000 6 12,025 (443)
Shares issued to
acquire
Updates.com,
Inc. .......... 582,526 6 13,494
Shares issued to
acquire
Softseek....... 991,038 10 18,990
Sale of shares
under employee
stock purchase
plan........... 152,764 1 2,682
Stock options
exercised...... 320,733 3 57,211 1 2,135
Forfeiture of
options........ (998) 998
Accelerated
vesting of
options........ 39,678
Unrealized loss
on securities.. (249)
Net loss........ (996,696)
Foreign currency
translation
adjustment..... 2,312
----------- ------ ------------ ------ ------- ---------- ----------- -------- ----- -------
Balance at
December 31,
1999........... 103,467,728 $1,034 13,707,063 $ 138 $ -- $1,915,173 $(1,193,934) $(15,388) $(249) $ 1,491
=========== ====== ============ ====== ======= ========== =========== ======== ===== =======
<CAPTION>
Total
----------
<S> <C>
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
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 option
vested as
severance...... 162
Conversion of
Softbank stock
options........ --
Issuance of
ZDNet Options.. --
Net loss........ (77,809)
Compensation
earned on
restricted
stock.......... 252
Foreign currency
translation
adjustment..... 954
----------
Balance at
December 31,
1998........... 1,352,598
Issuance of
common stock... 50,000
Sale of minority
interest of
subsidiary..... 7,176
Compensation
earned on stock
options........ 6,081
Issuance of
ZDNet shares,
net of offering
costs.......... 198,455
Shares issued to
acquire
minority
interest in
Gamespot....... 11,588
Shares issued to
acquire
Updates.com,
Inc. .......... 13,500
Shares issued to
acquire
Softseek....... 19,000
Sale of shares
under employee
stock purchase
plan........... 2,683
Stock options
exercised...... 2,139
Forfeiture of
options........ --
Accelerated
vesting of
options........ 39,678
Unrealized loss
on securities.. (249)
Net loss........ (996,696)
Foreign currency
translation
adjustment..... 2,312
----------
Balance at
December 31,
1999........... $ 708,265
==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-19
<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.
(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 the financial statements for the periods after May 4, 1998
have been prepared on a consolidated basis.

As further described below, the consolidated financial statements include the
accounts of ZDI and ZD Events for all periods presented. In addition, the
results of the MAC Assets (as 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 for all periods presented. 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).

1999 Restructuring

Ziff-Davis is in the process of disposing of substantially all of its ZD
businesses as part of a comprehensive restructuring described in its proxy
statement dated February 7, 2000. Ziff-Davis has already completed the sale of
ZD Market Intelligence, ZD Education, ZD Publishing (excluding Computer
Shopper, Smart Planet and an investment in Red Herring Communications) and its
equity interest in ZDTV. In addition, Ziff-Davis announced on March 7, 2000
that it intends to recapitalize and spin off its ZD Events group to the holders
of ZD common stock. See Notes 20, 21 and 22.

Relationship with Softbank and MAC

Softbank is the indirect majority shareholder of Ziff-Davis Inc. Softbank is
a Japanese corporation, which at the time of the acquisition of the MAC Assets
from MAC Inc. ("MAC") was majority owned directly and indirectly by its
president, Mr. Son. As of December 31, 1999, Mr. Son owned approximately 38% of
Softbank (45% as of December 31, 1998). MAC, also a Japanese corporation, was
wholly owned by Mr. Son.

Operations and acquisitions

Ziff-Davis Inc. operates in two business segments: (1) publishing and (2)
Internet. The Company's other businesses are reported as discontinued
operations, see Note 20.

Publishing

The publishing segment is engaged in publishing magazines and electronic
information products 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.

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.

F-20
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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.

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 the 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 the initial
public offering of Ziff-Davis Inc.'s common stock (further described below). At
December 31, 1997, ZDI had accrued the $370,000,000 purchase price which was
recorded as a return of capital.

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.

Acquisition of GameSpot, Inc.

In January 1997, SOFTBANK Holdings, Inc., an affiliate of Ziff-Davis Inc.
("SBH"), acquired a 70% interest in GameSpot, Inc. ("GameSpot", formerly
SpotMedia Communications, Inc.) for approximately $3,000,000. Ziff-Davis Inc.
provided funds for this acquisition 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.

F-21
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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's results in a non-cash capital contribution of
$5,167,000 for the year ended December 31, 1997.

On April 7, 1999, ZDNet acquired the remaining 30% interest in GameSpot by
issuing 600,000 shares of ZDNet stock valued at $19.00 per share. The
transaction was accounted for using the purchase method of accounting and the
entire purchase price was allocated to goodwill.

Acquisition of ZDTV

On February 4, 1999, Ziff-Davis Inc. purchased ZDTV at a purchase price of
approximately $81,400,000. Ziff-Davis Inc. paid approximately $32,800,000 of
the purchase price in cash and paid the remainder by applying approximately
$48,600,000 in advances owed to it by MAC Holdings America. Ziff-Davis Inc.
also agreed to be responsible for the funding of ZDTV during the period in 1999
prior to the purchase which was accounted for as additional purchase price. On
November 19, 1999, Ziff-Davis Inc. announced that it had entered into a
definitive agreement to sell its interest in ZDTV to Vulcan Programming. The
sale closed during January 2000. Because of the decision to sell ZDTV, the
results of ZDTV for the period from the date of acquisition through December
31, 1999 are included in the results of operations from discontinued
operations.

Acquisition of Updates.com

During July 1999, ZDNet acquired 100% of the operations of Updates.com, Inc.
ZDNet paid cash of approximately $5,000,000 and issued 582,526 shares of ZDNet
stock valued at $23.175 per share. The transaction was accounted for under the
purchase method of accounting. The results of Updates.com have been included in
ZDNet's results from the date of acquisition through December 31, 1999 and are
not material to Ziff-Davis Inc.'s financial statements. The excess of purchase
price over net assets acquired was $18,451,000.

Acquisition of Softseek, Inc.

During August 1999, ZDNet acquired 100% of the operations of Softseek, Inc.
ZDNet paid cash of approximately $7,000,000 and issued 991,038 shares of ZDNet
stock valued at $19.17 per share. The transaction was accounted for under the
purchase method of accounting. The results of Updates.com have been included in
ZDNet's results from the date of acquisition through December 31, 1999 and are
not material to Ziff-Davis Inc.'s financial statements. The excess of purchase
price over net assets acquired was $25,964,000.

2. Reorganization, Initial Public Offering and ZDNet Stock 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. 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
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.

F-22
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 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 Corp.

ZDNet Stock Initial Public Offering

The stockholders of Ziff-Davis Inc. voted 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"). Immediately prior to the issuance of the ZDNet stock, Ziff-Davis
Inc.'s existing common stock was re-classified as Ziff-Davis Inc.--ZD Common
Stock ("ZD stock"), and that stock is 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").

Ziff-Davis Inc. offered to the public, for cash, 10,000,000 shares of ZDNet
stock which represented approximately 14% of the equity value attributed to
ZDNet. The ZDNet stock offering was issued on March 31, 1999.

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 Ziff-Davis Inc.'s 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.

F-23
<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.'s 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.

Inventories

Inventories, which consist principally of paper, are stated at the lower of
cost or market. Cost is determined on a first-on, 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.

Investments

Ziff-Davis Inc. holds investments in various businesses related to Ziff-Davis
Inc.'s businesses. When Ziff-Davis Inc. owns a significant percentage of an
investee's equity, or has the ability to exert significant influence over the
investee's management, the Company accounts for the investment using the equity
method of accounting. Investments that do not represent a significant
percentage of the investee's equity, or Ziff-Davis does not have the ability to
significantly influence the investee's management are accounted for on a cost
basis.

Intangible assets

Intangible assets consist principally of advertising lists, exhibitor
relationships, trademarks and trade names and goodwill. Amortization of these
assets is computed on a straight-line basis over 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.

F-24
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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, primarily paper, printing and distribution. Selling, general and
administrative costs include subscriber acquisition costs which are expensed as
incurred. Editorial and product development costs are expensed as incurred.
Product development costs include the cost of artwork, graphics, prepress,
plates and photography for new products.

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 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 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.

F-25
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 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 deferred and recognized ratably in earnings over
the term of the underlying debt.

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 1997 has been omitted on the basis that it is not
meaningful due to the insignificant number of shares outstanding.

ZD loss per share data for 1998 is calculated on a pro forma basis as if the
ZD shares issued in connection with the Reorganization and initial public
offering described in Note 2 were outstanding as of January 1, 1998. The loss
per share for ZD has been presented based on the separate income (loss) of the
ZD group on a continuing and a discontinued operations basis. In order to
reflect the initial issuance of ZDNet stock on March 30, 1999 (as described in
Note 2), the separate income (loss) of the ZD group on a continuing

F-26
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

operations basis included 100% of the income (loss) of the ZDNet group for 1998
and the first quarter of 1999 and approximately 84% of the income of the ZDNet
group for the last three quarters of 1999. As a result, in 1999, ZD had a loss
from continuing operations of $1,015,226,000 and income from discontinued
operations of $18,151,000 for a combined net loss of $997,075,000. Options to
purchase shares of ZD common stock that could potentially dilute basic earnings
per share were not included in the computation of diluted earnings per share
because they were anti-dilutive. There were options to purchase 3,773,235 and
6,691,305 shares of ZD common stock at December 31, 1999 and 1998,
respectively.

For the year ending December 31, 1999, the Company has presented its earnings
per share for both series of common stock--ZD and ZDNet. The earnings per share
for ZDNet is presented on a pro forma basis based on the separate income of the
ZDNet group (as set forth in the ZDNet financial statements included later in
this Form 10-K), assuming all shares had been issued on January 1, 1999.
Options to purchase ZDNet stock that could potentially dilute basic earnings
per share were included in the calculation of diluted earnings per share for
ZDNet, using the treasury stock method. There were options to purchase
8,386,129 shares of ZDNet common stock included in the calculation.

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 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 beginning with
the first quarter of 2001. Ziff-Davis Inc. does not expect the adoption of SFAS
No. 133 to have a material impact on Ziff-Davis Inc.'s result of operations.
Ziff-Davis Inc. will adopt SFAS No. 133 beginning with its 2001 financial
statements.

Staff Accounting Bulletin No. 101

Reclassifications and restatements

Certain amounts have been reclassified, where appropriate, to conform to the
current financial statement presentation. The 1997 and 1998 financial
statements have been restated to reflect the Company's events, market
intelligence, education and television businesses as discontinued operations in
accordance with Accounting Principles Board Opinion No. 30.

F-27
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

4. 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.

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. Of the total charge, $46,021,000 relates to continuing
operations. 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, trade names 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 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).

All of these costs had been paid by December 31, 1999.

5. Account Receivable, Net

Accounts receivable, net consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
(dollars in
thousands)
<S> <C> <C>
Account receivable.................................. $312,706 $ 47,435
Allowance for doubtful accounts, returns and
cancellations...................................... (85,381) (13,702)
-------- --------
$227,325 $ 33,733
======== ========
</TABLE>

F-28
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

6. Property and Equipment, Net

Property and equipment, net consist of the following:

<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
(dollars in
thousands)
<S> <C> <C>
Computers and equipment............................... $ 78,587 $ 24,220
Leasehold improvements................................ 62,672 3,926
Furniture and fixtures................................ 29,646 11,143
-------- --------
170,905 39,289
Accumulated depreciation and amortization............. (79,716) (16,108)
-------- --------
$ 91,189 $ 23,181
======== ========
</TABLE>

7. Intangible Assets, Net

Intangible assets, net consist of the following:

<TABLE>
<CAPTION>
December 31,
Range of --------------------
Useful lives 1998 1999
------------- ---------- --------
(dollars in
(years) thousands)
<S> <C> <C> <C>
Advertising lists...................... 7-34 $ 872,400 $ 62,959
Exhibitor relationships................ 4-27 154,070 --
Trademark/trade names.................. 30-40 709,306 14,947
License agreements..................... 6-14 11,212 --
Subscribers lists...................... 3-10 51,375 4,070
Other.................................. 2-20 58,837 13,726
Goodwill............................... 5-40 1,419,892 113,859
---------- --------
3,277,092 209,561
Accumulated amortization............... (370,049) (67,925)
---------- --------
$2,907,043 $141,636
========== ========
</TABLE>

Intangible assets primarily relate to the acquisitions of ZDI, ZD Events 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 subscribers 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.

F-29
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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, in
1998, Ziff-Davis Inc. recorded a $37,175,000 write-down of intangible assets
associated with discontinued publications and events.

As a result of the decision reached in the fourth quarter of 1999 to sell
certain of the Company's publishing assets, the Company evaluated the related
intangible assets for a decline in fair value on a held for sale basis. The
fair value of the related intangible assets was determined based upon the
Company's agreement to sell these assets to a third party; accordingly the
Company recorded a write down of these intangible assets totaling $778,761,000.

As a result of a decline in revenues and cash flow of the Company's Computer
Shopper magazine and anticipated loss of operational synergies resulting from
the planned sale of the rest of the Company's publishing businesses, the
Company evaluated its intangible assets associated with the Computer Shopper
for impairment on a held for use basis. This analysis indicated that the
intangible assets would not be recoverable and the Company wrote these
intangible assets down by $269,424,000 in the fourth quarter of 1999 to fair
value based upon an independent third party appraisal.

8. Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------- -------
(dollars in
thousands)
<S> <C> <C>
Payroll and related employee benefits.................... $26,351 $10,575
Accrued interest......................................... 13,678 16,088
Restructuring reserve.................................... 7,260 --
Other taxes payable...................................... 2,674 5,675
Other.................................................... 47,356 46,902
------- -------
$97,319 $79,240
======= =======
</TABLE>

9. Unearned Income

Unearned income consists of the following:

<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
-------- -------
(dollars in
thousands)
<S> <C> <C>
Unexpired subscriptions................................ $ 66,018 $12,808
Prepaid conference fees................................ 95,706 --
Reserve for cancellations.............................. (9,643) --
-------- -------
$152,081 $12,808
======== =======
</TABLE>

10. Income Taxes

F-30
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

relating to the MAC Assets (described in Note 1), which were assets of a
separate taxpayer. 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. filed its own U.S. Federal consolidated tax
return and was no longer included in the consolidated U.S. federal tax returns
filed by Softbank. The tax expense reflected in the consolidated statement of
operations and tax liabilities reflected in the consolidated balance sheets for
the periods prior to the Reorganization have been prepared on a separate return
basis as though Ziff-Davis Inc. filed stand-alone income tax returns.

Income (loss) from continuing operations before income taxes is attributable
to the following jurisdictions:

<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1998 1999
-------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C>
U.S..................................... $(84,110) $(126,164) $(1,140,669)
Foreign................................. 2,147 (3,104) (5,289)
-------- --------- -----------
Total................................. $(81,963) $(129,268) (1,145,958)
======== ========= ===========
</TABLE>

Components of the provision (benefit) for income taxes for continuing
operations are as follows:

<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1998 1999
------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C>
U.S. federal income taxes:
Current................................... $ -- $ -- $ --
Deferred.................................. (7,357) (30,447) (115,719)
State and local income taxes:
Current................................... -- -- --
Deferred.................................. (2,137) (7,718) (16,779)
Foreign income taxes:
Current................................... -- 2,545 1,387
Deferred.................................. -- -- --
------- -------- ---------
Total provision (benefit) for income
taxes.................................. $(9,494) $(35,620) $(131,111)
======= ======== =========
</TABLE>

A reconciliation of the U.S. federal statutory tax rate to Ziff-Davis Inc.'s
effective tax rate on loss from continuing operations before income taxes is as
follows:

<TABLE>
<CAPTION>
December 31,
------------------
1997 1998 1999
----- ---- -----
<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 3.9 3.6
Non-recognition of combined losses of MAC Assets..... (24.9) (3.5) --
Valuation allowance.................................. -- -- (16.9)
Non-deductible write-down of goodwill................ -- -- (9.6)
Amortization of non-deductible goodwill.............. (3.7) (2.0) (0.4)
Other................................................ (0.8) (5.8) (0.3)
----- ---- -----
Effective tax rate................................... 11.6% 27.6% 11.4%
===== ==== =====
</TABLE>

The effective tax rate on continuing operations for the years ended December
31, 1997 and 1998 differ from the statutory tax rate primarily as a result of
Ziff-Davis Inc.'s inability to deduct losses of the MAC

F-31
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Assets prior to May 4, 1998 and non-deductible goodwill amortization primarily
related to the acquisition of 100% of the stock of Holdings in 1996. The
effective tax rate on continuing operations for the year ended December 31,
1999 differs from the statutory tax rate primarily as a result of a significant
increase in the valuation allowance as described below, and the write-down of
non-deductible goodwill associated with the intangible asset write-down as
described in Note 7. The tax provision (benefit) disclosure above does not
include the tax on results of operations from discontinued operations and loss
on disposal of discontinued operations as shown in the consolidated statement
of operations, net of tax.

Following is a summary of the components of the deferred tax accounts at
December 31, 1998 and 1999:

<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1999
---- ----
(dollars in thousands)
<S> <C> <C> <C>
Current deferred tax assets and
(liabilities):
Allowance for doubtful accounts.... $ 15,769 $ 13,617
Unearned income.................... 6,309 2,733
Other.............................. 184 2,974
--------- --------------
Current deferred tax assets...... 22,262 19,324
--------- --------------
Noncurrent deferred tax assets and
(liabilities):
Stock-based compensation........... -- 3,981
Basis difference in intangible
assets............................ (247,832) 60,075
Basis difference in property and
equipment......................... 12,274 7,732
Net operating loss and other
carryforwards..................... 91,637 95,505
Other.............................. 15,149 2,636
--------- --------------
Noncurrent deferred tax assets
(liabilities)................... (128,772) 169,929
--------- --------------
Valuation allowance.................. (36,310) (182,830)
--------- --------------
Net deferred tax assets
(liabilities)....................... $(142,820) $ 6,423
========= ==============
</TABLE>

The December 31, 1999 deferred tax balances relate to continuing operations
and do not include those deferred tax balances attributable to discontinued
operations or assets held for sale as described in Notes 20 and 21,
respectively, as discontinued operations and assets held for sale are presented
net of tax effects.

As of December 31, 1998 and 1999, Ziff-Davis Inc. had total deferred tax
assets of $141,322,000 and $189,253,000, respectively, and total deferred tax
liabilities of $247,832,000 and $0, respectively. The December 31, 1998 and
1999 total deferred tax assets are reduced by a valuation allowance of
$36,310,000 and $182,830,000, respectively. The valuation allowance increased
significantly in 1999, due to the planned sale of publishing assets (described
in Note 21), the related write-down of goodwill and intangible assets
(described in Note 7) and discontinued operations (described in Note 20), all
of which will impact future taxable income and Ziff-Davis Inc.'s ability to
realize deferred tax assets relating to net operating loss carryovers and other
future deductible temporary differences. In addition, 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.

As of December 31, 1999, net deferred tax liabilities related to discontinued
operations are $60,000,000 and net deferred tax assets (before valuation
allowance) related to assets held for sale are $79,426,000, which has been
reduced to nil by a full valuation allowance. Discontinued operations and
assets held for sale are presented in these financial statements net of these
tax effects.

F-32
<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, 1999, Ziff-Davis Inc. had U.S. and foreign net operating loss
carryforwards of approximately $243,303,000 which begin to expire in 2000.
Ziff-Davis Inc.'s utilization of certain net operating loss carryforwards of
approximately $123,273,000, is subject to limitations, due to the change of
ownership resulting from the Softbank acquisition of the Holdings stock on
February 29, 1996. A valuation allowance was established to reduce the deferred
tax asset relating to the carryforward, as discussed above. In addition, Ziff-
Davis Inc. has alternative minimum tax credit carryforwards of $385,000 which
may be carried forward indefinitely until used, which have also been reduced by
a valuation allowance.

Undistributed earnings of foreign subsidiaries for which no deferred taxes
have been provided were approximately $3,720,000 at December 31, 1999 and are
intended to be permanently reinvested.

11. Notes Payable

A summary of Ziff-Davis Inc.'s notes payable at December 31, 1998 and 1999 is
as follows:

<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
----------- ----------
(dollars in thousands)
<S> <C> <C>
Notes payable to affiliates (Note 12)........... $ 77,884 $ 70,962
----------- ----------
8 1/2% Senior Subordinated Notes (1)............ 249,130 249,236
Credit Facility:
Revolving credit.............................. 270,000 301,500
Term Loan A................................... 450,000 260,000
Term Loan B................................... 500,000 290,000
----------- ----------
Third party notes payable....................... 1,469,130 1,100,736
----------- ----------
Total notes payable............................. 1,547,014 1,171,698
Less current portion notes payable to
affiliates..................................... (7,692) (6,923)
----------- ----------
$ 1,539,322 $1,164,775
=========== ==========
</TABLE>
- --------

(1) Net of unamortized discount of $764.

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, 1999 as a reduction of long-term debt is $764,000 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.

See Note 22 (Subsequent Events).

Credit facility

Ziff-Davis Inc. was 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 term credit facility.
The amount outstanding under this facility at December 31, 1999 was

F-33
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

$851,500,000. The credit facility originally consisted of (1) a seven-year
$400,000,000 reducing revolving credit facility, with $301,500,000 drawn as of
December 31, 1999, (2) a seven-year $450,000,000 term loan ("Term Loan A") and
(3) an eight-year $500,000,000 term loan ("Term Loan B"). As of December 31,
1999, the Company had paid $190,000,000 on the Term Loan A and $210,000,000 on
the Term Loan B. Under the credit facility, Ziff-Davis Inc. paid interest at
rates ranging from LIBOR plus 1.625% to LIBOR plus 3.375%. See "--Amendment to
credit facility" below.

Term Loan A amortizes as follows:

. $35.0 million in 2002

. $90.0 million in 2003 and 2004

. $45.0 million in 2005.

Term Loan B matures in March 2006.

The Notes and the credit facility are secured, in part, by a first priority
security interest in capital stock of certain subsidiaries of Ziff-Davis Inc.
and are guaranteed by certain wholly-owned domestic subsidiaries of Ziff-Davis
Inc., in each case, including ZD and ZD Events.

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 ranging from LIBOR plus 1.625% to
LIBOR plus 3.375%, depending on the type of loan and the Company's level of
leverage, as defined, at the time of borrowing. The fee has been capitalized
and will be amortized to interest expense over the remaining term of the
facility.

Under its most restrictive covenant, Ziff-Davis Inc. could have borrowed an
additional $98,500,000 under the credit facility at December 31, 1999.

See Note 22 (Subsequent Events).

Covenants

The Notes and the credit facility contain 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 contain
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, 1999,
management believes that Ziff-Davis Inc. was in compliance with all covenants
under its debt agreements.

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.

F-34
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

See Note 12 (Related Party Transactions).

Scheduled principal repayments

Scheduled principal payments due on long-term debt at December 31, 1999 are
as follows:

<TABLE>
<CAPTION>
December 31,
1999
------------
(dollars in thousands)
<S> <C>
2000............................................... $ 6,923
2001............................................... 6,923
2002............................................... 41,923
2003............................................... 96,923
2004............................................... 96,923
Thereafter......................................... 922,847
----------
Total.............................................. 1,172,462
Less unamortized discount.......................... (764)
----------
Notes payable, net................................. $1,171,698
==========
</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. receives a floating rate
of interest based on three-month LIBOR, which resets quarterly, and Ziff-Davis
Inc. pays 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. pays is 5.85%. Ziff-Davis
Inc. entered into these agreements solely to hedge its interest rate risk under
its floating bank debt. As of April 12, 2000, all of these swaps were unwound.
The Company realized a net gain of $13.7 million, $2.9 million of which was
received during 1999, on the termination of these swap agreements.

See Note 22 (Subsequent Events).

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 consists of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
----------- -----------
(dollars in thousands)
<S> <C> <C>
Due from:
MAC.............................................. $50,704 $ 987
Softbank......................................... 1,557 1,894
Management....................................... -- 1,344
Other affiliates................................. 1,723 260
----------- ----------
$ 53,984 $ 4,485
=========== ==========
</TABLE>

F-35
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Due to affiliates and management consists of the following:

<TABLE>
<CAPTION>
December 31,
------------------------
1998 1999
------------ -----------
(dollars in thousands)
<S> <C> <C>
Due to:
Management (including long-term portion)........ $ 9,900 $ --
Other affiliates................................ 118 --
------------ ---------
$ 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.

Other affiliated arrangements

During the years ended December 31, 1997, 1998 and 1999, Ziff-Davis Inc.
incurred, $1,631,000, $270,000 and $333,000, respectively, in advertising
expense with Yahoo!, Inc. ("Yahoo!"), an affiliated company.

Ziff-Davis Inc. sells advertising space and exhibition services to Kingston.
During the years ended December 31, 1997, 1998 and 1999, Ziff-Davis Inc.
recorded revenue of $2,667,000, $3,070,000 and $2,015,000, 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 $3,600,000 in 1999 and $2,400,000 in 1998,
respectively.

Ziff-Davis Inc. has entered into an agreement to manage certain trade shows
and expositions owned by Softbank, whereby Ziff-Davis Inc. earns management,
royalty and licensing fees. The fees earned for the years ended December 31.
1997, 1998 and 1999 were $4,057,000, $1,117,000 and $1,267,000, respectively.

In 1997, Ziff-Davis Inc. had an arrangement with SOFTBANK Interactive
Marketing, an affiliated company, for the provision of interactive media sales.
Ziff-Davis Inc. paid commissions to SOFTBANK Interactive of $1,800,000 during
the year ended December 31, 1997. The relationship for provision of interactive
media sales was terminated in 1997 and on December 31, 1997, SOFTBANK
Interactive was acquired by an unrelated third party.

F-36
<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. had 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, 1997 and 1998,
Ziff-Davis Inc. incurred service fees of $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, 1997, 1998 and 1999 were approximately $1,818,000, $709,000 and $808,000,
respectively.

In June 1998, ZDTV entered into a licensing agreement with Computer Channel
Corporation ("CCH"), an affiliated company, by which CCH has rights to exhibit
certain ZDTV program series in Japan. Licensing revenues earned in 1999 from
this agreement were $290,000.

Certain Ziff-Davis Inc. employees have been granted options to purchase
SOFTBANK Corp. 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. 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, which through December 31,
1997, totaled $14.4 million net of $10.1 million in repayments, were repaid
concurrently with the Reorganization. (See Note 2). 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.)

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. The leases held by Ziff-Davis Inc. were transferred to ZDTV upon
closing of the sale in January 2000.

On February 5, 1999, Vulcan Programming purchased a one-third interest in
ZDTV for $54 million. On March 4, 1999, Vulcan Ventures, the investment vehicle
of Paul Allen, purchased 3 million shares of ZD common stock for $50 million.
On November 19, 1999, the Company entered into a definitive agreement with
Vulcan Programming to sell the remaining interest in ZDTV. See Note 20--
Discontinued Operations.

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 a note
payable of $70,962,000, of which $6,923,000 is current. This note matures on
February 28, 2010 and bears interests at a rate of 9.9% per annum.

During 1997, 1998 and 1999, Ziff-Davis Inc. incurred $190,445,000,
$65,935,000 and $7,497,000, respectively, of interest expense due to Softbank
related to the above notes payable.

F-37
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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.

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 Corp. to officers, directors and key employees of Ziff-Davis
Inc. 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 9,
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 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.

Amended 1998 Incentive Compensation Plan and the Amended 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 Incentive Plan 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 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
available for issuance from 8,500,000 shares to 17,827,500 shares.

F-38
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 to
certain employees at a price of $7.50 per share. As a result of the grant,
Ziff-Davis Inc. has recorded deferred compensation expense of $18,262,000 for
the difference between the exercise price and the deemed fair value of the
underlying shares. This amount has been recorded as a component of
stockholders' equity offset by an addition to paid-in capital. Ziff-Davis Inc.
expects to recognize non-cash compensation for accounting purposes of
$18,262,000 ratably over the vesting period of the options. These options are
currently scheduled to vest ratably and become fully exercisable on the fifth
anniversary of the date of grant.

The terms of the options described in the preceding paragraph required an
adjustment in the number of shares of ZDNet stock that holders may purchase and
the per share purchase price thereof once it was determined that the initial
number of shares issuable with respect to ZD's Retained Interest in ZDNet was
in excess of 40,000,000. This adjustment was similar to the adjustment that
would generally be made to the terms of employee stock options in the event of
a stock split. The actual initial number of shares issuable with respect to
ZD's Retained Interest in ZDNet was 70,000,000. As a result, the total number
of shares of ZDNet stock that holders may purchase upon exercise of these
options increased to approximately 10,026,000 and the per share purchase price
decreased to $4.29.

The December 21, 1998 Board actions described above were subject to
stockholder approval. The majority owner of the common stock of Ziff-Davis Inc.
committed to approve these actions, and they were subsequently approved at a
meeting of stockholders held on March 30, 1999.

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 stockholder value. The GameSpot Plan provides for the grant of
options to purchase shares of GameSpot Inc.'s common stock. GameSpot has
reserved 800,000 shares of GameSpot Inc.'s common stock for issuance under the
GameSpot Plan. Such options vest ratably over 3 years. All GameSpot stock
options were converted to ZDNet stock options in 1999. The compensation charge
associated with this conversion was $442,000.

Smart Planet 1999 Equity Incentive Plan

On October 25, 1999 the Company's Board approved the 1999 Equity Incentive
Plan ("Equity Incentive Plan") for Smart Planet Inc. The Equity Incentive Plan
enables employees, directors, and consultants of the Company to receive stock
awards through incentive stock options, nonstatutory stock options, stock
bonuses, rights to acquire restricted stock and stock appreciation rights. The
purpose of the awards is to secure and retain the services of the members of
the Company and to provide incentives for such persons to exert maximum effort
for the success of the Company. The Company has made 5,000,000 shares of common
stock available to the participants of the Plan. On October 25, 1999, the
Company issued 2,318,000 shares of incentive stock options to employees and
directors of the Company at the determined fair market value.

F-39
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Option grants

Information relating to the Softbank options during 1997, 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
Number Weighted Average
of Option Price Per
Shares Share (1)
-------- ----------------
<S> <C> <C>
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
--------
Granted ....................................... 7,740 158.33
Exercised...................................... (311,031) 31.03
Forefeited/Cancelled........................... (42,868) 31.03
--------
Shares outstanding under options at December
31,1999....................................... 409,546 $33.44
--------
Shares exercisable as of:
At December 31, 1997 (price range $44.26-
$87.15)....................................... 107,630 $82.06
At December 31, 1998 (price range of $31.03)... 255,060 $31.03
At December 31, 1999 (price range of $31.03)... 155,401 $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 1.3:1 stock split during 1997.

Information relating to the Ziff-Davis Inc. -ZD stock options issued during
1998 and 1999 is as follows:

<TABLE>
<CAPTION>
Weighted Average
Number of Option Price Per
Shares 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
----------
Granted ..................................... 4,520,144 15.48
Exercised.................................... (320,733) 6.00
Forefeited/Cancelled......................... (878,926) 9.69
----------
Shares outstanding under options at December
31, 1999.................................... 10,011,790 $10.11
----------
Shares exercisable as of:
At December 31, 1998......................... -- --
At December 31, 1999 (price range of $6.00-
$17.13)..................................... 1,650,547 $7.28
</TABLE>

F-40
<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. -- ZDNet stock options issued during
1998 and 1999 is as follows:

<TABLE>
<CAPTION>
Weighted Average
Number of Option Price Per
Shares Share
---------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1997.................................... -- --
Granted(1)................................... 10,026,275 $ 4.29
Exercised.................................... -- --
Forfeited.................................... -- --
----------
Shares outstanding under options at December
31, 1998.................................... 10,026,275 $ 4.29
Granted...................................... 6,476,787 22.94
Exercised.................................... (57,211) 4.87
Converted Game Spot options(2)............... 45,998 5.28
Forfeited.................................... (797,579) 10.88
----------
Shares outstanding under options at December
31, 1999.................................... 15,694,270 $11.65
----------
Shares Exercisable as of:
At December 31, 1998......................... -- --
At December 31, 1999 (price range of $4.29).. 2,345,427 $ 4.29
</TABLE>
- --------
(1) In conjunction with the ZDNet tracking stock offering, the number of
options and the price per option was changed from 5,729,300 at $7.50 per
share to 10,026,275 at $4.29 per share.
(2) On April 7, 1999 all Game Spot options were converted to ZDNet options.
ZDNet recorded a compensation charge of $443,000 in connection with this
conversion.

Information relating to the GameSpot Inc. stock options is as follows:

<TABLE>
<CAPTION>
Weighted Average
Number of Option Price Per
Shares 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
Granted....................................... -- --
Exercised..................................... -- --
Forfeited/Cancelled........................... -- --
Converted to ZDNet Options(1)................. (552,000) 0.44
--------
Shares outstanding under options at December
31, 1999..................................... -- --
--------
Shares exercisable as of:
At December 31, 1997 (price range of $0.44)... 400,610 $ 0.44
At December 31, 1998 (price range of $0.44)... 497,639 $ 0.44
</TABLE>
- --------
(1) On April 7, 1999, all outstanding Gamespot shares were converted to 45,998
ZDNet shares at a conversion price of $5.28.

F-41
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Information related to the Smart Planet stock options is as follows:
<TABLE>
<CAPTION>
Weighted Average
Number of Option Price Per
Shares Share
--------- ----------------
<S> <C> <C>
Shares outstanding under options at December
31, 1998..................................... -- --
Granted....................................... 2,318,000 $0.35
Exercised..................................... --
Forfeited/Cancelled........................... (51,000) 0.35
--------- -----
Shares outstanding under options at December
31, 1999..................................... 2,267,000 $0.35
---------
Shares exercisable as of:
At December 31, 1999.......................... -- --
</TABLE>

As permitted by SFAS No. 123, Ziff-Davis Inc. 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 1997, 1998 or 1999. Compensation expense of $9,916,000 was recorded
in 1999 related to an acceleration of certain options held by terminated
employees and for options granted to employees that were below the deemed fair
market value on the date of grant. 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 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 1997, 1998 and 1999:

Softbank options

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... 6.35% 5.46% 5.58%
Dividend yield.................................... 0.22% 1.50% 0.10%
Volatility factor................................. 51.35% 77.72% 72.20%
Expected life..................................... 6 years 6 years 6 years

Ziff-Davis Inc. options

<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... n/a 5.03% 5.23%
Dividend yield.................................... n/a 0.00% 0.00%
Volatility factor................................. n/a 54.70% 59.27%
Expected life..................................... n/a 6 years 6 years

ZDNet options

<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... n/a 4.67% 5.84%
Dividend yield.................................... n/a 0.00% 0.00%
Volatility factor................................. n/a 54.70% 84.15%
Expected life..................................... n/a 6 years 6 years

Smart Planet options

<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... n/a n/a 6.36%
Dividend yield.................................... n/a n/a 0.00%
Volatility factor................................. n/a n/a 84.15%
Expected life..................................... n/a n/a 5 years
</TABLE>

F-42
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

GameSpot Inc. options

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- ----
<S> <C> <C> <C>
Risk-free interest rate.............................. 6.35% 6.44% n/a
Dividend yield....................................... 0.00% 0.00% n/a
Volatility factor.................................... 100.27% 100.27% n/a
Expected life........................................ 4 years 4 years n/a
</TABLE>

The weighted average fair value of options granted in 1997, 1998 and 1999 is
as follows:

<TABLE>
<S> <C> <C> <C>
<CAPTION>
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Softbank options.................................... $34.05 $19.81 $66.98
Ziff-Davis Inc. options............................. n/a 5.21 9.13
ZDNet options....................................... n/a 4.25 16.14
GameSpot Inc. options............................... 0.32 0.32 n/a
Smart Planet options................................ n/a n/a 0.25
</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 1997, 1998 and 1999 consistent
with the provisions of SFAS No. 123, Ziff-Davis Inc.'s net loss would have been
increased by approximately $4,200,000, $15,130,000 and $33,304,000,
respectively.

Other stock compensation plans

During 1997 and 1998, Ziff-Davis Inc. granted 61,940 and 27,223 shares of
common stock of SOFTBANK Corp. respectively (adjusted for 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 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
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.
During 1999, 2,599 shares were forfeited and $252,000 was charged to expense
related to these restricted stock awards.

Amended 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 1,500,000 shares of common stock for
issuance under the Stock Purchase Plan.

On December 21, 1998 the Board approved an amendment to the Employee Stock
Purchase Plan, subsequently approved at a meeting of stockholders held on March
30, 1999, to permit grants of options with respect to any series of common
stock of Ziff-Davis Inc. and increase the number of shares available for sale
to participants from 1,500,000 shares to 2,500,000 shares.

F-43
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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
were based on years of service and average compensation at the time of
retirement. Ziff-Davis Inc.'s funding policy was to contribute amounts
sufficient to meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974 ("ERISA"). Contributions to the plan
were determined in accordance with the projected unit credit cost method. Plan
assets consisted of U.S. equity securities, high grade corporate bonds and
commercial paper, and U.S. treasury notes.

During 1997, Ziff-Davis Inc. terminated 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 obligations were settled during 1998 and a gain of $156,000 was
recognized 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>
1997 1998 1999
----- ---- ----
(dollars in
thousands)
<S> <C> <C> <C>
Service cost............................................ $ 391 $-- $--
Interest cost........................................... 456 -- --
Expected return on plan assets.......................... (445) -- --
Amortization of transition obligation................... 75 -- --
----- ---- ----
Net periodic pension cost............................... $ 477 $-- $--
===== ==== ====
</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
$13,725,000, $13,004,000 and $12,228,619 in 1997, 1998 and 1999, respectively.

F-44
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

15. Investments

Ziff-Davis Inc. has investments in the following companies/joint ventures:

<TABLE>
<CAPTION>
Carrying value at
December 31,
-----------------------
1998 1999
----------- -----------
(dollars in thousands)
<S> <C> <C>
Equity investments:
MAC Publishing LLC................................ $ 19,268 $ --
ExpoComm LLC...................................... 8,571 --
Cost investments:
Red Herring Communications, Inc................... $ 5,000 $ 5,000
Deja.com.......................................... 5,000 6,618
Techies.com....................................... -- 4,000
Expertcity.com, Inc............................... -- 4,250
Gamespy Industries, Inc........................... -- 3,000
etown.com, Inc.................................... -- 3,000
ecircles.com, Inc................................. -- 2,000
800.com, Inc...................................... -- 1,256
Onebox Inc........................................ -- 1,000
ECal, Corp........................................ -- 280
</TABLE>

The entities listed above are engaged primarily in the (1) publication or
distribution of print media, (2) organization, productions and management of
trade shows and (3) providing interactive information and programming to
technology-oriented Internet users. Other investment and joint ventures are not
material to Ziff-Davis Inc.'s financial statements.

Ziff-Davis Inc.'s equity income was $335,000, $2,043,000 and $1,874,000 in
1997, 1998 and 1999, respectively. During September 1999, the Company sold its
interest in the ExpoComm LLC joint venture and recognized a pre-tax gain of
approximately $13,746,000. This gain on the sale of the interest in ExpoComm is
included in the results of discontinued operations, see Note 20.

16. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................... $185,447 $129,976 $114,739
Income taxes............................... 4 1,000 --
Noncash investing and financing activities:
Fair value of assets acquired.............. $ 20,749 $ 60,473 $152,369
Liabilities assumed........................ 6,749 32,701 73,883
-------- -------- --------
Consideration paid......................... 14,000 27,772 78,486
Less--value of stock issued................ -- -- 32,500
Less--cash acquired........................ -- -- --
-------- -------- --------
Net cash paid for investments and
acquisitions.............................. $ 14,000 $ 27,772 $45,986
======== ======== ========
Return of capital dividends................ $381,434 $ -- $ --
======== ======== ========
Capital contributions...................... $ 61,580 $926,096 $ --
======== ======== ========
</TABLE>

F-45
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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>
2000............................................. $ 7,315
2001............................................. 6,492
2002............................................. 5,406
2003............................................. 5,281
2004............................................. 5,241
Thereafter....................................... 7,334
-------
Total.......................................... $37,069
=======
</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 $29,994,000, $24,695,000 and $3,695,000 for the years
ended December 31, 1997, 1998 and 1999, respectively.

Ziff-Davis Inc. has assigned its obligation under a lease agreement for its
New York offices to the purchaser of a substantial portion of its publishing
business. This obligation for it's New York offices totaling $288,155,000 is
excluded from the above table. Ziff-Davis Inc.'s guaranty of the lease
continues for the remainder of the lease term.

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 suites 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 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. The consolidated amended complaint was filed on March 15,
1999 and only alleges claims under Section 11 of the Securities Act of 1933. On
May 20, 1999, Ziff-Davis moved to dismiss the consolidated amended complaint.
In July 1999, plaintiffs filed their response to the motion. Ziff-Davis filed a
reply on August 11, 1999. The motion has not yet been decided.

F-46
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED 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. 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 the actions have been consolidated. Answers to the amended
complaint on behalf of both Ziff-Davis and its directors were filed on April
12, 1999. Discovery is proceeding.

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 Corp. The complaint alleged, 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 investment in Ziff-Davis) and failed to act in the best
interests of SIM and the minority stockholders by taking actions which
benefited Ziff-Davis. The complaint stated 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. Upon motion of Ziff-Davis and the other defendants,
all of the claims against them other than a breach of contract claim which is
solely against SBH, were dismissed on February 26, 1999. On April 1, 1999,
plaintiffs filed a notice of appeal of the dismissal. On September 2, 1999, the
remaining claim, which was solely against SBH, was dismissed. On October 6,
1999, plaintiffs filed a notice of appeal of this dismissal. On March 28, 2000,
the decisions of dismissal were affirmed on appeal.

Ziff-Davis and ZDTV, L.L.C. ("ZDTV") were named as defendants in an action
filed on November 10, 1999 in the U.S. District Court, Southern District of New
York, by Mark Bunting, Tom Hoitsma and SkyTV Inc. In October, 1998 ZDTV through
a subsidiary purchased certain assets from corporations owned by plaintiff and
two other individuals. In addition to a cash payment at the closing of the
sale, ZDTV agreed to pay additional purchase price, contingent on the future
operating profits of the SkyTV division. Ziff-Davis guaranteed the obligations
of ZDTV. The complaint alleges, among other things, that ZDTV and Ziff-Davis
breached their covenants of good faith and fair dealing by failing to act in
the best interests of the SkyTV division, to support and procure business for
the SkyTV division, and to provide public relations, marketing assistance and
corporate sales team support, thereby lessening plaintiff's opportunity to earn
additional purchase price. The complaint seeks an amount to be determined at
trial, but not less than $60,000,000 in damages.

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 has been
included in the financial statements.

There are no other legal proceedings to which Ziff-Davis 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.

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.

F-47
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 and other non-cash charges. 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
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 computer industry. The publishing segment's principal operations are in
the United States and Europe, although it licenses or syndicates its editorial
content to over 50 other publications distributed worldwide.

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 and Asia.

The accounting policies of the segments are the same as those described in
Note 3 under "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 revenue included in segment data are not material.
The following presents information about the reported segments for the years
ending December 31:

<TABLE>
<CAPTION>
1997 1998 1999
-------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Revenue:
Publishing......................... $711,630 $ 647,915 $ 598,280
Internet........................... 32,218 56,143 104,178
-------- ---------- ----------
Total............................ $743,848 $ 704,058 $ 702,458
======== ========== ==========
<CAPTION>
1997 1998 1999
-------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
EBITDA:
Publishing......................... $166,301 $ 120,150* $ 90,194**
Internet........................... (14,400) (924) 19,727
-------- ---------- ----------
Total............................ $151,901 $ 119,226 $ 109,921
======== ========== ==========
<CAPTION>
1998 1999
---------- ----------
(dollars in
thousands)
<S> <C> <C> <C>
Total Assets:
Publishing, net of assets held for sale..... $2,192,099 $ 83,811
Internet.................................... 97,686 189,365
Events...................................... 1,144,018 --
Net assets held for sale(2)................. -- 780,000
Net assets of discontinued operations(3).... -- 934,669
---------- ----------
$3,433,803 $1,987,845
========== ==========
</TABLE>

F-48
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

- --------
* Before restructuring charge of $46,021,000.
** Before writedown of intangible assets of $1,048,185,000.
(1) The net assets of the publishing business, to be sold, have been reclassed
to "Net assets held for sale", see Note 21.
(2) The net assets of the events, education and television businesses have been
reclassed to "Net assets of discontinued operations", see Note 21.

A reconciliation of total segment EBITDA to total consolidated loss from
continuing operations before income taxes, for the years ended December 31,
1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C>
EBITDA:
Total segment EBITDA................ $ 151,901 $ 119,226 $ 109,921
Restructuring charge................ -- (46,021) --
Stock based compensation............ (9,916)
Depreciation & amortization......... (22,227) (18,867) (23,867)
Amortization of intangible assets... (85,064) (79,955) (86,963)
Writedown of intangible assets...... -- -- (1,048,185)
Interest expense, net............... (126,573) (103,651) (86,948)
--------- --------- -----------
Consolidated loss from continuing
operations before income taxes... $ (81,963) $(129,268) $(1,145,958)
========= ========= ===========
</TABLE>

Equity in income of investees included in the publishing segment EBITDA for
the years ended December 31, 1997, 1998 and 1999 was $335,000, $2,043,000 and
$1,874,000, respectively.

Publishing's investment in equity method investees for the years ended
December 31, 1997, 1998 and 1999 was $25,586,000, $19,268,000 and $0,
respectively.

During the years ended December 31, 1997, 1998 and 1999, Publishing spent
$19,026,000, $42,324,000 and $20,338,000, respectively, for additions to long-
lived assets. Internet spent $5,372,000, $9,483,000 and $38,495,000 for
additions to long-lived assets during the years ended December 31, 1997, 1998
and 1999, respectively.

The following is sales information by geographic area as of and for the
respective years ended December 31.
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Revenue:
U.S.......................................... $664,431 $622,349 $616,603
Foreign...................................... 79,417 81,709 85,855
-------- -------- --------
Total...................................... $743,848 $704,058 $702,458
======== ======== ========
</TABLE>

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.

F-49
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

The following is long-lived asset information by geographic area as of and
for the years ended December 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- --------
(dollars in thousands)
<S> <C> <C> <C>
Long-lived assets:
U.S...................................... $3,090,643 $3,034,002 $213,658
Foreign.................................. 8,555 13,570 854
---------- ---------- --------
Total.................................. $3,099,198 $3,047,572 $214,512
========== ========== ========
</TABLE>

No single customer accounted for more than 10% of total revenue for each of
the years ended December 31, 1997, 1998 and 1999.

20. Discontinued Operations

On July 14, 1999 the Company announced that it had engaged Morgan Stanley
Dean Witter to explore strategic alternatives to maximize shareholder value. As
a result of this process, the Company has sold its market intelligence,
education and television businesses and determined to spin off the events
business into its own separate company.

Specifics of these transactions follow:

The Company sold its market intelligence business in early October 1999.
During the fourth quarter of 1999, the Company recognized a pre-tax gain of
approximately $60 million from this sale.

On November 17, 1999 the Company announced that it had signed a definitive
agreement to sell its business-to-business IT learning organization, ZD
Education, for $172 million cash to a company formed by U.S. Equity Partners,
LP. The transaction closed in the first quarter of 2000. U.S. Equity Partners
is a private equity fund managed by Wasserstein Perella Group, Inc. The Company
expects to recognize a pre-tax gain on the sale of this business of
approximately $115.5 million in the first quarter of 2000.

On November 19, 1999 the Company announced that it has signed a definitive
agreement to sell its 64% interest in ZDTV to Vulcan Ventures, Inc., the
investment organization of Paul G. Allen, for $204.8 million. The sale closed
in January 2000. The Company expects to recognize a pre-tax gain on the sale of
this business of approximately $85.9 million in the first quarter of 2000.

Ziff-Davis Inc. expects to form a new holding company for the ZD Events
group. That holding company will borrow approximately $400 million from bank
lenders, the capital markets, or a combination of both. The proceeds of that
borrowing will be used to retire Ziff-Davis Inc.'s remaining indebtedness and
to fund a cash dividend to holders of ZD common stock. At the time of the
dividend or shortly thereafter, Ziff-Davis intends to distribute all of the
shares it owns in the ZD Events holding company to the holders of ZD common
stock. These transaction are expected to be completed at or around the end of
the second quarter of 2000.

The businesses that have been identified above have been accounted for as
discontinued operations in the consolidated financial statements of Ziff-Davis
Inc. and the 1998 and 1997 Consolidated Statements of Operations have been
restated to reflect this treatment.

F-50
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Below is a summary of the combined results of operations and net gain on
disposal for all discontinued entities for the years ended December 31, 1999,
1998 and 1997, as follows:

<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
----------------------------------------------
Events Education TV ZDMI(1) Total
-------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenue, net .............. $251,802 $64,588 $ 14,909 $39,492 $370,791
Income (loss) before
taxes..................... (3,529) (7,003) (37,566) 7,079 (41,019)
Income tax provision
(benefit)................. (22,605) (1,471) 3,132 (20,944)
Net income (loss).......... (26,134) (8,474) (37,566) 10,211 (61,963)
Net gain on disposal....... -- -- -- 27,175 27,175
</TABLE>
- --------
(1) Results for ZD Market Intelligence are 9 months through September 30, 1999
as sale closed in early October 1999.

The assets and liabilities of discontinued operations have been classified in
the consolidated balance sheets as net assets (liabilities) of discontinued
operations and consist of the following:

<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------
Events Education TV ZDMI Total*
---------- --------- ------- ---- ----------
<S> <C> <C> <C> <C> <C>
Current Assets.................. $ 286,409 $24,844 $11,235 $-- $ 322,488
Total Assets.................... 1,170,010 76,055 24,023 -- 1,270,088
Current Liabilities............. 109,825 17,469 11,972 -- 139,266
Total Liabilities............... 594,742 17,469 14,889 -- 627,100
</TABLE>
- --------
* Includes a net intercompany liability of $236 million and does not include
costs accrued related to the disposition of these businesses.

21. Assets Held for Sale

On December 6, 1999, Ziff-Davis Inc. agreed to sell its print publishing
business excluding Computer Shopper, Smart Planet and an investment in Red
Herring Communications Inc. to a company controlled by Willis Stein and
Partners for $780 million subject to certain adjustments. In connection with
this sale, Ziff-Davis has written down its book value of the related net assets
to fair value (see Note 7) and has reported the net assets of the publishing
business being sold as "Assets held for sale" in the December 31, 1999
consolidated balance sheet.

At December 31, 1999, assets held for sale consisted of:

<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Current assets........................................... $127,735
Total assets............................................. 884,523
========
Total liabilities(1)..................................... $104,523
========
</TABLE>
- --------
(1)All liabilities were current at December 31, 1999.

This sale closed on April 5, 2000. During the second quarter of 2000, the
Company will record charges of approximately $79,492,000 related to the sale of
the publishing division. The majority of this charge relates to stock-
compensation from the accelerated vesting of stock options held by publishing
employees. This charge is expected to be approximately $59,000,000 and is a
non-cash charge.

F-51
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

22. Subsequent Events

In the first three and a half months of 2000, Ziff Davis Inc. completed the
sales of ZD Education, ZD Publishing (excluding Computer Shopper, Smart Planet
and an investment in Red Herring Communications) and its equity interest in
ZDTV and determined to recapitalize and spin off ZD Events and pay a special
cash dividend, as further described in Notes 20 and 21 above.

On April 5, 2000, Ziff-Davis repaid the remaining balance on its bank credit
facility in full out of proceeds from the sale of Ziff-Davis businesses.
Thereafter, it unwound the interest rate swaps that it had entered into in
order to hedge its interest rate exposure under the credit facility. Ziff-Davis
expects to recognize a pre-tax gain of approximately $13,600,000 in the second
quarter of 2000 in connection with the unwind of these interest rate swaps.

On April 13, 2000, Ziff-Davis borrowed $150 million under an interim credit
facility, which it plans to repay in full out of the proceeds of the
approximately $400 million ZD Events group borrowing described in Note 20
above. Ziff-Davis used the proceeds from the borrowing under this interim
credit facility, together with approximately $130 million in cash on hand, to
repurchase substantially all of its outstanding 8 1/2% Senior Subordinated
Notes Due 2008. In connection with this repurchase, Ziff-Davis received
consents to certain amendments to the Indenture under which these Notes were
issued in order to eliminate certain restrictive covenants contained therein.
Ziff-Davis expects to incur a pre-tax charge of approximately $37,585,000 in
the second quarter of 2000 as a result of this repurchase, composed of a
premium to repay the Notes of approximately $20,745,000 and the write-off of
debt issuance costs which were being amortized over the original life of the
Notes of $16,840,000.

Ziff-Davis Inc. plans, after recapitalizing and spinning off ZD Events and
paying a special cash dividend, to eliminate its tracking stock structure and
make ZDNet a stand-alone, independent Internet company. This will be
accomplished by merging a newly formed subsidiary into Ziff-Davis Inc. so that
all current holders of its ZD stock (NYSE: ZD) and ZDNet stock (NYSE: ZDZ) will
hold their investments through a single class of ordinary common stock. The
surviving company will be renamed ZDNet Inc. The merger is expected to be
completed at or around the end of the second quarter of 2000.

For additional details, please refer to the Ziff-Davis Inc. proxy statement
dated February 7, 2000 that is incorporated by reference into this Form 10-K.

Investments

In January 2000, ZDNet acquired a 35% interest in Ziff-Davis Richina Media
LDC. ZDNet paid $7.0 million in cash and issued 186,046 shares of ZDNet stock
valued at $5.1 million or $27.375 per share. ZDNet intends to account for this
investment using the equity method of accounting.

Acquisitions

In March 2000, ZDNet acquired 100% of FerretSoft LLC for $6.0 million in cash
plus 601,502 shares of ZDNet shares valued at $17.0 million or $28.26 per
share. This acquisition will be accounted for as a purchase.

F-52
<PAGE>

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 year ended December 31,
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 and as of and for the years ended
December 31, 1997 and 1998. Data for 1996, 1997, 1998 and 1999 was derived from
the Combined Financial Statements of ZDNet. This table should be read in
conjunction with the Selected Historical Financial and Other Data and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for ZDNet and Ziff-Davis Inc. included elsewhere in this document.

<TABLE>
<CAPTION>
Predecessor (1) ZDNet
------------------------- -----------------------------------------
Years Ending December 31,
----------------------------
Two Month Ten month
Year ended period ended period ended
December 31, February 28, December 31,
1995 1996 1996 1997 1998 1999
------------ ------------ ------------ -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $ 13,576 $ 2,903 $ 16,215 $ 32,218 $ 56,143 $104,178
Cost of Operations:
Production and
content............... 10,709 1,802 14,863 23,543 26,208 37,592
Selling, general and
administrative
expenses.............. 8,360 1,774 13,280 23,475 30,993 48,920
Stock-based
compensation.......... -- -- -- -- -- 3,616
Depreciation and
amortization.......... 4,040 597 5,485 7,681 6,448 12,888
Income (loss) from
operations............. (9,533) (1,270) (17,413) (22,481) (7,506) 1,162
Minority interest....... -- -- -- 400 134 117
Income (loss) before
income taxes........... (9,533) (1,270) (17,413) (22,081) (7,372) 4,406
Net income (loss) (2)... (5,755) (814) (16,925) (21,238) (7,884) 1,939
Balance Sheet Data (at
period end):
Total current assets.... $ 3,992 $ 4,951 $ 7,852 $ 11,521 $ 20,068 $ 44,709
Total assets............ 91,772 92,717 82,507 87,326 97,686 189,365
Total liabilities....... 2,090 1,492 3,932 4,034 8,139 26,249
Division equity......... 89,682 91,225 78,575 83,292 89,547 163,116
Other Data:
Capital expenditures.... $ 1,590 $ 168 $ 1,010 $ 2,374 $ 4,483 $ 4,869
Investments and
acquisitions, net of
cash acquired.......... -- -- -- 2,998 5,000 33,626
ZDNet earnings per pro
forma basic share (2).. -- -- -- -- -- 0.03
ZDNet earnings per pro
forma diluted share
(2).................... -- -- -- -- -- 0.02
</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 for periods
prior to 1999 as ZDNet does not consider such data meaningful. ZDNet
earnings per share for 1999 is presented on a pro forma basis as if the
ZDNet shares issued in connection with the ZDNet stock initial public
offering described in Note 2 to the consolidated financial statements of
Ziff-Davis Inc. were outstanding as of January 1, 1999.

F-53
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations

The table below presents the results of ZDNet for the three years ending
December 31, 1997, 1998 and 1999.

<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1997 1998 1999
-------- ------- --------
(dollars in thousands)
<S> <C> <C> <C>
Revenue, net................................. $ 32,218 $56,143 $104,178
Cost of operations:
Production and content..................... 23,543 26,208 37,592
Selling, general and administrative
expenses.................................. 23,475 30,993 48,920
Stock-based compensation................... -- -- 3,616
Depreciation and amortization.............. 1,495 2,010 3,201
Amortization of intangible assets.......... 6,186 4,438 9,687
-------- ------- --------
Total operating expenses................. 54,699 63,649 103,016
-------- ------- --------
Income (loss) from operations................ (22,481) (7,506) 1,162
Interest income, related party............... -- -- 1,183
Non-operating income......................... -- -- 1,944
Minority interest............................ 400 134 117
-------- ------- --------
Income (loss) before income taxes............ (22,081) (7,372) 4,406
Provision (benefit) for income taxes......... (843) 512 2,467
-------- ------- --------
Net income (loss)............................ $(21,238) $(7,884) $ 1,939
======== ======= ========
Other data:
Capital expenditures......................... $ 2,374 $ 4,483 $ 4,869
Investments and acquisitions, net of cash
acquired.................................... 2,998 5,000 33,626
EBITDA(1).................................... (14,400) (924) 19,728
</TABLE>
- --------
(1) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization and other non-cash charges. EBITDA
is not intended to represent cash flows for 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.

F-54
<PAGE>

The following table presents the foregoing amounts as a percentage of
revenue:

<TABLE>
<CAPTION>
Year ended
December 31,
---------------------
1997 1998 1999
----- ----- -----
(dollars in
thousands)
<S> <C> <C> <C>
Revenue, net........................................ 100.0% 100.0% 100.0%
Cost of operations:
Production and content............................ 73.1 46.7 36.1
Selling, general and administrative expenses...... 72.9 55.2 47.0
Stock-based compensation.......................... -- -- 3.5
Depreciation and amortization..................... 4.6 3.6 3.1
Amortization of intangible assets................. 19.2 7.9 9.3
----- ----- -----
Total operating expenses........................ 169.8 113.4 99.0
----- ----- -----
Income (loss) from operations....................... (69.8) (13.4) 1.0
Interest income, related party...................... -- -- 1.1
Non-operating income................................ -- -- 1.9
Minority interest................................... 1.2 0.3 0.1
----- ----- -----
Income (loss) before income taxes................... (68.6) (13.1) 4.1
Provision (benefit) for income taxes................ (2.7) 0.9 2.4
----- ----- -----
Net income (loss)................................... (65.9)% (14.0)% 1.7%
===== ===== =====
</TABLE>

Year ended December 31, 1999 compared with the year ended December 31, 1998

Revenue, net

Net revenue increased 86% to $104.2 million for the year ended December 31,
1999 from $56.1 million for the year ended December 31, 1998. Revenue from
advertising was 93% of net revenue for the year ended December 31, 1999
compared to 86% for the year ended December 31, 1998.

Revenue from advertising increased 102% to $97.2 million for the year ended
December 31, 1999 from $48.1 million for the year ended December 31, 1998. 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 13% to $7.0
million for the year ended December 31, 1999 from $8.0 million for the year
ended December 31, 1998. Management expects that subscription revenue will
continue to decrease in the future as a percentage of ZDNet's total revenue.

Cost of operations

Production and content. Production and content expenses were $37.6 million or
36% of net revenue for the year ended December 31, 1999, compared to $26.2
million or 46% 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 charges 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. In October 1999, ZDNet and ZD amended the royalty
agreement to charge the royalty on revenue net of the provision for bad debts.
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 $5.1 million and $2.8 million for the years ended
December 31, 1999 and 1998, respectively.

Selling, general and administrative expenses. Selling, general and
administrative expenses were $48.9 million or 47% of net revenue for the year
ended December 31, 1999, compared to $31.0 million or 55% of net revenue for
the year ended December 31, 1998. The absolute dollar increase was primarily
due to increased

F-55
<PAGE>

personnel and services required to support the growth of ZDNet. Sales and
marketing costs were $37.6 million or 36% of net revenue for the year ended
December 31, 1999 compared to $21.2 million or 38% of net revenue for the year
ended December 31, 1998. ZDNet intends to continue to increase spending in
absolute dollars on sales and marketing. During December 1999, ZDNet launched a
$25.0 million consumer advertising campaign to further extend awareness of its
brand among the growing population of technology interested Web users. 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 Ziff-Davis Inc. relating
to certain selling, general and administrative services and shared services
provided on a centralized basis amounting to $0.4 million and $0.9 million for
the years ended December 31, 1999 and 1998, respectively.

Administrative and overhead costs were $11.4 million or 11% of net revenue
for the year ended December 31, 1999 compared to $9.7 million or 17% of net
revenue for the year ended December 31, 1998. Included in administrative and
overhead costs was an allocation of the cost of certain Ziff-Davis Inc.
services provided on a centralized basis amounting to $5.1 million for each of
the years ended December 31, 1999 and 1998, respectively. The selling, general
and administrative costs decreased as a percentage of revenue primarily due to
economies of scale.

Management expects selling, general and administrative costs to increase in
the future as the shared services will no longer be provided by Ziff-Davis
beginning in mid 2000 and ZDNet will be increasing spending to provide such
services on its own behalf.

Depreciation. Depreciation expense was $3.2 million for the year ended
December 31, 1999 compared to $2.0 million for the year ended December 31,
1998. The increase 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 $9.7
million for the year ended December 31, 1999 compared to $4.4 million for the
year ended December 31, 1998. The increase in amortization expense was due to
the acquisition of the remaining 30% interest in GameSpot Inc. and the
acquisitions of Updates.com and Softseek, Inc. totaling $56.1 million. Annual
amortization expense related to the remaining goodwill balance will be
approximately $15.6 million before giving effect to any future acquisitions
which may result in an increase in goodwill.

Non-Operating Income

During 1999, ZDNet received some shares of a publicly held company as part of
a revenue generating contract. ZDNet sold a majority of the shares that it held
and recognized a gain of $1.9 million.

Minority interest

The minority interest of $0.1 million in 1999 and $0.1 million in 1998
represented losses attributed to the holders of the minority interest in
GameSpot. As previously discussed, this minority interest in GameSpot was
acquired during 1999.

Income taxes

The 1999 tax provision of $2.5 million increased from $0.5 million reported
in 1998. The increase is attributable to an increase in U.S. pre-tax book
income as well as a corresponding increase in the amount of non-deductible
goodwill related to the purchase of the remaining 30% GameSpot stock interest,
plus the Softseek, Inc. stock acquisition. This results in an effective tax
rate of 56% for the year ending December 31, 1999. Losses incurred prior to the
completion date 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, the effective tax rate in 1998 was significantly lower than the statutory
rate of 35% due to the substantial level of nondeductible expenses incurred
while ZDNet was owned by MAC Inc.

F-56
<PAGE>

Net income/(loss)

As a result of the items described above, ZDNet's net income increased to
$1.9 million from a loss of $7.9 million for the years ended December 31, 1999
and 1998, respectively.

EBITDA

EBITDA for the year ended December 31, 1999 was $19.7 million compared to a
loss of $0.9 million for the same period in 1998. The improvement was due to
substantially increased revenue, offset to some extent by higher production and
content costs and selling, general and administrative expenses.

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 year ended December 31, 1997.

Revenue from advertising increased 104% to $48.1 million for the year ended
December 31, 1998 from $23.6 million for the year ended December 31, 1997. 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. Royalty payments to
ZD were $2.8 million and $1.6 million for the years ended 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 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., as ZDNet sales and marketing teams
replaced SOFTBANK Interactive in these functions. Sales and marketing costs
were $21.2 million or 38% of net revenue for the year ended December 31, 1998
compared to $15.9 million or 49% of net revenue for the year ended December 31,
1997. Included in the sales and marketing costs was an allocation from Ziff-
Davis Inc. relating to certain selling, general and administrative services and
shared services provided on a centralized basis 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 of the cost of certain Ziff-Davis Inc. services
provided on a centralized basis 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.

F-57
<PAGE>

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 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.

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 negative 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 losses 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.

Liquidity and Capital Resources

Funding from ZD

In the financial statements of ZD and ZDNet, prior to the completion of the
offering of ZDNet common stock, 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 has
been reflected in the financial statements of ZDNet prior to the ZDNet initial
public offering. Each of ZD and ZDNet is sometimes referred to herein as a
"group". Subsequent to March 31, 1999, the date on which ZDNet stock was first
issued, Ziff-Davis Inc. has accounted for all cash transfers from ZD or ZDNet
to or for the account on the other, 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. These advances bear interest at the rate at which Ziff-Davis Inc.
could borrow such funds on a revolving credit basis as the board of directors
has determined in its sole discretion. However, the board of directors has the
discretion to determine 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.

F-58
<PAGE>

There is no assurance that ZDNet will continue to be able to obtain
sufficient funding from ZD or third parties.

Sources and uses of cash

Cash and cash equivalents were $0.1 million at December 31, 1999, a decrease
of $0.2 million from $0.3 million at December 31, 1998. The decrease was due to
the factors discussed below:

Cash provided by operations was $20.5 million for the year ended December 31,
1999 compared to cash used of $4.5 million for the year ended December 31,
1998. The improvement from 1999 to 1998 was due primarily to ZDNet generating
net income in 1999 of $1.9 million versus a net loss of $7.9 million in 1998.

Cash used by investing activities for the year ended December 31, 1999
totaled $31.2 million and $9.5 million for the year ended December 31, 1998.
Cash used for capital expenditures for the year ended December 31, 1999
increased by $0.4 million to $4.9 million from $4.5 million for the year ended
December 31, 1998. 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 $5.0 million in 2000. During 1999,
ZDNet acquired two companies for cash consideration of $12 million and made
several strategic investments for an aggregate $21.6 million. ZDNet received
proceeds of $7.3 million from the sale of securities. ZDNet recognized a pretax
gain of approximately $1.9 million on this sale.

Cash provided by financing activities decreased to $10.6 million for the year
ended December 31, 1999 from $14.3 million in 1998. During 1999, ZDNet
completed its initial public offering and generated cash, net of offering
costs, of $25.9 million. ZDNet loaned these proceeds to ZD in the form of an
interest bearing loan. ZDNet has received payments of $13.1 million from ZD
during the year which has been used, primarily, to finance ZDNet's investments
and acquisitions.

F-59
<PAGE>

Seasonality

Historically, ZDNet's business has been seasonal as a significant portion of
annual revenue has occurred in the fourth quarter. This fluctuation is a result
of seasonal changes common to the media industry. 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, 1999. 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 in this Form 10-K 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)
----------------------------------------------------------------------------
1998 1999
------------------------------------- -------------------------------------
Sept. Sept.
March 31 June 30 30 Dec. 31 March 31 June 30 30 Dec. 31
-------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ $ 9,688 $12,274 $14,504 $19,677 $18,561 $22,939 $26,291 $36,387
Cost of operations...... 16,050 15,405 14,344 17,850 19,122 21,609 26,744 35,541
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (6,362) (3,131) 160 1,827 (561) 1,330 (453) 846
Interest income......... -- -- -- -- -- 550 393 240
Non-operating income.... -- -- -- -- -- -- -- 1,944
Minority interest....... (125) (145) (60) 196 (117) -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. (6,237) (2,986) 220 1,631 (444) 1,880 (60) 3,030
Provision (benefit) for
taxes.................. (228) (92) 8 824 (258) 1,064 681 980
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(6,009) $(2,894) $ 212 $ 807 $ (186) $ 816 $ (741) $ 2,050
======= ======= ======= ======= ======= ======= ======= =======
EBITDA (1).............. $(4,511) $(1,569) $ 1,857 $ 3,299 $ 1,946 $ 4,608 $ 4,622 $ 8,552
<CAPTION>
Quarter Ended
(in thousands)
----------------------------------------------------------------------------
1998 1999
------------------------------------- -------------------------------------
Sept. Sept.
March 31 June 30 30 Dec. 31 March 31 June 30 30 Dec. 31
-------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of operations...... 165.7 125.5 98.9 90.7 103.0 94.2 101.7 97.7
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (65.7) (25.5) 1.1 9.3 (3.0) 5.8 (1.7) 2.3
Interest income......... -- -- -- -- -- 2.4 1.5 0.7
Non-operating income.... -- -- -- -- -- -- -- 5.3
Minority interest....... (1.3) (1.2) (0.4) 1.0 (0.6) -- -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. (64.4) (24.3) 1.5 8.3 (2.4) 8.2 (0.2) 8.3
Provision (benefit) for
taxes.................. (2.4) (0.7) 0.1 4.2 (1.4) 4.6 2.6 2.7
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... (62.0)% (23.6)% 1.4% 4.1% (1.0)% 3.6% (2.8)% 5.6%
======= ======= ======= ======= ======= ======= ======= =======
EBITDA (1).............. (46.6)% (12.8)% 12.8% 16.8% 10.5% 20.1% 17.6% 23.5%
</TABLE>
- --------
(1) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization and other non-cash charges. 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
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.

F-60
<PAGE>

Year 2000 readiness Disclosure

Ziff-Davis Inc. completed its identification, remediation and testing of Year
2000 issues prior to the end of 1999 and has not, to date, experienced any
significant problems as a result of the Year 2000 transition. Ziff-Davis Inc.
incurred costs of approximately $14.3 million, of which approximately $7.3
million was capital in nature. ZDNet's share of the expense was approximately
$0.4 million.

Recently Issued Accounting Pronouncement

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 beginning in
the first quarter of 2001. Ziff-Davis Inc. does not expect the adoption of SFAS
No. 133 to have a material impact on the ZDNet's results of operations.

ZDNet expects to adopt the above statement beginning with its 2001 financial
statements.

Staff Accounting Bulletin No. 101

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. This
bulletin summarizes the SEC's views in applying generally accepted accounting
principles to revenue recognition in financial statements and is required to be
adopted in the second quarter of 2000. Ziff Davis Inc. has determined that
adoption of this bulletin will not have a material impact on its financial
statements.

F-61
<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, comprehensive income, cash flows and changes
in stockholders' equity, present fairly, in all material respects, the
financial position of ZDNet (a division of Ziff-Davis Inc., the "Company") at
December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
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
auditing standards generally accepted in the United States 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 consolidated financial statements of Ziff-Davis Inc.

PricewaterhouseCoopers LLP
New York, NY
March 28, 2000, except as
to Note 16, which is as of
April 13, 2000.

F-62
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

COMBINED BALANCE SHEETS
(dollars in thousands)

<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 292 $ 108
Accounts receivable, net of allowance for doubtful accounts
of $1,866 and $3,841
for 1998 and 1999, respectively............................ 18,732 27,161
Receivable from ZD.......................................... -- 12,763
Deferred taxes.............................................. 779 4,165
Other current assets........................................ 265 512
------- --------
Total current assets...................................... 20,068 44,709
Property and equipment, net................................... 5,618 7,336
Investments, at cost.......................................... 5,000 25,404
Deferred taxes................................................ 4,274 2,258
Securities available for sale................................. -- 513
Intangible assets, net........................................ 62,726 109,145
------- --------
Total assets.............................................. $97,686 $189,365
======= ========
LIABILITIES AND DIVISION EQUITY
</TABLE>
Current liabilities:
<TABLE>
<S> <C> <C>
Accounts payable............................................ $ 2,553 $ 1,734
Accrued expenses............................................ 3,495 15,258
Unearned income............................................. 1,078 9,257
------- --------
Total current liabilities................................. 7,126 26,249
Non-current liabilities....................................... 1,013 --
------- --------
Total liabilities......................................... 8,139 26,249
------- --------
Commitments and contingencies (Notes 14 and 15)
Division equity............................................... 89,547 163,116
------- --------
Total liabilities and division equity..................... $97,686 $189,365
======= ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-63
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF OPERATIONS
(dollars in thousands)

<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1998 1999
-------- ------- -----------
<S> <C> <C> <C>
Revenue, net................................... $ 32,218 $56,143 $ 104,178
Cost of operations:
Production and content....................... 23,543 26,208 37,592
Selling, general and administrative
expenses.................................... 23,475 30,993 48,920
Stock-based compensation..................... -- -- 3,616
Depreciation and amortization of property and
equipment................................... 1,495 2,010 3,201
Amortization of intangible assets............ 6,186 4,438 9,687
-------- ------- -----------
Total operating expenses..................... 54,699 63,649 103,016
-------- ------- -----------
Income (loss) from operations.................. (22,481) (7,506) 1,162
Interest income, related party................. -- -- 1,183
Other income................................... -- -- 1,944
Minority interest.............................. 400 134 117
-------- ------- -----------
Income (loss) before income taxes.............. (22,081) (7,372) 4,406
Provision (benefit) for income taxes........... (843) 512 2,467
-------- ------- -----------
Net income (loss).............................. $(21,238) $(7,884) $ 1,939
======== ======= ===========
Net income per pro forma basic share........... $ 0.03
===========
Pro forma weighted average number of basic
shares outstanding............................ 72,664,270
Net income per pro forma diluted share......... $ 0.02
===========
Pro forma weighted average number of diluted
shares outstanding............................. 80,821,191
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-64
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1998 1999
-------- ------- -------
<S> <C> <C> <C>
Net income (loss)........ $(21,238) $(7,884) $ 1,939
Other comprehensive
income (loss):
Foreign currency
translation
adjustments........... 124 (130) 860
Unrealized loss on
securities available
for sale.............. -- -- (249)
-------- ------- -------
Comprehensive income
(loss).................. $(21,114) $(8,014) $ 2,550
======== ======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-65
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CASH FLOWS
(dollars in thousands)

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1998 1999
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $(21,238) $(7,884) $ 1,939
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 1,495 2,010 3,201
Amortization of intangible assets............... 6,186 4,438 9,687
Stock-based compensation........................ -- -- 3,616
Gain from sale of securities.................... -- -- (1,944)
Minority interest............................... (400) (134) (117)
Deferred tax (benefit) provision................ (843) 512 (2,928)
Changes in operating assets and liabilities:
Accounts receivable........................... (4,524) (7,336) (8,011)
Other current assets.......................... 4,093 (237) (238)
Accounts payable and accrued expenses......... (1,311) 3,195 10,379
Unearned income............................... (93) 1,078 4,044
Other, net.................................... 1,371 (164) 843
-------- ------- -------
Net cash provided by (used in) operating
activities....................................... (15,264) (4,522) 20,471
-------- ------- -------
Cash flows from investing activities:
Capital expenditures............................ (2,374) (4,483) (4,869)
Proceeds from sale of securities................ -- -- 7,301
Investments..................................... (2,998) (5,000) (21,626)
Acquisitions, net of cash acquired.............. -- -- (12,000)
-------- ------- -------
Net cash used in investing activities............. (5,372) (9,483) (31,194)
-------- ------- -------
Cash flows from financing activities:
Capital contributions (distributions) to/from
ZD............................................. 20,664 14,269 (2,723)
Proceeds from stock offering, net of offering
costs.......................................... -- -- 25,885
Loan to ZD, net of repayments................... -- -- (12,774)
Proceeds from exercise of stock options......... -- -- 151
-------- ------- -------
Net cash provided by financing activities......... 20,664 14,269 10,539
-------- ------- -------
Net increase (decrease) in cash and cash
equivalents...................................... 28 264 (184)
Cash and cash equivalents at beginning of period.. -- 28 292
-------- ------- -------
Cash and cash equivalents at end of period........ $ 28 $ 292 $ 108
======== ======= =======
Supplemental Cash Flow Information:
Non-cash capital contribution................... $ 5,167 $ -- $ --
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-66
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

COMBINED STATEMENT OF CHANGES IN DIVISION EQUITY
(dollars in thousands)

<TABLE>
<CAPTION>
Unrealized loss
on securities Cumulative Total
Paid-in Deferred available Accumulated translation division
capital compensation for sale deficit adjustment equity
-------- ------------ --------------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
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) -- -- -- --
Issuance of ZDNet
Options................ 13,269 (13,269) -- -- -- --
Net loss................ -- -- -- (7,884) -- (7,884)
Foreign currency
translation
adjustment............. -- -- -- -- (130) (130)
-------- -------- ----- -------- ----- --------
Balance at December 31,
1998................... 148,975 (13,345) -- (46,047) (36) 89,547
Return of capital to
parent................. (2,723) -- -- -- -- (2,723)
Compensation earned on
stock options.......... -- 3,616 -- -- -- 3,616
Change in unrealized
loss on securities
available for sale..... -- -- (249) -- -- (249)
Issuance of ZDNet
stock.................. 26,505 -- -- -- -- 26,505
ZDNet share offering
costs.................. (620) -- -- -- -- (620)
Acquisition of GameSpot
minority interest...... 12,031 (442) -- -- -- 11,589
Exercise of ZDNet
options................ 151 -- -- -- -- 151
Forfeiture of ZDNet
options................ (696) 696 -- -- -- --
ZDNet common stock
issued for
acquisitions........... 32,500 -- -- -- -- 32,500
Net income.............. -- -- -- 1,939 -- 1,939
Foreign currency
adjustment............. -- -- -- -- 861 861
-------- -------- ----- -------- ----- --------
Balance at December 31,
1999................... $216,123 $ (9,475) $(249) $(44,108) $ 825 $163,116
======== ======== ===== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-67
<PAGE>

ZDNet
(A Division of Ziff-Davis Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(numbers rounded to the nearest thousand, except share and per share amounts)

1. Organization and Basis of Presentation

Formation of Ziff-Davis Inc.

Ziff-Davis Inc. was formed through an initial public offering and
reorganization that was 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.
(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. focused on the business of print publishing, trade shows and
conferences, market research and education. Each of ZD and ZDNet is sometimes
referred to herein as a "Group".

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 consolidated financial statements of Ziff-Davis Inc. The ZD
financial statements have not been presented in this Form 10-K.

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 under
"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 described
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 that 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 or the market price of ZDNet Stock.
In addition, net losses of ZD, and any dividends or distributions on or
repurchases of ZD Stock, will reduce the assets of Ziff-Davis Inc. legally
available for dividends on ZDNet Stock. Accordingly, financial information for
ZDNet should be read in conjunction with financial information for Ziff-Davis
Inc.

Relationship with Softbank and MAC

SOFTBANK Corp. is the indirect majority stockholder of Ziff-Davis Inc.
SOFTBANK Corp. 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, 1999 Mr. Son owned approximately 38% of SOFTBANK
Corp. (45% as of December 31, 1998). MAC, also a Japanese corporation, was
wholly owned by Mr. Son.

Acquisition of ZDNet

In February 1996, SOFTBANK Corp. 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 Inc. (MAC Inc. and affiliates hereinafter referred to
as "MAC") directly or though 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.

F-68
<PAGE>

ZDNet
(A Division of Ziff-Davis Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

The 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 relating to ZDNet was
$72,692,000.

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.

On April 7, 1999, ZDNet acquired the remaining 30% interest in GameSpot by
issuing 600,000 shares of ZDNet stock valued at $19.00 per share. The entire
purchase price was allocated to goodwill. (See Note 6)

Reorganization and initial public offering

On February 4, 1998, a non-stock 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
Ziff-Davis Inc.

On May 4, 1998, SOFTBANK Corp., 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. Concurrent 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"), 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 were 74,200,000. The transactions described
above are herein referred to as the "Reorganization".

F-69
<PAGE>

ZDNet
(A Division of Ziff-Davis Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 Corp.

2. ZDNet Stock Initial Public Offering

The stockholders of Ziff-Davis Inc. voted 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"). Immediately prior to the issuance of the ZDNet stock, Ziff-Davis
Inc.'s existing common stock was re-classified as Ziff-Davis Inc.--ZD Common
Stock ("ZD Stock"), and that stock is 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").

Ziff-Davis Inc. offered to the public, for cash, 10,000,000 shares of ZDNet
Stock which represented approximately 14% of the equity value attributed to
ZDNet. The ZDNet stock offering was issued on March 31, 1999.

Currently, Ziff-Davis Inc. provides all funding for ZD and ZDNet as described
in Note 4 under "Certain Cash Management and Allocation Policies".

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.

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 has 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

F-70
<PAGE>

ZDNet
(A Division of Ziff-Davis Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 expenses as incurred.

Securities available for sale

ZDNet holds securities which management may sell. These securities are
"marked to market" and the resulting unrealized gain or loss is deferred to
division equity, net of taxes.

Investments

ZDNet holds investments in several Internet related companies. These
investments have been accounted for on a cost basis as ZDNet does not hold a
significant ownership interest and does not have the ability to exert
significant influence on the management of these companies.

Intangible assets

Intangible assets consist principally of advertising lists, subscriber lists,
non-compete agreements and goodwill. Amortization of these assets is computed
on a straight-line basis over their estimated useful lives. Identifiable
intangible assets are amortized over a period of 2 to 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 5 to 20 years.
(See Note 6.) ZDNet asses 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 the intangible assets, an
impairment loss is recognized to reduce the carrying value of the intangibles
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 contacts. 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. From time to time, ZDNet enters into revenue
agreements whereby ZDNet receives an equity investment (i.e. warrants, or
options to purchase shares) in the other party. ZDNet values these assets at
the lower of the fair market value of the equity instrument received, when
possible, or the cash value that ZDNet has forgone in lieu of receiving these
equity instruments. The value assigned to these transactions is included as
deferred revenue and recognized ratably over the life of the contract. Revenue
recognized on this type of transaction is included as barter revenue. Total
revenue recognized from barter transactions in 1999 was approximately
$3,557,000, while barter transactions in 1998 and 1997 were insignificant.

F-71
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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.

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.

Earnings per share

Earnings per share data for 1999 has been calculated on a pro forma basis as
if the ZDNet shares issued in connection with the ZDNet stock initial public
offering described in Note 2 were outstanding as of January 1, 1999.

Options to purchase ZDNet stock that could potentially dilute basic earnings
per share were included in the calculation of diluted earnings per share, under
the treasury method. There were options to purchase 8,386,129 shares of ZDNet
stock included in the calculation for 1999.

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.

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
established accounting and reporting standards for

F-72
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

derivative instruments and for hedging activities and is effective beginning
the first quarter of 2001. ZDNet does not expect that the adoption of SFAS No,
133 will have a material impact on ZDNet's results of operations. ZDNet will
adopt SFAS No. 133 beginning with its 2001 financial statements.

Staff Accounting Bulletin No. 101

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.

In the financial statements of ZD and ZDNet for 1998 and prior, (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 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.

As of March 31, 1999, for financial statement purposes, the following
policies have been applied, however the Board retains the right to rescind,
modify or add 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.

F-73
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 to 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 long-term will
have an 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).

(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 dividend 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 dividend by (2) the Market Value
of ZDNet Stock in the date of transfer.

F-74
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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, 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 is equal to 5% of the first $100,000 of ZDNet's
revenue for the year, 4% of the next $50,000 of ZDNet's revenue for that year
and 3% of any incremental revenue over $150,000 for that year. In October 1999,
ZDI's Board of Directors approved a change in the methodology of determining
future royalty charges whereby the charge began to be based on revenue, net of
bad debt expense.

On completion of the sale of ZD's publishing business, this royalty agreement
will be contractually formalized for a five-year period. ZDNet will have
exclusive rights to use ZD content online for a period of three years. Minimum
and maximum payments under the agreement will be established as follows:

<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Year 1.......... $ 7,000 $14,000
Year 2.......... 9,000 18,000
Year 3.......... 11,000 22,000
</TABLE>

After the third year, the contract begins a two-year transition period in
which fees are reduced and ZDNet's exclusive right to ZD's content is
eliminated.

5. Property and Equipment, Net

Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
----------- -----------
(dollars in thousands)
<S> <C> <C>
Computers and equipment.......................... $ 8,003 $ 12,107
Furniture and fixtures........................... 1,076 1,216
Leasehold improvements........................... 700 1,062
---------- -----------
9,779 14,385
Accumulated depreciation and amortization........ (4,161) (7,049)
---------- -----------
$5,618 $ 7,336
========== ===========
</TABLE>

F-75
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

6. Intangible Assets, Net

Intangible assets, net consists of the following:

<TABLE>
<CAPTION>
December 31,
Range of -----------------
Useful Lives 1998 1999
------------ ------- --------
(dollars in
(years) thousands)
<S> <C> <C> <C>
Subscription lists........................ 2 $ 4,300 $ --
Advertising lists......................... 9 2,400 2,400
Non-compete agreements.................... 3 -- 7,001
Intellectual property..................... 5 -- 6,725
Goodwill.................................. 5-20 71,479 113,859
------- --------
78,179 129,985
Accumulated amortization.................. (15,453) (20,840)
------- --------
$62,726 $109,145
======= ========
</TABLE>

A significant portion of the intangible assets relates 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
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, subscribers and
exhibitors, legal and contractual obligations and factors.

7. Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
----------------------
(dollars in thousands)
<S> <C> <C>
Payroll and related employee benefits............. $ 2,221 $ 3,402
Advertising & marketing expenses.................. -- 3,767
Licenses.......................................... 24 --
Other taxes....................................... 302 4,998
Other............................................. 948 3,091
---------- -----------
$3,495 $ 15,258
========== ===========
</TABLE>

F-76
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

8. Investments, at cost

<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
------ -------
<S> <C> <C>
Deja.com.................................................. $5,000 $ 6,618
Expertcity.com............................................ -- 4,250
Techies.com............................................... -- 4,000
Gamespy Industries Inc.................................... -- 3,000
e-town.com, Inc........................................... -- 3,000
e-Circles, Inc............................................ -- 2,000
800.com, Inc.............................................. -- 1,256
Onebox.com, Inc........................................... -- 1,000
e-cal Corp................................................ -- 280
------ -------
$5,000 $25,404
====== =======
</TABLE>

The investments in Deja.com, Techies.com, Onebox, Expertcity, GameSpy Inc.,
e-Town and e-Circles are all purchases of the respective companies classes of
preferred stock. In all cases, ZDNet was a member of a larger group providing
financing for these companies, and acquired these interests at fair market
value. The investment in 800.com and e-cal represents the fair value of
warrants that ZDNet received in conjunction with longer term advertising
agreements. All investments are accounted for on a cost basis.

9. Acquisitions

During 1999, ZDNet acquired two companies for a combination of cash and ZDNet
stock. These acquisitions were accounted for using the purchase method of
accounting. The excess of the purchase price over the fair market value of the
assets acquired, net of cash, was allocated to intangible assets.

<TABLE>
<CAPTION>
Updates.com SoftSeek Inc.
----------- -------------
<S> <C> <C>
Cash............................................ $ 5,000 $ 7,000
ZDNet common stock.............................. 13,500 19,000
------- -------
Total purchase price........................... 18,500 26,000
Net assets acquired............................. 49 36
------- -------
Value assigned to intangible assets............. $18,451 $25,964
======= =======
</TABLE>

ZDNet issued 582,526 shares at $23.17 per share to acquire Updates.com and
issued 991,038 shares at $19.17 per share to acquire SoftSeek Inc. These
acquisitions did not have a material impact on ZDNet's results of operations.

10. 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). Previously, GameSpot was a 70% owned subsidiary and filed separate
federal and state income tax returns. As of April 7, 1999, ZDNet acquired the
remaining 30% interest in GameSpot, and after, GameSpot operations will be
included in the federal consolidation.

F-77
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Income (loss) before income taxes is attributable to the following
jurisdictions:

<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998 1999
-------- ------- ------
(dollars in thousands)
<S> <C> <C> <C>
U.S............................................ $(18,853) $(5,009) $6,007
Foreign........................................ (3,228) (2,363) (1,601)
-------- ------- ------
Total...................................... $(22,081) $(7,372) $4,406
======== ======= ======
</TABLE>

Components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
December 31,
------------------
1997 1998 1999
----- ---- ------
(dollars in
thousands)
<S> <C> <C> <C>
U.S. federal income taxes:
Current.............................................. $ -- $-- $3,904
Deferred............................................. (653) 413 (1,747)
State and local income taxes:
Current.............................................. -- -- 558
Deferred............................................. (190) 99 (248)
Foreign income taxes................................... -- -- --
----- ---- ------
Total provision (benefit) for income taxes......... $(843) $512 $2,467
===== ==== ======
</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,
--------------------
1997 1998 1999
----- ----- -----
<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 5.0 5.0
Non-recognition of
combined losses of MAC
Assets................. (26.8) (29.3) --
Change in valuation
allowance.............. (9.5) (14.2) (22.4)
Amortization of non-
deductible goodwill.... (0.9) (2.8) 33.3
Other................... -- (0.6) 5.1
----- ----- -----
Effective tax rate...... 3.8% (6.9)% 56.0%
===== ===== =====
</TABLE>

The 1997 and 1998 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.

In 1999, the effective tax rate differs from the federal statutory rate
primarily as a result of an increase in goodwill, which is not deductible for
tax purposes, offset by a net decrease in the valuation allowance previously
applied against ZDNet's deferred tax assets.

F-78
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Following is a summary of the components of the deferred tax accounts as of
December 31, 1998 and 1999:

<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
---------- ----------
(dollar in thousands)
<S> <C> <C>
Current deferred tax assets:
Unearned income................................. $ -- $ 2,369
Allowance for doubtful accounts................. 701 1,250
Other........................................... 78 546
---------- ----------
Current deferred tax assets................... 779 4,165
Non-current deferred tax assets:
Unearned income................................. -- 1,334
Basis difference in property and equipment...... 237 1,040
Net operating loss and other carryforwards...... 9,728 4,434
Other........................................... (122) (116)
---------- ----------
Non-current deferred tax assets................. 9,843 6,692
Valuation allowance............................... (5,569) (4,434)
---------- ----------
Net non-current deferred tax assets............. 4,274 2,258
---------- ----------
Net deferred tax assets....................... $ 5,053 $ 6,423
========== ==========
</TABLE>

The valuation allowance relates to tax benefits of foreign net operating loss
carryforwards acquired in the MAC Asset purchase and from post MAC asset
purchase foreign operations the aggregate of these losses is 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 foreign net operating loss carryforwards at December 31, 1999 of
approximately $9,827,000, which will begin to expire in 2000. All net operating
losses attributable to ZDNet's U.S. operations have been fully absorbed against
ZDNet's U.S. derived federal taxable income.

11. Related Party Transactions

ZDNet 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.

Prior to March 31, 1999, ZD provided all necessary funding for the operations
and investments of ZDNet; this funding was accounted for as capital
contributions. (See Notes 2 and 4.) For the years ended December 31, 1997 and
1998, such capital contributions were $25,831,000 and $14,269,000,
respectively. There were no capital contributions made by ZD in 1999; however,
during the first quarter of 1999, ZDNet was able to provide a return of capital
of $2,723,000 to ZD.

F-79
<PAGE>

ZDNet
(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 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,
-----------------------
1998 1999
----------- -----------
(dollars in thousands)
<S> <C> <C>
Accounts receivable:
Softbank Kingston............................... $ 72 $ 26
E-Trade......................................... 367 312
US Web.......................................... -- 50
----------- -----------
Total......................................... $ 439 $ 388
=========== ===========
Accounts payable:
Yahoo!.......................................... $ 60 $ 50
GeoCities....................................... 12 --
PointCast....................................... 16 --
----------- -----------
Total......................................... $ 88 $ 50
=========== ===========
</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 $2,671,000, $1,429,000 and $2,274,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.

Related party transactions included in the accompanying combined statements
of operations include the following:

<TABLE>
<CAPTION>
Year ending December 31,
--------------------------
1997 1998 1999
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Revenue, net
ZD................................................ $ 76 $ 160 $ 561
ZDTV.............................................. 11 36 5
GeoCities......................................... 30 -- 17
E-Trade........................................... -- 1,168 818
Kingston Technology Company....................... 353 615 65
US Web............................................ 75 -- 234
Asia Communication Global Limited................. 61 -- --
Electric Minds, Inc............................... 15 -- --
Inquiry.com, Inc.................................. 149 -- --
Trend Micro, Inc.................................. 77 -- --
Sega Entertainment................................ 248 94 --
-------- -------- --------
Total........................................... $ 1,095 $ 2,073 $ 1,700
======== ======== ========
</TABLE>

F-80
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

<TABLE>
<CAPTION>
Year ending December
31,
----------------------
1997 1998 1999
------ ------ ------
(dollars in
thousands)
<S> <C> <C> <C>
Expenses
ZD.................................................... $8,330 $9,374 $7,280
ZDTV.................................................. (120) (532) (977)
SIM................................................... 1,613 -- (105)
Yahoo!................................................ -- 101 59
Geocities............................................. -- 108 --
PointCast............................................. 42 144 --
------ ------ ------
Total............................................... $9,865 $9,195 $6,257
====== ====== ======
</TABLE>

Included in the selling, general and administrative expenses is an allocation
for Ziff-Davis Inc.'s Central Services amounting to $3,877,000, $5,949,000 and
$5,463,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
Also included in selling, general and administrative expenses is a royalty
charge to ZD amounting to $1,611,000, $2,807,000 and $5,124,000 for the years
ended December 31, 1997, 1998 and 1999, 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.

12. 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 become eligible for a discretionary Company
contribution after completing one year of service. ZDNet made contributions to
the plan totaling $751,000, $1,111,000 and $1,539,000 for the years ended
December 31, 1997, 1998 and 1999, respectively.

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 Corp. to officers, directors and key employees of Ziff-Davis
Inc. 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 grant of all of the shares outstanding under option
agreements were 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.

F-81
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Amended 1998 Incentive Compensation Plan and the Amended 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.

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 to
certain employees, at a price of $7.50 per share. As a result of the grant
ZDNet has recorded deferred compensation expense of $13,269,000 for the
difference between the exercise price and the deemed fair value of the
underlying shares. This amount has been recorded as a component of division
equity offset by an addition to paid-in capital. ZDNet expects to recognize
non-cash compensation for accounting purposes of $13,269,000 ratably over the
vesting period of the options. These options are currently scheduled to vest
and become exercisable on the fifth anniversary of the date of the grant.

The terms of the options described in the preceding paragraph required an
adjustment in the number of shares of ZDNet Stock that holders may purchase and
the per share purchase price thereof once it was determined that the initial
number of shares issuable with respect to ZD's Retained Interest in ZDNet was
in excess of 40,000,000. This adjustment was similar to the adjustment that
would generally be made to the terms of the employee stock options in the event
of a stock split. The initial number of shares issuable with respect to ZD's
Retained Interest in ZDNet was 70,000,000. As a result, the total number of
shares of ZDNet stock that holders may purchase upon exercise of these options
increased to approximately 7,285,150 and the per share purchase price thereof
decreased to $4.29.

The December 21, 1998 Board actions described above were subject to
stockholder approval. The majority owner of the common stock of Ziff-Davis Inc.
committed to approve of these actions, and they were subsequently approved at a
meeting of stockholders held on March 30, 1999.

F-82
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 stockholder value. The GameSpot Plan provides for the grant of
options to purchase shares of GameSpot's common stock. GameSpot has reserved
800,000 shares of GameSpot Inc.'s common stock for issuance under the GameSpot
Plan. Such options vest ratably over 3 years. All GameSpot stock options were
converted to ZDNet stock options in 1999. The compensation charge associated
with this conversion was $442,000.

Option grants

Information relating to the Softbank options during 1997, 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
Weighted
Average Option
Number of Price
Shares Per Share (1)
--------- --------------
<S> <C> <C>
Shares outstanding under options at December
31, 1996................................... 24,716(2) $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
Granted................................... -- --
Exercised................................. (2,200) 31.03
Forfeited/Cancelled....................... (1,200) 31.03
------
Shares outstanding under options at December
31, 1999................................... 28,920 $31.03
------
Shares exercisable as of:...................
December 31, 1997 (price range of $64.50
to $87.15)............................... 5,120 $78.97
December 31, 1998 (price range of
$31.03).................................. 11,374 31.03
December 31, 1999 (price range of
$31.03).................................. 12,458 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 rates 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 per share.

(2) Adjusted for a 1.3:1 stock split during 1997.

F-83
<PAGE>

ZDNet
(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 Ziff-Davis Inc. stock options issued during 1998 and
1999 is as follows:

<TABLE>
<CAPTION>
Weighted
Average Option
Number of 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
Granted..................................... 90,228 14.86
Exercised................................... (21,500) 6.00
Forfeited................................... (7,100) 6.83
-------
Shares outstanding under options at December
31, 1999..................................... 400,854 $ 7.98
-------
Shares exercisable as of:
At December 31, 1998.......................... -- --
At December 31, 1999 (price range $6.00)...... 92,154 $ 6.00
</TABLE>

Information relating to ZDNet stock options issued during 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
Weighted
Average Option
Number of Price
Shares Per Share
---------- --------------
<S> <C> <C>
Shares outstanding under options at December
31, 1997................................... -- --
Granted(/1/).............................. 7,285,150 $ 4.29
Exercised................................. -- --
Forfeited................................. -- --
----------
Shares outstanding under options at December
31, 1998................................... 7,285,150 $ 4.29
Granted................................... 3,878,476 19.77
Exercised................................. (45,336) 5.02
Converted from GameSpot(/2/).............. 45,998 5.28
Forfeited................................. (468,307) 7.34
----------
Shares outstanding under options at December
31, 1999................................... 10,695,981 $ 9.77
----------
Shares exercisable as of:
At December 31, 1998........................ -- --
At December 31, 1999 (price range $4.29).... 1,692,374 $ 4.29
</TABLE>
- --------
(/1/) In conjunction with the ZDNet tracking stock offering, the number of
options and the price per option was changed from 4,162,943 at $7.50 per share
to 7,285,150 at $4.29 per share.
(/2/) On April 7, 1999, all outstanding GameSpot options were converted to
ZDNet options at a conversion price of $5.28 per option.

F-84
<PAGE>

ZDNet
(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 GameSpot, Inc. stock options is as follows:

<TABLE>
<CAPTION>
Weighted
Average Option
Number of Price Per
Shares 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
Granted.................................... -- --
Exercised.................................. -- --
Converted to ZDNet options................. (552,000) 0.44
Forfeited.................................. -- --
--------
Shares outstanding under options at December
31, 1999.................................... -- --
--------
Shares exercisable as of:
December 31, 1997.......................... 400,610 $0.44
December 31, 1998.......................... 497,639 $0.44
December 31, 1999.......................... -- --
</TABLE>

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 1997 or
1998. In 1999, ZDNet recorded $3,173,000 of compensation expense related to
options granted at the end of 1998 that were below the deemed fair market value
on the date of grant. Pro forma information regarding net income is required by
SFAS No. 123 and has been determined as if ZDNet has 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 1997, 1998 and 1999:

Softbank options
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................ 6.35% 5.46% n/a
Dividend yield................................. 0.22% 1.50% n/a
Volatility factor.............................. 51.35% 77.72% n/a
Expected life.................................. 6 years 6 years n/a

Ziff-Davis Inc. options
1997 1998 1999
------- ------- -------
Risk-free interest rate........................ n/a 5.03% 5.30%
Dividend yield................................. n/a 0.00% 0.00%
Volatility factor.............................. n/a 54.70% 54.70%
Expected life.................................. n/a 6 years 6 years
</TABLE>

F-85
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

ZDNet options
<TABLE>
<S> <C> <C> <C>
1997 1998 1999
------- ------- -------
Risk-free interest rate........................ n/a 4.67% 6.11%
Dividend yield................................. n/a 0.00% 0.00%
Volatility factor.............................. n/a 54.70% 54.70%
Expected life.................................. n/a 6 years 6 years

GameSpot Inc. options
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................ 6.35% 6.44% n/a
Dividend yield................................. 0.00% 0.00% n/a
Volatility factor.............................. 100.27% 100.27% n/a
Expected life.................................. 4 years 4 years n/a

The weighted average fair value of options granted in 1997, 1998 and 1999 is
as follows:

<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Softbank options............................... $ 34.05 $ 19.81 $ n/a
Ziff-Davis Inc. options........................ n/a 5.21 10.16
ZDNet options.................................. n/a 4.25 14.19
GameSpot options............................... 0.32 0.32 n/a
</TABLE>

For the purpose 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 fair
value at the grant date for awards during 1997, 1998 and 1999, consistent with
the provisions of SFAS No. 123, ZDNet's expenses would have increased by
approximately $167,000, $1,046,000 and $6,387,000, respectively.

Employee Stock Purchase Plan

Ziff-Davis Inc. adopted the Employee Stock Purchase Plan ("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 1,500,000 shares of common stock for issuance under the Stock
Purchase Plan.

On December 21, 1998, the Board approved an amendment to the Employee Stock
Purchase Plan, subject to stockholder approval, to permit grants of options
with respect to any series of common stock of Ziff-Davis Inc. and increase the
number of shares available for sale to participants from 1,500,000 shares to
2,500,000 shares.

F-86
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

14. 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>
2000............................................. $ 4,166
2001............................................. 4,380
2002............................................. 3,802
2003............................................. 3,763
2004............................................. 3,801
Thereafter....................................... 25,807
-------
Total minimum payments.......................... $45,719
=======
</TABLE>

Rental expense from operating leases amounted to $1,348,000, $1,608,000 and
$2,563,000, for the years ended December 31, 1997, 1998 and 1999, respectively.

15. Contingencies

Class action and derivative litigations

ZDNet and Ziff-Davis Inc. are subject to various legal proceedings arising in
the normal course of business.

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 alleged 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 completed on May 4,
1998 (the "IPO"). More particularly, the complaints alleged that the
registration statement contained false and misleading statements and failed to
disclose the facts that could have indicated an impending decline in Ziff-Davis
Inc.'s revenue. The complaints sought 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 as 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 counsel and requiring the filing of a consolidated amended
complaint. The consolidated amended complaint was filed on March 15, 1999 and
only alleges claims under Section 11 of the Securities Act of 1933. On May 20,
1999, Ziff-Davis moved to dismiss the consolidated amended complaint. In July
1999, plaintiffs filed their response to the motion. Ziff-Davis filed a reply
on August 11, 1999. The motion has not yet been decided.

F-87
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 the actions have been consolidated. Answers to
the amended complaint on behalf of both Ziff-Davis Inc. and its directors were
filed on April 12, 1999. Discovery is proceeding.

Other legal proceedings

Ziff-Davis Inc. was named as 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 alleged, 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 stated 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. Upon motion of Ziff-Davis Inc. and the other
defendants, all of the claims against them other than a breach of contract
claim which is solely against SBH, were dismissed on February 26, 1999. On
April 1, 1999, plaintiffs filed a notice of appeal of the dismissal. On
September 2, 1999, the remaining claim, which was solely against SBH, was
dismissed. On October 6, 1999, plaintiffs filed a notice of appeal of this
dismissal.

Ziff-Davis Inc. and ZDTV, L.L.C. ("ZDTV"), a majority owned affiliate of
Ziff-Davis Inc., were named as defendants in an action filed on November 10,
1999 in the U.S. District Court, Southern District of New York, by plaintiff.
In October 1998, ZDTV through a subsidiary purchased certain assets from
corporations owned by plaintiff and two other individuals. In addition to a
cash payment at the closing of the sale, ZDTV agreed to pay additional purchase
price, contingent on the future operating profits of the SkyTV division. Ziff-
Davis Inc. guaranteed the obligations of ZDTV. The complaint alleges, among
other things, that ZDTV and Ziff-Davis Inc. breached their covenants of good
faith and fair dealing by failing to act in the best interests of the SkyTV
division, to support and procure business for the SkyTV division, and to
provide public relations, marketing assistance and corporate sales team
support, thereby lessening plaintiff's opportunity to earn additional purchase
price. The complaint seeks an amount to be determined at trial, but not less
than $60,000,000 in damages.

16. Subsequent Events

Ziff-Davis Inc., plans, after recapitalizing and spinning off ZD Events Inc.
and paying a special cash dividend, to eliminate its tracking stock structure
and make ZDNet a stand-alone, independent Internet

F-88
<PAGE>

ZDNet
(a Division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

company. This will be accomplished by merging a newly formed subsidiary into
Ziff-Davis Inc. so that all current holders of its ZD stock (NYSE: ZD) and
ZDNet stock (NYSE: ZDZ) will hold their investments through a single class of
ordinary common stock. The surviving company will be renamed ZDNet Inc. The
merger is expected to be completed at or around the end of the second quarter
of 2000.

Following the elimination of the Tracking Stock, ZDNet Inc. will report its
financial statements on a consolidated basis. Once consolidated, the historical
balance sheets, income and cash flow statements will be identical to that of
Ziff-Davis Inc. while future results will reflect the operations of ZDNet,
Computer Shopper, Smart Planet, the investment in Red Herring and any other
residual amounts or businesses transferred to ZDNet by ZD.

For additional details, please refer to the Ziff-Davis Inc. proxy statement
dated February 7, 2000 that is incorporated by reference into this Form 10-K.

Investments

In February 2000, ZDNet acquired a 35% interest in Ziff-Davis Richina Media
LDC. ZDNet paid $7.0 million in cash and issued 186,046 shares of ZDNet stock
valued at $5.1 million or $27.375 per share. ZDNet intends to account for this
investment using the equity method of accounting.

Acquisitions

In March 2000, ZDNet acquired 100% of FerretSoft LLC for $6.0 million in cash
and issued 601,502 shares of ZDNet stock valued at $17.0 million or $28.26 per
share. This acquisition will be accounted for as a purchase.

F-89
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Page No.
--------
<C> <S> <C>
2.1* Purchase Agreement, dated August 30, 1999, among ZD Inc., ZD
Holdings (Europe) Ltd. and Harte-Hanks, Inc.

2.2* Purchase Agreement, dated November 17, 1999, between ZD Inc.
and WP Education Holdings LLC.

2.3* Purchase Agreement, dated November 19, 1999, between ZD Inc.
and Vulcan Programming Inc.

2.4* Purchase Agreement, dated December 6, 1999, among ZD Inc., ZD
Holdings (Europe)
Ltd. and WS-ZD Acquisition, Inc.

2.5 Agreement and Plan of Merger, dated February 7, 2000, between
Ziff-Davis Inc. and ZD Merger Subsidiary Inc. (incorporated
by reference to Exhibit 99.1 in this Form 10-K)

3.1 Amended and Restated Certificate of Incorporation of Ziff-
Davis Inc. (incorporated by reference to the exhibit in Ziff-
Davis Inc.'s Registration Statement of Form S-1, File No.
333-69447)

3.2 Form of Amended and Restated Certificate of Incorporation of
Ziff-Davis Inc. to be in effect after completion of the
agreement filed as Exhibit 2.5 (incorporated by reference to
Exhibit 99.1 in this Form 10-K)

3.3 By-Laws of Ziff-Davis Inc. (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement on Form
S-1, File No. 333-46493)

4.1 Specimen of certificate representing Ziff-Davis Inc.--ZD
Common Stock, par value $.01 per share (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-69447)

4.2 Specimen certificate representing Ziff-Davis Inc.--ZDNet
Common Stock, par value $.01 per share (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-69447)

10.1 Amended 1998 Incentive Compensation Plan

10.2 Amended 1998 Employee Stock Purchase Plan

10.3 Amended 1998 Non-Employee Directors' Stock Option Plan

10.4 Undertaking, dated as of April 1, 1998, between SOFTBANK
Corp. and ZD Inc. (incorporated by reference to the exhibit
in Ziff-Davis Inc.'s Registration Statement on Form S-1, File
No. 46493)

10.6 Master License Agreement, dated as of April 1, 1998, between
Ziff-Davis Inc. and SOFTBANK Corp. (incorporated by reference
to the exhibit in Ziff-Davis Inc.'s Registration Statement on
Form S-1, File No. 333-46493)

10.7 License Agreement, dated as of July 1, 1998, between MAC Inc.
and Ziff-Davis Inc. and SOFTBANK Corp. (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-46493)

10.8 Agreement to Produce, dated as of April 1, 1998, between ZD
COMDEX and Forums Inc. and SOFTBANK Corp. (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-46493)

10.9 Trademark License Agreement, dated as of April 1, 1998,
between ZD COMDEX and Forums Inc. and SOFTBANK Forums KK
(incorporated by reference to the exhibit in Ziff-Davis
Inc.'s Registration Statement on Form S-1, File No. 333-
46493)
</TABLE>
- --------
* Upon request, Ziff-Davis Inc. will provide the Commission with any omitted
schedules related to the indicated Purchase Agreements.

(i)
<PAGE>

<TABLE>
<CAPTION>
Page No.
--------
<C> <S> <C>
10.10 License Agreement, dated April 5, 2000, between Ziff-Davis
Inc. and Ziff Davis Media Inc.

10.11 License Agreement, dated April 5, 2000, between ZD Inc. and
Ziff Davis Publishing Holdings Inc.

10.12 License Agreement, dated April 5, 2000, between ZD Inc. and
Ziff Davis Publishing Holdings Inc.

10.13 Services Agreement, dated April 5, 2000, between ZD Inc. and
Ziff Davis Media Inc.

10.14 Transition Services Agreement, dated April 5, 2000, between
ZD Inc. and Ziff Davis Media Inc.

10.15 Side Letter Agreement, dated as of April 5, 2000, by and
among Ziff Davis Media Inc., ZD Inc. and ZD Holdings (Europe)
Ltd.

10.16 Technical Agreement, dated as of April 1, 1998, between ZD
COMDEX and Forums Inc. and SOFTBANK Forums KK (incorporated
by reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-46493)

10.17 Registration Rights Agreement, dated as of April 1, 1998,
between ZD Inc. and SOFTBANK Holdings Inc. (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-46493)

10.18 Credit Agreement, dated as of March 27, 1996 between SOFTBANK
Holdings Inc., the Guarantors listed therein, The Bank of New
York and Morgan Stanley Senior Funding, Inc. as amended March
9, 1998 (incorporated by reference to the exhibit in Ziff-
Davis Inc.'s Registration Statement on Form S-1, File No.
333-46493)

10.19 Secured Guaranteed Credit Agreement, dated as of May 4, 1998,
among Ziff-Davis Inc., the Banks listed therein, Morgan
Stanley Senior Funding, Inc., as Syndication Agent, the Chase
Manhattan Bank and DLJ Capital Funding, Inc., as Co-
Documentation Agents, The Bank of New York, as Administrative
Agent, and the Guarantors (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement of Form
S-1, File No. 333-46493)

10.20 Amendment No. 1 and Waiver to Secured Guaranteed Credit
Agreement, dated as of May 28, 1998, among Ziff-Davis Inc.,
the Banks listed therein and The Bank of New York, as
Administrative Agent (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement on Form
S-1, File No. 333-69447)

10.21 Amendment No. 2 to Secured Guaranteed Credit Agreement, dated
as of June 8, 1998, among Ziff-Davis Inc., the Banks listed
therein and The Bank of New York, as Administrative Agent
(incorporated by reference to the exhibit in Ziff-Davis
Inc.'s Registration Statement on Form S-1, File No. 333-
69447)

10.22 Amendment No. 3 to Secured Guaranteed Credit Agreement, dated
as of December 30, 1998, among Ziff-Davis Inc., the Banks
listed therein and The Bank of New York, as Administrative
Agent (incorporated by reference to the exhibit in Ziff-Davis
Inc.'s Registration Statement on Form S-1, File No. 333-
69447)

10.23 Lease of Ziff-Davis Inc.'s headquarters at 28 East 28th
Street, New York, New York (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement of Form
S-1, File No. 333-46493)

10.24 Lease Agreement, dated as of May 4, 1998, between Ziff-Davis
Inc., ZD Inc., ZD COMDEX and Forums Inc. and Kingston
Technology Company (incorporated by reference to the exhibit
in Ziff-Davis Inc.'s Registration Statement on Form S-1, File
No. 333-46493)

10.25 Agreement and Consent to Assignment, dated as of April 4,
2000, by and among 63 Madison Associates, L.P., ZD Inc. and
Ziff Davis Publishing Inc.
</TABLE>

(ii)
<PAGE>

<TABLE>
<CAPTION>
Page No.
--------
<C> <S> <C>
10.26 Assignment and Assumption of Lease, dated as of April 5,
2000, between ZD Inc. and Ziff Davis Publishing Inc.

10.27 Agreement of Sublease, dated March 10, 2000, between ZD Inc.
and Ziff-Davis Inc.

10.28 Assignment, dated as of May 4, 1998, between Kingston
Technology Company and Ziff-Davis Inc. (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-46493)

10.29 Employment Agreement, dated as of April 1, 1998, between ZD
Inc. and Eric Hippeau (incorporated by reference to the
exhibit in Ziff-Davis Inc.'s Registration Statement on Form
S-1, File No. 333-46493), amended as of March 1, 1999

10.30 Employment Agreement, dated as of April 1, 1998, between ZD
COMDEX and Forums Inc. and Jason E. Chudnofsky (incorporated
by reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-46493)

10.31 Employment Agreement, dated as of April 1, 1998, between
Ziff-Davis Inc. and Terri S. Holbrooke (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-69447)

10.32 Employment Agreement, dated as of April 1, 1998, between
Ziff-Davis Inc. and Timothy C. O'Brien (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-69447)
10.33 Employment Agreement, dated as of November 6, 1998, between
Ziff-Davis Inc. and Michael S. Perlis (incorporated by
reference to the exhibit in Ziff-Davis Inc.'s Registration
Statement on Form S-1, File No. 333-69447)

10.34 Employment Agreement, dated as of March 1, 2000, between
Ziff-Davis Inc. and Frederic D. Rosen

10.35 Stock Purchase Agreement, dated as of February 5, 1999, by
and between Ziff-Davis Inc. and Vulcan Ventures Inc.
(incorporated by reference to the exhibit in Ziff-Davis
Inc.'s Registration Statement on Form S-1, File No. 333-
69447)

10.36 Bill of Sale and Assignment, dated as of February 4, 1999,
between MAC Holdings (America) Inc. and ZD Inc. (incorporated
by reference to the exhibit in Ziff-Davis Inc.'s Current
Report on Form 8-K, File No. 001-14055)

21.1 List of subsidiaries of Ziff-Davis Inc.

23.1 Consent of PricewaterhouseCoopers LLP

27.1 Financial Data Schedule

99.1 Proxy Statement dated February 7, 2000
</TABLE>

(iii)

<PAGE>

================================================================================
Exhibit 2.1

PURCHASE AGREEMENT

among

ZD INC.,

ZD HOLDINGS (EUROPE) LTD.

and

HARTE-HANKS, INC.

Dated as of August 30, 1999

================================================================================
<PAGE>

EXHIBITS AND SCHEDULES

Exhibits

Exhibit A List of Companies
Exhibit B Form of Bill of Sale
Exhibit C Form of Trademark Assignment
Exhibit D Form of Assumption Agreement
Exhibit E Form of Sellers' Closing Certificates
Exhibit F Form of Buyer's Closing Certificate
Exhibit G Form of Transition Services Agreement
Exhibit H Form of Opinion of Counsel to Seller

Schedules

Schedule 1.1(b) Software
Schedule 1.1(c) Databases
Schedule 1.3 Excluded Assets
Schedule 1.4 Assumed Liabilities
Schedule 2.2(a) Asset Purchase Price Allocation
Schedule 2.2(b) Stock Purchase Price Allocation
Schedule 4.2 Capitalization
Schedule 4.4 Third Party Consents
Schedule 4.6 Intellectual Property
Schedule 4.7 Insurance Policies
Schedule 4.8 Contracts
Schedule 4.9 Employees/Contractors
Schedule 4.10 Litigation
Schedule 4.11 Real Property Leases
Schedule 4.12(a) Personal Property
Schedule 4.12(b) Leased Personal Property
Schedule 4.13 Transactions with Employees
Schedule 4.14(a) Asset Seller Financial Statements
Schedule 4.14(b) Stock Seller Financial Statements
Schedule 4.16 Absence of Certain Changes
Schedule 4.19(a) Employee Plans
Schedule 4.19(b) General Employee Severance
Schedule 4.19(c) ERISA
Schedule 4.19(e) Vesting
Schedule 4.22 Customers
Schedule 6.6 Trademark Guidelines

<PAGE>

Exhibit A:

The Companies

ZD Market Intelligence SARL

ZD Market Intelligence Ltd. (UK)

ZD Market Intelligence GmbH

ZD Market Intelligence Espana LLC

ZD Market Intelligence Ltd. (Ireland)
<PAGE>

PURCHASE AGREEMENT

dated August 30, 1999

The parties to this Purchase Agreement (this "Agreement") are ZD INC., a
Delaware corporation with its principal offices at 28 East 28th Street, NY, NY
10016 ("Asset Seller"), ZD Holdings (Europe) Ltd., a company incorporated under
the laws of the United Kingdom, with its principal office at One St. Katherine's
Way, London E1 9UN ("Stock Seller" and, collectively with the Asset Seller, the
"Sellers") and Harte-Hanks, Inc., a Delaware corporation with its principal
office at 200 Concord Plaza Drive, San Antonio, Texas 78216 ("Buyer"). Asset
Seller and Stock Seller are sometimes referred to herein individually as the
"Applicable Seller", as the context requires. As used herein the term "Stock
Seller" shall also be deemed to refer to Asset Seller solely with respect to ZD
Market Intelligence Ltd. (Ireland) and ZD Market Intelligence Espana LLC, two of
the Companies, and the sale of the share capital therein.

The Asset Seller, through ZD Market Intelligence (the "Division"), and the
Stock Seller, through its wholly owned corporations, limited liability companies
and other companies listed on Exhibit A hereto (each a "Company" and,
collectively, the "Companies"), develop, compile and distribute information on
installed and planned technology hardware and software purchases and provide
customized service solutions utilizing such information (collectively, the
"Business").

The parties have agreed upon the sale to Buyer of all of the assets
primarily used in the Business as conducted by the Asset Seller and all of the
share capital in the Companies, in each case upon the terms and conditions set
forth in this Agreement.

Accordingly, it is agreed as follows:

1. SALE AND TRANSFER OF ASSETS AND SHARE CAPITAL.

1.1. Assets To Be Sold. Subject to the terms and conditions contained
herein, at the Closing (as defined in Section 3) Asset Seller shall sell, assign
and transfer to Buyer, and Buyer shall purchase and acquire from Asset Seller,
all assets, whether real, personal or mixed, whether tangible or intangible
(including good will), whether accrued, contingent or otherwise, primarily used
in the Business other than the Excluded Assets (as defined in Section 1.3) (the
"Assets"). The transactions contemplated by this Section 1.1 are sometimes
herein referred to as the "Asset Purchase." The Assets shall include, but are
not limited to, the following assets primarily used in the Business:

(a) all domain names, trademarks, trade names, service marks, trade
dress, logos, patents, copyrights, together with the goodwill associated with
the foregoing, and all registrations and applications for registration and all
claims for infringement of the foregoing, and all trade secrets, know-how and
other intellectual property rights, including those set forth on Schedule 4.6;
<PAGE>

(b) all software programs, technology and software licenses, whether
developed, purchased or customized by Asset Seller, including any associated
documentation ("Software"), including without limitation the Software listed on
Schedule 1.1(b);

(c) all databases, marketing information, marketing research data and
reports, all prospect, customer and mailing lists, as well as databases and
works in progress with respect to any of the foregoing (the "Databases"),
including without limitation the Databases listed on Schedule 1.1(c);

(d) all records, accounts, files and data, whether existing in print
or on magnetic or other media;

(e) all promotional and advertising materials, whether existing in
print, video, online, magnetic or other media, and stationery, forms, labels and
other materials;

(f) all contracts, purchase or other orders, leases, licenses,
commitments and other agreements and any rights thereunder;

(g) all office equipment, computers and other equipment, vehicles,
furniture, fixtures, supplies, capital improvements and other tangible personal
property;

(h) all prepaid expenses, accounts receivable and other current
assets, including the security deposit under any real estate lease, and other
similar assets;

(i) all licenses, permits and approvals; and

(j) all of Asset Seller's claims or causes of action relating to the
Assets or the Business.

1.2. Share Capital to be Sold. Subject to the terms and conditions
contained herein, at the Closing, Stock Seller shall sell, assign, transfer and
deliver to Buyer, and Buyer shall purchase, acquire and accept from Stock
Seller, all of the share capital in the Companies (the "Share Capital") free
and clear of all liens, charges, pledges, mortgages, privileges, usufructs,
beneficial interests or other dismemberment of share capital or other rights,
restrictions or claims in favor of third parties or the Sellers whatsoever
without limitation (collectively "Liens") and together with all rights attaching
to that share capital but not including the Companies' interest in any Excluded
Assets. The transactions contemplated by this Section 1.2 are sometimes herein
referred to as the "Equity Purchase."

1.3. Excluded Assets. Notwithstanding anything herein to the contrary, the
following assets relating to the Business are being retained by Asset Seller and
Stock Seller, as applicable, and are not being sold, assigned or transferred to
Buyer and Buyer will not purchase, obtain any rights with respect to or accept
any of the following assets (the "Excluded Assets") in connection with the Asset
Purchase or the Equity Purchase:

2
<PAGE>

(a) all cash, bank accounts, certificates of deposit, commercial
paper, annuities, treasury notes and bills and other marketable securities other
than the Share Capital;

(b) subject to Section 6.3, Asset Seller's rights under any order,
lease, contract or other agreement relating to the Business as to which consent
to assignment has not been obtained;

(d) all assets primarily used in connection with the Division's former
metric businesses, which included the StoreBoard, InfoBeads, Technology User
Profile (TUP), MicroDesign Resources and Trendata products (whether or not such
assets have been either sold by Asset Seller to third parties or transferred to
Asset Seller's other divisions);

(e) all software, hardware, equipment and other personal property and
other centralized or shared assets used by other businesses of the Asset Seller
or Stock Seller and not primarily used in connection with the Business;

(f) the "Ziff-Davis", "ZD", any derivation or other variation of such
terms and other trademarks, trade names, service marks, trade dress, domain
names or logos of Asset Seller or its parent, Ziff-Davis Inc., or any of its
parent's affiliates (as defined in Rule 405 promulgated under the Securities Act
of 1933) or divisions subject to Section 6.6 below; and

(g) the assets specifically described in Schedule 1.3.

1.4. Assumed Liabilities. Buyer hereby assumes Asset Seller's liabilities
for the following: (a) all liabilities and obligations related to the conduct of
the Business arising after the Closing; (b) obligations of Asset Seller to
perform contracts and other commitments with respect to the conduct of the
Business after the Closing; (c) all current liabilities, as reflected on the
Asset Seller's Closing Balance Sheet prepared in accordance with Section 2.3;
(d) any payment obligations from and after the Closing Date to Asset Seller
Employees (as defined in Section 6.5(b)) who become Buyer's employees
("Transferred Employees") arising out of their employment with Buyer, including
the severance arrangements, but excluding the retention bonuses, set forth in
Schedule 4.19(b) and (e) those liabilities set forth in Schedule 1.4
(collectively, the "Assumed Liabilities").

1.5. Retained Liabilities. Except for the liabilities that Buyer is
expressly agreeing to assume pursuant to Section 1.4, Buyer is not assuming and
shall have no obligation to pay, perform or discharge any debts, liabilities,
claims and obligations relating to Sellers' conduct of the Business prior to
the Closing Date, including without limitation: (a) any payment obligations from
and after the Closing Date to Asset Seller Employees who do not become
Transferred Employees, including severance arrangements, and the retention
bonuses payable to Asset Seller's employees set forth in Schedule 4.19(b) and
any obligation to the Companies' employees resulting from any measures taken
prior to the Closing Date, including as a result of any social plans or
redundancies, (b) any liability or obligation of Asset Seller for taxes of any
kind (and any penalties or interest due on account thereof), including any tax
liability and other

3
<PAGE>

related costs arising from the transfer by any of the Companies of any Excluded
Asset to the Seller or any affiliated or parent company of the Seller; (c) any
liability or obligation with respect to any suits, actions, claims or
proceedings pending or threatened on the Closing Date or which results from
action taken prior to the Closing Date; (d) any long term debt, including
short-term portions thereof, and intercompany liabilities; and (e) any
liabilities related to employees, former employees, or Employee Plans (as
defined in Section 4.19), including without limitation liabilities under the
Ziff-Davis Retirement & Savings Plan through the Closing Date, except as
expressly provided in Section 6.5 (collectively, the "Retained Liabilities").
Asset Seller shall retain and shall timely pay, perform and discharge the
Retained Liabilities. Furthermore, Buyer is not assuming and shall have no
obligation to pay, perform or discharge any debts, costs, liabilities, expenses
or obligations relating to (a) any value added taxes or similar taxes currently
owed or incurred by the Companies on or prior to the Closing Date (the "VAT
Taxes") or (b) any debts, costs, liabilities, expenses or obligations relating
to the Sellers or the Companies' employee stock options or similar equity
instruments outstanding or proposed or committed to be issued on or prior to the
Closing Date (the "Option Obligations"). Asset Seller shall assume, retain and
pay all debts, costs, liabilities, expenses or obligations related to the VAT
Taxes or the Option Obligations and the VAT Taxes and Option Obligations shall
be part of the Retained Liabilities.

2. CONSIDERATION; ALLOCATION OF PURCHASE PRICES; ADJUSTMENT OF PURCHASE
PRICES.

2.1. Consideration. In consideration for the Assets to be purchased by
Buyer, at the Closing Buyer shall pay to Asset Seller an amount equal to NINETY
FOUR MILLION Dollars ($94,000,000) (the "Asset Purchase Price") in immediately
available funds by wire transfer at the Closing to the account designated by
Asset Seller at least two business days prior to Closing, subject to adjustment
as provided in Section 2.3. In consideration for the Share Capital to be
purchased by Buyer, at the Closing Buyer shall pay to the Stock Seller, an
amount equal to SEVEN MILLION Dollars ($7,000,000) (the "Stock Purchase Price"
and, collectively with the Asset Purchase Price, the "Purchase Prices") in
immediately available funds by wire transfer at the Closing to the account
designated by Stock Seller at least two business days prior to Closing, subject
to adjustment as provided in Section 2.3.

2.2. Allocation of Purchase Prices.

(a) The Asset Purchase Price shall be allocated among the Assets in
accordance with Schedule 2.2(a). Each party shall use such allocation in all tax
and governmental filings, except as may be adjusted by its subsequent agreement
with the Internal Revenue Service in connection with an audit or by court
decision. To the extent that disclosures of this allocation are required to be
made by the parties to the Internal Revenue Service (the "IRS"), Buyer and Asset
Seller will disclose such reports to the other prior to filing with the IRS.

(b) The Stock Purchase Price shall be allocated among the Share
Capital in accordance with Schedule 2.2(b). Each of Buyer and Stock Seller shall
use such allocation in all tax and governmental filings, except as may be
adjusted by its subsequent agreement with the applicable government authority in
connection with an audit or by court decision. To the extent

4
<PAGE>

that disclosures of this allocation are required to be made by the parties to a
tax authority having jurisdiction over the Companies, Buyer and Stock Seller
will disclose such reports to the other prior to such filing.

2.3. Adjustment of Purchase Prices.

(a) Schedule 4.14(a) contains an unaudited balance sheet of the
Division as of June 30, 1999 ("Asset Seller's Pre-Closing Balance Sheet").
Within thirty days after the Closing, Asset Seller will deliver to Buyer an
unaudited balance sheet of the Division as of the Closing Date prepared on a
basis consistent with Asset Seller's Pre-Closing Balance Sheet ("Asset Seller's
Closing Balance Sheet"). Based upon the Asset Seller's Closing Balance Sheet,
the parties shall determine the Division's Working Capital (as hereinafter
defined). It is the intention of the parties that the Division's Working Capital
shall be zero at the Closing Date. For this purpose, the "Division's Working
Capital" means (a) the sum of prepaid expenses, net accounts receivable and
other current assets purchased by Buyer pursuant to Section 1.l(h) minus (b)
the sum of accounts payable, accrued operating expenses, accrued other expenses
and other current liabilities that are assumed by Buyer pursuant to Section
1.4(c). Notwithstanding the foregoing, the Division Working Capital shall
include deferred revenue associated with (i) Database sales and (ii) unexpired
customer license agreements (but only to the extent deferred revenue exceeds the
balance as of June 30, 1999) but shall not include retention bonuses and
severance arrangements set forth on Schedule 4.19(b), the Retained Liabilities
or the Excluded Assets.

(b) Schedule 4.14(b) contains an unaudited combined balance sheet of
the Companies as of June 30, 1999 ("Stock Seller's Pre-Closing Balance Sheet"
and, collectively with the Asset Seller's Pre-Closing Balance Sheet, the
"Sellers' Pre-Closing Balance Sheets"). Within thirty days after the Closing,
Asset Seller will deliver to Buyer an unaudited combined balance sheet of the
Companies as of the Closing Date prepared on a basis consistent with Stock
Seller's Pre-Closing Balance Sheet ("Stock Seller's Closing Balance Sheet" and,
collectively with the Asset Seller's Closing Balance Sheet, the "Sellers'
Closing Balance Sheets"). Based upon the Stock Seller's Closing Balance Sheet,
the parties shall determine the Companies' Working Capital (as hereinafter
defined). It is the intention of the parties that the Companies' Working Capital
shall be zero at the Closing Date. For this purpose, the "Companies' Working
Capital" means (a) the sum of prepaid expenses, net accounts receivable and
other current assets of the Companies minus (b) the sum of accounts payable,
accrued operating expenses, accrued other expenses and other current liabilities
of the Companies. Notwithstanding the foregoing, the Companies' Working Capital
shall include deferred revenue associated with (i) Database sales and (ii)
unexpired customer license agreements (but only to the extent deferred revenue
exceeds the balance as of June 30, 1999) but shall not include retention bonuses
and severance arrangements set forth on Schedule 4.19(b) or Excluded Assets of
the Companies. The Companies' Working Capital and Division's Working Capital are
sometimes individually referred to herein as the "Applicable Working Capital",
as the context requires.

(c) The Sellers' Pre-Closing Balance Sheets and Sellers' Closing
Balance Sheets shall be prepared by Asset Seller and Stock Seller, respectively,
from the books and records of Asset Seller and the Companies, respectively, on a
basis consistent with U.S. generally accepted accounting principles ("GAAP")
consistently applied to the Division and the

5
<PAGE>

Companies, respectively. Buyer shall have the right to audit any Sellers'
Closing Balance Sheet. Within forty- five days of Buyer's receipt of any
Sellers' Closing Balance Sheet, Buyer shall either notify the Applicable Seller
of its acceptance of such Sellers' Closing Balance Sheet or present to such
Seller its objections to such Seller's Closing Balance Sheet. In the event that
Buyer fails to notify the Applicable Seller of its acceptance of, or present its
objections to, any Sellers' Balance Sheet within such forty-five day period,
such Sellers' Closing Balance Sheet shall be considered accepted by and final
and binding upon Buyer. If Buyer presents objections to any Sellers' Closing
Balance Sheet and after reasonable, good faith efforts, the parties are unable
to resolve their differences within thirty (30) days after Buyer's presentation
of its objections to the Applicable Seller, Buyer and such Seller shall submit
the differences to a "Big Five" accounting firm having no existing relationship
with Buyer or Sellers, nominated by such Seller and reasonably acceptable to
Buyer, who, acting as an expert and not as an arbitrator, shall review such
Sellers' Closing Balance Sheet and determine all disputed items and such balance
sheet as adjusted by such accounting firm shall be binding upon the parties
hereto. Buyer shall bear the cost and expense for such accounting firm unless
the statement shows an error in the Applicable Seller's calculation of the
Applicable Working Capital which is (i) unfavorable to Buyer and (ii) in excess
of $100,000, in which case the Applicable Seller shall bear the cost and expense
of such accounting firm.

(d) Within five (5) business days after any Sellers' Closing Balance
Sheet becomes final and binding:

(i) if the amount of Applicable Working Capital indicated on
such Sellers' Closing Balance Sheet is less than zero (i.e.,
negative), then the Applicable Seller shall remit to Buyer,
or

(ii) if the amount of Applicable Working Capital indicated on
such Sellers' Closing Balance Sheet is greater than zero,
then Buyer shall remit to the Applicable Seller,

by wire transfer of immediately available funds, a payment equal to such
Applicable Working Capital, together with interest thereon at a rate equal to
the rate of interest from time to time announced publicly by Citibank, N.A., as
its prime rate, calculated on the basis of the actual number of days elapsed
from Closing to the date of payment divided by 365.

3. THE CLOSING. The closing of the Asset Purchase and the Equity Purchase
contemplated by this Agreement (collectively, the "Closing") shall take place at
the offices of Seller at 9:30 AM local time on the second business day following
the first date on which of all waiting periods applicable to Asset Purchase and
the Equity Purchase under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), or other similar applicable waiting periods
(such as those provided under the European Union merger regulations or any
applicable national law), shall have expired or been terminated and all
applicable government approvals have been received and all conditions to Closing
set forth in Section 8 shall have been satisfied or waived, or at such other
time, place and date as Buyer and Sellers may mutually agree. The date of the
Closing is referred to as the "Closing Date."

6
<PAGE>

4. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly and severally,
represent and warrant to Buyer that, except as set forth in the disclosure
schedules attached hereto:

4.1. Sellers' Organization and Authority. Each Seller and each Company is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the full corporate, partnership, limited
liability company or other applicable power and authority to enter into and to
perform the transactions contemplated on its part by this Agreement and to carry
on its portion of the Business as now conducted by it and to own, lease and
operate, in the case of the Asset Seller, the Assets or, in the case of the
Companies, its properties, assets (tangible and intangible), rights and goodwill
(collectively for |each Company, such Company's "Company Assets" and,
collectively for all the Companies, the "Companies' Assets") in each case as it
now does. Each of Asset Seller and each Company is duly licensed or qualified to
do business and, to the extent such concept is applicable to it, is in good
standing in each jurisdiction where the character of the properties owned or
leased by it, or the nature of its business, makes such licensing or
qualification necessary, except for such failures to so qualify that would not,
alone or in the aggregate, have a Material Adverse Effect. "Material Adverse
Effect" shall mean any material adverse effect on (i) the operations, financial
condition or results of operations of the Business, (ii) the Assets, the
Companies' Assets and the Companies, taken as a whole, or (iii) the Sellers'
ability to perform under this Agreement. No other parties have any beneficial
ownership, equity or other interest, actual or phantom, in the Business.

4.2. Capitalization. (a) Schedule 4.2 sets forth the outstanding Share
Capital in each Company, all of which is duly authorized, validly issued, fully
paid and nonassessible. All share capital contributions have been validly made
and have not been redeemed or reimbursed by any Company. The Share Capital
represents all of the share capital or equivalent in the Companies. Except for
the Share Capital, there is not, and at the Closing there will not be, any
share capital in any Company issued or outstanding or any subscriptions,
options, warrants, calls, rights, convertible securities or other agreements or
commitments of any character obligating any Company to offer, issue, transfer or
sell or to acquire or retire any of its share capital or any agreements,
arrangements or understandings granting any person any rights in any Company
similar to the Share Capital. All of the Share Capital is owned by Stock Seller
free and clear of any liens, charge, encumbrance, restriction or claim
(collectively, "Liens"). There are not now, and at the Closing there will not
be, any voting trusts or other agreements or understandings to which Stock
Seller or any Company is a party or is bound with respect to the voting of the
Share Capital. All of the Share Capital was issued by the Companies in
compliance with all applicable securities laws.

(b) The consummation of the Equity Purchase will convey to Buyer good
and marketable title to the Share Capital, free and clear of all Liens, except
for those created by Buyer.

4.3. Authority. The execution, delivery and performance by Sellers of (i)
this Agreement and (ii) each other document required by this Agreement to be
executed and delivered by them to Buyer (the "Seller Other Documents") and the
consummation by them of

7
<PAGE>

the transactions contemplated herein and therein have been duly authorized by
all necessary corporate action of each Seller; this Agreement has been, and when
executed and delivered as required by this Agreement the Seller Other Documents
will be, duly executed by an authorized officer of each Seller; and this
Agreement constitutes, and when executed and delivered as required by this
Agreement the Seller Other Documents will constitute, valid and binding
obligations of each Seller, enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

4.4. No Conflicts.

(a) The execution, delivery and performance of this Agreement and the
Seller Other Documents and the consummation of the transactions contemplated
herein and therein by each Seller will not: (i) conflict with, or result in a
breach of, violation of or default under, the certificate of incorporation, by-
laws or other organizational documents of such Seller or any of the Companies;
(ii) conflict with, or result in the breach or termination of, or constitute a
default (or any event that, with notice or lapse of time, or both, would
constitute a default) under, or accelerate the performance required by, any
material contract, lease, agreement, commitment or other instrument or
restriction of any kind to which such Seller or any Company is a party or by
which it, any of the Assets or any of the Companies' Assets is bound or
affected; (iii) constitute a violation by such Seller or any Company of any
applicable statute, law, rule, regulation, order, writ, injunction or decree of
any court or governmental authority; or (iv) result in the creation of any lien,
charge, encumbrance, restriction, or claim upon any of the Assets, any Share
Capital or any of the Companies' Assets.

(b) Other than as required under the HSR Act or under the European
Union merger regulations or any other similar applicable national law, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental or European authority is required on the part of the
Sellers or the Companies in connection with the execution, delivery and
performance of this Agreement and the other documents referred to in this
Agreement and the transactions contemplated herein and therein.

(c) No consent of any third party is required for the transfer of the
Assets or the Share Capital as provided in this Agreement except for those
consents set forth on Schedule 4.4.

4.5. Assets; Companies Assets. Asset Seller has, and at the Closing, Buyer
will receive, good and marketable title to all of the Assets and the Companies
have, and at the Closing by virtue of the Equity Purchase, Buyer will receive,
good and marketable title to all of the Companies' Assets, in each case free and
clear of any Lien, except for such Liens that would not materially interfere
with the ownership or operation of the Business, the Assets or the Companies'
Assets, taken as a whole, and which will not secure any debt as of the Closing
Date. All tangible assets constituting Assets or Companies' Assets are in good
operating condition and repair, ordinary wear and tear excepted. The Assets and
Companies' Assets will constitute all the assets primarily used in the Business
as conducted other than the Excluded Assets. The Assets

8
<PAGE>

and the Companies' Assets (when taken together with working capital and the
Excluded Assets described in paragraphs (b), (e), (f) and (g) of Section 1.3)
are adequate and sufficient for the operation of the Business as presently
conducted.

4.6. Trademarks; Intellectual Property. Each of Asset Seller and each
Company owns or has the right to use all of the Databases, Software, domain
names, trademarks, trade names, service marks, logos, patents and, copyrights
used by it in the Business (collectively, the "Intellectual Property"),
including those listed on Schedule 4.6. The Business as currently conducted does
not infringe upon any trademark, trade name, service mark, logo, patent,
copyright or trade secret. No proceedings have been instituted or, to the best
of Sellers' knowledge, are pending or threatened to the effect that the use by
the Asset Seller or any Company of any Intellectual Property infringes on the
rights of any third party and no claim has been received by Sellers alleging any
such infringement. To the best of Sellers' knowledge, there is no violation by
others of any right of the Business with respect to any Databases, Software,
domain names, trademarks, trade names, service marks, logos, patents,
copyrights, trade secrets or any other rights to be sold or assigned to Buyer by
Asset Seller pursuant to this Agreement or of the Companies. Each of Asset
Seller and each Company has taken commercially reasonable steps to safeguard
the confidentiality of the information comprising the Databases.

4.7. Insurance. Schedule 4.7 sets forth a list of all insurance policies
covering the Business, the Assets and the Companies' Assets. No notice of
cancellation or termination has been received with respect to any such insurance
policies , and such policies are in full force and effect. Sellers have no
knowledge of any act or omission that could result in cancellation or
termination of any such policy prior to its scheduled expiration date. Such
insurance policies are sufficient in all material respects for compliance by
Asset Seller and the Companies with all requirements of law and with the
requirements of all contracts to which Seller or any Company is a party.

4.8. Contracts. Except for those contracts set forth on Schedules 4.9,
4.11 and 4.12(b), Schedule 4.8 hereto contains a list of all of the following
oral and written contracts, agreements and arrangements (and all supplements and
modifications thereto) to which any Seller or any of the Companies is a party:
(i) all contracts, commitments and agreements to which Asset Seller or any
Company is a party or by which it is bound relating to the Business that could
involve more than $50,000 and that are not terminable by Asset Seller or any
Company without penalty to Asset Seller or any Company on notice not exceeding
six months; (ii) any contract or agreement relating to the making of any loan,
advance, or investment in any person or entity; (iii) any guarantee or other
contingent liability in respect of any indebtedness or obligation of any person
or entity; (iv) any material contract or agreement where any person or entity
has agreed not to compete in the Business with either Seller, any Company or any
of their affiliates, (v) any contract or agreement, regardless of dollar amount,
that is material to the Business as presently conducted or to the Assets, the
Companies' Assets and the Companies, taken as a whole; and (vi) any contract,
commitment, or agreement limiting the freedom of either Seller (with respect to
the Business only) or any Company or their successors or assigns from engaging
in any line of business, soliciting employees or customers, or competing with
any person or entity. Sellers have made available copies of each agreement
listed on Schedules 4.8, 4.9, 4.11 and 4.12(b) (or summaries in the case of
oral agreements) for inspection by Buyer.

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Except as set forth in Schedule 4.4, each of the agreements to which Asset
Seller is a party set forth in Schedules 4.8, 4.9, 4.11 and 4.12(b) is fully
assignable to Buyer by Asset Seller without the consent of any third parties.
Each of the agreements set forth in Schedules 4.8, 4.9, 4.11 and 4.12(b) is
presently in full force and effect in accordance with its terms and no condition
exists that, with notice or lapse of time or both, would constitute a breach or
default by Asset Seller or any Company, or to Sellers' knowledge, by any other
party to any of such agreements. Except for such instances that, alone or in the
aggregate, would not have a material adverse effect on the Assets, the
Companies' Assets or the Business, taken as a whole, no party to any of the
agreements has made or asserted any claim of breach, defense, setoff or
counterclaim under any of the agreements or has exercised any option granted to
it to cancel or terminate its agreement.

4.9. Employees/Contractors. Except as set forth on Schedule 4.9 hereto,
neither Asset Seller nor any Company is a party to or bound by any employment
agreement, collective bargaining or other labor agreement in connection with the
Business. Schedule 4.9 hereto contains a complete and correct list of (a) each
employee of Asset Seller who works for the Division and each employee of the
Companies, in each case including job title, compensation and date of hire, and
(b) each independent contractor who works for the Division or any of the
Companies for aggregate annual fees in excess of $20,000. Asset Seller and each
Company is in compliance in all material respects with all laws and regulations
respecting employment and employment practices, terms and conditions of
employment, wages and hours with respect to the Business, and is not engaged in
any unfair or illegal labor practice or subcontracting arrangement, and no claim
or notice has been received by Sellers or any Company asserting that Asset
Seller or any Company is not in such compliance or is engaged in such practices
or, to the best of Sellers' knowledge, has been threatened. Except as set forth
in Schedule 4.9 hereto, with respect to the Business, neither Asset Seller nor
any Company has experienced any labor strike, dispute, union organization
attempts, concerted employee activity or any work stoppage due to labor
disagreements, and there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending against or affecting the
Business or, to the best of Sellers' knowledge, threatened. Except as set forth
in Schedule 4.9, there are no administrative charges or court complaints against
Asset Seller or any Company with respect to the Business concerning alleged
employment discrimination or employment related matters pending or, to the best
of Sellers' knowledge, threatened before the U.S. Equal Employment Opportunity
Commission or any state, federal or foreign court or governmental or regulatory
authority or agency. None of the employees of the Companies may claim payment
for extra hours performed during the five years preceding the date of this
Agreement.

