EXHIBIT 10.5
LIMITED LIABILITY COMPANY AGREEMENT
OF
MAC PUBLICATIONS, L.L.C.
July 31, 1997
The parties to this agreement are ▇▇▇▇-▇▇▇▇▇ INC. ("▇▇▇▇-▇▇▇▇▇"), a
Delaware corporation with its principal offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, MACWORLD COMMUNICATIONS, INC. ("MCI"), a Massachusetts corporation with
its principal office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and
INTERNATIONAL DATA GROUP, INC. ("IDG"), a Massachusetts corporation with its
principal office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
▇▇▇▇-▇▇▇▇▇ publishes a number of computer-related publications including
MacUser and MacWeek. MCI publishes a computer-related publication called
Macworld and is a subsidiary of IDG, which publishes a number of computer-
related publications.
▇▇▇▇-▇▇▇▇▇ and MCI are all of the members of MAC Publications, L.L.C., a
limited liability company (the "Company") formed under the Delaware Limited
Liability Company Act, 6 Del. (S)(S) 18-101, et seq, as amended from time to
time (the "'Delaware Act"). ▇▇▇▇-▇▇▇▇▇ and MCI are hereinafter referred to from
time to time as the "Members".
The Members wish to set forth certain provisions governing the affairs of
the Company and the conduct of its business in this agreement which shall become
effective on the date set forth above.
It is therefore agreed as follows:
1. Purpose of the Company. The purpose of the Company shall be to engage
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in (a) the business of developing, producing, publishing and distributing
Macworld, MacUser, MacWeek and other Apple/Macintosh related print publications
(the "Publications") and (b) annuals or special issues or CD-ROM versions of the
Publications. The Company will not engage in the business of producing or
publishing electronic publications (other than the Publications' sites on the
World Wide Web, AOL or similar proprietary networks), trade shows, conferences,
seminars, books, tips and techniques newsletters, training materials,
directories, market information research, television, radio, database or
reference products or any other business not specified in (a) and (b) above
without the majority approval of the Management Board, as set forth in Section
5.1(h) below.
2. Registered Office; Registered Agent. The address of the registered
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office of the Company in the State of Delaware is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ in the City
of Wilmington, County of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The name of the registered
agent of the Company is Corporation Trust Center. The address of the registered
agent in the State of Delaware is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ in the City of ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
3. Capital Contributions.
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3.1 Initial Contributions.
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(a) ▇▇▇▇-▇▇▇▇▇ shall contribute to the Company all of its rights with
respect to the publications MacUser and MacWeek, together with the business of
publishing and distributing such publications and the assets used in connection
therewith pursuant to an Assignment and Assumption Agreement dated July 31,
1997.
(b) MCI and IDG shall contribute, or cause to be contributed, to the
Company all of the rights with respect to the publication, Macworld, together
with the business of publishing and distributing such publication and the assets
used in connection therewith pursuant to an Assignment and Assumption Agreement
dated July 31, 1997.
(c) Each of ▇▇▇▇-▇▇▇▇▇ and MCI (or IDG on behalf of MCI) shall also
contribute equal cash amounts pursuant to their respective Assignment and
Assumption Agreements and as may be provided in the Preliminary Plan (as such
term is defined below). Those contributions shall be for the sole purpose of
funding the operations of the Company and the Company will not maintain cash
balances in excess of the Company's needs. The timing and amount of each
contribution by the Members shall be specified by the President (as defined
below) in a notice delivered at least five business days prior to the specified
date of contribution.
(d) Notwithstanding Section 3.1(c) above, each Member shall have the
right to review its obligations set forth in such Section and to discontinue
making any capital contributions if the Company's operating income (loss) for
any given year as reflected on the Company's financial statements is more than
25% less favorable than the Company's operating income projected for such year
as reflected in the Preliminary Plan (as defined below) provided, however, such
shortfall exceeds $200,000. If a Member elects to discontinue its capital
contributions pursuant to this Section 3.1(d), the other Member may loan the
Company the amount of the contribution in issue, in return for a promissory note
bearing interest at the prime rate as published in The Wall Street Journal plus
2%, as in effect from time to time. That note shall be repayable out of the
first available cash from day-to-day operations not required for fulfilling
capital needs, as determined by the Company's Chief Financial Officer.
3.2 Additional Contributions. Upon a determination at any time or from
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time to time during the term of this agreement by the Management Board (a) to
pursue additional business ventures through the Company, or (b) that the
existing business of the Company requires capital in excess of that previously
contributed, the Members may agree on appropriate additional capital
contributions. If the President proposes that the Company publish a new
Publication and both Members do not mutually agree that the Company shall
publish the new Publication, then one Member may advance the entire amount
required for such Publication by the Company ir return for a promissory note
bearing interest at the prime rate as published in The Wall Street Journal plus
2%, as in effect from time to time. That note shall only be repayable out of
the proceeds of the new Publication. Notwithstanding any provision to the
contrary, nothing in this Section shall permit the Company to engage in any of
the activities listed in the last sentence of Section 1 unless both
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Members agree nor may the Company engage in any new Publication if the
dissenting Member in good faith believes that such new Publication may have a
material adverse effect on the Company's existing Publications or operations. In
the event the other Member reasonably believes that such new Publication would
not have a material adverse effect on the Company's existing Publications or
operations, despite the dissenting Member's good faith belief to the contrary,
and the dissenting Member has rejected the other Member's offer to fund the new
Publication, the other Member shall have the right to declare that a "deadlock"
condition exists, as described in Section 5.2 below.
3.3 No Withdrawals. Except as expressly provided in this agreement, no
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Member shall be entitled to resign as a Member or withdraw any part of its
capital contribution from the Company.
3.4 No Liability for Capital Contributions; No interest. No Member shall
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be personally liable for the return of any portion of the capital contributions
of the Members. The return of the Members' capital contributions shall be made
solely from the Company's assets. No Member shall have the right to demand or
receive property other than cash for its Interest (as such term is defined in
Section 4 below) in the Company. No Member shall receive any interest on its
capital contributions.
