EXHIBIT 10.15
ZIFF XXXXX MEDIA INC.
x/x Xxxxxx Xxxxx & Xxxxxxxx XX, X.X.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
April 5, 2000
ZD Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: J. Xxxxxxx Xxxxxx, 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 Xxxxx 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 Xxxx Xxxxx and Asset Seller, Xxxx Xxxxx 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.
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
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
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
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.
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 XXXXX MEDIA INC.
By: /s/ XXXXXX X. XXXXXXXXXX
---------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Vice President
ZD INC.
By: /s/ J. XXXXXXX XXXXXX
---------------------------
Name: J. Xxxxxxx Xxxxxx
Title: Senior Vice President
ZD HOLDINGS (EUROPE) LTD.
By: /s/ J. XXXXXXX XXXXXX
---------------------------
Name:
Title: For Xxxx Xxxxxxx
By Power of Attorney
Schedule 1
Enhanced Outplacement
-------- ------------
Name Dept Term Date Severance Vacation Pay Fee
---- ---- --------- --------- ------------ ---
1 Xxxxx Xxxxxx Corp Sales 03/06/00 242,308 26,923 --
2 Xxxxx X Xxxxxxxxxxx Corp Sales 02/29/00 11,948 1,803 --
3 Xxxxxx X Xxxx Corp Sales 02/29/00 27,600 6,900 3,000
4 Xxxxxxxxxxx Xxxxxxx Corp Sales 01/31/00 19,615 4,904 --
5 Xxxxxx Xxxxxxxxxx Corp Sales 02/29/00 25,479 3,004 --
6 Xxxxx X Xxxxxx Corp Sales 02/29/00 67,692 11,692 --
TOTAL 394,642 55,226 3,000
GRAND TOTAL 452,868