4.10. Litigation; Compliance with Laws; Permits. Except as set forth on
Schedule 4.10:

(a) There are no judicial or administrative actions, suits,
arbitration, proceedings or investigations pending or, to the best of Sellers'
knowledge, threatened, or any orders, injunctions or decrees outstanding,
against or involving the Business or any Asset or Companies' Asset. There are
no proceedings pending or, to the best of Sellers' knowledge, threatened which
seek to restrain, rescind or in any way restrict, delay or prohibit either
Seller's ability to consummate the Asset Purchase or Equity Purchase
contemplated on its part hereby. There are no unpaid judgments, injunctions,
orders, or decrees, or arbitration decisions or awards

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<PAGE>

outstanding against Asset Seller or any Company with respect to the Assets, the
Companies' Assets or the Business.

(b) Neither Asset Seller nor any Company is in violation in any
material respect of any applicable law, regulation, ordinance, or any other
requirement of any governmental body or court applicable to the Business and no
notice has been received by Sellers or any Company alleging any such violation.

(c) Each of Asset Seller and each Company has all permits, licenses,
registrations, franchises, consents and other authorizations (`Permits")
necessary for the conduct of its portion of the Business and is in compliance
with all such Permits in all material respects, and such Permits are in full
force and effect and, in the case of those relating to the Assets, are
assignable to Buyer in accordance with the terms of this Agreement.

4.11. Real Property; Realty Leases. Sellers and the Companies do not own
any real property in connection with the Business. Schedule 4.11 contains a list
of all real property leases or other arrangements relating to the premises used
by the Business. Complete copies of each realty lease listed on Schedule 4.11
have been delivered to Buyer. There is no default of any material term of any
such lease by Asset Seller or any Company or, to the best of Sellers' knowledge,
by the other parties thereto and, to the best of Sellers' knowledge, no event
has occurred which with notice or lapse of time or both would constitute such a
default. Neither of the Sellers nor any Company have received any notice from
any governmental body or owner of the leased properties requiring or calling
attention to the need for any work, repair, construction, alteration or
installation on or in connection with such properties that has not been complied
with or settled. The buildings, offices, and any other structures leased or
occupied by Asset Seller or any Company in connection with the Business are
generally adequate and sufficient for the operation of the Business as currently
conducted.

4.12. Personal Property. The personal property owned, leased or used in
connection with the Business is in good operating condition and repair, ordinary
wear and tear excepted, and is generally adequate and sufficient for the
operation of the Business as currently conducted. All of the personal property
primarily used in the Business and with a fair market value in excess of
$100,000 is set forth on Schedule 4.12(a). All of the leases for the leased
personal property primarily used in the Business and with a fair market value in
excess of $50,000 are set forth on Schedule 4.12(b) and, except as set forth on
Schedule 4.12(b), are in full force and effect. All of the leases set forth on
Schedule 4.12(b) that comprise the Assets are fully assignable to Buyer without
third party consents except as set forth on Schedule 4.12(b). Neither Asset
Seller nor any Company is in breach of or default under (and no event has
occurred which, with due notice or lapse of time or both, may constitute such a
lapse or default under) any lease of any such personal property purported to be
leased by it in connection with the Business.

4.13. Transactions with Employees. Except as set forth on Schedule 4.13,
neither Asset Seller nor any Company has, or is currently, engaged in any
transaction and is not a party to any contract with any employee, manager,
member, director or officer of the Division or any Company or any of their
affiliates, other than employment related agreements entered into in the
ordinary course of business and listed on Schedules 4.8 or 4.9.

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<PAGE>

4.14. Certain Financial Information. Asset Seller has delivered to Buyer
copies of (a) unaudited balance sheets of the Business conducted by Asset Seller
as of December 31, 1998 and June 30, 1999, and (b) unaudited statements of
operations for the Business conducted by Asset Seller for the year ended
December 31, 1998 and for the period beginning January 1, 1999 and ending June
30, 1999, which are attached as Schedule 4.14(a) (collectively, "Asset Seller
Financial Statements"). The Asset Seller Financial Statements have been prepared
in accordance with the books and records of the Business conducted by Asset
Seller on a basis consistent with GAAP, and fairly present the assets,
liabilities, revenue, expenses and financial position of such Business as of
such dates or for the periods indicated. Stock Seller has delivered to Buyer
copies of (i) unaudited combined balance sheets of the Companies as of December
31, 1998 and June 30,, 1999, and (ii) unaudited combined statements of
operations for the Companies for the year ended December 31, 1998 and for the
period beginning January 1, 1999 and ending June 30,, 1999, which are attached
as Schedule 4.14(b) (collectively, "Stock Seller Financial Statements" and,
collectively with the Asset Seller Financial Statements, the "Financial
Statements"). The Stock Seller Financial Statements have been prepared in
accordance with the books and records of the Companies on a basis consistent
with GAAP, and fairly presents the assets, liabilities, revenue, expenses and
financial position of the Companies as of such dates or for the periods
indicated. Except as disclosed in the Schedules to this Agreement or in the
Financial Statements and for the Retained Liabilities, there are no material
undisclosed liabilities relating to the Assets, the Business or any of the
Companies, contingent or absolute, other than current liabilities arising in the
ordinary course of business subsequent to the Financial Statements, which are of
a nature and in amounts consistent with past business practices.

4.15. Accounts Receivable and Payable. Since June 30, 1999, Asset Seller
and the Companies have collected their respective accounts receivable and paid
their respective accounts payable relating to the Business in the ordinary
course of business. All of the accounts receivable of Asset Seller and the
Companies relating to the Business are bona fide accounts receivable that arose
in the ordinary course of business for goods delivered or services rendered or
to be rendered.

4.16. Absence of Certain Changes. Since June 30, 1999, each of Asset
Seller and each Company has operated its portion of the Business in the ordinary
course and consistent with past practice and, except as set forth on Schedule
4.16:

(a) there has not been any material adverse change in the
operations, financial condition or results of operations of the Business or any
material loss, damage or destruction, including, without limitation, any
material reduction in prices charged and received for the Business' products,
goods and services (other than any such reduction made in the ordinary course of
business), affecting the Assets or the Companies' Assets, taken as a whole,
whether or not covered by insurance (collectively, a "Material Adverse Change");

(b) except with respect to retention bonuses and severance
arrangements set forth in Schedule 4.19(b), neither Asset Seller nor any Company
has entered into any material transaction or incurred any material liability or
obligation except in the ordinary course of business with respect to the
Business;

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<PAGE>

(c) neither Asset Seller nor any Company has incurred, assumed or
guaranteed any indebtedness, other than indebtedness to trade creditors incurred
in the ordinary course of business with respect to the Business;

(d) neither Asset Seller nor any Company has made any loan or advance
to any person in connection with the Business including, without limitation, any
officer, director or employee of the Business other than advances to employees
in the ordinary course for travel expenses in accordance with past practice;

(e) there has been no change in the accounting methods or principles
used by Asset Seller or any Company;

(f) there has been no amendment or termination by Asset Seller or any
Company of any material contract, or any waiver of material rights under such
contract, other than in the ordinary course of business with respect to the
Business, or any breach of any obligations or of any rights of the Asset Seller
or any Company under such contracts;

(g) no mortgage, pledge, lien or encumbrance has been made on any
Assets or Companies' Assets; and

(h) no Assets or Companies' Assets have been sold, leased, or
transferred (other than those that have been replaced with Assets or Companies'
Assets of equal or greater value).

4.17. Taxes. All tax returns due by Asset Seller or any Company relating
to the Business have been timely filed and all taxes due from Asset Seller or
any Company relating to the Business have been fully paid and there is no
action, suit, proceeding, audit, claim, lien or assessment pending or, to the
best of Sellers' knowledge, proposed with respect to taxes due or with respect
to any tax return. The provision made for taxes on the Financial Statements is
sufficient for the payment of all taxes and assessments for all periods through
the dates thereof in each jurisdiction in which the Business is operated or
subject to tax. Each of Asset Seller and each Company has duly withheld and paid
all taxes that it is required to withhold and pay relating to salaries, wages
and other compensation, remuneration or benefits paid to the employees.

4.18. Environmental Matters. Each of Asset Seller and each Company is in
compliance in all material respects with all environmental laws and regulations
applicable to it, including approved assessment or remediation plans
(collectively, "Environmental Laws") in connection with the Business and there
are no facts, events, conditions, circumstances, activities, practices,
incidents, actions or omissions that could reasonably be expected to result in a
material liability relating to the Assets, the Companies' Assets, the Business
or any Company under any Environmental Law. None of Asset Seller, any Company,
nor any agent or employee of Asset Seller or any Company acting on its behalf or
at its direction has generated, manufactured, refined, transported, treated,
stored, handled, disposed, transferred, produced or processed any pollutants,
dangerous or toxic substances or hazardous wastes or materials or such similar

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<PAGE>

substances as defined in any Environmental Law in connection with the Business.
Neither Seller nor any Company has received notice of any summons, citation,
directive, order, claim, litigation, investigation, proceeding, judgment, letter
or other written communication from any federal, local or foreign agency or
authority regarding any actual or threatened release, spill, leak, discharge,
disposing or dumping of any such materials in connection with the Business.

4.19. Employee Plans. Schedule 4.19(a) lists each pension, retirement,
profit-sharing, deferred compensation, bonus, phantom stock or other incentive
plan, stock option plan, stock purchase plan, deferred compensation
arrangement, arrangement in relation to the 35-hour week in France, severance
pay arrangement, supplemental executive retirement plan or program, medical,
vision, dental, health, life, disability or other welfare plan, or any other
employee benefit plan, to which (i) Asset Seller contributes or is a party or is
bound with respect to the Division (whether by contract, by collective
bargaining agreement, unilateral decision or customary rules or by law) and
under which it may have liability with respect to employees or former employees
of Asset Seller who worked in the Division (or their dependents or
beneficiaries) ("Asset Seller Employee Plans") or (ii) any Company contributes
or is a party or is bound (whether by contract, by collective bargaining
agreement, unilateral decision or customary rules or by law) and under which it
may have liability with respect to employees or former employees of such Company
(or their dependents or beneficiaries) ("Companies' Employee Plans" and,
collectively with Asset Seller Employee Plans, "Employee Plans"). Sellers have
delivered to Buyer copies of all documents, summary plan descriptions and all
other documentation created to embody all Employee Plans and any related trusts,
insurance contracts or other funding vehicles, plus descriptions of any Employee
Plans that have not been reduced to writing. Schedule 4. 19(b) lists all
retention bonus plans and severance arrangements provided to the Division
employees in connection with the sale of the Business. Except as set forth on
Schedule 4.19(c):

(a) Each Asset Seller Employee Plan is in substantial compliance with
applicable requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the Internal Revenue Code and, if intended to be tax-
qualified, received a favorable determination letter from the Internal Revenue
Service regarding such Asset Sellers Employee Plan's qualified status under
section 401(a) of the Internal Revenue Code.

(b) Asset Seller has performed all material obligations to which it
is subject under ERISA, the Internal Revenue Code and other applicable laws
with respect to or under the terms of each Asset Seller Employee Plan. The
Companies' Employee Plans are not subject to ERISA, the Internal Revenue Code or
any other United States local, state or federal employee benefits related law,
regulation, order, rule, requirement or Governmental Approval and comply with
the provisions of all applicable national laws. Asset Seller has received no
written notice of the existence of any material default or violation by any
other party of any such obligations with respect to any Asset Seller Employee
Plan.

(c) Neither Asset Seller, any Company, nor any other corporation,
trade or business which is affiliated with Asset Seller or any Company, in the
manner described in section 414(b) or (c) of the Internal Revenue Code or
section 4001(b)(1) of ERISA, has maintained, or made or been obligated to make
contributions to, any plan subject to part 3 of

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<PAGE>

Title I or Title IV of ERISA at any time within the last six years, except for
the ZD Events Inc. defined benefit pension plan. (The ZD Events Inc. defined
benefit pension plan was terminated in a standard termination in 1997 in
accordance with ERISA and all obligations and liabilities thereunder were
satisfied and discharged in full in 1998.)

(d) There are no commitments, obligations, or representations
regarding continuation of welfare benefits after termination of employment under
any of the Employee Plans, except as required by Part 6 of Title I of ERISA or
similar laws.

(e) Except as expressly set forth in Schedules 4.9 and 4.19(e), the
transactions contemplated by this Agreement will not result in the acceleration
of the time of payment or vesting of, or increase the amount of, any
compensation or benefits payable to any employee or former employee of the
Business. Without limiting the foregoing, no excess parachute payments, as
defined in Section 280G of the Internal Revenue Code, will occur in connection
with the transactions contemplated by this agreement, and none of the Employee
Plans or the agreements listed on Schedule 4.9, either singly or in combination,
provide for any such excess parachute payments.

(f) The Companies conform in all material respects with the provisions
of any applicable European or national law or regulations in relation to staff
delegates and workers' committees, and in a more general manner in relation to
the representation of the employees within the Companies.

4.20. Brokers. There is no investment banker, broker, finder,
consultant or other intermediary that has been retained by, or is authorized to
act on behalf of, either Seller or any Company who is entitled to any fee or
commission from Buyer in connection with the transactions contemplated by this
Agreement.

4.21. Year 2000 Compliance. All hardware, firmware, Databases,
Software and computer systems ("Computer Assets") comprising the Assets and the
Companies' Assets and, to the Companies' knowledge, the Computer Assets of the
Companies' suppliers that are used in the Business are, or will be on or prior
to November 30, 1999, Year 2000 Compliant (as defined below) without incurring
more than $250,000 of additional costs or expenses after the Closing Date. As
used herein, "Year 2000 Compliant" means, with respect to any Computer Asset,
(i) that the occurrence in or use by the Computer Asset of dates before, on or
after January 1, 2000 will not adversely affect the performance of the Computer
Asset with respect to date-dependent data, computations, output or other
functions (including without limitation calculating, comparing and sequencing),
(ii) the Computer Assets will not abnormally end or provide invalid or incorrect
results as a result of date-dependent data and (iii) the Computer Assets can
accurately recognize, manage, accommodate and manipulate date-dependent data,
including without limitation single and multi-century formulas and leap years.

4.22 Principal Customers. Schedule 4.22 attached hereto sets forth
the twenty largest customers of the Business based on annual revenues for the
fiscal year ended December 31, 1998 and for the six months ended June 30, 1999.

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5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller as follows:

5.1. Buyer's Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the full corporate power and authority to enter into and to perform the
transactions contemplated by this Agreement. Buyer is duly licensed or qualified
to do business as a foreign corporation, and is in good standing, in each
jurisdiction where the character of the properties owned or leased by it, or the
nature of its business, makes such licensing or qualification necessary, except
for jurisdictions where the failure to qualify would not, individually or in the
aggregate, have a material adverse effect on the business or financial condition
of Buyer or its ability to perform its obligations hereunder or to consummate
the transaction contemplated hereby.

5.2. Authorization of Agreement. The execution, delivery and performance
by Buyer of (i) this Agreement and (ii) each other documents required by this
Agreement to be executed and delivered by it ("Buyer Other Documents") and the
consummation by it of the transactions contemplated herein and therein have been
duly authorized by all necessary corporate action of Buyer, this Agreement has
been, and when executed and delivered as required by this Agreement the Buyer
Other Documents will be, duly executed by an authorized officer of Buyer, and
this Agreement constitutes, and when executed and delivered as required by this
Agreement the Buyer Other Documents will constitute, the valid and binding
obligation of Buyer enforceable against it in accordance with its terms, except
as may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

5.3. No Violation; Consents of Third Parties. The execution, delivery and
performance of this Agreement and the Buyer Other Documents by Buyer and the
consummation of the transactions contemplated herein and therein by Buyer will
not (i) conflict with the certificate of incorporation or by laws of Buyer, or
(ii) constitute a violation by Buyer of any statute, law, rule, regulation,
order, writ, injunction or decree of any court or governmental authority
applicable to Buyer. No consent, approval or authorization of, or designation,
declaration or filing with, any governmental or European authority (other than
under the HSR Act or under the European merger regulations or any other similar
applicable national law) is required on the part of Buyer in connection with the
execution, delivery and performance of this Agreement.

5.4. Brokers. There is no investment banker, broker, finder, consultant
or other intermediary that has been retained by, or is authorized to act on
behalf of, Buyer who is entitled to any fee or commission from either Seller in
connection with the transactions contemplated by this Agreement.

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6. FURTHER AGREEMENTS OF THE PARTIES.

6.1. Access to Records. Sellers shall give, or cause to be given, to
Buyer and its representatives, during normal business hours, such reasonable and
timely access to the properties, titles, contracts, books, records, files and
documents of any Seller or any Company as is reasonably necessary to allow Buyer
and its representatives to obtain such information as it may reasonably request,
and to make copies of such information to the extent reasonably necessary.

6.2. Record Retention. Buyer agrees that for a period of not less than
five years following the Closing Date, it shall not destroy or otherwise dispose
of any records, accounts or files ("Records") relating to the Business prior to
the Closing Date. Buyer agrees that it shall make available to Sellers all such
Records and permit Sellers and their respective representatives, agents or
attorneys to review and, at Sellers' expense, copy such Records relating to the
Business at any reasonably convenient time during normal business hours for any
proper purpose.

6.3. Consent; Non-Assignable Agreements. Buyer acknowledges that certain
agreements between Asset Seller and third parties require that such third
parties consent to the assignment of such agreements. Sellers shall use
reasonable efforts to obtain all consents and approvals listed in Schedule 4.4
in form and substance reasonably satisfactory to Buyer. Without in any way
limiting the foregoing, Buyer shall reasonably cooperate with and provide
assistance to Sellers in obtaining all such consents and approvals. If any
consent for any agreement is not obtained, such agreement shall not be assigned,
but Sellers shall, to the extent possible without incurring any liability to
any third party, keep the agreement in effect and give Buyer the benefit of the
agreement to the same extent as if it had been assigned including, without
limitation, (a) cooperating with Buyer in holding any rights under agreements
for which no consent to assign rights to Buyer is obtained (Non-Assignable
Rights) in trust for Buyer or acting as an agent for Buyer; (b) enforcing any
rights of the Sellers arising from such Non-Assignable Rights against the
issuers thereof or the other party or parties thereto; (c) taking all such
actions and doing, or causing to be done, all such things at the request of
Buyer as shall be reasonably necessary and proper in order that the value of any
Non-Assignable Rights shall be preserved and shall inure to the benefit of Buyer
and (d) paying over to Buyer all monies or other assets collected by or paid to
the Sellers in respect of such Non-Assignable Rights. Buyer shall perform the
obligations under the agreement relating to the benefit obtained by Buyer.
Nothing in this Agreement shall be construed as an attempt to assign any
agreement or other instrument that is by its terms non-assignable without the
consent of the other party.

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6.4. Non-Competition; Confidentiality; Non-Solicitation.

(a) Sellers agrees that, for a period commencing on the Closing Date
and ending on the second anniversary of the Closing Date, neither Ziff-Davis,
Inc. ("Parent") nor Sellers nor any other affiliate of Parent directly or
indirectly controlled by it (each, a "Controlled Affiliate") shall engage,
whether as principal, partner, co-venturer, owner, stockholder, investor or
manager, anywhere in the world, in any business or activity that competes with
the Business as it is conducted on the Closing Date, provided that (i) nothing
contained in this Section 6.4(a) shall restrict (A) any Controlled Affiliate
from and after the date it is sold by Parent to any person or entity not
controlled by Parent (a "Third Party Purchaser"), (B) any Third Party Purchaser
who acquires a Controlled Affiliate or assets from Parent or any Controlled
Affiliate or (C) the publication and distribution of magazines and Internet
sites, production of trade shows or conferences, production of television shows,
provision of training or educational services by Parent or any Controlled
Affiliate; and (ii) this Section shall not apply to the acquisition by Parent
or any Controlled Affiliate of (A) any third party which may engage in
activities materially competitive to the Business, so long as such activities
are less than 15% of that third party's business (B) any investment in publicly
traded securities of any entity constituting less than 5% of the outstanding
voting securities of such entity.

(b) After the Closing Date, Sellers shall keep confidential and shall
not disclose to any third party, or use in any manner other than as specifically
requested by Buyer, any confidential or proprietary information including,
without limitation, all customer, prospect and marketing lists, sales data,
intellectual property, and trade secrets relating to the Business, the Assets or
the Companies' Assets. For purposes of this Agreement, confidential information
shall not be deemed to include information generally available to the public
(other than as a result of the disclosure by a Seller or any of their
affiliates) or information required to be disclosed by law or by court order or
the rules of any stock exchange or quotation service on which any securities of
Ziff-Davis Inc. are listed or quoted.

(c) Sellers agree that, for a period commencing on the Closing Date
and ending on the second anniversary of the Closing Date, Sellers shall not
solicit or encourage any person who is or becomes an employee of Buyer after the
Closing Date in connection with the Business, to leave Buyer's employ for any
reason whatsoever or hire any such person within three months after they have
left the Buyer's employ. Parent and Asset Seller shall require any buyer of
Parent or Asset Seller's other business units to agree throughout the same
period that such buyers will not employ any Transferred Employee in competition
with the Business.

(d) Sellers acknowledge that the remedy at law for breach of any of
its covenants under this Section 6.4 may be inadequate and, accordingly, in the
event of any breach or threatened breach by Sellers of the provisions of this
Section 6.4, Buyer may be entitled, in addition to all other remedies, to an
injunction restraining any such breach.

6.5. Employees.

(a) Buyer shall comply in all material respects with all laws and
regulations respecting employment and employment practices in connection with
the transfer of any of the

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<PAGE>

Companies' employees to Buyer or the retention of employees by the Companies
after the Closing Date.

(b) Buyer shall offer employment to all of Asset Seller's current
employees (including employees temporarily absent from work for disability,
worker's compensation or Family Medical and Leave Act ("FMLA") reasons) who are
involved primarily in the Business and listed on Schedule 4.9 (each, an "Asset
Seller Employee") for cash compensation substantially comparable to that
currently being provided to them by Asset Seller. Asset Seller shall use its
best efforts to ensure the orderly transfer of the Transferred Employees to
Buyer. In the event that Buyer terminates any of the Transferred Employees
without cause within the first 60 days after the Closing Date (or such longer
periods as may be set forth on Schedule 4.19(b)), Buyer shall provide severance
pay in accordance with the Harte-Hanks Communications, Inc. Severance Plan,
except that the amount of severance pay shall be the "Enhanced Severance
Benefit" set forth on Schedule 4.19(b) and the Transferred Employees shall be
credited with their years of service with Asset Seller for this purpose.

(c) Each Transferred Employee shall: (i) be permitted to carry over a
maximum of four (4) weeks of vacation time accrued during his or her employment
with Asset Seller; and (ii) receive credit for the period such Transferred
Employee was employed by Asset Seller for purposes of determining severance,
family leave, eligibility and vesting under Buyer's tax-qualified retirement
plan ("Buyer's Plan"), eligibility for disability benefits, eligibility for
group health plan coverage, and vacation eligibility and accruals after transfer
to Buyer. With respect to any flexible spending accounts maintained by Asset
Seller under sections 104, 125 and 129 of the Internal Revenue Code for the
benefit of Transferred Employees and subject to Buyer's receipt of reasonably
acceptable records and documentation with respect to such accounts, Asset Seller
shall transfer to Buyer, and Buyer shall assume, the contribution and benefit
payment histories pertaining to, and the assets and liabilities associated with,
such accounts, as they appear on the books and records of Asset Seller or their
agent as of the Closing Date.

(d) Buyer shall take all such action as is necessary or appropriate
in order to assure that Transferred Employees and their spouses and dependent
children covered by Asset Seller's group health plans as of the Closing Date
become eligible for coverage under a group health plan of Buyer effective as of
the Closing Date. None of the foregoing shall be construed to require Buyer to
provide group health plan coverage to any person hired by Buyer subsequent to
Closing or Transferred Employees not covered by Asset Seller's group health
plans as of the Closing Date. Furthermore, all short-term, long-term and
extended disability benefit or worker's compensation obligations (if any)
payable to Asset Seller or the Companies' employees and their dependents
(including domestic partners and their dependents) who became disabled, claimed
or proposed to claim worker's compensation or claimed FMLA benefits before the
Closing Date are the responsibility of Sellers and shall be paid directly by the
Sellers or their insurance carriers. Sellers shall be solely responsible for
providing to Sellers' employees any notices under Part 6 of Title I of ERISA and
Internal Revenue Code Section 4980B ("COBRA") that are required with respect to
the termination of their employment with Sellers as a result of the transactions
contemplated by this agreement, for providing any coverage under COBRA to such
employees,

19
<PAGE>

and to continue providing any coverages under COBRA to any of Sellers' former
employees or covered dependents currently purchasing benefits under COBRA.

(e) The account balances under the Ziff-Davis Retirement & Savings
Plan ("ZD Plan") of all Transferred Employees shall become one hundred percent
(100%) vested and non-forfeitable upon the Closing Date. Buyer shall cause its
tax-qualified defined contribution plan ("HH Plan") to accept direct rollovers
of distributions from the ZD Plan to Transferred Employees, to the extent
permitted under section 401(a)(31) of the Internal Revenue Code, and shall use
reasonable efforts to facilitate such rollovers and to publicize to Transferred
Employees the availability of such rollovers. Transferred Employees shall be
permitted to elect direct rollovers of any outstanding plan loans from the ZD
Plan to the HH Plan, subject to Buyer's receipt of reasonably satisfactory
evidence that such loans comply with applicable provisions of ERISA and the
Internal Revenue Code. Asset Seller shall make a discretionary contribution
under the ZD Plan to all eligible Asset Seller Employees for the period in 1999
through the Closing Date. That contribution as a percentage of eligible
earnings shall not be less than the amount the Asset Seller contributes to its
other eligible participants.

(f) Nothing in this Agreement shall be construed to change the "at
will" status of any individual's employment, nor to restrict the right of the
Buyer or the Companies to terminate, discipline, or change the employment terms
of any employee; nor to affect the Buyer's and the Companies' rights to amend
or terminate any of their benefit plans or policies at any time.

6.6. Trademark License.

(a) Asset Seller hereby grant to Buyer a nontransferable, royalty-
free license and right for a period of three months commencing on the Closing
Date to use, reproduce and distribute the "ZD" trademark (the "Mark") as part of
the composite "ZD Market Intelligence" trademark solely in connection with the
Business for transition purposes only. Such use shall be in accordance with the
trademark guidelines set forth in Schedule 6.6. In the event that Asset Seller
reasonably modifies or changes the guidelines, and Asset Seller notifies Buyer
of such modification or change, Buyer shall promptly modify its use of the Mark.

(b) All rights arising from the use of the Mark and/or any similar
names or marks (including logos) shall inure solely to Asset Seller's benefit.
Buyer agrees that neither Buyer, nor any entity that directly or indirectly owns
or controls, is owned or controlled by, or is under common control or ownership
with Buyer (a "Buyer Affiliate"), shall use, directly or indirectly, the Mark,
or any marks similar thereto, as part of Buyer's or any Buyer Affiliate's own
trade name, or in any other way that suggests that there is any relation or
affiliation between Asset Seller and Buyer or any Buyer Affiliate other than
that created by this Agreement, or as a trademark, service mark or trade name
for any other business, product or service. Buyer shall have no interest in the
Mark except as expressly provided in this Agreement and shall not claim any
other rights therein. Buyer's right to use the Mark shall automatically cease
upon the earlier of (i) the expiration or termination of the three-month period
following the Closing Date or (ii) Buyer's failure to cure any material breach
with respect to its use of the Mark within 15 days' of receipt of written notice
from Asset Seller.

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<PAGE>

6.7. Government Consents and Approvals. The parties shall take all
necessary corporate and other action and use all reasonable efforts to obtain
promptly all government consents, approvals, permits, licenses, authorizations,
exemption and waivers required to carry out the Asset Purchase and the Equity
Purchase (collectively "Government Approvals"), including but not limited to
filings required under the HSR Act , the European Union merger regulations or
any other similar applicable national law, and shall provide the other party
such information as the other party may reasonably require to make such filings.
Buyer shall be solely responsible for all fees and expenses associated with any
filings required by the HSR Act, the European Union merger regime or other
similar applicable national law.

6.8. Expenses. Asset Seller shall pay all transfer taxes, recordation
taxes and similar fees associated with the assignment of the realty leases
listed on Schedule 4.11. Except as otherwise provided in this Agreement, Buyer
and Sellers shall bear their own respective expenses incurred in connection with
this Agreement and in connection with all obligations required to be performed
by each of them under this Agreement.

6.9. Cooperation of the Parties. Sellers and Buyer shall use their
reasonable efforts to assist each other in generally effecting an orderly
transition in the transfer of the Business. It is contemplated that Sellers and
Buyer shall provide transition services to each other following the Closing
Date. In connection therewith, at the Closing Sellers and Buyer shall enter into
a transition services agreement in the form of Exhibit G hereto. Any and all
public announcements concerning the transaction contemplated hereunder shall be
jointly agreed upon by Sellers and Buyer.

6.10. Sales Tax. Sellers shall pay any foreign, state or local sales or
transfer tax payable in connection with the Asset Purchase and the Equity
Purchase pursuant to this Agreement.

6.11. Bulk Sale. Buyer and Asset Seller hereby agree to waive the
provisions of any bulk sale law that may relate to the sale of Assets under this
Agreement. Asset Seller will indemnify and hold Buyer harmless from any claims
arising out of such non-compliance in accordance with Section 10.3 below.

6.12. Conduct of Business. Prior to the Closing, unless Buyer otherwise
consents in writing, the Sellers and the Companies will (a) operate the Business
solely in the ordinary course and consistent with past practices and use their
commercially reasonable efforts to preserve the goodwill of the Business, and of
its employees, suppliers, customers, governmental authorities and others having
business dealings with it; (b) not engage in any transaction involving the
Business, the Assets, the Companies or the Companies' Assets, outside the
ordinary course, including without limitation by making any material
expenditure, investment or commitment or entering into any material agreement or
arrangement of any kind; (c) not increase the compensation of any employee
involved in the Business other than in the ordinary course and consistent with
past practice; (d) maintain all insurance policies referred to in Schedule 4.7
and all Permits; and (e) not take any action that could reasonably be expected
to result in a breach of Section 4 of this Agreement.

21
<PAGE>

6.13 Evaluation Material. Promptly after the Closing Date, Parent will
exercise its contractual rights to require all persons with whom it entered into
confidentiality agreements in connection with the sale of the Assets and the
share capital in the Companies to deliver to Parent all copies of the Evaluation
Material (as defined in the confidentiality agreements) and to destroy all
memoranda, notes and other materials prepared by them or their agents based
thereon.

6.14 Staff Delegates and Works Committees. The staff delegates and works
committees of the Companies will be promptly informed and consulted on the
transfer of the Share Capital and signing of this agreement in accordance with
all relevant provisions of any applicable national law.

6.15 Further Assurances. At any time and from time to time after the
Closing Date, each party shall, without further consideration, execute and
deliver to the other such other instruments of transfer and assumption and shall
take such other action as the other may reasonably request to carry out the
transactions contemplated by this Agreement.

7. ADDITIONAL AGREEMENTS AND DOCUMENTS. At the Closing, the parties will
execute and deliver the following:

7.1. Bill of Sale. Asset Seller shall deliver to Buyer a bill of sale in
the form of Exhibit B hereto and a trademark assignment in the form of Exhibit C
hereto.

7.2. Assumption Agreement. Buyer shall deliver to Asset Seller an
assumption agreement in the form of Exhibit D hereto

7.3. Certificates or Share Transfer Agreements for Share Capital. Stock
Seller shall, depending on the applicable law, deliver to Buyer certificates
representing the Share Capital, duly endorsed for transfer or accompanied by
duly executed stock powers with all documentary stamps attached, or other
appropriate evidence of ownership of the Share Capital under applicable law and
of the transfer of ownership of the Share Capital to Buyer in accordance with
the terms of this Agreement such as duly executed share transfer agreements in
relation to the Share Capital of the Companies concerned.

7.4. Sellers' Closing Certificate. Each Seller shall deliver to Buyer a
certificate of a duly authorized officer of such Seller in the form of Exhibit E
hereto.

7.5. Buyer's Closing Certificate. Buyer shall deliver to Sellers a
certificate of a duly authorized officer of Buyer in the form of Exhibit F
hereto.

7.6. Opinion of Sellers' Counsel. Asset Seller shall deliver to Buyer an
opinion or opinions of counsel to Asset Seller and Stock Seller in the form of
Exhibit H hereto. Asset Seller shall also deliver opinions of counsel in form
and substance reasonably satisfactory to Buyer that (a) each of the Companies is
validly existing, (b) that at the Closing Date Buyer will receive 100% of the
Share Capital of each of the Companies free and clear of all Liens and (c) that
the

22
<PAGE>

transfer of the Share Capital of each of the Companies will not violate the law
of the jurisdiction of incorporation.

8. CONDITIONS TO CLOSING. The obligations of each party (treating the Sellers
as one party and Buyer as the other) to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment prior to or at Closing of
each of the following conditions:

(a) All representations and warranties made by the other party in
this Agreement shall be true and correct on the Closing Date as though made as
of the Closing Date; provided, however, that any representation and warranty of
the Sellers shall be deemed to be so true and correct unless its failure to be
so true and correct, individually or together with the failures to be so true
and correct of all representations and warranties, has had or is reasonably
likely to have a Material Adverse Effect; and the other party shall have duly
performed or complied with all the covenants, obligations and conditions to be
performed or complied with by them under the terms of this Agreement prior to
the Closing Date;

(b) The Sellers shall have received any and all necessary regulatory
approvals and the consent of the lessors under the real property leases
described in Schedule 4.11 as pertaining to the U.S. Headquarters and the U.S.
Operations/CallCenter;

(c) No action, suit or proceeding before any court or any
governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Buyer, any Seller or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connect with, or imposing any condition
on, any such transactions.

(d) The parties shall have entered into the transition services
agreement attached hereto as Exhibit G.

(e) On the Closing Date, there shall not have been any Material
Adverse Change since June 30, 1999.

(f) As of the Closing Date, Asset Seller has entered into an
amendment to that certain Subscription Distribution Agreement, dated January 1,
1999 whereby the agreement shall have an initial term lasting through December
31, 2000 and shall continue thereafter subject to either party's right to
terminate on 120 days' notice (it being understood that such notice may be
delivered 120 days before December, 31, 2000.)

9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND RELATED MATTERS

9.1. Survival; Remedy For Breach. The representations and warranties
contained herein, in any Schedule hereto or in any other writing delivered by
any party to any other party pursuant hereto shall survive the Closing and
continue in full force and effect for a period of 18 months from and after the
Closing Date, except for the representations and warranties contained

23
<PAGE>

in Sections 4.2, 4.3, 4.5 (the first sentence thereof), 4.17, and 4.19 which
shall continue until claims thereunder would be barred by the applicable statute
of limitations.

9.2. Warranty Claim. Notwithstanding any contrary provision of this
Agreement, it is expressly agreed that each party's sole remedy for any breach
of any representation and warranty of the other party contained herein shall be
the indemnification provided for in Section 10 (except with respect to claims of
fraud in regard to or willful breach of any such representation or warranty).

10. INDEMNIFICATION AND RELATED MATTERS

10.1. Indemnification By Sellers. From and after the Closing, Sellers
shall, jointly and severally, indemnify and hold harmless Buyer and its
officers, directors, affiliates, stockholders, employees and agents from and
against any and all damages arising from, in connection with or as a result of:
(a) any breach of any representation or warranty of Sellers set forth in this
Agreement, (b) any failure of Sellers to carry out, perform, satisfy and
discharge any of their covenants, agreements, undertakings, liabilities or
obligations under this Agreement; (c) any tax or other liabilities relating to
the Companies interests in the Excluded Assets being retained by Sellers (d) the
failure of Sellers to pay, perform or discharge any of the Retained Liabilities
or (e) claims by third parties against the Buyer relating to the operation and
ownership by Sellers of the Assets or Equity Interests and the conduct of the
Business by Sellers or the Companies prior to the Closing Date. As used
hereinafter in Sections 10.1 and 10.2, the term "damages" means any and all
losses, damages, judgments, liabilities, settlements (but only to the extent
permitted under Section 10.3), expenses, obligations, fines, penalties and other
costs incurred or suffered including, without limitation, reasonable attorneys'
fees.

10.2. Indemnification By Buyer. From and after the Closing, Buyer shall
indemnify and hold harmless each Seller and its officers, directors, affiliates,
stockholders, employees and agents from and against any and all damages arising
from, in connection with or as a result of: (a) any breach of any representation
or warranty of Buyer set forth in this Agreement; (b) any failure of Buyer to
carry out, perform, satisfy and discharge any of its covenants, agreements,
undertakings, liabilities or obligations under this Agreement; (c) Buyer's
ownership and/or operation of the Business, the Share Capital, the Companies'
Assets or the Assets after the Closing; or (d) the failure of Buyer to pay,
perform or discharge any of the Assumed Liabilities.

10.3. Indemnification; Notice and Settlement.

(a) A party seeking indemnification pursuant to Sections 10.1 or
10.2 (an "Indemnified Party") shall promptly give written notice to the party
from whom indemnification is sought (the "Indemnifying Party") of the assertion
of any claim, or the commencement of any action or proceeding in respect of
which indemnity may be sought hereunder, after the Indemnified Party has actual
knowledge of such claim. The written notice shall specify all facts then known
to the Indemnified Party giving rise to the indemnification right. Any failure
to give such notice shall only relieve the Indemnifying Party from its
indemnification obligations to the extent that it is actually prejudiced by such
failure

24
<PAGE>

(b) The Indemnifying Party shall be entitled, upon its election, by
written notice given to the Indemnified Party within 30 days after the date on
which notice of a claim or demand is given by the Indemnifying Party in
accordance with Section 10.3(a), to assume the defense or prosecution of that
claim and any litigation resulting therefrom at its expense and through counsel
of its own choosing and reasonably acceptable to the Indemnified Party. After
such assumption in any such suit, action or proceeding, the Indemnified Party
shall have the right to participate therein and to retain its own counsel, but
the fees and expenses of such counsel shall be at its own expense. The
Indemnifying Party may settle any claim as it deems fit; provided, however, that
if any settlement shall impose any restriction or affirmative obligation
(including any obligation to make any payments of any kind) upon the Indemnified
Party, no settlement shall be made without its consent, which consent shall not
be unreasonably withheld or delayed. If the Indemnifying Party does not assume
the defense or prosecution of any such Claim or litigation, the Indemnified
Party may defend against or prosecute such Claim or litigation and may settle
such Claim or litigation with the consent of the Indemnifying Party, such
consent shall not be unreasonably withheld or delayed.

(c) The Indemnified Party shall reasonably cooperate with the
Indemnifying Party in contesting any claim that the Indemnifying Party
legitimately elects to contest, or, if appropriate, in the making of any
counterclaim against the person asserting the claim or any cross-complaint
against any person. The Indemnifying Party will promptly reimburse the
Indemnified Party for any reasonable expenses incurred by the Indemnified Party
in cooperating with the Indemnifying Party.

10.4. Certain Limitations. Notwithstanding anything to the contrary
contained herein, no party shall be entitled to recover indemnification under
Section 10.1(a) or Section 10.2(a) in respect of any claim until the aggregate
of all claims by such party exceeds $1 million, in which case the other party
shall only be liable for such excess. In order to be eligible for
indemnification, any claim by a party under Section 10.1(a) or 10.2(a) must be
received by the other party prior to the date on which the representation and
warranty giving rise to the claim ceases to survive pursuant to Section 9.1.

11. LIMITATION OF LIABILITY. NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS
AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR PUNITIVE DAMAGES IN
CONNECTION WITH THIS AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. IN NO EVENT SHALL THE SELLERS' OR BUYER'S AGGREGATE LIABILITY UNDER
THE PROVISIONS OF THIS AGREEMENT EXCEED THE PURCHASE PRICES.

12. TERMINATION. This Agreement may be terminated and the transactions may be
abandoned at any time prior to Closing: (a) by the written consent of Buyer and
Sellers; (b) by either Buyer or Sellers if the Closing shall not have occurred
on or before December 31, 1999; provided that the terminating party has not,
through breach of a representation, warranty or covenant, prevented the Closing
from occurring on or before such date. In the event of termination pursuant to
this Section, all obligations of the parties to each other hereunder shall
terminate, and no party shall have any liability to the other party under this
Agreement; provided that such termination shall not relieve either party from
any liability for any breach of this

25
<PAGE>

Agreement. In the event of such termination, the provisions of the
Confidentiality Agreement dated July 2, 1999 between Buyer and Sellers' agent
shall continue in full force in accordance with its terms.

13. MISCELLANEOUS.

13.1. Entire Agreement. This Agreement, together with the Schedules
hereto, contains and is intended as, a complete statement of all of the terms of
the arrangements among the parties with respect to the matters provided for,
supersedes any previous agreements and understandings between the parties with
respect to those matters, and cannot be changed or terminated orally.

13.2. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed in New York and without
application of the conflict of law principles thereof. In connection with any
proceeding arising from this Agreement or the transactions contemplated herein,
the parties hereby irrevocably consent to the exclusive jurisdiction of any
Federal court or state court located in the Borough of Manhattan, The City of
New York, NY.

13.3. No Third Party Beneficiaries. Each of the provisions of this
Agreement is for the sole and exclusive benefit of the parties hereto,
respectively, as their interests shall appear, and shall not be deemed to be for
the benefit of any other person or entity or group of persons or entities.

13.4. Headings. The Section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.

13.5. Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally, or
mailed by certified or registered mail, return receipt requested, or sent by
overnight courier, to the parties at the addresses set forth in the first
paragraph of this Agreement (or to such other address as a party may have
specified by notice given to the other parties pursuant to this provision). In
addition, all notices sent to Sellers shall be sent to the attention of
President with recopy of notices relating to breach or interpretation of this
Agreement to the Legal Department at Ziff-Davis Inc., 28 East 28th Street, New
York, New York 10016-7930.

13.6. Separability. If any provision of this Agreement is held or deemed
to be invalid or unenforceable, in whole or in part, by a court of competent
jurisdiction, such provision shall be automatically reformed and construed so as
to be valid, operative and enforceable to the maximum extent permitted by law or
equity while most nearly preserving its original intent; such invalidity shall
not render invalid or unenforceable the remaining terms and provisions of this
Agreement.

13.7. Waiver. Any party may waive compliance by another with any of the
provisions of this Agreement, provided that such waiver is in writing and signed
by the party against whom enforcement is sought. No waiver of any provision
shall be construed as a waiver of any other provision.

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<PAGE>

13.8. Assignment. Neither of the parties hereto may assign any of its
rights or delegate any of its duties under this Agreement without the consent of
the other parties; provided that Buyer may assign any or all of its rights (but
not its obligations) hereunder to one or more of its wholly-owned subsidiaries.
Any attempted assignment in violation of this provision shall be void.

13.9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which,
when taken together) shall constitute one and the same instrument.

13.10. Interpretation Against the Draftsperson. Each party hereto has
reviewed and commented upon or fully participated in the preparation of this
Agreement. In no event will any provision of this Agreement be interpreted to
the disadvantage of any party based on such party's having been the draftsperson
of such provision.

13.11. Parent Guaranty. Parent for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, does hereby
irrevocably, unconditionally and absolutely guaranty the payment and performance
by the Sellers of their obligations hereunder and any extensions, modifications
or substitution thereof, which may be agreed upon by and among the Sellers and
the Buyer. Parent represents and warrants that: (i) it has all the corporate
power and authority to execute this Agreement and perform its obligations
hereunder, (ii) all necessary action, corporate or otherwise, for the
authorization, execution and delivery of this Agreement and the performance of
its obligations hereunder has been taken and (iii) this Agreement constitutes a
legal, valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms, except as may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).. Guarantor
hereby waives, to the maximum extent permitted by law, any present or future
facts or circumstances that could constitute a legal or equitable defense to,
or discharge of, a guarantor or surety; provided that the foregoing shall not
constitute a waiver by Parent of any defenses available to the Sellers

[Signature Pages Follow This Page]

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<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Purchase Agreement
as of the date set forth in the first paragraph above.

ZD INC.

By: /s/ TIMOTHY C. O'BRIEN
-------------------------------
Name: Timothy C. O'Brien
Title: Chief Financial Officer

ZD HOLDINGS (EUROPE) LTD.

By: /s/ RON FISHER
-------------------------------
Name: Ron Fisher
Title: Director

ZIFF-DAVIS, INC.

By: /s/ TIMOTHY C. O'BRIEN
-------------------------------
Name: Timothy C. O'Brien
Title: Chief Financial Officer

HARTE-HANKS, INC.

By: /s/ DONALD R. CREWS
-------------------------------
Name: Donald R. Crews
Title: Senior Vice President, Legal

<PAGE>

================================================================================
EXHIBIT 2.2

PURCHASE AGREEMENT

by and between

ZD INC.

and

WP EDUCATION HOLDINGS LLC

Dated as of November 17, 1999

================================================================================
<PAGE>

TABLE OF CONTENTS
-----------------
Page
----

ARTICLE I DEFINITIONS.......................................................1
- ---------

SECTION 1.1 Definitions..................................................1

ARTICLE II SALE AND PURCHASE OF ASSETS AND SHARES...........................4
- ----------

SECTION 2.1 Sale and Purchase of Assets..................................4
SECTION 2.2 Sale and Purchase of Shares..................................5
SECTION 2.3 Excluded Assets..............................................5
SECTION 2.4 Assumption of Liabilities; Excluded Liabilities..............7
SECTION 2.5 Purchase Price...............................................8
SECTION 2.6 Payment of Purchase Price....................................8
SECTION 2.7 The Closing..................................................8
SECTION 2.8 Post-Closing Purchase Price Adjustment.......................9

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.......................12
- -----------

SECTION 3.1 Organization and Good Standing..............................12
SECTION 3.2 Capitalization..............................................12
SECTION 3.3 Corporate Authority.........................................13
SECTION 3.4 Consents and Approvals......................................13
SECTION 3.5 No Violations...............................................13
SECTION 3.6 Financial Statements........................................14
SECTION 3.7 Absence of Certain Changes and Events.......................14
SECTION 3.8 Litigation; Orders..........................................15
SECTION 3.9 Taxes.......................................................15
SECTION 3.10 Employee Benefits; ERISA...................................16
SECTION 3.11 Employees; Labor Matters...................................17
SECTION 3.12 Compliance with Laws; Governmental Authorizations..........18
SECTION 3.13 Real Property..............................................18
SECTION 3.14 Contracts, Leases and Agreements; No Default...............19
SECTION 3.15 Environmental Matters......................................20
SECTION 3.16 Insurance..................................................21
SECTION 3.17 Brokers and Finders........................................22
SECTION 3.18 No Undisclosed Liabilities.................................22
SECTION 3.19 Intellectual Property......................................22
SECTION 3.20 Transferred Assets.........................................24
SECTION 3.21 Year 2000 Compliance.......................................24
SECTION 3.22 Intercompany Transactions..................................25
SECTION 3.23 No Other Representations or Warranties.....................25

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.........................25
- ----------

SECTION 4.1 Organization and Good Standing..............................25
SECTION 4.2 Limited Liability Company Authority.........................25
SECTION 4.3 Consents and Approvals; No Violations.......................26
SECTION 4.4 Securities Act..............................................26
SECTION 4.5 Brokers and Finders.........................................26
SECTION 4.6 Financing...................................................27
SECTION 4.7 Litigation..................................................27
SECTION 4.8 No Other Representations or Warranties......................27
<PAGE>

ARTICLE V COVENANTS........................................................27
- ---------

SECTION 5.1 Conduct of Business.........................................27
SECTION 5.2 Access; Confidentiality.....................................28
SECTION 5.3 Required Consents and Approvals.............................30
SECTION 5.4 Reasonable Best Efforts.....................................30
SECTION 5.5 Publicity...................................................30
SECTION 5.6 Expenses....................................................31
SECTION 5.7 ZDMI Non-Solicitation.......................................31
SECTION 5.8 Employees...................................................31
SECTION 5.9 Intercompany Liabilities and Debt...........................33
SECTION 5.10 Intercompany Programs......................................33
SECTION 5.11 Retention of Records.......................................34
SECTION 5.12 Seller's Trademarks........................................34
SECTION 5.13 Tax Matters................................................36
SECTION 5.14 Further Assurances.........................................37
SECTION 5.15 Non-Assignable Agreements..................................37
SECTION 5.16 Insurance..................................................38

ARTICLE VI CONDITIONS TO CLOSING...........................................39
- ----------

SECTION 6.1 Conditions to Obligations of Buyer..........................39
SECTION 6.2 Conditions to Obligations of Seller.........................40

ARTICLE VII TERMINATION....................................................41
- -----------

SECTION 7.1 Termination.................................................41
SECTION 7.2 Effect of Termination.......................................42

ARTICLE VIII INDEMNIFICATION; REMEDIES.....................................43
- ------------

SECTION 8.1 Survival....................................................43
SECTION 8.2 Indemnification.............................................43
SECTION 8.3 Tax Indemnifications by Seller..............................43
SECTION 8.4 Tax Indemnifications by Buyer...............................46
SECTION 8.5 No Affiliate Liability......................................48

ARTICLE IX MISCELLANEOUS...................................................48
- ----------

SECTION 9.1 Assignments; No Third Party Rights..........................48
SECTION 9.2 Entire Agreement............................................49
SECTION 9.3 Amendment or Modification...................................49
SECTION 9.4 Notices.....................................................49
SECTION 9.5 Governing Law...............................................50
SECTION 9.6 Consent to Jurisdiction; Waiver of Jury Trial...............51
SECTION 9.7 Severability................................................51
SECTION 9.8 Waiver of Conditions........................................52
SECTION 9.9 Actions of the Company......................................52
SECTION 9.10 Descriptive Headings; Construction.........................52
SECTION 9.11 Counterparts...............................................52
SECTION 9.12 Knowledge..................................................53
SECTION 9.13 Materiality................................................53
<PAGE>

Schedule 3.2(a) Capitalization
Schedule 3.2(b) Liens
Schedule 3.4 Governmental Consents and Approvals
Schedule 3.5(b) Violations
Schedule 3.5(c) Third Party Consents
Schedule 3.6 Financial Statements
Schedule 3.7 Absence of Certain Changes and Events
Schedule 3.8(a) Litigation
Schedule 3.9(a) Taxes
Schedule 3.10(a) Employee Benefit Plans
Schedule 3.10(e) ERISA
Schedule 3.11 Employees
Schedule 3.13(a) Property
Schedule 3.13(b) Liens on Property
Schedule 3.14(a) Applicable Contracts
Schedule 3.14(b) Enforceability and Compliance under Applicable Contracts
Schedule 3.16 Insurance Policies
Schedule 3.18 Undisclosed Liabilities
Schedule 3.19(a) Intellectual Property Rights
Schedule 3.19(b) Intellectual Property: Enforceability and Compliance
Schedule 5.8(a) Enhanced Severance Benefit Plan
Schedule 5.8(c)(i) Employees on Leave, Authorized Leave or Military Service
Compensation
Schedule 5.8(c)(ii) Employees on Long-Term Disability
Schedule 5.8(d) Retention and Special Bonuses
Schedule 5.10 Intercompany Programs
Schedule 5.10(c)(i) License Agreement with SmartPlanet, Inc.
Schedule 5.10(c)(ii) License Agreement with ZDNet
Schedule 5.15 Reasonable Efforts to Obtain Consent
Schedule 6.1(b) Certain Consents Delivered at Closing
Schedule 9.12 Persons Deemed to Have Knowledge
<PAGE>

EXHIBIT A BILL OF SALE AND ASSIGNMENT

EXHIBIT B ASSUMPTION AGREEMENT

EXHIBIT C TRADEMARK GUIDELINES

EXHIBIT D FINANCING TERM SHEET
<PAGE>

PURCHASE AGREEMENT, dated as of November 17, 1999 (this
"Agreement"), by and between ZD INC., a Delaware corporation ("Seller"), and WP
Education Holdings LLC, a limited liability company organized under the laws of
the State of Delaware ("Buyer").

WHEREAS, Seller, through its ZD Education division (the
"Division"), and Ziff-Davis Education Canada, Inc. (the "Company") are engaged
in the business of providing integrated IT learning solutions to businesses and
organizations (the "Business").

WHEREAS, the parties hereby agree that Seller shall sell,
transfer and assign to Buyer the assets, properties and rights of the Business,
including all of the issued and outstanding shares of capital stock (the
"Shares") of the Company, and Buyer shall assume certain liabilities of Seller,
in each case upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I
---------

DEFINITIONS

SECTION 1.1 Definitions. The following terms are defined in the sections
-----------
indicated.

Defined Term Section
- ------------ -------

"Accounting Expert" Section 2.8(e)
"Action" Section 3.8(a)
"Adjustment Amount" Section 2.8(h)
"Affiliate" Section 2.3(d)
"Agreement" Recitals
"Ancillary Agreements" Section 3.5
"Annual Financial Statements" Section 3.6
"Applicable Contracts" Section 3.7(d)
"Asset Purchase" Section 2.1
"Assumed Liabilities" Section 2.4(a)
"Benefit Plans" Section 3.10(a)
"Bill of Sale" Section 2.7(b)(i)
"Books and Records" Section 2.1(g)
"Business" Recitals
"Business Systems" Section 3.21(a)

-1-
<PAGE>

"Buyer" Recitals
"Buyer Affiliate" Section 8.5
"Buyer License" Section 3.19(b)(i)
"Buyer's Plan" Section 5.8(b)
"Closing" Section 2.7(a)
"Closing Date" Section 2.7(a)
"Closing Statement" Section 2.8(a)
"Code" Section 3.10(b)
"Company" Recitals
"Company Benefit Plans" Section 3.10(a)
"Conducted" Section 3.1
"Confidentiality Agreement" Section 7.2
"Consideration" Section 5.13(b)
"Content" Section 2.1(a)
"Continuing Employee" Section 5.8(a)
"Contract" Section 2.1(f)
"Contracts" Section 2.1(f)
"Copyrights" Section 2.1(a)
"Damages" Section 8.2(a)
"Date Data" Section 3.21(b)
"Division" Recitals
"DOJ" Section 5.3(b)
"Enforceability Exceptions" Section 3.3
"Environmental Claim" Section 3.15(c)(i)
"Environmental Law" Section 3.15(c)(ii)
"ERISA" Section 3.10(a)
"ERISA Affiliate" Section 3.10(c)
"Excluded Assets" Section 2.3
"Excluded Liabilities" Section 2.4(b)
"Financial Statements" Section 3.6
"FTC" Section 5.3(b)
"GAAP" Section 2.8(a)
"Governmental Authorizations" Section 3.12(b)
"Governmental Entity" Section 3.4
"Governmental Filings and Approvals" Section 6.1(c)
"Governmental Order" Section 6.1(d)
"Hazardous Substance" Section 3.15(c)(iii)
"HSR Act" Section 2.7(a)
"HSR Filing" Section 3.4
"Intellectual Property" Section 2.1(a)
"International Plan" Section 3.10(g)
"Interim Financial Statements" Section 3.6
"IRS" Section 2.5
"Law" Section 3.5(d)

-2-
<PAGE>

"Leased Real Property" Section 3.13(a)
"Lender" Section 4.6
"Liabilities" Section 3.18
"Liens" Section 3.2(b)
"Marks" Section 5.12(b)
"Non-Assignable Rights" Section 5.15
"Order" Section 3.5(d)
"Pacifica Litigation" Section 2.4(b)(vii)
"Patents" Section 2.1(a)
"Pension Plan" Section 3.10(b)
"Person" Section 3.2(c)
"Plans" Section 3.10(b)
"Purchase Price" Section 2.5
"Pre-Closing Taxes" Section 8.3(c)
"Related to the Business" Section 2.1
"Representatives" Section 7.2
"Review Period" Section 2.8(c)
"Securities Act" Section 4.4
"Seller" Recitals
"Seller Benefit Plans" Section 3.10(a)
"Seller Group" Section 8.3(a)
"Seller Health Plans" Section 5.8(a)(ii)
"Seller Life Plan" Section 5.8(a)(iii)
"Sept. 30 Balance Sheet" Section 2.8(a)
"Shares" Recitals
"Software" Section 2.1(a)
"Statement of Objections" Section 2.8(d)
"Stock Purchase" Section 2.2
"Subsidiary" Section 9.1(a)
"Tax" Section 8.3(b)
"Tax Package" Section 8.4(e)
"Tax Returns" Section 2.3(e)
"Trade Secrets" Section 2.1(a)
"Trademarks" Section 2.1(a)
"Transfer Taxes" Section 5.13(a)
"Transferred Assets" Section 2.1
"Year 2000 Compliance" Section 3.21(c)
"Year 2000 Compliant" Section 3.21(c)
"ZD Mark" Section 5.12(b)
"ZD Plan" Section 2.8(a)
"Ziff-Davis Mark" Section 5.12(b)

-3-
<PAGE>

ARTICLE II
----------

SALE AND PURCHASE OF ASSETS AND SHARES

SECTION 2.1 Sale and Purchase of Assets. Upon the terms and subject to the
---------------------------
conditions set forth in this Agreement, Seller hereby agrees to sell, convey,
transfer, assign and deliver to Buyer, and Buyer hereby agrees to purchase from
Seller, at the Closing, all of Seller's right, title and interest in and to all
assets, rights and properties primarily related to, or used or held for use
primarily in connection with, the Business immediately prior to the Closing
("Related to the Business"), whether tangible or intangible, real, personal or
-----------------------
mixed, other than the Excluded Assets (the "Transferred Assets"), including, but
------------------
not limited to, the following assets, rights and properties of Seller to the
extent Related to the Business:

(a) all intellectual property (the "Intellectual Property") defined as
---------------------
any United States, foreign, international and state: patents and patent
applications, industrial design registrations, certificates of invention
and utility models (collectively, "Patents"); trademarks, service marks,
-------
and trademark or service mark registrations and applications, trade names,
logos, designs and slogans, together with all goodwill related to the
foregoing (collectively, "Trademarks"); Internet domain names, copyrights,
----------
copyright registrations, renewals and applications for copyrights,
including without limitation for the Content and the Software (each as
defined below in this Section 2.1) (collectively, "Copyrights"); Content;
----------
Software, trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models and methodologies
(collectively, "Trade Secrets"), rights of publicity, and all license
-------------
agreements and other agreements granting rights relating to any of the
foregoing. "Software" means any and all (i) computer programs, including
--------
any and all software implementations of algorithms, models and
methodologies, whether in source code or object code form, (ii) databases,
compilations, and any other electronic data files, including any and all
collections of data, whether machine readable or otherwise, (iii)
descriptions, flow-charts, technical and functional specifications, and
other work product used to design, plan, organize, develop, test,
troubleshoot and maintain any of the foregoing, (iv) without limitation to
the foregoing, the software technology supporting any functionality
contained on Internet site(s) and (v) all documentation, including
technical, end-user, training and troubleshooting manuals and materials,
relating to any of the foregoing. "Content" means any and all information,
-------
pictures, images, graphics, video, audio, text and any other content or
information, in whatever form and on any media;

(b) all marketing information, marketing research and data and
customer and mailing lists, including works in progress;

-4-
<PAGE>

(c) all furniture, fixtures, furnishings, machinery, vehicles,
computers, equipment, supplies and other tangible personal property located
in the Division's headquarters in Rochester, New York or elsewhere;

(d) all inventory and all raw materials, work in process, finished
products, wrapping, supply and packaging items located in the Division's
headquarters in Rochester, New York or elsewhere;

(e) all prepaid expenses, accounts receivable and other current assets
as of the Closing Date;

(f) all contracts, purchase or other orders, leases, licenses,
commitments, instruments and other agreements to which Seller is a party
(each, a "Contract" and collectively, the "Contracts") and all rights
-------- ---------
thereunder;

(g) originals or copies of all books, records, ledgers, files,
reports, accounts, data, plans and operating records, whether in hard copy,
electronic format, magnetic or other media ("Books and Records");
-----------------
(h) all promotional and advertising materials, whether existing in
print, video, online, magnetic or other media, and all stationery, forms,
labels and other materials;

(i) all licenses, permits, approvals, registrations and similar rights
or authorizations obtained from governmental entities;

(j) all claims, causes of action and other rights of recovery, set off
or recoupment (but excluding any recovery (whether by settlement or
otherwise) of attorneys' fees and expenses incurred by Seller in connection
with the Pacifica Litigation (as defined herein)); and

(k) all goodwill relating to the Business or any of the foregoing.

The transactions contemplated by this Section 2.1 are sometimes referred to
herein as the "Asset Purchase."
--------------

SECTION 2.2 Sale and Purchase of Shares. Upon the terms and subject to the
---------------------------
conditions set forth in this Agreement, at the Closing, Seller hereby agrees to
sell to Buyer, and Buyer hereby agrees to purchase from Seller, all of the
Shares. The transactions contemplated by this Section 2.2 are sometimes referred
to herein as the "Stock Purchase."
--------------

SECTION 2.3 Excluded Assets. Notwithstanding anything in this Agreement to
---------------
the contrary, Seller shall retain from and after the Closing all of its direct
and indirect right, title and interest in and to, and there shall be excluded
from the Asset

-5-
<PAGE>

Purchase, the Stock Purchase and the Transferred Assets, the following
(collectively, the "Excluded Assets"):
---------------

(a) cash, bank accounts and marketable securities of Seller (other
than the Shares);

(b) all assets of Seller not Related to the Business;

(c) Seller's rights under all insurance policies, including insurance
policies in respect of directors and officers and to all claims against
insurance carriers;

(d) all amounts owed by Seller or any of its Affiliates (other than
the Company or the Division) to the Company or the Division, whether or not
Related to the Business. For purposes of this Agreement, an "Affiliate" is
---------
any Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or under common control with such Person;

(e) all returns, reports, notices, forms, declarations, claims for
refund, estimates, elections, information statements or other documents
relating to any Tax, including any schedule or attachment thereto, and any
amendment thereof ("Tax Returns") so long as copies of such Tax Returns
-----------
insofar as they relate exclusively to the Company are included in the
Transferred Assets;

(f) all Books and Records Related to the Business which Seller is
required by law to retain, so long as copies of such Books and Records are
included in the Transferred Assets;

(g) subject to Sections 5.10(c) and 5.12 below, all rights to the
names "Ziff-Davis," "Ziff," "ZD," any derivation or other variation of such
terms whether or not Related to the Business and all other trademarks and
trade names, service marks, trade dress, domain names or logos of Seller or
any of its Affiliates that are not Related to the Business;

(h) all assets sold or otherwise disposed of by Seller or any of its
Affiliates in the ordinary course of business prior to the Closing Date;

(i) all rights, claims, credits, causes of action or rights of set-off
against third parties pertaining to the Excluded Assets; and

(j) subject to Sections 5.15 and 6.1, Seller's rights under any
Contract Related to the Business for which consent to assignment is
required and has not been obtained as of the Closing Date.

-6-
<PAGE>

SECTION 2.4 Assumption of Liabilities; Excluded Liabilities.
-----------------------------------------------

(a) Upon the terms and subject to the conditions set forth herein, at
the Closing, Buyer agrees to assume and become solely responsible for all
debts, liabilities or obligations whatsoever of Seller or any of its
Affiliates that arise out of or relate to the ownership of the Transferred
Assets or the operation of the Business, whether arising before or after
the Closing and whether known or unknown, disclosed or undisclosed, mature
or unmatured, accrued, absolute, contingent or otherwise, including the
following (such debts, liabilities and obligations to be assumed, the
"Assumed Liabilities"):
------- -----------

(i) except as provided in Section 2.4(b)(vi), all liabilities and
obligations of Seller under the Contracts;

(ii) all liabilities with respect to all actions, suits,
proceedings, disputes, claims or investigations that arise out of or
relate to the ownership of the Transferred Assets or the operation of
the Business, at law, in equity or otherwise (but excluding the
Pacifica Litigation);

(iii) all employee benefit, compensation, retention and severance
liabilities and other similar liabilities associated with employees of
the Division (it being expressly understood and agreed that the
retention and special bonuses set forth in Schedule 5.8(d) of the
Disclosure Schedule, to the extent paid, and the contribution to the
ZD Plan contemplated in Section 5.8(b), shall be accrued as
liabilities on the Closing Statement).

(b) It is understood and agreed by the parties hereto that the Assumed
Liabilities shall not include liabilities of Seller or the Business other
than those set forth in clause (a) above, whether known or unknown,
disclosed or undisclosed, mature or unmatured, accrued, absolute,
contingent or otherwise, and shall also not include the following (all such
excluded liabilities, the "Excluded Liabilities"):
--------------------

(i) any liabilities and obligations to the extent arising out of
the Excluded Assets;

(ii) any liabilities of the Company (since these liabilities will
continue to be owed by the Company rather than Buyer);

(iii) except as provided with respect to Transfer Taxes in
Section 5.13(a) hereof, expenses incurred by Seller in connection with
the sale of the Transferred Assets;

-7-
<PAGE>

(iv) any intercompany liabilities owed by the Division to Seller
or any of its Affiliates (other than the Company or the Division) that
arise prior to the Closing and any debt for borrowed money owed by the
Division to third parties;

(v) any obligations for borrowed money;

(vi) any liabilities or obligations under any agreement that is
not a Contract, or any agreement that is not effectively assigned to
Buyer; and

(vi) all liabilities and obligations with respect to the
litigation referred to in Schedule 3.8 of the Disclosure Schedule (the
"Pacifica Litigation").
-------------------

SECTION 2.5 Purchase Price. The purchase price for the Transferred Assets
--------------
and the Shares shall be One Hundred Seventy-Two Million Dollars and Zero Cents
($172,000,000) (the "Purchase Price") plus or minus the Adjustment Amount. The
--------------
Purchase Price shall be paid in accordance with Section 2.6 hereof. The Purchase
Price shall be allocated among the Transferred Assets and the Shares in
accordance with Section 5.13(b) below. Each party shall use this allocation in
all tax and governmental filings, except as otherwise required by a tax or
governmental authority in connection with an audit or by a court decision. To
the extent that disclosures of this allocation are required to be made by the
parties to the Internal Revenue Service (the "IRS"), Buyer and Seller will
---
disclose such reports to the other prior to filing with the IRS.

SECTION 2.6 Payment of Purchase Price. At the Closing, Buyer agrees to pay
-------------------------
to Seller the Purchase Price in cash by wire transfer of immediately available
funds to the account designated by Seller.

SECTION 2.7 The Closing.
-----------

(a) The closing of the Asset Purchase and the Stock Purchase
(collectively, the "Closing") shall take place at the offices of Seller at
-------
9:30 a.m. local time on the first business day following the first date on
which (i) all waiting periods applicable to the Asset Purchase or the Stock
Purchase under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), shall have expired or been terminated and (ii) all
-------
the other conditions to Closing set forth in Article VI (other than those
conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions) shall have been
satisfied or waived, or at such other time, place and date as Buyer and
Seller may mutually agree; provided, however, that if the Closing would
-------- -------
otherwise occur prior to January 18, 2000, then the Closing shall occur on
January 18, 2000. The date on which the Closing occurs is referred to as
the "Closing Date."
------------

-8-
<PAGE>

(b) At the Closing, Seller shall deliver to Buyer:

(i) a duly executed bill of sale and assignment in the form
attached hereto as Exhibit A (the "Bill of Sale");
--------- ------------

(ii) the ancillary documents referred to in Section 6.1(h);

(iii) assignments of all the Intellectual Property;

(iv) executed copies of the consents referred to on Schedule
6.1(b) of the Disclosure Schedule;

(v) all of the Books and Records;

(vi) the officer's certificate referred to in Sections 6.1(a)
hereof;

(vii) the Shares in the form provided in Section 6.1(e);

(viii) the opinion of counsel referred to in Section 6.1(f); and

(ix) such other documents and certificates as are required to be
delivered by Seller to Buyer pursuant to this Agreement.

(i) the Purchase Price;

(ii) the Assumption Agreement in substantially the form of
Exhibit B attached hereto duly executed by Buyer;
---------

(iii) the Bill of Sale, duly executed by Buyer;

(iv) the certificate referred to in Sections 6.2(a) and (b);

(v) such other documents as are required to be delivered by Buyer
to Seller pursuant to this Agreement; and

(vi) the opinion of counsel referred to in Section 6.2(f).

SECTION 2.8 Post-Closing Purchase Price Adjustment.
--------------------------------------

(a) Preparation of Closing Statement. As soon as practicable, but in no
--------------------------------
event later than 45 days after the Closing Date, Buyer shall prepare and deliver
to Seller the Closing Statement. For purposes of this Agreement, "Closing
-------
Statement" shall mean the statement setting forth the net assets of the Division
- ---------
and the Company which for purposes of this Agreement shall mean the excess of

-9-
<PAGE>

assets over liabilities as of the Closing Date. Net assets shall be determined
in accordance with generally accepted United States accounting principles
("GAAP") applied on a basis consistent with the basis on which the unaudited
----
consolidated balance sheet of the Division and the Company as of September 30,
1999 referred to in Section 3.6 (the "Sept. 30 Balance Sheet") was prepared,
----------------------
except as otherwise provided below. For purposes of calculating net assets,
"assets" in the Sept. 30 Balance Sheet and the Closing Statement shall not
include any Excluded Assets, and "liabilities" shall include only those
liabilities that are Assumed Liabilities or liabilities of the Company and shall
not include any liabilities that this agreement expressly provides shall be
retained or discharged (or indemnified against) by Seller. In addition, for
purposes of calculating liabilities for the Closing Statement only, the
following shall be accrued as liabilities: (i) liabilities relating to retention
and special bonuses set forth in Schedule 5.8(d) of the Disclosure Schedule, but
only to the extent those amounts are actually paid and (ii) the discretionary
contributions to be made under the Ziff-Davis Retirement & Savings Plan (the "ZD
--
Plan") as contemplated in the last sentence of Section 5.8(b) hereof.
- ----

(b) Access to Buyer. Upon reasonable notice to Seller, Seller shall provide
---------------
Buyer full access at all reasonable times to such historical financial
information (to the extent still in Seller's possession) relating to the
Division and the Company as Buyer shall reasonably request to prepare and
deliver the Closing Statement in accordance with Section 2.8(a) and to respond
to any Statement of Objections.

(c) Examination by Seller. Upon receipt of the Closing Statement, Seller
---------------------
shall have 45 days (the "Review Period") to review such Closing Statement and
-------------
related computation of net assets. During the Review Period Buyer shall give
Seller full access at all reasonable times to the books, records, premises and
facilities and other materials of the Division and the Company and the personnel
of, and work papers prepared by or for Buyer or in Buyer's possession to the
extent that they relate to the Division or the Company for the purpose of
reviewing such Closing Statement and the related computation of net assets.

(d) Objection by Seller. On or prior to the last day of the Review Period,
-------------------
Seller may object to the Closing Statement by delivering to Buyer a written
statement setting forth in reasonable detail Seller's objections to the Closing
Statement and/or the computation of net assets (the "Statement of Objections").
-----------------------
If Seller fails to deliver a Statement of Objections within the Review Period,
the Closing Statement and computation of net assets shall be deemed to have been
accepted by Seller and shall be final and binding on the parties and the net
assets reflected in the Closing Statement shall be used in computing the
Adjustment Amount described in Section 2.8(h) below. If Seller delivers a
Statement of Objections within the Review Period, Seller and Buyer shall
negotiate in good

-10-
<PAGE>

faith to resolve such objections, and any objections that are resolved by a
written agreement between Buyer and Seller shall be final and binding on the
parties for purposes of the Closing Statement.

(e) Resolution of Disputes. If Seller and Buyer fail to reach an agreement
----------------------
with respect to all of the matters set forth in a Statement of Objections, then
the matters still in dispute shall, not later than 10 business days after the
earlier of the end of the Review Period or the first date on which one of the
parties affirmatively terminates discussions in writing with respect to the
Statement of Objections, be submitted for resolution to the New York office of
one of the five largest United States independent certified public accountants
that has no material business relationships with Buyer or Seller, as selected by
Buyer and Seller jointly (the "Accounting Expert") who, acting as an expert and
-----------------
not as an arbitrator, shall resolve the matters still in dispute and adjust the
Closing Statement and the net assets to reflect such resolution. The Accounting
Expert's resolution of the matters in dispute shall be final and binding on the
parties. The Accounting Expert shall make a determination as soon as practicable
and in any event within 30 days (or such other time as the parties hereto shall
agree in writing) after its engagement. The parties hereto agree that all
adjustments shall be made without regard to materiality.

(f) Fees and Expenses of the Accounting Expert. The fees and expenses
------------------------------------------
of the Accounting Expert shall be divided equally between Seller and Buyer.

(g) Access to Supporting Documentation. Seller and Buyer shall each
----------------------------------
make readily available to the Accounting Expert all relevant work papers
and books and records relating to the Business, the Closing Statement and
the computation of the net assets.

(h) Payment of Adjustment Amount. Within two business days after the
----------------------------
Closing Statement and the computation of the net assets become final and
binding, (i) if the net assets shown on the Closing Statement is less than
the net assets shown on the Sept. 30 Balance Sheet, the Purchase Price
shall be decreased on a dollar-for-dollar basis by the amount by which net
assets on the Sept. 30 Balance Sheet exceeds the net assets shown on the
Closing Statement, (ii) if the net assets shown on the Closing Statement is
greater than the net assets shown on the Sept. 30 Balance Sheet, the
Purchase Price shall be increased on a dollar-for-dollar basis by the
amount by which net assets on the Sept. 30 Balance Sheet is less the net
assets shown on the Closing Statement (the increase or decrease in Purchase
Price each being an "Adjustment Amount") and (iii) Seller shall pay to
-----------------
Buyer (in the case of clause (i)) or Buyer shall pay to Seller (in the case
of clause (ii)), as the case may be, the Adjustment Amount, together with
interest thereon at a rate equal to the rate announced from time to time by
The Bank of New York as its base rate during the period from the Closing
Date to the date of the adjustment

-11-
<PAGE>

payment required by this Section 2.8(h) calculated on the basis of a
365-day year and the actual number of days elapsed. Any such payment shall
be made by wire transfer of immediately available funds to a bank account
or accounts as shall be designated in writing by the recipient no later
than one business day prior to the payment date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF SELLER

Seller hereby represents and warrants to Buyer as follows:

SECTION 3.1 Organization and Good Standing. Each of Seller and the Company
------------------------------
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, with full corporate power and authority to conduct
its businesses and to own or use its assets as currently conducted or as
contemplated to be conducted ("Conducted"), owned and used. The Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which it is required to be so licensed or qualified, except for
any failures to be so licensed, qualified or in such good standing that,
individually or in the aggregate, are not material.

SECTION 3.2 Capitalization.
--------------

(a) The authorized, issued and outstanding capital stock of, or other
equity interest in, the Company as of the date of this Agreement is set
forth in Schedule 3.2(a) of the Disclosure Schedule. All of the issued and
outstanding shares of capital stock of, or other equity interests in, the
Company have been duly authorized and are validly issued, fully paid and
nonassessable.

(b) Except as set forth in Schedule 3.2(b) of the Disclosure Schedule,
Seller is, and on the Closing Date will be, the sole record and beneficial
owner of the Shares, free and clear of all liens, mortgages, security
interests, charges, pledges, claims, options, voting trusts, restrictions
or other encumbrances (collectively, "Liens"). At the Closing, Buyer will
-----
obtain good and marketable title to the Shares, free and clear of all
Liens.

(c ) There are no shares of capital stock of, or other equity
interests in, the Company reserved for issuance or subject to preemptive
rights or any outstanding subscriptions, options, warrants, calls, rights
or convertible or exchangeable securities, phantom stock, participation
interests, SARs or any other agreements or other instruments in effect
giving any Person the right to acquire from Seller or any of its Affiliates
any shares of capital stock of, or other equity interests in, the Company.
"Person" means any individual, corporation (including any non-profit
------

-12-
<PAGE>

corporation), general or limited partnership, limited liability company,
Governmental Entity, joint venture, estate, trust, association,
organization or other entity of any kind or nature. The Company owns no
equity interests in any other Person.

SECTION 3.3 Corporate Authority. Seller has the corporate power and
-------------------
authority, and has taken all corporate action necessary, to authorize, execute,
deliver and perform its obligations under this Agreement and the Ancillary
Agreements (as defined below). This Agreement and the Ancillary Agreements and
the transactions contemplated hereby have been duly authorized, executed and
delivered by Seller and constitutes valid and legally binding obligations of
Seller, enforceable against Seller in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles (collectively, the "Enforceability
--------------
Exceptions").
- ----------

SECTION 3.4 Consents and Approvals. Except for the notification and report
----------------------
form required to be filed under the HSR Act (such filing, the "HSR Filing") and
----------
except as set forth in Schedule 3.4 of the Disclosure Schedule, no notices,
reports, registrations or other filings are required to be made or delivered by
Seller with, nor are any consents, approvals or authorizations required to be
obtained by Seller from, any court or other governmental, administrative or
regulatory authority in the United States or elsewhere (each, a "Governmental
------------
Entity"), in connection with the execution, delivery or the performance of this
- ------
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby by Seller, except for any such matters the failure of which to make or
obtain, individually or in the aggregate, are not material.

SECTION 3.5 No Violations. The execution, delivery and performance of this
-------------
Agreement and any agreement required to be delivered in connection herewith and
the licenses contemplated by Section 5.10(c) (the "Ancillary Agreements") by
--------------------
Seller and of the transactions contemplated hereby or thereby will not:

(a) violate or contravene any provision of the certificate of
incorporation or by-laws (or other comparable governing documents) of
Seller or the Company;

(b) violate, conflict with, or constitute or result in a default,
acceleration or creation of a Lien under, or a termination of (in each case
with or without notice or lapse of time or both), or result in the loss of
any benefit under, any provision of any Contract to which Seller or the
Company is a party or by which any of their respective assets are bound, in
each case other than (i) as set forth in Schedule 3.5(b) of the Disclosure
Schedule and (ii) for any such matters that, individually or in the
aggregate, are not material;

-13-
<PAGE>

(c) require Seller or the Company to obtain the consent, waiver,
authorization or approval of any Person under any Contract to which Seller
or the Company is a party or by which any of their respective assets are
bound, in each case other than (i) as set forth in Schedule 3.5(c) of the
Disclosure Schedule or (ii) for any such matters that, individually or in
the aggregate, are not material; or

(d) violate, contravene or conflict with any statute, law, rule or
regulation (each, a "Law"), or any award, judgment, decree, or other order
---
(each, an "Order"), of any Governmental Entity having jurisdiction over
-----
Seller or the Company or any of their assets.

SECTION 3.6 Financial Statements. Schedule 3.6 of the Disclosure Schedule
--------------------
contains (i) unaudited consolidated pro-forma balance sheets of the Division and
the Company as of December 31, 1997 and 1998, and the related unaudited
consolidated pro-forma statements of operations for each of the years then ended
(collectively, the "Annual Financial Statements") and (ii) an unaudited
---------------------------
consolidated balance sheet of the Division and the Company as of September 30,
1999 and the related unaudited consolidated pro-forma statement of operations
for the nine months then ended (collectively, the "Interim Financial
-----------------
Statements," and, together with the Annual Financial Statements, the "Financial
- ---------- ---------
Statements"). The Financial Statements have been prepared based on the books and
- ----------
records of Seller in accordance with GAAP consistently applied throughout the
periods covered by such statements and fairly present the financial condition
and the results of operations of the Division and the Company as of the
respective dates and for the periods then ended, as applicable, subject to (i)
in the case of the Interim Financial Statements, normal year-end adjustments
that are not expected to be material in amount or effect, (ii) the absence of
the level of detail and full financial footnotes that would be required in
regular financial statements, (iii) the absence of line items below earnings
before interest and taxes in the unaudited consolidated pro forma statements of
operations, (iv) the exclusion of operations Related to the Business that have
been sold by Seller prior to the date hereof and (v) the pro forma adjustments
described therein.

SECTION 3.7 Absence of Certain Changes and Events. Except as set forth in
Schedule 3.7 of the Disclosure Schedule, since September 30, 1999:

(a) there has not been any material adverse change in the business,
assets, liabilities, prospects, results of operations or condition
(financial or otherwise) of the Division and the Company taken as a whole;

(b) each of Seller (but solely with respect to the Division) and the
Company has Conducted its business only in the ordinary course of business,
consistent with past practice;

-14-
<PAGE>

(c) neither Seller nor the Company has sold, leased or otherwise
disposed of, or incurred any Lien on, any material asset of the Business;

(d) neither Seller nor the Company has settled, compromised, waived,
released or assigned any material rights or claims it has under or in
respect of any Action or Contract included in the Transferred Assets or to
which the Company is a party or by which its assets are bound
(collectively, "Applicable Contracts"), tax matter or insurance policy; and
--------------------

(e) there has not been any material change in the accounting
practices, methods or principles used by Seller (but solely with respect to
the Division) or the Company.

SECTION 3.8 Litigation; Orders.
------------------

(a) Except as set forth in Schedule 3.8(a) of the Disclosure Schedule,
there are no actions, suits or other legal or administrative proceedings or
investigations by or before any Governmental Entity (each, an "Action")
------
pending or, to the knowledge of Seller, threatened against Seller or the
Company or any of their respective assets, other than Actions that,
individually or in the aggregate, are not material or not reasonably likely
to prohibit, materially restrict or delay the performance of this Agreement
or the Ancillary Agreements by Seller or the Company.

(b) None of Seller, the Company or any of their assets is subject to
any Order except for those that, individually or in the aggregate, are not
material or not reasonably likely to prohibit, materially restrict or delay
the performance of this Agreement or the Ancillary Agreements by Seller or
the Company.

SECTION 3.9 Taxes.
-----

(a) Each of Seller and the Company has filed or caused to be filed all
Tax Returns that are or were required to be filed by or with respect to any
of them, either separately or as a member of a group of corporations,
pursuant to applicable Law, and all such Tax Returns are or will be true,
complete and correct in all material respects. Each of Seller and the
Company has paid, or made provision for the payment of, all Taxes that have
or are reasonably likely to become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Seller or the Company,
except such Taxes, if any, as are listed in Schedule 3.9(a) of the
Disclosure Schedule or are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided
in the Financial Statements.

(b) The charges, accruals and reserves with respect to Taxes provided
in the Financial Statements are adequate (determined in accordance with
GAAP) and

-15-
<PAGE>

all Taxes that Seller or the Company is or was required by Law to withhold
or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity or other Person.

(c) There are no Liens on any of the Transferred Assets or the assets
of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.

SECTION 3.10 Employee Benefits; ERISA.
------------------------

(a) Seller has delivered or otherwise made available to Buyer a true,
complete and correct copy of, and Schedule 3.10(a) of the Disclosure
Schedule sets forth a true, complete and correct list of, each
profit-sharing, pension, severance pay, thrift, savings, incentive, change
of control, employment, retirement, bonus, deferred compensation, group
life and health insurance and other employee benefit plan, agreement,
arrangement or commitment, including any such plan, agreement, arrangement
or commitment or any other plan or program that constitutes an "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (i) that provides benefits for
-----
or pertains to any Division employee or to which Seller makes contributions
on behalf of any Division employee or is otherwise bound in connection with
the Division ("Seller Benefit Plans") or (ii) that provides benefits for or
--------------------
pertains to any Company employee or to which the Company makes
contributions on behalf of any of its employees or is otherwise bound (all
of which are hereinafter referred to as "Company Benefit Plans" and,
---------------------
collectively with Seller Benefit Plans, the "Benefit Plans").
-------------

(b) All Benefit Plans that are employee benefit plans (the "Plans"),
to the extent subject to ERISA or the Internal Revenue Code of 1986, as
amended (the "Code"), are in substantial compliance with ERISA and the
----
Code. Each Plan that is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") and that is intended to
------------
be qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS and nothing has occurred following
receipt of such letter that is reasonably likely to cause such letter to be
revoked. There is no material pending or, to the knowledge of Seller,
threatened litigation relating to the Plans. No action has been taken with
respect to any Benefit Plan either to terminate such Benefit Plan or to
cause distributions, other than in the ordinary course of business, to
participants under such Benefit Plan.

(c) Neither Seller, the Company nor any entity that is considered one
employer with Seller or the Company under Section 4001(b)(1) of ERISA or
Section 414(b) or (c) of the Code (an "ERISA Affiliate") has maintained, or
---------------
made

-16-
<PAGE>

or been obligated to make, contributions to any plan subject to Part 3 of
Title I or Title IV of ERISA at any time within the last six years.

(d) All contributions required to be made under the terms of any
Benefit Plan have been timely made when due.

(e) None of Seller or the Company has any commitments or obligations
nor made any representations regarding continuation of welfare benefits
after termination of employment under any of the Benefit Plans, except as
required by Part 6 of Title I of ERISA or similar laws or as set forth in
Schedule 3.10(e) of the Disclosure Schedule. Except to the extent limited
by applicable Law, there are no restrictions on the rights of Seller or the
Company to amend or terminate any such Benefit Plan without incurring
Liability thereunder.

(f) None of Seller or the Company has any obligations for retiree
health or life benefits. Except to the extent limited by applicable Law,
there are no restrictions on the rights of Seller or the Company to amend
or terminate any Benefit Plan without incurring Liability thereunder.

(g) Each Benefit Plan covering non-U.S. employees (an "International
-------------
Plan") has been maintained in substantial compliance with its terms and
----
with the requirements prescribed by any and all applicable Laws (including
any special provisions relating to qualified plans where such International
Plan was intended to so qualify) and has been maintained in good standing
with applicable regulatory authorities. The fair market value of the assets
of each funded International Plan (or the liability of each funded
International Plan funded through insurance) is sufficient to procure or
provide for the benefits accrued thereunder through the Closing Date
according to the actuarial assumptions and valuations most recently used to
determine employer contributions to the International Plan. The Company
conforms in all material respects with the provisions of any applicable
national law or regulations in relation to staff delegates and workers'
committees, and in a more general manner in relation to the representation
of the employees within the Company.

SECTION 3.11 Employees; Labor Matters. Schedule 3.11 of the Disclosure
------------------------
Schedule contains a true, complete and correct list of the name, job title,
current compensation, and date of hire of each employee of (a) Seller in the
Division and (b) the Company, including each employee on leave of absence or
layoff status. Neither Seller nor the Company is a party to, or bound by, any
collective bargaining agreement or other labor Contract nor is any such
collective bargaining agreement or other labor Contract currently being
negotiated, nor, to the knowledge of Seller, are there any activities or
proceedings of any labor union or labor organization to organize any employees
of Seller in the Division or the Company.

-17-
<PAGE>

SECTION 3.12 Compliance with Laws; Governmental Authorizations. Except for
-------------------------------------------------
any such matters that, individually or in the aggregate, are not material:

(a) each of Seller and the Company is in compliance with each Law
applicable to it or to its conduct, ownership or operation of the Business
and no notice has been received by Seller or the Company alleging a failure
to comply with such Laws;

(b) each of Seller and the Company has all licenses, permits and other
approvals or authorizations from Governmental Entities that are necessary
to permit it to lawfully conduct and operate the Business in the manner it
currently does and to permit it to own and use its assets in the manner in
which it currently does ("Governmental Authorizations"); and
---------------------------

(c) each of Seller and the Company is in full compliance in all
material respects with all of the terms and requirements of each of its
Governmental Authorizations and no notice has been received by Seller or
the Company alleging a failure to comply with such terms and requirements.

SECTION 3.13 Real Property.
-------------

(a) Schedule 3.13(a) of the Disclosure Schedule contains a true,
complete and correct list of all leased real property (the "Leased Real
-----------
Property") included in the Transferred Assets or leased by the Company.
--------
Seller has delivered or made available to Buyer true, complete and correct
copies of the deeds, leases or other instruments by which such real
property is leased. Neither Seller nor the Company owns any real property
Related to the Business. There is no default under any leases relating to
the Leased Real Property by Seller or the Company or, to the knowledge of
Seller, by the other parties thereto and, to the knowledge of Seller, no
event has occurred which with the giving of notice, lapse of time or both
would constitute such a default other than in each such case for any such
defaults that, individually or in the aggregate, are not material. Each
lease relating to the Leased Real Property is valid, binding and
enforceable in accordance with its terms and in full force and effect.

(b) Each of Seller and the Company hold the leasehold interests in the
Leased Real Property free and clear of all Liens except: (i) Liens
------
disclosed in Schedule 3.13(b) of the Disclosure Schedule, (ii) mortgages or
security interests shown on the Financial Statements as securing specified
Liabilities or obligations, (iii) mortgages or security interests incurred
in connection with the purchase of property or assets after September 30,
1999 and disclosed in Schedule 3.13(b) of the Disclosure Schedule (such
mortgages and security interests being limited to the property or assets so
acquired), (iv) Liens for current Taxes and assessments and other charges
by Governmental Entities not yet due and payable or which

-18-
<PAGE>

may thereafter be paid without penalty or are being contested in good faith
by appropriate proceedings, and (v) imperfections of title that are not
material.

SECTION 3.14 Contracts, Leases and Agreements; No Default.
--------------------------------------------

(a) Except as set forth in Schedule 3.14(a) of the Disclosure
Schedule, there are no Applicable Contracts:

(i) evidencing indebtedness for borrowed money or pursuant to
which Seller or the Company has guaranteed any obligation of any other
Person;

(ii) prohibiting or limiting the ability of Seller or the Company
to engage in any line of business, to compete with any Person or to
carry on the Business anywhere in the world;

(iii) requiring the performance of services or delivery of goods
or materials by or to Seller or the Company or the lease of personal
property by or from any Person for consideration exceeding $100,000 in
any one year;

(iv) regarding the employment or severance arrangements of any
employee;

(v) with directors, officers or employees that are not
cancellable by it on notice of not longer than 30 days and without
liability, penalty or premium or providing for the payment of any
bonus or commission based upon sales or earnings; or

(vi) that are material to the Business.

Seller has delivered or made available to Buyer a true, complete and
correct copy of each Applicable Contract listed in Schedule 3.14(a) of the
Disclosure Schedule.

(b) Except as set forth in Schedule 3.14(b) of the Disclosure
Schedule or for any such matters that, individually or in the aggregate,
are not material, with respect to each Applicable Contract listed in
Schedule 3.14(a) of the Disclosure Schedule:

(i) such Applicable Contract is a valid, legally binding and
enforceable obligation of Seller or the Company party thereto, subject
to the Enforceability Exceptions;

-19-
<PAGE>

(ii) Seller or the Company that is a party to such Applicable
Contract is in substantial compliance with all terms and requirements
of such Applicable Contract;

(iii) to the knowledge of Seller, each other Person that is a
party to such Applicable Contract is in substantial compliance with
all terms and requirements of such Applicable Contract and

(iv) to the knowledge of Seller, no event has occurred or
circumstance exists that (with or without the giving of notice, the
lapse of time or both) gives any Person other than Seller or the
Company that is a party to such Applicable Contract the right to
declare a default, exercise any remedy under, accelerate the maturity
or performance of, or terminate such Applicable Contract.

SECTION 3.15 Environmental Matters.
---------------------

(a) Except for any such matters that, individually or in the
aggregate, are not material: (i) each of Seller (but solely with respect to
the Division) and the Company is in compliance with all applicable
Environmental Laws; (ii) neither Seller (but solely with respect to the
Division) nor the Company has received any written notice from any
Governmental Entity, citizens group, employee or otherwise alleging that
Seller (but solely with respect to the Division) is in violation of any
applicable Environmental Laws; (iii) there is no Environmental Claim
pending or, to the knowledge of Seller, threatened against Seller (but
solely with respect to the Division) and/or the Company against any person
or entity whose liability for any Environmental Claim Seller (but solely
with respect to the Division) or the Company has or may have retained or
assumed either contractually or by operation of law and (iv) there are no
past or present (or to the knowledge of Seller) future actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release or presence of any Hazardous Substance which could
form the basis of any Environmental Claim against Seller (but solely with
respect to the Division) or the Company, or to the knowledge of Seller,
against any person or entity whose liability for any Environmental Claim
Seller (but solely with respect to the Division) or the Company has or may
have retained or assumed either contractually or by operation of law.

(b) This Section 3.15 constitutes the sole representation and warranty
of Seller or the Company with respect to any Environmental Law or Hazardous
Substance notwithstanding any other representation and warranty in this
Article III.

-20-
<PAGE>

(i) "Environmental Claim" means any claim, action, cause of
-------------------
action, investigation or notice (written or oral) by any person or
entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (1) the presence, or release of any Hazardous
Substances at any location, whether or not owned or operated by Seller
or the Company, or (2) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.

(ii) "Environmental Law" means any applicable federal, state,
-----------------
local and foreign law, regulation, code, license, permit, order,
judgment, decree or injunction promulgated by any Governmental Entity
(1) relating to pollution or protection of human health or the
environment (including air, water, soil and natural resources) or (2)
the manufacture, processing, distribution, use, treatment, storage,
transport, handling, release or disposal of Hazardous Substances, and
all laws and regulations relating to the record keeping, notification,
disclosure and reporting requirements respecting Hazardous Substances.

(iii) "Hazardous Substance" means any substance to the extent
-------------------
listed, defined, designated, classified or regulated as hazardous,
toxic, radioactive, a pollutant, contaminant or oil under either the
National Oil and Hazardous Substances Pollution Contingency Plan (40
C.F.R.ss. 300.5) or any applicable Environmental Law, including
petroleum and any derivative or by-product thereof.

SECTION 3.16 Insurance. Schedule 3.16 of the Disclosure Schedule sets forth
---------
a true, complete and correct list of all insurance policies covering the
Division, the Company and any of their assets or employees. The insurance
policies listed in Schedule 3.16 of the Disclosure Schedule are (a) in such
amounts and ensure against such risks and losses as are consistent with standard
industry practice and (b) are sufficient to comply with applicable laws and the
requirements of any Applicable Contract. No notice of cancellation or
termination of any insurance policy listed in Schedule 3.16 of the Disclosure
Schedule has been received with respect to any such policy and each such policy
is in full force and effect.

-21-
<PAGE>

SECTION 3.17 Brokers and Finders. Except for Morgan Stanley & Co.
-------------------
Incorporated, whose fees shall be paid by Seller, no agent, broker, investment
banker, intermediary, finder, Person or firm acting on behalf of Seller or the
Company will be entitled to any broker's or finder's fee or any other commission
or similar fee, directly or indirectly, from any of the parties hereto in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.

SECTION 3.18 No Undisclosed Liabilities. The Assumed Liabilities do not
--------------------------
include, and the Company does not have, any Liabilities except for (a)
Liabilities disclosed in Schedule 3.18 of the Disclosure Schedule, (b)
Liabilities reflected or adequately reserved against in the Financial
Statements, (c) current Liabilities incurred in the ordinary course of business,
consistent with past practice and (d) other Liabilities that, individually or in
the aggregate, are not material. "Liabilities" means any debts, liabilities,
-----------
commitments or obligations of any kind, character or nature whatsoever, whether
known or unknown, accrued, contingent or absolute, due or to become due.

SECTION 3.19 Intellectual Property.
-------------------

(a) Schedule 3.19(a) of the Disclosure Schedule sets forth, for all
Intellectual Property included in the Transferred Assets or owned by the
Company, a complete and accurate list of all U.S. and foreign: (i) Patents;
(ii) Trademark registrations (including Internet domain name registrations)
and applications and (iii) Copyright registrations and Copyright
applications. Except as set forth on Schedule 3.19(b) of the Disclosure
Schedule, Seller or the Company is the sole and exclusive beneficial owner,
and, with respect to the United States, record owner (except for U.S. Reg.
No. 1631580), of the items on Schedule 3.19(a).

(b) Except as set forth in Schedule 3.19(b) of the Disclosure Schedule
and except in such instances as is not reasonably likely to be material:

(i) Seller, the Company, or the Division own or have the right to
use all Intellectual Property which is used in or necessary for the
Business as currently conducted, free and clear of all liens or other
encumbrances. The Intellectual Property owned by or licensed to the
Company, and included in the Transferred Assets and covered by the
arrangements and license agreements contemplated under Sections 5.10
and 5.12 (the "Buyer License") constitutes all of the Intellectual
-------------
Property used in or necessary for the business as currently conducted,
including but not limited to all Intellectual Property contained in or
necessary to manufacture, use, sell, reproduce, display and, with
respect to Intellectual Property owned by Seller or the Company, make
derivative works of the products sold by the Business and all product
names (other than Seller's trademarks, trade names, service marks,
domain names or logos that

-22-
<PAGE>

include the words "Ziff Davis," "Ziff," "ZD" or "Softbank" as
described in Section 5.12);

(ii) all Intellectual Property owned by the Company or included
in the Transferred Assets or covered by the Buyer License, has been
duly maintained, is valid and subsisting, in full force and effect and
has not been cancelled, expired or abandoned;

(iii) Seller, the Company or the Division has not received
written notice from any third party regarding any actual or potential
infringement by Seller with respect to the Business, the Company or
the Division of any intellectual property of such third party, and
Seller, the Company or the Division has no knowledge of any valid
basis for such a claim against Seller, the Company or the Division;

(iv) Seller, the Company or the Division has not received written
notice from any third party regarding any assertion or claim
challenging the validity of any Intellectual Property owned by the
Company or included in the Transferred Assets or covered by the Buyer
License, and Seller, the Company or the Division has no knowledge of
any valid basis for such a claim;

(v) to Seller's knowledge, no third party is misappropriating,
infringing, diluting or violating any Intellectual Property owned by
the Company or Seller and included in the Transferred Assets or
covered by the Buyer License;

(vi) neither Seller with respect to the Transferred Assets, nor
the Company or the Division have licensed or sublicensed its rights in
any Intellectual Property, or received or been granted any such
rights, other than pursuant to the Contracts;

(vii) Seller, the Company or the Division take reasonable
measures to protect the confidentiality of Trade Secrets owned by or
licensed to Company, the Division or to Seller and included in the
Transferred Assets or covered by the Buyer License;

(viii) the execution, delivery and performance by Seller, the
Company or the Division of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the loss or
impairment of, or give rise to any right of any third party to
terminate or alter, any of the Intellectual Property rights of the
Company or the Division, or of the rights of Buyer as the successor
owner of the Transferred Assets, nor require the consent of any
Governmental Entity or third party in respect of any such Intellectual
Property; and

-23-
<PAGE>

(ix) there are no settlement agreements, consents or covenants
not to sue concerning any Intellectual Property to which the Company,
the Division or Seller is a party (to the extent such Intellectual
Property is included in the Transferred Assets).

SECTION 3.20 Transferred Assets. Seller has, and at the Closing Buyer will
------------------
receive, good and marketable title to all of the Transferred Assets, in each
case free and clear of any Lien, except for such Liens that would not materially
interfere with the ownership or operation of the Business or the Transferred
Assets, taken as a whole, and which will not secure debt as of the Closing Date.
All tangible assets constituting Transferred Assets are (i) in good operating
condition and repair, ordinary wear and tear excepted and (ii) are suitable for
operation of the Business, are fit for their intended purposes and meet all
requirements of Law or any Governmental Entity, except for such failures that
individually or in the aggregate are not likely to be material. The Transferred
Assets together with the other rights conferred to Buyer as contemplated by this
Agreement constitute all of the assets, properties and rights necessary for the
operation of the Business as conducted and are adequate and sufficient for the
operation of the Business as presently conducted.

SECTION 3.21 Year 2000 Compliance.
--------------------

(a) Except as is not reasonably likely to be material, (i) the
products sold by the Business are Year 2000 Compliant; and (ii) all of the
internal computer systems of Seller (but solely with respect to the
Division) and the Company comprised of software, hardware, databases or
embedded control systems (microprocessor controlled, robotic or other
device) that are used in the Business, or the operation of the Company or
the Division (collectively the "Business Systems"), including but not
----------------
limited to accounting systems, are Year 2000 Compliant.

(b) Except as is not reasonably likely to be material, Seller (but
solely with respect to the Division) and the Company have obtained written
representations or assurances from each entity that (x) provides data of
any type that includes date information or which is otherwise derived from,
dependent on or related to date information ("Date Data") to Seller (but
---------
solely with respect to the Division) or the Company, (y) processes in any
way Date Data for Seller (but solely with respect to the Division) or the
Company or (z) otherwise provides any material product or service to Seller
with respect to the Business or, the Company or the Division, that all of
such entity's Date Data and related hardware, software and embedded
technology that are used for, or on behalf of, Seller, the Company or the
Division are Year 2000 Compliant. Neither Seller (but solely with respect
to the Division) nor the Company is reasonably likely to incur material
expenses arising from or relating to the continuing efforts by the Business
to achieve Year 2000 compliance or the failure of any of the products sold
by the Business, or to the knowledge of Seller or the Company, the Business
Systems used by or relied upon by the Business to be Year 2000 Compliant.

-24-
<PAGE>

(c) As used herein, "Year 2000 Compliant" and "Year 2000 Compliance"
------------------- --------------------
mean for all dates and times, including, without limitation dates and times
after December 31, 1999 and in the multi-century scenario, when used on a
stand-alone system or in combination with other software or systems: (i)
the application system functions and receives and processes dates and times
correctly without abnormal results; (ii) all date-related calculations are
correct (including, without limitation, age calculations, duration
calculations and scheduling calculations); (iii) all manipulations and
comparisons of date-related data produce correct results for all valid date
values within the scope of the application; (iv) there is no century
ambiguity; (v) all reports and displays are sorted correctly; and (vi) leap
years are accounted for and correctly identified (including, without
limitation, that 2000 is recognized as a leap year).

SECTION 3.22 Intercompany Transactions. All arrangements and agreements
-------------------------
between the Division and the Company on the one hand, and Seller and its
Affiliates (other than the Company or the Division) on the other, are on terms
no cheaper to the Division and the Company than arm's length, commercially
reasonable transactions and the amounts with respect thereto are representative
of amounts charged to the Division and the Company.

SECTION 3.23 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article III, neither Seller nor
any other Person makes any express or implied representation or warranty on
behalf of or with respect to Seller, the Company, the Transferred Assets, the
Division or the Business, and Seller hereby disclaims any representation or
warranty not contained in this Article III.

ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as follows:

SECTION 4.1 Organization and Good Standing. Buyer is duly organized,
------------------------------
validly existing and in good standing under the laws of its jurisdiction of
organization. Buyer has full limited liability company power and authority to
conduct its businesses and to own or use its assets as it currently does or as
will be Conducted.

SECTION 4.2 Limited Liability Company Authority. Buyer has the limited
-----------------------------------
liability company power and authority, and has taken all limited liability
company action necessary, to authorize, execute, deliver and perform its
obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a valid and legally binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
subject to the Enforceability Exceptions.

-25-
<PAGE>

SECTION 4.3 Consents and Approvals; No Violations.
-------------------------------------

(a) Except for the HSR Filing, no notices, reports, registrations or
other filings are required to be made by Buyer with, nor are any consents,
approvals or authorizations required to be obtained by Buyer from, any
Governmental Entity, in connection with the execution, delivery or
performance of this Agreement by Buyer, in each case except for those the
failure of which to make or obtain, individually or in the aggregate, are
not material.

(b) The execution, delivery and performance of this Agreement by Buyer
will not:

(i) violate or contravene any provision of the governing
documents of Buyer;

(ii) violate, conflict with, or constitute or result in a
default, acceleration or creation of a Lien under, or a termination of (in
each case with or without notice, lapse of time or both), any provision, or
result in the loss of any benefit under, any Contract to which Buyer is a
party or by which any of its assets are bound;

(iii) require Buyer to obtain the consent, waiver, authorization
or approval of, any Person under any Contract to which Buyer is a
party or by which any of its assets are bound; or

(iv) violate, contravene or conflict with any Law or Order of any
Governmental Entity having jurisdiction over Buyer or any of its
assets.

SECTION 4.4 Securities Act. Buyer is acquiring the Shares for its own
--------------
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933 (the "Securities Act") in any manner that
--------------
would be in violation of the Securities Act. Buyer has not, directly or
indirectly, offered the Shares to anyone or solicited any offer to buy the
Shares from anyone, so as to bring such offer and sale of the Shares by Buyer
within the registration requirements of the Securities Act. Buyer will not sell,
convey, transfer or offer for sale any of the Shares except upon compliance with
the Securities Act and any applicable state securities laws or pursuant to any
exemption therefrom.

SECTION 4.5 Brokers and Finders. Except for Wasserstein, Perella & Co.,
-------------------
Inc., whose fees shall be paid by Buyer, no agent, broker, investment banker,
intermediary, finder, Person or firm acting on behalf of Buyer is or will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from any of the parties hereto in connection with the
execution of this Agreement or upon consummation of the transactions
contemplated hereby.

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<PAGE>

SECTION 4.6 Financing. Buyer has received and furnished to Seller true,
---------
complete and accurate copies of a commitment letter from Fleet Boston Financial
("Lender"), pursuant to which Lender has committed, subject to the terms and
------
conditions thereof, to provide Buyer with all of the debt financing that Buyer
will require in order to satisfy its obligations to fund the Purchase Price.

SECTION 4.7 Litigation. As of the date hereof, there are no Actions pending
----------
or, to the knowledge of Buyer, threatened against Buyer or any of its assets,
other than Actions that, individually or in the aggregate, are not material to
its ability to perform its obligations hereunder or not reasonably likely to
prohibit or materially restrict or delay the performance of this Agreement by
Buyer.

SECTION 4.8 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of or with respect to Buyer and Buyer hereby disclaims any
representation or warranty not contained in this Article IV.

ARTICLE V
---------

COVENANTS

SECTION 5.1 Conduct of Business. Prior to the Closing, except as requested
-------------------
or consented to by Buyer in writing, which consent shall not be unreasonably
withheld or delayed and except as otherwise expressly contemplated hereby,
Seller shall, and agrees to cause the Company to, conduct the Business only in
the ordinary course of business consistent with past practice and use their
respective commercially reasonable efforts to preserve intact the Business and
the relationships of the Division and the Company with their employees,
suppliers and others having business relationships with them and Seller shall
not (solely with respect to the Division) and Company shall not:

(a) grant or increase any bonus, salary, severance, termination or
other compensation or benefits to any director, officer or
employee of the Division or the Company other than in the
ordinary course of business consistent with past practice;

(b) sell, lease or otherwise dispose of, mortgage, pledge or otherwise
subject to a Lien, any material Transferred Assets or any assets of the
Company other than in the ordinary course of business consistent with past
practice;

(d) make or commit to make any capital expenditure in excess of
$150,000;

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<PAGE>

(e) enter into any Applicable Contract that would have been required
to be listed in Schedule 3.14(a) of the Disclosure Schedule if it had been
in effect as of the date of this Agreement or terminate, modify in any
material respect or waive any material rights under any Applicable Contract
listed in such Schedule;

(f) settle, compromise, waive, release or assign any material claims
or rights it has in respect of any material Actions to which it is a party
or by which it is bound;

(g) incur any indebtedness for money borrowed other than indebtedness
to Seller or its Affiliates, which shall remain the obligation of Seller
and shall not be assumed by Buyer;

(h) change any of its accounting methods, policies or practices;

(i) enter into any agreement to do any of the foregoing; and

(j) settle or compromise any material tax liability or dispute or
matter or revoke any tax election.

The preceding sentence notwithstanding, Seller may cause the Company to
transfer, by dividend or otherwise, to Seller or any of its Affiliates:

(a) any cash, bank accounts, certificates of deposit, commercial
paper, annuities, treasury notes and bills or other marketable
securities other than the Transferred Assets or the Shares; and

(b) any of the Excluded Assets.

SECTION 5.2 Access; Confidentiality.
-----------------------

(a) Between the date of this Agreement and the Closing Date, Seller
shall, and shall cause the Company to, afford Buyer full and free access,
at all reasonable times during normal business hours, to the personnel,
premises, properties, Applicable Contracts, books and records, and other
documents and data of the Division and the Company as Buyer may reasonably
request. The foregoing shall not require Seller or the Company to permit
any inspection, or to disclose any information, that in their reasonable
judgment is reasonably likely to result in the disclosure of any trade
secrets of third parties or violate any of their obligations with respect
to confidentiality if Seller or the Company, as the case may be, shall have
used reasonable best efforts to obtain the consent of such third party to
such inspection or disclosure. All requests for information made pursuant
to this Section 5.2(a) shall be directed to an executive officer of Seller.

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<PAGE>

(b) Following the Closing, Buyer shall, and shall cause the Company
and any of Buyer's other Affiliates to (i) afford Seller full and free
access, upon reasonable notice, during normal business hours, to the
personnel, premises, properties, Applicable Contracts, books and records,
and other documents and data of the Division and the Company as Seller
shall reasonably request, (ii) furnish Seller with copies of all such
Applicable Contracts, books and records, and other existing documents and
data as Seller may reasonably request and (iii) furnish Seller with such
additional financial, operating, and other data and information as Seller
may reasonably request in order for Seller to prepare its financial
statements, Tax Returns and other documents and reports Seller or any of
its Affiliates are required to file with Governmental Entities or
reasonably require in connection with any Action against, or tax
examination of, Seller or any of its Affiliates. The foregoing shall not
require Buyer, the Company or any of Buyer's other Affiliates to permit any
inspection, or to disclose any information, that in their reasonable
judgment is reasonably likely to result in the disclosure of any trade
secrets of third parties or violate any of their obligations with respect
to confidentiality if Buyer, the Company or Buyer's other Affiliates shall
have used reasonable best efforts to obtain the consent of such third party
to such inspection or disclosure. All requests for information made
pursuant to this Section 5.2(b) shall be directed to an executive officer
of Buyer.

(c) Seller hereby covenants and agrees that from and after the Closing
Date it will use its reasonable best efforts to ensure that its
Representatives, affiliates, successors and assigns (including assignees of
any portion of its other businesses) hold in confidence and prevent the
disclosure to any person or use by any Person of any information and
documents concerning the Business and the Transferred Assets, including but
not limited to the information compiled in the data room (other than
pursuant to a court order or subpoena or with respect to Tax Returns and
other reports or information required by law to be disclosed), except to
authorized representatives of Buyer. Seller agrees that it shall not and it
shall cause its Representatives, affiliates, successors and assigns not to
use any confidential documents or information for any purpose other than
the preparation of Seller's financial statements, Tax Returns or other
documents or reports required to be filed by Seller with any Governmental
Entities or reasonably required in connection with any Action against, or
examination of Seller or its Affiliates. The parties agree that irreparable
damage may occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that Buyer shall be entitled
to seek an injunction or injunctions to prevent breaches of this paragraph
and to enforce specifically the terms and provisions of this paragraph in
any court, without having to prove irreparable damages, this being in
addition to any other remedy to which it is entitled at law or equity.

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<PAGE>

SECTION 5.3 Required Consents and Approvals.
-------------------------------

(a) Each party hereto hereby agrees to cooperate with each other party
and use its reasonable best efforts to promptly prepare and file all
necessary documentation, to effect all necessary notices, reports,
registrations or other filings and documents and to obtain as promptly as
practicable all necessary consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated herein. Each party shall have the
right to review in advance, and to the extent practicable each will consult
the other on, in each case subject to applicable Laws relating to the
exchange of information, all the information relating to Buyer, Seller or
the Company that appears in any filing made with, or written materials
submitted to, all third parties and Governmental Entities in connection
with the transactions contemplated in this Agreement. In exercising the
foregoing right, each of Buyer and Seller shall act reasonably and as
promptly as practicable. Buyer and Seller agree that they will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein, including promptly furnishing the other
with copies of notice or other communications received by Buyer, Seller or
the Company, from all third parties and Governmental Entities with respect
to the transactions contemplated herein.

(b) Buyer and Seller each agree to promptly prepare and file an HSR
Filing with the Federal Trade Commission (the "FTC") and the Antitrust
---
Division of the Department of Justice (the "DOJ"). Each such party hereby
---
covenants to cooperate with the other such party to the extent reasonably
necessary to assist in making reasonable supplemental presentations to the
FTC or the DOJ, and if requested by the FTC or the DOJ, to promptly amend
or furnish additional information thereunder. Nothing in this Agreement
shall be construed as an obligation on the part of any of the parties
hereto to take any actions with respect to the FTC or the DOJ other than
those set forth in this Section 5.3(b).

SECTION 5.4 Reasonable Best Efforts. Between the date of this Agreement and
-----------------------
the Closing Date, each of the parties hereto shall use its respective reasonable
best efforts to cause the conditions in Sections 6.1 and 6.2 to be satisfied as
soon as practicable (subject to the proviso in Section 2.7(a)).

SECTION 5.5 Publicity. The initial press release announcing the
---------
transactions contemplated herein shall be released jointly after consultation
between the parties hereto and thereafter the parties hereto shall consult with
each other prior to issuing any press releases or otherwise making public
announcements with respect to the transactions contemplated herein and prior to
making any filings with any Governmental Entity or with any national securities
exchange or interdealer quotation service with respect thereto, except as may be
required by applicable Law or by obligations pursuant

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<PAGE>

to any listing agreement with or rules of any national securities exchange or
interdealer quotation service.

SECTION 5.6 Expenses. Except as otherwise expressly provided herein,
--------
whether or not the transactions contemplated herein are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated herein shall be paid by the party incurring such expense. In the
event of termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from a breach
of this Agreement by the other party.

SECTION 5.7 ZDMI Non-Solicitation. Buyer hereby covenants and agrees that
---------------------
for a period of two years following October 1, 1999, Buyer shall not employ any
person formerly employed by Seller's ZD Market Intelligence division who became
an employee of Harte-Hanks, Inc. in connection with the sale of the ZD Market
Intelligence business, and in competition with such business (such business
being the development, compilation and distribution of information on installed
and planned technology hardware and software purchases and the provision of
customized service solutions utilizing such information).

SECTION 5.8 Employees.
---------

(a) As of the Closing Date, Buyer shall, or shall cause the Company
to, continue to employ all of the employees of the Division and the Company
at the Closing Date (each, a "Continuing Employee") for cash compensation
-------------------
substantially comparable to that currently being provided to them by Seller
(it being understood that nothing contained herein shall require Buyer to
maintain the employment of any Continuing Employee after the Closing Date).
Seller shall use its reasonable best efforts to ensure the orderly transfer
of such employees to Buyer. Further, with respect to Continuing Employees:

(i) Buyer shall cause each of the Division and the Company to
continue the Enhanced Severance Benefit Plan set forth in Schedule
5.8(a) of the Disclosure Schedule for a period of at least 60 days
after the Closing (but shall have no obligations thereafter).
Continuing Employees of the Division and the Company shall be given
credit under each employee benefit plan, program, policy or
arrangement of Buyer or any of its Affiliates in which the employees
are eligible to participate for all service with the Division, the
Company or any predecessor employer (to the extent such credit was
given by the Division or the Company) for purposes of eligibility,
vesting, benefit accrual (excluding, however, benefits accrued under
any defined benefit or defined contribution pension plan), severance
and vacation entitlement.

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<PAGE>

(ii) Buyer shall take all such action as is necessary or
appropriate in order to ensure that Continuing Employees of the
Division and the Company and their spouses and dependent children
covered by the group health plans sponsored by Seller (the "Seller
------
Health Plans") as of the Closing Date become eligible for coverage
------------
under a group health plan maintained by Buyer or its Affiliates
effective immediately after the Closing. Buyer shall cause the group
health plan maintained by it or its Affiliates to (i) waive any
waiting periods, evidence of insurability requirements or preexisting
condition limitations and (ii) honor any deductible, co-payment and
out-of-pocket expenses incurred by the employees and their
beneficiaries under the Seller Health Plans during the portion of 1999
preceding the Closing.

(iii) Buyer shall take all such action as is necessary or
appropriate in order to assure that Continuing Employees of the
Division and the Company covered by the group term life insurance plan
sponsored by Seller (the "Seller Life Plan") as of the Closing Date
----------------
become eligible for coverage under a group term life insurance plan
maintained by Buyer or its Affiliates effective immediately after the
Closing.

(b) The account balances under the ZD Plan of all current and former
employees of the Division and the Company, (i) if not forfeited under the
terms of the ZD Plan prior to the Closing Date, shall become 100% vested
and non-forfeitable upon the Closing Date, and (ii) shall be transferred to
Buyer's tax-qualified defined contribution plan ("Buyer's Plan") in a
------------
so-called "trust-to-trust" transfer satisfying the applicable requirements
of Section 414(l) of the Code. Seller shall make a discretionary
contribution consistent with past practice under the ZD Plan to the
accounts of all eligible employees of the Division and under the Registered
Retirement Service Plan to the accounts of all eligible employees of the
Company for all of 1999. An amount equal to 8% of the eligible earnings
earned in the year 2000 prior to the Closing Date of all Continuing
Employees who would be eligible for a discretionary contribution in the
year 2000 shall be accrued as a liability on the Closing Statement,
provided that Buyer shall use such amount to make a discretionary
-------------
contribution to Buyer's own retirement plan for the benefit of such
Continuing Employees.

(c) Employees of the Division and the Company who, immediately prior
to the Closing Date, are on disability leave, authorized leave of absence
or military service shall become employees of Buyer or its Affiliates as of
the Closing Date and such employees as of the date hereof are listed on
Schedule 5.8(c)(i) of the Disclosure Schedule. Continuing Employees who are
on long-term disability as of the Closing Date shall continue disability
coverage under Seller's disability plan until such time as they are no
longer disabled and such employees as of the date hereof are listed on
Schedule 5.8(c)(ii) of the Disclosure

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<PAGE>

Schedule. Continuing Employees who are on short-term disability as of the
Closing Date shall be covered under a short-term disability plan maintained
by Buyer or its Affiliates effective immediately after the Closing Date,
and shall be transferred to a long-term disability plan maintained by Buyer
or its Affiliates upon becoming permanently disabled or otherwise entitled
to long-term disability benefits under such plan. Such employees as of the
date hereof are listed on Schedule 5.8(c)(i) of the Disclosure Schedule.

(d) Buyer shall pay to employees of the Division and the Company the
retention and special bonuses set forth in Schedule 5.8(d) of the
Disclosure Schedule in accordance with such Schedule to the extent such
employees become entitled thereto.

SECTION 5.9 Intercompany Liabilities and Debt. Seller shall take all
---------------------------------
actions necessary so that at the Closing (a) neither the Company nor the
Division shall have (except as set forth in this Agreement) any (i) Liability
(other than with respect to trade receivables arising in the ordinary course of
business consistent with past practice) to Seller or any Affiliate of Seller
(other than to the Division or the Company), including all borrowings by Seller
or the Company from Seller or any Affiliate of Seller or any obligation to pay a
dividend to Seller or any Affiliate of Seller or (ii) indebtedness for borrowed
money and (b) neither Seller nor any Affiliate of Seller (other than the Company
or the Division) shall have any liability to the Company or the Division.

SECTION 5.10 Intercompany Programs.
---------------------

(a) Prior to the date hereof, Seller has proposed or agreed upon
transactions (each of which is set forth on Schedule 5.10 of the Disclosure
Schedule and a copy of which has been provided to Buyer) with third parties
whereby Seller has offered to them products of the Division and the Company
bundled with other products of Seller and/or its Affiliates. Buyer shall
cause the Division and the Company to provide such products to such third
parties in substantially the same manner as such services were provided
immediately prior to the Closing. Seller shall allocate to Buyer the
revenue and costs arising from such transactions in the same manner as such
revenue and costs were allocated immediately prior to the Closing. Within
30 days of receipt of payments in connection with such transactions, Seller
shall deliver to Buyer its allocated revenue, less costs, arising from such
transactions.

(b) Prior to the date hereof, Seller and its Affiliates, on the one
hand, and the Division and the Company, on the other hand, have provided
the other party with certain cross-marketing services in connection with
their respective products. Commencing on the Closing Date and continuing
for a period of six months following the Closing Date, Seller and its
Affiliates shall provide such cross-marketing services to Buyer and Buyer
shall cause the Division and the Company

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<PAGE>

to provide such cross-marketing services to Seller and its Affiliates in
substantially the same manner as such services were provided by such
parties prior to the Closing.

(c) Prior to the date hereof, the Division, as licensor, entered into
a license agreement with SmartPlanet, Inc., a copy of which is attached
hereto as Schedule 5.10(c)(i) of the Disclosure Schedule. Prior to the
Closing, the Division, as licensee, also entered into a license agreement
with ZDNet, a copy of which is attached hereto as Schedule 5.10(c)(ii) of
the Disclosure Schedule. Notwithstanding the terms and conditions of this
Agreement, these agreements shall remain in full force and effect following
the Closing.

SECTION 5.11 Retention of Records.
--------------------

(a) Buyer shall retain, and cause the Company to retain, all books and
records relating to the conduct of the Business prior to the Closing Date
for a period of at least six years from the date hereof. After the end of
such six-year period, any such document or record may be disposed of by
Buyer or the Company only if Buyer or the Company first offers to surrender
possession thereof to Seller at Seller's expense and Seller declines such
offer. Seller shall have the right during business hours, upon reasonable
notice to Buyer, to inspect and make copies of any such records for any
reasonable purpose.

(b) Seller may retain (i) all internal correspondence and memoranda,
valuations, investment banking presentations and bids received from others
in connection with the Asset Purchase and the Stock Purchase and (ii) a
copy of all consolidating and consolidated financial information and all
other accounting records prepared or used in connection with the
preparation of the Financial Statements. Seller shall deliver to Buyer all
other books and records relating to the Business and the Company.

SECTION 5.12 Seller's Trademarks.
-------------------

(a) Except as set forth in Section 5.10(c) above, (i) effective as of
the Closing Date, any license agreement pursuant to which Seller or any
Affiliate of Seller has granted to the Division or the Company the right to
use trademarks, trade names, service marks, domain names or logos that
include the words "Ziff-Davis," "Ziff," "ZD" or "Softbank" shall be
cancelled, and (ii) as promptly as is practicable after the Closing, Buyer
shall and agrees to cause the Company to eliminate the words "Ziff-Davis,"
"Ziff," "ZD" and "Softbank" and every word or expression derived therefrom
from the names under which the Division and the Company do business. Within
90 days after the Closing, Buyer shall, and shall cause the Company to,
remove any such trademarks, trade names, service marks, domain names and
logos from its respective properties, stationery and literature,

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<PAGE>

and thereafter neither Buyer nor the Company shall use any such trademarks,
trade names, service marks, domain names or logos.

(b) Seller hereby grants to Buyer a nontransferable, royalty-free
license and right for a period of 90 days immediately after the Closing to
use, reproduce and distribute (i) the "ZD" trademark (the "ZD Mark") as
-------
part of the composite "ZD Education" and "ZD Journals" trademarks and (ii)
the "Ziff-Davis" trademark (the "Ziff-Davis Mark," collectively with the ZD
---------------
Mark, the "Marks"), as part of the composite "Ziff-Davis Education Center"
-----
trademark, solely in connection with the Business and for transition
purposes only. Such use shall be in accordance with the trademark
guidelines set forth in Exhibit C. In the event that Seller reasonably
---------
modifies or changes the guidelines and Seller notifies Buyer of such
modification or change, Buyer shall promptly modify its use of the Marks.

(c) All rights and goodwill arising from the use of the Marks and/or
any similar names or marks (including logos) shall inure solely to Seller's
benefit. Buyer agrees that neither Buyer, nor any of its Affiliates, shall
use, directly or indirectly, either the ZD Mark or the Ziff-Davis Mark, or
any marks similar thereto, as part of Buyer's or any of its Affiliates' own
trade names, or in any other way that suggests that there is any relation
or affiliation between Seller and Buyer or any of its Affiliates other than
that created by this Agreement, or as a trademark, service mark or trade
name for any other business, product or service. Buyer shall have no
interest in the Marks except as expressly provided in this Agreement and
shall not claim any other rights therein. Nothing in this Agreement or in
the performance thereof, or that might otherwise be implied by law, shall
operate to grant Buyer any right, title, or interest in or to the Marks
other than as specified in the limited license grant in this Agreement. All
rights not expressly granted in this Agreement or herein are reserved to
Seller. Buyer's right to use the Marks shall automatically cease upon the
earlier of (i) the end of the 90-day period immediately after the Closing
or (ii) Buyer's failure to cure any material breach with respect to its use
of the Marks within 120 days of receipt of written notice from Seller.

(d) Buyer agrees to assign to Seller and does hereby assign to Seller
all rights it may acquire, if any, by operation of law or otherwise in the
Marks, including all applications or registrations therefore, along with
the goodwill associated therewith. Buyer shall assist Seller in protecting
and maintaining Seller's rights in the Marks in connection with Buyer's
licensed use hereunder, including preparation and execution of documents
necessary or appropriate to register the Marks and/or record this
Agreement. As between the parties, Seller shall have the sole right to, and
in its sole discretion may, commence, prosecute or defend, and control any
action concerning the Marks.

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<PAGE>

(e) Buyer agrees to maintain the quality of all aspects of the
Business (e.g., products and services, advertising) at a level that meets
or exceeds those standards maintained by Seller immediately prior to the
execution of this Agreement. Buyer shall fully correct and remedy any
deficiencies in its use of the Marks or the quality of the products and
services associated with the Business, and the advertising and promotion
thereof, and all other aspects of the Business, upon notice from Seller.

(f) Neither Buyer nor any of its Affiliates shall, directly or
indirectly, contest the validity of, by act or omission jeopardize, or take
any action inconsistent with, Seller's rights or goodwill in the Marks
(including attempting to register the Marks or a mark incorporating either
the ZD Mark or the Ziff-Davis Mark or any mark confusingly similar
thereto). Buyer's rights under this Agreement are personal and may not be
sublicensed, assigned or otherwise transferred except to a purchaser of all
or substantially all of the Business.

(g) Notwithstanding the foregoing, Buyer and its Affiliates may
continue to use all courseware which incorporates the ZD Mark or the
Ziff-Davis Mark or any similar mark existing in inventory as of the Closing
until such inventory is exhausted.

SECTION 5.13 Tax Matters.
-----------

(a) Transfer Taxes. All excise, sales, use, transfer, documentary,
-------------
filing, recordation and other similar Taxes and fees that may be imposed or
assessed as a result of the transactions effected pursuant to this
Agreement, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties
("Transfer Taxes"), shall be borne 50% by Buyer and 50% by Seller. Buyer
--------------
and Seller shall cooperate in the timely preparation and filing of any Tax
Returns that must be filed in connection with any Transfer Taxes. Buyer
shall promptly and timely pay all Transfer Taxes and Seller shall reimburse
Buyer for its share of such Transfer Taxes within 5 days of the filing of
such Tax Returns by Buyer in immediately available funds in United States
dollars. Any such Taxes or fees resulting from any subsequent transfer of
the Transferred Assets or Assumed Liabilities or any transfer of property
on or subsequent to the Closing shall be borne entirely by Buyer, and Buyer
shall indemnify Seller for any liabilities arising in connection therewith.

(b) Determination and Allocation of Consideration. The parties to this
---------------------------------------------
Agreement agree to determine the amount of and allocate the total
consideration transferred by Buyer to Seller pursuant to this Agreement
(the "Consideration") in accordance with the fair market value of the
assets and liabilities transferred and in accordance with Section 1060 of
the Code. Buyer shall provide Seller with one or more schedules allocating
the Consideration, and such schedule(s) shall be

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<PAGE>

binding upon the parties, unless Seller notifies Buyer of its disagreement
with such schedule(s) within 10 days. If Seller reasonably disagrees with
any items reflected on the schedules so provided, Seller shall have the
right within 30 business days of its receipt of such schedules to notify
Buyer of such disagreement and its reasons for so disagreeing, in which
case Seller and Buyer shall attempt in good faith to resolve the
disagreement. If Seller and Buyer cannot resolve the disagreement, the
disagreement shall be referred to the Accounting Expert, whose decision
shall be final and binding and whose expenses shall be borne by the party
that the Accounting Expert determines has lost the dispute. Seller and
Buyer agree to prepare and file an IRS Form 8594 in a timely fashion in
accordance with the rules under Section 1060 of the Code. To the extent
that the Consideration is adjusted after the Closing Date, the parties
agree to revise and amend the schedule and IRS Form 8594 in the same manner
and according to the same procedure. The determination and allocation of
the Consideration derived pursuant to this subsection shall be binding on
Seller and Buyer for all Tax reporting purposes.

(c) Employee Withholding and Reporting Matters. With respect to those
------------------------------------------
employees who are employed by Buyer within the same calendar year as the
Closing, Buyer shall, in accordance with and to the extent permitted
pursuant to Revenue Procedure 84-77, 1984-2 C.B. 753, assume all
responsibility for preparing and filing Form W-2, Wage and Tax Statement,
Form W-3, Transmittal of Income and Tax Statements, Form 941, Employer's
Quarterly Federal Tax Return, Form W-4, Employee's Withholding Allowance
Certificate, and Form W-5, Earned Income Credit Advance Payment
Certificate. Seller and Buyer agree to comply with the procedures described
in Section 5 of Revenue Procedure 84-77.

SECTION 5.14 Further Assurances. At any time and from time to time after
------------------
the Closing Date, the parties hereto agree to (a) furnish upon request to each
other such further assurances, information, documents and instruments of
transfer or assignment, (b) promptly execute, acknowledge, and deliver any such
further assurances, documents and instruments of transfer or assignment and (c)
do all such further acts and things, in each case that the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to herein. In the event Seller is the obligor on a
performance bond, letter of credit or similar instrument for the benefit of the
Business, Buyer shall cause Seller to be released from such obligations and
shall take such actions as are necessary to reimburse Seller for any payments
Seller makes in respect of such obligations.

SECTION 5.1.5 Non-Assignable Agreements. Buyer acknowledges that certain
-------------------------
agreements between Seller and third parties require that such third parties
consent to the assignment of such agreements. Seller shall use reasonable best

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<PAGE>

efforts to obtain all consents and approvals listed in Schedule 5.15 in form and
substance reasonably satisfactory to Buyer. Without in any way limiting the
foregoing, Buyer shall reasonably cooperate with and provide assistance to
Seller in obtaining all such consents and approvals. If any consent for any
agreement is not obtained, such agreement shall not be assigned, but Seller
shall, to the extent possible without incurring any liability to any third
party, keep the agreement in effect and give Buyer the benefit of the agreement
to the same extent as if it had been assigned including, without limitation, (a)
cooperating with Buyer in holding any rights under agreements for which no
consent to assign rights to Buyer is obtained ("Non-Assignable Rights") in trust
---------------------
for Buyer or acting as an agent for Buyer; (b) enforcing any rights of Seller
arising from such Non-Assignable Rights against the issuers thereof or the other
party or parties thereto; (c) taking all such actions and doing, or causing to
be done, all such things at the request of Buyer as shall be reasonably
necessary and proper in order that the value of any Non-Assignable Rights shall
be preserved and shall inure to the benefit of Buyer and (d) paying over to
Buyer all monies or other assets collected by or paid to Seller in respect of
such Non-Assignable Rights. Buyer shall perform the obligations under the
agreement relating to the benefit obtained by Buyer. Nothing in this Agreement
shall be construed as an attempt to assign any agreement or other instrument
that is by its terms non-assignable without the consent of the other party.

SECTION 5.16 Insurance. The parties acknowledge the possibility that losses
---------
Buyer may suffer after the Closing as a result of events or occurrences
affecting the Division or the Company before the Closing may be covered by
insurance policies of Seller or its Affiliates. The parties further acknowledge
the possibility that they may be able to put in place arrangements that would
make available to Buyer the benefit of such coverage with respect to such losses
without prejudicing Seller's other rights under such policies. The parties agree
to cooperate fully with each other and use their reasonable best efforts to put
such arrangements in place to the extent practicable including, without
limitation, by (i) seeking the consent of the insurer under such policies to
permit Buyer or the Company to make claims directly against the insurer or (ii)
making claims on the insurer under such policy and remitting any proceeds to
Buyer or the Company; provided that, if Buyer receives any benefit as a result
-------------
of any such arrangement in respect of any loss as to which it has already been
compensated through an adjustment in the Purchase Price as contemplated by
Section 2.8, Buyer and Seller will agree on appropriate measures to avoid any
windfall to Buyer. Buyer agrees to reimburse Seller for all of Seller's
reasonable expenses incurred in connection with obtaining for Buyer the benefit
of such insurance coverage with respect to such losses.

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<PAGE>

ARTICLE VI
----------

CONDITIONS TO CLOSING

SECTION 6.1 Conditions to Obligations of Buyer. The obligation of Buyer to
----------------------------------
consummate the Asset Purchase and the Stock Purchase and to take the other
actions to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived in whole or in part by Buyer subject to the provisions of Section
9.8):

(a) Representations and Warranties, Covenants, Consents and Material
----------------------------------------------------------------
Adverse Changes. (i) The representations and warranties of Seller set forth
---------------
in this Agreement shall have been true and correct in all respects as of
the date of this Agreement and shall be true and correct in all respects as
of the Closing Date as though made on and as of the Closing Date (except
that any such representations and warranties that are expressly made as of
an earlier date need only be true in all respects as of such earlier date
and except that any qualifications, limitations or exceptions in any such
representation or warranty as to materiality or material adverse effect
shall be of no force or effect), (ii) Seller shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, (iii) Seller shall have obtained
all consents listed in Schedules 3.4 and 3.5(c) of the Disclosure Schedule
and (iv) there shall not have occurred any material adverse change in the
business, assets, liabilities, results of operations, prospects or
condition (financial or otherwise) of the Division and the Company taken as
a whole, except, in the case of clauses (i), (ii), (iii) and (iv) above,
for such matters as do not, individually or in the aggregate, result in a
diminution in excess of $8.6 million in the value of the Company and the
Division taken as a whole (excluding for purposes of this calculation any
portion of such diminution that results in a corresponding reduction in the
net assets on the Closing Statement as compared to the net assets that
would have appeared on the Closing Statement in the absence of such
matters), and Buyer shall have received a certificate, dated the Closing
Date, signed on behalf of Seller by one of its senior executive officers to
that effect.

(b) Certain Consents. Seller shall have obtained all consents listed
----------------
in Schedule 6.1(b) of the Disclosure Schedule.

(c) HSR Act; Governmental Approvals. The waiting period applicable to
-------------------------------
the Asset Purchase and the Stock Purchase under the HSR Act shall have
expired or been terminated and all the notices, reports, registrations and
other filings with, and all consents, approvals and authorizations from,
Governmental Entities listed in Schedule 3.4 of the Disclosure Schedule
(collectively, "Governmental Filings and Approvals") shall have been made
----------------------------------
or obtained, as the case may be, except for

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<PAGE>

any such Governmental Filings and Approvals the failure of which to make or
obtain are not, individually or in the aggregate, material.

(d) Litigation. No Governmental Entity of competent jurisdiction shall
----------
have enacted, issued, promulgated, enforced or entered any Law or Order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits or challenges the validity or
legality of the sale of the Transferred Assets or the Shares or the other
transactions contemplated by this Agreement (each, a "Governmental Order"),
------------------
and no Governmental Entity or any other Person shall have instituted any
Action or threatened in writing to institute any Action seeking any
Governmental Order.

(e) Receipt of Shares. Buyer shall have received from Seller a
-----------------
certificate or certificates evidencing all of the then issued and
outstanding Shares, duly endorsed in blank or accompanied by stock powers
duly executed in blank, in proper form for transfer and with any requisite
stock transfer tax stamps properly affixed thereto.

(f) Opinion of Counsel. Buyer shall have received an opinion, dated as
------------------
of the Closing Date, of counsel of or to Seller in a form reasonably
acceptable to Buyer and Seller and covering customary matters for a
transaction of this sort. At the request of Buyer, such opinion shall be
confirmed to any lenders providing financing for the transactions
contemplated hereby.

(g) Bill of Sale and Assignment. Seller shall have executed and
---------------------------
delivered the Bill of Sale and Assignment.

(h) Ancillary Documents. Buyer shall have received from Seller such
-------------------
instruments of transfer, assignment and conveyance as are necessary to vest
in Buyer the right, title and interest of Seller in accordance with this
Agreement in and to the Transferred Assets and the Shares in a form
reasonably satisfactory to Buyer.

(i) Financing. Buyer shall have received the financing contemplated by
---------
Section 4.6 on generally the terms set forth in the commitment letter and
term sheet attached hereto as Exhibit D.
---------

SECTION 6.2 Conditions to Obligations of Seller. The obligation of Seller
-----------------------------------
to consummate the Asset Purchase and the Stock Purchase and to take the other
actions to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived in whole or in part by Seller):

(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer set forth in this Agreement shall have been true and correct in
all

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<PAGE>

material respects as of the date of this Agreement and shall be true and
correct in all material respects as of the Closing Date as though made on
and as of the Closing Date (except that any such representations and
warranties that are expressly made as of an earlier date need only be true
in all material respects as of such earlier date) and Seller shall have
received a certificate, dated the Closing Date, signed on behalf of Buyer
by one of its senior executive officers to such effect.

(b) Covenants. Buyer shall have performed in all material respects all
---------
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and Seller shall have received a certificate, dated
the Closing Date, signed on behalf of Buyer by one of its senior executive
officers to such effect.

(c) HSR Act; Governmental Approvals. The waiting period applicable to
-------------------------------
the Asset Purchase and the Stock Purchase under the HSR Act shall have
expired or been terminated and all the Governmental Filings and Approvals
shall have been made or obtained, as the case may be, except for any such
Governmental Filings and Approvals the failure of which to make or obtain
are not, individually or in the aggregate, material.

(d) Litigation. No Governmental Entity of competent jurisdiction shall
----------
have enacted, issued, promulgated, enforced or entered any Governmental
Order, and no Governmental Entity or any other Person shall have instituted
any Action or threatened in writing to institute any Action seeking any
Governmental Order.

(e) Receipt of Purchase Price. Seller shall have received from Buyer
-------------------------
the payments required to be made pursuant to Section 2.6 hereof.

(f) Opinion of Counsel. Seller shall have received an opinion, dated
------------------
as of the Closing Date, of counsel to Buyer in a form reasonably acceptable
to Buyer and Seller and covering customary matters for a transaction of
this sort.

(g) Assumption Agreement. Buyer and its Affiliates, as appropriate,
--------------------
shall have executed and delivered the Assumption Agreement.

ARTICLE VII
-----------

TERMINATION

SECTION 7.1 Termination. Notwithstanding anything in this Agreement to the
-----------
contrary, this Agreement and the transactions contemplated herein may, by
written notice given at any time prior to the Closing, be terminated:

(a) by either Buyer or Seller, upon their mutual written consent;

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<PAGE>

(b) by either Buyer or Seller, without liability to the terminating
party on account of such termination if the Closing has not occurred by
March 1, 2000; provided, however, that a party may not effect a termination
-------- -------
pursuant to this Section 7.1(b) if it has breached this Agreement and such
breach has proximately contributed to the failure to close;

(c) by either Buyer or Seller, if the other party has breached any of
its representations, warranties or covenants contained in this Agreement in
any material respect and, if curable, such breach has not been cured within
10 days after the terminating party shall have given the other party notice
of such breach; provided, however, that termination pursuant to this
-------- -------
Section 7.1(c) shall not relieve the breaching party of liability for such
breach or otherwise;

(d) by either Buyer or Seller, if any Governmental Entity shall have
issued, enacted, entered, promulgated or enforced any Governmental Order
and such Governmental Order shall have become final and non-appealable;
provided that the right to terminate this Agreement pursuant to this
--------
Section 7.1(d) shall not be available to any party that has failed to
comply with its obligations hereunder in any manner that shall have
proximately contributed to the occurrence of such Governmental Order;

(e) by Buyer, if any of the conditions set forth in Section 6.1 become
incapable of being satisfied (other than through the failure of Buyer to
fully comply with its obligations hereunder) by March 1, 2000; or

(f) by Seller, if any of the conditions set forth in Section 6.2
become incapable of being satisfied (other than through the failure of
Seller to fully comply with its obligations hereunder) by March 1, 2000.

SECTION 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to Section 7.1, this Agreement (other than Section 5.6
(Expenses), Section 9.5 (Governing Law) and Section 9.6 (Consent to
Jurisdiction; Waiver of Jury Trial) and the Confidentiality Agreement between
Buyer and Seller's agent, dated September 28, 1999 (the "Confidentiality
---------------
Agreement"), which shall remain in full force and effect) shall forthwith become
- ---------
null and void and no party hereto (or any of its respective Affiliates,
Representatives or stockholders) shall have any liability or further obligation
to any other party hereto, except as provided in this Section 7.2; provided,
--------
however, that if this Agreement is terminated by a party because of a breach of
- -------
this Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to fully comply with its obligations under
this Agreement, the terminating party's rights to pursue all legal remedies will
survive such termination unimpaired. For purposes of this Agreement, the
"Representatives" of a Person include such Person's
- ----------------

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<PAGE>

affiliates, members, partners, directors, officers, employees, agents,
consultants, legal counsel, accountants, financing sources and financial
advisors.

ARTICLE VIII
------------

INDEMNIFICATION; REMEDIES

SECTION 8.1 Survival. None of the representations, warranties or
--------
covenants (other than covenants to be performed after the Closing, which will
survive indefinitely) of the parties contained in this Agreement shall survive
the Closing and no claims for breach or otherwise in respect thereof may be made
or continued after the Closing by any party.

SECTION 8.2 Indemnification.
---------------

(a) Buyer shall indemnify and hold harmless Seller and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all damages, losses, liabilities,
judgments and expenses (including costs of investigation and defense and
reasonable attorneys' and accountants' fees) of any kind or nature whatsoever
(collectively, "Damages") incurred or sustained by them arising out of or
-------
resulting from any Assumed Liabilities. Seller shall cooperate with and assist
Buyer (at Buyer's expense) in the event that Buyer must defend against any
claims for Damages arising our of or resulting from any Assumed Liabilities.

(b) Seller shall indemnify and hold harmless Buyer and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all Damages incurred or sustained by
them arising out of or resulting from the Excluded Liabilities. Buyer shall
cooperate with and assist Seller (at Seller's expense) in the event that Seller
must defend against any claims for Damages arising out of or resulting from any
Excluded Liabilities.

SECTION 8.3 Tax Indemnifications by Seller.
------------------------------

(a) Seller shall be liable for, and indemnify Buyer for, (i) all Taxes
(including any obligation to contribute to the payment of a Tax determined on a
consolidated, combined or unitary basis with respect to a group of corporations
that includes or included the Company and Taxes resulting from the Company
ceasing to be a member of Seller Group) imposed on Seller Group (other than the
Company) for any taxable year and (ii) Pre-Closing Taxes. Seller shall be
entitled to any refund of Taxes of the Company received for such periods. The
term "Seller Group" shall mean Seller and any "affiliated group" (as defined in
------------
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b)

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<PAGE>

of the Code) that includes Seller or any predecessor of or successor to Seller
(or another such predecessor or successor).

(b) For purposes of this Agreement, "Tax" means any foreign, federal, state
---
or local income, gross receipts, license, severance, occupation, capital gains,
premium, environmental (including taxes under Section 59A of the Code), customs,
duties, profits, disability, registration, alternative or add-on minimum,
estimated, withholding, payroll, employment, unemployment insurance, social
security (or similar), excise, production, sales, use, value-added, occupancy,
franchise, real property, personal property, business and occupation,
mercantile, windfall profits, capital stock, stamp, transfer, workmen's
compensation or other tax, fee or imposition of any kind whatsoever relating to
the Business, including any interest, penalties, additions, assessments or
deferred liability with respect thereto, and any interest in respect of such
penalties, additions, assessments or deferred liability, whether disputed or
not.