4. Interests. In return for its capital contributions, each Member will
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have a fifty (50%) percent interest (the ""Interests") in the Company
and a right to 50% of all distributions.
5. Management of the Company
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5.1 The Management Board.
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(a) The Company shall have a Management Board of four members, which
shall oversee and manage the business and affairs of the Company. It is the
intention that the Company be set up as a partnership, therefore two members of
the Management Board shall be appointed by ▇▇▇▇-▇▇▇▇▇ and two shall be appointed
by MCI. The parties hereto intend that such members of the Management Board
shall be high-level executives of ▇▇▇▇-▇▇▇▇▇ and IDG, respectively. Therefore,
neither Member shall appoint as a member of the Management Board any person who
is actively involved in the day-to-day operations of the Company. The President
may attend meetings of the Management Board as a nonvoting participant.
(b) Each member of the Management Board shall hold office until his
or her successor is appointed or until his or her earlier resignation or
removal. Any member may resign at any time upon written notice to the Members.
Such resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. Any member of the Management Board may he removed, with or
without cause, by the Member which appointed such member. In the event of a
removal or resignation of any member of the Management Board, the resulting
vacancy shall be filled by the Member which appointed the departing member.
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(c) Regular meetings of the Management Board shall be held at least
quarterly and may be held at such places and at such times as the Management
Board may from time to time determine.
(d) Special meetings of the Management Board may be held at any time
or place or by conference telephone or similar equipment whenever called by the
President or by any Member. Reasonable notice thereof shall be given by the
person or persons calling the meeting.
(e) At all meetings of the Management Board, the presence of at least
one member designated by each Member shall be required for a quorum for the
transaction of business. Any member of the Management Board may vote by proxy
for any absent member appointed by the same Member. The vote of a majority of
the members present, including votes by proxy, if any, at a meeting at which a
quorum is present shall be the act of the Management Board. In case at any
meeting of the Management Board a quorum shall not be present, the members of
the Management Board present may adjourn the meeting from time to time until a
quorum shall be present.
(f) Meetings of the Management Board shall be presided over by a
member of the Management Board mutually agreed upon by the Members.
(g) Any action required or permitted to be taken at any meeting of
the Management Board, may be taken without a meeting if all members of the
Management Board personally consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Management Board.
(h) In addition to any rights expressly reserved in this agreement or
by law to the Members and the Management Board and notwithstanding anything to
the contrary contained in Section 5.3 below, each of the following actions
("Major Decisions") may be taken only with the majority approval of the
Management Board:
(i) making any material change in the nature of the
business conducted by the Company, including, without limitation, the
addition of any Publication (subject to Section 3.2 above), the
discontinuation of any Publication or changing the name of any Publication
from the names set forth in Section 1 above or licensing the name or other
material intellectual property of any Publication to any third party or the
decision to pursue additional business ventures through the Company;
(ii) approval of the Plans (as defined in Section 6 below)
and any material changes to the Plans;
(iii) (A) hiring, promotion, termination or determination
of the compensation of the President or any employee whose term of
employment is equal to or exceeds one year, or (B) the hiring of any
employee(s) beyond those contemplated in the then current approved Plan or
(C) the veto of the President's decisions with respect to the hiring,
promotion, termination or determination of compensation of the publisher,
or the senior editorial position of any of the Publications;
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(iv) the distribution of profits of the Company;
(v) the sale, lease or other disposition or encumbrance
of any of the Company's assets in excess of $25,000 and not in the ordinary
course of business or any sale or transfer of any interest in the Company,
except as permitted herein;
(vi) the investment of the Company's earnings in the
purchase or other acquisition of assets by the Company not in the ordinary
course of business or of securities or investments other than cash or cash
equivalents;
(vii) entering into any joint venture or other similar
arrangement with any party or agreeing to merge or consolidate the Company
with any other entity, or forming a subsidiary of the Company or
reorganizing the capital structure of the Company;
(viii) any request that a third party provide funds to the
Company or any incurrence of indebtedness by the Company in respect of such
funds;
(ix) (A) a guarantee by the Company of any obligation of
any person or entity or a pledge, or (B) a grant of a security interest in
any assets of the Company, other than purchase money security interests
entered into in the ordinary course of business, or (C) use of any asset of
the Company for the benefit of a party hereto but not for the commensurate
benefit of the other parties hereto;
(x) any material action taken or agreement entered into,
including settlement of any Internal Revenue Service audit, by the Tax
Matters Partner designated under Section 15.4 below;
(xi) any capital expenditure by the Company in excess of
$10,000, except as approved as part of a Plan;
(xii) entering into any lease, contract or other instrument
which creates obligations of the Company in excess of $20,000 or greater
than one year in duration, except as approved as part of a Plan;
(xiii) any other transaction not in the ordinary course of
business;
(xiv) entering into any transaction with any officer, owner
or affiliate of any Member, except as contemplated herein and except for
advancements or reimbursement of expenses in the ordinary course of
business;
(xv) commencement or settlement of any material claim or
litigation, or a decision to forgo any material claim or litigation in
excess of $10,000;
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(xvi) the selection or removal of legal counsel in
connection with the defense or prosecution of claims or any other actions
relating to arbitration proceedings, litigation or potential litigation by
or against the Company;
(xvii) the selection or removal of independent accountants,
auditors and tax advisers;
(xviii) entering into, amending or terminating an employee
benefit plan; or
(xix) such other matters as may be established by
agreement of the Management Board.
(i) Notwithstanding Section 5.3(e) below, the Management Board shall
have the right to oversee and direct the hiring, promotion, termination or
determination of the compensation of the chief financial officer.