(c) For purposes of this Agreement, "Pre-Closing Taxes" shall mean all
-----------------
liabilities for Taxes imposed on, or with respect to, the Company, the Business
or Transferred Assets with respect to any period (and whether imposed on Seller,
the Company or any of their Affiliates, Buyer or any third party that acquires
any of the foregoing) other than (i) Taxes imposed on the Company or for which
the Company may otherwise be liable for any taxable year or period that begins
and ends after the Closing Date, and with respect to any taxable period which
begins before and ends after the Closing Date, the portion of such taxable year
beginning on and including the day following the Closing Date and (ii) Taxes
that arise out of or are attributable to the Business for any taxable year or
period that begins and ends after the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date, the
portion of such taxable year beginning on and including the day following the
Closing Date. It is hereby agreed and understood that the foregoing obligations
shall include, but not be limited to, defending Buyer or the Company (at
Seller's sole cost and expense), or reimbursing Buyer's reasonable fees and
expenses to the extent that Buyer elects to defend, before any foreign or
domestic taxing authority.

(d) For purposes of Section 8.3(a), whenever it is necessary to determine
the liability for Taxes of the Company or Taxes attributable to or arising out
of the Business for a portion of a taxable year or period that begins before and
ends after the Closing Date, the determination of the Taxes of the Company for
the portion of the year or period ending on, and the portion of the year or
period beginning after, the Closing Date shall be determined by assuming that
the Company or the Business had a taxable year or period which ended at the
close of the Closing Date, except that exemptions, allowances or deductions that
are calculated on an annual basis and are not affected by the purchases
contemplated

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<PAGE>

by this Agreement, such as the deduction for real property taxes, shall be
apportioned on a time basis.

(e) Seller shall pay Buyer the Taxes for which Seller is liable pursuant to
Section 8.3(a) but which are payable with Tax Returns to be filed by Buyer
pursuant to Section 8.4(c) within 10 days prior to the due date for the filing
of such Tax Returns.

(f) Seller shall file or cause to be filed when due all Tax Returns that
are required to be filed by or with respect to the Company for taxable years or
periods ending on or before the Closing Date and shall remit any Taxes due in
respect of such Tax Returns.

(g) Seller and Buyer shall each be liable for 50% of the transfer Taxes
arising from the sale of the Shares.

(h) Any tax allocation or sharing agreement or arrangement, whether or not
written, that may have been entered into by Seller or any member of Seller Group
and the Company shall be terminated as to the Company as of the Closing Date,
and no payments which are owed by or to the Company pursuant thereto shall be
made thereunder.

(i) Seller and Buyer shall jointly determine the character of any payment
of Taxes made pursuant to this Section 8.3 and subsequent Tax filings shall
reflect such characterization.

(j) After the Closing Date, Seller shall:

(i) assist, and cause its respective Affiliates to assist, Buyer
in preparing any Tax Returns or reports which Buyer is responsible for
preparing and filing in accordance with Section 8.4(c);

(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Company;

(iii) make available to Buyer and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes of the Company;

(iv) provide timely notice to Buyer in writing of any pending or
threatened tax audits or assessments of the Company for taxable periods
for which Buyer may have a liability under Section 8.4(a);

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<PAGE>

(v) furnish Buyer with copies of all correspondence received from
any taxing authority in connection with any tax audit or information
request with respect to any such taxable period;

(vi) be responsible for all costs and expenses of Buyer, the
Company and Seller in connection with any investigations, audits or
disputes with any taxing authorities relating to Pre-Closing Taxes; and

(vii) not settle or compromise any material dispute with any
taxing authority relating to Pre-Closing Taxes without the written
consent of Buyer, which consent shall not be unreasonably withheld.

(k) The obligations of Seller set forth in this Section 8.3 shall remain in
effect until the expiration of the relevant statutes of limitations.

SECTION 8.4 Tax Indemnifications by Buyer.
-----------------------------

(a) Buyer shall be liable for and indemnify Seller for the Taxes of the
Company for any taxable year or period that begins after the Closing Date and,
with respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year beginning after the Closing Date.

(b) For purposes of Section 8.4(a), whenever it is necessary to determine
the liability for Taxes of the Company or Taxes attributable to or arising out
of the Business for a portion of a taxable year or period that begins before and
ends after the Closing Date, the determination of the Taxes of the Company or
attributable to or arising out of the Business for the portion of the year or
period ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that the Company or the Business
had a taxable year or period which ended at the close of the Closing Date,
except that exemptions, allowances or deductions that are calculated on an
annual basis and are not affected by the purchases contemplated by this
Agreement, such as the deduction for real property taxes, shall be apportioned
on a timely basis.

(c) Buyer shall file or cause to be filed when due all Tax Returns that are
required to be filed by or with respect to the Company for taxable years or
periods ending after the Closing Date and shall remit any Taxes due in respect
of such Tax Returns.

(d) Buyer shall promptly notify Seller in writing upon receipt by Buyer,
any of its Affiliates or the Company of notice of any pending or threatened
federal, state, local or foreign income or franchise Tax audits or assessments
which may materially affect the tax liabilities of the Company for which Seller
would be required to indemnify Buyer pursuant to Section 8.3(a). Seller shall
have the sole right to represent the Company' interests in any Tax audit or

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<PAGE>

administrative or court proceeding relating to taxable periods ending on or
before the Closing Date, and to employ counsel of its choice at its expense (it
being understood that Buyer may represent the Company's interest at Seller's
expense if Seller shall not have assumed such representation). Seller shall be
entitled to participate at its expense in the defense of any claim for Taxes for
a year or period ending after the Closing Date which may be the subject of
indemnification by Seller pursuant to Section 8.3(a) and, with the written
consent of Buyer, and at its sole expense, may assume the entire defense of such
Tax claim. Neither Buyer nor the Company may agree to settle any Tax claim for
the portion of the year or period ending on the Closing Date which may be the
subject of indemnification by Seller under Section 8.3(a) without the prior
written consent of Seller, which consent shall not be unreasonably withheld.

(e) With respect to the taxable year of Seller ending 1999 and the period
prior to the Closing Date, Buyer shall promptly cause the Company to prepare and
provide to Seller a package of tax information materials (the "Tax Package"),
-----------
which shall be completed in accordance with past practice including past
practice as to providing the information, schedules and work papers and as to
the method of computation of separate taxable income or other relevant measures
of income of the Company. Buyer shall cause the Tax Package for the portion of
the taxable period ending on the Closing Date to be delivered to Seller within
120 days after the Closing Date.

(f) Seller and Buyer shall jointly determine the character of any payment
of Taxes made pursuant to this Section 8.4 and subsequent Tax filings shall
reflect such characterization.

(g) After the Closing Date, Buyer shall:

(i) assist, and cause its respective Affiliates to assist, Seller
in preparing any Tax Returns or reports which Seller is responsible for
preparing and filing in accordance with Section 8.3(d);

(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Company;

(iii) make available to Seller and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes of the Company;

(iv) provide timely notice to Seller in writing of any pending or
threatened tax audits or assessments of the Company for taxable periods
for which Seller may have a liability under Section 8.3(a);

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<PAGE>

(v) provide to Seller at least 30 days before due any Tax Returns
or reports which Buyer is responsible for preparing and filing in
accordance with Section 8.4(c); and

(vi) furnish Seller with copies of all correspondence received
from any taxing authority in connection with any tax audit or information
request with respect to any such taxable period.

(h) The obligations of Buyer set forth in this Section 8.4 shall remain in
effect until the expiration of the relevant statutes of limitations.

SECTION 1.0 No Affiliate Liability. Each of the following is herein
----------------------
referred to as a "Buyer Affiliate": (a) any direct or indirect holder of any
---------------
equity interests or securities in Buyer (whether limited or general partners,
members, stockholders or otherwise), (b) any Affiliate of Buyer, or (c) any
director, officer, employee, representative or agent of (i) Buyer, (ii) any
Affiliate of Buyer or (iii) any such holder of equity interests or securities
referred to in clause (a) above. No Buyer Affiliate shall have any liability or
obligation of any nature whatsoever in connection with or under this Agreement
or the transactions contemplated hereby and Seller hereby waives and releases
all claims of any such liability and obligation, it being understood that no
such Person or entity (other than Buyer) shall be liable for or in respect of
such matters.

ARTICLE IX
----------

MISCELLANEOUS

SECTION 9.1 Assignments; No Third Party Rights.
----------------------------------

(a) Buyer may not assign any of its rights or obligations under this
Agreement without the prior written consent of Seller (which may not be
unreasonably withheld or delayed) and any purported assignment without such
consent shall be void. The preceding sentence notwithstanding, Buyer may assign
this Agreement or all or any part of its rights and obligations under this
Agreement, following written notice to Seller, to a wholly owned Subsidiary of
Buyer or a Person or entity which controls Buyer within the meaning of the
Securities Act or to any Person or entity required by Buyer's financing sources
in order to secure Buyer's obligations to such financing sources; provided,
--------
however, that no such assignment shall relieve Buyer of its
- -------
obligations under this Agreement. "Subsidiary" means, with respect to any
----------
Person, any corporation or other entity of which such Person has, directly or
indirectly, (i) ownership of securities or other interests having the power to
elect a majority of the Board of Directors or similar governing body of such
corporation or other entity, or (ii) the power to direct the business and
policies of that corporation or other entity.

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<PAGE>

(b) Seller may not assign any of its rights or obligations under
this Agreement without the prior written consent of Buyer (which may not
be unreasonably withheld or delayed) and any purported assignment without
such consent shall be void. The preceding sentence notwithstanding,
Seller may assign this Agreement or all or any part of its rights and
obligations under this Agreement, following written notice to Buyer, to a
wholly owned Subsidiary of Seller; provided, however, that no such
-------- -------
assignment shall relieve Seller of its obligations under this Agreement.

(c) Except as provided in Section 5.8, nothing in this Agreement,
express or implied, is intended to confer upon any Person other than the
parties hereto any rights or remedies of any nature whatsoever under or
by reason of this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors
and permitted assigns.

SECTION 9.2 Entire Agreement. This Agreement, including the
----------------
Exhibits hereto, the Disclosure Schedule, the Buyer's Disclosure Schedule and
the other agreements and written understandings referred to herein or otherwise
entered into by the parties hereto on the date hereof, and the Confidentiality
Agreement constitute the entire agreement and understanding and supersede all
other prior covenants, agreements, undertakings, obligations, promises,
arrangements, communications, representations and warranties, whether oral or
written, by any party hereto or by any director, officer, employee, agent,
Affiliate or Representative of any party hereto. There are no covenants,
agreements, undertakings or obligations with respect to the subject matter of
this Agreement other than those expressly set forth or referred to herein and no
representations or warranties of any kind or nature whatsoever, express or
implied, including any implied warranties of merchantability or fitness for a
particular purpose, are made or shall be deemed to be made herein by the parties
hereto except those expressly made herein.

SECTION 9.3 Amendment or Modification. This Agreement may be
-------------------------
amended or modified only by written instrument signed by all of the parties
hereto.

SECTION 9.4 Notices. All notices, requests, instructions, claims,
-------
demands, consents and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given on the
date delivered by hand or by courier service such as Federal Express, or by
other messenger (or, if delivery is refused, upon presentment) or upon receipt
by facsimile transmission (with confirmation), or upon delivery by registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following addresses:

(a) If to Buyer:

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<PAGE>

WP Education Holdings LLC
c/o WP Management Partners, L.L.C.
320 Park Avenue
14th Floor
New York, New York 10022
Telephone: (212) 702-5683
Facsimile: (212) 702-5635
Attention: Bruce R. Barnes

(b) With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
Attention: Howard L. Ellin, Esq.

ZD Inc.
28 East 28th Street
New York, NY 10016
Telephone: (212) 503-3500
Facsimile: (212) 503-3581
Attention: J. Malcolm Morris

With a copy to:

Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
Attention: Alan J. Sinsheimer

SECTION 9.5 Governing Law. This agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable to

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<PAGE>

contracts made and performed in such State and without regard to the conflict of
law principles thereof.

SECTION 9.6 Consent to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------

(a) The parties hereto hereby irrevocably submit to the jurisdiction of the
courts of the State of New York, County of New York and the federal courts of
the United States of America located in the State of New York solely in respect
of the interpretation and enforcement of the provisions of this agreement and of
the documents referred to in this agreement, and in respect of the transactions
contemplated herein, and hereby waive, and agree not to assert, as a defense in
any action for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or
that this agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a New York state
or federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 9.4 hereof or in
such other manner as may be permitted by law, shall be valid and sufficient
service thereof.

(b) Each party hereto hereby acknowledges and agrees that any controversy
which may arise under this agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury in
respect of any litigation directly or indirectly arising out of or relating to
this agreement or the transactions contemplated in this agreement. Each party
certifies and acknowledges that (i) no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each
such party understands and has considered the implications of this waiver, (iii)
each such party makes this waiver voluntarily, and (iv) each such party has been
induced to enter into this agreement by, among other things, the mutual waivers
and certifications in this Section 9.6.

SECTION 9.7 Severability. In case any one or more of the provisions
-----------
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision or provisions shall be ineffective
only to the extent of such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or provisions or the remaining
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or

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<PAGE>

provisions had never been contained herein, unless such a construction would be
unreasonable.

SECTION 9.8 Waiver of Conditions.
--------------------

(a) To the extent permitted by applicable Law: (i) no claim or right
arising out of this Agreement or the documents referred to in this Agreement can
be discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party; (ii) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given and (iii) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.

(b) The rights and remedies of the parties hereto are cumulative and not
alternative. Except where a specific period for action or inaction is provided
herein, neither the failure nor any delay on the part of any party in exercising
any right, power or privilege under this Agreement or the documents referred to
in this Agreement shall operate as a waiver thereof, nor shall any waiver on the
part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any other or
further exercise thereof or the exercise of any other such right, power or
privilege. The failure of a party to exercise any right conferred herein within
the time required shall cause such right to terminate with respect to the
transaction or circumstances giving rise to such right, but not to any such
right arising as a result of any other transactions or circumstances.

SECTION 9.9 Actions of the Company. Whenever this Agreement requires the
----------------------
Company to take any action, such requirement shall be deemed to involve, with
respect to actions to be taken at or prior to the Closing, an undertaking on the
part of Seller to cause the Company to take such action and, with respect to
actions to be taken after the Closing, an undertaking on the part of Buyer to
cause the Company to take such action.

SECTION 9.10 Descriptive Headings; Construction. The descriptive headings
----------------------------------
herein are inserted for convenience of reference only and are not intended to be
part of, or to affect the meaning, construction or interpretation of, this
Agreement. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms and shall be deemed to be followed by the
phrase "without limitation."

SECTION 9.11 Counterparts. For the convenience of the parties hereto, this
------------
Agreement may be executed in any number of counterparts, each such counterpart

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<PAGE>

being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.

SECTION 9.12 Knowledge. When references are made in this Agreement to
---------
information being "to the knowledge of Seller" or similar language, such
knowledge shall refer to the knowledge of the officers of Seller and the Company
set forth in Schedule 9.12 of the Disclosure Schedule. Such individuals shall be
deemed to have "knowledge" of a particular fact or other matter if such
individual is actually or otherwise should have been aware of such fact or other
matter.

SECTION 9.13 Materiality. Whenever the terms "material," "materially," "in
-----------
all material respects" or similar materiality qualifiers are used in this
Agreement with respect to Seller or the Division or any of them, they shall be
deemed to refer only to matters, circumstances or events that are material to
the business, assets, liabilities, results of operations, prospects or condition
(financial or otherwise) of the Division and the Company taken as a whole.

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers duly authorized as of the date first
above written.

ZD INC.

By /s/ DARYL R. OTTE
--------------------------------
Name: Daryl R. Otte
Title: Senior Vice President of Development
and Planning

WP EDUCATION HOLDINGS LLC

By /s/ BRUCE BARNES
--------------------------------
Name: Bruce Barnes
Title: President

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<PAGE>

- --------------------------------------------------------------------------------
EXHIBIT 2.3

ZDTV L.L.C.

Unit Purchase Agreement

dated

November 19, 1999

by and between

Vulcan Programming Inc.

and

ZD Inc.

- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS.......................................................... 1

1.1 DEFINITIONS......................................................... 1

ARTICLE 2 SALE OF ZD UNITS; CLOSING............................................ 7

2.1 PURCHASE OF ZD UNITS................................................ 7

2.2 DELIVERY OF OWNERSHIP............................................... 7

2.3 PURCHASE PRICE...................................................... 7

2.4 PAYMENT OF PURCHASE PRICE........................................... 7

2.5 TRANSFER TAXES...................................................... 7

2.6 CLOSING............................................................. 7

ARTICLE 3 REPRESENTATIONS AND WARRANTIES REGARDING COMPANY..................... 7

3.1 ORGANIZATION AND STANDING........................................... 7

3.2 POWER AND AUTHORIZATION............................................. 8

3.3 CAPITALIZATION...................................................... 8

3.4 FINANCIAL STATEMENTS................................................ 8

3.5 ABSENCE OF UNDISCLOSED LIABILITIES; CHANGES;
INTERCOMPANY INDEBTEDNESS........................................... 9

3.6 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES......................... 9

3.7 MATERIAL CONTRACTS.................................................. 10

3.8 INTELLECTUAL PROPERTY RIGHTS........................................ 10

3.9 NON-CONTRAVENTION................................................... 11

3.10 CONSENTS............................................................ 11

3.11 COMPLIANCE WITH LAWS................................................ 11

3.12 TAXES............................................................... 12

3.13 LABOR AGREEMENTS AND ACTIONS........................................ 13

3.14 EMPLOYEES........................................................... 13

3.15 ERISA............................................................... 13

3.16 ENVIRONMENTAL COMPLIANCE............................................ 14

3.17 LITIGATION.......................................................... 14

3.18 Y2K................................................................. 14

3.19 FINDERS' FEES....................................................... 14
</TABLE>
<PAGE>

TABLE OF CONTENTS

(CONTINUED)

<TABLE>
<CAPTION>
PAGE
<S> <C>
3.20 DISCLOSURE.......................................................... 15

ARTICLE 4 REPRESENTATIONS AND WARRANTIES REGARDING ZD AND CERTAIN ZD
AFFILIATES........................................................... 15

4.1 ORGANIZATION AND STANDING........................................... 15

4.2 TITLE TO ZD UNITS................................................... 15

4.3 POWER AND AUTHORIZATION............................................. 15

4.4 GOVERNMENTAL AUTHORIZATION.......................................... 16

4.5 NON-CONTRAVENTION................................................... 16

4.6 CONSENTS............................................................ 16

4.7 COMPLIANCE WITH LAWS................................................ 16

4.8 EXCLUSIVE VEHICLE................................................... 17

4.9 FINDERS' FEES....................................................... 17

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................... 17

5.1 ORGANIZATION AND STANDING........................................... 17

5.2 CORPORATE POWER AND AUTHORIZATION................................... 17

5.3 GOVERNMENTAL AUTHORIZATION.......................................... 17

5.4 NON-CONTRAVENTION................................................... 18

5.5 CONSENTS............................................................ 18

5.6 FINDERS' FEES....................................................... 18

5.7 INVESTMENT REPRESENTATIONS.......................................... 18

ARTICLE 6 COVENANTS............................................................ 19

6.1 FURTHER EFFORTS..................................................... 19

6.2 CERTAIN FILINGS..................................................... 19

6.3 PUBLIC ANNOUNCEMENTS................................................ 20

6.4 CONFIDENTIALITY..................................................... 20

6.5 SKY TV GUARANTY..................................................... 20

6.6 DIRECTV OBLIGATIONS................................................. 20

6.7 LEASE AGREEMENTS.................................................... 20

6.8 TRANSPONDER LEASE................................................... 21

6.9 GE MASTER LEASE..................................................... 21
</TABLE>

ii
<PAGE>

TABLE OF CONTENTS

(CONTINUED)

<TABLE>
<CAPTION>
PAGE
<S> <C>
6.10 RETIREMENT AND FLEXIBLE SPENDING PLAN
ACCOUNTS............................................................ 21

6.11 WANGBERG RIGHTS..................................................... 22

6.12 ACCESS.............................................................. 22

6.13 INTERCOMPANY PROGRAMS............................................... 22

6.14 TAX MATTERS......................................................... 23

6.15 COURSE OF BUSINESS.................................................. 23

6.16 GUARANTY OF PURCHASER'S OBLIGATIONS................................. 23

ARTICLE 7 CONDITIONS TO CLOSING................................................ 24

7.1 CONDITIONS TO OBLIGATION OF PURCHASER............................... 24

7.2 CONDITIONS TO OBLIGATIONS OF ZD..................................... 25

ARTICLE 8 TERMINATION OF AGREEMENT............................................. 25

8.1 RIGHT TO TERMINATE AGREEMENT........................................ 25

8.2 EFFECT OF TERMINATION............................................... 26

ARTICLE 9 BINDING ARBITRATION OF DISPUTES...................................... 26

9.1 BINDING ARBITRATION................................................. 26

9.2 INITIATION.......................................................... 26

9.3 APPOINTMENT AND POWERS OF ARBITRATOR................................ 27

9.4 COSTS AND FEES...................................................... 27

9.5 DISCOVERY........................................................... 27

9.6 LOCATION AND DATE OF ARBITRATION HEARING............................ 27

9.7 PRE-HEARING CONFERENCES............................................. 27

9.8 CONDUCT OF THE ARBITRATION HEARING.................................. 28

9.9 BURDEN OF PROOF; BASIS OF DECISION.................................. 28

9.10 AWARD............................................................... 28

9.11 SURVIVAL............................................................ 28

9.12 FINALITY OF AWARD................................................... 28

ARTICLE 10 INDEMNIFICATION AND RELATED MATTERS................................. 28

10.1 INDEMNIFICATION BY ZD............................................... 28

10.2 INDEMNIFICATION BY PURCHASER........................................ 29

10.4 DEDUCTIBLE AMOUNT................................................... 29
</TABLE>

iii
<PAGE>

TABLE OF CONTENTS

(CONTINUED)

<TABLE>
<CAPTION>
PAGE
<S> <C>
10.5 MAXIMUM LIABILITY................................................... 29

10.6 KNOWLEDGE OF BREACH................................................. 29

10.7 NO IMPLIED REPRESENTATIONS.......................................... 29

10.8 INDEMNIFICATION CLAIMS.............................................. 29

10.9 DEFENSE OF THIRD PARTY ACTIONS...................................... 30

10.10 SUBROGATION......................................................... 31

10.11 EXCLUSIVITY......................................................... 31

ARTICLE 11 MISCELLANEOUS....................................................... 31

11.1 NOTICES............................................................. 31

11.2 AMENDMENTS AND WAIVERS.............................................. 32

11.3 EXPENSES............................................................ 32

11.4 SUCCESSORS AND ASSIGNS.............................................. 33

11.5 FURTHER ASSURANCES.................................................. 33

11.6 GOVERNING LAW....................................................... 33

11.7 COUNTERPARTS; EFFECTIVENESS......................................... 33

11.8 ENTIRE AGREEMENT.................................................... 33

11.9 SEVERABILITY........................................................ 33

11.10 HEADINGS; PRONOUNS.................................................. 33

11.11 EXPIRATION OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND THE SELECTED PRIOR AGREEMENTS......................... 33
</TABLE>

iv
<PAGE>

Schedules

Schedule 3.3 Capitalization
Schedule 3.4 Financial Statements
Schedule 3.5 Undisclosed Liabilities; Changes; Intercompany Indebtedness
Schedule 3.6(a) Liens
Schedule 3.6(b) Leases
Schedule 3.7 Material Contracts
Schedule 3.8 Intellectual Property
Schedule 3.9 Non-Contravention
Schedule 3.10 ZDTV Consents
Schedule 3.13 Labor Agreements and Actions
Schedule 3.15 ERISA Benefit Plans
Schedule 3.17 Litigation
Schedule 4.6 ZD Consents
Schedule 4.9 Finders' Fees
Schedule 6.5 Sky TV Guaranty
Schedule 7.1 "Schedule 7.1 Consents"

Exhibits

Exhibit A - ZD License Agreement
Exhibit B - Lease Agreements
Exhibit C - Amended and Restated Services Agreement
Exhibit D - GE Master Lease Assignment
Exhibit E - Form of Legal Opinion of Cooley Godward LLP
Exhibit F - Form of Legal Opinion of ZD
<PAGE>

ZDTV L.L.C. Unit Purchase Agreement

ZDTV L.L.C. Unit Purchase Agreement dated as of November 19, 1999
("Effective Date") by and among Vulcan Programming Inc., a Washington
corporation ("Purchaser"), and ZD Inc., a Delaware corporation ("ZD").

Recitals

Whereas, ZDTV L.L.C., a Delaware limited liability company ("ZDTV" or
"Company"), is engaged, directly or indirectly, in the business of acquiring,
holding as an investment, obtaining financing or refinancing, developing,
operating, maintaining, producing and broadcasting programming over television,
the Internet and any other distribution channels and such other activities which
relate in any way to such acquisition, holding, financing or refinancing,
development, operation, maintenance, production or broadcast;

Whereas, Purchaser owns 54,000,000 Class A Units of Company;

Whereas, ZD owns 108,000,000 Class A Units of the Company ("ZD Units"); and

Whereas, Purchaser desires to purchase all of the ZD Units on the terms set
forth in this Agreement.

Now, Therefore, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto agree
as follows:

ARTICLE 1

Definitions

1.1 Definitions. The following terms, as used herein, have the following
meanings:

"Administrator" shall have the meaning set forth in Section 9.1.

"Agreement" means this Unit Purchase Agreement, including all
Schedules and Exhibits referenced herein.

"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person; provided, however, that notwithstanding the foregoing,
the Company shall not be considered an Affiliate of Purchaser and Purchaser
shall not be considered an Affiliate of the Company. For the purposes of this
definition, "control," when used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
<PAGE>

"Allocation Agreement" shall have the meaning set forth in Section
6.14.

"Amended Services Agreement" means the Amended and Restated Services
Agreement between ZD and Company in substantially the form set forth as Exhibit
C, which amends and restates the Services Agreement.

"Ancillary Agreements" means: (i) ZD License Agreement; (ii) Lease
Agreements; (iii) Amended Services Agreement; (iv) GE Master Lease Assignment;
and (v) Wangberg Letter Agreement.

"Associates" of a Person shall include such Person's Affiliates,
stockholders or unit holders, directors, officers, employees, agents,
accountants and representatives.

"Cable or Broadcast Television Network" shall have the meaning set
forth in Section 4.8.

"Claim Notice" shall have the meaning set forth in Section 10.8.

"Claimant" shall have the meaning set forth in Section 10.8.

"Closing" shall have the meaning set forth in Section 2.6.

"Closing Date" shall mean the time and date as of which the Closing
actually takes place.

"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent superceding federal revenue laws.

"Company" shall have the meaning set forth in the recitals to this
Agreement.

"Company Retirement Plan" shall have the meaning set forth in Section
6.10.

"Consent" means any third party (including any governmental agency)
consent, authorization, approval or waiver required for the consummation of the
transactions set forth in this Agreement and the Ancillary Agreements.

"Controlled Affiliates" shall have the meaning set forth in Section
4.8.

"Damages" shall mean losses and damages; provided however, that for
purposes of computing the amount of Damages incurred by any Person, there shall
be deducted (i) an amount equal to the amount of any net tax benefit directly or
indirectly received or receivable by such Person or any of such Person's
Affiliates in connection with such Damages or the circumstances giving rise
thereto, and (ii) an amount equal to the amount of any insurance proceeds,
indemnification payments, contribution payments or reimbursements directly or
indirectly received by such Person or any of such Person's Affiliates from any
third party in payment of such Damages.

2
<PAGE>

"Deductible Amount" shall have the meaning set forth in Section 10.4.

"Demand for Arbitration" shall have the meaning set forth in Section
9.2(a).

"Designated Affiliates" shall mean the following: (i) ZD Television
Production, Inc., a Delaware corporation, (ii) Sky Video LLC, a Delaware limited
liability company, and (iii) Sky Holdings Corp., a Delaware corporation.

"DirecTV Option" shall mean the Option to Purchase Class B Units
granted to DirecTV, Inc. dated June 5, 1998.

"DirecTV Agreements" shall have the meaning set forth in Section 6.6.

"DirecTV Consulting Agreement" shall mean the Consulting Services
Agreement between ZD and DirecTV, Inc. dated June 5, 1998.

"DirecTV License and Services Agreement" shall mean the License and
Services Agreement between ZD and DirecTV, Inc. dated June 5, 1998.

"Disclosure Schedule" shall mean the Disclosure Schedule furnished by
ZD in connection with the execution and delivery of this Agreement.

"Effective Date" shall have the meaning set forth in the preamble to
this Agreement.

"ERISA" shall have the meaning set forth in Section 3.15.

"ERISA Affiliate" shall have the meaning set forth in Section 3.15.

"Financial Statements" shall have the meaning set forth in Section
3.4.

"GE Master Lease" shall mean the Master Lease Agreement dated December
31, 1997, between General Electric Capital Corporation and ZD.

"GE Master Lease Assignment" shall mean the agreement pursuant to
which the rights and obligations of the GE Master Lease are assigned to and
assumed by Company or Purchaser, as required by General Electric Capital
Corporation, in the form substantially set forth as Exhibit D.

"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.

"Indemnified Party" shall have the meaning set forth in Section 10.10.

"Indemnifying Party" shall have the meaning set forth in Section 10.9.

"Indemnitee" shall have the meaning set forth in Section 10.9.

3
<PAGE>

"Indemnitor" shall have the meaning set forth in Section 10.10.

"Intellectual Property Rights" means all (i) United States, state and
foreign trademarks, service marks and trade names, including claims for present
and past infringement, and registrations thereof and applications therefor and
goodwill associated with the foregoing accruing from the dates of first use
thereof; (ii) United States and foreign copyrights, copyright registrations and
copyright applications, including claims for present and past infringement;
(iii) United States and foreign patents and patent applications, including
claims for present and past infringement; (iv) contracts or agreements granting
any right, title, license or privilege to the Company under the intellectual
property rights of any third party; (v) trade secrets; and (vi) all rights and
licenses to any of the foregoing, in each case owned or used by Company in its
business.

"Intercompany Transition Period" shall have the meaning set forth in
Section 6.13.

"IP Liens" shall have the meaning set forth in Section 3.8.

"Lease Agreements" shall mean the Lease Agreements in substantially
the form set forth on Exhibit B.

"Leases" shall have the meaning set forth in Section 3.6.

"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, option, right of first refusal, easement, restriction
(including transfer restriction) or other similar encumbrance of any kind in
respect of such asset.

"MAC" shall have the meaning set forth in Section 3.12.

"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the business, assets, financial condition or results
of operations of such Person.

"Material Contracts" shall have the meaning set forth in Section 3.7.

"Matter" shall mean any claim, demand, dispute, action, suit,
examination, audit, proceeding, investigation, inquiry or other similar matter.

"Partnership Assets" shall have the meaning set forth in Section 6.14.

"Person" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality.

"Plan" shall have the meaning set forth in Section 3.15.

4
<PAGE>

"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association or organization,
joint venture, government or department or agency thereof, or other entity of
whatever nature.

"Post Closing Leases" shall have the meaning set forth in Section 6.7.

"Profits Interest Plan" shall have the meaning set forth in Section
3.3.

"Purchaser" shall have the meaning set forth in the preamble to this
Agreement.

"Purchase Price" shall have the meaning set forth in Section 2.2.

"Real Property Leases" has the meaning set forth in Section 3.6.

"Reasonable Consideration" shall have the meaning set forth in Section
3.8(a).

"Restated Operating Agreement" shall mean the Amended and Restated
Operating Agreement of ZDTV L.L.C. dated as of May 19, 1999.

"Schedule 7.1 Consents" shall mean the Consents required for the
assignment of the Leases listed on Schedule 7.1.

"Scheduled Closing Time" shall mean the time and date as of which the
Closing is scheduled to take place (as such time and date may be postponed by
the mutual agreement of the parties hereto).

"Securities Act" shall have the meaning set forth in Section 5.7.

"Selected Prior Agreements" shall mean the (i) Unit Purchase Agreement
by and among Company, ZD and Purchaser dated as of February 5, 1999 and (ii) Co-
Investor Agreement by and among Company, ZD and Purchaser dated as of February
5, 1999.

"Service" shall have the meaning set forth in Section 3.12(b).

"Services Agreement" shall mean the Services Agreement by and between
ZD and Company dated as of February 5, 1999.

"Sky TV Agreement" shall mean the Asset Purchase Agreement dated
October 26, 1998 by and among the parties named therein.

"Sky TV Guaranty" shall mean the Guaranty Agreement dated October 26,
1998 made by Ziff-Davis Inc., a Delaware corporation in favor of Sky TV, Inc.,
Guy TV, Inc., Buy TV, Why TV, Inc., WorldwideTV.com, Inc., Computer Broadcasting
Network, Inc., Mark Bunting, Kyle Bunting, and Tom Hoitsma, a copy of which is
attached as Schedule 6.5.

"Tax" or "Taxes", as the context may require, include: (i) any income,
alternative or add-on minimum tax, gross income, gross receipts, franchise,
profits, sales, use, ad

5
<PAGE>

valorem, business license, withholding, payroll, employment, excise, stamp,
transfer, recording, occupation, premium, property, value added, custom duty,
severance, windfall profit or license tax, governmental fee, including estimated
taxes relating to any of the foregoing, or other similar tax or other like
assessment or charge of similar kind whatsoever together with any interest and
any penalty, addition to tax or additional amount imposed by any governmental
authority responsible for the imposition of any such Tax; or (ii) any liability
of a Person for the payment of any taxes, interest, penalty, addition to tax or
like additional amount resulting from the application of Treas. Reg. (S)1.1502-6
or comparable provisions of any governmental authority in respect of a
consolidated or combined return.

"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
governmental authority in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any law relating to any
Tax.

"Transponder Lease" shall mean C-4 Satellite Transponder Service
Agreement, dated March 16, 1998, between GE American Communications, Inc. and
Company.

"Units" means the limited liability company units of the Company.

"Wangberg Agreement" shall mean the Unit Purchase Agreement by and
among Larry Wangberg, Company and ZD dated as of March 23, 1999.

"Wangberg Letter Agreement" shall mean the agreement by and between
Larry Wangberg and Purchaser pursuant to which Wangberg agrees to defer his
right to exercise his tag along rights under the Wangberg Ageement as of the
Effective Date.

"Year 2000 Problems" shall have the meaning set forth in Section 3.18.

"ZD" shall have the meaning set forth in the preamble to this
Agreement.

"ZD License Agreement" means the Amended and Restated License
Agreement by and among ZD on behalf of (i) ZD Publishing, a division of ZD and
(ii) ZDNet, a division of ZD, and Company entered into on or before the Closing
Date in the form substantially set forth as Exhibit A, as the same may be
amended and in effect from time to time.

"ZD MFN Letter" means the MFN Letter between ZD Inc. and DirectTV
dated June 5, 1998.

"ZD Plan" shall have the meaning set forth in Section 6.10.

"ZD Units" shall have the meaning set forth in the recitals to this
Agreement.

6
<PAGE>

ARTICLE 2

SALE OF ZD UNITS; CLOSING

2.1 Purchase of ZD Units. At the Closing, ZD shall sell the ZD Units to
Purchaser, and Purchaser shall purchase the ZD Units from ZD on the terms and
subject to the conditions set forth in this Agreement.

2.2 Delivery of Ownership. At the Closing, ZD shall transfer to Purchaser
all rights, title, and interest in to and under the ZD units. Purchaser shall
become a Substitute Member (as defined in the Restated Operating Agreement) with
respect to the ZD Units and shall succeed to ZD's right, title and interest
under the Restated Operating Agreement and the Investors Right Agreement.

2.3 Purchase Price. The purchase price payable by Purchaser for the ZD
Units shall be $204,800,000.00 ("Purchase Price").

2.4 Payment of Purchase Price. The Purchase Price shall be paid by
Purchaser to ZD on the Closing Date by wire transfer of immediately available
funds to an account or accounts to be designated by ZD.

2.5 Transfer Taxes. Any transfer taxes, stamp duties, filing fees,
registration fees, recordation expenses, or similar taxes, fees, charges or
expenses incurred by Purchaser and ZD in connection with the transfer of the ZD
Units to Purchaser shall be borne and paid one-half by Purchaser and one-half by
ZD.

2.6 Closing. The closing of the sale of the ZD Units to Purchaser
("Closing") shall take place at the offices of Cooley Godward LLP, 5 Palo Alto
Square, Palo Alto, California, at 9:00 a.m. (California time) ten (10) business
days after the final Schedule 7.1 Consent is obtained by ZD, but in no event
later than January 31, 2000; provided, however, that the parties may agree to
postpone the Scheduled Closing Time.

ARTICLE 3

Representations and Warranties Regarding Company

ZD hereby represents and warrants to Purchaser that:

3.1 Organization and Standing. Company is a limited liability company
duly organized, validly existing and in good standing as a limited liability
company under the laws of Delaware. Company is duly qualified and authorized to
do business and is in good standing in all jurisdictions in which the nature of
its activities and of its properties makes such qualification necessary, except
for those jurisdictions in which failure to do so would not have a Material
Adverse Effect on Company. ZD has delivered to Purchaser or its counsel prior
to the Effective Date, complete and correct copies of the organizational
documents of the Company and all amendments and restatements thereto.

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<PAGE>

3.2 Power and Authorization. Company has all requisite power and authority
to own and operate its properties and assets, to execute and deliver the
Ancillary Agreements to which it is a party and to carry out the provisions of
the Ancillary Agreements to which it is a party, and to carry on its business as
currently conducted.

3.3 Capitalization.

(a) The issued and outstanding Units are 162,000,000 Class A Units and
6,750,000 Class C Units. All issued and outstanding Units have been duly
authorized and validly issued and are fully paid and non-assessable. The
rights, preferences, privileges and restrictions of the outstanding Units are as
stated in the Restated Operating Agreement. The Company has reserved 12,700,000
Class D Units for issuance pursuant to the Company's 1999 Profits Interest Plan
("Profits Interest Plan"). Schedule 3.3 sets forth a true, accurate and
complete list of all profits interest rights granted under the Profits Interest
Plan as of Closing with the corresponding number of Class D Units and the
vesting schedule of each grant. Unless otherwise set forth in Schedule 3.3, the
Profits Interest Plan sets forth a complete, accurate and true description of
the rights of the Participants (as defined in the Profits Interest Plan) and the
terms and conditions governing the Class D Units and the Profits Interest Plan.
In addition, based upon the present capitalization (excluding the Profits
Interest Plan) up to 18,750,000 Class B Units are issuable upon exercise of the
DirecTV Option as disclosed in Schedule 3.3. Except for issuances pursuant to
the Profits Interest Plan and as disclosed in Schedule 3.3, (x) there are no
outstanding options, warrants, subscriptions, calls or commitments of any
character relating to or entitling any Person to purchase or otherwise acquire
any interests or other securities of Company; (y) there are no obligations or
securities convertible into or exchangeable or exercisable for any interests or
other securities of Company or any commitments of any character relating to or
entitling any Person to purchase or otherwise acquire any such interests or
other securities; and (z) there are no preemptive or similar rights to subscribe
for or to purchase any interests or other securities of Company except for
preemptive rights, rights of first refusal and compelled sale rights and
obligations set forth in the Investor Rights Agreement and rights of first
refusal set forth in the Co-Investor Agreement (as defined in Section 4.2).

(b) Company has no debt or equity interests in any other entity, nor
any obligation, option or right to acquire any such debt or equity interest.
Company has no subsidiaries or joint ventures.

3.4 Financial Statements. The financial statements attached hereto as
Schedule 3.4 (the "Financial Statements") consist of (i) the unaudited pro forma
combined balance sheets of ZDTV, L.L.C. and predecessor companies as of December
31, 1998 and September 30, 1999, (ii) the related unaudited pro forma combined
statements of operations and cash flows for the year ended December 31, 1998 and
the nine months ended September 30, 1999 and (iii) the unaudited statement of
members' equity for the period from February 4, 1999 to September 30, 1999.
Except as described in Schedule 3.4, the Financial Statements (i) present fairly
the financial condition of Company as of December 31, 1998 and September 30,
1999, (ii) are in accordance with the books and records of Company, (iii) show
all material liabilities, absolute or contingent, of Company required to be
recorded therein in accordance with generally accepted accounting principles,
and (iv) are prepared in accordance with generally accepted accounting
principles

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<PAGE>

consistently applied, except for the omission of footnotes. There has been no
material adverse change in the properties, business, operations and/or financial
condition of Company taken as an entirety since September 30, 1999.

3.5 Absence of Undisclosed Liabilities; Changes; Intercompany
Indebtedness. Except as provided in Schedule 3.5 hereto, Company has no
liability or obligation, which individually or in the aggregate exceeds
$250,000, absolute or contingent, including, without limiting the generality of
the foregoing, any tax liabilities due or to become due, not reflected in the
Financial Statements, except (i) obligations and liabilities incurred after the
date of the Financial Statements in the ordinary course of business, (ii)
obligations under contracts made in the ordinary course of business that would
not be required to be reflected in Financial Statements prepared in accordance
with GAAP or obligations under contracts that are disclosed in Schedule 3.7 and
(iii) obligations under this Agreement and the Ancillary Agreements; which in
the case of clauses (i) and (ii) above, individually or in the aggregate do not
give rise to a Material Adverse Effect. Without limiting the generality of the
foregoing, ZD does not know of, and has no reasonable grounds to believe that
there is any basis for the assertion against Company, of any material
liabilities of Company (not listed in Schedule 3.5, and the Financial
Statements). As of the date hereof, the Company is not obligated to pay any
indebtedness to ZD or any Affiliate of ZD, except for indebtedness owed for
services provided, trade payables, payroll and other normal course current
liabilities, all accrued over such time periods and in such manners as are
consistent with the Company's normal practices, as such practices are reflected
in the Financial Statements. As of the date hereof, the Company does not have
any current liabilities to third parties, except for normal course current
liabilities accrued over such time periods and in such manners as are consistent
with the Company's normal practices, as such practices are reflected in the
Financial Statements. Since September 30, 1999, except as contemplated by this
Agreement and the Ancillary Agreements or as disclosed on Schedule 3.5 hereto,
Company has been operated in the ordinary and usual course of business, and
there has not been:

(a) any material adverse change in the (i) assets, liabilities,
condition (financial or otherwise), business or prospects of Company from that
reflected in the Financial Statements, or (ii) operating results of Company from
that reflected in the Financial Statements;

(b) any damage, destruction or loss, whether or not covered by
insurance, resulting in a Material Adverse Effect on Company (as its business is
presently conducted); or

(c) to ZD's knowledge, any other event or condition of any character
that would have a Material Adverse Effect on Company (as its business is
presently conducted).

3.6 Title to Properties; Liens and Encumbrances. Company has good and
marketable title to all of its owned properties and assets not referenced in
Section 3.8 hereof, and such properties and assets are not subject to any Liens,
except for Liens described on Schedule 3.6(a) hereto and immaterial Liens that
arise in the ordinary course of business (including without limitation Liens
from current taxes not yet due and payable). The Company, through the Services
Agreement, leases or otherwise uses real or personal property as set forth in
Schedule 3.6(b) pursuant to leases, subleases, conditional sale contracts and
other agreements ("Leases") which are in good standing and are valid and
effective and enforceable in accordance with their

9
<PAGE>

respective terms. With respect to the Leases regarding real property (the "Real
Property Leases"), set forth in Schedule 3.6(b), each of the Company, ZD and the
third parties to the Real Property Leases are in material compliance with their
respective obligations thereunder and there exists no fact or circumstance known
to ZD or the Company which, with the passage of time or the giving of notice or
both, would constitute a material default or breach by ZD under the Real
Property Leases (except with respect to the subleasing arrangement between ZD
and Company pursuant to the Services Agreement). The leased premises listed on
Schedule 3.6(b) are in a state of repair suitable for the continued operation of
the business thereon without the need for material repair. ZD represents and
warrants that the GE Lease Agreement is in full force and effect, ZD is in
material compliance with its obligations thereunder and there exists no fact or
circumstance known to ZD which, with the passage of time or the giving of notice
or both, would constitute a material default or breach by ZD under the GE Lease
Agreement.

3.7 Material Contracts. Schedule 3.7 hereto contains a list of each
executory contract or agreement (excluding this Agreement and the Ancillary
Agreements) of any nature, written or oral, to which Company is a party or by
which it or its assets are bound which (i) requires performance for more than
one year after the date hereof, (ii) requires future payments, performance of
services or delivery of goods and/or materials, to or by Company of an aggregate
amount or value reasonably expected to be in excess of $250,000 and is not
cancelable without material penalty to Company, or (iii) is between Company, on
the one hand, and ZD or any of its Affiliates, on the other hand (collectively,
"Material Contracts"). Each of the Material Contracts is in full force and
effect. Company has performed all of its material obligations to date under
each Material Contract and no party to a Material Contract has made, or to ZD's
knowledge intends to make, a claim to the effect that Company is in material
breach of its obligations thereunder except as set forth on Schedule 3.17. To
ZD's knowledge, without a specific review having been conducted by ZD or
Company, no other party to any Material Contract is in material default
thereunder or in material violation thereof, and no condition exists that with
notice or lapse of time or both would constitute a material violation thereof or
a material default thereunder.

3.8 Intellectual Property Rights.

(a) Except as set forth in Schedule 3.8, Company (i) owns or has the
right to use, free and clear of all liens, and claims ("IP Liens"), all
Intellectual Property Rights (other than those described in clause (ii) below)
required in the conduct of its business as now conducted or presently proposed
to be conducted without infringing upon the right of any person, corporation or
other entity under or with respect to any of the foregoing, (ii) to the best of
ZD's knowledge, has the right to use, free and clear of all IP Liens, all
Intellectual Property Rights required in the conduct of the Company's business
as now conducted or presently proposed to be conducted, which are licensed by
Company from third parties to the extent that each such license grants Company
such rights, (iii) owns or will use its best efforts to acquire for Reasonable
Consideration (as hereinafter defined) any and all Intellectual Property Rights
necessary or desirable to conduct the business as now conducted or presently
proposed to be conducted by

10
<PAGE>

Company, and ZD knows of no impediment to the development of any product or
service contemplated by Company as part of the business presently proposed to be
conducted by Company, nor does ZD have any reasonable basis to believe that any
such impediment exists, and (iv) is not obligated or under any liability
whatsoever to make any payments by way of royalties, fees or otherwise to any
owner, licensor or licensee of, or other claimant to, any Intellectual Property
Rights, with respect to the use thereof or in connection with the conduct of its
business as now conducted, presently proposed to be conducted or otherwise; in
all above cases, except to the extent that a failure of this representation and
warranty would not have a Material Adverse Effect on Company. For purposes of
this Section 3.8(a), the term "Reasonable Consideration" shall mean
consideration, the payment of which would not have a Material Adverse Effect on
Company.

(b) Company has taken the security measures to protect the secrecy,
confidentiality and value of its Intellectual Property Rights, which measures it
believes are reasonable and customary in the industry in which it operates. ZD
is not aware that any of Company's officers, directors, agents, employees,
consultants, contractors or prospective employees are in violation of their
obligations to the Company relating to Intellectual Property Rights, nor aware,
or has any reasonable basis to believe, that any former officer, director,
agent, employee or consultant of Company has made any claim of ownership in or
rights with respect to any of Company's Intellectual Property Rights.

3.9 Non-Contravention. Except as specified in Schedule 3.9, the execution,
delivery of and consummation of the transactions contemplated by this Agreement
(including the transactions contemplated by the Ancillary Agreements) do not and
will not, with notice or lapse of time or both, conflict with, or result in any
breach or violation of or constitute grounds for the occurrence of a declaration
of a default or termination of (i) Company's certificate of formation or other
organizational documents (including the Restated Operating Agreement), (ii) any
contract, agreement, undertaking, commitment or instrument to which Company, is
a party or by which it or either of them or their respective properties are
bound or (iii) any license, judgment, order, injunction, decree, statute, law,
rule or regulation, domestic or foreign, applicable to Company, its properties
or assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations or defaults that individually or in the aggregate would
not have a Material Adverse Effect on Company, or would not materially impair
Company's ability to perform its obligations contemplated by this Agreement and
the Ancillary Agreements.

3.10 Consents. Except as specified in Schedule 3.10, there are no
agreements, contracts or other instruments binding upon Company that require a
Consent as a result of the execution, delivery and performance of this Agreement
or any of the Ancillary Agreements, or the consummation of the transactions
contemplated hereby and thereby.

3.11 Compliance with Laws. Company is not in violation of any statutes,
laws, ordinances, governmental rules or regulations or any judgment, order or
decree (federal, state, local or foreign) to which it is subject, nor has it
failed to obtain any licenses, permits, franchises or other governmental
authorization necessary to the ownership or operation of its properties or the
conduct of its business as intended to be conducted, which violations or
failures would be reasonably likely to have a Material Adverse Effect on
Company. In addition, Company has not knowingly violated any applicable law
through intentionally inducing or intentionally causing any employee of any
other Person to breach such employee's contractual obligations to his or her

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<PAGE>

employer or otherwise through intentionally interfering with the business
relationships between any such employee and his or her employer.

3.12 Taxes.

(a) Each of the Company, MAC Holdings (America) Inc. ("MAC"), and the
Designated Affiliates (but in the case of MAC only with respect to Company and
Company's business) (i) has timely filed all Tax Returns required to be filed by
it with respect to the period up to and including the Closing, (ii) has used its
commercially reasonable efforts to maintain all required records with respect to
any liability for Taxes, regardless of whether such liability has been
previously assessed in whole or in part or is assessed in whole or in part after
the date of this Agreement and (iii) has timely paid or has made appropriate
provision for on its balance sheet (in accordance with GAAP) all Taxes whether
or not shown to be due on or with respect to such Tax Returns or claimed to be
due from it by any governmental authority with respect to any liability for
Taxes. With respect to periods commencing after September 30, 1999, the Company
has not incurred any material liability for Taxes (other than in the ordinary
course of business) other than those which are reflected on the Financial
Statements. There are no Liens with respect to Taxes upon any of the properties
or assets, real, personal or mixed, tangible or intangible, of Company or upon
interests in Company, except for current Taxes not yet due. Purchaser has been
provided with correct and complete copies of all federal and state Tax Returns
of Company, MAC (with respect to Company and Company's business) and ZD
Television since January 1, 1996.

(b) For all periods up to and including the Closing Date, neither the
Internal Revenue Service (the "Service") nor any other appropriate taxing
jurisdiction has examined the Tax Returns of Company, MAC (with respect to
Company and Company's business) or any Designated Affiliate, or otherwise
notified Company in writing that it may be examining its tax situation. No
deficiencies, penalties or interest have been asserted by the Service or any
appropriate taxing authority, and no reserves for such liabilities have been
established on the balance sheets of the Company, MAC or any Designated
Affiliates.

(c) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include, the Company, MAC, or any Designated Affiliate (but
in the case of MAC only with respect to Company and Company's business).

(d) The Company is not subject to any joint venture, partnership or
other arrangement or contract which is treated as a partnership for federal
income tax purposes.

(e) There are no tax sharing agreements or similar arrangements with
respect to or involving Company.

(f) From February 5, 1999 and immediately after the Closing, the
Company has been and will be classified as a partnership for federal income tax
purposes. Since February 5, 1999, neither Company nor any taxing authority has
taken any action or position inconsistent with the classification of Company as
a partnership for federal income tax purposes.

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<PAGE>

(g) Prior to February 5, 1999, Company and each Designated Affiliate
always had a single owner, and each of Company and Sky Video LLC had been
disregarded as an entity separate from its owner for purposes of income taxes
and neither Company nor any taxing authority had taken any action or position
inconsistent with such treatment, in each case, except with respect to the State
of Texas.

(h) As of the Closing, Larry W. Wangberg and each of the recipients of
Units pursuant to the Profits Interest Plan shall have properly and timely
elected pursuant to Section 83(b) of the Code to include in their respective
gross income, for the taxable year in which the Units were transferred to them,
the excess of the fair market value of such Units at the time of transfer
(determined without regard to any restriction other than a restriction which by
its terms will never lapse), over the amount (if any) paid for such Units.
Neither the sale and transfer of the ZD Units nor the termination of service of
the individuals described in Section 7.1(j) will trigger acceleration of vesting
of any unvested Units.

3.13 Labor Agreements and Actions. Except as set forth in Schedule
3.13 Company is not bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or has sought to represent any of the employees, representatives or agents of
Company. There is no strike or other labor dispute involving Company pending,
or to ZD's knowledge threatened against Company, which could have a Material
Adverse Effect on Company (as its business is presently conducted), nor is ZD
aware of any labor organization activity involving Company's employees. Subject
to Schedule 3.13, ZD is not aware that any officer, key employee, consultant,
contractor or any group of key employees of Company intends to terminate his or
their employment or relationship with Company, as the case may be, nor is ZD
aware that Company has a present intention to terminate the employment of or
relationship with any of the foregoing persons.

3.14 Employees. To ZD's best knowledge, none of the senior executive
officers of Company are subject to any contract, agreement, undertaking,
commitment or instrument (including any no hire or noncompetition agreements)
which would impair materially their aggregate abilities to perform the services
on behalf of Company contemplated to be performed by such senior executive
officers as a group.

3.15 ERISA. Except as listed in Schedule 3.15 neither the Company, nor
any member of the same controlled group of businesses as Company within the
meaning of Section 4001(a)(14) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"; an "ERISA Affiliate"), maintains, sponsors, or
contributes to any program or arrangement that is an "employee pension benefit
plan" or an "employee welfare benefit plan," as those terms are defined in
Sections 3(2) and 3(1) of ERISA (a "Plan"). Except as identified on Schedule
3.15 (i) none of the Plans is or was a "multiemployer plan," as defined in
Section 3(37) of ERISA, (ii) none of the Plans is or was a "defined benefit
pension plan" within the meaning of Section 3(35) of ERISA, (iii) none of the
Plans provides or provided post-retirement medical or health benefits (except as
required by Section 4980B of the Code or similar Laws), (iv) none of the Plans
is or was a "welfare benefit fund," as defined in Section 419(e) of the Code, or
an organization described in Sections 501(c)(9) or 501(c)(20) of the Code, and
(v) neither the Company nor any

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<PAGE>

ERISA Affiliate has announced or otherwise made any commitment to create or
amend any Plan. Each Plan is in substantial compliance with ERISA, and has been
operated substantially in accordance with its terms, after giving effect to any
amendment that will be adopted before the end of the remedial amendment period
with a retroactive date on or before the date of this Agreement. Each Plan
listed on Schedule 3.15 that is intended to be qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended, has been amended or is intended
to be amended in a timely fashion to comply with the qualification provisions of
the Tax Reform Act of 1986 and subsequent legislation before the expiration of
the applicable remedial amendment period and has received a favorable
determination letter from the Internal Revenue Service, and ZD and Company are
not aware of circumstances likely to result in the revocation of any such
favorable determination letter. All contributions required to be made under the
terms of each Plan listed on Schedule 3.15 have been timely made, and the
Financial Statements properly reflect all amounts required to be accrued as
liabilities to date under each of the Plans. There is no pending or threatened
litigation, audit, investigation, or proceeding relating to the Plans listed on
Schedule 3.15, nor, to the ZD's best knowledge, is the Company or any of its
officers, employees, or directors liable for any tax under Section 4975 of the
Code or any penalty under Section 502 of ERISA.

3.16 Environmental Compliance. To ZD's best knowledge, Company has
complied with, and is currently in compliance with, all federal, state and local
environmental laws and regulations in connection with the operation of its
business. Company has not received any notice from any federal, state and/or
local regulatory authority of any pending or threatened suit, action or other
proceeding alleging a violation of or liability under any federal, state or
local environmental law or regulation. There are no toxic or hazardous
substances, materials or wastes present at any current or former property owned,
leased or used by the Company that would have a Material Adverse Effect on
Company.

3.17 Litigation. Except as set forth in Schedule 3.17, there is no
action, proceeding or investigation pending against Company in any court or
before any governmental authority or arbitration board or tribunal, foreign or
domestic, and, to the knowledge of ZD, there is no such action, proceeding or
investigation threatened (and ZD knows of no reasonable basis therefor)
(including any threatened action to prevent any executive of Company or any
group of employees from being employed by Company and performing the services
contemplated to by Company and performing the services contemplated to be
performed by them), which in any case would have a Material Adverse Effect on
Company.

3.18 Y2K. Company has used diligent efforts to assure that there
shall be no Material Adverse Effect on Company by reason of the year 2000,
including without limitation that its computer-based systems and other data
processing capabilities become unable to function or fail to generate valid or
correct data-related results or cause any problems commonly referred to as "Year
2000 Problems."

3.19 Finders' Fees. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Company who might be entitled to any fee or commission upon consummation of
the transactions contemplated by this Agreement and each of the Ancillary
Agreements.

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<PAGE>

3.20 Disclosure. ZD has provided Purchaser with all the information
regarding Company that Purchaser has requested for deciding whether to purchase
the ZD Units and all information that ZD believes is reasonably necessary to
enable Purchaser to make such decision. Neither this Agreement or the Ancillary
Agreements nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES REGARDING ZD AND CERTAIN ZD AFFILIATES

ZD hereby represents and warrants to Purchaser that:

4.1 Organization and Standing. ZD is a Delaware corporation duly organized,
validly existing and in good standing as a corporation under the laws of
Delaware. ZD is duly qualified and authorized to do business and is in good
standing in all jurisdictions in which the nature of its activities and of its
properties makes such qualification necessary, except for those jurisdictions in
which failure to do so would not have a Material Adverse Effect on ZD.

4.2 Title To ZD Units. ZD owns all of the ZD Units, free and clear of all
claims, liens, security interests, options, charges and interests of others
whatsoever except such rights of other unit holders as provided in the Restated
Operating Agreement, Amended and Restated Investors Rights Agreement dated as of
May 19, 1999 ("Investor Rights Agreement") and the Co-Investor Agreement among
ZD, Company and Purchaser dated as of February 5, 1999 provided, however, that
the execution and delivery of this Agreement and consummation of the
transactions hereunder shall not trigger any such rights other than rights that
have been waived or where a consent has been obtained. Upon transfer of
ownership to Purchaser at the Closing, Purchaser will obtain good and valid
title to the ZD Units, free and clear of any claims, liens, security interests,
options, charges, restrictions and interests of others whatsoever, except such
rights of other unit holders as provided in the Restated Operating Agreement and
Investor Rights Agreement provided, however, that the execution and delivery of
this Agreement and consummation of the transactions hereunder shall not trigger
any such rights other than rights that have been waived or where a consent has
been obtained. The ZD Units are not (and never have been) represented by
certificates.

4.3 Power and Authorization. ZD has all requisite power and authority to
own and operate its properties and assets, to execute and deliver this Agreement
and the Ancillary Agreements, to issue and sell the ZD Units and to carry out
the provisions of this Agreement and the Ancillary Agreements. The execution,
delivery and performance by ZD of this Agreement and the Ancillary Agreements,
and the consummation by ZD of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary action on the part of ZD. This
Agreement and the Ancillary Agreements constitute, or upon execution and
delivery will constitute, valid and binding agreements of ZD enforceable in
accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of

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<PAGE>

general application affecting enforcement of creditors' rights; and (ii) as
general principles of equity restrict the availability of equitable remedies.

4.4 Governmental Authorization. The execution, delivery and
performance by ZD of this Agreement and each of the Ancillary Agreements does
not require any action by or in respect of, or filing with, any governmental
body, agency, official or authority by ZD, including any filings or other
requirements pursuant to the HSR Act, other than any such action or filing the
failure to obtain or complete which would not have, individually or in the
aggregate, a Material Adverse Effect on ZD or which would not materially and
adversely affect ZD's ability to consummate the transactions contemplated hereby
and thereby and other than: (i) such filings as have been made prior to the
Closing; and (ii) such post-Closing filings as may be required under applicable
state securities laws, which will be timely filed within the applicable periods
therefor. ZD has obtained or will obtain prior to the Closing all necessary
consents, authorizations, approvals and orders, and have made all registrations,
qualifications, designations, declarations or filings with all federal, state,
or other relevant governmental authorities required on the part of ZD in
connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.

4.5 Non-Contravention. The execution, delivery of and consummation of the
transactions contemplated by this Agreement (including the transactions
contemplated by the Ancillary Agreements) do not and will not, with notice or
lapse of time or both, conflict with, or result in any breach or violation of or
constitute grounds for the occurrence of a declaration of a default or
termination of (i) any charter or other organizational documents of ZD, (ii) any
contract, agreement, undertaking, commitment or instrument to which ZD or any
Affiliate of ZD is a party or by which ZD, any Affiliate of ZD, or either of
them or their respective properties are bound or (iii) any license, judgment,
order, injunction, decree, statute, law, rule or regulation, domestic or
foreign, applicable to ZD or its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect on ZD,
or any Affiliate of ZD that provides services to or for the Company, or would
not materially impair ZD or any such Affiliate's ability to perform its
obligations contemplated by this Agreement and the Ancillary Agreements.

4.6 Consents. Except as specified in Schedule 4.6, there are no
agreements, contracts or other instruments binding upon ZD, or any Affiliate of
ZD which provides services to or for the Company, that require a Consent as a
result of the execution, delivery and performance of this Agreement or any of
the Ancillary Agreements, or the consummation of the transactions contemplated
hereby and thereby.

4.7 Compliance with Laws. ZD is not in violation of any statutes,
laws, ordinances, governmental rules or regulations or any judgment, order or
decree (federal, state, local or foreign) to which ZD is subject, nor has ZD
failed to obtain any licenses, permits, franchises or other governmental
authorization necessary to the ownership or operation of ZD's properties or the
conduct of its business as intended to be conducted, which violations or
failures would be reasonably likely to have a Material Adverse Effect on ZD.

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<PAGE>

4.8 Exclusive Vehicle. ZD and any Affiliate of ZD over which Ziff-
Davis, Inc. or ZD exercises or has the power to exercise management control
("Controlled Affiliates") do not operate a Cable or Broadcast Television Network
principally on the subject of computing or technology except through the
Company. For purposes of this Agreement, a "Cable or Broadcast Television
Network" means a business primarily focused on production and distribution of a
minimum of two (2) hours per day of linear (i.e. not on demand or random access)
video programming, which is distributed principally through cable television,
broadcast satellite or any other means by which linear television programming is
now or hereafter distributed.

4.9 Finders' Fees. Except as set forth in Schedule 4.9, there is no
investment banker, broker, finder or other intermediary that has been retained
by or is authorized to act on behalf of ZD who might be entitled to any fee or
commission upon consummation of the transactions contemplated by this Agreement
and each of the Ancillary Agreements.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to ZD that:

5.1 Organization and Standing. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of
Washington. Purchaser is duly qualified and authorized to do business and is in
good standing as a foreign corporation in all jurisdictions in which the nature
of its activities and of its properties makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
Material Adverse Effect on Purchaser.

5.2 Corporate Power and Authorization. Purchaser has all requisite
corporate power and authority to own and operate its properties and assets, to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party and to carry out the provisions of this Agreement and to carry on its
business as presently conducted. The execution, delivery and performance by
Purchaser of this Agreement and each of the Ancillary Agreements to which it is
a party, and the consummation by Purchaser of the transactions contemplated and
thereby have been duly authorized by all necessary corporate action on the part
of Purchaser. This Agreement and each of the Ancillary Agreements to which it is
a party constitute, or upon execution and delivery will constitute, valid and
binding agreements of Purchaser enforceable in accordance with their terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and (ii) as general principles of equity restrict the
availability of equitable remedies.

5.3 Governmental Authorization. The execution, delivery and
performance by Purchaser of this Agreement and each of the Ancillary Agreements
to which it is a party does not require any action by or in respect of, or
filing with, any governmental body, agency, official or authority by Purchaser,
including any filings or other requirements pursuant to the HSR Act, other than
any such action or filing the failure to obtain or complete which would not
have,

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individually or in the aggregate, a Material Adverse Effect on Purchaser
or which would not materially and adversely affect Purchaser's ability to
consummate the transactions contemplated hereby and thereby, and other than: (i)
such filings as have been made prior to the Closing; and (ii) such post-closing
filings as may be required under applicable state securities laws, which will be
timely filed within the applicable periods therefor.

5.4 Non-Contravention. The execution, delivery and performance by Purchaser
of this Agreement and each of the Ancillary Agreements to which it is a party do
not and will not (i) contravene or conflict with the organizational documents of
Purchaser, and (ii) assuming compliance with the matters referred to in Section
5.3, contravene or conflict with or constitute a material violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Purchaser, which violation would have a Material Adverse
Effect on Purchaser.

5.5 Consents. There are no agreements, contracts or other instruments
binding upon Purchaser which require a Consent as a result of the execution,
delivery and performance of this Agreement or any of the Ancillary Agreements,
or the consummation of the transactions contemplated hereby and thereby.

5.6 Finders' Fees. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Purchaser who might be entitled to any fee or commission upon consummation of
the transactions contemplated by this Agreement and each of the Ancillary
Agreements.

5.7 Investment Representations. Purchaser understands that the ZD Units
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser also understands that the Units are being offered
and sold pursuant to an exemption from registration contained in the Securities
Act based in part upon Purchaser's representations contained in this Agreement.
Purchaser hereby represents and warrants as of the date hereof and as of the
Closing Date as follows:

(a) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.

(b) Purchaser Bears Economic Risk. Purchaser must bear the economic
risk of this investment indefinitely unless the Units are registered pursuant to
the Securities Act, or an exemption from registration is available. Purchaser
understands that Company has no present intention of registering the Units.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Units or under the circumstances, in the amounts or at the times
Purchaser might propose.

(c) Acquisition for Own Account. Purchaser is acquiring the Units for
Purchaser's own account for investment only, and not with a view towards their
distribution.

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(d) Investment Experience. Purchaser represents that by reason of
its, or of its management's, business or financial experience, Purchaser has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement.

(e) Receipt of Company Information. Purchaser has had an opportunity
to discuss Company's business, management and financial affairs with directors,
officers and management of Company and has had the opportunity to review
Company's operations and facilities and has received all of the information it
has requested. Purchaser has also had the opportunity to ask questions of and
receive answers from, Company and its management regarding the terms and
conditions of this investment.

(f) Restricted Securities. Purchaser acknowledges and agrees that the
ZD Units acquired hereby must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.

(h) Notwithstanding anything to the contrary contained herein, nothing
in this Section 5.7 shall be deemed to constitute a waiver of the rights
hereunder by or on behalf of Purchaser, including, without limitation, any
rights to indemnification based on the representations and warranties set forth
in this Agreement or any Ancillary Agreement. The validity of the
representations and warranties shall not be affected by any investigation made
by or on behalf of Purchaser.

ARTICLE 6

COVENANTS

The parties agree that:

6.1 Further Efforts. Subject to the terms and conditions of this
Agreement, each party will use commercially reasonable efforts to take, or cause
to be taken, all actions, by such party or Company, and to do, or cause to be
done, by such party or Company, all things necessary or desirable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements. The parties each agree to execute
and deliver such other documents, certificates, agreements and other writings,
and to cause Company to execute and deliver such other documents, certificates,
agreements and other writings, and to take such other actions, by such party or
Company, as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement and the Ancillary
Agreements.

6.2 Certain Filings. The parties shall cooperate with one another (a)
in determining whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements and (b) in taking
such actions or making any such filings, in furnishing such information as may
be required in connection therewith, and in seeking timely to obtain any such
actions, consents, approvals or waivers.

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<PAGE>

6.3 Public Announcements. The parties agree not to issue any press
release or make any public statement with respect to this Agreement and the
Ancillary Agreements or the transactions contemplated hereby and thereby, and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement, in each case without the other party's prior consent.

6.4 Confidentiality. Purchaser and ZD shall hold in strict confidence, and
shall cause each of its Associates to hold in strict confidence, all documents
and information obtained with respect to ZD, Company and ZD's other Associates
and Purchaser and its Associates, respectively. Neither party shall permit any
of such documents or information to be improperly utilized or to be disclosed or
conveyed to any other Person. Without limited the generality of the foregoing,
neither party shall disclose to any Person, and shall not permit any of its
Associates to disclose to any Person, the existence of this Agreement or any of
the terms or provisions hereof, except as may be required by law or pursuant to
any necessary governmental filings including but not limited to any filing under
the HSR Act.

6.5 Sky TV Guaranty. Purchaser confirms and acknowledges that the rights
and obligations relating to the Sky TV Agreement are the rights and obligations
of the Company. ZD represents and warrants that the Sky TV Agreement is in full
force and effect, Company is in material compliance with its obligations
thereunder and, except as set forth in Schedule 3.17 hereto, there exists no
fact or circumstance known to ZD or Company which, with the passage of time or
the giving of notice or both, would constitute a material default or breach by
ZD under the Sky TV Agreement. ZD covenants that it shall cause Company to
perform all obligations pursuant to the Sky TV Agreement through the Closing
Date. Effective as of the Closing Date, Purchaser shall assume all rights and
obligations of ZD under the Sky TV Guaranty.

6.6 DirecTV Obligations. On the Closing Date, ZD shall assign and
Purchaser shall assume, or will cause an Affiliate to assume, all rights and
obligations of ZD under the DirecTV Option, DirecTV Consulting Agreement and the
ZD MFN Letter. On the Closing Date, ZD shall assign and Purchaser shall cause
Company to assume all of the rights and obligations of ZD under the DirecTV
Licenses and Services Agreement. ZD represents and warrants that each of the
DirecTV Option, the DirecTV Consulting Agreement and the DirecTV License and
Services Agreement is in full force and effect, ZD is in material compliance
with its obligations thereunder and there exists no fact or circumstance known
to ZD which, with the passage of time or the giving of notice or both, would
constitute a material default or breach by ZD under any of the DirecTV Option,
the DirecTV Consulting Agreement or the DirecTV License and Services Agreement.
ZD covenants that it shall comply with all obligations under each of the DirecTV
Option, the DirecTV Consulting Agreement and the DirecTV License and Services
Agreement until the Closing Date. As of the Closing Date, Purchaser will
indemnify ZD from any liabilities or obligations arising pursuant to the DirecTV
Option, the DirecTV Consulting Agreement and the DirecTV License and Services
Agreement.

6.7 Lease Agreements. On the Closing Date, ZD and Purchaser shall enter
into the Lease Agreements; provided however, that the Lease Agreements relating
to those Real Property Leases which are not set forth on Schedule 7.1 (the "Post
Closing Leases") shall not be effective until Consent of the Landlord is
received as set forth in this paragraph. Purchaser

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<PAGE>

agrees that it or a bank reasonably acceptable to ZD shall provide a guaranty
for the obligations of Company under the lease for the premises located at 650
Townsend Street and any other such guaranties for the obligations of Company
under the other Real Property Leases listed as Principal Real Property Leases
set forth on Schedule 3.6(b), as is reasonably necessary to obtain the Consents
of the applicable Landlords. ZD agrees that it shall obtain Consents for the
Post Closing Leases as soon as reasonably possible following the Closing. Until
such Consents are received, ZD will sublease the Post Closing Leases to Company
pursuant to the terms and conditions of the Amended Services Agreement. ZD
represents and warrants that the failure to obtain the Consents prior to Closing
for the Post Closing Leases will not have a Material Adverse Effect on Company.
ZD covenants that until the earlier of the time when the Consents for the Post
Closing Leases are obtained and the termination of the Amended Services
Agreement, ZD shall comply with its obligations under each of the Post Closing
Leases. As of the effective date of each Lease Agreement, Purchaser will
indemnify ZD from any liabilities or obligations arising pursuant Real Property
Leases assigned or subleased, as the case may be, pursuant to the Lease
Agreements.

6.8 Transponder Lease. At Closing, Purchaser shall provide a letter of
credit sufficient to replace and release, effective as of the Closing Date, the
letter of credit of Softbank Holdings, Inc. with regard to the Transponder
Lease.

6.9 GE Master Lease. At Closing, ZD and Purchaser or Company as is
acceptable to GECC shall enter into the GE Master Lease Assignment with respect
to the GE Master Lease, which shall not be effective until the Consent of
General Electric Capital Corporation is received as set forth in this paragraph.
Purchaser agrees that it or a bank reasonably acceptable to ZD shall provide a
guaranty for the obligations of Company under the GE Master Lease. ZD agrees
that it shall obtain the Consent for the GE Master Lease as soon as reasonably
possible. Until such Consent is received, ZD will provide services relating to
the GE Master Lease pursuant to the terms and conditions of the Amended Services
Agreement. ZD represents and warrants that the failure to obtain the Consent for
the GE Master Lease prior to Closing will not have a Material Adverse Effect on
Company. ZD covenants that until the earlier of the time when the Consent for
the GE Master Lease is obtained or through the termination of the Amended
Services Agreement, ZD shall comply with its obligations under the GE Master
Lease. As of the effective date of the GE Master Lease Assignment, Purchaser
will indemnify ZD from any liabilities or obligations arising pursuant to the GE
Master Lease assigned pursuant to such assignment.

6.10 Retirement and Flexible Spending Plan Accounts. If Company
establishes a tax qualified defined contribution plan (the "Company Retirement
Plan"), Purchaser shall arrange for the transfer of retirement plan accounts
from the tax-qualified defined contribution plan maintained by ZD or its
Affiliates ("ZD Plan") as follows: the account balances under the ZD Plan of
all current and former employees of Company, (i) if not forfeited under the
terms of the ZD Plan prior to the Closing Date, shall become one hundred percent
(100%) vested and non-forfeitable upon the Closing Date, and (ii) shall be
transferred to the Company Retirement Plan in a so-called "trust-to-trust"
transfer satisfying the applicable requirements of Section 414(l) of the Code.
If Purchaser or Company establishes after the Closing Date a flexible

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<PAGE>

spending plan providing for health care reimbursement accounts and dependent
care assistance accounts (the "Company Flexible Spending Plan"), ZD shall
transfer to Purchaser or Company a cash amount equal to the balance in ZD's
flexible spending plan of the health care reimbursement accounts and dependent
care assistance accounts of the employees who participate in the Company
Flexible Spending Plan.

6.11 Wangberg Rights. At Closing, Purchaser assumes the obligations of ZD
pursuant to the Guaranty by ZD of the Employment Agreement between Larry
Wangberg and Company dated as of May 1, 1998. Simultaneously with the execution
of this Agreement, Purchaser and Wangberg shall execute the Wangberg Letter
Agreement.

6.12 Access.

(a) Between the Effective Date and the Closing Date, ZD and Company
shall afford Purchaser full and free access, at all reasonable times during
normal business hours, to the personnel, premises, properties, applicable
contracts, books and records, and other documents and data of the Company as
Purchaser may reasonably request. All requests for information made pursuant to
this Section 6.12(a) shall be directed to an executive officer of ZD.

(b) Following the Closing, Purchaser shall retain, and cause the
Company to retain, all books and records relating to the conduct of the
Company's business prior to the Closing Date for a period of at least six (6)
years from the Effective Date. Purchaser shall, and shall cause the Company to
(i) afford ZD reasonable access, upon reasonable notice at mutually agreeable
times during normal business hours, to such personnel, premises, properties,
applicable contracts, books and records, and other documents and data of the
Company as ZD shall reasonably request, (ii) furnish ZD with copies of all such
applicable contracts, books and records, and other existing documents and data
as ZD may reasonably request, and (iii) furnish ZD with such additional
financial, operating, and other data and information as ZD may reasonably
request in order to prepare its financial statements, tax returns and other
documents and reports ZD or any of its Affiliates are required to file with
governmental entities. All requests for information made pursuant to this
Section 6.12(b) shall be directed to an executive officer of Purchaser.

6.13 Intercompany Programs. Prior to the Closing, ZD has proposed or
agreed upon transactions with third parties whereby ZD has offered to them the
Company's services bundled with other products of ZD and its other businesses.
Commencing on the Closing Date and continuing for a period of up to one (1) year
following the Closing Date ("Intercompany Transition Period"), Purchaser shall
cause the Company to provide the Company's services to such third parties in
substantially the same manner as such services were provided by the Company
immediately prior to the Closing. ZD shall allocate to the Company the revenue
and costs arising from such transactions in the same manner as such revenue and
costs were allocated to the Company immediately prior to the Closing. Within
thirty (30) days of receipt of payments in connection with such transactions, ZD
shall deliver to the Company its allocated revenue, less costs, arising from
such transactions.

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<PAGE>

6.14 Tax Matters.

(a) Section 754 Elections; Allocation of Purchase Price. To the
extent not already in effect, the Company shall timely file an election under
Section 754 of the Code so that it shall be able to adjust the tax basis of its
assets (collectively, the "Partnership Assets") under Section 743(b) of the code
as a result of the transactions contemplated herein. The aggregate amount of
the Purchase Price shall be allocated among the Partnership Assets in an
allocation agreement (the "Allocation Agreement") to be prepared in accordance
with the rules under Sections 743(b), 751, 755 and 1060 of the Code. Purchaser
shall deliver a draft of the Allocation Agreement to ZD as soon as reasonably
practicable after the Closing Date for ZD's review and consent, which consent
shall not be unreasonably withheld. Neither Purchaser nor the Company shall
unreasonably withhold its approval and consent with respect to the Allocation
Agreement. Unless otherwise required by applicable law, Purchaser, ZD and the
Company agree to act, and cause their respective affiliates to act, in
accordance with the computations and allocations contained in the Allocation
Agreement in any relevant Tax Returns or similar filings (including any forms or
reports required to be filed pursuant to Section 1060 of the Code ("1060
Forms")), to cooperate in the preparation of any 1060 Forms, to file such 1060
Forms in the manner required by applicable law and to not take any position
inconsistent with such Allocation Agreement upon examination of any tax refund
or refund claim, in any litigation or otherwise.

(b) From and after the date of this Agreement, the Company shall not
without the prior written consent of the Purchaser (which consent shall not be
unreasonably withheld) make, or cause or permit to be made, any Tax election
that would adversely affect Purchaser in any material respect.

6.15 Course of Business. From the date hereof through the Closing, ZD
agrees that until the Closing, unless Purchaser otherwise consents in writing or
except as specifically contemplated hereunder or under the Ancillary Agreements,
ZD will conduct the business of Company so far as reasonably in its control only
in the ordinary and usual course consistent with past practice, and shall not
permit Company to: (i) enter into, extend, materially modify, terminate or
renew any Material Contract, except in the ordinary course of business; (ii)
sell, assign, transfer, convey, lease mortgage, pledge or otherwise dispose of
any assets, except assets consumed or disposed of in the ordinary course of
business; (iii) create, assume or permit to exist any encumbrance upon the
assets of Company, other than the encumbrance disclosed in Schedule 3.6(a); (iv)
to incur any indebtedness for borrowed money, except in the ordinary course of
business; (v) increase annually recurring compensation by more than 5%, on
average for Company's employees, except for customary merit or time-in-grade
increase for qualifying employees or otherwise in accordance with Company's
employees policies; (vi) waive any material rights of Company; or (vii) enter
into any new business arrangement or business relationship with any ZD or any ZD
Affiliate or modify or revise or alter any existing such arrangement or
relationship if it would have a material adverse effect on Company.

6.16 Guaranty of Purchaser's Obligations. Paul G. Allen or an Affiliate of
the Purchaser acceptable to ZD shall guaranty the obligations of Purchaser
pursuant to this Agreement and the Ancillary Agreements as of the Closing Date.

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<PAGE>

ARTICLE 7

CONDITIONS TO CLOSING

7.1 Conditions to Obligation of Purchaser. The obligation of Purchaser to
consummate the Closing is subject to the satisfaction of the following further
conditions:

(a) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.

(b) ZD shall have executed and delivered each of the Ancillary
Agreements to be executed and delivered by it, in each case substantially in the
form previously delivered and agreed to by the parties thereto.

(c) ZD shall have received the Consents set forth on Schedule 7.1, and
all such Consents shall be in full force and effect on and as of the Closing
Date, provided, however, that the failure to obtain any other Consents would not
have a Material Adverse Effect on ZD or Company or adversely and materially
affect any party's ability to consummate the transaction contemplated hereby.

(d) The representations, warranties and covenants of ZD contained in
Sections 3, 4 and 6 of this Agreement shall be accurate in all material respects
as of the date hereof and as of the Closing Date, except to the extent that any
of such representations and warranties refers specifically to a date other than
the Closing Date.

(e) ZD shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date.

(f) There shall have been no Material Adverse Effect on Company.

(g) Purchaser shall have received an opinion of Cooley Godward LLP,
counsel to Company, dated the Closing Date in substantially the form attached
hereto as Exhibit E. In rendering such opinion, such counsel may rely upon
certificates of public officers, as to matters governed by other than the
federal laws of the United States of America, the laws of the state of
California and the Delaware Limited Liability Company Act, upon opinions of
counsel reasonably satisfactory to Purchaser, copies of which shall be
contemporaneously delivered to Purchaser, and as to matters of fact, upon
certificates of officers of ZD and Company.

(h) Purchaser shall have received an opinion of the General Counsel of
ZD, dated the Closing Date in substantially the form attached hereto as Exhibit
F.

(i) Purchaser shall have received a certificate signed by the Chief
Executive Officer or Chief Financial Officer of ZD attesting to the satisfaction
of the conditions contained in Sections 7.1(c), (d), (e) and (f).

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<PAGE>

(j) ZD shall have obtained the resignations of or shall have otherwise
removed the individuals listed on Schedule 3.3 subsection (2)A.

(k) Purchaser shall have received all documents it may reasonably
request relating to the authority of ZD to enter into and perform this
Agreement, all in form and substance reasonably satisfactory to Purchaser.

(l) All actions, proceedings, instruments and documents required to
carry out this Agreement shall be reasonably satisfactory in form and substance
to counsel for Purchaser.

(m) ZD shall furnish Purchaser with an affidavit that satisfies the
requirements of Section 1445(b)(2) of the Code.

7.2 Conditions to Obligations of ZD. The obligation of ZD to consummate the
Closing is subject to the satisfaction of the following further conditions:

(a) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.

(b) Purchaser and Company shall have executed and delivered each of
the Ancillary Agreements to be executed by it, in each case substantially in the
form previously delivered and agreed to by the parties thereto.

(c) The representations, warranties and covenants of Purchaser
contained in this Agreement shall be true in all material respects, in each case
as of the date hereof and as of the Closing Date.

(d) Purchaser shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date.

(e) Purchaser shall have provided the guaranty referred in Section
6.15.

(f) ZD shall have received all documents they may reasonably request
relating to the authority of Purchaser to enter into and perform this Agreement,
all in form and substance reasonably satisfactory to Company.

(g) All actions, proceedings, instruments and documents required to carry out
this Agreement shall be reasonably satisfactory in form and substance to
counsel for ZD.

ARTICLE 8

TERMINATION OF AGREEMENT

8.1 Right to Terminate Agreement. This Agreement may be terminated prior to
the Closing:

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<PAGE>

(a) By the mutual agreement of ZD and Purchaser;

(b) By Purchaser at any time after the Scheduled Closing Time, if any
condition set forth in Section 7.1 shall not have been satisfied or waived; or

(c) By ZD at any time after the Scheduled Closing Time, if any
condition set forth in Section 7.2 shall not have been satisfied or waived.

8.2 Effect of Termination. Upon the termination of this Agreement pursuant
to Section 8.1:

(a) Purchaser shall promptly cause to be returned to ZD and ZD's
Associates all documents and information obtained in connection with this
Agreement and the transactions contemplated by this Agreement and all documents
and information obtained in connection with Purchaser's investigation of the
Company's business, operations and legal affairs, including any copies made by
Purchaser or any of Purchaser's Associates of any such documents or information;
and

(b) Neither party hereto shall have any obligation or liability to the
other party hereto, except that Purchaser shall remain bound by the provisions
of Sections 6.4, 8.2, 11.3 and 11.5.

ARTICLE 9

BINDING ARBITRATION OF DISPUTES

9.1 Binding Arbitration. Any dispute, claim or controversy of whatever
nature arising out of or relating to this Agreement (including any other
agreement(s) contemplated hereunder), including, without limitation, any action
or claim based on tort, contract, or statute, or concerning the interpretation,
effect, termination, validity, performance and/or breach of this Agreement,
shall be resolved by final and binding arbitration administered by the San
Francisco County office of the American Arbitration Association (the
"Administrator").

9.2 Initiation. Arbitration shall be initiated in the following manner:

(a) Timing. Unless barred by an applicable statute or period of
limitations, either party may initiate an arbitration at any time after a
dispute has arisen by serving upon the other party and filing with the
Administrator a written demand for arbitration, including a general description
of the nature of the claim and the nature and amount of damages and/or other
relief sought (the "Demand for Arbitration"). A claim shall be forever barred
if on the date the Demand for Arbitration is filed with the Administrator, the
claim, if asserted in a civil action, would be barred under law by an applicable
statute or period of limitations.

(b) Response. If the responding party desires to file a response
and/or counterclaim to the Demand for Arbitration, it must do so within twenty
(20) calendar days after service of the Demand for Arbitration. Any response to
a counterclaim shall be filed and served

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<PAGE>

within ten (10) calendar days after service of the counterclaim, but no such
response shall be required. A failure to file a counterclaim or response will
not operate to delay the arbitration proceedings.

(c) Further Pleadings. After the filing of the Demand for
Arbitration, any counterclaim, and/or any responses thereto, no further claims
or counterclaims may be made except by order of the arbitrator made on a duly
noticed motion to the arbitrator.

9.3 Appointment and Powers of Arbitrator. The dispute shall be submitted to
a single arbitrator chosen by the parties from a list of potential arbitrators
provided by the Administrator. The parties shall use their best efforts to cause
the Administrator to provide such list to the parties within fifteen (15) days
after the Demand for Arbitration is filed. Should the parties be unable to agree
on a choice of arbitrator within ten (10) days after receipt of the list from
the Administrator, then either party may request the Administrator to furnish a
list of three names and each side may strike one name, thereby nominating the
remaining person as the arbitrator. If more than one name remains, the
Administrator shall choose an arbitrator from the list of remaining names. If
the designated arbitrator shall die, become incapable of, unwilling to, or
unable to serve or proceed with the arbitration, the Administrator shall appoint
a replacement arbitrator, and such replacement arbitrator shall have all such
powers as if he or she had been originally appointed as the arbitrator. Should
either party refuse or neglect, after reasonable notice, to furnish the
arbitrator with any papers or information demanded or to attend hearings before
the arbitrator, the arbitrator is empowered by both parties to proceed with the
remainder of the arbitration process set forth in this Article 9. The arbitrator
is authorized to issue an award for compensatory damages, and/or to grant any
equitable remedy or relief he or she deems just and equitable and within the
scope of the Agreement of the parties, including, but not limited to, an
injunction or order for specific performance. The arbitrator shall not have the
authority to award punitive damages.

9.4 Costs and Fees. The arbitrator, in his or her discretion, shall be
authorized to determine whether a party is the prevailing party, and if so, to
award to that prevailing party reimbursement for its share of the costs and fees
of the Administrator and the arbitrator, and reimbursement for its reasonable
attorneys' fees, disbursements (including, for example, expert witness fees and
expenses, photocopy charges, travel expenses, etc.), and costs arising from the
arbitration. However, until any such order is issued, the parties shall bear
equally the costs and fees of the Administrator and the arbitrator.

9.5 Discovery. The parties shall be entitled to conduct discovery
proceedings in accordance with the provisions of California Code of Civil
Procedure (S)1283.05.

9.6 Location and Date of Arbitration Hearing. The arbitration shall be held
in San Francisco County, California, and shall commence no later than sixty (60)
days following the service of the Demand For Arbitration, or as soon thereafter
as practicable.

9.7 Pre-Hearing Conferences. Within thirty (30) days of the time that the
arbitrator is chosen, the arbitrator shall hold a Pre-Hearing Conference with
the parties for the purpose of

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<PAGE>

narrowing the issues and in all respects arranging for the most expeditious
hearing possible of the matters in dispute.

9.8 Conduct of the Arbitration Hearing. The arbitration hearing shall be
conducted according to the discretion of the arbitrator. Judicial rules relating
to the order of proof, the conduct of the hearing and the presentation and
admissibility of evidence need not be followed. Any relevant information,
including hearsay, may be admitted by the arbitrator regardless of its
admissibility as evidence in court, but the arbitrator also shall be authorized
to exclude evidence.

9.9 Burden of Proof; Basis of Decision. For any claim submitted to
arbitration, the burden of proof shall be as if the claim were litigated in a
judicial proceeding, and the decision shall be based on the application of
California law (as determined from statutes, court decisions, and other
recognized authorities) to the facts bound by the arbitrators.

9.10 Award. The Arbitrator shall, within fifteen (15) calendar days after
the conclusion of the Arbitration hearing, or as soon as it is practicable issue
a written award and a brief written statement of decision describing the reasons
for the award, including the calculation of any compensatory damages awarded.

9.11 Survival. Notwithstanding Section 9.10, the provisions in this Article
9 shall survive and apply in all events, including, without limitation, after
the breach, repudiation and/or termination of this Agreement.

9.12 Finality of Award. The award of the arbitrator shall be final and
binding upon the parties without appeal or review except as permitted by
California law. Any party may apply to any court of competent jurisdiction for
confirmation and entry of judgment based on said award. In connection with any
application to confirm, correct or vacate the arbitration award, any appeal of
any order rendered pursuant to any such application, or any other action
required to enforce the arbitration award, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, disbursements and costs
incurred in such post-arbitration award activities.

ARTICLE 10

INDEMNIFICATION AND RELATED MATTERS

10.1 Indemnification by ZD. Subject to the limitations set forth in this
Section 10 and elsewhere in this Agreement, ZD shall indemnify Purchaser against
any Damages of Purchaser arising from any breach by ZD of any representation,
warranty, or covenant or agreement of ZD set forth in this Agreement or the
Ancillary Agreements. Notwithstanding anything to the contrary contained in this
Agreement, in the event that the merger of ZD Television Productions, Inc. into
the Company pursuant to an Agreement of Merger entered into as of December 11,
1998, between the Company and ZD Television Productions, Inc. is determined not
to qualify as a tax free event as defined under the relevant sections of
Subchapter C of the Code, any tax liability arising from such determination and
accruing to the Company

28
<PAGE>

shall be the exclusive obligation of ZD, and to the extent, if any, Purchaser is
required to directly or indirectly contribute to the payment of such liability,
ZD shall indemnify Purchaser and the indemnification provisions of Section 10.1
shall apply.

10.2 Indemnification by Purchaser. Subject to the limitations set forth in
this Section 10 and elsewhere in this Agreement, Purchaser shall indemnify ZD
against any Damages of ZD arising from any breach by Purchaser of any
representation, warranty, or covenant or agreement of Purchaser set forth in
this Agreement or the Ancillary Agreements.

10.3 Allocation. The amount to be indemnified with respect to any claims
for Damages properly allocable to the Company attributable to events occurring
after February 5, 1999 and prior to Closing, shall be reduced by the amount, if
any, that would have been allocated by the Company to the Indemnitee, based on
its ownership of the Company as of the Effective Date.

10.4 Deductible Amount. Without limiting the effect of any of the other
limitations set forth herein, a party shall not be required to make any
indemnification payment hereunder with respect to any breach of any of its
representations and warranties, except to the extent that the cumulative amount
of the Damages actually incurred by the damaged party as a direct result of all
such breaches of such representations and warranties actually exceeds the
Deductible Amount; and such party shall only be required to pay, and shall only
be liable for, the amount by which the cumulative amount of the Damages actually
incurred by the damaged party as a direct result of all such breaches of such
representations and warranties actually exceeds the Deductible Amount. The
"Deductible Amount" shall be $1,000,000.

10.5 Maximum Liability. The total amount of the payments that a party
can be required to make under or in connection with this Agreement (including
all indemnification payments required to be made pursuant to this Section 10)
shall be limited in the aggregate to a maximum of the Purchase Price, and each
party's cumulative liability shall in no event exceed such amount.

10.6 Knowledge of Breach. For purposes of this Section 10, ZD shall
not be deemed to have breached any representation or warranty if Purchaser had,
on or prior to the Closing Date, any knowledge of the breach of, or of any facts
or circumstances constituting or resulting in a breach of, such representation
or warranty.

10.7 No Implied Representations. Purchaser and ZD acknowledge that,
except as expressly provided in Sections 3, 4, 5 and 6, neither party hereto,
and none of the Associates of either party hereto, has made or is making any
representations or warranties whatsoever, implied or otherwise.

10.8 Indemnification Claims. If either party hereto (the "Claimant")
wishes to assert an indemnification claim against the other party hereto, the
Claimant shall deliver to the other party a written notice (a "Claim Notice")
setting forth:

29
<PAGE>

(a) the specific representation, warranty, covenant or agreement
alleged to have been breached by such other party;

(b) a detailed description of the facts and circumstances giving rise
to the alleged breach of such representation, warranty, covenant or agreement;
and

(c) a detailed description of, and a reasonable estimate of the total
amount of, the Damages actually incurred or expected to be incurred by the
Claimant as a direct result of such alleged breach if such determination is
reasonably estimated at the time of such notice.

10.9 Defense of Third Party Actions. If either party hereto (the
"Indemnitee") receives notice or otherwise obtains knowledge of any Matter or
any threatened Matter that may give rise to an indemnification claim against the
other party hereto (the "Indemnifying Party"), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice describing such
Matter in reasonable detail; provided, however, that for the sole purpose of
determining whether a Matter or threatened Matter may give rise to an
indemnification claim within the meaning of this sentence, the limitation set
forth in Section 10.3 shall not be taken into account. Delay or failure to so
notify the Indemnitee shall relieve the Indemnifying Party of its obligations to
the extent, if at all, that it is prejudiced by reason of such delay or failure.
The Indemnifying Party shall have the right, at its option, to assume the
defense of any such Matter with counsel which is reasonably satisfactory to the
Indemnitee. If the Indemnifying Party elects to assume the defense of any such
Matter, then:

(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnitee against any attorneys' fees or other expenses incurred
on behalf of the Indemnitee in connection with such Matter following the
Indemnifying Party's election to assume the defense of such Matter unless the
interests of the Indemnifying Party and the Indemnitee conflict in such a manner
and to the extent to require, consistent with applicable standards of
professional conduct, the retention of separate counsel for the Indemnitee in
which case, the Indemnifying Party shall pay for one separate counsel chosen by
the Indemnitee;

(b) the Indemnitee shall make available to the Indemnifying Party all
books, records and other documents and materials that are under the direct or
indirect control of the Indemnitee and that are reasonably necessary or
desirable for the defense of such Matter;

(e) the Indemnifying Party shall have the exclusive right to settle,
adjust or compromise such Matter, on such terms as it may deem appropriate,
without the consent or approval of the Indemnitee or any other Person, provided
that the Indemnifying Party will not have the right, without the written consent
of the Indemnitee, to settle any such claim, if such settlement (i) arises from
or is part of any criminal action, suit or proceeding, (ii) contains a
stipulation to, confession of judgment with respect to, or admission or
acknowledgement of any liability or wrongdoing on the part of the Indemnified
Party, (iii) relates to any federal, state or

30
<PAGE>

local tax matters or (iv) provides for injunctive relief or relief other than
damages, which is binding in the Indemnitee.

If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel reasonably satisfactory to the Indemnifying Party;
provided, however, that the Indemnitee shall not settle, adjust or compromise
such Matter, or admit any liability with respect to such Matter, without the
prior written consent of the Indemnifying Party.

10.10 Subrogation. To the extent that either party hereto (the
"Indemnitor") makes or is required to make any indemnification payment to the
other party hereto (the "Indemnified Party"), the Indemnitor shall be entitled
to exercise, and shall be subrogated to, any rights and remedies (including
rights of indemnity, rights of contribution and other rights of recovery) that
the Indemnified Party or any of the Indemnified Party's Associates may have
against any other Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly related; provided,
however, that the Indemnifying Party shall not have any rights of subrogation
with respect to the other party hereto or any of its Affiliates or any of its or
its Affiliates' officers, directors, agents or employees. The Indemnified Party
shall take such actions as the Indemnitor may reasonably request for the purpose
of enabling the Indemnitor to perfect or exercise the Indemnitor's right of
subrogation hereunder.

10.11 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Section 10 shall be the sole and exclusive right and remedy exercisable by such
party with respect to any breach by the other party hereto of any
representation, warranty or covenant.

ARTICLE 11

MISCELLANEOUS

11.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,

if to Purchaser, to:

Vulcan Programming Inc.
110 110th Avenue, N.E., Suite 550
Bellevue, WA 98004
Attention: William Savoy
Telecopy: (425) 453-1985

with a copy to:

31
<PAGE>

Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attention: Alvin G. Segel
Telecopy: (310) 203-7199

If to ZD Inc., a ZD, to:

ZD Inc.
28 East 28th Street
New York, NY 10016
Attention: Legal Department
Telecopy: (212) 503-3581

With a copy to:

Cooley Godward llp
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Patrick A. Pohlen, Esq.
Telecopy: (650) 849-7400

Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effective (i) if
personally delivered, at the time delivered by hand, (ii) if delivered by
facsimile transmission, upon confirmation of transmission, (iii) if by courier,
on the business day such courier guarantees delivery, and (iv) if delivered by
first class U.S. Mail, seven business days after deposit in the U.S. Mail,
postage prepaid.

11.2 Amendments and Waivers.

(a) Any provisions of this Agreement may be amended or waived prior to
the Closing Date if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and ZD, or in the case of a
waiver, by the party against whom the waiver is to be effective.

(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.

11.3 Expenses . Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.

32
<PAGE>

11.4 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns.

11.5 Further Assurances. After the Closing, the parties shall take any
actions and execute any other documents that may be necessary or desirable to
the implementation and consummation of this Agreement and the transactions
contemplated hereby upon the reasonable request of any other party.

11.6 Governing Law. This Agreement shall be governed in all respects by
the laws of the United States of America and by the laws of the State of
California, excluding its conflict of law provisions.

11.7 Counterparts; Effectiveness . This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.

11.8 Entire Agreement . This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter hereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein or therein has been made or relied upon by either party hereto.
Neither this Agreement nor any provision hereof or thereof, is intended to
confer upon any person other than the parties hereto rights or remedies
hereunder or thereunder.

11.9 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

11.10 Headings; Pronouns. The section headings used in this Agreement are
for convenience of reference only and are not to be considered in construing or
interpreting this Agreement. All pronouns contained herein and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the parties hereto may require.

11.11 Expiration of Representations, Warranties, Covenants and the Selected
Prior Agreements .

(a) The covenants set forth in the Selected Prior Agreements shall
terminate and expire, and shall cease to be of any further force and effect on
the Closing Date, and all liability of the parties hereto with respect to such
covenants shall thereupon be extinguished. All of the representations and
warranties of ZD and Purchaser and each party's Affiliates set forth in this
Agreement and the Selected Prior Agreements shall terminate and expire, and
shall cease to

33
<PAGE>

be of any further force or effect, at 9:00 a.m. on the date sixty (60) days
after the Closing Date; provided however, that with respect to:

(A) this Agreement (i) the representations and warranties set forth in
Section 4.2 shall survive indefinitely, (ii) the representations and warranties
set forth in Sections 3.12, 3.15 and 3.16 and any actions for fraud or other
willful misconduct shall survive for the applicable statute of limitations
period and (iii) the representations and warranties set forth in Sections 3.4
and 3.5 shall survive until April 30, 2000, and

(B) the Unit Purchase Agreement, dated February 5, 1999 among the
parties and Company (i) the representations and warranties set forth in
Sections 3.14, 3.17 and 3.18 and any actions for fraud or other willful
misconduct shall survive the applicable statute of limitations period and (ii)
the representations and warranties set forth in Sections 3.5 and 3.6 shall
survive until April 30, 2000, provided, however, that the indemnification and
arbitration provisions of this Agreement shall apply to any Damages related to
the foregoing representations and warranties.

Upon termination of the applicable time periods specified above, all
liability of ZD and Purchaser and each party's Affiliates with respect to such
representations and warranties shall thereupon be extinguished; provided
however, that if, prior to such date, a party shall have duly delivered a Claim
Notice to the other party as provided in Section 10, then the specific
indemnification claim set forth in such notice shall survive such date.

(b) Notwithstanding anything to the contrary contained in this Section
11.11, in the event that the merger of ZD Television Productions, Inc. into the
Company pursuant to an Agreement of Merger entered into as of December 11, 1998,
between the Company and ZD Television Productions, Inc. is determined not to
qualify as a tax free event as defined under the relevant sections of Subchapter
C of the Code, any tax liability arising from such determination and accruing to
the Company shall be the exclusive obligation of ZD, and to the extent, if any,
Purchaser is required to directly or indirectly contribute to the payment of
such liability, ZD shall indemnify Purchaser and the indemnification provisions
of Section 8.11(a) of the Unit Purchase Agreement, dated as of February 5, 1999
shall apply.

(c) Notwithstanding anything to the contrary contained in this Section
11.11, in the event Damages to the Company or the Purchaser arise relating to
the litigation matter described in Schedule 3.17, ZD shall indemnify Purchaser
for the amount of such Damages that would have been allocable to ZD based on
ZD's ownership interest in Company as of the Effective Date.

34
<PAGE>

In Witness Whereof, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

Purchaser: Vulcan Programming Inc.

By: /s/ WILLIAM SAVOY
----------------------
Name: William Savoy
Title: President

ZD: ZD Inc.

By: /s/ DARYL R. OTTE
----------------------
Name: Daryl R. Otte
Title: Senior Vice President
of Development and
Planning

<PAGE>

Exhibit 2.4

===============================================================================

PURCHASE AGREEMENT

among

ZD INC.,

ZD HOLDINGS (EUROPE) LTD.

and

WS-ZD Acquisition, Inc.

Dated as of December 6, 1999

===============================================================================
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
Page

<S> <C>
ARTICLE I DEFINITIONS...........................................................................................2
- ---------

SECTION 1.1 DEFINIT.........................................................................................2

ARTICLE II SALE AND PURCHASE OF ASSETS AND SHARES...............................................................5
- ----------

SECTION 2.1 SALE AND PURCHASE OF ASSETS.....................................................................5
SECTION 2.2 SALE AND PURCHASE OF SHARES.....................................................................6
SECTION 2.3 EXCLUDED ASSETS.................................................................................6
SECTION 2.4 ASSUMPTION OF LIABILITIES.......................................................................8
SECTION 2.5 PURCHASE PRICES................................................................................10
SECTION 2.6 PAYMENT OF PURCHASE PRICE......................................................................12
SECTION 2.7 THE CLOSING....................................................................................13
SECTION 2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENTS........................................................13
SECTION 2.9 CERTAIN EUROPEAN RESTRUCTURING MATTERS.........................................................15

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS..........................................................16
- -----------

SECTION 3.1 ORGANIZATION AND GOOD STANDING.................................................................16
SECTION 3.2 CAPITALIZATION.................................................................................16
SECTION 3.3 CORPORATE AUTHORITY............................................................................17
SECTION 3.4 CONSENTS AND APPROVALS.........................................................................17
SECTION 3.5 NO VIOLATIONS..................................................................................17
SECTION 3.6 FINANCIAL STATEMENTS...........................................................................18
SECTION 3.7 ABSENCE OF CERTAIN CHANGES AND EVENTS..........................................................18
SECTION 3.8 LITIGATION; ORDERS.............................................................................20
SECTION 3.9 TAXES..........................................................................................20
SECTION 3.10 EMPLOYEE BENEFITS; ERISA......................................................................22
SECTION 3.11 EMPLOYEES; LABOR MATTERS......................................................................23
SECTION 3.12 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS.............................................24
SECTION 3.13 REAL PROPERTY.................................................................................24
SECTION 3.14 CONTRACTS, LEASES AND AGREEMENTS; NO DEFAULT..................................................25
SECTION 3.15 ENVIRONMENTAL MATTERS.........................................................................27
SECTION 3.16 INSURANCE.....................................................................................28
SECTION 3.17 BROKERS AND FINDERS...........................................................................29
SECTION 3.18 NO UNDISCLOSED LIABILITIES....................................................................29
SECTION 3.19 INTELLECTUAL PROPERTY.........................................................................29
SECTION 3.20 TRANSFERRED ASSETS............................................................................29
SECTION 3.21 YEAR 2000 COMPLIANCE..........................................................................30
SECTION 3.22 SEC FILINGS...................................................................................30
SECTION 3.23 RELATED PARTY TRANSACTIONS....................................................................30
SECTION 3.24 CAPITALIZATION................................................................................30
SECTION 3.25 LIABILITIES...................................................................................31
SECTION 3.26 NO OTHER REPRESENTATIONS OR WARRANTIES; DISCLAIMER OF REPRESENTATIONS AND WARRANTIES..........31

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................31
- ----------

SECTION 4.1 ORGANIZATION AND GOOD STANDING.................................................................31
SECTION 4.2 CORPORATE AUTHORITY............................................................................31
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS..........................................................31
</TABLE>
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<PAGE>

<TABLE>
<CAPTION>
<S> <C>
SECTION 4.4 SECURITIES ACT..................................................................................32
SECTION 4.5 BROKERS AND FINDERS.............................................................................32
SECTION 4.6 FINANCING.......................................................................................32
SECTION 4.7 LITIGATION......................................................................................33
SECTION 4.8 NO OTHER REPRESENTATIONS OR WARRANTIES..........................................................33

ARTICLE V COVENANTS.............................................................................................33
- ---------

SECTION 5.1 CONDUCT OF BUSINESS.............................................................................33
SECTION 5.2 ACCESS..........................................................................................34
SECTION 5.3 REQUIRED CONSENTS, APPROVALS AND ACTIONS........................................................35
SECTION 5.4 COMMERCIALLY REASONABLE EFFORTS.................................................................36
SECTION 5.5 PUBLICITY.......................................................................................36
SECTION 5.6 EXPENSES........................................................................................37
SECTION 5.7 ZDMI NON-SOLICITATION...........................................................................37
SECTION 5.8 EMPLOYEES.......................................................................................37
SECTION 5.9 INTERCOMPANY LIABILITIES........................................................................40
SECTION 5.10 INTERCOMPANY PROGRAMS..........................................................................40
SECTION 5.11 TRANSITION SERVICES AND SUBLEASES..............................................................40
SECTION 5.12 RETENTION OF RECORDS...........................................................................41
SECTION 5.13 ASSET SELLER'S TRADEMARKS......................................................................41
SECTION 5.14 TAX MATTERS....................................................................................42
SECTION 5.15 FURTHER ASSURANCES.............................................................................43
SECTION 5.16 NON-ASSIGNABLE AGREEMENTS......................................................................43
SECTION 5.17 AUDITED FINANCIAL STATEMENTS...................................................................44
SECTION 5.18 CONFIDENTIALITY................................................................................45
SECTION 5.19 STOCKHOLDERS MEETING; INFORMATION SUPPLIED.....................................................46
SECTION 5.20 INSURANCE......................................................................................47
SECTION 5.21 SALE OF INVESTMENTS............................................................................48
SECTION 5.22 ESTOPPEL LETTERS...............................................................................48
SECTION 5.23 UNREGISTERED TRADEMARKS........................................................................48
SECTION 5.24 INTER@CTIVE INVESTOR...........................................................................48

ARTICLE VI CONDITIONS TO CLOSING................................................................................49
- ----------

SECTION 6.1 CONDITIONS TO OBLIGATIONS OF BUYER..............................................................49
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF SELLERS............................................................52

ARTICLE VII TERMINATION.........................................................................................53
- -----------

SECTION 7.1 TERMINATION.....................................................................................53
SECTION 7.2 EFFECT OF TERMINATION...........................................................................54

ARTICLE VIII INDEMNIFICATION; REMEDIES..........................................................................54
- ------------

SECTION 8.1 SURVIVAL........................................................................................54
SECTION 8.2 INDEMNIFICATION BY BUYER AND SELLERS............................................................55
SECTION 8.3 TAX INDEMNIFICATION BY STOCK SELLER; PROCEDURE..................................................55
SECTION 8.4 TAX INDEMNIFICATION BY BUYER; PROCEDURE.........................................................57

ARTICLE IX MISCELLANEOUS........................................................................................59
- ----------

SECTION 9.1 ASSIGNMENTS; NO THIRD PARTY RIGHTS..............................................................59
SECTION 9.2 ENTIRE AGREEMENT................................................................................60
SECTION 9.3 AMENDMENT OR MODIFICATION.......................................................................60
SECTION 9.4 NOTICES.........................................................................................60
SECTION 9.5 GOVERNING LAW...................................................................................61
</TABLE>

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<PAGE>

<S> <C>
SECTION 9.6 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL...................................................61
SECTION 9.7 SEVERABILITY....................................................................................62
SECTION 9.8 WAIVER OF CONDITIONS............................................................................62
SECTION 9.9 ACTIONS OF THE COMPANIES........................................................................63
SECTION 9.10 DESCRIPTIVE HEADINGS; CONSTRUCTION.............................................................63
SECTION 9.11 COUNTERPARTS...................................................................................63
SECTION 9.12 KNOWLEDGE......................................................................................63
SECTION 9.13 MATERIALITY....................................................................................63
</TABLE>
-iii-
<PAGE>

EXHIBITS

Exhibit A The Companies
Exhibit B Magazines and other Publications
Exhibit C The Investments
Exhibit D Commitment Letters
Exhibit E Bill of Sale and Assignment
Exhibit F ZDNet License Agreement
Exhibit G "ZD" Mark License Agreement
Exhibit H Services Agreement
Exhibit I Assumption Agreement

SELLER'S DISCLOSURE SCHEDULE

Schedule 2.1 Assets Not Related to the Business
Schedule 2.4(i) Special Bonus - Excluded Liability
Schedule 3.2(d) Ownership by the Companies
Schedule 3.4 Governmental Consents and Approvals
Schedule 3.5(b) Violations
Schedule 3.5(c) Consents
Schedule 3.6 Financial Statements
Schedule 3.7 Absence of Certain Changes and Events
Schedule 3.8(a) Litigation
Schedule 3.8(c) Claims by Freelance Employees or Independent Contractors
Schedule 3.9(a) Taxes
Schedule 3.10(a) Benefit Plans
Schedule 3.11(a) Employees of the Division and the Companies
Schedule 3.11(b) Other Employees
Schedule 3.13(a) Real Property
Schedule 3.13(b) Transferability, Enforceability, Encumbrances, Etc.
Schedule 3.14(a) Certain Contracts
Schedule 3.14(b) Enforceability and Compliance under Certain Contracts
Schedule 3.16 Insurance
Schedule 3.19 Intellectual Property
Schedule 3.23 Related Party Transactions
Schedule 5.1(e) New, Terminated or Modified Applicable Contracts
Schedule 5.1(i) Transfer of Assets by Stock Seller
Schedule 5.8(a) Employees on Disability Leave, Authorized Leave or Military
Service
Schedule 5.8(c) Enhanced Severance Benefit Plan
Schedule 5.8(e) Retention Costs and Special Bonuses
<PAGE>

Schedule 5.11(a) Use Agreements
Schedule 5.11(b) Subleases
Schedule 5.15 Performance Bond, Letter of Credit or Similar Instrument
Schedule 5.22 Certain Leased Real Property
Schedule 9.12 Persons Deemed to Have Knowledge
Schedule 9.13 Financial Projections

BUYER'S DISCLOSURE SCHEDULE

Schedule 4.3 Consents and Approvals

-v-
<PAGE>

PURCHASE AGREEMENT, dated as of December 6, 1999 (this "Agreement"), by and
---------
between ZD INC., a Delaware corporation ("Asset Seller"), ZD HOLDINGS (EUROPE)
------------
LTD., a company incorporated under the laws of the United Kingdom ("Stock
Seller") and WS-ZD Acquisition, Inc., a Delaware corporation ("Buyer") and any
permitted assignee of Buyer under Section 9.1. Asset Seller and Stock Seller are
sometimes referred to herein individually as a "Seller" or the "Applicable
Seller" and collectively as "Sellers", as the context requires.

WHEREAS, except as set forth in Exhibit A hereto, Stock Seller owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock of, or other equity interest in, the corporations and the other entities
set forth in Exhibit A (each a "Company" and, collectively, the "Companies").

WHEREAS, Asset Seller, through its ZD Publishing division (the "Division"),
and the Companies are engaged in the business of publishing magazines and other
publications about computers, the Internet, gaming and other technology related
topics, which magazines and other publications are set forth in Exhibit B
hereto, including the businesses of developing and distributing benchmarks for
measuring performance of Internet, computer and network products and systems and
the provision of testing services for technology vendors (collectively, the
"Business").

WHEREAS, the parties have agreed that Asset Seller shall sell, transfer and
assign to Buyer certain assets of Asset Seller related to the Business, and
Buyer shall assume certain liabilities of Asset Seller related to the Business,
in each case upon the terms and subject to the conditions set forth herein.

WHEREAS, the parties have agreed that Stock Seller shall sell and Buyer or
any permitted assignee of Buyer under Section 9.1 shall purchase from Stock
Seller all of the issued and outstanding shares of capital stock of, or other
equity interests in, the Companies (the "Shares") upon the terms and subject to
the conditions set forth herein.

WHEREAS, Ziff-Davis Inc. holds, directly or indirectly, all of the
outstanding capital stock of Asset Seller and Stock Seller, and SOFTBANK America
Inc. ("SOFTBANK") is holder of 71,619,355 shares of Ziff-Davis Inc.-ZD Common
Stock and, contemporaneously with the execution hereof, SOFTBANK is executing
and delivering to Buyer an agreement and irrevocable proxy (the "Voting
Agreement") to vote all of its shares of Ziff-Davis Inc.'s stock to approve the
transactions contemplated hereby.

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and arrangements set forth herein, and intending to
be legally bound hereby, the parties hereto agree as follows:

-1-
<PAGE>

ARTICLE I

DEFINITIONS

Section 1.1 Definitions.

The following terms are defined in the sections indicated.

<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------

<S> <C>
"Accounting Expert"........................................................... Section 2.8(e)
"Action"...................................................................... Section 3.8(a)
"Affiliate"................................................................... Section 2.3(c)
"Agreement"................................................................... Recitals
"Annual Financial Statements"................................................. Section 3.6
"Applicable Contracts"........................................................ Section 3.5(c)
"Applicable Seller"........................................................... Recitals
"Asset Purchase".............................................................. Section 2.1
"Asset Purchase Price"........................................................ Section 2.5(a)
"Asset Seller"................................................................ Recitals
"Asset Seller Benefit Plans".................................................. Section 3.10(a)
"Assumed Liabilities"......................................................... Section 2.4
"Benefit Plans"............................................................... Section 3.10(a)
"Books and Records"........................................................... Section 2.1(g)
"Business".................................................................... Recitals
"Buyer"....................................................................... Recitals
"Buyer's Plan"................................................................ Section 5.8(d)
"Closing"..................................................................... Section 2.7
"Closing Date"................................................................ Section 2.7
"Closing Date Tangible Net Worth"............................................. Section 2.8(a)
"Code"........................................................................ Section 8.3(a)
"Companies"................................................................... Recitals
"Company"..................................................................... Recitals
"Company Benefit Plans"....................................................... Section 3.10(a)
"Confidentiality Agreement"................................................... Section 7.2
"Consideration"............................................................... Section 5.14(c)
"Contract".................................................................... Section 3.5(b)
"Division".................................................................... Recitals
"DOJ"......................................................................... Section 5.3(b)
"Draft Financial Statements" ................................................. Section 5.17(a)
"Draft 1999 EBITDA" .......................................................... Section 2.5(c)(1)
"EBITDA Accounting Expert" ................................................... Section 2.5(c)(4)
</TABLE>

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<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------

<S> <C>
"EBITDA Review Period" ....................................................... Section 2.5(c)(2)
"EBITDA Statement of Objections" ............................................. Section 2.5(c)(3)
"Enforceability Exceptions"................................................... Section 3.3
"Environmental Law"........................................................... Section 3.15(b)
"ERISA"....................................................................... Section 3.10(a)
"Excluded Assets"............................................................. Section 2.3
"Excluded Employment Liabilities"............................................. Section 5.8(a)
"Excluded Liabilities"........................................................ Section 2.4(d)
"Filings and Approvals"....................................................... Section 6.1(c)
"Final Asset Purchase Adjustments"............................................ Section 2.8(h)
"Financial Statements"........................................................ Section 3.6
"Financial Statements Accounting Expert"...................................... Section 5.17(d)
"Financial Statements Review Period".......................................... Section 5.17(b)
"Financial Statements Statement of Objections"................................ Section 5.17(c)
"FTC"......................................................................... Section 5.3(b)
"GAAP"........................................................................ Section 2.8(a)
"Governmental Authorizations"................................................. Section 3.12(b)
"Governmental Entity"......................................................... Section 3.4
"Governmental Prohibition".................................................... Section 6.1(d)
"Hazardous Substance"......................................................... Section 3.15(b)
"HSR Act"..................................................................... Section 2.7
"HSR Filing".................................................................. Section 3.4
"Initial Cash Purchase Price"................................................. Section 2.5(a)
"Initial Cash Purchase Price for the Assets".................................. Section 2.5(a)
"Insignificant Items"......................................................... Section 5.23(a)
"Intellectual Property"....................................................... Section 2.1(a)
"International Plan".......................................................... Section 3.10(g)
"Interim Financial Statements"................................................ Section 3.6
"Inventory Unregistered Trademarks"........................................... Section 5.23
"Investments"................................................................. Section 2.1
"IRS"......................................................................... Section 2.5(a)
"IT Asset" ................................................................... Section 3.21
"Law"......................................................................... Section 3.5(d)
"Lease"....................................................................... Section 2.4(k)
"Leased Real Property"........................................................ Section 3.13(a)
"Liabilities"................................................................. Section 3.18
"Liens"....................................................................... Section 3.2(b)
"1999 Draft Financial Statements"............................................. Section 5.17(a)
"1999 EBITDA"................................................................. Section 2.5(b)
"Non-Assignable Rights"....................................................... Section 5.16
"Order"....................................................................... Section 3.5(d)
"Parent"...................................................................... Section 2.1
</TABLE>

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<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------

<S> <C>
"Parent Stockholders"......................................................... Section 5.19(a)
"Person"...................................................................... Section 2.3(c)
"Plans"....................................................................... Section 3.10(b)
"Pre-1999 Draft Financial Statements"......................................... Section 5.17(a)
"Proxy Statement"............................................................. Section 5.19(b)
"Purchase Price for the Shares"............................................... Section 2.5(a)
"Related to the Business"..................................................... Section 2.1
"Representatives"............................................................. Section 7.2
"Review Period"............................................................... Section 2.8(c)
"SEC"......................................................................... Section 3.22
"SEC Reports"................................................................. Section 3.22
"Securities Act".............................................................. Section 4.4
"Seller"...................................................................... Recitals
"Seller Health Plans"......................................................... Section 5.8(c)(2)
"Seller Life Plan"............................................................ Section 5.8(c)(3)
"Seller Material Adverse Effect".............................................. Section 9.13
"Sellers"..................................................................... Recitals
"September 30 Tangible Net Worth"............................................. Section 2.8(a)
"Shares"...................................................................... Recitals
"Significant Items"........................................................... Section 5.23(a)
"SOFTBANK".................................................................... Recitals
"Statement of Objections"..................................................... Section 2.8(d)
"Stock Purchase".............................................................. Section 2.2
"Stock Seller"................................................................ Recitals
"Stockholders Meeting"........................................................ Section 5.19(a)
"Subsidiary".................................................................. Section 9.1(a)
"Tangible Net Worth".......................................................... Section 2.8(a)
"Tangible Net Worth Adjustment Amount"........................................ Section 2.8(h)(3)
"Tax"......................................................................... Section 8.3(a)
"Tax Package"................................................................. Section 8.4(e)
"Tax Returns"................................................................. Section 3.9(a)
"Transfer Taxes".............................................................. Section 5.14(a)
"Transferred Assets".......................................................... Section 2.1
"Transition Period"........................................................... Section 5.13
"Unregistered Trademarks"..................................................... Section 2.1
"Voting Agreement"............................................................ Recitals
"Year 2000 Compliant"......................................................... Section 3.21
"ZD Market Intelligence Business"............................................. Section 5.7
"ZD Plan"..................................................................... Section 2.8(h)(2)
"ZD Stock" ................................................................... Section 3.24
"ZDNet Stock" ................................................................ Section 3.24
</TABLE>

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ARTICLE II

SALE AND PURCHASE OF ASSETS AND SHARES

Section 2.1 Sale and Purchase of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, Asset Seller hereby agrees to, and to
cause Ziff-Davis Inc. ("Parent") and each of its Affiliates (other than the
Companies) to, sell, convey, transfer, assign and deliver to Buyer free and
clear of all Liens, and Buyer hereby agrees to purchase from Asset Seller, at
the Closing (i) the stock, partnership interests and member interests in the
Companies and other entities set forth in Exhibit C hereto (the "Investments"),
(ii) all of Asset Seller's and each of its Affiliates' (other than the
Companies) right, title and interest in and to the trademarks, trade names,
trade dress, service marks and logos (other than "EQUIP", "Inter@ctive Investor"
and derivatives thereof) which are not registered or the subject of a pending
application for registration, were created for use in the Business (whether or
not also created for use in other businesses of Asset Seller or any of its
Affiliates) or initially used in the Business and were at some point used in the
Business (collectively, the "Unregistered Trademarks"), (iii) all of Asset
Seller's and each of its Affiliates' (other than the Companies) right, title and
interest in and to the registered copyrights, trademark and service mark
applications and registrations and domain names listed on Schedule 3.19 of the
Disclosure Schedule, the mark "eShopper" and derivatives thereof and (iv) all of
Asset Seller's and each of its Affiliates' (other than the Companies) respective
right, title and interest in and to all of its assets that are primarily related
to, or used or held by it for use primarily in connection with, the Business
immediately prior to the Closing ("Related to the Business"), whether or not
reflected on the books of Asset Seller or Parent or any Affiliate of either of
the foregoing and whether tangible or intangible, real, personal or mixed, other
than the Excluded Assets (the "Transferred Assets") (which assets (together with
those assets set forth in Schedule 2.1 of the Disclosure Schedule (which are not
Transferred Assets)) are sufficient to enable Buyer to operate and continue
after the Closing the Business as it is presently conducted), including the
following assets of the Asset Seller or Parent to the extent they are Related to
the Business:

(a) all intellectual property (including software, databases,
know-how, inventions, data, trademarks, trade names, trade dress, service
marks, domain names, logos, patents, trade secrets and copyrights,
including the trademarks, trade names, trade dress, service marks, domain
names and logos that include "Ziff-Davis"), licenses and sublicenses
granted or obtained in connection therewith, rights to, and applications
for, protection thereof and rights and remedies with respect to any
infringement thereof (the "Intellectual Property");

(b) all marketing information, marketing research and data and
customer and mailing lists, including works in progress;

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(c) all furniture, fixtures, furnishings, machinery, vehicles,
computers, equipment, supplies and other tangible personal property;

(d) all inventory and all raw materials, work in process, finished
products, wrapping, supply and packaging items;

(e) all prepaid expenses, accounts receivable and other current assets
as of the Closing Date;

(f) all contracts, purchase or other orders, leases, licenses,
commitments, instruments and other agreements to which Asset Seller is a
party and all rights thereunder;

(g) subject to Section 2.3(f) and Section 5.12(b), the originals and
all copies of all books, records, ledgers, files, reports, accounts, data,
plans and operating records, whether in hard copy, electronic format,
magnetic or other media ("Books and Records");

(h) all promotional and advertising materials, whether existing in
print, video, online, magnetic or other media, and all stationery, forms,
labels and other materials;

(i) all licenses, permits, approvals, registrations and similar rights
or authorizations obtained from governmental entities;

(j) all goodwill and other intangible assets Related to the Business;
and

(k) all claims, causes of action and other rights of recovery, set off
or recoupment.

The transactions contemplated by this Section 2.1 are sometimes referred to
herein as the "Asset Purchase."

Section 2.2 Sale and Purchase of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing Stock Seller hereby
agrees to sell to Buyer or any permitted assignee of Buyer under Section 9.1,
and Buyer (and any assignee) hereby agrees to purchase from Stock Seller all of
the Shares, free and clear of all Liens. The transactions contemplated by this
Section 2.2 are sometimes referred to herein as the "Stock Purchase."

Section 2.3 Excluded Assets. Notwithstanding anything in this Agreement to
the contrary, Asset Seller shall retain from and after the Closing all of its
right, title and interest in and to, and there shall be excluded from the Asset
Purchase and the Transferred Assets, the following (collectively, the "Excluded
Assets"):

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(a) cash, bank accounts and marketable securities (other than the
Investments);

(b) subject to Section 5.20, all rights under all insurance policies,
including insurance policies in respect of directors and officers and to
all claims against insurance carriers;

(c) all amounts owed by Asset Seller or any Affiliate of Asset Seller
(other than the Companies or the Division) to any Company or the Division,
whether or not Related to the Business ("Person" means any individual,
corporation (including any non-profit corporation), general or limited
partnership, limited liability company, Governmental Entity, joint venture,
estate, trust, association, organization or other entity of any kind or
nature; "Affiliate" shall mean, with respect to Sellers, Parent or any
direct or indirect Subsidiary of Parent and, with respect to Buyer, any
Person that controls, is controlled by, or under common control with,
Buyer);

(d) all Books and Records Related to the Business which Asset Seller
is required by law to retain, so long as accurate and complete copies of
such Books and Records are included in the Transferred Assets;

(e) all rights to the name "SOFTBANK" and any derivation or other
variation of such term whether or not Related to the Business;

(f) subject to the license agreements contemplated by Section 6.1(h),
all rights to the name "ZD", "Ziff" and any derivation or other variation
of such terms whether or not Related to the Business and all other
trademarks and trade names, service marks, trade dress, domain names or
logos of Asset Seller or any of its Affiliates not Related to the Business;

(g) all rights, claims, credits, causes of action or rights of set-off
against third parties pertaining to the Excluded Assets, except to the
extent related to the "ZD" mark and the logo associated therewith as used
in the Business;

(h) subject to Section 5.16, Asset Seller's rights under any lease,
agreement, contract, purchase order, instrument or other similar
arrangement Related to the Business for which consent to assignment is
required and has not been obtained as of the Closing Date;

(i) any Unregistered Trademark that is deemed to be an Excluded Asset
as contemplated by Section 5.23;

(j) Computer Shopper magazine and, subject to Section 2.1(a), any
special editions thereof, such as the special issue distributed under the
name Computer Shopper eShopper in 1999; and

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(k) the marks "EQUIP" and "Inter@ctive Investor" and derivatives
thereof.

Section 2.4 Assumption of Liabilities. Upon the terms and subject to the
conditions set forth herein, at the Closing Buyer agrees to assume and become
solely responsible for all debts, liabilities or obligations whatsoever of Asset
Seller to the extent arising out of or relating to the ownership of the
Transferred Assets or the operation of the Business, or of any of Asset Seller's
Affiliates to the extent arising out of or relating to the ownership of the
Transferred Assets or the operation of the Business, whether arising before or
after the Closing and whether known or unknown, fixed or contingent, but
excluding the Excluded Liabilities (the "Assumed Liabilities"), including the
following:

(a) all liabilities and obligations of Asset Seller under the
agreements, contracts, leases, licenses and other arrangements included in
the Transferred Assets;

(b) all liabilities with respect to all actions, suits, proceedings,
disputes, claims or investigations that arise out of or relate to the
ownership of the Transferred Assets or the operation of the Business;

(c) employee benefit, compensation, retention and severance
liabilities and other similar liabilities associated with employees of
Asset Seller engaged in the operation of the Business, including the
Liability for the retention costs and special bonuses set forth in Schedule
5.8(e) of the Disclosure Schedule; and

(d) all liabilities of Asset Seller and its Affiliates for Taxes with
respect to the operation of the Business or the Transferred Assets (other
than Taxes imposed with respect to any gain realized as a result of the
transactions contemplated by this Agreement) for any taxable year or period
beginning before and ending after the Closing Date, for the portion of such
taxable year or period after the Closing Date determined in accordance with
Section 8.3(b).

Notwithstanding the foregoing, Assumed Liabilities shall not include (and the
following, collectively, shall constitute the "Excluded Liabilities"):

(a) any Liabilities of the Companies (since these liabilities will
continue to be owed by the Companies);

(b) any Liabilities owed to Asset Seller or any of its Affiliates
(other than the Companies or the Division) by any Company or Asset Seller
(with respect to the Business or the Division) that arise prior to the
Closing Date except for those that will continue under Section 5.10;

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(c) any Liabilities owed by Asset Seller or any of its Affiliates
(other than the Companies or the Division) to any Company or the Division
that arise prior to the Closing Date;

(d) any Liabilities for borrowed money owed by Asset Seller or any of
its Affiliates to third parties;

(e) any Liabilities of Asset Seller or Stock Seller pursuant to this
Agreement or relating to the transfer of assets or stock hereunder;

(f) subject to the license agreements contemplated by Section 6.1(h),
any Liability arising out of or relating to any asset that is not a
Transferred Asset and is not owned by any of the Companies, except to the
extent that such Liability shall have been accrued on the Closing Date
Balance Sheet;

(g) any Liability to the extent arising out of or relating to Excluded
Assets;

(h) all Liability arising out of or resulting from (i) the claims and
Actions listed on Schedule 3.8(a) of the Disclosure Schedule, including any
successor or related claims or Actions, (ii) any claims or Actions which
are not disclosed on Schedule 3.8(a) of the Disclosure Schedule if, as a
result of the failure to disclose such claims or Actions on such Schedule,
the representation set forth in Section 3.8(a) is not true and correct as
of the date of execution of this Agreement (ignoring for this purpose the
reference to Seller Material Adverse Effect but including only claims and
Actions that, individually or in the aggregate, could reasonably be
expected to result in a liability in excess of $1,000,000), and (iii) any
claims or Actions which are not disclosed on Schedule 3.8(a) of the
Disclosure Schedule if, as a result of the failure to disclose such claims
or Actions in such Schedule, the representation in Section 3.8(a) would not
be true and correct as of the Closing Date if restated on the Closing Date;

(i) Excluded Employment Liabilities, as defined in Section 5.8(a), any
Liability in respect of or relating to the issuance or grant of stock
options, stock appreciation rights, performance shares or capital stock to
employees of or consultants to any of the Sellers and their Affiliates, any
Liability in respect of retention costs and special bonuses (including
those set forth on Schedule 2.4(i) of the Disclosure Schedule but not
including those set forth in Schedule 5.8(e) of the Disclosure Schedule)
and any Liability in respect of any agreement set forth in clause 1(q) of
Schedule 3.10(a) of the Disclosure Schedule;

(j) any Liabilities of Asset Seller or any of its Affiliates for Taxes
with respect to the operation of the Business or the Transferred Assets for
any taxable year or period ending on or before the Closing Date and, with
respect to any

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taxable year or period beginning before and ending after the Closing Date,
for the portion of such taxable year or period ending on the Closing Date
as determined in accordance with Section 8.3; and

(k) any obligation to contribute any or all amounts in excess of
$19,250,000.00 incurred by 63 Madison Associates, L.P., as landlord, in its
renovation of the real estate and improvements subject to the Lease of
Asset Seller under that certain Agreement of Lease, dated January 15, 1998,
by and between 63 Madison Associates, L.P. and Ziff-Davis Inc. (the
"Lease"). -----

Buyer is not assuming or becoming responsible for any debts, liabilities or
obligations other than the Assumed Liabilities.

Section 2.5 Purchase Prices.
---------------

(a) Purchase Price. The purchase price for the Transferred Assets and
--------------
the Shares shall be $780,000,000 minus, if 1999 EBITDA (as defined in
Section 2.5(b) and calculated in accordance with Section 2.5(c)) is less
than $88,400,000 (90% of projected 1999 EBITDA), 7.9 times the amount by
which 1999 EBITDA is less than $98,200,000 (100% of projected 1999 EBITDA)
(the "Initial Cash Purchase Price"), plus the Assumed Liabilities, minus
---------------------------
the Final Asset Purchase Adjustments (as defined in Section 2.8). The
Initial Cash Purchase Price shall be paid in accordance with Section 2.6
hereof. The parties will, prior to the Closing, negotiate in good faith and
agree upon a reasonable allocation of the purchase price between the
Transferred Assets and the Shares of each of the Companies, respectively.
The value so allocated to the Shares is herein referred to as the "Purchase
--------
Price for the Shares" and an amount equal to the Initial Cash Purchase
--------------------
Price minus that value is herein referred to as the "Initial Cash Purchase
---------------------
Price for the Assets". An amount equal to the Initial Cash Purchase Price
--------------------
for the Assets plus the Assumed Liabilities minus the Final Asset Purchase
Adjustments (collectively, the "Asset Purchase Price") shall be allocated
--------------------
among the Transferred Assets in accordance with Section 5.14(c) below. Each
party shall use these allocations in all tax and governmental filings,
except as otherwise required by a tax or governmental authority in
connection with an audit or by a court decision. To the extent that
disclosures of these allocations are required to be made by a party to the
Internal Revenue Service (the "IRS"), such party will disclose such
---
reports to the other prior to filing with the IRS.

(b) EBITDA. For purposes of this Agreement, "1999 EBITDA" shall mean
-----------
net income of the Asset Seller in respect of the Division and the Companies
for 1999 plus, to the extent previously deducted in the calculation
thereof, the sum of (i) interest expense for indebtedness for borrowed
money, (ii) income tax expense and (iii) depreciation expense, amortization
expense and other non-cash charges, in each case in 1999. Except as
otherwise provided below, each of the

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foregoing amounts shall be determined on a consolidated basis in accordance
with GAAP on a basis consistent with the basis on which the unaudited
pro-forma combined statement of operations of the Division and the
Companies as of September 30, 1999 referred to in Section 3.6 were
prepared.

(1) Not later than the later of February 1, 2000 and the date on
which the Draft Audited Financial Statements are delivered to
Buyer pursuant to Section 5.17, Sellers shall prepare and deliver
to Buyer a draft calculation of 1999 EBITDA (the "Draft 1999
----------
EBITDA").
------

(2) Upon receipt of the Draft 1999 EBITDA, Buyers shall have 15 days
(the "EBITDA Review Period") to review the Draft 1999 EBITDA.
--------------------
During the EBITDA Review Period, Sellers shall give Buyer full
access at all reasonable times to all books, records, premises
and facilities and other materials relating to the Division and
the Companies, and to Sellers' personnel and advisors and any
work papers prepared by or for Sellers, in each case as they may
require for the purpose of reviewing such Draft 1999 EBITDA.

(3) On or prior to the last day of the EBITDA Review Period, Buyer
may object to the Draft 1999 EBITDA by delivering to Sellers a
written statement setting forth in reasonable detail Buyer's
objections to the Draft 1999 EBITDA (the "EBITDA Statement of
-------------------
Objections"). If Buyer does not deliver an EBITDA Statement of
----------
Objections within the EBITDA Review Period, the Draft 1999 EBITDA
shall be deemed to have been accepted by the Buyer and shall be
final and binding on the parties and EBITDA reflected in the
Draft 1999 EBITDA shall be the 1999 EBITDA used in computing the
Asset Purchase Price described in Section 2.5(a) above. If Buyer
delivers a EBITDA Statement of Objections within the EBITDA
Review Period, Sellers and Buyer shall negotiate in good faith to
resolve such objections, and any objections that are resolved by
a written agreement between Buyer and Sellers shall be final and
binding on the parties and the amount of EBITDA for 1999 so
agreed shall be the 1999 EBITDA used in computing the Asset
Purchase Price in Section 2.5(a) above.

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(4) If the Sellers and Buyer fail to reach an agreement with respect
to all of the matters set forth in the EBITDA Statement of
Objections, then the matters still in dispute shall, not later
than 5 business days after the earlier of the end of the EBITDA
Review Period or the first date on which one of the parties
affirmatively terminates discussions in writing with respect to
the EBITDA Statement of Objections, be submitted for resolution
to the New York office of one of the five largest United States
independent certified public accountants that has no material
business relationships with Buyer or either of the Sellers, as
selected by Buyer and the Sellers jointly (the "EBITDA Accounting
-----------------
Expert") who, acting as an expert and not as an arbitrator, shall
------
resolve the matters still in dispute and adjust the Draft 1999
EBITDA to reflect such resolution. The EBITDA Accounting Expert's
resolution of the matters in dispute shall be final and binding
on the parties and the Draft 1999 EBITDA, as adjusted in
accordance with the EBITDA Accounting Expert's resolution of the
matters in dispute shall be the 1999 EBITDA for purposes of
Section 2.5(a). The EBITDA Accounting Expert shall make a
determination as soon as practicable and in any event within 10
business days (or such other time as the parties hereto shall
agree in writing) after its engagement. The parties hereto agree
that all adjustments shall be made without regard to materiality.

(5) Buyer shall pay one-half and the objecting Seller shall pay one-
half of the fees and expenses of the EBITDA Accounting Expert.

(6) Sellers and Buyer shall each make readily available to the EBITDA
Accounting Expert all relevant work papers and books and records
in their possession or to which they have the power to grant
access relating to the Division, the Companies, and the Draft
1999 EBITDA.

Section 2.6 Payment of Purchase Price. At the Closing, Buyer agrees to pay to
-------------------------
Asset Seller the Initial Cash Purchase Price for the Assets and Buyer agrees to
pay to Stock Seller the Purchase Price for the Shares, in each case in cash by
wire transfer of immediately available funds to an account designated by the
Applicable Seller, and the Buyer additionally agrees to assume the Assumed
Liabilities.

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Section 2.7 The Closing. The closing of the Asset Purchase and the Stock
-----------
Purchase (collectively, the "Closing") shall take place at 9:30 a.m. local time
on the second business day following the first date on which (a) all waiting
periods applicable to the Asset Purchase or the Stock Purchase under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"), or similar applicable waiting periods under the European Union merger
- ---
regulations or other applicable national laws, shall have expired or been
terminated and (b) all the other conditions to Closing set forth in Article VI
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) shall
have been satisfied or waived, or at such other time, place and date as Buyer
and Sellers may mutually agree; provided, however, that in no event shall the
-------- -------
Closing occur prior to February 15, 2000. The date on which the Closing occurs
is referred to as the "Closing Date."
------------

Section 2.8 Post-Closing Purchase Price Adjustments.
---------------------------------------

(a) Calculation of Tangible Net Worth. As soon as practicable, but in no
---------------------------------
event later than 90 days after the Closing Date, Buyer shall deliver a
computation of Tangible Net Worth as of September 30, 1999 ("September 30
------------
Tangible Net Worth") and a computation of Tangible Net Worth as of the
------------------
Closing Date ("Closing Date Tangible Net Worth"). For purposes of this
-------------------------------
Agreement, "Tangible Net Worth" shall mean the Transferred Assets and all
------------------
assets of the Companies (excluding in each case all intangible assets) minus
all liabilities of the Division and the Companies. Except as otherwise
provided below, Tangible Net Worth shall be determined in accordance with
generally accepted United States accounting principles ("GAAP"). For purposes
----
of calculating Tangible Net Worth, liabilities shall not include any
liabilities that this Agreement expressly provides shall be retained or
discharged by Sellers. In addition, Tangible Net Worth shall reflect all
Assumed Liabilities and all Liabilities of the Companies, but shall not
include any Excluded Assets, any liabilities of the Division other than the
Assumed Liabilities, any current or non-current deferred tax assets, any
current or non-current deferred tax liabilities, any intangible assets or any
Liabilities for the matters referred to in Section 2.8(h)(i) and Section
2.8(h)(ii).

(b) Access to Buyer. Upon reasonable notice to Sellers, Sellers shall
---------------
provide Buyer full access at all reasonable times to such historical
financial information (to the extent still in Sellers' possession or to which
Sellers have power to grant access) relating to the Division or the Companies
as Buyer shall reasonably request to prepare and deliver the computations of
September 30 Tangible Net Worth and Closing Date Tangible Net Worth in
accordance with Section 2.8(a) and to respond to any Statement of Objections.

(c) Examination by Sellers. Upon receipt of the computations of September
----------------------
30 Tangible Net Worth and Closing Date Tangible Net Worth, Sellers

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shall have 45 days (the "Review Period") to review such computations. During
-------------
the Review Period, Buyer shall give Sellers full access at all reasonable
times to all books, records, premises and facilities and other materials
relating to the Division and the Companies, and to Buyer's personnel and
advisors and any work papers prepared by or for Buyer, in each case as they
may require for the purpose of reviewing such computations.

(d) Objection by Sellers. On or prior to the last day of the Review
--------------------
Period, Asset Seller may object to the computation of September 30 Tangible
Net Worth and/or Closing Date Tangible Net Worth by delivering to Buyer a
written statement setting forth in reasonable detail Asset Seller's
objections (the "Statement of Objections"). If Asset Seller does not deliver
-----------------------
a Statement of Objections within the Review Period, the computations of
September 30 Tangible Net Worth and Closing Date Tangible Net Worth shall be
deemed to have been accepted by Asset Seller and shall be final and binding
on the parties, and those computations shall be used in computing the
Tangible Net Worth Adjustment Amount described in Section 2.8(h) below. If
Asset Seller delivers a Statement of Objections within the Review Period,
Asset Seller and Buyer shall negotiate in good faith to resolve such
objections, and if the objections are resolved by a written agreement between
Buyer and Asset Seller, that resolution shall be final and binding on the
parties and shall be used in computing such Tangible Net Worth Adjustment
Amount.

(e) Resolution of Disputes. If Asset Seller and Buyer fail to reach
----------------------
an agreement with respect to all of the matters set forth in a Statement of
Objections, then the matters still in dispute shall, not later than 10
business days after the earlier of the end of the Review Period or the first
date on which one of the parties affirmatively terminates discussions in
writing with respect to the Statement of Objections, be submitted for
resolution to the New York office of one of the five largest United States
independent certified public accountants that has no material business
relationships with Buyer or either of the Sellers, as selected by Buyer and
Asset Seller jointly (the "Accounting Expert") who, acting as an
-----------------
expert and not as an arbitrator, shall resolve the matters still in dispute
and adjust the computation of the Tangible Net Worth Adjustment Amount to
reflect such resolution. The Accounting Expert's resolution of the matters in
dispute shall be final and binding on the parties. The Accounting Expert
shall make a determination as soon as practicable and in any event within 30
days (or such other time as the parties hereto shall agree in writing) after
its engagement. The parties hereto agree that all adjustments shall be made
without regard to materiality.

(f) Fees and Expenses of the Accounting Expert. Buyer shall pay one-half
------------------------------------------
and Asset Seller shall pay one-half of the fees and expenses of the
Accounting Expert.

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<PAGE>

(g) Access to Supporting Documentation. Sellers and Buyer shall each
----------------------------------
make readily available to the Accounting Expert all relevant work papers and
books and records in their possession or to which they have the power to
grant access relating to the Division, the Companies and the computations of
September 30 Tangible Net Worth and Closing Date Tangible Net Worth.