(j) Any Member may act alone on behalf of the Company in any claim
against the other Member or IDG for breach of this Agreement, the relevant
Assignment and Assumption Agreement, or any other agreement between the Company
and that other Member, IDG or an affiliate of that other Member.
5.2 Deadlock. In the event that the members of the Management Board are
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equally divided over a proposed Major Decision, or the publication of a new
Publication, as described in Section 3.2 above, or any Member repeatedly refuses
to attend meetings of the Management Board after notice thereof, either Member
shall have the right to provide notice to the other Member that a "deadlock"
condition exists. For a period of 90 days following the delivery of such
notice, the Members shall negotiate in good faith in order to resolve such
deadlock. If, after such 90 day period, the Members are unable to resolve such
deadlock, the Members shall submit such dispute to non-binding mediation before
a mediator mutually agreed upon by the Members. If, after mediation for a
period not to exceed 60 days the parties are unable to resolve such deadlock,
either Member may make an offer to purchase the other Member's interest in the
Company. The Member receiving such an offer must either accept such offer or
purchase the offering member's interest at the offer price and on the terms of
the offer. The purchase and sale shall be set forth in an agreement with terms
and conditions standard in such a sale, including a two year non-compete and no
solicitation period applicable to the selling Member on terms substantially the
same as the provisions of Sections 10.1 and 10.3 hereof.
5.3 President. The daily business and affairs of the Company generally
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shall be supervised by a President (the "President") chosen by the Members. The
initial President and Chief Executive Officer shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The
President will be responsible for overseeing all day-to-day operations of the
Company and the Publications, subject to any limitations contained in the Plans
and in this agreement. The President will keep the Management Board informed of
all material business issues and any material (i.e., greater than $50,000 in
value) or strategic deviation from the Plans must be disclosed and agreed to by
the Management Board. In addition, the President shall have the power and
authority to take any of the following actions:
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(a) prepare the Plans and present them to the Management Board for
its approval;
(b) implement the Plans in accordance with their terms including the
budget;
(c) manage the day-to-day business and affairs of the Company in the
ordinary course of its business, in accordance with the Plans;
(d) collect all revenue of the Company and pay all expenses; and
(e) approve and carry out the hiring, promotion, termination and the
determination of compensation of employees in accordance with the then current
approved Plan, provided, however, the Management Board (i) shall have control
over the chief financial officer of the Company, as provided in Section 5.1(i)
above, (ii) shall have the right to veto the President's recommendations
regarding the hiring or termination of publisher and the senior editorial
position of any Publication and (iii) shall approve the hiring of any
employee(s) whose term is more than one year.
In addition, the President shall have such other powers and authority as may be
determined from time to time by the Management Board.
6. Business Plans. The Members have reached a preliminary agreement on
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the terms of an initial 3-Year Business Plan which is attached as Exhibit A
hereto (the "Preliminary Plan") No later than October 1 of this year and each
subsequent year, the President shall prepare and submit to the Management Board
for its approval an annual business plan and budget for the following calendar
year (an "Annual Plan") (the Preliminary Plan and Annual Plan, hereinafter the
"Plans"). The parties hereto agree that the Annual Plan for 1998 shall be
consistent with the Preliminary Plan. Each Annual Plan will include, without
limitation, (i) performance benchmarks for the Company's operations during each
fiscal year covered by such Plan, (ii) overall financial and operating
objectives and projections for the Company for such fiscal year, (iii) the
number of issues of each Publication to be published each year, and (iv) certain
advertising and circulation targets for each Publication, such as ad rates, ad
yields, and circulation and rate base levels. The Management Board may approve
each Plan as presented by the President or adopt such Plan with such amendments
or changes (including different performance benchmarks) as it sees fit.
7. Certain Operational Issues.
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7.1 Services. The Company shall have the right to procure centralized
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services from either Member at an at-cost-basis, that is on the same terms that
Members provide such services to their own publications. It is the intention of
the parties that the Company should procure the following services from either
Member, as is least expensive: circulation, production, accounting, public
relations, facilities and legal. It is the intention of the parties that the
Member who can provide such services at the lowest cost shall provide such
services to the Company. Within 30 days of the date hereof, the Company shall
determine which Member shall provide such services for the two year calendar
period following the date hereof based upon the Member's reported 1997 costs for
such services, as set forth in Schedule 7.1 hereto. At the end of each two year
period following the
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date hereof, the Company shall revisit its determination as to which Member (or
whether the Company itself or a third party) shall provide such services. The
Company shall pay for such services on a monthly basis promptly following the
receipt of a invoice from the providing Member.
7.2 Benefits and Employee Leasing Arrangements. (a) From the date hereof
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until December 31, 1997, each of IDG and ▇▇▇▇-▇▇▇▇▇ shall lease to the Company
their employees chosen by the Company to continue to work on the Publications
and shall continue to pay those employees and provide these employees benefits
under their respective existing benefits plans. Promptly following the date
hereof, IDG and ▇▇▇▇-▇▇▇▇▇ shall each enter into a leasing agreement with the
Company consistent with the provisions of this Section 7.2, including terms and
conditions similar to those that are normally included in agreements of that
type. The Company shall promptly reimburse each Member for all costs and
expenses incurred for salaries, expenses and benefits according to the regular
charging method in effect prior to this date. The costs of amounts which are
payable for the year, such as a retirement plan contribution or annual bonus,
shall be pro rated between the Member and the Company according to the period
within the year prior to this date and the period after this date.
(b) Promptly following the date hereof, the Company shall prepare a
benefits plan for its employees, which plan shall not distinguish between former
▇▇▇▇-▇▇▇▇▇ and IDG employees and shall provide benefits substantially equivalent
to those provided prior to that date to the extent practicable. The Company
shall submit the plan to the Management Board for approval, provided, that, if
the proposed plan is no more expensive than the current IDG plan, the Management
Board's approval shall not be unreasonably withheld. Commencing January 1,
1998, the Company shall establish its own payroll and take over all employees
and provide these employees with benefits pursuant to the Management Board
approved plan. If requested by the Company, each of the Members shall, to the
extent permissible, extend the coverage of its respective welfare plans (which
shall not include any employee stock option plan or similar long term
compensation plan) to the Company's employees, to allow for the cost benefits
resulting from participation in a larger group. The Company shall to the extent
permitted by law provide credit for past service with the Members for purposes
of eligibility, vesting and level of benefits under all Company benefit plans.