(h) Final Asset Purchase Adjustments. As used herein, the term "Final
--------------------------------
Asset Purchase Adjustments" shall mean the sum of:
- --------------------------

(1) The actual amounts paid in connection with the retention costs and
special bonuses set forth in Schedule 5.8(e) of the Disclosure
Schedule;

(2) The amount of the discretionary contributions to be made under the
Ziff-Davis Retirement & Savings Plan (the "ZD Plan"), to the
extent accrued as of the Closing Date as contemplated in the last
sentence of Section 5.8(d); and

(3) If (i) the Closing Date Tangible Net Worth is less than (ii) the
September 30 Tangible Net Worth minus $5,000,000, an amount equal
to the September 30 Tangible Net Worth minus the Closing Date
Tangible Net Worth (such amount, the "Tangible Net Worth
------------------
Adjustment Amount").
-----------------

(i) Payment of Adjustment Amounts. Within two business days after the
-----------------------------
date on which the computations of September 30 Tangible Net Worth and
Closing Date Tangible Net Worth become final and binding pursuant to this
Section 2.8, Sellers shall collectively pay to Buyer the Final Asset
Purchase Adjustments together with interest thereon at a rate equal to the
rate announced from time to time by The Bank of New York as its base rate
during the period from the Closing Date to the date of the payment
calculated on the basis of a 365-day year and the actual number of days
elapsed. Any payments by Sellers pursuant to the preceding sentence shall be
allocated to them in such proportion as they shall determine in their
absolute discretion, and Buyer shall have no liability with respect to such
allocation. Notwithstanding the foregoing sentence, the obligation to pay
Buyer the foregoing adjustment shall be a joint and several obligation of
each Seller. Any such payments shall be made by wire transfer of immediately
available funds to a bank account or accounts as shall be designated in
writing by the recipient no later than one business day prior to the payment
date.

Section 2.9 Certain European Restructuring Matters. Notwithstanding
--------------------------------------
anything to the contrary herein, the parties hereto agree that prior to the
Closing, Stock Seller shall be permitted to cause the Companies to transfer all
assets and liabilities of the Companies Related to the Business to one or more
to-be-formed subsidiaries of the

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<PAGE>

Companies and if Stock Seller does so, references herein to the Companies shall
be deemed references to such subsidiaries, where appropriate.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

Sellers hereby represent and warrant to Buyer as follows:

Section 3.1 Organization and Good Standing.
------------------------------

(a) Each Seller and each Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, with full corporate or limited liability company power
and authority, as applicable to conduct its businesses and to own or
use its assets as currently conducted, owned and used. Each Company
is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which it is required to be so licensed or
qualified, except for any failures to be so licensed, qualified or
in such good standing that, individually or in the aggregate, is not
reasonably likely to have a Seller Material Adverse Effect.

Section 3.2 Capitalization.
--------------

(a) All of the issued and outstanding shares of capital stock
of, or other equity interests in, each Company have been duly
authorized and are validly issued, fully paid and nonassessable and
free of any transfer restriction.

(b) Stock Seller is, and on the Closing Date will be, the sole
record and beneficial owner of the Shares (other than a de minimis
number of directors' qualifying shares that is not greater than the
minimum required by applicable Law), free and clear of all liens,
claims, mortgages, security interests, charges, title imperfections,
restrictions or other encumbrances (collectively, "Liens").

(c) There are no shares of capital stock of, or other equity
interests in, any Company reserved for issuance or subject to
preemptive rights or any outstanding subscriptions, options,
warrants, calls, rights or convertible or exchangeable securities or
any other agreements or instruments in effect giving any Person the
right to acquire from Stock Seller or any of its Affiliates any
shares of capital stock, or other equity, profits or interests in,
any Company or requiring the Stock Seller or any Company to
repurchase, redeem or otherwise acquire any of its capital stock or
other securities.

(d) Except as set forth in Schedule 3.2(d), none of the
Companies owns shares of capital stock of, or other equity interests
in, any Person.

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<PAGE>

Section 3.3 Corporate Authority. Each Seller has the
-------------------
corporate power and authority, and has taken all corporate action necessary, to
execute, deliver and perform its obligations under this Agreement and each of
the agreements contemplated hereby. This Agreement has been duly executed and
delivered by each Seller and constitutes a valid and legally binding agreement
of each Seller, enforceable against each Seller in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (collectively, the
"Enforceability Exceptions").
-------------------------

Section 3.4 Consents and Approvals. Except for the
----------------------
notification and report form required to be filed under the HSR Act (an "HSR
---
Filing"), European Union merger regulations and except as set forth in Schedule
- ------
3.4 of the Disclosure Schedule, no notices, reports, consultations,
registrations or other filings are required to be made by Sellers or any Company
with, nor are any consents, approvals, opinions or authorizations required to be
obtained by Sellers or any Company from, any court or other governmental,
judicial, administrative or regulatory authority in the United States or
elsewhere (each, a "Governmental Entity"), or any third party (including,
-------------------
without limitation, any work council or other labor entity) in connection with
the execution, delivery or the performance of this Agreement by Sellers and the
consummation of the transactions contemplated hereby, except for any such
matters the failure of which to make or obtain, individually or in the
aggregate, would not have a Seller Material Adverse Effect.

Section 3.5 No Violations. The execution, delivery and performance
-------------
of this Agreement by Sellers will not:

(a) violate or contravene any provision of the certificate of
incorporation or by-laws (or other comparable governing documents) of
either Seller or any Company;

(b) violate, conflict with, or constitute or result in a default,
acceleration or creation of a Lien under, or a termination of (in each
case with or without notice or lapse of time or both), any provision of
any agreement, license, lease, contract, loan, note, franchise,
mortgage, indenture, or other obligation (each, a "Contract"), to which
--------
either Seller or any Company is a party or by which any of their
respective assets are bound, in each case other than (i) as set forth in
Schedule 3.5(b) of the Disclosure Schedule and (ii) for any such matters
that, individually or in the aggregate, would not have a Seller Material
Adverse Effect;

(c) require either Seller or any Company to obtain the consent,
waiver, authorization or approval of any Person under any Contract to
which either Seller or any Company is a party or by which any of their
respective assets are bound (collectively, "Applicable Contracts"), in
--------------------
each case other than (i) as set forth in

-17-
<PAGE>

Schedule 3.5(c) of the Disclosure Schedule and (ii) for any such matters
that, individually or in the aggregate, would not have a Seller Material
Adverse Effect:

(d) violate, contravene or conflict with any foreign or domestic
(federal, state or local) statute, law, rule, regulation or ordinance
(each, a "Law"), or any award, judgment, decree, injunction or other
order (each, an "Order"), of any Governmental Entity having jurisdiction
over either Seller, any Company or any of their respective assets or
businesses.

Section 3.6 Financial Statements. Schedule 3.6 of the Disclosure
--------------------
Schedule contains (i) unaudited combined pro-forma statements of operations of
the Division and the Companies for each of the years ended December 31, 1997 and
1998 (collectively, the "Annual Financial Statements") and (ii) an unaudited
---------------------------
combined pro-forma statement of tangible net worth of the Division and the
Companies as of September 30, 1999 and the related unaudited combined pro-forma
statement of operations for the nine months then ended (collectively, the
"Interim Financial Statements" and, together with the Annual Financial
----------------------------
Statements, the "Financial Statements"). The Financial Statements have been
--------------------
prepared in accordance with GAAP consistently applied throughout the periods
covered by such statements and fairly present the combined financial condition
and results of operations of the Division and the Companies as of the respective
dates and for the periods then ended, as applicable, except that the Financial
Statements are subject to (i) the absence of the level of detail and full
financial footnotes that would be required in regular financial statements, (ii)
the assumptions, qualifications and adjustments set forth in the Basis of
Presentation contained in Schedule 3.6 of the Disclosure Schedule, (iii) the
absence of line items below earnings before interest and taxes in the unaudited
consolidated pro forma statements of operations and (iv) in the case of the
Interim Financial Statements, normal year-end adjustments that are not expected
to be material in amount or effect.

Section 3.7 Absence of Certain Changes and Events.
-------------------------------------
(a) Except as set forth in Schedule 3.7 of the Disclosure Schedule,
since September 30, 1999, there has not occurred any matter,
circumstance, event or effect which has had or is reasonably likely to
have a Seller Material Adverse Effect.

(b) Except as set forth in Schedule 3.7 of the Disclosure Schedule,
since December 31, 1998:

(1) each of Asset Seller (but solely with respect to
the Division) and each Company has conducted its
business only in the ordinary course of business,
consistent with past practice;

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<PAGE>

(2) neither Asset Seller nor any Company has sold, leased
or otherwise disposed of, or incurred any Lien on, any
Intellectual Property or any other asset material to
the Business other than sales in the ordinary course of
business consistent with past practice;

(3) neither Seller nor any Company has settled,
compromised, waived, released or assigned any material
rights or claims it has under or in respect of any
Action, Applicable Contract, Tax matter or insurance
policy relating to the Business or the Companies or
made any material modification or material amendment
with respect to any Applicable Contract;

(4) there has not been any change in the accounting
practices, methods or principles used by Asset Seller
(but solely with respect to the Division) or any
Company;

(5) there has not been any material increase in the
benefits under, or the establishment, amendment or
termination of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation,
the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards),
stock purchase or other employee benefit plan covering
any of the employees of the Division or any of the
Companies, or any other material increase in the
compensation payable or to become payable to, or any
other material change in the employment terms for any
officer of the Division or any Company or any other
employee of the Division or any of the Companies
earning in excess of $100,000 per year;

(6) there has not been any entry by Asset Seller (with
respect to the Division) or any Company into an
employment, consulting, severance, termination or
indemnification agreement with any officer of Asset
Seller with respect to the Business or the Division or
any Company or any other employee of Asset Seller with
respect to the Business or the Division or any of the
Companies earning in excess of $100,000 per year;

(7) neither Asset Seller (with respect to the Division) nor
any Company has incurred any material Liabilities,
other than

-19-
<PAGE>

Liabilities incurred in the ordinary course
of business consistent with past practice;

(8) neither Asset Seller (with respect to the Division) nor
any Company has entered into any Contract or engaged in
any transaction requiring the performance of services
or the delivery of goods or materials by or to Asset
Seller or any Company for consideration exceeding
$1,000,000 in any one year or which is likely to result
in the incurrence of Liabilities by Asset Seller (but
only with respect to the Division) or any Company in
excess of $1,000,000; and

(9) neither Asset Seller (with respect to the Division) nor
any Company has entered into any Contract or commitment
with respect to any of the foregoing.

Section 3.8 Litigation; Orders.
------------------

(a) Except as set forth in Schedule 3.8(a) of the Disclosure Schedule,
there are no actions, suits or other legal or administrative proceedings by or
before any Governmental Entity or other Person (each, an "Action") pending or,
to the knowledge of Sellers, threatened against any Seller, any Company or any
of their respective assets that relate to the Business or any Company, other
than any such Actions that, individually or in the aggregate, would not cause a
Seller Material Adverse Effect and are not reasonably likely to prohibit,
materially restrict or delay the performance of this Agreement by Sellers.

(b) Neither Seller, nor any Company nor any of their respective assets
is subject to any Order except for those that, individually or in the aggregate,
are not material and are not reasonably likely to prohibit, materially restrict
or delay the performance of this Agreement by Sellers.

(c) Except as set forth in Schedule 3.8(c), there are no Actions
pending or, to the knowledge of Sellers, threatened, as of the date hereof or
within the past three years, against Asset Seller (with respect to the
Division), any Company or any of their respective assets, brought by or on
behalf of any freelance employee or independent contractor that are related to
copyright infringement.

Section 3.9 Taxes.
-----

(a) Each of Asset Seller and each Company has filed or caused to be
filed (on a timely basis since May 5, 1998) all Tax Returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of a group of corporations, pursuant to applicable Law, and all such
Tax Returns are or, with respect to Tax Returns filed after the date hereof,
will be true and

-20-
<PAGE>

complete in all material respects and comply with all applicable Laws. Each of
Asset Seller and each Company has paid, or made provision for the payment of,
all Taxes that have or are reasonably likely to become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Asset Seller or
any Company, except such Taxes as are listed in Schedule 3.9(a) of the
Disclosure Schedule or are being contested in good faith and for which adequate
reserves have been established in the Financial Statements and the Interim
Financial Statements in accordance with GAAP. "Tax Returns" means all returns,
reports, notices, forms, declarations, claims for refund, estimates, elections,
information statements or other documents relating to any Tax, including any
schedule or attachment thereto, and any amendment thereof.

(b) The charges, accruals and reserves with respect to Taxes of Asset
Seller and each Company provided in the Financial Statements are adequate
(determined in accordance with GAAP) and all Taxes that Asset Seller or any
Company is or was required by Law to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Entity or other Person.

(c) There are no Liens on any of the Transferred Assets or the assets
of any Company that arose in connection with any failure (or alleged failure) of
Asset Seller or any Company to pay any Tax for any period prior to the Closing
Date nor will any such Liens arise in the future.

(d) No foreign, federal, state or local tax audits or administrative or
judicial Tax proceedings are pending or being conducted with respect to the
Asset Seller or any Company and neither the Asset Seller nor any Company has
received from any foreign, federal, state or local taxing authority any (i)
written notice indicating an intent to open an audit or other review, (ii)
request for information related to Tax matters or (iii) notice of deficiency or
proposed adjustment for any amount of Tax proposed, asserted or assessed by any
taxing authority against the Asset Seller or any Company.

(e) None of the Companies is a party to or bound by any Tax allocation
or Tax sharing agreement.

(f) None of the Companies shall be required to include any items of
income in, or exclude any item of deduction or loss from, taxable income for any
taxable year or period ending after the Closing Date as a result of any prepaid
amount received by the Company on or prior to the Closing Date.

(g) None of the Companies is a party to, and none of the Assumed
Liabilities constitutes, an agreement, contract, arrangement or plan that has
resulted or would result, separately or in the aggregate in the payment of any

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<PAGE>

"excess parachute payment" within the meaning of Section 280G of the Code (or
any corresponding provision of state, local or foreign Tax law).

Section 3.10 Employee Benefits; ERISA.
------------------------

(a) Sellers have delivered or otherwise made available to Buyer a
true, complete and correct copy of, and Schedule 3.10(a) of the Disclosure
Schedule sets forth a true, complete and correct list of, each profit-sharing,
pension, severance pay, thrift, savings, incentive, change of control,
employment, retirement, bonus, deferred compensation, group life and health
insurance and other employee benefit plan, agreement, arrangement or commitment,
including any such plan, agreement, arrangement or commitment or any other plan
or program that constitutes an "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (i) that provides benefits for or pertains to any Division employee
or to which Asset Seller makes contributions on behalf of any Division employee
or is otherwise bound in connection with the Division ("Asset Seller Benefit
--------------------
Plans") or (ii) that provides benefits for or pertains to any current or former
- -----
employee of any Company or to which any Company makes contributions on behalf of
any of its current or former employees or is otherwise bound (all of which are
hereinafter referred to as "Company Benefit Plans" and, collectively
---------------------
with Asset Seller Benefit Plans, the "Benefit Plans").
-------------

(b) All Benefit Plans that are employee benefit plans (the "Plans"), to
the extent subject to ERISA or the Code, are in substantial compliance with
their terms, ERISA, the Code and any other applicable Law. Each Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS. There is no material pending or, to
the knowledge of Sellers, threatened litigation relating to the Plans. No action
has been taken with respect to any Benefit Plan either to terminate such Benefit
Plan or to cause distributions, other than in the ordinary course of business,
to participants under such Benefit Plan.

(c) Neither Asset Seller, nor any Company, nor any entity that is
considered one employer with Asset Seller or any Company under Section
4001(b)(1) of ERISA or Section 414(b) or (c) of the Code has maintained, or made
or been obligated to make, contributions to any plan subject to Part 3 of Title
I or Title IV of ERISA at any time within the last six years.

(d) All contributions required to be made under the terms of any
Benefit Plan have been timely made when due.

-22-
<PAGE>

(e) Neither Asset Seller nor any Company has any commitments or
obligations nor made any representations regarding continuation of welfare
benefits after termination of employment under any of the Benefit Plans,
except as required by Part 6 of Title I of ERISA or similar laws. Neither
Asset Seller (with respect to the Division) nor any Company has any
obligations for retiree health or life benefits. Except to the extent
limited by applicable Law, there are no restrictions on the rights of Asset
Seller or any Company to amend or terminate any such Benefit Plan without
incurring Liability thereunder.

(f) Neither Asset Seller nor any Company has any obligations for
retiree health or life benefits other than as provided under any Benefit
Plan. Except to the extent limited by applicable Law, there are no
restrictions on the rights of Asset Seller or any Company to amend or
terminate any Benefit Plan without incurring Liability thereunder.

(g) Each Benefit Plan covering employees of the Companies (an
"International Plan") has been maintained in substantial compliance with
------------------
its terms and with the requirements prescribed by any and all applicable
Laws (including any special provisions relating to qualified plans where
such International Plan was intended to so qualify) and has been maintained
in good standing with applicable regulatory authorities. The fair market
value of the assets of each funded International Plan (or the liability of
each funded International Plan funded through insurance) is sufficient to
procure or provide for the benefits accrued thereunder through the Closing
Date according to the actuarial assumptions and valuations most recently
used to determine employer contributions to the International Plan. The
Companies conform in all material respects with the provisions of any
applicable national law or regulations in relation to staff delegates and
workers' committees, and in a more general manner in relation to the
representation of the employees within the Companies.

Section 3.11 Employees; Labor Matters. Schedule 3.11(a) of the
Disclosure Schedule contains a true, complete and correct list, as of the date
of this Agreement, of the name, job title, current compensation, and date of
hire of each employee of (i) Asset Seller working for the Division and (ii) the
Companies, including each employee on leave of absence or layoff status.
Schedule 3.11(b) of the Disclosure Schedule contains a true, complete and
correct list, as of the date of this Agreement, of the name, job title, current
compensation, and date of hire of each employee of Asset Seller that provides
services to the Division or the Business but is not listed in Schedule 3.11(a),
including each employee on leave of absence or layoff status. Neither Asset
Seller nor any Company is a party to, or bound by, any collective bargaining
agreement or other labor Contract nor is any such collective bargaining
agreement or other labor Contract currently being negotiated, none of the
employees of Asset Seller (with respect to the Division) or any Company is
represented by any union or labor organization nor, to the knowledge of Sellers,
are there any activities or proceedings of any labor union or

-23-
<PAGE>

labor organization to organize any employees of Asset Seller (with respect to
the Division), the Companies or any of the employees listed in Schedule 3.11(b).
Each of Asset Seller (but solely with respect to the Division) and each Company
is in compliance with all Laws in respect of employment and employment
practices, terms and conditions of employment, wages, hours of work, equal
opportunity and occupational health and safety except for such instances of non-
compliance that, individually or in the aggregate, are not reasonably likely to
have a Seller Material Adverse Effect. To the knowledge of Sellers, no employee
of Asset Seller (with respect to the Division) or of any Company that receives
compensation at an annual rate in excess of $200,000 has given notice or has
otherwise informed Asset Seller that he or she intends to terminate employment
with Asset Seller or the applicable Company.

Section 3.12 Compliance with Laws; Governmental Authorizations. Except
-------------------------------------------------
for any such matters that, individually or in the aggregate, have not had and
are not reasonably likely to result in a Seller Material Adverse Effect:

(a) each of Asset Seller (but solely with respect to the Division)
and each Company is in compliance with each Law applicable to it or to its
conduct or operation of the Business and no notice has been received by
Asset Seller or any Company alleging a failure to comply with such Laws;

(b) each of Asset Seller (but solely with respect to the Division)
and each Company has all licenses, permits, certificates and other
approvals or authorizations from Governmental Entities that are necessary
to permit it to lawfully conduct and operate the Business in the manner it
currently does and to permit it to own and use its assets in the manner in
which it currently does ("Governmental Authorizations"); and
---------------------------

(c) each of Asset Seller (but solely with respect to the Division)
and each Company is in full compliance in all material respects with all
of the terms and requirements of each of its Governmental Authorizations
and no notice has been received by Asset Seller or any Company alleging a
failure to comply with such terms and requirements.

Section 3.13 Real Property.
-------------

(a) Schedule 3.13(a) of the Disclosure Schedule contains a true,
complete and correct list, as of the date of this Agreement, of all leased
and subleased real property included in the Transferred Assets or leased
or subleased by any Company (the "Leased Real Property"). Sellers have
--------------------
delivered or made available to Buyer true, complete and correct copies of
the deeds, leases or other instruments and all amendments thereto
(collectively, the "Leases") by which such real property is leased. As of
------
the date of this Agreement, neither Seller nor any Company owns any real
property Related to the Business. There is no

-24-
<PAGE>

significant default under any Leases relating to the Leased Real Property
by Asset Seller or any Company or, to the knowledge of Sellers, by the
other parties thereto, and no event has occurred which with the giving of
notice, lapse of time or both would constitute such a significant default.

(b) Each of the Leases are in full force and effect. Except as
set forth in Schedule 3.13(b) of the Disclosure Schedule, each Lease will
continue to be enforceable on substantially identical terms following the
Closing; neither Asset Seller nor any Company has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in any
Lease and each Lease is fully assignable to Buyer without the necessity of
any consent.

(c) Each of Asset Seller and each Company has a valid leasehold
interest in the Leased Real Property held by it free and clear of all
Liens except: (i) mortgages or security interests shown on the Financial
Statements as securing specified Liabilities or obligations, all of which
shall be discharged by Sellers at or prior to Closing, (ii) Liens for
current Taxes and assessments and other charges by Governmental Entities
not yet due and payable or which may thereafter be paid without penalty or
are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established on the Financial Statements and
the Interim Financial Statements in accordance with GAAP, and (iii)
imperfections of title that do not materially impair the use of such
properties by the Asset Seller or the applicable Company, as applicable,
or the value of the leasehold interests of such Leased Real Property.

Section 3.14 Contracts, Leases and Agreements; No Default.
--------------------------------------------

(a) Except as set forth in Schedule 3.14(a) of the Disclosure
Schedule, there are no Applicable Contracts included among the
Transferred Assets or to which any Company is a party or by which
any of them are bound:

(1) evidencing indebtedness for borrowed money in excess
of $1,000,000 or pursuant to which Asset Seller (but
solely with respect to the Division) or any Company
has guaranteed any obligation of any other Person in
excess of $1,000,000;

(2) prohibiting, restricting or limiting the ability of
Asset Seller or any Company to engage in any line of
business, to compete with any Person or to carry on
the Business or any other business activity anywhere
in the world;

(3) leasing real property;

-25-
<PAGE>

(4) requiring the performance of services or delivery of
goods or materials by or to Asset Seller or any
Company for consideration exceeding $1,000,000 in
any one year that are not terminable by Asset Seller
or the relevant Company within one year without
penalty;

(5) representing an employment agreement (i) in the case
of employees of the Asset Seller, that cannot be
cancelled with less than 30 days notice and without
penalty or special payment (other than severance in
an amount not to exceed $100,000) and (ii) in the
case of employees of any of the Companies, that
cannot be cancelled without penalty or special
payment (other than severance in an amount not to
exceed $250,000);

(6) that pertain to significant Intellectual Property
including license agreements, indemnification
agreements or other similar arrangements;

(7) that create any joint venture or other similar
arrangements (other than as specifically
contemplated by Section 6.1(h)) or prohibit it from
freely engaging in any business or competing
anywhere in the world;

(8) that are between the Asset Seller (with respect to
the Business or the Division) or any Company, on the
one hand, and any Affiliate of Asset Seller (other
than the Division or any Company), on the other
hand;

(9) requiring any Company to repurchase, redeem or
otherwise acquire any shares of its capital stock or
other securities or that are shareholder agreements,
voting trust agreements, registration rights
agreements or other Contracts between any Company
and its current or former security holders;

(10) in the case of employees of any of the Companies,
which is an employment agreement for which there
exists contractual liability (and excluding any
statutory liability) related to severance in an
amount in excess of $100,000;

(11) constituting capital leases; or

(12) that are otherwise material to the Business.

-26-
<PAGE>

Sellers have delivered or made available to Buyer a true, complete
and correct copy of each Applicable Contract listed in Schedule
3.14(a) of the Disclosure Schedule.

(b) Except as set forth in Schedule 3.14(b) of the Disclosure
Schedule or for any such matters that, individually or in the aggregate,
would not have a Seller Material Adverse Effect with respect to each
Applicable Contract listed in Schedule 3.14(a) of the Disclosure
Schedule:

(1) such Applicable Contract is a valid and legally
binding obligation of Asset Seller or the Company
party thereto and, to the knowledge of Sellers, the
other parties thereto;

(2) Asset Seller or the Company that is a party to such
Applicable Contract is in substantial compliance with
all material terms and requirements of such Applicable
Contract;

(3) to the knowledge of Sellers, each other Person that is
a party to such Applicable Contract is in substantial
compliance with all material terms and requirements of
such Applicable Contract;

(4) to the knowledge of Sellers, no event has occurred or
circumstance exists that (with or without the giving
of notice, the lapse of time or both) gives any Person
the right to declare a default, exercise any remedy
under, accelerate the maturity or performance of, or
terminate such Applicable Contract;

(5) except as set forth in Section 3.5(b) of the
Disclosure Schedule, to the knowledge of Sellers upon
the consummation of the transactions contemplated by
this Agreement and subject to the receipt of consents
set forth in Schedule 3.5(c) of the Disclosure
Schedule, each Applicable Contract listed in Schedule
3.14(a) of the Disclosure Schedule will be a valid and
binding obligation of Buyer, enforceable in accordance
with its terms.

Section 3.15 Environmental Matters.
---------------------

(a) Except for any such matters that, individually or in the
aggregate would not have a Seller Material Adverse Effect:

-27-
<PAGE>

(1) each of Asset Seller (but solely with respect to the
Division) and each Company is in substantial
compliance with all applicable Environmental Laws;

(2) neither Asset Seller (but solely with respect to the
Division) nor any Company has received any written
notice from any Governmental Entity alleging the
violation of any applicable Environmental Laws other
than for matters that have been resolved prior to the
date hereof;

(3) neither Asset Seller (but solely with respect to the
Division) nor any Company is subject to any Order
arising under any Environmental Law; and

(4) to the knowledge of Sellers, neither Asset Seller
(but solely with respect to the Division) nor any
Company has generated, stored, used, transported,
disposed of or released any Hazardous Substance
except as permitted under applicable Environmental
Laws.

(b) This Section 3.15 constitutes the sole representation and
warranty of Asset Seller and the Companies with respect to any Environmental
Law or Hazardous Substance notwithstanding any other representation and
warranty in this Article III. For purposes of this Agreement, the term
"Environmental Law" means any applicable law, regulation, code, license,
-----------------
permit, order, judgment, decree or injunction promulgated by any Governmental
Entity (i) for the protection of the environment (including air, water, soil
and natural resources) or (ii) regulating the use, storage, handling, release
or disposal of Hazardous Substances, in each case as presently in effect. For
purposes of this Agreement, the term "Hazardous Substance" means any
-------------------
substance to the extent listed, defined, designated or classified as
hazardous, toxic or radioactive under any applicable Environmental Law
including petroleum and any derivative or by-product thereof.

Section 3.16 Insurance. Schedule 3.16 of the Disclosure Schedule sets
forth a true, complete and correct list of all insurance policies covering the
Division, the Companies and any of their assets or operations, including a
description of any and all programs of self-insurance. The insurance policies
listed in Schedule 3.16 of the Disclosure Schedule are sufficient in all
material respects to comply with applicable Laws and any requirements of the
Applicable Contracts. No notice of cancellation or termination of any insurance
policy listed in Schedule 3.16 of the Disclosure Schedule has been received with
respect to any such policy and, to the knowledge of Sellers, each such policy is
in full force and effect.

-28-
<PAGE>

Section 3.17 Brokers and Finders. Except for Morgan Stanley & Co.
-------------------
Incorporated, whose fees shall be paid by Sellers, no agent, broker, investment
banker, intermediary, finder, Person or firm acting on behalf of Sellers or any
Company will be entitled to any broker's or finder's fee or any other commission
or similar fee, directly or indirectly, from any of the parties hereto in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.

Section 3.18 No Undisclosed Liabilities. The Assumed Liabilities do not
--------------------------
include, and the Companies do not have, any Liabilities except for (a)
Liabilities disclosed in the Disclosure Schedule, (b) Liabilities reflected or
reserved against in the Financial Statements, (c) current liabilities incurred
since September 30, 1999 in the ordinary course of business consistent with past
practice, and (d) any other Liabilities that, individually or in the aggregate,
are not material. "Liabilities" means any debts, liabilities, commitments or
obligations of any kind, character or nature whatsoever, whether known or
unknown, contingent or absolute, due or to become due.

Section 3.19 Intellectual Property. Except as set forth in Schedule 3.19
---------------------
of the Disclosure Schedule, Asset Seller and the Companies own or have the valid
and enforceable right to use all of the Intellectual Property used by them in
the conduct of the Business. Schedule 3.19 of the Disclosure Schedule lists all
registered copyrights, material trademark and service mark applications and
registrations and domain names held by Asset Seller and the Companies in
connection with the Business, except for such copyrights, registrations or
applications for trademarks or domain names that are not being used, or that
individually or in the aggregate are not material. Except as set forth in
Schedule 3.19 of the Disclosure Schedule, no proceedings or claims are pending
or, to the knowledge of Sellers, threatened alleging that the use by Sellers or
any Company of any Intellectual Property infringes on the rights of any third
party and no written claim has been received by Sellers or any Company alleging
any such infringement, other than any such infringements, proceedings or claims
that, individually or in the aggregate, would not have a Seller Material Adverse
Effect. Except as set forth in Schedule 3.19 of the Disclosure Schedule, to the
knowledge of Sellers, no Person is infringing any of the Intellectual Property
in any material respect.

Section 3.20 Transferred Assets. Asset Seller has, and at the Closing
------------------
Buyer will receive, good and marketable title to all of the Transferred Assets,
in each case free and clear of any Lien, except for such Liens that would not
materially interfere with the ownership of the Transferred Assets or operation
of the Business, taken as a whole, and which would not reasonably be expected to
interfere with or adversely affect the financing contemplated by Section 6.1(k).
All tangible assets constituting Transferred Assets are in good operating
condition and repair, ordinary wear and tear excepted. Except for the Excluded
Assets, and except for the assets listed on Schedule 2.1 of the Disclosure
Schedule, the Transferred Assets will constitute all of the material assets of
the Asset Seller or any of its Affiliates used in the operation of the Business
as conducted on the Closing Date.

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<PAGE>

Section 3.21 Year 2000 Compliance. To the knowledge of Sellers, all
--------------------
hardware, software and embedded technology used by Asset Seller or any Company
in the conduct of the Business (each such item, an "IT Asset") is Year 2000
--------
Compliant, except for such failures to be Year 2000 Compliant that, individually
or in the aggregate, are not reasonably likely to be material. "Year 2000
---------
Compliant" means, with respect to any IT Asset, that the IT Asset can accurately
- ---------
recognize, manage, accommodate and manipulate date-dependent data, computations,
outputs and other functions for dates on or after January 1, 2000 (including
single-and multi-century formulas and leap years).

Section 3.22 SEC Filings. All forms, reports, statements and other
-----------
documents (the "SEC Reports") filed by Parent with the Securities and Exchange
-----------
Commission ("SEC") have been prepared in all material respects in accordance
---
with the requirements of the Securities Act of 1933, as amended, and the
Exchange Act of 1934, as amended, and the rules and regulations of the SEC
thereunder applicable to such SEC Reports and, to the extent covering
information or matters related to the Business, did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstance under which they were made, not
misleading. Neither Asset Seller nor any other direct or indirect Subsidiary of
Parent is subject to the periodic reporting requirements of the Exchange Act of
1934, as amended.

Section 3.23 Related Party Transactions. Except as set forth in Schedule
--------------------------
3.23 of the Disclosure Schedule, since September 30, 1999, none of Asset Seller
(with respect to the Division) and the Companies is party to any agreement,
contract, commitment, transaction or proposed transaction with any of its
Affiliates (excluding the Division and the Companies), except agreements,
contracts, commitments, transactions and proposed transactions which have been
entered into and conducted on an arm's-length basis.

Section 3.24 Capitalization. The issued and outstanding capital stock of
--------------
Parent consists solely of (i) 103,366,373 shares of Ziff-Davis Inc.-ZD Common
Stock ("ZD Stock"), of which 71,619,366 shares are owned by SOFTBANK, and (ii)
--------
13,707,063 shares of Ziff-Davis Inc.-ZDNet Common Stock ("ZDNet Stock"), of
-----------
which no shares are owned by SOFTBANK. Based on the market value of Ziff-Davis
Inc.-ZD Common Stock and Ziff-Davis Inc.-ZDNet Common Stock as of the date
hereof, SOFTBANK is entitled to approximately 59.4% of the voting power of
Parent on matters generally presented for a vote of stockholders of Parent,
including the matters contemplated by this Agreement. SOFTBANK is able to vote,
without limitation, all shares of ZD Stock it owns until this Agreement
terminates, or, if sooner, the date after the day on which any Stockholders
Meeting convened in accordance with Section 5.19 is held. There are no options
to purchase shares of ZD Stock or ZDNet Stock other than 10,005,060 options to
purchase ZD Stock and 12,852,277 options to purchase ZDNet Stock.

-30-
<PAGE>

Section 3.25 Liabilities. All of the Liabilities related to the
-----------
Business or the Transferred Assets are Liabilities of Asset Seller or the
Companies.

Section 3.26 No Other Representations or Warranties; Disclaimer of
-----------------------------------------------------
Representations and Warranties.
- ------------------------------

(a) Except for the representations and warranties contained in this
Article III, neither of the Sellers nor any other Person makes any express or
implied representation or warranty on behalf of or with respect to Sellers,
any Company, the Transferred Assets, the Division or the Business, and
Sellers hereby disclaim any representation or warranty not contained in this
Article III or in any other agreement, instrument or document delivered by
any of Sellers and the Companies upon execution hereof or at the Closing.

(b) Except as set forth in the first sentence of Section 3.20, the
Sellers do not make any express or implied representation or warranty with
respect to the Investments or the business conducted by the Companies or
entities in which such Investments were made.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Sellers as follows:

Section 4.1 Organization and Good Standing. Buyer is duly organized,
------------------------------
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Buyer has full corporate power and authority to conduct its
businesses and to own or use its assets as it currently does.

Section 4.2 Corporate Authority. Buyer has the corporate power and
-------------------
authority, and has taken all corporate action necessary, to execute, deliver and
perform its obligations under this Agreement. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and legally binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
subject to the Enforceability Exceptions.

Section 4.3 Consents and Approvals; No Violations.
-------------------------------------

(a) Except for an HSR Filing, European Union merger regulations and
except as set forth in Schedule 4.3 of Buyer's Disclosure Schedule, no
notices, reports, registrations or other filings are required to be made
by Buyer with, nor are any consents, approvals or authorizations required
to be obtained by Buyer from, any Governmental Entity or third-party in
connection with the execution, delivery or performance of this Agreement
by Buyer, in each case except for

-31-
<PAGE>

those the failure of which to make or obtain, individually or in the
aggregate, are not material to Buyer's ability to perform its obligations
under this Agreement.

(b) The execution, delivery and performance of this Agreement by
Buyer will not:

(1) violate or contravene any provision of the certificate of
incorporation or by-laws (or other comparable governing
documents) of Buyer;

(2) violate, conflict with, or constitute or result in a
default, acceleration or creation of a Lien under, or a
termination of (in each case with or without notice,
lapse of time or both), any provision of any Contract to
which Buyer is a party or by which any of its assets are
bound;

(3) require Buyer to obtain the consent, waiver,
authorization or approval of, any Person under any
Contract to which Buyer is a party or by which any of its
assets are bound; or

(4) violate, contravene or conflict with any Law or Order of
any Governmental Entity having jurisdiction over Buyer or
any of its assets.

Section 4.4 Securities Act. Buyer is acquiring the Shares for its own
--------------
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933 (the "Securities Act") in any manner that
--------------
would be in violation of the Securities Act. Buyer has not, directly or
indirectly, offered the Shares to anyone or solicited any offer to buy the
Shares from anyone in any manner that would bring the offer and sale of the
Shares pursuant hereto within the registration requirements of the Securities
Act. Buyer will not sell, convey, transfer or offer for sale any of the Shares
except upon compliance with the Securities Act and any applicable state
securities laws or pursuant to any exemption therefrom.

Section 4.5 Brokers and Finders. No agent, broker, investment banker,
-------------------
intermediary, finder, Person or firm acting on behalf of Buyer is or will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from any of the parties hereto, other than Buyer, in
connection with the execution of this Agreement or upon consummation of the
transactions contemplated hereby.

Section 4.6 Financing. Upon funding of the commitment letters
---------
attached as Exhibit D hereto in accordance with customary terms reasonably
---------
satisfactory to Buyer, on the Closing Date Buyer will have available immediately
available funds sufficient to enable it to purchase the Transferred Assets and
Shares on the terms and conditions of this Agreement. Except as set forth in
such commitment letters, Buyer's obligations

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<PAGE>

hereunder are not subject to any conditions regarding Buyer's ability to obtain
financing for the consummation of the transactions contemplated herein.

Section 4.7 Litigation. As of the date hereof, there are no Actions
----------
pending or, to the knowledge of Buyer, threatened against Buyer or any of its
Affiliates other than Actions that, individually or in the aggregate, are not
material to its ability to perform its obligations hereunder and are not
reasonably likely to prohibit or materially restrict or delay the performance of
this Agreement by Buyer.

Section 4.8 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of or with respect to Buyer and Buyer hereby disclaims any
representation or warranty not contained in this Article IV.

ARTICLE V

COVENANTS

Section 5.1 Conduct of Business. Prior to the Closing, except as
-------------------
requested or consented to by Buyer in writing, which consent shall not be
unreasonably withheld or delayed and except as otherwise expressly contemplated
hereby, Asset Seller shall, and Stock Seller shall cause the Companies to,
conduct the Business only in the ordinary course of business consistent with
past practice and use their commercially reasonable efforts to preserve intact
the Business and the relationships of the Division and the Companies with their
employees, suppliers and others having business relationships with them and
Asset Seller shall not (but solely with respect to the Division) and Stock
Seller shall ensure that the Companies shall not:

(a) grant, modify or increase any bonus, salary, severance,
termination or other compensation or benefits to any employee of the
Division or any Company other than in the ordinary course of business
consistent with past practice or adopt or enhance any Benefit Plans;

(b) sell, lease, license or otherwise dispose of, mortgage,
pledge or otherwise subject to a Lien any assets in excess of $1,000,000
Related to the Business and owned by the Asset Seller or any Company
other than (i) dividends of cash or other Excluded Assets; (ii) sales,
licenses or dispositions in the ordinary course of business consistent
with past practice; and (iii) nonconsensual statutory or common law
Liens incurred in the ordinary course of business of a nature that would
not reasonably be expected to interfere with or adversely affect the
financing contemplated by Section 6.1(k).

-33-
<PAGE>

(c) acquire or make any investment of more than $1,000,000 in
any other Person or assets, including without limitation by merger,
consolidation or share exchange;

(d) make or commit to make any capital expenditures in excess
of $1,000,000;

(e) except as set forth in Schedule 5.1(e) of the Disclosure
Schedule, enter into any Applicable Contract that would have been
required to be listed in Schedule 3.14(a) of the Disclosure Schedule
if it had been in effect as of the date of this Agreement or
terminate, modify in any material respect or waive any material
rights under any Applicable Contract listed in such Schedule in each
case other than in the ordinary course of business consistent with
past practice;

(f) settle, compromise, waive, release or assign any material
claims or rights it has in respect of any Actions related to the
Business or any Company to which it is a party or by which it is
bound;

(g) incur any indebtedness for borrowed money other than
indebtedness to Sellers or their Affiliates or guaranty any such
indebtedness or issue or sell any debt securities or warrants or
rights to acquire any debt securities, or grant or incur any Liens
for borrowed money or that could reasonably be expected to adversely
affect the Buyer's ability to obtain the financing contemplated by
this Agreement with respect to any of the Transferred Assets or any
assets of any of the Companies;

(h) change any of its accounting methods, policies or
practices;

(i) enter into any material transaction or Contract which, if
entered into prior to the date hereof, would have required
disclosure under Section 3.23 above; or

(j) enter into any agreement to do any of the foregoing.

Notwithstanding the foregoing, at any time before the Closing,
Stock Seller may cause any Company to (i) transfer, by dividend or otherwise, to
Stock Seller or any of its Affiliates any cash, bank accounts, certificates of
deposit, commercial paper, annuities, treasury notes and bills or other
marketable securities and any of the assets listed in Schedule 5.1(i) of the
Disclosure Schedule and (ii) discharge any Liability owed to or by Sellers or
any of their Affiliates.

Section 5.2 Access.
------

(a) Between the date of this Agreement and the Closing Date,
Sellers shall, and shall cause the Companies to, afford Buyer full
and free access, at all

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<PAGE>

reasonable times during normal business hours, to the personnel,
premises, properties, Applicable Contracts, books and records and
other documents and data relating to the Division and the Companies
as Buyer may reasonably request. The foregoing shall not require
Sellers or any Company to permit any inspection, or to disclose any
information, that in their reasonable judgment is reasonably likely
to result in the disclosure of any trade secrets of third parties or
violate any of their obligations with respect to confidentiality if
the Applicable Seller or the Company, as the case may be, shall have
used reasonable efforts to obtain the consent of such third party to
such inspection or disclosure. All requests for information made
pursuant to this Section 5.2(a) shall be directed to an executive
officer of the Applicable Seller.

(b) Following the Closing, Buyer shall, and shall cause
the Companies and any other Subsidiary of Buyer to (i) afford
Sellers full and free access, upon reasonable notice at all
reasonable times during normal business hours, to the personnel,
premises, properties, Applicable Contracts, books and records and
other documents and data relating to the Division and the Companies
as Sellers shall reasonably request, (ii) furnish Sellers with
copies of all such Applicable Contracts, books and records and other
existing documents and data as Sellers may reasonably request and
(iii) furnish Sellers with such additional financial, operating and
other data and information as Sellers may reasonably request, in
each case to the extent necessary to prepare its financial
statements, Tax Returns and other documents and reports Sellers or
any of its Affiliates are required to file with Governmental
Entities or which Sellers reasonably require in connection with any
Action against, or tax examination of, Sellers or any of its
Affiliates (other than any Action by or against Buyer or any of its
Affiliates); provided that Buyer shall not be obligated to comply
with any of the foregoing unless and until Sellers shall have
executed a confidentiality agreement in customary form. The
foregoing shall not require Buyer, any Company or any of Buyer's
other Affiliates to permit any inspection, or to disclose any
information, that in their reasonable judgment is reasonably likely
to result in the disclosure of any trade secrets of third parties or
violate any of their obligations with respect to confidentiality if
Buyer, the Companies or Buyer's other Affiliates shall have used
reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant
to this Section 5.2(b) shall be directed to an executive officer of
Buyer.

Section 5.3 Required Consents, Approvals and Actions.
----------------------------------------

(a) Sellers shall use their commercially reasonable
efforts to promptly prepare and file all necessary documentation, to
effect all necessary notices, reports, registrations or other
filings and documents and to obtain as promptly as practicable all
necessary consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable or to take
such other actions

-35-
<PAGE>

necessary or advisable under any Law to consummate the transactions
contemplated herein. Buyer shall provide reasonable assistance to
and cooperate with Sellers' efforts with respect to the matters
described in the preceding sentence. Each party shall have the right
to review in advance, and to the extent practicable each will
consult the other on, in each case subject to applicable Laws
relating to the exchange of information, all the information
relating to Buyer or any Seller or Company that appears in any
filing made with, or written materials submitted to, all third
parties and Governmental Entities in connection with the
transactions contemplated by this Agreement. In exercising the
foregoing right, each of Buyer and Sellers shall act reasonably and
as promptly as practicable. Buyer and Sellers agree that they will
keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein, including
promptly furnishing the other with copies of notice or other
communications received by Buyer, Sellers or the Companies, from all
third parties and Governmental Entities with respect to the
transactions contemplated herein.

(b) Without limiting the generality of the foregoing,
Buyer and Sellers each agree to promptly prepare and file an HSR
Filing with the Federal Trade Commission (the "FTC") and the
---
Antitrust Division of the Department of Justice (the "DOJ"). Each
---
party hereby covenants to request early termination of the waiting
period required by the HSR Act and to cooperate with the other such
party to the extent reasonably necessary to assist in making
reasonable supplemental presentations to the FTC or the DOJ, and if
requested by the FTC or the DOJ, to promptly amend or furnish
additional information thereunder. Buyer agrees to use its best
efforts to do all things necessary, proper or advisable to avoid or
eliminate any impediment under any antitrust law that may be
asserted by any of the FTC, the DOJ or any other Person to the
consummation of the acquisition of the Transferred Assets or the
Shares by the Buyer in accordance with the terms of this Agreement.

Section 5.4 Commercially Reasonable Efforts. Between the
-------------------------------
date of this Agreement and the Closing Date, each of the parties hereto shall
use their respective commercially reasonable efforts to cause the conditions set
forth in Sections 6.1 and 6.2, as applicable, to be satisfied.

Section 5.5 Publicity. The initial press release
---------
announcing the transactions contemplated herein shall be released jointly after
consultation between the parties hereto and thereafter the parties hereto shall
consult with each other to the extent practicable prior to issuing any press
releases or otherwise making public announcements with respect to the
transactions contemplated herein and prior to making any filings with any
Governmental Entity or with any national securities exchange or interdealer
quotation service with respect thereto.

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<PAGE>

Section 5.6 Expenses. Except as otherwise expressly provided herein,
--------
whether or not the transactions contemplated herein are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated herein shall be paid by the party incurring such expense; provided
that all fees and expenses arising from the assignment of trademarks or service
marks by Asset Seller or any of its Affiliates to Buyer shall be borne 50% by
Buyer and 50% by Asset Seller. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach of this Agreement by the other party.

Section 5.7 ZDMI Non-Solicitation. Buyer hereby covenants and agrees
---------------------
that for a period of two years following October 1, 1999, Buyer shall not employ
in competition with the ZD Market Intelligence Business any person formerly
employed by Asset Seller's ZD Market Intelligence division who became an
employee of Harte-Hanks, Inc. in connection with the sale of the ZD Market
---------
Intelligence Business. "ZD Market Intelligence Business" means the development,
- ---------------------
compilation and distribution of information on installed and planned technology
hardware and software purchases and the provision of customized service
solutions utilizing such information as conducted by the ZD Market Intelligence
division of Asset Seller before October 1, 1999.

Section 5.8 Employees.
---------

(a) Schedule 5.8(a) of the Disclosure Schedule sets forth, as of the
date hereof, a true, complete and correct list of employees of the
Division and the Companies who are on disability leave, authorized leave
of absence or military service. On the Closing Date, Buyer shall (i) offer
employment to all active employees of Asset Seller listed on Schedules
3.11(a) and 3.11(b) of the Disclosure Schedule and who are still employees
of Asset Seller as of the Closing Date, including the employees of Asset
Seller who are temporarily absent from work for short-term disability,
military service, worker's compensation or Family Medical and Leave Act
reasons and identified as such on Schedule 5.8(a) of the Disclosure
Schedule, for cash compensation substantially comparable to that set forth
on Schedules 3.11(a) and (b) of the Disclosure Schedule as increased in
accordance with the terms of Section 5.1(a), and (ii) offer employment to
all active employees of Asset Seller hired in the ordinary course of
business after the date hereof but prior to the Closing Date (provided,
however, that neither Asset Seller nor any Company shall hire any person
for annual compensation in excess of $150,000 without the prior written
consent of Buyer) for cash compensation equal to that amount for which
they were hired (in the case of persons hired after the date hereof) as
increased in accordance with the terms of Section 5.1(a) in connection
with similar increases for all other employees similarly situated.
Notwithstanding any other provision of this Agreement to the contrary,
Buyer shall not be obligated to offer employment to any person except as
required pursuant to the immediately preceding sentence. Buyer shall have
no liability or

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<PAGE>

obligation for (i) any active employee of Asset Seller who does not accept
employment with Buyer or (ii) any non-active or former employee of Asset
Seller (such Liabilities with respect to the foregoing being referred to
as "Excluded Employment Liabilities"). Asset Seller shall use its
-------------------------------
reasonable efforts to ensure the orderly transfer of such employees to
Buyer.

(b) Buyer shall comply in all material respects with all Laws
respecting employment and employment practices in connection with the
transfer of any employees of Asset Seller to Buyer or the retention of
employees by the Companies after the Closing Date.

(c) During the period commencing at the Closing Date and ending
on the first anniversary thereof, Buyer shall, or shall cause one of its
Affiliates to, continue to provide to the employees of the Division and
employees of each Company employee benefit plans, programs, policies and
arrangements (other than stock option or other plans involving the
potential issuance of securities) which in the aggregate are no less
favorable than those provided under the applicable employee benefit plans,
programs, policies and arrangements of the Division or the relevant
Company in effect on the Closing. Without limiting the generality of the
foregoing,

(1) Buyer shall cause each of the Division and each
Company to continue the Enhanced Severance Benefit
Plan set forth in Schedule 5.8(c) of the Disclosure
Schedule for a period of at least 60 days after the
Closing. Employees of the Division and each Company
shall (1) be permitted to carry over up to four
weeks of vacation time accrued during his or her
employment by Asset Seller and (2) be given credit
under each employee benefit plan, program, policy
or arrangement of Buyer or any of its Affiliates in
which the employees are eligible to participate for
all service with the Division, each Company or any
predecessor employer (to the extent such credit was
given by the Division or the relevant Company) for
purposes of eligibility, vesting, benefit accrual,
severance and vacation entitlement.

(2) Buyer shall take all such action as is necessary or
appropriate in order to ensure that employees of
the Division who accept employment by Buyer and
employees of each Company and their spouses and
dependent children covered by the group health
plans sponsored by Sellers or their Affiliates (the
"Seller Health Plans") as of the Closing
-------------------
Date become eligible for coverage under a
substantially comparable group health plan
maintained by Buyer or its

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<PAGE>

Affiliates effective immediately after the Closing.
Buyer shall cause the group health plan maintained
by it or its Affiliates to (i) waive any waiting
periods, evidence of insurability requirements or
preexisting condition limitations and (ii) honor
any deductible, co-payment and out-of-pocket
expenses incurred by the employees and their
beneficiaries under the Seller Health Plans during
the portion of 1999 preceding the Closing.

(3) Buyer shall take all such action as is necessary or
appropriate in order to assure that employees of
the Division and each Company covered by the group
term life insurance plan sponsored by Sellers or
their Affiliates (the "Seller Life Plan")
----------------
as of the Closing Date become eligible for
substantially comparable coverage under a group
term life insurance plan maintained by Buyer or its
Affiliates effective immediately after the Closing.
Buyer shall cause such plan to waive any medical
certification for such employees up to the amount
of coverage the employees had under the Seller Life
Plan (but subject to any limits on the maximum
amount of coverage under Buyer's group term life
insurance plan).

(d) The account balances under the ZD Plan of all current and former
employees of the Division and the each Company, (i) if not forfeited under the
terms of the ZD Plan prior to the Closing Date, shall become 100% vested and
non-forfeitable upon the Closing Date, and (ii) shall be transferred to a tax-
qualified defined contribution plan maintained by Buyer or any of its
Affiliates ("Buyer's Plan") in a so-called "trust-to-trust" transfer satisfying
------------
the applicable requirements of Section 414(l) of the Code. An amount equal to
8% of the eligible earnings earned in the year 2000 prior to the Closing Date
of all employees of the Division or any Company shall be accrued as a liability
on the Closing Date Balance Sheet; provided, however, that Buyer shall use such
-------- -------
amount to make a discretionary contribution to Buyer's own retirement plan for
the benefit of such employees.

(e) Employees of the Division and each Company who are on long-term
disability as of the Closing Date shall continue disability coverage under
Sellers' disability plan until such time as they are no longer disabled.
Employees of the Division and each Company who are on short-term disability as
of the Closing Date shall be covered under a short-term disability plan
maintained by Buyer or its Affiliate effective immediately after the Closing
Date, and shall be transferred to a plan maintained by Buyer or its Affiliates
upon becoming permanently disabled or otherwise entitled to long-term disability
benefits under such plan.

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<PAGE>

Buyer shall pay to employees of the Division and each
Company the retention costs and special bonuses set forth in
Schedule 5.8(e) of the Disclosure Schedule in accordance with such
Schedule.

Section 5.9 Intercompany Liabilities. Except as otherwise provided
------------------------
in Section 5.10, Sellers shall take all actions necessary so that, as of the
Closing Date, neither Asset Seller (with respect to the Division) nor any of the
Companies shall have any Liability (other than with respect to trade receivables
arising in the ordinary course of business consistent with past practice which
will be reflected on the Closing Date Balance Sheet and included in the
calculation of Closing Net Worth) to any of Sellers and their Affiliates (other
than the Division or any Company) after the Closing, including all borrowings by
Asset Seller (with respect to the Division) or any Company from any of Sellers
and their Affiliates (other than Asset Seller, with respect to the Division or
any Company) or any obligation to pay a dividend to any of Sellers and their
Affiliates (other than Asset Seller, with respect to the Division or any
Company).

Section 5.10 Intercompany Programs. Prior to the Closing, Asset
---------------------
Seller and its Affiliates have proposed or agreed upon transactions with third
parties whereby products or services of the Division and the Companies are
offered or sold to such third parties bundled with other products or services of
Asset Seller and/or its Affiliates. Prior to the Closing, Buyer and Asset Seller
shall, and Asset Seller shall cause its Affiliates to, negotiate in good faith
and, if such Persons agree, execute definitive agreements embodying, the terms
on which Buyer (with respect to the Business and the Division), Asset Seller and
such Affiliates shall provide such products or services to such third parties.
In connection with such negotiations, none of Buyer, Asset Seller and its
Affiliates shall be obligated to accept any payment or other terms, provided
that each will afford to the others the favorable terms which such Person
generally offers third parties buying such products or services from such Person
in similar quantities. Buyer acknowledges that prior to the Closing Date,
certain current Affiliates of Asset Seller may be sold by Asset Seller or its
parent company, Ziff-Davis Inc.

Section 5.11 Transition Services and Subleases.
---------------------------------

(a) Prior to Closing, Sellers and Buyer shall negotiate in good
faith and execute an agreement covering (i) certain services that
Seller will provide to Buyer for a period of up to six months
following the Closing, at a price equal to the Asset Seller's or
Parent's, as appropriate, cost of providing such services, and (ii)
terms on which Buyer will make available to Affiliates of Sellers
office space at a price equal to a pro rata portion of the lease
payments and other costs related to the use of the office space,
based on the amount of space used by such Affiliate.

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<PAGE>

(b) Asset Seller shall, and shall cause its Affiliates to, and
Buyer shall, enter into a sublease as contemplated by Schedule
5.11(b) of the Disclosure Schedule.

Section 5.12 Retention of Records.
--------------------

(a) Buyer shall retain, and cause its Affiliates to retain, all
books and records relating to the conduct of the Business prior to
the Closing Date for a period of at least six years from the date
hereof. After the end of such six-year period, any such document or
record may be disposed of by Buyer or its Affiliates only if Buyer
or such Affiliate first offers to surrender possession thereof to
Sellers at Sellers' expense and Sellers decline such offer. Upon
reasonable notice to Buyer and with Buyer's prior consent, which
consent Buyer will not withhold or delay unreasonably, Sellers may
inspect and make copies of any such records for any reasonable
purpose during business hours, subject to Sellers' obligations under
Section 5.18.

(b) Subject to Sellers' obligations under Section 5.18, Sellers
may retain (i) one copy of the materials included in the data room
organized by Sellers in connection with the Asset Purchase and the
Stock Purchase, together with a copy of all documents referred to in
such materials, (ii) all internal correspondence and memoranda,
valuations, investment banking presentations and bids received from
others in connection with the Asset Purchase and the Stock Purchase
and (iii) a copy of all combined, consolidating and consolidated
financial information and all other accounting records prepared or
used in connection with the preparation of the Financial Statements.
Sellers shall deliver to Buyer all other books and records relating
to the Business and the Companies.

Section 5.13 Asset Seller's Trademarks. Effective as of the
-------------------------
Closing Date, any license agreement pursuant to which Asset Seller or any of its
Affiliates has granted to the Division or any Company the right to use
trademarks, trade names, trade dress, service marks, domain names or logos that
include the words "ZD", "Ziff" or "SOFTBANK" shall be cancelled. Except as
provided in the license agreement contemplated by Section 6.1(h), as promptly as
is practicable after the Closing, Buyer shall, and agrees to cause each Company
to, eliminate the words "ZD", "Ziff" or "SOFTBANK" and every word or expression
derived therefrom from the names under which the Division and the Companies do
business. Except as provided in the license agreement contemplated by Section
6.1(h), within 60 days after the Closing (the "Transition Period"), Buyer shall,
and shall cause each Company to, remove any such trademarks, trade names, trade
dress, service marks, domain names and logos from its respective properties,
stationery and literature, and thereafter neither Buyer nor the Companies shall
use any such trademarks, trade names, trade dress, service marks, domain names
or logos.

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<PAGE>

Section 5.14 Tax Matters.
-----------

(a) Transfer Taxes. All excise, sales, use, transfer, documentary,
--------------
filing, recordation and other similar taxes and fees that may be imposed or
assessed as a result of the transactions effected pursuant to this Agreement,
together with any interest, additions or penalties with respect thereto and
any interest in respect of such additions or penalties ("Transfer Taxes"),
--------------
shall be borne 50% by Buyer and 50% by Sellers. Buyer and Sellers shall
cooperate in the timely preparation and filing of any Tax Returns that must be
filed in connection with any Transfer Taxes. Buyer shall promptly and timely
pay all Transfer Taxes. Any Transfer Taxes or fees resulting from any
subsequent transfer of the Transferred Assets or Assumed Liabilities or any
transfer of property on or subsequent to the Closing shall be borne entirely
by Buyer, and Buyer shall indemnify Sellers for any liabilities arising in
connection therewith.

(b) Remittance of Transfer Taxes. Transfer Taxes described in Section
----------------------------
5.14(a) shall be remitted as provided by applicable law, and where the paying
party is entitled to reimbursement, such reimbursement will be made by the
non-paying party in immediately available funds in United States dollars not
later than five business days after the payment of such taxes.

(c) Determination and Allocation of Consideration. Asset Seller and
---------------------------------------------
Buyer agree to determine the amount of and allocate the total consideration
transferred by Buyer to Asset Seller pursuant to this Agreement (the
"Consideration") in accordance with the fair market value of the assets and
liabilities transferred and in accordance with Section 1060 of the Code. Buyer
shall provide Asset Seller with one or more schedules allocating the
Consideration. If Asset Seller disagrees with any items reflected on the
schedules so provided, Asset Seller shall have the right to notify Buyer of
such disagreement and its reasons for so disagreeing, in which case Asset
Seller and Buyer shall attempt to resolve the disagreement. If Asset Seller
and Buyer cannot resolve the disagreement, the disagreement shall be referred
to the Accounting Expert, whose decision shall be final and binding and whose
expenses shall be borne by the party that the Accounting Expert determines has
lost the dispute. Asset Seller and Buyer agree to prepare and file an IRS Form
8594 in a timely fashion in accordance with the rules under Section 1060 of
the Code. To the extent that the Consideration is adjusted after the Closing
Date, the parties agree to revise and amend the schedule and IRS Form 8594 in
the same manner and according to the same procedure. The determination and
allocation of the Consideration derived pursuant to this subsection shall be
binding on Asset Seller and Buyer for all Tax reporting purposes.

(d) Employee Withholding and Reporting Matters. With respect to those
------------------------------------------
employees who are employed by Buyer within the same calendar year as the

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<PAGE>

Closing, Buyer shall, in accordance with and to the extent permitted
pursuant to Revenue Procedure 96-60, 1996-2C.B.399, assume all
responsibility for preparing and filing Form W-2, Wage and Tax
Statement, Form W-3, Transmittal of Income and Tax Statements, Form 941,
Employer's Quarterly Federal Tax Return, Form W-4, Employee's
Withholding Allowance Certificate, and Form W-5, Earned Income Credit
Advance Payment Certificate. Sellers and Buyer agree to comply with the
procedures described in Section 5 of Revenue Procedure 96-60.

Section 5.15 Further Assurances. At any time and from time to
------------------
time after the Closing Date, the parties hereto agree to (a) furnish upon
request to each other such further assurances, information, documents and
instruments of transfer or assignment, (b) promptly execute, acknowledge, and
deliver any such further assurances, documents and instruments of transfer or
assignment, and (c) do all such further acts and things, in each case that the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to herein. In the event either Seller
is the obligor on a performance bond, letter of credit or similar instrument
described on Schedule 5.15 of the Disclosure Schedule which secures the payment
or performance of an Assumed Liability, Buyer shall use its commercially
reasonable efforts to cause such Seller to be released from such obligations and
shall take such actions as are necessary to reimburse the Applicable Seller for
any payments it makes in respect of such obligations.

Section 5.16 Non-Assignable Agreements. Buyer acknowledges that
-------------------------
certain agreements between Asset Seller and third parties require that such
third parties consent to the assignment of such agreements. Asset Seller shall
use commercially reasonable efforts to obtain all consents and approvals
necessary or desirable in connection with the consummation of the transactions
contemplated by this Agreement, in form and substance reasonably satisfactory to
Buyer, including the assignment to Buyer of all agreements, contracts, purchase
orders, instruments or other similar arrangements which, but for Section 2.3(h),
would be Transferred Assets. Without in any way limiting the foregoing, Buyer
shall reasonably cooperate with and provide assistance to Asset Seller in
obtaining all such consents and approvals. If any consent for any agreement is
not obtained, such agreement shall not be assigned, but Asset Seller shall, to
the extent possible without incurring any liability to any third party, keep the
agreement in effect and give the Buyer the benefit of the agreement to the same
extent as if it had been assigned including, without limitation, (i) cooperating
with Buyer in holding any rights under agreements for which no consent to assign
rights to Buyer is obtained ("Non-Assignable Rights") in trust for Buyer or
---------------------
acting as an agent for Buyer; (ii) enforcing any rights of Asset Seller arising
from such Non-Assignable Rights against the issuers thereof or the other party
or parties thereto; (iii) taking all such actions and doing, or causing to be
done, all such things at the request of Buyer as shall be reasonably necessary
and proper in order that the value of any Non-Assignable Rights shall be
preserved and shall inure to the benefit of Buyer and (iv) paying over to Buyer
all monies or other assets

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<PAGE>

collected by or paid to Asset Seller in respect of such Non-Assignable Rights.
Buyer shall perform the obligations under the agreement relating to the benefit
obtained by Buyer. Nothing in this Agreement shall be construed as an attempt to
assign any agreement or other instrument that is by its terms non-assignable
without the consent of the other party.

Section 5.17 Audited Financial Statements.
----------------------------

(a) Delivery. Sellers will use their commercially reasonable efforts to
--------
deliver to Buyer (i) by January 15, 2000 draft audited consolidated balance
sheets of Asset Seller (with respect to the Division) and the Companies as
of December 31, 1997 and 1998 and the related draft audited consolidated
statements of operations and cash flow for Asset Seller (with respect to
the Division) and the Companies for the successive fiscal year periods
ended on such dates ("the "Pre-1999 Draft Financial Statements") and (ii)
-----------------------------------
by February 1, 2000 a draft audited consolidated balance sheet of Asset
Seller (with respect to the Division) and the Companies as of December 31,
1999, and the related draft audited consolidated statements of operations
and cash flow for Asset Seller (with respect to the Division) and the
Companies for the fiscal year period ended on such date (the "1999 Draft
----------
Financial Statements" and, together with the Pre-1999 Draft Financial
--------------------
Statements, the "Draft Financial Statements"). The parties hereto agree
--------------------------
that each such draft audited balance sheet shall include only assets
Related to the Business, the assets of the Companies and the liabilities to
the extent Related to the Business, and shall exclude the Excluded Assets
and the Excluded Liabilities in each case as of, or for, the date or period
referred to in such financial statements, and that the audited financial
statements shall, in each case, be in form and substance consistent with
the requirements of the SEC for a registered offering.

(b) Review by Buyer. Upon receipt of all of the Draft
---------------
Financial Statements, Buyer shall have 15 days (the "Financial Statements
Review Period") to review the Draft Financial Statements. From and after
the date hereof, Sellers shall give Buyer and Buyer's personnel and
advisors reasonable access at all reasonable times to all books, records
and other materials relating to the Division and the Companies and any work
papers prepared by or for Sellers (including accountant's work papers), in
each case as is reasonably requested.

(c) Objection by Buyer. On or prior to the last day of the
------------------
Financial Statements Review Period, Buyer may object to the Draft Financial
Statements by delivering to Seller a written statement setting forth in
reasonable detail such Seller's objections to the Draft Financial Statements
(the "Financial Statements Statement of Objections"). If Buyer does not
--------------------------------------------
deliver a Financial Statements Statement of Objections within the Financial
Statements Review Period, the Draft Financial Statements shall be deemed to
have been accepted by the Buyers and,

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<PAGE>

assuming the final audited version thereof does not depart therefrom, the
condition set forth in Section 6.1(l) shall be deemed to have been
satisfied. If Buyer delivers a Financial Statements Statement of Objections
within the Financial Statements Review Period, Sellers and Buyer shall
negotiate in good faith to resolve such objections, and any objections that
are resolved by a written agreement between Buyer and Sellers shall be final
and binding on the parties. If all objections are so resolved and the final
audited financial statements do not depart from that resolution, the
condition set forth in Section 6.1(l) shall be deemed to have been
satisfied.

(d) Resolution of Disputes. If the Seller and Buyer fail to reach an
----------------------
agreement with respect to all of the matters set forth in the Financial
Statements Statement of Objections, then the matters still in dispute shall,
not later than 5 business days after the earlier of the end of the Financial
Statements Review Period or the first date on which one of the parties
affirmatively terminates discussions in writing with respect to the
Financial Statements Statement of Objections, be submitted for resolution to
the New York office of one of the five largest United States independent
certified public accountants that has no material business relationships
with Buyer or either of the Sellers, as selected by Buyer and the Sellers
jointly (the "Financial Statements Accounting Expert") who, acting as an
--------------------------------------
expert and not as an arbitrator, shall resolve the matters still in dispute.
The Financial Statements Accounting Expert's resolution of the matters in
dispute shall be final and binding on the parties. The Financial Statements
Accounting Expert shall make a determination as soon as practicable and in
any event within 10 days (or such other time as the parties hereto shall
agree in writing) after its engagement. The parties hereto agree that all
adjustments shall be made without regard to materiality. If the final
audited financial statements do not depart from such resolution, the
condition set forth in Section 6.1(l) shall be deemed to have been
satisfied.

(e) Fees and Expenses. Buyer shall pay one-half and the objecting
-----------------
Seller shall pay one-half of the fees and expenses of the Financial
Statements Accounting Expert.

(f) Access to Supporting Documentation. Sellers and Buyer shall each
----------------------------------
make readily available to the Financial Statements Accounting Expert all
relevant work papers and books and records in their possession or to which
they have the power to grant access relating to the Division, the
Companies, and the Draft Financial Statements.

Section 5.18 Confidentiality.
---------------

(a) Confidentiality. Each Seller shall treat and hold as confidential
---------------
any information concerning the business and affairs of the Company that is
not

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<PAGE>

already generally available to the public (the "Confidential Information"),
refrain from using any of the Confidential Information except in connection
with this Agreement, and (except for any information that this Agreement
expressly permits Sellers to retain) deliver promptly to Buyer, at the
request and option of Buyer, all tangible embodiments (and all copies) of
the Confidential Information which are in its possession or under its
control. If Seller is required to disclose any Confidential Information in
order to avoid violating any Law, Sellers will provide the Buyer with
prompt notice of such requirement. To the extent legally permissible and at
Buyer's expense, Sellers shall provide the Buyer, in advance of any such
disclosure, with copies of any Confidential Information Sellers intend to
disclose (and, if applicable, the text of the disclosure language itself)
and to cooperate with Buyers to the extent Buyer may seek to limit such
disclosure. If, in the absence of a protective order or the receipt of a
waiver from the Buyer after a request in writing therefor is made by
Sellers, and after complying with the foregoing, Sellers are, on the advice
of counsel, by Law required to disclose Confidential Information, Sellers
may do so without liability hereunder.

(b) Remedy for Breach. Each Seller acknowledges and agrees that in
-----------------
the event of a breach by any Seller of any of the provisions of this
Section 5.18, monetary damages shall not constitute a sufficient remedy.
Consequently, in the event of any such breach, Buyer and its successors or
assigns may, in addition to other rights and remedies existing in its
favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce
or prevent any violations of the provisions hereof, in each case without
the requirement of posting a bond or proving actual damages.

(c) Enforcement. If the final judgment of a court of competent
-----------
jurisdiction declares that any term or provision of this Section 5.18 is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed.

Section 5.19 Stockholders Meeting; Information Supplied.
------------------------------------------

(a) If deemed appropriate, Parent will take all action necessary to
convene a meeting (the "Stockholders Meeting") of Parent's stockholders
("Parent Stockholders"), to occur as promptly as practicable after the
date hereof, to approve the transactions contemplated hereby.

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<PAGE>

(b) Parent and Buyer each agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion in the proxy
statement (and any amendment or supplement thereto) to be filed with
the SEC by Parent in connection with the Asset Purchase and Stock
Purchase (the "Proxy Statement") will, at the date of mailing to
stockholders and at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they were made, not misleading. Parent will cause the Proxy
Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act of 1934, as amended, and
the rules and regulations thereunder.

(c) Buyer shall, upon request by Parent, furnish Parent with
all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with the filing and
mailing of the Proxy Statement.

(d) Buyer and its counsel shall be given an opportunity to
review the Proxy Statement, and all amendments or supplements
thereof, prior to their being filed with the SEC and Parent shall
not make any such filing without the approval of Buyer (which shall
not be unreasonably withheld or delayed). Parent shall advise Buyer,
promptly after it receives notice thereof, of the time when the
Proxy Statement has been cleared by the SEC or any request by the
SEC for amendment of the Proxy Statement or proposed responses
thereto or requests by the SEC for additional information.

Section 5.20 Insurance. The parties acknowledge the possibility
---------
that losses Buyer may suffer after the Closing as a result of events or
occurrences affecting the Division or the Companies before the Closing may be
covered by insurance policies of Sellers or their Affiliates. The parties
further acknowledge the possibility that they may be able to put in place
arrangements that would make available to Buyer the benefit of such coverage
with respect to such losses without prejudicing Seller's other rights under such
policies. The parties agree to cooperate fully with each other and Sellers shall
use their best efforts to put such arrangements in place by naming the Buyer as
an additional insured under the insurance policies of Sellers or otherwise
enable Buyer to benefit from the insurance policies; provided that, if Buyer
receives any benefit as a result of any such arrangement in respect of any loss
as to which it has already been compensated through an adjustment in the
Purchase Price as contemplated by Section 2.8, Buyer and Seller will agree on
appropriate measures to avoid any windfall to Buyer. Buyer agrees to reimburse
Sellers for all of Sellers' reasonable expenses incurred in connection with
obtaining for Buyer the benefit of such insurance coverage with respect to such
losses.

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<PAGE>

Section 5.21 Sale of Investments. Buyer acknowledges (i) that ZD APN
-------------------
Partners and Ziff-Davis Richina Media LDC hold assets that are not Related to
the Business; (ii) that, prior to Closing, Stock Seller intends to cause such
entities to transfer or other otherwise convey to Affiliates of Stock Seller
those assets not Related to the Business; and (iii) that such transfer or
conveyance may require the consent of other Persons who hold interests in such
entities. In the event that Stock Seller cannot obtain the consents contemplated
by this Section or otherwise cannot transfer such assets to Affiliates of Stock
Seller, the parties hereto shall negotiate in good faith to determine the
appropriate percentage of the interests the Companies currently hold in such
entities to remain in the Companies at Closing and the appropriate percentage of
such interests to be conveyed to Stock Seller or Affiliates of Stock Seller at
Closing in recognition that ZDNet assets are in included in such investments.

Section 5.22 Estoppel Letters. Prior to the Closing, Sellers shall use
----------------
their reasonable best efforts to obtain and deliver to Buyer at the Closing
estoppel letters with respect to the parcels of Leased Real Property listed on
Schedule 5.22 of the Disclosure Schedule.

Section 5.23 Unregistered Trademarks. The following provisions of this
-----------------------
Section 5.23 will apply solely to Unregistered Trademarks that have not been
used by the Business at any time since January 1, 1999 ("Inventory Unregistered
----------------------
Trademarks"):
- ----------

(a) Prior to Closing, Asset Seller may deliver a list of Inventory
Unregistered Trademarks which (i) have been used by Asset Seller since
January 1, 1999 other than in connection with the Business, and (ii) Asset
Seller reasonably believes in good faith are significant to it other than
in connection with the Business, it being understood that presentations of
Inventory Unregistered Trademarks on the website of a Buyer publication
shall not constitute a use of such trademark for the purposes of this
Section 5.23. Buyer will then, in a reasonable and good faith manner,
determine which items on that list are or may become significant to the
Business ("Significant Items") and which items are not Significant Items
-----------------
("Insignificant Items").
-------------------

(b) At Closing, Buyer and Asset Seller will enter into a quit claim
agreement, in a form reasonably satisfactory to the parties, agreeing that
neither party will object to the use of any Significant Item by the other
party. Each Insignificant Item will be deemed to be an Excluded Asset.

Section 5.24 Inter@ctive Investor. At Closing, Buyer and Asset Seller
--------------------
will enter into a license agreement, in a form reasonably satisfactory to the
parties, pursuant to which Asset Seller will grant to Buyer a perpetual license
to use the name Inter@ctive Investor and derivatives thereof in any print
--------------------
publication and in Alternative Electronic Versions (as defined in the license
agreement set forth in Exhibit F hereto) (to the fullest extent that Asset
Seller has rights therein that it may so license).

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ARTICLE VI

CONDITIONS TO CLOSING

Section 6.1 Conditions to Obligations of Buyer. The obligation of Buyer to
----------------------------------
consummate the Asset Purchase and the Stock Purchase and to take the other
actions to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived in whole or in part by Buyer):

(a) Representations and Warranties. The representations and warranties
------------------------------
of Sellers set forth in this Agreement, individually and in the aggregate,
shall have been true and correct in all material respects as of the date of
this Agreement and shall be true and correct in all material respects as of
the Closing Date as though made on and as of the Closing Date (in each case
ignoring for this purpose any qualification of any such representations and
warranties which uses the word "material" or the words "Seller Material
Adverse Effect" or any variation of either of the foregoing set forth therein
and except that any such representations and warranties that are expressly
made as of an earlier date shall be made as of such date and not restated as
of a later date); in addition, the aggregate damage to Buyer resulting from
all breaches of covenants set forth herein by Sellers or either of them
(except in respect of matters which are not within the reasonable control of
Sellers or their Affiliates) on or after the date of execution of this
Agreement and from all breaches of representations and warranties set forth
herein by Sellers or either of them as of the date of execution of this
Agreement (in each case ignoring for this purpose any qualification of any
such representations and warranties which uses the word "material" or the
words "Seller Material Adverse Effect" or any variation of either of the
foregoing set forth therein) shall not exceed $15,000,000; and Buyer shall
have received a certificate, dated the Closing Date, signed on behalf of
Sellers by one senior executive officer of each of them to the foregoing
effect.

(b) Covenants. Sellers shall have performed in all material respects
---------
all obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and Buyer shall have received a certificate, dated
the Closing Date, signed on behalf of each of Sellers by one senior executive
officer of each of them to such effect.

(c) HSR Act; Governmental and Third Party Approvals. The waiting period
-----------------------------------------------
applicable to the Asset Purchase and the Stock Purchase under the HSR Act
shall have expired or been terminated and all the notices, reports,
registrations and other filings with, and all consents, approvals and
authorizations from, Governmental Entities listed in Schedule 3.4 of the
Disclosure Schedule and

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<PAGE>

Schedule 4.3 of the Buyer's Disclosure Schedule and all other third party
consents, consultations and approvals required in connection with the
transactions contemplated hereby (collectively, "Filings and Approvals"),
shall have been made or obtained, as the case may be, except for any such
Filings and Approvals the failure of which to make or obtain would not,
individually or in the aggregate, have a Seller Material Adverse Effect.

(d) Litigation. No Governmental Entity of competent jurisdiction
----------
shall have enacted, issued, promulgated, enforced or entered any Law or Order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits or challenges the validity or
legality of the sale of the Transferred Assets or the Shares or the other
transactions contemplated by this Agreement or seeks material damages with
respect thereto (each, a "Governmental Prohibition"), and no Governmental
------------------------
Entity or any other Person shall have instituted any Action or threatened in
writing to institute any Action seeking any Governmental Prohibition.

(e) Receipt of Shares. Buyer shall have received from Stock Seller a
-----------------
certificate or certificates evidencing all of the then issued and outstanding
Shares, free and clear of all Liens, duly endorsed in blank or accompanied by
stock powers duly executed in blank, in proper form for transfer and with any
requisite stock transfer tax stamps properly affixed thereto, or any other
documents or copies of registrations required under Laws applicable to the
Companies.

(f) Opinion of Counsel. Buyer shall have received an opinion, dated
------------------
as of the Closing Date, of counsel of Sellers in a form reasonably acceptable
to Buyer and Sellers and covering customary matters for a transaction of this
sort.

(g) Bill of Sale. Sellers shall have executed the Bill of Sale, in
------------
substantially the form of Exhibit E hereto.

(h) License Agreements. Asset Seller and Buyer shall have entered
------------------
into a license agreement with terms identical to that attached as Exhibit F
---------
hereto, a license agreement with respect to the ZD name in the form attached
hereto as Exhibit G and a Services Agreement in the form of Exhibit H hereto,
---------
and each such agreement shall be in full force and effect.

(i) Transition Services Agreement. Sellers and their Affiliates
-----------------------------
identified therein shall have executed and delivered to Buyer a Transition
Services Agreement as contemplated by Section 5.11, and such agreement shall
be in full force and effect.

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<PAGE>

(j) No Seller Material Adverse Effect. There shall not be any
---------------------------------
matter, circumstance or event which has had or is reasonably likely to have a
Seller Material Adverse Effect.

(k) Funding of Commitment Letters. Buyer shall have received the
-----------------------------
financing proceeds described in the commitment letters set forth in Exhibit D
hereto on the terms and conditions set forth therein as they may be modified
in a manner that is reasonably acceptable to Buyer.

(l) Audited Financial Statements. Sellers shall have delivered to
----------------------------
Buyer financial statements, prepared in accordance with GAAP consistently
applied and audited by PricewaterhouseCoopers LLC (which financial statements
shall fully reflect all of the binding decisions or recommendations of any
arbitrator appointed pursuant to Section 5.17, if any), consisting of
combined balance sheets of the Companies and the Asset Seller (with respect
to the Division) as of each of December 31, 1997, 1998 and 1999 (including
only the Transferred Assets and the assets of the Companies, and excluding
the Excluded Assets, and including only Assumed Liabilities, and excluding
the Excluded Liabilities) and the related audited consolidated statements of
operations and cash flows for Asset Seller (with respect to the Division) and
the Companies for the successive fiscal year periods ended on such dates, in
each case in form and substance consistent with the requirements of the SEC
for a registered offering.

(m) Ancillary Documents. Buyer shall have received from Asset Seller
-------------------
instruments of transfer, assignment and conveyance as are necessary to vest
in Buyer the right, title and interest of Sellers in accordance with this
Agreement in and to the Transferred Assets and the Shares in a form
reasonably satisfactory to the Buyer.

(n) Estoppel Letters. At or prior to Closing, Asset Seller shall have
----------------
(i) obtained and delivered to Buyer estoppel letters, in form and content
reasonably satisfactory to Buyer and Buyer's lender, from the landlords and,
if any, sublandlords for the Leased Real Property at 28 East 28th Street in
New York City and the Leased Real Properties in San Francisco and Medford at
which PC Computing and PC Week are based, or (ii) indemnified Buyer against
the consequence of failure to obtain such letters.

(o) Compliance with Section 5.9. Buyer shall have received evidence
---------------------------
reasonably satisfactory to Buyer that the covenant set forth in Section 5.9
has been satisfied.

(p) EBITDA Calculation. The 1999 EBITDA calculation shall have
------------------
become final.

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<PAGE>

(q) License and Quit Claim Agreements. The license agreement
---------------------------------
contemplated by Section 5.24 shall have been authorized, executed and
delivered by Asset Seller; in addition, if there are any Significant Items,
the quit claim agreement contemplated by Section 5.23 shall have been
authorized, executed and delivered by Asset Seller.

Section 6.2 Conditions to Obligations of Sellers. The obligation of
------------------------------------
Sellers to consummate the Asset Purchase and the Stock Purchase and to take the
other actions to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived in whole or in part by Sellers):

(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer set forth in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement and shall be true and
correct in all material respects as of the Closing Date as though made on and
as of the Closing Date (except that any such representations and warranties
that are expressly made as of an earlier date need only be true in all
material respects as of such earlier date and any representation already
qualified by the word "material" or any variation thereof shall be true and
correct in all respects) and Sellers shall have received a certificate, dated
the Closing Date, signed on behalf of Buyer by one of its senior executive
officers to such effect.

(b) Covenants. Buyer shall have performed in all material respects all
---------
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and Sellers shall have received a certificate, dated the
Closing Date, signed on behalf of Buyer by one of its senior executive
officers to such effect.

(c) HSR Act; Governmental Approvals. The waiting period applicable to
-------------------------------
the Asset Purchase and the Stock Purchase under the HSR Act shall have
expired or been terminated and all the Filings and Approvals shall have been
made or obtained, as the case may be, except for any such Filings and
Approvals the failure of which to make or obtain are not, individually or in
the aggregate, material.

(d) Litigation. No Governmental Entity of competent jurisdiction shall
----------
have enacted, issued, promulgated, enforced or entered any Governmental
Prohibition, and no Governmental Entity or any other Person shall have
instituted any Action or threatened in writing to institute any Action
seeking any Governmental Prohibition.

(e) Receipt of Purchase Price. Sellers shall have received from Buyer
-------------------------
the payments required to be made pursuant to Section 2.6 hereof.

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<PAGE>

(f) Opinion of Counsel. Sellers shall have received an opinion, dated
------------------
as of the Closing Date, of Kirkland & Ellis, counsel for Buyer, in a form
reasonably acceptable to Buyer and Sellers and covering customary matters
for a transaction of this sort.

(g) Assignment and Assumption Agreement. Buyer and its Affiliates, as
-----------------------------------
appropriate, shall have executed and delivered the Assignment and Assumption
Agreement, in substantially the form of Exhibit I hereto.

(h) Stockholder Approval. If a Stockholders Meeting is convened in
--------------------
accordance with Section 5.19, the Stockholders Meeting shall have been held.

(i) EBITDA Calculation. The 1999 EBITDA calculation shall have become
------------------
final.

(j) Quit Claim Agreement. If there are any Significant Items, the quit
--------------------
claim agreement contemplated by Section 5.23 shall have been authorized,
executed and delivered by Buyer.

ARTICLE VII

TERMINATION

Section 7.1 Termination. Notwithstanding anything in this Agreement to the
-----------
contrary, this Agreement and the transactions contemplated herein may, by
written notice given at any time prior to the Closing, be terminated:

(a) by either Buyer or Sellers, upon their mutual written consent;

(b) by either Buyer or Sellers, without liability to the terminating
party on account of such termination if the Closing has not occurred within
120 days of the date hereof; provided, however, that a party may not effect a
termination pursuant to this Section 7.1(b) if it has breached this Agreement
and such breach has proximately contributed to the failure to close;

(c) by either Buyer or Sellers, if the other party has breached any of
its representations, warranties or covenants contained in this Agreement in
any material respect and, if curable, such breach has not been cured within
10 days after the terminating party shall have given the other party notice
of such breach; provided, however, that termination pursuant to this Section
-------- -------
7.1(c) shall not relieve the breaching party of liability for such breach or
otherwise;

(d) by either Buyer or Sellers, if any Governmental Entity shall have
issued, enacted, entered, promulgated or enforced any Governmental
Prohibition and such Governmental Prohibition shall have become final and
non-appealable;

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<PAGE>

provided that the right to terminate this Agreement pursuant to this Section
7.1(d) shall not be available to any party that has failed to comply with its
obligations hereunder in any manner that shall have proximately contributed
to the occurrence of such Governmental Prohibition;

(e) by Buyer, if any of the conditions set forth in Section 6.1 have
not been satisfied as of, or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to fully comply
with its obligations hereunder) by, the date that is 120 days after the date
hereof; or

(f) by Sellers, if any of the conditions set forth in Section 6.2 have
not been satisfied as of, or if satisfaction of such a condition is or
becomes impossible (other than through the failure of any of Sellers to fully
comply with its obligations hereunder or SOFTBANK to comply with its
obligations under the Voting Agreement) by, the date that is 120 days after
the date hereof.

Section 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to Section 7.1, this Agreement (other than Section 5.6
(Expenses), this Section 7.2 (Effect of Termination), Section 9.5 (Governing
Law) and Section 9.6 (Consent to Jurisdiction; Waiver of Jury Trial) and the
Confidentiality Agreement between Buyer and Sellers' agent, dated September 15,
1999 (the "Confidentiality Agreement"), which shall remain in full force and
-------------------------
effect) shall forthwith become null and void and no party hereto (or any of its
respective Affiliates, Representatives or stockholders) shall have any liability
or further obligation to any other party hereto, except as provided in this
Section 7.2; provided, however, that termination will not relieve a party of
liability for breach of this Agreement prior thereto. For purposes of this
Agreement, the "Representatives" of a Person include such Person's directors,
---------------
officers, employees, agents, consultants, legal counsel, accountants and
financial advisors.

ARTICLE VIII

INDEMNIFICATION; REMEDIES

Section 8.1 Survival. None of the representations, warranties or
covenants (other than (i) Section 5.16 (Non-Assignable Agreements) and Section
5.20 (Insurance), which will survive indefinitely, (ii) covenants to the extent
to be performed at or after the Closing which will survive indefinitely, (iii)
Section 5.1 (Conduct of Business), which will survive until the Final Asset
Purchase Adjustments shall have been finally determined in accordance with this
Agreement, but only in respect of any action or omission to the extent it has
the effect of increasing the cash the Seller is able to sweep from the Division
or the Companies or decreasing the Final Asset Purchase Adjustments, and (iv)
Section 5.18 (Confidentiality) and the final sentence of Section 5.8(a), which
will survive until the Final Asset Purchase Adjustments) of the parties
contained in this Agreement shall survive the Closing and no claims for breach
or otherwise in respect

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<PAGE>

thereof may be made or continued after the Closing by any party; provided,
however that the representations set forth in Sections 3.2, 3.3, and 4.2 shall
survive the Closing.

Section 8.2 Indemnification by Buyer and Sellers.
------------------------------------

(a) Buyer shall indemnify and hold harmless Sellers and (without
duplication) its successors, assigns, stockholders, Affiliates and
Representatives from and against any and all damages, losses, liabilities,
judgments and out-of-pocket expenses (including out-of-pocket costs of
investigation and defense and reasonable attorneys' and accountants' fees)
of any kind or nature whatsoever incurred or sustained by them arising out
of or resulting from any Assumed Liabilities.

(b) The Sellers shall jointly and severally indemnify and hold harmless
each of Buyer and the Companies and (without duplication) each of its
respective successors, assigns, stockholders, Affiliates and Representatives
from and against any and all damages, losses, liabilities, judgments and
out-of-pocket expenses (including out-of-pocket costs of investigation and
defense and reasonable attorneys' and accountants' fees) of any kind or
nature whatsoever incurred or sustained by them arising out of or resulting
from (i) the Excluded Liabilities, and each other Liability of any of the
Sellers and their Affiliates, other than Assumed Liabilities and Liabilities
of any of the Companies, and (ii) the failure of Asset Seller to assign to
Buyer any Nonassignable Rights.

Section 8.3 Tax Indemnification by Stock Seller; Procedure.
----------------------------------------------

(a) Stock Seller shall be liable for, and indemnify Buyer for (i) Taxes
imposed on members (other than the Companies) of a group of corporations
that includes or included any Company for any taxable year (including any
obligation to contribute to the payment of Tax determined on a consolidated,
combined or unitary basis with respect to a group of corporations that
includes or included any Company and Tax resulting from any Company ceasing
to be a member of such group), and (ii) Tax of the Companies for any taxable
year or period ending on or before the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date,
for the portion of such taxable year or period ending on and including the
Closing Date. Stock Seller shall be entitled to any refund of Taxes of any
Company received for such periods. For purposes of this Agreement, "Tax"
---
means any foreign, federal, state or local income, gross receipts, license,
severance, occupation, capital gains, premium, environmental (including
taxes under Section 59A of the Internal Revenue Code of 1986, as amended
(the "Code")), customs, duties, profits, disability, registration,
----
alternative or add-on minimum, estimated, withholding, payroll, employment,
unemployment insurance, social security (or similar), excise, production,
sales, use, value-added, occupancy, franchise, real property, personal
property, business

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<PAGE>

and occupation, mercantile, windfall profits, capital stock, stamp,
transfer, workmen's compensation or other tax, fee or imposition of any kind
whatsoever, including any interest, penalties, additions, assessments or
deferred liability with respect thereto, and any interest in respect of such
penalties, additions, assessments or deferred liability, whether disputed or
not.

(b) For purposes of Section 8.3(a), whenever it is necessary to
determine the liability for Taxes of any Company for a portion of a taxable
year or period that begins before and ends after the Closing Date, the
determination of the Taxes of any Company for the portion of the year or
period ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that such Company had a taxable
year or period which ended at the close of the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned on a time
basis.

(c) Stock Seller shall pay to Buyer the Taxes for which Stock
Seller is liable pursuant to Section 8.3(a) but which are payable with Tax
Returns to be filed by Buyer pursuant to Section 8.4(c) within 10 days prior
to the due date for the filing of such Tax Returns.

(d) Stock Seller shall file or cause to be filed when due, in
accordance with past practice, all Tax Returns that are required to be filed
by or with respect to the Companies for taxable years or periods ending on
or before the Closing Date and shall remit any Taxes due in respect of such
Tax Returns.

(e) Any tax allocation or sharing agreement or arrangement,
whether or not written, that may have been entered into by any Company shall
be terminated as to any Company as of the Closing Date, and no payments
which are owed by or to the Company pursuant thereto shall be made
thereunder.

(f) Any payment of Taxes made pursuant to this Section 8.3
shall be treated as an adjustment to the Purchase Price for the Shares.

(g) After the Closing Date, Stock Seller shall:

(1) assist, and cause its respective Affiliates to
assist, Buyer in preparing any Tax Returns or reports
which Buyer is responsible for preparing and filing
in accordance with Section 8.4(c);

(2) cooperate fully with Buyer in preparing for any
audits of, or disputes with taxing authorities
regarding, any Tax Returns of the Companies;

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<PAGE>

(3) make available to Buyer and to any taxing authority
as reasonably requested all information, records, and
documents relating to Taxes of the Companies;

(4) provide timely notice to Buyer in writing of any
pending or threatened tax audits or assessments of
the Companies for taxable periods for which Buyer may
have a liability under Section 8.4(a); and

(5) furnish Buyer with copies of all correspondence
received from any taxing authority in connection with
any tax audit or information request with respect to
any such taxable period.

(h) The obligations of Stock Seller set forth in this Section 8.3 shall
remain in effect until the expiration of the relevant statutes of limitations
(including any extensions thereof).

Section 8.4 Tax Indemnification by Buyer; Procedure.
---------------------------------------

(a) Buyer shall be liable for and indemnify Stock Seller for Taxes of
the Companies for any taxable year or period that begins after the Closing
Date and, with respect to any taxable year or period beginning before and
ending after the Closing Date, for the portion of such taxable year beginning
after the Closing Date.

(b) For purposes of Section 8.4(a), whenever it is necessary to
determine the liability for Taxes of any Company for a portion of a taxable
year or period that begins before and ends after the Closing Date, the
determination of the Taxes of any Company for the portion of the year or
period ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that such Company had a taxable
year or period which ended at the close of the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned on a time basis.

(c) Buyer shall file or cause to be filed when due, in accordance with
past practice, all Tax Returns that are required to be filed by or with
respect to any Company for taxable years or periods ending after the Closing
Date and shall remit any Taxes due in respect of such Tax Returns.

(d) Buyer shall promptly notify Stock Seller in writing upon receipt by
Buyer, any of its Affiliates or any Company of notice of any pending or
threatened Tax audits or assessments which may materially affect the tax
liabilities of any Company for which Stock Seller would be required to
indemnify

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<PAGE>

Buyer pursuant to Section 8.3(a). Stock Seller shall have the sole right to
represent any Company's interests in any Tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Closing Date,
and to employ counsel of its choice at its expense. Stock Seller shall be
entitled to participate at its expense in the defense of any claim for Taxes
for a year or period ending after the Closing Date which may be the subject
of indemnification by Stock Seller pursuant to Section 8.3(a) and, with the
written consent of Buyer, and at its sole expense, may assume the entire
defense of such Tax claim. Neither Buyer nor any Company may agree to settle
any Tax claim for the portion of the year or period ending on or before the
Closing Date which may be the subject of indemnification by Stock Seller
under Section 8.3(a) without the prior written consent of Stock Seller, which
consent shall not be unreasonably withheld.

(e) With respect to the taxable year of Stock Seller ending
1999 and the period prior to the Closing Date, Buyer shall promptly cause
each Company to prepare and provide to Stock Seller a package of tax
information materials (the "Tax Package"), which shall be completed in
-----------
accordance with past practice including past practice as to providing the
information, schedules and work papers and as to the method of computation of
separate taxable income or other relevant measures of income of such Company.
Buyer shall cause the Tax Package for the portion of the taxable period
ending on the Closing Date to be delivered to Stock Seller within 120 days
after the Closing Date.

(f) Any payment of Taxes made pursuant to this Section 8.4
shall be treated as an adjustment to the Purchase Price for the Shares.

(g) After the Closing Date, Buyer shall:

(1) assist, and cause its respective Affiliates to
assist, Sellers in preparing any Tax Returns or
reports which Stock Seller is responsible for
preparing and filing in accordance with Section
8.3(d);

(2) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax
Returns of any Company;

(3) make available to Stock Seller and to any taxing
authority as reasonably requested all information,
records, and documents relating to Taxes of the
Companies;

(4) provide timely notice to Stock Seller in writing of
any pending or threatened tax audits or assessments
of any Company for taxable periods for which Stock
Seller may have a liability under Section 8.3(a) ;

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<PAGE>

(5) provide to Stock Seller at least 30 days before due
any Tax Returns or reports relating to a taxable
period for which Stock Seller may have a liability
under Section 8.3(a); and

(6) furnish Stock Seller with copies of all
correspondence received from any taxing authority in
connection with any tax audit or information request
with respect to any such taxable period.

(h) The obligations of Buyer set forth in this Section 8.4 shall
remain in effect until the expiration of the relevant statutes of limitations
(including any extensions thereof).

ARTICLE IX

MISCELLANEOUS

Section 9.1 Assignments; No Third Party Rights.
----------------------------------

(a) Buyer may not assign any of its rights or obligations under this
Agreement without the prior written consent of Sellers (which may not be
unreasonably withheld or delayed) and any purported assignment without such
consent shall be void. The preceding sentence notwithstanding, Buyer may assign
this Agreement or all or any part of its rights and obligations under this
Agreement, following written notice to Sellers, to a wholly owned Subsidiary of
Buyer or to a lender or financing source for collateral purposes; provided,
however, that no such assignment shall relieve Buyer of its obligations under
this Agreement. "Subsidiary" means, with respect to any Person, any corporation
----------
or other entity of which such Person has, directly or indirectly, (i) ownership
of securities or other interests having the power to elect a majority of the
Board of Directors or similar governing body of such corporation or other
entity, or (ii) the power to direct the business and policies of that
corporation or other entity.

(b) Sellers may not assign any of its rights or obligations under this
Agreement without the prior written consent of Buyer and any purported
assignment without such consent shall be void.

(c) Except as provided in Section 8.2, nothing in this Agreement,
express or implied, is intended to confer upon any Person other than the parties
hereto any rights or remedies of any nature whatsoever under or by reason of
this Agreement or any provision of this Agreement. Except as provided in Section
8.2, this Agreement and all of its provisions and conditions are for the sole
and exclusive benefit of the parties to this Agreement and their successors and
permitted assigns.

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<PAGE>

Section 9.2 Entire Agreement. This Agreement, including the Exhibits
----------------
hereto, the Disclosure Schedule, the Buyer's Disclosure Schedule and the other
agreements and written understandings referred to herein or otherwise entered
into by the parties hereto on the date hereof, and the Confidentiality Agreement
constitute the entire agreement and understanding and supersede all other prior
covenants, agreements, undertakings, obligations, promises, arrangements,
communications, representations and warranties, whether oral or written, by any
party hereto or by any director, officer, employee, agent, Affiliate or
Representative of any party hereto. There are no covenants, agreements,
undertakings or obligations with respect to the subject matter of this Agreement
other than those expressly set forth or referred to herein and no
representations or warranties of any kind or nature whatsoever, express or
implied, including any implied warranties of merchantability or fitness for a
particular purpose, are made or shall be deemed to be made herein by the parties
hereto except those expressly made herein.

Section 9.3 Amendment or Modification. This Agreement may be amended
-------------------------
or modified only by written instrument signed by all of the parties hereto.

Section 9.4 Notices. All notices, requests, instructions, claims,
-------
demands, consents and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given (i)
when delivered personally to the recipient, (ii) one business day after being
sent to the recipient by reputable overnight courier service (charges prepaid),
(iii) upon machine-generated acknowledgment of receipt after transmittal by
facsimile if so acknowledged to have been received before 5:00 p.m. on a
business day at the location of receipt and otherwise on the next following
business day, provided that each such notice, demand or other communication is
also deposited within 24 hours thereafter with a reputable overnight courier
service (charges prepaid) for delivery to the same Person, or (iv) five days
after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid, to the parties at the following
addresses:

If to Buyer: WS-ZD Acquisition, Inc.
c/o Willis Stein & Partners II, L.P.
227 West Monroe Street
Chicago, IL 60606
Telephone: 312/422-2400
Facsimile: 312/422-2418
Attention: Daniel H. Blumenthal
Avy H. Stein

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<PAGE>

With a copy to: Kirkland & Ellis
200 E. Randolph Drive
57th Floor
Chicago, IL 60601
Telephone: 312/861-2000
Facsimile: 312/861-2200
Attention: John A. Weissenbach

If to Sellers: ZD Inc.
28 East 28th Street
New York, NY 10016
Telephone: (212) 503-3500
Facsimile: (212) 503-3581
Attention: J. Malcolm Morris

With a copy to: Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
Attention: Alan J. Sinsheimer

Section 9.5 Governing Law. This agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed in such State and without regard to the conflict of
law principles thereof.

Section 9.6 Consent to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------

(a) The parties hereto hereby irrevocably submit to the jurisdiction of
the courts of the State of New York and the federal courts of the United
States of America located in the State of New York solely in respect of the
interpretation and enforcement of the provisions of this agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated herein, and hereby waive, and agree not to assert, as a defense
in any action for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action may not be
brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that
all claims with respect to such action or

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<PAGE>

proceeding shall be heard and determined in such a New York state or federal
court. The parties hereby consent to and grant any such court jurisdiction
over the person of such parties and over the subject matter of such dispute
and agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 9.4 hereof or in such
other manner as may be permitted by law, shall be valid and sufficient
service thereof.

(b) Each party hereto hereby acknowledges and agrees that any
controversy which may arise under this agreement is likely to involve
complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of or relating to this agreement or the transactions contemplated by this
Agreement. Each party certifies and acknowledges that (i) no representative,
agent or attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to enforce
the foregoing waiver, (ii) each such party understands and has considered the
implications of this waiver, (iii) each such party makes this waiver
voluntarily, and (iv) each such party has been induced to enter into this
agreement by, among other things, the mutual waivers and certifications in
this Section 9.6.

Section 9.7 Severability. In case any one or more of the
------------
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision or provisions shall be
ineffective only to the extent of such invalidity, illegality or
unenforceability, without invalidating the remainder of such provision or
provisions or the remaining provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein, unless such a construction would be
unreasonable.

Section 9.8 Waiver of Conditions.
--------------------

(a) To the extent permitted by applicable Law: (i) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (ii) no waiver that may be given by a party will be applicable except
in the specific instance for which it is given and (iii) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.

(b) The rights and remedies of the parties hereto are
cumulative and not alternative. Except where a specific period for action or
inaction is provided

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<PAGE>

herein, neither the failure nor any delay on the part of any party in
exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power or privilege. The
failure of a party to exercise any right conferred herein within the
time required shall cause such right to terminate with respect to the
transaction or circumstances giving rise to such right, but not to any
such right arising as a result of any other transactions or
circumstances.

Section 9.9 Actions of the Companies. Whenever this Agreement
------------------------
requires any Company to take any action, such requirement shall be deemed to
involve, with respect to actions to be taken at or prior to the Closing, an
undertaking on the part of the Applicable Seller to cause such Company to take
such action and, with respect to actions to be taken after the Closing, an
undertaking on the part of Buyer to cause such Company to take such action.

Section 9.10 Descriptive Headings; Construction. The descriptive
----------------------------------
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning, construction or interpretation
of, this Agreement. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms and shall be deemed to be followed
by the phrase "without limitation."

Section 9.11 Counterparts. For the convenience of the parties
------------
hereto, this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.

Section 9.12 Knowledge. When references are made in this
---------
Agreement to information being "to the knowledge of Sellers" or similar
language, such knowledge shall refer to the knowledge of the officers of Sellers
and the Companies set forth in Schedule 9.12 of the Disclosure Schedule. Such
individuals shall be deemed to have "knowledge" of a particular fact or other
matter if such individual is actually aware of such fact or other matter after
due inquiry.

Section 9.13 Materiality. Whenever (i) the terms "material,"
-----------
"materially," "in all material respects" or similar materiality qualifiers are
used in this Agreement in relation to (a) Sellers, (b) the Division, (c) the
Companies or all or any of (a), (b) and (c), they shall be deemed to refer only
to matters, circumstances or events that are material to the business, assets,
liabilities, results of operations or condition (financial or otherwise) of the
Division and the Companies taken as a whole, and (ii) the term "Seller Material
---------------
Adverse Effect" is used in this Agreement, it shall be deemed to refer to any
- --------------
matters, effects, circumstances or events that have had or are reasonably likely
to

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<PAGE>

have a material adverse effect on the business, assets, liabilities, results of
operations or condition (financial or otherwise) of the Division and the
Companies taken as a whole; provided, however, that whenever such terms are used
-------- -------
in connection with the performance of or failure to perform any covenant (except
in respect of matters which are not within the reasonable control of Sellers or
their Affiliates) after the date hereof or in a representation or warranty
insofar as it speaks as of the date of execution of this Agreement, such terms
shall be deemed to refer to matters, circumstances, effects or events that have
resulted in, or would result in, damages, losses, liabilities, judgments or
expenses of $15,000,000 or greater; and provided, further, that for purposes of
-------- -------
Section 6.1(j) and, to the extent relating to Section 3.7(a), Section 6.1(a), no
material adverse change that is fully reflected in the financial projections
included in Schedule 9.13 of the Disclosure Schedule shall be considered.

(SIGNATURE PAGE FOLLOWS)

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers duly authorized as of the
date first written above.

ZD INC.

By: /s/ TIMOTHY C. O'BRIEN
--------------------------------
Name: Timothy C. O'Brien
Title: Chief Financial Officer

ZD HOLDINGS (EUROPE) LTD.

By: /s/ TIMOTHY C. O'BRIEN
-----------------------------
Name: Timothy C. O'Brien
Title: Director

WS-ZD ACQUISITION, INC.

By: /s/ AVY H. STEIN
------------------------------
Name: Avy H. Stein
Title: President

<PAGE>

Exhibit 10.1

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.

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<PAGE>

not exceed forty (40) million shares and pursuant to Awards granted in each
fiscal year thereafter shall not exceed four percent (4%) of the issued and
outstanding shares of Common Stock, determined as of the last day of the
immediately preceding fiscal year, increased by the number of shares available
for Awards in previous fiscal years but not covered by Awards granted in such
years. Shares of Common Stock which may be delivered pursuant to Awards may be
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 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. Notwithstanding the
foregoing, but subject to adjustment as provided in Section 9, no more than 40
million shares of Common Stock shall be delivered pursuant to the exercise of
incentive stock options within the meaning of Code Section 422. 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.

2
<PAGE>

(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 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

3
<PAGE>

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.

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.

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<PAGE>

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 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

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<PAGE>

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. 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.

<PAGE>

Exhibit 10.2

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.

<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.

<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.

<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 regular 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

<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.

<PAGE>

Exhibit 10.3

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 9, the total number of shares
of Common Stock which may be delivered pursuant to Awards granted under the
Plan through the Company's fiscal year ending in 2000 shall not exceed 300,000
shares and pursuant to Awards granted in each fiscal year thereafter shall not
exceed one-tenth of one percent (0.1%) of the issued and outstanding shares of
Common Stock determined as of the last day of the immediately preceding fiscal
year, increased by the number of shares available for Awards in previous fiscal
years but not covered by Awards granted in such years. 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.

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.

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.

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.

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.

(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

3
<PAGE>

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.

<PAGE>

EXHIBIT 10.10

License Agreement

THIS LICENSE AGREEMENT (this "Agreement") is dated as of April 5, 2000 and
made by and between Ziff-Davis Inc. ("ZDNet"; as used in this Agreement, the
term "ZDNet" shall be deemed to include subsidiaries of ZDNet, except where the
context otherwise requires) and Ziff Davis Media Inc. ("Ziff Davis Media"; as
used in this Agreement, the term Ziff Davis Media shall be deemed to include
affiliates of Ziff Davis Media, except where the context otherwise requires), a
Delaware corporation (formerly known as WS-ZD Acquisition, Inc.).

1. License to Use Content
----------------------

(i) Subject to Section 5(iv) below, Ziff Davis Media hereby grants
ZDNet the exclusive license to translate, reproduce, publicly display, transmit
and distribute online throughout the world all of the editorial content of Ziff
Davis Media's magazine and newspaper publications listed on Exhibit A (the
"Publications") on ZDNet's online service in the United States and on
international versions of the U.S. service (collectively, the "Service") but
such license shall not include any translation, reproduction, public display,
transmission or distribution of Alternative Electronic Versions. For purposes of
this Agreement online distribution shall mean electronic distribution via the
World Wide Web, the Internet or any technology hereafter developed and used for
similar purposes or evolutions or migrations thereof. Any successors to a
Publication whether by change of name or
<PAGE>

merger into another publication shall continue to be Publications and covered by
this Agreement. Ziff Davis Media shall also cause the purchaser of any
Publication to agree to assume and carry out the obligations of Ziff Davis Media
under this Agreement with respect to that Publication. Ziff Davis Media and any
such purchaser shall be responsible for negotiating an allocation of royalties
and any participation of the purchaser on the Content Board and Sales and
Marketing Board described below. The editorial content of the Publications is
hereafter referred to as "Content." Publications shall in no event include the
Yahoo! Internet Life e-shopper publication launched by ZD Publishing, the
unincorporated division of a subsidiary of ZDNet and its foreign affiliates
engaged in the print publishing business (collectively, "ZD Publishing"), in
November 1999.

(ii) Notwithstanding the exclusivity of Ziff Davis Media's license to
ZDNet, Ziff Davis Media may (a) license advertisers, award-winners or entities
with a similar relationship to Ziff Davis Media, to display for a limited time
period, an individual article or similar limited content from the Publications
on that advertiser's, winner's or entity's Website, (b) display, and allow
international print licensees of its Publications to display, a limited amount
of Content online as part of Ziff Davis Media advertisements or similar
promotional efforts (for example, an ad or promotion may include a column or
review as an example of Publication content),(c) license the online publication,
display and download of a limited amount of Content ancillary to a license for
the use of Content in books; provided, however, no such publication or display
-------- -------
shall compete with ZDNet, and (d) continue the ZDTV License Agreement on its
current terms. As used herein, "Website" means a website or any technology

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<PAGE>

hereafter developed or used for similar purposes or evolutions or migrations
thereof.

(iii) Ancillary to the license granted in Section 1(i) above, Ziff
Davis Media grants ZDNet a license to use the titles (including logos) and
other Ziff Davis Media trademarks and trade names associated with the
Publications (but excluding "Ziff-Davis") and, subject to Section 5(iv) below,
the urls containing those titles and trade names (collectively, the
"Trademarks") in the Service in connection with the Content provided such uses
are consistent with proper trademark usage and other reasonable guidelines set
forth in Exhibit D or otherwise communicated to ZDNet from time to time.

(iv) Ziff Davis Media shall be responsible for acquiring from its
non-employee authors, sufficient rights, consistent with current practices, for
the license to ZDNet under this Agreement, it being understood that some part of
the Publications' content may not be available for online use because of
extraordinary arrangements with authors or other content providers (for example,
book serialization rights may not be available for online publication) or
because certain content providers will not grant a license beyond print use on
commercially reasonable terms.

-3-
<PAGE>

(v) ZDNet acknowledges that as between it and Ziff Davis Media, Ziff
Davis Media is the exclusive owner of the Trademarks and the Content and agrees
it will not have or obtain any rights or interests in the Trademarks or the
Content beyond the rights granted by this Agreement.

(vi) Notwithstanding any other provisions of this Agreement, Ziff
Davis Media shall be permitted to engage in the activities set forth in clause
(y) at the second sentence of Section 3(i).

2. License to Redistribute Online.
------------------------------

(i) ZDNet's license to use the Content shall also include the
exclusive right, subject to Section 1(ii) and 5(iv), to grant third parties the
right to distribute the Content (accompanied by the Trademarks associated with
that Content) on their online Websites and, subject to the last sentence of this
subsection (i) below, to retain all the revenues or other consideration from
such distribution; provided, however:
-------- -------

(A) ZDNet may not allow display or distribution of the Content by any
direct competitor of the Publications as defined in 7(i);

(B) All such distribution shall prominently display the name of the
author and the Publication;

(C) Ziff Davis Media may require ZDNet to terminate any distribution
by a third party if such third party alters the Content or misuses any Trademark
or such third party Website does not meet reasonable standards of quality
consistent with the reputation of the Trademarks and the Publications (after
notice of such failure and a reasonable time to cure). Ziff Davis Media
acknowledges that the myway.com and Excite.com websites on which the Content

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<PAGE>

is currently displayed are examples of websites meeting these reasonable
standards of quality; and

(D) All of the terms and conditions applicable to the display of the
Content and the Trademarks by ZDNet shall apply to those third parties.

Notwithstanding the foregoing, ZDNet shall continue to license the Content for
inclusion in archival databases distributed to public libraries and educational
institutions under existing arrangements with Gale/IAC or similar third parties
(for example, Lexis/Nexis and Dow Jones) to which Gale/IAC has sublicensed
Content, and ZDNet shall pay Ziff Davis Media an amount equal to 50% of the
royalties received from such license. Notwithstanding the foregoing, ZDNet shall
not be required to license Gale/IAC or similar companies unless their
distribution is restricted so as not to compete with ZDNet. If ZDNet licenses
any of the Content to a third party for royalties (whether a fixed amount of
cash or a per article or per use amount of cash), it shall promptly remit 50% of
such royalties to Ziff Davis Media.

(ii) Notwithstanding (i) above, if Ziff Davis Media wishes to have
part of the Content distributed on a third party Website as part of a
Publication's or Ziff Davis Media's promotional, marketing (but exclusive of ad
sales) or circulation efforts, it may do so, but it shall first seek ZDNet's
consent by notice describing in reasonable detail such proposed arrangement and
ZDNet shall not unreasonably refuse such request. (For example, if Family PC
believes it is important for its promotional and circulation efforts to have
selected content posted on women.com, it may notify ZDNet and ZDNet shall not
unreasonably refuse that request.) ZDNet shall respond to Ziff Davis Media
within 20 days after such request; the failure to deliver a notice denying such
consent and specifying in reasonable detail the reasons

-5-
<PAGE>

therefor shall be deemed consent. Grounds on which ZDNet may reasonably refuse
such request may include:

(A) the Website designated directly competes with ZDNet;

(B) ZDNet has an exclusive arrangement with another entity for that
content area; or

(C) the third party Website refuses to include appropriate branding and
links back to ZDNet; provided, however, ZDNet shall use its best efforts to work
-------- -------
around limitations imposed by its arrangements with other Websites and to avoid
such limitations in arrangements it makes with third parties. It is understood
that the content which Ziff Davis Media may request to be posted on other
Websites may only be a small part of the Content of a Publication (for example,
a column, articles on a particular topic, etc.) and, without limiting ZDNet's
right to reasonably refuse on other grounds, shall not include product reviews
and shall not constitute more than ten percent (10%) of the Content of any
single issue or more than five percent (5%) of the Content of any Publication's
issues published within the previous twelve months.

3. Hosting of Publications Websites.
--------------------------------

(i) ZDNet shall host the Websites of each Publication and Ziff Davis
Media may not create or support any other Websites which also use the Trademarks
of a Publication except as provided in Sections 1(ii), 2(ii) and 5(iv).
Notwithstanding anything to the contrary, nothing shall prevent Ziff Davis Media
from (x) having a corporate Website with general information about the
Publications including advertising rates, schedules, subscription forms,
mastheads and contact information, (y) operating Websites with pages displaying
Trademarks for two or more Ziff Davis Media publications, and including on those
pages e-commerce

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<PAGE>

links, links to additional information about particular publications and/or
content, so long as those Websites do not include any Content, the e-commerce
links do not appear to be directly tied to any Trademarks and no Trademarks are
situated in a manner that suggests that any content is Content or (z) delivering
Alternative Electronic Versions. For purposes of this Agreement, the term
"Alternative Electronic Versions" shall mean outbound periodic electronic
versions substantially equivalent to a Publication as an exclusive or
nonexclusive alternative to print delivery, but only if such electronic versions
do not contain hyperlinks (or any technology hereafter developed or used for
similar purposes or evolutions or migrations thereof) to any Website and the
recipients have no ability to interact with the content (including advertising)
to receive additional content (other than with respect to a functional
equivalent of a printed order form or subscription form (and which functional
equivalent is limited to such purpose) to receive other Additional Electronic
Versions) or to send additional content. Each Publication's Website (including
any url containing a Publication's name or mark) may, except as described below,
contain only Content provided by the Publication and shall contain all the
Content from the Publication from past issues consistent with current practices,
subject to each Publication's right to remove or not to provide Content that may
be incorrect, dated, subject to a third party claim or otherwise inappropriate
for continued display. ZDNet shall remove any such Content immediately after
notice from Ziff Davis Media. Each Publication's Website shall also contain
links to Ziff Davis Media's corporate Website or, if Ziff Davis Media chooses,
information about the Publication which is customary to be included in such
Websites including contact information,

-7-
<PAGE>

editorial feedback, subscription order forms, advertising information, masthead
and similar topics. Electronic files of the Content shall be made available to
ZDNet by Ziff Davis Media consistent with ZD Publishing's practice as of the
date hereof.

(ii) Ziff Davis Media and ZDNet shall each designate three senior
managers who shall include the senior editorial manager from each party to form
a Content Board. The Content Board shall meet at least once each month to
review the Publications' Websites and changes that ZDNet or Ziff Davis Media may
wish to make in those Websites. ZDNet shall keep the Content Board and each
Publication informed in advance on any proposed significant change in the
design, presentation or navigation of each Publication's Website (it being
understood that day to day matters do not require notice or consent). Subject
to Section 9, no significant change shall be made to the design, arrangement or
content practices of any Publication's Website unless the Content Board has
approved such change by the favorable vote of a majority of the representatives
from both Ziff Davis Media and ZDNet. The Content Board shall to the extent
commercially feasible and consistent with the overall design and structure of
the Publication and ZDNet, as the case may be, use its best efforts to
accommodate requests by the Publication or ZDNet to make changes in a
Publication's Website. Each of Ziff Davis Media and ZDNet may also raise at the
Content Board concerns about the quality or quantity of the Content from Ziff
Davis Media or the quality of the Service or third party Websites which have
been licensed by ZDNet to distribute the Content. Any deadlocks on the Content
Board shall be referred to the chief executive officers of ZDNet and Ziff Davis
Media who shall meet and attempt in good faith to resolve such disputes. If
they are

-8-
<PAGE>

unable to resolve any disputes, those deadlocks shall be referred to mediation
by a person to be mutually agreed with recognized expertise in the area of the
Web and publishing. Each Publication shall inform ZDNet and the Content Board as
far in advance as reasonably practicable (but not less than sixty (60) days
before) of any material changes in the scope of its editorial focus.

(iii) From time to time ZDNet may request that the Publications
create additional editorial content for inclusion on the Publication's Websites
(for example, updates of reviews) and in such instance the Publications shall
not unreasonably refuse such requests provided that ZDNet bears any incremental
cost of creating such material. ZDNet may also include content it creates or
licenses in a Publication Website provided such content is consistent with the
Publication's editorial focus, is up to the standards of the Publication's
Content and provided the Editor-in-Chief of the Publication has consented, which
consent shall not unreasonably be withheld. Ziff Davis Media may also include a
reasonable amount of additional content on the Publications' Websites provided
that content is consistent with the Content published in the Publication (for
example, the PC Week Website may include breaking news) subject to ZDNet's
consent, which shall not be unreasonably withheld. All such additional content
shall be considered as "Content" under this Agreement.

(iv) ZDNet shall also distribute at no cost to Ziff Davis Media,
Publication e-mail newsletters and news alerts to persons requesting those
newsletters and alerts. Each Publication shall be entitled to the greater of
(x) two mailings per month and (y) the number of mailings currently being
provided by ZDNet to that Publication (set forth on Exhibit E). Ziff Davis
Media shall be responsible for

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<PAGE>

creating the content of each newsletter or alert, but those newsletters and
alerts shall comply with the same policies and practices that apply to ZDNet
newsletters and alerts. ZDNet shall offer subscriptions to each such newsletter
or alert as part of its registration process. If Ziff Davis Media requests that
ZDNet seek to acquire additional subscribers, ZDNet shall use its best efforts
to do so, subject to Ziff Davis Media's bearing the out-of-pocket costs of such
efforts.

(v) During the period ZDNet hosts the Publication Websites, ZDNet
shall use reasonable efforts on the Service to promote and drive traffic to each
Publication's Website. These efforts shall be at least as great as the efforts
expended currently and shall be consistent throughout the term. Without limiting
the generality of the foregoing, ZDNet shall include:

(A) a link on its homepage to the Websites of Family PC, Inter@ctive
Week, PC Magazine, PC Week, PC Computing and Smart Reseller, a link to pages
that list game and international titles and a link to the archival Website for
the Publications; and

(B) a link to each Publication's Website as part of the display of any
content from a Publication.

(vi) ZDNet shall continue to hire and provide its fulltime employees
to work on the design, template, navigation and content for the Publications'
Websites and those persons shall be reasonably satisfactory to Ziff Davis
Media. Those persons shall be provided with office space by Ziff Davis Media in
the offices of the Publications at ZDNet's expense (based on a reasonable
allocation of actual costs). Those persons shall report to and be under the
general supervision of ZDNet's editorial group. To the extent those persons
create or edit Content on the

-10-
<PAGE>

Publications' Websites, however, they shall continue to take direction from the
editors of the applicable Publication. For example, Tom Ponzo, a ZDNet employee,
is part of the PC Magazine First Looks team, and he shall continue to perform
that function under the direction of the PC Magazine editor in charge of First
Looks. Similarly Don Willmott shall be under the direction of a PC Magazine
editor in respect to overseeing the First Looks, Trends, Pipeline, Columns and
other content of PC Magazine and the PC Magazine Website.

(vii) ZDNet may edit the Content as required to fit space or similar
editorial requirements for the Service or to render the Content more readily
comprehensible in style or language to the service users; provided, however,
-------- -------
such changes may not affect the meaning of any items of the Content and
provided, however, that certain Content (to be designated by Ziff Davis Media)
- -------- -------
may not be edited without the author's consent (that is, in the rare case where
an author refuses to allow editing of his work without his consent). ZDNet may
cause the translation of the Content to be made in languages other than English
so long as the translation is faithful and accurate. Ziff Davis Media shall own
any resulting translations.

(viii) ZDNet acknowledges that prior to the date hereof, ZD
Publishing has licensed the trademark Yahoo and other brand features from Yahoo!
Inc. for Yahoo! Internet Life pursuant to an agreement dated January 15, 1996
and amended as of October 30, 1996 and amended as of January 1, 2000 (the "Yahoo
Agreement"), a copy of which has been provided to ZDNet. ZDNet shall comply
with all of the obligations of Ziff Davis Media under the Yahoo Agreement with
respect to the Yahoo! Internet Life Website (defined as the "ZD Online Magazine"
in the Yahoo Agreement) including, without limitation, the payment to Yahoo of
twenty (20%)

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<PAGE>

percent of Advertising Revenues (as defined in the Yahoo Agreement) on the
Yahoo! Internet Life Website in accordance with Section 5 of the Yahoo
Agreement. ZDNet shall deliver to Ziff Davis Media a copy of each payment to
Yahoo and the supporting statement promptly after the delivery thereof by ZDNet
to Yahoo!. ZDNet also acknowledges that notwithstanding any suggestion to the
contrary in Section 1(iii), the name "Yahoo! Internet Life" may only be used in
compliance with the Yahoo Agreement.

(ix) ZDNet shall incorporate all bug fixes and technical upgrades,
which it incorporates into the other channels of the Service, into the
Publication Websites while it hosts such Websites and shall maintain the
hardware and software reasonably needed to maintain the Publications' Websites
with performance and reliability standards no less favorable in any respect
than the standards to which ZDNet maintains its own channels.

4. Joint Ad Sales
--------------

ZDNet and Ziff Davis Media shall cooperate to coordinate and offer
combined advertising packages for the Publications in print, the Publications'
Websites and otherwise on ZDNet. ZDNet and Ziff Davis Media shall each designate
three senior sales managers who shall comprise a "Sales and Marketing Board."
The purpose of the Sales and Marketing Board shall be to approve and regulate
the joint sales efforts between Ziff Davis Media and ZDNet.

5. Royalty
-------

(i) ZDNet shall pay Ziff Davis Media a royalty for the use of the
Content based on its annual gross revenues. That royalty shall be five percent
(5%) of the first $100,000,000 of gross revenues; four percent (4%) of the next
$50,000,000 and three percent (3%) above $150,000,000, in each case per contract
year, determined quarterly, subject,

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<PAGE>

however, to a minimum and maximum royalty of $7 million and $14 million,
respectively, for the first contract year after the date of this Agreement, $9
million and $18 million, respectively, for the second contract year after the
date of this Agreement and $11 million and $22 million, respectively, for the
third contract year after the date of this Agreement. For purposes of this
Agreement gross revenues shall mean all of ZDNet's revenues from any source
including, without limitation, from advertising, subscriptions, sponsorships,
list rentals, user fees and royalties, but in each case less credits, discounts
and a reasonable reserve for bad debt and also excluding any revenues from (x)
ZDNet's print publications or other non-online products and services and (y) any
royalty amounts shared with Ziff Davis Media pursuant to Section 2(i)(D) above
including the amounts retained by ZDNet. If ZDNet is merged with another
Website, then gross revenues shall include the gross revenues of all activities
which were part of ZDNet prior to the merger or which are conducted as part of
the Service or under the ZDNet name after the merger and also the gross revenues
from all Websites with which the Service is merged which concern technology.

(ii) The royalty shall be paid within 45 days after the end of each
calendar quarter. Each payment shall include a statement of gross revenues for
that quarter.

(iii) Ziff Davis Media shall have the right not more than once during
each calendar year to have an independent certified accounting firm review the
appropriate books and records of ZDNet concerning its calculation of gross
revenues for the most recent statement and for the previous three quarterly
statements. If such statement is more than 10% under the amount determined by
such audit,

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<PAGE>

ZDNet shall also reimburse Ziff Davis Media for the reasonable costs of the
audit.

(iv) Beginning on the date that is three years from the date of this
Agreement, there shall commence a transition period which shall last for 24
months, which is referred to herein as the "Transition Period". During the
first twelve months of the Transition Period, ZDNet shall continue to have all
its rights to use and license the Content and the Trademarks hereunder and to
host the Publication Websites, but Ziff Davis Media shall have the right to
display the Content from the Publications on its own Websites. During the
second twelve months of the Transition Period, ZDNet shall have the right to use
and license the Content hereunder, but Ziff Davis Media shall have the right to
host, maintain and produce its own Publication Websites and to the exclusive use
of its urls. During the second twelve months of the Transition Period, Ziff
Davis Media shall cause the Publication Websites using the urls that had been
used by ZDNet to host the Publications prior to the beginning of the last twelve
months of the Transition Period to contain links to ZDNet in contextually-
appropriate locations within the Websites using that url. Each of the links
shall be a graphic button designed and programmed by ZDNet and reasonably
acceptable to Ziff Davis Media), which button shall contain inserted text
prominently displayed. Similarly, during the second twelve months of the
Transition Period ZDNet shall use reasonable commercial efforts to redirect
traffic seeking Publication Websites to urls designated by Ziff Davis Media.
Each of the links shall be a graphic button designed and programmed by Ziff
Davis Media (and reasonably acceptable to ZDNet), which button shall contain
inserted text prominently displayed. Ziff Davis Media shall not license the
Content to any third party (any entity

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<PAGE>

which is not controlled by them) during the first twelve months of the
Transition Period. During the second twelve months of the Transition Period,
Ziff Davis Media may license the Content to third parties but not to any entity
with which ZDNet has in effect at the end of the first twelve months of the
Transition Period a bona fide license for Content entered into in the ordinary
course. During the first twelve months of the Transition Period, the ZDNet
royalty to Ziff Davis Media shall be reduced by 50% (i.e., from 5% of the first
----
$100 million of annual revenues, 4% of the next $50,000,000 and 3% of all
additional revenues, to 2.5%, 2% and 1.5%, respectively) and in the second
twelve months of the Transition Period by 75% (i.e., from 5%, 4% and 3% to
----
1.25%, 1% and .75%, respectively).

6. Cross Promotional Rights.
------------------------

(i) ZDNet shall have the right to run (1) one 4-color print ad for
the Service (and not for any other use) for free in each U.S. Publication and
(2) one 4-color print ad for the Service (and not for any other use) at house
rates in each U.S. Publication. Except for rates, all such ads shall be subject
to each Publication's standard terms and conditions. Ziff Davis Media shall
continue to put on the cover of the U.S. Publication, on the table of contents
and, where appropriate as determined by Ziff Davis Media, in the text and on all
circulation solicitations sent by Ziff Davis Media, the url of such U.S.
Publication's Website on the Service and shall offer subscriptions to ZDNet
newsletters as part of its subscription signups, provided in each case that such
inclusion shall not violate postal regulation or require Ziff Davis Media to
mail in a more expensive class, or materially adversely affect the response rate
to such solicitations. The provisions of this paragraph shall continue through
the end of the third contract year.

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<PAGE>

(ii) ZDNet shall provide the U.S. Publications with free banner ads,
e-mail solicitations and other promotional opportunities in the format and
manner no less favorable to Ziff Davis Media in any respect than currently being
provided, in sufficient amounts, to meet annual goals for net subscriptions
secured on the Service set by Ziff Davis Media for each year of this Agreement
as described below. (Net subscriptions means for Publications with a paid
circulation, subscriptions for which the subscriber actually pays; for qualified
Publications, subscriptions for which the subscriber actually qualifies.) Ziff
Davis Media shall have the right to set the terms and rates of such
subscriptions and to allocate the net amount of each annual goal among the
Publications by notice to ZDNet. The goal for U.S. Publications for net
subscriptions secured on the Service in 1999 was 163,000 and in 2000 is 206,000.
For 1999 and 2000 the allocation of those subscription goals among the U.S.
Publications and the timing is set forth on Exhibit C. Commencing in 2000,
ZDNet shall be obligated to meet the level of 163,000 of such subscriptions per
year each year; above that level, ZDNet shall use its best efforts to reach the
goal, but shall only be obligated to provide an additional percentage of
promotional efforts equivalent to the increase in the goal. (For example, in
2000, when the goal is 206,000 subscriptions, ZDNet shall be obligated to
provide at least 163,000 subscriptions and to use 26.4% (i.e., the percentage
----
increase from 163,000 subscriptions to 206,000 subscriptions) more promotional
efforts in each category of promotional activity than it used to meet the
163,000 goal in 1999, but shall not be in breach if it fails to deliver 206,000
subscriptions.) The annual subscription goal shall be reduced for each
Publication no longer under this Agreement by the amount of subscriptions
allocated to it

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<PAGE>

in the previous year. The annual subscription goal shall be adjusted to the
extent Ziff Davis Media materially changes the kind and nature of its
subscription offers (for example, instead of an equal mix of hard and soft
offers, Ziff Davis Media materially increases the ratio of hard offers to soft
offers). Ziff Davis Media shall have the right to increase the net subscription
goal for years after 2000 by up to 10% for 2001, 5% for 2002 and 3% for each
year thereafter. ZDNet shall be entitled to a bounty of $3 per net subscription
secured on the Service for each year for the Publications above the base goal of
163,000 (as adjusted in the future for deleted Publications). Ziff Davis Media
shall have the right at any time by notice to ZDNet to instruct ZDNet to suspend
subscription solicitations for a specific Publication. Without limiting the
generality of the first sentence of this Section (ii), ZDNet's subscription
promotion efforts shall continue to include, without limitation, hosting the
webpages, graphics and related scripts of the Ziff Davis Media circulation
department (including subscription order forms and customer service pages),
developing CD premiums for use in Publication solicitations to be paid for by
Ziff Davis Media under the pricing methodology in effect between ZD Publishing
and ZDNet as of the date hereof, and including Publication subscription offers
in the registration process for ZDNet and for ZDNet's hosted contests (as
currently provided), a high impact promotion on each Publication Website, at the
bottom of pages on sponsored links, and, on a remnant basis, on AnchorDesk and
other email newsletters. Both parties shall consult in good faith and make
changes as appropriate in the mix of promotional efforts. Ziff Davis Media shall
provide reports at least once each quarter to ZDNet on the number of net
subscriptions secured. ZDNet shall immediately add

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<PAGE>

additional promotions in the event that the net subscriptions are falling short
of the annual goal. This provision shall terminate one year from the date of
this Agreement, unless Ziff Davis Media shall elect by written notice on or
before one month prior to such termination date to extend this provision for one
additional year.

(iii) ZDNet and Ziff Davis Media shall each make available to the
other lists of subscribers to the Publications and registered users of ZDNet,
subject to applicable privacy restrictions. Those lists may be used in
accordance with standard industry practice by ZDNet solely for promoting ZDNet
online products and services and by Ziff Davis Media solely for its print
products and services and may not be used for the benefit of, or made available
to, any third party. ZDNet and Ziff Davis Media may set reasonable restrictions
on the number of mailings or e-mails to each person on such lists; provided,
--------
however, neither may restrict such uses to less than the average annual number
- -------
provided prior to this date (for example, for circulation for U.S. Publications,
twelve mailings a year). This provision and the right to use such lists shall
terminate one year from the date of this Agreement; provided, however, that if
-------- -------
Ziff Davis Media extends the provisions of (ii) for an additional year, the
provisions of this paragraph (iii) shall also be extended for an additional
year.

7. Restrictions on Use of Competitive Materials.
--------------------------------------------

(i) In consideration of ZDNet's right to use the Content and host the
Publication's Websites, during the first three contract years, ZDNet shall not:

(A) incorporate content into its Websites from the publications set
forth on Schedule 7.1(i),

(B) manage, host or assist the Websites of the publications set forth
on Schedule 7.1(i),

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<PAGE>

(D) accept and run advertising from, offer subscriptions to, or
otherwise promote, the publications set forth on Schedule 7.1(i).

A Publication is "Directly Competitive" if it is principally focused on the same
editorial subject matter as any of the Publications, provided if any Publication
changes its principal focus to a new editorial subject matter materially
different from its previous principal subject matter and, prior to notice of
such change, ZDNet has entered into an agreement with a publication primarily
focused on the new subject matter, ZDNet may complete the then current term of
such agreement (without any renewals or extensions) without regard to whether
that publication is then a Directly Competitive publication.

(ii) In consideration of ZDNet's payment to Ziff Davis Media and
other services, during the term of this Agreement, but not during the Transition
Period, Ziff Davis Media shall not accept or run advertising in any of the
Publications from any of the Websites set forth in Schedule 7.1(ii).

8. Term.
----

(i) Subject to Section 5(iv), the term of Ziff Davis Media's license
shall be for a period ending on the fifth anniversary hereof, except that
shortly after the second anniversary, at the request of either party, the
parties will discuss whether and on what terms they might extend the term of
this Agreement, it being understood that neither party has any obligation under
this paragraph to extend this Agreement except in their sole discretion.

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<PAGE>

(ii) Either party may also terminate this license and its obligations
under this Agreement if the other party materially breaches any of its
obligations under this Agreement unless, in respect of any breach which is
curable, the other party cures such breach within 60 days after notice by the
non-breaching party.

(iii) ZDNet shall have the right to terminate this Agreement or
demand a renegotiation of the royalties going forward in the event of a
substantial reduction in the Content available to it from the Publications. A
substantial reduction shall mean that the number of Publications is reduced to
less than six United States non-gaming titles (counting Publications which may
be owned by third parties, but still are subject to this Agreement); or that the
number of articles within the Content is less than 66% of the number of articles
produced in 1999 (reduced by the number of articles in Computer Shopper). If
the parties are unable to agree on new royalties, then the royalties shall be
determined by an independent arbitrator.

(iv) If either party is acquired by or acquires a direct competitor
to the other (that is, Ziff Davis Media acquires or is acquired by an online
technology content Website or ZDNet acquires or is acquired by a print publisher
Directly Competitive to the Publications), the other party may within six (6)
months after such transaction, give notice of not less than (six) 6 months of
its termination of this Agreement. Any entity that maintains a Website
primarily focused on technology content shall be deemed to be a direct
competitor of ZDNet.

(v) ZDNet and Ziff Davis Media may by mutual consent remove any
Publication from this Agreement.

9. Quality Standards. In consideration of Ziff Davis Media's license of the
-----------------
Trademarks, ZDNet shall cause the

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<PAGE>

Service to be maintained in all material respects at substantially the same
standards of quality as the Service currently has been maintained. ZDNet shall
not take or allow any action with respect to the Service or the use of the
Trademarks or the Content on the Service or on any third party Website that
would infringe or adversely affect the value or reputation of the Trademarks or
derogate, dilute or impair the rights of Ziff Davis Media in the Trademarks.

10. Indemnities.
-----------

(i) ZDNet shall indemnify and hold Ziff Davis Media harmless from any
and all loss, cost, liability, damage and expense (including reasonable
attorneys' fees and other legal costs) (a) incurred by Ziff Davis Media on
account of any claims or lawsuits arising out of or relating to any of ZDNet's
or its licensees' activities hereunder, including without limitation, the
publication and distribution of the Content appearing in the Service (other than
claims as to which Ziff Davis Media indemnifies ZDNet under Section 10(ii)), or
of ZDNet created content, or the marketing, promotion, publication, sale or
distribution of the Service; (b) arising out of any breach by ZDNet of any of
its obligations under this Agreement; or (c) arising out of the use of the
Content, except as specifically authorized herein, or improper reproduction or
use of the Trademarks as licensed under this Agreement. Ziff Davis Media shall
promptly advise ZDNet of any such claim, shall give ZDNet the opportunity to
defend, compromise or settle the same (so long as such settlement is satisfied
solely by payments by ZDNet and imposes no obligations on Ziff Davis Media), as
ZDNet in its sole discretion may determine, shall cooperate fully with ZDNet in
the defense of same and shall not settle any such claim without first obtaining
ZDNet's written consent thereto, which shall not be unreasonably withheld.

-21-
<PAGE>

(ii) Subject to Section 10(iii) below, Ziff Davis Media shall
indemnify and hold ZDNet harmless from any and all loss, cost, liability, damage
and expense (including reasonable attorneys' fees and other legal costs)
incurred by ZDNet on account of (a) any suit or claim by a third party against
ZDNet alleging that ZDNet's use of the Trademarks in the United States in
accordance with the terms and conditions hereof is an infringement of the rights
of that third party in their trademark, or that ZDNet's use in the Service in
accordance with the terms and conditions of this Agreement of any Content
(unless the claim arises out of the creation, translation or alteration by ZDNet
of the Content) is libelous, an infringement of copyright or an invasion of
privacy (but with respect to Content originating in the U.S. only to the extent
that the claim would have been actionable in the United States, it being
understood that Ziff Davis Media shall not be responsible for claims of libel,
infringement of copyright, or invasion of privacy with respect to Content
originating in the U.S. that may arise solely under the law of any country other
than the United States), or (b) arising out of any breach by Ziff Davis Media of
any of its obligations under this Agreement. ZDNet shall promptly advise Ziff
Davis Media of any such claim, shall give Ziff Davis Media the opportunity to
defend, compromise or settle the same (so long as such settlement is satisfied
solely by payments by Ziff Davis Media and imposes no obligation on ZDNet), as
Ziff Davis Media in its sole discretion may determine, shall cooperate fully
with Ziff Davis Media in the defense of same, and shall not settle any such
claim without first obtaining Ziff Davis Media's written consent thereto, which
shall not be unreasonably withheld.

(iii) In the event of a third party claim alleging that ZDNet's use
of any of the Trademarks or the Content is

-22-
<PAGE>

an infringement of the rights of that third party, ZDNet shall, upon Ziff Davis
Media's request, remove or modify the Content, or use a modified non-infringing
form of the affected Trademark, or a different title and/or logo. Ziff Davis
Media shall have the right to settle any claim or action arising out of any such
third party claim in its sole discretion. In no event may ZDNet make any
settlement or compromise which may authorize or permit any third party to use
any of the Trademarks, or any element thereof, or any similar trademark in any
language or the Content without Ziff Davis Media's written consent.

(iv) Notwithstanding anything to the contrary in this Agreement, in
no event shall either party be liable to the other for consequential or indirect
damages, including, but not limited to damages resulting from lost profits or
goodwill, whether or not that party has been advised or is aware of the
possibility of such damages.

(v) Ziff Davis Media's aggregate liability to ZDNet in respect of any
claims for damages under this Agreement (including any liability for attorneys'
fees) arising in any contract year following the date of this Agreement shall
not exceed the total amount of royalties paid to Ziff Davis Media under this
Agreement during that contract year. The foregoing language shall not be
construed to affect the extent to which specific performance or other equitable
or injunctive relief may be available with respect to the breach by either
party.

11. Retention of Rights. All rights not specifically granted to ZDNet herein
-------------------
are retained by Ziff Davis Media. Without limiting the generality of the
foregoing, except for the rights specifically granted to ZDNet in Section 1
above, Ziff Davis Media retains all rights in and to the Trademarks, and the
Content, including, but not limited to, the right to

-23-
<PAGE>

use and exploit the Trademarks and the Content throughout the world, in all
languages in any medium or form, whether now known or hereafter invented,
including, but not limited to, books, magazines, newspapers, newsletters,
microfilm, reprint, serial, syndication, condensation, abridgment, radio
adaptation, television, motion picture, video, recording, tape or any electronic
or digital form and in connection with any services or business.

12. Assignment.
----------

(i) In entering into this Agreement, Ziff Davis Media is relying upon
the skills, reputation and personnel, including the officers, directors and
owners, of ZDNet. This Agreement and all rights and obligations under this
Agreement are personal to ZDNet and shall not, without the prior written consent
of Ziff Davis Media, be assigned, sublicensed, delegated or otherwise
transferred by ZDNet or by operation of law. Any unauthorized transfer or
delegation in violation of this Section 12(i) shall be void and of no force or
effect and shall constitute a material breach of this Agreement.

(ii) Notwithstanding the foregoing, either party may assign its
rights and obligations under this Agreement to an affiliate or division or in
connection with the sale or transfer of all or substantially all of the assets
of its business with the consent of the other party which shall not be
unreasonably withheld. This Agreement shall inure to the benefit of each
party's permitted successors and assigns.

13. Discontinuance of a Publication. Notwithstanding anything contained
-------------------------------
herein to the contrary, (but subject to the provision in Section 1(i) above with
respect to the sale or merger of a Publication) Ziff Davis Media shall have the
absolute right in its sole discretion, at any time, to discontinue, suspend,
abandon or otherwise terminate the

-24-
<PAGE>

publication of any Publication or merge any Publication into or with another
publication.

14. Confidential Information. If pursuant to this Agreement either party
------------------------
receives or becomes aware of any information from the other that is confidential
or proprietary in nature, that party shall keep such information confidential
and shall not, without the other party's prior written consent, disclose such
information in any manner whatsoever, in whole or in part, except as may
otherwise be required by applicable law and shall not use such information for
any purpose except to carry out its rights and obligations under this Agreement.

15. Copyright and Trademark Notice and Credit. The Service shall carry the
-----------------------------------------
following notice and credit. "Editorial items appearing in "ZDNET" that were
originally published in the [U.S.] Edition of [Publication] are the copyright
property of [ZD Inc.] or its suppliers. Copyright (C) [year of publication] ZD
Inc. All Rights Reserved. [___] is a [registered] trademark of ZD Inc." ZDNet
shall make any additions, changes and deletions to such notices and credits as
are reasonably required by Ziff Davis Media upon notice to ZDNet. In addition,
ZDNet shall give attribution to the Content back to the Publication and author
so as to avoid confusion over the source and ownership of the Content and that
attribution shall be prominent and consistent with industry practice.

16. Trademarks.
-----------

(i) All trademark rights related to or created by ZDNet's use of the
Trademarks in any language belong to Ziff Davis Media. If, contrary to the
provisions of this Agreement, ZDNet has obtained or shall obtain any such right
or interest in the Trademarks by any cause, then all rights ZDNet has obtained
in the Trademarks, including all

-25-
<PAGE>

associated goodwill, shall be the sole property of Ziff Davis Media and ZDNet
shall assign to Ziff Davis Media or its designee all of such trademark rights,
together with the associated goodwill or shall abandon or withdraw any
application or other claim of ownership for the Trademarks, at Ziff Davis
Media's option and at ZDNet's expense, in accordance with Ziff Davis Media's
written instructions given at any time.

(ii) ZDNet agrees to use the Trademarks only in accordance with, and
subject to the restrictions set forth in, this Agreement and the Trademark
Guidelines set forth on Exhibit D and such other guidelines as Ziff Davis Media
may reasonably prescribe from time to time and in a manner that does not
derogate Ziff Davis Media's or its affiliate's rights therein, and not in
combination with any other words or marks without Ziff Davis Media's consent,
not unreasonably withheld, or in any corporate name, trade name or other
designation used by ZDNet to identify its business. ZDNet shall not, directly
or indirectly, (a) interfere with Ziff Davis Media's or its affiliate's use,
licensing or registration of the Trademark anywhere throughout the world, (b)
challenge, contest or attack the ownership by Ziff Davis Media or its affiliate,
of any Trademarks or the validity of any Trademark or, (c) seek to register or
claim ownership of any of the Trademarks or any other designation similar to the
Trademarks.

(iii) Upon Ziff Davis Media's written instructions, ZDNet will assist
and fully cooperate with Ziff Davis Media's efforts to secure, protect and
preserve Ziff Davis Media's rights and interests in the Trademarks, including
Ziff Davis Media's or its affiliate's procuring of copyright and trademark
registrations, and ZDNet, at its expense, will execute and deliver any and all
documents, and

-26-
<PAGE>

perform any and all acts, including, without limitation, the supplying of such
samples and similar materials (e.g., copies of printouts of the Service and
----
promotional or similar materials) as may be required in this Agreement or
reasonably requested by Ziff Davis Media to confirm Ziff Davis Media's ownership
of the Trademarks and Content and otherwise further the intent and purposes of
this Agreement.

(iv) ZDNet shall use reasonable efforts to monitor the marketplace
during the term of this Agreement for infringements by third parties of the
Trademarks, the Content and any other material which is proprietary to Ziff
Davis Media and ZDNet will immediately notify Ziff Davis Media in writing of any
infringement or imitation of, or any other event or claim adverse to or in
violation of Ziff Davis Media's or its affiliates' rights or interests in, any
Trademarks, the Content, or any other rights. Ziff Davis Media will have sole
discretion to decide whether any communication or legal action is undertaken
with respect to such events or claims, and will have sole right to control all
aspects of such communication and action (including choice of attorney and
settlement). ZDNet will not take any steps with respect to such events or
claims, including any oral or written communication with the offending or
adverse person, without the prior written specific instructions of Ziff Davis
Media. ZDNet will assist and fully cooperate with Ziff Davis Media in
connection with any such communications and actions.

17. Non-Solicitation. For a period of twelve months after the date of
----------------
this Agreement, neither party shall solicit for employment any employee of the
other, it being understood that if an employee of a party initiates discussion
about employment with the other party without any solicitation by

-27-
<PAGE>

the other party, that other party shall be free to hire such employee.

18. Miscellaneous.
-------------

(i) Notices. All notices, requests, instructions, claims, demands,
-------
consents and other communications required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given (a) when
delivered personally to the recipient, (b) one business day after being sent to
the recipient by reputable overnight courier service (charges prepaid), (c) upon
machine-generated acknowledgment of receipt after transmittal by facsimile if so
acknowledged to have been received before 5:00 p.m. on a business day at the
location of receipt and otherwise on the next following business day, provided
that each such notice, demand or other communication is also deposited within 24
hours thereafter with a reputable overnight courier service (charges prepaid)
for delivery to the same Person or (d) five days after being mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, to the parties at the following addresses:

(a) with respect to notices to Ziff Davis Media regarding any matters,
to:

Ziff Davis Media Inc.
c/o Willis Stein & Partners II, L.P.
227 West Monroe Street
Chicago, IL 60606
Telephone: 312/422-2400
Facsimile: 312/422-2418
Attention: Daniel H. Blumenthal
Avy H. Stein

with copies of any notices to Ziff Davis Media regarding the breach,
interpretation or termination of this Agreement, to:

-28-
<PAGE>

Kirkland & Ellis
200 E. Randolph Drive
57th Floor
Chicago, IL 60601
Telephone: 312/861-2000
Facsimile: 312/861-2200
Attention: John A. Weissenbach
John Lynn - New York City

(b) with respect to notices to ZDNet regarding any matters, to:

ZDNET
650 Townsend Street
San Francisco, CA 94103, U.S.A.
Attention: Chief Executive Officer

with a copy of any notices to ZDNet regarding the breach, interpretation or
termination of this Agreement, to ZDNet's Legal Department at ZD Inc., 28 East
28th Street, New York, New York 10016, U.S.A.

(ii) Entire Agreement. This Agreement contains a complete statement
----------------
of all of the arrangements between Ziff Davis Media and ZDNet with respect to
its subject matter, supersedes all previous agreements, arrangements and
understandings, written or oral, relating to its subject matter, and may not be
modified except by a writing signed by both parties. This Agreement shall be
binding on each party's permitted successors and permitted assigns, including
subsequent owners of each party. Notwithstanding the foregoing, this Agreement
shall not supercede the arrangements made between ZDNet and Ziff Davis Media
with respect to magazine subscriptions offered as part of ZD Rewards or
GamesGuide arrangements with respect to payments to Ziff Davis Media or Ziff
Davis Media employees for part of the time of its employees (for example, Tom
Steinhart-Threlkeld) or for special contributions by Ziff Davis Media employees,
nor similar arrangements not specifically covered by this Agreement.

-29-
<PAGE>

(iii) Governing Law. This Agreement shall be governed by and
-------------
construed during and after the term of this Agreement in accordance with the law
of the State of New York applicable to agreements made and to be performed in
New York and the United States Federal law where applicable. Each party agrees
that any action or proceeding brought by the other during or after the term of
this Agreement and arising out of or related to this Agreement shall be brought
in courts located in the State of New York. Each party irrevocably consents to
the jurisdiction of the courts of the State of New York and of any Federal Court
located in New York in connection with any action or proceeding brought during
or after the term of this Agreement and arising out of or related to this
Agreement and waives any objection to venue or any claim that the action is
brought in an inconvenient forum. In any such action or proceeding, each party
waives personal service of any summons, complaint or other process and agrees
that service thereof shall be deemed made when mailed registered air mail,
return receipt requested, addressed to that party at its address set forth in
Section 18(a) or at such other address as that party may specify by written
notice to the other party.

(iv) No Waiver. The failure of a party to insist upon strict
---------
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must be
in writing.

(v) Force Majeure. Neither party shall be responsible for any
-------------
failure or delay in performance of its obligations under this Agreement because
of circumstances beyond its reasonable control, including, without limitation,
acts of God, fires, floods, wars, civil disturbances,

-30-
<PAGE>

sabotage, accidents, labor disputes (whether or not the employees' demands are
reasonable and within the party's power to satisfy), governmental actions or
inability to obtain labor, material, equipment or transportation, nor, except as
provided below, shall any such failure or delay give the other party the right
to terminate this Agreement. No event of force majeure shall affect any
obligation of ZDNet to pay any amounts under this Agreement, including, without
limitation, the full amount of the royalty payable under Section 5.

(vi) Separability. If any provision of this Agreement is invalid or
------------
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.

(vii) Survival. Sections 8(v), 10, 11, 14, 15 and 16 shall survive
--------
the expiration or termination of this Agreement, as well as all other provisions
of this Agreement which expressly state that they survive or that they apply
during and after the term of this Agreement, or which by their sense are
intended to survive the expiration or termination of this Agreement.

(viii) Further Instruments. Each party agrees to execute and deliver
-------------------
such further documents and take such further steps as may be reasonably
requested by the other party to further the purposes of this Agreement. Without
limiting the generality of the foregoing, ZDNet agrees to execute, upon Ziff
Davis Media's request, a shortened version of this Agreement, as it relates to
the Trademarks, acceptable in form and content to Ziff Davis Media's counsel,
for purposes of recording such agreement with any appropriate authority. Upon
the execution of such agreement, all

-31-
<PAGE>

provisions in this Agreement regarding the recordation of this Agreement shall
be deemed to also apply to that agreement.

(ix) Affiliates. Ziff Davis Media shall ensure that each of its
----------
affiliates complies with all of its obligations purported to be created hereby,
and ZDNet shall ensure that each of its subsidiaries complies with all of its
obligations purported to be created hereby.

-32-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers duly authorized as of the date first written
above.

ZIFF-DAVIS INC.

By: /s/ J. MALCOLM MORRIS
------------------------------
Name: J. Malcolm Morris
Title: Senior Vice President

ZIFF DAVIS MEDIA INC.

By: /s/ DANIEL H. BLUMENTHAL
------------------------------
Name: Daniel H. Blumenthal
Title: Vice President

-33-
<PAGE>

Schedule 7.1(i)

Competitors

Comp Reseller News
Computer World
Dr. Dobbs
Game Pro
Home Office Computing
Incite
Industry Standard
Info World
InformationWeek
InternetWeek
MacAddict
Maximum PC
Network Computing
Network World
PC Gamer
PC Games
PC World
Smart Computing
The Net
Tips & Tricks
Var Business
Wired
Next Generation
PC Accelerator

-34-
<PAGE>

Schedule 7.1(ii)
----------------

Competitors of ZDNet

cnet.com
internet.com
earthweb.com
idg.com
cmp.com
andovernet.com
comdex.com
zdtv.com
happypuppy.com
gamerevolution.com
gamesdomain.com
ign.com

-35-
<PAGE>

Exhibit A
---------

Computer Gaming World

Electronic Gaming Monthly
Expert Gamer
Family PC
Inter@ctive Week
- -----------

Official U.S. PlayStation Magazine
PC Computing
PC Magazine
PC Week
Smart Reseller
Yahoo! Internet Life

France
- ------

PC Expert
PC Direct

Germany
- -------

PC Direct
- ---------
PC Professionell
- ----------------
Internet Professionell
- ----------------------

PC Direct
PC Magazine
It Week
PC Gaming World

Australia
- ---------

PC Magazine
- -----------
PC Week
- -------

China
- -----

PC Magazine
- -----------
PC Week
- -------
Smart Reseller
- --------------
PC Computing
- ------------

-36-
<PAGE>

Exhibit B
---------

[Intentionally Omitted]
-----------------------

-37-
<PAGE>

Exhibit C

<TABLE>
<CAPTION>
1999
zdnet jan feb mar apr may jun jul aug sep oct nov dec

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Yahoo! Internet Life 1300 800 800 800 800 800 1800 800 800 900 900 900 11400
PC Computing 1400 1900 1200 1100 1600 1400 1100 1100 1100 1100 1100 1100 15200
FamilyPC 800 1000 400 400 300 600 300 300 300 400 400 400 5600
PC Magazine Extra 30 30 30 30 30 30 30 1870 30 30 30 30 2200
PC Magazine 2400 1400 1300 1100 800 1000 1000 1500 1500 1500 1600 1600 16700
Computer Gaming World 695 167 521 344 404 271 333 333 333 333 333 333 4400
Electronic Gaming Monthly 150 140 140 200 140 225 245 245 245 490 490 490 3200
Expert Gamer 41 41 41 41 42 42 42 42 42 42 42 42 500
Official US Playstation Magazine 100 100 100 100 100 100 100 100 100 100 100 100 1200
PC Week 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 42000
Inter@ctive Week 3966 3966 3966 3966 3967 3967 3967 3967 3967 3967 3967 3967 47600
Sm@rt Reseller 1083 1083 1083 1083 1083 1083 1083 1083 1084 1084 1084 1084 13000

15465 14127 13081 12664 12766 13018 13500 14840 13001 13446 13546 13546 163000
</TABLE>

-38-
<PAGE>

<TABLE>
<CAPTION>
2000
zdnet jan feb mar apr may jun jul aug sep oct nov dec

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Yahoo! Internet Life 1615 1615 1615 1615 1615 1615 2215 2215 2215 2215 2215 2215 22980
PC Computing 1600 1600 1600 1600 1600 1600 2500 2500 2500 2500 2500 2500 24600
FamilyPC 500 500 500 500 500 500 900 900 900 900 900 900 8400
PC Magazine 1500 1500 1500 1500 1500 1500 3500 3500 3500 3500 3500 3500 30000
Computer Gaming World 700 700 700 700 700 700 700 700 700 700 700 700 8400
Electronic Gaming Monthly 500 500 500 500 500 500 500 500 500 500 500 500 6000
Expert Gamer .75 75 75 75 75 75 150 150 150 150 150 150 1350
Official US Playstation Magazine 125 125 125 125 125 125 150 150 150 150 150 150 1650
PC Week 1500 19000 1500 1500 1500 1500 1500 14010 1500 1500 6510 1500 53020
Inter@ctive Week 600 500 13000 600 600 600 10000 600 600 600 800 600 36400
Sm@rt Reseller 5000 300 300 300 3000 300 300 300 300 2500 300 300 13200

13715 26515 21415 9015 11715 9015 22415 25525 15215 13015 25425 13015 206000
</TABLE>

- 39 -

<PAGE>

Exhibit D
Trademark Usage Guidelines

1. The Trademarks shall not be enclosed in any way by, combined with or
incorporated into or with any other words or marks, or modified in any other
ways. In each instance of use, the Trademarks shall be of a sufficient size
aid on an appropriately contrasting background so that all words and logo
elements are plainly legible.

2. ZDNet will use its commercially diligent efforts to use the Trademarks only
as brands or adjectives followed by the common generic term for the
Trademarks, e.g., "PC Week Magazine". ZDNet shall not use the Trademarks in
the genitive or as a possessive, e.g., "PC Week's Table of Contents" or "the
Table of Contents of PC Week".

3. ZDNet shall use commercially reasonable efforts to include a notice that
the Trademarks are being used under license from Ziff Davis Media.

4. The Trademarks must include the symbol "TM" (or the symbol "(R)" if so
designated by Ziff Davis Media) or the following notice where reasonable:
"(Trademark] is either a registered trademark or a trademark of Ziff Davis
Media Inc. in the United States and/or in foreign countries."

5, ZDNet shall not register domain names that contain or are confusingly
similar to the Trademarks.

6. Ziff Davis Media may reasonably amend these guidelines from time to time
upon at least one hundred eighty (18o) days written notice to ZDNet, subject
to ZDNet's consent, which shall not be unreasonably withheld.

All terms used in this Exhibit D and defined in the Agreement shall have the
meanings ascribed to them in the Agreement.

-40-
<PAGE>

Exhibit E
<TABLE>
<CAPTION>

E-mail Newsletters Magazines Publishing Frequency Distribution
- ------------------ --------- -------------------- ------------
<S> <C> <C> <C>

Bill Machrone's New Product
Alert PC Magazine 3x Weekly N/A
E-mail Readership Survey PC Week Monthly N/A
FamilyPC FamilyPC Weekly 70,000
Inter@ctive Week Alert Inter@ctive Week 2x Week N/A
- ----------- -----------
IT WEEK IT Week Weekly N/A
LINUX PC Week Daily - Monday thru Friday N/A
Miller's Choice PC Magazine Weekly N/A
PC Direct pcdirect.co.uk Weekly N/A
PC Magazine Alert PC Magazine Occasionally N/A
PC Week InBox Direct PC Week Monday thru Friday N/A
Sm@rt Reseller Online Sm@rt Reseller Monday and Thursday 60,000 to
- ----- -----
70,000
TIP OF THE DAY PCComputing Twice p/week 200,000+
Y2K Watch PC Week Weekly N/A
Y-Life Daily Bulletin YILO Daily 120,009
Y-Life Weekly YILO Weekly 28,370
Y-Life Music News YILO Weekly Start-up
newsletter
</TABLE>

-41-

<PAGE>

EXHIBIT 10.11

LICENSE AGREEMENT

Dated April 5, 2000

This license agreement (this "Agreement") is between ZD Inc. (hereinafter
"Licensor"), a Delaware corporation having offices at 28 East 28th Street, New
York, NY 10016 and Ziff Davis Publishing Holdings Inc. (hereinafter "Licensee"),
a Delaware corporation having offices at 227 West Monroe Street, Chicago, IL
60606.

As between Licensor and Licensee, Licensor is the owner of the full right,
title and interest in and to the mark Inter@ctive Investor (hereinafter the
"Mark") and the Inter@ctive Investor logo illustrated on Exhibit A attached
hereto and made a part hereof (the "Inter@ctive Investor Logo").

Licensee (through the division formerly known as ZD Publishing and acquired
by Licensee) has used and wishes to continue to use the Mark as the title of a
section on the subject of investing online (hereinafter the "Section") in the
Inter@ctive Week publication or any successor publication (hereinafter the
"Publication").

Licensor wishes to license Licensee to use the Mark as the title of the
Section in the Publication on the terms and conditions hereof;

In consideration of the mutual covenants and promises herein provided, the
parties agree as follows:

1. Grant of License. Licensor hereby grants to Licensee, subject to the
terms and conditions of this Agreement, a perpetual, non-transferable (except in
accordance with Section 18 hereof) royalty-free license to use the Mark
throughout the world (except for the United Kingdom, which is specifically
excluded) (hereinafter the "Territory") during the term of this Agreement as the
title of the Section in the Publication, and on advertising and promotional
materials related to the Section, only in the design attached hereto as Exhibit
B, or in such other design as is approved by Licensor in writing, such approval
not to be unreasonably withheld. Notwithstanding the foregoing, Licensor shall
have the right, upon notice to Licensee, to withdraw from the Territory any
country in which a third party claims that Licensee's use of the Mark is an
infringement or violation of such third party's rights; provided, however, that
Licensor shall not withdraw any such country from the Territory in the event
Licensee notifies Licensor in writing of its intention to resolve such third
party infringement claim at Licensee's expense; provided, further, that (i)
Licensee shall not enter into any settlement of any such claim in any way that
limits the validity or rights of Licensor in the Mark without Licensor's prior
written consent, and (ii) Licensee agrees to indemnify, defend and hold harmless
Licensor from all liability, damages, loss, cost or expense (including but not
limited to reasonable attorneys' fees and expenses) arising from Licensee's
continued use of the Mark in such country of the Territory following Licensor's
notice to Licensee of its intention to withdraw such country from the Territory
as a result of such third party infringement claim. The Mark may only be used on
print
<PAGE>

materials and may not be used or appear in any other medium, including, without
limitation, television, the World Wide Web, the Internet, or online; provided,
however, the Mark may appear (x) in other media if it is part of the cover or
another page of the Publication and that cover or page is displayed in such
other media and (y) in Alternative Electronic Versions (as defined in Section
3(i)(z) of the Amended and Restated License Agreement between ZDNet and ZD
Publishing dated this same date (the "ZDNet License Agreement")), provided that
the Mark shall appear in the electronic version in locations substantially
equivalent to the locations that the Mark appears in the Publication in print.
All rights not expressly granted herein are reserved to Licensor, including the
right to create derivative versions of the Mark and to use those derivative
marks in all media.

2. Value, Ownership and Use of the Mark; Quality Control.

(a) Licensee acknowledges that great value is placed on the Mark and
the goodwill associated therewith and agrees not to challenge or contest
Licensor's ownership of the Mark anywhere in the world, or the validity of
the license granted under this Agreement. Nothing in this Agreement or in
the performance thereof, or that might otherwise be implied by law, shall
operate to grant Licensee any right, title or interest in or to the Mark
other than specified in the license grant herein.

(b) Licensee agrees to maintain the quality of all aspects of the
Publication (including any Alternative Electronic Versions) (e.g.,
editorial content, production, advertising, etc.) at a level that is at
least commensurate with the quality of printed periodicals distributed by
Licensor immediately prior to the date of this Agreement. During the term
of this Agreement, all use of the Mark shall be in accordance with the
guidelines attached hereto as Exhibit C, as it may be reasonably amended by
Licensor from time to time upon notice to Licensee (the "Guidelines").

(c) Licensee shall provide to Licensor use dates, use specimens and
other similar information relating to Licensee's use of the Mark as
necessary to monitor the quality of the Publication (including any
Alternative Electronic Versions) and obtain and maintain registration for
the Mark, as and when reasonably requested by Licensor. Licensee shall
remedy any deficiencies in its use of the Mark and/or the quality of the
Publication (including any Alternative Electronic Versions) and related
advertising and promotional materials upon notice from Licensor.

(d) Licensee shall use the Mark only in a form and manner that is
consistent with proper trademark usage and the Guidelines and only with the
symbols, notices and legends stated in Exhibit C as it may be reasonably
amended from time to time by Licensor upon notice to Licensee.

(e) Licensee understands, accepts and agrees that its usage of the
Mark shall inure solely to the benefit of Licensor. Licensee hereby assigns
and shall assign in the future to Licensor all rights it may acquire by
operation of law or otherwise in the Mark, including, without limitation,
all applications or registrations therefore, along with the goodwill
associated therewith.

(f) Licensee shall not knowingly do anything that is inconsistent with
or impairs the validity of the Mark, or that infringes, derogates, dilutes
or is inconsistent with or impairs the Mark or Licensor's ownership of the
Mark or which is detrimental to the reputation of the Mark or Licensor and
shall cooperate with and reasonably assist Licensor, if such cooperation
and assistance is requested, at Licensor's expense, in protecting and
maintaining Licensor's rights in the Mark, including, without limitation,
in any efforts of Licensor to register the Mark and/or

2
<PAGE>

record this Agreement. In the event that Licensee unknowingly does anything
that is inconsistent with or impairs the validity of the Mark, or that
infringes, derogates, dilutes or is inconsistent with or impairs the Mark
or Licensor's ownership of the Mark or which is detrimental to the
reputation of the Marks or Licensor, upon notice from Licensor, Licensee
shall promptly cease such activity.

(g) Without limiting the generality of anything in this paragraph 2 or
Exhibit C, Licensee specifically agrees that it shall not use the Mark, or
any name, mark or logo confusingly similar to the Mark, in any corporate,
business or trade name or in or on any electronic or online media, product
or service, whether now known or hereafter devised, except for the title of
the Section in the Publication (including any Alternative Electronic
Versions), and shall not file any trademark applications or domain name
applications or registrations or other indicia of ownership anywhere in the
world for the Mark or any name, mark or logo confusingly similar to the
Mark or the Inter@ctive Investor Logo, or any name, mark or logo
incorporating the Mark or the Inter@ctive Investor Logo.

(h) Licensee shall not advertise, market or publicize the Section or
the Publication in a manner suggesting Licensor's sponsorship or
endorsement of the Section or the Publication, other than the use of the
Mark as contemplated herein.

(i) Any breach of this Section 2 shall be deemed a material breach of
this Agreement.

3. Sublicense. Licensee may sublicense the rights to use the Mark granted
herein in connection with its license of foreign or other editions of the
Publication. In the event of any such sublicense, the sublicensee shall be bound
by the terms and conditions of this Agreement and Licensee shall be liable for
any breach by the sublicensee of such terms and conditions.

4. Infringement of the Mark; Prosecution and Maintenance of Mark.

(a) Licensee shall notify Licensor in writing of any infringement or
imitations by others of the Mark which may come to Licensee's attention,
and Licensor shall have fifteen (15) business days to determine whether it
shall take action on account of any such infringements or imitations. Any
action which Licensor takes against a third party on account of any such
infringement or imitation shall be at Licensor's expense and any final
award granted or any settlement made shall be paid to Licensor, and
Licensee shall have no claim to such award or settlement. In the event that
Licensor does not take any action within such fifteen (15) business day
period, or if Licensor begins to take action against such infringement or
imitation but later abandons such action, Licensee may institute any suit
or take any action on account of any such suspected infringements or
imitations at its own expense and any final award shall be paid to
Licensee, provided, that (i) Licensee may not settle any litigation
involving the Mark in any way that limits the validity or rights of
Licensor in the Mark, without Licensor's prior written consent, and (ii)
Licensee agrees to indemnify and defend and hold harmless Licensor from all
liability, damages, loss, cost or expense (including but not limited to
reasonable attorneys' fees and expenses) arising from Licensee's
institution of such suit or action. Each party shall cooperate with the
other party, at such other party's expense, whenever a party takes any
action against a suspected infringing or imitating party.

(b) Licensor has no obligation to file, or maintain in full force and
effect any applications or registrations for the Mark. Notwithstanding the
foregoing, Licensor will file applications and maintain registrations for
the Mark in Licensor's name at Licensee's reasonable

3
<PAGE>

request, provided that Licensee shall reimburse Licensor for the cost of
filing and prosecuting such application and maintaining any resulting
registrations. Licensor and Licensee shall cooperate with and assist each
other in the provision of documents and information in connection with any
registration or application for the Mark as reasonably necessary to
effectuate the procurement and maintenance of any applications or
registrations filed by Licensor for the Mark, whether at Licensee's request
or otherwise.

5. Term.

(a) This Agreement shall commence on the date set forth above and
shall continue thereafter unless terminated upon mutual agreement of the
parties, or in accordance with Paragraph 5(b) of (c) below (the "Term").

(b) In the event that Licensee ceases to use the Mark as the title of
the Section in the Publication in four (4) issues within any twelve month
period, Licensor may request by notice that the Licensee within the next
120 days use the Mark as the title of the Section in the Publication and
supply Licensor with evidence of such use. If Licensee fails to so use the
Mark within such 120 days, Licensor shall have the right to terminate this
Agreement upon notice to Licensee.

(c) In the event of a breach of this Agreement by either party, the
other party may pursue all available equitable and legal remedies
(including without limitation injunctive relief and monetary damages) but
in no event shall the license granted herein terminate because of either
party's breach of its obligations under this Agreement, except as provided
in Paragraph 5(b) above; provided, however, that in the event Licensee
materially breaches this Agreement at any time after Licensor has been
granted injunctive relief or damages, or other equitable or legal remedy,
as a result of a prior breach by Licensee of this Agreement, Licensor shall
have the right to terminate this Agreement upon written notice to Licensee
(i) if Licensee has not cured or taken reasonable steps to cure such breach
within such sixty (60) day period from Licensor; (ii) if after having taken
reasonable steps to cure such breach within such sixty (60) day period,
Licensee does not at any time thereafter continue to take reasonable steps
to cure such breach; or (iii) if after having taken reasonable steps to
cure such breach within such sixty (60) day period and thereafter, Licensee
does not cure such breach within six (6) months after the original notice
from Licensor.

6. Warranty and Indemnification. Licensee agrees to indemnify Licensor and
to save it harmless against all actions, claims, costs, damages or expenses
which may be brought or made against or incurred by Licensor as a result of or
in any way connected with (i) Licensee's conduct of its business, (ii) the
publication, marketing, promotion and distribution of the Publication,
including, without limitation, third-party claims of libel, invasion of privacy
or infringement of copyright based on material published in the Publication, or
(iii) Licensee's use of the Mark. Licensee acknowledges that Licensor makes no
representations or warranties to Licensee with respect to the Mark and Licensee
accepts the license granted herein with such understanding. Licensor agrees to
indemnify Licensee and to save it harmless against all actions, claims, costs,
damages or expenses which may be brought or made against or incurred by Licensee
as a result of or in any way connected with the infringement of third party
trademark rights as a result of Licensor's use of its marks.

4
<PAGE>

7. Limitation of Liability. EXCEPT FOR ANY INDEMNIFICATION LIABILITY
ARISING UNDER SECTION 6 HEREIN, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTIAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), ARISING FROM ANY PROVISION OF THIS AGREEMENT (INCLUDING SUCH
DAMAGES INCURRED BY THIRD PARTIES), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE
OR ANTICIPATED PROFITS OR LOST BUSINESS.

8. No Public Statements. Neither party may make any public statements or
disclosures concerning this Agreement or its terms to any medium except with the
prior approval of both parties or as required by law or the rules of any
applicable stock exchange or any governmental agency.

9. Notices. Notices shall be in writing, sent either by hand, by certified
mail, return receipt requested, postage prepaid, or by Airborne or other
recognized overnight delivery service, all delivery changes prepaid and
addressed to Licensor and Licensee as follows:

If to Licensor: ZD Inc.
28 East 28th Street
New York, NY 10016
Attention: President
General Counsel
Fax No.: (212) 503 3581

If to Licensee: Ziff Davis Publishing Holdings Inc.
c/o Willis Stein & Partners II, L.P.
227 West Monroe Street
Chicago, IL 60606
Attention: President
General Counsel
Fax No.: (312) 422 2418

or to such other persons or addresses as the person to whom notice is given may
have previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof). A notice shall be deemed to have been delivered (i) upon
receipt of such notice by the receiving party in the event such notice is
delivered by hand, (ii) three (3) business days following the deposit of such
notice in the mail if such notice is being delivered by mail, and (iii) one
business day following the deposit of such notice with an overnight delivery
service.

10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its choice
of law provisions.

5
<PAGE>

11. Severability. In the event that one or more provisions of this
Agreement shall at any time be found to be invalid or otherwise rendered
unenforceable, such provision or provisions shall be severable from this
Agreement, so that the validity or enforceability of the remaining provisions of
this Agreement shall not be affected.

12. No Waiver. Failure of the parties at any time to insist upon strict
performance of any term, condition or covenant shall not be deemed a waiver of
its right at any time thereafter to insist on strict performance.

13. Entire Agreement. This Agreement expresses all the rights, duties and
obligations between the parties relating to its subject matter, and it may not
be modified or amended except in a writing signed by both parties.

14. No Agency. This Agreement shall not be construed as to constitute
either party the agent or representative of the other for any purpose
whatsoever, and each party agrees that it has no authority to assume or to incur
any obligation or responsibility, expressed or implied, for, or on behalf of, or
in the name of, the other, or to bind, or attempt to bind, the other in any
manner or thing whatsoever.

15. Successors and Assigns. This Agreement shall be deemed to inure to the
benefit of and to bind the parties hereto and their respective successors and
permitted assigns.

16. Further Instruments. Licensee agrees to execute such further documents
and take such further steps as may be reasonable requested by Licensor to
further the purposes of this Agreement.

17. Survival. Paragraphs 2, 6, 7, 8, 10, 11, 13, 15, and 16, and any other
provisions which by their terms or sense are intended to survive the termination
of this Agreement, shall survive the termination of this Agreement.

18. Assignability. Except as part of a merger or the sale of all or
substantially all of Licensor's business or the Publication, Licensee shall not
assign or transfer this agreement or its rights or obligations hereunder without
the prior written consent of the Licensor, which consent shall not be
unreasonably withheld.
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the day and year first above written.

ZD INC.

By: /s/ J. MALCOLM MORRIS
---------------------------
Name: J. Malcolm Morris
Title: Senior Vice President

Ziff Davis Publishing Holdings Inc.

By: /s/ DANIEL H. BLUMENTHAL
---------------------------
Name: Daniel H. Blumenthal
Title: President
<PAGE>

Exhibit A

INTER@CTIVE INVESTOR
[GRAPHIC]
<PAGE>

Exhibit B

inter@ctive investor
[GRAPHIC]
<PAGE>

EXHIBIT C
Trademark Guidelines

All terms used in this Exhibit C that are defined in the Agreement shall
have the meaning ascribed to them in the Agreement.

1. The Mark licensed under the Agreement shall mean the "Inter@ctive
Investor" mark. The Mark licensed under the Agreement shall be used strictly in
accordance with the specifications set forth in the Agreement and below.

2. The "Inter@ctive Investor" mark shall not be enclosed in any way by a
border or combined with or incorporated with or in any other words or marks, or
modified in any other way. The "Inter@ctive Investor" mark shall be of
sufficient size and on an appropriately contrasting background to make all words
plainly legible.

3. Licensee will use commercially diligent efforts to use the "Inter@ctive
Investor" mark only as a brand or an adjective followed by the common generic
term for the mark, e.g., the Inter@ctive Investor section and shall not use the
"Inter@ctive Investor" mark in the possessive.

4. Whenever reasonable in the context of a particular use of the Mark,
Licensee shall identify such trademark as being used under license from
Licensor.

5. The Mark must include the(R)or(TM)symbol, as designated by Licensor,
and, where reasonable, the following notice: "Inter@ctive Investor is either a
registered trademark or a trademark of ZDNet, Inc. in the United States and/or
other countries."

Licensor may reasonably amend these guidelines from time to time upon at
least 60 days written notice to Licensee, subject to Licensee's consent, which
shall not be unreasonably withheld.

<PAGE>

Exhibit 10.12

LICENSE AGREEMENT
-----------------

Dated April 5, 2000

THIS LICENSE AGREEMENT (this "Agreement") is between ZD Inc. (hereinafter
"Licensor"), a Delaware corporation having offices at 28 East 28th Street, New
York, NY 10016 and Ziff Davis Publishing Holdings Inc. (hereinafter "Licensee"),
a Delaware corporation having offices at 227 West Monroe Street, Chicago, IL
60606.

WHEREAS, as between Licensor and Licensee, Licensor is the owner of the
full right, title and interest in and to the mark ZD and the ZD logo illustrated
on Exhibit A attached hereto and made a part hereof (the "ZD Logo")
(hereinafter, collectively the "Marks").

WHEREAS, ZD Inc. and ZD Holdings (Europe) Ltd. have entered into that
certain Purchase Agreement (the "Purchase Agreement"), dated as of December 6,
1999, with Ziff-Davis Media (formerly known as WS-ZD Acquisition, Inc.), whereby
Ziff Davis Media is acquiring certain assets and assuming certain liabilities,
all on the terms and subject to the conditions set forth in the Purchase
Agreement.

WHEREAS, Licensee is entering into this Agreement with Licensor pursuant to
Section 6.1 of the Purchase Agreement as a wholly owned subsidiary of Ziff Davis
Media.

WHEREAS, Licensee wishes to use the Marks in connection with printed
computer and technology periodicals (including magazines, newspapers and
newsletters) (hereinafter the "Publications") as an acronym for the house mark
"Ziff-Davis";

WHEREAS, Licensor wishes to license Licensee to use the Marks on the
Publications on the terms and conditions hereof;

In consideration of the mutual covenants and promises herein provided, the
parties agree as follows:

1. Grant of License. Licensor hereby grants to Licensee, subject to the
----------------
terms and conditions of this Agreement, an exclusive, perpetual, irrevocable,
worldwide, non-transferable, royalty-free license to use the Marks during the
term of this Agreement in connection with the Publications, and on advertising
and promotional materials related to the Publications bearing the Marks. The
Marks may only be used on print materials and may not be used or appear in any
other medium, including, without limitation, television, the World Wide Web, the
Internet, or online, provided, however, the Marks may appear (x) in other media
if they are part of the cover or another page of a Publication that is displayed
in such other media and (y) in Alternative Electronic Versions (as defined in
Section 3(i)(z) of the Amended and Restated License Agreement between ZDNet and
ZD Publishing dated this same date (the "ZDNet License Agreement")), provided
that the Marks shall appear in that electronic version in locations
substantially equivalent to the locations that the Marks appear in that
Publication in print. All
<PAGE>

rights not expressly granted herein are reserved to Licensor, including the
right to create derivative versions of the Marks and to use those derivative
marks (e.g., ZDU, ZDU logo, ZDTV, ZDTV logo) in all media but not in print
----
periodical magazines and newspapers. Notwithstanding any of the foregoing, (i)
Licensor shall have the right to use derivative versions of the Marks including
ZDNet for print newsletters, programming guides, advertisements, promotional
materials, books, course materials, materials which complement the use of those
derivative marks in other media and similar materials, (ii) during the period of
the ZDNet License Agreement, Licensor may use the mark ZDNet in print in
connection with Computer Shopper magazine (and its special editions, including
the Publication launched by Computer Shopper under the name eshopper (the name
of which shall be changed to a different name) and including changing the name
of Computer Shopper to ZDNet magazine) and (iii) after the fourth anniversary of
this date, Licensor may use the ZDNet mark without restrictions in print.
Licensor shall not use the mark ZD or the ZD Logo by themselves (i.e., without
----
some additional element) in any media.

2. Value, Ownership and Use of the Marks; Quality Control.
------------------------------------------------------

(a) Licensee acknowledges that great value is placed on the Marks and
the goodwill associated therewith and agrees not to challenge or contest
Licensor's ownership of the Marks anywhere in the world, or the validity of the
license granted under this Agreement. Nothing in this Agreement or in the
performance thereof, or that might otherwise be implied by law, shall operate to
grant Licensee any right, title or interest in or to the Marks other than as
specified in the license grant herein.

(b) Licensee agrees to maintain the quality of all aspects of the
Publications (including any Alternative Electronic Versions) (e.g., editorial
content, production, advertising, etc.) at a level that is at least commensurate
with the quality of printed periodicals distributed by Licensor immediately
prior to the date of this Agreement. During the term of this Agreement, all use
of the Marks shall be in accordance with the guidelines attached hereto as
Exhibit A, as it may be reasonably amended by Licensor from time to time upon
notice to Licensee (the "Guidelines").

(c) Licensee shall provide to Licensor use dates, use specimens and
other similar information relating to Licensee's use of the Marks as necessary
to maintain registration therefor, as and when reasonably requested by Licensor.
Licensee shall remedy any deficiencies in its use of the Marks and/or the
quality of the Publications (including any Alternative Electronic Versions) and
related advertising and promotional materials upon notice from Licensor.

(d) Licensee shall use the Marks only in a form and manner that is
consistent with proper trademark usage and the Guidelines and only with the
symbols, notices and legends stated in Exhibit A as it may be reasonably amended
from time to time by Licensor upon notice to Licensee. Until the earlier of the
fourth anniversary of this date and the termination of the ZDNet License
Agreement, Licensee may at its option use the "ZD" mark in the form of the ZD
Logo; following that, Licensee shall, within six months following receipt of
Licensor's notice received on or after 42 months from the date of this
Agreement, cease all use of the ZD Logo and shall use the "ZD" mark only with
another logo which shall not be confusingly similar to the ZD Logo, it being
understood that both parties will use the letters "ZD."

-2-
<PAGE>

(e) Licensee understands, accepts and agrees that its usage of the
Marks shall inure solely to the benefit of Licensor. Licensee hereby assigns and
shall assign in the future to Licensor all rights it may acquire by operation of
law or otherwise in the Marks, including, without limitation, all applications
or registrations therefore, along with the goodwill associated therewith.

(f) Licensee shall not knowingly do anything that is inconsistent
with or impairs the validity of the Marks, or that infringes, derogates, dilutes
or is inconsistent with or impairs the Marks or Licensor's ownership of the
Marks or which is detrimental to the reputation of the Marks or Licensor and
shall cooperate with and reasonably assist Licensor, if such cooperation and
assistance is requested, at Licensor's expense, in protecting and maintaining
Licensor's rights in the Marks, including, without limitation, in any efforts of
Licensor to register the Marks and/or record this Agreement. In the event that
Licensee unknowingly does anything that is inconsistent with or impairs the
validity of the Marks, or that infringes, derogates, dilutes or is inconsistent
with or impairs the Marks or Licensor's ownership of the Marks or which is
detrimental to the reputation of the Marks or Licensor, upon notice from
Licensor, Licensee shall promptly cease such activity.

(g) Without limiting the generality of anything in this paragraph 2
or Exhibit A, Licensee specifically agrees that it shall not use the Marks, or
any name, mark or logo confusingly similar to either of the Marks, in any
corporate, business or trade name or in or on any electronic or online media,
product or service, whether now known or hereafter devised, except for the
Publications (including any Alternative Electronic Versions), and shall not file
any trademark applications or other indicia of ownership anywhere in the world
for either of the Marks or any confusingly similar name, mark or logo, or any
name, mark or logo incorporating either of the Marks.

(h) Licensee shall not advertise, market or publicize the Publications
in a manner suggesting Licensor's sponsorship or endorsement of the
Publications, other than the use of the Marks as contemplated herein.

(i) "Ziff" Mark. Licensor agrees that it shall not use nor claim any
-----------
rights in, whether arising from use, purchase or otherwise, the "Ziff" name,
including without limitation for trademarks, service marks, logos and domain
names.

3. Sublicense. Licensee may sublicense the rights to use the Marks granted
----------
therein in connection with its license of foreign or other editions of one of
its Publications. In the event of any such sublicense, the sublicensee shall be
bound by the terms and conditions of this Agreement and Licensee shall be liable
for any breach by the sublicensee of such terms and conditions.

4. Infringement of the Marks; Prosecution and Maintenance of Marks.
---------------------------------------------------------------
(a) Licensee shall notify Licensor in writing of any infringement or
imitations by others of the Marks which may come to Licensee's attention, and
Licensor shall have fifteen (15) business days to determine whether it shall
take action on account of any such infringements or imitations. Any action which
Licensor takes against a third party on account of any such infringement or
imitation shall be at Licensor's expense and any final award granted or any
settlement made shall be paid to Licensor, and Licensee shall have no claim to
such award or

-3-
<PAGE>

settlement. In the event that Licensor does not take any action within such
fifteen (15) business day period, or if Licensor begins to take action against
such infringement or imitation but later abandons such action, Licensee may
institute any suit or take any action on account of any such suspected
infringements or imitations at its own expense and any final award shall be paid
to Licensee, provided, that (i) Licensee may not settle any litigation involving
the Marks in any way that limits the validity or rights of Licensor in the
Marks, without Licensor's prior written consent, and (ii) Licensee agrees to
indemnify and defend and hold harmless Licensor from all liability, damages,
loss, cost or expense (including but not limited to reasonable attorneys' fees
and expenses) arising from Licensee's institution of such suit or action. Each
party shall cooperate with the other party, at such other party's expense,
whenever a party takes any action against a suspected infringing or imitating
party.

(b) Licensor, at its own expense, shall use reasonable efforts to
prosecute and maintain in full force and effect the registrations and
applications included among the Marks, except where Licensor shall notify
Licensee of a decision not to continue prosecution of any such application or
not to otherwise maintain any such Mark in force. In the event of such
notification, Licensee shall have the right to pursue or maintain any such
registration or application with Licensor's consent, which consent shall not be
unreasonably withheld, and, if Licensor so elects, such registration or
application shall be assigned to Licensor. Licensor and Licensee shall cooperate
with and assist each other in the provision of documents and information in
connection with any such registration or application as reasonably necessary to
effectuate the procurement and maintenance rights and obligations set forth in
this section.

5. Term.
----

(a) This Agreement shall commence on the date set forth above and
shall continue thereafter unless terminated in accordance with this Agreement
(the "Term").

(b) In the event that Licensee ceases to use the Marks in connection
with the Publications for a period of more than 18 months, Licensor may request
by notice that the Licensee within the next 120 days use the Marks in ways
sufficient to avoid abandonment and supply Licensor with evidence of such use.
If Licensor fails to so use the Marks and provide such evidence of use within
such 120 days, Licensor shall have the right to use the Marks by themselves
(i.e., the ZD Marks and ZD Logo) on the World Wide Web, the Internet, or
----
online and, to the extent necessary to avoid abandonment, in print; provided,
however, that should Licensee resume use of the Marks in print, it shall notify
Licensor and Licensor shall promptly discontinue its use of the Marks in print.

(c) Upon termination of this Agreement, whether pursuant to this
paragraph 5 or otherwise, Licensee shall cease and refrain from all use of the
Marks and any name, mark or design confusingly similar to either of the Marks.

(d) In the event of a breach of this Agreement by either party, the
other party may pursue all available equitable and legal remedies (including
without limitation injunctive relief and monetary damages) but in no event shall
the license granted herein terminate because of either party's breach of its
obligations under this Agreement.

6. Warranty and Indemnification. Licensee agrees to indemnify Licensor and
----------------------------
to save it harmless against all actions, claims, costs, damages or expenses
which may be brought or made against or incurred by Licensor as a result of or
in any way connected with (i) Licensee's

-4-
<PAGE>

conduct of its business, (ii) the publication, marketing, promotion and
distribution of the Publications, including, without limitation, third-party
claims of libel, invasion of privacy or infringement of copyright based on
material published in the Publications, or (iii) Licensee's use of the Marks.
Licensee acknowledges that Licensor makes no representations or warranties to
Licensee with respect to the Marks and Licensee accepts the license granted
herein with such understanding. Licensor agrees to indemnify Licensee and to
save it harmless against all actions, claims, costs, damages or expenses which
may be brought or made against or incurred by Licensee as a result of or in any
way connected with the infringement of third party trademark rights as a result
of Licensor's use of its marks.

7. Limitation of Liability. EXCEPT FOR ANY INDEMNIFICATION LIABILITY
-----------------------
ARISING UNDER SECTION 6 HEREIN, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTIAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), ARISING FROM ANY PROVISION OF THIS AGREEMENT (INCLUDING SUCH
DAMAGES INCURRED BY THIRD PARTIES), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE
OR ANTICIPATED PROFITS OR LOST BUSINESS.

8. No Public Statements. Neither party may make any public statements or
--------------------
disclosures concerning this Agreement or its terms to any medium except with the
prior approval of both parties or as required by law or the rules of any
applicable stock exchange or any governmental agency.

9. Notices. Notices shall be in writing, sent either by hand, by
-------
certified mail, return receipt requested, postage prepaid, or by Airborne or
other recognized overnight delivery service, all delivery changes prepaid and
addressed to Licensor and Licensee as follows:

If to Licensor: ZD Inc.
28 East 28th Street
New York, NY 10016
Attention: President
General Counsel
Fax No.: (212)503 3581

If to Licensee: Ziff Davis Publishing Holdings Inc.
c/o Willis Stein & Partners II, L.P.
227 West Monroe Street
Chicago, IL 60606
Attention: President
General Counsel
Fax No.: (312)422 2418

or to such other persons or addresses as the person to whom notice is given may
have previously furnished to the other in writing in the manner set forth above
(provided that notice of any

-5-
<PAGE>

change of address shall be effective only upon receipt thereof). A notice shall
be deemed to have been delivered (i) upon receipt of such notice by the
receiving party in the event such notice is delivered by hand, (ii) three (3)
business days following the deposit of such notice in the mail if such notice is
being delivered by mail, and (iii) one business day following the deposit of
such notice with an overnight delivery service.

10. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, without regard to its choice
of law provisions.

11. Severability. In the event that one or more provisions of this
------------
Agreement shall at any time be found to be invalid or otherwise rendered
unenforceable, such provision or provisions shall be severable from this
Agreement, so that the validity or enforceability of the remaining provisions of
this Agreement shall not be affected.

12. No Waiver. Failure of the parties at any time to insist upon strict
---------
performance of any term, condition or covenant shall not be deemed a waiver of
its right at any time thereafter to insist on strict performance.

13. Entire Agreement. This Agreement expresses all the rights, duties and
----------------
obligations between the parties relating to its subject matter, and it may not
be modified or amended except in a writing signed by both parties.

14. No Agency. This Agreement shall not be so construed as to constitute
---------
either party the agent or representative of the other for any purpose
whatsoever, and each party agrees that it has no authority to assume or to incur
any obligation or responsibility, expressed or implied, for, or on behalf of, or
in the name of, the other, or to bind, or attempt to bind, the other in any
manner or thing whatsoever.

15. Successors and Assigns. This Agreement shall be deemed to inure
----------------------
to the benefit of and to bind the parties hereto and their respective
successors and permitted assigns.

16. Further Instruments. Licensee agrees to execute such further
--------------------
documents and take such further steps as may be reasonable requested by Licensor
to further the purposes of this Agreement.

17. Survival. Paragraphs 2, 6, 7, 8, 9 and 11, and any other provisions
--------
which by their terms or sense are intended to survive the expiration or
termination of this Agreement, shall survive the expiration or termination of
this Agreement.

18. Assignability. Except as part of a merger or the sale of all or
-------------
substantially all of the Publications, Licensee shall not assign or transfer
this agreement or its rights or obligations hereunder without the prior written
consent of the Licensor, which consent shall not be unreasonably withheld.

-6-
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first written above.

ZD INC.

By: /s/ J. MALCOLM MORRIS
---------------------------
Name: J. Malcolm Morris
Title: Senior Vice President

ZIFF DAVIS PUBLISHING HOLDINGS INC.

By: /s/ DANIEL H. BLUMENTHAL
---------------------------
Name: Daniel H. Blumenthal
Title: President
<PAGE>

EXHIBIT A
Trademark Guidelines

All terms used in this Exhibit A that are defined in the Agreement
shall have the meaning ascribed to them in the Agreement.

1. The Marks licensed under the Agreement shall mean the "ZD" mark and
the "ZD" logo. The Marks licensed under the Agreement shall be used strictly in
accordance with the specifications set forth in the Agreement and below.

2. The "ZD" mark shall not be enclosed in any way by a border or combined
with or incorporated with or in any other words or marks, or modified in any
other way. The "ZD" mark shall be of sufficient size and on an appropriately
contrasting background to make all words plainly legible.

3. Licensee will use commercially diligent efforts to use the "ZD" mark
only as a brand or an adjective followed by the common generic term for the
mark, e.g., the "ZD magazine" and shall not use the "ZD" mark in the possessive.

4. Whenever reasonable in the context of a particular use of the Marks,
Licensee shall identify such trademark as being used under license from
Licensor.

5. The Marks must include the (R) or (/TM/) symbol, as designated by
Licensor, and the following notice: "ZD and the ZD logo are either registered
trademarks or trademarks of ZD Inc. in the United States and/or other
countries."

These guidelines may be reasonably amended by Licensor from time to
time upon at least 180 days written notice to Licensee, subject to Licensee's
consent, which shall not be unreasonably withheld.

<PAGE>

Exhibit 10.13

EXECUTION COPY
SERVICES AGREEMENT

The parties to this Services Agreement (this "Agreement"), dated as of
April 5, 2000, are ZD Inc., a Delaware corporation ("ZD"), and Ziff Davis
Publishing Inc., a Delaware corporation ("Buyer").

Pursuant to the Purchase Agreement among ZD, ZD Holdings (Europe) Ltd. and
Buyer, dated December 6, 1999 (the "Purchase Agreement"), Buyer has purchased
certain print publications (the "Buyer Publications") and other assets as
described in the Purchase Agreement (the "Business"). The Buyer Publications and
the Business exclude the Computer Shopper print publication, its various special
editions, including the edition published under the name eShopper, and any
successor publication thereto (collectively, the "Publication").

Prior to the purchase of assets pursuant to the Purchase Agreement, ZD
provided to the Publication certain services described in Section 1 below
(collectively, the "Services");

ZD now desires to retain Buyer to provide the Services to ZD for the
Publication, as ZD may request from time to time, and Buyer desires to provide
such Services to ZD for the Publication.

NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations set forth herein, the parties hereto agree as follows:

SECTION 1. PERFORMANCE OF SERVICES; BUDGET.
-------------------------------

(a) Subject to the terms and conditions of this Agreement, Buyer shall
perform for ZD the Services described on Schedule 1(a) attached hereto. As part
of the Services, ZD shall be entitled to receive the benefit of all contractual
arrangements which Buyer has in effect from time to time with third parties
which relate to the functions described in Schedule 1(a) hereto, including,
without limitation, the arrangements with Warner Publisher Services, for
distribution; Centrobe, for fulfillment services; and Direct
<PAGE>

Media, for list rental. Buyer shall also manage ZD's relationships under the
arrangements with R.R. Donnelley & Sons, for printing and Bowater Newsprint for
paper.

(b) At least ninety (90) days prior to the end of each calendar year during
the Term (as defined in Section 5), representatives of Buyer and ZD will meet to
discuss and agree upon a budget for the following year for the Services to be
performed by Buyer. Attached as Exhibit A is the budget for calendar year 2000,
which has been agreed to by the parties. ZD will provide Buyer with reasonable
detail as to the expected nature and extent of the Services desired to be used
and Buyer will provide ZD with projected costs of such Services based on ZD's
stated needs. ZD may notify Buyer of any changes to the nature or extent of the
Services it desires to obtain during any budgeted year and Buyer will use its
commercially reasonable efforts to accommodate ZD's request for increased or
decreased use of the Services as specified by ZD. Buyer shall promptly (to the
extent practicable) notify ZD of any material deviation from the budget and
shall make any changes reasonably requested by ZD to remedy such deviation.

SECTION 2. FEES; PAYMENT.
-------------

(a) ZD shall pay to Buyer in exchange for the Services, the cost, both out-
of-pocket and an allocable portion (based on the allocation method described in
the following sentence) of overhead of such Services (collectively, the "Usage
Fees"), plus an annual payment of $5 million (such annual payment the "Annual
Fee"). The allocation method will be specified in Schedule 2 but revised from
time to time so as to not be any less favorable than the allocation method used
to charge Buyer's Publications for such Services. Buyer shall provide to ZD all
benefits of Buyer's third party arrangements such that the out of pocket costs
charged to ZD shall be the same per unit (or other comparable metric) amounts as
those applicable to the Buyer Publications.

2
<PAGE>

(b) The amounts payable for Services under this Agreement do not include
any amounts for sales, use or similar taxes. If any such taxes are found at any
time to be required to be paid, they will be added to the amounts payable by ZD
pursuant to this Agreement.

(c) Buyer shall send an itemized monthly invoice, in a format mutually
agreed to by Buyer and ZD, to ZD for the Usage Fees resulting from Services
provided by Buyer during the previous month and for one-twelfth of the Annual
Fee for the ensuing month. Payment terms are net cash payable in full by ZD
within the later of thirty (30) days after receipt of the invoice or forty-five
(45) days after the end of such previous month (the "Payment Due Date"). A late
charge will be charged each month for any payments received by Buyer later than
this Payment Due Date, except for payments which ZD disputes in good faith. The
late charge will be determined by multiplying the outstanding balance by X/12
where (X) is the prime rate announced from time to time by the Bank of New York.

(d) ZD shall have the right, on at least ten (10) days prior notice to
Buyer, to examine or appoint an independent certified public accountant, who
shall agree to hold all information confidential except in connection with any
claim for ZD reimbursement hereunder, to examine and audit, at its own expense,
not more than twice each calendar year, during normal business hours and for a
reasonable duration, the relevant records of Buyer relating to calculation of
the Usage Fees. If such audit uncovers an overpayment by ZD, Buyer shall
promptly reimburse ZD in the amount of such overpayment and if the overpayment
is five percent (5%) or greater of the amount that should properly have been
charge for such period, Buyer shall also promptly reimburse ZD for the
reasonable costs of such audit actually incurred by ZD.

SECTION 3. DIRECTION AND CONTROL OF BUYER'S PERSONNEL.
------------------------------------------

Buyer shall have the exclusive right to direct and control its employees
providing the Services under the terms of this Agreement, free of any
interference by

3
<PAGE>

ZD (other than in respect of ZD's right, as the recipient of the Services, to
specify the nature of the Services desired to be performed and the right to
receive and approve strategies and materials created or to be distributed by
such employees, in each case, specifically for the Publication). All of Buyer's
personnel providing the Services herein shall be exclusively employees of Buyer
or its affiliates, and Buyer shall have the sole right to determine their
conditions of employment, their working hours, employment and vacation policies,
seniority, promotions and assignments. Buyer will be solely responsible for
compensation of such employees and for all withholding taxes, F.I.C.A. and
F.U.T.A. taxes, unemployment insurance, workmen's compensation, and any other
insurance and fringe benefits with respect to its employees. Buyer shall also
have the exclusive rights to hire and fire any such personnel.

SECTION 4. SERVICES TO BE RENDERED CONSISTENT WITH PAST PRACTICES. During
------------------------------------------------------
the Term (as defined in Section 5), Buyer shall in all material respects render
the Services and otherwise assist ZD in connection with the Publication in a
manner and of a quality consistent with past practice prior to the closing under
the Purchase Agreement, including, among other things, providing the Services
for the Publication in all respects with the same level of care and expertise as
it provides similar service to the Buyer Publications.

SECTION 5. TERM AND TERMINATION.
--------------------

(a) The term (the "Term") of this Agreement shall commence as of the date
hereof and, unless earlier terminated pursuant to this Section 5, shall end on
the third anniversary of the date hereof. Upon termination or expiration, all
rights and obligations of each party hereunder shall cease as of the date of
termination and any amounts owed by either party under this Agreement shall be
paid in full in accordance with Section 2(c).

(b) ZD may terminate this Agreement on at least ninety (90) days prior
notice to Buyer for any reason or for no reason.

4
<PAGE>

(c) Either party may terminate this Agreement in the event that the other
party is in material breach of such other party's obligations under this
Agreement, unless such party is also in material breach of its obligations under
this Agreement, (i) if the defaulting party has not cured the breach within
fifteen (15) days after notice by the non-defaulting party specifying the nature
of the breach, or (ii) if the breach is not amenable to cure, then immediately
upon receipt of such notice by the defaulting party.

(d) Either party may terminate this Agreement as permitted under Section 8
in the event of a force majeure that prevents or materially delays the
performance by the other party of its obligations under this Agreement.

(e) Sections 6, 7, and 9 through 11 shall survive termination or expiration
of this Agreement. In addition, ZD's obligation to pay the Annual Fee until the
third anniversary of the date of the Agreement shall survive early termination
of this Agreement for any reason other than termination pursuant to Section 5(c)
due to a breach by Buyer.

SECTION 6. INDEMNIFICATION.
---------------

(a) Buyer, will, at its expense, promptly reform or correct any Services
which do not meet the requirements of this Agreement to the extent that such
errors were caused by Buyer, its equipment, its employees or agents. Buyer shall
not be responsible in any manner for any Services which do not meet the
requirements of this Agreement to the extent that such Services are due to
causes external to Buyer or otherwise beyond Buyer's control.

(b) Buyer agrees to indemnify and hold ZD and its affiliates, successors
and assigns harmless against and in respect of, and to pay any costs, damages,
claims, losses, settlements, deficiencies, expenses and liabilities arising from
(A) Buyer's failure to have all rights, licenses, and/or approvals necessary to
permit it to perform the Services and (B) the gross negligence or willful
misconduct of Buyer, its employees or its agents; and (ii) any breach by Buyer,
its employees or its agents of any of Buyer's

5
<PAGE>

obligations hereunder.

(c) ZD agrees to indemnify and hold Buyer and its affiliates, successors
and assigns harmless against and in respect of, and to pay any costs, damages,
claims, losses, settlements, deficiencies, expenses and liabilities arising from
(i) any breach by ZD, its employees or its agents of any of ZD's obligations
hereunder and (ii) any claims arising against Buyer relating to the Publication
provided such claims do not result from the negligence or willful misconduct of
Buyer, its employees or its agents.

(d) The obligation of either party to provide indemnification under this
Agreement shall be contingent upon the party seeking indemnification (i)
providing the other party with prompt written notice of any claim for which
indemnification is sought and (ii) cooperating fully with the other party and,
so long as such other party acknowledges its obligations to indemnify the party
seeking indemnification for such claim, allowing the other party to control the
defense and settlement of such claim. The party seeking indemnification may not
settle any such claim without the other party's prior consent, which consent
shall not be unreasonably withheld. The party seeking indemnification shall have
the right, at its own expense, to participate in the defense of any such claim.

SECTION 7. CONFIDENTIALITY. Confidential or proprietary information
---------------
disclosed by either party to the other for the purposes of this Agreement which
is clearly identified as such in writing or which the circumstances surrounding
its disclosure indicate that it is confidential or proprietary (which shall
include, without limitation, all circulation strategies and results for the
Publication) shall not be disclosed to any third party and shall be protected by
the recipient in the same manner and to the same degree that the recipient
protects its own confidential information. Such information will be disclosed
only to those employees of the recipient requiring access thereto in order to
perform the party's obligations under this Agreement (it being understood that
access in a manner consistent with past practice will be permitted) and

6
<PAGE>

shall not be used in any manner other than as specifically provided in this
Agreement.

SECTION 8. FORCE MAJEURE. Neither ZD nor Buyer shall be responsible for any
-------------
failure or delay in performance of its obligations under this Agreement because
of circumstances beyond its reasonable control including, but not limited to,
acts of God, fires, floods, wars, civil disturbances, sabotage, accidents, labor
disputes (whether or not the employees' demands are reasonable and within the
party's power to satisfy), governmental actions or transportation delays. Either
party may terminate this Agreement without any liability to the other party,
subject to Section 5(g), if such other party is substantially unable, as a
result of any circumstance set forth in this Section, to perform its obligations
under this Agreement for a continuous period of thirty (30) days or for thirty
(30) or more days during any sixty-day period.

SECTION 9. NOTICES.
-------

(a) All notices, requests, instructions, claims, demands, consents and
other communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given (i) when delivered
personally to the recipient, (ii) one business day after being sent to the
recipient by reputable overnight courier service (charges prepaid), (iii) upon
machine-generated acknowledgment of receipt after transmittal by facsimile if so
acknowledged to have been received before 5:00 p.m. on a business day at the
location of receipt and otherwise on the next following business day, provided
that each such notice, demand or other communication is also deposited within 24
hours thereafter with a reputable overnight courier service (charges prepaid)
for delivery to the same Person or (iv) five days after being mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, to the parties at the following addresses:

If to ZD, addressed to: ZD Inc.
28 East 28th Street
New York, New York 10016
Attention: Legal Department

7
<PAGE>

With a copy to: Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone: 212/558-4000
Facsimile: 212/558-3588
Attention: Alan J. Sinsheimer
Jonathan A. Gluck

If to Buyer, addressed to: Ziff Davis Publishing Inc.
c/o Willis Stein & Partners II, L.P.
227 West Monroe Street
Chicago, IL 60606
Attention: Daniel H. Blumenthal
Avy H. Stein

With a copy to: Kirkland & Ellis
200 E. Randolph Drive
57th Floor
Chicago, IL 60601
Telephone: 312/861-2000
Facsimile: 312/861-2200
Attention: John A. Weissenbach

or to such other address or addresses as may be specified from time to time in a
notice given by such party as permitted under this Section 9(a).

(b) Notwithstanding the foregoing, routine instructions, requests,
directions and notices dealing with day to day operations under this Agreement
may be given in such manner to such persons as may be agreed by the parties from
time to time is reasonable and practicable.

SECTION 10. SCHEDULES. The parties hereto acknowledge and agree that the
---------
Schedules referenced herein and attached hereto are an integral part of this
Agreement. Such Schedules are hereby incorporated by reference herein and made a
part hereof.

SECTION 11. MISCELLANEOUS.
-------------

8
<PAGE>

(a) This Agreement constitutes the entire Agreement between the parties
with respect to the provision or performance of Services for ZD by Buyer, and is
a complete allocation of risks between them as to the subject matter hereof.
This Agreement supersedes and cancels all previous oral or written
communications, negotiations, representations, undertakings and agreements
heretofore made between the parties in respect to the subject matter hereof.

(b) If any term or provision of this Agreement is held to be invalid or
unenforceable by reason of any rule of law or public policy, then this Agreement
shall be deemed amended to delete therefrom the term or provision held to be
invalid or unenforceable, and all of the remaining terms and provisions of this
Agreement shall remain in full force and effect.

(c) This Agreement shall be interpreted, construed and governed under and
by the laws of the State of New York, without regard to its choice of law rules.
In connection with any proceeding arising from this Agreement or the
transactions contemplated herein, the parties hereby irrevocably consent to the
exclusive jurisdiction of any Federal court or state court located in New York,
NY.

(d) Except as expressly set forth herein, no person not a party hereto
shall be a third-party beneficiary of any provision of this Agreement. Nothing
contained herein shall be construed or deemed to confer any benefit or right
upon any third party.

(e) The failure of a party to insist upon strict or timely adherence to any
term of this Agreement on any occasion shall not be construed a waiver, or
deprive that party of the right thereafter to insist upon strict or timely
adherence to that term or any other term of this Agreement.

(f) The headings in this Agreement are intended solely for the convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement. No modification of this Agreement shall be effected by the
acknowledgement or acceptance of any purchase order, acknowledgement or other

9
<PAGE>

forms containing terms or conditions at variance with or in addition to those
set forth in this Agreement.

(g) Neither this Agreement nor any provision hereof may be waived,
released, discharged, abandoned, changed or modified in any manner, orally or
otherwise, except by an instrument in writing signed by duly authorized officers
or representatives of the parties.

(h) Nothing in this Agreement shall be construed to place the parties in
the relationship of partners, joint venturers, principal and agent, or employer
and employee.

(i) This Agreement may be executed in counterparts, each of which shall
constitute an original but all of which, taken together, shall constitute a
single instrument.

(j) Each party to this Agreement has reviewed and commented upon or fully
participated in the preparation of this Agreement. In no event will any
provision of this Agreement be interpreted to the disadvantage of any party
based on such party's having been the draftsperson of such provision.

(k) ZD may assign this Agreement to any entity acquiring all or
substantially all of the Publication, provided that the assuming party executes
documents reasonably acceptable to Buyer assuming all of ZD's obligations
hereunder and ZD remains liable hereunder.

(l) Buyer may assign this Agreement to any entity acquiring all or
substantially all of Buyer's assets, provided that the assuming party executes
documents reasonably acceptable to ZD assuming all of Buyer's obligations
hereunder and Buyer remains liable hereunder.

(SIGNATURE PAGE TO FOLLOW)

10
<PAGE>

ZIFF DAVIS PUBLISHING INC. ZD INC.

By: /s/ DANIEL H. BLUMENTHAL BY: /s/ J. MALCOLM MORRIS
------------------------- -------------------------
Name: Daniel H. Blumenthal Name: J. Malcolm Morris
Title: President Title: Senior Vice President

11
<PAGE>

EXHIBIT A

2000 BUDGET
(amounts to be paid only for the period after the
closing under the Purchase Agreement)

Production: annual budget of 300,000

Circulation: annual budget of $531,000

Benchmarks: annual budget of $167,000

12
<PAGE>

SCHEDULE 1

SERVICES DESCRIPTION
--------------------

(a) Services Description:

(1) Production: paper, printing, prepress operations (e.g., layout,
----------
transmission of pages to the printer etc.) and other similar services.

(2) Circulation: subscription acquisition services, newsstand placement and
-----------
management services, list rental management, fulfillment services,
relationships with wholesalers. This includes contractual arrangements
with, among other parties, third party subscription agents and national
distributors.

(3) Distribution: postal service, trucking and other transportation services.
------------

(4) Benchmarks: access to all Benchmark products and services and access to and
----------
participation in the Benchmark intranet Test Site for the Publication, and
computershopper.com, and membership in all Benchmark advisory committees on
the same basis as the Buyer Publications. ZD shall be exempt from
compliance with the benchmark disclosure requirements to the same extent
waived for the Buyer Publications.

13
<PAGE>

SCHEDULE 2

ALLOCATION METHOD
-----------------

The Allocation method will be agreed to by the parties hereto from time to time.

<PAGE>

EXHIBIT 10.14

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this "Agreement") is made as of April
5, 2000, by and between Ziff Davis Media Inc., a Delaware corporation ("Buyer"),
and ZD Inc., a Delaware corporation ("Asset Seller").

W I T N E S S E T H:

WHEREAS, pursuant to that certain Purchase Agreement, dated as of December
6, 1999 (the "Purchase Agreement"), by and among Asset Seller, Ziff-Davis
(Europe) Holdings, Inc. (the "Stock Seller," and together with the Asset Seller,
the "Sellers") and Buyer, Buyer purchased certain publishing assets and
companies of the Sellers;

WHEREAS, in connection therewith, Buyer and Asset Seller desire that each
of Buyer and Asset Seller provide, or cause their respective wholly-owned direct
or indirect subsidiaries to provide, the other or such other's wholly-owned
direct or indirect subsidiaries, with certain transition services as set forth
herein (it being understood that the provision of certain other services by
Buyer on the one hand, and/or Asset Seller, on the other hand, is addressed in
other agreements executed and delivered as of the date hereof); and

WHEREAS, capitalized terms used herein and not otherwise defined herein
have the meanings given to such terms in the Purchase Agreement;

NOW, THEREFORE, in consideration of the premises and covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Buyer and Asset Seller agree as follows:

1. Transition Services.

(a) Subject to the other terms and conditions of this Agreement, each of
Buyer and Asset Seller shall provide, or shall cause its wholly-owned direct or
indirect subsidiaries to provide, to the other or wholly-owned direct or
indirect subsidiaries of the other, from the date of this Agreement and for the
period of time set forth on Attachment A with respect to each of the services,
the respective services set forth on Attachment A attached hereto and such other
transition assistance as may be mutually agreed by Buyer and Asset Seller
(collectively, the "Transition Services"). For purposes of this Agreement, each
party is referred to as a "Provider" in its capacity as the provider of a
Transition Service and as a "Recipient" in its capacity as the recipient of a
Transition Service.

(b) Unless otherwise agreed, the Transition Services shall be provided at
Vendor Cost. For purposes of this Agreement, "Vendor Cost" means the amount
specified on Attachment A. In addition, "Vendor Cost" shall include the direct
out-of-pocket costs incurred by the Provider in providing the services, but only
to the extent that such direct out-of-pocket costs have not been
<PAGE>

included by the Provider in the amounts set forth on Attachment A. In addition,
unless otherwise specified on Attachment A, Asset Seller shall also pay to Buyer
any amounts that are required to be paid to any licensors of software that is
used in connection with the provision of any services hereunder, and any amounts
that are required to be paid to any such licensors to obtain the consent of such
licensors to provide any of the services hereunder. Subject to the immediately
preceding sentence, Buyer shall use reasonable efforts to obtain any consents
that may be required from such licensors in order to provide any of the services
hereunder.

(c) Each Provider of Transition Services shall perform such Transition
Services exercising the same degree of care as it exercises in performing the
same or similar services for its own account, with priority equal to that
provided to its own businesses or those of any of its affiliates, subsidiaries
or divisions.

2. Billing and Payment. With respect to each of the Transition Services,
the Recipient shall pay to the Provider the monthly charge or other charge
specified on Attachment A for each Transition Service by the last day of each
calendar month during the Transition Period. The Recipient shall promptly pay
all other bills and invoices for charges permitted hereunder that it receives
from the Provider for services provided under or pursuant to this Agreement,
subject to receiving, if requested, any appropriate support documentation for
such bills and invoices. Such additional charges may, at the Provider's option,
be billed as incurred if the amount involved equals or exceeds $10,000, or, if
such charges do not exceed $10,000, at the end of each calendar month during the
Transition Period. All amounts shall be paid by wire transfer in accordance with
the instructions provided by the Provider to the Recipient and, in the case of
additional charges, shall be paid not later than 10 days following receipt by
the Recipient of the Provider's invoice.

3. General Intent. Each party and its wholly-owned direct or indirect
subsidiaries agree to use their respective reasonable commercial efforts to end
their need to use the Transition Services as soon as reasonably possible and
(unless the parties otherwise agree) in all events to end such need with respect
to each service specified in Attachment A attached hereto not later than the
periods specified in Attachment A.

4. Validity of Documents. The parties hereto shall be entitled to rely upon
the genuineness, validity or truthfulness of any document, instrument or other
writing presented in connection with this Agreement unless such document,
instrument or other writing appears on its face to be fraudulent, false or
forged.

5. Term of Agreement. The term of this Agreement shall commence on the date
hereof and shall continue (unless sooner terminated pursuant to the terms
hereof) until January 1, 2001, or such shorter or longer period as may be agreed
by the parties or provided in Attachment A attached hereto with respect to
particular Transition Services described in Attachment A attached hereto.

6. Partial Termination. Any or all of the services provided hereunder are
only terminable earlier than the Transition Period or the period specified in
Attachment A attached hereto

- 2 -
<PAGE>

by the Recipient as of the end of a month upon 30 days' prior written notice to
the Provider (unless otherwise specifically provided in Attachment A). Any such
termination shall be final, subject to the Recipient's obligation to pay the
Provider for the monthly charges and other amounts owing in respect of such
terminated Transition Service.

7. Assignment. This Agreement shall not be assignable in whole or in part
by any party hereto without the prior written consent of the other parties
hereto.

8. Confidentiality. Each party shall cause each of its Affiliates and each
of their officers, directors and employees to hold all information relating to
the business of the other party disclosed to it by reason of this Agreement that
is not already generally available to the public confidential and will not
disclose any of such information to any party unless legally compelled to
disclose such information; provided, however, that to the extent that any of
them may become so legally compelled they may only disclose such information if
they shall first have used reasonable efforts to, and, if practicable, shall
have afforded the other party the opportunity to obtain, an appropriate
protective order or other satisfactory assurance of confidential treatment for
the information required to be so disclosed. Asset Seller hereby agrees that
neither it nor any of its subsidiaries, employees or agents will access or use
any Buyer or third party software on Buyer systems, other than the software and
systems specifically described in Attachment A.

9. Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by and construed in accordance
with the domestic laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.

10. Limitation of Liability. Neither party shall be liable to the other or
any third party for any special, consequential or exemplary damages (including
lost or anticipated revenues or profits relating to the same) arising from any
claim relating to this Agreement or any of the services provided hereunder,
whether such claim is based on warranty, contract, tort (including negligence or
strict liability) or otherwise, even if an authorized representative of such
party is advised of the possibility or likelihood of the same. In addition,
neither party shall be liable to the other party or any third party for any
direct damages arising from any claim relating to this Agreement or any of the
services provided hereunder or required to be provided hereunder, except to the
extent that such direct damages are caused by the gross negligence or willful
misconduct of such party or their wholly-owned direct or indirect subsidiaries.

11. Consent to Jurisdiction; Waiver of Jury Trial.

- 3 -
<PAGE>

interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action may not be brought or is not maintainable in
said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a New York state or federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 13 of this Agreement or in such
other manner as may be permitted by law, shall be valid and sufficient service
thereof.

(b) Each party hereto hereby acknowledges and agrees that any controversy
which may arise under this agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury in
respect of any litigation directly or indirectly arising out of or relating to
this agreement or the transactions contemplated by this Agreement. Each party
certifies and acknowledges that (i) no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each
such party understands and has considered the implications of this waiver, (iii)
each such party makes this waiver voluntarily, and (iv) each such party has been
induced to enter into this agreement by, among other things, the mutual waivers
and certifications in this Section 11.

12. Counterparts. This Agreement may be executed in one or more
counterparts (including by means of telecopied signature pages), all of which
shall be considered one and the same agreement, and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.

13. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or by
overnight courier to the recipient, one business day after being sent by telefax
(with transmission confirmed) or five days after being mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall be sent to each party at
the address indicated below or to such other address or to the attention of such
other Person as the recipient party has specified by prior written notice to the
sending party.

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<PAGE>

Buyer:

Ziff Davis Media Inc.
28 E. 28th Street
New York, NY 10016
Attention: Chief Executive Officer
Fax: (212) 503-3581

with copies to:

Willis Stein Partners II, L.P.
227 West Monroe, Ste. 4300
Chicago, IL 60606
Fax: (312) 422-2424
Attention: Daniel H. Blumenthal

and

Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: John A. Weissenbach
Fax: (312) 861-2200

Asset Seller:

ZD Inc.
28 E. 28th Street
New York, NY 10016
Attention: J. Malcolm Morris

14. Modification, Nonwaiver, Severability. Neither this Agreement nor any
part hereof may be changed, altered or amended orally. Any modification must be
by written instrument signed by the parties. Failure by either party to exercise
promptly any right granted herein or to require strict performance of any
obligation imposed hereunder shall not be deemed a waiver of such right. If any
provision of this Agreement is held ineffective for any reason, the other
provisions shall remain effective.

15. Interpretation. The headings and captions contained in this Agreement
and in Attachment A attached hereto are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. The use
of the word "including" herein shall mean including without limitation."

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<PAGE>

16. No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any person.

17. Entire Agreement. This Agreement and the Recapitalization Agreement
contain the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, whether written or oral, relating to such subject matter.

18. Relationship of Parties. Except as specifically provided herein, none
of the parties shall act or represent or hold itself out as having authority to
act as an agent or partner of the other parties, or in any way bind or commit
the other party to any obligations. Nothing contained in this Agreement shall be
construed as creating a partnership, joint venture, agency, trust or other
association of any kind, each party being individually responsible only for its
obligations as set forth in this Agreement.

19. Force Majeure. If any Provider is prevented from complying, either
totally or in part, with any of the terms or provisions of this Agreement by
reason of fire, flood, storm, strike, lockout or other labor trouble, any law,
order, proclamation, regulation, ordinance, demand or requirement of any
governmental authority, riot, war, rebellion or other causes beyond the
reasonable control of the Provider or other acts of God, then upon written
notice to the Recipient, the affected provisions and/or other requirements of
this Agreement shall be suspended during the period of such disability and the
Provider shall have no liability to the Recipient in connection therewith.

* * * * *

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<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date and year first set forth
above.

ZIFF DAVIS MEDIA INC.

By: /s/ DANIEL H. BLUMENTHAL
----------------------------

Title: Vice President
----------------------------

ZD INC.

By: /s/ J. MALCOLM MORRIS
----------------------------

Title: Senior Vice President
----------------------------
<PAGE>

Attachment A

1. Banking and Cash Management Services.

A. Services; Duration. Buyer and Asset Seller shall provide the services
described in Schedule I attached hereto for the time periods set forth
in such Schedule 1.

B. Charges for Services. The services described on the attached Schedule
I shall be provided at no charge.

2. Use of Certain Financial Software.

A. Services; Duration. In addition to the banking and cash management
services described on Schedule I attached hereto, Buyer will provide
to Asset Seller and ZDTV access to and use of the People Soft
financial software and the Admarc software applications purchased by
Buyer as part of the Acquisition for Asset Seller's transaction
processing needs. Such access and use will be provided until June 30,
2000 (April 30, 2000 with respect to ZDTV) with respect to the
PeopleSoft software and until December 31,2000 with respect to the
Admarc software. Asset Seller shall be entitled to discontinue use of
such software prior to the specified dates upon at least 30 days'
prior written notice to Buyer. In the event the Admarc system is
replaced by Buyer, access to data relevant to Asset Seller will be
provided through alternate means (determined by Buyer) for the
remainder of the service period.

B. Charges for Services. Buyer shall charge Asset Seller an allocated
portion of the monthly operation cost of the software covered in this
paragraph 2B based on the "Charge-back Allocation Criteria" set forth
on the attached Schedule 2.

3. Information Technology Services.

A. Services; Duration; Charges. Buyer shall provide to Asset Seller and
the other businesses described in Schedule 2 attached hereto the
services described in such Schedule 2 for the time periods set forth
in such Schedule 2. Schedule 2 also describes the fees and charges
that Asset Seller shall pay to Buyer in exchange for the provision of
such services. To the extent that Buyer is providing services to
entities other than Asset Seller, Asset Seller shall be liable to
Buyer for such charges and Asset Seller shall seek reimbursement from
the applicable entity receiving such services.
<PAGE>

4. Use of Premises.

A. Description. Schedule 5.11(a) attached to the Purchase Agreement sets
forth a list of the portions of the offices leased by Buyer (the
"Shared Spaces") that Asset Seller (or such other parties as are
indicated on such Schedule) will be entitled to continue to occupy for
a period of 6 months following the Closing. Such use shall be for such
purposes and in such manner as Sellers were using such spaces
immediately prior to the Closing. In addition to the Shared Spaces,
Buyer shall permit those employees of Sellers and Red Herring whose
offices are located in areas of Buyer's offices which do not
constitute Shared Spaces to continue using such spaces or alternate
equivalent spaces designated by Buyer for a period of up to 3 months
following the Closing in order to permit Sellers to transition such
employee's work spaces to location of Sellers in an orderly fashion.

B. Charges. Sellers shall pay Buyer the allocable portion of all rent,
taxes, maintenance and other fees, expenses and charges incurred by
Buyer with respect to the Shared Spaces. Such allocation shall be
based on the approximate square footage of the Shared Spaces versus
the total square footage of the space covered by the applicable rent,
tax, fee, expense or charge. To the extent that Buyer is providing the
use of Shared Spaces to entities other than Asset Seller, Asset Seller
shall be liable to Buyer for amounts owed in respect of such Shared
Spaces and Asset Seller shall seek reimbursement from the applicable
entity using such Shared Spaces.

5. Accounting and Transaction Processing Services.

A. Services; Duration. Buyer shall provide to the "ZDNet" division of
Asset Seller and the ZDTV business transaction processing management
services through April 30, 2000. Such services shall consist of
credit, billing, collections, accounts payable and general accounting.
Buyer shall also provide to the "ZD Corporate" division of Asset
Seller accounts payable and general accounting services through June
30, 2000. Upon completion of the accounting services transition
period, Asset Seller will be responsible for maintaining the archive
of historical financial information for all businesses other than the
businesses acquired by Buyer. Asset Seller shall provide accounting
personnel to perform the transaction processing functions for ZDNet,
ZDTV and ZD Corporate. Asset Seller shall also provide personnel to
assist Buyer in transitioning the accounting services that Buyer is
retaining into a stand-alone business unit. Such services being
provided by Asset Seller shall be provided through June 30, 2000.

B. Charges. Attached as Schedule 3 hereto is a projected budget for the
accounting services described in paragraph 5A above. The allocation

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<PAGE>

methodology contained in such projected budget shall be used by Buyer
and Asset Seller to determine the net amount owing by Asset Seller to
Buyer for the services being provided under this paragraph 5.
References to ZDNet, ZDTV or Computer Shopper in such budget are
references to amounts that will be charged to Asset Seller by Buyer.

6. Intellectual Property Legal Services.

A. Services; Intellectual Property Legal Services. Asset Seller shall
provide the following services to Buyer during the term specified
under "Duration", below:

1. Provide a list of all law firms, agents and foreign associates
used worldwide for trademark prosecution and enforcement,
including contact information. Asset Seller shall request that
each such law firm, agent and associate prepare and provide, at
Buyer's cost and expense, a list of applications and
registrations of active matters relating to the Division.

2. Provide copies of all written files.

3. Promptly provide an electronic copy of the docketing system of
all trademarks, including status and action items, and continue
to docket matters manually and advise Buyer of new deadlines
until such file transfer is completed.

4. Promptly forward all notices received from outside counsel and
registry officials, retaining one copy for docketing purposes.

5. Promptly forward all cease-and-desist letters or other notices of
actual or potential trademark infringement relating to all
trademarks.

6. Respond to Office Actions and other correspondence received from
the U.S. Patent and Trademark Office or U.S. Copyright Office,
consistent with past procedure.

7. Coordinate preparation by outside counsel of all filings required
to be made to update record title into name of Asset Seller for
those patents, trademark and copyright registrations and
applications identified by Buyer to Asset Seller in accordance
with the side letter agreement between Asset Seller and Buyer
dated of even date herewith.

B. Covered Persons. The following employees of Asset Seller (the "IP
Covered Persons") shall, so long as they remain in the employ of Asset
Seller, continue to provide services to Buyer following the Closing on
a basis consistent with services provided to the Division prior to the
Closing (percentages indicate the percentage of the applicable
employee's working time that will be devoted to providing services to
Buyer): Andrea van Kampen (80%), Phyllis Schoenberg (90%), Helene
Calabrese (90%), Marylin

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<PAGE>

Kelly (90%), Janice Sanchez (90%) and Lucy Maldonado (50%). Such
persons shall at all times remain employees of Asset Seller, and
except as set forth in paragraph 6C below, Buyer shall have no
liability or obligation with respect to such persons in connection
with their employment by ZD Inc.

C. Charges. Buyer shall reimburse Asset Seller for 100% of outside
domestic and foreign counsel fees and disbursements and official fees
related to the services provided under this paragraph 6 (except as
otherwise provided pursuant to the side letter referenced in paragraph
6A.(7) above) and other direct out-of-pocket costs and expenses
incurred by Asset Seller and for a percentage of each of the Covered
Person's salary and bonus (which, in the case of the bonus, shall be
prorated for the periods during which each Covered Person provides
services to Buyer) in an amount equal to the percentage of that
person's time engaged in activities for the Buyer (as indicated in
paragraph 6B above). Such amounts shall be increased by 19% to
compensate Asset Seller for the benefits and other costs incurred by
Asset Seller with respect to such persons. Buyer shall have no
liability with respect to any severance, vacation, termination,
pension, profit sharing or other employee benefits that may be payable
to any covered person.

D. Duration. Asset Seller shall use commercially reasonable efforts to
have available the IP Covered Persons to continue to provide the
applicable services to Buyer until June 1, 2000.

7. Use of Certain Employees.

A. Covered Persons. The following employees of Asset Seller and Buyer
(the "Covered Persons") shall, so long as such Covered Persons remain
in the employ of the applicable party, continue to provide services to
the other following the Closing on a basis consistent with services
provided to the applicable business prior to the Closing (percentages
indicate the percentage of each person's working time that will be
devoted to providing services to the Recipient):

-4-
<PAGE>

<TABLE>
<CAPTION>
Name Time Allocation Employer Recipient
---- --------------- -------- ---------
<S> <C> <C> <C>
Adam Power 20% Asset Seller Buyer
Megumi Jinno 20% Asset Seller Buyer
Patrick Scherrer 50% Buyer Asset Seller
Freddy Mini 50% Buyer Asset Seller
Dominique Petit 25% Buyer Asset Seller
</TABLE>

Such persons shall at all times remain employees of the applicable
"Employer", and, except as set forth in paragraph 7B below, the
Recipient shall have no liability or obligation with respect to such
persons in connection with their employment by the "Employer".

B. Charges. Each Recipient shall reimburse the Provider for a percentage
each of the Covered Person's salary in an amount equal to the
percentage "Time Allocation" for each such person (as indicated in
paragraph 7A above). Such amounts shall be increased by 19% to
compensate the applicable Provider for the benefits and other costs
incurred by such Provider with respect to such persons. The Recipient
shall have no liability with respect to any severance, vacation,
termination, pension, profit sharing or other employee benefits that
may be payable to any Covered Person of the Provider.

C. Duration. Each Provider shall use commercially reasonable efforts to
have available the Covered Persons to continue providing the
applicable services to the Recipient until December 31, 2000, or such
earlier date as the Recipient may specify in writing to the applicable
Provider with respect to each Covered Person with 30 days prior
written notice.

8. Continued Health Insurance Coverage.

A. Services; Duration; Charges. For the period beginning on the Closing
Date and continuing for the remainder of the calendar month in which
the Closing Date occurs and thereafter until May 31, 2000 (unless
Buyer provides Asset Seller with notice by April 14 of an earlier
termination in which case it shall be until April 30, 2000), Asset
Seller shall provide to the Transferred Employees the same medical
coverage under Asset Seller's Aetna's ASA medical plan that was
provided to such employees by Asset Seller immediately before Closing.
Buyer shall pay Asset Seller the amount of $220,000 per month for each
month as total compensation for such coverage, payable promptly after
this date with respect to April and on May 1 if not cancelled as
provided herein.

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<PAGE>

Schedule 1

Accounts Receivable

Cash receipts into the lockbox accounts maintained by Asset Seller will be
posted to the Accounts Receivable ledger by the A/R department of Buyer (led by
Beverly Lewis). Once Asset Seller has established its own A/R department,
Buyer's team will provide reasonable assistance in transitioning to Asset Seller
the process of monitoring Asset Seller's lockbox accounts and posting receipts
to Asset Seller's Accounts Receivable ledger. Such transition shall occur as
soon as practicable, but in any event no later than June 1, 2000.

The majority of the existing lockbox accounts of Asset Seller will remain with
Asset Seller. Buyer's A/R department will continue to process receivables
ensuring the appropriate split between Asset Seller and Buyer. The cash received
in the lockbox accounts will be distributed to the appropriate bank accounts
(i.e., Asset Seller or Buyer).

Once Asset Seller's personnel have taken over receivable management and review
of the daily lockbox receipts for Asset Seller's lockbox accounts, Asset Seller
shall promptly remit (within 1 business day of receipt) all collections in
respect of payments made to Buyer.

If during the period that Buyer's personnel are managing Asset Seller's lockbox
accounts or the period that Asset Seller's personnel are managing such lockbox
accounts, any payment is received from a customer who purchases products or
services from both Buyer and Asset Seller without specification as to which
invoice such payment relates, the following procedures shall be implemented to
determine which party (Buyer or Asset Seller) is entitled to the benefit of such
payment:

o Contact the customer for specifics as to what invoices and what
company is being paid (this should be performed by the personnel
managing the lockbox (i.e. Buyer in the early transition and Asset
Seller in the later transition). A written indication (fax or e-mail)
should be requested from the customer to alleviate potential future
collection issues.

o If specifics are not available from the customer, the cash should be
applied to the oldest invoices of Buyer or Asset Seller and ratably to
any invoices which are the same aging.

Cash Disbursements

Cash disbursements are made primarily through accounts payable processing and
wire transfers. Wire transfers are discussed under Management of Daily Cash
Position.

Buyer shall continue to process Asset Seller's accounts payable through April
30, 2000, at which time Asset Seller's personnel will take over the processing
of Asset Seller's accounts payables. Accounts payable for Asset Seller will
continue to be processed out of the Delaware checking
<PAGE>

account. Buyer will be permitted to continue to use Asset Seller's Delaware
checking account to process its disbursements on a transitional basis until
April 30, 2000. During the period that Buyer and Asset Seller are using the same
Delaware checking account for accounts payable processing, the account will be
funded by Asset Seller's concentration account (this is how the "mechanics" are
set at the bank) and Buyer will reimburse Asset Seller's concentration account
(from Buyer's concentration account).

Such reimbursement will be done at the time of a check run. A separate business
unit A/P will be set up to process Buyer's A/P. In this manner at the time of
cutting checks, the parties will know which checks relate to Buyer and which
relate to Asset Seller. Before checks are mailed in respect of Buyer's A/P,
Buyer will fund Asset Seller's concentration account in respect of such
payments.

Management of Daily Cash Position

Managing the daily cash position includes, managing overnight investing of cash
and repayment of debt with excess cash.

Wire transfers are currently processed by Val Estrada and approved by either
Mark Moyer or Tom Wright. Prior to Closing, Asset Seller needs to set up
authorization for wire approval with an authorized representative of Asset
Seller. Such wires are processed out of Asset Seller's concentration account and
primarily relate to debt payments. Wires are currently approved through the Bank
of NY software system installed at Buyer. On a daily basis, Val Estrada prepares
a G/L upload file to record the day's wire activities in the G/L.

While Asset Seller works to train new users and to have the software installed
locally, Buyer will continue to provide this service. The parties may establish
a system of e-mail authorization to indicate wire transfers are made in
accordance with Asset Seller's instructions. Once Asset Seller has the software
installed and employees trained, it will take over the process of setting up the
wires for approval and preparing the G/L upload file (until 6/30/00, the file
will be uploaded to Buyer's PeopleSoft system). Such takeover of the process
shall occur no later than June 30, 2000.

Timing

Based on the above, Asset Seller's and Buyer's banking systems should be
operating separately no later than May 1, 2000. Asset Seller may continue to use
the links to Buyer's PeopleSoft system so accounting services can be provided
(i.e. ensure proper G/L posting of all cash transactions) through June 30, 2000
(in accordance with paragraph 2A of Attachment A).

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<PAGE>

Schedule 2

Buyer agrees to provide continued support for users from each of the
organizations listed below of infrastructure, core business applications, and
departmental systems, being acquired by Buyer pursuant to the Purchase
Agreement, for the periods listed below. Services will be rendered on a monthly
charge-back basis (where applicable) throughout the transition period.
Charge-back fees will be calculated as described on the schedule included below.
The following sections outline the support to be provided for each organization.
In all cases the dates provided are projected based on requirements expressed by
the supported organizations. In each case the purpose of this service agreement
is to facilitate the smooth transition of existing Ziff-Davis Inc.
organizational components from an integrated centrally serviced group to
autonomous businesses each capable of sustaining operations independently. As
each business unit is able to transition to its own information systems
infrastructure the services provided by Buyer will be terminated. Accordingly,
the contents of this Schedule 2 form a framework that will be used to guide
activities between Buyer and other business components throughout the transition
period. Modifications will be negotiated as required due to operational
considerations within the spirit of this Schedule 2.

The information systems strategy for Buyer consists of migration of applications
from their current operational environment. The current applications platform
will remain in place (supported by Buyer) through the periods described below.
Supported organizations will require no change to their existing client
environment throughout this period. In any case where an organization requires
support after the dates provided, such support will be provided, however
additional costs may be incurred associated with changes in technology required
within the new applications environment of Buyer. These additional costs would
be passed directly through to the organizations(s) receiving such services.

Support provided for Asset Seller

PeopleSoft HR through 30 June 2000
PeopleSoft Accounting through 30 June 2000
ADMARC through 30 October 2000 (access to history provided through 1/1/2001)
ADSCOPE through 30 October 2000 (access to history provided through 1/1/2001)
Continued use of Wide Area Network through 30 October 2000

Support provided for ZD Events

PeopleSoft HR through 30 June 2000
PeopleSoft Accounting through 30 June 2000
Continued use of Wide Area Network through 30 June 2000

Support provided for ZDTV

Continued use of Wide Area Network through 30 June 2000
<PAGE>

Support provided for Education

Continued use of Wide Area Network through 30 June 2000

Support provided for ZDTV

Continued use of Wide Area Network through 30 June 2000

Lotus Notes Environment

Ziff Davis Publishing has begun the process of transitioning support for Lotus
Notes to Interliant, an external service provider. This transition project
involves an overall upgrade and consolidation of Publishing Lotus Notes servers,
upgrade of the Lotus Notes server software to version 5.0, and implementation of
a hierarchical addressing scheme. A copy of the Interliant project proposal has
been provided to ZDNet, ZDTV, and ZD Events for review. The primary Lotus Notes
asset acquired by Buyer in this area is the Lotus Notes Certificate (i.e. naming
convention) for the current Notes implementation. Accordingly, each separate
business entity (ZDNet, ZDTV, etc.) will be required to procure their own Lotus
Notes Certificate to continue operating Lotus Notes following the transition
period. However, the application implementations that have been developed with
Lotus Notes (Sales Territory Database etc.) are not controlled by any license
agreement and are considered shared. Accordingly, copies of the required
applications with associated data will be provided to each business organization
as part of their transition to their own Lotus Notes environment.

In regards to Lotus Notes Mail each organization will be developing an
addressing scheme independent of the current shared [email protected]
convention. For a period of time following separation, the service of forwarding
Internet e-mail addressed via ZD.COM will be required. During the transition
period continued routing of this e-mail will be maintained as is by the
Publishing Notes service provider. However, the ZD.COM domain name has not been
acquired by Buyer. Consequently, the service of providing internet e-mail
forwarding via this address, and related "new address notification", will
necessarily revert to the remaining company following the transition of
Publishing on or before June 30, 2000.

Throughout the transition period (projected through 30 June 2000) there will be
no charges for continued use of the existing Lotus Notes Certificate, e-mail, or
applications. In addition, Publishing will continue to share all information
regarding Interliant and the outsourcing of Notes support as an alternative to
be considered by each organization.

Charge-back Schedules

Wide Area Network -- Charges are based on connections supported and the number
of users within each organization. As each organization migrates to their own
WAN network charges for remaining organizations will not change. All charges
computed for WAN usage will be handled as a direct pass through and will be
reviewed with representatives of Asset Seller.

Core Business Applications -- Charge-back for core business applications
(PeopleSoft HR, PeopleSoft Accounting, ADSCOPE and ADMARC) will be based on the
following criteria. In each

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<PAGE>

case the schedule reflects only that cost associated with continued support of
these applications in their current configuration through the transition period.
On a monthly basis a detailed breakdown of operating cost for each application
will be provided in support of the charge-back fee. In addition, services
provided by the ZDNet and the ZD Inc. transition team that support the
Publishing transition will be deducted from monthly charge-back fees.

PeopleSoft Accounting - Charge-back for this application will be calculated
based on the percentage of the total number of AP invoices/GL line item
transactions processed by each user organization during a given month and
therefore will vary according to actual use.

PeopleSoft HR - Charge-back for this application will be calculated based on the
percentage of the total number of employees actively supported within the
application represented by each user organization during a given month and
therefore will vary according to employee count.

ADMARC - Charge-back for this application will be calculated based on the number
of ZDNet Active users as a percentage of the total actively supported users
within the application. The only organization affected is ZDNet with
approximately five current users as compared to approximately eighty for
Publishing. The Product Index application is considered a part of ADMARC within
this agreement.

ADSCOPE - Charge-back for this application will be calculated based on the
number of ZDNet Active users as a percentage of the total actively supported
users within the application. The only organization affected is ZDNet. These
calculations will take into account any external costs for licensing as well as
internal costs for support personnel as required.

Transition Support

The Publishing division has initiated projects to migrate all of these
applications to a new platform supported by an external service provider (Ciber,
Inc.). The cost of this transition project will not be included in calculations
of charge-back to supported organizations. In addition, Publishing will provide
all information related to Ciber for consideration by supported organizations,
as a possible service provider for their long term needs.

<PAGE>

EXHIBIT 10.15

ZIFF DAVIS MEDIA INC.
c/o Willis Stein & Partners II, L.P.
227 West Monroe Street
Chicago, IL 60606

April 5, 2000

ZD Inc.
28 East 28th Street
New York, NY 10016
Attn: J. Malcolm Morris, Esq.

Gentlemen:

Reference is made to that certain Purchase Agreement (the "Purchase
Agreement") dated as of December 6, 1999 by and among ZD Inc. ("Asset Seller"),
ZD Holdings (Europe) Ltd. ("Stock Seller" and together with Asset Seller, the
"Sellers") and Ziff Davis Media Inc. (formerly WS-ZD Acquisition Inc.)
("Buyer"). Capitalized terms used in this letter agreement (the "Letter
Agreement") and not otherwise defined shall have the meanings ascribed to such
terms in the Purchase Agreement.

On the date of this Letter Agreement, the parties hereto are effecting the
Closing of the transactions contemplated by the Purchase Agreement. In
connection with the Closing, and as a condition thereto, the parties hereto have
made certain other agreements and arrangements which the parties wish to set
forth in this Letter Agreement. Sellers and Buyer have agreed as follows:

1. Pursuant to a letter agreement (the "Dolce Letter Agreement") dated as of
January 1, 1998, between Jack Dolce and Asset Seller, Jack Dolce holds a
ten percent (10%) shadow equity interest ("Dolce Equity Interest") in Asset
Seller's publication Smart Reseller. The Dolce Letter Agreement grants Mr.
Dolce the right to put the Dolce Equity Interest to Asset Seller under
certain conditions, including in the event he is terminated without cause.
The Dolce Letter Agreement also grants Asset Seller the right to call the
Dolce Equity Interest under certain conditions, including in the event
Asset Seller sells Smart Reseller, either independently or as part of a
transaction involving more than just the sale of Smart Reseller. Buyer and
Asset Seller hereby agree that, notwithstanding anything in the Purchase
Agreement to the contrary, Asset Seller shall not assign to Buyer, and
Buyer shall not assume from Asset Seller, the Dolce Letter Agreement as
part of the Closing and Asset Seller shall, subject to Buyer's
reimbursement obligations set forth below, remain responsible for all
obligations and liabilities thereunder.
<PAGE>

April 5, 2000
Page 2

On March 31, 2001, Dolce's employment with Asset Seller was terminated. Mr.
Dolce has indicated his intent to exercise his right to put the Dolce
Equity Interest to Asset Seller pursuant to the Dolce Letter Agreement. In
the event Mr. Dolce does not exercise his right to put the Dolce Equity
Interest to Asset Seller, Asset Seller hereby confirms that it will call
the Dolce Equity Interest in a timely manner pursuant to its rights to do
so under the Dolce Letter Agreement.

Buyer agrees that it will reimburse Asset Seller the amount of any
severance, vacation and incentive compensation payments it makes to Mr.
Dolce to the extent that Asset Seller was required to make such payments to
Mr. Dolce under terms of his employment as previously disclosed to Buyer
(but in no event shall Buyer be obligated to reimburse Asset Seller in
excess of $233,000 for such severance, vacation and incentive compensation
obligations) as well as any other out-of-pocket costs Asset Seller may
reasonably incur as a direct result of the termination of Mr. Dolce. Buyer
further agrees to reimburse Asset Seller for the purchase price paid by
Asset Seller to Mr. Dolce for the Dolce Equity Interest pursuant to the
terms of the Dolce Letter Agreement as in effect in the form previously
delivered to Buyer, which Asset Seller estimates to be the amount of
$1,995,100. Asset Seller shall allow Buyer to participate fully in the
negotiations with Mr. Dolce concerning the purchase of the Dolce Equity
Interest and shall not agree to a determination of the value of Smart
Reseller or of Mr. Dolce's interest therein, or the amount of any payment
to Mr. Dolce, without the prior written consent of Buyer, which consent
Buyer shall not withhold unreasonably. The amount of each reimbursement
payment by Buyer pursuant to this paragraph 1 shall be paid immediately
prior to or concurrently with any payment made by Asset Seller to Mr. Dolce
which is subject to reimbursement hereunder. Notwithstanding anything in
the Purchase Agreement to the contrary, other than a liability accrued in
accordance with GAAP for the purchase price for the Dolce Equity Interest
pursuant to the terms of the Dolce Letter Agreement, none of the amounts
set forth above shall be included in the calculation of the Closing Date
Tangible Net Worth under Section 2.8 of the Purchase Agreement.

2. Concurrently with the Closing, Buyer will reimburse Asset Seller for an
aggregate of $400,268.78 of information technology related expenses which
have been incurred by Asset Seller prior to the Closing at the request of
Buyer in connection with the transactions contemplated by the Purchase
Agreement and which were primarily for the benefit of Buyer.
Notwithstanding anything in the Purchase Agreement to the contrary, neither
the asset nor the liability in respect of such information technology
related
<PAGE>

April 5, 2000
Page 3

expenses shall be included in the calculation of the Closing Date Tangible
Net Worth under Section 2.8 of the Purchase Agreement.

3. Asset Seller has informed Buyer that, prior to Closing, it will withdraw
all cash from the respective accounts of each of its European subsidiaries
(the "European Subsidiaries"). As set forth in the Purchase Agreement,
Buyer is acquiring the stock of the European Subsidiaries as a result of
the transactions contemplated therein. For logistical reasons, it will be
difficult for Buyer to provide the newly acquired European Subsidiaries
with their required cash needs for several days after the Closing Date.
Accordingly, Asset Seller has agreed to fund each of the European
Subsidiaries (such funding to be accomplished by leaving an amount of cash
in each European Subsidiary) with an amount of cash requested by Buyer (the
"Cash Flow Amount"). Such Cash Flow Amount will be $631,334 for the
European Subsidiary located in Germany, $491,520 for the European
Subsidiary located in United Kingdom and $181,835 for the European
Subsidiary located in France (or $1,304,689 in the aggregate). Buyer will
make a payment to Asset Seller at the Closing in an amount equal to the
lesser of (i) the aggregate amount of cash held by the European
Subsidiaries at the Closing, and (ii) the Cash Flow Amount. Notwithstanding
anything in the Purchase Agreement to the contrary, Closing Date Tangible
Net Worth shall be calculated under Section 2.8 of the Purchase Agreement
assuming that Asset Seller had withdrawn all cash from the European
Subsidiaries, and consequently, no cash held by any of the European
Subsidiaries at the Closing shall be included in the calculation of the
Closing Date Tangible Net Worth under Section 2.8 of the Purchase
Agreement.

4. Buyer requested that the employment of certain employees of the Division be
terminated prior to the Closing, which employees are listed on the attached
Schedule 1 (the "Terminated Employees"). In connection therewith, Buyer
agreed that it would reimburse Asset Seller for all payments of severance
and other benefits and obligations that Asset Seller incurred in connection
with the termination of such individuals to the extent that Asset Seller
was required to make such payments under the terms of the employment of
such individuals previously disclosed to Buyer as well as any other
out-of-pocket costs Asset Seller may reasonably incur as a direct result of
the termination of such Terminated Employees. The attached Schedule 1 sets
forth the calculation of the amount for which Buyer is obligated to
reimburse Asset Seller pursuant to this paragraph 4 in respect of such
payments of severance and other benefits and obligations (which were paid
by Asset Seller prior to the Closing Date) which amount shall be paid by
Buyer on the date hereof by wire transfer to an account designated by Asset
Seller. For purposes of the determination of the Closing Date Tangible Net
Worth, the cost of the
<PAGE>

April 5, 2000
Page 4

severance and other employee benefits obligations as set forth on the
attached Schedule 1 shall not be included as a liability as of the Closing
Date, however, an adjustment shall be made to the Closing Date Tangible Net
Worth calculation to reflect the liability or expense that would have been
accrued by the Division as of the Closing Date in respect of the
compensation, employee benefits and other employment-related expenses had
such Terminated Employees been employed by the Division as of the Closing
Date.

5. As of the date of this Letter Agreement, Buyer and Sellers have been unable
to agree upon a reasonable allocation of the purchase price between the
Transferred Assets and the Shares of each of the respective Companies, as
contemplated by the Purchase Agreement. In order to resolve the parties'
dispute concerning such allocation, the parties have agreed to submit such
dispute for resolution to an independent valuation expert mutually
agreeable to Asset Seller and Buyer; provided, however, that if Asset
Seller and Buyer are unable to agree upon the selection of an independent
valuation expert within 30 days of the date of this Letter Agreement, then
within 10 business days after the expiration of such 30-day period, each of
Buyer and Asset Seller shall designate one independent valuation expert to
select, within a further 10-business day period, a mutually satisfactory
third valuation expert who shall resolve such dispute. Each of the
valuation experts selected or designated hereunder shall be experienced in
valuing businesses in the magazine publishing industry. The valuation
expert so selected or designated shall be directed by the parties to
determine the allocation of the purchase price between the Transferred
Assets and the Shares of each of the respective Companies based upon the
fair market value of the assets and liabilities transferred and consistent
with the principles of Section 1060 of the Code. Each party shall have no
longer than one day to present its position, the entire proceedings before
the appraiser shall be on no more than three consecutive days, and the
determination shall be made in writing no more than 30 days following the
end of the proceeding. Buyer shall not take a position in the appraisal
proceeding which allocates more than $60,000,000, in the aggregate, to the
purchase price for the Shares, and Seller shall not take a position in the
appraisal proceeding which allocates less than $40,000,000, in the
aggregate, to the purchase price for the Shares. Such determination shall
be a final and binding determination of the dispute. The allocation of the
Consideration as contemplated by Section 5.14(c) of the Purchase Agreement
shall be delayed pending outcome of the appraisal proceeding. Upon the
final determination of the purchase price allocation as described above,
the parties shall commence the procedures set forth in Section 5.14(c) with
respect to the allocation of the Consideration. Pending the resolution of
the allocation of the purchase price as described above, the purchase price
<PAGE>

April 5, 2000
Page 5

paid by Buyer to the account designated by Sellers (as set forth in the
Flow of Funds Memorandum prepared by the parties at the Closing) shall be
deemed payment in full of the Purchase Price for Shares and the Initial
Cash Purchase Price for the Assets, and Buyer shall have no further
liability or obligation with respect thereto notwithstanding the future
allocation of such payment between Asset Seller and Stock Seller once the
Fair Market Value is finally determined under this Letter Agreement. The
fees and costs of the appraiser shall be paid by the parties on a
proportionate basis based upon the relative deviations or the parties'
proposed purchase price allocations from the allocation of the purchase
price determined by the appraiser in the above-described proceeding. Each
of the parties shall bear their own fees and expenses (including, without
limitation legal fees and expenses) incurred in connection with the above
described appraisal proceeding.

This Letter Agreement may be executed in counterparts (including by means
of telecopied signature pages), any one of which need not contain the signatures
of more than one party, but all such counterparts taken together shall
constitute one and the same agreement.
<PAGE>

April 5, 2000
Page 6

IN WITNESS WHEREOF, this Letter Agreement has been executed by a duly
authorized representative of each of the parties hereto as of the date first
above written.

ZIFF DAVIS MEDIA INC.

By: /s/ DANIEL H. BLUMENTHAL
---------------------------
Name: Daniel H. Blumenthal
Title: Vice President

ZD INC.

By: /s/ J. MALCOLM MORRIS
---------------------------
Name: J. Malcolm Morris
Title: Senior Vice President

ZD HOLDINGS (EUROPE) LTD.

By: /s/ J. MALCOLM MORRIS
---------------------------
Name:
Title: For Eric Hippeau
By Power of Attorney
<PAGE>

Schedule 1

<TABLE>
<CAPTION>
Enhanced Outplacement
-------- ------------
Name Dept Term Date Severance Vacation Pay Fee
---- ---- --------- --------- ------------ ---
<S> <C> <C> <C> <C> <C> <C>
1 Nancy Newman Corp Sales 03/06/00 242,308 26,923 --

2 Kaila S Bongiovanni Corp Sales 02/29/00 11,948 1,803 --

3 Daniel P Daly Corp Sales 02/29/00 27,600 6,900 3,000

4 Christopher Harding Corp Sales 01/31/00 19,615 4,904 --

5 Karina Montgomery Corp Sales 02/29/00 25,479 3,004 --

6 Scott S Murphy Corp Sales 02/29/00 67,692 11,692 --

TOTAL 394,642 55,226 3,000

GRAND TOTAL 452,868
</TABLE>

<PAGE>

EXHIBIT 10.25
AGREEMENT AND

CONSENT TO ASSIGNMENT

This Agreement and Consent to Assignment (this "Consent Agreement") by and
among 63 Madison Associates, L.P., a Delaware limited partnership, having an
office address c/o George Comfort & Sons, Inc., 200 Madison Avenue, New York,
New York 10016, ("Landlord"), ZD Inc., a Delaware corporation, having an office
address at 28 East 28th Street, Avenue, New York, New York 10016 ("Assignor"),
and Ziff Davis Publishing Inc., a Delaware corporation, qualified to do business
in the State of New York and having an office address c/o Willis Stein &
Partners II, L.P., 227 West Monroe Street, Chicago, Illinois 60606 ("Assignee").

W I T N E S S E T H:

WHEREAS, Assignor desires that Landlord grant its consent to a certain
Assignment and Assumption of Lease of even date herewith (the "Assignment") (in
the form which is annexed hereto as Exhibit A and made a part hereof), between
Assignor and Assignee demising Concourse Level "B-2" and the 8th, 9th, 10th,
11th, 12th, 13th, 14th and 15th floors of the building (the "Building") known as
63 Madison Avenue, New York, New York, now leased and demised by Landlord to
Assignor pursuant to that certain lease dated as of January 15, 1998 between
Landlord and Ziff-Davis Inc., Assignor's predecessor-in-interest, as amended by
letter agreement dated September 23, 1999 between Landlord and Assignor
(collectively, as the same may hereafter be amended or extended, the "Lease");

WHEREAS, Ziff-Davis, Inc., a Delaware corporation, having an office at 28
East 28th Street, New York, New York 10016 ("Guarantor") has executed and
delivered that certain Guaranty dated May 4, 1998 (the "Guaranty") with respect
to the Lease;

WHEREAS, as a condition to this Consent Agreement, (A) Landlord, assignor
and Guarantor are entering into an agreement of even date herewith with respect
to inter alia certain corporate covenants and a letter of credit (the
"Agreement") and (B) Assignor and Assignee are to cause opinion letters to be
delivered to Landlord from their respective counsel simultaneously herewith (the
Agreement, letter of credit, opinion letters and other documents relating to the
transaction anticipated hereby, the "Related Documents").

NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord consents to the Assignment, subject to the following
terms and conditions, and in addition, the parties agree as follows:

1. All capitalized terms used herein but not otherwise defined herein shall
have the respective meanings ascribed to them in the Lease.

2. Landlord hereby waives any Recapture Option it any have solely in
connection with the Assignment and any obligation of Assignor to send a
Recapture Offer solely in connection with the Assignment.

3. Any and all notices of default which Landlord gives to Assignee under
the Lease shall simultaneously be given to Assignor at its address first above
written, Attention: President, in the manner required of notices under the
Lease. Assignor may designate in the manner provided in the Lease a different
address or addresses for communications intended for it.
<PAGE>

4. Landlord and Assignor hereby certify to each other and to Assignee, with
the knowledge that all the parties are relying upon the accuracy of such
certification, that (a) the Lease is unmodified and in full force and effect;
(b) the term of the Lease commenced on January 15, 1998 and will expire on
July 31, 2019, unless sooner terminated in accordance with the provisions of the
Lease; (c) Fixed Rent has been paid through March 31, 2000 (a check for April,
2000 has been received but is subject to collection) and all additional rent, to
the extent billed by Landlord, has been paid; (d) Assignor did not heretofore
deposit any security under the Lease; (e) neither Landlord nor Assignor is in
default under the Lease; and (f) to the best to Assignor's and Landlord's actual
knowledge as of the date hereof, no event has occurred and no condition exists
which, with the giving of notice or the passage of time or both, will constitute
a default under the Lease by Landlord or Assignor. This paragraph shall not
release Assignor form any obligations or liabilities accruing before the date of
the Assignment.

5. Nothing in the Assignment or herein contained shall be construed to
modify, waive, impair or affect any of the provisions, covenants, agreements,
terms or conditions in the Lease (except as may be herein expressly provided),
or to waive any breach thereof, or any right of Landlord against any person,
firm, association or corporation liable or responsible for the performance
thereof, or to enlarge or increase Landlord's obligations under the Lease, and
all provisions, covenants, agreements, terms and conditions of the Lease are
hereby mutually declared to be in full force and effect.

6. Landlord's consent to the Assignment shall not be assignable.

7. A. Subject to Article 11(H) of the Lease, Assignor shall be and remain
jointly and severally primarily liable and responsible for the due keeping,
performance and observance of all the provisions, covenants, agreements, terms
and conditions set forth in the Lease on the part of the tenant to be kept,
performed and observed and for the payment of the rent, additional rent and all
other sums now and/or hereafter becoming payable thereunder, expressly including
as such (but not limited to) additional rent, adjustment of rent, and any and
all charges for any property, material, labor, utility or other similar or
dissimilar services rendered or supplied or furnished by Landlord or others in,
or in connection with, the premises demised under the Lease, whether for or at
the request of Assignor or Assignee. Notwithstanding the foregoing and anything
in the Lease to the contrary, Assignor shall be released from all liability
under the Lease, and Guarantor shall be released of all liability under the
Guaranty and Guarantor's guaranty with respect to this Consent Agreement, in
each case solely with respect to obligations arising under the Lease after the
last day of the initial term thereof, except for those obligations arising under
Article 47 of the Lease in the event Assignee fails to extend the initial term
of the Lease.

B. Anything in the Lease to the contrary notwithstanding, Assignee shall
not have the right to exercise its options to extend the term of the Lease
Pursuant to Article 53 thereof unless (i) the net worth, cash flow and overall
creditworthiness of Assignee, as of the date of Assignee's exercise of any such
extension option and as of the first day of the applicable extension term, shall
be satisfactory to Landlord and any mortgagee of the Building in their sole and
absolute discretion or (ii) Assignee's obligations under the Lease for such
extension term are to be guaranteed by an entity with a net worth, cash flow and
overall creditworthiness, as of the date of Assignee's exercise of such
extension option and as of the first day of the applicable extension term,
satisfactory to Landlord and any mortgagee of the Building in their sole and
absolute discretion.

C. All parties hereto agree that, notwithstanding anything herein to the
contrary, the release of Guarantor's liability under the Guaranty pursuant to
the last sentence of paragraph 7.A hereof

2
<PAGE>

shall be subject to the consent of the holder of any mortgage of the Building,
and, if such consent is not obtained, Assignee shall have no right to extend the
term of the Lease pursuant to Article 53 thereof.

8. The Assignment shall be subject and subordinate at all times to the
Lease, and to all of the provisions, covenants, agreements, terms and conditions
of the Lease, this Consent Agreement and the Agreement, and neither Assignor nor
Assignee shall do or permit anything to be done in connection with its occupancy
of the premises demised under the Lease which might or would violate any of said
provisions, covenants, agreements, terms and conditions.

9. A. This Consent Agreement shall not be construed as a consent by
Landlord to, or as permitting, any other or further assignment by either
Assignor or Assignee, and no sublease of the premises demised under the Lease or
any part thereof and no other or further assignment of the Lease will be made by
Assignor or Assignee without Landlord's prior written consent in each instance,
except as specifically otherwise provided in the Lease.

B. The parties expressly agree that Article 11(U) of the Lease shall be
deemed modified as of the date hereof by the addition of the following sentence:

"The rights of Tenant to permit occupancy pursuant to this
Paragraph (U) (i) to and including March 31, 2001 shall be
limited to 80,000 square feet in the aggregate and (ii)
thereafter shall be limited to 40,000 square feet in the
aggregate, in each case exclusive of any space on the 10th and
15th floors of the Building subleased to Softbank Inc. and/or
Ziff-Davis Inc. and any portion of such floors occupied by one or
more business affiliates of Softbank Inc. and/or Ziff-Davis Inc.
This Paragraph 11(U) shall not serve as a basis to assign the
Lease or avoid the restrictions of this Lease with respect to
assignment."

C. The parties acknowledge that the Assignment is subject to two subleases,
the first dated March 10, 2000 between Assignor and Ziff-Davis Inc. covering the
entire 10th floor in the Building and the second dated March 16, 2000 between
Assignor and Softbank Inc. covering the entire 15th floor in the Building.
Assignor represents that (i) each of such subtenants is a "related corporation"
as defined in Article 11(N) of the Lease, and (ii) the provisions of Article
11(J) are applicable and binding on each subtenant.

10. The submission of this Consent Agreement shall not be effective nor
shall Assignor or Assignee have any rights with respect hereto unless and until
(a) Landlord shall have executed and delivered a counterpart hereof to all
parties hereto and (b) all conditions precedent to the effectiveness of the
Related Documents have been satisfied.

11. Assignor and Assignee covenant and agree to indemnify and hold Landlord
harmless against any and all claims for (a) brokerage commissions in connection
with the transactions recited herein and this Consent Agreement and (b) all
attorneys' fees and disbursements incurred by Landlord in connection with this
Consent Agreement, the Agreement and the Related Documents, the negotiation and
preparation thereof and their enforcement. All sums payable hereunder shall be
deemed additional rent under the Lease and payable promptly upon rendition of a
bill therefor.

3
<PAGE>

12. Assignee hereby assumes and agree to be bound by all of the terms,
covenants, conditions, provisions and agreements of the Lease, as amended
hereby, on the tenant's part to be kept and performed under the Lease, as
amended hereby, accruing on and after the date hereof.

13. Assignee shall use and occupy the Premises for the permitted use
specified in Article 2 of the Lease and for no other purpose.

14. Assignor and Assignee agree that Landlord's acceptance from time to
time of any monies, (including any checks), and/or any performance under the
Lease, from Assignor or Assignee shall not be deemed a waiver by Landlord of any
of the terms, covenants, conditions, provisions or agreements of the Lease, nor
be deemed to constitute a release by Landlord, in whole or in part, of the
liability of the then "tenant" under the Lease, nor be deemed to confer upon any
such party the status of "tenant" under the Lease, except the then "tenant"
thereunder.

15. This Consent Agreement may not be changed orally, but only by an
agreement in writing, signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.

16. This Consent Agreement shall be construed, interpreted and applied in
accordance with, and shall be governed by, the laws applicable in the State of
New York.

17. This Consent Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

4
<PAGE>

18. Except as otherwise specifically provided herein, the terms, covenants
and conditions contained in this Consent Agreement shall bind and inure to the
benefit of the parties hereto and their respective heirs, successors, executors,
administrators and, except as provided in the Lease and this Consent Agreement,
their respective assigns.

IN WITNESS WHEREOF, the parties have executed this Consent Agreement on the
date set forth below next to their respective signatures and this Consent
Agreement shall be effective as of such date.

LANDLORD: 63 MADISON ASSOCIATES, L.P.

By: Comfort 63 Madison, Inc., a general partner

By: /s/ PETER S. DUNCAN
---------------------------------------
Name: Peter S. Duncan
---------------------------------------
Title: President
---------------------------------------

By: Loeb Partners Realty and Development Corp.,
a general partner

By: /s/ JOSEPH S. LESSER
---------------------------------------
Name: Joseph S. Lesser
---------------------------------------
Title: President
---------------------------------------

Date April 4, 2000

ASSIGNOR: ZD INC.

By: /s/ J. MALCOLM MORRIS
----------------------------------------------
Name: J. Malcolm Morris
----------------------------------------------
Title: Senior Vice President
----------------------------------------------

Date April 4, 2000

ASSIGNEE: ZIFF DAVIS PUBLISHING INC.

By: /s/ DANIEL H. BLUMENTHAL
----------------------------------------------
Name: Daniel H. Blumenthal
----------------------------------------------
Title: President
----------------------------------------------

Date April 4, 2000

5
<PAGE>

STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )

On the 4th day of April in the year 2000 before me, the undersigned,
personally appeared Peter S. Duncan, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

[SEAL]
MARIA E. SIERRA
Notary Public State of New York /s/ MARIA E. SIERRA
No. 01SI4863288 ------------------------------------
Qualified in New York County Signature and Office of individual
Commission Expires July 14, 2000 taking acknowledgement

STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )

On the 4th day of April in the year 2000 before me, the undersigned,
personally appeared Joseph S. Lesser, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

/s/ RUTH K. SOPKO
------------------------------------
Signature and Office of individual
taking acknowledgement

[SEAL]
RUTH K. SOPKO
NOTARY PUBLIC, State of New York
No. 01SO4603211
Qualified in New York County
Commission Expires July 31, 2001

6
<PAGE>

STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )

On the 4th day of April, in the year 2000 before me the undersigned
personally appeared J. Malcolm Morris, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in
his/her capacity as Senior V.P. of ZD Inc., and that by his/her signature on the
instrument, the individual, or the person upon behalf of which the individual
acted executed the instrument.

/s/ EUGENE HOM [SEAL]
- ---------------------------------- EUGENE HOM
Signature and Office of individual Notary Public, State of New York
taking acknowledgment No. 01HO4929038
Qualified in Queens County
Certificate Filed in New York County
Commission Expires June 25, 2000

STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )

On the ____ day of ____, in the year ____ before me the undersigned
personally appeared _____________, personally known to me or proved to me on the
basis of satisfactory evidence to be the individual whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her capacity as _____________ of Ziff Davis Publishing Inc., and that by
his/her signature on the instrument, the individual, or the person upon behalf
of which the individual acted, executed the instrument.

- ----------------------------------
Signature and Office of individual
taking acknowledgment

7
<PAGE>

The undersigned acknowledges that it is the Guarantor of the Lease (as
hereinabove defined) pursuant to that certain Guaranty dated May 4, 1998. For
value received and in consideration of and as an inducement to the Landlord
above-named to grant the foregoing Consent Agreement, the undersigned approves
the foregoing and agrees to be bound by all of the terms, covenants, conditions,
provisions and agreements of such Consent Agreement and the Agreement (as
hereinabove defined), reaffirms its obligations under the Guaranty, as if fully
set forth at length herein, which obligations shall not be deemed diminished by
reason of the Assignment, the Consent Agreement or the Agreement and guarantees
to Landlord and to its successors and assigns the full performance and
observance of all covenants and undertakings by Assignor (as hereinabove
defined) and Assignee (as hereinabove defined) under the Consent Agreement,
except as otherwise provided in Paragraph 7 of the Consent Agreement.

ZIFF-DAVIS INC.

By: /s/ THOMAS L. WRIGHT
----------------------------------------
Name: Thomas L. Wright
----------------------------------------
Title: VP Treasurer
----------------------------------------
Date: April 4, 2000

8
<PAGE>

STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )

On the 4th day of April in the year 2000 before me, the undersigned,
personally appeared Thomas L. Wright, personally known to me or proved to me on
the basis of satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her their signatures on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

EUGENE HOM /s/ EUGENE HOM
Notary Public, State of New York ------------------------------------
No. 01HO492938 Signature and Office of individual
Qualified in Queens County taking acknowledgement
Certificate Filed in New York County
Commission Expires June 25, 2000

<PAGE>

EXHIBIT 10.26
ASSIGNMENT AND ASSUMPTION OF LEASE

THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment"), made as of the
5th day of April, 2000, between ZD Inc., a Delaware corporation, having an
office at 28 East 28th Street, New York, New York 10016 ("Assignor"), and
Ziff Davis Publishing Inc., a Delaware corporation, having an office c/o Willis
Stein & Partners II, L.P., 227 West Monroe Street, Chicago, Illinois 60606
("Assignee").

W I T N E S S E T H:

WHEREAS, by that certain Lease dated as of January 15, 1998, between 63
Madison Associates, L.P. ("Landlord"), as landlord, and Ziff-Davis Inc. n/k/a ZD
Inc., as tenant, as amended by letter agreement dated September 23, 1999 between
Landlord and Assignor (collectively, the "Lease"), Landlord is leasing to
Assignor Concourse Level "B-2" and the entire 8th, 9th, 10th, 11th, 12th, 13th,
14th and 15th floors (collectively, the "Premises") of the building (the
"Building") known as 63 Madison Avenue, New York, New York 10016 as more
particularly described on Schedule 1 annexed hereto;

WHEREAS, by that certain Sublease dated March 16, 2000 between Assignor, as
sublandlord, and Softbank Inc., as subtenant (the "15th Floor Sublease"),
Assignor is subleasing to Softbank Inc. the entire 15th floor of the Building on
the terms and conditions described therein;

WHEREAS, by that certain Sublease dated March 10, 2000 between Assignor, as
sublandlord, and Ziff-Davis Inc., as subtenant (the "10th Floor Sublease" and,
collectively with the 15th Floor Sublease, the "Subleases"), Assignor is
subleasing to Ziff-Davis, Inc. the entire 10th floor of the Building on the
terms and conditions contained therein; and

WHEREAS, Assignor desires to assign and transfer to Assignee (i) Assignor's
right, title and interest in and to the Lease subject to the Subleases and (ii)
Assignor's right, title and interest in and to the Subleases; and Assignee
desires to accept such assignment and transfer upon the terms and conditions
hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is mutually agreed as follows:

1. Assignment by Assignor. Assignor hereby assigns and transfers to
Assignee (a) all of Assignor's right, title and interest in and to the Lease
subject to the Subleases and (b) all of Assignor's right, title and interest in
and to the Subleases, in each case subject to the terms and conditions
hereinafter set forth.

2. Effective Date of Assignment. This Assignment shall take effect on the
"Closing Date" specified in that certain Purchase Agreement dated as of December
6, 1999 between Assignor and Assignee (the "Purchase Agreement"), and Assignor
shall give possession of the Premises to Assignee on that date (the "Assignment
Date").

After recording, this Assignment should be returned to:

Roberto S. Miceli, Esq.
- ---------------------------------------
Kirkland & Ellis
- ---------------------------------------
200 East Randolph Drive
- ---------------------------------------
Chicago, IL 60601
- ---------------------------------------

3. Acceptance and Assumption by Assignee. Assignee hereby accepts the
assignment and transfer of Assignor's right, title and interest in and to the
Lease subject to the
<PAGE>

Subleases and Assignor's right, title and interest in and to the Subleases and
promises to pay all rent and additional rent under the Lease and to faithfully
perform all covenants, stipulations, agreements and obligations under the Lease
and the Subleases accruing on or after the Assignment Date or otherwise
attributable to the period commencing on the Assignment Date and continuing
thereafter.

4. Notices. Except as otherwise specifically provided herein, any notice,
statement, demand, consent, approval, advice or other communication required or
permitted to be given, rendered or made by either party to the other, pursuant
to this Assignment or pursuant to any applicable law or requirement of public
authority (collectively, "communications") shall be in writing and shall be
deemed to have been properly given, rendered or made only if sent by personal
delivery, or registered or certified mail, return receipt requested, posted in a
United States post office station in the continental United States, or by a
nationally recognized overnight courier, in each case addressed (i) to Assignor
at its address first above written, Attention: President and (ii) to Assignee,
at its address first above written, Attention: President. A copy of each
communication to Assignor shall also be sent to Clifford Chance Rogers & Wells
LLP, 200 Park Avenue, New York, New York 10166, Attention: Joanne Feil, Esq. All
such communications shall be deemed to have been given, rendered or made when
delivered on the date such communication is actually received as evidenced by a
written receipt therefor or refusal to accept delivery, as of the date of such
refusal, in the case of personal delivery, or three (3) days after the day so
mailed, or one (1) business day after sent by nationally recognized overnight
courier. Either party may, by notice as aforesaid actually received, designate a
different address or addresses for communications intended for it. Any and all
notices of default which Assignee may give to Landlord or any subtenant under
the Subleases shall simultaneously be given to Assignor. Copies of any and all
notices of default which Assignee may receive from Landlord or any subtenant
under the Subleases shall immediately be delivered to Assignor.

5. Broker. Each party hereto covenants, warrants and represents to the
other party that it has had no dealings, conversations or negotiations with any
broker concerning the execution and delivery of this Assignment except as may
otherwise be specified in the Purchase Agreement. Each party hereto agrees to
defend, indemnify and hold harmless the other party against and from any claims
for any brokerage commissions and all costs, expenses and liabilities in
connection therewith, including, without limitation, reasonable attorneys' fees
and disbursements, arising out of its respective representations and warranties
contained in this Section being untrue. The provisions of this Section shall
survive the expiration or earlier termination of this Assignment.

6. Costs of Assignment. All taxes and other governmental charges and fees,
if any, including, without limitation, any and all transfer taxes, stamp taxes,
sales tax and recording fees, relating to this Assignment shall be paid by the
party against whom such taxes, charges, and fees are assessed.

7. Indemnification. Assignor and Assignee hereby reaffirm the
indemnification obligations set forth in the Purchase Agreement.

8. Consent of Landlord. This Assignment is specifically conditioned upon
Assignor obtaining the consent of Landlord to this assignment.

9. Successors and Assigns: Further Actions. This Assignment shall be
binding upon all successors and assigns of the parties hereto. The parties
hereto shall execute and
<PAGE>

deliver such further and additional instruments, agreements and other documents
which may be necessary to evidence or carry out the provisions of this
Assignment.

10. Entire Agreement. This Assignment supersedes all agreements previously
made between the parties hereto relating to the subject matter contained herein.

11. No Waiver. No delay or failure by any party hereto to exercise any
rights under this Assignment, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right, unless otherwise expressly
provided herein.

12. Applicable Law. This Assignment shall be construed in accordance with
and governed by the laws of the State of New York.

13. Counterparts. This Assignment may be executed in two counterparts, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.

WITNESS WHEREOF, the parties hereto have executed this Assignment on the
date first above written.

ASSIGNOR:
ZD INC.

By: /s/ J. MALCOLM MORRIS
------------------------------
Name: J. Malcolm Morris
------------------------------
Title: Sr. V.P.
------------------------------

ASSIGNEE:
ZIFF DAVIS PUBLISHING INC.

By: /s/ DANIEL H. BLUMENTHAL
------------------------------
Name: Daniel H. Blumenthal
------------------------------
President
------------------------------
<PAGE>

State of New York, )
) ss.:
County of New York )

On the 4th day of April, in the year 2000 before me the undersigned
personally appeared J. Malcolm Morris, personally know to me or proved to me on
the basis of satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he/she executed the same in
his/her capacity as Senior V.P. of ZD Inc., and that by his/her signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.

/s/ Eugene Hom EUGENE HOM
- -------------------------------------- NOTARY PUBLIC, State of New York
Signature and Office of individual No. 41-4929038
taking acknowledgment Qualified in Queens County
Certificate filed in New York County
Commission Expires June 25, 2000

State of Illinois )
) ss.:
County of Cook )

On the 5th day of April, in the year 2000 before me the undersigned
personally appeared Daniel H. Blumenthal, personally know to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity as President of Ziff Davis Publishing Inc. and that
by his/her signature on the instrument, the individual, or the person upon
behalf of which the individual acted, executed the instrument.

/s/ Cynthia M. Wasik [Seal]
- ---------------------------------------- ----------------------------------
Signature and Office of individual
taking acknowledgment Cynthia M. Wasik
Notary Public, State of Illinois
My Commission Expires May 12, 2002
----------------------------------

<PAGE>

Schedule 1

All that certain plot, piece or parcel of land situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:

BEGINNING at the intersection of the northerly side of East 27th Street with the
easterly side of Madison Avenue;

THENCE along said side of Madison Avenue in a northerly direction, 197 feet 6
inches to the southerly side of East 28th Street;

THENCE along said side of East 28th Street, a distance of 275 feet to a point
which is distant 150 feet westerly as measured along said side of East 28th
Street from the Westerly side of Park Avenue South;

THENCE southerly and parallel with said side of Park Avenue South 197 feet 6
inches to the northerly side of East 27th Street; and

THENCE westerly along said side of East 27th Street, a distance of 275 feet to
the point of place of BEGINNING.

TOGETHER WITH the benefits and subject to the burdens of an Agreement dated
November 20, 1995 between New York Life Insurance Company and 63 Madison
Associates, L.P. and recorded in the Office of the New York City Register's
Office on January 10, 1996 in Reel 2280 page 174.

<PAGE>

EXHIBIT 10.27

AGREEMENT OF SUBLEASE

between

ZD Inc., Sublandlord

and

Ziff-Davis Inc., Subtenant

Subleased Premises:
------------------

The Entire 10th Floor
63 Madison Avenue
New York, New York 10016
<PAGE>

TABLE OF CONTENTS

1. Subleasing of Subleased Premises............................ 1
2. Term........................................................ 1
3. Fixed Rent and Additional Rent.............................. 1
4. Subordination to and Incorporation of the Lease............. 3
5. Use......................................................... 4
6. Covenants with Respect to the Lease......................... 4
7. Services and Repairs........................................ 4
8. Early Termination Rights.................................... 5
9. Consents.................................................... 5
10. Termination of Lease........................................ 5
11. Sublease, Not Assignment.................................... 6
12. Damage, Destruction, Fire and Other Casualty; Condemnation.. 6
13. No Waivers.................................................. 6
14. Notices..................................................... 6
15. Broker...................................................... 6
16. Condition of the Subleased Premises......................... 6
17. Additional Rights of Sublandlord/Subtenant.................. 7
18. Assignment, Subletting...................................... 11
19. Memorandum of Sublease...................................... 11
20. Nondisturbance.............................................. 11
21. Miscellaneous............................................... 11
22. Related Corporation......................................... 12

i
<PAGE>

EXHIBIT A - FIXED RENT

EXHIBIT B - SUBLANDLORD'S SUBCELLAR 1 LEVEL INCOMING SERVICE ROOM

EXHIBIT C - SUBCELLAR 1 TELECOMMUNICATIONS RISER CONDUIT DIAGRAM

EXHIBIT D - LOCATION OF PORTION OF ROOF DEDICATED FOR
SUBTENANT'S USE

EXHIBIT E - MEMORANDUM OF SUBLEASE

SCHEDULE 1 - UTILIZATION OF SYSTEMS AND SERVICES

ii
<PAGE>

AGREEMENT OF SUBLEASE (this "Sublease"), made this 10th day of March, 2000,
between ZD Inc., a Delaware corporation, having an office at 63 Madison Avenue,
New York, New York 10016 ("Sublandlord"), and Ziff-Davis Inc., a Delaware
corporation, having an office at 63 Madison Avenue, New York, New York 10016
("Subtenant").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, by that certain lease dated as of January 15, 1998, between 63
Madison Associates, L.P. ("Landlord"), as landlord, and Ziff-Davis Inc. n/k/a ZD
Inc., as tenant, as amended by that certain letter agreement dated September 23,
1999 between Landlord and Sublandlord (as so amended, the "Lease"), Landlord is
leasing to Sublandlord Concourse Level "B-2" and the entire 8th, 9th, 10th,
11th, 12th, 13th, 14th, and 15th floors (collectively, the "Leased Premises") of
the building (the "Building") known as 63 Madison Avenue, New York, New York
10016 as more particularly described in the Lease; and

WHEREAS, Sublandlord desires to sublease to Subtenant the entire 10th floor
of the Building (the "Subleased Premises") and Subtenant desires to hire the
Subleased Premises from Sublandlord on the terms and conditions contained
herein.

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is mutually agreed as follows:

1. Subleasing of Subleased Premises. Sublandlord hereby subleases to
--------------------------------
Subtenant, and Subtenant hereby hires from Sublandlord, the Subleased Premises,
upon and subject to the terms and conditions hereinafter set forth.

2. Term. The term (the "Term") of this Sublease shall commence on April 1,
----
2000 (the "Commencement Date") and shall terminate on the Expiration Date of the
Lease (the "Sublease Expiration Date"), or on such earlier date upon which the
Term shall expire or be cancelled or terminated pursuant to any of the
conditions or covenants of this Sublease or pursuant to law. Promptly after the
determination of the Expiration Date of the Lease, Sublandlord shall notify
Subtenant thereof.

3. Fixed Rent and Additional Rent.
------------------------------

3.1 Subtenant shall pay to Sublandlord, commencing on the Commencement Date
and thereafter on the first (1st) day of each month during the Term, Fixed Rent
as set forth on Exhibit A annexed hereto and incorporated herein by reference.
If the Commencement Date shall occur on a date other than the first day of any
calendar month, the Fixed Rent payable hereunder for such month shall be
prorated on a per-diem basis. Promptly after the determination of the dates
comprising Rent Period 1, Rent Period 2, Rent Period 3 and Rent Period 4 under
the Lease, Sublandlord shall notify Subtenant thereof.

3.2 In addition to the Fixed Rent herein reserved, Subtenant agrees to pay
to Sublandlord, as additional rent, Subtenant's Share (as hereinafter defined)
of the amounts payable by Sublandlord pursuant to Articles 36 and 37 of the
Lease on account of increases in Real Estate Taxes and increases in Operating
Expenses. Operating Expenses and Real Estate
<PAGE>

Taxes shall be payable by Subtenant to Sublandlord in the same manner as
corresponding payments are payable by Sublandlord to Landlord under the Lease.
The term "Subtenant's Share" shall mean a fraction, the numerator of which shall
be the number of rentable square feet in the Subleased Premises, and the
denominator of which shall be the total number of rentable square feet in the
Leased Premises. As of the date hereof, the Subleased Premises contain 49,140
rentable square feet, the Leased Premises contain 399,773 rentable square feet
and Subtenant's Share is 12.29%. In the event there is an increase or decrease
in the number of rentable square feet in the Subleased Premises or in the number
of rentable square feet in the Leased Premises after the Commencement Date,
Subtenant's Share shall be adjusted to reflect the ratio that the number of
rentable square feet in the Subleased Premises bears to the total number of
rentable square in the Leased Premises. Further, Subtenant agrees to pay as
additional rent, the full amount of any other charge, fee, cost, sum or expense
which Sublandlord pays or incurs on or after the Commencement Date (x) for the
provision of, or in connection with, any services or supplies provided to or for
the Subleased Premises (or any part thereof) at the request of Subtenant
(including, but not limited to, the furnishing of electric service and other
utilities and concierge services) and (y) as may be required pursuant to the
terms and provisions of the Lease with respect to the Subleased Premises.

3.3 All Fixed Rent and additional rent or other costs, charges and sums
payable by Subtenant hereunder (collectively, "Rent") shall constitute rent
under this Sublease, and shall be payable to Sublandlord at its address as set
forth in Section 15 hereof, unless Sublandlord shall otherwise so direct in
writing.

3.4 Subtenant shall promptly pay the Rent as and when the same shall become
due and payable without set-off, offset or deduction of any kind whatsoever,
except as expressly set forth herein or in the Lease as incorporated herein by
reference, and, in the event of Subtenant's failure to pay the same when due
(subject to grace periods provided herein), Sublandlord shall have all of the
rights and remedies provided for herein or at law or in equity, in the case of
non-payment of rent.

3.5 Subtenant shall have no obligation to pay amounts that have not been
billed to Subtenant hereunder within ninety (90) days after such sums are billed
by Landlord to Sublandlord in a timely manner as required pursuant to the Lease.
Further, in the event Sublandlord shall defer payments due by it under the Lease
in accordance with the provisions of the Lease, Subtenant shall have the right
to similarly defer corresponding payments due by it hereunder until the date
Sublandlord 's deferred payments under the Lease are due and payable.
Subtenant's liability for Rent due under this Sublease accruing during the Term,
and Sublandlord's obligation to refund overpayments of or adjustments to Rent
paid to it by Subtenant, shall survive the expiration or sooner termination of
this Sublease.

3.6 Sublandlord shall promptly furnish to Subtenant a copy of each notice
or statement from Landlord affecting the Subleased Premises. If Sublandlord
disputes the correctness of any such notice or statement and if such dispute is
resolved in Sublandlord's favor, or if Sublandlord shall receive any refund of
additional rent without a dispute, Sublandlord shall promptly pay to Subtenant
any refund (after deducting from the amount of any such refund all expenses,
including court costs and reasonable attorneys' fees, incurred by Sublandlord in
resolving any such dispute) received by Sublandlord in respect (but only to the
extent) of any

2
<PAGE>

related payments of additional rent made by Subtenant less any amounts
theretofore received by Subtenant directly from Landlord and relating to such
refund.

3.7 Subtenant shall pay any commercial rent or occupancy tax with regard to
the Subleased Premises either to the taxing authority, or, if appropriate, to
Sublandlord, as Additional Rent, at least five (5) business days before the due
date of each and every such tax payment to the taxing authority.

4. Subordination to and Incorporation of the Lease.
-----------------------------------------------

4.1 This Sublease is in all respects subject and subordinate to the terms
and conditions of the Lease (a true and complete copy of which has been
furnished by Sublandlord to Subtenant), and to all matters to which the Lease is
subject and subordinate. Sublandlord represents that a true and complete copy of
the Lease has been furnished by Sublandlord to Subtenant.

4.2 Except as otherwise expressly provided in, or otherwise inconsistent
with, this Sublease, or to the extent not applicable to the Subleased Premises,
the terms, provisions, covenants, stipulations, conditions, rights, obligations,
remedies and agreements contained in the Lease are incorporated in this Sublease
by reference, and are made a part hereof as if herein set forth at length,
Sublandlord being substituted for the "Landlord" under the Lease, Subtenant
being substituted for the "Tenant" under the Lease, and Subleased Premises being
substituted for "demised premises" or "premises" under the Lease, except that
the following provisions of the Lease shall be deemed deleted therefrom and
shall have no force and effect as between Sublandlord and Subtenant: (P) 7(C);
(P) 7(D); (P) 7(E); (P) 11(C); (P) 11(D); (P) 11(E); (P) 19(B); (P) 23; (P)
30(B); (P) 35(A); (P) 35(G); (P) 39; (P) 40; (P) 44; (P) 49(A); (P) 49(B); (P)
49(D); (P) 52; (P) 54; (P) 55; (P) 56; all portions of Exhibit A other than the
portion thereof which delineates the Subleased Premises; Exhibits B, B-1, B-2,
B-3, B-4, B-5, C, E, E-1, K, M, N, O, P-1 and R.

In addition, certain provisions of the Lease as incorporated herein shall
be modified as set forth elsewhere in this Sublease or as hereinafter provided:

(1) With respect all applicable provisions of the Lease pursuant to
which Tenant shall have an exclusive right to use any portion of
the Building, Subtenant shall have a non-exclusive right to use
such portion of the Building in common with Sublandlord and/or
Sublandlord's assignees and other subtenants.

(2) Subtenant shall not be entitled any abatement of Rent pursuant to
Subparagraph 28(C) of the Lease unless Sublandlord is entitled to
an abatement with respect to its corresponding obligation under
the Lease.

(3) Sublandlord shall deliver to Subtenant a copy of any Extension
Notice delivered by Sublandlord to Landlord pursuant to Article
53 of the Lease simultaneously with Sublandlord's delivery of
such Extension Notice to Landlord. Anything in Article 53 of the
Lease as incorporated herein by reference to the contrary

3
<PAGE>

notwithstanding, (a) Subtenant shall have the right to extend the
term of this Sublease if and only if Sublandlord extends the term
of the Lease for a corresponding period, (b) subject to the
foregoing, Subtenant may exercise such right to extend the Term
of this Sublease by notice to Sublandlord given within sixty (60)
days after Subtenant's receipt of a copy of Sublandlord's
Extension Notice delivered in accordance with the provisions of
the Lease and (c) in the event of any such extension of the Term
of this Sublease, the Fixed Rent hereunder during any such
extension shall be equal to the corresponding fixed rent payable
under the Lease in respect of the Subleased Premises for such
Extension Term.

(4) Subtenant shall have no obligation to maintain and/or repair any
portion of the Building other than the Subleased Premises.

5. Use. Subtenant shall use and occupy the Subleased Premises for the
---
permitted use specified in Article 2 of the Lease and for no other purpose.

6. Covenants with Respect to the Lease.
-----------------------------------

6.1 Neither Sublandlord nor Subtenant shall do anything that would
constitute a default under the Lease or omit to do anything that such party is
obligated to do under the terms of this Sublease so as to cause there to be a
default under the Lease.

6.2 Each party shall promptly deliver to the other party copies of all
notices, requests or demands which relate to the Subleased Premises or the use
or occupancy thereof after receipt of same from Landlord. Without limitation of
the foregoing, Sublandlord shall (i) deliver a copy of any notice of default
sent by Sublandlord under the lease simultaneously with its delivery of such
notice of default to Landlord and (ii) promptly after Sublandlord's receipt of
any notice of default received by Sublandlord under the Lease, deliver a copy of
same to Subtenant.