8. Licenses to Members and Third Parties.
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8.1 Macworld Expos.
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(a) With respect to existing, continuously run Macworld Expos held
within the United States, the Company shall (i) grant a sublicense to IDG for
the use of the name "Macworld" and all other trademarks, trade names or service
marks containing the term "Macworld" (collectively, the "'Macworld Marks")
solely in connection with such Macworld Expos and (ii) perform the obligations
set forth in Schedule 8.1 hereto for such Macworld Expos in exchange for a
royalty of 8% of the aggregate revenues of such Macworld Expos held after August
15, 1997, using historical practices to calculate such revenues; provided, that,
(x) if the Company's aggregate costs and expenses in performing the obligations
set forth in Schedule 8.1 hereto exceed such royalty amounts, the Company shall
terminate the license and its obligations set forth in this Section, unless IDG
raises the royalty to an amount greater than the aggregate costs and expenses or
reduces the services
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required so that the existing royalty becomes greater than the new costs and
expenses and (y) with respect to any Macworld Expos that discontinues events in
its current geographic region of the United States, the sublicense and
obligations set forth in (i) and (ii) above with respect to such geographic
region shall terminate. The license granted hereunder shall be utilized by IDG
for Macworld Expos to extent such services are conducted substantially
consistent with its current scope of operations.
(b) With respect to existing, continuously run Macworld Expos held
outside of the United States, the Company shall grant a royalty-free sublicense
to IDG for the use of the Macworld Marks solely in connection with such Macworld
Expos, provided, that (x) the Company shall not perform any services or
obligations with respect to such Macworld Expos, and (y) with respect to any
Macworld Expos that discontinues events in its current geographic region, the
sublicense set forth above with respect to such geographic region shall
terminate. The license granted hereunder shall be utilized for Macworld Expos to
extent such services are conducted substantially consistent with its current
scope of operations.
(c) All new sublicenses for new geographic locations in the United
States and internationally between IDG and the Company shall be entered on arms'
length terms and conditions. IDG shall have a right of first refusal for itself
or on behalf of its affiliates for all new sublicenses offered to third parties
for new geographic locations in the United States and internationally.
(d) Promptly hereafter, the Company and IDG shall negotiate and
execute a standard form of license agreement consistent with the provisions of
this Section 8.1, including terms and conditions similar to those that are
normally included in agreements of that type.
8.2 Sublicense to IDG for International Editions.
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(a) With respect to existing international editions of Macworld
produced by IDG or its affiliates, the Company shall (a) grant a sublicense to
IDG for the use of the Macworld Marks solely in connection with the publication
of such international editions, and (b) perform the obligations set forth in
Schedule 8.2 hereto in exchange for a royalty of 2% of the aggregate revenues
from such editions; provided, that, (x) in the event the Company's aggregate
costs and expenses in performing the obligations set forth in Schedule 8.2
hereto exceed such royalty amounts, the Company shall terminate the license and
its obligations set forth in this Section unless IDG raises the royalty to an
amount greater than the aggregate costs and expenses or reduces the services
required so that the existing royalty becomes greater than the new costs and
expenses, (y) with respect to any international edition that discontinues
publication, the sublicense set forth above shall terminate, and (z) IDG shall
have the right to terminate any license on not less than 60 days notice to the
Company.
(b) With respect to existing international editions of Macworld
produced by non-IDG affiliates, pursuant to the Assignment and Assumption
Agreement, MCI has assigned to the Company all of its rights, and the Company
agreed to assume all of MCI's obligations, under the currently existing licenses
with such non-affiliates.
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(c) All new licenses for new international geographic locations
between IDG and the Company shall be entered on arms' length terms and
conditions. IDG shall have a right of first refusal for itself or on behalf of
its affiliates for all new licenses offered to third parties for new
international geographic locations.
(d) Promptly hereafter, the Company and IDG shall negotiate and
execute a standard form of license agreement consistent with the provisions of
this Section 8.2, including terms and conditions similar to those that are
normally included in agreements of that type.
8.3 MacUser and MacWeek Licenses.
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(a) With respect to existing international editions of MacUser
produced by licenses, pursuant to the Assignment and Assumption Agreement, ▇▇▇▇-
▇▇▇▇▇ has assigned to the Company all of its rights, and the Company agreed to
assume all of ▇▇▇▇-▇▇▇▇▇' obligations, under the currently existing licenses
with such licensees.
(b) With respect to the existing international edition of MacUser
produced by SOFTBANK Japan or its affiliates, the Company shall grant a
perpetual royalty-free sublicense to SOFTBANK Japan for the use of the "MacUser"
trademark and all other trademarks, trade names or service marks containing the
term "MacUser" (collectively, the "MacUser Marks") solely in connection with the
publication of MacUser in Japan; provided, that, in the event that SOFTBANK
Japan discontinues publication of such publication, the sublicense set forth
above shall terminate. Promptly after this date, the parties shall use good
faith efforts to consider and negotiate a joint venture or other arrangement
with respect to the publication of Macworld in Japan.
(c) With respect to the existing international edition of MacUser
produced by Editorial America Iberica ("EAI") or its affiliates, the Company
shall grant a one-year, royalty-free sublicense to EAI for the use of the
"MacUser" trademark in connection with the publication of MacUser in Spain in
order to enable EAI to transition from the MacUser trademark; provided, that, in
the event that EAI discontinues publication of such publication, the sublicense
set forth above shall terminate.