7. Services and Repairs. Notwithstanding anything to the contrary contained
--------------------
in the Lease, Sublandlord shall not be required to provide any of the services
that Landlord has agreed to provide pursuant to the Lease (or required by law),
or furnish the electricity to the Subleased Premises that Landlord has agreed to
furnish pursuant to the Lease (or required by law), or make any of the repairs
or restorations that Landlord has agreed to make pursuant to the Lease (or
required by law), or reimburse Subtenant for any repairs or restoration that
Subtenant may make pursuant to the Lease (as incorporated herein by reference)
or take any other action that Landlord has agreed to provide, furnish, make,
comply with, or take, or cause to be provided, furnished, made, complied with or
taken under the Lease, but at Subtenant's request, Sublandlord agrees to use all
diligent efforts to obtain the same from Landlord (provided, however, that
Sublandlord shall not be obligated to use such efforts or take any action which
might give rise to a default under the Lease), in which event Subtenant shall be
responsible for Subtenant's Share of the cost incurred by Sublandlord to obtain
the same from Landlord, and Subtenant shall rely upon, and look solely to,
Landlord for the provision, furnishing or making thereof or compliance
therewith. If Landlord shall default in the performance of any of its

4
<PAGE>

obligations under the Lease, Sublandlord shall, at Subtenant's request, timely
institute and diligently prosecute any action or proceeding which Subtenant, in
its reasonable judgment, deems meritorious, in order to have Landlord make such
repairs, furnish such electricity, provide such services or comply with any
other obligation of Landlord under the Lease or as required by law, in which
event Subtenant shall be responsible for Subtenant's Share of the cost incurred
by Sublandlord by reason of such action or proceeding. Notwithstanding the
foregoing, Subtenant shall have the right to contact Landlord on a direct basis
in respect of regular maintenance and operational issues.

8. Early Termination Rights. Subtenant shall have the right to terminate
------------------------
this Sublease by notice to Sublandlord given no less than six (6) months prior
to the effective date of such early termination, in which event this Sublease
shall expire as of the date specified in Subtenant's notice and, provided that
Subtenant shall not theretofore have sent a notice to Sublandlord terminating
this Sublease pursuant to this sentence, Sublandlord shall have the right to
terminate this Sublease by notice to Subtenant given no less than twelve (12)
months prior to the effective date of such early termination, in which event
this Sublease shall expire as of the date specified in Sublandlord's notice.
Notwithstanding the foregoing, in no event shall the date of early termination
arising by reason of either party's notice given pursuant to the immediately
preceding sentence occur prior to the tenth (10th) anniversary of the
Commencement Date.

9. Consents. Sublandlord agrees that whenever its consent or approval is
--------
required hereunder, or where something must be done to Sublandlord's
satisfaction, it shall not unreasonably withhold or delay such consent or
approval. If Landlord shall withhold its consent or approval in connection with
this Sublease or the Subleased Premises in any instance where, under the Lease,
the consent or approval of Landlord may not be unreasonably withheld, and if
Subtenant shall contend that Landlord has unreasonably withheld such consent, at
Subtenant's election, (i) Sublandlord, upon the request and at the expense of
Subtenant, shall timely institute and diligently prosecute any action or
proceeding which Subtenant, in its reasonable judgment, deems meritorious, in
order to dispute such action by Landlord, or (ii) Subtenant, to the extent
allowable under the Lease, may institute and prosecute such action or proceeding
in the name of Sublandlord, provided that Subtenant shall keep Sublandlord
informed of its actions and shall not take any action which might give rise to a
default under the Lease.

10. Termination of Lease. In the event of a default under the Lease which
--------------------
results in the termination of the Lease, Subtenant shall, at the option of
Landlord, attorn to and recognize Landlord as sublandlord hereunder and shall,
promptly upon Landlord's request, execute and deliver all instruments necessary
or appropriate to confirm such attornment and recognition. Notwithstanding such
attornment and recognition, Landlord shall not (a) be liable for any previous
act or omission of the sublandlord under this Sublease which shall not then be
continuing, (b) be subject to any offset, not expressly provided for in this
Sublease, which shall have accrued to Subtenant hereunder against said
sublandlord, or (c) be bound by any modification of this Sublease or by any
prepayment shall have been previously approved in writing by Landlord. Subtenant
hereunder hereby waives all rights under any present or future law to elect, by
reason of the termination of the Lease, to terminate this Sublease or surrender
possession of the Subleased Premises.

5
<PAGE>

11. Sublease, Not Assignment. Notwithstanding anything contained herein,
------------------------
this Sublease shall be deemed to be a sublease of the Subleased Premises and not
an assignment, in whole or in part, of Sublandlord's interest in the Lease.

12. Damage, Destruction, Fire and Other Casualty; Condemnation.
----------------------------------------------------------
Notwithstanding any contrary provision of this Sublease or the provisions of the
Lease herein incorporated by reference, Subtenant shall not be entitled to an
abatement of Rent by reason of a casualty or condemnation affecting the
Subleased Premises unless Sublandlord is entitled to an abatement with respect
to its corresponding obligation under the Lease.

13. No Waivers. Failure by Sublandlord or Subtenant in any instance to
----------
insist upon the strict performance of any one or more of the obligations of the
other party under this Sublease, or to exercise any election herein contained,
shall in no manner be or be deemed to be a waiver by Sublandlord or Subtenant,
as the case may be, of any of such other party's defaults or breaches hereunder
or of any of such other party's rights and remedies by reason of such defaults
or breaches, or a waiver or relinquishment for the future of the requirement of
strict performance of any and all of such other party's obligations hereunder.

14. Notices. Except as otherwise specifically provided herein, any notice,
-------
statement, demand, consent, approval, advice or other communication required or
permitted to be given, rendered or made by either party to the other, pursuant
to this Sublease or pursuant to any applicable law or requirement of public
authority (collectively, "communications") shall be in writing and shall be
deemed to have been properly given, rendered or made only if sent by personal
delivery, or registered or certified mail, return receipt requested, posted in a
United States post office station in the continental United States, or by a
nationally recognized overnight courier, in each case addressed (i) to Subtenant
at its address first above written, Attention: President and (ii) to
Sublandlord, at its address first above written, Attention: President. A copy of
each communication to either Sublandlord or Subtenant shall also be sent to
Clifford Chance Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166,
Attention: Joanne Feil, Esq. All such communications shall be deemed to have
been given, rendered or made when delivered on the date such communication is
actually received as evidenced by a written receipt therefor or refusal to
accept delivery, as of the date of such refusal, in the case of personal
delivery, or three (3) days after the day so mailed, or one (1) business day
after sent by nationally recognized overnight courier. Either party may, by
notice as aforesaid actually received, designate a different address or
addresses for communications intended for it.

15. Broker. Each party hereto covenants, warrants and represents to the
------
other party that it has had no dealings, conversations or negotiations with any
broker concerning the execution and delivery of this Sublease. Each party hereto
agrees to defend, indemnify and hold harmless the other party against and from
any claims for any brokerage commissions and all costs, expenses and liabilities
in connection therewith, including, without limitation, reasonable attorneys'
fees and disbursements, arising out of its respective representations and
warranties contained in this Section 15 being untrue. The provisions of this
Section 15 shall survive the expiration or earlier termination of this Sublease.

16. Condition of the Subleased Premises. Subtenant represents that it has
-----------------------------------
made or caused to be made a thorough examination of the Subleased Premises and
is familiar

6
<PAGE>

with the condition of every part thereof. Subtenant agrees to accept the
Subleased Premises in its "as is" condition on the date hereof, reasonable wear
and tear between the date hereof and the Commencement Date excepted. Anything in
the Lease as incorporated herein by reference to the contrary notwithstanding,
Sublandlord has not made and does not make any representations or warranties as
to the physical condition of the Subleased Premises, the use to which the
Subleased Premises may be put, or any other matter or thing affecting or
relating to the Subleased Premises, except as specifically set forth in this
Sublease. Sublandlord shall have no obligation whatsoever to alter, improve,
decorate or otherwise prepare the Subleased Premises for Subtenant's occupancy.

17. Additional Rights of Sublandlord/Subtenant. Anything herein to the
------------------------------------------
contrary notwithstanding:

17.1 Subject to the prior consent of Landlord if and solely to the extent
required pursuant to the Lease, during the entire Term hereof:

(1) Subtenant shall have the right to connect to and use
Sublandlord's generator. Sublandlord shall maintain said
generator in good operating condition, and Subtenant shall pay
Subtenant's Share of Sublandlord's generator costs, as determined
pursuant to paragraph 4 of Schedule 1 attached hereto and by this
reference made a part hereof. Such charges shall be set forth in
Sublandlord's monthly invoice to Subtenant for Rent.

(2) Subtenant shall have the right to connect to and use
Sublandlord's chiller. Subtenant may at Subtenant's election and
Subtenant's sole cost and expense install a separate meter to
measure the consumption of chilled water utilized within the
Subleased Premises, provided that prior to the installation of
such separate meter, Subtenant shall pay Subtenant's Share of
Sublandlord's costs with respect to the use of chilled water in
the Leased Premises, which charges shall be set forth in
Sublandlord's monthly invoice to Subtenant for Rent payable
hereunder and shall be substantiated with sufficient
documentation submitted to Subtenant together with such monthly
invoice. So long as Subtenant uses Sublandlord's chiller,
Sublandlord shall maintain same in good operating condition.

(3) Subtenant shall have the right to connect to and use
Sublandlord's data and telecommunications cabling and associated
conduit(s) serving the Subleased Premises as more particularly
described in paragraph 1 of Schedule 1. Sublandlord shall
maintain such data and communications cabling and associated
conduit(s) in good operating condition, provided that Subtenant
shall have the right to obtain access to such data and
telecommunications cabling and associated conduit(s) (or, as
necessary, Sublandlord's data and telecommunications cabling and
associated conduit serving other

7
<PAGE>

portions of the Leased Premises) to maintain, upgrade or respond
to emergencies with respect to the data and telecommunications
cabling and associated conduit(s) serving the Subleased Premises,
in an emergency immediately after Subtenant orally advises
Sublandlord of the need for such access, and otherwise within
four (4) hours after Subtenant orally advises Sublandlord of the
need for such access. In the event Sublandlord subleases all or
any portion of Subcellar 1 Level (referenced in the Lease as
Concourse Level "B-2") to any entity other than Subtenant and/or
other portions of the Leased Premises other than the Subleased
Premises to an entity other than Subtenant, Sublandlord shall
take all necessary action, at no cost to Subtenant, to protect
the integrity of Subtenant's data and telecommunications cabling
and associated conduit(s) located in Subcellar 1 Level.

(4) Subtenant shall have the right to connect to (i) incoming service
conduits and utilize spare conduits and service rooms as more
particularly described in paragraph 2 of Schedule 1 and (ii)
Sublandlord's incoming service room located on Subcellar 1 Level
as shown on Exhibit B annexed hereto (the "Incoming Service
Room"). Subtenant shall have the right, at its expense, to run
cables from the Incoming Service Room to achieve access to the
Subleased Premises as shown on Exhibit C annexed hereto. In the
event Sublandlord subleases all or any portion of Subcellar 1
Level to an entity other than Subtenant, Sublandlord shall take
all necessary action, at no cost to Subtenant, to protect the
integrity of the Incoming Service Room and Subtenant's cables run
therefrom or to provide, at no expense to Subtenant, the right to
connect to alternate incoming service.

(5) Subtenant shall have the right to use that portion of the roof of
the Building shown on Exhibit D annexed hereto to install,
maintain and use Roof Equipment pursuant to Article 48 of the
Lease and as more particularly described in paragraph 3 of
Schedule 1.

(6) Subject to Landlord's consent, Subtenant shall have the right (a)
to install an identification of Subtenant's name in 25% of the
header portion of Sublandlord's directory software, (b) to
utilize the electronic directory in the Z-D Lobby, (c) to list in
such electronic directory all employees, floor numbers and
departments applicable to the Subleased Premises and/or
Subtenant's use thereof and such other information as Subtenant
shall reasonably require, (d) to install a computer disc in such
electronic directory and (e) to update the information stored in
such computer disc on a periodic basis as required by Subtenant.

8
<PAGE>

(7) Subtenant shall have the right to install an electronic directory
located in the Z-D Lobby and to otherwise utilize the Z-D Lobby
and systems located therein to the extent and in the manner set
forth in paragraph 5 of Schedule 1.

(8) Subtenant shall have the right to use Sublandlord's cafe in the
Building so long as same exists.

(9) Subtenant shall have the right to use Sublandlord's convention
and meeting rooms located on Subcellar 1 Level and shall pay to
Sublandlord a fee of $100 per hour for the use of such rooms on a
first come-first serve basis, provided that Sublandlord shall
have the right to exercise a priority to use any Town Center Room
on at least two (2) weeks prior written notice to Subtenant or
any other meeting room on at least forty-eight (48) hours prior
written notice to Subtenant. Notwithstanding the foregoing,
Sublandlord shall not have right to exercise any such priority to
use one Town Center Room per week for a time and location
specified by Subtenant.

(10) Subtenant shall have access to and the right to use the 28th
Street Loading Dock Bays subject to Sublandlord's rights with
respect thereto pursuant to Article 28 of the Lease.

(11) Subtenant shall have the right to use the freight elevator and
the right to obtain access through Subcellar 1 Level from the
loading dock to the freight elevator. In the event Sublandlord
subleases all or any portion of Subcellar 1 Level, Sublandlord
shall maintain an access corridor on Subcellar 1 Level from the
loading dock to the freight elevator sufficient to allow for
Subtenant's continued access through Subcellar 1 Level from the
loading dock to the freight elevator.

(12) So long as Sublandlord uses the Messenger Center, Subtenant and
Subtenant's employees and invitees shall have the right to pass
through same to obtain access from the street to the freight
elevator or the Z-D Lobby to the Subleased Premises.

(13) Subtenant shall install a security system for the Subleased
Premises compatible with Sublandlord's existing security system
per paragraph 13 of Schedule 1, and Sublandlord agrees that, if
Sublandlord should replace its existing security system, such
replacement security system shall maintain compatibility with
Subtenant's security system.

(14) During the first year of the Term hereof, Subtenant shall have
the right to issue security passes in Sublandlord's security
system.

9
<PAGE>

Such security passes shall provide access limited to the
Subleased Premises.

17.2 During the first year of the Term hereof, Sublandlord shall allow
Subtenant to connect to and use Sublandlord's data and voice equipment, IDF
closet, telecommunications equipment, security system, microlite lighting
control system and all other systems and equipment of Sublandlord presently
serving the Subleased Premises as more particularly described in paragraphs 6
through 13 of Schedule 1. Within the first year of the Term hereof, Subtenant
shall cause the Subleased Premises to operate independently from the balance of
the Leased Premises with respect to all such systems and equipment described in
the immediately preceding sentence, provided, however, that with respect to each
of the foregoing systems and equipment, until Subtenant shall achieve such
independent operation, Subtenant shall pay Subtenant's Share of Sublandlord's
costs with respect thereto, which charges shall be set forth on Sublandlord's
monthly invoice to Subtenant for Rent payable hereunder and shall be
substantiated with sufficient documentation submitted to Subtenant together with
such monthly invoice. Sublandlord shall maintain in good operational condition
all systems and equipment described in this Subsection 17.2 until Subtenant
shall have segregated such systems and equipment from those serving the
Subleased Premises. Notwithstanding the provisions of this Section 17.2,
Subtenant shall have no obligation to cause the Subleased Premises to operate
independently from the balance of the Leased Premises with respect to the
systems and equipment described in Section 17.1 hereof.

17.3 During the entire Term hereof, Subtenant shall pay Subtenant's Share
of Sublandlord's costs with respect to gas consumed within the Leased Premises,
which charges shall be set forth in Sublandlord's monthly invoice to Subtenant
for rent payable hereunder and shall be substantiated with sufficient
documentation submitted to Subtenant together with such invoice.

17.4 (1) Subtenant shall have the right to connect to and use
Sublandlord's satellite dish for the Leased Premises and all
cabling and equipment required for its proper operation in the
manner and to the extent provided in paragraph 3 of Schedule 1.

(2) In the event Subtenant shall desire cable television within the
Subleased Premises, it shall enter into an agreement directly
with the vendor providing cable television to the Building for
the provision of same, in the manner and to the extent provided
in paragraph 8 of Schedule 1.

17.5 Notwithstanding anything to the contrary contained herein, Sublandlord
may discontinue the provision or maintenance of any service or supplies which it
had been providing or maintaining on a voluntary basis provided that Sublandlord
shall give Subtenant sixty (60) days' written notice (or such lesser period of
notice as is required by any third party vendor unaffiliated with Sublandlord
who is providing or maintaining such service or supplies) prior to discontinuing
the provision or maintenance of such service or supplies.

10
<PAGE>

18. Assignment, Subletting. This Sublease may not be assigned or the
----------------------
Subleased Premises demised hereunder further sublet, in whole or in part,
without the prior written consent of Landlord in accordance with all the
provisions of the Lease including, without limitation, Section K of Article 11
of the Lease.

19. Memorandum of Sublease. Sublandlord and Subtenant agree not to record
----------------------
this Sublease. The parties shall, contemporaneously with the execution of this
Sublease, execute, acknowledge and deliver a short form or memorandum of this
Sublease in recordable form and otherwise in the form annexed hereto as Exhibit
E. Recording, filing and like charges imposed by any governmental agency to
effect such recording shall be paid by Subtenant. Upon the expiration or
termination of this Sublease, Subtenant, at Sublandlord's request, shall
execute, acknowledge and deliver to Sublandlord all necessary instrument(s) in
recordable form evidencing a termination of this Sublease and sufficient to
discharge any memorandum hereof of record, and Subtenant shall pay for all
recording, filing and like charges imposed by any governmental agency to effect
such recording.

20. Nondisturbance.
--------------

20.1 Landlord, Sublandlord and Subtenant agree to execute and deliver a
Subordination, Non-Disturbance and Attornment Agreement with respect to this
Sublease in the form required pursuant to Subparagraph 11(S) of the Lease.

20.2 Landlord agrees to use good faith efforts to obtain from the holder of
any mortgage encumbering the Building as of the date hereof a non-disturbance
agreement for the benefit of Subtenant.

21. Miscellaneous.
-------------

21.1 This Sublease contains the entire agreement between the parties and
all prior negotiations and agreements are merged in this Sublease. Any agreement
hereafter made shall be ineffective to change, modify or discharge this Sublease
in whole or in part unless such agreement is in writing and signed by the
parties hereto. No provision of this Sublease shall be deemed to have been
waived by Sublandlord or Subtenant unless such waiver be in writing and signed
by Sublandlord or Subtenant, as the case may be. The covenants and agreement
contained in this Sublease shall bind and inure to the benefit of Sublandlord
and Subtenant and their respective permitted successors and assigns.

21.2 In the event that any provision of this Sublease shall be held to be
invalid or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Sublease shall be unaffected
thereby.

21.3 The paragraph headings appearing herein are for purpose of convenience
only and are not deemed to be a part of this Sublease.

21.4 Capitalized terms used herein shall have the same meanings as are
ascribed to them in the Lease, unless otherwise expressly defined herein.

11
<PAGE>

21.5 This Sublease is offered to Subtenant for signature with the express
understanding and agreement that this Sublease shall not be binding upon
Sublandlord unless and until Sublandlord shall have executed and delivered a
fully executed copy of this Sublease to Subtenant.

21.6 All insurance policies required to be obtained by Subtenant under this
Sublease or the Lease shall name Landlord and Sublandlord as additional insured
as their interests may appear.

21.7 This Sublease shall be governed by, and construed in accordance with,
the laws of the State of New York.

22. Related Corporation. Pursuant to Subparagraph 11(N) of the Lease,
-------------------
Sublandlord hereby certifies to Landlord, its successors and assigns that, as of
the date hereof, Subtenant s a "related corporation" (as defined in the Lease).

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement of
Sublease as of the date and year first above written.

SUBLANDLORD: ZD Inc. SUBTENANT: Ziff-Davis Inc.

/s/ J.MALCOLM MORRIS /s/ DANIEL S. ROSENWEIG
By: _________________________ By: __________________________
J. Malcom Morris Daniel S. Rosenweig
Name: _______________________ Name: ________________________
Senior Vice President Director
Title: ______________________ Title: _______________________

With respect to Paragraph 20 only:

LANDLORD: 63 Madison Associates, L.P.

By: Comfort 63 Madison, Inc., a general partner

By: ______________________________________
Name: ____________________________________
Title: ___________________________________

By: Loeb Partners Realty and Development
Corp. a general partner

By: ______________________________________
Name: ____________________________________
Title: ___________________________________

12
<PAGE>

EXHIBIT A

FIXED RENT

Monthly
Period Annual Amount Amount
------ ------------- ------

Commencement Date - last day of Rent Period 1 $1,388,205.00 $115,683.75
Rent Period 2 $1,589,679.00 $132,473.25
Rent Period 3 $1,791,153.00 $149,262.75
Rent Period 4 - Sublease Expiration Date $1,995,084.00 $166,257.00
<PAGE>

EXHIBIT B

SUBLANDLORD'S SUBCELLAR 1 LEVEL
INCOMING SERVICE ROOM
<PAGE>

EXHIBIT C

SUBCELLAR 1 TELECOMMUNICATIONS
RISER CONDUIT DIAGRAM
<PAGE>

EXHIBIT D

LOCATION OF PORTION OF ROOF
DEDICATED FOR SUBTENANT'S USE
<PAGE>

EXHIBIT E

MEMORANDUM OF SUBLEASE

THIS MEMORANDUM OF SUBLEASE ("Memorandum") is executed the 10th day of
March, 2000, to evidence for recording purposes the execution of a certain
sublease dated as of March 15, 2000 (the "Sublease"), the relevant terms of
which are set forth below:

1. The Sublandlord is ZD Inc. ("Sublandlord"), a Delaware corporation
having an office at 63 Madison Avenue, New York, New York 10016.

2. The Subtenant is Ziff-Davis Inc. ("Subtenant"), a Delaware corporation
having an office at 63 Madison Avenue, New York, New York 10016.

3. The term of the Sublease shall commence on April 1, 2000 and shall
expire on July 16, 2019, subject to Subtenant's options to extend the same for
two (2) consecutive ten (10) year periods pursuant to the terms and conditions
provided in the Sublease.

4. The subleased premises (the "Subleased Premises") consist of the entire
tenth (10th) floor of the building known as 63 Madison Avenue, New York, New
York (the "Building"), constituting a portion of the premises demised by
Sublandlord pursuant to that certain lease dated as of January 15, 1998 between
63 Madison Associates, L.P., as landlord, and Sublandlord, as tenant. Schedule A
attached hereto and incorporated herein by reference is a legal description of
the land upon which the Building is situated.

5. In the event of any conflict between the terms hereof and the terms of
the Sublease, the terms of the Sublease shall govern.

IN WITNESS WHEREOF, the parties have executed this memorandum of Lease on
the respective dates as set forth on the acknowledgments below:

ZD Inc. Ziff-Davis Inc.

By: By:
---------------------------- -------------------------
Name: Name:
-------------------------- -----------------------
Title: Title:
------------------------- -----------------------

After recording, this Memorandum
should be returned to:

Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attn: Joanne Feil, Esq.

E-1
<PAGE>

State of New York, )
) ss.:
County of ____________ )

On the ___________ day of ______________________________, in the year
________ before me the undersigned personally appeared
_____________________________________________ , personally know to me or proved
to me on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity as ______________________________ of ZD Inc., and
that by his/her signature on the instrument, the individual, or the person upon
behalf of which the individual acted, executed the instrument.

Signature and Office of individual

taking acknowledgment

State of New York, )
) ss.:
County of ____________ )

On the ___________ day of ______________________________, in the year
________ before me the undersigned personally appeared
_____________________________________________ , personally know to me or proved
to me on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity as ______________________________ of Ziff-Davis
Inc., and that by his/her signature on the instrument, the individual, or the
person upon behalf of which the individual acted, executed the instrument.

Signature and Office of individual
taking acknowledgment

E-2
<PAGE>

Schedule A

All that certain plot, piece or parcel of land situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:

BEGINNING at the intersection of the northerly side of East 27th Street with the
easterly side of Madison Avenue;

THENCE along said side of Madison Avenue in a northerly direction, 197 feet 6
inches to the southerly side of East 28th Street;

THENCE southerly and parallel with said side of Park Avenue South 197 feet 6
inches to the northerly side of East 27th Street; and

THENCE westerly along said side of East 27th Street, a distance of 275 feet to
the point of place of BEGINNING.

E-3
<PAGE>

Schedule 1

Utilization of Systems and Services
-----------------------------------

1. Low Voltage Risers

a. Sleeves within Riser/IDF Closets (B1 thru 15th floors) - Two (2)
4" empty riser sleeves shall be dedicated; one in each of the
East and West riser for Subtenant.

b. Sub-Concourse horizontal raceways - Subtenant reserves the right
to intercept the riser conduits designated for its use and extend
said conduits to one of the following locations:

i. West side conduits shall be extended to the Incoming service
room

ii. East side conduits shall be extended to the IDF closet at
the southeast corner of the sub-concourse.

2. Incoming Service

a. Incoming Service Conduits - One (1) 4" empty conduit in either
the Northwest or Southwest incoming service point shall be made
available at the entrance point for Subtenant in the event it
deems the utilization of same necessary.

b. Incoming Service Room - The incoming service room shall be a
shared room for Sublandlord, Subtenant and any other subtenants
of Sublandlord. It shall be available to Subtenant 24 hours a
day/365 days a year. It shall be one of the entrance points for
any incoming service vendors as Subtenant shall deem necessary.

c. Alternate incoming service room - The IDF closet in the southeast
corner of the sub-concourse (or other mutually agreed upon
location shall be made available as an alternate incoming service
room for use by Subtenant should it deem it necessary. It shall
be available to Subtenant 24 hours a day/365 days a year. It
shall be one of the entrance points for any incoming service
vendors as Subtenant shall deem necessary.

d. Alternate Incoming service - Subtenant reserves the right to
access one or the other incoming service points (Northwest and
Southeast) that are not fed into the incoming service room for
the purpose of having redundant and diverse services delivered to
the Subleased Premises. Sublandlord shall cooperate in allowing
access by Subtenant (or its designated vendor) to the incoming
service points and extending of services across the sub-concourse
to the alternate riser location for delivery to the Sublease
Premises.

S1-1
<PAGE>

e. Incoming service cabling - Subtenant reserves the right to
utilize the spare conduits made available by Sublandlord for
running new incoming service risers to the Subleased Premises.

3. Roof System

a. Dish Array - Subtenant shall have space reserved on the dish
array for mounting two (2) dedicated dishes on the dish array for
Subtenant's exclusive use. Where necessary, Sublandlord shall
allow access by Subtenant to route cabling through Sublandlord's
IDF closets and through Sublandlord's existing conduits from the
15th Floor IDF to the roof and from the 15th Floor IDF to the
10th Floor IDF for the purposes of providing services to the
Subleased Premises.

b. Spare Satellite Dish Cabling to the Subleased Premises - Three
(3) spare satellite dish cables installed from the 15th floor IDF
to the 10th floor IDF for future dish installations shall become
the property of Subtenant.

4. Emergency Generator/UPS

a. Allocation of Expenses - Subtenant shall be charged its
proportionate share of the overall costs of operation,
maintenance, service, etc. with regard to the emergency generator
and UPS systems. The allocation of expenses associated with the
emergency generator and the UPS shall be in accordance with one
of the following methods as selected by Subtenant.

i. The basis for determination of proportionate share shall be
based upon a rentable square foot of space basis as outlined
in the Sublease. This proportionate share allocation also
assures Subtenant of the same proportionate share of the
overall emergency generator and UPS system capacity (as
applied to each system separately).

ii. Subtenant shall pay for usage of the emergency generator and
UPS systems based upon its actual demand or consumption. The
amount established shall be as negotiated between
Sublandlord and Subtenant. This shall be determined by
placing sub-meter(s) on Subtenant's associated emergency/UPS
panels, loads, etc. The costs for the addition of the
sub-meters shall be at the sole cost and expense of
Subtenant.

5. Z-D Lobby Technology Systems

a. [Intentionally Deleted].

b. Special Events - Subtenant reserves the right to use the Z-D
Lobby area for the purposes of special events or as a
pre-function area for special events held elsewhere upon written
notice to Sublandlord and in no event more than four (4)

S1-2
<PAGE>

times in any twelve (12) month period. During such events, all
audiovisual systems and sub-systems located in the Z-D Lobby
shall be made available for Subtenant's use. Subtenant, at its
sole cost and expense, shall comply with all applicable laws in
connection with its use of the Z-D Lobby for such events,
including, without limitation, obtaining all necessary permits
therefor and shall be responsible for all required clean-up to
restore the Z-D Lobby to its normal condition.

6. Voice Systems

a. Voice cable risers (twisted pair copper cabling)- Subtenant
reserves the right to make use of the existing voice risers that
connect the Subleased Premises to the data center. If so desired,
it may re-route/extend voice riser cables from the data center on
the sub-concourse level to alternate locations within the
sub-concourse level. Cabling that runs up the west riser shall be
extended to the incoming service room. Cabling that runs up the
east riser shall be extended to another mutually acceptable
location within the sub- concourse. The re-routing/extending of
the existing voice cables can be done outside of the spare
conduit capacity made available by Sublandlord per Schedule 1,
paragraph 1. Where necessary, Sublandlord shall allow access by
Subtenant to route cabling through Sublandlord's IDF closets for
the purposes of providing services to the Subleased Premises. All
work performed by Subtenant shall insure that Sublandlord's
remaining cabling systems and services are not compromised or
placed at risk.

b. Data Center PBX - Within the first year of the Term of the
Sublease, Subtenant shall remove its telephone cards from the
current PBX system in the data center, proportionate to the
number of telephone lines serving the Subleased Premises in
relation to the total number of telephone lines serving the
Leased Premises. All of the phone devices located in the
Subleased Premises shall be the property of Subtenant to utilize
as it sees fit.

c. Horizontal Cabling - All of the horizontal cabling, connectors,
patch panels, cross connects, etc. located in the Subleased
Premises to support the voice systems shall be the property of
Subtenant.

7. Data Systems

a. Data cable risers (fiber optic cabling) - Subtenant reserves the
right to make use of the existing data risers that connect the
Subleased Premises to the data center. If so desired, Subtenant
may re-route/extend data riser cables from the data center on the
sub-concourse level to alternate locations within the
sub-concourse level. Cabling that runs up the west riser shall be
extended to the incoming service room. Cabling that runs up the
east riser shall be extended to another mutually acceptable
location within the sub-concourse. The re-routing/extending of
the existing data cables can be done outside of the spare conduit
capacity made

S1-3
<PAGE>

available by Sublandlord. Where necessary, Sublandlord shall
allow access by Subtenant to route cabling through Sublandlord's
IDF closets for the purposes of providing services to the
Subleased Premises. All work performed by Subtenant shall insure
that Sublandlord's remaining cabling systems and services are not
compromised or placed at risk.

b. IDF closet electronics - All of the data/LAN electronics that are
located in the IDF closet for the purposes of delivering LAN
connectivity to the Subleased Premises shall become the property
of Subtenant. All software, catalogs, warrantees, etc. shall also
become the property of Subtenant.

c. Horizontal Cabling - All of the horizontal cabling, connectors,
patch panels, patch cords, etc. on the Subleased Premises to
support the data systems shall be the property of Subtenant.

8. CATV System

a. CATV riser cabling - Within the first year of the Term of the
Sublease, Subtenant shall cease utilizing Sublandlord's CATV
riser system. Where appropriate the riser shall be spliced to
by-pass the Subleased Premises and provide connectivity for the
balance of the Leased Premises. All of the distribution passive
components and electronics located within the IDF closet for the
purposes of serving the horizontal distribution shall remain the
property of Subtenant. Any rebalancing of the remaining CATV
system required by Sublandlord to ensure proper operation shall
be at Sublandlord's expense.

b. Horizontal Cabling - All of the horizontal CATV cabling and
devices located in the Subleased Premises shall remain the
property of Subtenant.

c. New CATV Service - Subtenant reserves the right to bring in new
CATV service to support the Subleased Premises. The riser cables
necessary to support this new service shall be run in the
existing CATV riser sleeve that currently provides CATV service
to the occupied portion of the Leased Premises. The work will be
done outside of the spare conduit capacity made available by
Sublandlord per Schedule 1, paragraph 1. Where necessary,
Sublandlord shall allow access by Subtenant to route cabling
through Sublandlord's IDF closets for the purposes of providing
services to the Subleased Premises. All work performed by the
sub- tenants shall insure that Sublandlord's remaining cabling
systems and services are not compromised or placed at risk.

9. IDF Closets

a. IDF Closets - The IDF closets on the Subleased Premises shall
become the exclusive property of Subtenant. Any access to the
closet by Sublandlord or its designated vendor shall only be upon
prior approval of, and shall be supervised

S1-4
<PAGE>

by, Subtenant. Any expenses incurred by Subtenant for after-hours
supervision shall paid by Sublandlord. All work performed in the
IDF closets shall be at a time that is reasonably approved by
Subtenant.

b. Low Voltage Systems Components - All of the patch panels, racks
frames, electronics, etc. to support the voice, data, CATV,
security system, etc. shall become the property of Subtenant.

10. Lighting Control System

a. Lighting Control System relay Panels - The relay panels for the
lighting control system shall be removed from the overall system
and shall be isolated for Subtenant's exclusive use. Subtenant
shall provide its own lighting control system control unit to
make its system operational. Sublandlord shall provide the
necessary connectivity once Subtenant's panels have been removed
to ensure proper operation of Sublandlord's overall lighting
control system.

11. Building Management System

a. Remote Monitoring Interface - Subtenant, at its sole cost and
expense, shall have the right to install a remote monitoring
interface to Sublandlord's building management system and place
it in the Subleased Premises as designated by Subtenant.
Subtenant shall have the ability to monitor all control points
and functions that affect the Subleased Premises, but shall not
have the ability to control those points unless deemed acceptable
by Sublandlord. Any BMS or control related issues presented to
Sublandlord by Subtenant shall be addressed in a proactive manner
and shall be brought to resolution as quickly as possible.

12. Telephone Numbers

a. Subtenant reserves the right to be allocated its proportionate
share of the DID numbers that currently support Sublandlord and
Subtenant as a whole. The bank of DID phone numbers allocated to
Subtenant shall be those that are closest to the numbers that
currently serve it today.

13. Security System

a. Subtenant Security System - Subtenant shall take ownership of all
security systems devices located on the Subleased Premises for
the purposes of isolating and securing Subtenant's perimeter and
interior. This includes but is not limited to access control
panels, card readers, door contacts, electric strikes, security
system panels, CCTV cameras, panic buttons, etc. Subtenant shall
provide its own security system that will interface with the
existing security system panels located in Subtenant's IDF
closets. If any portion of Sublandlord's security system is
disconnected specifically due to Subtenant's removal of its
panels from

S1-5
<PAGE>

Sublandlord's security system, Subtenant shall reconnect such
disconnected security system components of Sublandlord at
Subtenant's expense.

b. Common Security Components - Common security components such as
the lobby turnstiles, elevator access, floor access, etc. shall
remain on Sublandlord's security system. For the purposes of
control of these components to the extent that they affect
Subtenant only, a remote administrative terminal shall be
provided to Subtenant. Sublandlord's security system shall be
partitioned to allow the administration of access rights by
Subtenant for its floor and common shared areas. Subtenant, at
its sole cost and expense, shall install administrative terminals
and system partitioning. Subtenant shall be responsible for
maintaining the cardholder's database on both Subtenant's and
Sublandlord's security systems.

S1-6

<PAGE>

Exhibit 10.29

March 1, 1999

Eric Hippeau
Ziff-Davis Inc.
One Park Avenue
New York, NY 10016

Re: Employment Agreement
--------------------

Dear Eric:

This letter is to confirm our agreement to amend the Employment Agreement
dated as of April 1, 1998 to delete the annual incentive bonus provided for in
Section 4(b) for the year 1998 and subsequent years.

In lieu of the incentive bonus, it is the intention of Ziff-Davis Inc. to
provide you with options from time to time in such amounts as the Compensation
Committee and Incentive Compensation Plan Committee shall determine.

Please indicate your agreement by signing in the space provided below.

Ziff-Davis Inc.

By: /s/ J. MALCOLM MORRIS
_____________________

Accepted and agreed:

/s/ ERIC HIPPEAU
______________________
Eric Hippeau

<PAGE>

EXHIBIT 10.34

EMPLOYMENT AGREEMENT

Agreement, dated as of March 1, 2000, between Ziff-Davis Inc., a Delaware
corporation (the "Employer" or "Ziff-Davis"), and Fredric D. Rosen (the
"Executive").

WHEREAS, ZD Events Inc., a Delaware corporation ("ZD Events"), is a wholly
owned subsidiary of Ziff-Davis engaged in the business of conducting trade
shows, conferences and other events (the "Events Business"); and

WHEREAS, Ziff-Davis intends to (a) contribute the stock of all of its
subsidiaries engaged in the Events Business, including ZD Events, ZD Events Pty
Ltd., an Australian corporation, ZD Events S.A., a Mexican corporation and ZD
Events S.A., a French corporation, and any other assets primarily used in the
Events Business, to a newly formed Delaware corporation ("Newco"), (b) assign to
Newco, and cause Newco to assume, all of Ziff-Davis' rights and obligations
under this Agreement, after which Newco will be considered to be the Employer
hereunder (such assignment and assumption, the "Newco Assumption"), (c)
guarantee the performance of this Agreement by Newco until the Spin Off
(described below) is effectuated, (d) cause Newco, directly or through its
subsidiaries, to borrow cash from bank lenders or the capital markets (or a
combination thereof) in
<PAGE>

an aggregate amount not to exceed $425 million and to distribute that cash to
Ziff-Davis (which will in turn pay out all or some of that cash as a dividend)
and (e) distribute all of the stock of Newco to the holders of Ziff-Davis Inc.
- -- ZD Common Stock ("ZD Common Stock") as a dividend (the "Spin Off"); and

WHEREAS, Ziff-Davis wishes to have the Executive immediately assume
leadership of the Events Business while it is still owned by Ziff-Davis and
thereafter following the Spin Off; and

WHEREAS, the Board of Directors of Ziff-Davis has determined that it is in
the best interests of Ziff-Davis and its stockholder to enter into this
Agreement.

THEREFORE, in consideration of the premises and the respective covenants
and agreements herein contained, the parties hereto agree as follows:

1. Employment

Until the Newco Assumption is formed, Executive shall be employed by Ziff
Davis in the capacity of "Chairman of the events business." Upon the Newco
Assumption, the Executive shall be employed as the Chairman of the Board and
Chief Executive Officer of Newco. No executive or other employee of Newco shall
hold a position, stature, title or powers higher or greater than or equal to
those of

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<PAGE>

Executive. The Executive will devote his full business time, and use his best
efforts, to serve the Employer in the described capacities, on the terms and
conditions set forth herein. The Executive will have full authority and power to
manage the Events Business consistent with his position and the reasonable
directions of the Board of Directors of Newco (the "Board") and, prior to the
Spin Off, the chief executive officer of Ziff-Davis. Executive may continue his
memberships on the boards of directors of the corporations listed on Schedule 1
as well as on additional boards with the consent of the Board, which shall not
be unreasonably withheld.

2. Term

Unless sooner terminated as contemplated herein, the term of employment of
the Executive under this Agreement will commence on the date hereof and end on
February 28, 2005.

3. Place of Performance

The Executive's employment will be based in the Los Angeles area.

4. Compensation and Related Matters

(a) Salary. During the term of the Executive's employment, the Employer
will pay to the Executive a base

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<PAGE>

salary of not less than $1,500,000 on an annualized basis, payable no less
frequently than monthly.

(b) Performance Bonus. (i) With respect to the term of employment
commencing after December 31, 2000, the Executive will receive an annual
performance bonus based upon the growth in the EBITDA of the Events Business.
For these purposes, "EBITDA" for any year means the consolidated reported
earnings of Newco for that year, as adjusted to (w) add back interest, taxes,
depreciation and amortization, all as determined by the independent auditors of
the Employer applying generally accepted accounting principles, (x) exclude
unusual non-recurring items, such as gains or losses on the sale of a major
business unit, (y) exclude charges related to this performance bonus and any
substantially similar performance bonus granted to the president, chief
operating officer, chief financial officer, chief technology officer or general
counsel of Newco, or any other earnings-related bonuses exceeding $150,000 on an
annualized basis, and (z) exclude any charges to earnings attributable to
payments to affiliates which are in excess of fair market value of goods sold or
services rendered. EBITDA for 2000 shall be adjusted by the Compensation
Committee of the Board to reflect a normalized situation,

-4-
<PAGE>

taking into account special costs and expenses which may be incurred in that
year.

(ii) The amount of performance bonus for each year will be based on the
incremental growth in EBITDA for that year over the prior year (or earlier prior
year if there has been an interim decrease in EBITDA) where the increments are
as follows:

<TABLE>
<CAPTION>
Incremental growth Applicable
in EBITDA Percentage

<S> <C>
less than or equal to 8% 0

greater that 8%, but less
than or equal to 10% 2%

greater than 10%, but less
than or equal to 15% 4%

more than 15% 5%
</TABLE>

The performance bonus will then be determined by multiplying the incremental
growth in EBITDA by the Applicable Percentage.

The bonus formula is illustrated by the following examples: Assume EBITDA
is $100 in 2000 and $113 in 2001. The percentage increase is therefore 13% and
the amount of increase is $13. The performance bonus is calculated as 4% times
$13 = $0.52, the 13% growth yielding an Applicable Percentage of 4%. Assume
EBITDA for 2002 is $140. The percentage increase is 140 - 113 = 23.9%, and
amount of ---------
113

-5-
<PAGE>

increase is $27. The performance bonus is calculated 5% times $27 = $1.35.

(iii) If there is a change in fiscal year, the computation and payment of
the performance bonus shall be adjusted on an allocable and equitable basis to
reflect such change, including payment of the performance bonus for a short
fiscal year.

(iv) The performance bonus will be paid as soon as is practicable in the
year following the year to which it relates, but with at least 75% paid by March
1st and the balance by April 15th.

(v) If the Events Business acquires a major business unit, the performance
bonus formula will include EBITDA of the acquired business but also will be
debited for interest charges directly attributable to the acquisition of such
business.

(c) Year 2000 Performance Bonus. With respect to the year 2000, the Board
will, in its discretion, pay a performance bonus to Executive.

(d) Discretionary Bonus. During the term of his employment, the Board (or
the Compensation Committee if the Board so determines) may grant discretionary
bonuses to the Executive in cash or stock whether or not Executive receives a
performance bonus.

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<PAGE>

(e) Stock Options. Effective as of the date of the Spin Off, Newco will
grant options to the Executive to acquire shares of its common stock in
accordance with an Incentive Compensation Plan to be adopted by the Board. Such
Plan will include all provisions typically found in an incentive plan for senior
executives of a public company including SEC registration at the expense of
Newco.

(i) Number of Shares. The number of shares of the common stock of Newco
which may be acquired by the Executive upon exercise of the options shall be
equal to 10% times the total number of shares of common stock of Newco on the
date of the Spin Off determined on a fully diluted basis, including private
equity infusions.

(ii) Exercise Price. The exercise price for one-half of the shares subject
to option shall be equal to (x) $640 million plus the amount of any equity
infusion described in paragraph (i) above less the consolidated debt of Newco
(as set forth in the third WHEREAS clause) as of the date of the Spin Off
divided by (y) the number of issued and outstanding shares of stock of Newco as
of the date of the Spin Off, including any shares issued as a result of the
equity infusion. For example, if the consolidated debt is $395 million and 100
million shares are outstanding, the option price will be $2.45 per share. The
exercise price

-7-
<PAGE>

for the other half of the shares subject to option shall be the exercise price
determined pursuant to the preceding sentence times 5.50 divided by 2.45.

(iii) Vesting. Vesting occurs if Executive is employed by the Employer on
the relevant date. No option may be exercised until vested in accordance with
the following schedule or as otherwise provided in this Agreement:

<TABLE>
<CAPTION>
Portion of ... Which Vest
Options on:
---------- ---------------------
<S> <C>
1/16 May 31, 2000

1/16 August 31, 2000

1/16 November 30, 2000

1/16 February 28, 2001

1/48 at the end of each month
beginning March 31, 2001
</TABLE>

It is recognized that some options may be fully vested when granted if the Spin
Off does not occur before May 31, 2000. Notwithstanding the Terms of the
Incentive Compensation Plan the options will fully vest immediately and become
immediately exercisable upon a Change of Control, which means:

(A) individuals who, on the date of the Spin Off, are members of the
Board (the "Incumbent Directors") cease for any reason following the date
of the Spin Off, to constitute at least a majority of the Board; provided,
that any new

-8-
<PAGE>

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 Newco approve a merger, consolidation,
statutory share exchange or any manner of corporate transaction in which
Newco is not the surviving corporation or entity or more than 50% of the
value of Newco is affected by a merger or acquisition; provided, however,
that such approval shall not be a Change in Control if immediately
following such transaction, Executive is the highest ranking officer of the
surviving entity; or

(C) the stockholders of Newco approve a plan of complete liquidation
or dissolution or a sale of all or substantially all of the assets.

(iv) Expiration. Options shall expire at the earliest of:

(A) The 10th anniversary of the Spin Off; or

(B) The 3rd anniversary of termination of employment for any reason
except Cause (as defined below); or

(D) Under conditions specified in Section 6(d)

(v) Exercise. The exercise 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 Executive valued at fair

-9-
<PAGE>

market value as of the date of exercise (subject to such guidelines as the
Compensation Committee of the Board 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 Compensation Committee deems appropriate.

In the event of a Change of Control, the Executive may elect to receive in
cancellation of his outstanding and unexercised stock options, a cash payment in
an amount equal to the difference between the exercise 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 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 reasonably determined by the Compensation Committee at
such time.

(vi) Adjustments 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,

-10-
<PAGE>

combination or exchange of shares or other corporate change, or any
distributions (including stock or stock rights distributions) to common
shareholders other than regular cash dividends, the Compensation Committee shall
make a substitution or appropriate adjustment which preserves the aggregate
option value and ratio of exercise price to fair market value of the property
subject to option.

(f) Benefits and Perquisites. During the term of his employment, the
Executive will be entitled to benefits and perquisites as set forth on Schedule
4(f).

5. Termination

The Executive's employment shall terminate upon his death. The Employer may
terminate the Executive's employment for Disability or Cause, or without Cause,
and the Executive may terminate such employment at any time for Good Reason (all
as defined below). Any termination of such employment shall be subject to the
following conditions:

(a) Regardless of the reason for such termination, the Employer will pay
the Executive his base salary through the date of termination and any amounts
owed to the Executive pursuant to the terms and conditions of the benefit plans
of the Employer at the time such payments are due.

(b) If such employment is terminated as a result of the Executive's
Disability or death, the Employer will

-11-
<PAGE>

pay (i) one year's worth of base compensation in a lump sum plus (ii) following
the determination of such award, the prorated portion of any annual incentive
bonus the Executive would have received for the year of such termination. These
payments will be made to the Executive or his legal representatives or to
Executive's estate or as may be directed by the legal representatives of such
estate, as the case may be.

(c) If such employment is terminated by the Employer for Cause or prior to
the end of the Initial Term by the Executive voluntarily for other than Good
Reason, the Employer will have no additional obligations to the Executive under
this Agreement.

(d) If the Spin Off does not occur before December 31, 2000 and either the
Executive terminates his employment after that date but before February 28, 2001
(the "Window Period"), or the Employer terminates the Executive's employment
during the Window Period, assuming such termination is not for Cause, the
Employer shall pay the Executive $750,000 in satisfaction of all obligations
under this agreement.

(e) If the Employer terminates the Executive's employment after the Window
Period other than for Disability or Cause or the Executive terminates such
employment for Good Reason, then during the period commencing on the

-12-
<PAGE>

Executive's termination of employment and ending on the date 24 months later (or
February 28, 2005, if earlier) the Employer will (i) pay the Executive his base
salary at the level in effect as of the date of termination (at the time such
payments would normally be made), (ii) pay the Executive 2 times his most recent
performance bonus, spread in monthly payments and (iii) fully vest all options.

(f) For purposes of this Agreement, the following terms shall have the
meanings specified below:

(i) "Disability" will mean the Executive's absence from his full-time
duties hereunder by reason of physical or mental illness for a period of
six consecutive months.

(ii) Termination for "Cause" will mean termination of the Executive's
employment by the Employer following the Executive's:

(A) gross misconduct that is materially injurious to the Employer
that, if correctable, is not corrected as soon as practicable (but in
no event not more than 30 days), following a written demand by the
Employer that specifically identifies the manner in which the Employer
believes the Executive has engaged in such misconduct;

-13-
<PAGE>

(B) conviction of, or plea of nolo contendere to, a felony or any
crime involving financial impropriety by or before any criminal
tribunal;

(C) willful and continuing failure to substantially perform his
reasonable duties (other than as a result of physical or mental
illness) that is not corrected within 30 days following a written
demand by the Employer that specifically identifies the manner in
which the Employer believes the Executive has not substantially
performed his duties.

Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the Board at a
meeting of the Board called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive, together with
the Executive's counsel, to be heard before the Board) finding that in the
good faith opinion of the Board, the Executive was guilty of the conduct
set forth in clause (i), (ii) or (iii) of this section and specifying the
particulars thereof.

(iii) Termination for "Good Reason" shall mean termination by the
Executive following a material

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<PAGE>

breach of this Agreement by the Employer or a diminution of Executive's
responsibilities or status that is not corrected within 30 days of the
Executive's notifying the Employer in writing of such breach or diminution.

6. Confidentiality; Non-Competition

(a) In consideration for any severance that may be due to the Executive
after termination of employment (but regardless of whether and for how long any
severance is in fact due) and for allowing the Executive's stock options to be
exercised for a period of two years (or if as a result of any securities law,
the time required to exercise options and sell the stock acquired pursuant to
such exercise is longer than two years, then such longer period, but in no event
more than 3 years) after termination of employment (except for Cause), and in
return for other valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, for a period of two years commencing upon the termination
of his employment hereunder (regardless of the reason for the termination), the
Executive shall not, without written consent of the Employer, engage, as a
stockholder, director, officer, consultant or otherwise, in any enterprise which
competes with the Employer or any business of its subsidiaries, or directly or
indirectly employ, contract for or solicit the services in any capacity

-15-
<PAGE>

of any executive or management person who is, or within the prior three months
has been, employed by the Employer or any such business. The Executive will not
be deemed to be engaged in a competing enterprise if (A) less than 10% of the
gross receipts of such enterprise are derived from businesses that compete with
the Employer or businesses of its affiliates that were under the Employer's
management control, and (B) the Executive's engagement does not involve such
competing businesses. This paragraph shall not bar Executive from owning up to
5% of the outstanding securities of any publicly-held company.

(b) The Executive shall keep secret and confidential and not use (except in
connection with the business of the Employer and its affiliates or pursuant to
applicable law or court order) any confidential information with respect to the
business or affairs of the Employer or its subsidiaries. This obligation will be
in effect while the Executive is employed by the Employer and for 36 months
after he ceases to be so employed, but it will not apply at any time to
information that is or becomes generally known to the public (other than through
a breach of this Section 6(b)).

(c) The Executive acknowledges that the remedy at law for breach of his
covenants under this Section 6 will be inadequate and, accordingly, in the event
of any breach or

-16-
<PAGE>

threatened breach by the Executive of the provisions of this Section 6 the
Employer will be entitled (without the necessity of showing economic loss or
other actual damage), in addition to all other remedies to an injunction
restraining any such breach, without any bond or other security being required.
The Executive and the Employer recognize and agree that the duration and scope
for which the covenants not to compete and solicit set forth in this Section 6
are to be effective are reasonable. In the event that any court determines that
the time period or the area, or both of them, are unreasonable and that such
covenants are to that extent unenforceable, the parties agree that the covenants
shall remain in full force and effect for the greatest time period and in the
greatest area that would not render them unenforceable.

(d) In the event of a breach by the Executive of any covenant under this
Section 6, the Executive agrees that, notwithstanding anything to the contrary
in this Agreement or any award of or letter agreement for any options to acquire
common stock of the Employer, all remaining obligations of the Employer
hereunder and under such options shall thereupon automatically be extinguished
and all such options shall thereupon automatically expire. No breach shall be
deemed to occur under this Section 6(d) until Employer delivers a written
allegation to Executive

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<PAGE>

setting forth in reasonable detail the facts or events constituting the breach;
and further, no breach shall be deemed to have occurred if Executive cures said
breach within 30 days of such notice, unless such breach was of such magnitude
as to be incapable of being cured.

7. Inventions

All copyrights, trademarks, proprietary processes and analytical models or
formulas and other intangible or intellectual property rights that may be
invented, conceived, developed or enhanced by the Executive during the term of
his employment under this Agreement that relate to the business or operations of
the Employer or any affiliate thereof of which the Executive has served as an
officer, or that result from any work performed by the Executive for the
Employer or any such affiliate, will be the sole property of the Employer or
such affiliate, as the case may be, and the Executive hereby waives any right or
interest that he may otherwise have in respect thereof. Upon the reasonable
request of the Employer, the Executive will execute and deliver any instrument
or document reasonably necessary or appropriate to give effect to this Section 7
and do all other acts and things reasonably necessary to enable the Employer or
such affiliate, as the case may be, to exploit the same or to obtain patents or
similar protection with respect thereto.

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<PAGE>

8. Nontransferability; Forfeiture

No amount payable hereunder shall be assignable or transferable, and no
right or interest of the Executive shall be subject to any lien, obligation or
liability of the Executive, except by will or the laws of descent and
distribution. Notwithstanding the immediately preceding sentence, the
Compensation Committee may, subject to the terms and conditions it may specify,
permit Executive to transfer any stock options (other than incentive stock
options) granted to him pursuant to the Incentive Compensation Plan to one or
more of his immediate family members or to trusts, limited liability companies
or family partnerships (collectively "family entities") established in whole or
in part for the benefit of the Executive and/or one or more of such immediately
family members. During the lifetime of the Executive, stock options shall be
exercisable only by the Executive or by the immediate family member or family
entity 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
Executive's spouse and issue (including adopted and stepchildren) and (b)
"immediate family members and family entity established in whole or in part for
the benefit of the Executive and/or one more of such immediate family members"
shall be further limited, if necessary, so that

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<PAGE>

neither the transfer of a stock option to such immediate family member or family
entity, nor the ability of Executive to make such transfer, shall have adverse
consequences to the Employer or the Executive by reason of Section 162(m) of the
Code.

9. No Obligation to Mitigate Damages; Other Rights

The Executive shall not be required to mitigate damages or any amount
payable under this Agreement by seeking other employment or otherwise, nor shall
any such amount be reduced by any compensation received by the Executive from
another employer after the date of resignation or termination, or otherwise. The
provisions of this Agreement, and any payment provided for hereunder, shall not,
to the extent permitted by law, reduce any amounts otherwise payable, or in any
way diminish the Executive's rights under any other employee benefit plan,
contract or arrangement.

10. Successors; Binding Agreement

(a) The Employer will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Employer, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this
Agreement in the same

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<PAGE>

manner and to the same extent that the Employer would be required to perform it
if no such succession had taken place.

(b) This Agreement and all rights of the Executive hereunder will inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die following his termination of
employment while any amounts would still be payable to him pursuant to the
provisions of Section 5 or Section 8 if he had continued to live, all such
amounts will be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there be no such
designee, to the Executive's estate.

11. Notices

For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:

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<PAGE>

If to the Executive:

Mr. Fredric D. Rosen
603 Doheny Rd.
Beverly Hills CA 90210

Fax 310 550 0760

with a copy to:

Stephen J. Saft
Kleban & Samor, P.C.
2425 Post Road
Southport, CT 06490

If to the Employer:

Ziff-Davis Inc.
28 East 28th Street
New York, NY 10016

Attention: General Counsel

with a copy to:

SOFTBANK Holdings Inc.
10 Langley Road, Suite 403
Newton Center, MA 02159

Attention: Mr. Ronald D. Fisher
Vice Chairman

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

12. Modification; Waiver

No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing signed by the
Executive and the Employer and a duly authorized member of the Board.

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<PAGE>

No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party will be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement.

13. Certain Taxes

In the event of termination of the Executive's employment as a result of a
Change in Control, the Company shall pay to the Executive an amount which, on an
after-tax basis (including federal income and excise taxes, and state and local
income taxes) equals the excise tax, if any, imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, upon the executive by reason of
amounts payable under this Agreement (including this Section 8). For purposes of
this Section 13, the Executive shall be deemed to pay federal, state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the gross up payment is to be made, taking into account the maximum
reduction in federal income taxes which could be obtained from deduction of
state and local income taxes.

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<PAGE>

14. Entire Agreement

This Agreement and the related documents referred to herein set forth the
entire agreement of the parties in respect of the subject matter contained
herein, and upon the effectiveness of this Agreement shall supersede all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto.

15. Validity

The invalidity or unenforceability of any provision or provisions of this
Agreement will not affect the validity or enforceability of any other provision
of this Agreement, which will remain in full force and effect.

16. Governing Law

This Agreement will be governed by, and construed in accordance with, the
laws of the State of New York. Each of the parties consents to personal
jurisdiction in any action brought in any court in New York City having subject
matter jurisdiction over matters arising under this Agreement.

17. Counterparts

This Agreement may be signed in two counterparts, each of which shall be
deemed an original agreement, but

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<PAGE>

both of which together shall constitute one and the same instrument.

18. Withholding taxes

All payments made pursuant to this Agreement are subject to withholding of
applicable income employment taxes. The Employer shall have the right to require
the Executive to pay to the Employer such amount required to be withheld prior
to the issuance or delivery of any shares of common stock deliverable upon
exercise of a stock option. The Compensation Committee may, in its discretion,
permit the Executive to elect to satisfy such withholding obligation by having
the Employer retain the number of shares of common stock whose fair market value
equals the amount required to be withheld.

19. Expenses

Subject to documentation the Employer shall reimburse Executive for his
reasonable out-of-pocket expenses incurred in (i) entering into this Agreement
and (ii) as a result of Executive's earlier efforts with respect to the failed
"Pritzker deal" not to exceed $125,000.

20. Indemnification

The Employer shall indemnify Executive if he is made, or threatened to be
made, a party to an action or proceeding, to the full extent permitted by
applicable law, including an action by or in the right of the Employer to

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<PAGE>

procure a judgment in its favor, by reason of the fact that Executive is or was
an officer, director or employee of the Employer, against all costs and expenses
resulting from or related to such action or proceeding, or any appeal thereof,
if Executive acted in good faith for a purpose which he reasonably believed to
be in the best interests of the Employer. The termination of any such action or
proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create the presumption that
Executive did not act in good faith for a purpose which he reasonably believed
to be in the best interests of the Employer. As used in this Section 20, (i)
"costs and expenses" means any and all costs, expenses and liabilities incurred
by Executive, including but not limited to (A) attorney fees, (B) amounts paid
in settlement of, or in the satisfaction of any order or judgement in, any
action or proceeding and (C) fines, penalties and assessments asserted or
adjudged in any action or proceeding, and (ii) "action or proceeding" means any
and all suits, claims, actions, investigations or proceedings whether civil,
criminal or administrative, heretofore or hereafter instituted or asserted. For
purposes of this Section 20, "Employer" means Newco or Ziff-Davis, as
applicable.

-26-
<PAGE>

21. Possible Sale of Equity Securities

Ziff-Davis acknowledges that, depending on the terms, it may be in the best
interest of Ziff-Davis, ZD Events and their respective stockholders for ZD
Events to sell common stock or some other equity security of ZD Events to
Executive and certain other persons at or around the time of the Spin Off.
Accordingly, Ziff-Davis and the Executive agree to discuss in good faith the
terms on which such a sale might be accomplished and, if the parties mutually
agree, to use reasonable efforts to consummate such a sale on such terms,
including a price intended to reflect fair value of the stock at the time of
Spin Off.

22. Ziff-Davis Guarantee

Ziff-Davis guarantees the performance of this Agreement by Newco until the
Spin Off is effectuated.

IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year first above written.

ZIFF-DAVIS INC.

/s/ FREDRIC D. ROSEN By: /s/ ERIC HIPPEAU
- ------------------------- ----------------------
Fredric D. Rosen

-27-
<PAGE>

SCHEDULE 1

TO EMPLOYMENT AGREEMENT
BETWEEN
ZIFF-DAVIS, INC.
And
FREDRIC ROSEN

CURRENT BOARD MEMBERSHIPS

Casden Properties, Inc.
Engage Technology, Inc.
Dreamlife, Inc.
Charity and Educational Boards - various
<PAGE>

Schedule 4(f)

Benefits and Perquisites

(a) Expenses. Executive shall be entitled to receive prompt reimbursement
for all documented business expenses incurred by him in the performance of his
duties hereunder consistent with reimbursements accorded to CEO's and other
senior executives provided that Executive properly accounts therefor in
accordance with the Company's reimbursement policy.

(b) Fringe Benefits. Executive shall be entitled to participate in and
receive benefits under all of the company's benefit plans or programs generally
available to senior management of the Company, including, but not limited to any
retirement plan, medical, dental or disability insurance plans and all other
similar plans or programs. Nothing paid to Executive under any benefit plan
presently in effect or made available in the future shall be deemed to be in
lieu of compensation payable to Executive under this Agreement.

(c) Life Insurance. So long as Executive is insurable, the Company agrees
to maintain in effect during the term hereof insurance on Executive's life
payable to his estate or his named beneficiary or beneficiaries in the amount of
$5,000,000. The ownership of such insurance policies may, at the sole discretion
of the Executive, be transferred to a Trust for the benefit of his spouse or
family.

(d) Vacations. During the term hereof, Executive shall be entitled to sick
leave and paid holidays consistent with the Company's sick leave and holiday
policy for senior management and up to six (6) weeks paid vacation during each
year. Any vacation time that is not taken in a given year shall be carried
forward to the following year or years, as the case may be but in no event more
than two (2) weeks, on a cumulative basis. The Executive shall not receive
additional compensation for vacation time not taken.

(e) Tax and Financial Advisor. The Company shall pay the reasonable
expenses of Executive's investment advisor and tax advisor, and all related
reasonable expenses pertaining to financial planning and tax return preparation,
up to a total expense of $25,000 per year.

<PAGE>

Exhibit 21.1

List of Subsidiaries of Ziff-Davis Inc.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Subsidiary Jurisdiction Doing Business As
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ZD Inc. Delaware Also doing business as ZDNet
- -----------------------------------------------------------------------------------------------
ZD Events Inc. Delaware
- -----------------------------------------------------------------------------------------------
INET Centric Finance Inc. Delaware
- -----------------------------------------------------------------------------------------------
ZD Holdings (UK) Ltd United Kingdom
- -----------------------------------------------------------------------------------------------
Ziff-Davis Asia Pacific Pte Ltd Singapore
- -----------------------------------------------------------------------------------------------
ZD Events Pty Ltd Australia
- -----------------------------------------------------------------------------------------------
ZD Events S.A. Mexico
- -----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Exhibit 23.1

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 333-57257) of Ziff Davis Inc. of our reports
relating to the consolidated financial statements of Ziff Davis Inc. dated March
28, 2000, except as to notes 1, 21, and 22 which are as of April 13, 2000, and
our report on the combined financial statements of ZDNet dated March 28, 2000,
except as to note 16, which is as of April 13, 2000, appearing on pages F14 and
F62, respectively, of this Form 10-K.

/s/ PricewaterhouseCoopers LLP
New York, NY
April 13, 2000

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 10,207 32,566
<SECURITIES> 0 0
<RECEIVABLES> 47,435 312,706
<ALLOWANCES> (13,702) (85,381)
<INVENTORY> 468 15,551
<CURRENT-ASSETS> 58,151 386,231
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,987,845 3,433,803
<CURRENT-LIABILITIES> 110,929 350,698
<BONDS> 1,164,775 1,539,322
0 0
0 0
<COMMON> 1,172 1,000
<OTHER-SE> 707,093 1,351,598
<TOTAL-LIABILITY-AND-EQUITY> 1,987,845 3,433,803
<SALES> 702,458 704,058
<TOTAL-REVENUES> 702,458 704,058
<CGS> (186,748) (210,034)
<TOTAL-COSTS> (186,748) (210,034)
<OTHER-EXPENSES> (529,893) (521,934)
<LOSS-PROVISION> (1,048,185) 0
<INTEREST-EXPENSE> (86,948) (103,651)
<INCOME-PRETAX> (1,145,958) (129,268)
<INCOME-TAX> (131,111) (35,620)
<INCOME-CONTINUING> (1,014,847) (93,648)
<DISCONTINUED> 18,151 15,839
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (996,696) (77,809)
<EPS-BASIC> (9.717) (0.78)
<EPS-DILUTED> 0 0

</TABLE>

<PAGE>

EXHIBIT 99.1

[LOGO OF ZIFF-DAVIS INC.]

ZIFF-DAVIS INC.
28 EAST 28th STREET
NEW YORK, NEW YORK 10016

February 7, 2000

Dear Stockholder:

As you probably know by now, the board of directors of Ziff-Davis has
unanimously approved a major restructuring. In this restructuring we plan to:

. sell substantially all of our non-Internet assets for cash;

. use a portion of the proceeds from these sales to repay our debt and to
cover certain other liabilities;

. dividend out all or most of the remaining proceeds to the holders of our
ZD stock (NYSE-ZD); we currently estimate this special dividend will
amount to about $5.00 per share;

. transfer the remaining assets of our ZD division, including Computer
Shopper and our interest in Red Herring, to our ZDNet division in return
for an increase in ZD's retained interest in ZDNet; and

. eliminate our existing tracking stock structure by merging with a
subsidiary so that all of our stockholders will hold a single class of
ordinary common stock.

Immediately prior to the merger that will eliminate our tracking stock
structure, ZD's only remaining asset will be its retained interest in ZDNet. As
a result, each share of ZD stock will be equivalent to about 0.5 to 0.6 shares
of ZDNet stock (NYSE - ZDZ). We will maintain this equivalency in the merger by
converting each share of ZDNet stock into about 1.7 to 1.9 shares of common
stock while each share of ZD stock will remain outstanding as one share. We
will determine the exact conversion ratio in the manner described in the
attached proxy statement.

After the restructuring, we will be focused almost exclusively on the
Internet and we will change our name to ZDNet Inc. to reflect this new focus.

We have scheduled a special meeting of our stockholders for February 29,
2000 to vote on the restructuring and certain other proposals described in this
proxy statement.

The board of directors has carefully considered and unanimously approved the
restructuring and other proposals and determined that they are in the best
interests of our company and all of our stockholders. The board recommends that
you vote for these proposals by completing, signing and mailing the enclosed
proxy card to us.

SOFTBANK America Inc., which owns ZD stock entitled to cast a majority of
the total votes at the special meeting, has agreed to vote for these proposals.
Thus, we expect these proposals to pass regardless of how other stockholders
vote.

The proxy statement describes the proposals in detail, and we urge you to
read it carefully. We are very excited about our Internet future and thank you
for your continued support and interest.

Sincerely yours,

Eric Hippeau
Chairman

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

This proxy statement is dated February 7, 2000 and is first being mailed to
stockholders shortly after that date.
<PAGE>

ZIFF-DAVIS INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 29, 2000

TO THE STOCKHOLDERS OF
ZIFF-DAVIS INC.:

We will hold a special meeting of stockholders of Ziff-Davis Inc. at 9:00
a.m., Eastern Standard Time, on February 29, 2000 at 28 East 28th Street, New
York, New York for the following purposes:

1. To consider and vote upon the adoption of the following resolutions:

RESOLVED, that Ziff-Davis Inc. is hereby authorized to complete the
restructuring described under "Proposal 1--The Restructuring of Ziff-
Davis--General" in its proxy statement dated February 7, 2000 to which this
resolution is attached and, in furtherance thereof, is hereby specifically
authorized to (a) sell some or all of the following businesses and assets
owned or previously owned by Ziff-Davis Inc.: ZD Market Intelligence, ZD
Publishing, ZD Events, ZD Education, Smart Planet, an equity interest in
ZDTV and an equity interest in Red Herring Communications Inc., (b) pay a
special dividend to the holders of its ZD common stock, (c) transfer
certain assets from ZD to ZDNet and (d) complete the merger contemplated by
the merger agreement referred to in the next resolution; and

FURTHER RESOLVED, that the merger agreement attached as Annex II to such
proxy statement is hereby adopted.

2. To act upon proposals to amend each of the Amended 1998 Incentive
Compensation Plan and the Amended 1998 Non-Employee Directors' Stock Option
Plan to increase the number of shares available for issuance thereunder.

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 carefully before voting.

Only stockholders of record at the close of business on February 7, 2000
will be entitled to vote at the meeting.

To vote, you may either attend the meeting in person or complete, date, sign
and return the enclosed proxy. SOFTBANK America Inc., which owns ZD stock
entitled to cast a majority of the total votes entitled to be cast at the
special meeting, 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
February 7, 2000
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
RESTRUCTURING....................... 1
SUMMARY.............................. 2
RISK FACTORS......................... 17
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS.......... 26
THE SPECIAL MEETING.................. 27
OUR CURRENT COMPANY.................. 29
PROPOSAL 1--THE RESTRUCTURING
OF ZIFF-DAVIS....................... 30
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS OF ZIFF-
DAVIS INC. ......................... 55
PROPOSALS 2 AND 3--AMENDMENTS
TO BENEFIT PLANS.................... 61
EXECUTIVE COMPENSATION............... 70
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.... 75
STOCKHOLDER PROPOSALS................ 77
WHERE YOU CAN FIND MORE INFORMATION.. 77
</TABLE>
<TABLE>
<S> <C>
ANNEX I--PROPOSAL 1--RESOLUTION
AUTHORIZING THE RESTRUCTURING OF
ZIFF-DAVIS INC..................... I-1
ANNEX II--AGREEMENT AND PLAN OF
MERGER, INCLUDING AS AN ATTACHMENT
THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF THE
COMPANY ........................... II-1
ANNEX III--ZIFF-DAVIS INC. (Selected
Historical Consolidated Financial
and Other Data, Management's
Discussion and Analysis of
Financial Condition and Results of
Operations, Description of Business
and Consolidated Financial
Statements)........................ III-1
ANNEX IV--ZD (Selected Historical
Combined Financial and Other Data,
Management's Discussion and
Analysis of Financial Condition and
Results of Operations, Description
of Business and Combined Financial
Statements)........................ IV-1
ANNEX V--ZDNET (Selected Historical
Combined Financial and Other Data,
Management's Discussion and
Analysis of Financial Condition and
Results of Operations, Description
of Business and Combined Financial
Statements)........................ V-1
ANNEX VI--OPINION OF MORGAN STANLEY
DEAN WITTER........................ VI-1
</TABLE>

<PAGE>

QUESTIONS AND ANSWERS ABOUT THE RESTRUCTURING

Q: Why am I receiving this proxy statement?

A: You are receiving this proxy statement because we are seeking your proxy to
vote for the restructuring and the other proposals described in this proxy
statement at a special meeting of stockholders.

Q: What does the board of directors recommend?

A: The board of directors has carefully considered and unanimously approved the
restructuring and the other proposals and determined that they are in the
best interests of our company and all of our stockholders. The board
recommends that you vote for these proposals.

Q: What do I need to do now?

A: After you carefully read this document, please complete, sign and mail the
enclosed proxy card to us. Your shares will be voted (or not voted) as you
indicate on the proxy card. If you hold your shares in "street name" through
a broker or other institution, only that broker or institution can vote your
shares and it will not do so without instructions from you.

Q: What Do I Get in the Restructuring? When? What Happens To My Shares? When?

A: If you own ZD stock, you will receive a special dividend that we currently
estimate will amount to about $5.00 per share. We expect to pay this
dividend in the second quarter of 2000.

The last step in the restructuring is a merger that will eliminate our
existing tracking stock structure and result in a single class of ordinary
common stock for all of our stockholders. In the merger, we will convert
each share of ZDNet stock into about 1.7 to 1.9 shares of common stock
while each share of ZD stock will remain outstanding as one share. We will
determine the exact conversion ratio in the manner described later in this
proxy statement. We expect to complete the merger in the second quarter of
2000.

Q: Should I Send in My Stock Certificates?

A: No. After we complete the merger, we will send you instructions on how to
exchange your stock certificates.

Q: How will Softbank vote? Is Passage Assured?

A: SOFTBANK America Inc., which owns ZD stock entitled to cast a majority of
the total votes at the special meeting, has agreed to vote for these
proposals. Thus, we expect these proposals to pass regardless of how other
stockholders vote.

Q: What Do I Do If I Have Additional Questions?

A: Please call Morrow & Co., Inc. at (212) 754-8000 if you have any questions
about these matters.

1
<PAGE>

SUMMARY
This summary highlights key aspects of our proposals. It does not contain
all of the information that is important to you. You should read the entire
proxy statement for a more complete description.

Our Current Company

We are a leading media and marketing company focused on computing and
Internet-related technologies. Through our ZDNet division, which we call
"ZDNet," we provide online content and other Internet related services. Through
our ZD division, which we call "ZD," we are or have been engaged in the print
publishing, trade shows and conferences, education and television businesses.
We are in the process of selling these ZD businesses as part of the
restructuring described below.

We have two series of common stock: ZDNet Common Stock, which we call "ZDNet
stock," and ZD Common Stock, which we call "ZD stock." Each of these series is
what is commonly referred to as "tracking stock." We intend the ZDNet stock to
track the performance of ZDNet, and we intend the ZD stock to track the
performance of ZD. In addition to the businesses referred to above, ZD owns a
retained interest in ZDNet which is currently the equivalent of 60 million
shares of ZDNet stock.

Proposal 1--The Restructuring

General

The restructuring is a series of transactions that will transform us into a
company focused almost exclusively on Internet related businesses and replace
our existing tracking stock structure with a single class of ordinary common
stock. In the restructuring, we plan to:

. sell substantially all of our non-Internet assets for cash; these assets
include substantially all of ZD's assets other than its retained
interest in ZDNet;

. use a portion of the proceeds from these sales to repay ZD's debt and to
cover certain other ZD liabilities;

. dividend out all or most of the remaining proceeds to the holders of ZD
stock; we currently estimate this special dividend will amount to about
$5.00 per share;

. transfer the remaining ZD assets, including Computer Shopper and our
interest in Red Herring, to ZDNet in return for an increase in ZD's
retained interest in ZDNet; and

. eliminate our existing tracking stock structure by merging with a newly
formed subsidiary so that all of our stockholders will hold a single
class of ordinary common stock.

Sales of Non-Internet Assets for Cash

In the past few months, we sold our ZD Market Intelligence business for $106
million and our equity interest in ZDTV for $205 million. In addition, we
entered into agreements to sell our ZD Publishing business (which excludes
Computer Shopper) for $780 million and our ZD Education business for $172
million, and we expect to complete these sales in the first quarter of 2000.
The ZD Publishing and ZD Education sales are subject to the buyers receiving
debt financing, the receipt of various governmental approvals and third party
consents and various other conditions. The sales prices for ZD Publishing and
ZD Education are subject to adjustment in the manner described later in this
proxy statement (although we do not expect these adjustments to be material).
For more information about these sales, see "Proposal 1 -- The Restructuring of
Ziff-Davis--The Sale Agreements."

We are currently in discussions regarding a possible sale of ZD Events, and
we expect to either complete this sale or recapitalize ZD Events and spin it
off to holders of ZD stock in the second quarter of 2000. We also expect to
either sell our Smart Planet online consumer education business or transfer it
from ZD to ZDNet in the same time frame.

2
<PAGE>

Repayment of ZD Debt and Provision for Other ZD Liabilities

The principal amount of our debt is currently about $1.0 billion and all of
it is attributed to ZD. We will use a portion of the asset sale or
recapitalization proceeds to repay this debt. We will also use a portion to
cover the amounts that ZD owes ZDNet and certain other actual or contingent ZD
liabilities, net of amounts that ZDNet owes ZD. We will determine the amount
that we will leave behind to cover these other actual or contingent ZD
liabilities based on the advice of management and our financial and legal
advisors; since contingent liabilities are inherently uncertain, it is possible
that the amount we leave behind will turn out to be significantly more or less
than the amount actually needed to cover these liabilities.

Dividend to ZD Stockholders

After deducting from the asset sale or recapitalization proceeds the amounts
referred to in the preceding paragraph, we will dividend out all or most of the
remaining proceeds to the holders of ZD stock. The exact amount of this special
dividend will depend on the actual proceeds and the actual amounts we determine
to set aside to repay ZD debt, to cover other ZD liabilities and to fund future
ZDNet cash needs. If we determine to recapitalize ZD Events and spin it off to
ZD stockholders rather than to sell it, the dividend would include the stock of
ZD Events.

We currently estimate that the special dividend will amount to about $5.00
per share. We expect to pay this dividend in the second quarter of 2000, but
the exact timing will depend on when we are able to complete the disposition of
ZD Education, ZD Publishing and ZD Events.

Transfer of Assets from ZD to ZDNet

We will transfer the following assets from ZD to ZDNet in return for an
increase in ZD's retained interest in ZDNet:

. our Computer Shopper business,

. our interest in Red Herring Communications Inc. and

. any other ZD assets that we have not sold or set aside to cover ZD
liabilities.

Our certificate of incorporation provides that these transfers will increase
the number of shares of ZDNet stock issuable with respect to ZD's retained
interest in ZDNet by an amount equal to the fair value of the transferred
assets divided by the market value of the ZDNet stock on the transfer date. We
currently estimate that the fair value of the transferred assets will be about
$75 million, but the board will make a final determination at the time of
transfer.

The Merger

Immediately prior to the merger that will eliminate our tracking stock
structure, ZD's only remaining asset will be its retained interest in ZDNet. As
a result, at the time of the merger, each share of ZD stock will be equivalent
to a number of shares of ZDNet stock equal to:

. the number of shares of ZDNet stock issuable with respect to ZD's
retained interest in ZDNet, divided by

. the number of shares of ZD stock outstanding immediately prior to the
merger.

We call this number the "ZD/ZDNet equivalency ratio." After the merger, each
share of ZD stock will remain outstanding as one share of common stock. In
order to maintain the relationship between the ZD stock and ZDNet stock, in the
merger we will convert each share of ZDNet stock into a number of shares of our
common stock equal to the reciprocal of the equivalency ratio. Thus, we will
convert each share of ZDNet stock into a number of shares of common stock equal
to:

. the number of shares of ZD stock outstanding immediately prior to the
merger, divided by

. the number of shares of ZDNet stock issuable with respect to ZD's
retained interest in ZDNet.

We call this number the "exchange ratio," and we will round it to the nearest
0.00001 before we apply it in the merger.

3
<PAGE>

A total of 60 million shares of ZDNet stock are currently issuable with
respect to ZD's retained interest in ZDNet, but this number will increase as a
result of the transfer of the transferred assets in the manner described in the
preceding section. Because this increase will depend on the final valuation for
the transferred assets and the market value of the ZDNet stock on the date of
transfer, we cannot now tell you the exact number we will use to determine the
ZD/ZDNet equivalency ratio and the exchange ratio.

We provide the following as an illustrative example of these calculations.
If we assume that:

. the transferred assets in excess of those set aside to cover ZD
liabilities will be valued at about $75 million,

. the market price of ZDNet stock on the transfer date will be $27.8125
per share (which is equal to the closing price of the ZDNet stock on
January 31, 2000), and

. options to purchase about 8 million shares of ZD stock will be exercised
before the merger, resulting in there being about 111 million shares of
ZD stock outstanding at the time of the merger,

then the ZD/ZDNet equivalency ratio would be about 0.56 (that is, each ZD share
would be equivalent to about 0.56 ZDNet shares) and the exchange ratio would be
about 1.77 (that is, in the merger we would convert each ZDNet share into about
1.77 shares of common stock). The actual ZD/ZDNet equivalency ratio and
exchange ratio will be determined as described earlier in this section; the
final numbers may differ significantly from those set forth in this
illustrative example and may even fall outside the ranges set forth in the
stockholder's letter that appears on the front cover of this proxy statement.

After the restructuring, we will be focused almost exclusively on the
Internet, and as part of the merger we will change our name to ZDNet Inc. to
reflect this new focus.

We currently expect to complete the merger in the second quarter of 2000.

For more information about the merger, see "Proposal 1--The Restructuring of
Ziff-Davis--The Merger Agreement."

No Appraisal Rights

Under the Delaware General Corporation Law, you will not have appraisal
rights as a result of the restructuring.

Treatment of Options

We plan to deal with employee stock options in the manner described under
"Proposal 1--The Restructuring of Ziff-Davis--Treatment of Options."

Reasons for the Restructuring

The board of directors believes that recent market prices for our ZD stock
and ZDNet stock have not fully reflected the underlying value of our businesses
because of the diversity of those businesses, the level of our debt and our
existing tracking stock structure. The board also desires to focus more
narrowly on our Internet businesses because it believes the opportunity for
growth in these businesses is greater than it is in our other businesses. The
restructuring will:

. allow the holders of ZD stock to realize value from our non-Internet
assets,

. allow us to focus on our Internet businesses,

. allow us to pay down all of our debt and

. eliminate our tracking stock structure.

For these reasons, the board of directors believes that the restructuring will
enhance stockholder value and is in the best interests of our company and all
of our stockholders.

For more information about the background and reasons for the restructuring,
including information about a special committee we have formed to address
transactions that might create conflicts or the appearance of conflicts, see
"Proposal 1--The Restructuring of Ziff-Davis--Background of the Restructuring"
and "--Reasons for the Restructuring."

4
<PAGE>

Material Federal Income Tax Consequences of the Restructuring

We expect to have sufficient net operating losses to fully shelter any
federal income tax gain that is realized as a result of the sale of the
businesses as currently contemplated. For this reason, we expect that we will
not be required to pay any material federal income tax as a result of such
sales.

The company will not be required to pay any federal income taxes as a result
of the merger.

This summary does not apply to special classes of stockholders. To determine
whether you are a member of a special class and for more information about tax
consequences of the restructuring, see "Proposal 1--The Restructuring of Ziff-
Davis--Material Federal Income Tax Consequences of the Restructuring."

Accounting

The restructuring will result in an aggregate net loss of about $1.2
billion. The majority of this loss will be reported in the fourth quarter of
1999 with the remainder expected to be recognized in the first quarter of 2000.

This non-recurring loss results in large part from the dramatic shift in
value from our print publishing business (carried on our books at almost $1.9
billion) to our online business (carried on our books at only about $160
million). Since we are selling our print publishing businesses but not our
online business, we are recognizing an accounting loss on the sale but are not
permitted to recognize what we believe is currently a more than offsetting gain
represented by the difference between the current value and the book value of
our online business. For further information about the components of the loss,
see "Proposal 1--The Restructuring of Ziff-Davis--Accounting."

The merger will have no significant accounting consequences for the
consolidated company, except that after the merger the company will again begin
to report per share information on a consolidated basis.

Listing

After the merger, our common stock will continue to be listed on the NYSE,
although we may investigate the possibility of transferring our listing to
NASDAQ at some point in the future.

Proposals 2 and 3--Amendments to Benefit Plans

At the special meeting, we will also ask you to consider and approve
proposals to amend each of the Amended 1998 Incentive Compensation Plan and the
Amended 1998 Non-Employee Directors' Stock Option Plan.

The purpose of each of these proposed amendments is to increase the number
of shares available for issuance. The board of directors believes that it needs
to be able to grant more awards under these plans in order to maintain and
enhance our ability to recruit, retain and motivate top quality employees for
our Internet businesses. The market for top quality employees in the Internet
industry is extremely competitive and stock options and stock-based plans have
become an increasingly important part of the compensation packages for these
employees.

Recommendation of the Board of Directors

The board of directors has carefully considered and unanimously approved the
proposals and determined that they are in the best interests of our company and
all of our stockholders. The board of directors recommends that you vote for
all of the proposals.

5
<PAGE>

The Special Meeting

Time, Place and Matters to Be Voted Upon

We will hold a special meeting at 9:00 a.m., Eastern Standard Time, on
February 29, 2000 at our offices at 28 East 28th Street, New York, New York. At
the special meeting, you will be asked to:

. adopt resolutions authorizing the restructuring;

. approve the proposed amendments to the Amended 1998 Incentive
Compensation Plan and the Amended 1998 Non-Employee Directors' Stock
Option Plan; and

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

SOFTBANK America Inc., which owns ZD stock entitled to cast a majority of
the total votes at the special meeting, has agreed to vote for all of the
proposals. Thus, we expect the proposals to pass regardless of how other
stockholders vote.

Dividend Information

We have never paid dividends on our common stock. Other than the special
dividend described in this proxy statement, we currently intend to continue to
retain all of our earnings to finance our operations and fund future growth for
the foreseeable future.

Market Prices for Our Shares

Prior to the creation and issuance of our ZDNet stock on April 2, 1999, we
had only one series of common stock, which was listed and traded on the NYSE
under the symbol "ZD." On April 2, 1999, we re-designated that series as ZD
stock, and it continued to be listed and traded on the NYSE under the symbol
"ZD." As of February 4, 2000 there were 365 ZD stockholders of record. The
following table sets forth, for the calendar quarters indicated and for
July 14, 1999 (the last trading day that ended before we announced our decision
to explore strategic alternatives), the high and low sales prices per share of
ZD stock as reported on the NYSE Composite Tape.

<TABLE>
<CAPTION>
ZD ZD
Stock Stock
High Low
1998 ------ ------
<S> <C> <C>
Second Quarter (from April 29).................................. $19.00 $12.81
Third Quarter................................................... 16.38 5.38
Fourth Quarter.................................................. 23.94 3.63

<CAPTION>
1999
<S> <C> <C>
First Quarter................................................... $29.00 $15.81
Second Quarter.................................................. 25.31 11.00
Third Quarter................................................... 19.13 13.75
Fourth Quarter.................................................. 19.50 14.31
July 14, 1999................................................... 14.38 14.00

<CAPTION>
2000
<S> <C> <C>
First Quarter (through February 4).............................. $20.00 $14.81
</TABLE>

Our ZDNet stock has been listed and traded on the NYSE since March 31, 1999
under the symbol "ZDZ." As of February 4, 2000 there were 137 ZDNet
stockholders of record. The following table sets forth, for the calendar
quarters indicated and for July 14, 1999 (the last trading day that ended
before we announced our decision to explore strategic alternatives), the high
and low sales prices per share of ZDNet stock as reported on the NYSE Composite
Tape.

<TABLE>
<CAPTION>
ZDNet ZDNet
Stock Stock
High Low
1999 ------- ------
<S> <C> <C>
First Quarter (March 31 only).................................. $ 40.00 $29.00
Second Quarter................................................. 55.50 16.63
Third Quarter.................................................. 26.63 13.38
Fourth Quarter................................................. 25.69 18.00
July 14, 1999.................................................. 23.69 23.00

<CAPTION>
2000
<S> <C> <C>
First Quarter (through February 4)............................. $ 32.88 $19.88
</TABLE>

The following table sets forth the closing sales prices per share of ZD
stock and ZDNet stock on the NYSE on the following dates:

. July 14, 1999, the last trading day that ended before we announced our
decision to explore strategic alternatives,

. July 15, 1999, the first trading day that ended after we announced our
decision to explore strategic alternatives and

. February 4, 2000, the last practicable trading day before the date of
this proxy statement.

6
<PAGE>

The table also presents an estimated equivalent value per share of ZDNet stock
on each of the indicated dates, determined as:

. the price per share of ZD stock on the indicated date minus an estimated
cash dividend of $5.00 per share of ZD stock, times

. an estimated exchange ratio for the merger of 1.77.

<TABLE>
<CAPTION>
ZDNet
Stock
Estimated
ZD ZDNet Equivalent
Stock Stock Value
------ ------ ----------
<S> <C> <C> <C>
July 14, 1999.......................................... $14.19 $23.25 $16.27
July 15, 1999.......................................... 18.50 24.81 23.90
February 4, 2000....................................... 18.50 29.88 23.90
</TABLE>

We cannot predict the market prices for the ZD stock or ZDNet stock before
the merger or for our common stock after the merger. You should obtain current
market quotations.

7
<PAGE>
SUMMARY OF RESTRUCTURING STEPS

The following charts summarize the steps of the restructuring, assuming that:

. There are 111 million ZD shares and 17 million ZDNet shares outstanding,

. The value of the ZD assets transferred to ZDNet is $75 million and

. The ZDNet stock price at the time ZD assets are transferred is $27.8125 (the
closing price on January 31, 2000).

Steps 1 and 2: Sell Various Assets and Pay Down All Debt
-----------------------------------------

After Step 1 and 2:

_______________ ________________
! Holders of ! ! Holders of !
! ZD Stock ! ! ZDNet Stock !
!_______________! !________________!
| |
| 111 million 17 million |
| shares shares |
| |
| _____________________ |
|__________! !__________|
! Ziff-Davis Inc. !
________! !________
| !_____________________! |
| |
| |
________________|_______________ _________________|_______________
| ZD | | |
| | | |
| . Cash | | ZDNet |
| . Computer Shopper and | | |
| other residual ZD assets | | ZDNet online |
| . 60,000,000 share notional | | business |
| retained interest in ZDNet | | |
|________________________________| |_________________________________|

8
<PAGE>

Steps 3 and 4: Pay Spacial Dividend on ZD Stock and Transfer Residual
Assets to ZDNet in Return for Increased Retained Interest
---------------------------------------------------------

After Steps 3 and 4:

Step 5: Eliminate Tracking Stock Structure by Merging with a Shell Subsidiary
---------------------------------------------------------------------

In the Merger:

. Each share of ZD stock remains one share

. Each share of ZDNet stock becomes about 1.77 shares

<PAGE>

ZIFF-DAVIS INC.

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA

The following table presents summary historical consolidated data for Ziff-
Davis Inc. as of and for the years ended December 31, 1996, 1997 and 1998 and
as of and for the nine months ended September 30, 1998 and 1999. This data was
derived from the Consolidated Financial Statements of Ziff-Davis Inc. which,
except for the 1996 balance sheet, are included in an Annex to this proxy
statement. The data as of and for the nine months ended September 30, 1998 and
1999 are unaudited.

An affiliate of Ziff-Davis Inc. acquired a print publishing business 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 unaudited Consolidated
Financial Statements of Ziff-Davis Inc. and on April 6, 1999, Ziff-Davis Inc.
completed a public offering of ZDNet stock described in Note 3 to the unaudited
Consolidated Financial Statements of Ziff-Davis Inc. Results for periods before
the reorganization and public offering are not directly comparable to results
for periods after those events. No historical earnings per share or share data
are presented as Ziff-Davis Inc. does not consider such data meaningful.

In addition, the table presents unaudited summary pro forma consolidated
data as of and for the year ended December 31, 1998 and as of and for the nine
months ended September 30, 1999. The pro forma data gives pro forma effect to
the transactions described in Notes 2 and 3 to the unaudited Consolidated
Financial Statements of Ziff-Davis Inc. and further assumes that the
restructuring had occurred (a) immediately prior to the beginning of each of
the periods presented, in the case of statement of operations and other data,
and (b) as of the balance sheet date, in the case of balance sheet data, all as
described in greater detail in the notes to the Unaudited Pro Forma
Consolidated Financial Statements of Ziff-Davis Inc. appearing later in this
proxy statement.

The pro forma data is not necessarily indicative of the actual financial
position or results of operations of Ziff-Davis Inc. as of or for the year
ended December 31, 1998 or as of or for the nine months ended September 30,
1999 or the financial position or results of operations that Ziff-Davis Inc.
would have experienced if the transactions for which the data gives pro forma
effect had in fact occurred at the times assumed. Also, the pro forma data does
not purport to represent Ziff-Davis Inc.'s future financial position or results
of operations.

This table should be read in conjunction with the Unaudited Pro Forma
Consolidated Financial Statements of Ziff-Davis Inc. appearing later in this
proxy statement as well as the Selected Historical Consolidated Financial and
Other Data, Management's Discussion and Analysis of Financial Condition and
Results of Operations and Consolidated Financial Statements for Ziff-Davis Inc.
included in an Annex to this proxy statement.

10
<PAGE>

<TABLE>
<CAPTION>
Nine month Pro Forma
period ended Pro Forma nine month
Year ended December 31, September 30, year ended period ended
---------------------------------- ---------------------- December 31, September 30,
1996 1997 1998 1998 1999 1998 1999
---------- ---------- ---------- ---------- ---------- ------------ -------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $ 955,139 $1,153,761 $1,108,892 $ 730,547 $ 752,910 $ 169,506 $ 120,882
Cost of operations:
Production and
content............... 271,532 325,245 305,346 207,395 202,038 61,151 42,504
Selling, general and
administrative
expenses.............. 456,690 564,344 567,683 425,764 458,593 77,179 60,713
Stock-based
compensation expense.. -- -- -- 189 4,861 3,477 3,073
Depreciation and
amortization.......... 139,736 154,940 152,544 114,594 127,866 9,543 10,348
Income (loss) from
operations............. 87,181 109,232 31,080 (17,395) (40,448) 18,156 4,244
Interest expense, net... 120,646 190,445 143,547 111,185 89,602 -- --
Income (loss) before
income taxes........... (27,124) (72,491) (104,236) (119,768) (87,602) 18,290 4,361
Net income (loss)....... 52,081 (71,179) (77,809) (86,179) (55,947) 7,513 1,680
Net income per common
share:
Basic.................. N/A N/A N/A N/A N/A 0.06 0.01
Diluted................ N/A N/A N/A N/A N/A 0.05 0.01
Weighted average common
shares outstanding:
Basic.................. N/A N/A N/A N/A N/A 129,890,502 137,736,688
Diluted................ N/A N/A N/A N/A N/A 141,485,182 151,580,906
Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 29,915 $ 30,301 $ 32,566 $ 27,153 $ 29,791 20,292 61,220
Total assets............ 3,584,173 3,546,646 3,433,803 3,412,701 3,443,936 184,510 278,852
Total long-term debt.... 2,522,252 2,408,240 1,539,322 1,526,047 1,264,984 -- --
Stockholders' equity.... 447,756 126,130 1,352,598 1,344,048 1,605,158 156,293 241,930
Other Data:
Net cash provided (used)
by operating
activities(1).......... $ 61,543 $ (3,364) $ 95,776 $ 82,791 $ 63,923 N/A N/A
EBITDA(2)............... 234,338 276,810 244,346 106,200 130,602 31,310 17,782
Capital expenditures.... 22,365 30,196 36,599 27,399 64,624 N/A N/A
Investments and
acquisitions, net of
cash acquired.......... 2,124,823 14,000 27,772 13,192 65,181 N/A N/A
</TABLE>
- --------
<TABLE>
<S> <C>
</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 included in an Annex to this
proxy statement.

(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and other non-cash charges. These non-cash charges
include amortization of intangible assets and stock-based compensation
expense. EBITDA as reported for Ziff-Davis Inc. includes its proportionate
interest in the EBITDA of ZDTV, LLC. 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.

11
<PAGE>

ZD DIVISION

SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL AND OTHER DATA

The following table presents summary historical combined historical data for
ZD as of and for the years ended December 31, 1996, 1997 and 1998 and as of and
for the nine months ended September 30, 1998 and 1999. ZD is the division of
Ziff-Davis Inc. focused on the businesses of print publishing, trade shows and
conferences and education. This data was derived from the Combined Financial
Statements of ZD which, except for the 1996 balance sheet, are included in an
Annex to this proxy statement. The data as of and for the nine months ended
September 30, 1998 and 1999 are unaudited.

An affiliate of Ziff-Davis Inc. acquired a print publishing business 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 unaudited Combined
Financial Statements of ZD and on April 6, 1999, Ziff-Davis Inc. completed a
public offering of ZDNet stock described in Note 3 to the unaudited Combined
Financial Statements of ZD. Results for periods before the reorganization and
public offering are not directly comparable to results for periods after those
events. No historical earnings per share or share data are presented as Ziff-
Davis Inc. does not consider such data meaningful.

In addition, the table presents unaudited summary pro forma combined data as
of and for the year ended December 31, 1998 and as of and for the nine months
ended September 30, 1999. The pro forma data gives effect to the transactions
described in Notes 2 and 3 to the unaudited Combined Financial Statements of
ZD, in a manner consistent with the treatments of those transactions in the
Unaudited Pro Forma Consolidated Financial Statements of Ziff-Davis Inc.
appearing later in this proxy statement. However, the pro forma data does not
give effect to any of the transactions included in the restructuring.

The pro forma data is not necessarily indicative of the actual financial
position or results of operations of ZD as of or for the year ended December
31, 1998 or as of or for the nine months ended September 30, 1999 or the
financial position or results of operations that ZD would have experienced if
the transactions for which the data gives pro forma effect had in fact occurred
at the times assumed. Also, the pro forma data does not purport to represent
ZD's future financial position or results of operations.

This table should be read in conjunction with the Selected Historical
Combined 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 to this proxy statement.

12
<PAGE>

<TABLE>
<CAPTION>
Nine month Pro forma
period ended Pro forma nine month
Year ended December 31, September 30, year ended period ended
---------------------------------- ------------------------ December 31, September 30,
1996 1997 1998 1998 1999 1998 1999
---------- ---------- ---------- ----------- ----------- ------------ -------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $ 938,924 $1,121,543 $1,052,749 $ 694,081 $ 685,119 $ 1,052,749 $ 685,119
Depreciation and
amortization........... 134,251 147,259 146,096 109,814 120,076 146,996 120,076
Income (loss) from
operations............. 104,594 131,713 38,586 (8,062) (40,764) 37,338 (40,764)
Interest expense, net... 120,646 190,445 143,547 111,185 90,545 123,659 86,878
Loss before income
taxes.................. (26,636) (71,648) (104,748) (119,456) (89,089) (85,940) (84,924)
Net loss................ (52,081) (71,179) (77,809) (86,179) (55,947) (66,524) (53,448)
Net loss per share...... N/A N/A N/A $ (0.86) $ (0.55) $ (0.67) $ (0.52)
Weighted average shares
outstanding............ N/A N/A N/A 100,000,000 102,508,377 100,000,000 102,508,377
Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 29,915 $ 30,273 $ 32,274 $ 26,728 $ 29,300 $ 32,274 $ 29,300
Total assets............ 3,584,963 3,548,108 3,429,938 3,405,300 3,432,951 3,439,333 3,432,951
Total long-term debt.... 2,522,252 2,408,240 1,539,322 1,526,047 1,264,984 1,340,865 1,264,984
Division equity......... 447,756 126,130 1,352,598 1,344,048 1,592,637 1,534,565 1,592,637
Other Data:
Net cash provided by
operating
activities(1).......... $ 74,164 $ 11,900 $ 100,299 $ 87,455 $ 48,899 N/A N/A
EBITDA(2)............... 234,338 276,810 244,346 106,200 128,985 245,246 106,200
Capital expenditures.... 21,355 27,822 32,117 24,218 61,861 N/A N/A
Capital contributions to
ZDNet.................. 13,630 20,664 14,269 13,242 -- N/A N/A
Investments and
acquisitions, net of
cash acquired.......... 2,124,823 11,002 22,772 8,192 46,563 N/A N/A
</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 included in an Annex to this proxy statement.
(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and other non-cash charges. These non-cash charges
include amortization of intangible assets and stock-based compensation
expense. EBITDA as reported for ZD includes its proportionate interest in
the EBITDA of ZDNet and ZDTV, LLC. 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
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.

13
<PAGE>

ZDNET DIVISION

SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL AND OTHER DATA

The following table presents summary historical combined data for ZDNet as
of and for the ten month period ended December 31, 1996, as of and for the
years ended December 31, 1997 and 1998 and as of and for the nine months ended
September 30, 1998 and 1999. ZDNet is the online business division of Ziff-
Davis Inc. This data was derived from the Combined Financial Statements of
ZDNet which, except for the 1996 balance sheet, are included in an Annex to
this proxy statement. The data as of and for the nine months ended September
30, 1998 and 1999 are unaudited.

An affiliate of Ziff-Davis Inc. acquired ZDNet on February 29, 1996; the
data does not include results from ZDNet for the period before the date of
acquisition. No historical earnings per share or share data is presented as
Ziff-Davis Inc. does not consider such data to be meaningful.

In addition, the table presents unaudited summary pro forma combined data as
of and for the year ended December 31, 1998 and as of and for the nine months
ended September 30, 1999. The pro forma data gives pro forma effect to the
transactions described in Note 3 to the unaudited Combined Financial Statements
of ZDNet in a manner consistent with the treatment of those transactions in the
Unaudited Pro Forma Consolidated Financial Statements of Ziff-Davis Inc.
appearing later in this proxy statement. However, the pro forma data does not
give effect to any of the transactions included in the restructuring.

The pro forma data is not necessarily indicative of the actual financial
position or results of operations of ZDNet as of or for the year ended December
31, 1998 or as of or for the nine months ended September 30, 1999 or the
financial position or results of operations that ZDNet would have experienced
if the transactions for which the data gives pro forma effect had in fact
occurred at the times assumed. Also, the pro forma data does not purport to
represent ZDNet's future financial position or results of operations.

14
<PAGE>

<TABLE>
<CAPTION>
Pro forma
Ten months Year ended Nine month period ended Pro forma nine month
ended December 31, September 30, year ended period ended
December 31, ------------------ ------------------------ December 31, September 30,
1996 1997 1998 1998 1999 1998 1999
------------ -------- -------- ----------- ----------- ------------ -------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue, net............ $ 16,215 $ 32,218 $ 56,143 $ 36,466 $ 67,791 $ 56,143 $ 67,791
Cost of operations:
Production and
content............... 14,863 23,543 26,208 18,971 25,491 26,208 25,491
Selling, general and
administrative
expenses.............. 13,280 23,475 30,993 22,048 31,241 30,993 31,241
Stock-based
compensation expense.. -- -- -- -- 2,953 3,317 2,953
Depreciation and
amortization.......... 5,485 7,681 6,448 4,780 7,790 6,448 7,790
Income (loss) from
operations............. (17,413) (22,481) (7,506) (9,333) 316 (10,823) 316
Interest income......... -- -- -- -- 943 -- --
Minority interest....... -- 400 134 330 117 134 117
Income (loss) before
income taxes........... (17,413) (22,081) (7,372) (9,003) 1,376 (8,489) 1,926
Net income (loss)....... (16,925) (21,238) (7,884) (8,691) (111) (8,554) 219
Net loss per share...... N/A N/A N/A $ (0.12) $ (0.00) $ (0.12) $ 0.00
Weighted average shares
outstanding............ N/A N/A N/A 71,500,000 72,315,852 71,500,000 72,315,852
Balance Sheet Data (at
period end):
Total current assets.... $ 7,852 $ 11,521 $ 20,068 $ 15,502 $ 38,555 $ 45,953 $ 38,555
Total assets............ 82,507 87,326 97,686 95,092 179,650 118,953 179,650
Total liabilities....... 3,932 4,034 8,139 7,359 18,076 8,139 18,076
Division equity......... 78,575 83,292 89,547 87,734 161,574 115,432 161,574
Other Data:
Net cash provided (used)
in operating activities
(1).................... $(12,620) $(15,264) $ (4,522) $ (4,664) $ 15,022 N/A N/A
EBITDA (2).............. (11,928) (14,400) (924) (4,223) 11,176 (4,223) 11,176
Capital expenditures.... 1,010 2,374 4,483 3,181 2,763 N/A N/A
Investments and
acquisitions, net of
cash acquired.......... -- 2,998 5,000 5,000 18,618 N/A N/A
</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 ZDNet's
Combined Financial Statements included in an Annex to this proxy statement.
(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and other non-cash charges. These non-cash charges
include amortization of intangible assets and stock-based compensation
expense. 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 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.

15
<PAGE>

COMPARATIVE PER SHARE DATA

We have set forth in the table below the following information:

. the pro forma book value and loss per share of ZD stock and ZDNet stock
as of and for the year ended December 31, 1998 and as of and for the
nine months ended September 30, 1999, in each case before giving effect
to the restructuring and based on the same assumptions and subject to
the same caveats described in the charts entitled "Summary Historical
and Pro Forma Combined Financial and Other Data" for ZD and ZDNet
appearing earlier in this summary,

. the pro forma book value and loss per share of common stock as of and
for the year ended December 31, 1998 and as of and for the nine months
ended September 30, 1999, in each case after giving effect to the
restructuring and based on the same assumptions and subject to the same
caveats described in the chart entitled "Summary Historical and Pro
Forma Consolidated Financial and Other Data" for Ziff-Davis Inc.
appearing earlier in this summary and

. the pro forma book value and loss per ZDNet estimated equivalent share
as of and for the year ended December 31, 1998 and as of and for the
nine months ended September 30, 1999, in each case computed by taking
the corresponding pro forma amount per share after giving effect to the
restructuring and multiplying it by an estimated exchange ratio for the
merger of 1.77.

<TABLE>
<CAPTION>
Post-
Restructuring
Pre- Pre- Post- ZDNet Stock
Restructuring Restructuring Restructuring Estimated
ZD Stock ZDNet Stock Common Stock Equivalent
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Pro forma book value per
share:
December 31, 1998..... $15.35 $ 1.61 $1.20 $2.13
September 30, 1999.... 15.42 2.19 1.72 3.04
Pro forma income (loss)
per share--basic:
Year ended December
31, 1998............. $(0.67) $(0.12) $0.06 $0.10
Nine months ended
September 30, 1999... (0.52) 0.00 0.01 0.02
Pro forma income (loss)
per share--diluted:
Year ended December
31, 1998............. $(0.67) $(0.12) $0.05 $0.09
Nine months ended
September 30, 1999... (0.52) 0.00 0.01 0.02
</TABLE>

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 Restructuring

The Sales Of ZD Publishing, ZD Education And ZD Events May Not Occur As
Contemplated

It is possible that the sale of one or more of ZD Publishing, ZD Education
and ZD Events will not occur as currently contemplated.

The ZD Publishing and ZD Education sales agreements are each subject to a
number of conditions, including, among others:

. the absence of certain adverse changes,

. the accuracy of representations and warranties on the closing date,

. the receipt of third party consents and

. the receipt of sufficient financing by the buyer.

Because these transactions are structured as asset sales, they will require
numerous third party consents, and we cannot assure you that we will be able to
obtain these consents on reasonable terms. The buyers will not be obligated to
purchase unless all the conditions to closing have been satisfied and we cannot
assure you that this will occur. If any of the conditions are not satisfied,
the sale may not proceed or we may be forced to renegotiate material terms,
including the price.

We are currently in discussions regarding a possible sale of ZD Events, but
we cannot assure you that a sale transaction will result and, if it does, we
cannot assure you that the sale price will meet Wall Street expectations. If we
are unable to reach agreement to sell ZD Events at an acceptable price, we
currently plan to recapitalize it and spin it off to holders of ZD stock.
However, we cannot assure you that we would be able to complete a
recapitalization and spin off. Moreover, if we are able to complete a
recapitalization and spin off of ZD Events, we cannot assure you that the value
of the special dividend (which would include most of the cash proceeds from the
recapitalization as well as the stock of ZD Events) would approximate the $5.00
per share of ZD stock that we currently envision.

If we do not complete one or more of the sales as planned, we will still be
free to complete the rest of the restructuring or otherwise revise it, in our
discretion.

The Special Dividend May Be Less Than $5.00 Per Share Of ZD Stock

We currently anticipate that we will pay a special dividend of about $5.00
per share of ZD stock as part of the restructuring. This is, however, an
estimate and we cannot assure you that this will be the actual amount of the
dividend. The board of directors will determine the amount of the dividend
after taking into account several factors, including:

. the actual amount of proceeds from the sales of ZD's businesses and

. the amount of cash we retain to cover ZD's actual and contingent
liabilities and to fund ZDNet's future cash needs.

The Exchange Ratio May Be More Or Less Than Our Example

Each share of ZDNet stock will convert into a fixed number of shares of our
common stock in the merger. The exact exchange ratio will depend upon three
factors that are not yet known and as a result we are unable to tell you now
what it will be. These three factors are:

. the value of the remaining ZD assets in excess of the cash set aside to
cover the ZD liabilities, as determined by our board of directors,

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. the market price of ZDNet stock on the date those assets are transferred
from ZD to ZDNet and

. the number of options to acquire ZD stock that are exercised prior to
the merger.

We have included an example of how we will calculate the exchange ratio in this
proxy statement which is based on certain assumptions with respect to these
three factors. This example, which results in an exchange ratio of about 1.77,
is included for illustrative purposes only. The actual exchange ratio may
differ significantly from this example and may even fall outside the range set
forth in the stockholder's letter that appears on the front cover of this proxy
statement.

The Amount We Leave Behind To Cover ZD Liabilities May Be Different From The
Amount Actually Needed

We will determine the amount that we will leave behind to cover actual or
contingent ZD liabilities based on the advice of management and our financial
and legal advisors, as contemplated under "Proposal 1--The Restructuring of
Ziff Davis--Repayment of ZD Debt and Provision for Other ZD Liabilities." Since
contingent liabilities are inherently uncertain, it is possible that the amount
we leave behind will turn out to be significantly more or less than the amount
actually needed to cover these liabilities. In that case, holders of ZDNet
stock would end up with significantly more or less value than they would
otherwise have, and holders of ZD stock would correspondingly end up with
significantly less or more value than they would otherwise have.

The Restructuring Involves Transactions That Might Create Conflicts Of
Interest

The restructuring involves transactions and issues that might create
conflicts or the appearance of conflicts between the interests of the holders
of ZD stock and the holders of ZDNet stock or between Softbank and other
stockholders. These transactions and issues include:

. the terms of the content license arrangements between ZDNet and the
buyer of our publishing business,

. the valuation of the assets being transferred from ZD to ZDNet,

. the valuation of any actual or contingent ZD liabilities that will be
provided for and

. the possibility that Softbank may provide equity or debt financing (or
both) to the buyer in connection with a possible sale of ZD Events.

In order to address these potential conflicts of interest, we created a special
committee of our board of directors to review these issues and make
recommendations to the full board. Our board of directors has followed the
recommendations of the special committee to date and expects to continue to do
so in the future.

The Sale Of ZD's Businesses May Adversely Affect ZDNet's Future Business

It is possible that the sale of ZD's businesses as part of the restructuring
may adversely affect ZDNet's future business in a number of ways, including the
following:

. ZDNet will no longer be able to leverage the ZD brand and cross-market
across all of ZD's platforms.

. ZDNet currently relies on content that it licenses from ZD Publishing on
an exclusive basis online. Under the agreement for the sale of ZD
Publishing, ZDNet will retain the rights to this content online for only
five years and those rights will remain exclusive to ZDNet for only
three years. After the three year exclusivity period expires, the buyer
of ZD Publishing will be free to use the content to compete with ZDNet
on the Internet, and after four years the buyer will be free to license
it to other online competitors.

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. The buyer of ZD Publishing is acquiring the "Ziff-Davis" brand name and
is receiving a license for the "ZD" brand name, in each case, for use in
print publishing and its future actions may adversely affect the ZD
brand.
. As a standalone company, ZDNet's costs of services may increase
significantly due to the loss of certain large volume discounts or other
special pricing arrangements it previously received as a division of
Ziff-Davis.

We Have Only Operated As A Standalone Company Since May 1998, And A
Significant Part Of Our Infrastructure May Be Transferred Along With The
Businesses Being Sold As Part Of The Restructuring

We have only operated as a standalone company since May 1998. In addition,
a significant part of our infrastructure may be transferred along with the
businesses being sold as part of the restructuring. Our success will depend on
our continued ability to manage the company with the resources available to us
and our ability to rebuild infrastructure appropriate for the new standalone
company.

ZDNet May Be Unable To Obtain Additional Financing On Reasonable Terms

As mentioned in a number of the risk factors described below, ZDNet will
need access to additional financing in order to be successful. Because the
company will be considerably smaller and less diversified after the
restructuring, it may be difficult for it to obtain additional financing on
reasonable terms. If this is the case, ZDNet's future financial position and
results of operations may be adversely affected.

Other Risk Factors

ZDNet Has An Extremely Limited Operating History And A History Of Net Losses
And There Is No Assurance ZDNet Will Report Net Income In The Future

ZDNet, which will constitute the principal business of the company after
the restructuring, has an extremely limited operating history and a
stockholder 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, $7.9 million in 1998 and $0.1 million in the first nine months of 1999).
For more information regarding these net losses, see "ZDNet Summary Historical
and Pro Forma Combined Financial and Other Data" above, "Unaudited Pro Forma
Consolidated Financial Statements" below and ZDNet's Combined Financial
Statements in an Annex to this proxy statement. 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 ZDNet's 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.

ZDNet's Quarterly Operating Results May Fluctuate Significantly And Are Not
Reliable Indicators Of Its Future Performance

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,

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<PAGE>

. 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. If a large number of
ZDNet's advertisers do not advertise in a given quarter or if advertising
revenue is deferred, ZDNet's revenue in that quarter could be substantially
reduced. This would have a material adverse affect on ZDNet's operating results
and could impair its business in future periods. Quarterly comparisons of
ZDNet's results of operations are not reliable and you should not rely on them
as an indication of ZDNet's 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 an Annex to
this proxy statement.

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 and 92% of its revenue in the first
nine months of 1999 from the sale of advertising on its Internet sites and we
expect that advertising revenue will continue to be the principal source of
ZDNet's 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. ZDNet's top 20 advertising customers accounted
for approximately 46.5% of its advertising revenue in 1998 and approximately
42.1% of its advertising revenues in the first nine months of 1999. 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 Arrangements With Third Parties For Internet Traffic To Its
Sites And ZDNet's Failure To Maintain These Arrangements With Third Parties
Could Adversely Affect Its Business

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!, AltaVista, Go.com, Lycos and iVillage which are either short-term
arrangements 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 And ZDNet's Failure To
Maintain These Arrangements With Third Parties Could Adversely Affect Its
Business

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

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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.

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.

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.

ZDNet Has Launched An Expensive Advertising Campaign That May Or May Not Be
Effective.
ZDNet May Need To Spend Significantly More Money On Advertising In The Future

On December 25, 1999, ZDNet launched a 15-month, $25 million consumer
advertising campaign. This campaign is ZDNet's first major attempt at offline
consumer advertising. The campaign will initially run on network and cable TV,
in mainstream and technology-focused print publications and in key online and
outdoor positions. We cannot assure you that this campaign, or any other
advertising campaign we may launch in the future, will be effective. In
addition, to remain competitive, ZDNet may need to spend significantly more
money on advertising in the future and such additional costs could adversely
affect ZDNet's profits.

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.

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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.

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, not all security measures which are
implemented may be the latest state of the art and 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 affecting ZDNet's business, 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 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 trademarks, service marks 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 certain of 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
seek or 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 have recently been 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

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<PAGE>

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,
1998, ZDNet had a total of 316 employees and as of December 31, 1999, ZDNet had
a total of 483 employees--a growth of 52.8%. 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's 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 currently intends to continue acquisitions of and investments in new
or complementary businesses, products, services or technologies. However, 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.

ZDNet Intends To Expand Its International Operations And May Encounter A
Number Of Problems Doing So. There Are Also A Number Of Risks Associated With
International Operations That Could Adversely Affect ZDNet's Business

Expansion Of International Operations. 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.

Risks Of International Operations. 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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The Inclusion Of Computer Shopper In Our Consolidated Results May Adversely
Affect Our Stock Price

We plan to include our Computer Shopper business in the assets that we will
transfer to ZDNet in return for an increase in ZD's retained interest in
ZDNet. Although we expect that the value of Computer Shopper will be
immaterial in relation to the expected market capitalization of ZDNet Inc.
after the restructuring, we also expect Computer Shopper to be highly material
to the consolidated financial statements of ZDNet Inc. after the
restructuring. Even though we plan to break out our online business as a
separate segment from our Computer Shopper business for accounting purposes,
it is possible that the market will not value our stock as highly as it would
in the absence of Computer Shopper since, among other things, we expect that
our consolidated revenues will grow at a substantially lower rate (or may even
decline) as a result of including Computer Shopper in our consolidated
results.

Our Historical And Pro Forma Financial Information Is Not particularly
Relevant To Our 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 existed and the restructuring been completed prior to
the periods in question. In addition, the financial information is not
necessarily indicative of our future results of operations, financial position
and cash flows.

We Are Controlled By Our Principal Stockholder. This Creates Potential
Conflicts Of Interest

SOFTBANK Corp. and its non-Ziff-Davis affiliates ("Softbank") currently own
71,620,000 shares of ZD stock and will, after the restructuring, own a
majority of our outstanding shares of common stock. As a result, Softbank will
be able to 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 ZDNet 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 ZDNet. However, the agreements with Softbank do 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 ZDNet with respect to new
investments. In addition, Softbank may also develop new funds which may
compete with ZDNet for investment opportunities. These agreements will also
prohibit ZDNet from competing with SOFTBANK Corp. in Japan without the prior
approval of SOFTBANK Corp.'s board of directors and give Softbank the
continuing right to license all of ZDNet's products and services in Japan.
These arrangements and undertakings might be less favorable than arrangements
negotiated at arm's length between unrelated parties.

We Are A Defendant In Several Lawsuits, Which Could Materially And Adversely
Affect Our Business And Operations

In connection with the initial public offering of our common stock on April
28, 1998, 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 an Annex to this proxy statement.

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

Our logo and certain of our Internet sites, publications, products and
services referenced in this proxy statement are our trademarks. Each trade
name, trademark or service mark of any other company appearing in this proxy
statement is the property of its owner.

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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. These
forward-looking statements include, without limitation, statements regarding
the timing of the sales that are part of the restructuring (or even whether
those sales will in fact close), the net proceeds to be received in those
sales, the timing and amount of the cash dividend to be paid to holders of ZD
stock as part of the restructuring, the ZD liabilities that will need to be
provided for as part of the restructuring, the timing of the merger, the
ZD/ZDNet equivalency ratio and the exchange ratio for the merger, our future
business plans and strategies and our future financial condition or results of
operations, as well as other statements that are not historical. You can find
many of these statements by looking for words like "may," "will," "believes,"
"expects," "anticipates," "plans" and "estimates" and for similar expressions.

Because forward-looking statements involve risks and uncertainties, there
are factors that could cause the actual results to differ materially from those
expressed or implied. For example, the statements appearing under "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., ZDNet and ZD appearing elsewhere in this proxy statement describe
circumstances that could materially affect the accuracy of forward-looking
statements.

If there are any subsequent written or oral forward-looking statements made
by us or any person acting on our behalf, they are qualified in total by the
cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to these forward-
looking statements to reflect events or circumstances after the date of this
document or to reflect the occurrence of unanticipated events.

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 in this proxy statement.

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THE SPECIAL MEETING

General

The board of directors of Ziff-Davis Inc. 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 February 29, 2000 at our offices at 28 East
28th Street, New York, New York and at any adjournments or postponements
thereof.

The purpose of the special meeting is to:

. Consider and adopt resolutions authorizing the restructuring of Ziff-
Davis Inc. These resolutions are set forth in full in Annex I to this
proxy statement. We refer to this proposal as Proposal 1.

. Consider and approve proposals to amend each of the Amended 1998
Incentive Compensation Plan and the Amended Non-Employee Directors'
Stock Option Plan to increase the number of shares available for
issuance thereunder. We refer to these proposals as Proposals 2 and 3.

. Act on other matters that may be brought properly before the special
meeting.

The board of directors recommends that stockholders vote "FOR" Proposals 1,
2 and 3.

Record Date; Voting

Stockholders of record at the close of business on February 7, 2000 are
entitled to vote at the special meeting. As of this record date, there were
approximately 103.7 million shares of ZD stock issued and outstanding and
approximately 14.1 million shares of ZDNet stock issued and outstanding.
Holders of ZD stock and holders of ZDNet stock will vote together as a single
class on all business before the special meeting. A quorum will be met at the
special meeting if the holders of a majority of the outstanding shares of
common stock are present in person or by proxy.

Holders of ZD stock will be entitled to one vote per share of ZD stock held
on the record date and holders of ZDNet stock will be entitled to 1.47758 votes
per share of ZDNet stock held on the record date. The voting rights of the
ZDNet stock were determined based on the relative average trading prices of the
ZDNet stock and the ZD stock during the twenty consecutive trading day period
ending on and including the fifth trading day before the record date.

Presence of Independent Accountants

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.

Vote Required

Proposal 1 requires the affirmative vote of the holders of shares entitled
to cast a majority of the votes entitled to be cast by all outstanding shares
of common stock. Each of Proposals 2 and 3 requires the affirmative vote of the
holders of shares entitled to cast a majority of the votes entitled to be cast
by all shares of common stock present in person or represented by proxy at the
special meeting. Any failure to be present at the special meeting, in person or
by proxy, any abstention and any failure to instruct a broker as to how to vote
shares held by such broker with respect to any proposal will have the same
effect as votes against 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 vote against each of the
proposals.

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<PAGE>

Proxies

Each copy of this document mailed to stockholders is accompanied by a form
of proxy with voting instructions for submission by mail. 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 a written revocation or a duly executed proxy bearing a later date
or by voting in person at the special meeting. However, a proxy is not revoked
by simply attending the special meeting. Stockholders who have instructed a
broker to vote their shares must follow directions received from their broker
to change or revoke their proxy. To submit a written proxy by mail,
stockholders should complete, sign, date and mail the proxy card provided with
this document in accordance with the instructions set forth on such card. If no
choice is specified on the form of proxy, the shares will be voted "FOR" the
approval of each of the proposals described in this proxy statement. If you
vote "FOR" the proposals at the special meeting you may be forfeiting your
right to challenge the proposals in the future.

Other Matters

The board of directors is not currently aware of any business to be acted
upon at its stockholders meeting, other than as described herein. If, however,
other matters are properly brought before the special meeting, the persons
appointed as proxies will have discretion to vote or act thereon according to
their best judgment, unless otherwise indicated on any particular proxy. The
persons appointed as proxies also will have discretion to vote on adjournment
of the special meeting. Such adjournment may be for the purpose of soliciting
additional proxies. Notwithstanding the foregoing, shares represented by
proxies voting against the adoption of the restructuring will be voted against
a proposal to adjourn the special meeting for the purposes of soliciting
additional proxies.

Solicitation of Proxies

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.

Do Not Send in Stock Certificates

Stockholders should not send stock certificates with their proxy cards.
After the merger constituting part of the restructuring is completed:

. we will mail holders of ZDNet stock a transmittal form with instructions
on how to exchange their current stock certificates for stock
certificates representing common stock of the surviving company and

. holders of ZD stock will not need to exchange their stock certificates
since their ZD stock will remain outstanding as shares of common stock
of the surviving company and their stock certificates will continue to
represent those shares. However, if after the merger any holders of ZD
stock would like to exchange their stock certificates for new stock
certificates that specify the new name of the company and the correct
designation for the common stock, they should contact the company's
transfer agent or Secretary.

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<PAGE>

OUR CURRENT COMPANY

The mailing address of our principal executive offices is 28 East 28th
Street, New York, New York 10016, and our telephone number is (212) 503-3500.

29
<PAGE>

PROPOSAL 1--THE RESTRUCTURING OF ZIFF-DAVIS

General

At the special meeting, stockholders will be asked to consider and adopt
resolutions authorizing the restructuring of Ziff-Davis Inc. These resolutions
are set forth in full in Annex I to this proxy statement.

. sell substantially all of our non-Internet assets for cash; these assets
include substantially all of ZD's assets other than its retained
interest in ZDNet;

. use a portion of the proceeds from these sales to repay ZD's debt and to
cover certain other ZD liabilities;

. dividend out all or most of the remaining proceeds to the holders of ZD
stock; we currently estimate this special dividend will amount to about
$5.00 per share;

. transfer the remaining ZD assets, including Computer Shopper and our
interest in Red Herring Communications Inc., to ZDNet in return for an
increase in ZD's retained interest in ZDNet; and

. eliminate our existing tracking stock structure by merging with ZD
Merger Subsidiary Inc., our newly formed subsidiary, so that all of our
stockholders will hold a single class of ordinary common stock.

ZD Merger Subsidiary is a Delaware corporation organized in January 2000 and is
a wholly owned subsidiary of Ziff-Davis Inc. To date, this subsidiary has
engaged in no activities other than those incident to its formation and the
merger. The mailing address of its principal executive offices is 28 East 28th
Street, New York, New York 10016, and its telephone number is (212) 503-3500.

Sales of Non-Internet Assets for Cash

Repayment of ZD Debt and Provision for Other ZD Liabilities

The principal amount of our debt is currently about $1.0 billion and all of
it is attributed to ZD. We will use a portion of the asset sale or
recapitalization proceeds to repay this debt. We will also use a portion to
cover the amounts that ZD owes ZDNet and certain other actual or contingent ZD
liabilities, net of amounts that ZDNet owes ZD. We will determine the amount
that we will leave behind to cover these other actual or contingent ZD
liabilities based on the advice of management and our financial and legal
advisors. Because contingent liabilities are inherently uncertain, it is
possible that the amount we leave behind will turn out to be significantly more
or less than the amount actually needed to cover these liabilities.

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<PAGE>

Dividend to ZD Stockholders

Transfer of Assets from ZD to ZDNet

We will transfer the following assets from ZD to ZDNet in return for an
increase in ZD's retained interest in ZDNet:

. our Computer Shopper business,

. our interest in Red Herring Communications Inc. and

. any other ZD assets that we have not sold or set aside to cover ZD
liabilities.

The Merger

. the number of shares of ZDNet stock issuable with respect to ZD's
retained interest in ZDNet, divided by

. the number of shares of ZD stock outstanding immediately prior to the
merger.

We call this number the "ZD/ZDNet equivalency ratio." After the merger, each
share of ZD stock will remain outstanding as one share of common stock. In
order to maintain the relationship between the ZD stock and ZDNet stock, in the
merger we will convert each share of ZDNet stock into a number of shares of
common stock equal to the reciprocal of the equivalency ratio. Thus, we will
convert each share of ZDNet stock into a number of shares of common stock equal
to:

. the number of shares of ZD stock outstanding immediately prior to the
merger, divided by

. the number of shares of ZDNet stock issuable with respect to ZD's
retained interest in ZDNet.

We call this number the "exchange ratio," and we will round it to the nearest
0.00001 before we apply it in the merger. Fractional shares of common stock
will not be issued to holders of ZDNet stock. In lieu of fractional shares,
holders of ZDNet stock will receive a cash payment.

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<PAGE>

in the preceding section. Because this increase will depend on the final
valuation for the transferred assets and the market value of the ZDNet stock on
the date of transfer, we cannot now tell you the exact number we will use to
determine the ZD/ZDNet equivalency ratio and the exchange ratio.

We provide the following as an illustrative example of these calculations.
If we assume that:

. the transferred assets in excess of those set aside to cover ZD
liabilities will be valued at about $75 million,

. the market price of ZDNet stock on the transfer date will be $27.8125
per share (which is equal to the closing price of the ZDNet stock on
January 31, 2000), and

. options to purchase about 8 million shares of ZD stock will be exercised
before the merger, resulting in there being about 111 million shares of
ZD stock outstanding at the time of the merger,

then the ZD/ZDNet equivalency ratio would be about 0.56 (that is, each ZD share
would be equivalent to about 0.56 ZDNet shares) and the exchange ratio would be
about 1.77 (that is, in the merger we would convert each ZDNet share into about
1.77 shares of common stock). The actual ZD/ZDNet equivalency ratio and
exchange ratio will be determined as described earlier in this section; the
final numbers may significantly differ from those set forth in this
illustrative example and may even fall outside the ranges set forth in the
stockholder's letter that appears on the front cover of this proxy statement.

After the restructuring, we will be focused almost exclusively on the
Internet, and as part of the merger we will change our name to ZDNet Inc. to
reflect this new focus. We will also amend our certificate of incorporation to
delete all of the provisions relating to our existing tracking stock structure
so that it will provide for a single class of ordinary common stock. These
deletions will have no substantive effect, since our current certificate of
incorporation states that the tracking stock provisions will apply only when
there are shares of both series of common stock outstanding.

We currently expect to complete the merger in the second quarter of 2000.

For more information about the merger, see "--The Merger Agreement" below.

No Appraisal Rights

Under the Delaware General Corporation Law, you will not have appraisal
rights as a result of the restructuring.

Treatment of Options

We plan to deal with employee stock options to purchase ZD stock, which we
call "ZD options," and employee stock options to purchase ZDNet stock, which we
call "ZDNet options," in the following way:

. We will accelerate the vesting of all of the options granted in 1998,
and 50% of the options granted in 1999, held by any employee transferred
to the buyer of a sold business, but only if the employee remains with
the sold business until a specified date after the date on which we sell
that business or is terminated by the buyer before that day. The
remaining options held by these employees will be forfeited.

. We will generally accelerate the vesting of all of the ZD options
granted in 1998, and 50% of the ZD options granted in 1999, held by any
employee who remains with Ziff-Davis through a specified date or is
terminated by Ziff-Davis before that date as a result of the
restructuring. We do not currently expect to accelerate the vesting of
any ZDNet options held by employees who remain with Ziff-Davis.

. If we pay any dividend on ZD stock before a ZD option is exercised (as
expected), we will adjust the terms of the ZD options in a customary
manner in order to preserve the employee's effective position.

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<PAGE>

. If ZD options are exercised prior to the merger, we will attribute the
exercise proceeds to ZD and will apply those proceeds to increase the
dividend we will pay to holders of ZD stock or to increase the amount we
will transfer from ZD to ZDNet in return for an increase in ZD's
retained interest in ZDNet. If ZDNet options are exercised prior to the
merger, we will attribute the exercise proceeds to ZDNet and those
proceeds will not affect the dividend or the amount we transfer from ZD
to ZDNet.

. Accelerated ZD options will generally expire on June 30, 2000, to the
extent they have not already been exercised or forfeited. ZDNet options
held by employees who remain with Ziff-Davis will expire according to
their current schedule.

If we complete the merger before all ZD options have been exercised, have
been forfeited or have expired, we will compensate ZDNet for the dilutive
effect of these options by either:

. leaving behind cash of ZD sufficient to cover the spread between the
aggregate market value of the shares subject to those options shortly
before the merger and the aggregate exercise price of those options (in
a manner analogous to the provision for ZD liabilities contemplated
under "--Repayment of ZD Debt and Provision for Other ZD Liabilities"
above) or

. reducing ZD's retained interest in ZDNet by an amount equal to the
spread referred to above divided by the market price of the ZDNet stock
on a date shortly before the merger (in a manner analogous to the
transfer of assets in return for an increased retained interest
contemplated under "--Transfer of Assets from ZD to ZDNet" above).

When we complete the merger, each remaining option to purchase a share of ZD
will continue to be an option to purchase a share of common stock at the same
exercise price.

When we complete the merger, each option to purchase a share of ZDNet will
become an option to purchase, for the same aggregate exercise price, a number
of shares of common stock equal to the exchange ratio in the merger.

Material Federal Income Tax Consequences of the Restructuring

The following summary of the federal income tax consequences of the
restructuring is based on the tax laws of the United States (including the
Internal Revenue Code of 1986, as amended, existing and proposed Treasury
Department regulations, published rulings and court decisions), all of which
are subject to change. This summary does not address the tax consequences of
the restructuring if you are a member of a special class of investors, such as

. a tax-exempt entity,

. a financial institution,

. an insurance company,

. a dealer in securities or currencies,

. a trader in securities who elects to use a mark-to-market method of
accounting,

. a person who is liable for alternative minimum tax,

. a person who actually or constructively owns 10% or more of the ZD stock
or ZDNet stock,

. a person who is not for United States federal income tax purposes
--a citizen or resident of the United States,
--a domestic corporation,
--an estate whose income is subject to United States federal income
taxation regardless of its source or
--a trust over which a United States court can exercise primary
supervision and as to which one or more United States persons are
authorized to control all substantial decisions,

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<PAGE>

. a person who holds ZD stock or ZDNet stock as part of a straddle,
hedging or conversion transaction or

. a person whose functional currency is not the U.S. dollar.

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.

Assuming we have no earnings and profits for tax purposes (as we expect),
the dividend to holders of ZD stock will be treated as a return of capital
reducing basis for federal income tax purposes. If the amount of the dividend
exceeds a ZD stockholder's basis, the excess will be taxed for federal income
tax purposes as a capital gain and will be long-term capital gain or loss if
the ZD stockholder's holding period for the ZD stock exceeds one year. Long-
term capital gain of a noncorporate person is generally subject to a maximum
tax rate of 20%.

No ZD stockholder will be required to pay any federal income taxes as a
result of the merger. No ZDNet stockholder will be required to pay any federal
income taxes as a result of the merger, except to the extent of cash received
instead of a fractional share of common stock. Any cash received by a ZDNet
stockholder will be treated as received in redemption of the ZDNet
stockholder's fractional share interest, and the ZDNet stockholder would
generally recognize a capital gain or loss equal to the difference between the
amount of cash received and the ZDNet stockholder's basis in the ZDNet stock
exchanged therefor.

The company will not be required to pay any material federal income taxes as
a result of the merger.

Backup Withholding and Information Reporting

In general, we will report any dividend payments made to a ZD stockholder
that is a non-corporate United States person to the Internal Revenue Service.
We also will be required to "backup withhold" at the rate of 31% of the amount
of the dividend if you fail to provide your accurate taxpayer identification
number in the manner required by law, if the Internal Revenue Service notifies
us that you have failed to report all interest or dividends required to be
shown on your federal income tax returns or, in certain circumstances, if you
fail to comply with applicable certification requirements. Certain corporations
and other exempt persons may be required to establish their exemption from
information reporting and back-up withholding by certifying their status on
Internal Revenue Service Form W-8BEN.

We (or your broker) may also be required to report and backup withhold on
any cash received by a ZDNet stockholder instead of a fractional share of ZD
stock.

Amounts withheld under the backup withholding rules may be credited against
your tax liability, and you may obtain a refund of any excess amounts withheld
under the backup withholding rules by filing the appropriate claim for a refund
with the Internal Revenue Service.

Accounting

The restructuring will result in a net loss of about $1.2 billion. The
majority of this loss will be reported in the fourth quarter of 1999 with the
remainder expected to be recognized in the first quarter of 2000.

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<PAGE>

recognizing an accounting loss on the sale but are not permitted to recognize
what we believe is currently a more than offsetting gain represented by the
difference between the current value and the book value of our online business.
The following table summarizes the estimated components of the loss:

<TABLE>
<CAPTION>
Component Estimated gain (loss)
- --------- ---------------------
<S> <C>
Sale of ZD Publishing (which excludes Computer
Shopper): ............................................. $ (766,000,000)*
Write-down of Computer Shopper intangible assets........ (270,000,000)**
Accounting charge for accelerating vesting of stock
options................................................ (190,000,000)
Sale of ZD Education.................................... 115,000,000*
Sale of equity interest in ZDTV......................... 111,000,000*
Sale of ZD Market Intelligence.......................... 75,000,000*
Sale of ZD Events and other transaction costs........... (320,000,000)
---------------
Estimated loss........................................ $(1,245,000,000)
===============
</TABLE>
- --------
* Based on sales prices in completed or announced transactions. See "--The
Sale Agreements" below.

** The write-down of Computer Shopper intangible assets results from
management's review of the recoverability of the value of such assets. This
review was undertaken during the fourth quarter of 1999 primarily due to
the write-down of intangible assets resulting from the agreement to sell
our other publications. Based on management's current assessment of market
conditions, projected future profitability and the impact of the
restructuring, including the loss of certain synergies, an impairment
write-down, estimated to be approximately $270 million, will be recorded in
the fourth quarter of 1999. The amount of this write-down was determined
based upon a discounted cash flow analysis.

The foregoing amounts are only estimates. The actual gain or loss associated
with each component may be more or less than that set forth above.

Listing

After the merger, our common stock will continue to be listed on the NYSE,
although we may investigate the possibility of transferring our listing to
NASDAQ at some point in the future.

Recommendation of the Board of Directors

The board of directors has carefully considered and unanimously approved
Proposal 1 and determined that it is in the best interests of our company and
all of our stockholders. The board of directors recommends that you vote "FOR"
Proposal 1.

Background of the Restructuring

We continually review each of our businesses and Ziff-Davis Inc. as a whole
to determine the best way to realize the company's inherent value. As a result
of this review process, we retained Morgan Stanley Dean Witter (whom we call
"Morgan Stanley") and Sullivan & Cromwell in mid 1999 and shortly thereafter we
publicly announced that we were beginning to explore strategic alternatives to
maximize stockholder value. As part of this exploration process, we determined
to explore the possible sale of all or substantially all of our non-Internet
assets.

Accordingly, Morgan Stanley, on our behalf, commenced auctions with respect
to the ZDTV, ZD Education, ZD Publishing and ZD Events divisions. Each business
was the subject of its own auction process. All of these auctions proceeded in
similar fashion, with Morgan Stanley working with our management to

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<PAGE>

identify potential purchasers and to prepare presentations discussing the
operations of those businesses for those potential purchasers. Morgan Stanley
also delivered to potential purchasers a form of sale agreement prepared by us
and our legal counsel with respect to each of the potential sales. In each
case, Morgan Stanley requested potential purchasers to submit bids with respect
to their proposed purchase. Potential purchasers then conducted due diligence
investigations with respect to the relevant businesses and submitted bids.
Morgan Stanley then discussed these bids with the potential purchasers, and
indicated the manner in which such bids could be improved to make such bids
more attractive to us. Thereafter, we and our financial and legal advisors
commenced negotiations and proceeded to final contract with whichever purchaser
we had determined had made the most attractive offer with respect to a given
business.

Set forth below is a more specific chronology for these auctions:

. Auction for ZD Education--Throughout August and September 1999, Ziff-
Davis and Morgan Stanley discussed a possible ZD Education transaction
with a variety of potential purchasers and invited those potential
purchasers to submit indications of interest by October 7, 1999. On
October 7, 1999, various interested parties submitted initial
indications of interest. On November 15, 1999, interested parties
submitted final bids and Morgan Stanley began to discuss the terms of
those bids with those parties. On November 16, 1999, Ziff-Davis and its
financial and legal advisors commenced negotiations for the sale of the
ZD Education division with Wasserstein Perella U.S. Equity Partners and
its financial and legal advisors. On November 17, 1999, Ziff-Davis
entered into an agreement to sell its ZD Education division to a company
controlled by Wasserstein Perella. For more information about this
agreement, see "--The Sale Agreements--ZD Education" below.

. Auction for ZDTV--Throughout August and September 1999, Ziff-Davis and
Morgan Stanley discussed a possible ZDTV transaction with a variety of
potential purchasers and invited those potential purchasers to submit
indications of interest. During October 1999, various interested parties
submitted initial indications of interest. Throughout October and into
November 1999, Morgan Stanley reviewed the terms of those indications of
interest with the interested parties. On November 7, 1999, Ziff-Davis
and its financial and legal advisors commenced negotiations for the sale
of our equity interest in ZDTV with Vulcan Programming Inc. (a company
controlled by Paul G. Allen) and its financial and legal advisors.
Vulcan Programming Inc. owned almost all of the equity in ZDTV that we
did not own. On November 19, 1999, Ziff-Davis entered into an agreement
to sell its equity interest in ZDTV to Vulcan Programming Inc. On
January 21, 2000, we completed this transaction. For more information
about this agreement, see "--The Sale Agreements--ZDTV" below.

. Auction for ZD Publishing--Throughout August and September 1999, Ziff-
Davis and Morgan Stanley discussed a possible ZD Publishing transaction
with a variety of potential purchasers and invited those potential
purchasers to submit indications of interest by October 7, 1999. On
October 7, 1999, various interested parties submitted initial
indications of interest. On November 19, 1999, interested parties
submitted final bids and Morgan Stanley began to discuss the terms of
those bids with those parties. On November 30, 1999, Ziff-Davis and its
financial and legal advisors commenced negotiations for the sale of the
ZD Publishing division with Willis Stein & Partners and its financial
and legal advisors. On December 6, 1999, Ziff-Davis entered into an
agreement to sell its ZD Publishing division to a company controlled by
Willis Stein & Partners. For more information about this agreement, see
" -- The Sale Agreements--ZD Publishing" below.

. Auction for ZD Events--Beginning in August 1999, Ziff-Davis and Morgan
Stanley discussed a possible ZD Events transaction with a variety of
potential purchasers and invited those purchasers to submit indications
of interest, and since that time various interested parties have done
so. We are currently in discussions regarding a possible sale of ZD
Events, and we expect to complete this sale or recapitalize ZD Events
and spin it off to holders of ZD stock in the second quarter of 2000.

Because the restructuring involves transactions that might create conflicts
or the appearance of conflicts between the interests of the holders of ZD stock
and the holders of ZDNet stock or between Softbank and other

36
<PAGE>

stockholders, we created a special committee of our board of directors to
review these issues and make recommendations to the full board. The sole member
of the special committee is Jonathan Lazarus. The special committee engaged
Hambrecht & Quist as financial advisors and Preston Gates & Ellis LLP as legal
advisors to assist it in its work. The special committee has been an active
participant in the restructuring process. The special committee has met
frequently with its financial and legal advisors and members of Ziff-Davis'
senior management to review the terms of the restructuring, including the
material terms of the asset purchase agreements. The issues that have been
considered or will be considered by the special committee include:

. the terms of the content license arrangements between ZDNet and the
buyer of our publishing business,

. the valuation of the assets being transferred from ZD to ZDNet,

. the valuation of any actual or contingent ZD liabilities that will be
provided for and

. the possibility that Softbank may provide equity or debt financing (or
both) to the buyer in connection with a possible sale of ZD Events.

In each case thus far, the board of directors has followed the recommendations
of the special committee, and the board expects to continue to do so in the
future.

Reasons for the Restructuring

. allow the holders of ZD stock to realize value from our non-Internet
assets,

. allow us to focus on our Internet businesses,

. allow us to pay down all of our debt and

. eliminate our tracking stock structure.

For these reasons, the board of directors believes that the restructuring will
enhance stockholder value and is in the best interests of our company and all
of our stockholders.

In connection with the sales of particular businesses, the board of
directors also considered the following additional factors:

. the price and terms of the respective sale agreements, including the
fact that the price will be payable in cash,

. the fact that the company and Morgan Stanley had conducted an open
auction and that the company had not received any other offers that were
superior to the terms of these sales,

. the advice of Morgan Stanley, its financial advisor, as to the financial
aspects of each of the sales and

. the opinions of Morgan Stanley to the effect that, subject to the
matters and limitations set forth therein, the consideration to be
received by Ziff-Davis in connection with the sale of its ZD Publishing
business is fair, from a financial point of view, to Ziff-Davis. This
opinion, dated December 5, 1999, is attached as an Annex to this proxy
statement. We encourage you to read this opinion in its entirety.

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<PAGE>

The board of directors also evaluated the potential negative aspects of the
restructuring, including the following:

. the challenges inherent in pursuing a business strategy relating to a
pure play Internet company,

. the possibility that the potential increase in price of the common stock
that may occur as a result of the restructuring may not be realized and

. the fact that the remaining sales may not be completed in the
anticipated time frame or on the agreed terms (particularly in light of
the fact that all of the remaining sales are conditioned on the buyer
obtaining debt financing).

The board of directors was fully aware of the interests of management and
directors described in the next section.

The foregoing discussion of the information and factors which were given
weight by the board of directors is not exhaustive, but includes all material
factors considered by it. The board of directors did not assign specific
weights to the foregoing factors and individual directors may have given
different weights to different factors. The board of directors did, however,
unanimously determine that the restructuring is in the best interests of our
company and all of our stockholders.