(d) Promptly hereafter, the Company and companies set forth in this
Section 8.3 shall negotiate and execute a standard form of license agreement
consistent with the provisions of this Section 8.3, including terms and
conditions similar to those that are normally included in agreements of that
type.
9. The Company's Web Sites.
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9.1 Publication Web Sites. The Company shall own (except for the sites
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licensed pursuant to the Assignment and Assumption Agreements), produce, publish
and maintain sites on the World Wide Web with respect to the Publications and
Apple/MacIntosh products, including without limitation the sites licensed
pursuant to the Assignment and Assumption Agreements and the ZDNet MAC sites
licensed pursuant to Section 9.2 below (collectively, the "Sites"). With
respect to the Sites:
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(a) Each of the Sites shall have "▇▇▇▇▇.▇▇▇" as its root domain.
(b) The Company shall solicit and sell advertising for insertion in
the Sites at its own cost and expense.
(c) At the Company's option, ▇▇▇▇-▇▇▇▇▇ or IDG may solicit and sell
non-Apple/MacIntosh advertising on the Sites and shall receive a 20% commission
on all ads sold.
(d) IDG and ▇▇▇▇-▇▇▇▇▇ shall each maintain reciprocal links on its
sites to the Sites, the location of such links to be editorially appropriate.
(e) IDG and ▇▇▇▇-▇▇▇▇▇ shall modify their search engines at
▇▇▇▇▇▇.▇▇▇ and ▇▇▇▇▇.▇▇▇, respectively, so that the scope of such search engines
includes the content located on the Sites.
(f) The Company hereby grants IDG and ▇▇▇▇-▇▇▇▇▇ a non-exclusive,
royalty-free, perpetual license and right to create excerpts and links to
content located on the Sites, including, without limitation, news content and
products.
(g) The Company shall maintain the archival content of the Sites
consistent with MCI's existing practices with respect to Macworld, and ▇▇▇▇-
▇▇▇▇▇' existing practices with respect to MacWeek and MacUser.
(h) All advertising revenue and web traffic statistics resulting from
access to the Sites shall be credited to Company for audit purposes, provided
that, advertising revenue and web traffic statistics shall be attributed first
to ZDNet, and then IDG to the extent audit rules of the relevant reporting
entity permit. The Company shall provide ZDNet and IDG with such records and
data reasonably required for their auditing needs and shall reasonably
accommodate ZDNet and IDG in the Company's selection of its reporting entity.
The Company shall maintain complete and accurate records of such web traffic and
shall report such traffic consistent with the provisions of this Section.
(i) The Company shall establish and maintain a link to ▇▇▇▇-▇▇▇▇▇'
shareware library and shall not maintain any link to any non-Company site which
offers shareware products or software. If the Company publishes and maintains a
site which offers shareware products or software, in no event shall the Company
display or promote such site more prominently than ▇▇▇▇-▇▇▇▇▇' shareware
library.
(j) With respect to the sites on the World Wide Web contributed by
▇▇▇▇-▇▇▇▇▇ and IDG pursuant to the Assignment and Assumption Agreements (the
"Contributed Sites"), the Company shall cause the Contributed Sites to perform,
and the quality of its content to be, in accordance with or better than current
ZDNet standards.
9.2 ZDNet MAC. The Company, pursuant to a license from ZDNet, an
---------
affiliate of ▇▇▇▇-▇▇▇▇▇, shall produce, publish and maintain a site to replace
the ZDNet MAC channel and each of the subsidiary ZDNet MAC sections currently
produced, published and maintained by ZDNet,
-11-
except for "Mac Download," which shall continue to be produced, published and
maintained by ZDNet. ▇▇▇▇-▇▇▇▇▇ and the Company shall agree upon a new name for
such site, as well as the look and feel of such site. With respect to existing
subsidiary ZDNet MAC channel sections which are produced, published or
maintained by third parties, ▇▇▇▇-▇▇▇▇▇ shall use commercially reasonable
efforts to assign and transfer such rights and obligations to the Company.
Thereafter, the Management Board may continue, modify or terminate such rights
and obligations. Furthermore, the Company shall maintain the site reasonably
consistent with the existing ZDNet "look and feel", and the site shall perform
and the quality of its content shall be in accordance with or better than
current ZDNet standards.
10. Special Covenants.
-----------------
10.1 Non-Compete. During the period that ▇▇▇▇-▇▇▇▇▇ is a member, Ziff-
-----------
▇▇▇▇▇ (nor any of its respective subsidiaries or affiliates) shall not, and
during the period that MCI is a member, neither MCI nor IDG shall (nor any of
its respective subsidiaries or affiliates) publish, or own more than a 5%
interest in any business that publishes a print magazine for distribution
primarily in the United States which is directly competitive with the
Publications and principally devoted to computers and other products of Apple
Inc. or its licensees and assignees, unless such publication or other interest
is owned by the Company. Notwithstanding anything to the contrary contained in
this Section, ▇▇▇▇-▇▇▇▇▇ and IDG (and any of their respective subsidiaries or
affiliates) may continue to publish and operate all of their present
publications, services and products, so long as such products do not
substantially change to become significantly more focused on the products of
Apple or its licensees or assignees, and may publish or otherwise participate in
print magazines outside of the Company which are directed generally at home,
educational or personal computing, so long as any such publications do not
provide substantially disproportionate coverage to Apple products and services.
Notwithstanding the foregoing, ▇▇▇▇-▇▇▇▇▇ may continue to publish and operate a
shareware library which contains products of Apple and its licensees and
assignees.
10.2 Confidentiality. Each of the Members and IDG shall keep confidential
---------------
and shall not (a) disclose to any person or (b) use in any manner other than on
behalf of the Company or as may otherwise be specifically permitted under this
agreement or by a specific determination of the Management Board, or as
otherwise required by any applicable legal or regulatory authority, any
Confidential Information. "Confidential Information" means any nonpublic,
confidential or proprietary information of the Company, or relating to any of
the Publications other than information which is or becomes generally available
to the public other than as a result of a breach of this agreement by the
disclosing Member or ▇▇▇.
▇▇.▇ ▇▇▇-▇▇▇▇▇▇▇▇▇▇▇▇/▇▇ ▇▇▇▇. During the period that ▇▇▇▇-▇▇▇▇▇ is a
------------------------
member, ▇▇▇▇-▇▇▇▇▇ (nor any of its respective subsidiaries or affiliates) shall
not, and during the period that MCI is a member, neither MCI nor IDG shall (nor
any of its respective subsidiaries or affiliates) solicit, employ or hire, as an
employee or consultant, for its business or on behalf of any third party any
individual who after this date is an employee or consultant of the Company
(unless the services of such employee or consultant ceased more than three
months before such solicitation or hire or such employee or consultant was fired
or laid-off by the Company). Notwithstanding the foregoing, (i) the limitation
set forth above shall not apply in the event that the President approves of a
Member
-12-
hiring the Company employee, (provided, the President shall act in an even
handed manner as between ▇▇▇▇-▇▇▇▇▇ on the one hand and MCI and IDG on the
other) and (ii) none of ▇▇▇▇-▇▇▇▇▇, MCI or IDG shall encourage the resignation
or termination of any individual who after this date is an employee or
consultant of the Company.
10.4 Remedies. Each of ▇▇▇▇-▇▇▇▇▇, MCI and IDG acknowledge that the remedy
--------
at law for breach of any of their respective covenants under this Section 10
will be inadequate and, accordingly, in the event of any breach or threatened
breach by any of them of the provisions of this Section 10, the other parties
shall be entitled, in addition to all other remedies, to an injunction
restraining any such breach, without bond or other security being required.
11. Distributions. Distributions shall be made to the Members at the
-------------
times and in the aggregate amounts unanimously determined by the Management
Board. Such distributions shall be made among the Members pro rata based on
their respective Interests. Notwithstanding the foregoing, distributions made
in connection with a sale of all or substantially all the Company's assets or a
liquidation of the Company shall be made in accordance with the positive capital
account balances of the Members (determined after giving effect to the
allocation of all gains and losses realized in connection with the liquidation)
within the time period set forth in Treasury Regulation Section 1.704-
1(b)(2)(ii)(b)(3), to the extent thereof and thereafter, in proportion to the
Members' respective Interests. This Section 11 shall not apply to repayment of
Member loans made pursuant to Sections 3.1 or 3.2 hereof.
12. Transfer Restrictions. During the period beginning on the date of
---------------------
this agreement, and ending five years from such date, no Member may sell,
transfer, assign, pledge, mortgage or otherwise dispose of or encumber all or
any portion of its Interests in the Company, or enter into any agreement as a
result of which any person shall have an interest in, or right to receive
distributions from, the Company (any of the foregoing, a "Transfer"). After the
expiration of such five year period, neither Member may sell, transfer, assign
or otherwise dispose of its Interest in the Company without granting the other
Member a right of first refusal. Any attempted Transfer of an Interest in the
Company otherwise than in accordance with this Section 12 shall be void as
against the other Member. Notwithstanding anything to the contrary in this
Section, either Member may at any time without the consent of the other Member
(but after giving prior notice to the other Member) effect a Transfer of all
(but not less than all) of its Interests in the Company to an affiliate of such
Member which has expressly assumed in writing all of such Member's obligations
under this agreement, provided, however, such Transfer shall not release the
transferor of liability for these obligations if not performed by the
transferee. For purposes of this agreement, an "affiliate" of any Member shall
mean (a) any existing or future entity which directly or indirectly controls or
is controlled by or is under common control with such Member, (b) any entity
that directly or indirectly, is the beneficial owner of 50% or more of any class
of the voting securities of such Member provided, however, SOFTBANK Corporation
or any of its wholly owned subsidiaries shall not be considered an affiliate of
▇▇▇▇-▇▇▇▇▇ hereunder, except with respect to Section 10.1 above.
-13-
13. Term; Dissolution; Liquidation.
------------------------------
13.1 Term. Unless terminated earlier pursuant to Section 13.2, the term of
----
the Company shall end on December 31, 2026.
13.2 Dissolution Prior to Expiration of Term. The Company shall be
---------------------------------------
dissolved prior to the expiration of its term (a) upon agreement of Members to
dissolve the Company, (b) upon a sale of all or substantially all of the assets
of the Company, (c) if the Members are unable to resolve a deadlock condition
pursuant to Section 5.2 above and neither Member purchases the interest of the
other Member as provided in Section 5.2 above, or (d) as otherwise provided by
applicable law.
13.3 Liquidation and Distribution of Assets. Upon dissolution, the
--------------------------------------
Company's business shall be liquidated in an orderly manner. The Management
Board shall act as the liquidator (unless the Management Board elects to appoint
a liquidator) to wind up the affairs of the Company pursuant to this Agreement.
In performing its duties, the liquidator is authorized to sell, distribute,
exchange or otherwise dispose of the assets of the Company in accordance with
the Delaware Act and in any reasonable manner that the liquidator shall
determine to be in the best interest of the Members or their successors-in-
interest.
13.4 Termination. The Company shall terminate when all property owned by
-----------
the Company has been disposed of and the assets, after payment of or provisions
for liabilities to the Company's creditors, have been distributed between the
Members as provided in Section 11 above.
14. Fiscal Year; Reports.
--------------------
14.1 Fiscal Year. The Company's fiscal year shall be the calendar year.
-----------
14.2 Books of Account. Complete and accurate corporate records and books
----------------
of account shall be kept by the Company at the principal office of the Company
(or at such other office as the Management Board may designate). Each Member
shall have unrestricted access at all time to such records and books. The
determinations of the Management Board with respect to the treatment of any item
or its allocation for foreign, federal, state or local income tax purposes shall
be binding upon the Members so long as that determination is not inconsistent
with any provision of this agreement.