Interests of Management and Directors in the Restructuring

In considering the proposals and the recommendations of our board of
directors, you should be aware that some of our executive officers and
directors have interests in the proposals to be voted upon and some of these
interests may be different from those of the holders of ZD stock or ZDNet stock
or both. These interests include the following:

. Most of our executive officers and directors have unvested options to
acquire ZD stock at prices significantly below the current market price
which will vest as a result of the restructuring.

. Some of our executive officers and directors that are part of the
management of businesses we are selling intend to become employees of
the buyer and may receive significant financial inducements from the
buyer to do so.

. Most of our executive officers and directors have unvested options to
acquire ZDNet stock which may become more valuable as a result of the
restructuring.

. Some of our executive officers and directors are affiliated with
Softbank. Softbank is the largest holder of ZD stock and, accordingly,
has a greater economic interest in ZD than in ZDNet.

No Appraisal Rights

Under the General Corporation Law of the State of Delaware, you will not
have appraisal rights in connection with the restructuring.

The Sale Agreements

General

We have entered into four separate purchase agreements with various third
parties that provide for the sale of:

. ZD Market Intelligence, our market intelligence division,

. ZD Education, our business education division,

. our equity interest in ZDTV, our television division and

. ZD Publishing, our print publishing division.

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<PAGE>

As of the date of this proxy statement, we have already completed the sale
of our ZD Market Intelligence division and our equity interest in ZDTV.

ZD Market Intelligence

On August 30, 1999, we entered into an agreement to sell our ZD Market
Intelligence division to Harte-Hanks for $101 million. The address of Harte-
Hanks is 200 Concord Plaza Drive, San Antonio, Texas 78216. On October 1, 1999,
we completed this transaction.

The initial purchase price was subject to a post-closing adjustment based on
the amount by which the division's working capital on the closing date was
greater than or less than zero. As a result of this post-closing adjustment,
the buyer paid us an additional $5 million.

Under the terms of the agreement, at closing the buyer acquired all of our
assets primarily used in the division, with certain limited exceptions. These
exceptions included:

. any assets primarily used in connection with the division's former
metric businesses and

. the marks "Ziff-Davis" and "ZD."

At closing, the buyer assumed all of our liabilities related to the
division, with certain limited exceptions. These exceptions included:

. any long term debt,

. certain liabilities relating to certain active and former employees and

. liabilities for taxes incurred prior to closing.

The agreement contained customary representations, warranties and covenants.
The representations and warranties generally terminate on March 1, 2000.

ZD Education

On November 17, 1999, we entered into an agreement to sell our ZD Education
division to WP Education Holdings LLC, a company controlled by Wasserstein
Perella, for $172 million, subject to an adjustment as described in the next
paragraph. The address of the buyer is c/o WP Management Partners, L.L.C., 320
Park Avenue, 14th Floor, New York, New York 10022. We expect to complete this
transaction in the first quarter of 2000.

The $172 million purchase price is subject to a post-closing adjustment in
either direction to the extent that the net assets of the division as of the
closing date is different from the net assets of the division as of September
30, 1999.

Under the terms of the agreement, at closing the buyer will acquire all of
our assets primarily related to, or used or held for use primarily in
connection with, the division's business, with certain limited exceptions.
These exceptions include:

. cash, bank accounts and marketable securities,

. rights under insurance policies and

. all rights to the names "Ziff-Davis," "Ziff," "ZD" and any derivation
thereof, subject to the division's license agreements with Smart Planet,
Inc. and ZDNet.

At closing, the buyer will assume all of our liabilities related to the
division, with certain limited exceptions. These exceptions include:

39
<PAGE>

. any obligations for borrowed money,

. all liabilities and obligations with respect to the Pacifica litigation
described in the purchase agreement and

. liabilities for taxes incurred prior to closing.

The agreement contains customary representations, warranties and covenants.
The representations and warranties will not survive closing.

The agreement contains customary conditions to closing. These conditions
include, without limitation, receipt of various governmental approvals and
third party consents. (Because the transaction is structured as an asset sale,
it will require numerous third party consents, but we do not currently expect
to have trouble obtaining any material consents.)

In addition, the following are conditions to the buyer's obligation to
complete the transaction:

. the buyer shall have obtained financing for the transaction on the terms
set forth in the commitment letter and term sheet provided from
BankBoston, N.A. at the time of the signing of the agreement and

. there shall not have occurred breaches of representations and
warranties, failures to perform covenants, failures to obtain specified
consents, and any material adverse change in the business, assets,
liabilities, results of operations, prospects or condition (financial or
otherwise) of the education division and Ziff-Davis Education Canada
taken as a whole, which, individually or in the aggregate, results in a
diminution in excess of $8.6 million in the value of the education
division and Ziff-Davis Education Canada taken as a whole (any portion
of such diminution of value that results in a corresponding reduction in
the net assets of the division as of the closing date (and that would
not have resulted in a net asset reduction in the absence of such
events), is excluded from such determination).

Either party may terminate the agreement if the transaction has not been
completed by March 1, 2000, as long as the terminating party has not breached
the agreement in a manner that has proximately contributed to the failure to
complete the transaction by such date. Either party may also terminate the
agreement if a condition to closing becomes incapable of being satisfied or if
any governmental entity enjoins the transactions. Further, one party may
terminate the agreement if the other breaches any of its representations,
warranties or covenants in any material respect that cannot be, or is not,
cured within 10 days.

ZDTV

On November 19, 1999, we entered into an agreement to sell our 64% equity
interest in ZDTV to Vulcan Programming Inc., a company controlled by Paul G.
Allen, for $204.8 million. The address of the buyer is Vulcan Programming Inc.,
110 110th Avenue, N.E., Suite 550, Bellevue, Washington 98004. Before this
transaction, the buyer owned a 32% interest in ZDTV. We completed this
transaction on January 21, 2000.

The agreement contains customary representations, warranties and covenants.
The representations and warranties generally terminate on the 60th day after
the closing. In addition, under the agreement:

. the buyer assumed our obligations to Sky TV under the Sky TV asset
purchase agreement,

. the buyer assumed our obligations to DirecTV under various agreements
and indemnified us from any liabilities or obligations arising pursuant
to such agreements,

. we will continue to provide certain services and rights to ZDTV until no
later than June 30, 2000 pursuant to an Amended Services Agreement and

. for a one-year period following the completion of the sale, the buyer
will honor our contracts with third parties which provide for ZDTV's
services to be packaged with the services of our other divisions.

40
<PAGE>

ZD Publishing

On December 6, 1999, we entered into an agreement to sell our ZD Publishing
division (which excludes Computer Shopper and our investment in Red Herring) to
WS-ZD Acquisition, Inc., a company controlled by Willis Stein & Partners (a
private equity fund), for $780 million, subject to adjustments described in the
next paragraph. The address of WS-ZD Acquisition, Inc. is c/o Willis Stein &
Partners II, L.P., 227 West Monroe Street, Chicago, Illinois 60606. We expect
to complete this transaction in the first quarter of 2000.

If the division's 1999 earnings before interest, taxes, depreciation and
amortization excluding the effect of the assets not being sold ("1999 EBITDA")
is less than $88.4 million, the $780 million purchase price will be reduced by
an amount equal to 7.9 times the amount by which 1999 EBITDA is less than $98.2
million. In addition, if the division's tangible net worth at September 30,
1999 excluding the assets and liabilities not being transferred to the buyer
("September 30 Tangible Net Worth") exceeds the division's tangible net worth
at closing excluding the assets and liabilities not being transferred to the
buyer ("Closing Tangible Net Worth") by more than $5 million, the purchase
price will be reduced by an amount equal to the difference between the
September 30 Tangible Net Worth and the Closing Net Tangible Worth.

. our Computer Shopper print publication,

. our investment in Red Herring Communications Inc.,

. the marks "EQUIP" and "Inter@ctive Investor" and derivatives thereof and

. subject to a license agreement to be entered into between us and the
buyer at the completion of the sale, all rights to the name "ZD."

At closing, the buyer will assume all of our liabilities related to the
division, with certain limited exceptions. These exceptions include:

. any obligations for borrowed money,

. certain disclosed litigation, litigation existing on the date of signing
that should have been disclosed and could reasonably be expected to
result in liability in excess of $1,000,000 and litigation arising after
the date of the agreement and prior to closing if such litigation would
cause a material adverse effect on the publishing division and

. liabilites for taxes incurred prior to closing.

The agreement contains customary representations, warranties and covenants.
The representations and warranties will not survive closing.

In addition, the following are conditions to the buyer's obligation to
complete the transaction:

. the buyer shall have obtained financing for the transaction on the terms
set forth in the commitment letters attached as an exhibit to the
agreement and

. the representations and warranties shall be true and correct in all
material respects as of the date of the agreement and at closing and the
seller shall have performed in all material respects its covenants under
the agreement (where "material" is defined to mean material to the
division as a whole except

41
<PAGE>

that, for purposes of determining the materiality of any breach of
representation that existed as of the date of the agreement or any
breach of a covenant (other than breaches not within the reasonable
control of the seller), "material" includes matters that individually or
in the aggregate have resulted in or would result in damages of $15
million or greater).

Before the closing, the company will enter into a service agreement with
the buyer covering various services that we will provide to the buyer for up
to six months following the closing and covering the terms on which the buyer
will make office space available to our affiliates during this transitional
period.

Either party may terminate the agreement if the transaction has not been
completed by April 4, 2000, as long as the terminating party has not breached
the agreement in a manner that has proximately contributed to the failure to
complete the transaction by such date. Either party may terminate the
agreement if a condition to closing becomes incapable of being satisfied, or
if any governmental entity enjoins the transactions. Further, one party may
terminate the agreement if the other breaches any of its representations,
warranties or covenants in any material respect that cannot be, or is not,
cured within 10 days.

ZDNet License Agreement

In order to assure that 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 the closing of the sale. That license agreement will
grant us the right to use and license third parties to use online the content
of the publications that are being sold 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, we
will host the official websites for the publications that are the subject of
the license agreement, and during the fifth year buyer will host the official
websites.

In exchange for these rights, we will continue to pay a royalty that will
initially be set at a similar level to the royalty that ZDNet currently pays
the publishing division: 5% of the first $100 million in annual revenue (net
of bad debt expense), 4% of the next $50 million in annual revenue (net of bad
debt expense) and 3% of any incremental annual revenue (net of bad debt
expense) 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.

<TABLE>
<CAPTION>
Minimum Maximum
Payment Payment
----------- -----------
<S> <C> <C>
First Year.............................................. $ 7 million $14 million
Second Year............................................. $ 9 million $18 million
Third Year.............................................. $11 million $22 million
</TABLE>

The license agreement will also contain various cross promotional rights
and obligations, including our right to one free page of advertising and one
additional page at "house rates" (i.e., substantially discounted) in each
issue of each publication subject to the licensing agreement.

Advice And Opinion Of Morgan Stanley

Under a letter agreement dated July 14, 1999, we engaged Morgan Stanley to
provide financial advisory services to us. Morgan Stanley was selected by the
board of directors to act as its financial advisor for the restructuring based
on Morgan Stanley's qualifications, expertise and reputation, as well as its
knowledge of the

42
<PAGE>

business and affairs of Ziff-Davis. Morgan Stanley gave financial advice to the
board of directors in connection with all of the sales described above. In
addition, as described below, Morgan Stanley rendered a formal opinion to the
board of directors in connection with the sale of ZD Publishing.

Publishing

On December 5, 1999, Morgan Stanley delivered its oral opinion (subsequently
confirmed in writing) to the board of directors that, as of such date, the
consideration to be received by Ziff-Davis pursuant to the ZD Publishing sale
agreement was fair from a financial point of view to Ziff-Davis, based upon and
subject to the various considerations and assumptions set forth in the opinion.

The full text of the opinion dated December 5, 1999, which sets forth
assumptions made, procedures followed, matters considered and limitations on
the scope of the review undertaken by Morgan Stanley in rendering its opinion,
is attached as an Annex to this proxy statement. Ziff-Davis stockholders are
urged to read the entire opinion. Morgan Stanley's written opinion is directed
to the board of directors and only addresses the fairness of the consideration
to be received by Ziff-Davis pursuant to the ZD Publishing sale agreement from
a financial point of view as of the date of the opinion. Morgan Stanley's
written opinion does not address any other aspect of the sale and does not
constitute a recommendation to any Ziff-Davis stockholder as to how to vote at
the special meeting. This summary of the opinion is qualified in its entirety
by reference to the opinion's full text.

In connection with rendering its opinion, Morgan Stanley, among other
things:

. reviewed certain publicly available financial statements and other
information of Ziff-Davis,

. reviewed certain internal financial statements and other financial and
operating data concerning Ziff-Davis and ZD Publishing prepared by the
management of Ziff-Davis and ZD Publishing,

. analyzed certain financial projections prepared by the management of
Ziff-Davis and ZD Publishing,

. discussed the past and current operations and financial condition and
the prospects of ZD Publishing with management of Ziff-Davis and ZD
Publishing,

. reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions,

. participated in discussions and negotiations among representatives of
Ziff-Davis and Willis Stein & Partners (the "Buyer") (and certain other
parties) and their financial and legal advisors,

. reviewed the draft ZD Publishing sale agreement and supporting schedules
dated December 4, 1999 and certain related documents and

. performed such other analyses as Morgan Stanley has deemed appropriate.

Morgan Stanley has assumed and relied upon without independent verification
the accuracy and completeness of the information reviewed by them for the
purposes of its opinion. With respect to the financial projections, Morgan
Stanley has assumed that they have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the future financial
performance of ZD Publishing. In addition, Morgan Stanley assumed that the sale
will be consummated in accordance with the terms of the ZD Publishing sale
agreement. Morgan Stanley has not made any independent valuation or appraisal
of the assets or liabilities of Ziff-Davis, nor has Morgan Stanley been
furnished with any such appraisals. Morgan Stanley's opinion is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to us as of, the date of such opinion.

The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its opinion and the preparation
of its opinion. Certain of these summaries of financial analyses include
information presented in tabular format. In order to fully understand the
financial analyses used by

43
<PAGE>

Morgan Stanley, the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the financial
analyses. Morgan Stanley used financial estimates for ZD Publishing developed
by management of Ziff-Davis in performing some of its analyses.

Peer Group Comparison. Morgan Stanley compared certain financial information
of ZD Publishing with corresponding financial information for a group of
domestic and international business-to-business and consumer magazine
publishers including:

EMAP-Petersen
Hachette-Fillipachi
McGraw-Hill
Meredith
Penton
Primedia
Reader's Digest
Reed-Elsevier
Scholastic
United News & Media
VNU

Morgan Stanley analyzed, among other things, the current aggregate value of
each company expressed as a multiple of estimated revenue and earnings before
interest, taxes, and depreciation and amortization expense ("EBITDA") for the
calendar year 2000, as of September 30, 1999. As of December 5, 1999 and based
on estimates of revenue and EBITDA taken from selected securities research
analysts, the statistics derived from this analysis are set forth below:

<TABLE>
<CAPTION>
ZD Business to Business and
Publishing Consumer Publishing Companies
Transaction -----------------------------
MANAGEMENT CASE Multiples Median(1) High(1) Low(1)
------------------------ ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
2000E Revenue
Multiples.............. 1.2x 1.8x 2.9x .8x
2000E EBITDA Multiples.. 7.0x 8.7.x 13.2x 7.3x
<CAPTION>
ZD Business to Business and
Publishing Consumer Publishing Companies
Transaction -----------------------------
CONSERVATIVE CASE Multiples Median(1) High(1) Low(1)
------------------------ ----------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
2000E Revenue
Multiples.............. 1.4x 1.8x 2.9x .8x
2000E EBITDA Multiples.. 9.6x 8.7x 13.2x 7.3x
</TABLE>
- --------
(1) These multiples have been reduced by .25x revenue and 1.5x EBITDA to
reflect the reduced Internet opportunity inherent in the content agreement
between ZD Publishing and ZDNet.

Morgan Stanley calculated the financial multiples and ratios for ZD
Publishing based on the purchase price contained in the ZD Publishing sale
agreement and financial projections developed by management of Ziff-Davis
("Management Case"). The Management Case forecasts were then revised by Morgan
Stanley to reflect conservative forecasts for ZD Publishing ("Conservative
Case"). Morgan Stanley first noted that the purchase price represented a
multiple of 1.4x calendar year 1999 estimated revenue and 7.9x calendar year
1999 estimated EBITDA. Morgan Stanley then noted that the purchase price
represented a multiple of 1.2x calendar year 2000 Management Case estimated
revenue and 7.0x calendar year 2000 Management Case estimated EBITDA. Morgan
Stanley also noted that purchase price represented a multiple of 1.4x calendar
year 2000 Conservative Case estimated revenue and 9.6x calendar year 2000
Conservative Case estimated EBITDA. In addition, Morgan Stanley noted the
reduced Internet opportunity for ZD Publishing inherent in the exclusive
content agreement in place between ZD Publishing and ZDNet, as well as the
negative growth rates experienced by ZD Publishing over the course of the last
year.

44
<PAGE>

No company used in the peer group comparison is identical to ZD Publishing.
In evaluating the peer group companies, Morgan Stanley made judgments and
assumptions with regard to industry performance, Internet opportunities,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of ZD Publishing (e.g., the impact of
competition on ZD Publishing and the industry generally, industry growth and
the absence of any material adverse change in the financial condition and
prospects of ZD Publishing or the industry or in the financial markets in
general).

Analysis of Selected Precedent Transactions. As part of its analysis, Morgan
Stanley reviewed the following 22 transactions involving business to business
and consumer publishing companies since 1994:

.February 1994, United Advertising / Harmon

.October 1994, Forstmann-Little / Ziff-Davis

.January 1995, KIII / Rogers

.February 1995, Economist Group / Journal of Commerce

.March 1995, KIII / PJS

.November 1995, KIII / Cahners

.February 1996, Softbank / Ziff-Davis

.April 1996, Hellman & Friedman / Advanstar

.August 1996, Investor Group / Petersen

.October 1996, United News & Media / Blenheim Group PLC

.June 1997, Reed-Elsevier / Chilton Publications

.July 1997, Euromoney / Institutional Investor

.January 1998. Primedia / Cowles Media

.January 1998, Cinven / IPC

.April 1998, Pearson / Apax Partners

.April 1998, Advanstar / Magic

.October 1998, Madison Dearborn / Reiman

.October 1998, Penton Media / Mecklermedia

.December 1998, EMAP / Petersen

.March 1999, Miller-Freeman / CMP

.March 1999, United News & Media / CMP

.August 1999, Veronis Shuler & Associates / Hanley-Wood

For each of these, Morgan Stanley reviewed the prices paid and calculated
the multiples of trailing revenue and EBITDA. This analysis indicated multiples
ranging from 1.8x to 4.5x trailing revenue for these transactions, with a
median multiple of 2.0x. The analysis indicated multiples ranging from 6.7x to
31.7x trailing EBITDA for these transactions with a median multiple of 10.9x.
Morgan Stanley noted that the purchase price for ZD Publishing represented a
multiple of 1.4x 1999 estimated revenue and 7.9x 1999 estimated EBITDA. In
addition, Morgan Stanley noted the reduced Internet opportunity for ZD
Publishing inherent in the exclusive content agreement in place between ZD
Publishing and ZDNet, as well as the negative growth rates experienced by ZD
Publishing over the course of the last year.

45
<PAGE>

No transaction used in the analysis of selected precedent transactions is
identical to the sale. In evaluating these transactions, Morgan Stanley made
judgments and assumptions with regard to industry performance, Internet
opportunities, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of ZD Publishing (e.g., the
impact of competition on ZD Publishing and the industry generally, industry
growth and the absence of any material adverse change in the financial
condition and prospects of ZD Publishing or the industry or in the financial
markets in general).

Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis (i.e., an analysis of the present value of projected cash flows
using discount rates and perpetuity growth rates as indicated below) of ZD
Publishing. Morgan Stanley analyzed ZD Publishing using a forecast for the
period beginning September 30, 1999 and ending December 31, 2006, based on
estimates developed by Ziff-Davis management ("Management Case"). Morgan
Stanley estimated ZD Publishing's discounted cash flow value by using a
discount rate of 13% to 15% and perpetuity growth rates ranging from 3% to 6%.
This analysis yielded a range of values for ZD Publishing of approximately $780
- - $930 million. The purchase price for ZD Publishing represented no premium to
the Management Case discounted cash flow values.

The Management Case forecasts were revised by Morgan Stanley and a separate
discounted cash flow analysis was conducted to reflect conservative forecasts
for ZD Publishing ("Conservative Case"). This analysis yielded a range of
values for ZD Publishing of approximately $640 - $760 million. The purchase
price for ZD Publishing represented a premium to the discounted cash flow
values of approximately 3%-22%.

Morgan Stanley performed a variety of financial and comparative analyses
solely for purposes of providing its opinion to the board of directors as to
the fairness of the consideration from a financial point of view to Ziff-Davis.
While the foregoing summary describes the analyses and factors reviewed by
Morgan Stanley for its opinion, it is not intended to be a complete description
of all the analyses performed by Morgan Stanley in arriving at its opinion.

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, selecting any portion of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion. In addition, Morgan Stanley may have given various
analyses and factors more or less weight than other analyses and factors, and
may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of ZD Publishing.

In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of ZD Publishing. The
analyses performed by Morgan Stanley are not necessarily indicative of future
results or actual values, which may be significantly more or less favorable
than those suggested by such estimates. The analyses performed were prepared
solely as part of Morgan Stanley's analysis of the fairness of the
consideration from a financial point of view to Ziff-Davis and were conducted
in connection with the delivery of its opinion. The analyses are not intended
to be appraisals or to reflect the prices at which ZD Publishing might actually
be sold.

The consideration was determined through arm's length negotiations between
Ziff-Davis and Buyer and was approved by the board of directors. Morgan Stanley
did not recommend any specific consideration to Ziff-Davis or that any specific
consideration constituted the only appropriate consideration for the sale.
Morgan Stanley's opinion to the board of directors was one of many factors
taken into consideration by the board of directors in making its determination
to approve the sale. Consequently, the Morgan Stanley analyses described above
should not be viewed as determinative of the opinion of the board of directors
with respect to the value of ZD Publishing or whether the board of directors
would have been willing to agree to different consideration.

46
<PAGE>

General

Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. In the ordinary
course of Morgan Stanley's trading, brokerage and financial activities, Morgan
Stanley or its affiliates may at any time hold long or short positions, may
trade, make a market or otherwise effect transactions, for its own account or
for the accounts of customers, in the securities of Ziff-Davis. In the past,
Morgan Stanley and its affiliates have provided financial advisory and
financing services for Ziff-Davis, affiliates of Ziff-Davis and Buyer and have
received fees for the rendering of these services.

Under the letter agreement dated as of July 14, 1999, Morgan Stanley has
provided advisory services and financial opinions in connection with the
restructuring and Ziff-Davis has agreed to pay a customary fee to Morgan
Stanley based on the aggregate value of the transactions if the sales are
consummated, including an additional success fee measured with reference to the
future stock price of the ZD stock if the sales of ZD Education, ZD Publishing,
ZD Events and our equity interest in ZDTV are all consummated. In addition,
Ziff-Davis has also agreed to indemnify Morgan Stanley and its affiliates,
their respective directors, officers, agents and employees and each person, if
any, controlling Morgan Stanley or any of its affiliates against certain
liabilities and expenses, including the fees of its legal counsel and certain
liabilities under the federal securities laws, arising out of Morgan Stanley's
engagement and the transactions in connection therewith.

Filings, Approvals, Clearances and Consents for the Sales

In each of the pending sale agreements, we have agreed to use our reasonable
efforts (or reasonable best efforts, depending on the agreement) to obtain all
government approvals and third party consents necessary to complete the
respective sales. In addition, each sale agreement provides that it is a
condition to closing that the parties shall have received all necessary
government approvals and third party consents except for those which the
failure to obtain would not be material. These transactions will require
numerous third party consents because these transactions are structured as
asset sales.

These transactions will require numerous third party consents because these
transactions are structured as asset sales.

There can be no assurance that the approvals and consents described above
that have not yet been obtained will be obtained, or, if obtained, will not
include conditions that would be detrimental to us or would result in the
abandonment of the transactions by us or other parties to the sale agreements.
Neither we nor the other parties have determined how we will respond to
conditions, limitations or divestitures which may be sought by governmental
entities or third parties in connection with any requisite approvals or
consents. If any conditions, limitations or divestitures are sought by
governmental entities or third parties, we and the other parties will make such
determinations at the appropriate time.

The Merger Agreement

A copy of the merger agreement is attached as an Annex to this proxy
statement. The merger agreement provides, among other things, for a merger of
Ziff-Davis Inc. and a newly formed subsidiary of Ziff-Davis Inc. that was
formed solely for the purpose of engaging in the merger. Pursuant to the
merger, the newly formed subsidiary will merge with and into Ziff-Davis Inc.,
and Ziff-Davis Inc. will be the surviving corporation.

Terms Of The Merger

In the merger:

. each share of ZDNet stock issued and outstanding immediately prior to
the merger will be converted into a number of shares of common stock
equal to the exchange ratio for the merger calculated as described under
"--The Merger" above,

47
<PAGE>

. each share of ZD stock issued and outstanding immediately prior to the
merger will remain an issued and outstanding share of common stock and

. each share of common stock of the newly formed subsidiary issued and
outstanding immediately prior to the merger will be canceled and retired
without payment of any consideration therefor and will cease to exist.

Fractional shares of common stock will not be issued to holders of ZDNet stock.
In lieu of fractional shares, holders of ZDNet stock will receive a cash
payment.

Effective Time Of The Merger

The merger will become effective at the time when we duly file a certificate
of merger with the Secretary of State of the State of Delaware or such other
time as agreed upon by the parties and set forth in the certificate of merger.

Certificate Of Incorporation And By-laws Of Ziff-Davis Inc.

The merger agreement provides that, at the effective time of the merger, our
Amended and Restated Certificate of Incorporation will be further amended and
restated to read in its entirety as set forth in Exhibit A to the merger
agreement. The substance of the amendments is to:

. Delete all of the provisions relating to our existing tracking stock
structure so that it will provide for a single class of ordinary common
stock. These deletions will have no substantive effect, since our
current certificate of incorporation states that the tracking stock
provisions will apply only when there are shares of both series of
common stock outstanding.

. Change the name of the company from Ziff-Davis Inc. to ZDNet Inc.

The merger will not affect our current by-laws.

Termination

We may choose to terminate the merger agreement and abandon the merger at
any time prior to the completion of the merger.

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<PAGE>

Description Of Capital Stock And Comparison Of Stockholders' Rights; Anti-
Takeover Considerations

We currently have outstanding two series of common stock: ZDNet Common
Stock, which we call "ZDNet stock," and ZD Common Stock, which we call "ZD
stock." Each of these series is what is commonly referred to as "tracking
stock." We intend the ZDNet stock to track the performance of ZDNet, and we
intend the ZD stock to track the performance of ZD. In addition to the
businesses being sold as part of the restructuring described in this proxy
statement, ZD owns a retained interest in ZDNet which is currently the
equivalent of 60 million shares of ZDNet stock.

The terms of our two series of common stock are typical for "tracking
stock." After the merger described in this proxy statement, all of our
stockholders will hold a single class of ordinary common stock. The following
is a brief comparison of the rights our stockholders currently have and the
rights they will have after the merger:

<TABLE>
<CAPTION>
Current Rights Rights After Merger
-------------- -------------------
<S> <C>
. Holders of ZD stock and holders of ZDNet . Holders of common stock will vote
stock generally vote together as a together as a single class and have one
single class. Holders of ZD stock have vote per share. Stockholders will not
one vote per share and holders of ZDNet have preemptive or cumulative voting
stock have a number of votes per share rights.
determined with reference to the ZDNet
stock price as compared to the ZD stock
price over a specified averaging period
prior to the record date for the vote.
Neither holders of ZDNet stock nor
holders of ZD stock have preemptive or
cumulative voting rights.
. Holders of ZD stock and ZDNet receive . Holders of common stock will receive
dividends if, as and when the board dividends if, as and when the board
declares them out of legally available declares them out of legally available
funds, and the board may declare funds.
dividends in equal or unequal amounts on
each series (or may declare dividends on
one series and not on the other), but
the dividends on ZD stock cannot be
greater than the amount ZD could pay if
ZD were a separate Delaware corporation
and the dividends on ZDNet stock cannot
be greater than the amount ZDNet could
pay if ZDNet were a separate Delaware
corporation.
. If we dispose of all or substantially . We will not be permitted to sell all or
all of the assets of ZD, we are required substantially all of the assets of Ziff-
to distribute to holders of ZD stock Davis Inc. (renamed ZDNet Inc.) unless
their proportionate interest in the net we receive stockholder approval to do
proceeds or issue ZDNet stock for ZD so. Neither we nor our stockholders will
stock at a 10% premium. Similarly, if we have any conversion or redemption rights
dispose of all or substantially all of with respect to the ZD stock or the
the assets of ZDNet, we are required to ZDNet stock. None of the other
distribute to holders of ZDNet stock provisions described in the paragraph
their proportionate interest in the net that appears to the left of this
proceeds or issue ZD stock for ZDNet paragraph will apply.
stock at a 10% premium. In addition, we
are not permitted to sell all or
substantially all of the assets of Ziff-
Davis Inc. unless we receive stockholder
approval to do
</TABLE>

49
<PAGE>

<TABLE>
<CAPTION>
Current Rights Rights After Merger
-------------- -------------------
<S> <C>
so. We are also permitted in certain
circumstances to exchange ZD stock for
ZDNet stock or vice versa, to redeem ZD
stock in return for stock of a subsidiary
holding all of the assets and liabilities
of ZD or to redeem ZDNet stock in return
for the stock of a subsidiary holding all
of the assets and liabilities of ZDNet.
Except as otherwise described in this
paragraph, neither we nor our stockholders
have any conversion or redemption rights
with respect to the ZD stock or the ZDNet
stock.
. If we liquidate, holders of ZD stock and . If we liquidate, holders of common stock
ZDNet stock will share in the assets will share in the assets remaining after
remaining after satisfaction in full of satisfaction in full of the prior rights
the prior rights of creditors and of creditors and payment of the
payment of the aggregate liquidation aggregate liquidation preference for all
preference for all outstanding shares of outstanding shares of preferred stock,
preferred stock, pro rata in relation to pro rata in proportion to the number of
the aggregate market value of their shares held.
holdings over a specified averaging
period prior to announcement of the
liquidation.
</TABLE>

Our transfer agent and registrar will continue to be The Bank of New York.

Certain Other Provisions Of Our Restated Certificate Of Incorporation And By-
laws

Authorized Shares

We currently have authority to have outstanding up to 210 million shares of
common stock (regardless of series) and 10 million shares of preferred stock,
and the merger will not change these amounts. After the merger, and after
giving effect to the shares of common stock we expect to have outstanding at
that time (but without giving effect to options we expect to have outstanding
at that time), we will have authority to issue about 70 million additional
shares of common stock, and 10 million shares of preferred stock, without
further stockholder approval under the Delaware General Corporation Law. 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 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.

Preferred Stock

Our current certificate of incorporation provides, and our certificate of
incorporation after the merger will provide, that the board of directors may
issue shares of preferred stock in one or more series from time to time. The
board of directors 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,

50
<PAGE>

. 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 to holders of the shares of such series upon voluntary or
involuntary liquidation, dissolution or winding-up Ziff-Davis 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 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 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 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 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 charter 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 or any corresponding provision hereafter enacted.

Staggered Board Of Directors

The board of directors 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 of directors has the effect of making it more
difficult for stockholders to change the composition of the board of directors,
because only a minority of the directors are up for election at each annual
meeting, and the board of directors may not be replaced by vote of the
stockholders at any one time.

Number Of Directors; Removal; Filling Vacancies

The number of members of the board of directors will be fixed from time to
time pursuant to our by-laws. Our by-laws provide that the board of directors
will consist of one or more members, the number of which is determined from
time to time by the board of directors. In the event of any increase or
decrease in the authorized number of directors,

. 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

. 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.

51
<PAGE>

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.

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 of directors 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 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 may be called only by the Chairman of
the board of directors or the board of directors 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 of directors 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 notice of any proposal to be presented or
of a candidate to be nominated for election as a director of Ziff-Davis 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) 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 of directors, 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's directors, the election and term of Ziff-Davis' directors, the filling
of vacancies and the removal of directors.

Certain Provisions Of Delaware Law

Ziff-Davis is subject to the business combination provisions of Section 203
of the General Corporation Law of the State of Delaware. 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 the person
became an interested stockholder unless:

. the business combination transaction, or the transaction in which the
interested stockholder became an interested stockholder, is approved by
the board of directors prior to the date the interested stockholder
obtained such status,

52
<PAGE>

. 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 (1) persons who are
directors and also officers and (2) 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

. on or subsequent to such date the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested
stockholder.

A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. In general,
an "interested stockholder" is a person who, together with affiliates and
associates, owns (or, within three years, did own) 15% or more of a
corporation's voting stock. The statute could prohibit or delay mergers or
other takeover or change in control attempts with respect to Ziff-Davis and,
accordingly, may discourage attempts to acquire Ziff-Davis. Since the board of
directors approved the acquisition of common stock by SOFTBANK America Inc.
before SOFTBANK America Inc. acquired such common stock, SOFTBANK America Inc.
is not an interested stockholder for these purposes.

Limitations On Liability And Indemnification Of Officers And Directors

Section 102 of the General Corporation Law of the State of Delaware
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 General Corporation Law of the State of Delaware
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
charter and by-laws include provisions which limit or eliminate the personal
liability of our directors to the fullest extent permitted by Section 102 of
the General Corporation Law of the State of Delaware. Consequently, a director
will not be personally liable to Ziff-Davis or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for any breach of
the director's duty of loyalty to Ziff-Davis 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 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 or serves
or served at the request of Ziff-Davis 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 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.
The inclusion of these indemnification provisions in our by-laws is intended to
enable Ziff-Davis 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 are insured under policies of
insurance maintained by Ziff-Davis, subject to the limits of such policies,
against certain losses arising from any claim made against them by reason

53
<PAGE>

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

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

Section 203 of the General Corporation Law of the State of Delaware, and the
provisions of our charter and by-laws described above, may make it more
difficult for a third party to acquire or discourage bids for Ziff-Davis.
Section 203 and these provisions could have the effect of inhibiting attempts
to change the membership of the board of directors.

54
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF ZIFF-DAVIS INC.

The following unaudited pro forma consolidated financial statements of Ziff-
Davis Inc. are based on the historical Consolidated Financial Statements of
Ziff-Davis Inc. appearing in an Annex to this proxy statement, adjusted to give
effect to the reorganization described in Note 2 to the unaudited Consolidated
Financial Statements of Ziff-Davis Inc. included in that Annex, the public
offering described in Note 3 to those financial statements and the
restructuring described in this proxy statement.

The Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1998
gives pro forma effect to the public offering and the restructuring as if they
had occurred as of that date. The Unaudited Pro Forma Consolidated Balance
Sheet as of September 30, 1999 gives pro forma effect to the restructuring as
if it had occurred as of that date. The Unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1998 gives pro forma
effect to the reorganization, the public offering and the restructuring as if
they had occurred immediately prior to January 1, 1998. The Unaudited Pro Forma
Consolidated Statement of Operations for the nine months ended September 30,
1999 gives pro forma effect to the public offering and the restructuring as if
they had occurred immediately prior to January 1, 1999. Further detail about
the pro forma adjustments appear in notes appearing at the end of the unaudited
pro forma consolidated financial statements.

These statements are not necessarily indicative of the actual financial
position or results of operations of Ziff-Davis Inc. as of the dates or for the
periods indicated or the financial position or results of operations that Ziff-
Davis Inc. would have experienced if the transactions for which the statements
give pro forma effect had in fact occurred at the times assumed. Also, the
statements do not purport to represent Ziff-Davis Inc.'s future financial
position or results of operations.

These statements should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements for Ziff-Davis Inc. included in an Annex to
this proxy statement.

55
<PAGE>

ZIFF-DAVIS INC.
UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEETS
(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
December 31, 1998 September 30, 1999
------------------------------------- -------------------------------------
Actual Adjustment Pro forma Actual Adjustment Pro forma
----------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 32,566 $ (12,274) $ 20,292 $ 29,791 $ 31,429 $ 61,220
Accounts receivable,
net.................. 227,325 (189,495) 37,830 218,437 (186,322) 32,115
Inventories........... 15,551 (12,213) 3,338 12,946 (11,918) 1,028
Prepaid expenses and
other current
assets............... 34,543 (33,042) 1,501 37,407 (35,417) 1,990
Due from affiliates... 53,984 (53,984) -- 4,722 (4,722) --
Deferred taxes........ 22,262 (21,483) 779 22,262 (22,262) --
----------- ------------ ----------- ----------- ------------ -----------
Total current
assets............. 386,231 (322,491) 63,740 325,565 (229,212) 96,353
Securities available for
sale................... -- -- -- 7,916 -- 7,916
Property and equipment,
net.................... 91,189 (82,758) 8,431 116,917 (106,741) 10,176
Intangible assets, net.. 2,907,043 (2,799,704) 107,339 2,935,514 (2,787,725) 147,789
Other assets............ 49,340 (44,340) 5,000 58,024 (41,406) 16,618
----------- ------------ ----------- ----------- ------------ -----------
Total assets........ $ 3,433,803 $ (3,249,293) $ 184,510 $ 3,443,936 $ (3,165,084) $ 278,852
=========== ============ =========== =========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 75,863 $ (71,303) $ 4,560 $ 36,506 $ (32,307) $ 4,199
Accrued expenses...... 97,319 (80,228) 17,091 136,081 (115,874) 20,207
Unearned income, net.. 152,081 (147,307) 4,774 195,613 (183,097) 12,516
Due to affiliates and
management........... 4,618 (4,618) -- -- -- --
Current portion of
notes payable to
affiliates........... 7,692 (7,692) -- 6,923 (6,923) --
Other current
liabilities.......... 13,125 (13,125) -- 17,054 (17,054) --
----------- ------------ ----------- ----------- ------------ -----------
Total current
liabilities........ 350,698 (324,273) 26,425 392,177 (355,255) 36,922
Notes payable to
affiliates............. 70,192 (70,192) -- 65,769 (65,769) --
Notes payable, net of
unamortized discount... 1,469,130 (1,469,130) -- 1,199,215 (1,199,215) --
Deferred taxes.......... 165,082 (164,303) 779 134,884 (134,884) --
Due to management....... 5,400 (5,400) -- 665 (665) --
Other liabilities....... 19,690 (19,690) -- 14,813 (14,813) --
----------- ------------ ----------- ----------- ------------ -----------
Total liabilities... 2,080,192 (2,052,988) 27,204 1,807,523 (1,770,601) 36,922
----------- ------------ ----------- ----------- ------------ -----------
Commitments and
contingencies
Minority interest....... 1,013 -- 1,013 31,255 (31,255) --
----------- ------------ ----------- ----------- ------------ -----------
Total stockholders'
equity................. 1,352,598 (1,196,305) 156,293 1,605,158 (1,363,228) 241,930
----------- ------------ ----------- ----------- ------------ -----------
Total liabilities
and stockholders'
equity............. $ 3,433,803 $ (3,249,293) $ 184,510 $ 3,443,936 $ (3,165,084) $ 278,852
=========== ============ =========== =========== ============ ===========
Common Stock
Outstanding, par value
$0.01 per share
Ziff-Davis Inc.--ZD
Stock................ 100,000,000 (100,000,000) -- 103,310,097 (103,310,097) --
Ziff-Davis Inc.--ZDNet
Stock................ 11,500,000 (11,500,000) -- 13,706,063 (13,706,063) --
Common Stock.......... -- 129,890,502 129,890,502 -- 140,999,081 140,999,081
</TABLE>

The accompanying notes are an integral part of these pro forma financial
statements.

56
<PAGE>

ZIFF-DAVIS INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
Pro forma
Pro forma Nine Months Nine Months
Year Ended Year Ended Ended Ended
December 31, December 31, September 30, September 30,
1998 Adjustment 1998 1999 Adjustment 1999
------------ ---------- ------------ ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............ $ 782,882 $(673,184) $ 109,698 $518,626 $(468,169) $ 50,457
Events................ 269,867 (269,867) -- 157,150 (157,150) --
Internet.............. 56,143 3,665 59,808 67,791 2,634 70,425
Television............ -- -- -- 9,343 (9,343) --
--------- --------- ----------- -------- --------- -----------
1,108,892 (939,386) 169,506 752,910 (632,028) 120,882
Production and content.. 305,346 (244,195) 61,151 202,038 (159,534) 42,504
Selling, general and
administrative
expenses............... 567,683 (490,504) 77,179 458,593 (397,880) 60,713
Stock-based
compensation........... -- 3,477 3,477 4,861 (1,788) 3,073
Depreciation and
amortization of
property and
equipment.............. 29,885 (27,785) 2,100 25,558 (23,281) 2,277
Amortization of
intangible assets...... 122,659 (115,216) 7,443 102,308 (94,237) 8,071
Restructuring charge.... 52,239 (52,239) -- -- -- --
--------- --------- ----------- -------- --------- -----------
Income (loss) from
operations............. 31,080 (12,924) 18,156 (40,448) 44,692 4,244
Interest expense, net--
related party.......... (65,935) 65,935 -- -- -- --
Interest expense, net... (77,612) 77,612 -- (89,602) 89,602 --
Other non-operating
income, net............ 8,231 (8,097) 134 26,762 (26,762) --
Minority interest in
losses of
subsidiaries........... -- -- -- 15,686 (15,569) 117
--------- --------- ----------- -------- --------- -----------
Income (loss)
before income taxes.... (104,236) 122,526 18,290 (87,602) 91,963 4,361
Provision (benefit) for
income taxes........... (26,427) 37,204 10,777 (31,655) 34,336 2,681
--------- --------- ----------- -------- --------- -----------
Net income (loss)....... $ (77,809) $ 85,322 $ 7,513 $(55,947) $ 57,627 $ 1,680
========= ========= =========== ======== ========= ===========
Pro forma net income per
common share
Basic................. $ 0.06 $ 0.01
Diluted............... $ 0.05 $ 0.01
Pro forma weighted
average common shares
outstanding
Basic................. 129,890,502 137,736,688
Diluted............... 141,485,182 151,580,906
</TABLE>

The accompanying notes are an integral part of these pro forma financial
statements.

57
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Pro Forma Consolidated Balance Sheet Notes

December 31, 1998

The pro forma adjustments for the unaudited pro forma consolidated balance
sheet as of December 31, 1998 assume that the following had occurred as of that
date:

. the sale of 11,500,000 shares of ZDNet stock at a public offering price
of $19.00 per share, less underwriting discounts and expenses of $1.74
per share;

. the application of the net proceeds from the sale of ZDNet stock to
reduce indebtedness underZiff-Davis Inc.'s revolving credit facility by
approximately $200 million;

. the sale of ZD Market Intelligence, ZD Publishing (which excludes
Computer Shopper), ZD Events, Ziff-Davis Inc.'s equity interest in ZDTV
and ZD Education for proceeds assumed to aggregate $1.9 billion (the
actual number will not impact the pro forma statements, as explained
under "--General Notes" below);

. the use of a portion of the proceeds from the sale of these businesses
to repay ZD's remaining debt (approximately $1.35 billion at December
31, 1998 after giving effect to the $200 million repayment referred to
above), to pay certain expenses (assumed to aggregate $75 million) and
to cover certain ZD contingent liabilities (assumed to aggregate $10
million) (see "--General Notes" below);

. a $270 million write down of intangible assets relating to Ziff-Davis
Inc.'s Computer Shopper business (this amount, which is an estimate of
the impairment write down that Ziff-Davis Inc. expects it will take in
the fourth quarter of 1999, is the amount by which the estimated net
present value of future cash flows from Computer Shopper exceeds the
carrying value of Computer Shopper);

. the vesting and exercise of options to purchase an assumed 5.5 million
shares of ZD stock for an assumed $34 million and options to purchase an
assumed 2.3 million shares of ZDNet stock for an assumed $10 million
(see "--General Notes" below);

. the payment of a dividend to holders of ZD stock in an amount assumed to
equal all of the remaining proceeds from the sales of the various
businesses and the exercise of ZD options; under the foregoing
assumptions, the dividend would aggregate about $500 million, or about
$4.73 per share of ZD stock (see "--General Notes" below); and

. the elimination of Ziff-Davis Inc.'s tracking stock structure through a
merger with a newly formed subsidiary, as a result of which each share
of ZDNet stock will be converted into an assumed 1.77 shares of common
stock and each share of ZD stock will remain outstanding as one share of
common stock (see "--General Notes" below).

September 30, 1999

The pro forma adjustments for the unaudited pro forma consolidated balance
sheet as of September 30, 1999 assume that the following had occurred as of
that date:

. the use of a portion of the proceeds from the sale of these businesses
to repay ZD's remaining debt (approximately $1.27 billion at September
30, 1999), to pay certain expenses (assumed to aggregate $75 million)
and to cover certain ZD contingent liabilities (assumed to aggregate $10
million) (see "--General Notes" below);

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<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

. the vesting and exercise of options to purchase an assumed 7.6 million
shares of ZD stock for an assumed $66 million and options to purchase an
assumed 3.3 million shares of ZDNet stock for an assumed $39 million
(see "--General Notes" below);

. the payment of a dividend to holders of ZD stock in an amount assumed to
equal all of the remaining proceeds from the sales of the various
businesses and the exercise of ZD options; under the foregoing
assumptions, the dividend would aggregate about $608 million, or about
$5.48 per share of ZD stock (see "--General Notes" below); and

Unaudited Pro Forma Consolidated Statement of Operations Notes

Year Ended December 31, 1998

The pro forma adjustments for the unaudited pro forma consolidated statement
of operations for the year ended December 31, 1998 assume that the following
had occurred immediately prior to January 1, 1998:

. the reorganization described in Note 2 to the unaudited Consolidated
Financial Statements of Ziff-Davis Inc. included in an Annex to this
proxy statement;

. the grant of ZDNet options that were in fact granted in the fourth
quarter of 1998 and the adjustment of the terms of those options to
reflect the dividend and merger described above, resulting in a greater
pro forma diluted weighted average common shares outstanding and the
recording of non-cash compensation expense during the period; and

. each of the other transactions described under "Unaudited Pro Forma
Consolidated Balance Sheet Notes--December 31, 1998" above.

In addition, for purposes of calculating the pro forma diluted weighted average
common shares outstanding (under the treasury stock method) and the resulting
pro forma diluted net income per common share, this consolidated statement of
operations assumes a weighted average price per common share of $15.71 (which
is equal to the closing price per share of ZDNet stock on January 31, 2000
divided by the assumed exchange ratio in the merger of 1.77).

Nine Months Ended September 30, 1999

The pro forma adjustments for the unaudited pro forma consolidated statement
of operations for the nine months ended September 30, 1999 assume that the
following had occurred immediately prior to January 1, 1999:

. the sale of 11,500,000 shares of ZDNet stock at a public offering price
of $19.00 per share, less underwriting discounts and expenses of $1.74
per share;

. the application of the net proceeds from the sale of ZDNet stock to
reduce indebtedness under Ziff-Davis Inc.'s revolving credit facility by
approximately $200 million;

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<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

. the grant of options that were in fact granted at various times in the
first three quarters of 1999 and the adjustment of the terms of all
options to reflect the dividend and merger described above, resulting in
a greater pro forma diluted weighted average common shares outstanding
during the period; and

. each of the other transactions described under "Unaudited Pro Forma
Consolidated Balance Sheet Notes--September 30, 1999" above.

General Notes Applicable to All of the Unaudited Pro Forma Consolidated
Financial Statements

As long as the dividend to holders of ZD stock is assumed to equal all of
the remaining proceeds from the sales of the various businesses and the
exercise of ZD options, none of the following amounts have any impact on the
pro forma consolidated financial statements:

. the actual sale proceeds from the assumed sales of the various
businesses,

. the actual amount needed to repay ZD's remaining debt, to pay various ZD
expenses and to cover various ZD contingent liabilities and

. the actual amount of proceeds from the exercise of ZD options.

Of course, the foregoing amounts will have a direct impact on the size of the
dividend paid to holders of ZD stock.

The foregoing adjustments assume that Ziff-Davis Inc. will merge with a
newly formed subsidiary, as a result of which each share of ZDNet stock will be
converted into an assumed 1.77 shares of common stock and each share of ZD
stock will remain outstanding as one share of common stock. The actual exchange
ratio will be calculated as described under "Proposal 1--The Restructuring of
Ziff-Davis--The Merger" appearing earlier in this proxy statement. The
underlying assumptions that generated this assumed exchange ratio are described
in that same section of this proxy statement.

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<PAGE>

PROPOSALS 2 and 3--AMENDMENTS TO BENEFIT PLANS

General

At the special meeting, we will also ask you to consider and approve
proposals to amend:

. The Amended 1998 Incentive Compensation Plan (the "Incentive Plan") and

. The Amended 1998 Non-Employee Directors' Stock Option Plan (the "Non-
Employee Directors' Plan").

The purpose of the amendments to each of the plans is to increase the number of
shares available for issuance thereunder.

Description of Amendment to Incentive Plan (Proposal 2)

The amendment to the Incentive Plan will increase the number of shares of
common stock (regardless of series) available for grants or awards. Currently,
the Incentive Plan allows a cumulative issuance of up to 23,000,000 shares. As
it will be amended:

. the total cumulative number of shares of common stock that may be issued
under the Incentive Plan through December 31, 2000 may not exceed a
maximum of 40,000,000 and

. the total cumulative number of shares of common stock that may be issued
through the end of any fiscal year beginning after December 31, 2000 may
not exceed the maximum number in effect during the preceding fiscal year
plus four percent of the number of shares of common stock outstanding as
of the last day of the preceding fiscal year.

These shares may be authorized but unissued common stock or authorized and
issued common stock held in treasury or otherwise acquired for the purposes of
the Incentive Plan. If any grant or award is forfeited or is otherwise
terminated or canceled without the delivery of shares of common stock or if
shares of common stock owned by a grantee are tendered to pay the exercise
price of grants or awards, then such shares will again become available under
the Incentive Plan. No more than 40,000,000 shares of common stock may be
available for delivery in connection with the exercise of ISOs (as defined
below).

We estimate that options to purchase about 11 million shares will already
have been exercised by the time of the merger described in this proxy statement
and that options to purchase another 22 million shares will remain outstanding
at that time. Based on this estimate, about 7 million shares would initially be
available for future grants or awards under the Incentive Plan.

Description Of The Incentive Plan

General

Ziff-Davis 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 is administered by the incentive compensation plan
committee which

. selects the participants and determines the type of awards and the
number of shares or share units subject to awards and

. interprets the Incentive Plan and makes all other determinations
necessary or advisable for its administration.

All employees and consultants of Ziff-Davis and our affiliates who have
demonstrated significant management potential or the capacity for contributing
substantially to the successful performance of Ziff-Davis and our affiliates
are eligible to be participants in the Incentive Plan. Awards may consist of
stock awards, stock options (either incentive stock options ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, 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.

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<PAGE>

In the event of any change in the outstanding shares by reason of any stock
dividend or split, recapitalization, merger, consolidation, spin-off,
combination, exchange of shares, 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 or reserved for issuance pursuant to the Incentive
Plan and to outstanding awards.

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 generally not be less
than 100% of the fair market value of the common stock on the date of grant,
unless otherwise specifically determined by the incentive compensation plan
committee. 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 stock options that are intended to qualify as
ISOs will contain any additional provisions necessary to comply with the
requirements of Section 422 of the Internal Revenue Code.

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.

Limitation On Awards Of Options To Any Individual

Under the Incentive Plan, no individual employee may receive grants of stock
options with respect to more than 1,000,000 shares of common stock (regardless
of series) in any calendar year; provided, however, that for the 1998 calendar
year, no individual employee could receive grants of stock options with respect
to more than 2,600,000 shares of common stock.

Stock Appreciation Rights

Stock appreciation rights, also known as 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 compensation 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 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 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

62
<PAGE>

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 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 Internal Revenue
Code and any other employee of Ziff-Davis 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 the 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, 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):

. all stock options will be fully vested and exercisable in full,

. all SARs which have not been granted in tandem with stock options will
become exercisable in full,

. 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,

. all performance shares will be deemed to be earned at target level and

. 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 of directors except upon consent
of the previous board of directors, (2) certain mergers, consolidations or
similar corporate transactions in which Ziff-Davis is not the surviving
corporation or entity or (3) a plan of complete liquidation or dissolution of
Ziff-Davis or a sale of all or substantially all of Ziff-Davis' assets that is
approved by the stockholders of Ziff-Davis; 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 the voting securities
of any surviving corporation.

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<PAGE>

Amendment And Termination

The board of directors may amend, suspend or terminate the Incentive Plan or
any portion thereof at any time; provided that,

. 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

. 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 will expire 10 years from February 13, 1998, unless it is
terminated earlier.

Repricing

On September 23, 1998, the incentive compensation 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 stock options was reduced from $16.00 to $6.00 (the
closing price of our common stock on September 23, 1998), but the stock options
will not vest until three months after the dates on which the stock options
were originally to become vested unless otherwise accelerated in connection
with the restructuring.

Common Stock Available Under The Incentive Plan

Both before and after the amendment:

. the shares of common stock issued under the Incentive Plan may be
authorized and unissued shares or treasury shares, as the company may
from time to time determine;

. up to 327,500 shares of common stock were available out of outstanding
shares 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 of common stock in
respect of these awards will be supplied by SOFTBANK Corp-- Ziff-Davis'
majority stockholder; and

. 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 a stock option, will thereafter
again be available for grant under the Incentive Plan.

Grants Of Awards

Currently, under the Incentive Plan, grants of stock options and other
stock-based awards may be made with respect to either ZD stock or ZDNet stock,
or both. After the restructuring is completed, grants of stock options and
other stock-based awards under the Incentive Plan will be made in respect of
the common stock of the company.

Effect Of Amendment On Outstanding Awards

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

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<PAGE>

Future Awards Under The Incentive Plan

The incentive compensation plan committee will be able to grant awards
under the Incentive Plan with respect to common stock in such amounts and
types as it determines in its discretion in accordance with the terms of the
Incentive Plan.

Market Value Of Securities Underlying the Options

As of January 31, 2000 the aggregate market value of the securities
underlying the ZD stock options was approximately $17.7 million and the
aggregate market value of the securities underlying the ZDNet stock options
was approximately $44.8 million.

Plan Benefits

We cannot currently determine the number of shares subject to stock options
that may be granted in the future to executive officers and employees under
the Incentive Plan. The following table sets forth information with respect to
the ZD stock options and the ZDNet stock options granted prior to February 1,
2000 to (1) the named executive officers below, (2) all current executive
officers as a group, (3) all current directors who are not executive officers
as a group and (4) all employees (including all current officers who are not
executive officers) as a group under the Incentive Plan.

<TABLE>
<CAPTION>
Number of Number of
options to options to
purchase shares of purchase shares
ZD stock granted of ZDNet stock
under granted under the
Name the Incentive Plan Incentive Plan
---- ------------------ -----------------
<S> <C> <C>
Eric Hippeau ............................ 1,020,000 700,000
Chairman and Chief Executive Officer
Jason E. Chudnofsky...................... 327,000 70,500
President and Chief Executive Officer,
ZD Events
Michael S. Perlis........................ 310,000 118,750
President and Chief Executive Officer,
ZD Publishing
Timothy C. O'Brien....................... 192,000 168,000
Chief Financial Officer
Terri S. Holbrooke....................... 177,000 80,500
President, ZD Corporate Operations
James J. Spanfeller, Jr.................. 77,000 47,750
Executive Vice President, ZD Publishing
Jack Dolce............................... 82,701 48,250
Executive Vice President, ZD Publishing
All current executive officers as a group
(15 persons)............................ 2,567,717 5,114,400
All current directors who are not
executive officers as a group
(4 persons)............................. 237,500 90,000
All employees (including all current
officers who are not executive officers)
as a group (1,014 persons).............. 8,472,422 11,402,158
</TABLE>

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 a stock option or SAR will not have any tax consequences for
the participant or the company.

A participant will not recognize taxable income upon exercising an ISO
(within the meaning of Section 422 of the Internal Revenue Code), except where
a participant is subject to the alternative minimum tax. Upon

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<PAGE>

exercising a stock 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

. the fair market value of the shares at the date of exercise of the ISO
minus the exercise price or

. 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 a stock 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 a stock
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 a stock
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.

Description of Amendment to Non-Employee Directors' Plan (Proposal 3)

The amendment to the Non-Employee Directors' Plan will increase the number
of shares of common stock (regardless of series) available for grants or awards
over time. Currently, the Non-Employee Directors' Plan allows a cumulative
issuance of up to 300,000 shares. As it will be amended:

. the total cumulative number of shares of common stock that may be issued
under the Non-Employee Directors' Plan through December 31, 2000 may not
exceed a maximum of 300,000 and

. the total cumulative number of shares of common stock that may be issued
through the end of any fiscal year beginning after December 31, 2000 may
not exceed the maximum number in effect during the preceding fiscal year
plus 0.1 percent of the number of shares of common stock outstanding as
of the last day of the preceding fiscal year.

These shares may be authorized but unissued common stock or authorized and
issued common stock held in treasury or otherwise acquired for the purposes of
the Non-Employee Directors' Plan. If any grant or award is

66
<PAGE>

forfeited or is otherwise terminated or canceled without the delivery of
shares of common stock or if shares of common stock owned by a grantee are
tendered to pay the exercise price of grants or awards, then such shares will
again become available under the Incentive Plan.

Description Of The Non-Employee Directors' Plan

Eligibility

Directors who are not employees of Ziff-Davis, SOFTBANK Corp., SOFTBANK
Holdings Inc. or SOFTBANK America Inc. ("non-employee directors")
automatically participate in the Non-Employee Directors' Plan.

Types Of Options

Currently, under the Non-Employee Directors' Plan, each Non-Employee
Director automatically receives:

. upon election as a member of the board of directors, an initial grant of
options to purchase 15,000 shares of common stock and

. on the date of each annual stockholders meeting thereafter a grant of
options to purchase 7,500 shares of common stock (the "Nondiscretionary
Options").

The Non-Employee Directors' Plan provides that, if applicable, the committee
administering the plan may determine the portion of the stock options granted
that shall be stock options to purchase shares of ZD stock and the portion of
the stock options that shall be stock options to purchase shares of ZDNet. The
plan further provides that a non-employee director may not receive the annual
grant of stock options to purchase 7,500 shares of common stock in any year in
which such non-employee director also receives the initial grant of stock
options to purchase 15,000 shares of common stock. In addition, under the Non-
Employee Directors' Plan,

. each non-employee director who was on the board of directors on the date
of the initial public offering of ZDNet stock received 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 vest and become
exercisable with respect to 25% of the shares on December 31, 1999, and
an additional 6.25% of the shares at the end of each three-month period
thereafter and

. each non-employee director who was on the board of directors on the date
of the initial public offering of Ziff-Davis' common stock in April 1998
received such initial grant on the date of such initial public offering.

After the restructuring is completed, each non-employee director will
automatically receive the Nondiscretionary Options with respect to the common
stock of the company.

Under the 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) unless the committee
administering the Non-Employee Directors' Plan determines otherwise in its
discretion, except that the option price of the option to purchase 25,000
shares of ZDNet stock granted on the date of the initial public offering of
ZDNet stock was equal to the initial public offering price. The stock option
vests and becomes exercisable in five equal installments beginning on the
first anniversary of the date of grant and expires 10 years from the date of
grant. If the optionee ceases to be a non-employee director, the stock option
will expire, except that

. if the termination results from any reason other than death, disability
or cause, the stock options will remain exercisable for 90 days and

. if the termination results from death or disability, the stock option
will remain exercisable for one year.

In no event will any such option remain exercisable past the remainder of its
scheduled ten-year term.

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<PAGE>

Each non-employee director is eligible to receive grants of stock options
(in addition to the Nondiscretionary Options) from time to time, and on such
terms and conditions, as are determined by the board of directors.

Changes in Outstanding Shares

In the event of any change in the outstanding shares by reason of any stock
dividend or split, recapitalization, merger, consolidation, spin-off,
combination, exchange of shares, other corporate change or distributions to
common stockholders other than regular cash dividends, the compensation
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 Non-Employee
Directors' Plan and to outstanding awards.

Change In Control

Upon a change in control of Ziff-Davis, each outstanding stock option will
fully vest and become immediately exercisable in full. In addition, the
compensation committee may provide in its sole discretion that upon a change in
control of Ziff-Davis, 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

. 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

. 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 compensation committee at such time.

Amendment And Termination

The board of directors may amend, suspend or terminate the Non-Employee
Directors' Plan or any portion thereof at any time, provided that, no amendment
shall be made

. without stockholder approval if such approval is necessary in order for
the Non-Employee Directors' Plan to comply with any applicable law,
regulation or stock exchange rule and

. except in the case of a change in control of Ziff-Davis, that would
adversely affect the rights of any non-employee director under any
outstanding stock option without such non-employee director's written
consent.

Grants Of Options

Currently, under the Non-Employee Directors' Plan, grants of stock options
may be made with respect to either ZD stock or ZDNet stock, or both. After the
restructuring is completed, grants of stock options under the Non-Employee
Directors' Plan will be made in respect of the common stock of the company.

Effect of Amendment On Outstanding Options

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

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<PAGE>

Market Value of Securities Underlying the Options

As of January 31, 2000 non-employee directors as a group have received stock
options to purchase 37,500 shares of ZD stock and 57,500 shares of ZDNet stock
under the Non-Employee Director's Plan. As of January 31, 2000 the aggregate
market value of the securities underlying these ZD stock options was
approximately $0.7 million and the aggregate market value of the securities
underlying these ZDNet stock options was approximately $1.6 million.

Federal Income Tax Consequences

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

The grant of a stock option will create no tax consequences for the non-
employee director or Ziff-Davis. Upon exercising a stock 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 a stock 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 stock option).

Recommendation of the Board of Directors

The board of directors has carefully considered and unanimously approved
Proposals 2 and 3 and determined that they are in the best interests of our
company and all of our stockholders. The board of directors recommends that you
vote "FOR" Proposals 2 and 3.

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<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------- ------------
Securities
Underlying
Name and Principal Options All Other
Position Year Salary($) Bonus($) (#)(1) Compensation($)(2)
------------------ ---- --------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Eric Hippeau............ 1999 900,000 0 300,000(3a) 1,161,689(4)
Chairman and Chief
Executive Officer 1998 1,050,000 0 1,665,032(3b) 17,566
1997 1,350,000 14,063 31,000 17,566
Jason E. Chudnofsky..... 1999 800,000 91,200 45,000(5a) 28,720
President and Chief
Executive Officer, 1998 800,000 288,493 378,395(5b) 95,023
ZD Events 1997 800,000 300,000 10,000 28,269
Michael S. Perlis....... 1999 650,000 300,000 100,000(6a) 20,759
President and Chief
Executive Officer, 1998 93,750 0 328,750(6b) 130
ZD Publishing 1997(7) -- -- -- --
Timothy C. O'Brien...... 1999 490,000 191,798 70,000(8a) 221,961(9)
Chief Financial Officer 1998 485,833 136,163 312,988(8b) 42,892
1997 462,500 305,850 7,700 36,806
Terri S. Holbrooke...... 1999 457,450 163,099 70,000(10a) 18,425
President, ZD Corporate
Operations 1998 430,000 137,993 193,410(10b) 14,018
1997 380,000 143,993 5,000 6,868
James J. Spanfeller,
Jr..................... 1999 355,000 1,217,984 45,000(11a) 17,227
Executive Vice
President, 1998 316,250 171,244 84,458(11b) 17,218
ZD Publishing 1997 272,500 99,484 1,650 13,335
Jack Dolce.............. 1999 350,000 515,377 64,701(12a) 24,563
Executive Vice
President, 1998 300,000 269,833 68,250(12b) 21,342
ZD Publishing 1997 300,000 289,224 2,000 11,066
</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 1999 reflects contributions to Ziff-Davis'
defined contribution plan, group term life insurance and reimbursement of
certain medical expenses and housing costs.
(3)(a) Includes options to purchase 160,000 shares of ZD stock and options to
purchase 140,000 shares of ZDNet stock.
(b) Includes options to purchase 860,000 shares of ZD stock, options to
purchase 560,000 shares of ZDNet stock and 245,032 Repriced Softbank
Options (including the 31,000 granted in 1997).
(4) Includes $1,135,160 paid to Mr. Hippeau in connection with grants made
under the ZDTV, L.L.C. Profits Interest Plan.
(5)(a) Includes options to purchase 27,000 shares of ZD stock and options to
purchase 18,000 shares of ZDNet stock.
(b) Includes options to purchase 300,000 shares of ZD stock, options to
purchase 52,500 shares of ZDNet stock and 25,895 Repriced Softbank
Options (including the 10,000 granted in 1997).
(6)(a) Includes options to purchase 60,000 shares of ZD stock and options to
purchase 40,000 shares of ZDNet stock.
(b) Includes options to purchase 250,000 shares of ZD stock and options to
purchase 78,750 shares of ZDNet stock.
(7) Mr. Perlis was not an employee of Ziff-Davis in 1997.
(8)(a) Includes options to purchase 42,000 shares of ZD stock and options to
purchase 28,000 shares of ZDNet stock.
(b) Includes options to purchase 150,000 shares of ZD stock, options to
purchase 140,000 shares of ZDNet stock and 22,988 Repriced Softbank
Options (including the 7,700 granted in 1997).
(9) Includes $174,640 paid to Mr. O'Brien in connection with grants made under
the ZDTV, L.L.C. Profits Interest Plan.
(10)(a) Includes options to purchase 42,000 shares of ZD stock and options to
purchase 28,000 shares of ZDNet stock.
(10)(b) Includes options to purchase 135,000 shares of ZD stock, options to
purchase 52,500 shares of ZDNet stock and 5,910 Repriced Softbank
Options (including the 5,000 granted in 1997).

70
<PAGE>

Option Grants and Exercises in 1999

Option Grants in 1999

<TABLE>
<CAPTION>
Potential Realized
Percent of Value at Assumed
Total Annual Rates of Stock
Number of Options Price Appreciation for
Securities Granted to Exercise Option Term
Underlying Employees or Base -----------------------
Name and Principal Option in Fiscal Price
Position Granted(#) Year(%) ($/Sh) Expiration Date 5%($) 10%($)
------------------ ---------- ---------- -------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eric C. Hippeau......... 160,000(1) 3.55 15.8750 April 20, 2009 1,597,392 4,048,106
Chairman and Chief 40,000(2) 0.61 31.0625 April 20, 2009 781,402 1,980,225
Executive 100,000(2) 1.53 20.00 December 17, 2009 1,257,789 3,187,485
Officer 200,00(3) 8.10 0.35(4)October 25, 2009 44,023 111,562
Jason Chudnofsky........ 27,000(1) 0.60 15.8750 April 20, 2009 269,560 683,118
President and Chief 18,000(2) 0.28 31.0625 April 20, 2009 351,631 891,101
Executive
Officer, ZD Events
Michael S. Perlis....... 60,000(1) 1.33 15.8750 April 20, 2009 599,022 1,518,040
President and Chief 40,000(2) 0.61 31.0625 April 20, 2009 781,402 1,980,225
Executive
Officer, ZD Publishing
Timothy C. O'Brien...... 42,000(1) 0.93 15.8750 April 20, 2009 419,315 1,062,628
Chief Financial Officer 28,000(2) 0.43 31.0625 April 20, 2009 546,981 1,386,158
Terri S. Holbrooke...... 42,000(1) 0.93 15.8750 April 20, 2009 419,315 1,062,628
President, ZD Corporate 28,000(2) 0.43 31.0625 April 20, 2009 546,981 1,386,158
Operations 25,000(3) 1.01 0.35(4)October 25, 2009 5,503 13,945
James J. Spanfeller 27,000(1) 0.60 15.8750 April 20, 2009 269,560 683,118
Jr.....................
Executive Vice 18,000(2) 0.28 31.0625 April 20, 2009 351,631 891,101
President, ZD
Publishing
Jack Dolce.............. 33,000(1) 0.73 15.8750 April 20, 2009 329,462 834,922
Executive Vice 5,000(1) 0.11 15.7500 June 30, 2000 3,938 7,875
President, ZD
Publishing
22,000(2) 0.34 31.0625 April 20, 2009 429,771 1,089,124
4,701(5) 0.10 8.8939 February 28, 2006 17,021 39,666
</TABLE>
- --------
(1) Represents options to purchase shares of ZD stock.
(2) Represents options to purchase shares of ZDNet stock.
(3) Represents options to purchase shares of common stock of Smart Planet Inc.
(4) The exercise price represents the fair value of one share of common stock
of Smart Planet at the time of granting of the options, based on a third
party valuation of Smart Planet.
(5) Represents options to purchase shares of ZD stock, which were granted in
exchange for cancelled Softbank options.

71
<PAGE>

Aggregated Option Exercises in 1999 and Fiscal Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Value Options at Fiscal Year-End (#) Fiscal Year-End($)
Shares ------------ ------------------------------ -------------------------
Name and Principal Acquired On
Position Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ ------------ ------------ --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Hippeau............ -- -- 150,500(1) 869,500(1) 1,476,781 6,961,969
Chairman and Chief
Executive Officer -- -- 140,000(2) 560,000(2) 2,339,400 7,118,200
65,000(4) 5,574,275 12,068(3) 167,964(3) 11,081,562 154,234,623
-- -- -- 200,000(5) -- --
Jason E. Chudnofsky..... -- -- 90,000(1) 237,000(1) 883,125 2,060,625
President and Chief
Executive Officer, -- -- 13,125(2) 57,375(2) 219,319 657,956
ZD Events 14,000(4) 6,225,402 537(3) 11,358(3) 493,106 10,429,597
Michael S. Perlis....... 35,000(6) 321,562 15,000(1) 260,000(1) 139,668 1,932,500
President and Chief
Executive Officer, 11,000(7) 189,997 8,687(2) 99,063(2) 145,168 986,934
ZD Publishing -- -- -- -- -- --
Timothy C. O'Brien...... -- -- 52,500(1) 139,500(1) 515,156 956,718
Chief Financial Officer -- -- 35,000(2) 133,000(2) 584,850 1,754,550
5,000(4) 1,204,312 6,603(3) 11,386(3) 6,063,271 10,455,308
Terri S. Holbrooke...... -- -- 47,250(1) 129,750(1) 463,641 861,047
President ZD Corporate -- -- 13,125(2) 67,375(2) 219,319 657,956
Operations
1,000(4) 94,335 182(3) 3,403(3) 167,123 3,124,839
-- -- -- 25,000(5) -- --
James J. Spanfeller -- -- 17,500(1) 59,500(1) 171,719 318,906
Jr.....................
Executive Vice -- -- 7,437(2) 40,313(2) 124,280 372,842
President,
ZD Publishing 2,366(4) 93,076 -- 2,342(3) -- 2,150,585
Jack Dolce.............. -- -- 14,000(1) 68,701(1) 137,375 287,961
Executive Vice -- -- 6,562(2) 41,688(2) 109,658 328,978
President,
ZD Publishing 800(4) 31,448 -- -- -- --
</TABLE>
- --------
(1) Represents options to purchase shares of ZD stock.
(2) Represents options to purchase shares of ZDNet stock.
(3) Represents Repriced Softbank Options.
(4) Represents shares of SOFTBANK Corp.
(5) Represents options to purchase shares of common stock of Smart Planet Inc.
(6) Represents shares of ZD stock.
(7) Represents shares of ZDNet stock.

Composition of the Board of Directors

The board of directors currently consists of eight members. Mr. O'Brien will
resign from the board of directors when he resigns as an officer on March 31,
2000 and Mr. Chudnofsky will resign from the board of directors upon the
closing of the sale or spinoff of ZD Events. The board of directors intends to
nominate for election two additional "independent directors" within the meaning
of the regulations of the NYSE to replace these directors. The board of
directors is divided into three classes each of whose members serves 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.

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

The board of directors currently has two committees: an audit committee and
a compensation committee. The audit committee currently consists of Messrs.
Lazarus and Yang. The compensation committee currently consists of Messrs.
Fisher, Lazarus and Yang.

Our audit committee reviews and recommends to the board of directors, as it
deems necessary, our internal accounting and financial control 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

72
<PAGE>

to the board of directors 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.

Each of Messrs. Fisher, Lazarus and Yang is independent of management. Mr.
Fisher is the Vice Chairman of SOFTBANK America Inc., 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! During 1998 and the first nine months of 1999,
we incurred approximately $0.3 million and $0.2 million, respectively, in
advertising expenses with Yahoo! Inc.

Compensation of Directors

Employment Agreements

Eric Hippeau

In April 1998, we entered into an employment agreement with Mr. Hippeau to
serve as our Chairman and Chief Executive Officer through March 31, 2004. In
March 1999, Mr. Hippeau's employment agreement was amended. Pursuant to the
amended agreement, Mr. Hippeau will receive an annual base salary of not less
than $900,000 and, in lieu of an annual incentive bonus, stock options as
determined from time to time by our compensation committee. Pursuant to the
Incentive Plan, we have granted Mr. Hippeau options to acquire up to 1,020,000
shares of ZD stock (of which 430,000 shares are based upon the achievement of
certain performance targets) and options to acquire up to 700,000 shares of
ZDNet stock.

On or before the merger, Mr. Hippeau will resign as Chief Executive Officer,
but it is expected he will continue to serve as non-executive Chairman. Our
compensation committee will determine the appropriate level of compensation for
Mr. Hippeau's new duties. In connection with the restructuring, certain of Mr.
Hippeau's unvested ZD options will become vested. The remainder of his unvested
ZD options, ZDNet options and options to purchase shares of common stock of
SOFTBANK Corp. will continue to vest in accordance with the terms of the grants
for these options.

Jason Chudnofsky

In April 1998, we entered into an employment agreement with Mr. Chudnofsky
to serve as the President and Chief Executive Officer of ZD Events Inc. through
March 31, 2001. Pursuant to this agreement, Mr. Chudnofsky receives 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 327,000 shares of ZD stock and options to acquire up to 70,500
shares of ZDNet stock.

73
<PAGE>

It is anticipated that upon the sale or spinoff of ZD Events, Mr. Chudnofsky
would be employed by ZD Events Inc. as opposed to Ziff-Davis. Upon termination
of Mr. Chudnofsky's employment, all of his ZD options and ZDNet options will
become vested.

Timothy C. O'Brien

In April 1998, we entered into an employment agreement with Mr. O'Brien to
serve as our Vice President, Chief Financial Officer through March 31, 2001.
Pursuant to this agreement, Mr. O'Brien receives 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
192,000 shares of ZD stock and options to acquire up to 168,000 shares of ZDNet
stock.

In connection with the restructuring, Mr. O'Brien will end his employment
with us on March 31, 2000. As a result, 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 1999
and 1998 (which is deemed to be $200,000). In addition, all of Mr. O'Brien's ZD
options, ZDNet options and options to purchase shares of common stock of
SOFTBANK Corp. will vest immediately. Mr. O'Brien will continue to receive
coverage under our health plans for a period of one year.

Terri S. Holbrooke

In April 1998, we entered into an employment agreement with Ms. Holbrooke to
serve as President of ZD Brand & Market Services through March 31, 2001.
Pursuant to this agreement, Ms. Holbrooke receives 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. Pursuant to the
Incentive Plan, we have granted Ms. Holbrooke options to acquire up to 177,000
shares of ZD stock and options to acquire up to 80,500 shares of ZDNet stock.

In connection with the restructuring, Ms. Holbrooke will end her employment
with us on February 29, 2000. As a result, we will pay Ms. Holbrooke severance
equal to her current base salary. In addition, all of Ms. Holbrooke's ZD
options, ZDNet options and options to purchase shares of common stock of
SOFTBANK Corp. will vest immediately. Ms. Holbrooke will continue to receive
coverage under our health plans for a period of one year.

Michael S. Perlis

In November 1998, we entered into an employment agreement with Mr. Perlis to
serve as President of ZD Publishing through December 31, 2001. Pursuant to this
agreement, Mr. Perlis receives 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 310,000 shares of ZD stock and options to
acquire up to 118,750 shares of ZDNet stock.

It is anticipated that Mr. Perlis will be employed by the purchaser of ZD
Publishing after the closing of that sale. If Mr. Perlis does not become
employed by the purchaser of ZD Publishing, his employment with us will end and
we will pay him severance equal to $550,000. In addition, all of Mr. Perlis' ZD
options and ZDNet options will vest immediately.

74
<PAGE>

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Certain Beneficial Owners

The following table sets forth certain information with respect to the
beneficial ownership (1) of ZD stock as of January 31, 2000 and (2) of the
common stock of the company as of January 31, 2000 but after giving effect to
the restructuring based on an estimated exchange ratio of 1.77, by each person
or entity which beneficially owns more than five percent of the outstanding
shares of the common stock of Ziff-Davis. As of January 31, 2000 no person or
entity beneficially owned more than five percent of the outstanding shares of
ZDNet stock.

<TABLE>
<CAPTION>
Prior to the After the
Restructuring Restructuring
--------------------- -------------------
Number of
Number of Shares of Percent
shares of Percent of Common of
Beneficial Owner ZD Stock Class(1) Stock Class(1)
- ---------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
SOFTBANK America Inc.(2).............. 71,619,355 69.10% 71,619,355 55.70%
SOFTBANK Holdings Inc.(3)............. 71,620,000 69.10 71,620,000 55.70
SOFTBANK Corp.(4)..................... 71,620,000 69.10 71,620,000 55.70
Masayoshi Son(5)...................... 71,620,000 69.10 71,620,000 55.70
</TABLE>
- --------
(1) The percentage of ownership is based on (a) 103,651,482 shares of ZD stock
outstanding as of January 31, 2000 and (b) 128,579,163 shares of common
stock of the company outstanding as of January 31, 2000 after giving effect
to the restructuring based on an estimated exchange ratio of 1.77.
(2) SOFTBANK America Inc.'s address is 10 Langley Road, Suite 403, Newton
Center, MA 02459.
(3) Includes shares owned by SOFTBANK America Inc. and 645 shares owned by
SOFTBANK Kingston Inc., all of which may be deemed to be beneficially owned
by SOFTBANK Holdings Inc. SOFTBANK Holdings Inc.'s address is 10 Langley
Road, Suite 403, Newton Center, MA 02459.
(4) Includes shares owned by SOFTBANK America Inc. and SOFTBANK Kingston Inc.,
all of which may be deemed to be beneficially owned by SOFTBANK Corp.
SOFTBANK Corp.'s address is 24-1 Nihonbashi-Hakozakicho, Chuo-ku, Tokyo
103, Japan.
(5) Includes shares owned by SOFTBANK America Inc. and SOFTBANK Kingston Inc.,
all of which may be deemed to be beneficially owned by Mr. Son (who owns
37.95% 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.

75
<PAGE>

Management

The following table sets forth certain information with respect to the
beneficial ownership (1) of ZD stock and ZDNet stock as of January 31, 2000 (2)
of the common stock of the company as of January 31, 2000 but after giving
effect to the restructuring based on an estimated exchange ratio of 1.77 and
(3) of the common stock of SOFTBANK Corp. as of December 31, 1999, in each case
by (x) each person named in the Summary Compensation Table, (y) each director
of Ziff-Davis and (z) all executive officers and directors of Ziff-Davis as a
group.

<TABLE>
<CAPTION>
Prior to the Restructuring After the Restructuring
-------------------------------------------- -----------------------
Number of
Number of Number of shares of
shares of Shares of Number of common stock of
common stock Percent of ZDNet Percent of Shares of Percent of SOFTBANK Percent of
Beneficial Owner of ZD Stock Class(1) Stock Class(1) Common Stock Class(1) Corp.(2) Class(1)
- ---------------- ------------ ---------- --------- ---------- ------------ ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric Hippeau(3)......... 225,101 * % 192,500 1.37% 565,826 * % 30,498 * %
Jason E. Chudnofsky(3).. 126,750 * 28,406 * 177,028 * 5,716 *
Timothy C. O'Brien(3)... 80,500 * 50,750 * 170,327 * 4,701 *
Michael S. Perlis(4).... 77,500 * 35,110 * 139,644 * 0 *
Terri S. Holbrooke(4)... 65,500 * 23,906 * 107,813 * 1,364 *
Daniel L. Rosensweig(3).. 58,600 * 546,875 3.88 1,026,568 * 3,136 *
Masayoshi Son(5)........ 71,620,000 69.10 0 * 71,620,000 55.70 41,708,748 37.95
Ronald D. Fisher(6)..... 85,000 * 14,450 * 110,576 * 274,450 *
Jonathan D. Lazarus(7).. 39,000 * 15,313 * 66,104 * 0 *
Jerry Yang(8)........... 18,300 * 7,813 * 32,129 * 0 *
James J. Spanfeller, Jr.(9).. 25,919 * 13,797 * 50,339 * 942 *
Jack Dolce(9)........... 29,505 * 13,703 * 53,759 * 0 *
Officers and directors
as a group............. 72,600,376 70.04 1,475,863 10.48 75,212,653 58.50 41,760,363 37.99
</TABLE>
- --------
* Less than one percent.
(1) The percentage of ownership is based on (a) 103,651,482 shares of ZD stock
outstanding as of January 31, 2000; (b) 14,083,436 shares of ZDNet stock
outstanding as of January 31, 2000, (c) 128,579,163 shares of common stock
of the company outstanding as of January 31, 2000 after giving effect to
the restructuring based on an estimated exchange ratio of 1.77 and (d)
109,910,337 shares of common stock of SOFTBANK Corp. outstanding as of
December 31, 1999. 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 SOFTBANK America Inc. 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.
(9) An officer named in the Summary Compensation Table.

76
<PAGE>

STOCKHOLDER PROPOSALS

If you intend to present any stockholder proposals at our 2000 Annual
Meeting of Stockholders, the proposals must have been received by Ziff-Davis at
our principal executive offices located at 28 East 28th Street, New York, NY
10016 by December 31, 1999 (or, if the date of our 2000 Annual Meeting is after
June 26, 2000, a reasonable time before Ziff-Davis begins to print and mail its
proxy materials) and must be in compliance with applicable Securities and
Exchange Commission regulations to be included in Ziff-Davis' proxy statement
and related proxy materials to be used in connection with our 2000 Annual
Meeting.

Any stockholder proposals you submit outside the proxy process must comply
with Ziff-Davis' advance notice procedure as set forth in our by-laws. This
procedure requires stockholders to deliver to Ziff-Davis, at our principal
executive offices located at 28 East 28th Street, 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 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.

WHERE YOU CAN FIND MORE INFORMATION

Ziff-Davis files reports, proxy statements and other information with the
SEC under the Securities Exchange Act of 1934. You may read and copy this
information at the following locations of the SEC:

Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-
2511

You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. can be obtained by calling the
SEC at 1-800-SEC-0330.

The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like Ziff-Davis,
who file electronically with the SEC. The address of that site is
http://www.sec.gov.

You can also inspect reports, proxy statements and other information about
Ziff-Davis Inc. at the offices of the NYSE, 20 Broad Street, New York, New York
10005.

77
<PAGE>

ANNEX I

PROPOSAL 1--RESOLUTIONS AUTHORIZING THE RESTRUCTURING OF ZIFF-DAVIS INC.

RESOLVED, that Ziff-Davis Inc. is hereby authorized to complete the
restructuring described under "Proposal 1--The Restructuring of Ziff-Davis--
General" in its proxy statement dated February 7, 2000 to which this resolution
is attached and, in furtherance thereof, is hereby specifically authorized to
(a) sell some or all of the following businesses and assets owned or previously
owned by Ziff-Davis Inc.: ZD Market Intelligence, ZD Publishing, ZD Events, ZD
Education, Smart Planet, an equity interest in ZDTV and an equity interest in
Red Herring Communications Inc., (b) pay a special cash dividend to the holders
of its ZD common stock, (c) transfer certain assets from ZD to ZDNet and (d)
complete the merger contemplated by the merger agreement referred to in the
next resolution; and

FURTHER RESOLVED, that the merger agreement attached as Annex II to such
proxy statement is hereby adopted.

I-1
<PAGE>

ANNEX II

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of February 7, 2000 (this
"Agreement"), between Ziff-Davis Inc., a Delaware corporation (the
"Corporation"), and ZD Merger Subsidiary Inc., a Delaware corporation and
wholly owned subsidiary of the Corporation ("Merger Sub").

RECITALS

WHEREAS, the Corporation and Merger Sub desire to merge on the terms and
subject to the conditions set forth herein;

WHEREAS, the Board of Directors of the Corporation has adopted a resolution
approving this Agreement and declaring it advisable and in the best interest of
the Corporation and its stockholders; and

WHEREAS, the Board of Directors of Merger Sub has adopted a resolution
approving this Agreement and declaring it advisable and in the best interest of
Merger Sub and its sole stockholder, and the sole stockholder of Merger Sub, by
a written consent dated the date hereof, has voted for adoption of this
Agreement;

NOW THEREFORE, the Corporation and Merger Sub hereby agree as follows:

ARTICLE I

THE MERGER

Section 1.1. The Merger. On the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.2),
Merger Sub shall be merged with and into the Corporation and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger"). The
Corporation shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation"), and the separate
corporate existence of the Corporation with all its rights, privileges, powers
and franchises shall continue unaffected by the Merger, except as set forth in
Article II. The Merger shall have the effects specified in the General
Corporation Law of the State of Delaware (the "DGCL").

Section 1.2. Filing of Certificate of Merger; Effective Time. As soon as
practicable after all of the conditions set forth in Article IV are satisfied,
the Corporation and Merger Sub will cause a Certificate of Merger (the
"Certificate of Merger") to be executed, acknowledged and filed with the
Secretary of State of the State of Delaware as provided in Section 251 of the
DGCL. The Merger shall become effective at the time when the Certificate of
Merger has been duly filed with the Secretary of State of the State of Delaware
or at such other time as shall be agreed by the parties and set forth in the
Certificate of Merger in accordance with the DGCL (such time of effectiveness,
the "Effective Time").

ARTICLE II

NAME; CERTIFICATE OF INCORPORATION;
BY-LAWS; DIRECTORS AND OFFICERS

Section 2.1. Name of Surviving Corporation. The name of the Surviving
Corporation shall be ZDNet Inc.

Section 2.2. Certificate of Incorporation of Surviving Corporation. The
amended and restated certificate of incorporation of the Corporation as in
effect immediately prior to the Effective Time shall be further amended and
restated as of the Effective Time so as to read in its entirety as set forth in
Exhibit A

II-1
<PAGE>

hereto and, as so amended and restated, such certificate of incorporation shall
be the amended and restated certificate of incorporation of the Surviving
Corporation until thereafter amended as provided therein or by applicable law.

Section 2.3. By-Laws of Surviving Corporation. The by-laws of the
Corporation as in effect immediately prior to the Effective Time shall be the
by-laws of the Surviving Corporation, until thereafter amended as provided
therein or by applicable law.

Section 2.4. Directors and Officers of Surviving Corporation. The directors
and officers of the Corporation immediately prior to the Effective Time shall,
from and after the Effective Time, be the directors and officers of the
Surviving Corporation until their successors have been duly elected or
appointed or until their earlier death, resignation or removal.

ARTICLE III

TREATMENT OF SHARES IN THE MERGER;
EXCHANGE OF CERTIFICATES

Section 3.1. Treatment of Shares in the Merger. The shares of common stock
of the Corporation and Merger Sub shall be treated in the Merger as follows:

(a) ZDNet Stock. At the Effective Time, as a result of the Merger and
without any action on the part of the holder of any capital stock of the
Corporation or Merger Sub, each share of Ziff-Davis Inc.-- ZDNet Common
Stock, par value $.01 per share ("ZDNet Stock"), of the Corporation issued
and outstanding immediately prior to the Effective Time shall be converted
into a number of shares of Common Stock, par value $0.01 per share ("Common
Stock"), of the Surviving Corporation equal to the Exchange Ratio. As used
herein, the term "Exchange Ratio" means (i) the number of shares of Ziff-
Davis Inc.--ZD Common Stock, par value $.01 per share ("ZD Stock"), of the
Corporation outstanding immediately prior to the Effective Time divided by
(ii) the Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet (as such term is defined in the Amended and Restated Certificate
of Incorporation of the Corporation) immediately prior to the Effective
Time. At the Effective Time, all shares of ZDNet Stock shall no longer be
outstanding and shall be cancelled and retired and shall cease to exist,
and each certificate (a "Certificate") formerly representing any of such
shares of ZDNet Stock shall thereafter represent only the shares of Common
Stock into which such shares have been converted and the right to receive
cash pursuant to Sections 3.2(c) and 3.2(e).

(b) ZD Stock. At the Effective Time, as a result of the Merger and
without any action on the part of the holder of any capital stock of the
Corporation or Merger Sub, each share of ZD Stock issued and outstanding
immediately prior to the Effective Time shall remain outstanding as one
issued and outstanding share of Common Stock of the Surviving Corporation.

(c) Common Stock of Merger Sub. At the Effective Time, as a result of
the Merger and without any action on the part of the holder of any capital
stock of the Corporation or Merger Sub, each share of common stock, par
value $1.00 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding, shall be
canceled and retired without payment of any consideration therefor and
shall cease to exist.

Section 3.2. Exchange of Certificates.

(a) Exchange Agent. The Surviving Corporation shall deposit with an exchange
agent (the "Exchange Agent"), on a timely basis, for the benefit of the persons
who had, immediately prior to the Effective Time, been holders of shares of
ZDNet Stock, certificates representing shares of Common Stock into which such
shares of ZDNet Stock shall have been converted as contemplated in Section
3.1(a) and any cash that the Surviving Corporation may be required to pay
pursuant to Section 3.2(c) or 3.2(e) (such certificates and cash, for so long
as held in deposit, being hereinafter referred to as the "Exchange Fund").

II-2
<PAGE>

(b) Exchange Procedures. Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each person who was,
immediately prior to the Effective Time, a registered holder of ZDNet Stock a
letter of transmittal and instructions for use in effecting the surrender of
the Certificates. Upon surrender of a Certificate together with such letter of
transmittal, duly executed and completed in accordance with the instructions,
the holder of such Certificate shall be entitled to receive in exchange
therefor (i) a certificate representing that number of shares of Common Stock
that such holder is entitled to receive pursuant to this Article III and (ii) a
check in an amount (after giving effect to any required tax withholdings) equal
to any cash the holder has a right to receive pursuant to Section 3.2(c) or
3.2(e), and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on any amount payable upon due surrender of
the Certificates. If any certificate for shares of Common Stock is to be issued
in a name other than that in which the Certificate surrendered in exchange
therefor was registered, it shall be a condition of such exchange that the
Certificate be properly endorsed or otherwise in proper form for transfer and
that the person requesting issuance shall pay any transfer or other taxes
required by reason of the issuance of the certificate for such shares of Common
Stock in a name other than that of the registered holder of the Certificate
surrendered or shall establish to the satisfaction of the Surviving Corporation
or the Exchange Agent that such tax has been paid or is not applicable.

(c) Status of Unexchanged Certificates; Dividends and Distributions with
Respect to Shares Represented by Unexchanged Certificates. Shares of Common
Stock to be issued pursuant to the Merger shall be deemed issued and
outstanding as of the Effective Time for all purposes, and from the Effective
Time to the time that a Certificate is exchanged for a new certificate
representing shares of Common Stock as contemplated above, such Certificate
shall be deemed to represent the shares of Common Stock issuable in exchange
therefor and the person who immediately prior to the Effective Time was the
registered holder of such Certificate shall be deemed to be the registered
holder of such shares; provided, however, that whenever a dividend or other
distribution is payable by the Surviving Corporation on shares of Common Stock
represented by a Certificate, the dividend or other distribution shall not be
paid to the holder thereof until such Certificate is surrendered for exchange
in accordance with this Article III (or an affidavit of loss in lieu thereof is
delivered as contemplated by Section 3.2(g)) and shall thereafter (subject to
the effect of applicable laws) be paid without interest.

(d) Transfers. At and after the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of the shares of ZDNet
Stock that were outstanding immediately prior to the Effective Time.

(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Common Stock will be issued pursuant to the
Merger and any person who was a registered holder of shares of ZDNet Stock
immediately prior to the Effective Time and who would, in the absence of this
Section 3.2(e), be entitled to receive a fraction of a share of Common Stock
pursuant to the Merger will instead be entitled to receive a cash payment in
lieu thereof, in an amount equal to such fraction times the closing price of a
share of ZD Stock, as reported in The Wall Street Journal, New York City
edition, on the last full trading day ending prior to the Effective Time.

(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any certificates for
Common Stock) that remains unclaimed by the holders of Certificates for 180
days after the Effective Time shall be transferred to the Surviving
Corporation, and thereafter holders of Certificates who have not already
exchanged their Certificates as contemplated by this Article III shall look
only to the Surviving Corporation for delivery of certificates representing
their shares of Common Stock and payment of cash pursuant to Sections 3.2(c)
and 3.2(e) upon due surrender of their Certificates (or affidavits of loss in
lieu thereof), in each case, without any interest thereon. Notwithstanding the
foregoing, none of the Corporation, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder of shares of
ZDNet Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.

II-3
<PAGE>

(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
person of a bond in customary amount as indemnity against any claim that may be
made against it with respect to such Certificate, the Surviving Corporation
will, in exchange for such lost, stolen or destroyed Certificate, issue and
deliver a certificate representing the shares of Common Stock and pay the cash
to which such person is entitled pursuant to Sections 3.1, 3.2(c) and 3.2(e).

Section 3.3. No Appraisal Rights. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of shares of ZD Stock,
ZDNet Stock or common stock of Merger Sub in connection with the Merger.

Section 3.4. Adjustments to Prevent Dilution. In the event that, prior to
the Effective Time, the Corporation changes the number of shares of ZDNet Stock
or ZD Stock outstanding through a stock split, reverse split or stock dividend,
the number of shares of Common Stock into which each share of ZDNet Stock shall
be converted in the Merger pursuant to Section 3.1 shall be proportionately
adjusted to equitably reflect such change.

ARTICLE IV

CONDITIONS TO THE MERGER

The obligations of the Corporation and Merger Sub to consummate the Merger
are subject to the satisfaction of the following conditions:

(a) this Agreement shall have been approved by the stockholders of the
Corporation in the manner required under the DGCL and the Corporation's
Amended and Restated Certificate of Incorporation; and

(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger.

ARTICLE V

TERMINATION

Section 5.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time by mutual written
consent of the Corporation and Merger Sub.

Section 5.2. Effect of Termination. If this Agreement is terminated pursuant
to Section 5.1, this Agreement shall become void and of no effect with no
liability on the part of either party hereto.

ARTICLE VI

MISCELLANEOUS

Section 6.1. Integration. This Agreement constitutes the entire
understanding between Merger Sub and the Corporation with respect to the
subject matter hereof.

Section 6.2. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.

Section 6.3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflict of laws.

II-4
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized representatives as of the day and year
first above written.

Ziff-Davis Inc.

/s/ Eric Hippeau
By: _________________________________
Name:Eric Hippeau
Title:President and Chief
Executive Officer

ZD Merger Subsidiary Inc.

/s/ Eric Hippeau
By: _________________________________
Name:Eric Hippeau
Title:President

II-5
<PAGE>

Exhibit A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

ZDNET INC.

(Adopted in accordance with Section 251 of the
General Corporation Law of the State of Delaware)

ARTICLE FIRST

NAME

The name of the Corporation is ZDNet Inc.

ARTICLE SECOND

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 THIRD

PURPOSES

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

ARTICLE FOURTH

CAPITAL STOCK

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 $0.01 per share ("Common
Stock"), and 10 million shares shall be designated as Preferred Stock, par
value $0.01 per share ("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;

II-6
<PAGE>

(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 the State of Delaware or any
corresponding provision hereafter enacted.

ARTICLE FIFTH

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 SIXTH

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

II-7
<PAGE>

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 SIXTH 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 SEVENTH

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.

ARTICLE EIGHTH

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 General Corporation Law of the State of Delaware as
currently in effect or as the same may hereafter be amended. No amendment,
modification or repeal of this Article EIGHTH shall adversely affect any right
or protection of a director that exists at the time of such amendment,
modification or repeal.

II-8
<PAGE>

ANNEX III

ZIFF-DAVIS INC.

INDEX TO ANNEX III

<TABLE>
<CAPTION>
Page
------
<S> <C>
Ziff-Davis Inc. Selected Historical Consolidated Financial and Other
Data.................................................................. III-2
Ziff-Davis Inc. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the three and nine month
periods ended September 30, 1998 and 1999............................. III-3
Ziff-Davis Inc. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the years ended December 31,
1996, 1997 and 1998 .................................................. III-13
Ziff-Davis Inc. Description of Business................................ III-25
Ziff-Davis Inc. Unaudited Consolidated Financial Statements for the
three and nine month periods ended September 30, 1998 and 1999
Unaudited Consolidated Balance Sheets as of December 31, 1998 and
September 30, 1999 ................................................. III-26
Unaudited Consolidated Statements of Operations for the three and
nine month periods ended September 30, 1998 and 1999................ III-27
Unaudited Consolidated Statements of Comprehensive Loss for the three
and nine month periods ended September 30, 1998 and 1999............ III-28
Unaudited Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 1998 and 1999........................... III-29
Unaudited Consolidated Statements of Changes in Stockholders' Equity
for the nine month period ended September 30, 1999.................. III-30
Notes to Unaudited Consolidated Financial Statements................. III-31
Ziff-Davis Inc. Consolidated Financial Statements for the years ended
December 31, 1996, 1997 and 1998
Report of Independent Accountants.................................... III-39
Consolidated Balance Sheets as of December 31, 1997 and 1998 ........ III-40
Consolidated Statements of Operations for the years ended December
31, 1996, 1997 and 1998 ............................................ III-41
Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1997 and 1998............................................. III-42
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998........................ III-43
Notes to Consolidated Financial Statements........................... III-44
</TABLE>

III-1
<PAGE>

ZIFF-DAVIS INC.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following table presents selected historical consolidated data for Ziff-
Davis Inc. as of and for the years ended December 31, 1995, 1996, 1997 and 1998
and as of and for the nine months ended September 30, 1998 and 1999. This data
was derived from the Consolidated Financial Statements of Ziff-Davis Inc. The
data as of and for the nine months ended September 30, 1998 and 1999 are
unaudited.

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. However, because ZDI represented
Ziff-Davis Inc.'s principal operations, the following table also presents
selected historical combined data for ZDI as of and for the years ended
December 31, 1994 and 1995 and as of and for the two months 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 audited
Consolidated Financial Statements of ZDI. The data as of and for the year ended
December 31, 1994 was derived from ZDI's unaudited consolidated financial
statements.

On May 4, 1998, Ziff-Davis Inc. completed a reorganization described in Note
2 to the unaudited Consolidated Financial Statements of Ziff-Davis Inc. and on
April 6, 1999 Ziff-Davis Inc. completed a public offering of ZDNet stock
described in Note 3 to the unaudited Consolidated Financial Statements of Ziff-
Davis Inc. Results for periods before the reorganization and public offering
are not directly comparable to results for period after those events. No
historical earnings per share or share data are presented as Ziff-Davis Inc.
does not consider such data meaningful.

For information concerning the pro forma effect of the reorganization, the
public offering of ZDNet stock and the restructuring described in this proxy
statement, see "Unaudited Pro Forma Consolidated Financial Statements of Ziff-
Davis Inc." included earlier in this proxy statement.

This table should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements for Ziff-Davis Inc. included later in this Annex.

<TABLE>
<CAPTION>
ZDI(1) Ziff-Davis Inc.
----------------------------------- ---------------------------------------------------------------------
Nine month
Year ended Two-month period ended
December 31, period ended Year ended December 31, September 30,
--------------------- February 28, --------------------------------------------- ----------------------
1994 1995 1996 1995(2) 1996(2) 1997 1998 1998 1999
---------- ---------- ------------ ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Op-
erations Data:
Revenue, net.... $ 711,379 $ 768,995 $ 125,465 $ 202,729 $ 955,139 $1,153,761 $1,108,892 $ 730,547 $ 752,910
Depreciation and
amortization... 34,208 91,546 15,137 24,305 139,736 154,940 152,544 114,594 127,866
Income (loss)
from
operations..... 80,723 55,750 7,270 62,675 87,181 109,232 31,080 (17,395) (40,448)
Interest
expense, net... 17,887 92,609 14,030 44,005 120,646 190,445 143,547 111,185 89,602
Income (loss)
before income
taxes.......... 77,650 (40,250) (6,995) 22,869 (27,124) (72,491) (104,236) (119,768) (87,602)
Net income
(loss)(3)(4)... 77,650 (26,002) (4,547) 10,945 (52,081) (71,179) (77,809) (86,179) (55,947)
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 $ 27,153 $ 29,791
Total assets.... 2,751,525 1,623,906 1,619,905 1,090,981 3,584,173 3,546,646 3,433,803 3,412,701 3,443,936
Total long-term
debt........... 1,034,000 964,153 964,153 575,450 2,522,252 2,408,240 1,539,322 1,526,047 1,264,984
Stockholders'
equity ........ 391,275 365,150 360,717 397,881 447,756 126,130 1,352,598 1,344,048 1,605,158
Other Data:
Capital
expenditures... $ 15,119 $ 14,163 $ 552 $ 3,367 $ 22,365 $ 30,196 $ 36,599 $ 27,399 $ 64,624
Investments and
acquisitions,
net of cash
acquired....... -- -- -- 814,520 2,124,823 14,000 27,772 13,192 65,181
</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 represented 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.

III-2
<PAGE>

ZIFF-DAVIS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND
1999

Overview

Ziff-Davis Inc. was formed through an initial public offering and a
reorganization that were completed on May 4, 1998. Prior to that date, the
predecessors of Ziff-Davis Inc. were wholly owned indirect subsidiaries of
SOFTBANK Corp. (together with its non-Ziff-Davis Inc. affiliates, "Softbank")
or assets owned by MAC Inc., an affiliate of SOFTBANK Corp. ("MAC Assets"). As
such, financial statements for periods prior to May 4, 1998 have been prepared
on a combined basis while the financial statements for the periods after May 4,
1998 have been prepared on a consolidated basis.

Historically, Ziff-Davis Inc.'s business has been seasonal, earning a
significant portion of its revenue in the second and fourth quarters. In
addition, the shift in timing of a tradeshow or conference may result in
material differences in comparison to prior periods.

On July 14, 1999, Ziff-Davis Inc. announced that it had retained Morgan
Stanley Dean Witter to explore strategic alternatives to maximize stockholder
value. That exploration process has resulted in the comprehensive restructuring
described in this proxy statement. The impact of the restructuring is addressed
elsewhere in this proxy statement and is not otherwise addressed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations for Ziff-Davis Inc.

ZDNet Stock

The stockholders of Ziff-Davis Inc. voted, at a Special Meeting held on March
30, 1999, to authorize the issuance of a new series of common stock, designated
as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"), which is intended to
reflect the performance of Ziff-Davis Inc.'s Internet business division, ZDNet.
When the ZDNet Stock was issued on April 6, 1999, Ziff-Davis Inc.'s existing
common stock was re-classified as Ziff-Davis Inc.--ZD Common Stock ("ZD
Stock"), which is intended to reflect the performance of Ziff-Davis Inc.'s
other businesses and a retained interest in ZDNet. The businesses represented
by ZD Stock are referred to as "ZD".

The ZDNet Stock offering was completed on April 6, 1999. Ziff-Davis Inc.
issued 11.5 million shares of ZDNet Stock, including 1.5 million shares issued
in conjunction with the underwriters' exercise of their option to purchase
additional shares to cover over-allotments. Net proceeds of approximately
$198.6 million were received on April 6, 1999.

Acquisitions and Sale of Common Stock

ZDTV

On February 4, 1999, Ziff-Davis Inc. purchased ZDTV, LLC ("ZDTV") from MAC
Holdings (America) Inc., a related party, for a purchase price of approximately
$81.4 million. Ziff-Davis Inc. paid approximately

III-3
<PAGE>

$32.8 million of the purchase price in cash (settled on February 5, 1999) and
paid the remainder by applying approximately $48.6 million in advances owed to
it by MAC Holdings (America) Inc. Ziff-Davis Inc. also agreed to be responsible
for the funding of ZDTV during the period in 1999 prior to the purchase which
was accounted for as additional purchase price. Such funding amounted to
approximately $4.2 million.

On February 5, 1999, Vulcan Programming Inc., an entity owned by Paul G.
Allen, acquired a one-third equity interest in ZDTV for $54.0 million in cash.
In March 1999, an additional 4.0% equity interest was acquired by ZDTV's
president. In both cases, the acquisitions were effected by issuing additional
equity.

As a result of the acquisition, Ziff-Davis Inc. recorded an increase in
intangible assets of $76.1 million which will be amortized over 10 years.
ZDTV's cash requirements are currently expected to be approximately $50 million
for 1999. The $54.0 million invested in ZDTV by Vulcan Programming Inc. will be
used to fund ZDTV and thereafter cash requirements will be funded by the
members or by third parties.

Sale of Common Stock

On March 4, 1999, Vulcan Ventures Inc., the investment vehicle of Paul G.
Allen, purchased 3,030,303 shares of Ziff-Davis Inc. common stock for $50.0
million in cash.

GameSpot Inc.

On April 7, 1999, Ziff-Davis Inc. closed on the acquisition of the remaining
30% interest in GameSpot Inc. in exchange for 600,000 newly issued shares of
ZDNet Stock valued at approximately $11.4 million. This acquisition was
accounted for under the purchase method of accounting.

Updates.com Inc.

On July 2, 1999, Ziff-Davis Inc. acquired Updates.com, Inc. for $5.0 million
in cash and 582,526 shares of ZDNet Stock valued at $13.5 million. This
acquisition was accounted for under the purchase method of accounting.

SoftSeek Inc.

On July 30, 1999, Ziff-Davis Inc. acquired SoftSeek Inc. for $7.0 million in
cash and 991,038 shares of ZDNet Stock valued at $19 million. This acquisition
was accounted for under the purchase method of accounting.

In connection with the acquisitions described in the preceding three
paragraphs, Ziff-Davis Inc. will record additional amortization expense in 1999
of approximately $5.5 million.

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
Ziff-Davis Inc.'s Consolidated Financial Statements included in this Annex.

III-4
<PAGE>

Results of Operations

Comparison of the three months ended September 30, 1999 and 1998

Revenue

Revenue for the third quarter of 1999 was $258.3 million compared to $226.0
million for the third quarter of 1998, an increase of $32.3 million or 14.3%.
Revenue by segment is summarized in the following table:

<TABLE>
<CAPTION>
Three months
ended
September 30,
-----------------
1999 1998
-------- --------
(dollars in
thousands)
<S> <C> <C>
Revenue:
Publishing............................................. $165,268 $181,727
Events................................................. 63,085 29,787
Internet............................................... 26,291 14,504
Television............................................. 3,642 --
-------- --------
Total................................................ $258,286 $226,018
======== ========
</TABLE>

Revenue from the publishing segment decreased by $16.5 million or 9.1% from
$181.7 million in the third quarter of 1998 to $165.3 million in the third
quarter of 1999. Excluding the effect of the three magazines that were closed
in October 1998 as part of a restructuring, publishing segment revenue
decreased by $10.4 million or 5.9%. Revenue from newer business publications
and consumer publications increased by 80.8% and 28.1%, respectively, but were
more than offset by a revenue decline from the major business publications,
most significantly at Computer Shopper. Margin pressure on computer equipment
manufacturers, industry consolidation product delays, and a focus on Year 2000
transition contributed to reduced demand for advertising in these publications.

Revenue from the events segment increased by $33.3 million or 111.8% from
$29.8 million in the third quarter of 1998 to $63.1 million in the third
quarter of 1999. The primary reason for the increase was the shift of two
events from the fourth quarter of 1998 to the third quarter of 1999. Excluding
the shifting of events, revenue decreased by $5.7 million or 8.3%, primarily
due to the discontinuation of certain smaller events.

Revenue from the Internet segment increased by $11.8 million or 81.3% from
$14.5 million in the third quarter of 1998 to $26.3 million in the third
quarter of 1999. Revenue from advertising accounted for 92.7% of total revenue
for 1999 compared to 86.4% for the same period in 1998. During the period both
the number of advertisers and the average monthly revenue per advertiser
increased as did the average sale price per page. Subscription-based fees and
services declined as expected and were $1.9 million of the three months ended
September 30, 1999 compared to $2.0 million for the same period in 1998.

Revenue from the television segment was $3.6 million for 1999. The television
segment was acquired on February 4, 1999 when Ziff-Davis Inc. purchased ZDTV
from MAC Holdings (America) Inc. for an aggregate purchase price of $81.4
million. (See Note 4 in the Ziff-Davis Inc. Unaudited Consolidated Financial
Statements).

Cost of production

The cost of production increased by $6.4 million or 10.3% from $62.5 million
in the third quarter of 1998 to $69.0 million in the third quarter of 1999. The
increase was driven by the acquisition of ZDTV and the shift in timing of
certain events. The increase was mostly offset by the decline in publishing
production costs related to a decline in advertising pages and the absence of
costs related to the closure of certain publications. Cost of production was
26.7% and 27.7% of revenue for the three months ended September 30, 1999 and
1998, respectively. The decrease as a percentage of revenue primarily reflects
the increased profitability of ZDNet.

III-5
<PAGE>

Selling, general and administrative expenses

Selling, general and administrative expenses were $157.5 million for the
third quarter of 1999 compared to $140.4 million in the third quarter of 1998,
an increase of $17.1 million or 12.2%. The increase was primarily related to
the acquisition of ZDTV and the increase in personnel and advertising costs
required to support the growth of ZDNet, partially offset by the reduced costs
as a result of the fourth quarter 1998 restructuring. Selling, general and
administrative expenses were 61.0% and 62.1% of revenue for the three months
ended September 30, 1999 and 1998, respectively.

Stock-based compensation

Stock-based compensation is a non-cash charge which is recorded over the
vesting period of certain stock option and restricted stock grants. Stock-based
compensation increased by $1.4 million from $0.1 million in the third quarter
of 1998 to $1.5 million for the third quarter of 1999. The increase was a
result of the issuance of certain options of ZDNet Stock and the conversion of
certain SOFTBANK Corp. stock options to Ziff-Davis Inc. stock options in
December 1998, both of which resulted in compensation.

Depreciation and amortization

Total depreciation and amortization expense was $44.7 million for the third
quarter of 1999 compared to $37.8 for the third quarter of 1998, an increase of
$6.9 million or 18.2%. The primary reason for the increase was depreciation and
amortization of assets associated with the acquisitions of ZDTV, Updates.com
and SoftSeek along with depreciation at Ziff-Davis Inc.'s new offices. These
increases were partially offset by the absence of amortization related to
intangible assets written off as part of the October 1998 restructuring.

Interest expense, net

Net interest expense declined by $0.5 million or 1.6% to $28.6 million for
the third quarter of 1999 from $29.1 million for the third quarter of 1998.
This was primarily due to a significant reduction in Ziff-Davis Inc.'s
outstanding debt through the reorganization and initial public offering
completed in May 1998 and the ZDNet Stock offering completed in April 1999,
partially offset by higher average interest rates in the 1999 period and non-
cash interest charges related to the amortization of fees paid in connection
with the December 1998 amendment to the credit facility.

Other non-operating income, net

Other non-operating income primarily reflects Ziff-Davis Inc.'s equity share
of earnings and losses from joint ventures, fees earned from management of
events not produced by Ziff-Davis and gains or losses realized on the
disposition of business units. Income of $15.3 million for the quarter ended
September 30, 1999 was $10.9 million higher than the income for the same period
in 1998 of $4.4 million. This difference was primarily due to one-time gains of
$13.3 million from the sale of several business units, principally the sale of
Ziff-Davis Inc.'s 50.0% interest in the ExpoComm joint venture, partially
offset by lower joint venture and management fee income. The sale of these
business units is not expected to have a material impact on Ziff-Davis Inc.'s
future results from operations or cash flows.

Minority interest in losses of subsidiaries

Losses attributable to minority stockholders of Ziff-Davis Inc.'s
subsidiaries increased $5.4 million from $0.1 million for the third quarter of
1998 to $5.5 million for the third quarter of 1999. This increase is primarily
due to the sale of a one-third interest in ZDTV in February 1999, creating a
minority interest in the losses of ZDTV.

III-6
<PAGE>

Income taxes

The consolidated tax benefit for the third quarter of 1999 was $7.3 million
compared to $35.0 million in the third quarter of 1998. The effective tax rate
for the three months ended September 30, 1999 was 32.6% compared to 88.6% for
the 1998 quarter. The difference is due to variances in the projected annual
effective tax rate for the respective years. These rates are based on estimates
for annual earnings and taxes available at the time and reflect adjustments to
record year-to-date income tax benefits or expense at revised rates of 36.1%
and 28.0% for the 1999 and 1998 periods, respectively. The actual annual
effective tax rate for 1988 was 25.4%.

Income taxes are provided based on Ziff-Davis Inc.'s projected annual
effective tax rate which differs from the U.S. federal statutory rate of 35.0%
due to certain items which are not deductible for income tax purposes,
primarily (i) losses of the MAC Assets prior to their purchase by Ziff-Davis
Inc., (ii) non-deductible goodwill amortization, and (iii) the effect of state
and local taxes. The deferred tax benefit for the three months ended September
30, 1999 has been reflected as a reduction of the long-term deferred tax
liability.

Net loss

As a result of the factors discussed above, the net loss increased from $4.5
million for the three months ended September 30, 1998 to $15.0 million for the
three months ended September 30, 1999.

EBITDA

EBITDA is defined as income before provision for income taxes, interest
expense, depreciation and other non-cash charges. These non-cash charges
include amortization of intangible assets and stock-based compensation expense.
EBITDA as reported for Ziff-Davis Inc. includes its interest in the EBITDA of
ZDTV, currently 64.0%.

EBITDA for the third quarter of 1999 was $51.0 million compared to $27.6
million for the third quarter of 1998, an increase of $23.4 million or 84.8%.
This change in EBITDA reflects the shift in timing of two events, one-time
gains from the sale of business units, and the significant improvement at
ZDNet, partly offset by the inclusion of ZDTV losses and declines in the
publishing segment.

Comparison of the nine months ended September 30, 1999 and 1998

Revenue

Revenue for the nine months ended September 30, 1999 was $752.9 million
compared to $730.5 million for the nine months ended September 30, 1998, an
increase of $22.3 million or 3.1%. Revenue by segment is summarized in the
following table:

<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------
1999 1998
-------- --------
(dollars in
thousands)
<S> <C> <C>
Revenue:
Publishing............................................. $518,626 $571,391
Events................................................. 157,150 122,690
Internet............................................... 67,791 36,466
Television............................................. 9,343 --
-------- --------
Total................................................ $752,910 $730,547
======== ========
</TABLE>

III-7
<PAGE>

publishing segment revenue decreased by $28.7 million or 5.2%. Revenue from
newer business publications and consumer publications increased by 53.8% and
43.8%, respectively, but were more than offset by a decline from the major
business publications, most significantly at Computer Shopper. Margin pressure
on computer equipment manufacturers, industry consolidation, product delays,
and a focus on Year 2000 transition contributed to reduced demand for
advertising in these publications.

Revenue from the events segment increased by $34.5 million or 28.1% from
$122.7 million in the nine months ended September 30, 1998 to $157.2 million in
the nine months ended September 30, 1999. This increase is primarily due to the
shift in timing of two events from the fourth quarter of 1998 to the third
quarter of 1999. This increase was partly offset by declines related to
discontinuation of certain smaller shows.

Revenue from the Internet segment increased by $31.3 million or 85.9% from
$36.5 million in the first nine months of 1998 to $67.8 million for the first
nine months of 1999. Revenue from advertising accounted for 92.4% of total
revenue for 1999 compared to 83.1% for the same period in 1998. During the
period both the number of advertisers and the average monthly revenue per
advertiser increased as did the average sale price per page. Subscription-based
fees and services declined as expected and were $5.1 million for the nine
months ended September 30, 1999 compared to $6.2 million for the same period in
1998.

Revenue from the television segment was $9.3 million for 1999. The television
segment was acquired on February 4, 1999 when Ziff-Davis Inc. purchased ZDTV
from MAC Holdings (America) Inc. for an aggregate purchase price of $81.4
million. (See Note 4 in the Ziff-Davis Inc. Unaudited Consolidated Financial
Statements.)

Cost of production

The cost of production decreased by $5.4 million or 2.6% from $207.4 million
for the nine months ended September 30, 1998 to $202.0 million for the nine
months ended September 30, 1999. The decline was consistent with the decrease
in revenue attributed to the discontinuation of three magazines in October 1998
as well as the decline in advertising pages in the business magazines. These
cost reductions were partially offset by production costs incurred from the
acquisitions of ZDTV and the shift in timing of certain events. Cost of
production was 26.8% and 28.4% of revenue for the three months ended September
30, 1999 and 1998, respectively. The decrease as a percentage of revenue
primarily reflects the increased profitability of ZDNet.

Selling, general and administrative expenses

Selling, general and administrative expenses were $458.6 million for the nine
months ended September 30, 1999 compared to $425.8 million for the nine months
ended September 30, 1998, an increase of $32.8 million or 7.7%. The increase
was primarily related to the acquisition of ZDTV and increased cost to support
ZDNet's growth, offset by cost savings realized from the October 1998
restructuring. Selling, general and administrative expenses were 60.9% and
58.3% of revenue for the nine months ended September 30, 1999 and 1998,
respectively. The percentage increase primarily represents increased personnel
costs related to the growth of ZDNet.

Stock-based compensation

Stock-based compensation increased by $4.7 million from $0.2 million for the
first nine months of 1998 to $4.9 million for the same period of 1999. The
increase was a result of the issuance of certain options of ZDNet Stock and the
conversion of certain SOFTBANK Corp. stock options to Ziff-Davis Inc. stock
options in December 1998, both of which resulted in compensation. In addition,
$0.4 million of stock compensation was incurred in 1999 relating to the
issuance of ZDNet stock options as part of completing the GameSpot minority
interest acquisition.

Depreciation and amortization

Total depreciation and amortization expense was $127.9 million for the nine
months ended September 30, 1999 compared to $114.6 million for the nine months
ended September 30, 1998, an increase of $13.3 million

III-8
<PAGE>

or 11.6%. The primary reason for the increase was depreciation and amortization
of assets acquired through acquisitions of ZDTV, Sky TV, Updates.com and
SoftSeek, as well as assets associated with Ziff-Davis Inc.'s new headquarters.
These increases were partially offset by the absence of amortization related to
intangible assets written off as part of the October 1998 restructuring.

Interest expense, net

Net interest expense declined by $21.6 million or 19.4% from $111.2 million
for the nine months ended September 30, 1998 to $89.6 million for the nine
months ended September 30, 1999. This was primarily due to a significant
reduction in Ziff-Davis Inc.'s outstanding debt through the reorganization and
initial public offering completed in May 1998 and the ZDNet Stock offering
completed in April 1999, partially offset by higher average interest rates in
the 1999 period and non cash interest charges related to the amortization of
fees paid in connection with the December 1998 amendment to the credit
facility.

Other non-operating income, net

Income of $26.8 million for the nine months ended September 30, 1999 was
$18.3 million higher than the income for the same period in 1998 of $8.5
million, primarily due to $20.4 million of one-time gains from the sale of
several business units, partially offset by lower joint venture and management
fee income. The sale of these business units is not expected to have a material
impact on Ziff-Davis Inc.'s future results of operations or cash flows.

Minority interest in losses of subsidiaries

Losses attributable to minority stockholders of Ziff-Davis Inc.'s
subsidiaries increased $15.4 million from $0.3 million to $15.7 million. This
increase is primarily due to the sale of a one-third interest in ZDTV in
February 1999, creating a minority interest in the losses of ZDTV.

Income taxes

The consolidated tax benefit for the nine months ended September 30, 1999 was
$31.7 million compared to $33.6 million in the nine months ended September 30,
1998. The effective tax rate for the nine months ended September 30, 1999 was
36.1% compared to 28.0% for the 1998 period. These rates are based on estimates
for annual earnings and taxes available at the time. The actual annual
effective tax rate for 1998 was 25.4%.

Net loss

As a result of the factors discussed above, the net loss decreased from $86.2
million for the nine months ended September 30, 1998 to $55.9 million for the
nine months ended September 30, 1999.

EBITDA

EBITDA for the nine months ended September 30, 1999 was $130.6 million
compared to $106.2 million for the nine months ended September 30, 1998, an
increase of $24.4 million or 23.0%. This increase is primarily due to the shift
in timing of events, one-time gains from the sale of businesses and
improvements at ZDNet, partly offset by the inclusion of ZDTV losses and a
decline in the publishing segment.

Liquidity and Capital Resources

At September 30, 1999, Ziff-Davis Inc.'s total outstanding debt was $1,272.7
million, excluding unamortized discount, and consisted of $72.7 million due to
Softbank and $1,200.0 million in notes.

Cash and cash equivalents were $29.8 million at September 30, 1999 compared
to $32.6 million at December 31, 1998. The change during the nine months ended
September 30, 1999 was due to the factors discussed below.

III-9
<PAGE>

Cash provided by operations was $63.9 million for the nine months ended
September 30, 1999 compared to $82.8 million for the nine months of 1998
primarily due to changes in working capital.

Cash used by investing activities was $96.7 million for the nine months ended
September 30, 1999 compared to $40.6 million for the nine months ended
September 30, 1998. The increase reflects higher capital spending of $37.2
million primarily due to one-time spending on relocation of the New York
operations. In addition, Ziff-Davis Inc. paid $9.4 million to the previous
owners of Inter@ctive Enterprises in connection with the contingent purchase
price adjustment. The remainder of the increase relates to an increase in the
cash paid for acquisitions of $39.0 million, primarily of ZDTV ($32.8 million),
partly offset by $29.1 million of proceeds from the sale of several business
units, principally the sale of Ziff-Davis Inc.'s 50.0% interest in the ExpoComm
joint venture.

Cash provided by financing activities was $30.0 million for the nine months
ended September 30, 1999 compared to a use of $45.3 million for the nine months
ended September 30, 1998. Financing activities in 1998 primarily represent
remittance of excess cash to Softbank to repay intercompany obligations prior
to ZD's initial public offering. Financing activities in 1999 include the ZDNet
Stock offering, proceeds of $54.0 million from Vulcan Programming Inc. for the
issuance of a one-third equity interest in ZDTV and $50.0 million for issuing
approximately 3 million shares of ZD Common Stock to Vulcan Ventures Inc., as
well as the partial use of these proceeds to repay indebtedness.

In connection with Ziff-Davis Inc.'s intention to pursue strategic
alternatives, programs have been put in place in order to retain employees. The
cost of such programs, which include enhanced severance packages, accelerated
vesting of stock options and employer contributions to the 401(k) plan, cannot
yet be estimated.

Ziff-Davis Inc. believes, based on it current level of operations and
anticipated growth, that its 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 its indebtedness and to fund anticipated
capital expenditures and working capital requirements. 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 on its future performance.

Swap Agreements

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.

On June 15, 1999, Ziff-Davis Inc. amended a swap agreement (with a notional
amount of $100 million) by reducing the fixed rate paid to the counterparty and
providing the counterparty with a one-time option to cancel the swap agreement
on February 5, 2000 (or reduce the term of the agreement by 3 1/2 years). Ziff-
Davis Inc. entered into another swap agreement (with a notional amount of $50
million) on June 15, 1999. Under this swap agreement, Ziff-Davis Inc. will
receive a fixed rate of interest and pay a floating rate of interest based on 3
month LIBOR, which resets quarterly, for the term of the agreement.

Through the use of swap agreements, Ziff-Davis Inc. has effectively
established a fixed interest rate for $500 million of the outstanding credit
facility. Based on the $950 million outstanding under the credit facility as of
September 30, 1999, if the LIBOR rate were to increase by 1%, Ziff-Davis Inc.
would incur, after giving effect to the swap agreements, an additional $4.5
million of annual interest expense. The weighted average fixed rate Ziff-Davis
Inc. pays under these agreements is approximately 5.1%.

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
$500 million does not represent a real amount

III-10
<PAGE>

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. These quotes
represented the amounts that Ziff-Davis Inc. would pay if the agreements were
terminated at the balance sheet date. Although 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 gain of
approximately $8.1 million. By their 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.

Hedge transaction

In June 1999, Ziff-Davis Inc. entered into a short-sale to effect a hedge on
300,000 of its 438,057 shares of Beyond.com Corporation. These shares were sold
on behalf of Ziff-Davis Inc. by a third party, at a weighted average price of
$22.50 per share. In September 1999, Ziff-Davis Inc. delivered the shares
required to close the short position and repurchased the shares at a market
price of $14.00 per share. An unrealized gain of approximately $2,600,000 was
deferred in the period related to this hedge transaction.

Restructuring

In October 1998, Ziff-Davis Inc. announced a restructuring program with the
intent of significantly reducing its cost base. As a result, a charge of $52.2
million was recorded in 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). Approximately $3.7 million remains
accrued on the balance sheet related to the restructuring, primarily related to
the future costs of vacant lease space.

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.

At December 31, 1998, Ziff-Davis Inc. was in the research and validation
phase of its Year 2000 project for information technology, or IT systems and
non-IT systems. This phase consisted 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 included
identifying systems that contained embedded technology, such as micro-
controllers, which were not Year 2000 compliant.

Ziff-Davis Inc. has identified critical systems and applications that have
been or are being validated for compliance through formal documentation,
vendors or testing. During the second quarter of 1999, Ziff-Davis Inc. entered
the testing phase of its infrastructure, hardware, software and databases and
plans to complete such phase by the fourth quarter of 1999. Contingency plans
are being finalized for any systems or platforms that remain in the testing
phase during the fourth quarter of 1999.

Some of Ziff-Davis Inc. computer systems and databases, including its
subscription fulfillment and payroll systems, are managed by third parties
under contractual arrangements. Ziff-Davis Inc. is not currently aware of any
Year 2000 compliance problems related to those third parties. In the second
quarter of 1999 Ziff-Davis Inc. had requested those third parties with which
Ziff-Davis Inc. has material relationships 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. Such inquiries are
substantially completed and no material matters have been identified.

III-11
<PAGE>

In addition, Ziff-Davis Inc. is developing contingency plans in order to
compensate for any disruption or downtime that could result from a Year 2000
compliance problem. Ziff-Davis Inc. has replaced or is remediating IT and non-
IT systems that it determined were not Year 2000 compliant.

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 internal 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 $1.7 million and $3.8 million,
respectively. Ziff-Davis Inc. estimates that it will incur external selling,
general and administrative expenses of approximately $7.0 to $9.0 million and
capital costs of $5.0 to $6.0 million during 1999 related to its Year 2000
readiness efforts.

Ziff-Davis Inc. expects to complete testing and replacement of critical
systems in 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 one
by one, 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 of
its 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.

III-12
<PAGE>

ZIFF-DAVIS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1997 AND 1998

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. 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% in 1998), direct
mail and the related costs for promotion of the events (37.0% in 1998) and
program development and presentation costs (13.4% in 1998). 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% in 1998) along with
marketing and promotion expenses related to advertising and circulation (19.7%
in 1998).

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 expenditures 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 industry generally, including pricing
pressures and temporary surpluses of inventory. Revenue and profitability

III-13
<PAGE>

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.

On February 4, 1999, Ziff-Davis Inc. purchased ZDTV. This purchase will
affect Ziff-Davis Inc.'s results in future periods. See "--ZDTV" below for
certain summary pro forma and other information about this purchase.

Ziff-Davis Inc. expects to recognize compensation expense of approximately
$21.3 million as a result of certain options granted on December 21, 1998 and
January 29, 1999. Such compensation expense will be recognized over the vesting
period of the options. The 1999 compensation expense related to these options
is expected to be approximately $5.5 million. See Note 13 to Ziff-Davis Inc.'s
Consolidated Financial Statements in this Annex.

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.

III-14
<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 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(1) Actual
---------- ----------------------
1996 1997 1998
---------- ---------- ----------
(dollars 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:
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)
EBITDA(2)......................... 255,430 272,894 244,094
</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.

III-15
<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). The
remainder of the decrease was primarily 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 Networld+Interop Las Vegas and
Java One due to an increased number of attendees.

Internet-- Net revenue increased by $23.9 million or 74.2% from $32.2 million
for the year ended December 31, 1997 to $56.1 million for the year ended
December 31, 1998. Revenue from advertising was 86% of net revenue for the year
ended December 31, 1998 compared to 73% for the year ended December 31, 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 year. 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 in 1997 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.

III-16
<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 costs eliminated by the
closure of three magazines in the fourth quarter of 1998.

Depreciation and amortization

Total depreciation and amortization decreased $2.4 million from $154.9
million in 1997 to $152.5 million in 1998. 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).

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 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.

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.

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. This 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, an entity that
was formed in August 1997.

III-17
<PAGE>

Income taxes

The 1998 income tax benefit of $26.4 million increased from $1.3 million
reported in 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 in 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 3.0% and 10.0%, 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 by $13.1 million or from $19.1 million for
the pro forma year ended December 31, 1996 to $32.2 million in 1997. 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 reflects 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 $16.4 million or 227.8% from $7.2 million
for the pro forma year ended December 31, 1996 to $23.6 million in 1997. 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 $3.3 million or 27.7% from
$11.9 million in 1996 to $8.6 million in 1997.

III-18
<PAGE>

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 in 1997. 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 in 1996 to $99.5 million in 1997 primarily as a result of costs related
to new events launched in 1997.

Internet production costs increased $1.3 million or 43.3% from $3.0 million
in 1996 to $4.3 million in 1997. 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. This 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 in 1997 and $77.2 million in 1996),
non-deductible goodwill amortization ($10.2 million and $8.6 million,
respectively) and state and local income taxes. In addition, the 1996 tax
provision increased approximately $3.2 million as a result of pro forma
adjustments related to the ZDI acquisition.

Net loss

As a result of the changes described above, net loss for the period increased
$4.2 million or 6.2% from $67.0 million to $71.2 million.

EBITDA

EBITDA for 1997 was $272.9 million, an increase of $17.5 million or 6.8% from
the $255.4 million generated in 1996. The increase was due to higher revenue
and management fee income, net of higher production costs and selling, general
and administrative expenses. The ratio of EBITDA to revenue remained relatively
constant at 23.7% for 1997 compared to the 1996 margin of 23.6%.

III-19
<PAGE>

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 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 year ended December 31, 1997.
The increase from 1997 to 1998 was attributed to Ziff-Davis Inc.'s lower losses
before 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 year ended December 31,
1997. 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 year ended December 31, 1997 reflect the purchase of a 70% interest in
GameSpot.

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 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 Inc. 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 $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.

III-20
<PAGE>

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 working capital requirements.
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.'s
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 $1,220.0
million 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. receives a floating rate of
interest based on three-month LIBOR, which resets quarterly, and Ziff-Davis
Inc. pays a fixed rate of interest each quarter for the terms of the respective
agreements. The weighted average fixed rate Ziff-Davis Inc. pays 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.

III-21
<PAGE>

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.

Ziff-Davis Inc. currently has certain long-term agreements to distribute ZDTV
via satellite. Historically, start-up cable television channels have required
substantial investment and there can be no assurance that ZDTV will ultimately
obtain sufficient cable carriage and commercial acceptance to be profitable.
The following unaudited summary pro forma information assumes that the
acquisition of ZDTV and the sale of a one-third interest in ZDTV to Vulcan
Programming referred to below had been consummated on January 1, 1998.
Adjustments for ZDTV transactions include the operating results of ZDTV,
amortization of the purchase price of ZDTV, Vulcan Programming's one-third
interest in the losses of ZDTV and the tax effect of these items. The pro forma
data is not necessarily indicative of actual results had the transaction
occurred on January 1, 1998. Further, pro forma results are not meant to
represent future financial results.

<TABLE>
<CAPTION>
Adjustments
Ziff-Davis for ZDTV
Inc. Transactions Pro forma
---------- ------------ ----------
(dollars in thousands except per
share data)
<S> <C> <C> <C>
Revenue.............................. $1,108,892 $ 5,585 $1,114,477
Income (loss) from operations........ 31,080 (55,049) (23,969)
Net loss............................. (77,809) (22,443) (100,252)
Pro forma basic loss per share....... $ (1.00)
</TABLE>

ZDTV's cash requirements are currently expected to be approximately $50
million for 1999. The $54 million invested in ZDTV by Vulcan Programming will
be used to fund ZDTV and thereafter cash requirements will be funded by the
partners or by third parties.

Ziff-Davis Inc. intends to file appropriate financial statements and pro
forma information regarding ZDTV on or before April 20, 1999 as set forth in
its Form 8-K filed with the SEC on February 19, 1999.

Vulcan Transactions

On February 5, 1999, Vulcan Programming, an entity owned by Paul G. Allen,
purchased a one-third interest in ZDTV for $54 million. On March 4, 1999,
Vulcan Ventures, the investment vehicle of Paul G. Allen, purchased
approximately three million shares of Ziff-Davis Inc. common stock for $50
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

III-22
<PAGE>

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.

<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 95,816
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) 48,475
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% 56.5%
</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 "ZD Description of Business--Print Publishing--Paper and Printing" set
forth in an Annex to this proxy statement.

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.

III-23
<PAGE>

At December 31, 1998, Ziff-Davis Inc. was in the research and validation
phase of its Year 2000 project for information technology ("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 Year 2000
compliance problems known to it 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 $3,837,000, 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 one by one 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 Pronouncement

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.

III-24
<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 our businesses and 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
other Annexes to this proxy statement.

Relationship with Softbank

For information concerning the formation of Ziff-Davis Inc. and its
relationship with Softbank see Note 1 to the Consolidated Financial Statements
of Ziff-Davis Inc. included in this Annex.

III-25
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 29,791 $ 32,566
Accounts receivable, net........................... 218,437 227,325
Inventories........................................ 12,946 15,551
Prepaid expenses and other current assets.......... 37,407 34,543
Due from affiliates................................ 4,722 53,984
Deferred taxes..................................... 22,262 22,262
---------- ----------
Total current assets............................. 325,565 386,231
Securities available for sale....................... 7,916 --
Property and equipment, net......................... 116,917 91,189
Intangible assets, net.............................. 2,935,514 2,907,043
Other assets........................................ 58,024 49,340
---------- ----------
Total assets..................................... $3,443,936 $3,433,803
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 36,506 $ 75,863
Accrued expenses................................... 136,081 97,319
Unearned income, net............................... 195,613 152,081
Due to affiliates and management................... -- 4,618
Current portion of notes payable to affiliates..... 6,923 7,692
Other current liabilities.......................... 17,054 13,125
---------- ----------
Total current liabilities........................ 392,177 350,698
Notes payable to affiliates......................... 65,769 70,192
Notes payable, net of unamortized discount.......... 1,199,215 1,469,130
Deferred taxes...................................... 134,884 165,082
Due to management................................... 665 5,400
Other liabilities................................... 14,813 19,690
---------- ----------
Total liabilities................................ 1,807,523 2,080,192
---------- ----------
Commitments and contingencies (See Note 9)
Minority Interest................................... 31,255 1,013
---------- ----------
Stockholders' equity:
Preferred stock(1)................................. -- --
Common stock--Ziff-Davis Inc.--ZD Common
Stock(2).......................................... 1,033 1,000
Common stock--Ziff-Davis Inc.--ZDNet Common
Stock(3).......................................... 137 --
Additional paid-in capital......................... 1,874,312 1,571,681
Accumulated deficit................................ (253,185) (197,238)
Deferred compensation.............................. (17,606) (22,024)
Unrealized gain on securities available for sale... 989 --
Cumulative translation adjustment.................. (522) (821)
---------- ----------
Total stockholders' equity....................... 1,605,158 1,352,598
---------- ----------
Total liabilities and stockholders' equity....... $3,443,936 $3,433,803
========== ==========
</TABLE>
- --------
(1) September 30, 1999 and December 31, 1998: par value $.01 per share,
10,000,000 shares authorized, no shares issued and outstanding.
(2) September 30, 1999: par value $.01 per share, 210,000,000 shares
authorized (including Ziff-Davis Inc.--ZDNet Common Stock), 103,310,097
shares issued and outstanding; December 31, 1998: par value $.01 per share
120,000,000 shares authorized, 100,000,000 shares issued and outstanding.
(3) September 30, 1999: par value $.01 per share, 210,000,000 shares
authorized (including Ziff-Davis Inc.--ZD Common Stock), 13,706,063 shares
issued and outstanding; December 31, 1998: no shares authorized, issued or
outstanding.

The accompanying notes are an integral part of these financial statements.

III-26
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited--dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue, net:
Publishing............ $ 165,268 $ 181,727 $ 518,626 $ 571,391
Events................ 63,085 29,787 157,150 122,690
Internet.............. 26,291 14,504 67,791 36,466
Television............ 3,642 -- 9,343 --
------------ ------------ ------------ ------------
258,286 226,018 752,910 730,547
Cost of production...... 68,932 62,512 202,038 207,395
Selling, general and
administrative
expenses............... 157,557 140,412 458,593 425,764
Stock-based
compensation........... 1,474 63 4,861 189
Depreciation and
amortization of
property and
equipment.............. 8,583 7,870 25,558 22,597
Amortization of
intangible assets...... 36,160 29,973 102,308 91,997
------------ ------------ ------------ ------------
Loss from operations.... (14,420) (14,812) (40,448) (17,395)
Interest expense, net... (28,632) (29,093) (89,602) (111,185)
Other non-operating
income, net............ 15,271 4,396 26,762 8,482
Minority interest in
losses of
subsidiaries........... 5,491 60 15,686 330
------------ ------------ ------------ ------------
Loss before income
taxes.................. (22,290) (39,449) (87,602) (119,768)
Income tax benefit...... (7,259) (34,951) (31,655) (33,589)
------------ ------------ ------------ ------------
Net loss................ $ (15,031) $ (4,498) $ (55,947) $ (86,179)
============ ============ ============ ============
ZDNet
Pro forma net income
(loss) per basic common
share.................. $ (.01) $ .00 $ (.00) $ (.12)
Pro forma weighted
average basic common
shares outstanding..... 73,402,667 71,500,000 72,315,852 71,500,000
ZD Group
Pro forma net loss per
basic common share..... $ (.14) $ (.04) $ (.55) $ (.86)
Pro forma weighted
average basic common
shares outstanding..... 103,287,483 100,000,000 102,508,377 100,000,000
</TABLE>

The accompanying notes are an integral part of these financial statements.

III-27
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited--dollars in thousands)

<TABLE>
<CAPTION>
Three months
ended Nine months ended
September 30, September 30,
----------------- ------------------
1999 1998 1999 1998
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net loss................................ $(15,031) $(4,498) $(55,947) $(86,179)
Other comprehensive income (loss):
Foreign currency translation
adjustments.......................... 5,627 1,152 299 999
Unrealized (loss) gain on securities
available for sale................... (1,648) -- 989 --
-------- ------- -------- --------
Comprehensive loss...................... $(11,052) $(3,346) $(54,659) $(85,180)
======== ======= ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

III-28
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--dollars in thousands)

<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------
1999 1998
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (55,947) $ (86,179)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization........................ 127,866 114,594
Amortization of debt issuance costs and discount..... 5,129 1,313
Stock-based compensation............................. 4,861 189
Gain from sale of business units..................... (20,420) --
Income from equity investments....................... (4,457) (4,688)
Deferred tax benefit................................. (31,655) (33,589)
Minority interest.................................... (15,686) --
Changes in operating assets and liabilities:
Accounts receivable................................ 11,554 28,622
Inventories........................................ 2,605 (591)
Accounts payable and accrued expenses.............. 12,043 6,703
Unearned income.................................... 38,495 62,770
Due to/from affiliates and management.............. -- 10,707
Other, net......................................... (10,465) (17,060)
--------- -----------
Net cash provided by operating activities............. 63,923 82,791
--------- -----------
Cash flows from investing activities:
Capital expenditures................................. (64,624) (27,399)
Proceeds from sale of business units................. 29,105 --
Investments and other................................ (19,195) (6,193)
Distributions from joint ventures.................... 4,000 --
Acquisitions, net of cash acquired................... (45,986) (6,999)
--------- -----------
Net cash used by investing activities................. (96,700) (40,591)
--------- -----------
Cash flows from financing activities:
Proceeds from sale of Ziff-Davis Inc.--ZD common
stock(1)............................................ 52,557 380,337
Proceeds from issuance of notes payable(1)........... -- 242,723
Proceeds from issuance of bank debt(1)............... -- 1,240,200
Proceeds from sale of Ziff-Davis Inc.--ZDNet common
stock(2)............................................ 198,537 --
Proceeds from sale of interest in ZDTV............... 54,000 --
Principal payments on notes payable to affiliates.... (5,192) (314,798)
Repayments of credit facility........................ (320,400) (45,000)
Borrowings under credit facility..................... 50,500 --
Payments of debt due to affiliate.................... -- (1,569,532)
Purchase of treasury shares.......................... -- (29,500)
Sale of treasury shares.............................. -- 29,500
Advance from majority shareholder.................... -- 20,377
Contributed capital.................................. -- 345
--------- -----------
Net cash provided (used) by financing activities...... 30,002 (45,348)
--------- -----------
Net decrease in cash and cash equivalents............. (2,775) (3,148)
Cash and cash equivalents at beginning of period...... 32,566 30,301
--------- -----------
Cash and cash equivalents at end of period............ $ 29,791 $ 27,153
========= ===========
Supplemental cash flow information:
Cash paid for income taxes........................... $ -- $ 642
Cash paid for interest............................... $ 74,298 $ 94,360
</TABLE>
- --------
(1) Net of transaction costs of $19,563; $9,800; and $7,277, respectively, for
the nine months ended September 30, 1998.
(2) Net of transaction costs of $19,897.

The accompanying notes are an integral part of these financial statements.

III-29
<PAGE>

ZIFF-DAVIS INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
------------------------------------
Unrealized
gain on
ZD Stock ZD Net Stock Additional securities Cumulative Total
------------------ ----------------- Paid-in Accumulated Deferred available Translation Stockholders'
Shares Amount Shares Amount Capital Deficit Compensation for sale adjustment equity
----------- ------ ---------- ------ ---------- ----------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1998........... 100,000,000 $1,000 -- $-- $1,571,681 $(197,238) $ (22,024) $-- $(821) $1,352,598
Issuance of
common stock... 3,030,303 30 -- -- 49,970 -- -- -- -- 50,000
Sale of minority
interest in
subsidiary..... -- -- -- -- 7,176 -- -- -- -- 7,176
Stock-based
compensation
earned......... -- -- -- -- -- -- 4,861 -- -- 4,861
Issuance of
Ziff-Davis
Inc.--ZDNet
Common Stock,
net of offering
costs.......... -- -- 11,500,000 115 198,340 -- -- -- -- 198,455
Shares and
options issued
to acquire
minority
interest in
GameSpot....... -- -- 600,000 6 12,025 -- (443) -- -- 11,588
Shares issued
for
acquisitions... -- -- 1,573,564 16 32,484 -- -- -- -- 32,500
Sale of shares
under employee
stock purchase
plan........... 152,764 2 -- -- 1,775 -- -- -- -- 1,777
Stock options
exercised...... 127,030 1 32,499 -- 861 -- -- -- -- 862
Unrealized gain
on securities
available for
sale, net...... -- -- -- -- -- -- -- 989 -- 989
Net loss........ -- -- -- -- -- (55,947) -- -- -- (55,947)
Foreign currency
translation
adjustment..... -- -- -- -- -- -- -- -- 299 299
----------- ------ ---------- ---- ---------- --------- --------- ---- ----- ----------
Balance at
September 30,
1999
(unaudited).... 103,310,097 $1,033 13,706,063 $137 $1,874,312 $(253,185) $(17, 606) $989 $(522) $1,605,158
=========== ====== ========== ==== ========== ========= ========= ==== ===== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

III-30
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(numbers rounded to the nearest thousand, except share and per share amounts)

1. The Company and Basis of Presentation

Basis of presentation

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly the consolidated financial position of Ziff-Davis Inc. at
September 30, 1999 and the results of its consolidated operations for the three
and nine months ended September 30, 1999 and 1998 and cash flows for the nine
months ended September 30, 1999 and 1998 have been included. Operating results
for the periods presented are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. It is suggested that the
statements be read in conjunction with Ziff-Davis Inc.'s consolidated financial
statements and notes thereto included in Ziff-Davis Inc.'s December 31, 1998
Annual Report and Form 10-K.