14.3 Reports and Tax Return. Within 90 days after the end of each fiscal
----------------------
year the Company shall furnish to each Member financial statements for that
fiscal year. The financial statements shall include a balance sheet of the
Company as of the end of the year and a statement of income and a statement of
changes in financial position of the Company for the year, setting forth in each
case in comparative form the figures as of the end of and for the previous
fiscal year. In addition, the Company shall furnish to each Member monthly
financial statements within 15 days after the close of each month. Each annual
tax return of the Company shall be presented to the Members (other than a Member
responsible for preparing such return) within 90 days after the end of the
fiscal year to which it applies, and the Member or Members shall have 30 days
within which to approve such return.
-14-
14.4 Access. Each Member and its representatives shall have access during
------
normal business hours to the premises, books and records of the Company and
shall be entitled to meet with the President and other key persons or officers
of the Company at reasonable intervals and on reasonable notice.
15. Tax Matters.
-----------
15.1 Designation. The Members intend that the Company be treated as a
-----------
partnership for Federal income tax purposes.
15.2 Allocations of Profits and Losses. The Company's taxable income and
---------------------------------
tax losses shall be allocated to each Member based on its respective Interest in
the Company.
15.3 Capital Accounts. The Company shall maintain a separate capital
----------------
account for each Member, Such capital account shall be maintained and adjusted
in accordance with Treasury Regulation Sections 1.704-1(b) and 1.704-2. For tax
purposes, all items of income, gain, loss, deduction or credit shall be
allocated to the Members in the same manner as are taxable income and tax losses
of the Company; provided, that items of income, gain, loss, deduction or credit
--------
for tax purposes shall be allocated among the Members in a manner that takes
account of the variations between the adjusted tax basis and fair market value
of property contributed to the Company in determining the Members' respective
shares of tax items under Section 704(c) of the Internal Revenue Code of 1986,
as amended (the "Code"). Consistent with applicable Treasury Regulations (A)
there shall be credited to each Member's capital account: (i) the amount of any
cash contributed by such Member to the capital of the Company; (ii) the fair
market value of any property contributed by such Member to the capital of the
Company (net of any liability secured by such property that the Company is
considered to assume or take subject to under Section 752 of the Code), (iii)
such Member's share of Company income or gain (or items thereof); and (B) there
shall be charged against each Member's capital account: (i) the amount of all
cash distributions to such Member; (ii) the fair market value of any property
distributed to such Member by the Company (net of any liability secured by such
property that the Member is considered to assume or take subject to under
Section 752 of the Code); (iii) such Member's share of Company loss and
deduction (or items thereof); and (iv) any Company expenditures described in
Section 705(a)(2)(B) of the Code.
15.4 Tax Matters Partner. (a) ▇▇▇▇-▇▇▇▇▇ shall be the Tax Matters Partner
-------------------
(as defined in Section 6231(a)(7) of the Code).
(b) The Tax Matters Partner is specifically directed and authorized to take
whatever steps it, in its sole discretion, deems necessary or desirable to
perfect its designation as such, including filing any forms or documents with
the Internal Revenue Service and taking such other action as may from time to
time be required under Treasury Regulations. In addition, the Tax Matters
Partner shall serve in a similar capacity with respect to any similar tax
related or other elections provided by state or local laws. The Tax Matters
Partner is authorized to employ such accountants, attorneys and agents as it, in
its sole discretion, determines are necessary to or useful in the performance of
its duties. Any amounts of tax or expenses paid or incurred by the Tax Matters
Partner with respect to the determination of any tax imposed on the Company or
its Members with respect to Company income
-15-
or deduction (including expenses of administrative and judicial proceedings
relating to the determination of Company items at the Company level) shall
constitute a Company expense and shall be paid by the Company.
16. Indemnification.
---------------
16.1 General. To the extent not inconsistent with applicable law, the
-------
Company shall indemnify and hold harmless the Members and any officers of the
Company from any loss, liability, damage or expense (including, but not limited
to, any judgment, award or settlement and reasonable attorneys' fees and other
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim) arising out of (a) any acts or omissions
or alleged acts or omissions arising out of their activities or the activities
of any of their respective employees or agents on behalf of the Company or in
connection with the business or operations of the Company, and (b) any liability
imposed upon any Member or any of their respective officers, directors or other
affiliates or any officer under any statute, rule or regulation relating to
environmental matters; provided that the acts or omissions or the alleged acts
or omissions upon which the action or threatened action, proceeding or claim is
based were not performed or omitted through gross negligence or intentional
malfeasance of the indemnified party. Reasonable expenses incurred by any
officer or any Member or any of their respective officers, directors or other
affiliates in connection with the matters referred to above may be paid or
reimbursed by the Company in advance of the final disposition of the proceeding
upon receipt by the Company of (a) a written affirmation by any officer or any
Member or the officer, director or other affiliate of his or its good faith
belief that he or it met the standard of conduct necessary for indemnification
by the Company, and (b) a written undertaking by or on behalf of any officer or
any Member or the officer, director or other affiliate to repay such amount if
it shall ultimately be determined by a court of competent jurisdiction that it
has not met that standard of conduct.
16.2 Liability for Acts or Omissions. To the extent not inconsistent with
-------------------------------
applicable law, neither any officer nor any Member nor any officer, director,
employee or other affiliate of any Member shall be liable, responsible or
accountable in damages or otherwise to the Company or to any Member for any
action taken or for any failure to act on behalf of the Company in connection
with the business or operations of the Company, unless the act or omission was
performed or omitted through gross negligence or intentional malfeasance.
17. Further Assurances. Each Member shall execute and deliver such
------------------
additional documents and instruments, and shall perform such additional acts, as
may be necessary or appropriate to carry out the terms of this agreement.
18. Liability of the Members. Except as otherwise expressly provided in
------------------------
the Delaware Act, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a member. Except as otherwise expressly provided in the Delaware Act, the
liability of each member shall be limited to the amount of capital
contributions, if any, required to be made by
-16-
such person in accordance with the provisions of this Agreement, but only when
and to the extent the same shall become due pursuant to the provisions of this
Agreement.
19. Miscellaneous.
-------------
19.1 Joint and Several Liability. IDG and MCI hereby acknowledge and agree
---------------------------
that their respective obligations under this agreement are joint and several,
and that each guarantees, jointly and severally, absolutely and unconditionally,
to the Company and to ▇▇▇▇-▇▇▇▇▇ for the performance of such obligations
19.1 Entire Agreement; Amendment. This agreement together with the
---------------------------
Assignment and Assumption Agreements, contains a complete statement of the
arrangements among the Members with respect to this subject matter, and
supersedes all prior agreements and understandings between them with respect to
such subject matter. This agreement may be amended only by a written agreement
of the Members.
19.2 Notices. Any notice or other communication under this agreement shall
-------
be in writing and shall be considered given when delivered in person or mailed
by certified or registered mail, postage prepaid and return receipt requested,
or sent by reputable overnight courier addressed to the party intended as the
recipient at the address listed on the Company's records or at such other
address as a Member may designate by written notice to the other Members and the
Company.
19.3 Governing Law. This agreement shall be governed by, and construed in
-------------
accordance with, the law of the State of Delaware applicable to agreements made
and to be performed in Delaware.
19.4 Severability. The invalidity or unenforceability of any provision of
------------
this agreement shall not effect the validity or enforceability of any other
provision of this agreement, which shall remain in full force and effect.
* * *
-17-
IN WITNESS WHEREOF, authorized officers of the parties hereto have duly
executed this agreement as of the date first above written.
▇▇▇▇-▇▇▇▇▇ INC. INTERNATIONAL DATA GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------- --------------------------
Name: ▇▇▇▇▇ ▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: VP Planning Title: VP Finance
MACWORLD COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: VP Finance
-18-
Exhibit A
Preliminary Business Plan
1998 1999 2000
Revenue
MacWorld/MacUser $47.0
MacWeek $22.0
-------------------
Total $69.0 $72.5 $76.0
Operating Profit
MacWorld/MacUser $16.0
MacWeek $ 4.0
-------------------
Total $20.0 $22.0 $24.0
Initial Cash Need [OPEN]
-19-
Schedule 7.1
Cost of Services
Cost Per Month ($000)
-----------------------------------
MacWorld/User MacWeek
----------------- -------------
ZD IDG ZD IDG
Circulation*
-----------
Management $54 $76 $29 NA
Promo Purchasing 4 incl. 2 NA
-----------------------------------
Total $58 $76 $31 NA
Production*
----------
Non-Classified $18 $49 $28 NA
Classified 4 incl. 10 NA
-----------------------------------
Total $22 $49 $38 NA
Accounting
----------
GL, AP, AR, Credit, $20 $36 $13 NA
Collections, Tax Treasury
Accounting Systems 5 incl. 5 NA
-----------------------------------
Total $25 $36 $18 NA
Facilities $17 $26 $12 NA
----------
* The parties understand that vendor contracts at ▇▇▇▇-▇▇▇▇▇ are available to
the Company only if the ZD Central Service Departments are used by the
Company.
-20-
Schedule 8.1
Macworld Expo Services
A. ADVERTISING
IDG shall receive 32 pages and provided inserts where noted of advertising in
the Publication:
January 2 FP 4C ads
February 2 FP 4C ads
March 2 FP 4C ads
April 2 FP 4C ads
May 2 FP 4C ads
June 4 FP 4C w/2po insert (pre-reg ad)
July 4 FP AC w/2pg insert (pre-reg ad)
August 2 FP 4C ads
September 2 FP 4C ads
October 2 FP 4C ads
November 4 FP 4C w/2pg insert (pre-reg ad)
December 4 FP 4C w/2pg insert (pre-reg ad)
B. DIRECT MAIL
1. IDG shall receive unlimited use of the Publication subscriber file at
cost [handwritten, initialed addition: for use at Macworld Expo only.]
2. The Company will polybag all August subscriber issues of the
Publication in the Boston area and provide insertion space for
Macworld Expo promotional items.
C. INTERNET
1. The Company will maintain a permanent link between the Macworld Online
site and the Macworld Expo site. During the two weeks before the pre-
registration deadline for a Macworld Expo show and the two weeks
before the first day of the show, this link shall appear on the
Macworld Online home page.
2. Mention of Macworld Expo be made in each "Express" bulletin that is
distributed by the Company via e-mail during the two peak periods
described above.
3. Information on Macworld Expo will be prominently included by the
Company in the Macworld area on America on Line.
D. ON SITE
1. The Company will provide current issues of the Publication and
ClubMacworld brochures for distribution in registration lobbies at
each Macworld Expo show.
-21-
2. The Company will provide tradeshow bags containing the Macworld Expo
logo for distribution at registration booths.
3. The Company will provide table tents promoting ClubMacworld for
display in registration lobbies.
4. The Company will provide banners promoting the Publication for display
in show registration lobbies.
-22-
Schedule 8.2
Obligations for International Edition
-------------------------------------
Respond to Inquiries and Provide Contact Information to and for International
Publications
Host Event at Expo that Address the Global Market
Annual Product Line Meeting to Provide a Forum to Share Information on
Publishing, the Macworld Brand and the MacMarket
Provide support for various publishing functions through:
. Content from Macworld US
. Issue of MacWorld US sent monthly
. Editorial Updates for Future Coverage
. Macintosh Market Information
. Audit Content Usage
. International Web Page
. Shared Online Advertising
. Consolidated Subscriber List for Rental
. Assistance with Marketing Efforts
. Assistance with International Expos and Events including Speaking Engagements
-23-