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. were wholly owned indirect
subsidiaries of SOFTBANK Corp. (together with its non-Ziff-Davis Inc.
affiliates, "Softbank") or assets owned by MAC Inc., an affiliate of SOFTBANK
Corp. ("MAC Assets"). As such, financial statements for periods prior to May 4,
1998 have been prepared on a combined basis while the financial statements for
the periods after May 4, 1998 have been prepared on a consolidated basis.

The results of the MAC Assets, 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") on February
29, 1996. These results have been included in a manner similar to a pooling of
interests, as the MAC Assets and predecessor companies of Ziff-Davis Inc. were
under common control at the time the MAC Assets were acquired by Ziff-Davis
Inc.

Ziff-Davis Inc. operates in four business segments: (1) publishing, (2)
events, (3) Internet and (4) television.

Publishing

The publishing segment is engaged in publishing magazines, journals,
newsletters, electronic information products, training manuals and market
research about computer technology and the Internet. 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 publications distributed worldwide.
The market research division was sold on October 1, 1999 (see Note 12).

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for the computer technology and
Internet industries. 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 computer technology and internet
related news and information to Internet users worldwide. The Internet
segment's principal operations are in the U.S. and to a lesser extent in
Europe.

III-31
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Television

The television segment, which was acquired in February 1999 (see Note 4), is
engaged in the production and distribution of television broadcasting for and
about the computer technology and the Internet industries. The television
segment's principal operations are in the U.S. although it licenses or
syndicates programming worldwide.

Sale of Common Stock

On March 4, 1999, Vulcan Ventures Inc., the investment vehicle of Paul G.
Allen, purchased 3,030,303 shares of Ziff-Davis Inc. common stock for
$50,000,000 in cash.

On April 6, 1999, the Company completed a public offering of 11,500,000
shares of a new class of common stock called Ziff-Davis Inc.--ZDNet Common
Stock (see Note 3).

Reclassifications

Certain amounts have been reclassified, where appropriate, to conform to the
current financial statement presentation.

2. Reorganization and Initial Public Offering

On May 4, 1998, SOFTBANK Corp., through its wholly owned subsidiary SOFTBANK
Holdings Inc. ("SBH"), completed a reorganization whereby the common stock of
the predecessor companies to Ziff-Davis Inc. was 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"), a related party, in exchange for 580,645 shares of Ziff-Davis
Inc.'s common stock and $107,000 in cash. These assets were subsequently leased
back to Kingston. Total shares of common stock issued to Softbank 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 the MAC Assets for $370,000,000 and repay intercompany
indebtedness.

3. ZDNet Stock

The stockholders of Ziff-Davis Inc. voted, at a Special Meeting held on March
30, 1999, to authorize the issuance of a new series of common stock, designated
as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"), which is intended to
reflect the performance of Ziff-Davis Inc.'s Internet business division
("ZDNet"). When the ZDNet Stock was issued on April 6, 1999, Ziff-Davis Inc.'s
existing common stock was re-classified as Ziff-Davis Inc.--ZD Common Stock
("ZD Stock"), which is intended to reflect the performance of Ziff-Davis Inc.'s
other businesses and a retained interest in ZDNet. The businesses represented
by ZD Stock are referred to as "ZD".

The ZDNet Stock offering was completed on April 6, 1999. Ziff-Davis Inc.
issued 11,500,000 shares of ZDNet Stock, at $19.00 per share, including
1,500,000 shares issued in conjunction with the underwriters' exercise of their
option to purchase additional shares to cover over-allotments. Net proceeds of
approximately $198,600,000 were received on April 6, 1999 and were used to
repay indebtedness under the revolving credit agreement.

III-32
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

The following pro forma information has been prepared as if the ZDNet Stock
offering had been consummated on January 1, 1999. The pro forma adjustments
include a $4,215,000 reduction of interest expense and the tax effect of this
adjustment at a statutory rate of 41.0%. There is no pro forma impact for the
three month period ended September 30, 1999.

<TABLE>
<CAPTION>
Nine months ended
September 30, 1999
----------------------
(dollars in thousands)
<S> <C>
Revenue, net....................................... $752,910
Loss from operations............................... (40,448)
Interest expense, net.............................. (85,387)
Loss before taxes.................................. (83,387)
Income tax benefit................................. (29,927)
Net loss........................................... (53,460)
</TABLE>

Pro forma loss per share is not shown since subsequent to the ZDNet offering,
Ziff-Davis Inc. reports earnings for each class of stock in its related
financial statements (i.e. ZD or ZDNet). The pro forma data is not necessarily
indicative of actual results had the transaction occurred on January 1, 1999.
Further, pro forma results are not meant to represent future financial results.

4. ZDTV

On February 4, 1999, Ziff-Davis Inc. purchased ZDTV, LLC ("ZDTV") from MAC
Holdings (America) Inc., a related party, for a purchase price of approximately
$81,400,000. 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) Inc.
Ziff-Davis Inc. also agreed to fund ZDTV during the period in 1999 prior to the
purchase which was accounted for as additional purchase price. Such funding
amounted to approximately $4,200,000.

On February 5, 1999, Vulcan Programming Inc., an entity owned by Paul G.
Allen, acquired a one-third equity interest in ZDTV for $54,000,000 in cash. In
March 1999, an additional 4.0% equity interest was acquired by ZDTV's
president. In both cases, the acquisitions were effected by issuing additional
equity.

The following unaudited summary pro forma information assumes that the
acquisition of ZDTV and the acquisition of a one-third equity interest in ZDTV
by Vulcan Programming Inc. had been consummated on January 1, 1999. Adjustments
for ZDTV transactions include the operating results of ZDTV, amortization of
the purchase price of ZDTV, Vulcan Programming Inc.'s one-third interest in the
losses of ZDTV and the tax effects of these items. Pro forma loss per share is
not shown since subsequent to the ZDNet Stock offering, Ziff-Davis Inc. reports
earnings for each class of stock in its related financial statements (i.e. ZD
or ZDNet). The pro forma data is not necessarily indicative of actual results
had the transaction occurred on January 1, 1999. Further, pro forma results are
not meant to represent future financial results. There is no pro forma impact
for the three months ended September 30, 1999.

<TABLE>
<CAPTION>
Nine months ended September
30, 1999
-------------------------------
Ziff- Adjustments
Davis for ZDTV Pro
Inc. transactions Forma
-------- ------------ --------
(dollars in thousands)
<S> <C> <C> <C>
Revenue.................................. $752,910 $ 316 $753,226
Loss from operations..................... (40,448) (2,546) (42,994)
Net loss................................. (55,947) (1,006) (56,953)
</TABLE>

III-33
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

ZDTV 1999 Profits Interest Plan

On May 11, 1999, ZDTV's Board of Directors adopted and approved the ZDTV 1999
Profits Interest Plan. Under such plan, ZDTV's Board of Directors may issue
interests in ZDTV for incentive purposes to employees, directors and
consultants covered by the plan. At September 30, 1999, there were 10,724,200
units issued under the plan.

5. Acquisitions and Dispositions

GameSpot Inc.

On April 7, 1999, Ziff-Davis Inc. completed the acquisition of the remaining
30.0% interest in GameSpot Inc. in exchange for 600,000 newly issued shares of
ZDNet Stock valued at approximately $11,400,000. This acquisition was accounted
for under the purchase method of accounting.

Updates.com Inc.

On July 2, 1999, ZDNet acquired Updates.com Inc. for a purchase price of
approximately $18,500,000. Consideration was in the form of $5,000,000 in cash
and 582,526 shares of ZDNet Stock valued at $13,500,000. This acquisition was
accounted for under the purchase method of accounting.

SoftSeek Inc.

On July 30, 1999, ZDNet acquired SoftSeek Inc. for a purchase price of
approximately $26,000,000. Consideration was in the form of $7,000,000 in cash
and 991,038 shares of ZDNet Stock valued at $19,000,000. This acquisition was
accounted for under the purchase method of accounting.

Sale of Business Units

Ziff-Davis Inc. has completed the sale of its 50.0% interest in ExpoComm LLC
along with other smaller business units from the ZD Market Intelligence and ZD
Education platforms. The proceeds from the sale of these business units totaled
$29,105,000 and are reflected as investing activities in the statement of cash
flows.

6. Investments

On February 19, 1999 Ziff-Davis Inc. acquired warrants to purchase 2,005,400
shares of Series E preferred stock of BuyDirect.com Inc. ("Series E shares") at
an exercise price of $1.65 per share. On March 25, 1999, Ziff-Davis Inc.
exercised its warrants and received 1,510,020 Series E shares in a cashless
exercise by exchanging 495,380 warrants in lieu of payment of the exercise
price. On March 30, 1999, BuyDirect.com Inc. was acquired by Beyond.com
Corporation and these Series E shares were converted to 438,057 shares of
Beyond.com Corporation and at September 30, 1999 are reflected in the balance
sheet as Securities Available for Sale.

The warrants were granted in connection with an agreement by BuyDirect.com
Inc. to advertise on certain ZDNet sites. As a result, the fair value of the
warrants at February 19, 1999 was recorded as deferred revenue and will be
recognized as income over the life of the advertising agreement. The fair value
of the warrants was determined to be $6,240,000.

In June 1999, Ziff-Davis Inc. entered into an agreement to hedge a portion of
the unrealized gain associated with these shares. (See Note 9).

III-34
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

7. Income Taxes

Income taxes are provided based on Ziff-Davis Inc.'s projected annual
effective tax rate which differs from the U.S. federal statutory rate of 35.0%
due to (i) certain items which are not deductible for income tax purposes,
primarily nondeductible goodwill amortization, and (ii) the effect of state and
local taxes. The tax benefit recorded for the nine months ended September 30,
1999 has been reflected as a reduction of the deferred tax liability as it is
anticipated that the benefit will be realizable in future periods.

8. Earnings per share

Ziff-Davis Inc. reports earnings per share for its two classes of common
stock, ZD Stock and ZDNet Stock.

The pro forma weighted average common shares outstanding and the pro forma
loss per share related to ZD Stock has been prepared assuming the
reorganization and initial public offering of ZD Stock (see Note 2) occurred on
January 1, 1998. ZD's earnings include its retained interest in ZDNet's
results. Diluted earnings per share are not shown as the impact of stock
options would be anti-dilutive.

The pro forma weighted average common shares outstanding and the pro forma
income (loss) per share related to ZDNet Stock has been prepared assuming the
reorganization and initial public offering of ZDNet Stock (see Note 3) occurred
on January 1, 1998. Diluted earnings per share are not shown as the impact of
stock options would be anti-dilutive.

9. Commitments and Contingencies

Strategic Alternatives

On July 14, 1999, Ziff-Davis Inc. announced that it had retained the
investment banking firm of Morgan Stanley Dean Witter ("Morgan Stanley") to
explore strategic alternatives to maximize shareholder value. The Ziff-Davis
Inc. Board of Directors has not embraced any particular alternatives and will
investigate all possible alternatives, including strategic alliances, mergers
and the sale or joint venture of all or some of Ziff-Davis Inc.'s businesses.
No assurances can be given that any transaction will result from the
exploration process that Morgan Stanley has been retained to manage.

On May 24, 1999, Ziff-Davis Inc. announced that it had retained Morgan
Stanley to explore strategic alternatives for its ZD Market Intelligence Unit,
the sale of which was completed on October 1, 1999. (See Note 12).

Class action and derivative litigations

Ziff-Davis Inc. is subject to various claims and legal proceedings arising in
the normal course of business.

The complaints alleged 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 completed on May 4,
1998 (the "IPO"). More particularly, the complaints alleged 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 sought 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.

III-35
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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. The consolidated amended complaint was filed on June 15,
1999 and only alleges claims under Section 11 of the Securities Act of 1933. On
May 20, 1999, Ziff-Davis Inc. moved to dismiss the consolidated amended
complaint. In July 1999, plaintiff filed their response to the motion. Ziff-
Davis Inc. filed a reply on August 11, 1999. The motion has not been decided.

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 the actions have been consolidated. Answers to the amended
complaint on behalf of both Ziff-Davis Inc. and its directors were filed on
April 12, 1999. Discovery is proceeding.

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 Corp. The complaint alleged, 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 stated 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. Upon motion of Ziff-Davis Inc. and the other
defendants, all of the claims against them other than a breach of contract
claim which is solely against SBH, were dismissed on February 26, 1999. On
April 1, 1999, plaintiffs filed a notice of appeal of the dismissal. On
September 2, 1999, the remaining claim, which was solely against SBH, was
dismissed. On October 6, 1999, plaintiffs filed a notice of appeal of this
dismissal.

Ziff-Davis Inc. and ZDTV, L.L.C. ("ZDTV"), a majority owned affiliate of
Ziff-Davis Inc., were named as defendants in an action filed on November 10,
1999 in the U.S. District Court, Southern District of New York, by plaintiff.
In October, 1998 ZDTV through a subsidiary purchased certain assets from
corporations owned by plaintiff and two other individuals. In addition to a
cash payment at the closing of the sale, ZDTV agreed to pay additional purchase
price, contingent on the future operating profits of the SkyTV division. Ziff-
Davis Inc. guaranteed the obligations of ZDTV. The complaint alleges, among
other things, that ZDTV and Ziff-Davis Inc. breached their covenants of good
faith and fair dealing by failing to act in the best interests of the SkyTV
division, to support and procure business for the SkyTV division, and to
provide public relations, marketing assistance and corporate sales team
support, thereby lessening plaintiff's opportunity to earn additional purchase
price. The complaint seeks an amount to be determined at trial, but not less
than $60,000,000 in damages.

III-36
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Interest rate swap

On June 15, 1999, Ziff-Davis Inc. amended a swap agreement (with a notional
amount of $100,000,000) by reducing the fixed rate paid to the counterparty and
providing the counterparty with a one-time option to cancel the swap agreement
on February 5, 2000. Ziff-Davis Inc. entered into another swap agreement (with
a notional amount of $50,000,000) on June 15, 1999. Under this swap agreement,
Ziff-Davis Inc. will receive a fixed rate of interest and pay a floating rate
of interest based on 3 months LIBOR, which resets quarterly, for the term of
the agreement.

Beyond.com hedge

In June 1999, Ziff-Davis Inc. entered into a short-sale to effect a hedge on
300,000 of its 438,057 shares of Beyond.com. These shares were sold on behalf
of Ziff-Davis Inc. by a third party at a weighted average price of $22.50 per
share. In September 1999, Ziff-Davis Inc. delivered the shares required to
close the short position by repurchasing the shares at a market price of $14.00
per share. A gain of approximately $2,600,000 was deferred in the period
relating to this hedge transaction.

10. Registration Statement

On August 5, 1999, Ziff-Davis Inc. filed a registration statement on Form S-3
(File No. 333-84555), which became effective on August 11, 1999, with the
Securities and Exchange Commission to register 1,180,173 shares of ZDNet Stock
in connection with the acquisition of Updates.com Inc. and SoftSeek Inc.

11. Segment Information

Ziff-Davis Inc. operates in four reportable business segments: (1)
publishing, (2) events, (3) Internet and (4) television. All material inter-
segment revenue has been eliminated. The following table presents information
about each of the reported segments:

<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ------------------
1999 1998 1999 1998
--------- --------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenue:
Publishing....................... $ 165,268 $ 181,727 $518,626 $571,391
Events........................... 63,085 29,787 157,150 122,690
Internet......................... 26,291 14,504 67,791 36,466
Television....................... 3,642 -- 9,343 --
--------- --------- -------- --------
Total.......................... $ 258,286 $ 226,018 $752,910 $730,547
========= ========= ======== ========
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ------------------
1999 1998 1999 1998
--------- --------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
EBITDA:
Publishing....................... $ 17,475 $ 23,558 $ 80,185 $ 88,544
Events........................... 35,962 2,135 60,164 21,879
Internet......................... 4,621 1,857 11,177 (4,223)
Television....................... (7,030) -- (20,924) --
--------- --------- -------- --------
Total.......................... $ 51,028 $ 27,550 $130,602 $106,200
========= ========= ======== ========
</TABLE>

III-37
<PAGE>

ZIFF-DAVIS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(dollars in thousands)
<S> <C> <C>
Total Assets:
Publishing..................................... $1,944,663 $2,192,099
Events......................................... 1,195,191 1,144,018
Internet....................................... 179,650 97,686
Television..................................... 124,432 --
---------- ----------
Total........................................ $3,443,936 $3,433,803
========== ==========
</TABLE>

A reconciliation of EBITDA to loss before income taxes is below:

<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- -------------------
1999 1998 1999 1998
--------- --------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Total segment EBITDA............ $ 51,028 $ 27,550 $130,602 $ 106,200
Depreciation and amortization of
property and equipment......... (8,583) (7,870) (25,558) (22,597)
Amortization of intangible
assets......................... (36,160) (29,973) (102,308) (91,997)
Stock-based compensation........ (1,474) (63) (4,861) (189)
Minority interest in ZDTV's non-
EBITDA losses.................. 1,531 -- 4,125 --
Interest expense, net........... (28,632) (29,093) (89,602) (111,185)
--------- --------- -------- ---------
Loss before income taxes........ $ (22,290) $ (39,449) $(87,602) $(119,768)
========= ========= ======== =========
</TABLE>

12. Subsequent Events

Sale of Market Intelligence Unit

On October 1, 1999, Ziff-Davis Inc. completed the sale of its Market
Intelligence unit for $101,000,000 in cash plus $5,000,000 in assumed deferred
revenue obligations.

Registration Statement

On October 22, 1999, Ziff-Davis Inc. filed a registration statement on Form
S-3 (File No. 333-89597), which became effective on October 29, 1999, with the
Securities and Exchange Commission to register 180,000 shares of ZDNet Stock
acquired by three selling shareholders of GameSpot in connection with its
merger with Ziff-Davis Inc.

Smart Planet Inc.

In September 1999, the Company formed Smart Planet Inc. to conduct the
operations of its consumer based educational website. In conjunction with the
launch of this business a stock option plan was adopted. On October 25, 1999,
the Company granted options to purchase approximately 2,468,000 shares of Smart
Planet Inc. The exercise price of the options was based on an estimate of the
fair value of the underlying shares.

III-38
<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

III-39
<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 $ 75,863
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 13,125
---------- ----------
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....................................... 12,390 19,690
---------- ----------
Total liabilities....................................... 3,419,335 2,080,192
---------- ----------
Commitments and contingencies (Notes 17 and 18)
Minority interest....................................... 1,181 1,013
---------- ----------
Stockholders' equity:
Preferred stock(1).................................... -- --
Common stock(2)....................................... -- 1,000
Additional paid-in capital............................ 248,330 1,571,681
Accumulated deficit................................... (119,429) (197,238)
Deferred compensation................................. (996) (22,024)
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.

III-40
<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--related party....... (120,646) (190,445) (65,935)
Interest expense, net...................... -- -- (77,612)
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.

III-41
<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
Restructuring charge...................... -- -- 52,239
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) (1,121)
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.

III-42
<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
Holdings Corp. .. 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)
Issuance of
ZDNet options.. 18,262 (18,262)
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 $ -- -- $ -- -- $ -- $1,571,681 $(197,238) $(22,024) $ (821)
=========== ====== ======= ==== ===== ==== ===== ========== ========= ======== ======
<CAPTION>
Total
stockholders'
equity
--------------
<S> <C>
Balance at
December 31,
1995........... $ 391,528
Acquisition of
Ziff-Davis
Holdings Corp. .. 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........ --
Issuance of
ZDNet 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.

III-43
<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.
(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 consolidated 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

SOFTBANK Corp. is the indirect majority stockholder of Ziff-Davis Inc.
SOFTBANK Corp. 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 SOFTBANK
Corp. (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: (1) publishing, (2)
events and (3) 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

III-44
<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.

Subsequent to the acquisition, Holdings and ZDI were merged with ZDI being
the surviving corporation.

Purchase of the MAC Assets

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 acquisitions. 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

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 Corp., through its wholly owned subsidiary SOFTBANK
Holdings Inc. ("SBH"), completed a reorganization whereby the common stock of
ZD Inc. and ZD Events Inc. were

III-45
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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"), 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 were 74,200,000. The transactions described above are hereafter
referred to as the "Reorganization".

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 tax rate of 40%.

<TABLE>
<CAPTION>
Year ended
December 31, 1998
---------------------
(dollars in thousands
except share and
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)

III-46
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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").

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

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. 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

III-47
<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

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, 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

III-48
<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 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 19.)

Foreign currency

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

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

III-49
<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, but does not
otherwise give pro forma effect to the Reorganization and initial public
offering. Options to purchase Ziff-Davis Inc. common stock 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.
There were options to purchase 6,691,305 shares of Ziff-Davis Inc. common stock
outstanding 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

III-50
<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.

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>

III-51
<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>

III-52
<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 1998
-------- --------
(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,
-----------------------------
1996 1997 1998
-------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C>
U.S. ....................................... $(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,
-------------------------
1996 1997 1998
------- ------- --------
(dollars in thousands)
<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>

III-53
<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 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................... $ 8,750 $ 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.

III-54
<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. had 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

A summary of Ziff-Davis Inc.'s notes payable at December 31, 1997 and 1998 is
as follows:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
(dollars in
thousands)
<S> <C> <C>
Notes payable to
affiliates (Note 12)..... $2,534,030 $ 77,884
---------- ----------
8 1/2% Senior Subordinated
Notes (1)................ -- 249,130
Credit Facility
Revolving credit........ -- 270,000
Term Loan A............. -- 450,000
Term Loan B............. -- 500,000
---------- ----------
Third party notes
payable.................. -- 1,469,130
---------- ----------
Total notes payable....... 2,534,030 1,547,014
Less current portion notes
payable to affiliates.... (125,790) (7,692)
---------- ----------
$2,408,240 $1,539,322
========== ==========
</TABLE>
- --------
(1)Net of unamortized discount of $870.

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,

III-55
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

with $270,000,000 drawn as of December 31, 1998, (2) a seven-year $450,000,000
term loan ("Term Loan A") and (3) an eight-year $500,000,000 term loan ("Term
Loan B"). 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 A 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 B 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 Notes and the credit facility are secured, in part, by a first priority
security interest in capital stock of certain subsidiaries of Ziff-Davis Inc.
and are guaranteed by certain wholly owned domestic subsidiaries of Ziff-Davis
Inc., in each case, including ZD Inc. and ZD Events.

Under its most restrictive covenant, Ziff-Davis Inc. could have borrowed an
additional $28,800,000 under the credit facility 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.

III-56
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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...................... 1,183,500
----------
Total........................... $1,547,884
Less unamoritized discount...... (870)
----------
Notes payable, net.............. $1,547,014
==========
</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. receives a floating rate
of interest based on three-month LIBOR, which resets quarterly, and Ziff-Davis
Inc. pays 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. pays is 5.85%. Ziff-Davis
Inc. has entered into these agreements solely to hedge its interest rate risk
under its floating rate bank debt.

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>

III-57
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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>

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.
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, whereby Ziff-Davis Inc. earns management,
royalty and licensing fees. The fees earned for the years ended December 31,
1996, 1997 and 1998 were $3,394,000, $4,057,000 and $1,117,000 respectively.

III-58
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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.

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, 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 21.)

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.

III-59
<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.'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. Notes bear interest at a rate of
7.8% per annum.
(2) 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 and bear interest at a rate of 8.0% per
annum.
(4) Note matures on February 28, 2010 and bears interest at 9.9% per annum.
(5) Note is payable in 52 equal quarterly installments commencing March 31,
1997 and bears interest at a rate of 8.0% per annum.
(6) Note is payable on January 1, 2007 and 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 Corp. 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

13. Stock Compensation Plans

SOFTBANK Executive Stock Option Plans

III-60
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

(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 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 to
certain employees, at a price of $7.50 per share. As a result of the grant
Ziff-Davis Inc. has recorded deferred compensation expense of $18,262,000 for
the difference between the exercise price and the deemed fair value of the
underlying shares. This amount has been recorded as a component of
stockholders' equity offset by an addition to paid-in capital. Ziff-Davis Inc.
expects to recognize non-cash compensation for accounting purposes of
$18,262,000 ratably over the vesting period of the options. These options are
currently scheduled to vest and become exercisable on the fifth anniversary of
the date of grant.

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 10,026,000 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.

III-61
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 stockholder value. The GameSpot Plan provides for the grant of
options to purchase shares of 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)..... 255,060 $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.

III-62
<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>
- --------
* The number of shares and price per share will be adjusted if the initial
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet is
different from 40,000,000.

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>

III-63
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except per share amounts)

As permitted by SFAS No. 123, Ziff-Davis Inc. 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 Ziff-Davis Inc. 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, the Ziff-Davis Inc.'s net loss would have
been increased by approximately $3,100,000, $4,200,000, and $15,130,000,
respectively.

III-64
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Other stock compensation plans

During 1996, 1997 and 1998, employees of Ziff-Davis Inc. were granted 45,760,
61,940 and 27,223 shares of common stock of SOFTBANK Corp., 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 Ziff-Davis Inc.'s employees has 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

On December 21, 1998 the Board approved an amendment to the Stock Purchase
Plan, subject to stockholder approval, to permit grant of options with respect
to any series of common stock of Ziff-Davis Inc. and increase the number of
shares available for sale to participants from 1,500,000 shares to 2,500,000
shares.

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.
All accrued obligations were settled during 1998 and a gain of $156,000 was
recognized in 1998 as a result of the plan settlement.

III-65
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Net periodic pension cost includes the following components:

<TABLE>
<CAPTION>
1996 1997 1998
-------- ------- -------
(dollars in thousands)
<S> <C> <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 1998
------------ -----------
(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 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>

III-66
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED 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 and 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 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.

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.

III-67
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 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, 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

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 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 $200,000,000 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, and the motion was granted, with
the result that all of the claims against Ziff-Davis Inc. and its officers were
dismissed, and most of the claims against SBH were dismissed, leaving only a
claim against SBH concerning the alleged failure of SBH to give plaintiffs
adequate notice of the sale of its stock to SIM.

19. Segment Information

III-68
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 and restructuring charges. 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
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.

III-69
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 revenue 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
-------- ---------- ----------
(dollars 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
-------- ---------- ----------
(dollars 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
======== ========== ==========
</TABLE>
- --------
* Before restructuring charge of $52,239,000.

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(dollars 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>

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
--------- --------- ---------
(dollars 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 $0,
$1,695,000 and $5,439,000, respectively.

III-70
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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
---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Revenue:
U.S....................................... $ 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 years ended December 31, 1996, 1997 and 1998:

<CAPTION>
1996 1997 1998
---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Long-lived assets:
U.S....................................... $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 accounted for more than 10% of total revenue for each of
the years ended December 31, 1996, 1997 and 1998.

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>

III-71
<PAGE>

ZIFF-DAVIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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. 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. 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 5, 1999, Vulcan Programming, an entity owned by Paul G. Allen,
purchased a one-third interest in ZDTV for $54,000,000 in cash. On March 4,
1999, Vulcan Ventures, the investment vehicle of Paul G. Allen, purchased
approximately three million shares of Ziff-Davis Inc. common stock for
$50,000,000 in cash.

Unaudited summary pro forma information

The following unaudited summary pro forma information assumes that the
acquisition of ZDTV and the sale of a one-third interest in ZDTV to Vulcan
Programming had been consummated on January 1, 1998. Adjustments for ZDTV
transactions include the operating results of ZDTV, amortization of the
purchase price of ZDTV, Vulcan Programming's one-third interest in the losses
of ZDTV and the tax effects of these items. The pro forma data is not
necessarily indicative of actual results had the transaction occurred on
January 1, 1998. Further, pro forma results are not meant to represent future
financial results.

<TABLE>
<CAPTION>
Adjustments
Ziff-Davis for acquisition
Inc. of ZDTV Pro forma
---------- --------------- ----------
(dollars in thousands except per
share amounts)
<S> <C> <C> <C>
Revenue........................... $1,108,892 $ 5,585 $1,114,477
Income (loss) from operations..... 31,080 (55,049) (23,969)
Net loss.......................... (77,809) (22,443) (100,252)
Pro forma basic loss per share.... $ (1.00)
</TABLE>

Other

On March 4, 1999, the Board approved an amendment to the Incentive Plan,
subject to stockholder approval, which increased the number of shares available
for issuance under the Incentive Plan to 23,327,500 shares.

III-72
<PAGE>

ANNEX IV

INDEX TO ANNEX IV

<TABLE>
<CAPTION>
Page
-----
<S> <C>
ZD Selected Historical Combined Financial and Other Data................ IV-2
ZD Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three and nine month periods ended
September 30, 1998 and 1999............................................ IV-4
ZD Management's Discussion and Analysis of Financial Condition and
Results of Operations for the years ended December 31, 1996, 1997 and
1998................................................................... IV-13
ZD Description of Business.............................................. IV-25
ZD Unaudited Combined Financial Statements for the three and nine month
periods ended September 30, 1998 and 1999
Unaudited Combined Balance Sheets as of December 31, 1998 and
September 30, 1999 .................................................. IV-36
Unaudited Combined Statements of Operations for the three and nine
month periods ended September 30, 1998 and 1999...................... IV-37
Unaudited Combined Statements of Comprehensive Income (Loss) for the
three and nine month periods ended September 30, 1998 and 1999 ...... IV-38
Unaudited Combined Statements of Cash Flows for the nine month periods
ended September 30, 1998 and 1999.................................... IV-39
Unaudited Combined Statements of Changes in Division Equity for the
nine month period ended September 30, 1999........................... IV-40
Notes to Unaudited Combined Financial Statements...................... IV-41
ZD Combined Financial Statements for the years ended December 31, 1996,
1997 and 1998
Report of Independent Accountants..................................... IV-49
Combined Balance Sheets as of December 31, 1997 and 1998.............. IV-50
Combined Statements of Operations for the years ended December 31,
1996, 1997 and 1998.................................................. IV-51
Combined Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998.................................................. IV-52
Combined Statements of Changes in Division Equity for the years ended
December 31, 1996, 1997 and 1998..................................... IV-53
Notes to Combined Financial Statements................................ IV-54
</TABLE>

IV-1
<PAGE>

SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents selected historical combined data for ZD as of
and for the years ended December 31, 1995, 1996, 1997 and 1998 and as of and
for the nine months ended September 30, 1998 and 1999. This data was derived
from the Combined Financial Statements of ZD. The data as of and for the nine
months ended September 30, 1998 and 1999 are unaudited.

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. However,
because ZD Publishing represents ZD's principal operations, the following table
also presents selected historical combined data for ZD Publishing as of and for
the years ended December 31, 1994 and 1995 and as of and for the two months
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 audited Combined Financial Statements of ZD Publishing. The data as of and
for the year ended December 31, 1994 was derived from ZD Publishing's unaudited
combined financial statements.

On May 4, 1998, Ziff-Davis Inc. completed a reorganization described in Note
2 to the unaudited Combined Financial Statements of ZD and on April 6, 1999
Ziff-Davis Inc. completed a public offering of ZDNet stock described in Note 3
to the unaudited Combined Financial Statements of ZD. Results for periods
before the reorganization and public offering are not directly comparable to
results for periods after those events. No historical earnings per share or
share data are presented as Ziff-Davis Inc. does not consider such data
meaningful.

For information concerning the pro forma effect of the reorganization and the
public offering of ZDNet stock, see Notes 2 and 3 referred to in the preceding
paragraph. For information concerning the pro forma effect of those
transactions and the restructuring described in this proxy statement, see
"Unaudited Pro Forma Consolidated Financial Statements of Ziff-Davis Inc."
included earlier in this proxy statement.

IV-2
<PAGE>

This table should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Combined
Financial Statements for ZD included later in this Annex as well as
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Financial Statements for Ziff-Davis Inc. and ZDNet included
in other Annexes to this proxy statement.

<TABLE>
<CAPTION>
ZD Publishing(1) ZD
------------------------------------- ---------------------------------------------------------------------
Nine month
Two month period ended
Year ended December 31, period ended Year ended December 31, September 30,
----------------------- February 28, --------------------------------------------- ----------------------
1994 1995 1996 1995(2) 1996 1997 1998 1998 1999
----------- ----------- ------------ ---------- ---------- ---------- ---------- ---------- ----------
(dollars 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 $ 694,081 $ 685,119
Depreciation and
amortization... 33,045 87,506 14,540 24,305 134,251 147,259 146,096 109,814 120,076
Income (loss)
from
operations..... 85,134 65,283 8,540 62,675 104,594 131,713 38,586 (8,062) (40,764)
Interest
expense, net... 17,887 92,609 14,030 44,005 120,646 190,445 143,547 111,185 90,545
Income (loss)
before income
taxes.......... 82,176 (36,472) (6,539) 22,869 (26,636) (71,648) (104,748) (119,456) (89,089)
Net income
(loss)(3)(4)... 82,176 (26,002) (4,547) 10,945 (52,081) (71,179) (77,809) (86,179) (55,947)
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 $ 26,728 $ 29,300
Total assets.... 2,747,968 1,625,426 1,622,438 1,090,981 3,584,963 3,548,108 3,429,938 3,405,300 3,432,951
Total long-term
debt........... 1,034,000 964,153 964,153 575,450 2,522,252 2,408,240 1,539,322 1,526,047 1,264,984
Division
equity......... 387,718 365,150 360,717 397,881 447,756 126,130 1,352,598 1,344,048 1,592,637
Other Data:
Capital
expenditures... $ 14,606 $ 12,573 $ 384 $ 3,367 $ 21,355 $ 27,822 $ 32,117 $ 24,218 61,861
Capital
contributions
to ZDNet....... -- 7,106 2,350 -- 13,630 20,664 14,269 13,242 --
Investments and
acquisitions,
net of cash
acquired....... -- -- -- 814,520 2,124,823 11,002 22,772 8,192 46,563
</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 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.

IV-3
<PAGE>

ZD
(A Division of Ziff-Davis Inc.)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
1998 AND 1999

Overview

ZD is the division of Ziff-Davis Inc. which focuses on the businesses of
print publishing, trade shows and conferences, market research, education and
television, and holds a retained interest in ZDNet, Ziff-Davis Inc.'s Internet
business. The market research division was sold on October 1, 1999.

Historically, ZD's business has been seasonal, earning a significant portion
of its revenue in the second and fourth quarters. In addition, the shift in
timing of a tradeshow or conference may result in material differences in
comparison to prior periods.

ZDNet Stock

The stockholders of Ziff-Davis Inc. voted, at a Special Meeting held on March
30, 1999, to authorize the issuance of a new series of common stock, designated
as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"), which is intended to
reflect the performance of Ziff-Davis Inc.'s Internet business division, ZDNet.
When the ZDNet Stock was issued on April 6, 1999, Ziff-Davis Inc.'s existing
common stock was reclassified as Ziff-Davis Inc.--ZD Common Stock ("ZD Stock"),
which is intended to reflect the performance of Ziff-Davis Inc.'s other
businesses and a retained interest in ZDNet. The businesses represented by ZD
Stock are referred to as "ZD".

Prior to the ZDNet Stock offering, ZD held a 100% retained interest in ZDNet.
The ZDNet Stock offering was completed on April 6, 1999. Ziff-Davis Inc. issued
11.5 million shares of ZDNet stock at $19.00 per share, including 1.5 million
shares issued in conjunction with the underwriters' exercise of their option to
purchase additional shares to cover over-allotments. Ziff-Davis Inc. attributed
to ZDNet 1.5 million of the sold shares in a manner analogous to a primary
offering and attributed to ZD 10 million of the sold shares in respect of its
retained interest in ZDNet, in a manner analogous to a secondary offering. ZD
received net proceeds of approximately $172.7 million and ZDNet received net
proceeds of approximately $25.9 million. The ZDNet net proceeds were loaned to
ZD as an intercompany loan which bears interest at the rate at which funding is
available to Ziff-Davis Inc. After giving effect to the ZDNet Stock offering,
there were 11.5 million shares of ZDNet Stock outstanding and another 60
million notional shares of ZDNet Stock intended to represent ZD's retained
interest in ZDNet, which was approximately 83.9% immediately following the
offering.

IV-4
<PAGE>

Acquisitions and Sale of Common Stock

ZDTV

On February 4, 1999, ZD purchased ZDTV, LLC ("ZDTV") from MAC Holdings
(America) Inc., a related party, for a purchase price of approximately $81.4
million. ZD paid approximately $32.8 million of the purchase price in cash
(settled on February 5, 1999) and paid the remainder by applying approximately
$48.6 million in advances owed to it by MAC Holdings (America) Inc. ZD also
agreed to be responsible for the funding of ZDTV during the period in 1999
prior to the purchase which was accounted for as additional purchase price.
Such funding amounted to approximately $4.2 million.

As a result of the acquisition, ZD recorded an increase in intangible assets
of $76.1 million which will be amortized over 10 years. ZDTV's cash
requirements are currently expected to be approximately $50.0 million for 1999.
The $54.0 million invested in ZDTV by Vulcan Programming Inc. will be used to
fund ZDTV and thereafter cash requirements will be funded by the members or by
third parties.

Sale of Common Stock

On March 4, 1999, Vulcan Ventures Inc., the investment vehicle of Paul G.
Allen, purchased 3,030,303 shares of ZD common stock for $50.0 million in cash.

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 included in Ziff-Davis Inc.'s Current Report on Form 8-K
(File No. 001-14055).

Results of Operations

Comparison of the three months ended September 30, 1999 and 1998 (unaudited)

Revenue

Revenue for the third quarter of 1999 was $232.0 million compared to $211.5
million for the third quarter of 1998, an increase of $20.5 million or 9.7%.
Revenue by segment is summarized in the following table:

<TABLE>
<CAPTION>
Three months
ended
September 30,
-----------------
1999 1998
-------- --------
(dollars in
thousands)
<S> <C> <C>
Revenue:
Publishing.............................................. $165,268 $181,727
Events.................................................. 63,085 29,787
Television.............................................. 3,642 --
-------- --------
Total................................................. $231,995 $211,514
======== ========
</TABLE>

IV-5
<PAGE>

Revenue from the television segment was $3.6 million for 1999. The television
segment was acquired on February 4, 1999 when ZD purchased ZDTV from MAC
Holdings (America) Inc. for an aggregate purchase price of $81.4 million. (See
Note 4 in the ZD Unaudited Consolidated Financial Statements).

Cost of production

The cost of production increased by $4.6 million or 7.3% from $62.9 million
in the third quarter of 1998 to $67.5 million in the third quarter of 1999. The
increase was driven by the acquisition of ZDTV and the shift in timing of
certain events partly offset by a decline in publishing production costs
related to a decline in advertising pages and the absence of costs related to
the closure of three magazines in October 1998. Cost of production was 29.1%
and 29.7% of revenue for the third quarter of 1999 and 1998, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $137.3 million for the
third quarter of 1999 compared to $127.3 million in the third quarter of 1998,
an increase of $10.0 million or 7.9%. The increase was primarily related to the
acquisition of ZDTV partly offset by the reduced costs as a result of the
fourth quarter 1998 restructuring. Selling, general and administrative expenses
were 59.2% and 60.2% of revenue for the third quarter of 1999 and 1998,
respectively.

Stock-based compensation

Stock-based compensation is a non-cash charge which is recorded over the
vesting period of certain stock option and restricted stock grants. Stock-based
compensation increased by $0.5 million from $0.1 million in the third quarter
of 1998 to $0.6 million for the third quarter of 1999. The increase was a
result of the issuance of certain options of ZDNet Stock and the conversion of
certain SOFTBANK Corp. stock options to ZD stock options in December 1998, both
of which resulted in compensation.

Depreciation and amortization

Total depreciation and amortization expense was $40.5 million for the third
quarter of 1999 compared to $36.2 million for the third quarter of 1998, an
increase of $4.3 million or 11.9%. The primary reason for the increase was
depreciation and amortization of assets associated with the acquisition of
ZDTV, along with depreciation at ZD's new offices. These increases were
partially offset by the absence of amortization related to intangible assets
written off as part of the October 1998 restructuring.

Interest expense, net

Net interest expense remained flat at $29.0 million for the third quarter of
1999. This reflects the net impact of lower debt levels offset by higher
interest rates and non cash interest charges related to amortization of fees
paid in connection with the December 1998 amendment to the credit facility.

Income (loss) related to retained interest in ZDNet

The retained interest in ZDNet decreased from an income of $0.2 million in
the third quarter of 1998 to a loss of $0.6 million in the third quarter of
1999. The change is due to the performance of the ZDNet business which had an
EBITDA increase of $2.7 million from $1.9 million to $4.6 million that was
offset by higher non-cash charges of stock-based compensation, depreciation,
amortization and taxes. See "ZDNet--Management's Discussion and Analysis of
Financial Condition and Results of Operations". Ziff-Davis Inc. completed an
initial public offering of the ZDNet Stock on April 6, 1999. As a result of the
ZDNet Stock

IV-6
<PAGE>

Offering, ZD's retained interest in ZDNet decreased from 100% to approximately
83.9%. During the quarter, ZDNet acquired Updates.com and SoftSeek, in part by
issuing ZDNet Stock, thus, reducing ZD's retained interest to 81.5%.

Other non-operating income, net

Other non-operating income primarily reflects ZD's equity share of earnings
and losses from joint ventures, fees earned from management of events not
produced by ZD and gains or losses realized on the disposition of businesses.
Income of $15.3 million for the quarter ended September 30, 1999 was $10.9
million more than the income for the same period in 1998 of $4.4 million due
primarily to $13.3 million of one-time gains from the sale of several business
units, principally the sale of ZD's 50% interest in the ExpoComm joint venture,
partially offset by lower joint venture and management fee income. The sale of
these business units is not expected to have a material impact on ZD's future
results of operations or cash flows.

Minority interest in losses of subsidiaries

Losses attributable to minority stockholders of ZD's subsidiaries increased
$5.4 million from a zero balance in 1998. The reason for this increase is the
sale of a one-third interest in ZDTV in February 1999, creating a minority
interest in the losses of ZDTV.

Income taxes

The tax benefit for the third quarter of 1999 was $7.9 million compared to
$35.0 million in the third quarter of 1998. The difference is due to changes in
the projected annual effective tax rate for the respective years. The effective
tax rate for the three months ended September 30, 1999 was 34.8% compared to
88.6% for the 1998 quarter. These rates reflect adjustments to record year-to-
date income tax benefit or expense at a revised rate of 36.1% and negative 1.7%
for the 1999 and 1998 periods, respectively. These rates are based on estimates
for annual earnings and taxes available at the time. The actual annual
effective tax rate for 1998 was 25.7%.

Income taxes are provided based on ZD's projected annual effective tax rate
which differs from the U.S. federal statutory rate of 35.0% due to certain
items which are not deductible for income tax purposes, primarily (i) losses
the MAC Assets prior to their purchase by ZD, (ii) non-deductible goodwill
amortization, and (iii) the effect of state and local taxes. The deferred tax
benefit for the three months ended September 30, 1999 has been reflected as a
reduction of the long-term deferred tax liability.

Net loss

As a result of the factors discussed above, the net loss increased from $4.5
million for the three months ended September 30, 1998 to $14.9 million for the
three months ended September 30, 1999.

EBITDA

EBITDA is defined as income before provision for income taxes, interest
expense, depreciation and other non-cash charges. These non-cash charges
include amortization of intangible assets and stock-based compensation expense.
EBITDA as reported for ZD includes its interests in the EBITDA of ZDTV and
ZDNet. At September 30, 1999, ZD's interest in ZDTV and ZDNet were
approximately 64.0% and 81.5%, respectively.

EBITDA for the third quarter of 1999 was $50.2 million compared to $27.6
million for the third quarter of 1998, an increase of $22.6 million or 81.9%.
Increases due to the shift in timing of events, one-time gains from the sale of
business units and increases at ZDNet were partially offset by the inclusion of
losses from ZDTV and declines in the publishing segment. EBITDA from ZDNet
increased $1.9 million from $1.9 million in the 1998 period to $3.8 million in
the 1999 period.

IV-7
<PAGE>

Comparison of the nine months ended September 30, 1999 and 1998 (unaudited)

Revenue

Revenue for the nine months ended September 30, 1999 was $685.1 million
compared to $694.1 million for the nine months ended September 30, 1998, a
decrease of $9.0 million or 1.3%. Revenue by segment is summarized in the
following table:

<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------
1999 1998
-------- --------
(dollars in
thousands)
<S> <C> <C>
Revenue:
Publishing.............................................. $518,626 $571,391
Events.................................................. 157,150 122,690
Television.............................................. 9,343 --
-------- --------
Total................................................. $685,119 $694,081
======== ========
</TABLE>

Revenue from the publishing segment decreased by $52.8 million or 9.2% from
$571.4 million for the nine months ended September 30, 1998 to $518.6 million
for the nine months ended September 30, 1999. Excluding the effect of the three
magazines that were closed in October 1998 as part of a restructuring,
publishing segment revenue decreased by $28.7 million or 5.2%. Revenue from
newer business publications and consumer publications increased by 53.8% and
43.8%, respectively, but were more than offset by a decline from the major
business publications, most significantly at Computer Shopper. Margin pressure
on computer equipment manufacturers, industry consolidation, product delays,
and a focus on Year 2000 transition contributed to reduced demand for
advertising in these publications.

Revenue from the events segment increased by $34.5 million or 28.1% from
$122.7 million for the nine months ended September 30, 1998 to $157.2 million
for the nine months ended September 30, 1999. This increase is primarily due to
the shift in timing of two events from the fourth quarter of 1998 to the third
quarter of 1999. This increase was partially offset by declines related to
discontinuation of certain smaller shows.

Revenue from the television segment was $9.3 million for 1999. The television
segment was acquired on February 4, 1999 when ZD purchased ZDTV from MAC
Holdings (America) Inc. for an aggregate purchase price of $81.4 million. (See
Note 4 in the ZD Unaudited Combined Financial Statements).

Cost of production

The cost of production decreased by $8.7 million or 4.2% from $206.7 million
for the nine months ended September 30, 1998 to $198.0 million for the nine
months ended September 30, 1999. The decline was consistent with the decrease
in revenue attributed to the discontinuation of three magazines in October 1998
as well as the decline in advertising pages in the business magazines. These
cost reductions were partially offset by production costs incurred from the
acquisition of ZDTV and the shift in timing of certain events. Cost of
production was 28.9% and 29.8% of revenue for the nine months ended September
30, 1999 and 1998, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $405.9 million for the nine
months ended September 30, 1999 compared to $385.5 million for the nine months
ended September 30, 1998, an increase of $20.4 million or 5.3%. The increase
primarily related to the acquisition of ZDTV, partially offset by savings
realized from the restructuring action taken during the fourth quarter of 1998.
Selling, general and administrative expenses were 59.2% and 55.5% of revenue
for the nine months ended September 30, 1999 and 1998, respectively. The
percentage increase primarily represents the impact of acquiring ZDTV.

IV-8
<PAGE>

Stock-based compensation

Stock-based compensation increased by $1.7 million from $0.2 million for the
nine months ended September 30, 1998 to $1.9 million for the nine months ended
September 30, 1999. The increase was a result of the issuance of certain
options of ZDNet Stock and the conversion of certain SOFTBANK Corp. stock
options to ZD stock options in December 1998, both of which resulted in
compensation.

Depreciation and amortization

Total depreciation and amortization expense was $120.1 million for the nine
months ended September 30, 1999 compared to $109.8 million for the nine months
ended September 30, 1998, an increase of $10.3 or 9.3%. The primary reason for
the increase was depreciation and amortization of assets acquired through the
acquisition of ZDTV along with depreciation at ZD's new offices. These
increases were partially offset by the absence of amortization related to
intangible assets written off as part of the October 1998 restructuring.

Interest expense, net

Net interest expense declined by $20.6 million or 18.6% from $111.2 million
for the nine months ended September 30, 1998 to $90.5 million for the nine
months ended September 30, 1999. This was primarily due to a significant
reduction in ZD's outstanding debt through the reorganization and initial
public offering completed in May 1998 and the ZDNet Stock offering completed in
April 1999, partially offset by higher average interest rates in the 1999
period and non cash interest charges related to amortization of fees paid in
connection with the December 1998 amendment to the credit facility.

Income (loss) related to retained interest in ZDNet

The retained interest in ZDNet decreased from a loss of $8.7 million in the
first nine months of 1998 to a loss of $0.1 million in the first nine months of
1999. The difference is due primarily to a significant improvement in the
performance of the ZDNet business. See "ZDNet--Management's Discussion and
Analysis of Financial Condition and Results of Operations". Ziff-Davis Inc.
completed an initial public offering of the ZDNet Stock on April 6, 1999. As a
result of the ZDNet Stock offering and the acquisitions of GameSpot, SoftSeek
and Updates.com, ZD's retained interest in ZDNet decreased from 100% to
approximately 81.5%.

Other non-operating income, net

Income of $26.8 for the nine months ended September 30, 1999 was $18.3
million more than the income for the same period in 1998 of $8.5, primarily due
to $20.4 million of one-time gains from the sale of several business units,
partially offset by lower joint venture and management fee income. The sale of
these business units is not expected to have a material impact on ZD's future
results of operations and cash flows.

Minority interest in losses of subsidiaries

Losses attributable to minority stockholders of ZD's subsidiaries increased
$15.6 million from a zero balance in 1998. This increase is due to the sale of
a one-third interest in ZDTV in February 1999, creating a minority interest in
the losses of ZDTV.

Income taxes

The tax benefit for the nine months ended September 30, 1999 was $33.1
million compared to $33.3 million for the nine months ended September 30, 1998.
The effective tax rate for the nine months ended September 30, 1999 was 37.2%
compared to 27.9% for the 1998 period. These rates are based on estimates for
annual earnings and taxes available at the time. The actual annual effective
rate for 1998 was 25.4%.

IV-9
<PAGE>

Net loss

As a result of the factors discussed above, the net loss decreased from $86.2
million for the nine months ended September 30, 1998 to $55.9 million for the
nine months ended September 30, 1999.

EBITDA

EBITDA for the nine months ended September 30, 1999 was $129.0 million
compared to $106.2 million for the same period of 1998, an increase of $22.8
million or 21.5%. The increase was due to one-time gains from the sale of
business units, the shifting of events and improvement at ZDNet were partly
offset by the inclusion of ZDTV losses and declines in the publishing business.
EBITDA from ZDNet increased $13.8 million from a loss of $4.2 million in 1998
to $9.6 million in 1999.

Liquidity and Capital Resources

At September 30, 1999, ZD's total outstanding debt was $1,272.7 million,
excluding unamortized discount, and consisted of $72.7 million due to Softbank,
$1,200.0 million in notes.

Cash and cash equivalents were $29.3 million at September 30, 1999 and $32.3
million at December 31, 1998. The change during the nine months ended September
30, 1999 was due to the factors discussed below.

Cash provided by operations was $48.9 million for the nine months ended
September 30, 1999 compared to $87.5 million for the nine months ended
September 30, 1998. This change was primarily due to changes in working
capital.

Cash used by investing activities was $75.3 million for the nine months ended
September 30, 1999 compared to $45.7 million for the nine months ended
September 30, 1998. The increase reflects higher capital spending of $37.6
million primarily due to one time spending on relocation of the New York
operations and higher spending of $27.0 million on acquisitions (ZDTV in 1999),
partially offset by $29.1 million of proceeds received from the sale of several
business units. In addition, ZD paid $9.4 million to the previous owners of
Inter@ctive Enterprises in connection with the contingent purchase price
adjustment. Finally, in 1998 ZD paid $13.2 million to fund the business of
ZDNet, which required no such funding in 1999.

Cash provided by financing activities was $23.4 million for the nine months
ended September 30, 1999 compared to a use of $45.3 million for the nine months
ended September 30, 1998. During the first quarter of 1999, ZD received
proceeds of $54.0 million from Vulcan Programming Inc. for the issuance of a
one-third equity interest in ZDTV and $50.0 million for issuing approximately 3
million shares of ZD Common Stock to Vulcan Ventures Inc. ZD also paid down
approximately $275.1 million of net indebtedness during the first nine months
of 1999. Financing activities in 1998 primarily represent remittance of excess
cash to Softbank to repay intercompany obligations prior to ZD's initial public
offering. Prior to the ZDNet Stock offering, ZD also received a return of
capital of approximately $2.7 million from ZDNet.

Upon completion of the offering of the ZDNet Stock, ZD received net proceeds
of approximately $172.5 million plus an additional $25.9 million advance from
ZDNet on April 6, 1999. These proceeds were used to repay indebtedness under
ZD's revolving credit agreement. The advance from ZDNet represents ZDNet's
proceeds from the ZDNet Stock offering and bears interest at the rate which
funding is available to Ziff-Davis Inc.

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 to fund anticipated capital expenditures and
working capital

IV-10
<PAGE>

requirements. However, actual capital expenditures 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 on its future
performance.

Swap Agreements

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.

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
$500 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. These quotes represented the amounts that Ziff-
Davis Inc. would pay if the agreements were terminated at the balance sheet
date. Although 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 gain of approximately $8.1 million. By
their 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.

Hedge transaction

Restructuring

In October 1998, ZD announced a restructuring program with the intent of
significantly reducing its cost base. As a result, a charge of $52.2 million
was recorded in the fourth quarter of 1998. The charge included assets
impairment costs ($37.9 million), employee termination costs ($8.6 million) and
costs to exit activities ($5.7 million). Approximately $3.7 million remains
accrued on the balance sheet related to the restructuring, primarily related to
the future costs of vacant lease space.

Year 2000 Readiness Disclosure

IV-11
<PAGE>

IV-12
<PAGE>

ZD
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

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. 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% in 1998), direct mail and the related costs for
promotion of the events (37.0% in 1998) and program development and
presentation costs (13.4% in 1998).

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%).

Ziff-Davis Inc. provides certain selling, general and administrative services
and shared services on a centralized basis and the costs of these 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 expenditures 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

IV-13
<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.

On February 4, 1999, ZD purchased ZDTV. This purchase will affect ZD's
results in future periods. See "--ZDTV" below for certain summary pro forma and
other information about this purchase.

ZD expects to recognize compensation expense of approximately $7.9 million as
a result of certain options granted on December 21, 1998 and January 29, 1999.
Such compensation expense will be recognized over the vesting period of the
options. The 1999 compensation expense related to these options is expected to
be approximately $2.2 million. See Note 15 to ZD's Combined Financial
Statements in this Annex.

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 increase or
decrease to, among other things, 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.

IV-14
<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
---------- ---------- ----------
(dollars 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:
Cash and cash equivalents, end of period.. $ 29,915 $ 30,273 $ 32,274
Net cash provided 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)
EBITDA(2)................................. 255,430 272,894 244,094
</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 $6,064,000, $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.

IV-15
<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). The
remainder of the decrease was primarily 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 Networld+Interop Las Vegas and
Java One due to an increased number of attendees.

Cost of production

Production costs decreased by 7.3% or $23.5 million from $320.9 million in
1997 to $297.4 million in 1998.

Publishing production costs decreased by $6.1 million or 2.7% from $221.4
million in 1997 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 decrease was
due primarily to the headcount reduction and efficiencies attained through the
integration of operations resulting from the reorganization completed in May
1998, as well as costs eliminated by the closure of three magazines in the
fourth quarter of 1998. This decrease was partially offset by increased costs
relating to the launch of new products and services and increased advertising
expenses.

Depreciation and amortization

Total depreciation and amortization decreased $1.2 million from $147.3
million in 1997 to $146.1 million in 1998. The decrease was a result of certain
assets being fully depreciated in 1997 and early 1998.

IV-16
<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.

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 totaled $37.9 million. These costs 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 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

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 "ZDNet Management's Discussion and
Analysis of Financial Condition and Results of Operations" set forth in an
Annex to this proxy statement.

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. This 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, an entity 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 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.

IV-17
<PAGE>

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 in 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 3.0% and 10.0%, 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 in 1996 to $99.5 million in 1997 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 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.

IV-18
<PAGE>

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
"ZDNet Management's Discussion and Analysis of Financial Condition and Results
of Operations" set forth in an Annex to this proxy statement.

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. This income 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 in 1997 and $63.0 million in 1996),
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

Sources and uses of cash

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.)

IV-19
<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, an
increase of $2.0 million from $30.3 million at December 31, 1997. The increase
was 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
restructuring charge, lower working capital and a decrease in funding to
affiliates and to ZDNet for the 1998 period.

Cash used in investing activities for the year ended December 31, 1998
totaled $69.2 million compared to $59.5 million for the year ended December 31,
1997. 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 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.

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
working capital requirements. 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 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

IV-20
<PAGE>

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, Ziff-Davis Inc.'s
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 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 for funding ZD or 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 receives a floating rate of interest based on
three-month LIBOR, which resets quarterly, and ZD pays a fixed rate of interest
each quarter for the terms of the respective agreements. The weighted average
fixed rate ZD pays 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 ZD 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.

IV-21
<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.

<TABLE>
<CAPTION>
Adjustments
for ZDTV
ZD Transactions Pro forma
---------- ------------ ----------
(dollars in thousands)
<S> <C> <C> <C>
Revenue............................... $1,052,749 $ 5,585 $1,058,334
Income (loss) from operations......... 38,586 (55,049) (16,463)
Net loss.............................. (77,809) (22,443) (100,252)
</TABLE>

Vulcan Transactions

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

IV-22
<PAGE>

(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) $(66,609) $ 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% 56.5%
</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 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

IV-23
<PAGE>

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. 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 $3,837,000, 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 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 one by one 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 ZD's profit and liquidity.

Recently Issued Accounting Pronouncements

ZD expects to adopt this statement beginning with its 2000 financial
statements.

IV-24
<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 and education (including ZDU, our Internet-based
educational service). ZD provides technology companies worldwide with marketing
strategies for reaching key decision-makers. As described in greater detail
earlier in this proxy statement, we plan to sell substantially all of ZD's
assets other than its retained interest in ZDNet. In furtherance of this plan,
we have already sold our market intelligence business and our equity interest
in ZDTV and entered into agreements to sell ZD Publishing and ZD Education, and
these agreements are described elsewhere in this proxy statement.

ZD's PC Magazine, PC Week and Computer Shopper magazines were 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. In 1998, ZD's COMDEX/Fall
event was 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 education and publication of
computer-related newsletters and training manuals. ZD also has a retained
interest in ZDNet which is currently the equivalent of 60 million shares of
ZDNet Stock.

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. In 1998, the estimated marketable product life
of a PC was 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.

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%

IV-25
<PAGE>

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.

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. In
1998, ZD's publications had 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. In 1998, ZD's U.S. publications had a total
circulation of approximately six million primary readers, and ZD had 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.

. 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).

IV-26
<PAGE>

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
Circulations 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.

IV-27
<PAGE>

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
ZDNetTrack 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. ZDNetTrak is a quarterly marketing survey of Web users in
the U.S. that tracks ZDNet Web users and their online activities, including
their purchasing behavior. 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). In 1998, ZD's publications had a total
circulation of approximately seven million primary readers worldwide.

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.

IV-28
<PAGE>

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., 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 230,000 (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. In 1998, 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 in 1998, 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. In 1998, Sm@rt
Reseller had a controlled circulation of over 65,000.

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. In 1998, Macworld had 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. In 1998, this monthly publication had a paid

IV-29
<PAGE>

circulation of more than 390,000. Expert Gamer (formerly known as EGM/2/), a
companion publication to Electronic Gaming Monthly which had a paid circulation
of more than 190,000 in 1998, 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. In 1998, Yahoo!
Internet Life had 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. In 1998, Computer Gaming World served 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. In 1998, this publication had a paid circulation of over 175,000
PlayStation game fans.

FamilyPC is specifically targeted to households with children and had a paid
circulation of over 400,000 in 1998. 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 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.
In 1998, 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.

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.

IV-30
<PAGE>

The COMDEX/Fall event, held in the fourth quarter of each year, has been held
for 19 years and was ranked in 1998 as the number one 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 produced 18 other COMDEX events in 13 countries
that year.

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 produced the following segment-focused trade shows in
1998:

. 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.

IV-31
<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 96,706 139 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.

IV-32
<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

IV-33
<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.

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 30 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.

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 education division competes with a variety of education providers,
including vendor-supplied training materials, traditional classroom-based
computer training and web-based training providers.

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.

IV-34
<PAGE>

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.

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 an Annex to this
proxy statement.

IV-35
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED BALANCE SHEETS
(dollars in thousands)

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 29,300 $ 32,274
Accounts receivable, net........................... 197,555 208,593
Inventories........................................ 12,946 15,551
Prepaid expenses and other current assets.......... 36,954 34,278
Due from affiliates................................ 4,722 53,984
Deferred taxes..................................... 22,262 21,483
---------- ----------
Total current assets............................. 303,739 366,163
Property and equipment, net.......................... 110,517 85,571
Retained interest in ZDNet........................... 149,053 89,547
Intangible assets, net............................... 2,823,236 2,844,317
Other assets......................................... 46,406 44,340
---------- ----------
Total assets..................................... $3,432,951 $3,429,938
========== ==========

LIABILITIES AND DIVISION EQUITY
Current liabilities::
Accounts payable................................... $ 32,411 $ 73,310
Accrued expenses................................... 130,623 93,824
Unearned income, net............................... 187,090 151,003
Due to ZDNet....................................... 16,729 --
Due to affiliates and management................... -- 4,618
Current portion of notes payable to affiliates..... 6,923 7,692
Other current liabilities.......................... 17,054 13,125
---------- ----------
Total current liabilities........................ 390,830 343,572
Notes payable to affiliates.......................... 65,769 70,192
Notes payable, net of unamortized discount........... 1,199,215 1,469,130
Deferred taxes....................................... 137,767 169,356
Due to management.................................... 665 5,400
Other liabilities.................................... 14,813 19,690
---------- ----------
Total liabilities................................ 1,809,059 2,077,340
---------- ----------
Commitments and contingencies (see Note 7)
Minority interest.................................... 31,255 --
Division equity...................................... 1,592,637 1,352,598
---------- ----------
Total liabilities and division equity............ $3,432,951 $3,429,938
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

IV-36
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF OPERATIONS
(Unaudited--dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue, net:
Publishing............ $ 165,268 $ 181,727 $ 518,626 $ 571,391
Events................ 63,085 29,787 157,150 122,690
Television............ 3,642 -- 9,343 --
------------ ------------ ------------ ------------
231,995 211,514 685,119 694,081
Cost of production...... 67,494 62,898 197,986 206,656
Selling, general and
administrative
expenses............... 137,325 127,319 405,913 385,484
Stock-based
compensation........... 635 63 1,908 189
Depreciation and
amortization of
property and
equipment.............. 7,724 7,253 23,527 21,235
Amortization of
intangible assets...... 32,784 28,953 96,549 88,579
------------ ------------ ------------ ------------
Loss from operations.... (13,967) (14,972) (40,764) (8,062)
Interest expense, net... (29,025) (29,093) (90,545) (111,185)
Income (loss) related to
retained interest in
ZDNet.................. (604) 212 (111) (8,691)
Other non-operating
income, net............ 15,271 4,396 26,762 8,482
Minority interest in
losses of
subsidiaries........... 5,491 -- 15,569 --
------------ ------------ ------------ ------------
Loss before income
taxes.................. (22,834) (39,457) (89,089) (119,456)
Income tax benefit...... (7,940) (34,959) (33,142) (33,277)
------------ ------------ ------------ ------------
Net loss................ $ (14,894) $ (4,498) $ (55,947) $ (86,179)
============ ============ ============ ============
Pro forma net loss per
basic common share..... $ (.14) $ (.04) $ (.55) $ (.86)
Pro forma weighted
average basic common
shares outstanding..... 103,287,483 100,000,000 102,508,377 100,000,000
</TABLE>

The accompanying notes are an integral part of these financial statements.

IV-37
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited--dollars in thousands)

<TABLE>
<CAPTION>
Three months
ended Nine months ended
September 30, September 30,
----------------- ------------------
1999 1998 1999 1998
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net loss................................ $(14,894) $(4,498) $(55,947) $(86,179)
Other comprehensive income, net of tax
Foreign currency translation
adjustments.......................... 5,627 1,152 299 999
Appreciation in equity of retained
interest in ZDNet.................... 26,022 -- 61,477 --
-------- ------- -------- --------
Comprehensive income (loss)............. $ 16,755 $(3,346) $ 5,829 $(85,180)
======== ======= ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

IV-38
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CASH FLOWS
(Unaudited--dollars in thousands)

<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1999 1998
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (55,947) $ (86,179)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization........................ 120,076 109,814
Amortization of debt discount........................ 5,129 1,313
Loss from retained interest in ZDNet................. 111 8,691
Loss from equity investments......................... (4,457) (4,688)
Gain from sale of business units..................... (20,420) --
Deferred tax provision............................... (33,142) (33,277)
Stock-based compensation............................. 1,908 189
Minority interest.................................... (15,569) --
Changes in operating assets and liabilities:
Accounts receivable................................ 13,285 32,334
Inventories........................................ 2,605 (591)
Accounts payable and accrued expenses.............. 9,120 3,836
Unearned income.................................... 37,290 62,036
Due to affiliates and management................... -- 10,707
Other, net......................................... (11,090) (16,730)
--------- -----------
Net cash provided by operating activities............. 48,899 87,455
--------- -----------
Cash flows from investing activities:
Capital expenditures................................. (61,861) (24,218)
Capital contributions to ZDNet....................... -- (13,242)
Proceeds from sale of business units................. 29,105 --
Distributions from joint ventures.................... 4,000 --
Investments and other................................ (12,577) (1,193)
Acquisitions, net of cash acquired................... (33,986) (6,999)
--------- -----------
Net cash used by investing activities................. (75,319) (45,652)
--------- -----------
Cash flows from financing activities:
Proceeds from sale of Ziff-Davis Inc.--ZD common
stock(1) 52,557 380,337
Proceeds from issuance of notes payable(1)........... -- 242,723
Proceeds from issuance of bank debt(1)............... -- 1,240,200
Proceeds from sale of Ziff-Davis Inc.--ZDNet common
stock(2)............................................ 172,572 --
Proceeds from sale of interest in ZDTV............... 54,000 --
Repayments of credit facility........................ -- --
Borrowings under credit facility..................... 50,500 --
Payments of notes payable to affiliates.............. -- (1,569,532)
Payments of bank debt................................ (320,400) (45,000)
Payments of debt due to affiliate.................... (5,192) (314,798)
Purchase of treasury shares.......................... -- (29,500)
Return of capital from ZDNet......................... 2,723
Sale of treasury shares.............................. -- 29,500
Advance from affiliate, net.......................... 16,686 20,377
Contributed capital.................................. -- 345
--------- -----------
Net cash provided (used) by financing activities...... 23,446 (45,348)
--------- -----------
Net decrease in cash and cash equivalents............. (2,974) (3,545)
Cash and cash equivalents at beginning of period...... 32,274 30,273
--------- -----------
Cash and cash equivalents at end of period............ $ 29,300 $ 26,728
========= ===========
Supplemental cash flow information:
Cash paid for income taxes........................... $ -- $ 642
Cash paid for interest............................... $ 74,298 $ 94,360
</TABLE>
- --------
(1)1998 amounts net of transaction costs of $19,563; $9,800; and $7,277,
respectively.
(2)Net of transaction costs of $19,897.

The accompanying notes are an integral part of these financial statements.

IV-39
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
(dollars in thousands)

<TABLE>
<CAPTION>
Cumulative Total
Division Accumulated Deferred translation division
capital deficit compensation adjustment equity
---------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1998................... $1,559,336 $(197,238) $(8,679) $(821) $1,352,598
Issuance of common
stock.................. 50,000 50,000
Sale of minority
interest in
subsidiary............. 7,176 7,176
Stock-based compensation
earned................. 1,908 1,908
Issuance of ZDNet Stock,
net of offering cost... 172,572 172,572
Sale of stock under
employee stock purchase
plan................... 1,775 1,775
Stock options
exercised.............. 779 779
Appreciation in equity
of retained interest in
ZDNet.................. 61,477 61,477
Net loss................ (55,947) (55,947)
Foreign currency
translation
adjustment............. 299 299
---------- --------- ------- ----- ----------
Balance at September 30,
1999 (unaudited)....... $1,853,115 $(253,185) $(6,771) $(522) $1,592,637
========== ========= ======= ===== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

IV-40
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
(numbers rounded to the nearest thousand, except share and per share amounts)

1. Organization and Basis of Presentation

Basis of presentation

The accompanying unaudited combined financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary to present fairly the
combined financial position of ZD at September 30, 1999 and the results of its
combined operations for the three and nine months ended September 30, 1999 and
1998 and cash flows for the nine months ended September 30, 1999 and 1998 have
been included. Operating results for the periods presented are not necessarily
indicative of the results that may be expected for the year ended December 31,
1999. It is suggested that the statements be read in conjunction with ZD's
combined financial statements and notes thereto for the year ended December 31,
1998, included in Ziff-Davis Inc.'s Current Report on Form 8-K dated August 4,
1999 (File No. 001-14055).

Formation of Ziff-Davis Inc.

ZD is the division of Ziff-Davis Inc. focused on the business of print
publishing, tradeshows and conferences, television, market research and
education. ZDNet is the Internet business division of Ziff-Davis Inc. As of
September 30, 1999, ZD held a retained interest in ZDNet of approximately 81.5%
(see Note 3).

ZD operates in three business segments: (1) publishing, (2) events and (3)
television.

Publishing

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for computer technology and the
Internet industries. The events segment's principal operations are in the U.S.
and to a lesser extent in Europe and Asia.

IV-41
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Television

The television segment, which was acquired in February 1999 (see Note 4), is
engaged in the production and distribution of television broadcasting for and
about the computer technology and the Internet industries. The television
segment's principal operations are in the U.S although it licenses or
syndicates programming worldwide.

Sale of Common Stock

On March 4, 1999, Vulcan Ventures Inc., the investment vehicle of Paul G.
Allen, purchased 3,030,303 shares of Ziff-Davis Inc. common stock for
$50,000,000 in cash.

On April 6, 1999, ZD completed a public offering of 10,000,000 shares of a
new class of common stock called Ziff-Davis Inc.--ZDNet Stock. (See Note 3.)

Earnings per share

Pro forma net loss per basic common share and the associated weighted average
common shares outstanding in the 1998 period presented on the combined
statement of operations assumes the initial public offering of Ziff-Davis Inc.
common stock (see Note 2) was completed on January 1, 1998.

Pro forma net loss per basic common share presented elsewhere in these
financial statements is calculated based on pro forma net loss for the
transaction being described divided by the weighted average common shares
outstanding indicated on the statement of operations.

Diluted earnings per share are not shown as the impact of stock options would
be anti-dilutive.

Reclassifications

Certain amounts have been reclassified, where appropriate, to conform to the
current financial statement presentation.

2. Reorganization and Initial Public Offering

IV-42
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

3. ZDNet Stock

The stockholders of Ziff-Davis Inc. voted, at a Special Meeting held on March
30, 1999, to authorize the issuance of a new series of common stock, designated
as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"), which is intended to
reflect the performance of Ziff-Davis Inc.'s Internet business division
("ZDNet"). When the ZDNet Stock was issued on April 6, 1999, Ziff-Davis Inc.'s
existing common stock was re-classified as Ziff-Davis Inc.--ZD Common Stock
("ZD Stock"), which is 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").

Prior to the ZDNet Stock offering, ZD held a 100% retained interest in ZDNet.
The ZDNet Stock offering was completed on April 6, 1999. Ziff-Davis Inc. issued
11,500,000 shares at $19.00 per share, including 1,500,000 shares issued in
conjunction with the underwriters' exercise of their option to purchase
additional shares to cover over-allotments. Ziff-Davis Inc. attributed to ZDNet
1,500,000 of the sold shares in a manner analogous to a primary offering, and
attributed to ZD 10,000,000 of the sold shares in respect of its retained
interest in ZDNet, in a manner analogous to a secondary offering. ZD received
net proceeds of approximately $172,700,000 and ZDNet received net proceeds of
approximately $25,900,000. The ZDNet net proceeds were loaned to ZD as an
intercompany loan which bears interest at the rate at which funding is
available to Ziff-Davis Inc. After giving effect to the ZDNet Stock offering,
there were 11,500,000 shares of ZDNet Stock outstanding and another 60,000,000
notional shares of ZDNet Stock intended to represent ZD's retained interest in
ZDNet, which was approximately 83.9% immediately following the offering.

Prior to the ZDNet Stock offering, Ziff-Davis Inc. provided all funding for
ZD and ZDNet. Ziff-Davis Inc. continued with these practices until the ZDNet
Stock was issued. Accordingly, no interest expense or income to or from ZDNet
has been reflected in the financial statements of ZD for any period prior to
the date on which the ZDNet Stock was issued.

The following pro forma information has been prepared as if the ZDNet Stock
offering had been consummated on January 1, 1999. The pro forma adjustments
include a $3,666,000 reduction of interest expense and the tax effect of this
adjustment at a statutory tax rate of 41.0%. The pro forma data is not
necessarily indicative of actual results had the transaction occurred on
January 1, 1999. Further, pro forma results are not meant to represent future
financial results. There is no pro forma impact for the three-month period
ended September 30, 1999.

<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
--------------------
(in thousands except
per share amount)
<S> <C>
Revenue, net......................................... $685,119
Loss from operations................................. (40,764)
Interest expense, net................................ (86,879)
Loss before taxes.................................... (85,423)
Income tax benefit................................... (31,639)
Net loss............................................. (53,784)
Pro forma loss per basic common share................ (.52)
</TABLE>

IV-43
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

4. ZDTV

On February 4, 1999, ZD purchased ZDTV, LLC ("ZDTV") from MAC Holdings
(America) Inc., a related party, for 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) Inc. ZD also
agreed to fund ZDTV during the period in 1999 prior to the purchase which was
accounted for as additional purchase price. Such funding amounted to
approximately $4,200,000.

On February 5, 1999 Vulcan Programming Inc., an entity owned by Paul G.
Allen, acquired a one-third interest in ZDTV for $54,000,000 in cash. In March
1999, an additional 4.0% equity interest was acquired by ZDTV's president. In
both cases the acquisitions were effected by issuing additional equity.

The following unaudited summary pro forma information assumes that the
acquisition of ZDTV and the acquisition of a one-third equity interest in ZDTV
by Vulcan Programming Inc. had been consummated on January 1, 1999. Adjustments
for ZDTV transactions include the operating results of ZDTV, amortization of
the purchase price of ZDTV, Vulcan Programming's one-third interest in the
losses of ZDTV and the tax effects of these items. The pro forma data is not
necessarily indicative of actual results had the transaction occurred on
January 1, 1999. Further, pro forma results are not meant to represent future
financial results. There is no pro forma impact for the three months ended
September 30, 1999.

<TABLE>
<CAPTION>
Nine months ended September
30, 1999
-------------------------------
Adjustments
for
ZDTV Pro
ZD transactions Forma
-------- ------------ --------
(in thousands except per share
amounts)
<S> <C> <C> <C>
Revenue................. $685,119 $ 316 $685,435
Loss from operations.... (40,764) (2,546) (43,310)
Net loss................ (55,947) (1,006) (56,953)
Pro forma loss per basic
common share........... (0.56)
</TABLE>

ZDTV 1999 Profits Interest Plan

5. Income Taxes

Income taxes are provided based on ZD's projected annual effective tax rate
which differs from the U.S. federal statutory rate of 35.0% due to (i) certain
items which are not deductible for income tax purposes, primarily losses of the
MAC Assets prior to their purchase by ZD and nondeductible goodwill
amortization, and (ii) the effect of state and local taxes. The tax benefit
recorded for the three and nine months ended September 30, 1999 has been
reflected as a reduction of the deferred tax liability as it is anticipated
that the benefit will be realizable in future periods.

IV-44
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

6. Sale of Business Units

ZD has completed the sale of its 50.0% interest in ExpoComm LLC along with
other smaller business units from the ZD Market Intelligence and ZD Education
platforms. The proceeds from the sale of these business units totaled
$29,105,000 and are reflected as investing activities in the statement of cash
flows.

7. Commitments and Contingencies

Strategic Alternatives

On July 14, 1999, Ziff-Davis Inc. announced that it had retained the
investment banking firm of Morgan Stanley Dean Witter ("Morgan Stanley") to
explore strategic alternatives to maximize shareholder value. The Ziff-Davis
Inc. Board of Directors has not embraced any particular strategic alternatives
and will investigate all possible alternatives, including strategic alliances,
mergers, and the sale or joint venture of all or some of Ziff-Davis Inc.'s
businesses (including the businesses which make up ZD). No assurances can be
given that any transaction will result from the exploration process that Morgan
Stanley has been retained to manage.

On May 24, 1999, Ziff-Davis Inc. announced that it had retained Morgan
Stanley to explore strategic alternatives for its ZD Market Intelligence unit,
the sale of which was completed on October 1, 1999. (See Note 9).

Class action and derivative litigations

ZD and Ziff-Davis Inc. are subject to various claims and legal proceedings
arising in the normal course of business.

The complaints alleged 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 completed on May 4,
1998 (the "IPO"). More particularly, the complaints alleged 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 sought 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.

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. The consolidated amended complaint was filed on June 15,
1999 and only alleges claims under Section 11 of the Securities Act of 1933. On
May 20, 1999, Ziff-Davis Inc. moved to dismiss the consolidated amended
complaint. In July 1999, plaintiff filed their response to the motion. Ziff-
Davis Inc. filed a reply on August 11, 1999. The motion has not been decided.

IV-45
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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 the
actions have been consolidated. Answers to the amended complaint on behalf of
both Ziff-Davis Inc. and its directors were filed on April 12, 1999. Discovery
is proceeding.

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 Corp. The complaint alleged, 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 stated 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. Upon motion of Ziff-Davis Inc. and the
other defendants, all of the claims against them other than a breach of
contract claim which is solely against SBH, were dismissed on February 26,
1999. On April 1, 1999, plaintiffs filed a notice of appeal of the dismissal.
On September 2, 1999, the remaining claim, which was solely against SBH, was
dismissed. On October 6, 1999, plaintiffs filed a notice of appeal of this
dismissal.

Ziff-Davis Inc. and ZDTV, L.L.C. ("ZDTV"), a majority owned affiliate of
Ziff-Davis Inc., were named as defendants in an action filed on November 10,
1999 in the U.S. District Court, Southern District of New York, by plaintiff.
In October, 1998 ZDTV through a subsidiary purchased certain assets from
corporations owned by plaintiff and two other individuals. In addition to a
cash payment at the closing of the sale, ZDTV agreed to pay additional
purchase price, contingent on the future operating profits of the SkyTV
division. Ziff-Davis Inc. guaranteed the obligations of ZDTV. The complaint
alleges, among other things, that ZDTV and Ziff-Davis Inc. breached their
covenants of good faith and fair dealing by failing to act in the best
interests of the SkyTV division, to support and procure business for the SkyTV
division, and to provide public relations, marketing assistance and corporate
sales team support, thereby lessening plaintiff's opportunity to earn
additional purchase price. The complaint seeks an amount to be determined at
trial, but not less than $60,000,000 in damages.
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 has been
included in the financial statements.

Interest rate swap

On June 15, 1999, ZD amended a swap agreement (with a notional amount of
$100,000,000) by reducing the fixed rate paid to the counterparty and
providing the counterparty with a one-time option to cancel the swap agreement
on February 5, 2000. ZD entered into another swap agreement (with a notional
amount of $50,000,000) on June 15, 1999. Under this swap agreement, ZD will
receive a fixed rate of interest and pay a floating rate of interest based on
3 months LIBOR, which resets quarterly, for the term of the agreement.

IV-46
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

8. Segment Information

ZD operates in three reportable business segments: (1) publishing, (2) events
and (3) television. All material inter-segment revenue has been eliminated. The
following table presents information about each of the reported segments:

<TABLE>
<CAPTION>
Three months
ended Nine months ended
September 30, September 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenue:
Publishing............................. $165,268 $181,727 $518,626 $571,391
Events................................. 63,085 29,787 157,150 122,690
Television............................. 3,642 -- 9,343 --
-------- -------- -------- --------
Total................................ $231,995 $211,514 $685,119 $694,081
======== ======== ======== ========
<CAPTION>
Three months
ended Nine months ended
September 30, September 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
EBITDA:
Publishing............................. $ 21,253 $ 25,415 $ 89,745 $ 84,321
Events................................. 35,962 2,135 60,164 21,879
Television............................. (7,030) -- (20,924) --
-------- -------- -------- --------
Total................................ $ 50,185 $ 27,550 $128,985 $106,200
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(dollars in thousands)
<S> <C> <C>
Total Assets:
Publishing.................................... $2,113,328 $2,285,920
Events........................................ 1,195,191 1,144,018
Television.................................... 124,432 --
---------- ----------
Total....................................... $3,432,951 $3,429,938
========== ==========
</TABLE>

A reconciliation of EBITDA to loss before income taxes is below:

<TABLE>
<CAPTION>
Three months
ended Nine months ended
June 30, June 30,
------------------ -------------------
1999 1998 1999 1998
-------- -------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Total segment EBITDA................. $ 50,185 $ 27,550 $128,985 $ 106,200
Depreciation and amortization of
property and equipment.............. (7,724) (7,253) (23,527) (21,235)
Amortization of intangible assets.... (32,784) (28,953) (96,549) (88,579)
Stock-based compensation............. (635) (63) (1,908) (189)
Retained interest in ZDNet's non-
EBITDA losses....................... (4,380) (1,645) (9,670) (4,468)
Minority interest in ZDTV's non-
EBITDA losses....................... 1,529 -- 4,125 --
Interest expense, net................ (29,025) (29,093) (90,545) (111,185)
-------- -------- -------- ---------
Loss before income taxes............. $(22,834) $(39,457) $(89,089) $(119,456)
======== ======== ======== =========
</TABLE>

IV-47
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

9. Subsequent Events

Sale of Market Intelligence Unit

On October 1, 1999, Ziff-Davis Inc. completed the sale of its Market
Intelligence unit for $101,000,000 in cash plus $5,000,000 in assumed deferred
revenue obligations.

Smart Planet Inc.

IV-48
<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

IV-49
<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 $ 73,310
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 13,125
---------- ----------
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.

IV-50
<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--related party....... (120,646) (190,445) (65,935)
Interest expense, net...................... -- -- (77,612)
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.

IV-51
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

COMBINED 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
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)
Restructuring charge...................... -- -- 52,239
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) (4,316)
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.

IV-52
<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 Holdings Corp. .. 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) --
Issuance of ZDNet
options................ 4,993 -- (4,993) -- --
Net loss................ (77,809) (77,809)
Compensation earned on
restricted stock....... 252 252
Foreign currency
translation
adjustment............. 954 954
---------- --------- ------- ------ ----------
Balance at December 31,
1998 .................. $1,559,336 $(197,238) $(8,679) $ (821) $1,352,598
========== ========= ======= ====== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

IV-53
<PAGE>

ZD
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS
(numbers rounded to the nearest thousand, except share and per share amounts)

1. Organization and Basis of Presentation

Formation of Ziff-Davis Inc.

Ziff-Davis Inc. was formed through an initial public offering and
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. and ZD
Events Inc.) were wholly owned indirect subsidiaries of SOFTBANK Corp.
(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. ZDNet is the online business division of Ziff-Davis Inc. Each of ZD
and ZDNet is sometimes referred to herein as a "Group".

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 under "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. 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

SOFTBANK Corp. is the indirect majority stockholder of Ziff-Davis Inc.
SOFTBANK Corp. 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 SOFTBANK
Corp. (50.2% as of December 31, 1997). MAC, also a Japanese corporation, was
wholly owned by Mr. Son.

IV-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)

Operations and acquisitions

ZD operates in two business segments: (1) publishing and (2) events.

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.

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 the 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 of which closed upon completion of the initial
public offering of Ziff-Davis Inc.'s common stock (further described below). At
December 31, 1997, ZD had 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

IV-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)

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 May 4, 1998, SOFTBANK Corp., 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"), 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 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., an affiliate of SOFTBANK Corp.

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

IV-56
<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)

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 under "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.

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:

IV-57
<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)

(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.

(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).

(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.

(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.

IV-58
<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)

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

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.

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.

IV-59
<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)

Debt issuance costs and discount on senior subordinated notes

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 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

IV-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)

"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 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.

IV-61
<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)

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 that 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.

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).

IV-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)

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.

. 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).

IV-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)

. 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 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>

IV-64
<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>

IV-65
<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)

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>
U.S........................................ $(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>

IV-66
<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 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.

IV-67
<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.

Undistributed earnings of foreign subsidiaries for which no deferred taxes
have been provided approximated $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.

13. Notes Payable

All of Ziff-Davis Inc.'s external debt has been attributed to ZD.

A summary of ZD's notes payable at December 31, 1997 and 1998 is as follows:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
(dollars in
thousands)
<S> <C> <C>
Notes payable to
affiliates (Note 14)..... $2,534,030 $ 77,884
---------- ----------
8 1/2% Senior Subordinated
Notes(1)................. -- 249,130
Credit Facility
Revolving credit........ -- 270,000
Term Loan A............. -- 450,000
Term Loan B............. -- 500,000
---------- ----------
Third party notes
payable.................. -- 1,469,130
---------- ----------
Total notes payable....... 2,534,030 1,547,014
Less current portion notes
payable to affiliates.... (125,790) (7,692)
---------- ----------
$2,408,240 $1,539,322
========== ==========
</TABLE>
- --------
(1)Net of unamortized discount of $870.

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,

IV-68
<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)

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 Notes and the credit facility are secured, in part, by a first priority
security interest in capital stock of certain subsidiaries of Ziff-Davis Inc.
and are guaranteed by certain wholly owned domestic subsidiaries of Ziff-Davis
Inc., in each case, including ZD Inc. and ZD Events.

Under its most restrictive covenant, ZD could have borrowed an additional
$28,800,000 under the credit facility at December 31, 1998.

Covenants

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 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.

IV-69
<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)

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
Thereafter......................................... 1,183,500
----------
Total.............................................. $1,547,884
Less unamortized discount.......................... (870)
----------
Notes payable, net................................. 1,547,014
==========
</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 receives a floating rate of interest based
on three-month LIBOR, which resets quarterly, and ZD pays 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 pays is 5.85%. ZD has entered into these agreements solely to hedge its
interest rate risk under its floating rate bank debt.

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
=========== ==========
</TABLE>

IV-70
<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)

Due to affiliates and management consist of the following:

<TABLE>
<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 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, 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.

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. 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, 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.

IV-71
<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)

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 ZD 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.

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, 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.)

IV-72
<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)

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) 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 and bear interest at a rate of 8.0% per
annum.

(4)Note matures on February 28, 2010 and bears interest at 9.9% per annum.

(5) Note is payable in 52 equal quarterly installments commencing March 31,
1997 and bears interest at a rate of 8.0% per annum.

(6)Note is payable on January 1, 2007 and bears interest at a rate of 8.0% per
annum.

During 1996, 1997 and 1998 ZD 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 ZD, along with certain other
SOFTBANK Corp. 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.

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.

IV-73
<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)

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 Corp. to officers, directors and key employees of ZD.
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 ranging from $6.00 to $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
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
available for issuance from 8,500,000 shares to 17,827,500 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. As a result of the grant ZD
has recorded deferred compensation expense of $4,993,000 for the difference
between the exercise price and the deemed fair value of the underlying shares.
This amount has been recorded as a component of division equity offset by an
addition to paid-in capital. ZD expects to recognize non-cash compensation for
accounting purposes of $4,993,000 ratably over the vesting period of the
options. These options are currently scheduled to vest and become exercisable
on the fifth anniversary of the date of grant.

IV-74
<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)

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 10,026,000 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, ZD 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.

Option grants

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).... 243,686 $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.

IV-75
<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 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>

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>
- --------

* The number of shares and price per share will be adjusted if the initial
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet is
different from 40,000,000.

At December 31, 1998, no shares of either Ziff-Davis Inc. or ZDNet options
were exercisable.

IV-76
<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)

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>

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 Corp., 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

IV-77
<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)

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.

Net periodic pension cost includes the following components:

<TABLE>
<CAPTION>
1996 1997 1998
-------- ------- -------
(dollars in thousands)
<S> <C> <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>

IV-78
<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 following table sets forth the funded status and amounts recognized in the
balance sheet:

<TABLE>
<CAPTION>
1997 1998
------------ -----------
(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>

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, $21,238,000 and $7,884,000 in 1996, 1997 and 1998,
respectively, from its 100% Retained Interest in ZDNet.

IV-79
<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)

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.

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.

IV-80
<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)

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 and restructuring charge. 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

IV-81
<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 under "Summary of Significant Accounting Policies". ZD 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
-------- ---------- ----------
(dollars 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
-------- ---------- ----------
(dollars 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
======== ========== ==========
</TABLE>
- --------
* Before restructuring charge of $52,239,000

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(dollars 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
-------- -------- ---------
(dollars 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>

IV-82
<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)

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
---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Revenue:
U.S....................................... $ 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 years ended December 31, 1996, 1997 and 1998:

<CAPTION>
1996 1997 1998
---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Long-lived assets:
U.S....................................... $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

IV-83
<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 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, rescission and injunctive relief
such as the imposition of a constructive trust upon the proceeds of the IPO.

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 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 $200,000,000 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, and the motion was granted, with
the result that all of the claims against Ziff-Davis Inc. and its officers were
dismissed, and most of the claims against SBH were dismissed, leaving only a
claim against SBH concerning the alleged failure of SBH to give plaintiffs
adequate notice of the sale of its stock to SIM.

23. Subsequent Events

ZDTV

On February 4, 1999, ZD purchased ZDTV at a purchase price of approximately
$81,400,000. (See Note 14.) ZD paid approximately $32,800,000 of the purchase
price in cash (settled on February 5, 1999) and paid

IV-84
<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 remainder by applying approximately $48,600,000 in advances owed to it by
MAC Holdings America. ZD 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. 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

The following unaudited summary pro forma information assumes that the
acquisition of ZDTV and the sale of a one-third interest in ZDTV to Vulcan
Programming had been consummated on January 1, 1998. Adjustments for ZDTV
transactions include the operating results of ZDTV, amortization of the
purchase price of ZDTV, Vulcan Programming's one-third interest in the losses
of ZDTV and the tax effect of these items. The pro forma data is not
necessarily indicative of actual results had the transaction occurred on
January 1, 1998. Further, pro forma results are not meant to represent future
financial results.

<TABLE>
<CAPTION>
Adjustments
for ZDTV
ZD Transactions Proforma
---------- ------------ ----------
(dollars in thousands)
<S> <C> <C> <C>
Revenue............................... $1,052,749 $ 5,585 $1,058,334
Income (loss) from operations......... 38,586 (55,049) (16,463)
Net loss.............................. (77,809) (22,443) (100,252)
</TABLE>

Other

IV-85
<PAGE>

ANNEX V

ZDNet

INDEX TO ANNEX V

<TABLE>
<CAPTION>
Page
----
<S> <C>
ZDNet Selected Historical Combined Financial and Other Data............... V-2
ZDNet Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three and nine month periods ended
September 30, 1998 and 1999.............................................. V-4
ZDNet Management's Discussion and Analysis of Financial Condition and
Results of Operations for the years ended December 31, 1996, 1997 and
1998..................................................................... V-10
ZDNet Description of Business............................................. V-20
ZDNet Unaudited Combined Financial Statements for the nine month period
ended
September 30, 1999
Unaudited Combined Balance Sheets as of December 31, 1998 and September
30, 1999............................................................... V-30
Unaudited Combined Statements of Operations for the three and nine
months ended September 30, 1998 and 1999............................... V-31
Unaudited Combined Statements of Comprehensive Income (Loss) for the
three and nine month periods ended September 30, 1998 and 1999......... V-32
Unaudited Combined Statements of Cash Flows for the nine month periods
ended September 30, 1998 and 1999...................................... V-33
Combined Statements of Changes in Division Equity for the nine month
period ended September 30, 1999 ....................................... V-34
Notes to Unaudited Combined Financial Statements........................ V-35
ZDNet Combined Financial Statements for the years ended December 31, 1996,
1997 and 1998
Report of Independent Accountants....................................... V-41
Combined Balance Sheets as of December 31, 1997 and 1998................ V-42
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................................................................... V-43
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................................................................... V-44
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...................................................... V-45
Notes to Combined Financial Statements.................................. V-46
</TABLE>

V-1
<PAGE>

ZDNET

SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents selected historical combined data for ZDNet as
of and for the ten month period ended December 31, 1996, as of and for the
years ended December 31, 1997 and 1998 and as of and for the nine months ended
September 30, 1998 and 1999. This data was derived from the Combined Financial
Statements of ZDNet. The data as of and for the nine months ended September 30,
1998 and 1999 are unaudited.

An affiliate of Ziff-Davis Inc. acquired ZDNet on February 29, 1996; the
ZDNet data does not include results from ZDNet for the period before the date
of acquisition. However, the following table also presents selected historical
combined data for the predecessor of ZDNet 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
audited Combined Financial Statements of ZDNet's predecessor. The data as of
and for the year ended December 31, 1994 was derived from the unaudited
combined financial statements of ZDNet's predecessor.

On May 4, 1998, Ziff-Davis Inc. completed a reorganization described in Note
2 to the unaudited Combined Financial Statements of ZDNet and on April 6, 1999
Ziff-Davis Inc. completed a public offering of ZDNet stock described in Note 3
to the unaudited Combined Financial Statements of ZDNet. Results for periods
before the reorganization and public offering are not directly comparable to
results for periods after those events. No historical earnings per share or
share data are presented as Ziff-Davis Inc. does not consider such data
meaningful.

V-2
<PAGE>

This table should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Combined
Financial Statements for ZDNet included later in this Annex as well as
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Financial Statements for Ziff-Davis Inc. and ZD included in
other Annexes to this proxy statement.

<TABLE>
<CAPTION>
Predecessor(1) ZDNet
------------------------------ ------------------------------------------------
Two month Ten month Nine month
Year ended period ended period ended Year ended period ended
December 31, February 28, December 31, December 31, September 30,
1994 1995 1996 1996 1997 1998 1998 1999
------- ------- ------------ ------------ -------- ------- ------- -------
(dollars 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 $36,466 $67,791
Cost of operations:
Production and
content............... 9,321 10,709 1,802 14,863 23,543 26,208 18,971 25,491
Selling, general and
administrative
expenses.............. 7,276 8,360 1,774 13,280 23,475 30,993 22,048 31,241
Stock-based
compensation expense.. -- -- -- -- -- -- -- 2,953
Depreciation and
amortization.......... 1,163 4,040 597 5,485 7,681 6,448 4,780 7,790
Income (loss) from
operations............. (4,411) (9,533) (1,270) (17,413) (22,481) (7,506) (9,333) 316
Interest income-related
party.................. -- -- -- -- -- -- -- 943
Minority interest....... -- -- -- -- 400 134 330 117
Income (loss) before
income taxes........... (4,411) (9,533) (1,270) (17,413) (22,081) (7,372) (9,003) 1,376
Net loss (2)............ (4,526) (5,755) (814) (16,925) (21,238) (7,884) (8,691) (111)
Balance Sheet Data (at period
end):
Total current assets.... $ 2,432 $ 3,992 $ 4,951 $ 7,852 $ 11,521 $20,068 $15,467 $38,555
Total assets............ 3,557 91,772 92,717 82,507 87,326 97,686 90,092 179,650
Total liabilities....... 8,083 2,090 1,492 3,932 4,034 8,139 7,401 18,076
Division equity
(deficit).............. (4,526) 89,682 91,225 78,575 83,292 89,547 82,691 161,574
Other Data:
Capital expenditures.... $ 513 $ 1,590 $ 168 $ 1,010 $ 2,374 $ 4,483 $ 3,181 $ 2,763
Investments and
acquisitions, net of
cash acquired.......... -- -- -- -- 2,998 5,000 5,000 18,618
</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.

V-3
<PAGE>

ZDNet
(A Division of Ziff-Davis Inc.)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
1998 AND 1999

Overview

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. 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.

ZDNet Stock

The stockholders of Ziff-Davis Inc. voted, at a Special Meeting held on March
30, 1999, to authorize the issuance of a new series of common stock, designated
as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock'), which is intended to
reflect the performance of Ziff-Davis Inc.'s online business division, ZDNet.
When the ZDNet Stock was issued on April 6, 1999, Ziff-Davis Inc.'s existing
common stock was reclassified as Ziff-Davis Inc.--ZD Common Stock ("ZD Stock"),
which is intended to reflect the performance of Ziff-Davis Inc.'s other
businesses and a retained interest in ZDNet.

Prior to the ZDNet Stock offering, ZD held a 100% Retained Interest in ZDNet.
The ZDNet Stock offering was completed on April 6, 1999. Ziff-Davis Inc. issued
11.5 million shares of ZDNet Stock, including 1.5 million shares issued in
conjunction with the underwriters' exercise of their option to purchase
additional shares to cover over-allotments. Ziff-Davis Inc. attributed to ZDNet
1.5 million of the sold shares in a manner analogous to a primary offering and
attributed to ZD 10 million of the sold shares in respect of its retained
interest in ZDNet, in a manner analogous to a secondary offering. ZD received
net proceeds of approximately $172.7 million and ZDNet received net proceeds of
approximately $25.9 million. The ZDNet net proceeds were loaned to ZD as an
intercompany loan which will bear interest at the rate at which funding is
currently available to Ziff-Davis Inc. After giving effect to the ZDNet Stock
offering, there were 11.5 million shares of ZDNet Stock outstanding and another
60 million notional shares of ZDNet Stock intended to be represented by ZD's
retained interest in ZDNet, which was approximately 83.9% immediately following
the offering.

Prior to the ZDNet Stock offering, Ziff-Davis Inc. provided all funding for
ZD and ZDNet, which was accounted for as division equity contributions or a
return of capital. Ziff-Davis Inc. continued with these practices until the
ZDNet Stock was 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 the ZDNet Stock was issued.

Acquisition of GameSpot Inc.

On April 7, 1999, ZDNet closed on the acquisition of the remaining 30%
interest in GameSpot Inc. in exchange for 600,000 newly issued shares of ZDNet
Stock valued at approximately $11.4 million. This acquisition was accounted for
under the purchase method of accounting.

V-4
<PAGE>

Acquisition of Updates.com Inc.

On July 2, 1999, ZDNet acquired Updates.com Inc. for $5.0 million in cash and
582,526 shares of ZDNet stock valued at $13.5 million. This acquisition will be
accounted for under the purchase method of accounting.

Acquisition of SoftSeek Inc.

On July 30, 1999, Ziff-Davis Inc. acquired SoftSeek Inc. for $7.0 million in
cash and 991,038 shares of ZDNet Stock valued at $19.0 million. This
acquisition will be accounted for under the purchase method of accounting.

In connection with the acquisitions described in the preceding three
paragraphs, amortization expense for 1999 will increase by approximately $5.5
million.

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 included in Ziff-Davis Inc.'s Current Report on Form 8-K,
dated April 2, 1999 (File No. 001-14055).

Results of Operations

Comparison of the three months ended September 30, 1999 and 1998

Revenue

Revenue for the third quarter of 1999 increased by $11.8 million or 81.3%
from $14.5 million in 1998 to $26.3 million in 1999. Revenue from advertising
accounted for 92.7% of total revenue for 1999 compared to 86.4% for the same
period in 1998.

Revenue from advertising increased 94.5% to $24.4 million for the three
months ended September 30, 1999 from $12.5 million for the three months ended
September 30, 1998. The increase in advertising revenue was attributed to an
increase in rates and volume. During the period both the number of advertisers
and the average monthly revenue per advertiser increased as did the average
sale price per page. Subscription-based fees and services declined as expected
and were $1.9 million for the three months ended September 30, 1999 compared to
$2.0 million for the same period in 1998. These results reflect the continuing
shift from a subscription-based business model to an advertising based model.

Cost of operations

Production and content. Production and content expenses were $9.2 million or
35.0% of revenue compared to $5.9 million or 40.7% of revenue for the quarters
ended September 30, 1999 and 1998, respectively. The absolute dollar increase
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. The cost of
production and content decreased as a percentage of revenue due to economies of
scale and revenue growth significantly exceeding the growth of the cost base.
Royalty payments to ZD were $1.3 million and $0.7 million in the 1999 and 1998
periods, respectively.

Selling, general and administrative expenses. Selling, general and
administrative expenses were $12.5 million or 47.4% of revenue compared to $6.8
million or 46.9% of revenue for the quarters ended September 30, 1999 and 1998,
respectively. The absolute dollar increase was due to additional personnel and
advertising costs required to support and strengthen the growth of ZDNet.
Included in the selling, general and administrative costs was an allocation
from Ziff-Davis Inc. relating to certain selling, general and administrative
services and shared services provided on a centralized basis which amounted to
$1.3 million and $0.7 million for the quarters ended September 30, 1999 and
1998, respectively.

V-5
<PAGE>

Stock-based compensation. As a result of the grant of certain stock options
in December 1998, ZDNet incurred a deferred compensation charge of $13.3
million. This non-cash charge will be recognized ratably over the vesting
period of the underlying options. The charge on a quarterly basis is $0.8
million. This charge did not exist in 1998 because the options were granted in
December 1998.

Depreciation. Depreciation expense was $0.9 million for the three months
ended September 30, 1999 compared to $0.6 million for the three months ended
September 30, 1998. The increase primarily relates to increased capital
expenditures made by ZDNet for equipment necessary to expand it network and
infrastructure in order to support its continued growth.

Amortization of intangible assets. Amortization was $3.4 million for the
three months ended September 30, 1999 compared to $1.0 million for the three
months ended September 30, 1998. The increase in amortization is a result of
the acquisitions of Updates.com, SoftSeek and the remaining interest in
GameSpot Inc.

Interest income. ZDNet's portion of the proceeds from the ZDNet Stock
offering have been advanced to ZD. Such advance bears interest at the rate at
which funds are available to ZD (currently approximately 8.5%). As a result of
such advance, interest income of $0.4 million was reported in the third quarter
of 1999. No such amounts were reported in prior periods.

Income taxes. ZDNet recorded an income tax provision of $0.7 million in 1999
and $8,000 million in 1998. Income taxes are provided based on ZDNet's
projected annual effective tax rate which differs from the U.S. federal
statutory rate of 35.0% due to certain items which are not deductible for
income tax purposes, primarily losses at GameSpot prior to acquisition of the
minority interest, and the effect of state and local taxes.

Net income loss. As a result of the items described above, ZDNet's net income
decreased from income of $0.2 million in 1998 to a loss of $0.7 million in
1999.

EBITDA

EBITDA for the three months ended September 30, 1999 was $4.6 million
compared to an EBITDA of $1.9 million for the three months ended September 30,
1998. The improvement was due primarily to higher revenue, offset to some
extent by higher production and content and selling, general and administrative
expenses.

Comparison of the nine months ended September 30, 1999 and 1998

Revenue

Revenue for the nine months ended September 30, 1999 increased by $31.3
million or 85.8% from $36.5 million in 1998 to $67.8 million for the nine
months ended September 30, 1999. Revenue from advertising accounted for 92.4%
of total revenue for 1999 compared to 83.1% for the same period in 1998.

Revenue from advertising increased 106.7% to $62.7 million for the nine
months ended September 30, 1999 from $30.3 million for the nine months ended
September 30, 1998. The increase in advertising revenue was attributed to an
increase in rates and volume. During the period both the number of advertisers
and the average monthly revenue per advertiser increased as did the average
sale price per page. Subscription-based fees and services declined as expected
and were $5.1 million for the nine months ended September 30, 1999 compared to
$6.2 million for the nine months ended September 30, 1998. These results
reflect the continuing shift from a subscription-based business model to an
advertising based model.

V-6
<PAGE>

Cost of operations

Production and content. Production and content expenses were $25.5 million or
37.6% of revenue compared to $19.0 million or 52.0% of revenue for the nine
months ended September 30, 1999 and 1998, respectively. The absolute dollar
increase 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. The
cost of production and content decreased as a percentage of revenue due to
economies of scale and revenue growth significantly exceeding the growth of the
cost base. Royalty payments to ZD were $3.4 million and $1.8 million in the
1999 and 1998 periods, respectively.

Selling, general and administrative expenses. Selling, general and
administrative expenses were $31.2 million or 46.1% of revenue compared to
$22.0 million or 60.5% of revenue for the nine months ended September 30, 1999
and 1998, respectively. The absolute dollar increase was due to additional
personnel and advertising costs required to support and strengthen the growth
of ZDNet. Included in the selling, general and administrative costs was an
allocation from Ziff-Davis Inc. relating to certain selling, general and
administrative services and shared services provided on a centralized basis
which amounted to $4.0 million and $2.9 million for the nine months ended
September 30, 1999 and 1998, respectively. ZDNet has announced a significant
marketing campaign and anticipates spending $25 million over the next 18
months.

Stock-based compensation. The charge for the nine months ended September 30,
1999 was $3.0 million. This charge did not exist in 1998 because the options
were granted in December 1998. In addition, $0.4 million of stock compensation
was incurred in 1999 relating to the issuance of ZDNet stock options as part of
completing the GameSpot minority interest acquisition.

Depreciation. Depreciation expense was $2.0 million for the nine months ended
September 30, 1999 compared to $1.4 million for the nine months ended September
30, 1998. The increase related primarily to increased capital expenditures made
by ZDNet for equipment necessary to expand it network and infrastructure in
order to support its continued growth.

Amortization of intangible assets. Amortization was $5.8 million for the nine
months ended September 30, 1999 compared to $3.4 million for the nine months
ended September 30, 1998. The increase in amortization is primarily due to the
acquisitions of Updates.com, SoftSeek and the remaining interest in GameSpot
Inc., partly offset by certain intangible assets becoming fully amortized as of
March 1, 1998.

Interest income. ZDNet's portion of the proceeds from the ZDNet Stock
offering have been advanced to ZD. Such advance bears interest at the rate at
which funds are available to ZD (currently approximately 8.5%). As a result of
such advance, interest income of $0.9 million was reported for the nine months
ended September 30, 1999. No amounts were reported in prior periods.

Minority interest. The minority interest of $0.1 million in 1999 and $0.3
million in 1998 represents the losses attributed to the holders of the minority
interest in GameSpot Inc. The remaining minority interest was acquired in April
1999.

Income taxes. ZDNet recorded an income tax provision of $1.5 million in 1999
and a benefit of $0.3 in 1998. Income taxes are provided based on ZDNet's
projected annual effective tax rate which differs from the U.S. federal
statutory rate of 35.0% due to certain items which are not deductible for
income tax purposes, primarily losses at GameSpot prior to the acquisition of
the minority interest.

Net loss. As a result of the items described above, ZDNet's net loss improved
from $8.7 million 1998 to a loss of $0.1 million in 1999.

EBITDA

EBITDA for the nine months ended September 30, 1999 was $11.2 million
compared to an EBITDA loss of $4.2 million for the nine months ended September
30, 1998. The improvement was due primarily to higher revenue, offset to some
extent by higher production and content and selling, general and administrative
expenses.

V-7
<PAGE>

Liquidity and Capital Resources

Historically, the cash needs for ZDNet, excluding the cash needs of ZDNet's
foreign operations and operations that were not wholly owned, were 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 had been reflected in the financial statements of ZDNet. After the
completion of the ZDNet Stock offering, Ziff-Davis Inc. accounts for all cash
transfers between ZD and ZDNet, other than transfers in return of 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. ZDNet received net proceeds of $25.9 million from the initial public
offering of the ZDNet Stock, which were loaned to ZD as an interest bearing
advance. These advances will bear interest at the rate at which Ziff-Davis Inc.
could borrow such funds on a revolving credit basis as the Board of Directors
determines in its sole discretion. Funding for ZDNet's future cash needs will
be provided by ZD through a reduction of the interest bearing advance and to
the extent necessary, as a revolving credit advance bearing interest.

Sources and uses of cash

Cash and cash equivalents were $0.5 million at September 30, 1999 compared to
$0.3 million at December 31, 1998. The increase was due to the factors
discussed below.

Cash provided by operations was approximately $15.0 million for the nine
months ended September 30, 1999 compared to a use of $4.7 million for the nine
months ended September 30, 1998. The improvement was due primarily to an
improvement in net loss from $8.7 million in 1998 to $0.1 million in 1999,
despite higher non-cash charges related to depreciation, amortization and
stock-based compensation expense.

Cash used by investing activities was $21.4 million in 1999 compared to $8.2
million in 1998. This increase is a result of ZDNet's continued investments and
acquisitions of other Internet related businesses.

Cash provided by financing in 1999 was $6.5 million compared to cash provided
by financing of $13.3 million in 1998. As a result of decreased losses, ZDNet
did not require the same level of funding from ZD in 1999 as was required in
1998. Financing activities in 1998 reflected advances from ZD to fund the
business prior to the ZDNet Stock offering. Financing activities in 1999
primarily represent the receipt of proceeds from the ZDNet Stock offering
partly offset by the advances of such funds to ZD, net of the amount used by
ZDNet to fund acquisitions and capital spending. In addition, prior to the
ZDNet Stock offering, ZDNet generated positive cash flow which was treated as a
return of capital to ZD in the first quarter of 1999.

Year 2000 Readiness Disclosure

V-8
<PAGE>

V-9
<PAGE>

ZDNET
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

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 advertiser accounted for more than 5.0% of ZDNet's total revenue
for the year ended December 31, 1997 or 1998. ZDNet's top 20 advertisers
accounted for 29.3% and 39.9% 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 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").

V-10
<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 expenditures 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.

ZDNet expects to recognize compensation expense of approximately $13.4
million as a result of certain options granted on December 21, 1998 and January
29, 1999. Such compensation expense will be recognized over the vesting period
of the options. The 1999 compensation expense related to these options is
expected to be approximately $3.3 million. See Note 11 to ZDNet's Combined
Financial Statements in this Annex.

For a discussion of other factors that may affect results, see "Risk
Factors--Risk Factors Relating to the Restructuring" and "--Other Risk
Factors".

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.

V-11
<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
-------- -------- -------
(dollars 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:
Capital expenditures.................... $ 1,178 $ 2,374 $ 4,483
Investments and acquisitions, net of
cash acquired.......................... $ -- $ 2,998 $ 5,000
EBITDA(2)............................... $(12,601) $(14,400) $ (924)
</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. The above numbers assume that the acquisition
took place on January 1, 1995; therefore amortization of intangible assets
and net loss have been increased 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.

V-12
<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

Revenue from advertising increased 104% to $48.1 million for the year ended
December 31, 1998 from $23.6 million for the prior year. 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 production

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 year ended December 31, 1997. 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 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 the year ended December 31,
1998 compared to

V-13
<PAGE>

$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 Ziff-Davis Inc. relating to
certain selling general and administrative services and shared services
provided on a centralized basis amounting to $0.9 million and $0.5 million for
the years ended December 31, 1998 and 1997, respectively.

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
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

V-14
<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 reflects 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. relating to
certain selling, general and administrative services and shared services
provided on a centralized basis 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 of the cost of certain Ziff-Davis Inc.
services provided on a centralized basis 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 expense 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.

V-15
<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 1997 income tax benefit of $0.8 million compares to a pro forma tax
provision of $1.1 million in 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 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 "Ziff-Davis Inc. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Credit
Facility" set forth in an Annex to this proxy statement. There is no assurance,
however that ZDNet will continue to be able to obtain sufficient funding from
ZD.

Sources and uses of cash

Cash and cash equivalents were $0.3 million at December 31, 1998, an increase
of $0.3 million from $0.0 million at December 31, 1997. The increase was due to
the factors discussed below:

V-16
<PAGE>

Cash used by operations was $4.5 million for the year ended December 31, 1998
compared to $15.3 million for the year ended December 31, 1997. The improvement
from 1998 to 1997 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 totaled $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.

V-17
<PAGE>

Seasonality

Historically, ZDNet's business has been seasonal as a significant portion of
annual revenue has occurred in the fourth quarter. This fluctuation is a result
of seasonal changes common to the media industry. 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
---------------------------------------------------------------------------------------
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>
(dollars in thousands)
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 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 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.

V-18
<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. 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 $1.7 million and $3.8 million, respectively.
Ziff-Davis Inc. estimates that it will capitalize an additional $3.8 million
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 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 one by one 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 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 the
ZDNet's results of operations.

ZDNet expects to adopt the above statement beginning with its 2000 financial
statements.

V-19
<PAGE>

ZDNET

DESCRIPTION OF BUSINESS

Introduction

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.

Industry Background

Growth of the Internet and Demand for Technology-Related Content

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.

V-20
<PAGE>

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.

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

V-21
<PAGE>

its content broadly into "channels" that focus on specific topics or audience
groups. Approximately 50 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
approximately 1,200 news stories per month, 818,000 product listings and 44,000
downloadable programs. In addition, through ZDNet's relationship with ZD
Publishing, ZDNet currently 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. See "--Relationship with ZD Publishing" below.

Strong Community Affinity

Attractive Environment for Advertising and Commerce

. 58% have college degrees,

. 84% have an annual household income of at least $35,000 (and 21% in
excess of $100,000),

. 55% use the Internet every day and

. 68% purchased a product in the prior six months after gathering
information on the Internet.

The ZDNet Strategy

Continue to Offer Differentiated Technology and Internet-Related Content

V-22
<PAGE>

Grow the ZDNet Community

Build ZDNet Brand Strength

Increase Advertising and Commerce Revenue

Strengthen and Expand Strategic Alliances

Extend International Presence

ZDNet Sites and Services

V-23
<PAGE>

own skilled and dedicated team of 247 editors, online producers, developers and
operations staff and also uses 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.

Select ZDNet Sites

ZDNet News (www.zdnn.com) provides 24 hours a day, 7 days a week coverage for
computing and technology news and information. ZDNet News generates original
news content produced by its own staff. It also posts content from other
sources including ZD publications such as PC Week, Inter@ctive Week and Sm@rt
Reseller, ZDTV, ZD Radio and strategic partners such as MSNBC and the Wall
Street Journal. ZDNet News also publishes an e-mail newsletter six days a week
and provides news to the Wall Street Journal, MSN and Yahoo!, among others.

V-24
<PAGE>

GameSpot and Videogames.com (www.gamespot.com, www.videogames.com) offer
comprehensive news, reviews, previews and tips for all game categories.

ZDNet Downloads (www.hotfiles.com) offers over 44,000 files of shareware,
freeware and other downloadable software programs, nearly all of which are
tested for viruses and compatibility and approximately 33,000 of these files
are professionally reviewed and rated.

Other ZDNet Channels

Ziff-Davis Print Publication Sites. Pursuant to an arrangement with ZD
Publishing, 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 currently 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. For a more detailed
description of the arrangement between the buyer of ZD Publishing and ZDNet for
the publication web sites, see "--Relationship with ZD Publishing" below.

Topical Channels. ZDNet also has ten topical channels that bring together one
or more sites with a common theme, such as Tech News, Business & Technology,
Tech Life and Reviews. The Tech Life channel, for example, is aimed at
consumers and includes content, community and commerce geared for personal use,
families, gamers, and music aficionados. The Business & Technology channel
aggregate sites aimed at information technology managers in large and medium
sized business as well as small business users.

ZDNet seeks to identify and monitor technology trends in order to effectively
launch and introduce new sites and channels that address the needs of its
audience.

Relationship with ZD Publishing

ZDNet believes that its current relationship with ZD Publishing provides it
with substantial advantages over other online technology content providers.

ZDNet currently has the exclusive right to use ZD Publishing's technology
content online and currently enjoys the benefits of cross promotion with ZD
Publishing. After completion of the pending sale of ZD Publishing described
earlier in this proxy statement, ZDNet will continue to have that right and to
enjoy the benefits of cross promotion under the terms of a five year license
agreement described under "Proposal 1--The Restructuring of Ziff-Davis--The
Sale Agreements--ZDNet License Agreement." See "Risk Factors--Risk Factors
Relating to the Restructuring--The Sale of ZD's Businesses May Adversely Affect
ZDNet's Future Business."

Strategic Alliances

V-25
<PAGE>

sites in exchange for traffic, brand recognition, content or a percentage of
the revenue generated from those sites. These alliances are generally for 1 or
2 year terms, subject to renewal upon the agreement of both parties. In
addition, ZDNet content is distributed by various Internet service providers
such as Earthlink, MindSpring and BellSouth to individual and corporate
customers.

International

Advertising Sales and Marketing

ZDNet derives the principal portion of its revenue from the sale of
advertisements. For the first nine months of 1999 advertising revenue
represented 92% 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.

<TABLE>
<S> <C> <C>
Active Home/X-10 Egghead Micron Computer
Beyond.com First USA Microsoft
Buy.com Gateway Seagate
Compaq/Digital Hewlett Packard Symantec
Dell Intel Toshiba
</TABLE>

No advertiser accounted for more than 6% of ZDNet's revenue during the first
nine months of 1999. ZDNet's 20 largest advertising customers accounted for
approximately 42.1% of net advertising revenue during the first nine months of
1999.

V-26
<PAGE>

Technology Infrastructure and Operations

. Vignette for its StoryServer publishing system,

. Thunderstone for its Texis search software and

. Deja.com 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

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. 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 snowball.com and c|net Gamecenter, and the
ZDNet Downloads compete with several software download sites.

Employees

As of December 31, 1999, ZDNet had 483 employees, including 247 in Web design
and content development, 139 in sales, marketing, customer support and audience
development, 84 in technical development and operations and 13 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.

V-27
<PAGE>

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, Seattle and Miami. 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

Class Action and Derivative Litigation

The complaints alleged 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 28, 1998
(the "IPO"). More particularly, the complaints alleged 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 sought on behalf of a class of purchasers of Ziff-Davis
Inc. common stock from the date of the IPO through October 8, 1998, unspecified
damages, interest, fees and costs, recession 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. The consolidated amended complaint was filed on June 15,
1999 and only alleges claims under Section 11 of the Securities Act of 1933. On
May 20, 1999, Ziff-Davis Inc. moved to dismiss the consolidated amended
complaint. In July 1999, plaintiffs filed their response to the motion. Ziff-
Davis Inc. filed a reply on August 11, 1999. The motion has not yet been
decided.

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 the actions have been consolidated. Answers to the amended
complaint on behalf of both Ziff-Davis Inc. and its directors were filed on
April 12, 1999. Discovery is proceeding.

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 Corp. The complaint alleged, 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 investment 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 stated 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. Upon motion of Ziff-Davis Inc. and the other
defendants, all of the claims against them other than a breach of contract
claim which is solely against SBH, were dismissed on February 26, 1999.

V-28
<PAGE>

On April 1, 1999, plaintiffs filed a notice of appeal of the dismissal. On
September 2, 1999, the remaining claim, which was solely against SBH, was
dismissed. On October 6, 1999, plaintiffs filed a notice of appeal of this
dismissal.

Ziff-Davis Inc. and ZDTV, L.L.C. ("ZDTV") were named as defendants in an
action filed on November 10, 1999 in the U.S. District Court, Southern District
of New York, by Mark Bunting, Tom Hoitsma and SkyTV Inc. In October, 1998 ZDTV
through a subsidiary purchased certain assets from corporations owned by
plaintiff and two other individuals. In addition to a cash payment at the
closing of the sale, ZDTV agreed to pay additional purchase price, contingent
on the future operating profits of the SkyTV division. Ziff-Davis Inc.
guaranteed the obligations of ZDTV. The complaint alleges, among other things,
that ZDTV and Ziff-Davis Inc. breached their covenants of good faith and fair
dealing by failing to act in the best interests of the SkyTV division, to
support and procure business for the SkyTV division, and to provide public
relations, marketing assistance and corporate sales team support, thereby
lessening plaintiff's opportunity to earn additional purchase price. The
complaint seeks an amount to be determined at trial, but not less than
$60,000,000 in damages.

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.

V-29
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

COMBINED BALANCE SHEETS
(dollars in thousands)

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
</TABLE>
Current assets:
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 491 $ 292
Accounts receivable, net.................................... 20,882 18,732
Receivable from ZD.......................................... 16,729 --
Deferred taxes.............................................. -- 779
Other current assets........................................ 453 265
-------- -------
Total current assets...................................... 38,555 20,068
Securities available for sale................................. 7,916 --
Property and equipment, net................................... 6,400 5,618
Investments, at cost.......................................... 11,618 5,000
Deferred taxes................................................ 2,883 4,274
Intangible assets, net........................................ 112,278 62,726
-------- -------
Total assets.............................................. $179,650 $97,686
======== =======
</TABLE>

<TABLE>
<S> <C> <C>
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable............................................ $ 4,095 $ 2,553
Accrued expenses............................................ 5,458 3,495
Unearned income............................................. 8,523 1,078
-------- -------
Total current liabilities................................. 18,076 7,126
Non-current liabilities....................................... -- 1,013
-------- -------
Total liabilities......................................... 18,076 8,139
-------- -------
Commitments and contingencies (see Note 9)
Division equity............................................... 161,574 89,547
-------- -------
Total liabilities and division equity..................... $179,650 $97,686
======== =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

V-30
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF OPERATIONS
(Unaudited--dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue, net............... $ 26,291 $ 14,504 $ 67,791 $ 36,466
Cost of operations:
Production and content... 9,205 5,906 25,491 18,971
Selling, general and
administrative
expenses................ 12,464 6,801 31,241 22,048
Stock-based
compensation............ 839 -- 2,953 --
Depreciation and
amortization of property
and equipment........... 860 617 2,031 1,362
Amortization of
intangible assets....... 3,376 1,020 5,759 3,418
----------- ----------- ----------- -----------
Income (loss) from
operations................ (453) 160 316 (9,333)
Interest income............ 393 -- 943 --
Minority interest.......... -- 60 117 330
----------- ----------- ----------- -----------
Income (loss) before income
taxes..................... (60) 220 1,376 (9,003)
Income tax provision
(benefit)................. 681 8 1,487 (312)
----------- ----------- ----------- -----------
Net income (loss).......... $ (741) $ 212 $ (111) $ (8,691)
=========== =========== =========== ===========
Pro forma net income (loss)
per basic common share.... $ (.01) $ .00 $ (.00) $ (.12)
Pro forma weighted average
basic common shares
outstanding............... 73,402,667 71,500,000 72,315,852 71,500,000
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

V-31
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited--dollars in thousands)

<TABLE>
<CAPTION>
Nine months
Three months ended ended
September 30, September 30,
--------------------- ---------------
1999 1998 1999 1998
---------- --------- ------ -------
<S> <C> <C> <C> <C>
Net (loss) income ...................... $ (741) $ 212 $ (111) $(8,691)
Other comprehensive income (loss), net
of tax:
Foreign currency translation
adjustments.......................... 118 (129) 864 (105)
Unrealized (loss) gain on securities
available for sale................... (1,648) -- 989 --
---------- -------- ------ -------
Comprehensive (loss) income ............ $ (2,271) $ 83 $1,742 $(8,796)
========== ======== ====== =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

V-32
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CASH FLOWS
(Unaudited--dollars in thousands)

<TABLE>
<CAPTION>
Nine Months
Ended
September 30,
-----------------
1999 1998
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................. $ (111) $(8,691)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization of property and equipment.. 2,031 1,362
Amortization of intangible assets........................ 5,759 3,418
Minority interest........................................ (117) --
Deferred tax provision (benefit)......................... 1,487 (312)
Stock-based compensation................................. 2,953 --
Changes in operating assets and liabilities:
Accounts receivable.................................... (1,731) (3,712)
Other current assets................................... (191) (1)
Accounts payable and accrued expenses.................. 2,923 2,867
Unearned income........................................ 1,205 734
Other, net............................................. 814 (329)
-------- -------
Net cash provided (used) by operating activities........... 15,022 (4,664)
-------- -------
Cash flows from investing activities:
Capital expenditures..................................... (2,763) (3,181)
Investments.............................................. (6,618) (5,000)
Acquisitions............................................. (12,000) --
-------- -------
Net cash used by investing activities...................... (21,381) (8,181)
-------- -------
Cash flows from financing activities:
Capital (distributions) contributions to from ZD......... (2,723) 13,242
Advances to ZD, net...................................... (16,686) --
Proceeds from stock offering(1).......................... 25,885 --
Proceeds from exercise of stock options.................. 82 --
-------- -------
Net cash provided by financing activities.................. 6,558 13,242
-------- -------
Net increase in cash and cash equivalents.................. 199 397
Cash and cash equivalents at beginning of period........... 292 28
-------- -------
Cash and cash equivalents at end of period................. $ 491 $ 425
======== =======
</TABLE>
- --------
(1) Net of transaction costs of $2,615.

The accompanying notes are an integral part of the combined financial
statements.

V-33
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
(dollars in thousands)

<TABLE>
<CAPTION>
Unrealized gain Cumulative Total
Division Deferred Accumulated on securities translation division
capital compensation deficit available for sale adjustment equity
--------- ------------ ----------- ------------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1998................... $ 148,975 $(13,345) $ (46,047) $-- $(36) $ 89,547
Return of capital to
parent................. (2,723) (2,723)
Stock-based compensation
earned................. 2,953 2,953
Unrealized gain on
securities available
for sale, net.......... 989 989
Issuance of ZDNet
Stock.................. 25,885 25,885
Acquisition of
GameSpot............... 12,031 (443) 11,588
Exercise of ZDNet
options................ 82 82
Stock issued for
acquisitions........... 32,500 32,500
Net income.............. (111) (111)
Foreign exchange
translation
adjustment............. 864 864
--------- -------- --------- ---- ---- --------
Balance at September 30,
1999 (unaudited)....... $ 216,750 $(10,835) $(46,158) $989 $828 $161,574
========= ======== ========= ==== ==== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

V-34
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
(numbers rounded to the nearest thousand, except share and per share amounts)

1. Organization and Basis of Presentation

Basis of presentation

The accompanying unaudited combined financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary to present fairly the
combined financial position of ZDNet at September 30, 1999 and the results of
its combined operations for the three and nine months ended September 30, 1999
and 1998 and cash flows for the nine months ended September 30, 1999 and 1998
have been included. Operating results for the periods presented are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. It is suggested that the statements be read in conjunction
with ZDNet's combined financial statements for the year ended December 31,
1998, included in Ziff-Davis Inc.'s Current Report on Form 8-K dated August 4,
1999 (File No. 001-14055).

Formation of Ziff-Davis Inc.

Ziff-Davis Inc. was formed through an initial public offering and
reorganization that were completed on May 4, 1998 (see Note 2). Prior to that
date, the predecessors of Ziff-Davis Inc. were wholly owned indirect
subsidiaries of SOFTBANK Corp. (together with its non-Ziff-Davis Inc.
affiliates, "Softbank") or assets owned by MAC Inc., an affiliate of Softbank
("MAC Assets").

ZDNet is the Internet business division of Ziff-Davis Inc. ZD is the division
of Ziff-Davis Inc. focused on the business of print publishing, trade shows and
conferences, television, market research and education. At September 30, 1999,
ZD held a retained interest in ZDNet of approximately 81.5% (see Note 3).

Acquisition of GameSpot, Inc.

In January 1997, SOFTBANK Holdings Inc. ("SBH"), an affiliate of Ziff-Davis
Inc., acquired 70.0% 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 reorganization and
initial public offering that was completed on May 4, 1998 (See Note 2), the
70.0% interest in 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).

On April 7, 1999, Ziff-Davis Inc. completed the acquisition of the remaining
30.0% interest in GameSpot in exchange for 600,000 newly issued shares of Ziff-
Davis Inc.--ZDNet Common Stock ("ZDNet Stock") valued at approximately
$11,400,000. This acquisition has been accounted for under the purchase method
of accounting.

Reclassifications

Certain amounts have been reclassified, where appropriate, to conform to the
current financial statement presentation.

V-35
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

2. Reorganization and Initial Public Offering

On May 4, 1998, SOFTBANK Corp., through its wholly owned subsidiary, SBH,
completed a reorganization whereby the common stock of the predecessor
companies to Ziff-Davis Inc. was 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 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"), 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 were 74,200,000. The
transactions described above are herein referred to as the "Reorganization".

3. ZDNet Stock

The stockholders of Ziff-Davis Inc. voted, at a Special Meeting held on March
30, 1999, to authorize the issuance of a new series of common stock, designated
as Ziff-Davis Inc.--ZDNet Common Stock ("ZDNet Stock"), which is intended to
reflect the performance of Ziff-Davis Inc.'s Internet business division
("ZDNet"). When the ZDNet Stock was issued on April 6, 1999, Ziff-Davis Inc.'s
existing common stock was re-classified as Ziff-Davis Inc.--ZD Common Stock
("ZD Stock"), which is 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").

Prior to the ZDNet Stock offering, ZD held a 100% retained interest in ZDNet.
The ZDNet Stock offering was completed on April 6, 1999. Ziff-Davis Inc. issued
11,500,000 shares at $19.00 per share including 1,500,000 shares issued in
conjunction with the underwriters' exercise of their option to purchase
additional shares to cover over-allotments. Ziff-Davis Inc. attributed to ZDNet
1,500,000 of the sold shares in a manner analogous to a primary offering and
the related net proceeds of approximately $25,900,000. The full amount of the
net proceeds was loaned to ZD as an intercompany loan which bears interest at
the rate at which funding is available to Ziff-Davis Inc. After giving effect
to the ZDNet Stock offering, there were 11,500,000 shares of ZDNet Stock
outstanding and another 60,000,000 notional shares of ZDNet Stock intended to
represent ZD's retained interest in ZDNet, which was approximately 83.9%
immediately following the offering.

Prior to the ZDNet Stock offering, Ziff-Davis Inc. provided all funding for
ZD and ZDNet. Ziff-Davis Inc. continued these practices until the ZDNet Stock
was 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 the ZDNet Stock was issued.

The following summary pro forma information has been prepared as if the ZDNet
Stock offering had been consummated on January 1, 1999. The pro forma
adjustments include the recognition of $550,000 of interest income from ZD and
the tax effect of this adjustment at a statutory tax rate of 41.0%. The pro
forma data is not

V-36
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

necessarily indicative of actual results had the transaction occurred on
January 1, 1999. Further, pro forma results are not meant to represent future
financial results. There is no pro forma impact for the three month period
ended September 30, 1999.

<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999
-----------------
(in thousands,
except share
amounts)
<S> <C>
Revenue, net.......................................... $67,791
Loss from operations.................................. 316
Interest income....................................... 1,493
Income before taxes................................... 1,926
Income tax provision.................................. 1,712
Net income............................................ 214
Pro forma net income per basic and diluted common
share................................................ 0.00
</TABLE>

4. Investments

BuyDirect.com Inc.

On February 19, 1999 ZDNet acquired warrants to purchase 2,005,400 shares of
Series E preferred stock of BuyDirect.com Inc. ("Series E shares") at a
exercise price $1.65 per share. On March 25, 1999, ZDNet exercised its warrants
and received 1,510,020 Series E shares in a cashless exercise by exchanging
495,380 warrants in lieu of payment of the exercise price. On March 30, 1999,
BuyDirect.com Inc. was acquired by Beyond.com Corporation and these Series E
shares were converted to 438,057 shares of Beyond.com Corporation and at
September 30, 1999 are reflected in the balance sheet as Securities Available
for Sale.

The warrants were granted in connection with an agreement by BuyDirect.com
Inc. to advertise on certain ZDNet sites. As a result, the fair value of the
warrants on February 19, 1999 was recorded as deferred revenue and will be
recognized as income over the life of the advertising agreement. The fair value
of the warrants was determined to be $6,240,000.

In June 1999, ZDNet entered into an agreement to hedge a portion of the
unrealized gain associated with these shares. (See Note 9).

Deja.com Inc.

On May 13, 1999, ZDNet made an additional investment in Deja.com Inc.
(formerly Deja News, Inc.) with the purchase of 386,939 shares of Series D
convertible non-voting preferred stock at a purchase price of $3.61 per share.
This investment is accounted for at cost.

Onebox.com, Inc.

On July 30, 1999, ZDNet made an investment in Onebox.com, Inc. with the
purchase of 346,650 shares of Series B preferred stock at a purchase price of
approximately $1,000,000. This investment is accounted for at cost.

Techies.com, Inc.

On September 14, 1999, ZDNet made an investment in Techies.com, Inc. ZDNet
paid $4,000,000 in cash for 655,738 shares of Series B convertible preferred
stock. This investment is accounted for at cost.

V-37
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

5. Acquisitions

Updates.com Inc.

On July 2, 1999, ZDNet acquired Updates.com Inc. for a purchase price of
approximately $18,500,000. Consideration was in the form of $5,000,000 in cash
and 582,526 shares of ZDNet Stock valued at $13,500,000. This acquistion was
accounted for under the purchase method of accounting.

SoftSeek Inc.

On July 30, 1999, ZDNet acquired SoftSeek Inc. for a purchase price of
approximately $26,000,000. Consideration was in the form of $7,000,000 in cash
and 991,038 shares of ZDNet stock valued at $19,000,000. This acquisition was
accounted for under the purchase method of accounting.

6. Income Taxes

Income taxes are provided based on ZDNet's projected annual effective tax
rate which differs from the U.S. federal statutory rate of 35.0% due to (i)
certain items which are not deductible for income tax purposes, primarily
nondeductible goodwill amortization, and (ii) the effect of state and local
taxes. 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. The tax benefit recorded for the nine months ended
September 30, 1999 has been reflected as a non-current deferred tax asset as it
is anticipated that the benefit will reverse in future periods when ZDNet
generates taxable income.

7. Earnings per share

Pro forma earnings per share and the related weighted average common shares
outstanding presented in the statement of operations assume that the ZDNet
Stock offering (see Note 3) occurred on January 1, 1998. Diluted earnings per
share are not shown as the impact of stock options would be anti-dilutive.

8. Registration Statement

9. Commitments and Contingencies

Strategic Alternatives

On July 14, 1999, Ziff-Davis Inc. announced that it has retained the
investment banking firm of Morgan Stanley Dean Witter ("Morgan Stanley") to
explore strategic alternatives to maximize shareholder value. The Ziff-Davis
Inc. Board of Directors has not embraced any particular strategic alternative
and will investigate all possible alternatives, including strategic alliances,
mergers, and the sale or joint venture of all or some of Ziff-Davis Inc.'s
businesses (including ZDNet). No assurances can be given that any transaction
will result from the exploration process that Morgan Stanley Dean Witter has
been retained to manage.

V-38
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Class action and derivative litigations

ZDNet and Ziff-Davis Inc. are subject to various legal proceedings arising in
the normal course of business.

The complaints alleged 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 completed on May 4,
1998 (the "IPO"). More particularly, the complaints alleged 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 sought 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.

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. The consolidated amended complaint was filed on June 15,
1999 and only alleges claims under Section 11 of the Securities Act of 1933. On
May 20, 1999, Ziff-Davis Inc. moved to dismiss the consolidated amended
complaint. In July 1999, plaintiff filed their response to the motion. Ziff-
Davis Inc. filed a reply on August 11, 1999. The motion has not yet been
decided.

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 the actions have been consolidated. Answers to the amended
complaint on behalf of both Ziff-Davis Inc. and its directors were filed on
April 12, 1999. Discovery is proceeding.

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 Corp. The complaint alleged, 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 stated 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. Upon motion of Ziff-Davis Inc. and the other
defendants, all of the claims against them other than a breach of contract
claim which is solely against SBH, were dismissed on February 26, 1999. On
April 1, 1999, plaintiffs filed a notice of appeal of the dismissal. On
September 2, 1999, the remaining claim, which was solely against SBH, was
dismissed. On October 6, 1999, plaintiffs filed a notice of appeal of this
dismissal.

V-39
<PAGE>

ZDNet
(a division of Ziff-Davis Inc.)

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

Ziff-Davis Inc. and ZDTV, L.L.C. ("ZDTV"), a majority owned affiliate of
Ziff-Davis Inc., were named as defendants in an action filed on November 10,
1999 in the U.S. District Court, Southern District of New York, by plaintiff.
In October, 1998 ZDTV through a subsidiary purchased certain assets from
corporations owned by plaintiff and two other individuals. In addition to a
cash payment at the closing of the sale, ZDTV agreed to pay additional purchase
price, contingent on the future operating profits of the SkyTV division. Ziff-
Davis Inc. guaranteed the obligations of ZDTV. The complaint alleges, among
other things, that ZDTV and Ziff-Davis Inc. breached their covenants of good
faith and fair dealing by failing to act in the best interests of the SkyTV
division, to support and procure business for the SkyTV division, and to
provide public relations, marketing assistance and corporate sales team
support, thereby lessening plaintiff's opportunity to earn additional purchase
price. The complaint seeks an amount to be determined at trial, but not less
than $60,000,000 in damages.

Beyond.com Hedge

In June 1999, ZDNet entered into a short-sale to effect a hedge on 300,000 of
its 438,057 shares of Beyond.com. These shares were sold on behalf of ZDNet by
a third party at a weighted average price of $22.50 per share. In September
1999, ZDNet delivered the shares required to close the short position by
repurchasing the shares at a market price of $14.00 per share. A gain of
approximately $2,600,000 was deferred in the period related to this hedge
transaction.

10. Subsequent Events

Registration statement

V-40
<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

V-41
<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.

V-42
<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.

V-43
<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
Minority interest....................... -- (400) (134)
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) 1,371 (164)
-------- -------- -------
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.

V-44
<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) -- -- --
Issuance of ZDNet
options................ 13,269 (13,269) -- -- --
Net loss................ -- -- (7,884) -- (7,884)
Foreign currency
translation
adjustment............. -- -- -- (130) (130)
-------- -------- -------- ----- --------
Balance at December 31,
1998................... $148,975 $(13,345) $(46,047) $ (36) $ 89,547
======== ======== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

V-45
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS
(numbers rounded to the nearest thousand, except share and per share amounts)

1. Organization and Basis of Presentation

Formation of Ziff-Davis Inc.

Ziff-Davis Inc. was formed through an initial public offering and
reorganization that 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.
(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. Each of
ZD and ZDNet is sometimes referred to herein as a "Group".

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.

Relationship with Softbank and MAC

SOFTBANK Corp. is the indirect majority stockholder of Ziff-Davis Inc.
SOFTBANK Corp. 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 SOFTBANK
Corp. (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.

V-46
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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 May 4, 1998, SOFTBANK Corp., 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. Concurrent 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"), 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 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., an affiliate of SOFTBANK Corp.

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)

V-47
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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").

Currently, Ziff-Davis Inc. provides all funding for ZD and ZDNet as described
in Note 4 under "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:

V-48
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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.

(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).

(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.

(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.

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

V-49
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per share amounts)

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.

Foreign currency

Income taxes

ZDNet uses the asset and liability approach for financial accounting and
reporting of deferred taxes.

V-50
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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

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 that the adoption of SFAS
No. 133 will 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

V-51
<PAGE>

ZDNET
(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 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

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 the 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>

V-52
<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
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>

V-53
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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>
U.S........................................... $(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.

V-54
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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
ownership with Softbank and has various transactions and relationships with
members of the group. Due to those 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.

V-55
<PAGE>

ZDNET
(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 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.

V-56
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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.)

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.

V-57
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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 Corp. to officers, directors and key employees of Ziff-Davis
Inc. 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.

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 to
certain employees, at a price of $7.50 per share. As a result of the grant
ZDNet has recorded deferred compensation expense of $13,269,000 for the
difference between the exercise price and the deemed fair value of the
underlying shares. This amount has been recorded as a component of division
equity offset by an additional to paid-in capital. ZDNet expects to recognize
non-cash compensation for accounting purposes of $13,269,000 ratably over the
vesting period of the options. These options are currently scheduled to vest
and become exercisable on the fifth anniversary of the date of grant.

V-58
<PAGE>

ZDNET
(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 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 stockholder value. The GameSpot Plan provides for the grant of
options to purchase shares of 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.

V-59
<PAGE>

ZDNET
(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 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)............. 11,374 $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)4000.
(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>

V-60
<PAGE>

ZDNET
(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 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>
- --------
* The number of shares and price per share will be adjusted if the initial
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet is
different from 40,000,000.

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>

V-61
<PAGE>

ZDNET
(a division of Ziff-Davis Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(numbers rounded to the nearest thousand, except share and per 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, 1997
or 1998. 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.

V-62
<PAGE>

ZDNET
(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 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 1,500,000 shares of common stock 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.

V-63
<PAGE>

ZDNET
(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. 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 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 $200,000,000 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, and the motion was granted, with
the result that all of the claims against Ziff-Davis Inc. and its officers were
dismissed, and most of the claims against SBH were dismissed, leaving only a
claim against SBH concerning the alleged failure of SBH to give plaintiffs
adequate notice of the sale of its stock to SIM.

14. Subsequent Events

V-64
<PAGE>

ANNEX VI
[Morgan Stanley Dean Witter Letter Head]

December 5, 1999

Board of Directors
Ziff-Davis Inc.
28 East 28th Street
New York, N.Y. 10016

Members of the Board:

We understand that ZD Inc. ("ZD" or the "Company") and Willis Stein & Partners
("Buyer") propose to enter into a Purchase Agreement substantially in the form
of the draft dated December 4, 1999 (the "Agreement") which provides for the
sale by ZD to Buyer of selected assets of ZD Publishing, an unincorporated
division of the Company ("ZD Publishing") for $780 Million in cash (subject to
post-closing adjustment based upon working capital and other factors). The
terms and conditions of the sale are more fully set forth in the Agreement.

You have asked for our opinion as to whether the consideration to be received
by the Company pursuant to the Agreement is fair from a financial point of view
to the Company.

For purposes of the opinion set forth herein, we have:

(i)reviewed certain publicly available financial statements and other
information of the Company;

(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company and ZD Publishing prepared by
the management of the Company and ZD Publishing;

(iii) analyzed certain financial projections prepared by the management of
the Company and ZD Publishing;

(iv) discussed the past and current operations and financial condition and
the prospects of the ZD Publishing with senior executives of the
Company and ZD Publishing;

(v) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;

(vi) participated in discussions and negotiations among representatives of
the Company and Buyer (and certain other parties) and their financial
and legal advisors;

(vii) reviewed the draft Purchase Agreement and supporting schedules dated
December 4, 1999, and certain related documents;

(viii)performed such other analyses as we have deemed appropriate.

We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. In
addition, we have assumed that the transaction will be consummated in
accordance with the terms of the Agreement. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company, nor have we
been furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.

We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction as well as certain other transactions
undertaken by the Company and will receive a fee for our services. In the past,
Morgan Stanley & Co. Incorporated and its affiliates have provided financial
advisory and financing services for the Company and for the Buyer and have
received fees for the rendering of these services.

VI-1
<PAGE>

It is understood that this letter is for the information of the Board of
Directors of the Company only and may not be used for any other purpose without
our prior written consent.

Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the Company pursuant to the Agreement is fair
from a financial point of view to the Company.

Very truly yours,

Morgan Stanley & Co. Incorporated

By: /s/ Stuart J. Epstein
---------------------

VI-2